Annual Report (ESEF) • Apr 29, 2022
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ANNUAL REPORT FOR 2021
Page
Independent Auditor’s Report 1 – 7
Statement of the Management Board's responsibilities 8
Separate statement of comprehensive income 10
Separate statement of financial position 11 – 12
Separate statement of changes in equity 13
Separate statement of cash flows 14
Notes to the separate financial statements 15 – 54
Management Report 55 – 70
Corporate Governance Statement 71 - 73
Pursuant to the Croatian Accounting Act in force, the Management Board of JADRAN d.d., Crikvenica, Bana Jelačića 16 (the “Company”) is responsible for ensuring that separate annual financial statements are prepared for 2021 in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, in order to give a true and fair view of the financial position, operating results, changes in equity, cash flows of the Company for the period and the notes.
After making enquiries, the Management Board has a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, the Management Board has prepared the separate annual financial statements under the going concern assumption.
In preparing the annual financial statements the responsibilities of the Company’s Management Board include ensuring that:
* suitable accounting policies are selected and then applied consistently, in accordance with applicable finial reporting standards;
* judgements and estimates are reasonable and prudent;
* applicable accounting standards are followed; subject to any material departures disclosed and explained in the financial statements; and
* the annual financial statements are prepared on a going concern basis unless this assumption is inappropriate.
The Management Board is responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time the financial position, operating results, changes in equity and cash flows of the Company and must also ensure that the financial statements comply with the Croatian Accounting Act in force and International Financial Reporting Standards.
The Management Board is also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Moreover, in accordance with the Accounting Act, the Management Board is obliged to prepare an Annual Report comprising the separate financial statements, the separate Management Report and the Corporate Governance Statement. The Management Report was prepared in line with the requirements of Article 21 of the Croatian Accounting Act, and the Corporate Governance Statement in line with the requirements of Article 22 of the Croatian Accounting Act.
Furthermore, in accordance with Commission Delegated Regulation (EU) 2018/815 of 17 December 2018 supplementing Directive 2004/109/ EC of the European Parliament and of the Council with regard to regulatory technical standards on the specification of the single electronic reporting format ("ESEF Regulation"), the Management Board is obliged to prepare and publish separate Annual Report in XHTML format and to tag the annual financial statements prepared in accordance with IFRS in XHTML format using XBRL tags and tag the notes to the annual financial statements as a text block to meet Article 462 requirements of the Capital Market Act.
The Annual Report was authorised for issue by the Management Board on 28 April 2022.
| Chairman of the Management Board | Member of Management Board | Member of Management Board |
| Note | 2020. | 2021. |
|---|---|---|
| Revenue | 60.003.345 | 133.741.797 |
| Other income | 7 | 12.150.637 |
| Total operating income | 72.153.982 | 147.517.798 |
| Cost of goods sold | -145.273 | -192.044 |
| Cost of raw materials and supplies | 8 | -13.585.800 |
| Cost of services | 9 | -18.690.045 |
| Staff costs | 10 | -29.604.392 |
| Depreciation and amortisation | 17,18,19.37 | -37.186.555 |
| Impairment of non-current non-financial assets | 11 | -59.330.540 |
| Net gains/(losses) on value adjustments of financial assets | 12 | -4.146.568 |
| Other operating expenses | 13 | -7.750.498 |
| Total operating expenses | -170.439.671 | -147.147.958 |
| Operating (loss)/profit | -98.285.689 | 369.840 |
| Finance income | 14 | 1.010.204 |
| Finance costs | 14 | -10.207.628 |
| Net loss from financing activities | -9.197.424 | -7.945.618 |
| Loss before tax | -107.483.113 | -7.575.778 |
| Income tax | 15 | - |
| Net loss | -107.483.113 | -7.575.778 |
| Other comprehensive income | - | - |
| Total comprehensive loss for the year | -107.483.113 | -7.575.778 |
| Loss per share | 16 | -3,84 |
*The accompanying notes are an integral part of these financial statements. These financial statements have been authorised and signed by the Management Board.
| Note | 31.12.2020. | 31.12.2021. | |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Property, plant and equipment | 17 | 583.533.800 | 584.930.171 |
| Intangible assets | 18 | 617.815 | 1.884.885 |
| Investment property | 19 | 31.131.676 | 30.273.858 |
| Financial assets | 20 | - | - |
| Investments in subsidiaries | 21 | 118.581.185 | 118.581.185 |
| Right-of-use assets | 37 | 104.531.592 | 98.512.892 |
| Total non-current assets | 838.396.068 | 834.182.991 | |
| Current assets | |||
| Inventories | 22 | 451.721 | 804.981 |
| Trade receivables | 23 | 413.226 | 2.642.111 |
| Receivables from related parties | 23 | 1.288.253 | 541.423 |
| Receivables from the government | 24 | 3.538.700 | 3.342.567 |
| Income tax receivable | 624.021 | 624.021 | |
| Other receivables | 25 | 1.610.896 | 3.660.524 |
| Receivables for loans granted to related parties | 26 | 24.626.866 | 10.566.438 |
| Cash and cash equivalents | 27 | 26.663.536 | 15.723.956 |
| Total current assets | 59.217.219 | 37.906.021 | |
| TOTAL ASSETS | 897.613.287 | 872.089.012 | |
| EQUITY AND LIABILITIES | |||
| Capital and reserves | |||
| Share capital | 482.507.730 | 482.507.730 | |
| Capital reserves | 234.210.922 | 234.210.922 | |
| Accumulated loss | -226.905.606 | -234.481.384 | |
| Total equity | 28 | 489.813.046 | 482.237.268 |
| Non-current liabilities | |||
| Provisions | 29 | 484.001 | 706.347 |
| Liabilities to financial institutions | 30 | 143.201.974 | 215.083.930 |
| Other non-current liabilities | 31 | 61.720 | 61.720 |
| Lease liabilities | 37 | 109.270.795 | 96.385.274 |
| Total non-current liabilities | 253.018.490 | 312.237.271 | |
| Current liabilities | |||
| Trade payables | 32 | 9.232.082 | 10.522.870 |
| Liabilities for advances, deposits and guarantees | 33 | 3.313.182 | 3.119.358 |
| Liabilities to employees | 34 | 3.575.974 | 7.143.941 |
| Liabilities to the government | 35 | 400.641 | 1.361.077 |
| Liabilities to banks and other financial institutions | 30 | 120.830.835 | 29.718.363 |
| Other current liabilities | 36 | 862.030 | 842.726 |
| Lease liabilities | 37 | 16.567.007 | 24.906.138 |
| Total current liabilities | 154.781.751 | 77.614.473 | |
| Total liabilities | 407.800.241 | 389.851.744 | |
| TOTAL EQUITY AND LIABILITIES | 897.613.287 | 872.089.012 |
*The accompanying notes are an integral part of these financial statements. These financial statements have been authorised and signed by the Management Board.
| Share capital | Capital reserves | Accumulated loss | Total | |
|---|---|---|---|---|
| Balance at 1 January 2020 | 482.507.730 | 234.210.922 | -119.422.493 | 597.296.159 |
| Comprehensive loss for the year | - | - | -107.483.113 | -107.483.113 |
| Balance at 31 December 2020 | 482.507.730 | 234.210.922 | -226.905.606 | 489.813.046 |
| Comprehensive loss for the year | - | - | -7.575.778 | -7.575.778 |
| At 31 December 2021 | 482.507.730 | 234.210.922 | -234.481.384 | 482.237.268 |
*The accompanying notes are an integral part of these financial statements. These financial statements have been authorised and signed by the Management Board.
| Note | 2020. | 2021. |
| :------------------------------------------------- | :---- | :---- |# Cash flow from operating activities
| Loss after tax | -107,483,113 |
| Depreciation and amortisation | 46,026,005 |
| Net loss on sale and disposal of non-current assets | 2,127,714 |
| Changes in non-current provisions | 222,346 |
| Interest income | -527,797 |
| Interest expense | 9,122,948 |
| Net foreign exchange differences | -620,955 |
| Net gains/(losses) on value adjustments of financial assets | -2,723,192 |
| Impairment of non-current non-financial assets | - |
| Changes in trade and other receivables | -2,573,418 |
| Changes in inventories | -353,260 |
| Decrease in trade and other payables | 5,474,694 |
| Cash flows from operating activities | 48,599,307 |
| Interest paid | -9,640,069 |
| A. Net cash from operating activities | 38,959,238 |
| Payments for purchases of non-current tangible and intangible assets | -30,101,408 |
| Interest received | 1,348,205 |
| Loans granted | -1,155,000 |
| Repayment of loans granted | 16,009,643 |
| B. Net cash from investing activities | -13,898,560 |
| Proceeds from borrowings | - |
| Repayment of borrowings | -17,973,734 |
| Principal elements of lease payments | -18,026,524 |
| C. Net cash from financing activities | -36,000,258 |
| Net increase/(decrease) in cash | -10,939,580 |
| Cash and cash equivalents at beginning of period | 26,663,536 |
| Cash and cash equivalents at end of period | 15,723,956 |
*The accompanying notes are an integral part of these financial statements. These financial statements have been authorised and signed by the Management Board.
JADRAN joint stock company for hotel management and tourism, Bana Jelačića 16, Crikvenica (the “Company”) is registered with the Commercial Court in Rijeka under Reg. No. (MBS): 040000817. The Company’s subscribed share capital amounts to HRK 482,507,730. The Company’s authorised representatives are Goran Fabris, Chairman of the Management Board, appointed on 22 May 2018, Ivan Safundžić, Member of the Management Board, appointed on 1 December 2020 and Miroslav Pelko, Member of the Management Board, appointed on 1 September 2021. The Company is represented by the Management Board in such a manner that each Member of the Management Board represents the Company jointly with another member of the Management Board. The Company’s principal activity is the provision of accommodation services in hotels, resorts and campsites, preparation of food and provision of food services, and preparation and serving of drinks and beverages. In 2021, the average number of employees was 271 (2020: 232 employees).
The Company's Supervisory Board comprises the following persons:
* Goran Hanžek, Chairman of the Supervisory Board
* Karlo Došen, Deputy Chairman of the Supervisory Board
* Adrian Čajić, Member of the Supervisory Board
* Dragan Magaš, Member of the Supervisory Board
* Mirko Herceg, Member of the Supervisory Board
The most significant accounting policies consistently applied in the current year and previous years are set out below:
The Company's separate financial statements have been prepared in accordance with the International Financial Reporting Standards ("IFRS") as adopted by the European Union. The financial statements also comply with the Croatian Accounting Act which refers to the IFRSs as adopted by the EU. The accounting policies are consistent with those of the previous fiscal year. The separate financial statements have been prepared under the accrual basis according to which the transaction effects are recognised when incurred and are included in the financial statements for the period to which they relate, and by applying the basic accounting assumption of going concern. The separate financial statements have been presented in the Croatian currency, Croatian kuna (“HRK”), which is the Company’s functional currency. The Company has also prepared consolidated financial statements in accordance with IFRS for the Company and its subsidiaries (the Group), which were authorised by the Management Board on 28 April 2022 and issued separately. In the consolidated financial statements, subsidiaries Club Adriatic d.o.o. and Stolist d.o.o. (Note 21) have been fully consolidated. Users of these separate financial statements should read them together with the Group’s consolidated financial statements for the year ended 31 December 2021 in order to obtain complete information about the financial position, results of operations and changes in the financial position of the Group as a whole.
In preparing these separate financial statements, certain estimates have been used that affect the presentation of the Company’s assets and liabilities, income and expenses and the disclosure of the Company's contingent liabilities. Future events and their effects cannot be anticipated with certainty, and therefore actual results may differ from these estimates. The estimates used in the preparation of the financial statements are subject to change as new events occur, as more experience is gained, additional information is obtained and due to the changing environment in which the Company operates. The key estimates used in the application of accounting policies when preparing financial statements are disclosed in Note 3 below.
In the period from 2010 to 2014, bankruptcy proceedings were initiated against the Company. In the course of the bankruptcy proceedings, the Company performed its business activities, and continued to perform them even after the proceedings were completed. The Commercial Court in Rijeka in the case ref. no. 14 St-52/2010 issued a Decision ordering supervision over the implementation of the bankruptcy plan, and in February 2017 issued a Decision terminating the supervision over the fulfilment of obligations of the bankruptcy administrator’s, the Creditors Committee’s and the Bankruptcy Judge’s duties in relation to the bankruptcy plan, thus ensuring the Company’s ability to continue as a going concern. All court proceedings initiated to challenge the bankruptcy plan have been completed. During 2017 and 2018, the Company entered into out-of-court settlements on the amicable settlement of disputes with all former employees who undertook to withdraw their claims before courts and release the mortgages after their claims are settled, which the Company undertook to do in 12 equal instalments. The last of these instalments became due and payable in September 2019. By concluding these settlements, the Company ensured its ability to continue as a going concern. The separate financial statements have been prepared on the assumption that the Company will continue in business on a going concern basis. The Company realised the planned divestment in the company CLUB ADRIATIC (sale of land), thus creating the preconditions for the repayment of loans granted to a related company, but also providing funds for a continuous investment cycle, although restricted due to the pandemic. In the course of the past years, the Company has invested significant amounts in the renovation of facilities from the portfolio and the improvement of the portfolio of services provided to clients. At the beginning of 2021, the Company's operations were marked by the COVID-19 pandemic to the same extent and in the same way as during almost the entire year 2020. Various forms of restrictions regarding both travels and events have led to most accommodation capacities remaining closed. Other than the café of International Hotel in Crikvenica, which operated in accordance with existing measures and restrictions, the Garden Palace Resort in Umag was opened on 1 February, and on 1 March, the Esplanade Hotel in Crikvenica reopened after having been closed in early January. It is important to note that based on the decision of the Management Board dated 31 December 2020, JADRAN d.d. accommodated residents living in the earthquake-affected areas of Banovina and Glina in the International Hotel, thus helping thirty families until mid-March 2021. In the second quarter of 2021, the Company still operated under the strong impact of the COVID-19 pandemic. However, given the many efforts made both at the global and local levels to bring the pandemic under control, the Company recorded a better business result in that period compared to the same period last year.
Although being faced with all the challenges posed to the Company by the COVID-19 pandemic, business continued in the third quarter with maximum adherence to all epidemiological measures, all for the purpose of protecting the Company’s guests and employees. In the third quarter of 2021, there was a boost in tourism turnover compared to the same period last year, primarily due to more favourable trends in the expansion of COVID-19 in the Republic of Croatia and the fact that our most important European tourism competitors were in the so-called red zone for most of the third quarter (especially during peak season), which resulted in more tourists travelling to Croatia. It can be concluded that 2021 was uncertain, challenging and unpredictable for the Company's operations.In order to protect business continuity and preserve liquidity, the Company's Management Board has maximally streamlined operating expenses, capital expenditures and control of cash outflows, similar to the previous year: As agreed with the social partners, it rationalised staff costs by reducing salaries for those employees who do not work and enabling, where possible, employees to work from home one to two days a week. Capital expenditures were limited to completing the investments started in recent years, completing the range of amenities in some facilities, investments in the beach management segment and continuing the investment cycle to ensure the further growth of the Company. Other operating expenses are limited to those necessary to maintain business continuity. Properties were sold in accordance with the previous disinvestment plan in CLUB ADRIATIC d.o.o., which in no way decreased the business potential, i.e. the accommodation capacities of the said company for 2021 were not reduced. Despite the fact that the Company's operations were extremely challenging in the first half of the year and the future was uncertain and unpredictable at the time, the Company's Management Board decided to continue the investment cycle. Capital expenditures were limited to completing the investments started in recent years, completing the range of amenities in some facilities, investments in the beach management segment, with liabilities arising from the signed concession agreements, and continuing the investment cycle to ensure the further growth of the Company as well as its future competitiveness. Of the realised investments, special emphasis should be placed on the final completion of the investment in furnishing the annex buildings of Hotel Slaven with the aim of upgrading the classification from 2 to 3 stars, the purchase of 12 new mobile homes, the development and furnishing of plots and a supermarket at the Selce campsite and the beginning of investment in the swimming pool complex at Hotel Omorika. All other operating expenses are limited to those necessary to maintain business continuity. The Company's cumulative losses as at 31 December 2021 amounted to HRK 234,481 thousand (31 December 2020: HRK 226,906 thousand), and current liabilities exceeded current assets by HRK 39,708 thousand (31 December 2020: HRK 95,565 thousand). The Company has sufficient funds in the account and due to agreed credit facilities is able to ensure the Company's liquidity. Accordingly, the financial statements have been prepared on the going concern principle.
The accounting policies adopted are consistent with those of the previous year unless otherwise stated and disclosed below.
The Company has applied the following standards and amendments for the first time for its annual reporting period commencing 1 January 2021:
The above amendments did not have a significant impact on the Company's current period.
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2021 reporting periods and have not been early adopted by the Company:
Classification of liabilities as current or non-current - Amendments to IAS 1 (issued on 23 January 2020 and effective for annual periods beginning on or after 1 January 2022). These narrow scope amendments clarify that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the reporting period. Liabilities are non-current if the entity has a substantive right, at the end of the reporting period, to defer settlement for at least twelve months. The guidance no longer requires such a right to be unconditional. Management’s expectations whether they will subsequently exercise the right to defer settlement do not affect classification of liabilities. The right to defer only exists if the entity complies with any relevant conditions as of the end of the reporting period. A liability is classified as current if a condition is breached at or before the reporting date even if a waiver of that condition is obtained from the lender after the end of the reporting period. Conversely, a loan is classified as non-current if a loan covenant is breached only after the reporting date. In addition, the amendments include clarifying the classification requirements for debt a company might settle by converting it into equity. ‘Settlement’ is defined as the extinguishment of a liability with cash, other resources embodying economic benefits or an entity’s own equity instruments. There is an exception for convertible instruments that might be converted into equity, but only for those instruments where the conversion option is classified as an equity instrument as a separate component of a compound financial instrument. The amendment has not yet been endorsed by the European Union. The Company is currently assessing the impact of the amendments on its financial statements.
Classification of liabilities as current or non-current, deferral of effective date – Amendments to IAS 1 (issued on 15 July 2020 and effective for annual periods beginning on or after 1 January 2023, not yet endorsed by the European Union). The amendment to IAS 1 on classification of liabilities as current or non-current was issued in January 2020 with an original effective date 1 January 2022. However, in response to the Covid-19 pandemic, the effective date was deferred by one year to provide companies with more time to implement classification changes resulting from the amended guidance. The Company is currently assessing the impact of the amendments on its financial statements.
• The requirement for entities to exclude cash flows for taxation when measuring fair value under IAS 41 was removed. This amendment is intended to align with the requirement in the standard to discount cash flows on a post-tax basis. The interpretation has not yet been endorsed by the European Union. The Company is currently assessing the impact of the amendments on its financial statements. The Company is currently assessing the impact of the amendments on its financial statements. Unless otherwise described above, the new standards and interpretations are either not relevant or not expected to affect significantly the Company’s financial statements.
Property, plant and equipment are presented in the statement of financial position (balance sheet) at historical cost less accumulated depreciation and accumulated impairment losses. Cost includes the purchase price and all costs directly attributable to bringing the asset to working condition for its intended use. The costs of current maintenance and repairs, replacements and minor investment maintenance are recognised as expense when incurred. The costs of major overhauls and replacements are capitalised. Gains and losses on the retirement or disposal of property, plant and equipment are presented in profit or loss in the period when incurred. Property under construction is presented at cost less any impairment losses. Depreciation commences when the assets are ready for their intended use. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets, as follows:
Non-current intangible assets include licenses and software and are measured at historical cost less accumulated amortisation and any accumulated impairment losses. Subsequent costs are capitalised only if they increase future economic benefits arising from the asset. All other costs are recognised in profit or loss as incurred. The amortisation charge is recognised in profit and loss on a straight-line basis over the estimated useful lives of intangible assets, from the date that they are available for use. Intangible assets are amortised using the straight-line method over a period of 5 years.
Investment property mainly relates to buildings and other business premises within the hotels and campsites and is held to earn long-term rentals or capital appreciation and is not owner-occupied. Investment property is treated as a long-term investment unless it is intended to be sold in the next year and a buyer has been identified in which case it is classified within current assets. Investment property is carried at historical cost less accumulated depreciation. The depreciation of buildings is calculated using the straight-line method to allocate cost over their estimated useful life. Subsequent expenditure is capitalised only when it is probable that future economic benefits associated with it will flow to the Company and the cost can be measured reliably. All other repairs and maintenance costs are expensed when incurred. If an investment property becomes owner-occupied, it is reclassified to property, plant and equipment, and its carrying amount at the date of reclassification becomes its deemed cost to be subsequently depreciated. Income from a lease with the Company as lessor is recognised in income for the period over the lease term.
Non-financial assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). For the Company and the Group, the CGU is defined at the level of the accommodation facility. Non-financial assets that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.
The business model reflects how the Company manages its assets in order to generate cash flows - regardless whether the Company’s objective is:
(i) solely to collect contractual cash flows from the assets (“hold to collect contractual cash flows”) or
(ii) to collect both the contractual cash flows and cash flows arising from the sale of assets (“hold to collect contractual cash flows and sell”) or, if neither of (i) and (ii) are applicable, financial assets are classified as part of “other” business model and are measured at fair value through profit or loss. As at the reporting date, the Company’s financial assets comprise receivables.
The measurement of the expected credit loss (ECL) is based on reasonable and supportable information available without undue costs or effort, including information about past events, current and foreseeable future conditions and circumstances. Assessments of expected credit losses are normally based on historical probability of the inability to collect debts, supplemented by future parameters relevant to credit risk. For trade receivables, a simplified approach to expected credit loss measurement is applied i.e. measurement on a collective basis, depending on the type of customer, and are monitored according to their ageing structure. For example, ageing groups may be defined as follows: not past due, due in 0-90 days, due in 90-180 days, etc. The ageing groups are determined according to the stages of the collection process.
Inventories are carried at the lower of cost and net realisable value. Cost is determined using the weighted average cost method. Net realisable value is the estimated selling price in the ordinary course of business, less costs to sell.
Cash and cash equivalents comprise cash on hand, deposits held at call with banks, and other short-term highly liquid instruments with original maturities of three months or less.
Borrowings are initially recognised at fair value less transaction costs and subsequently at amortised cost using the effective interest rate method. Interest is recognised as an expense, except in the case of the construction of a qualifying asset, when it is capitalised as part of the asset’s cost. The effective interest rate method is a method to calculate the amortised cost of a financial liability and allocate interest expenses over the accounting period. Borrowings are classified based on the agreed maturity as current liabilities, or non-current liabilities if they mature in more than 12 months. If the Company has an unconditional right to defer the settlement of a liability for at least 12 months after the reporting date, such liabilities are classified as non-current liabilities. The Company derecognises financial liabilities when, and only when, they have been discharged, cancelled or have expired.
Trade payables are obligations to pay for goods or services that have been acquired from suppliers in the ordinary course of business. Trade payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
The income tax expense represents the sum of the tax currently payable and deferred tax. The current tax liability is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years or non-taxable, i.e. not recognised as expense for income tax purposes. The Company’s current tax liability is calculated using tax rates that have been enacted by the reporting date. Deferred tax is recognized on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method.## 2.14. Income taxes
Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences and tax losses can be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the tax asset to be recovered. Deferred tax is recognised as an expense or income in profit or loss, except when they relate to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity.
In the normal course of business through salary deductions, the Company makes payments to mandatory pension funds on behalf of its employees as required by law. All contributions made to the mandatory pension funds are recorded as salary expense when incurred. The Company is not obliged to provide any other post-employment benefits.
The Company pays one-time termination benefits to its employees at retirement. The liability and costs of such benefits are determined using the projected unit credit method and discounted to their present value based on calculations made at the end of each reporting period, which take into account the assumptions of the number of employees estimated to become entitled to termination benefits at regular retirement, the estimated cost of such termination benefits, and the discount rate defined as the average anticipated rate of return on investment in government bonds. Actuarial gains and losses resulting from experience adjustments and changes in actuarial assumptions are recognised immediately in profit or loss.
The Company recognises a liability for long-term employee benefits (jubilee awards) evenly over the period the benefit is earned based on actual years of service. The long-term employee benefit liability is determined annually at the end of each reporting period using assumptions regarding the likely number of staff to whom the benefits will be payable, estimated benefit cost and the discount rate which is determined as the average expected yield rate on investments in government bonds. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised immediately in profit or loss.
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Where the Company expects a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.
The Company’s share capital comprises ordinary shares. The consideration paid for treasury shares, including any directly attributable transaction costs, is deducted from equity attributable to the Company’s shareholders until the shares are withdrawn, reissued or disposed of. When such shares are subsequently disposed of or reissued, any consideration received, net of any directly attributable transaction costs, is included in equity attributable to the Company’s shareholders.
Revenue is income arising in the course of the Company’s ordinary activities. A five-step model used for recognition of revenue from contracts with customers is presented below:
Revenue is recognised for each separate contractual performance obligation in the amount of the transaction price. The transaction price is the amount of the consideration in the contract to which the Company expects to be entitled in exchange for transferring control over the promised goods or services to a customer. The Company recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Company and specific criteria have been met for each of the Company’s activities.
Income from hotel & tourism services is recognised in the period the services are provided.
Lease income is generally recognised in the period the services are provided, using a straight-line method over the lease term.
Interest income is recognised on a time-proportion basis using the effective interest method.
Government grants are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Company will comply with all attached conditions. A grant receivable as compensation for costs or losses already incurred or for immediate financial support, with no future related costs, are recognised as income in the period in which it is receivable within other operating income (Note 7).
At inception of a contract, the Company assesses whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. If the above conditions are met, the contract is considered to be a lease or to contain a lease. If the terms and conditions of the contract are changed, the Company shall reassess whether the above conditions are met. The Company determines the lease term as the non-cancellable period of a lease, together with the periods covered by the option to extend the lease if the lessee is reasonably certain to exercise that option; and the periods covered by the option to terminate the lease if the lessee is reasonably certain not to exercise that option, with the obligation to reassess the above if significant events or a significant change in circumstances arise.
At the lease commencement date (the date on which the underlying asset is available for use), the Company recognises a right-of-use asset and a lease liability. The right-of-use assets are measured at cost that comprises: the amount of the initial measurement of the lease liability; any lease payments made at or before the commencement date, less any lease incentives received; any initial direct costs incurred.
After the commencement date, the right-of-use assets are measured using the cost model. Under the cost model, the right-of-use asset is measured at cost: less any accumulated depreciation on a straight-line basis over the period of the lease (3-15 years), and any accumulated impairment losses; and adjusted for any remeasurement of the lease liability.
Lease liabilities at the present value of the lease payments that are not paid by that date. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, the lessee’s incremental borrowing rate is used. The measurement of lease liabilities includes: fixed payments less any lease incentives receivable; variable lease payments that are based on an index or a rate; amounts expected to be payable by the Company under residual value guarantees; the exercise price of a purchase option if the Company is reasonably certain to exercise that option; payments of penalties for terminating the lease, if the lease term reflects the Company exercising that option. After the commencement date, the lease liability is measured considering any changes in the interest rate, lease payments made and any reassessment or lease modifications.
The Company has decided to apply the short-term lease exemption recognition (for leases up to 12 months that do not include the purchase option) and leases for which the underlying asset is of low value (up to HRK 30,000). Payments for leases for which the underlying asset is of low value are recognised on a straight-line basis as an expense over the lease term. The Company will consider a short-term lease to be a new lease if there is a lease modification and/or a change to the lease term. These leases mainly relate to photocopier machines and fire extinguishers.
Leases where the Company does not transfer substantially all the risks and rewards of ownership of the asset are classified as operating leases. Lease income is recognised on a straight-line basis over the lease term and included in the statement of comprehensive income due to its operating nature.
If investments are made that are expected to last less than one accounting period, then that expense is recognised as expense for the period, and if investments made in the concession area are expected to last longer than one accounting period, they will be capitalised. Investments in the concession area have a limited useful life and are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method to allocate the cost of investments over their estimated useful lives, which is consistent with the remaining life of the concession contract.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings over the period of their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in the period in which they are incurred.
Transactions in currencies other than Croatian kuna are recorded at the exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are re-translated at the reporting date using the exchange rate prevailing at that date. Gains and losses arising on translation are charged to profit or loss in the period when incurred.
Earnings (loss) per share are determined by dividing the profit or loss attributable to shareholders of the Company by the weighted average number of ordinary shares during the year.
Subsidiaries are all entities over which the Company has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity. Investments in the subsidiary are recognised at cost less impairment loss.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker is responsible for allocating resources and assessing performance of the operating segments. The chief operating decision-maker is the Company’s Management Board.
Events after the end of the reporting year providing additional information about the position of the Company as at the date of the financial statements (adjusting events) are reflected in the financial statements. Events that are not adjusting events are disclosed in the notes to the financial statements, if material.
In applying the accounting policies described in Note 2, management has made certain judgements that had a significant impact on the amounts reported in the financial statements (independent of those presented below). These judgements are detailed in the relevant notes and the most significant ones among them relate to the following:
The Company, with the assistance of an expert, analysed the useful lives of buildings and their individual components. When a significant investment in tourism properties (buildings) occurs, the useful life of buildings or their components is reassessed/reviewed. The useful lives should be periodically revised to reflect any changes in circumstances since the previous assessment. Changes in estimate, if any, will be reflected prospectively in a revised depreciation charge over the remaining, revised useful life.
By using a certain asset, the Company uses the economic benefits contained in this asset, which diminish more intensely with economic and technological ageing. Consequently, in the process of determining the useful life of an asset, in addition to assessing the expected physical utilisation, it is necessary to consider the changes in demand on the tourism market, which will cause a faster economic obsolescence as well as a more intense development of new technologies. In view of the above, business operations in the hotel industry impose the need for more frequent investments, and this circumstance contributes to the fact that the useful life of assets is decreasing.
If the useful life of property, plant and equipment had been 10% longer, with all other variables held constant, the net profit for 2021 would have been HRK 2,122 thousand higher (for 2020 it would have been HRK 1,812 thousand higher), and the net carrying value of property, plant and equipment would have been HRK 2,588 thousand higher (for 2020 it would have been HRK 2,210 thousand higher).
If the useful life of property, plant and equipment had been 10% shorter, with all other variables held constant, the net profit for the year would have been HRK 2,122 thousand lower (for 2020 it would be have been HRK 1,812 thousand lower), and the net carrying value of property, plant and equipment would have been HRK 2,588 thousand lower (for 2020 it would have been HRK 2,210 thousand lower).
The Company is a party to a number of court disputes arising from the ordinary course of business. A provision is made if there is a present obligation resulting from a past event (taking into account all available evidence, including the opinions of legal experts) when it is probable than an outflow of resources will be required to settle the obligation, and the amount of the obligation can be measured reliably. As at 31 December 2021, provisions for court disputes amounted to HRK 181,000 thousand (31 December 2020: HRK 0, see Note 25).
In accordance with the adopted accounting policy, the Company reviews the carrying amounts of non-financial assets (including property, plant and equipment, investment property and right-of-use assets) at least once a year to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). The cash-generating unit in the hotel industry/tourism is the accommodation facility. The accounting policy is presented in Note 2.8.
Given the prolonged impact of the COVID-19 pandemic on the Company's operations in 2021 and the absence of operating profit or overall operations in individual cash-generating units, the Company has assessed that there are indicators of impairment of certain categories of non-current non-financial assets and in accordance with IAS 36 made an impairment test of all its cash-generating units i.e. accommodation facilities (own as well as rental facilities).
The recoverable amount is calculated in one of two ways: by calculating the value of assets in use or by calculating the fair value of assets less costs to sell for individual cash-generating units whose value in use determined by the Discounted Cash Flows (DCF) method does not reflect their intrinsic value (taking into account their location and development potential).
The investment cycle started by the Company in 2019 and continued through 2020 and 2021 resulted in an increase in revenue in the facilities covered by new investments. Consequently, the historical approach to allocating administrative costs by revenue of an individual facility in relation to total revenues did not adequately reflect the Company’s new asset structure. In order to optimally allocate the administrative costs of central services, a new method of allocating these costs has been applied, which is based on the number of accommodation units per each facility. By applying the new method of allocating administrative costs of central services, the Company’s total operating result remained unchanged.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining the recoverable amount, management considers key indicators such as revenue growth based on occupancy of facilities, revenue per unit and expected market growth in the hotel industry, etc. The valuations are based on five-year cash flow projections prepared by the Company's management, with the budget for 2022 also approved by the Supervisory Board. For the period after the end of the five-year period, the assumed long-term sustainable growth rate (sustainable growth rate) was applied. Taking into account the significant capital investments in the Company's accommodation units just before the outbreak of the Covid-19 pandemic, the sustainable growth rates used in the valuation represent the maximum value of the projected inflation rates in the Republic of Croatia.
An overview of the assumptions used in the in-use value calculation model is as follows:
| Tourism 2023 - 2026 | |
|---|---|
| EBITDA margin | 17% - 53% |
| Revenue growth | 6% - 13% |
| Discount rate (before tax) | 9.4% - 9.6% |
| Sustainable long-term growth rate | 2% |
Note: the margin and revenue growth listed in the table above reflect the ranges after returning to the business level after the Covid-19 pandemic (in 2023 or onward) and depend on the individual facility of different characteristics.
The calculation of fair value less costs to sell is based primarily on the revenue method, and in two cases on the comparative (for land) and cost method. According to the income method, real estate is worth as much as the cash it is able to generate over its lifetime.After determining all income and expenses related to an individual accommodation unit, the net income of all future periods is calculated and discounted at an adequate discount rate in order to obtain the present value of future cash flows. The assumptions used in the income method are the average board price per accommodation unit, the average occupancy rate, the estimated total cost defined as % of GOP and the capitalisation factor. The following is an overview of the key assumptions in the revenue method used:
| Tourism | 2022 |
|---|---|
| Average board price (HRK) | 43 - 646 |
| Average occupancy rate | 18% - 66% |
| Estimated total cost (% of GOP) | 60% |
| Capitalisation factor | 7% |
Note: The key assumptions listed in the table above depend on the individual facility of different characteristics. For accommodation facilities where land represents the most significant part of the estimated value, a comparative method was used, i.e. method of determination based on realised comparable transactions on the real estate market, in accordance with the current state of the respective real estate. Prepared impairment tests suggest that the recoverable amount of each facility exceeds the net carrying amount of each facility as at 31 December 2021 and, accordingly, there are no indications of impairment. The Company considered the impact of reasonable changes in key assumptions and identified the following:
2) Right-of-use assets
In 2021, the Company conducted an impairment test for right-of-use assets with respect to the indicators of impairment due to the prolonged effects of the COVID-19 pandemic. A leased accommodation facility was identified as a cash-generating unit. The recoverable amount of leased accommodation facilities has been determined on the basis of the value in use based on financial projections in the contracted lease term at a discount rate. For tourism facilities for which recoverable amount is determined at fair value less costs to assess, the Company has determined that the level of the fair value hierarchy - Level 3. The applied valuation methods for these facilities are described above. The results of this analysis suggest that the recoverable amount of each leased facility exceeds the reported net carrying amount of each facility as at 31 December 2021 and, accordingly, there are no indications of impairment.
3) Recoverability of investments in subsidiaries
As at 31 December 2021, the investment in subsidiaries relates to 100% shares in the subsidiary Club Adriatic d.o.o. in the amount of HRK 117,605 thousand and the subsidiary Stolist d.o.o. in the amount of HRK 977 thousand. The valuation was prepared by the Company, whereby for the valuation of the share in the company Club Adriatic d.o.o. the company hired independent experts. The valuation of Club Adriatic d.o.o. was determined using the fair value approach less costs to sell, given that the market value of the location or land owned by the subsidiary significantly exceeds the value in use of the assets of this subsidiary (primarily due to dilapidation and the need for significant investment and arrangement of facilities and ancillary facilities) for the purposes of the impairment test the Company used the valuation of a certified appraiser, increased by the present value of future cash flows of the leased tourist facility of the subsidiary (where the estimate of the independent appraiser for the land in question approximates the fair value less estimated costs to sell). The fair value determined is significantly higher than the carrying amount of the investment in this subsidiary.
Leases
As the interest rate implicit in the lease cannot be readily determined, the Company uses its own incremental borrowing rate of 2.70% (2020: 2.70%) when calculating the lease liability for cash flow discounting purposes in 2021. The Company defines a lease term as a non-cancellable period, together with periods under the lease extension and/or termination option if it is reasonably certain that such option will be exercised (extension) or not exercised (termination). The Company does not expect to exercise either the lease termination or the extension option, and no potential effects were calculated in relation to these options.
Impairment of receivables
The Company classifies its receivables in Stage 2 and Stage 3. Stage 2 includes recognised expected credit losses possible for the entire life of the receivable (lifetime credit losses). Lifetime credit losses are calculated on the basis of a matrix for expected credit losses and are applied collectively to all Stage 2 receivables. Stage 3 represents receivables for which, after the analysis, it was concluded that they will not be collectible and their value is individually adjusted to the expected collectible amount. At the end of each year, the Inventory Committee reviews the recoverability of receivables and adjustments are made according to the information gathered from the sales and legal departments, depending on the maturity of the receivables. In 2021, the Company released the previously recognised credit losses under the simplified IFRS 9 model for trade receivables whose total net effect amounted to HRK 1,288,489.
Capital risk management
The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Company's capital structure consists of share capital, statutory reserves, retained earnings/(accumulated loss) and profit for the year.
Classes of financial instruments
| 31 December 2020 | 31 December 2021 | |
|---|---|---|
| Financial assets | ||
| Trade receivables | 413,226 | 2,642,111 |
| Receivables from related parties | 1,288,253 | 541,423 |
| Cash and cash equivalents | 26,663,536 | 15,723,956 |
| Loans receivable | 24,626,866 | 10,566,438 |
| Total | 52,991,881 | 29,473,928 |
| Financial liabilities | ||
| Liabilities to financial institutions | 264,032,809 | 244,802,293 |
| Trade payables | 9,227,082 | 10,522,870 |
| Lease liabilities | 125,837,802 | 121,291,413 |
| Total | 399,097,693 | 376,616,576 |
Financial risk factors
The Company’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The Company does not have a formal risk management programme in place, and the overall risk management in respect of these risks is carried out by the Company’s Management Board and Company’s management.
Market risk
The Company’s activities primarily expose the Company to the financial risks of changes in foreign currency exchange rates and interest rates (see below). Market risk exposures are supplemented by the sensitivity analysis. There has been no change to the Company’s exposure to market risks or the manner in which it manages and measures the risk.
Currency risk management
The Company undertakes certain transactions denominated in foreign currencies. Hence, exposures to exchange rate fluctuations arise. The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities as at the reporting date are as follows:
| Company | Assets | Liabilities |
|---|---|---|
| 31 December 2020 | 31 December 2021 | |
| EUR | 17,774,519 | 12,745,834 |
Analysis of foreign currency sensitivity
The Company is exposed to foreign currency risk in the event of a change in the euro (EUR) exchange rate. The following table presents an analysis of the effects of changes in the HRK exchange rate compared to the increase or decrease in HRK value by 10% in relation to EUR. 10% is the rate used for internal reporting to the Management Board on foreign currency risk and represents the Management Board's assessment of the reasonably possible change in foreign exchange rates. An analysis is performed only for receivables and liabilities denominated in foreign currencies and represents the adjustment of their value at the period end for a change in the exchange rate of 10%. The sensitivity analysis includes third-party loans where the loan is denominated in the currency different from the lender's or the borrower's currency. The positive/negative amount recorded below indicates a net decrease/increase in profit or other equity when HRK compared to the relevant currency strengthens by 10%: If the HRK would weaken by 10% in relation to another relevant currency, the effect would be the same, only negative.
| 2020 | 2021 | |
|---|---|---|
| EUR exchange rate fluctuation by +10% (Increase) of loss | (37,249,637) | (35,364,261) |
| EUR exchange rate fluctuation by -10% (Increase) of loss | 37,249,637 | 35,364,261 |
Interest rate risk management
The Company is exposed to interest rate risk as it enters into loan agreements with variable interest rates. The Company’s exposure to interest rates based on financial assets and liabilities is detailed under Liquidity risk management. The Company manages this risk by maintaining an appropriate ratio of loans with fixed and variable interest rates in its loan portfolio.
Interest rate sensitivity analysis
Cash flow interest rate risk is the risk that the cost of interest for the instrument will fluctuate over time.Most financial liabilities are contracted at fixed interest rates and the sensitivity analysis of interest rate changes to financial liabilities contracted at a variable interest rate is shown in the following table:
| 2020 | 2021 | |
|---|---|---|
| Interest rate change by +100 bp | Decrease in profit | 1,013,034 |
| Interest rate change by -100 bp | Increase in profit | (1,013,034) |
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss for the Company. The Company constantly monitors its exposure to the parties it conducts business with and their credit ratings and allocates the total value of transactions among acceptable customers. The carrying amount of financial assets recorded in the financial statements, net of impairment losses, represents the Company's maximum exposure to credit risk without taking account of the value of any collateral obtained.
Inflation risk is present in contractual relationships where the price of a service or product is indexed and tied to the Croatian National Bank’s strong HRK policy. As this is an external risk, the ability to eliminate it is minimal. The Company notes trends of increasing inflation rates primarily measured through the consumer price index, as a result of extremely expansive monetary policies of central banks and for the purpose of minimising inflation risk, the Company insists on negotiating fixed terms of supply with all suppliers where possible. Suppliers of energy are an exception - their prices are subject to market variations.
The ultimate responsibility for liquidity risk management rests with the Company's Management Board which has built an appropriate liquidity risk management framework for the management of the Company’s short, medium and long-term funding and liquidity management requirements. The Company manages liquidity risk by maintaining adequate reserves, bank borrowings and other sources of financing, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. The table below details the remaining contractual maturities for the Company for non-derivative financial liabilities. The table has been prepared on the basis of undiscounted cash flows of financial liabilities based on the earliest date on which the Company may be required to settle the liabilities.
| Weighted average interest method | Up to 1 month | 1 to 3 months | 3 months to 1 year | 1 to 5 years | Over 5 years | Total |
|---|---|---|---|---|---|---|
| 2020 | ||||||
| Interest-free | 7,905,646 | 18,762 | - | - | - | 7,924,408 |
| Lease liabilities | 1,660,653 | 87,624 | 18,162,162 | 65,536,819 | 55,607,607 | 141,054,865 |
| Fixed interest rate 2.7% | 264,828 | 504,044 | 20,934,064 | 91,754,804 | 65,110,598 | 178,568,338 |
| Variable interest rate 2.1% | - | 531,843 | 1,625,076 | 45,200,732 | 67,689,654 | 115,047,305 |
| Total | 9,831,127 | 1,142,273 | 40,721,302 | 202,492,355 | 188,407,859 | 442,594,916 |
| 2021 | ||||||
| Interest-free | 10,169,733 | 353,097 | - | - | - | 10,522,870 |
| Lease liabilities | 2,093,707 | 4,501,340 | 21,501,452 | 62,096,231 | 44,026,605 | 134,219,335 |
| Fixed interest rate 2.7% | 1,108,648 | 2,005,306 | 21,986,601 | 79,260,819 | 53,126,358 | 157,397,732 |
| Variable interest rate 2.1% | 1,018,648 | 524,557 | 9,163,335 | 46,760,856 | 56,146,204 | 112,594,952 |
| Total | 13,282,128 | 7,384,300 | 52,651,388 | 188,177,906 | 153,299,167 | 414,734,889 |
Operating segments are presented in accordance with the internal procedure of reporting to the Company’s Management Board, the chief operating decision-maker, which is responsible for allocating resources to the reportable segments and assessing its performance. Management defined Hotels & Apartments, Campsites and Other (beach buffet Kačjak, Inter café bar, Katarina swimming pools etc.) as its reportable segments. The segment information for the reportable segments for the year ended 31 December 2021 is as follows:
| Operating segment | Income by segment (HRK) | Expenses by segment (HRK) | Result by segment (HRK) |
|---|---|---|---|
| Hotels & Apartments | 116,851,127 | (110,419,401) | 6,431,726 |
| Campsites | 18,084,574 | (10,335,189) | 7,749,385 |
| Other | 6,319,020 | (6,189,358) | 129,662 |
| Total reportable segments | 141,254,721 | (126,943,948) | 14,310,773 |
| Other operating segments | 6,263,077 | (20,204,010) | (13,940,933) |
| TOTAL | 147,517,798 | (147,147,958) | 369,840 |
The segment information for the reportable segments for the year ended 31 December 2020 is as follows:
| Operating segment | Income by segment (HRK) | Expenses by segment (HRK) | Result by segment (HRK) |
|---|---|---|---|
| Hotels & Apartments | 55,159,698 | (137,971,267) | (82,811,569) |
| Campsites | 6,307,490 | (5,168,380) | 1,139,110 |
| Other | 4,064,206 | (4,458,360) | (394,154) |
| Total reportable segments | 65,531,394 | (147,598,007) | (82,066,613) |
| Other operating segments | 6,622,588 | (22,841,664) | (16,219,076) |
| TOTAL | 72,153,982 | (170,439,671) | (98,285,689) |
Result by segment represents the profit of each segment before the distribution of other operating income, other operating expenses, finance income, finance costs and income tax. This result represents a benchmark that is submitted to the Company's Management Board for the purpose of making a decision on allocating resources to that segment and evaluating its performance. A reconciliation of the result by reportable segments and net loss for the period is provided as follows:
| Item | 31 December 2020 (HRK) | 31 December 2021 (HRK) |
|---|---|---|
| Result by reportable segment | (82,066,613) | 14,310,773 |
| Unallocated operating income | 6,622,588 | 6,263,077 |
| Unallocated finance income | 1,010,204 | 3,275,818 |
| Unallocated operating costs: | (22,841,664) | (20,204,010) |
| Cost of goods sold | 1,011 | 0 |
| Cost of raw materials and supplies | (338,135) | (356,190) |
| Cost of services | (4,380,336) | (5,423,476) |
| Staff costs | (11,100,044) | (13,796,338) |
| Depreciation and amortisation | (1,104,737) | (1,498,728) |
| Impairment | (4,021,875) | 2,867,409 |
| Other operating expenses | (1,897,548) | (1,996,687) |
| Unallocated finance costs | (10,207,628) | (11,221,436) |
| Loss for the year | (107,483,113) | (7,575,778) |
The Company does not monitor assets and liabilities by segments and therefore, this information has not been disclosed. The hotels, apartments and campsites (operating assets) are located in the Republic of Croatia. The Company provides its hotel/hospitality services and sales activities in Croatia to domestic and foreign customers.
| 2020 (HRK) | 2021 (HRK) | |
|---|---|---|
| Accommodation | 39,694,817 | 90,028,775 |
| Food and beverages | 19,179,207 | 41,049,964 |
| Other hotel services | 870,119 | 2,292,473 |
| Trade goods | 259,202 | 370,585 |
| TOTAL | 60,003,345 | 133,741,797 |
The Company provides its hotel/hospitality services and sales activities in Croatia to domestic and foreign customers. The Company’s revenues are classified according to the customers’ origin.
| 2020 (HRK) | 2021 (HRK) | |
|---|---|---|
| Sales - domestic customers | 13,612,895 | 34,409,137 |
| Sales - foreign customers | 39,197,907 | 86,001,991 |
| Other /i/ | 7,192,543 | 13,330,669 |
| Total | 60,003,345 | 133,741,797 |
/i/ Other includes revenues from the sale of trade goods, alcoholic and non-alcoholic drinks, food and beverages, parking services, wellness and other similar services, where it is not possible to determine whether revenue was earned from the sale to foreign or domestic customers.
| 2020 (HRK) | 2021 (HRK) | |
|---|---|---|
| Income from marketing and other services | 362,085 | 1,103,217 |
| Rental income | 2,825,198 | 4,051,227 |
| Recharged costs of lessees | 577,859 | 630,068 |
| Reversal of provisions | - | 172,114 |
| Insurance reimbursements | 50,484 | 610 |
| Direct aid | 346,126 | 361,761 |
| Collection of amounts due as per judgement and out-of-court settlement | 95,428 | 12,502 |
| Collection of doubtful and bad debts | 1,280 | 65,570 |
| Disposal of non-current assets | 13,765 | 291,451 |
| Covid-19-related grants | 6,326,824 | 4,401,761 |
| Other operating income | 1,551,588 | 2,685,720 |
| TOTAL | 12,150,637 | 13,776,001 |
| 2020 (HRK) | 2021 (HRK) | |
|---|---|---|
| Groceries consumed | 5,217,313 | 10,483,689 |
| Electricity | 2,866,739 | 5,315,756 |
| Heating oil and gas | 566,487 | 1,237,141 |
| Water consumed | 966,820 | 2,471,890 |
| Alcoholic and soft drinks consumed | 532,294 | 991,140 |
| Consumables and cleaning supplies | 1,168,507 | 1,627,463 |
| Write-off of small inventory | 892,966 | 569,201 |
| Fuel for passenger and freight vehicles | 197,667 | 399,503 |
| Packaging | 119,925 | 128,275 |
| Office supplies | 56,916 | 75,883 |
| Overheads - leased properties | 766,104 | 300,641 |
| Other costs | 234,062 | 189,360 |
| TOTAL | 13,585,800 | 23,789,942 |
| 2020 (HRK) | 2021 (HRK) | |
|---|---|---|
| Investment and current maintenance | 1,679,300 | 2,722,644 |
| Contractor services | 3,377,922 | 6,877,933 |
| Intellectual services | 2,090,244 | 2,291,340 |
| Commissions and banking services | 5,921,352 | 10,322,641 |
| Utilities | 1,876,086 | 2,738,357 |
| Gross temporary service contract cost | 405,218 | 812,528 |
| Student employment agency services | 990,257 | 1,673,057 |
| Telephone, Internet and mail | 726,134 | 588,654 |
| Advertising services | 349,813 | 666,465 |
| Rentals | 526,118 | 515,886 |
| Music and ZAMP fees | 125,540 | 127,240 |
| Transport services (road and maritime transport) | 20,465 | 76,413 |
| Other services | 601,596 | 963,967 |
| TOTAL | 18,690,045 | 30,377,125 |
| 2020 (HRK) | 2021 (HRK) | |
|---|---|---|
| Net salaries | 16,076,054 | 19,726,081 |
| Transportation to and from work | 745,717 | 1,052,237 |
| Taxes and surtaxes | 2,071,752 | 2,122,285 |
| Contributions from salaries | 4,837,612 | 5,707,393 |
| Contributions on salaries | 3,694,069 | 4,575,287 |
| Unused hours off - redistribution | 63,715 | 528,795 |
| Accruals for unused vacation days | 397,251 | 1,483,157 |
| Non-current provisions for termination benefits and jubilee awards | 23,200 | 63,332 |
| Termination benefits | 708,042 | 121,133 |
| Children’s gifts, Christmas bonus, non-taxable voucher | 450,200 | 1,003,596 |
| Performance bonus and holiday pay | 6,417 | 2,863,915 |
| Meal | 372,901 | 946,226 |
| Other | 157,462 | 299,842 |
| TOTAL | 29,604,392 | 40,493,279 |
Remuneration for the members of the Company’s key personnel and Supervisory Board:
| 2020 (HRK) | 2021 (HRK) | |
|---|---|---|
| Key personnel | 1,115,477 | 1,814,838 |
| of which receipts in kind | 49,522 | 146,601 |
| Supervisory Board | 293,527 | 576,551 |
| TOTAL | 1,409,004 | 2,391,389 |
| 2020 | 2021 | |
|---|---|---|
| Impairment of property, plant and equipment (Note 17) | 52,994,245 | - |
| Impairment of investment property (Note 19) | 549,799 | - |
| Impairment of right-of-use assets (Note 37) | 5,786,496 | - |
| TOTAL | 59,330,540 | - |
| 2020 | 2021 | |
|---|---|---|
| Impairment of trade receivables | (124,693) | (179,920) |
| Expected credit losses – trade receivables | (2,390,556) | (153,113) |
| Release of impairment of expected credit losses – trade receivables | - | 1,441,602 |
| Expected credit losses – loans | (1,631,319) | - |
| Release of impairment of expected credit losses – loans | - | 1,614,623 |
| TOTAL | (4,146,568) | 2,723,192 |
| 2020 | 2021 | |
|---|---|---|
| Reimbursement to students in practice and scholarships | 209,143 | 375,616 |
| Insurance premiums | 775,068 | 920,656 |
| Municipal charges and concessions | 2,273,798 | 1,697,197 |
| Entertainment | 217,572 | 462,576 |
| Travel expenses, per diems, accommodation and field bonus | 159,504 | 102,645 |
| Aid to employees | 77,000 | 273,444 |
| Charges to Hrvatske vode | 1,719,928 | 1,280,953 |
| Taxes and contributions irrespective of business result | 219,785 | 332,228 |
| Professional training of employees | 54,648 | 32,164 |
| Employee accommodation | 214,811 | 371,149 |
| Animation and entertainment | 108,365 | 664,606 |
| Subscriptions and memberships | 255,508 | 350,200 |
| Disability benefits | 67,031 | 61,200 |
| Net book amount of disposed assets | 271,403 | 345,477 |
| Other operating expenses | 1,126,934 | 1,722,644 |
| TOTAL | 7,750,498 | 8,992,755 |
Finance income
| 2020 | 2021 | |
|---|---|---|
| Regular and penalty interest income | 677,327 | 527,797 |
| Foreign exchange gains | 332,877 | 2,748,021 |
| Total | 1,010,204 | 3,275,818 |
| 2020 | 2021 |
|---|---|
| Finance costs | |
| Regular and penalty interest expense | (4,816,968) |
| Foreign exchange losses | (2,253,267) |
| Interest expense on lease | (3,137,393) |
| Total | (10,207,628) |
NET FINANCE (EXPENSES) / INCOME | (9,197,424) | (7,945,618)
The Company is liable for income tax under the laws and regulations of the Republic of Croatia. The tax base is determined as the difference between income and expenses for the period plus and net of income and expenses having a different tax treatment according to the tax regulations concerning the taxation of income. The income tax rate was 18% in all presented periods.
| 2020 | 2021 | |
|---|---|---|
| Accounting loss before tax | (107,483,113) | (7,575,778) |
| Income tax calculated at the rate of 18% | (19,346,960) | (1,363,640) |
| Effects of expenses not recognised for tax purposes | 13,880,352 | 632,109 |
| Effects of income not recognised for tax purposes | (1,149,146) | (3,659,515) |
| Effects of unrecognised deferred tax assets | 6,615,754 | 4,391,046 |
| Income tax | - | - |
The Tax Administration has not conducted any audits of the Company’s income tax returns in the past several years. According to the relevant tax regulations, the Tax Administration may inspect Company’s books and records at any time within three years of the end of the year in which the relevant tax liability is presented and may impose additional tax liabilities and penalties. The Management Board is not aware of any circumstances that may give rise to a potential material liability in this respect.
As at 31 December 2021, temporary tax differences for which deferred tax assets were not recognised, and which relate to property, plant and equipment, amount to HRK 20,293 thousand. Also, the Company has tax losses available for utilisation in the amount of HRK 12,938 thousand for which deferred tax assets are not recognised as presented in the table below. Deferred tax assets are not recognised given that their utilisation is uncertain. In the following periods, the Company will consider the recognition of deferred tax assets in accordance with the requirements of IAS 12.
Tax losses available for carry forward are presented below:
| Year incurred | Amount | Year of expiry |
|---|---|---|
| 2017 | (6,359,699) | 2022 |
| 2018 | (3,449,889) | 2023 |
| 2019 | (920,085) | 2024 |
| 2020 | (36,754,195) | 2025 |
| 2021 | (24,394,700) | 2026 |
| Total | (71,878,568) |
| 2020 | 2021 | |
|---|---|---|
| Loss attributable to shareholders of the Company | (107,483,113) | (7,575,778) |
| Weighted average number of ordinary shares used to calculate basic/diluted earnings per share | 27,971,463 | 27,971,463 |
| Basic and diluted loss per share | (3.84) | (0.27) |
| Item description | Land | Buildings | Plant and equipment | Other assets | Tangible assets under construction | Total |
|---|---|---|---|---|---|---|
| COST | ||||||
| At 1 January 2020 | 269,098,311 | 680,873,335 | 98,444,543 | 857,972 | 35,855,416 | 1,085,129,577 |
| Additions | - | 53,668,457 | 38,074,627 | 327,744 | (33,188,961) | 58,881,867 |
| Disposals | (9,196) | - | (3,017,391) | - | - | (3,026,587) |
| At 31 December 2020 | 269,089,115 | 734,541,792 | 133,501,779 | 1,185,716 | 2,666,455 | 1,140,984,857 |
| Additions | - | 7,381,156 | 19,063,046 | 518,488 | 919,997 | 27,882,687 |
| Disposals | (220,635) | - | (1,596,300) | - | - | (1,816,935) |
| At 31 December 2021 | 268,868,480 | 741,922,948 | 150,968,525 | 1,704,204 | 3,586,452 | 1,167,050,609 |
| ACCUMULATED DEPRECIATION | ||||||
| At 1 January 2020 | - | 455,419,717 | 29,400,886 | 268,283 | - | 485,088,886 |
| Depreciation charge | - | 8,385,153 | 13,614,572 | 102,299 | - | 22,102,024 |
| Disposals | - | - | (2,734,098) | - | - | (2,734,098) |
| Impairment of non-current assets | 27,988,580 | 25,005,665 | - | - | - | 52,994,245 |
| At 31 December 2020 | 27,988,580 | 488,810,535 | 40,281,360 | 370,582 | - | 557,451,057 |
| Depreciation charge | - | 8,637,940 | 16,985,369 | 158,039 | - | 25,781,348 |
| Disposals | - | - | (1,111,967) | - | - | (1,111,967) |
| At 31 December 2021 | 27,988,580 | 497,448,475 | 56,154,762 | 528,621 | - | 582,120,438 |
| NET BOOK AMOUNT | ||||||
| At 31 December 2020 | 241,100,535 | 245,731,257 | 93,220,419 | 815,134 | 2,666,455 | 583,533,800 |
| At 31 December 2021 | 240,879,900 | 244,474,473 | 94,813,763 | 1,175,583 | 3,586,452 | 584,930,171 |
17. PROPERTY, PLANT AND EQUIPMENT (continued)
Additions to tangible assets in 2021: buildings in the amount of HRK 8,045,666 relate to investments in hotel facilities (upgrading the classification of hotels, developing campsites and other construction works), equipment in the amount of HRK 19,063,047 relates to the purchase of equipment necessary for operations in hotels and campsites, additions to tangible assets under construction in the amount of HRK 919,997 relate to investments in hotel facilities and campsite development, which were not put into use during 2021. The disposals in land in the amount of HRK 1,656,212 relate to the divestment in 2021 (of which the amount of HRK 220,635 relates to own property, and the amount of HRK 1,435,578 relates to investment property).
Additions to tangible assets in 2020: buildings in the amount of HRK 53,668,457 relate to investments in hotel facilities (upgrading the classification of hotels, developing campsites and other construction works), equipment in the amount of HRK 38,074,627 relates to the purchase of equipment necessary for operations in hotels and campsites and the disposals in tangible assets under construction in the amount of HRK 33,188,961 relate to investments in hotel facilities and campsite development, which were not put into use during 2019 but rather during 2020.
As at 31 December 2021, the carrying amount of mortgaged properties (hotels Omorika, hotel Ad Turres, Esplanade, Katarina, International, Slaven resort, pavilions, swimming pool and central restaurant within the Ad Turres, Kačjak and Kaštel resorts) amounts to a total of HRK 298,653,837 (31 December 2020: HRK 165,115,398).
The total value of tangible assets that are fully depreciated, and which are still in use as at 31 December 2021 amounts to HRK 107,649,750 (31 December 2020: HRK 102,812,819).
| Item description | Licences, software and other rights | Total |
|---|---|---|
| COST | ||
| At 1 January 2020 | 1,701,050 | 1,701,050 |
| Additions | 601,675 | 601,675 |
| Disposals | (373,137) | (373,137) |
| At 31 December 2020 | 1,929,588 | 1,929,588 |
| Additions | 1,554,211 | 1,554,211 |
| Disposals | (12,245) | (12,245) |
| At 31 December 2021 | 3,471,554 | 3,471,554 |
| ACCUMULATED AMORTISATION | ||
| At 1 January 2020 | 1,570,302 | 1,570,302 |
| Amortisation charge | 110,212 | 110,212 |
| Disposals | (368,741) | (368,741) |
| At 31 December 2020 | 1,311,773 | 1,311,773 |
| Amortisation charge | 286,822 | 286,822 |
| Disposals | (11,926) | (11,926) |
| At 31 December 2021 | 1,586,669 | 1,586,669 |
| NET BOOK AMOUNT | ||
| At 31 December 2020 | 617,815 | 617,815 |
| At 31 December 2021 | 1,884,885 | 1,884,885 |
| Item description | Land and buildings | Total |
|---|---|---|
| COST | ||
| At 1 January 2020 | ||
| At 31 December 2020 | 32,878,873 | 32,878,873 |
| Additions | 664,510 | 664,510 |
| Disposals | (1,435,578) | (1,435,578) |
| At 31 December 2021 | 32,107,805 | 32,107,805 |
| ACCUMULATED DEPRECIATION | ||
| At 1 January 2020 | 1,131,418 | 1,131,418 |
| Depreciation charge | 65,980 | 65,980 |
| Impairment | 549,799 | 549,799 |
| At 31 December 2020 | 1,747,197 | 1,747,197 |
| Depreciation charge | 86,750 | 86,750 |
| Impairment | - | - |
| At 31 December 2021 | 1,833,947 | 1,833,947 |
| NET BOOK AMOUNT | ||
| At 31 December 2020 | 31,131,676 | 31,131,676 |
| At 31 December 2021 | 30,273,858 | 30,273,858 |
19. INVESTMENT PROPERTY (continued)
Investment property relates to land and buildings that are leased or held for future realisation through renting or selling. The fair value of investment property based on an external appraisal by independent appraisers or an internal appraisal amounts to HRK 30,274 thousand at the balance sheet date. Estimates of the fair value of investment property are categorised as level 3 in the fair value hierarchy.
| 31 December 2020 | 31 December 2021 | |
|---|---|---|
| Hoteli Novi d.d. in bankruptcy | 4,384,800 | 4,384,800 |
| Impairment of shares | (4,384,800) | (4,384,800) |
| TOTAL | - | - |
As at 31 December, the Company holds shares in the following subsidiaries:
| Country | Ownership share | 31 December 2020 | 31 December 2021 | |
|---|---|---|---|---|
| Club Adriatic /i/ | Republic of Croatia | 100% | 117,604,500 | 117,604,500 |
| Stolist /ii/ | Republic of Croatia | 100% | 976,685 | 976,685 |
| TOTAL | 118,581,185 | 118,581,185 |
/i/ Club Adriatic CLUB ADRIATIC d.o.o., with its registered office in Baška Voda, Petra Krešimira IV 11, Company ID No.: 44661735229, operates a hotel and a campsite at Baško polje. Hotel Alem has 99 double rooms and 9 double suites and the annexes have 99 more double rooms.Baško Polje Campsite, classified as a 3-star campsite, has 600 pitches, 3 bungalows and 16 mobile homes. Based on the decision of FINA dated 10 October 2014, a pre-bankruptcy settlement procedure was initiated against the debtor CLUB ADRAITIC d.o.o. Based on the decision of the Commercial Court in Zagreb No. Stpn-217/2015 dated 19 December 2019, which became final on 8 January 2020, the pre-bankruptcy settlement was concluded, and in the following 60 days all actions envisaged by the pre-bankruptcy settlement were carried out, both those relating to the settlement of creditors and those relating to changes in share capital. On 7 April 2020, the debtor CLUB ADRIATIC d.o.o. submitted to FINA the Quarterly and Final Report on the implementation of the pre-bankruptcy settlement. On 6 November 2018, the Restructuring and Sale Center rendered the Decision on Acceptance of the Binding Offer made by Jadran d.d. for the acquisition of three shares in CLUB ADRIATIC d.o.o., Zagreb, having a total nominal value of HRK 120,947,400 which accounts for 100% of the share capital, for a purchase price of HRK 50,500,000. The Agreement on the Sale and Transfer of Shares of CLUB ADRIATIC was signed on 19 November 2018. Jadran d.d. paid HRK 50.5 million on 19 December 2018 and thus acquired control of Club Adriatic d.o.o. On 19 December 2018, the Company acquired 100% of shares in Club Adriatic d.o.o. On 19 December 2019, the Commercial Court in Zagreb issued Decision No. Stpn-217/2015 authorising the pre-bankruptcy settlement agreement between CLUB ADRIATIC d.o.o. as the debtor and its creditors. In the period from 5 March to 11 March 2020 Club Adriatic d.o.o. made payments to all creditors involved in the pre-bankruptcy settlement, in the amounts determined by the pre-bankruptcy settlement as amounts to be paid after the write-off. It was not possible to make a payment to a small number of creditors, who were deleted from the court register or did not have open accounts, so the amount of HRK 41,419.51 was stored in a special account and will be paid if the legal preconditions are met.
/ii/ Stolist - On 18 June 2019, the Company entered into a Sale and Purchase Agreement for the acquisition of Stolist d.o.o. Pursuant to this Agreement, the Company acquired 100% of the shares in the said company. The Company paid HRK 976,685 to acquire Stolist d.o.o.
| 31 December 2020 | 31 December 2021 | |
|---|---|---|
| Raw materials and supplies on stock | 417,840 | 719,115 |
| Cost - low value items, tyres in use | 9,457,066 | 9,046,994 |
| Impairment of small inventory and tyres | (9,457,066) | (9,046,994) |
| Trade goods | 13,710 | 30,408 |
| Inventories - packaging | 20,171 | 55,458 |
| TOTAL | 451,721 | 804,981 |
| 31 December 2020 | 31 December 2021 | |
|---|---|---|
| Domestic trade receivables | 3,106,417 | 3,661,557 |
| Foreign trade receivables | 788,595 | 968,092 |
| Impairment of trade receivables - individual adjustments | (1,091,230) | (885,470) |
| Impairment of receivables - expected credit losses (IFRS 9) | (2,390,556) | (1,102,067) |
| Receivables from related parties | 12,352,533 | 11,605,702 |
| Impairment of trade receivables from related parties | (11,064,280) | (11,064,280) |
| TOTAL | 1,701,479 | 3,183,534 |
/i/ The carrying amount of foreign trade receivables is translated from EUR.
Maturity structure of total trade receivables:
| Company | Impairment | Net trade receivables | |
|---|---|---|---|
| 31 December 2020 | 31 December 2021 | 31 December 2020 | |
| Not past due | 390,456 | 1,961,982 | (10,097) |
| Up to 30 days | 250,299 | 284,230 | (31,544) |
| 31-60 days | 439,065 | 716,762 | (91,027) |
| 61-90 days | 113,851 | 593,190 | (60,685) |
| 91-180 days | 1,297,706 | 471,875 | (840,021) |
| 181-365 days | 679,469 | 181,783 | (502,421) |
| 365 days and more | 13,076,699 | 12,025,529 | (13,010,271) |
| TOTAL | 16,247,545 | 16,235,351 | (14,546,066) |
Changes in the impairment allowance on trade receivables for expected credit losses and individual adjustments were as follows:
| 31 December 2020 | 31 December 2021 | |
|---|---|---|
| At 1 January | 12,098,122 | 14,546,066 |
| Increase in expected credit losses in the current period | 2,390,556 | 153,113 |
| Collection/reversal of impairment in the current period | (1,280) | (1,441,602) |
| Total changes in expected credit loss through profit or loss | 2,389,276 | (1,288,489) |
| Write-off of previously impaired receivables | 58,668 | (205,760) |
| At 31 December | 14,546,066 | 13,051,817 |
| 31 December 2020 | 31 December 2021 | |
|---|---|---|
| Grants receivable | 1,823,064 | 74,723 |
| Prepaid VAT receivable | 1,608,943 | 2,689,975 |
| Other receivables from the government | 106,693 | 577,869 |
| TOTAL | 3,538,700 | 3,342,567 |
| 31 December 2020 | 31 December 2021 | |
|---|---|---|
| Suspense accounts for services accounted for | 129,298 | 620,361 |
| Recognised leasehold improvements | 87,450 | 42,769 |
| Banking charges for loans | 281,312 | 221,223 |
| Receivables for advances given /i/ | 1,000,207 | 2,737,562 |
| Prepayments - other costs | 112,629 | 38,609 |
| TOTAL | 1,610,896 | 3,660,524 |
/i/ Receivables arising from advances given relate to advances for rents paid in the amount of HRK 823,563, the amount of HRK 560,199 paid to HEP, the amount of HRK 464,230 paid to Cossetto and other advances given to suppliers.
| 31 December 2020 | 31 December 2021 | |
|---|---|---|
| Receivables for loans granted to related parties /i/ | 26,258,185 | 10,583,134 |
| Impairment of loan receivables – IFRS 9 | (1,631,319) | (16,696) |
| TOTAL | 24,626,866 | 10,566,438 |
/i/ Receivables from related parties in the amount of HRK 10,583,134 relate to short-term loans granted to Club Adriatic d.o.o. in the amount of HRK 10,400,000 and associated interest in the amount of HRK 87,040 and to short-term loans granted to Stolist d.o.o. in the amount of HRK 95,357 and HRK 737 of associated interest. The loans were granted in 2021 at an interest rate of 3.00% and they are repayable at the first call of the lender. The loans are classified as Stage 2.
| 31 December 2020 | 31 December 2021 | |
|---|---|---|
| Bank balances - domestic currency | 9,399,315 | 3,766,850 |
| Bank balances - foreign currency /i/ | 17,261,339 | 11,953,414 |
| Cash on hand | 2,882 | 3,692 |
| TOTAL | 26,663,536 | 15,723,956 |
/i/ The carrying amount of cash at banks in foreign currency was translated from EUR.
The Company mainly deposits cash with local banks that are members of banking groups with the following credit ratings by Standard & Poor's:
| 31 December 2020 | 31 December 2021 | |
|---|---|---|
| Cash at bank and deposits: | ||
| A | 2,040,098 | 6,722,026 |
| BBB | 24,599,035 | 8,961,358 |
| No credit rating | 21,521 | 36,880 |
| TOTAL | 26,660,654 | 15,720,264 |
The Company's share capital amounts to HRK 482,507,730 and is divided among 27,971,463 ordinary shares without a nominal value with the ticker symbol JDRN-R-B. The Company's ID No. (OIB) is 56994999963, while its Reg. No. (MBS) is 040000817. The share capital represents the Company’s own sources of assets for its operating purposes. Capital reserves as of 31 December 2021 as well as of 31 December 2020 amount to HRK 234,210,922 and are not available for distribution to the shareholders. Individual major shareholders are PBZ CO OMF – CATEGORY B which holds 58.10% of shares and ERSTE PLAVI OMF CATEGORY B which holds 30.56% of the Company’s shares.
| 31 December 2021 | 31 December 2020 | |
|---|---|---|
| Investor | Balance % | Balance % |
| ADDIKO BANK D.D./PBZ CO OMF - CATEGORY B (1/1) - Custodial account | 16,250,954 58.10 | 16,228,666 58.02 |
| OTP BANKA d.d. /ERSTE PLAVI OMF CATEGORY B - Custodial account | 8,547,346 30.56 | 8,547,346 30.56 |
| RESTRUCTURING AND SALE CENTER - CERP (0/1) REPUBLIC OF CROATIA (1/1) ZS | 673,666 2.41 | 673,666 2.41 |
| HRVATSKE VODE, WATER MANAGEMENT CORPORATION (1/1) | 208,292 0.74 | 208,292 0.74 |
| TOWN OF CRIKVENICA (1/1) | 184,056 0.66 | 184,056 0.66 |
| OTP BANKA D.D./ERSTE PLAVI EXPERT - VOLUNTARY PENSION FUND (1/1) - Custodial account | 174,249 0.62 | 174,249 0.62 |
| OTHER SHAREHOLDERS | 1,932,900 6.91 | 1,955,188 6.99 |
| TOTAL | 27,971,463 100 | 27,971,463 100 |
| 31 December 2020 | 31 December 2021 | |
|---|---|---|
| Provisions for termination benefits | 174,648 | 237,980 |
| Provisions for jubilee awards | 309,353 | 287,367 |
| Provisions for legal disputes | - | 181,000 |
| TOTAL | 484,001 | 706,347 |
Movements in provisions over the years are as follows:
| Legal disputes | Termination benefits | Jubilee awards | Total | |
|---|---|---|---|---|
| At 31 December 2019 | - | 151,448 | 337,971 | 489,419 |
| Additional provisions based on estimate | - | 23,200 | - | 23,200 |
| Release of provisions | - | - | (28,618) | (28,618) |
| At 31 December 2020 | - | 174,648 | 309,353 | 484,001 |
| Additional provisions based on estimate | 181,000 | 63,332 | - | 244,332 |
| Release of provisions | - | - | (21,986) | (21,986) |
| At 31 December 2021 | 181,000 | 237,980 | 287,367 | 706,347 |
| 31 December 2020 | 31 December 2021 | |
|---|---|---|
| Interest in currency | 1,377,861 | 859,068 |
| Long-term loans-HBOR - DT-6/15 /i/ | 1,718,321 | 1,071,140 |
| Long-term loans-HBOR - DT-1/16 /ii/ | 13,382,934 | 12,294,129 |
| Long-term loans-HBOR - DT-10/16 /iii/ | 7,798,357 | 7,163,900 |
| Long-term loans-PBZ - 2016 -5110217867-5110217867 /iv/ | 46,124,889 | 36,803,344 |
| Long-term loans-PBZ - 2019 -5110228722-5110228722 /v/ | 92,327,001 | 85,572,377 |
| Long-term loans-ERSTE-2019-5117407680/15 /vi/ | 101,303,446 | 101,038,335 |
| TOTAL LIABILITIES | 264,032,809 | 244,802,293 |
| Current maturities of long-term loans in the current year | (119,452,974) | (28,859,295) |
| Interest in currency | (1,377,861) | (859,068) |
| CURRENT LIABILITIES | (120,830,835) | (29,718,363) |
| NON-CURRENT LIABILITIES | 143,201,974 | 215,083,930 |
A summary of long-term loans denominated in foreign currencies is presented below:
| 31 December 2020 | 31 December 2021 | |
|---|---|---|
| EUR | 264,032,809 | 244,802,293 |
/i/ In 2015, the Company entered into a long-term loan agreement with the Croatian Bank for Reconstruction and Development for a loan of HRK 7 million, repayable over 5 years, with a 1-year grace period and 3% interest rate, for the renovation of facilities and upgrading the classification of Hotel Omorika and Selce Autocamp. The loan matures in 2022 due to moratorium granted in Covid period.
/ii/ In 2016, the Company entered into a long-term loan agreement with the Croatian Bank for Reconstruction and Development for a loan of HRK 17,400,000, repayable over 8 years, with a 1-year and 10 months grace period and 3% interest rate, for the renovation of facilities and upgrading the classification of Hotel Omorika and Hotel Varaždin (Katarina).
/iii/ In 2016, the Company entered into a long-term loan agreement with the Croatian Bank for Reconstruction and Development for a loan of HRK 10 million, repayable over 8 years, with a 1-year and 3 months grace period and 3% interest rate, for the renovation of facilities and upgrading the classification of Hotel Varaždin (Katarina).
/iv/ In 2016, the Company entered into a long-term loan agreement with Privredna banka Zagreb d.d. for a loan of EUR 7,400,000, repayable over 6 years, with a 1-year and 6 months grace period and 2.6% interest rate, for the renovation of facilities and upgrading the classification of Hotel Varaždin (Katarina) and Hotel Esplanade and to purchase the receivables from Veneto banka d.d. This Agreement was entered into in December of 2016. The amount of EUR 7,343,852 was drawn under the loan, and the loan commencement date was 20 July 2019.
/v/ In 2019, the Company entered into a long-term loan agreement with Privredna banka Zagreb d.d. for a loan of EUR 12,250,000, repayable over 12 years, with a 2.05% interest rate, for the renovation of facilities and upgrading the classification of the Ad Turres resort, Selce Campsite - swimming pool and allotment, Hotel Katarina, Hotel Omorika, Kačjak resort, Slaven pavilions and Hotel Esplanade.
/vi/ In 2019, the Company entered into a long-term loan agreement with Erste&Steiermärkische Bank d.d. for a loan of EUR 13,441,000.00, repayable over 10 years, with a 2.1% interest rate, to be used for investments - purchasing and other costs of acquiring Club Adriatic d.o.o. Zagreb.
| 31 December 2020 | 31 December 2021 | |
|---|---|---|
| Bankruptcy Plan /i/ | 61,720 | 61,720 |
| TOTAL | 61,720 | 61,720 |
/i/ The liabilities under the Bankruptcy Plan of HRK 61,720.31 relate to liabilities to secured creditors of the 2nd rank = HRK 31,224.55 and liabilities intended to be included in the share capital of HRK 30,496. The Bankruptcy Plan does not infringe on the secured creditors’ right to be paid from items subject to separate satisfaction.
| 31 December 2020 | 31 December 2021 | |
|---|---|---|
| Domestic trade payables | 8,131,651 | 10,462,536 |
| Liabilities to related suppliers (Note 39) | 968,864 | - |
| Foreign trade payables | 131,567 | 60,334 |
| TOTAL | 9,232,082 | 10,522,870 |
| 31 December 2020 | 31 December 2021 | |
|---|---|---|
| Advances received | 2,719,563 | 2,585,739 |
| Security and other deposits | 593,619 | 533,619 |
| TOTAL | 3,313,182 | 3,119,358 |
| 31 December 2020 | 31 December 2021 | |
|---|---|---|
| Net salaries payable | 1,190,067 | 1,672,340 |
| Unused vacation days | 397,251 | 1,708,294 |
| Liabilities to employees - bonuses | 1,393,817 | 2,908,982 |
| Liabilities to employees - redistribution of working hours | 63,715 | 592,510 |
| Other liabilities to employees | 531,124 | 261,815 |
| TOTAL | 3,575,974 | 7,143,941 |
| 31 December 2020 | 31 December 2021 | |
|---|---|---|
| Contributions from and on salaries | 580,096 | 932,668 |
| Taxes and surtaxes payable | 133,434 | 190,955 |
| Other liabilities to the government | (312,889) | 237,454 |
| TOTAL | 400,641 | 1,361,077 |
| 31 December 2020 | 31 December 2021 | |
|---|---|---|
| Accrual of received capital grants /i/ | 799,999 | 737,911 |
| Fees based on temporary service agreements | 30,136 | 75,095 |
| Scholarships | 25,200 | 23,025 |
| Other liabilities - unpaid to bankruptcy creditors | 6,695 | 6,695 |
| TOTAL | 862,030 | 842,726 |
/i/ The capital grants remitted by the Energy Efficiency and Environmental Protection Fund relate to the reconstruction of the heating system at Hotel Katarina in 2016 and are prorated to revenue on an annual basis.
The cost of interest on lease liabilities is included in Finance costs - Interest expense on lease (Note 13). The method of recognition and measurement is set out in Note 2.20.
| 1 January 2021 | 31 December 2021 | |
|---|---|---|
| Non-current lease liabilities | 109,270,795 | 96,385,274 |
| Current lease liabilities | 16,567,007 | 24,906,138 |
| TOTAL | 125,837,802 | 121,291,412 |
| Vehicles | Real estate | Beach concession | Total | |
|---|---|---|---|---|
| Net book amount at 31 December 2019 | 59,082 | 16,000,011 | - | 16,059,093 |
| Net book amount at 1 January 2020 | 59,082 | 16,000,011 | - | 16,059,093 |
| Initial recognition as per new contracts | 886,228 | 101,921,640 | 637,737 | 103,445,605 |
| Modifications to existing contracts | - | 5,721,729 | - | 5,721,729 |
| Depreciation for the year | (439,062) | (14,394,249) | (75,028) | (14,908,339) |
| Impairment | - | (5,786,496) | - | (5,786,496) |
| Net book amount at 31 December 2020 | 506,248 | 103,462,635 | 562,709 | 104,531,592 |
| Net book amount at 1 January 2021 | 506,248 | 103,462,635 | 562,709 | 104,531,592 |
| Initial recognition as per new contracts | 54,390 | 6,999,000 | - | 7,053,390 |
| Modifications to existing contracts | 1,112,795 | 5,740,838 | - | 6,853,633 |
| Depreciation for the year | (763,810) | (19,032,247) | (75,028) | (19,871,085) |
| Disposals | (54,638) | - | - | (54,638) |
| Net book amount at 31 December 2021 | 854,985 | 97,170,226 | 487,681 | 98,512,892 |
As stated in Note 2.20, the Company uses the exemption expedient for short-term leases and low-value leases. In 2021, short-term leases and low-value leases amounted to HRK 515,886 (Note 9).
After the bankruptcy proceedings were completed in 2014, the Company continued to conduct all court disputes initiated at the time of bankruptcy, as well as those the Company did not manage to resolve during the bankruptcy period. The process of the Company’s transformation and the Property Statement Resolution issued by the Croatian Privatisation Fund resulted in unresolved proprietary matters. For the purpose of resolving such proprietary matters regarding its properties, the Company initiated individual corrective processes to align the land registry status with the actual status of the properties, as well as processes to establish title. Modular structures owned by third parties were illegally mounted on a part of assets owned by the Company, namely at the Selce campsite and the Kačjak campground. As the owners of such modular structures refuse to remove them and surrender the plots, the Company took legal action for the purpose of repossessing the land/plots as well as action for damages for the unauthorised use of land owned by the Company. The Company is involved in property disputes for determining the title over a part of land surrounding the Slaven hotel and annex buildings. The Company is involved in three legal proceedings concerning the establishment of title regarding two restaurants that were owned by the Company until 2006, when the Company leased them out. Based on the Decision of the Primorje-Gorski Kotar County, these facilities were given to be managed by third parties, without the Company receiving any compensation. In the meantime, the border of the maritime domain has been determined, which also includes the stated facilities. The proceedings in question are being conducted against the Town of Crikvenica and the Republic of Croatia. Also, the Company has several disputes with the Town of Crikvenica, related to property issues. Returning the plots at the Selce campsite and the Kačjak campground to the Company's possession is a precondition for the Company to continue the investment cycle in these two very attractive locations. For the further continuation of the investment cycle, it is important to resolve the issue of the status of the restaurant as well as disputes with the Town of Crikvenica. As regards other court proceedings, the Company is a party to proceedings for the restitution of and compensation for property seized and enforcement proceedings to collect debt owed to it by third parties.
The main transactions with related parties during 2021 and 2020 were as follows:
| Subsidiary | Revenue | Expenses | Receivables and loans | Liabilities |
|---|---|---|---|---|
| Stolist | 20,784 | - | 72,165 | - |
| Club Adriatic | 1,229,522 | (46,244) | 27,474,274 | (968,864) |
| TOTAL | 1,250,306 | (46,244) | 27,546,439 | (968,864) |
| Subsidiary | Revenue | Expenses | Receivables and loans | Liabilities |
|---|---|---|---|---|
| Stolist | 24,460 | - | 98,219 | - |
| Club Adriatic | 1,437,559 | (26,007) | 11,026,338 | - |
| TOTAL | 1,462,019 | (26,007) | 11,124,557 | - |
| Cash | Liabilities to financial institutions | Lease liabilities | Total | |
|---|---|---|---|---|
| Net debt at 1 January 2020 | 21,261,200 | (186,721,023) | (17,344,062) | (182,803,885) |
| Cash flow | 5,402,336 | (74,415,807) | 685,899 | (68,327,572) |
| Increase arising from new lease agreements and modifications | - | - | (109,167,334) | (109,167,334) |
| Interest expense | - | (4,455,866) | (3,137,393) | (7,593,259) |
| Interest paid | - | 4,455,866 | 3,137,393 | 7,593,259 |
| Foreign exchange differences and other non-cash movements | - | (2,895,979) | (12,305) | (2,908,284) |
| Net debt at 31 December 2020 | 26,663,536 | (264,032,809) | (125,837,802) | (363,207,075) |
| Cash flow | (10,939,580) | 17,973,734 | 18,026,524 | 25,060,678 |
| Increase arising from new lease agreements and modifications | - | - | (13,907,023) | (13,907,023) |
| Interest expense | - | (5,503,093) | (3,619,855) | (9,122,948) |
| Interest paid | - | 6,020,214 | 3,619,855 | 9,640,069 |
| Foreign exchange differences and other non-cash movements | - | 739,661 | 426,889 | 1,166,550 |
| Net debt at 31 December 2021 | 15,723,956 | (244,802,293) | (121,291,412) | (350,369,749) |
On 23 March 2022, the Lease Agreement for the Hotel View located in Postira on the island of Brač was signed for the period from 1 June 2022 to 31 December 2022 with a rent of EUR 225,000.00 payable in HRK at the middle exchange rate of the CNB on the date of the invoice issued by the Lessor over the entire lease term.
The situation in Ukraine is alarming, but due to its volatility it is not possible to assess its impact on the overall tourist season. Given the structure of our guests and the fact that in our facilities we have not had a significant share of guests from Ukraine, Russia and guests from distant markets such as South Korea or the United States, at this time we still believe in a very successful season in the Kvarner and Istria region. Compared to the same period last year, the dynamics of accommodation bookings has slowed down, with an increasing tendency. In our Dalmatian destinations, activities have been launched to adapt to the possible reduction in the number of air travellers.
Key operating indicators for the Company
| 2020 | 2021 | 2021/2020 | |
|---|---|---|---|
| Number of accommodation units (capacity) | 2,169 | 2,454 | 13.1% |
| Number of bed-places | 5,067 | 5,772 | 13.9% |
| Full occupancy days | 47 | 72 | 53.2% |
| Annual occupancy rate | 12% | 20% | 66.7% |
| Number of accommodations sold | 84,574 | 176,327 | 108.5% |
| Number of overnights | 215,111 | 443,364 | 106.1% |
| ADR (in HRK) | 474 | 519 | 9.5% |
| RevPar (in HRK) | 28,556 | 49,631 | 73.8% |
Key financial indicators for the Company
| 2020 | 2021 | 2021/2020 | |
|---|---|---|---|
| TOTAL REVENUE | 73,164,186 | 150,793,616 | 106.1% |
| SALES REVENUE | 60,003,345 | 133,741,797 | 122.9% |
| OTHER OPERATING INCOME | 12,150,637 | 13,776,001 | 13.4% |
| TOTAL COSTS | 180,647,299 | 158,369,394 | -12.3% |
| OPERATING EXPENSES | 170,439,671 | 147,147,958 | -13.7% |
| MATERIAL COSTS | 32,421,118 | 54,359,111 | 67.7% |
| STAFF COSTS | 29,604,392 | 40,493,279 | 36.8% |
| DEPRECIATION AND AMORTISATION | 37,186,555 | 46,026,005 | 23.8% |
| IMPAIRMENT OF NON-CURRENT NON-FINANCIAL ASSETS | 59,330,540 | 0 | n/a |
| VALUE ADJUSTMENT | 4,146,568 | -2,723,192 | -165.7% |
| OTHER COSTS | 7,750,498 | 8,992,755 | 16.0% |
| FINANCE INCOME | 1,010,204 | 3,275,818 | 224.3% |
| FINANCE COSTS | 10,207,628 | 11,221,436 | 9.9% |
| EBITDA | -61,099,134 | 46,395,845 | -175.9% |
| EBITDA MARGIN | -84% | 31% | -136.8% |
| NORMALISED EBITDA | 2,377,974 | 43,672,654 | 1736.5% |
| NORMALISED EBITDA MARGIN | 3% | 29% | 798.30% |
| EBIT | -98,285,689 | 369,840 | -100.4% |
| NORMALISED EBIT | -34,808,581 | -2,353,351 | -93.2% |
| EBT | -107,483,113 | -7,575,778 | -93.0% |
1 EBITDA was normalised for one-time costs
2 EBIT was normalised for one-time costs
JADRAN, joint stock company for hotel and tourism, entity registration number (MBS): 040000817, personal identification number (OIB): 56994999963. The abbreviated name of the company is JADRAN d.d.
JADRAN d.d. is a joint stock company. The headquarters are in Crikvenica, Bana Jelačića 16, Republic of Croatia.
The Company's share capital amounts to HRK 482,507,730 and is divided among 27,971,463 ordinary shares without a nominal value with the ticker symbol JDRN-R-B. The shares were issued in dematerialized form, code JDRN-R-B, ISIN code HRJDRNB0002 and are kept in the SKDD depository.
In 2021, the Supervisory Board comprised the following members:
* Goran Hanžek, Chairman of the Supervisory Board as of 30 July 2021
* Tomislav Kitonić, Chairman of the Supervisory Board until 30 July 2021
* Karlo Došen, Deputy Chairman of the Supervisory Board
* Adrian Čajić, Member of the Supervisory Board as of 23 April 2021
* Ivan Blažević, Member of the Supervisory Board until 23 April 2021
* Dragan Magaš, Member of the Supervisory Board
* Mirko Herceg, Member of the Supervisory Board
In 2021, the Management Board comprised the following members:
* from 1 January 2021 to 1 September 2021:
* Goran Fabris, Chairman of the Management Board
* Ivan Safundžić, Member of the Management Board
* from 1 September 2021 to 31 December 2021:
* Goran Fabris, Chairman of the Management Board
* Ivan Safundžić, Member of the Management Board
* Miroslav Pelko, Member of the Management Board
The members of the Company’s Management Board are authorised to represent the Company together with another member of the Management Board, based on the amendment to the provisions of the Articles of Association adopted at the General Assembly as at 31 August 2020.
The JADRAN group consists of JADRAN d.d. and its subsidiaries:
* CLUB ADRIATIC d.o.o. in which JADRAN has 4 business shares with a total value of HRK 117,104,500.00, which makes 100% of shares and voting rights: one business share with a nominal amount of HRK 9,900.00, one business share with a nominal value of HRK 53,570.10. HRK, one business share with a nominal amount of HRK 6,418,000.00 and one business share with a nominal amount of HRK 57,104,500.00.
* Stolist d.o.o. in which JADRAN has 100% business shares.
The list of the Company’s shareholders with a 5% share or more in the share capital of JADRAN d.d. (balance at 31 December 2021) is as follows:
* ADDIKO BANK D.D./PBZ CO OMF - KATEGORIJA B holds 16,250,954 shares, representing a 58.10% share in the Company’s share capital;
* OTP BANKA D.D./ERSTE PLAVI OMF KATEGORIJE B holds 8,547,346 shares, representing a 30.56% share in the Company’s share capital;
The organizational structure in 2021 has changed compared to the 2020 structure. Work in the Company is organized through seven sectors / services led by directors of sectors / services. Additionally, 3 clusters and 2 profit centers were formed within the Hotel Operations Service, while the Office of the Administration, advisors to the Management Board, the Internal Audit and Control Service and the Legal Affairs Service were formed within the Management Board:
* Administration office,
* Advisors to the Management Board,
* Internal Audit and Control Service,
* Legal Affairs Service,
* Human Resources Management Service,
* Informatics Service,
* Technical Support Sector,
* Controlling Service,
* Sales and Marketing Sector,
* Finance and Accounting Sector,
* Hotel Operations Sector:
* Accommodation department,
* Procurement Service,
* HiP Department,
* Cluster Ad Turres, Omorika,
* Selce Cluster,
* Grad Cluster,
* PC Lišanj,
* PC Umag.
Also in 2021, the challenging trend of doing business in pandemic circumstances, which began in 2020, continued. Based on the previous season’s business performance, further partial support through government instruments of job preservation measures, the advantage of independence from air transport due to the geographical proximity of emitting markets and epidemiological measures aimed at successful preparation and realisation of the tourist season, business results have reached record numbers compared to 2020 and record 2019.
In 2021, campsites have been recognised as a very interesting product as they provide all the comfort and infrastructure of hotel accommodation, but offer additional privacy, proximity to nature and freedom of movement, which has proven to be a benefit in the present specific epidemiological circumstances. We believe that further investment planning in campsite infrastructure will significantly contribute to better future results.
Source: JADRAN d.d.
The continuation of the investment cycle and new facilities in the company's portfolio resulted in an increase in overnight stays in 2021 compared to the successful 2019 and pandemic 2020. Hotel accommodation grew by 101% compared to 2020 and 13% compared to 2019, while campsites grew by 120% compared to 2020 and 14% compared to 2019. It should be noted that the growth in 2021 was achieved due to the new facility, the camp Uvala Slana, which the Company leased for 3 years.
The flexibility of cancellation policies, last-minute bookings and travel uncertainty have resulted in changes to sales channels distribution.The share of individual channels increased by 595% compared to 2019, which is a positive result of continued investment in the reservation center and the beginning of targeted advertising using Google Adwords, which brings guests to the Company’s website. Online booking increased from a 34% share in 2019 to a 46% share in overnight stays in 2021.
Chart 2 Overnights by the Company’s sales channels in 2019 and 2021 for hotel accommodation
Source: JADRAN d.d.
Chart 3 Overnights by the Company’s sales channels in 2019 and 2021 for campsites
Source: JADRAN d.d.
Chart 4 Overnight stays by country, hotels in 2021
Source: JADRAN d.d.
In 2021, the Company realized 70% of overnight stays from foreign guests, and as much as 30% of overnight stays from domestic guests in hotel facilities. In 2021, foreign guests came mostly from the emitting markets of Germany, Austria, Hungary, the Czech Republic and Slovenia, with an even more significant increase in guests from Poland compared to the year before.
Chart 5 Overnight stays by country, camps in 2021
Source: JADRAN d.d.
The majority of guests in campsites arrive from Slovenia, followed by guests from Germany, Poland, Croatia and the Czech Republic.
At the beginning of 2021, the Company’s operations were marked by the COVID-19 pandemic to the same extent and in the same way as during almost the entire year 2020. Various forms of restrictions regarding both travels and events have led to most accommodation capacities remaining closed. Other than the café of International Hotel in Crikvenica, which operated in accordance with existing measures and restrictions, the Garden Palace Resort in Umag was opened on 1 February, and on 1 March, the Esplanade Hotel in Crikvenica reopened after having been closed in early January. It is important to note that based on the decision of the Management Board of JADRAN d.d. dated 31 December 2020, the Company accommodated residents living in the earthquake-affected areas of Banovina and Glina in the International Hotel, thus helping thirty families until mid-March 2021.
In the second quarter of 2021, the Company still operated under the strong impact of the COVID-19 pandemic. However, given the many efforts made both at the global and local levels to bring the pandemic under control, the Company recorded a better business result in that period compared to the same period last year. Although being faced with all the challenges posed to the Company by the COVID-19 pandemic, business continued in the third quarter with maximum adherence to all epidemiological measures, all for the purpose of protecting the Company’s guests and employees. In the third quarter of 2021, there was a boost in tourism turnover compared to the same period last year, primarily due to more favourable trends in the expansion of COVID-19 in the Republic of Croatia and the fact that our most important European tourism competitors were in the so-called red zone for most of the third quarter (especially during peak season), which resulted in more tourists travelling to Croatia.
It can be concluded that 2021 was uncertain, challenging and unpredictable for the Company's operations. In order to protect business continuity and preserve liquidity, the Company has maximally streamlined operating expenses, capital expenditures and control of cash outflows, similar to the previous year:
Despite the fact that the Company's operations were extremely challenging in the first half of the year and the future was uncertain and unpredictable at the time, the Company decided to continue the investment cycle. Capital expenditures were limited to completing the investments started in recent years, completing the range of amenities in some facilities, investments in the beach management segment, with liabilities arising from the signed concession agreements, and continuing the investment cycle to ensure the further growth of the Company as well as its future competitiveness. Of the realised investments, special emphasis should be placed on the final completion of the investment in furnishing the annex buildings of Hotel Slaven with the aim of upgrading the classification from 2 to 3 stars, the purchase of 12 new mobile homes, the development and furnishing of plots and a supermarket at the Selce campsite and the beginning of investment in the swimming pool complex at Hotel Omorika. All other operating expenses are limited to those necessary to maintain business continuity.
In the period from January to December 2021, the JADRAN d.d. generated total revenues of HRK 150,793,616 which is HRK 77,629,430 or 106% higher than the total revenues generated in the same period in 2020. Total expenses amounted to HRK of 158,369,394 which was HRK 22,277,905 or 12% less than the costs incurred in the same period in 2020. The Company realised a loss of HRK 7,575,778, which is by HRK 99,907,335 lower than the loss realised in 2020. In 2021, EBITDA amounted to HRK 46,395,845, which is by HRK 107,494,979 higher than the EBITDA realised in 2020.
The analysis of total revenues, which in 2021 amounted to HRK 150,793,616, shows that operating revenues amounted to HRK 147,517,798, which is HRK 75,363,816 or 104% higher than revenues generated in the same period in 2020. To better understand the generated revenues, it should be noted that in the period from January to December 2021, the Company requested and received job preservation grants for the period from January to June in the amount of HRK 4,401,761, while in 2020 the Company received grants for the period from March to August and October to December in the amount of HRK 6,326,824. If we were to compare the total revenues generated from January to December 2021 and 2020 without the aforementioned grants, then in 2021 a total of HRK 146,391,856 or HRK 79,554,494 more revenue was generated than the revenue generated in 2020.
In 2021, the Company’s total expenses amounted to HRK 158,369,394, which is HRK 22,277,905 or 12% lower than the expenses incurred in the same period in 2020. Operating expenses amounted to HRK 147,147,958 and were HRK za 23,291,713 or 14% lower than operating expenses in 2020. In 2020, material costs amounted to HRK 54,359,111 , which is HRK 21,937,993 or 68% higher than the costs incurred in 2020. Staff costs amounted to HRK 40,493,279 and exceed the costs incurred in 2020 by HRK 10,888,888 or 37%. In 2021, amortisation and depreciation amounted to HRK 46,026,005 , which is HRK 8,839,450 or 24% higher than the amortisation and depreciation realised in 2020. Other operating expenses amounted to HRK 8,992,754 and were HRK 1,242,256 or 16% higher than the expenses incurred in 2020.
In 2021, impairment losses on non-financial assets amounted to HRK 0.00, while in 2020 they amounted to HRK 59,330,540 . In 2021, the net impairment gains on financial assets amounted to HRK 2,723,192 , while in 2020 it amounted to HRK - 4,146,568 .
In the period from January to December 2021, the Company realised a loss in the amount of HRK 7,575,778, while in the same period in 2020 it realised a loss in the amount of HRK 107,483,113. In 2021, EBITDA amounted to HRK 46,395,846, which is by HRK 107,494,980 lower than the EBITDA realised in the same period in 2020.
Jadran d.d. manages owned properties and properties for which it has entered into lease agreements for a period longer than 1 year.
Table 3 The Company’s accommodation capacities
| FACILITY | Classification: | Capacity of accommodation units | Capacity of bed-places |
|---|---|---|---|
| KAČJAK | 2* rooms | 185 | 435 |
| OMORIKA | 4/3 | 169 | 350 |
| AD TURRES TN | TN 3* | 351 | 663 |
| AD TURRES HOTEL | 3* | 40 | 80 |
| ESPLANADE | 4* | 38 | 76 |
| ZAGREB | 2* | 40 | 62 |
| INTERNATIONAL | 2* | 52 | 82 |
| KAŠTEL | 3* | 74 | 178 |
| KATARINA | 4* | 176 | 352 |
| SLAVEN HOTEL | 3* | 50 | 85 |
| SLAVEN PAVILIONS | 3* | 157 | 314 |
| SELCE CAMPSITE | 3* | 500 | 1,500 |
| UVALA SLANA CAMPSITE | 3/4 | 204 | 567 |
| KAČJAK CAMPGROUND | campground | 30 | 90 |
| DELFIN | boarding house | 48 | 123 |
| LIŠANJ | 4* | 228 | 522 |
| GARDEN PALACE RESORT UMAG | 4* | 112 | 293 |
| TOTAL IMMOVABLE FACILITIES | 1,720 | 3,615 | |
| TOTAL OTHER | 734 | 2,157 | |
| TOTAL | 2,454 | 5,772 |
Source: JADRAN d.d.
On 6 May 2021, the Company entered into a lease agreement for the Uvala Slana campsite including the Club Vala apartments with the Republic of Croatia, the Ministry of Physical Planning, Construction and State Assets, for a fixed period of 3 years. By entering into this Agreement, the Company's capacities were expanded by 204 accommodation units. On 1 July 2021, the Compay additionally leased the annex to the Lišanj Hotel, which further expanded the Company's capacity by 60 accommodation units.
After the bankruptcy proceedings were completed in 2014, the Company continued to conduct all legal disputes initiated at the time of bankruptcy of JADRAN d.d., as well as those that the stated company did not manage to resolve during the bankruptcy period. The process of the Company’s transformation and the Property Statement Resolution issued by the Croatian Privatisation Fund resulted in unresolved proprietary matters.# Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
For the purpose of resolving such proprietary matters regarding the stated company’s properties, Company initiated individual corrective proceedings to align the land registry status with the actual status of the properties, as well as processes to establish title. Modular structures owned by third parties were illegally mounted on a part of assets owned by Company namely at the Selce campsite and the Kačjak campground. As the owners of such modular structures refuse to remove them and surrender the plots, the Company took legal action for the purpose of repossessing the land/plots. The Company also conducts property disputes in order to determine the ownership rights to the part of the land around the Slaven hotel and annex. The Company is involved in three legal proceedings concerning the establishment of title regarding two restaurants that had been owned by the stated company until 2006, when the Company leased them out. Based on the Decisions of the Primorje-Gorski Kotar County, these facilities were given to be managed by third parties, without JADRAN d.d. receiving any compensation, considering that the stated company built and maintained these properties until they were leased. The proceedings in question are being conducted against the Town of Crikvenica and the Republic of Croatia. Also, the Company has several disputes with the Town of Crikvenica, related to property issues. Returning the plots at the Selce campsite and the Kačjak campground to the possession of the Company is a precondition for the stated company to continue the investment cycle in these two very attractive locations. For the further continuation of the investment cycle, it is important to resolve the issue of the status of the restaurant as well as disputes with the Town of Crikvenica. As regards other legal proceedings, the Company is a party to proceedings for the restitution of and compensation for property seized and enforcement proceedings to collect receivables from third parties.
The most significant risks faced by the Company are as follows:
Competition risk in the tourism market is very high because other similar tourism destinations have invested substantial funds to further improve and develop their capacities, as well as in other marketing activities focusing on the arrival of tourists. Among other things, competition is based on the prices, quality and substance of tourism offers on the Crikvenica Riviera and other domestic and foreign tourism destinations. To increase its market competitiveness, the Company launched a new investment cycle in 2018, which continued in 2021 including not only investments in accommodation for the purpose of increasing the number of units and improve accommodation quality, but also investments in the destination through active involvement in all events and designing new attractions on the Crikvenica Riviera. Regardless of the “coronavirus crisis”, the Company's Management Board has assessed that, without jeopardising its liquidity, the Company can continue with a part of its investments planned for the 2021 season, which were concluded during the year. In addition to all the existing challenges related to competitiveness, the events related to the COVID-19 pandemic require that it should be considered how the Company and the local community manage the events related to this new challenge. The way in which the local communities at the destinations where the Company operates will respond to the challenges will be extremely important for the Company’s future business and therefore the Company is trying to engage in solving this problem in a structural manner.
The official currency of the Company is HRK, but certain transactions denominated in foreign currencies are translated into HRK at the prevailing exchange rate at the balance sheet date. The resulting exchange differences are charged to operating expenses or credited to the income statement, but do not affect operating cash flows.
The Company is exposed to interest rate risk because it enters into loan agreements with banks at variable interest rates, which exposes the Company to higher risk. The inflation rate trends and the levels of interest rates on foreign and domestic financial markets are actively monitored, enabling the Company to react in a timely manner in the event of expected changes in interest rates on the domestic money market.
Settlement risk is present in all bilateral transactions. Given that settling financial obligations to issuers is one of the key elements necessary for smooth business operations, the Company considers this risk to be highly important. The Company has established stringent procedures to minimise collection risks. During the pandemic, certain partners may be further exposed to liquidity risk, which may result in higher settlement risk. In addition, settlement risk arising from executed contracts may be significantly increased if there is an option of terminating them on grounds of force majeure or in case the free movement of people and goods is disrupted during the pandemic.
Inflation risk is present in contractual relationships where the price of a service or product is indexed and tied to the Croatian National Bank’s strong HRK policy. As this is an external risk, the ability to eliminate it is minimal. The Company notes trends of increasing inflation rates primarily measured through the consumer price index, as a result of extremely expansive monetary policies of central banks and for the purpose of minimising inflation risk, the Company insists on negotiating fixed terms of supply with all suppliers where possible. Suppliers of energy are an exception - their prices are subject to market variations.
The Company manages liquidity risk by maintaining adequate reserves, bank borrowings and other sources of financing, by continuously monitoring planned and actual cash flows and matching the maturity profiles of financial assets and liabilities. The Company is particularly focused on this risk due to increased uncertainty regarding revenues as a result of the pandemic’s adverse impact on the free movement of guests, guests’ spending power and performance of contractual obligations by business partners. The Company manages liquidity risk by maintaining adequate reserves, bank borrowings and other sources of financing, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. The current high level of indebtedness of the Company does not jeopardise current liquidity, and the Company’s Management Board assesses that even in the event of a continued “crisis”, the Company can provide the necessary liquidity and smooth operations from its own reserves. It should be noted that several parties have expressed their interest for the purchase of a part of the Company’s property that is currently not in operation or its business performance is significantly below its current market value. In 2021, the Company realised the planned divestment in CLUB ADRIATIC, thus creating the preconditions for the repayment of loans by a related company, but also provided funds for a continuous investment cycle, although restricted due to the pandemic.
The risk of changes in tax and concession regulations is the likelihood that legislative authorities will amend tax regulations in a way that they adversely impact the Company’s profitability. This risk is reflected in potential changes in tax rates and taxable assets, as well as changes in regulations concerning concessions and concessional authorisations. The right to use maritime domain is one of the significant conditions for the Company’s further operations, and the Company has actively endeavoured to establish new bases for cooperation with the local community in this segment. During the pandemic, the Company is hoping that the legislator, the relevant executive authorities and the local community will, in addition to the measures absolutely necessary to protect people’s health, offer various financial and operational reliefs for entities adversely affected by the pandemic.
Tourism trends are largely affected by the COVID-19 pandemic and the global political situation. As an industry, tourism is highly sensitive to the epidemiological situation at the destination and its surroundings. By launching the aforementioned investment cycle and the advantages of the geographical position compared to the most important emitting markets (car destination), the Company will endeavour to minimise the impact of adverse market trends and the resulting risks. The global financial crisis may significantly reduce the spending power of individuals inclined to travelling, whereas a pandemic may also significantly reduce or completely eliminate the effects of tourist arrivals at the Company’s destination as a result of the inability to travel outside one’s own country or fear for one’s own health and future.
Environmental risk may significantly affect the Company’s performance, notably through the quality of the sea and coast where guests stay. Climate changes may directly affect the length of stay in the Company’s accommodation facilities. This risk also includes various other natural disasters.
As at 31 December 2021, JADRAN d.d. had a total of 271 employees.
The Company constantly monitors developments in its environment and invests in market research, identification of new business opportunities and new acquisitions. The Company directs and supports the activities of its related parties.
As at 31 December 2021, the share capital of JADRAN d.d.## 10. SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD
On 23 March 2022, the Lease Agreement for the View Hotel located in Postira on the island of Brač was signed for the period from 1 June 2022 to 31 December 2022. The rent was agreed in the amount of EUR 225,000.00 payable in HRK at the middle exchange rate of the CNB on the date of the invoice issued by the Lessor over the entire lease term. The situation in Ukraine is alarming, but due to its unpredictability it is not possible to assess its impact on the overall tourist season. Given the structure of our guests and the fact that in our facilities we have not had a significant share of guests from Ukraine, Russia and guests from remote markets such as South Korea or the United States, at this time we still believe in a very successful season in the Kvarner and Istria region. Compared to the same period last year, the dynamics of accommodation bookings has slowed down, with an increasing tendency. In our Dalmatian destinations, activities have been launched aimed at adapting to the possible decline in the number of air travellers.
Transactions with related companies take place under normal commercial conditions and terms and with the application of market prices. In the observed period, HRK 1,462,019 of revenue from transactions with related parties was generated, while expenses in the same period amounted to HRK 26,007. Balance of receivables from related parties as at 31.12.2021 amounts to HRK 11,124,557.
JADRAN d.d. (hereinafter Jadran d.d. or the Company), in accordance with Article 250.b. paragraphs 4 and 5 and Article 272.p of the Companies Act (Official Gazette No. 111/93, 34/99, 121/99, 52/00 - Decision of the Constitutional Court of the Republic of Croatia, 118/03, 107/07, 146/08, 137/09,152/11 - consolidated text, 111/12, 68/13, 110/15, 40/19 and 34/22), hereby issues this Corporate Governance Statement.
In 2021, JADRAN d.d., whose shares are listed on the ZSE Official Market, applied the Code of Corporate Governance adopted by the Croatian Financial Services Supervisory Agency (HANFA) and the Zagreb Stock Exchange, Inc. Zagreb. This Code has been in force since 1 January 2020, and has been published on the website of the Stock Exchange ( www.zse.hr ) and on the website of the Croatian Financial Services Supervisory Agency ( www.hanfa.hr ). The Company’s application of the Zagreb Stock Exchange’s Code is reflected in an annual questionnaire which is publicly disclosed in accordance with the applicable regulations. The answers in the questionnaire clearly show which provisions of the Code are complied with by the Company and which are not, and the Questionnaire is publicly available on the official website of the Zagreb Stock Exchange ( www.zse.hr ).
The Company's shares were listed on the official market of the Zagreb Stock Exchange in January 2018, and the shareholding report is an integral part of the Annual Report. As of the date its shares were first quoted on the stock exchange, the Company has not recorded profits and no dividend has thus been distributed.
The Company’s share capital is HRK 482,507,730.00, divided and contained in 27,971,463 registered common dematerialised shares without nominal value, each entitling its holder to one vote. There are no holders of securities in the Company that entail special control rights or voting limitations to a specific percentage or number of votes. As at 31 December 2021, the Company held 631 treasury shares. Information about significant shareholders is available on a daily basis on the official website of the Central Depositary and Clearing Company ( www.skdd.hr ).
The Company applied the principle of equal treatment of all shareholders. The shareholders exercised their primary control rights by deciding on matters within their scope of responsibility via the General Meeting. The operation of the General Meeting, its powers, the rights of shareholders and the manner of their realisation are prescribed by the Company's Articles of Association, which are publicly available on the Company's website ( www.jadran-crikvenica.hr ).
The General Meeting is responsible for deciding on the following matters: election and removal of Supervisory Board members, allocation of profits, granting discharge to Management Board members, appointment of auditors, amendments to the Articles of Association, increasing and decreasing of share capital and any other matters placed under its responsibility under the law. The shareholders exercise their rights via the General Meeting.
In 2021, the General Meeting in was convened and held in accordance with the provisions of the Companies Act and the Company's Articles of Association. The General Meeting notice, the motions made to, and resolutions passed by the General Meeting are publicly disclosed in accordance with the Companies Act, the Capital Market Act, the Zagreb Stock Exchange Rules and the Company's Articles of Association. Registrations for the General Meeting are limited insomuch as each shareholder is required to notify his/her their participation in accordance with the Companies Act.
At the session held on 30 July 2021, decisions on granting discharge to the members of the Company’s Management Board and the Supervisory Board were adopted, a decision on loss coverage was rendered and approval of the Remuneration Policy and acceptance of the Report on Remuneration of Members of the Management Board and the Supervisory Board of the Company in 2020and an auditor was appointed to audit the financial statements for 2021. All decisions from the sessions of the General Meeting were published in accordance with legal regulations on the websites of the Company (www.jadran-crikvenica.hr), the Zagreb Stock Exchange and HANFA.
In accordance with the Corporate Governance Code of the Zagreb Stock Exchange and HANFA in force since 1 January 2020, the Supervisory Board is mainly composed of independent members who do not have business, family or other relations with the Company, the majority shareholder or a group of majority shareholders or members of the Management Board or the Supervisory Board of the Company or the majority shareholder. The Supervisory Board has five members, four of whom are elected and relieved of duty by the General Meeting, and one representative is elected by the employees in accordance with the provisions of the Labour Act. In accordance with the amendment of the Articles of Association adopted at the General Meeting on 31 August 2020, the term of office of the Supervisory Board members is 2 years. The rules for appointing and removing members of the Management Board and the Supervisory Board are defined by the Articles of Association and the Companies Act. No restrictions as regards gender, age, education, profession or other similar restrictions apply in any executive, managing or supervisory bodies or at any other level.
Pursuant to the Companies Act and the Company's Articles of Association, the Supervisory Board renders decisions at its meetings. In 2021, the Supervisory Board supervised the management of the Company's affairs in accordance with the Companies Act, the Articles of Association and other internal corporate documents. The Supervisory Board held a total of 10 meetings, which is consistent with good corporate practices. The Supervisory Board of the Company operated three committees which support the Supervisory Board by preparing decisions to be taken by the Supervisory Board and supervising their implementation. These committees are as follows: the Audit and Remuneration Committee, the Appointment Committee and the Corporate Governance Committee.
During 2021, two members of the Supervisory Board were changed. That's how it was on April 23, 2021. The Company received a notification from the Workers' Council on the change of employee representatives on the Supervisory Board, and Mr. Adrian Čajić was appointed as the new employee representative. With the election of a new employee representative on the Supervisory Board, the term of office of the current member of the Supervisory Board ended. 29 July 2021 The President of the Supervisory Board, Mr. Tomislav Kitonić, resigned from his membership in the Supervisory Board. The General Assembly, at its session held on July 30, 2021. appointed Mr. Goran Hanžek a member of the Supervisory Board, and the Supervisory Board at a meeting held on 30 July 2021 make a Decision appointing Mr. Hanžek President of the Supervisory Board.
As at 31 December 2021, the Supervisory Board comprised the following persons :
* Goran Hanžek, Chairman of the Supervisory Board
* Karlo Došen, Deputy Chairman of the Supervisory Board
* Dragan Magaš, Supervisory Board Member
* Mirko Herceg, Supervisory Board Member
* Adrian Čajić - Supervisory Board Member ( employee representative )
In 2021, the Management Board managed the Company’s affairs in accordance with the Companies Act, the Articles of Association and other internal corporate documents, and fully complied with the provisions of the Code.
In 2021, the Company’s Management Board comprised the following persons:
* from 1 January 2021 to 1 September 2021:
* Goran Fabris, Chairman of the Management Board
* Ivan Safundžić, Member of the Management Bord
* from 1 January 2021 to 31 December 2021:
* Goran Fabris, Chairman of the Management Board
* Ivan Safundžić, Member of the Management Bord
* Miroslav Pelko, Member of the Management Bord.
30 July 2021 the Supervisory Board made a Decision appointing Mr.# SUPERVISORY BOARD
Crikvenica, April 28, 2022
Pursuant to Article 300.d, subject to the provision of Article 300.c of the Companies Act (Official Gazette No. 111/93, 34/99, 121/99, 52/00, 118/03, 107/07, 146/08, 137/09, 125/11, 152/11, 111/12, 68/13, 110/15, 40/19, 34/22), and Article 34 of the Articles of Association of JADRAN d.d., the Supervisory Board of JADRAN d.d., having its registered office in Crikvenica, Bana Jelačića 16, adopted at its 46 th meeting held on April 28, 2022 the following Resolution on the Validation of Annual Financial Statements
The 2021 Annual Financial Statements for the Company are hereby approved, including as follows:
The 2021 Consolidated Annual Financial Statements for the Group are hereby approved.
The Auditor’s Report for the Company and the Group prepared by PricewaterhouseCoopers d.o.o., Heinzelova 70, 10000 Zagreb, PIN: 81744835353, is hereby also approved.
In accordance with the provision of Article 300.d of the Companies Act, based on the approval referred to in Section I of this Resolution, the 2021 Annual Financial Statements for Jadran d.d are hereby validated by the Management Board and the Supervisory Board.
Crikvenica, April 28, 2022
Pursuant to Article 300.d, subject to the provision of Article 300.c of the Companies Act (Official Gazette No. 111/93, 34/99, 121/99, 52/00, 118/03, 107/07, 146/08, 137/09, 125/11, 152/11, 111/12, 68/13, 110/15, 40/19, 34/22), and Article 34 of the Articles of Association of JADRAN d.d., the Supervisory Board of JADRAN d.d., having its registered office in Crikvenica, Bana Jelačića 16, adopted at its 46 th meeting held on April 28, 2022 the following DRAFT RESOLUTION ON LOSS COVERAGE FOR 2021
It is hereby established that in the business year that ended on December 31, 2021 JADRAN d.d. recorded an operating loss in the amount of -HRK 7,575,778. It is hereby also proposed that the said loss be covered using the expected future profits.
It is hereby further proposed that the General Meeting accept the joint proposal of the Management Board and the Supervisory Board, as determined in Section I of this Resolution.
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