February 3, 2022
– “Stabilization of business, transformation of the organization and focus on sustainability and business development are the three key goals to which the Management Board of Zagreb Holding will attend to in 2022
”, said the President of the Management Board of Zagreb Holding, Ivan Novaković
, at today’s briefing for journalists.
The presented business plan sets an ambitious goal: from the unaudited HRK 587 million net loss in 2021, to achieve a positive result in 2022. Furthermore, following EBITDA (earnings before interest, taxes and amortization), as one of the most important financial indicators, the plan is to achieve EBITDA of around HRK 504 million from last year’s unaudited negative EBITDA of HRK -90 million, this year at the ZGH Group level.
“In order to achieve these goals, we will twist the long-term negative trends in the business of the Zagreb Holding Group. Namely, the past five years of businesses have been characterized by a continuous decline in revenue and business efficiency, loss and growth in indebtedness, which culminated in 2020 and currently amounts to HRK 4.8 billion. In short, we found a company that had liquidity problems at the time of the takeover and whose level of operating profit did not support the structure of credit liabilities
“, said Novaković.
CHANGE OF DEBT STRUCTURE
Given the previously mentioned level and structure of debt, negotiations will begin with creditors on possible changes to this structure, which will enable the company to stabilize its operations and create a basis for a new investment cycle. This is especially important given the fact that the Holding is due HRK 1.3 billion in loan obligations this year. Stabilization of operations is also necessary in order to create the preconditions for the successful reissue of bonds in the amount of HRK 2.3 billion, which mature in July 2023.
HOLDING RECOVERY MEASURES
Stabilization of the Zagreb Holding Group and its subsidiaries is planned through a series of efficiency measures that include already announced change in the waste management model, reduction of administrative employees, commercialization and sale of non-operating assets, establishment of an efficient billing control system and adjustment of prices for market services, like rental of commercial facilities. Furthermore, the expansion of existing services and digitalization of business is planned to reduce further costs, while increasing the quality and accessibility of services to citizens.
“We estimate that with these measures from sales activities in 2022, operating result (EBITDA) will increase by HRK 150 million, while measures to increase efficiency and reduce costs will have a positive impact on the result by an additional HRK 224 million. This will reverse the long-standing negative trends, stabilize the business and achieve the preconditions for further development of the company and raising the quality of existing services for citizen’s satisfaction.”
RAISING ORGANIZATIONAL EFFICIENCY
The main measures of the Zagreb Holding Group’s recovery are activities aimed at raising internal efficiency and revenue growth, as well as optimizing the number of administrative employees. Currently, 2,569 workers are employed in administrative positions in the Zagreb Holding Group, which is 27 percent of the total number of workers. This share of administrative jobs is planned to be reduced to 19 percent of the total workforce employed in the Zagreb Holding Group in 2022. At the same time, the introduction of shared services, which includes the consolidation and optimization of functions such as accounting, finance, controlling, human resources, procurement and others at the level of the entire Group, will significantly increase organizational efficiency.
INVESTMENT ACTIVITIES IN 2022
Despite the demanding process of increasing business efficiency, the Management Board of Zagreb Holding plans to launch a cycle of significant investments in 2022, of which the most important for citizens are investments in the water supply network worth over HRK 150 million, purchase of vehicles and equipment worth almost HRK 40 million, investments in water meter system renovation and gas meters and investments in IT equipment and software.
Characteristics of business to date - Negative trends
Financial objectives for 2022 - Achieving financial sustainability
Finally, in 2022, business stabilization will be carried out and the preconditions for further development of the Zagreb Holding Group will be realized, which will be manifested through increased quality of service and access to customers, introduction of a fairer waste management system and the beginning of a new investment cycle.