Annual report 2005 - Sava dd

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However, the volume of revenues, if a comparison is made with the same composition of the Group in
the past years, would demonstrate growth. There is another important aspect concerning the
restructuring of Trade: we shall enhance operating profit in the operations of our subsidiaries by 1.3
percentage points. By restructuring the Sava Group we are therefore continuing to implement a
profitable growth strategy.
Profitability as a non-linear indicator
It is worth emphasising that return on capital as an important criterion for the success of the Sava
Group with regard to the holding management and organisation of the Group is not an indicator that
grows in linear terms, but it is fluctuating. In the past two years profitability was appreciably high,
reaching 16 per cent in 2004, and 10.5 per cent in 2005. The achieved profitability level is substantially
affected by favourable purchases of new real investments or an increase in stakes in such investments,
as we have witnessed during these years, thereby creating single operating revenues in the form of
effects due to the elimination of negative goodwill. In 2006 we do not anticipate any larger sale of
financial investments, therefore the profit planned for the Sava Group and the company Sava is lower.
Nevertheless, it is planned to increase in the years ahead at an average annual rate of 6 per cent. The
planned return on capital is lower as well. Despite the mentioned fluctuation, the present direction of
the Group means progress towards stable and profitable growth of the selected operations.
Success in implementing the adopted dividend policy
The Investment Finance operation being performed by the holding company Sava continues to be of
importance for the Sava Group. Among its long-term financial investments the holding company holds
quality and profitable investments such as a stake in Gorenjska Banka d.d., in which it appears as a
strategic owner. Also in future the holding company will seek ownership stakes in financial institutions,
not to mention that it already has available a strong liquid and profitable portfolio of securities.
In 2006 we do not plan to sell any important portfolio investments, therefore the profit of the Group is
planned at a lower level and should reach €29 million. The balance of business operations, favourable
financial position, rich financial investment portfolio, which provides opportunities for future gains,
and an increase in operating profitability in business assures that Sava further meets the adopted
development and dividend policy on a consistent basis. The policy anticipates that the dividend paid for
the Sava share will undergo continual and stable growth.
The confidence that investors have is due to the structure of Sava’s assets and the successful
implementation of the development strategy, originating from the efficient management of its strategic
investment areas. This is at the same time the reason for the market value of the Sava share being less
sensitive to unfavourable movements as experienced by the SBI 20 index on the Ljubljana Stock
Exchange. In the international business environment Sava is renowned as a successful company with a
long-term development programme, which has been proven by the Sava share being included in a new
South-east Trade Index (SETX).
Preparations for profitable growth in the future development period
In February the Supervisory Board gave the Board of Management of Sava d.d. another 5-year mandate
until the year 2011 and entrusted it with the preparation of a development strategy for the next period.
The preparation for individual operations is underway. The strategy for the entire Group, which will
comprise the period from 2007 to 2011 before the end of the year, will be submitted to the Supervisory
Board. By designing new steps in the strategy of Sava’s profitable growth, the Sava Group and the
holding company Sava will continue to implement the adopted sustainable development vision to the
satisfaction of customers, employees, shareholders and the environment.
Janez Bohoriå,
Chairman of the Board of Management
Sava d.d.