Earnings Report /
Croatia

Adris Group: FY 19 – Strong fundamentals lead to surge in net income by 31%

  • Total revenue growth of 5.3% and a surge in net income of 31% in FY 19

  • Maistra reported sales growth of 6.6% while Croatia Osiguranje’s net earned premium amounted to HRK3bn (+2.3% yoy)

  • Recommend Buy with a TP of HRK475

Tea Pevec
Tea Pevec

Head of Research

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InterCapital
28 February 2020
Published byInterCapital

In FY 19, Adris achieved total revenue growth of 5.3% and a surge in net income AM of 31%. The strong achievement on the bottom line is a result of both growth and operational improvements as well as improvement from financial activities and investments. The hospitality business part in Maistra achieved 6.6% top line growth while fish production business increased sales volumes by 8.4%. On the insurance side, net earned premium was up 2.3% and investment income 15.7%. 

We believe the increase in net income is supportive of its dividend pay-out that amounted to HRK18.2 per share in 2019. As the company is interested tin general to returning more cash to its shareholders via a buy-back programme, we see the increase in net income as a potential for dividend increase.

Maistra in the FY 19 reported sales growth of 6.6%, which was supported by the new accommodation units of premium capacity via the Grand Hotel Park opening in Rovinj. We believe that premium capacity will further allow Adris to extend occupancy and increase ADR due to the addition of 209 premium units. EBITDA grew by 10.8% to HRK458.6mn while margin improved by 140bps to 36.4%. 

Croatia osiguranje’s (CO) net earned premium amounted to HRK3bn (+2.3% yoy) while claims benefits increased 4.9% yoy to HRK 1.4bn. On the other hand, operating expenses increased by only 1.8%, so the cost ratio improved by 20bps. Total GWP in FY 19 has decreased slightly by 0.5% yoy, which is in line with the current strategy of the company to retain its profitable business. This in turn negatively effects the market share. CO's net investment income increased by almost 16%, which acted as a counterweight to the increase in claim benefits and results in the flattish top line amounting to HRK339mn. Lastly, Q4 proved to be a strong quarter for the non-life segment (+5.1%), which should further support the company’s strategy and business development in 2020. 

The local equity market is currently driven by global trends evidenced by the threat of coronavirus outbreak to global and local economy growth prospects. We see downward pressures on a majority of regional shares and this impact is currently outweighing positive results achieved by the company in FY 19.