Annual Report 2 0 0 8 Audited annual report on business operations for the company Cetis, d.d., for the financial year 2008, and autited consolidated annual report for the company Cetis, d.d., for the financial year 2008
Cetis, d. d.
Annual Report 2 0 0 8
Table of Contents
2
4 INTRODUCTION
4
Letter from the General Manager
6
Report of the Cetis, d.d. Supervisory Board
12
Operating Activities of Cetis and Cetis Group in 2008: Highlights
14
Important Events in the Business Year 2008
14
Declaration of Compliance with the Corporate Governance Code for Joint Stock Companies
17
General Information
17
About Cetis
17
Organizational Structure
17
Management and Administrative Bodies
18
Companies of the Group
18
Affiliated Companies
19
History
20 BUSINESS REPORT
21
Business Orientation
21
Mission
21
Vision
21
Values
21
Strategic orientation
22
General Macroeconomic Trends
23
Asset Management
23
Financial Management
24
Investments
26
Shares and Shareholders
29
Sales
29
Commercial Printed Matter
30
Security Printed Matter
30
Sales: Companies of the Group
31
Amba CO., d.o.o.
32
Cetis Zagreb
32
Cetis Tirana
32
Cetis Print
Cetis, d. d.
Annual Report 2 0 0 8
33
Research & Development
33
Developments in Graphics
34
Cetis New Technologies
35
Production
37
Purchasing and Logistics
39
Employees
45
Corporate Social Responsibility and Care for the Environment
45
Quality Management
47
Environmental Responsibility
49
Social Responsibility
3
50 FINANCIAL REPORT FOR CETIS, d.d.
51
Independent Auditor’s Report
52
Statement of Management Responsibility
53
Income Statement
54
Balance Sheet
56
Cash Flow Statement
57
Statement of Changes in Equity
58
Summary of Significant Accounting Policies and Notes to the Financial Statement
67
Income Statement Disclosures
71
Balance Sheet Disclosures
86
Disclosures to Cash Flow Statement
92 CETIS GROUP FINANCIAL REPORT
93
Independent Auditor’s Report
94
Statement of Management Responsibility
95
Consolidated Income Statement
96
Consolidated Balance Sheet
98
Consolidated Cash Flow Statement
100
Consolidated Statement of Changes in Equity
103
Summary of Significant Accounting Policies and Notes to the Financial Statements
114
Income Statement Disclosures
117
Disclosures of Consolidated Balance Sheet Items
131
Disclosures to Cash Flow Statement
INTRODUCTION
Cetis, d. d.
Annual Report 2 0 0 8
Letter from the General Manager
4
Dear business partners, buyers, suppliers, shareholders and employees, the world around us is changing, and so are we – companies, organisations and systems. The only constant in life is change, and in the past year, it was considerable, not only in our country, but also in the wider economic environment. However, we firmly believe that in these difficult economic times, we will find new opportunities to develop and continue to be a successful actor in existing and emerging markets. We will move forward and not dwell on the problems surrounding us. We will continue to seek new business opportunities. A global integrator of information Cetis strives to follow its business vision set out two years ago, i. e., to be a global integrator of information. We still plan to expand to all continents and countries, taking into account commercial needs and our ability to perform. South America, Africa and part of Asia are our target markets. The company will provide its buyers more, and all in one place. We will provide products and services which will help them improve their effectiveness. In this day and age, it is no longer possible to operate without information. All our products carry certain information – for example, bank cards, packaging, lottery tickets, printed forms etc. Year 2008 was … In 2008, the company concluded several important contracts; however, from the financial point of view, this was partly evident not earlier than at the beginning of 2009. The economic outcome was therefore negative, at 0,4 million EUR. The difference between the planned and the actual outcome for 2008 is primarily the result of the above-mentioned fact; at the same time, we must not omit the harsher economic times and the subsequent reduction in orders in all our business sectors. There were setbacks in the realisation of some commercial transactions planned in 2008, but these were then carried out at the beginning of 2009. The company again started producing passports for a large African country. At the end of the 2008 business year, Cetis acquired two bigger projects for a former Yugoslav country – the certificate of vehicle ownership and certificate of vehicle registration, and labels for internal and external application on vehicles. In 2008, when planned commercial transactions were at a standstill, we still managed to achieve a great deal elsewhere. Among other important completed projects is the acquisition of the ISO 27001:2005 Certificate for Information Security, which gives our company a competitive advantage. Cetis was chosen to produce the new Slovenian driving licence, and the company strengthened and expanded its distribution network. At the end of 2008, the company started implementing organisational changes aimed at achieving greater operational efficiency and the goals set for 2009. One of these goals is to achieve 41 million EUR in sales in the Cetis Group, and a positive economic outcome for the parent company. Active co-operation with subsidiaries and affiliates The year 2008 was turbulent not only for the parent company, but also for our affiliates. The shareholders of the affiliated company SNLS in Gabon adopted a number of measures to improve business operations. The capital increase was successfully concluded and the management started looking for a new partner that would be able to enrich the company’s offer with new lottery games and help strengthen the distribution network.
Cetis, d. d.
INTRODUCTION
Annual Report 2 0 0 8
The company Nacional Sh.a Albania started operating at the beginning of 2008. Due to difficulties encountered at the very beginning, the operating result is lower than planned. The company faced difficulties when establishing a distribution network. These were due to a lack of adequate infrastructure, problems with human resources, and the introduction of new games of chance in the Albanian market. As a result, the company adapted the distribution network and marketing in the middle of 2008. At first, the Amba company faced some problems, but in 2008 it managed to reduce operating costs. Not only did it maintain market shares in some markets, but also increased them. By pooling procurement functions, Amba managed to reduce operating costs, and also unified sales. Changes in equity Compared to 2007, the equity of Cetis did not change significantly. Capital in the structure of liabilities represents 61,3 per cent, which indicates that business operations are still stable. In 2007, capital represented 58,8% of liabilities. The liabilities are nominally lower, by 6,3 million EUR, which represents a 20% reduction compared to the previous year. The capital covers 80,7% of all longterm assets, while in 2007 only 75,8% were covered by capital. Strategic goals The structure of income is adapted to added value. Added value is based on cost management aimed at ensuring anticipated profitability. We will develop integral solutions by pooling Cetis’s sales programmes, personalisation, electronic solutions and more. It is very important to develop key human resources and the management to expand successfully into new markets, and it is also important to transfer know-how within the company itself. When achieving strategic goals, our main advantage will be recognition and the realisation of new opportunities in the field of information security. In 2009, we will do what we do best, but also take new approaches. »Strength is in our thoughts; every change is preceded by a thought, therefore strength. At the same time, imagination is everything; it is
A new organisational structure, a better return on investments in our subsidiaries, orientation towards developing and attaining a better quality of products and services, enhancing sales in target markets and increasing the profitability of our companies are vehicles to drive us into a successful future. We shall continue to develop a quality offer and expand the activities of the Group.
a preview of life’s events - events still to come that we first conceive in our thoughts«. 30 March 2009
Simona Potočnik, MSc
5
INTRODUCTION
Cetis, d. d.
Annual Report 2 0 0 8
Report of the Cetis, d.d. Supervisory Board on the results of examining the audited Annual Report of the company Cetis, d.d. for 2008 and the audited Consolidated Annual Report of the company Cetis, d.d. for 2008
6
1. Components of the Annual Report In compliance with the legislation in force, the Cetis, d.d. Supervisory Board examined the legal aspects of the Annual Report prepared by the Management of Cetis, d.d. for the year 2008. The Supervisory Board established that the Management had prepared the 2008 Annual Report within legal deadline, as well as that the report contains all obligatory components required by the Companies Act currently in force (Official Gazette of the RS, no. 42/2006, as amended, hereinafter: ZGD-1). The Annual Report comprises the following components: business report and financial report, the latter comprising a Balance Sheet, Income Statement, Statement of Changes in Equity, Cash Flow Statement, explanatory accounting disclosures and indicators. The Annual Report was audited by the selected auditor at the 13th General Meeting of the company Cetis, d.d. The auditing company ABC revizija d.o.o., Dunajska cesta 101, Ljubljana, prepared the auditor’s reports for the company Cetis, d.d. and the Cetis Group on 22 April 2009, and the company Cetis, d.d. received both on 23 April 2009. In compliance with third paragraph of Article 272 of the ZGD-1, the Management of Cetis, d.d. submitted the prepared Annual Report and Consolidated Annual Report and the auditor’s reports to the Supervisory Board on 30 April 2009. 2. The method and scope of examining the managing of the company The Supervisory Board performed its supervisory role mainly at Supervisory Board meetings. In addition, individual Supervisory Board members also exercised their right, based on first paragraph of Article 282 of the ZGD-1, which enables each Supervisory Board member to examine all bases for the annual report. The Supervisory Board members were regularly informed about all significant events that could, or did, affect the company’s business operations in 2008 at the Supervisory Board meetings, upon a request from Supervisory Board members or initiated by the company Management. The Supervisory Board in 2008 had the following members: • • • • • •
Ljubo Peče, Chairman of the SB, shareholder representative, Goranka Volf, Deputy Chairman of the SB, shareholder representative *, Franc Ješovnik, shareholder representative, Dušan Mikuš, MSc, shareholder representative, Bernard Gregl, employee representative, Marko Melik, employee representative.
* The Deputy Chairman’s mandate expired on 25 August 2008 and the 13th General Meeting of Cetis, d.d. joint stock company did not vote a new mandate for Goranka Volf. Until 25 August 2008, the Supervisory Board therefore operated with six (6) members, and from that date onwards with five (5) members. The mandate of the employee representatives expired on 26 April 2009, while the mandate of the Chairman and the remaining two shareholder representatives expires on 31 May 2009. In the financial year 2008, the Supervisory Board convened four meetings to perform its supervisory role, on 27 February, 30 June, 13 November and 19 December.
Cetis, d. d.
Annual Report 2 0 0 8
INTRODUCTION
3. The most important Supervisory Board resolutions The Supervisory Board constantly monitored and adopted decisions regarding the matters most important to the company. In addition to monitoring and supervising the work of the Management and the company’s business operations, the Supervisory Board also adopted the following important resolutions, given below in chronological order: •
Resolutions adopted at the 53rd meeting of the Cetis, d.d. Supervisory Board, on 27 February 2008 - the Management report on the Cetis, d.d. business operations in 2007 was adopted; - the delay in realising the business transaction with Sudan in 2007 was taken into account; - due to possible risks, the Management was advised to search for possibilities to disinvest in the company Druckman, Hungary; - the Business Plan for the Cetis Group for 2008 was adopted.
•
Resolutions adopted at the 54th meeting of the Cetis, d.d. Supervisory Board, on 30 June 2008: - the Supervisory Board took note of the Management report on business operations for the company Cetis, d.d. and the Cetis Group for the period from 1 January 2008 until 30 April 2008; - the Supervisory Board adopted the audited Annual Report and audited Consolidated Annual Report for the company Cetis, d.d. for the financial year 2007; - the Supervisory Board report on examination of the Cetis, d.d. Annual Report and Consolidated Annual Report for the financial year 2007 was adopted; - the Supervisory Board confirmed the agenda and the wording of the resolutions for the Cetis, d.d. regular General Meeting, as follows: Proposed agenda and proposals for resolutions
for the General Meeting of the company Cetis, d. d., Čopova 24, Celje, to be held on 25 August 2008 at 10.00 at the business premises of the company’s registered office, conference room no. 608. 1. Opening the General Meeting, establishing a quorum and electing the Chairman of the General Meeting and two members to count votes Proposal for a resolution: Quorum of the General Meeting is established. The General Meeting elects Ljubo Peče as Chairman and two members to count votes, Miro Zakrajšek and Bernard Gregl, and establishes that in order to take minutes notary Srečko Gabrilo is present. 2. The General Meeting took note of the Annual Report on the company’s business operations for 2007, the auditor’s report and the Supervisory Board report on the examination of the Annual Report in writing Proposal for a resolution: The General Meeting takes note of the Annual Report on the company’s business operations for financial year 2007, the auditor’s report and the Supervisory Board report on the examination of the Annual Report in writing.
7
INTRODUCTION
Cetis, d. d.
Annual Report 2 0 0 8
3. Voting on allocation of profit for appropriation and discharge of the management and the Supervisory Board Proposal for resolutions: 3.1. The work of the Management and Supervisory Board of Cetis, d.d. in the financial year 2007 is hereby confirmed and approved, and the Management and Supervisory Board members are discharged. 3.2.Profit for appropriation in the company Cetis, d. d. for 2007 amounts to 872.904,55 EUR and shall remain undistributed. 4. Amendment of the company’s Articles of Association 8
Proposal for a resolution: a. The Company’s activity shall be harmonised with the Decree on standard classification of activities (Official Gazette of the RS, no. 69/07, 17/08) SCA 2008 and item 3.3. of the company Articles of Association shall be amended accordingly, so that the codes and stated activities are harmonised with the Standard Classification of Activities 2008. Amendments to the activity shall enter into force as of the date when adopted at the General Meeting. b. Paragraph 8.4. is deleted from the Articles of Association; it specifies that: »The Company has statutory reserves amounting to EUR 1.001.502,25 (one million, one thousand five hundred and two, twenty-five) for the following purposes: - zto cover unexpected business risks which caused loss, - for own business shares, - to decrease share capital, - to pay out dividends. Each year until this amount is reached, the company may, in drawing up the annual report, allocate to statutory reserves up to 20 (twenty) per cent of net profit generated in a certain year.« 5. Auditor appointment Proposal for a resolution: The General Meeting appoints as the certified auditor for the financial year 2008: ABC, družba za revizijo in sorodne storitve d.o.o. Dunajska 101, 1000 Ljubljana. - •
•
Negotiations to conclude contracts on worker’s participation in profit-taking shall begin when dividends are paid out to shareholders again.
Resolutions adopted at the 55th meeting of the Cetis, d.d. Supervisory Board, on 13 November 2008: - The Supervisory Board took note of the Management report on the business operations of Cetis, d.d. in writing for the period January - September 2008, as well as of the oral Management report on the business operations of Cetis, d.d. for the period January - October 2008; - the Supervisory Board discussed the business plan for the Cetis, d.d. company and Group for 2009, and rejected it with the opinion that is not ambitious enough. It also proposed that by the next meeting the Management prepare a new business plan which would take into consideration the current financial situation of the company and the group and would envisage appropriate Management measures to enable the pursuit of business objectives. It expressed its expectation that the Management would set out concrete measures in the business plans aimed at increasing productivity and income and reducing expenditure, in order to increase the return on capital for the company Cetis, d.d.
Resolutions adopted at the 56th meeting of the Cetis, d.d. Supervisory Board, on 19 December 2008: - the Business plan for the company Cetis, d.d. and Cetis Group for the year 2009 was adopted; - the audit committee of the Cetis Supervisory Board was established; the following members were appointed: Dušan Mikuš, MSc, as President of the committee, Ljubo Peče as committee member, and Dejan Jojić as external committee member. Minutes were drafted for each Supervisory Board meeting and adopted with a resolution.
Cetis, d. d.
Annual Report 2 0 0 8
INTRODUCTION
4. Management reporting Extensive reports from the Management in the financial year 2008 enabled the Supervisory Board to adequately perform its supervisory role. Management reports were in general prepared per segments operational within Cetis, with a joint and systematic overview of all business effects. In its reports, and oral explanations when necessary, the Management presented all relevant items that affect the business operations of the joint stock company. 5. Evaluation of business operations The Supervisory Board of the company Cetis, d.d. analysed movements in certain relevant financial data and indicators expressing the business performance of the company Cetis, d.d., and established that: • net sales revenue was generated in the amount of EUR 25.668.580, which is 9,7% less than the year before and 29,9% less than planned; • the total profit or loss before taxes is 132,88% lower than achieved in 2007 and 116,4% lower than planned for 2008; • the net loss amounting to EUR 417.028 contributed to reducing the profit or loss by 143,6% compared to 2007; • return on capital in Cetis, d.d., calculated as the ratio between total profit or loss in 2008 and the average balance of capital (excluding the net profit or loss for 2008) for the same year, is -1,28%; • return on capital in Cetis, d.d., calculated as the ratio between net profit or loss in 2008 and the average balance of capital (excluding the net profit or loss for 2008), for 2008 is -1,39%, which is 4,5 percentage points less than in 2007; • operating expenditure amounted to EUR 27.866.007, which is 7,1% less than in the same period the year before. Operating costs are structured as follows: 55,6% comprises the costs of goods, material and services, 30,4% labour cost, 12,8% amortisation and depreciation expense and 1,2% other expenditure; • in the Income Statement for 2008 the company Cetis, d.d. disclosed financial revenue amounting to EUR 2.375.753 and financial expenditure amounting to EUR 1.199.721. The surplus of financial revenue over financial expenditure, amounting to EUR 1.176.032, is 26,3% lower than in 2007; • profit for appropriation in Cetis, d.d. at 31 December 2008 amounted to EUR 455.877; • basic earnings per share in 2008 amounted to EUR -2,09; • the book value of each share at 31 December 2008 was EUR 143,27 (at 31 December 2007 = EUR 154,94), • the number of employees in Cetis, d.d. on 31 December 2008 was 380, which is 12,8 percent less than at the end of 2007. The Supervisory Board of Cetis, d.d. analysed movements in certain relevant financial data and indicators expressing business efficiency for the Cetis Group and established that: • net sales revenue was generated in the amount of EUR 35.966.704, which is 9,0% less than the year before and 23,6% less than planned; • the total profit or loss before taxes is 86,0% lower than in 2007 and 97,9% lower than planned for 2008; • the net profit amounting to EUR 86.298 represents a decrease in profit or loss by 50,0% compared to 2007; • return on capital in Cetis Group, calculated as the ratio between net profit or loss in 2008 and the average balance of capital (excluding the net profit or loss for 2008), for the same year, is 0,21%; • return on capital in Cetis Group, calculated as the ratio between net profit or loss in 2008 and the average balance of capital (excluding the net profit or loss for 2008), for 2008 is 0,29%, which is 0,28 percentage point less than in 2007; • operating expenditure amounted to EUR 38.337.021, which is 6,39% less than in the same period the year before. Operating costs are structured as follows: 60,5% comprises the costs of goods, material and services, 26,4% labour cost, 10,7% amortisation and depreciation expense; and 2,4% other expenditure; • in the Income Statement for 2008, the Cetis Group disclosed financial revenue amounting to EUR 2.425.353 and financial expenditure amounting to EUR 1.195.008. The surplus of financial revenue over financial expenditure, amounting to EUR 1.230.345, is 41,0% lower than in 2007; • profit for appropriation in the Cetis Group on 31 December 2008 amounted to EUR 269.498;
9
INTRODUCTION
10
• •
Cetis, d. d.
Annual Report 2 0 0 8
basic earnings per share in 2008 amounted to EUR 0,38; the number of employees in Cetis Group on 31 December 2008 was 436, which is 12,6 percent less than at the end of 2007.
Based on the stated indicators, the Supervisory Board established that in 2008 the company Cetis, d.d., including the Group, operated below planned results, but taking into consideration the unpredictable movements in the market it created a good basis for business operations in 2009 and beyond by increasing its activities. 6. Forming profit for appropriation and a proposal for its allocation The Supervisory Board checked the profit for appropriation as of 31 December 2008. The profit comprises net profit from previous periods amounting to EUR 872.904,55, less the net loss in 2008 amounting to EUR 417.028,34, and therefore amounting to EUR 455.876,21. The Supervisory Board agreed to the Management proposal according to which the profit for appropriation for the company Cetis, d.d., amounting to EUR 455.876,21 as of 31 December 2008, is retained and carried forward to be used in subsequent periods. 7. Independent auditor’s report The Supervisory Board took note of the Independent Auditor’s Report and established that an unqualified opinion had been issued. The Supervisory Board has no comments on the Auditor’s Report. The Supervisory Board established that the Auditor’s Report contains all the contents set out in second paragraph of Article 57 of ZGD-1. The Supervisory Board notes that the auditor established the financial statements to be a true and fair presentation of the financial position of the company Cetis, Graphic and Documentation Services, d. d., as of 31 December 2008, and its profit or loss and cash flow for the year ended on that date in accordance with International Financial Reporting Standards. The auditor confirmed that the business report is in accordance with the audited financial statements. Furthermore, the Supervisory Board notes that the auditor established the consolidated financial statements to be a true and fair presentation of the financial position of the Group of companies Cetis, Graphic and Documentation Services, d. d., as of 31 December 2008, and its profit or loss and cash flow for the year ended on that date in accordance with International Financial Reporting Standards. The auditor confirmed that the business report for the Group is in accordance with the audited financial statements. 8. Comments of the Supervisory Board on the Annual Report for 2008 The Supervisory Board has no comments on the Annual Report for 2008 which would represent an obstacle in adopting a decision to approve the Annual Report.
Cetis, d. d.
Annual Report 2 0 0 8
INTRODUCTION
9. Approving the Annual Report for 2008
11
At the 58 meeting, held on 29 May 2009, the Supervisory Board checked the audited Annual Report for Cetis, d.d. and audited Annual Report for the Cetis Group for 2008 and established that: th
- - - -
the Annual Report was compiled on time, the Annual Report was compiled in accordance with ZGD-1, International Financial Reporting Standards and the company’s Articles of Association, the Annual Report includes all relevant data important in taking a decision with regard to adopting the report, the financial statements and the underlying documents for the financial statements and the Annual Report were reviewed by a certified auditor, who submitted an unqualified opinion to the company’s business operations.
In 2008 the Supervisory Board monitored and checked the company’s business operations on the basis of oral and written information from the Management, while the final opinion was based on the audited annual reports mentioned above. The Supervisory Board is of opinion that the submitted Annual Report for the company presents a fair and true financial situation of the company, and therefore approves the audited Annual Report for the company Cetis, d.d., as well as for Cetis Group for the year 2008. The Supervisory Board approved the Annual Report for 2008 within an open deadline, i.e. before one month from the date when annual reports for 2008 were submitted to the Supervisory Board expired.
Celje, 29 May 2009
President of the Cetis, d.d. Supervisory Board Ljubo Peče, BSc Law, signed
The present Report was adopted at the 58th meeting of the Cetis, d.d. Supervisory Board held on 29 May 2009.
INTRODUCTION
Cetis, d. d.
Annual Report 2 0 0 8
The Operating Activities of Cetis and Cetis Group in 2008: Highlights
12
Operations in EUR thousand
Cetis Group
Net sales
Cetis, d.d.
2007
2008
2007
2008
39.520
35.967
28.411
25.669
Sales – domestic market
24.208
22.458
21.625
19.736
Sales – foreign markets
15.312
13.509
6.786
5.933
Gross profit
11.396
10.399
8.423
7.424
173
75
957
-417
Net profit or loss for the period
4.976
1.421
4.788
1.265
Gross added value per employee
Investments
28,4
31,5
27,2
27,4
Number of employees
499
436
436
380
Scope of investments
Cetis Group
In EUR thousand Chain index
Cetis, d.d.
2007
2008
2007
2008
4.976
1.421
4.788
1.265
178,90
28,56
190,60
26,4
Cetis, d. d.
INTRODUCTION
Annual Report 2 0 0 8
Structure of assets
13
Skupina Cetis Asset/year in EUR thousand Long-term assets
Cetis, d.d.
2007
2008
2007
2008
46.303
39.619
40.894
35.495
Short-term assets
15.446
14.864
11.817
11.266
Total assets
61.749
54.483
52.711
46.761
Structure of resources
Skupina Cetis Source/year in EUR thousand
Cetis, d.d.
2007
2008
2007
2008
Capital
30.396
28.495
30.989
28.655
Long-term liabilities
13.731
10.176
9.768
7.104
Short-term liabilities
17.622
15.812
11.954
11.003
Total liabilities
61.749
25.988
52.711
46.761
INTRODUCTION
Cetis, d. d.
Annual Report 2 0 0 8
Important Events in the Business Year 2008 - - - - - -
14
Company Cetis-ZG, d.o.o. acquired the ISO 9001:2000 Quality Standard. Cetis-ZG, d.o.o. received the Croatian Gazelle Award for the fastest-growing company in Croatia. Cetis acquired the ISO 27001:2005 Certificate for information security. The company was chosen in a public tender of RS as a provider of new driving licences. We responded to another tender and were chosen to print tobacco stamps. The company expanded its distribution network: we are active in Bosnia and Herzegovina, Macedonia and Serbia, and we are also marketing in the Czech Republic and Slovakia.
Important events after the balance sheet date - The company re-established its key areas, which are the basis for the new organisational structure as of 1 March 2009.
Statement on Corporate Governance The company Cetis, d.d. implements a transparent governance and management system, taking into account best practices and the highest business principles. Recommendations from our internal controls and auditors provide a solid foundation for an effective and high-quality decision-making. The governance and management of Cetis is based on a comprehensive set of positive relations between the Management and the Supervisory Board, the shareholders and other stakeholders, and also on mechanisms of control and supervision. Business operations comply with all legal provisions, the Rules of the Ljubljana Stock Exchange and internal regulations. Cetis, d.d. is managed by its Management; the Management is supervised by the Supervisory Board. The management of subsidiaries and affiliated companies is performed in accordance with provisions of their Articles of Association. 1.
Compliance with the Management code for publicly traded companies
Based on the provisions of the Rules of the Ljubljana Stock Exchange and the legislation in force the company Cetis, d.d. hereby expresses its Statement of compliance with the Management code for publicly traded companies (Official Gazette of RS no. 118/2005 of 17 December 2005, as amended, with effect from 5 February 2007, hereinafter: Code) for the period from 1 January 2008 to the adoption of this Annual Report. The Code is available to the public in Slovenian and English language on the web site of the Ljubljana Stock Exchange www.ljse.si. The Company operated in compliance with the provisions of the Code that was in force before the amendments were adopted. In 2008 it also followed the recommendations of the Management code for publicly traded companies with the amendments applicable from 5 February, 2007, with the exceptions listed below. Some recommendations of the Code are not relevant for the Company and cannot be breached and are therefore not explicitly exposed. The obligations of the Company and its bodies respectively will be performed if there is such a case.
Cetis, d. d.
INTRODUCTION
Annual Report 2 0 0 8
2.
Derogations from the Management code for publicly traded companies
it necessary. In this field the legislation in force is applied.
1.2.6. in 1.2.7. The Company treats all the shareholders equally and does not specifically encourage them to exercise their rights.
8.17.1. in 8.17.2. The Company has not published its Articles of Association on the website but they are available in the legal office at the Company’s registered office. The Company posted on the website the name and contact information of a person in charge of investor relations.
2.3.8. The remuneration, compensation and other benefits of the Management are disclosed to the public in the total amount in accordance with legal provisions. 3.1.5. The Supervisory Board operates without the rules of procedure but in accordance with legal regulations.
The Company shall respect the recommendations of the Code with the derogations described above also in future. If it appears that the Company cannot respect any of the Code provisions, the Management and the Supervisory Board will prepare a justified explanation.
3.4.6. in 3.4.7. The insurance of liability for damage of the Supervisory Board members has not been established.
3.
3.6.-3.9. With regard to the size of the Company and its organization, the Supervisory Board did not form any special committees, except for audit committee.
High-quality financial reporting is of crucial importance for the effective operation of the governance and management system in Cetis, d.d. The Management of the parent company is responsible for risk management, implementing the risk management system and internal control system. Risk management is further detailed in the financial section of this report. In 2008 the Company employed a Controlling Director for the field of controlling and risk management.
4.3. The Articles of Association do not define the types of operation that require from the Management to obtain the consent of the Supervisory Board. 7.1.4. So far an auditor has not been present at the company’s General Meeting. 8.1.1. According to the regulation the Company has not published half-yearly reports so far. 8.2. The Company’s shareholders are mainly Slovenian legal and natural persons and this is the reasons that publications are in Slovenian. Only annual reports are published in English. 8.6. The Company does not prepare a financial calendar for the forthcoming financial year because currently it is not possible to precisely determine the deadlines of individual publications. The Company promptly informs the shareholders of all relevant events. 8.11. The Company determines risk factors in the annual report. 8.15.5. The Company has not adopted a special bylaw that would specify the rules on trading in the Company shares because the Company does not consider
4.
The system of internal control and risk management with regard to financial reporting
Information from indents 3, 4, 6 and 9 of the sixth paragraph of Article 70 of the ZGD-1
The rules on the appointment and replacement of the members of the management or supervisory bodies are set out in the company’s Articles of Association, which comply with ZGD-1 and which are available for inspection at the company’s legal office. Amendments to the Articles of Association are adopted with the majority of at least three quarters of the share capital represented at the decision-making process. The Management of the Company does not have special authorisation to issue or purchase own shares. Other relevant data with regard to the Company is presented in the sub-chapter Shares and Shareholders of this report. 5.
General Meeting of the company Cetis, d.d., and shareholder rights and the exercise of those rights
SThe convening of General Meeting and other matters relevant to its implementation are set out in the legislation and the company’s Articles of Association, which are available at the Company’s registered office.
15
INTRODUCTION
16
Cetis, d. d.
The Management of the company convenes a General Meeting, usually once a year. The General Meeting is open to all shareholders or their representatives, who are obliged to confirm their participation at least three days before the session. The General Meeting is announced within a legal deadline, i.e. at least 30 days before it is held, in the Official Gazette of the Republic of Slovenia and on SEOnet. The company publishes important events in the electronic communication system of the Ljubljana Stock Exchange, SEOnet and on its web page www. cetis.si. At its 13th session on 28 August 2008, 66.6% of the stakeholders were present. The shareholders adopted the decisions of the Management regarding the utilisation of the profit for appropriation, the discharge of the Management and the Supervisory Board, the appointment of an auditor and the presentation of the Annual Report 2007. 6.
Management and supervisory bodies of the Company
a) Management of the company Cetis, d.d. The Management of Cetis, d.d. has one member, Simona Potočnik, MSc; her mandate started on 5 August 2005. The Management is appointed by the Supervisory Board. In accordance with the company’s Articles of Association, after five years the Management can be appointed for another mandate. The Management manages the Company by concluding contracts in the best interests of the Company, independently and on its own responsibility. The Management reports to the Supervisory Board on the developments in the Company and the business system. It also consults the Supervisory Board regarding important business issues and the management of the whole group. The members of the Council and the advisers to the Management are also involved in the decision-making process, thus ensuring high-quality and effective decision-making. The governance and management of subsidiaries The Management of Cetis, d.d. ensures effective management of the whole group and encourages the use of ethical business principles which comply with the legal framework of all the group’s companies. In this way the reputation of the company is upheld, which is also one of the elements of risk management. The management of subsidiaries is based on internal and external supervision and regular reporting.
Annual Report 2 0 0 8
Higher management of subsidiariesIn 2008, the following appointments and changes in the management of subsidiaries occurred: Milan Maksić was appointed General Manager of the new company Cetis Print Serbia, and Roman Žnidarič was appointed General Manager of the company Amba CO d.o.o. b) Supervisory Board of the company Cetis, d.d. Until 25 August 2008, the Supervisory Board operated with six (6) members, and from that date onwards with five (5) members. The Chairman of the Supervisory Board and two members represent the capital, with a mandate until 31 May 2009. Two members represent the employees; their mandate expired on 26 April 2009. The mandate of the Deputy Chairman of the Supervisory Board expired on 25 August 2008, and at the 13th Session the General Meeting of Cetis, d.d. did not vote for her new mandate. The structure of the Supervisory Board is specified in more detail in the chapter Organisation of the Cetis Group of this Annual Report.The Supervisory Board convenes at least four times a year and acts in the best interests of Cetis, d.d. and its shareholders. It also supervises and advises the Management regarding the best management of the Company and the Group and their future development. c) Audit Committee of the company Cetis, d.d. In accordance with ZGD-1, on 19 December 2008 the Supervisory Board appointed the Audit Committee of the company Cetis, d.d., as follows: Dušan Mikuš as the Chairman, Ljubo Peče as a member and Dejan Jojić as an independent expert, trained in accounting or auditing. d) External audit The Annual Report for 2008 was audited by a new auditor, ABC Revizija d.o.o. from Ljubljana. Ljubo Peče, BSc Law, signed Chairman of the Supervisory Board
Simona Potočnik, MSc, General Manager of Cetis
Cetis, d. d.
INTRODUCTION
Annual Report 2 0 0 8
General information
Cetis, d.d. ID
Company name:
Cetis, Graphic and Documentation Services, d.d.
Registered office:
Čopova 24, 3001 Celje, Slovenia
Company reg. number:
5042208
Tax number:
24635812
VAT number:
SI24635812
Share capital: 10.015.022,53 EUR Entered in the Companies Register at the District Court of Celje under registration number 063/10147600. Transaction accounts: Nova LB d.d.: SI 56 0223 4001 1655 374 Banka Celje d.d.: SI 56 0600 0002 6390 798 Abanka Vipa d.d.: SI 56 05100-8000027831 Probanka d.d.: SI 56 2510 0970 4894 196 Bank Austria Creditanstalt d.d.: SI 56 2900 0000 3262 161
Organizational structure of the Cetis Group
Telephone number:
+386 3 4278 500
Fax:
+386 3 4278 817
E-mail:
info@cetis.si
Web site:
www.cetis.si
Management and Administrative Bodies Management:
Simona Potočnik, MSc, General Manager
Supervisory Board:
Ljubo Peče, Chairman of the SB, shareholder representative Franc Ješovnik, shareholder representative Dušan Mikuš, MSc, shareholder representative Bernard Gregl, employee representative Marko Melik, employee representative
17
INTRODUCTION
Cetis, d. d.
Annual Report 2 0 0 8
Companies of the Group
18
Cetis-ZG,
Amba CO.,
Company for Trade and Services, d.o.o.,
Production and Trade, d.o.o., Ljubljana,
Industrijska ulica 11,
Leskoškova 11,
10431 Sveta Nedelja,
1000 Ljubljana,
Croatia,
Slovenia,
e-mail: cetis@cetis.hr,
e-mail: tajnistvo@amba.si,
web page: www.cetis.hr ,
web page: www.amba-tc.si,
t: +385 1 333 5000,
t: +386 1 587 4300,
f: +385 1 333 5001,
f: +386 1 586 4305,
manager: Matej Polutnik.
manager: Roman Žnidarič.
Cetis-Tirana Sh.p.k., Twin Towers, Tower 1, Blvd. Deshmoret e Kombit, Kati IV, Tirana, Albania, e-mail: cetistirana@albnet.net, t: +355 4 280 424, f: +355 4 280 425, manager: Marko Tumpej.
Cetis Print d.o.o., Breza 8, 11030 Beograd, Serbia, e-mail: cetisprint@cetisprint.rs, web page: www.cetisprint.rs, t/f: +381 11 2511 913, manager: Milan Maksić.
Affiliated companies
Nacional Sh.a, Albania,
Druckman, Budapest,
Rruga Kavajes, Porta Kry Esore, Misto Mame,
Jaszu. 33-35,
Tirana,
1135 Budapest,
Albania.
Hungary.
Cetis, d. d.
Annual Report 2 0 0 8
INTRODUCTION
History
The first words written on various surfaces such as stone, bones, tree bark, wood, palm leaves, leather, clay boards, papyrus, waxed wooden and ivory plates and so on, were the first physical preservation of human thoughts, discoveries and events of that time and place, and these words were put down for future generations. All this dates back to the 17th century B. C. The printed word has a long, 200-year tradition in Celje. The very first print-shop in Celje was opened in 1788. And it was around that time that the foundations of today’s Cetis were laid. Its last predecessor was Tiskarna Družbe sv. Mohorja, and in 1949 this printing plant - Tiskarna Družbe sv. Mohorja - was transformed into the state-owned company Celjska tiskarna. Ten years later, Celjska tiskarna merged with the regional newspaper Celjski tednik under a new name Celjski tisk, but in 1965 Celjska tiskarna again became an independent company. The company changed its name into Cetis almost a quarter of a century ago, and began realising its set objectives, and the emphasis at that time was on the production of continuous forms for mechanographic data processing. Having merged with Aero in 1971, Cetis increased the production and technological growth of all of its printing techniques, and the production of continuous forms and self-adhesive labels was also accelerated. In 1990, the employees of what was then TOZD (Temeljna organizacija združenega dela - Basic Organization of Associated Labour) Grafika in Aero decided to separate the TOZD from the parent company and in the following year, Grafika became the limited liability company Cetis. Six years later, the ownership transformation of the company was concluded. Cetis was converted into a joint-stock company and was entered into the register of companies on 13 February 1996. In 2001, the company renewed its entire graphic image, and a modern, market-oriented and technologically advanced company was formed. At AGM in 2003, the shareholders confirmed the renaming of Cetis, Graphic Compay, d.d. as Cetis, Graphic and Documentation Services, d.d., due to the company’s expanded activities and varied product range. In 2007, the company divided thus into four sellling pillars and adapted its business orientation, emphasizing the merger of the ‘black art’ with information technology.
19
BUSINESS REPORT
BUSINESS REPORT
20
Cetis, d. d.
Annual Report 2 0 0 8
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
Business orientation
Mission
Cetis provides for safe data management. With printed and electronic media, the company offers comprehensive solutions in corporate communications and security printed matter. Our purpose is to provide services that enable our clients to achieve optimal results and strengthen their position in the market, and that enable Cetis to grow continually. This is why we have been striving to combine graphic services and information technology, and to manage both.
Vision
The vision of the company is to be a global integrator of information. We strive to be the best partner to companies and countries worldwide in the fields of identification, security and corporate communications, and a leading partner and consultant when dealing with the rationalization and management of costs in packaging, corporate communication systems, documents and lottery games.
Values
Strategic orientation
• • • • •
Innovation. Multidisciplinarity Team work. Openness to challenges. Professionalism.
In Cetis, we are well aware of the importance of a modern model of strategic management aimed at increasing competitive advantage. We devote most of our attention to a policy of products and services that is in accordance with the needs and wishes of our clients. Our business strategy is to achieve the leading position in the field of high-quality commercial and security printed matter in higher volumes, which is divided into four selling pillars: packaging, business communication systems, games of chance and documents. It is based on joint investments and on international action. The company adapts the structure of income to added value. Added value is based on cost management aimed at ensuring anticipated profitability. Development is oriented towards personalization and electronic solutions, and towards comprehensive solutions achieved by combining Cetis’ marketing programmes. It is also very important to develop key human resources and the management to successfully expand to new markets, and it is also important to transfer know-how within the company itself.
21
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
General Macroeconomic Trends The year 2008 will be remembered as one of the most economically negative and probably crucial years in history. Many analysts around the world believe that this crisis, which affected every economy, is the biggest crisis since the Great Depression in the 1920’s. Some claim that the crisis has ended the trend towards liberal macroeconomic systems. It is said that governments will intervene more in the economy, especially in strengthening control of the banking and financial sectors.
22
And of course, Slovenia and Cetis, also fell victim to these negative global economic trends. A constant decline in the SBI index caused an overall reduction of its value by 60% in one year. The share value of some major companies listed on the Ljubljana Stock Exchange fell significantly; one of the ‘record holders’ was also a national bank that was the first to be listed on the stock exchange. Compared to the main index, the decline of Cetis stocks was not so abrupt. Visibly lower export growth, a reduction in industrial production and the processing industry, the lower value of completed projects in the building industry and the lower turnover in retail trade in November and December indicate a significant slowdown in economic activity in the last quarter of 2008. Due to lower demand in the EU and abroad, exports in the last quarter were, on a year-on-year basis, lower by 9,4% (nominally); in the processing industry it was lower by 11% (in real terms), and production in all processing industry sectors shrank. For the first time since 1993, gross national product in the last quarter fell by 0,8% compared to the same quarter in 2007. Real GNP growth in 2008 was 3,5%, which is significantly lower compared to GNP growth in 2007 (6,9 % growth). In our company, the decline in economic activity was mainly evident in the field of commercial programs, such as self-adhesive and other labels, packaging, some types of business communication systems etc. The modest lending activity of banks stabilised considerably in November and this continued well into December; this meant that it was harder to acquire financial resources in terms of price and adequate insurance. In December, after eleven months of downturn, credit volume growth, on a year-on-year basis, reached the lowest point in two and a half years (18,1%). In 2008, the banks granted about 25% fewer loans to the national non-banking sectors compared to 2007. And due to the harsher economic situation in the international inter-bank money market, the extent of borrowing of national banks abroad was only about one third of that in 2007. Household deposits were very important in providing the liquidity of banks. The situation in the labour market grew gradually worse in the last quarter of 2008, and in January 2009 the number of unemployed exceeded the numbers in January 2008. In December, the number of persons in employment fell by more than is usual for the period. In December, year-on-year inflation in Slovenia was 2,1%. Inflation in Slovenia stabilised more quickly than in the euro zone. In the second half of the year, the year-on-year growth of the harmonized index of consumer prices in Slovenia fell from 6,9% in July to 1,8% in December; in the euro zone during the same the same period, the HICP fell from 4% to 1,6%. Source: Slovenia Economic Mirror, January 2009 and February 2009. IMAD.
Cetis, d. d.
Annual Report 2 0 0 8
BUSINESS REPORT
Asset Management Financial management
The operating results of the company were lower than those achieved in 2007. However, due to business opportunities and financial circumstances, the company managed to maintain a favourable financing structure, despite the decline in long-term financial resources. The company estimated the financial situation through the break-down and analysis of past, current and hard-to-predict planned cash flows. The company took into consideration the following known principles and rules of financing: - coherence of the extent, structure and trends in assets, as well as liabilities, - consistency of business operations by providing rational financing, reduction of financial risks and optimal solvency, together with the appropriate financing economics, - achieving a positive financial result as a net cash flow attributable to operating activities, - the possibility to increase financial strength by increasing assets. The company strove to achieve these principles, despite lower total revenue and a negative operating result. The company financed current business operations, to a certain extent, with its own resources and resources acquired through the adjustment of investment policy and the disposal of some investments. The emphasis of the financial analysis was based on the financial and capital structure, as well as on the latest estimate and provision of creditworthiness of the company. By disposing of assets not relevant to business operations, and by dynamically planning the cash flows, the company managed to provide for the resources and guarantees needed to ensure stable current business operations and crucial investments. The 2008 business year was very demanding for the company in terms of financing, and it required prompt adjustments to the new circumstances in the domestic and international money and capital market. In the field of financing, the company adopted, due to the circumstances in the market, decisions regarding the registration of financial investments which were based on the European Commission Regulation. Because of changes in the MRS 39 and MSRP 7 Standards, on 1 July 2008 the company categorised all its short-term securities as long-term financial investments. Given the trends in the stock market, this meant that the company achieved a better current business operating result in the second half of the year. In light of the above circumstances and the well-known situation on the market, the primary goal of the company in 2008 was to ensure appropriate solvency. In doing so, the company still primarily took account of financing economics, while possibly controlling financial risks. The debt to capital ratio changed in 2008 due to business operations; in the structure of financing resources, this ratio was 61.3 : 38.7, which means that the ratio is still better than in the previous year (in favour of capital), despite the achieved negative operating result. This ratio is the result of already implemented and ongoing measures in the field of financing; in this respect, the company ensured that assets and resources were harmonised in terms of timetable. At the end of 2008, the long-term assets were fully financed with capital and with foreign long-term resources. With regard to the financing structure, which is balanced, those financial measures were implemented that led to an appropriate financial correction. Above all, the company used those internal measures that improved, in the short term, the level of self-financing. In 2008, the company was successful in managing receivables resulting from business operations in 2007, taken as a receivables turnover ratio; compared to the previous year, the company has fewer receivables. The company was also more efficient with regard to supplies: these were reduced in the structure, in the absolute figure and also when compared to revenues. However, the fact remains that the result of the financing in 2008 was positive despite the increased interest rates and the significant downturn in stock exchange quotations in capital markets. This result had a positive impact on the achieved operating profit or loss of the company. The company is well aware that because of the lowered level of self-financing, regular business activities must as soon as possible reach viable business operation levels, so that the re-payment of long-term liabilities is not jeopardized (the company successfully repays all its liabilities from financing). The company will acquire new or longer-term finance resources. Financial risks or individual exposures of the company are detailed in the financial report.
23
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
Investments
24
Scope of Investment in 2007-2008 (in EUR thousand)
Intangible fixed assets Buildings
2007
2008
237
512
204
250
Equipment
4.347
503
Total
4.788
1.265
Compared to the values for 2007, the company reduced investments in property, plant and equipment. In 2008, the company invested only in much needed equipment and renovation of facilities. In 2008, the company invested a significantly higher amount of resources in intangible fixed assets. In future, the company intends to invest even more in the market as well as in modern technology and knowhow. The main purpose is to ensure higher productivity, responsiveness, specialisation and the reliability of business processes and, consequently, lower costs.
Cash flows – investments in 2007-2008 (non-consolidated) Inflows (offset) in EUR thousand
2007
2008
Property, plant and equipment
312
765
Financial investments
541
1.693
Total
853
2.458
Cetis, d. d.
Annual Report 2 0 0 8
BUSINESS REPORT
Outflows (offset) in EUR thousand
25
2007
2008
237
512
Property, plant and equipment
4.551
753
Financial investments
1.802
Total
6.590
Intangible fixed assets
1.265
In 2008, the company implemented an investment policy to achieve a positive cash flow. Gross value added in EUR thousand
Gross value added in EUR thousand Chain index
2007
2008
12.052
11.350
100
86
Gross value added in 2008 was lower compared to the previous year. Because of the rapid changes in the market, the company failed to implement all the necessary adjustments of its business activities or adjustments in domestic and foreign markets. It was also not successful in this respect through its subsidiaries and affiliated companies abroad. In future, the company expects, with regard to its investments, to increase efficiency and returns, while ensuring long-term liquidity. In line with needs and the defined strategy, the company will invest in property, plant and equipment and other long-term assets, and in light of the existing market conditions, it will dispose of all investments not relevant to its business activities.
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
Shares and shareholders
26
The share capital of Cetis, d.d. is divided into 200,000 registered ordinary shares bearing the CETG mark, which are traded on the Ljubljana Stock Exchange. All shares are freely transferable. The company made no changes to the share capital in 2008. The Company publishes all the required information on the SEO-net portal of the Ljubljana Stock Exchange. The number of shareholders did not change significantly in 2008. At the end of 2008, there were 1.021 shareholders. Compared to the end of 2007, the number of shareholders decreased by 45. In 2008, due to the reorganisation of the status of an existing shareholder into the Infond balanced mutual fund, one new shareholder appeared among the ten largest shareholders. Structure of shareholders as of 31 December 2008
Shareholder Cetis-Graf d.d. Balanced mutual fund Infond Kovinoplastika d.d. Kapitalska družba d.d. Slovenska odškodninska družba VS Probanka Globalni naložbeni sklad Triglav naložbe d.d. NFD Holding d.d. Merkur Raiffeisen Zentralbank a.g. Other legal and natural persons Total
Number of shares
Percentage of share capital in %
78.493 27.358 18.649 15.609 14.948 12.049 12.043 3.500 530 459 16.362 200.000
39,25 13,68 9,32 7,80 7,47 6,02 6,02 1,75 0,27 0,23 8,19 100,00
The ten largest shareholders own 91,81% of the total shares issued in dematerialised form by the Central Securities Clearing Corporation in Ljubljana. As of 31 December 2008, the company holds 201 of its own shares for the purposes stated in the second indent of Article 240 of the Companies Act (ZGD-1). The company did not acquire any additional own shares in 2008. The Management Board member owned 100 ordinary shares of the company. None of the securities holders has special control rights. The voting rights of the securities holders are not limited. At the end of 2008, the share market value was EUR 66,00, which – based on the total number of issued registered shares - was 46,1% of the book value, which at the end of 2008 was EUR 143,28. In 2008, both the book value of the share and its market value decreased.
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
Movements of the market and book values of CETG shares in years 2007 and 2008
Market value of the share in EUR (as of 31 December)
Book value of the share in EUR (as of 31 December)
Ratio between the two values
93,15 66,00
154,94 143,28
60,1 46,1
2007 2008
Value SBI20
27
Movement of the SBI20 and CETG values in 2008 12.000,00
120
10.000,00
100
8.000,00
80
6.000,00
60
4.000,00
40
2.000,00
20
0,00
0 3.12.2008
3.11.2008
3.10.2008
3.9.2008
3.8.2008
3.7.2008
3.6.2008
3.5.2008
3.4.2008
3.3.2008
3.2.2008
3.1.2008
Value CET
The average price of CETG shares on the regulated market of the Ljubljana Stock Exchange did not fluctuate significantly in 2008. In the first six months, the price dropped to about 70 EUR per share. At the end of the year, the price fell below 70 UR per share, i.e. to 66 EUR per share. Compared to the SBI20 index, the market value of the CETG share decreased less dramatically. Net profit per share in 2007 and 2008 in EUR
2007
2008
4,79
-2,09
Net profit/loss per share
Note: The calculation is on the basis of the weighted average of the number of shares. Dividend policy In 2008, the company failed to achieve the planned positive result. In light of the worldwide economic crisis, dividend policy is much harder to predict. If the company achieves the planned positive results in the following years, the management of the company, taking into account all the relevant circumstances, will in individual years propose the allocation of corresponding net profit to dividends.
BUSINESS REPORT
28
Cetis, d. d.
Annual Report 2 0 0 8
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
Sales
The sales activities of Cetis, d.d. are based on four selling pillars: documents, packaging, lottery games and business communication systems with a common denominator - globalisation. The strategies relating to the selling pillars are well planned and divided within the company into security and commercial printed matter. In the field of documents, we are directed towards developing strategic partnerships by upgrading integrated solutions development. We seek possible potentials for public-private partnership with public institutions, and develop comprehensive offers to support small-sized countries. We pay special attention to the development of smart card technologies. In the field of packaging, we strive to modernise production and to include the consumers’ wishes regarding the development cycle of products and services and the upgrading of packaging into special ecological and other packaging. In the field of lottery games, which is our third selling pillar, we strive to develop a global business model for games of chance and new offers (services) in connection with other pillars. Cetis offers this model to the market with a view to promoting sales activities and advertising. The future of business communication systems lies in the systematic development of direct marketing solutions: the concentration of new services development connected to the pillar in the parent company, and the transfer of tested models to new print centres and the standardisation of repeatable documents.
Sales of commercial printed matter In the field of commercial printed matter, which includes packaging and business communication systems, the company reached only 83% of the planned goals. In the business year 2008, the company had 12.110 thousand EUR in revenues. We planned to reach 14.660 thousand EUR, and the biggest deviations from the plan were in the fields of flexible packaging, photo bags, direct mail and forms. In the field of flexible packaging (wrapping polypropylene labels, wrapping paper labels, thermo-shrinkable sleeves), we maintained our market share in the domestic market. However, in the foreign market, despite more aggressive sales activities, we managed to acquire only one-off contracts. We are working intensively on foreign markets, and we expect that this will increase the income in the next year. Strategically, the photo bags are in decline; the market is very divided and the processing is very specific. In the business year 2008, our commercial department kept in close contact with potential buyers across Europe and realised 62% of planned sales, i.e. 620 thousand EUR. In the field of direct mail, 75% of the selling plan was achieved, i.e. 1,9 million EUR. In the field of commercial printed matter, we retained our contractual buyers. At the same time, we acquired a new buyer in the field of receipt printing; this new buyer is among our biggest clients. The business transactions in this field went as planned. The greatest deviations were in the field of one-off orders for direct mail. In the last quarter, the number of these orders fell significantly compared to the previous year. Forms represent the biggest selling group in commercial printed matter in terms of value. In the business year 2008, sales in the domestic market increased; however, we achieved only 82% of the planned goals. The commercial printed matter segment strengthened its sales activities in SE Europe, prepared a new pricing strategy, ensured responsiveness and quality, and in 2009, further growth is planned. In the field of self-adhesive and paper labels, the company operated successfully; compared to the previous year, sales rose by 5%. The company maintained its market share in the domestic market, and strengthened sales activities in target markets in Austria, Germany and in SE Europe. In 2008, we also focused on the preparation of a new strategy regarding new target markets; a new strategy regarding conditions of sale for individual regions; we hired new staff in the field of area sales management for foreign markets, the expansion of the distribution network directly through the activities of new sales agents and adjustment of internal processes to market expectations. Due to all these activities, we expect good results in the field of commercial printed matter, despite the economic crisis. In 2009, our mail goal-orientations are a systematic approach, enhanced activities in foreign markets, more inquiries, competitive offers and meeting our customers’ needs.
29
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
Sales of security printed matter Sales of security printed matter include three major product groups: identity documents, cards and lottery games. The company sells security printed matter to twelve European and African countries, although we sell most of our security printed matter in Slovenia. In 2008, sales of security printed matter were equal to those in 2007, i.e. 47% of all Cetis sales. We managed to exceed our goals in the field of security forms, security labels and games of chance. We were also very successful in the field of personalised bank cards: we exceeded our sales plan, above all due to a successful continuation of the EMV chip technology implementation and the exchange of cards for one of Slovene’s largest banks. 30
In 2008, the company produced fewer biometric travel documents due to a decline in the number of applications by citizens of the Republic of Slovenia. We continued to issue EU tachograph cards – we are the system integrator of the European and Slovene systems – and we increased sales of modernised health insurance cards. In a public tender, the company was chosen to print polling cards. Cetis was also chosen to produce and personalise new driving licences on plastic cards for Slovenian citizens. The project started at the beginning of 2009. In 2008, we continued marketing activities to strengthen the Cetisecurity trade mark in foreign markets and to strengthen our position as a global company for the printing of protected printed matter and system integration. By approaching globally, we continued to fulfil the contract for printing biometric travel documents in Africa, and we were also successful in a public tender for automobile labels and registration documents in one of the former Yugoslav countries. Both projects will be concluded in 2009. The company was present at the international smart cards fair Cartes 2008 in Paris, where we successfully presented our business activities. The marketing strategy for security printed matter is directed towards a global approach in the field of providing system integration and the production of public travel documentation. In this way, in the light of our pro-active strategy, the company will continue to market its products and services in African and South American countries, where we are present independently, together with our foreign subsidiaries or through local commercial representatives.
Sales by companies of the Group Cetis group provides comprehensive solutions in the field of printed media combined with other media. It offers a wide range of security, variable and commercial printed matter. Aside from these, the company offers services such as personalisation, documentation services and alike. The parent company of the group is Cetis, grafične in dokumentacijske storitve, d.d., registered in Celje. The group includes subsidiaries of the parent company. These are Cetis-ZG d.o.o., poduzeče za trgovinu i usluge; Amba CO., d.o.o., Ljubljana; Cetis, Tirana and Cetis Print d.o.o. Beograd – its majority owner is CetisZG, d.o.o. In the company’s operations and consolidated accounts, the financial statements of these companies are included. The company is the sole owner of the company in Tirana. However, this company does not present financial statements. It acts only as a sales representative. Net sales revenues in the Group in EUR thousand, 2007 and 2008
2007
2008
Cetis - ZG, d.o.o.
6.892
5.800
Amba CO., d.o.o. Ljubljana
5.261
5.460
Cetis Print d.o.o. Total
97
12.153
11.357
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
Amba CO., d.o.o.
For Amba, 2008 was one of the most dynamic business years in its history. In this year, the company managed to further strengthen its position as the largest producer of flexible packaging in Slovenia. At the beginning of 2008, the company acquired new management, and numerous changes in the organisational structure and business operations of the company were later introduced. In this way its owner started to realise the set goals. Volatile conditions in the flexible packaging market compelled the employees to be more active. The streamlining of operations and optimisation of business processes were crucial for success in the market. Optimisation of purchasing and significantly lower costs of materials Due to its small size, Amba CO., d.o.o. was very exposed in the field of purchasing. Therefore, to achieve synergy effects and merge business functions with its majority owner, it successfully transferred purchasing to the parent company. This had positive business effects which were evident in the second half of 2008. The know-how of the parent company’s employees and a more favourable negotiating position led to tangible progress in managing the costs of material. 2008 was quite difficult in the field of raw materials for production; most materials are oil derivates. At the beginning of the last quarter, the movement of prices was unfavourable; however, the fall in prices in the world market had a positive effect for the company. Together with development, purchasing played a crucial role in price monitoring and choosing new suppliers. Thus the company successfully lowered the costs of materials. Despite fewer employees, sales increased and business operations were sound In 2008, we faced a significant fluctuation in personnel; at the beginning of the year, there were 42 employees and at the end, there were 33 employees. Labour costs were therefore lower by 20 per cent. However, despite the lower number of employees, the company managed to continue the planned work. Sales increased compared to the previous year. The increase was 3,7%; the company increased the production of foil by 1%. The company’s biggest market share was in Slovenia, with 51%. Amba managed to maintain its market share and to strengthen the confidence of its clients. The company was also very successful in Austria, where it faced lower competitiveness and problems with liquidity in other markets. In services, Amba analysed costs and carried out an optimisation, which resulted in a lower costs ratio in revenues of approximately 1 per cent. This was achieved despite the fact that some costs for outsourcing of certain functions were higher. The biggest problem relating to business optimisation was ensuring liquidity. The situation was even more stringent at the end of the year due to the global financial crisis. This meant sources were more difficult to find and interest rates were higher. Because the company was in debt and because it did not want to increase borrowing, it strove to find internal reserves; above all, the company lowered the costs of inventory financing. The company’s inventory was duly lowered by over 50 tons. This was achieved by better production and purchasing planning and by seeking more flexible suppliers. Growth in 2009 2009 will probably be crucial. The company will continue on its course. It will probably have to move its production facilities which are currently in a very cost-ineffective location. It will have to invest in the modernisation of production capacities and in finding new markets. The company has big plans for the future. It will further optimise operating costs and seek new business opportunities; the emphasis will be on products with a higher added value. Through its subsidiary Cetis Zagreb, southern markets are emerging, and in the demanding Austrian market, new opportunities are arising. The company will also strengthen sales activities in the demanding German market. In the domestic market, the company expects sales to grow, whereby it will strive to maintain good relations with customers and maintain their confidence and also find new business opportunities. The management of Amba is well aware that it will be hard to achieve sales growth, above all because of good competition and price pressure. This is why the company will continue to actively monitor operating costs. Together with its partners, the company will try to find the right way to achieve the set goals. The management of Amba CO., d.o.o. will do whatever is necessary to maintain the position as the leading manufacturer of flexible packaging in Slovenia and to successfully develop and fulfil the expectations of its owners, partners and employees.
31
BUSINESS REPORT
Cetis Zagreb
Cetis, d. d.
Annual Report 2 0 0 8
2008 was the most profitable year For Cetis Zagreb, 2008 was the most profitable in its history. This is the result of strategic directions and market connections in the past. Over a period of eighteen years, the company has built excellent connections and relations with suppliers, buyers and other important institutions. With high productivity and low costs, the company is the most competitive in the field of form printing (invoices) and direct mail. On a market where quality, price and good service are the decisive factors, Cetis-Zg has no problems concluding business contracts. However, it is not successful in markets where other factors are crucial. Very often, this is because the owner of the company is of Slovenian origin. Therefore, the company has been looking for new opportunities in the free market, where it is believed good business opportunities could be found. Working for the government was unattainable in the past. Croatia is preparing to join the EU, the treasury is lowering costs and costs in state-owned companies are being closely monitored; therefore, this market is also opening. Year of rewards – the Gazelle Award of central Croatia, the First Croatian Kuna Award In 2008, the company again joined the most successful companies in central Croatia, i.e. companies with annual growth exceeding 30 per cent. The company received the First Croatian Kuna award, awarded to one per cent of leading companies among the most profitable and productive companies in Croatia. One of the activities connected to the better fulfilment of customers’ needs was the introduction of the ISO 9001:2000 Quality Standard which the company acquired in 2008. The company also appointed a new director of the profit centre for direct mail. The new director focuses on the market, communication with staff and the introduction of new products.
32
Ambitious plans for the future We are facing a decline in economic growth. Everywhere we go, we hear of the crisis, reduced sales, and lay-offs. Cetis-ZG plans to achieve growth in 2009. It believes that the less successful companies will leave the market and the good, successful companies will have more work. The company has already concluded new contracts. The company has been growing continually since 1995, and has been achieving results, and this is a good sign for the future. In 2008, Cetis-Zg signed a contract regarding invoice production for a major mobile communications provider. The company started this business in the beginning of March 2009. Thus Cetis-Zg is becoming the biggest provider of direct mail in Croatia. The company has its own real estate and equipment, and employs excellent staff. In 2008, Cetis Zagreb made other strategic connections that will bear fruit in 2009 and further into the future. Cetis Tirana
In 2008, Cetis Tirana provided Cetis with 251.746 EUR worth of orders, which is 70% more than in 2007. The company managed to reverse the negative trend of falling turnover fall of previous years and is now recording growth. In 2008, Cetis Tirana acquired new customers and increased the volume of business. The company also faced problems regarding price competitiveness and delivery dates; however, these were successfully solved to everyone’s satisfaction. The Albanian market is quite specific, and the people are pragmatic and flexible. And in such a market, only those who quickly adjust to the needs and wishes of clients can be successful. The company, bearing in mind the harsh economic situation in the world and also in Albania, remains very conservative when making plans for 2009; the goal is to achieve half a million EUR turnover. However, this goal will be hard to achieve. The already difficult situation in the market is even harsher due to the illiquidity of large companies and the population, and this is connected to their way of life. Emigrants are returning to their native countries, and those who stay employed abroad are not sending as much money to their families in Albania as hitherto. And all this is reflected in everyday life. And all attempts to cooperate are difficult. However, there is still a sure way to proceed and maintain the good business operations of the company: to offer quality solutions for our customers’ needs.
Cetis Print
Regardless of problems in the previous years, the company achieved more than 97.000 EUR net sales. Serbia, too, is facing the consequences of the economic crisis, and this is reflected in the operations of the company. All the regular and potential users of products and services are victims of the recession and, consequently, they are delaying their orders, searching for most favourable suppliers and are delaying new projects. There were additional problems due to the negative exchange rate differences between the Euro and the Serbian Dinar. Cetis Print managed to partially solve this problem with exchange clauses. Cetis Print, which is still establishing its place in the Serbian market, must offer better conditions compared to existing suppliers, such as payment periods and a favourable price, and this is currently the biggest problem when trying to acquire new business. Cetis Print is a small company, and in 2009 it plans to expand, with the support of the parent company. It will hire more quality staff and expand its range of services. In 2009, the company plans to triple turnover compared to the previous year. With its presence in the Serbian market the company has created the impression that it is a business establishment with great potential, and this potential needs to be exploited. Plans will be affected by falls in the national currency and delayed payments by customers, but the company will do everything in its power to overcome these problems.
Cetis, d. d.
Annual Report 2 0 0 8
BUSINESS REPORT
Research and Development
Cetis, as a technologically advanced company, lays great emphasis on investment in research and development. The company divides this area into graphic technologies and information technologies. In the last few years, the printing company became a global information integrator, and in its products (chip cards, biometric passports etc.) it successfully combines graphic and information technologies.
Graphics development In 2008, R&D Graphic technologies followed the development guidelines in four basic fields of application: Documents
In the field of documents, the development department actively worked together with the sales department when preparing for public tenders and producing samples for Slovenian and foreign public tenders. In the field of cards, the development department tested and introduced new materials for production (polystyrene, PET-G polyethylene glycol), and standardised constructions and materials for polycarbonate cards (PC). The department produced new protective elements based primarily on visual controls which are the result of its own production of laminate plates. It also tested new materials for existing and new products (PC, PVC materials, Neobond print media, OVD protected dyes).
Lottery games
Development activities were directed towards improvements in the field of scratch-cards. In this field, the development department cooperated with the sales department to prepare the technical part of the offer for new buyers, which presented Cetis with new demands. The department also prepared the basics for the video surveillance of games of chance, which will be realised in 2009. The scratch-card technology was transferred to prepaid cards. Buyers are requesting printed coatings, and this opens up good possibilities for the production of these products.
Packaging
Business communication systems
Young researchers from the economy Program
In 2009, Cetis must optimise processes in the field of lottery games. The Company is also planning to introduce the video surveillance of production and thereby establish better reliability in the process and the end product. It is still investing in the development of new products in this field. In the field of packaging, the Company pays special attention to the production of more sophisticated selfadhesive labels (double-layer labels, security labels) and to optimising business and production processes in the field of packaging. Cetis is working on a development project in the field of in-mould labels (IMP technology). The basis of the IML technology is a tool in which, prior to ink jetting, the operator inserts a label made from the same material as the packaging. In the second half of 2008, the development team was reinforced. Its work is directed towards the development of new PIN mailers and the standardisation of technology processes. In 2008, the company applied for the tender ‘Young researchers from the economy – Generation 2008’. This program is partly co-financed by the European Social Fund. The company acquired funds for the research work of a young researcher. The co-financing, which lasts four and a half years, covers most of the costs of the research work, material costs, travel costs and amortisation.
33
BUSINESS REPORT
Plans for the future
34
Cetis, d. d.
Annual Report 2 0 0 8
In the field of packaging, Cetis will strive to develop ‘smart’ packaging and materials. In the field of documents, Cetis will continue to compete for public tenders and develop protective elements that are visible without any special devices. These protective elements will, above all, be manufactured in the lamination phase with laminate plates developed by Cetis, and where there are great possibilities of making new protective elements.
Cetis New Technologies The CeNT Research and Development Division is active in the field of research and development of innovative solutions in the field of information technology, in line with the vision of the company. In 2008, CeNT concluded or began the following important projects In the last months of 2008, the information services team, apart from extensive regular work, managed the procedures and documents needed to acquire the certificate of conformity with the ISO 27001:2005 Standard, the most important internationally recognised document for the information security field. However, the harmonisation of Cetis’s procedures with this standard did not begin in 2008. The very first steps were taken in 2004, when the first Cetis information security policy was adopted. In 2008, the harmonisation of procedures in the field of information security with the legal requirements took place; at the same time, emphasis was placed on the improvement of internal services efficiency. Therefore, comprehensively modernised, in terms of safety, the firewall, and this helped reduce the operating costs of information services within the company; it also established a service centre, the ‘ME ServiceDesk’, where all requests in the field of IT user support within the company are monitored. In just a few months, over 1000 requests were processed. This means that every user request for assistance is registered and appropriately recorded, and this allows for immediate problem solving. Cetis also established the following: control programs for information systems, a security segmentation of the computer network – WLAN, Secure FTP transfer of data (in line with the Data protection act), regular information and education for users, information support for marketing activities when entering foreign markets. CeNT worked with the Slovenian government on upgrading the following services in the field of comprehensive services for security printed matter: • • • •
transfer to electronic exchange of data when ordering Slovene biometric passports, transfer to electronic exchange of data when ordering Slovene identity cards, personalisation of second generation health insurance cards, CeNT successfully concluded the digitalisation of documents for DURS (RS Tax Administration).
In the field of supporting the sale of commercial printed matter (for large commercial systems, lottery companies, financial institutions and others), CeNT: • • • • •
upgraded the purchasing card and implemented the ‘Connect:Direct’ transfer of data for a commercial system, started digitalising documents for several commercial companies; successfully concluded a pilot project of betting slip digitalisation, started creating a new program for the production of lottery tickets, prepared documents with the relevant data for electronic archiving for an insurance company.
CeNT underwent a quality evaluation by the following competent institutions: the issuer of credit and payment cards, lottery organisations, central banks, health organisations and authorised auditing firms.
Cetis, d. d.
Annual Report 2 0 0 8
BUSINESS REPORT
Production
In 2008, the main problems in production were disproportionate capacity utilisation, reduction of inventory, lay-offs, and measures to increase production and reduce the use of materials. In the first quarter, we successfully concluded the first part of the passport production project for a large African country. This project continues in 2009 due to setbacks on the part of the client, and as a result, in 2008 the company had too many semi-products in stock. By the end of the first half-year, all our banks started using chip payment cards (EMV), and this put personalisation production to the test, as around one million cards had to be personalised in two months. In July, the ‘perso center’ started using the new system of data transfer and identity card personalisation. In November, it started personalising new health insurance cards. The company invested in new software and production department continued to prepare and produce printing forms. This new working procedure unified processes and automated procedures, and significantly reducing preparation time for printing forms. And with greater efficiency, fewer workers are needed for this task. In 2009, production will be automated and procedures standardised, i.e. from the receipt of the order to the production start-up and then the confirmation of the printing form preparation. The centralization of dye inventory management produced results above all regarding the reduction in dye and lacquer inventory by 40 per cent. By increasing control and optimising logistics, the current stock of all materials in production was reduced by 31 per cent. In the second half of 2008, the company did not renew contracts for temporary employment due to reduced production. The number of employees was therefore reduced by 12 per cent. In 2008, the production department managed to reduce raw material usage by 14 index points compared to the previous year. However, the company failed to attain the goal set for 2008, i.e. a 2% reduction in raw material use according to work orders. This goal will be attained in 2009 with process optimisation. With a view to improving work discipline and regulating the working environment, in the second half of 2008, the company began regulation, monitoring and evaluating the order and cleanliness of individual divisions. The positive effects are already visible: the divisions are better regulated, the employees are more aware of their working environment and are showing a better approach to work. Major production projects in 2009: • to successfully conclude the passport project for a large African country, • to reorganise the business communication systems pillar, • to optimize and develop packaging production, • to conclude the centralization of management and preparation of dyes in production, • to renew the system of remuneration and to introduce more effective and motivating remuneration, taking into account the effects (productivity, material usage), • in line with the set strategy of process organization in the company, which is based on four selling pillars, the aim is to introduce the principles of lean production. This would result in fluent production and constant productivity improvement, a determination of improvement possibilities and definition of activities for improvement and promotion of continuous improvement, above all among production workers.
35
BUSINESS REPORT
36
Cetis, d. d.
Annual Report 2 0 0 8
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
Purchasing and Logistics
The purchasing division strives to satisfy the needs of the production process and all other users with the aid of adequately priced high-quality material, goods and services. It is responsible for concluding purchasing contracts with all suppliers. This enables the company to implement the basic operation process in a quality and cost-effective manner. 2008 was also a challenge for the purchasing division Orders and receipts
Year
2007
Total number of orders in Cetis
5.003
3.774
19.043
12.432
11.599.800
10.417.097
Total number of receipts in Cetis Purchasing value in EUR
2008
Conclusions: purchasing value decreased slightly in 2008. In terms of quantity, Cetis faced a lower number of orders and receipts, which was due to the outsourcing of maintenance works in 2008. In 2008, Cetis took over purchasing for Amba. Despite the above-mentioned facts, the main characteristic of purchasing in 2008 was the fragmentation of orders. Movement of raw material prices and the search for alternative suppliers At the beginning of 2008, suppliers announced a material price increase, and the main characteristic of purchasing is still price negotiation. Cetis succeeded in pushing the announced price increases into the second half of the year. And where this was not possible, Cetis changed supplier. Most of the changes were in PVC materials, self-copy papers, packaging and dyes. Cetis carried out a public tender for the procurement of self-adhesive materials, but the outcomes were not favourable, as the process offered were not different from the existing ones. Therefore, the company has been searching for alternative material sources and new suppliers with lower prices from more distant countries (Asia, Russia, Middle East, South America). By the beginning of 2009, the company had managed to acquire one new adequate supplier of PVC materials for the production of cards. Monitoring of material inventory and disposal of dead inventory The company paid special attention to the monitoring of material inventory movement. It managed to use and dispose of some of the dead inventory, it closed the warehouse in Bukovžlak, and this in turn reduced logistics costs. Material is now kept in the warehouse at the company’s headquarters. Purchasing was limited only to materials for already concluded contracts, and the company managed the inventory more intensively. Relations with suppliers and complaints The company carried out supplier evaluation, as it does every year. Consequently, a new classification of suppliers was made: A – reliable, B – acceptable, and C – conditional.
37
BUSINESS REPORT
38
Cetis, d. d.
Annual Report 2 0 0 8
Number of suppliers by individual groups in the last two years
A
B
C
2007
23
76
1
2008
24
48
4
Conclusions: the company evaluated all suppliers and subcontractors, except for services and maintenance providers. The ratio in the structure remains the same throughout the year. In 2008, there were a few more conditional suppliers (classification C) due to a greater number of complaints, and some suppliers offered higher prices and were therefore classified as classification C suppliers. Only the top 20 suppliers are informed of the results of the evaluation. In the previous year the company made more complaints than in 2007, i.e. 78, and this shows that the company is stricter when it comes to quality and the volume of production scrap. This can be seen as positive. The company put more pressure on suppliers to deal with complaints in due time. And it was successful: 98% of all the complaints were solved. The company also dealt with a few major long-running complaints, which required a lot of effort and consultation. Storage transport service The main emphasis was on cost reduction. Compared to 2007, transport costs were reduced by 10,2 per cent. Costs by individual transport types: Transport by individual fields in EUR 2007
2008
Domestic market
167.534,00
170.586,00
Abroad
211.031,00
159.623,00
Raw materials
68.261,00
75.669,00
Postal services
28.809,00
21.359,00
475.635,00
427.237,00
Total
Conclusions: until September, the year 2008 was marked by continuous growth in petroleum products prices. This caused an 8% increase in the prices of contracting carriers. After September, the company managed to reduce prices by 12 per cent, in line with the fall in oil prices and in light of the general fall in economic growth. The number of exceptional transhipments in the domestic market also fell, while at the same time we increased the number of raw material shipments. There were more shipments to Croatia, and therefore the company strengthened cooperation with a contracting carrier who turned out to be very competitive. In the field of products and services for the health care industry, the volume of incoming transport also increased. Total costs of transport amounted to 427.237 EUR. Costs of raw material transport were 75.669 EUR, i.e. 17,7%.
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
Employees
To make the work of the Human Resources Management Department easier and more professional, the company defined personnel processes in the field of recruitment, employment, job coaching, training and termination of employment contracts. The education and training of personnel is in accordance with the ISO Standard. The Human Resources Management Department redefined rules regarding alcohol consumption in the workplace and smoking, in order to harmonise with requirements regarding safety and health at work. The company also updated sick leave records. At the same time, the unification of the work hour record system and salary calculation was carried out to optimise the work process. Number of employees per organisational unit (OU) for 2007 and 2008, as of 31 December
2007 OU Management Sales of commercial printed matter Sales of security printed matter
Number of employees
2008 IND 0708
%
Number of employees
%
9
2,37
10
2,63
111,11
25
6,58
26
6,84
104,00
16
4,21
14
3,68
87,50
41
10,79
38
10,00
92,68
21
5,53
18
4,74
85,71
11
2,89
10
2,63
90,91
11
2,89
12
3,16
109,09
7
1,84
10
2,63
142,86
Purchasing and Logistics Research and Development of new technologies Business integrations and human resources management Finance and Economics Research and Development of graphic technologies Production
295
77,63
242
63,68
82,03
Total
436
114,74
380
100,00
87,16
39
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
Number of employees in 2007 and 2008
Ĺ tevilo zaposlenih Plan for 2008
441
New employments by 31. 12. 2008
31
Situation on 31. 12. 2007
436
Terminations by 31. 12. 2008
87
Situation on 31. 12. 2008 40
380
Fluctuation rate
18,63
Decrease by 31. 12. 2008
-56
Deviation from the plan as of 31. 12. 2008
-61
Conclusions: in 2008, the company continued to reduce the number of employees through soft layoffs: the termination of temporary employment contracts; redundant workers were registered at the Employment Service of Slovenia, and remain registered until they qualify for retirement. For 2008, the company planned, according to the production plan, to have 441 employees. However, at the end of the year, this number was much lower, due to changes in the production plan. Educational structure of employees in Cetis
2007 Level of education II. Primary school
Number of employees 97
2008
%
Number of employees
%
22,25
83
21,84
III. Qualified workers
8
1,83
7
1,84
IV. Qualified workers
137
31,42
115
30,26
V. Secondary education
119
27,29
98
25,79
VI. Higher education
27
6,19
26
6,84
VII. University degree
42
9,63
45
11,84
6
1,38
6
1,58
436
100
380
100
VIII. Master’s degree Total
Conclusions: the number of employees with university degrees increased due to the recruitment of expert staff in the fields of graphic development and sales. On the other hand, the company did not extend temporary employment contracts, and this resulted above all in a reduced number of qualified workers.
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
Trends in the number of employees in Cetis Group in 2007 and 2008
2007
2008
Cetis Group
499
436
Cetis
436
380
Cetis-ZG
22
22
Amba
41
33
Cetis-Print
1 41
Conclusions: the number of employees in the group fell in the last few years, above all due to the reduction of the number of employees in the parent company. Educational structure of employees in the Cetis Group
2007 Level of education
Number of workers
%
2008 Number of workers
%
6
1,37
84
19,27
I. II. Primary school
103
21
III. Qualified workers
7
1,43
8
1,83
IV. Qualified workers
149
30,41
125
28,67
V. Secondary education
143
29,18
125
28,67
VI. Higher education
30
6,14
28
6,42
VII. University degree
52
10,61
52
11,93
VIII. Master’s degree
6
1,22
8
1,83
490
100
436
100
Total
Conclusions: within the Cetis Group, the number of employees with low educational levels decreased. This is above all due to trends in the parent company: temporary employment contracts were not extended. Labour costs and costs of salaries in EUR, in %
2007
2008
Average annual gross salary in Cetis
1.134,37
1.233,93
Average annual gross salary in Slovenia
1.285,57
1.391,14
-12
-11
1.119,15
1.211,65
1,34
1,81
29,18
31,73 
Deviations from the national average in % Average annual gross salary in the industry in Slovenia Deviations from the average in the industry in % Labour costs in the revenues structure in %
With regard to salaries, the company exceeds the average in the industry. However, due to the educational levels of employees, the average salary is lower than the national average.
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
Costs of education and training, in EUR Cetis is well aware of the importance of knowledge, therefore the company supports every wish and need of employees to continues their education and improve skills relevant to their field of work and related to Cetis’s goals. The company realises that one can never be too good. If a worker is to be successful, he or she will need to expand their existing knowledge and constantly improve it.
42
2007
2008
IND 07/08
180.416,15
73.315,23
40,64
Computer science
27.335,58
7.519,50
27,51
Foreign languages
3.466,73
404,35
11,66
Seminars
Fairs
46.719,00
26.581,58
56,90
Evening school
10.444,72
11.600,68
111,07
Scholarships Total
21.839,21
14.571,99
66,72
290.221,39
133.993,33
46,17
Conclusions: in 2008, employees continued with target education and training for those lacking skills and competences that are actually needed in the relevant field of work. Above all, these include expert seminars, computing and visits to fairs and conferences where novelties in the industry are presented. Compared to the previous year, the company allocated more funds to evening classes: it financially supported retraining of four production workers to work in the printing segment. Statistical data on employees for the past two years
2007
2008
436
380
Share of women
40,60%
42,10%
Share of men
59,40%
57,90%
Average age of females
40,75 years
41,91 years
Average age of males
40,82 years
42,15 years
Average term of employment of female employees
20,58 years
21,92 years
Average term of employment of male employees
20,13 years
21,49 years
Share of permanently employed
84,60%
87,90%
Share of temporarily employed
15,40%
12,10%
Fluctuation rate
13,66%
18,63%
Share of women in management
Number of employees
44,73%
43,59%
New hiring
86
31
Terminations of employment
69
87
Conclusions: the share of women did not change significantly in the company or in the management. In the last few years, the age structure and period of employment naturally increased. This means that, on average, workers stay in the company and therefore the age structure and period of employment increase. The fluctuation rate was higher, however, by 5 per cent, above all due to terminations of temporary employment and departures of some staff.
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
Overview of sick leave, in %
Sickness benefits chargeable to the companye
Reimbursed sickness benefits
Total
January
5,57
2,22
7,79
February
3,61
2,02
5,63
March
5,02
2,06
7,08
April
5,43
2,11
7,54
May
4,04
2,16
6,20
June
3,40
1,67
5,07
July
2,85
1,38
4,23
August
3,16
1,42
4,58
September
4,71
1,29
6,00
October
4,56
2,89
7,45
November
3,80
3,31
7,11
December
3,20
3,37
6,57
Average
4,11
2,16
6,27
Month
Conclusions: in 2008, the percentages of sickness leave decreased on average by 0,13 percentage points. Partly, sickness leave up to 30 days reduced, whereas absence due to longer periods of sickness leave rose by almost one per cent. The company regularly monitors sick leave, and has special interviews with those who are on sick leave for longer periods. For a certain number of employees, a proposal was made to the Pension and Disability Insurance Institute of the Republic of Slovenia to establish the possibility of retirement on the basis of disability. Safety and health at work In 2008, all regular health and safety at work activities were carried out in compliance with the Occupational Health and Safety Act, in particular: - - - -
theoretical training of employees regarding safety at work and fire safety (approx. 400 participating employees, excluding management), preventive medical examinations for employees (200 employees), periodical inspections and testing of working equipment (the company acquired operating licences for 60 machines), inspections and testing of fire fighting equipment (fire extinguishers, hydrants).
In order to permanently, and in the long-run, improve the health of employees and their safety at work, the following is important: regular monitoring of health status of the employees, timely diagnosis of occupational diseases by means of preventive medical examinations, and the gradual introduction of target health examinations for certain groups of posts. The company also actively co-operates with external partners in the field of safety at work when selecting, purchasing and introducing new equipment and new technological procedures in the company.
43
BUSINESS REPORT
44
Cetis, d. d.
Annual Report 2 0 0 8
Accidents in 2008 In 2008, fifteen workers were injured: four were injured on their way to work, and eleven were injured at work. Accidents at work and on the way to work
Injuries On the way to work
2007
2008
3
4
At work
13
11
Total
16
15
Plans for 2009 In line with the company’s vision – to become a global information integrator – the company will strive to further educate and train employees. Only the good qualifications and skills of every individual can bring success. In November 2008, the management harmonised and determined the following corporate competences that will be implemented in 2009 in order to develop human resources: system thinking, leadership, vision, promoting changes, mentorship, partnerships and integration, emotional intelligence, decision-making, innovation, team work, control, accepting responsibility, performance management, project management, expert knowledge, risk management. For every individual, and based on an evaluation of competences, we will prepare an analysis of certain competences and also an improvement plan, a development plan and an education and training plan. The company will apply the competences model to all employees and the result will be a number of activities, such as: 1. new definitions of posts - definitions will specify the required competences for individual posts, which is important when hiring and coaching new employees. 2. new methods regarding annual interviews; the worker and his/her superior will determine what competences are lacking and prepare a development and training plan. 3. determination of the human resources development policy (promotions, training, assignments to new posts, development etc.). In 2009, the company will strive to maintain the best staff. In this difficult period when the economic crisis has spared no one, it is very important to use all the energy and commitment of our employees - this is crucial for the development and performance of the company.
Cetis, d. d.
Annual Report 2 0 0 8
BUSINESS REPORT
Corporate Social Responsibility and Care for the Environment
Quality management The safety and quality of products and services are the fundamental aims of Cetis’ business operations. This has been proven by monitoring carried out by an authorised independent institution. The company verifies and tests the compliance and reliability of most of its products in the in-house laboratory. The criteria are taken from international standards and are often even stricter, with the aim of ensuring product reliability and user-friendliness. Cetis strives to establish a working environment that is pleasant for, and socially responsible towards its employees, as well as the wider community. It is for this reason that it identifies threats and their possible effects on working conditions. The Company adopts appropriate measures and system improvements to limit such threats. Cetis’s products and services, which embody a lot of know-how and state-of-the-art technology, demand an extraordinary emphasis on quality. For this reason, Cetis takes due account of, and uses all the technological possibilities to attain the highest quality in all aspects of products and services. The main goal is constantly to improve throughout the business and production processes. With the help of external and internal examinations, the Company determines, at an early stage, any possible deviations or non-compliance of every function or process, and thereby it reveals potential for improvement. Cetis takes the following quality standards into consideration: • • • • • • •
certified ISO 9001:2000 Quality Management System, certified ISO 14001:2004 Environmental Management System, OHSAS 18001 Occupational safety and health system, Visa/Mastercard certified system for ensuring physical and logical safety, CQM – (Card Quality Management) Mastercard standard ensuring the quality of bank cards, certified system of information security pursuant to ISO 27001:2005, FSCC (Facility Security Clearance Certificate), a security certificate of RS of the Government Office for the Protection of Classified Information, in accordance with EU security policy.
45
BUSINESS REPORT
46
Cetis, d. d.
Annual Report 2 0 0 8
Cetis, d. d.
Annual Report 2 0 0 8
BUSINESS REPORT
Environmental responsibility
47
A responsible, healthy attitude towards the natural environment is one of the conditions for a healthy working environment. The Company is well aware of this and it therefore observes the strict environmental guidelines defined in its environmental policy. Cetis is not a heavy polluter of the environment. Nevertheless, it has been working actively to minimise the effects of its business activities on the natural environment – from raising environmental awareness and education of employees, to considering the environmental aspect when acquiring new technologies. Implementation of environmental goals and programmes in 2008 • Reconstruction of warehouses for hazardous substances and waste with optimal storage conditions. • In 2008, the company managed to achieve environmental goals regarding the reduction of hazardous waste. Compared to 2006 (a 36,3 % reduction), it managed to reduce the volume of hazardous waste by 45,8%. • In 2008, the Company recorded a slight increase in the volume of municipal waste. Environmental plans for 2009 • acquisition of an environmental permit for plants that cause emissions into water, • reduction of the volume of municipal waste by 10%, • reduction of the volume of hazardous waste by 5%. Reducing the volume of waste by 30% compared to 2003 remains a long-term goal of Cetis (currently the Company has achieved a 20-percent reduction in total waste). A related goal is to raise the environmental awareness of employees. Environmental investments in recent years Environmental investments in recent years
Investments in EUR
Introduction of CTP technology
400.000
Introduction of flexo CTP technology
117.892
Construction of a warehouse for hazardous waste
330.000
Total
847.892
Volume of municipal waste
Year Municipal waste in tons
2007
2008
68,2
88,0
Compared to 2007, the volume of municipal waste rose by almost 2 per cent. In the future, the company will strive to reduce the volume of municipal waste.
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
Volumes of hazardous waste in kg
Dangerous waste
2007
2008
differ. in %
10.980
9.684
-12
990
940
-5
Dyes
8.989
5.280
-41
Adhesives
2.000
1.790
-11
284
191
-33
943
510
-46
1.898
130
-93
Cloth Packaging of dangerous substances
Toners 48
Solvents Fixers Developers Total
4.272
3.590
-16
30.356
22.115
-27
Compared to 2007, the volume of hazardous waste was reduced by 8.241 kg, i.e. by 27%. The main underlying reason for this reduction was reduced production. The greatest reduction in hazardous waste in recent years has been due to the introduction of CTP technology (replacing old reproduction procedures; currently, only 10% are still in use). Packaging Cetis generates waste packaging which is not considered municipal waste and is also an insignificant share of waste packaging from direct import. In 2008, the Company generated 99 tonnes of waste paper packaging nationwide. The Company’s waste does not burden the environment, as it is later recycled. Air emissions The advanced technological equipment and the Company’s dedication to using non-hazardous process materials result in minimum air emissions. Heating is based on natural gas, which is considered an environmentally-friendly form of heating.
Year Natural gas consumption in cm3
2007
2008
181.306
211.731
2007
2008
7.286.970
6.776.730
Electricity
Year Consumption of electricity in kwh
Cetis, d. d.
Annual Report 2 0 0 8
BUSINESS REPORT
Emissions into water By investing in BAT technology, the Company reduced the concentration of silver in waste water. Also, the measurements of competent institutions show that the Company’s wastewater is within the legally prescribed limits for emissions into the public sewerage system.
Year Consumption of wated in m3
2007
2008
12.666
15.782
When obsolete technology was replaced by modern CTP, the effects of the BAT technology in the prepress department were, in accordance with expectations, obvious also in lower water consumption (use of water has been excluded from the offset plate developing procedure). Preventive and corrective measures In 2007 and 2008, the Company did not implement any significant preventive or corrective measures. In most cases, the reason was inconsistent separation of waste and inaccessibility of fire extinguishers. Environmental communication Pursuant to the Rules on Environmental Management, the company keeps internal and external records on environmental communication. Periodically, and in the annual report, its employees and business partners are informed of the company’s environmental activities and of the implementation of major projects or investments. The established channels of communication, such as notice boards, electronic mail, newsletters and meetings, are used to regularly inform employees of Cetis environmental activities. Employees are expected to provide concrete proposals for improvements, because those working on individual programmes have the most relevant information. Employees are also constantly trained in the field of environmental protection and safety at work, with the purpose of improving organisational culture in terms of higher environmental awareness. Each individual is obliged to implement the Company’s environment protection policy and to act in accordance with its provisions.
Social responsibility In the last few years, the company strove to adjust operating costs to conditions in the market. In accordance with this policy, the company adjusted funds allocated to socially useful activities; these funds were considerably reduced. Cetis is still involved in various socially useful programmes and initiatives, yet to a much lesser extent compared to previous years. In 2008, Cetis allocated 0,12 % of its revenues to these activities. Cetis continues to sponsor sports teams. For several years, the Company has been a sponsor of the Pivovarna Laško Handball Club, the Kladivar Athletics Club, Celje Women’s Handball and other sport associations and clubs. Other donations in 2008 were mainly made to individuals in distress, schools and individual sports activities. Cetis supports the physical activity of its employees; within, the Company organises sport associations and supports them financially every year. In the light of the well-being of its employees and to raise awareness regarding the importance of health for the quality of life, Cetis introduced a new event three years ago – Health Day.
49
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
FINANCIAL REPORT OF CETIS, d.d. joint stock company
50
Cetis, d. d.
Annual Report 2 0 0 8
BUSINESS REPORT
Independent Auditor’s Report
51
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
Statement of Management responsibility
52
The Management Board is responsible for preparing financial statements so that they give a true and fair view of the state of affairs at the end of the financial year, and of profit or loss for the period. The Management Board hereby confirms that suitable accounting policies have been applied consistently and that the accounting estimates are reasonable and prudent. The Management Board also confirms that the financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). The financial statements have been prepared on a going concern basis. The Management Board recognizes its responsibility for keeping proper accounting records, the adoption of appropriate measures for safeguarding the Company’s assets, and prevention and detection of fraud and other irregularities.
30 March 2009
Simona PotoÄ?nik, MSc, General Manager
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
Income Statement (IFRS)
In EUR thousand
Notes
Achieved in 2008
Achieved in 2007
1.
REVENUE
2
25.669
28.411
2.
Cost of goods sold
3
-1.986
-1.345
3.
Production costs
3
-16.204
-18.643
4.
Costs of goods sold and production costs
-18.190
-19.988
7.479
8.423
A.
GROSS PROFIT
5.
Other operating income
4
1.054
950
6.
Sales and distribution expenses
3
-3.696
-3.552
7.
Administrative expenses
3
-6.195
-6.095
8.
Other operating expense
3
-203
-151
= Other income, expenses and costs (5+6+7+8)
-8.985
-8.848
-1.561
-425
B.
OPERATING PROFIT OR LOSS EXCLUDING FINANCE COSTS
9.
Finance income
5
2.376
2.397
Finance costs
5
-1.200
-802
1.176
1.595
-385
1.170
-32
-213
-417
957
10. C. D. 12. E.
NET FINANCE COSTS PROFIT OR LOSS BEFORE TAXATION Income tax expense
6
PROFIT/LOSS FOR THE FINANCIAL YEAR
Basic and diluted earnings (loss) per share (in EUR)
24
-2,09
4,79
53
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
Balance Sheet at 31 December 2008
In EUR thousand
Notes
31.12.2008
31.12.2007
ASSETS
Property, plant and equipment
8
16.692
20.024 1.375
54
Intangible assets
9
1.620
Investment property
10
203
Investments in group companies
11
3.615
3.616
Investments in affiliated undertakings
12
8
72
Available-for-sale investments
13
12.282
13.016
Loans
14
334
1.550
Long-term trade receivables
15
Deferred tax assets
16
Total non-current assets
878 741
363
35.495
40.894
Available-for-sale assets
17
2.381
Inventories
18
2.853
3.308
Current investments at fair value
19
Short-term loans
20
897
418
Trade and other receivables
21
4.179
5.434
Cash and cash equivalents
22
Total current assets TOTAL ASSETS
2.156
956
501
11.266
11.817
46.761
52.711
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
In EUR thousand Notes
31.12.2008
31.12.2007
Issued capital
10.015
10.015
Share premium account
17.859
17.859
1.927
1.901
Retained earnings
456
899
Own shares held
-26
-26
Equity
Reserves (legal and statutory)
Fair value reserve
-1.576
341
23
28.655
30.989
Borrowings
25
6.064
8.445
Non-current operating liabilities based on prepayments
26
3
3
Provisions
27
1.010
1.188
Deferred tax liabilities
16
26
132
7.104
9.768
Total equity
Total non-current liabilities Borrowings
25
5.730
3.960
Trade and other payables
28
5.273
7.994
Total current liabilities
11.003
11.954
Total liabilities
18.106
21.722
TOTAL EQUITY AND LIABILITIES
46.761
52.711
55
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
Cash Flow Statement (IFRS)
56
Achieved in 2008
In EUR thousand Achieved in 2007
-417 2.640 3.163 267 -120 10 -1.585 1.190 -173 -112
957 3.249 3.254 320 -147 4 -541 798 -53 -386
CASH FLOW FROM OPERATING ACTIVITIES Profit/loss for the financial year Adjustments for: Depreciation and amortisation of property, plant and equipment Depreciation and amortisation of intangible assets (Reversal of ) impairment losses Negative translation differences Finance income Finance costs Gain on disposal of property, plant and equipment Revenue from a decrease in long-term provisions OPERATING PROFIT BEFORE CHANGES IN NET OPERATING ASSETS AND PROVISIONS Change in trade and other receivables Change in inventories Change in trade and other payables Change in provisions and employee benefits CASH GENERATED BY OPERATIONS Interest paid NET CASH FLOW FROM OPERATING ACTIVITIES
2.223
4.206
-12 563 -3.000 -66 -2.515 -583 -875
-1.099 291 1.648 -27 813 -533 4.486
CASH FLOW FROM INVESTING ACTIVITIES Proceeds from disposal of property, plant and equipment Proceeds from disposal of investments Interest received Dividends received Purchase of property, plant and equipment Purchase of other investments Purchase of intangible assets NET CASH FLOW FROM INVESTING ACTIVITIES CASH FLOW FROM FINANCING ACTIVITIES Movements in equity Borrowings Repayment of borrowings Dividends paid NET CASH FLOW FROM FINANCING ACTIVITIES Net increase in cash and cash equivalents Cash and cash equivalents at beginning of period CASH AND CASH EQUIVALENTS AT END OF PERIOD
765 1.693 210 538 -753 -512 1.941 6.791 -7.402 -611 455 501 956
312 541 69 254 -4.551 -1.802 -237 -5.414 -20 6.787 -6.067 -1 699 -229 730 501
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
Statement of Changes in Equity (IFRS) In EUR thousand
Balance 1 January 2007
Issued capital
Capital reserves
Legal and statutory reserves
10.015
17.859
1.710
-26
153
690
30.401
957
957
Own shares
Profit retained
Fair value reserve
Total equity
Profit 2007 Allocation for statutory reserves Payment of bonuses
191
-191
-20
-20
Decrease in fair value
-349
-349
10.015
17.859
1.901
-26
899
341
30.989
Balance 31 December 2007 Profit 2008 Loss 2008
-417
-417
Allocation to reserves Allocation for statutory reserves Payment of bonuses
26
-26
Decrease in fair value
-1.917
-1.917
10.015
17.859
1.927
-26
456
-1.576
28.655
Balance 31 December 2008
The Management of Cetis, d.d. hereby approves the financial statements and notes thereto for the financial year ended on 31 December 2008.
57
Cetis, d. d.
Annual Report 2 0 0 8
Summary of significant accounting policies and notes to the financial statements
58
1. Company profile Cetis, Graphic and Documentation Services, d.d. is a Company with its registered office at Čopova 24, Celje, Slovenia. The Company was entered as a joint stock company in the Register of Companies with the District Court of Celje on 13 February 1996 under entry No 95/00923, and on 25 November 2003 under entry No 1/01476/0. The share capital of the Company at 31 December 2008 amounts to EUR 28.655 thousand, and is divided into 200.000 ordinary, no-par value registered shares issued as dematerialised securities at the Central Securities Clearing Corporation (KDD) in Ljubljana. The shares (designated as CETG) are traded on the free market of the Ljubljana Stock Exchange. Nature of operations and relevant activities The Company’s core business is the provision of comprehensive solutions in the field of communications through printed and other types of media. The corporate vision envisions Cetis as the leading company in Slovenia, with appropriate developmental, investing and marketing activities, and the best qualified staff, looking ahead to increase its market share also outside Slovenia. The Company offers a programme of diversified printed matter, such as security, variable and commercial printed matter; graphic design including accessory services, such as the personalisation of documents, the implementation of micro chips or magnetic tapes, archiving, identity management, consultancy, project management and other services. Fact sheet of the parent company Cetis, d.d. is a parent company of the Cetis group, for which consolidated financial statements are prepared. 2. Basis of preparation of financial statements The 2008 financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and the interpretations of the IFRS Interpretations Committee (IFRSIC), as adopted by the European Union.
The financial statements were approved by the Management Board in March 2009. Basis for measurement The 2008 financial statements have been prepared on a historical cost basis, except for the following items that are measured at fair value: - financial instruments at fair value through profit or loss, - financial instruments at fair value through capital or financial assets held for sale. The methods applied to measure fair value are described below. Functional and presentation method The financial statements are presented in euros (EUR), i.e. the functional currency of the Cetis, d.d. company. All accounting information presented in euros is rounded off to the nearest thousand. Use of estimates and judgements The preparation of financial statements in accordance with International Financial Reporting Standards (IFRS) requires the Management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions need to be reviewed on a regular basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. Information about significant risk assessments and critical judgements which the Management prepared during the process of applying accounting policies, and which have the most significant impact on the amounts presented in the financial statements, are described in the following notes: - Point 16 – utilisation of tax losses. - Points 26 and 27 – provisions and contingencies. - Point 29 – valuation of financial instruments. 3. Relevant accounting principles applied The accounting policies stated below were consistently applied by the Company to all the periods presented in the enclosed financial statements.
Cetis, d. d.
Annual Report 2 0 0 8
a) Foreign currencies Transactions denominated in a foreign currency are translated into a suitable functional currency of the company using the rate of exchange effective on the date of transaction. Assets and liabilities expressed in a foreign currency are translated on the date of the event and at the end of the accounting period using the reference exchange rate (ECB) of the Bank of Slovenia in EUR. Monetary assets and liabilities stated in a foreign currency on the balance sheet date are translated into functional currency at the applicable rate of exchange. The foreign exchange gains or losses are the differences between the amortised cost in the functional currency at the beginning of the period, adjusted by the amount of effective interest and the payments effected during the period, as well as the amortised cost expressed in a foreign currency and translated at the exchange rate at the end of the period. Non-monetary assets and liabilities stated in a foreign currency and measured at fair value are translated into the functional currency at the exchange rate effective on the date on which the fair value was set. Foreign exchange gains and losses are recognised in the Income Statement.
equity. When an investment is derecognised, the related gain or loss is transferred to profit or loss. When accounting for the regular purchase or sale of a financial asset, the asset is recognised or derecognised, respectively, taking into account the date of payment. Investments at fair value through profit or loss An instrument is classified at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. Financial instruments are designated at fair value through profit or loss if the company is able to manage such investments and make purchase and sale decisions based on their fair value. Upon initial recognition, attributable transaction costs are recognised in profit or loss when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and a change in fair value is recognised in profit or loss. Other Other non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment losses.
b) Financial instruments
Share capital Ordinary shares Ordinary shares constitute an integral part of the share capital.
Non-derivative financial instruments Non-derivative financial instruments include investments in equity and debt securities, trade and other receivables, cash and cash equivalents, borrowings and loans, and trade and other liabilities. Initially, non-derivative instruments are recognised at fair value increased by costs that are directly related to the business transaction. Subsequent to initial recognition, non-derivative financial instruments are measured as explained below.
Repurchase of own shares When shares recognised as equity are repurchased, the amount of the consideration paid, including directly attributable costs and excluding potential tax effects, is recognised as a change in equity. The shares bought back are classified as own shares and presented as a deduction from total equity. Upon sale of own shares, the amount received is recognised as an increase in equity, whereas the surplus or loss in transaction is recognised in equity.
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of cash management are included as a component of cash and cash equivalents in the Cash Flow Statement.
c) Property, plant and equipment
Accounting of finance income and finance costs is discussed in Point k) – Finance income and finance costs. Financial assets available for sale Investments of the company in equity securities and certain debt securities are classified as available-for-sale financial assets. Subsequent to initial recognition, these investments are measured at fair value, and the changes in fair value with the exception of impairment losses are recognised directly in
Items of property, plant and equipment are carried at cost, less any accumulated depreciation expense and accumulated impairment losses. At the date of transition to IFRS, the items of property, plant and equipment were stated at their historical cost as estimated on 1 January 2005. Historical cost includes costs that are directly attributable to the acquisition of assets. The cost of an item of property, plant or equipment that is a result of own production comprises material costs, direct labour costs and other costs that can be directly attributed to bringing the asset to a working condition for its intended use, as well as the costs of dismantling and removal from the location where
59
BUSINESS REPORT
it was used and restoring such location. Purchased software that is integral to the functionality of the related equipment is capitalised as a part of that equipment. The costs of borrowing related to the purchase and production of the related assets are disclosed in the income statement when incurred. Parts of an item of property, plant and equipment with different useful lives are accounted for as separate items of property, plant and equipment.
60
Gains or losses from the disposal of property, plant and equipment are determined as the difference between the income generated from the disposal of asset and its book value, and are disclosed in the income statement among “other operating income” or “other operating expenses”. Subsequent costs in connection with property, plant and equipment The cost of replacing a part of an item of property, plant and equipment is recognised in the book value of the asset if it is probable that future economic benefits linked to such a part will flow to the company, and if its historical cost can be reliably measured. All other costs, such as dayto-day servicing, are recognised in the income statement as expenses when incurred. Depreciation expense The calculation of depreciation expense is based on a straight-line method, taking into account the useful life for each asset. Depreciation charges on these assets are made individually. Land and assets in the process of acquisition are not depreciated.
Cetis, d. d.
Annual Report 2 0 0 8
Useful life is determined and examined in accordance with the Rules on accounting and finance. The item Buildings includes parts such as hydraulic bridge-over plate, with a 14,2% depreciation rate or useful life of 7 years. Depreciation methods, useful life and the carrying value are reviewed at the reporting date in accordance with the Rules on accounting and finance. d) Intangible assets Research and development Expenditure on research activities aiming to obtain new scientific and professional knowledge and understanding is recognised in the income statement as expenditure when incurred. Development activities involve a plan or design for production of new or essentially improved products and processes. A development expense is recognised: if it can be reliably measured; if the product or process is technically and operationally feasible; if there is a potential for future economic benefits; if the Company has adequate resources for the completion of development; and if it intends to use or sell such assets. The recognised amount of expenditure comprises the cost of materials, direct labour costs and other costs which can be directly attributed to qualifying the asset for its intended use. The cost of borrowing related to developing the asset and other costs are recognised in the income statement when incurred. Recognised development expenditure is carried at historical cost, less value adjustment for depreciation expense and accumulated impairment losses.
Depreciation rates are based on estimated useful life of assets and amount to:
In years min
In years max
Investment property
7
40
Buildings
7
40
Equipment – graphic activities
3
20
Laboratory equipment
3
10
Vehicles
5
8
Telephone sets, telegraphic switchboard
3
5
Furniture
5
6
Typewriters, computer equipment
3
8
Computer equipment for fire safety
3
3
Measuring and control devices
4
6
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
Other intangible assets Other intangible assets acquired by the Company with finite useful lives are disclosed at historical cost reduced by accumulated depreciation expenses and the current impairment losses. Subsequent expenditure Subsequent expenditure related to intangible fixed assets is capitalised only when it increases the future economic benefits arising from the specific asset to which it relates. All other expenditure is recognised in the income statement as expenses when incurred. Depreciation Depreciation of assets is calculated on the basis of a straight-line method, taking into account the useful life of an asset. The assets acquired in the current year are subject to depreciation when they are available for use. The estimated useful lives for the current and comparative periods are shown below. Depreciation rates are based on the useful life of assets:
Intangible assets
In years min 3
In years max 10
Measuring recognised value The company measures investment property based on a historical cost model. The historical cost of a purchased investment property comprises its purchase price and all directly attributable costs. Directly attributable costs include, for example, attributable fees for legal services, tax on property transfer, and other costs of a transaction. The historical cost of a property constructed within the company comprises its cost until the date when the construction or development was completed. On that date, the property becomes investment property. Disposal Investment property ceases to be recognised upon disposal, or when it is permanently withdrawn from use and no future economic benefits can be expected from its disposal. Profit or loss from discontinuation or the disposal of investment property has to be established as the difference between net return upon disposal and the book value of assets, and is recognised in the income statement.
e) Investment property
Depreciation
An investment property is a property owned in order to generate rent, or to increase the value of a long-term investment, or both. Investment property therefore creates cash flow that is highly independent of other assets owned by the company. An investment property is defined:
Investment property is depreciated at the same rate as investments used by the company. The manner of determining the useful life is the same as determining the useful life for property, plant and equipment.
• land owned to increase the value of a long-term investment, not for sale in the near future as part of regular business operations; • land for which the company has not determined its future use; • a building owned or in financial lease which is leased out on the basis of a single or multiple operational lease; • vacant building owned on the basis of a single or multiple operational lease and • in cases when, with regard to asset determination, a part of the property is investment property and another part a tangible fixed asset, but they cannot be sold separately, the whole asset is determined as an investment property if the part which is a tangible fixed asset is insignificant; otherwise, the whole asset is recognised as a tangible fixed asset. Whether the proportion is significant or not is determined by the employee competent for the segment.
f) Subsidiaries and affiliates Long-term financial investments in equity in subsidiaries and affiliates are valued according to historical cost. Participation in profit is recognised in financial statements when the Company has obtained the right to have it paid out. g) Inventories Inventories are valued at historical cost or net realisable value, whichever is lower. The value of inventories is based on the First-In-First-Out method (FIFO) and includes purchase value, costs of production and translation and other costs generated with the storage of inventories to the current location and their current condition. For finished products and work in progress, production costs also include an adequate share of indirect production costs, taking into account the normal use of production assets.
61
BUSINESS REPORT
Net realisable price is the estimated sales price to be achieved in ordinary business operations, reduced by the estimated cost of completion and the estimated costs of sale. h) Impairment of assets
62
Financial assets On the reporting date, the Company assesses the value of a financial asset in order to judge whether there are any objective signs of asset impairment. A financial asset is considered to be impaired if objective evidence indicates that one or more events reduced the estimated future cash flows arising from that asset. An impairment loss related to a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of a financial asset held for sale is calculated at its current fair value. Significant financial assets are assessed for impairment individually. The remaining financial assets are assessed collectively in groups that share similar risks exposure characteristics. All impairment losses are recognised in the income statement. Any current loss in respect of a financial asset which was not recognised directly in equity shall be transferred to profit or loss. An impairment loss is reversed if the reversal can be impartially linked to an event occurring after the impairment was recognized. For financial assets carried at amortised cost, and available-for-sale financial assets which are debt instruments, the reversal of impairment loss is recognised in profit or loss. For available-for-sale financial assets that are equity securities, impairment losses can not be reversed directly in profit and loss. Non-financial assets At each reporting date, the Company assesses the residual book value of non-financial assets, excluding inventories and deferred tax liabilities, in order to establish whether there is any objective indication of asset impairment. If such an indication exists, then the asset’s recoverable amount is estimated. For intangible assets that have indefinite useful lives and are not yet available for use, impairment is estimated at each reporting date.
Cetis, d. d.
The recoverable amount of an asset or a cashgenerating unit is its value in use or fair value, whichever is higher, reduced by costs of sale. When determining the value of an asset in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate which reflects current market assessments of the time value of money and the risks specific to the asset. To check for impairment, assets are combined into the smallest possible groups that generate cash inflows from permanent use, which are to a large extent independent of other assets or groups of assets (‘cash-generating units’). Impairment of an asset or a cash-generating unit is recognised when its book value exceeds its recoverable amount. Impairment is recognised in profit or loss. Loss that is recognised with a cashgenerating unit due to impairment is distributed to assets in a unit (groups of units) in proportion to the book values of individual assets in a unit. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indication that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s book value does not exceed the book value that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised for the asset in previous years. i)
Employee benefits
Other long-term employee benefits The net liability of the Company generated with regard to long-term employee benefits is the sum of future benefits that the employees have gained in return for their work carried out in the current and previous periods. Thus calculated, the sum of benefits is discounted in order to determine its current value, which is then reduced by the fair value of all related assets. The discount rate is the AA-rated bond yield at the reporting date, for which the due date is approximately the same as the due date of the Company’s liabilities. The calculation is based on the projected unit credit method. Potential actuarial profit or loss is recognised in the income statement in the period of its occurrence. Short-term employee benefits Liabilities for short-term employee benefits are measured on an undiscounted basis and are recognised as expenses when the employee’s work related to a short-tem return is provided.
Annual Report 2 0 0 8
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
The liability is disclosed as an amount for which payment in the form of a premium is expected, which is due in twelve months after the period of work performance is completed, or according to the programme of profit distribution if the company has a current legal or constructive obligation to make such payments because of the employee’s performance of work in the past and this liability can be reliably measured.
the income statement in proportion to the stage of completion of the business transaction at the reporting date. The stage of completion is assessed by verifying the work performed.
j)
l)
Provisions
Provisions are recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of factors which create economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax interest rate that reflects current market assessments of the time value of money and, if required, the risks specific to the liability. Warranties for products and services Provisions for warranties for products and services are recognised when the underlying products or services are sold. The provision is based on historical data related to warranty and a judgement of all potential outcomes against their associated probabilities. k) Revenues Revenues from products sold Revenue from the sale of products is measured at the fair value of the consideration received or the related receivable, reduced by net of returns and price reductions, trade discounts and volume rebates. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer, when recovery of the consideration and the associated costs is probable, and possible return of goods can be estimated reliably, and when there is no further management involvement with the sold goods, and the revenue can be reliably measured. Transfer of risks and benefits varies depending on the individual terms and conditions of the contract of sale. For sales of goods, transfer usually occurs when the product is received at the customer’s warehouse; however, for some international shipments, transfer occurs upon loading the goods onto the relevant carrier. Revenue from services supplied Revenue from services rendered is recognised in
Rental income Rental income is recognised in income on a straight-line basis over the term of the lease. Finance income and finance costs
Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income, gains on disposal of available-for-sale financial assets, changes in the fair value of financial assets held for trading through profit or loss, which are recognised in the income statement. Interest income is recognised in the income statement as it accrues, using the effective interest method. Dividend income is recognised in the income statement on the date that the shareholder’s right to receive payment is exercised, which in the case of quoted securities is normally the ex-dividend date. Finance costs comprise interest expense on borrowings, dividends on preference shares classified as liabilities, foreign currency losses, changes in the fair value of financial assets at fair value through profit or loss, impairment losses recognised on financial assets, and losses on hedging instruments that are recognised in the income statement. All borrowing costs are recognised in the income statement using the effective interest method. Profit or loss from exchange differences is disclosed in net amount. m) Income tax expense Income tax expense comprises current and deferred tax. Income tax expense is accounted for in profit or loss, except to the extent to which they relate to items recognised directly in equity, in which case they are recognised in equity. Current tax is the expected tax payable on taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous financial years. Deferred tax is recognised using the balance sheet liabilities method, taking into account the temporary differences between the book value of assets and liabilities for financial reporting purposes and the amounts used for taxation
63
BUSINESS REPORT
purposes. All temporary differences are taken into consideration. Deferred tax is disclosed in the amount expected to be paid when temporary differences no longer exist, based on the legal acts enacted or substantially enacted on the reporting date.
64
The Company offsets deferred tax assets and liabilities if it is legally entitled to offset recognised assessed tax assets and liabilities, and if they refer to corporate income tax that belongs to the same tax authority in relation to the same taxable unit; or different taxable units that intend to settle the assessed tax assets and tax receivables with the difference, or either simultaneously realise the assets and settle the liabilities. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which a deferred tax asset can be utilised. Deferred tax assets are reduced by the amount for which it is no longer probable that the tax benefit related to an asset could be realised. Additional income tax that arises from the distribution of dividends is recognised at the same time as the liability to pay the related dividend. n) Basic earnings per share The Company presents basic earnings per share (EPS) data for its ordinary shares. The basic earnings per share are calculated by dividing the profit or loss attributable to ordinary shareholders by the weighted average number of ordinary shares in the business year. Diluted earnings per share equal basic earnings per share since the Company does not have preferential shares or convertible bonds. Segment reporting A segment is a distinguishable component of an enterprise engaged in providing products or services (business segment), or products and services within a particular economic environment (geographical segment), and that is subject to risks and returns that are different from those of other segments. The Company’s segment reporting is based on business segments. Transfer prices between segments are set on an arm’s length basis. Segment profit or losses, segment assets and segment liabilities include such items that are directly attributable to a segment, as well as items that can be allocated to a segment on a reasonable basis. Unallocated assets include investments, whereas unallocated liabilities include capital.
Cetis, d. d.
New standards and explanations not yet in effect A number of new standards, amendments to standards and interpretations are not yet in effect for the year ended 31 December 2008, and have not been applied in preparing these financial statements: - IFRS 8 – Operating Segments introduces the “management approach” to segment reporting. IFRS 8, which becomes mandatory for the Company’s 2009 financial statements, will require the disclosure of segment information based on the internal reports regularly reviewed by the Company’s Chief Operating Decision Maker in order to assess each segment’s business performance and to allocate resources to them. Currently, the Company presents segment information in respect of its business segment (see Note No. 1). - Revised IAS 23 – Borrowing Costs removes the option to recognise borrowing costs as expenses and requires that an entity capitalises the borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the historical cost of that asset. The revised IAS 23 will become mandatory for the Company’s 2009 financial statements and will constitute a change in accounting policy. In accordance with the transitional provisions, the Company will apply the revised IAS 23 to those assets for which capitalisation of borrowing costs commences on or after the effective date of the change. - IFRIC 13 – Customer Loyalty Programmes addresses accounting by entities that operate, or otherwise participate in, customer loyalty programmes for their customers. It relates to customer loyalty programmes under which the customer can redeem credits for awards such as free or discounted goods or services. It is not expected that IFRIC 13, which becomes mandatory for the Company’s 2009 financial statements, will have an impact on the financial statements. 4. Determination of fair value The company’s accounting policies and disclosures require the determination of fair value in numerous cases, for both financial and non-financial assets and liabilities. Fair values for certain groups of assets have been determined for measurement and/or reporting purposes based on the methods described below. Where required, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
Annual Report 2 0 0 8
Cetis, d. d.
Annual Report 2 0 0 8
a) Property, plant and equipment The fair value of property equals the estimated value at which the property could be exchanged on the appraisal date, and following adequate marketing between knowledgeable, willing parties in an arm’s length transaction. The fair value of items of plant, equipment and inventory is based on the market price of similar items. b) Intangible assets The fair value of an intangible asset is determined as the present value of estimated future cash flows expected to arise from the use and eventual sale of the asset. c) Inventories The fair value of inventory is determined on the basis of its estimated selling price in the ordinary course of business reduced by the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventory. d) Investments in equity and debt securities The fair value of financial assets at fair value through profit and loss, held-to-maturity investments and available-for-sale financial assets is determined at bid price at the reporting date. The fair value of held-to-maturity investments is determined only for reporting purposes. e) Trade and other receivables The fair value of trade and other receivables is calculated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. f)
Non-derivative financial liabilities
The fair value determined for reporting purposes is calculated based on the present value of future principal and interest payments, discounted at the market rate of interest at the reporting date. In financial lease contracts, the market interest rate is determined through a comparison with similar lease contracts. 5. Financial risk management This section deals with the Company and its exposure to certain risks, its objectives, policies and procedures for risk measurement and management,
BUSINESS REPORT
and its equity management. Other quantitative disclosures are indicated below. The Management is entirely responsible for establishing the Company’s risk management framework. The risk management policies are designed to identify and analyse risks that can pose a threat to the Company, on the basis of which adequate restrictions and controls are determined, as well as monitored risks and compliance with restrictions. The risk management policies and systems are subject to regular review, and provide updated information on market conditions and the activities of the Company. Through training and risk management standards and procedures, the Company endeavours to develop a disciplined and constructive environment in which all employees are aware of their role and obligations. Credit risk Credit risk is the risk of suffering financial loss if any of the Company’s clients or parties to a financial instrument contract fail to meet their contractual obligations. Credit risk mainly occurs in relation to the Company’s trade receivables and investment securities. Trade and other receivables The Company’s exposure to credit risk mainly depends on individual clients’ characteristics. The demographics of the Company’s client base, as well as the payment risk in terms of the branch of industry or country in which a client operates, do not have such a great impact on credit risk. Approximately 3,5% of the Company’s revenues may be attributed to sales transactions with one client alone. In geographical terms, there is no credit risk concentration. The Company shapes its credit policy according to which a creditworthiness analysis of each new client is made before the Company offers them its standard payment and delivery terms and conditions. The Company review includes any exterior assessments, if available, and also, in certain cases, bank references. Purchase limits – determined in the form of the maximum outstanding amount – are set for each client separately; such limits are reviewed every three months. Any transactions with a client not meeting the standard creditworthiness are carried out solely through advance payments. Ownership is usually retained in goods until those goods have been paid for in full. In the event of non-payment for goods, the Company’s claim is therefore secured. For operating and other receivables, the Company requires no surety.
65
BUSINESS REPORT
The Company forms a value adjustment for the amount of impairment, which represents the amount of estimated losses arising from operating and other receivables and investments. The main components of this adjustment are a special part of the loss related to individual key risks, and the joint share of loss, formed for groups of similar assets due to incurred losses which are not yet defined. An adjustment for the joint amount of loss is determined by taking into account historical data related to statistics of payments for similar financial resources. 66
Adjustments for trade receivables are formed on the basis of an analysis with regard to recovering each receivable. Adjustment is based on receivables which remain unpaid 90 days after the maturity. In total gross trade receivables at 31 December 2008 the past-due receivables amounted to EUR 1.522 thousand, and receivables that were not yet due amounted to EUR 3.092 thousand. Guarantees In accordance with its policy, the Company provides financial guarantees or sureties solely to subsidiaries fully owned by the controlling company. The amount of guarantees is evident in the off-balance-sheet records. Liquidity risk Liquidity risk is the risk arising from the Company’s inability to meet its financial obligations when they fall due. The Company manages to ensure the highest possible liquidity by always having sufficient liquid assets available to settle its obligations within the set time limits, both under normal and stressful circumstances, without incurring unacceptable losses or risking harm to the Company’s reputation. The valuation of products and services is based on activities aimed at monitoring the Company’s cash flow needs and optimising the return on investments. The Company also ensures that it has sufficient cash (sight deposits) to cover operating expense for a period of 60 days, including servicing financial liabilities; the latter excludes any potential consequences of unpredictable extraordinary circumstances, such as natural disasters. As of 31 December 2008, the Company had credits lines based on the current account principle, which represents approved overdrafts with domestic banks totalling EUR 1.300 thousand; the interest rate on that date ranged between 5,175% and 7,015% per year. As of 31 December 2008, approved overdrafts had not been used.
Cetis, d. d.
Market risk Market risk is the risk that changes in market prices, such as exchange rates, interest rates and equity instruments that may affect the Company’s revenues or the value of financial instruments. The objective of market risk management is to manage and control market risk exposure within reasonable limits, while optimising profit. The Company trades in financial instruments and assumes financial obligations, both with the aim of managing market risks. All these transactions are carried out in compliance with the Company’s policies. In order to reduce fluctuations in profit or loss to the lowest possible level, the Company makes sustained efforts to use adequate treatment for risk protection purposes. Currency risk The Company is not exposed to currency risk. The Company concludes the majority of purchasing deals in its functional currency. The volume of business not concluded in the Company’s functional currency, i.e. USD, GBP and CHF is negligible. As far as sales and borrowing are concerned, transactions are carried out in euros. Interest rate risk The Company is exposed to interest rate risks, since a variable interest rate applies to most of its financial liabilities. The Company has so far had no specific protection against changes to interest rates. This is favourable for the company in a period of interest rates - linked to Euribor - falling. Capital management The Board decided to retain a large volume of capital so as to maintain the confidence of investors, creditors and the market, and the Company’s sustainable development. The Supervisory Board monitors the return on equity defined by the Company as net profit or loss divided by average equity, less net profit for the financial year. The Company endeavours to maintain a balance between higher returns to be ensured through higher loans, and the benefits and security of a strong capital position. The Company’s goal for 2008 was to achieve a 5,95 per cent return on capital employed. The actual return achieved was -1,39 per cent (3,17 per cent in 2007). During the reporting year, no changes related to capital management occurred at the Company. The parent company or its subsidiaries were not subject to capital requirements determined by external bodies.
Annual Report 2 0 0 8
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
Income statement disclosures
1.
Segment reporting
67
Sales revenue indicated under item Other comprises revenue from sale of materials, merchandise and fixed assets. In EUR thousand Security printed matter 2008 2007
Business segments
Net sales revenue
Total
2008
2007
2008
2007
9.261
12.105
16.443
2.920
2.707
25.669
28.411
-647
-139
-736
-246
-178
-40
-1.561
-425
12.795
11.035
14.551
19.590
3.510
3.226
30.856
33.851
15.905
18.860
12.795
11.035
14.551
19.590
3.510
3.226
46.761
52.711
7.508
7.081
8.538
12.571
2.059
2.070
18.106
21.722
Unallocated assets Total assets
Other
10.644
Net profit or loss Assets by segments
Commercial printed matter 2008 2007
Total liabilities Investments Depreciation expense
525
1.561
597
2.771
144
456
1.265
4.788
1.422
1.165
1.618
2.068
390
341
3.430
3.574
The Company’s business in 2008 was primarily in Europe, which is why it does not report by geographical segments. 2.
Revenue
In EUR thousand Sales revenue by type Sale of products in domestic market Sale of services in domestic market
2008
2007
17.777
19.374
601
667
Rental revenues from investment property in domestic market
55
-
Other rental revenues in domestic market
26
88
4.831
5.502
286
458
1.277
1.496
816
826
25.669
28.411
Sale of products in foreign market Sale of services in foreign market Sale of material and merchandise in domestic market Sale of material and merchandise in foreign market Total
Sales revenue in 2008 also includes revenue from the sale of products and services to group companies, totalling EUR 886 thousand. The company has not generated any revenue from affiliated companies.
BUSINESS REPORT
3.
Cetis, d. d.
Annual Report 2 0 0 8
Expenses
In EUR thousand
68
Cost by primary type, change in value of inventories
2008
2007
Cost of goods and materials sold
1.986
1.345
Cost of used material and services
13.510
15.914
Labour costs
8.480
8.729
Depreciation and amortisation expense
3.430
3.574
521
465
356
-241
28.283
29.786
Other (operating) expense Change in inventories of finished products, work in progress and semi-manufactured products Total (operating) expenses
Production costs and other costs charged by subsidiaries in 2008 amounted to EUR 21 thousand. No costs incurred in connection with affiliates. Labour costs
In EUR thousand  
2008
2007
Gross wages and salaries
6.091
5.991
778
792
Pension insurance costs Costs of other social insurance
448
459
Other labour costs
1.163
1.487
Total labour costs
8.480
8.729
The costs of wages and salaries are accounted for in compliance with internal rules and regulations governing wages and other emoluments, the Decree on the amount of costs recognised as deductible expense, and individual employment contracts. Other labour costs comprise the costs of meal allowances, commuting allowances, holiday bonuses, retirement bonuses, and payroll tax. In 2008, the Company also allocated EUR 236 thousand for supplementary pension insurance, together with employees, who voluntarily gave up 1,615% of their gross wages for the same purpose. In 2007, the Company paid EUR 237 thousand for this purpose, under the same terms. In 2008, taxes on wages and salaries accounted for EUR 100 thousand, which is less than in 2007, when it amounted to EUR 199 thousand.
Cetis, d. d.
Annual Report 2 0 0 8
4.
BUSINESS REPORT
Other operating income
In EUR thousand Type
2008
2007
Gain in disposal of fixed assets
251
100
Income from reversal of provisions Reversal of value adjustments for trade receivables and inventories Indemnities, subsidies and grants received
188
476
182
36
16
8
Other
417
330
Total
1.054
950
5.
Net finance income/finance costs
In EUR thousand Interest income Share-based income
2008
2007
246
69
538
254
1.585
541
Other finance income
7
1.533
- change in fair value of investments through profit and loss
7
1.505
Income from sale of investments
- other Total finance income Interest expense Foreign exchange losses
28
2.376
2.397
756
640
10
4
Loss in disposal of investments
137
Other finance costs
2
11
Finance costs arising from impairment Total finance costs Total net finance income
6.
432
10
1.200
802
1.176
1.595
Taxes
In EUR thousand
2008
2007
Current tax Deferred tax
32
213
Total
32
213
69
BUSINESS REPORT
70
Cetis, d. d.
Annual Report 2 0 0 8
Effective corporate income tax rates
In EUR thousand
2008
2008
2007
2007
Total profit or loss before taxes
-385
1.170
Tax effects:
Tax at general tax rate
22,1 %
-85
23,0 %
269
Tax exempt income
74,8 %
-288
-9,0 %
-105
-28,6 %
110
12,7 %
149
2,3 %
-9
-8,0 %
-94
Non-deductible expenses Tax relief
-74,0 %
285
-0,4 %
-5
Other changes to tax base
Tax loss
-4,9 %
19
-0,1 %
-1
Total tax expense
-8,3 %
32
18,2 %
213
Deferred taxes recognised directly in equity
In EUR thousand
2008
2007
Investments
-419
109
Total
-419
109
7.
Disclosure of auditor fees
The total amount spent on payment for all auditing services amounted to EUR 26 thousand in 2008. The value of the contract to audit the financial statements for 2008 amounts to EUR 11 thousand.
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
Balance Sheet disclosures
8.
71
Property, plant and equipment
In 2008, the Company invested EUR 754 thousand in property, plant and equipment items. Accounts payable for the purchase of property, plant and equipment amounted to EUR 525 thousand at the end of 2008. Movements in property, plant and equipment
Land Cost Balance at 1 January 2007
Other equipment
Buildings Equipment
PPE in progress
Prepayments
Total
1.220
14.528
37.111
28
97
52.984
Adjustment of the opening balance
Acquisitions in the period
204
4.093
65
4.362
Acquisition of PPE in progress
4.551
4.551
Transfer from PPE in progress
-4.297
-4.297
Disposals
2
1.436
1.438
Reclassifications Balance at 31 December 2007 Balance at 1 January 2008
1.220
14.730
39.768
28
351
65
56.162
1.220
14.730
39.768
28
351
65
56.162
Transfer to investment property
-471
-471
Transfer to assets for sale
-85
-85
Acquisitions in the period
183
769
952
Acquisitions of PPE in progress
754
754
Transfers from PPE in progress
-951
-951
Disposals
223
4.874
44
5.141
Reclassifications
1.220
14.219
35.663
28
69
21
51.220
Value adjustment
Balance at 1 January 2007
7.265
26.798
34.063
Depreciation expense
406
2.848
3.254
Transfer to investment property
Disposals
1.179
1.179
Reclassifications
Balance at 31 December 2007
7.671
28.467
36.138
Balance at 31 December 2008
BUSINESS REPORT
Cetis, d. d.
Land
72
Balance at 1 January 2008
7.671
Depreciation expense
414
Transfer to investment property
Disposals
Reclassifications
Balance at 31 December 2008
Book value
Other equipment 28.467
Buildings Equipment
Annual Report 2 0 0 8
PPE in progress
Prepayments
36.138 3.163
Total
2.749
268
268
56
4.449
4.505
7.761
26.767
34.528
Balance at 1 January 2007
1.220
7.263
10.313
28
97
18.921
Balance at 31 December 2007
1.220
7.059
11.301
28
351
65
20.024
Balance at 1 January 2008
1.220
7.059
11.301
28
351
65
20.024
Balance at 31 December 2008
1.220
6.458
8.896
28
69
21
16.692
Disposals made in 2008 mainly comprise the sale of commercially and technically outdated, but still functional machinery. The company has secured its long-term borrowings with mortgages on real property, liens on movable assets and a lien on long-term financial investments, all of which were accounted for in off-balance-sheet records in the amount equalling the debt at 31 December 2008. 9.
Intangible assets
Movements in intangible fixed assets
In EUR thousand Cost
Long-term deferred costs
Long-term property rights
Intangible assets in progress
Total
Balance at 1 January 2007
303
2.599
Acquisitions in the period
220
220
Acquisitions to investment in progress
237
237
Transfer from investment in progress
-220
-220
Disposals
7
7
303
2.812
17
3.132
Balance at 31 December 2007
2.902
Balance at 1 January 2008
303
2.812
17
3.133
Acquisitions in the period
329
329
Acquisitions to investment in progress
512
512
Transfer from investment in progress
-329
-329
Disposals Balance at 31 December 2008
2
2
303
3.139
200
3.643
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
Value adjustment
Long-term deferred costs
Long-term property rights
Intangible assets in progress
Total
Balance at 1 January 2007
78
1.366
Amortisation charge
58
262
Disposals
1.444
320
7
7
Balance at 31 December 2007
136
1.621
1.757
Balance at 1 January 2008
136
1.621
1.757
19
249
268
2
2
Amortisation charge Disposals Balance at 31 December 2008
155
1.868
Balance at 1 January 2007
225
1.233
Balance at 31 December 2007
167
1.191
17
1.375
Balance at 1 January 2008
167
1.191
17
1.375
Balance at 31 December 2008
149
1.272
200
1.620
Book value
2.023
1.458
Long-term property rights include mainly purchases of computer software for the information system. Development costs are recognised costs of projects that prove to be feasible for the project completion and eligible for use or sale. The purpose is to complete the project and sell or use it in view of the probability of economic benefits and the probability of a reliable measurement of costs attributable to the respective intangible asset. In 2008, the Company invested EUR 512 thousand in long-term property rights stated under acquisitions in the period as investment in PPE in progress. Deferred development costs are recorded for the public documents project. 10. Investment property At 1 January 2008, the company reclassified a part of fixed assets to investment property, which were leased out in 2008. Investment property is measured at cost and depreciated at the same rate as property in own use. The manner of determining useful life is the same as for property, plant and equipment. The fair value for investment property at 31 December 2008 cannot be determined. The total area of the property owned by the company measures 20.113m2, of which the investment property, comprising production, warehouse and office premises, as well as the corresponding functional area of the facility, is 1.110m2. The revenue arising from investment property is disclosed in point no. 2.
73
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
Movements in investment property
In EUR thousand Cost
Building
Total
Balance at 1 January 2007 Balance at 31 December 2007 74
Balance at 1 January 2008 Acquisitions in the period
471
Acquisitions of PPE in progress
Transfers of PPE in progress
Disposals
Balance at 31 December 2008 Value adjustment
471
471
471
268
268
268
268
203
203
Balance at 1 January 2007 Balance at 31 December 2007 Balance at 1 January 2008 Depreciation expense Disposals Balance at 31 December 2008 Book value Balance at 1 January 2007 Balance at 31 December 2007 Balance at 1 January 2008 Balance at 31 December 2008
11. Investments in group companies
In EUR thousand Type
2008
2007
Cetis Zagreb
1.691
1.691
5
5
Cetis Tirana Amba
1.920
1.920
Total
3.616
3.616
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
Companies in the group are: CETIS – ZG, Company for Trade and Services, d.o.o., Industrijska 11, Sveta Nedelja, Croatia, measured at cost. AMBA CO., d.o.o., Leskovškova cesta 11, Ljubljana measured at cost. The Company compiles a consolidated financial statement for the above two companies – Cetis-ZG, d.o.o. and Amba CO, both 100% owned by the controlling company. The subsidiaries submit monthly business reports to the controlling company; the latter conducts analyses and performs an annual internal audit. Both companies are audited and included in consolidated statements. The stake in CETIS – TIRANA Sh.p.k.,R.r. Deshmoret e4, Shkurit.P.7, Tirana, Albania is measured at cost. It is also 100% owned by Cetis, d.d. and all business transactions are included in the financial statements of the company Cetis. The company Cetis Tirana acts solely as an intermediary in acquiring business, and has the status of a small enterprise in compliance with the local legislation, and is therefore not obliged to prepare its own financial statements. Movements in investment in group companies
In EUR thousand Cost
Value adjustment (impairments)
Net amount
Balance at 01.01. 2007
1.696
1.696
Purchase
1.920
1.920
Balance at 31.12.2007
3.616
Balance at 01.01.2008
3.616
3.616
3616
Purchase Balance at 31.12.2008
3.616
3.616
12. Investments in affiliates Affiliated companies are: - Lotaria Nacionale SH.A Rruga Kavajes, Porta Kry Esore, Misto Mame, Tirana. The investment is measured at cost. - Druckman Hungary, in which the Company holds a 33% stake. Since the affiliated company has not operated for several years, we have formed a value adjustment for the entire amount, and the company is not disclosed in movements in investments.
In EUR thousand Type La Societe Nationale des Loteries Sportives (SNLS), Libreville, Gabon 31% ownership KIG KGA, Production, Trade, Engineering d.o.o. - 50 % ownership Lotaria Nacionale SH.A, Rruga Kavajes, Porta Kry Esore, Misto Mame, Tirana - 46,6 % ownership Druckman Ipari Kereskedelmi es Szolgaltto Korlatolt, Budapest, Hungary Total
2008
2007 47 17
8
8
8
72
75
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
In 2008, the company performed a capital increase in the company SNLS Gabon, but the investment amount was reclassified to assets held for sale, as we are planning to sell the company. 13. Investments available for sale Among available-for-sale investments, 77,4% of investments are valued at initially recognised amount, i.e. at cost.
In EUR thousand Type 76
Available-for-sale investments
2008
2007
12.283
13.016
Movements in available-for-sale investments
In EUR thousand Balance at 1 January 2007 Purchase
Cost
Value adjustment (impairment) )
13.960
Net amount 13.960
3.336
3.336
Sale Change in fair value
-4.718 438
-4.718 438
Balance at 31 December 2007
13.016
13.016
Balance at 1 January 2008 Purchase Transfer from short-term investments Sale
13.016
13.016
-32
-32
Change in fair value
-2.433
-2.433
Balance at 31 December 2008
12.282
12.282
1.731
1.731
14. Loans
In EUR thousand Type Loans
2008
2007
334
1.550
Loans granted as at 31 December 2008 include loans to employees for the purchase of apartments and construction, funds invested in the purchase of long-term bonds issued by a bank, and deposits granted.
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
Movments in loans granted in EUR thousand
Cost
Balance at 1 January 2007
1.303
Value adjustment (impairment)
Net amount
1.303
Increase
500
500
Repayments
221
221
32
32
Transfer to short-term loans Exchange rate difference
Balance at 31 December 2007
1.550
1.550
Balance at 1 January 2008
1.550
1.550
Increase
Repayments
Transfer to assets for sale Transfer to short-term loans Exchange rate difference
1.187
1.187
29
29
Balance at 31 December 2008
334
334
2008
In EUR thousand 2007
15. Movements in longterm investments
Type Other long-term business assets of associates
878
Total:
878
Movements in non-current trade receivables
in EUR thousand
Cost
Value adjustment (impairment)
Net amount
878
878
Balance at 1 January 2007 Increase Balance at 31 December 2007
878
Balance at 1 January 2008
878
878
Transfer
878
878
Balance at 31 December 2008
878
77
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
16. Deferred tax assets and liabilities
In EUR thousand Tax assets 31.12.2008
78
Tax assets Tax liabilities Tax liabilities 31.12.2007 31.12.2008 31.12.200a7
Assets - liabilities 31.12.2008
31.12.2007
Investments
445
21
26
132
419
-111
Receivables
49
52
49
52
180
209
Inventories Provisions for retirement bonuses Other provisions Tax loss Total
180
209
67
81
67
81
741
363
26
132
715
231
The Company used a 21% tax rate in deferred tax accounting Deferred tax liabilities are based on surpluses arising from the revaluation of available-for-sale investments, measured at fair value through equity. Deferred tax assets are based on provisions for anniversary bonuses and retirement bonuses, tax loss and temporary differences arising from accounting for income tax on receivables and other provisions to be recognised for tax purposes in subsequent periods. The Company recognised deferred tax assets for the tax loss based on the estimate that, in the coming years, taxable profits will be available against which the deferred tax assets can be used in the future. In periods of tax loss utilisation, a decrease in deferred tax assets will represent a corresponding decrease in profits. The unused tax loss records as at 31 December 2008 amounted to EUR 1.547 thousand. Movements in temporary differences in 2007
In EUR thousand 1.1.2007
Recognised under income/expenses
Recognised under equity
31.12.2007
Investments
-224
4
109
-111
Receivables
49
3
52
Inventories Provisions for retirement bonuses, other Other provisions
25
-25
246
-37
17
-17
209
Tax loss
222
-141
81
Total
335
-213
109
231
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
Movements in temporary differences in 2008
In EUR thousand
Recognised 1.1.2008 under income/ expenses
Recognised under equity
31.12.2008
Investments
-111
14
516
419
Receivables
52
-3
49
209
-29
180
Provisions for retirement bonuses, other Other provisions Tax loss Total
79
81
-14
67
231
-32
516
715
17. Assets held for sale In 2008, the company injected capital in the company SNLS GABON amounting to EUR 2.249 thousand, by which it became a 93,63 per cent owner of this company’s issued shares. The investment is valued at cost and was reclassified to non-current assets held for sale. The sales efforts for this investment include active marketing. Type Property, plant and equipment
In EUR thousand 2008
2007
85
Other non-current assets
2.297
Total
2.382
18. Inventories
In EUR thousand Type
2008
2007
Material
1.544
1.641
242
518
1.064
1.144
3
5
2.853
3.308
Work in progress Products Merchandise Total
For the year 2008, the Company wrote off assets in the amount of EUR 478 thousand related to materials and products which were no longer usable. The largest product write-offs were related to documents, labels, wrappings and lottery tickets as a result of the use of inadequate materials and replacing existing documents with new documents. The Company managed to reduce the related costs in part through claims concerning the materials, which is reflected among production costs. A surplus of EUR 70 thousand was recorded in 2008 in inventories, and a deficit of EUR 72 thousand in material assets.
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
Value adjustments are accounted for by type of inventory and its change. No new value adjustments were required other than those made in past periods. When examining the inventories of materials, products and merchandise that showed no change for more than 12 months, the Company applied the same policies as in preceding years. 19. Current investments at fair value In EUR thousand Type
80
2008
2007
Short-term investment
2.156
Total
2.156
When accounting for a regular purchase or sale of a financial asset, the amount is recognised or reversed, respectively, taking into consideration the date of payment. Due to the drop in stock exchange quotations in financial markets, the company decided not to trade in those securities in the short-term. Pursuant to the Commission Regulation amending the Regulation adopting certain international accounting standards (IAS 39 and IFRS 7), a decision was made to reclassify short-term financial investment at fair value to long-term investment held for sale, based on the investment balance at 30 June 2008. If the company could have already reclassified the assets on 1 January 2008, the net profit or loss for the business year would have been EUR 425 thousand higher. If the reclassification were not performed, the profit or loss would be lower by EUR 582 thousand. Movements in short-term investments In EUR thousand Cost Balance at 1 January 2007 Transfer after allocation to shares held for sale Sale Change in fair value
Value adjustments (impairment)
Net amount
1.839
1.839
-98
-98
-188
-3
-185
610
10
600
Balance at 31 December 2007
2.163
7
2.156
Balance at 1 January 2008
2.163
7
2.156
Transfer to non-current assets Sale Change in fair value until transfer Balance at 31 December 2008
-1.731
-1.731
-425 7
-425 7
Cetis, d. d.
Annual Report 2 0 0 8
BUSINESS REPORT
20. Short-term loans
In EUR thousand Type
2008
2007
Short-term loans granted
568
386
Short-term deposits
300
 
29
32
897
418
Current portion of long-term loans Total
81 21. Trade and other receivables
In EUR thousand Type
2008
2007
Current trade receivables
3.716
5.055
126
198
Current trade receivables from group companies Current trade receivables from affiliated companies Other current trade receivables Current prepayments Total
14
9
310
138
13
34
4.179
5.434
22. Cash and cash equivalents In EUR thousand Type Cash in banks, cheques and cash in hand
2008
2007
2
1
Deposits in banks
954
500
Total
956
501
23. Equity Total equity consists of issued capital, share premium account, legal and statutory reserves, retained earnings, own shares (deducted from equity), and fair value reserve. The Company issued 200.000 no par value shares registered at the Central Securities Clearing Corporation (KDD). In EUR thousand Basic capital
2008
2007
Basic capital
10.015
10.015
Total
10.015
10.015
Capital reserves amounting to EUR 17.859 thousand consist of simplified reversal of share capital by withdrawing shares amounting to EUR 2.215 thousand and general capital value adjustment amounting to EUR 15.644 thousand.
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
In EUR thousand Capital reserves Simplified reversal in equity by withdrawing shares
82
2008
2007
2.215
2.215
General equity value adjustment
15.644
15.644
Total
17.859
17.859
Legal and statutory reserves totalling EUR 1.927 thousand include legal reserves amounting to EUR 1.709 thousand, statutory reserves amounting to EUR 191 thousand, and reserves for own shares amounting to EUR 26 thousand. Legal reserves are formed every year in the amount of 10% from net profit for the period, remaining after covering loss, forming legal reserves and forming reserves for own shares in compliance with the Companies Act and the Articles of Association.
In EUR thousand Legal and statutory reserves
2008
2007
Legal reserves
1.709
1.709
26
26
Reserves for own shares Statutory reserves Total
191
191
1.927
1.927
In 2008, the company bought back no own shares. At 31 December 2008, it reported ownership in 201 shares designated CETG. The shares are recognised at cost as a deductible item in equity.
In EUR thousand Reserves for own shares
2008
2007
Reserves for own shares
26
26
Total
26
26
Fair value reserve in 2008 decreased because of the drop in exchange quotations. The accumulated reserve arising from surplus from value adjustment in long-term investments is negative, amounting to EUR 1.995 thousand. The company formed deferred receivables from the state arising from that, in the amount of EUR 419 thousand. Establishing profit for appropriation
Postavka
2008
In EUR thousand 2007
A.
NET PROFIT OR LOSS FOR THE BUSINESS YEAR
- 417
957
B.
NET PROFIT / LOSS FROM PREVIOUS PERIODS
873
107
C.
INCREASE IN RESERVES FROM ROFIT (1 to 1)
191
1. increase in statutory reserves D.
PROFIT FOR APPROPRIATION (A+B-C)
191 456
873
Cetis, d. d.
Annual Report 2 0 0 8
BUSINESS REPORT
24. Basic earnings per share.   Basic earnings / loss in EUR Weighted average number of ordinary shares Basic earnings / loss per share in EUR
2008
2007
-417.028
957.197
199.799
199.799
-2,09
4,79
Net loss per share is calculated by dividing basic net loss for the year by the weighted average number of shares. Diluted loss per share is identical, as the Company holds neither any preference nor convertible shares. 25. Borrowings Borrowings comprise long-term and short-term borrowings, including the current portion of long-term borrowings. Long-term borrowings In EUR thousand Type
2008
2007
Bank loans
6.064
8.445
The largest single loan is the loan for financing a long-term investment, totalling EUR 6.400 thousand, with a 7-year repayment period and its principal already being repaid. Short-term borrowings
In EUR thousand Breakdown per type
2008
2007
2.590
2.718
Current portion of long-term loans from banks repayable within one year Short-term bank loans
1.900
52
Other short-term loans
1.240
1.190
Total
5.730
3.960
83
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
Loan repayments
In EUR thousand Breakdown per type
84
Total repayment 2008
Interest 2008
Principal 2008
Short-term loans up to 1 year
4.833
150
4.683
Long-term loans, 1 to 5 years
1.980
575
1.405
Long-term loans with maturity longer than 5 years
1.313
 
1.313
Total
8.126
725
7.401
Type
Total repayment 2007
Interest 2007
Principal 2007
Short-term loans up to 1 year
3.881
57
3.824
Long-term loans, 1 to 5 years
1.841
583
1.258
985
 
985
6.707
640
6.067
Long-term loans with maturity longer than 5 years Total
The Company made no distinction between interest on long-term loans by maturity, and therefore the interest covers the period from 1 to 5 years. 26. Non-current trade payables In EUR thousand Type
2008
2007
Non-current trade payables based on prepayments
3
3
Total
3
3
The Company received a prepayment based on a contract, and according to its maturity, disclosed it under non-current trade payables. 27. Provisions
In EUR thousand Type
2008
2007
Provisions for warranties
71
99
Provisions for legal actions
29
89
233
231
Provisions for other costs Provisions for anniversary bonuses Provisions for retirement bonuses Total
26 677
743
1.010
1.188
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
Movements in provisions
In EUR thousand Type
31.12.2007
Made
used
reversed
31.12.2008
Provisions for warranties
99
43
71
71
Provisions for legal actions
89
60
29
Provisions for other costs
26
26
Provisions for anniversary bonuses
231
34
32
233
Provisions for retirement bonuses
743
9
57
677
41
214
1.010
Total
1.188
77
Provisions are formed in accordance with contracts, legal bases and expert opinions. The Company reviewed the provisions already made, took account of changes, and decreased total provisions for the purpose of long-term deferred expenses and provisions for long-term accrued costs. Provisions for retirement obligations and anniversary bonuses On the basis of a calculation for each employee using the projected unit method, prepared by a certified actuary, the Company reduced provisions for retirement obligations and anniversary bonuses in the amount of EUR 64 thousand. 28. Trade and other payables
In EUR thousand Razčlenitev po vrstah
2008
2007
Trade payables
4.006
5.319
Current trade payables based on prepayments
308
1.328
Payables to employees
532
557
Payables to state and other institutions
231
416
Other payables
196
374
5.273
7.994
Total
The bases for trade and other liabilities are the original documents that define an event in terms of time and substance. 29. Off-balance sheet record In EUR thousand Type
2008
2007
Mortgages
8.866
14.155
Other bank guarantees, liens granted and shares
7.498
13.259
Tax loss
1.547
395
49
9
77 18.037
77 27.895
Investment and other reliefs Other Total
85
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
Disclosures to Cash Flow Statement
86
The Cash Flow Statement was prepared under the indirect method, using data from the Balance Sheet at 31 December 2008 and the Balance Sheet at 31 December 2007, and from the data of the 2008 Income Statement, as well as additional data required for the adjustment of inflows and outflows to ensure an adequate breakdown of major items. 30. Financial instruments - risk managment Risk exposure and management Currency risks in the Company regarding the euro were almost entirely excluded. Almost all foreign transactions outside the EMU were also made in EUR. The Company is aware of the importance attributed to the regular control and management of financial risks to which the Company is exposed in the markets, and views it as a relevant precondition for successful operations and achieving strategic goals. In 2008, interest rate risks were predominant (a general drop in interest rates, except for new debts). The analysis of these risks resulted in an estimate that the interest rate risk was higher due to new short-term borrowings of the Company or guarantees issued. The Company also expects these risks to increase in the future as a result of the operations of the parent company and its subsidiaries. All long-term debts are denominated in euros. Interest rates are based on the market principles governing the price of money in the European banking market. Interest rate risks have not been hedged so far, as the Company assessed that the interest rate fixations offered are still above the variable rates, or that long-term changes in interest rates will allow more favourable costs of financing during the whole borrowing period. - Interest rate risks increased due to the amount of loans, and sudden decreases and increases in interest rates. The interest rate level was assessed to be still acceptable for all long-term loans taken, with its contractually agreed variability, and taking into account their maturity. The downward trends are favourable. The Company’s exposure to interest rate risks is otherwise estimated to be high. - Property risks and related risks in 2008 were systematically and analytically assigned to insurance companies. - Liquidity risks are low at Cetis over the short term as a result of efficient asset management, adequate credit lines for regulating cash flow, satisfactory financial flexibility and good access to the necessary financial resources, whereby the Company takes into account the circumstances in the financial environment and financial markets.
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
Financial instruments – credit risk
In EUR thousands Notes
31.12.2008
31.12.2007
Available-for-sale financial assets
12.282
13.016
Financial assets at fair value through profit or loss
Loans granted
1.231
1.968
Current and non-current trade receivables
4.179
6.312
Cash and cash equivalents
956
501
Total
18.648
23.953
2.156
The highest credit risk exposure for deposits or loans at the reporting date by geographical region was as shown in the table below: Book value 2008
2007
Domestic
663
398
Other European countries
568
383
In EUR thousands
Other regions – Africa Total
1.187
1.231
1.968
The highest credit risk exposure for trade receivables at the reporting date by geographical region was as follows: Book value In EUR thousands
2008
2007
Domestic
3.094
3.943
452
304
Euro zone countries Other European countries
332
462
Other regions - Africa
301
1603
4.179
6.312
Total
The highest credit risk exposure for trade receivables at the reporting date by type of customer was as follows: Book value In EUR thousands
2008
2007
Wholesale customers
1.117
1.087
Customers, end users
3.062
5.225
Total
4.179
6.312
87
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
Impairment losses Trade receivables on the reporting date: Gross value 2008
In EUR thousands Non-past-due
88
Impairment 2008
Gross value 2007
Impairment 2007
6.177
3.331
Past due 0-30 days
515
4
347
Past due 31-120 days
212
15
321
64
Past due 121-365 days
123
37
53
53
More than 1 year
706
652
840
809
Total
4.887
708
7.738
926
In EUR thousands
2008
2007
926
947
58
64
-55
-49
Paid written-off value adjustments
-221
-36
Balance at 31 December
708
926
Balance at 1 January New value adjustments Written-off value adjustments
Currency risk
In EUR thousands EUR
USD
GBP
CHF
DKK
EUR
USD
Trade receivables
4.007 -3.978
Secured bank loans Balance sheet gross exposure
-5
29
-5
-33
DKK
GBP
31.12.2007
31.12.2008
Accounts payable
CHF
-1
6.619
-5.214
-111
-12
-26
-33
-1
1.405
-111
-12
-26
The Company is not exposed to any specific currency risks. Liquidity risk 31/12/2008 in EUR thousand
Book Contractual value cash flow
Up to 6 months
From 6 to 12 months
From 1 to 2 years
From 2 to 5 years
Over 5 years
Secured bank loans
8.655
-9.321
-1.482
-1.432
-2.696
-3.711
Other loans Accounts payable and other liabilities TOTAL
1.240
-1.330
-351
-979
5.276
-5.276
-5.276
15.171
-15.927
-7.109
-2.411
-2.696
-3.711
3-month euribor 31.12.2008
2,928
6-month euribor 31.12.2008
3,000
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
Book Contractual value cash flow
31/12/2008 in EUR thousand Transaction account (TRR) overdraft Secured bank loans Other loans (account 2726000) Accounts payable and other liabilities Total
Up to months
From 6 to 12 months
From 1 to 2 years
From 2 to 5 years
Over 5 years
52
-54
-54
11.163
-12.810
-1.789
-1.628
-3.140
-6.253
1.189
-1.235
-301
-934
7.994
-7.994
-7.994
20.398
-22.093
-10.138
-2.562
-3.140
-6.253
3-month euribor 31.12.2007
4,684
6-month euribor 31.12.2007
4,707
89
Interest rate risk At the reporting date, loan contracts concluded by Cetis, d.d. were with a fixed and variable interest rate. In EUR thousands Instruments with a fixed interest rate
2008
2007
Financial assets
2.091
1.223
-889
-889
1.202
334
2008
2007
Financial liabilities
-10.905
-11.515
Difference
-10.905
-10.797
Financial liabilities Difference Instruments with a variable interest rate Financial assets
718
Sensitivity analysis for instruments with a fixed interest rate A change in interest rates by one percentage point at the reporting date would result in an increase or decrease in equity of EUR 6 thousand. Sensitivity analysis of cash flow for instruments with a variable interest rate A change in interest rates by one percentage point at the reporting date would result in an increase (decrease) in equity of EUR 13 thousand. Interest rates used to determine fair value.
Cash, loans, deposits Fair value
2008
2007
0,1% - 7,015%
0,2% - 7%
BUSINESS REPORT
90
Cetis, d. d.
Annual Report 2 0 0 8
Fair value and book value of assets and liabilities
Note Available-for-sale investments Loans granted Non-current trade receivables Investments at fair value through profit and loss Trade and other receivables
Book value 31.12.2008
Fair value 31.12.2008
Book value 31.12.2007
In EUR thousand Fair value 31.12.2007
12.282
12.282
13.016
13.016
334
334
1.550
1.550
878
878
2.156
2.156
4.179
4.179
5.434
5.434
Short-term loans granted
897
897
418
418
Cash and cash equivalents
956
956
501
501
Long-term borrowings
-6.064
-6.064
-8.445
-8.445
Short-term borrowings
-5.730
-5.730
-3.960
-3.960
Trade and other payables
-5.272
-5.272
-7.994
-7.994
Total
1.582
1.582
3.554
3.554
Available-for-sale long-term investments are measured at fair value and depend on the recognition of the investment at the rate of 31 December 2008. Accumulated fair value reserve arising from surplus from revaluation of long-term investments is negative, amounting to EUR 1.995 thousand. Based on this, the company also formed deferred receivables from the state amounting to EUR 419 thousand. Testing investments in terms of possible impairment The company performed no impairment of investments. Upon acquiring an investment in mutual funds and other investment companies, the company classifies them as long-term investments if the intention is to own such investment for more than one year. If such investment is listed on the stock exchange, it is entered in books at fair value; if it is not listed, it is valued at cost. When an investment in mutual funds and other investment companies is valued at cost, it is tested five years from the date of investment acquisition to estimate whether the investment should be impaired. Such investment is usually impaired if the purchase value in the period of five successive years exceeds the realisable value on the balance sheet cut-off date. When valued at fair value through capital, it is checked five years from the date of acquiring such investment for the probability that such investments need to be impaired.
Cetis, d. d.
Annual Report 2 0 0 8
BUSINESS REPORT
An investment is usually impaired when its fair value is continuously lower than the investment purchase value in five successive years. Impairment is performed in compliance with IAS 39. For all other investments valued at fair value through capital, verification of possible impairment was performed on the balance sheet date, comparing the percentage of decrease in fair value of an investment in the period from the date of its recognition until the balance sheet cut-off date, as well as relative change in the Slovenian Share Index (SBI 20). The amount of investments revaluation that would have to be performed after checking for possible impairment is an insignificant item in the company. For investments valued at cost, checking for possible impairment was performed on the balance sheet cut-off date. Checking for possible impairment of investments valued at cost was performed by comparing the investment book value from the most recent known statements with the investment purchase value. Insofar as the discrepancy from the book value was high, the review was performed by assessing the current value of future benefits. No impairment was required. Loans granted and obtained are valued on the basis of recalculating the repaid value using the effective interest rate, which is the same as the contractual interest rate. Calculations are therefore based on the contractual interest rate. For trade and other receivables, we have taken into account impairment to fair value due to the recovering of claims. With regard to their short-term nature, trade and other liabilities are not discounted. Other disclosures Disclosures by groups of persons: members of the Management Board, Supervisory Board, and staff employed under individual employment contracts. - Management Board 113 thousand EUR, - Other staff employed under individual employment contracts (12 persons) 1.060 thousand EUR, - Supervisory Board13 thousand EUR. The loan repayments under earmarked loans granted by the Company to persons from these groups amounted to EUR 0,5 thousand in 2008. Related-party transactions The transactions between the Company and related parties were based on contracts of sale, whereby market prices of products and services Post balance sheet events Major post balance sheet events are described in the introduction section of the Business Report.
91
BUSINESS REPORT
CETIS GROUP FINANCIAL REPORT
92
Cetis, d. d.
Annual Report 2 0 0 8
Cetis, d. d.
Annual Report 2 0 0 8
BUSINESS REPORT
Independent Auditor’s Report
93
BUSINESS REPORT
94
Cetis, d. d.
Annual Report 2 0 0 8
Statement of Management responsibility The Management Board is responsible for preparing the financial statements so that they give a true and fair view of the state of affairs at the end of the financial year, and of profit or loss for the period. The Management Board confirms that suitable accounting policies have been applied consistently and that the accounting estimates that have been made are reasonable and prudent. The Management Board also confirms that the financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). The financial statements have been prepared on a going concern basis. The Management Board recognises its responsibility for keeping proper accounting records, the adoption of appropriate measures for safeguarding the Company’s assets, and preventing and detecting fraud and other irregularities.
30 april 2009
Simona PotoÄ?nik MSc, General Manager
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
Consolidated Income Statement
In EUR thousand Notes
2008
2007
REVENUE
1
35.967
39.520
Cost of goods sold
2
-4.913
-4.942
Production costs
-20.655
-23.182
Cost of goods sold and production costs
-25.568
-28.124
GROSS PROFIT
10.399
11.396
Other (operating) income
3
1.203
1.011
Distribution expenses
2
-5.777
-5.719
Administrative expenses
2
-6.705
-6.635
Other (operating) expenses
2
-287
-476
-11.567
-11.819
-1.168
-423
= Other income, costs and expenses (5+6+7+8) OPERATING PROFIT OR LOSS EXCLUDING FINANCE COSTS Finance income
4
2.425
2.426
Finance costs
4
-1.195
-1.554
NET FINANCE COSTS PROFIT OR LOSS BEFORE TAXATION Tax
5
NET PROFIT
1.230
872
63
449
-12
276
75
173
Profit attributable to minority interest
-11
Profit attributable to majority owner
86
173
0,38
0,86
Basic and diluted earnings per share (in EUR)
22
95
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
Consolidated Balance Sheet
In EUR thousand 96
Notes
31.12.2008
31.12.2007
ASSETS 1.
Property, plant and equipment
8
22.408
27.304
2.
Intangible assets
9
2.489
2.185
3.
Investment property
7
203
4.
Investments in group companies
5.
Investments in affiliates
10
6.
Available-for-sale investments
11
13.443
14.305
7.
Loans
12
334
1.249
8.
Long-term trade receivables
13
9.
Deferred tax assets
14
SA.
Total non-current assets
18
878 743
364
39.619
46.303
0.
Non-current assets available for sale
15
2.381
1.
Inventories
16
3.750
2.
Current investments at fair value
17
3.
Short-term loans
18
1.074
362
4.
Corporate income tax assets
4.
Trade and other receivables
19
6.617
7.738
6.
Cash and cash equivalents
20
1.042
1.003
Total current assets
14.864
15.446
TOTAL ASSETS
54.483
61.749
SB. S.
4.186 2.156
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
In EUR thousand Notes
31.12.2008
31.12.2007
EQUITY AND LIABILITIES 1.
Issued capital
10.015
10.015
2.
Share premium account
17.859
17.859
3.
Reserves (legal and statutory)
1.927
1.901
4.
Retained earnings from previous periods
183
134
86
173
Retained earnings for the period 5.
Own shares held
-26
-26
6.
Fair value reserve
-1.576
341
Translated (consolidated) equity adjustment
-27
- from capital
-28
- from profit
1
Minority interest capital
53
Total equity
21
28.495
30.396
1.
Borrowings
23
8.770
11.841
2.
Non-current operating liabilities
24
26
78
71
99
KO.A
- for guarantees - for lawsuits - for anniversary bonuses and retirement bonuses - other long-term provisions
29
88
947
1.014
23
40
3.
Provisions
25
1.070
1.242
5.
Deferred tax liabilities
14
310
571
10.176
13.731
KO.B.a)
Total non-current liabilities
1.
Borrowings
23
8.615
7.652
2.
Trade and other liabilities
26
7.197
9.970
Total current liabilities
15.812
17.622
Total liabilities
25.988
31.353
TOTAL EQUITY AND LIABILITIES
54.483
61.749
23.172
33.030
KO.B.b) KO.B KO.
Off-balance sheet assets (liabilities)
27
97
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
Consolidated Cash Flow
In EUR thousand
98 CASH FLOW FROM OPERATING ACTIVITIES
2008
2007
75
173
Adjustments for:
3.773
4.512
Depreciation of property, plant and equipment
3.803
3.832
Profit or loss for the period
Amortisation of intangible assets (Reversal of ) impairment loss Negative translation differences
296
339
-211
179
28
13
Change in biological assets
Change in investment properties
Finance income
-1.585
-541
1.562
1.115
Share of affiliated companies in profits / losses
-18
-54
Gain on disposal of property, plant and equipment
-84
-57
-102
-374
Finance costs
Revenue from a decrease in long-term provisions Deferred state grants Expenses for share-based payment transactions settled in equity Tax expenses CASH FLOW FROM OPERATING ACTIVITIES BEFORE CHANGES IN NET OPERATING ASSETS AND PROVISIONS Increase in biological assets Change in trade and other receivables Change in inventories Change in trade and other payables
84
60
3.848
4.685
959
-2.353
525
-308
-3.366
3.272
Change in provisions and employee benefits
-69
8
CASH FLOW GENERATED BY OPERATIONS
-1.951
619
-954
-820
Interest paid Income tax paid Revenue from sale arising from discontinuing operations, excl. tax NET CASH FLOW FROM OPERATING ACTIVITIES
944
4.484
Cetis, d. d.
Annual Report 2 0 0 8
BUSINESS REPORT
In EUR thousand
CASH FLOW FROM INVESTING ACTIVITIES Proceeds from sale of property, plant and equipment Proceeds from sale of investments
2008
2007
84
57
-742
541
Interest received
216
72
Dividends received
538
254
10
Sale of subsidiary, net of cash disposed of Acquisition of subsidiary, net of cash acquired Purchase of property, plant and equipment Acquisition of investment property Expenditure on other investment Purchases of intangible assets
880
-9.546
876
-1.169
-600
-1.028
NET CASH FLOW FROM INVESTING ACTIVITIES
1.263
-10.819
2008
2007
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issue of share capital
Proceeds from issue of convertible bonds
Proceeds from issue of redeemable preference shares
Share buyback
-59
5
Movements in equity Borrowings
8.939
18.543
-11.047
-12.267
Repayment of liabilities from long-term financial lease
Payment for transaction costs (issuing shares, bonds)
Repayment of borrowings
Dividends paid NET CASH FLOW FROM FINANCING ACTIVITIES Net increase in cash and cash equivalents Cash and cash equivalents at beginning of period
-1
-2.168
6.281
38
-54
1.003
1.057
Exchange gains / (losses) on cash and cash equivalents
1.042
1.003
CASH AND CASH EQUIVALENTS AT END OF PERIOD
99
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
Consolidated Statement of Changes in Equity
100 Balance at 1 January 2006
Issued capital
Capital
Legal and statutory reserves
Own shares
10.015
17.859
1.709
-26
Profit 2006
Exchange differences CETIS ZG,IPI,BS
Dividends on own shares
Increase in fair value
Balance at 31 December 2006
10.015
17.859
1.709
-26
Profit 2007
Allocation to statutory reserves
192
Payment of bonuses Adjustment from previous years - refund Tax Administration of the Republic of Slovenia Translation differences CETIS ZG
Decrease in fair value
Balance at 31 December 2007
10.015
17.859
1.901
-26
Profit 2008
Profit 2007-unconsolidated BG Adjustment from previous years – provisions for own shares Dividend payment
26
Reserves for own shares
Translation reserve
Decrease in fair value
Increase in minority interest
10.015
17.859
1.927
-26
Balance at 31 December 2008
The Management Board of Cetis, d.d. approves the financial statements and notes thereto for the financial year ended on 31 December 2008.
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
In EUR thousand Fair value reserve
Majority interest capital
-689
134
29.002
999
999
7
7
1
1
556
556
317
690
30.564
173
173
Profit
Minority interest capital
Total capital
-192
-20
-20
25
25
3
3
-349
-349
306
341
30.396
30.396
86
86
-11
75
-5
-5
-3
-8
-26
-92
-27
-119
-119
-1.917
-1.917
-1.917
67
67
269
-27
-1.576
28.441
53
28.495
101
BUSINESS REPORT
102
Cetis, d. d.
Annual Report 2 0 0 8
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
Summary of significant accounting policies and notes to the financial statements
1.
Group profile
The Group’s core business is the provision of comprehensive solutions in the field of communications through printed media and other types of media. The corporate vision is of the company as the leading company of its type in Slovenia, with appropriate developmental, investment and marketing activities and the best qualified staff, looking ahead to increase its market share also outside Slovenia. The Company offers a programme of diversified printed matter, such as security, variable and commercial printed matter, graphic design, including accessory services, such as the personalisation of documents, the implementation and personalisation of micro chips or magnetic tapes, archiving, identity management and consultancy, project management and other services. The Group’s consolidated financial statements for the year that ended on 31 December 2008 comprise the Company and its subsidiaries, as well as the Group’s stakes in affiliated companies. Consolidation for the company Cetis Print d.o.o., Beograd was performed on the basis of the simultaneous consolidation method. The group comprises
Cetis, d.d., Celje Cetis-ZG, d.o.o., Zagreb Cetis Print, d.o.o., Belgrade (65% owned by Cetis-ZG, d.o.o.) AMBA CO., d.o.o., Ljubljana
Parent company stake 100% 65% 100%
La Societe Nationale des Loteries Sportives (SNLS), Gabon
93,63%
The company La Societe Nationale des Loteries Sportives, Gabon became a subsidiary upon a capital increase in 2008; at the same time, the parent company decided to sell it in the short-term, and the investment was therefore reclassified to non-current assets available for sale. The company in Gabon is not active, which is the reason that no financial statements were prepared at 31 December 2008, and the company was therefore not included in the consolidated financial statements. Based on the previous year’s financial statements, the conclusion was that the assets and the sales revenue and total costs for the subsidiary comprise less than 5% of the corresponding Group item, which is an insignificant share, regarding Group policies, and does not need to be included in the consolidated financial statements. In the previous period, the company was included in consolidated financial statements as an affiliated company, and valued by the equity method. In 2008, all effects of the equity method were abrogated in consolidated financial statements; the same are recognised as financial income amounting to EUR 348 thousand. Affiliated companies Company Druckman, Hungary – does not operate Lotaria Nacionale SH.A, Rruga Kavajes, Porta Kry Esore, Misto Mame, Tirana
Equity stake in %
Company’s own capital In EUR thousand
Company’s Profit In EUR thousand
-865
-733
33% 46,6%
103
BUSINESS REPORT
2.
Basis for preparation of consolidated financial statements
a)
Statement of compliance
The 2008 consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and the interpretations by the IFRS Interpretations Committee (IFRSIC), as adopted by the European Union. 104
The Management Board approved the consolidated financial statements on 18 April 2008. b)
Basis for measurement
The 2008 consolidated financial statements were prepared on a historical cost basis, except for the following cases that were measured at fair value: • financial instruments at fair value through profit or loss, • available-for-sale financial assets, • investment property. The methods used to measure fair value are described below. c)
Functional and presentation currency
The consolidated financial statements are presented in Euros, i.e. in the Company’s functional currency and are rounded off to EUR thousand. d)
Use of estimates and judgements
The preparation of consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) requires the Management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts for assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on a regular basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.
Cetis, d. d.
3.
Significant accounting policies
The accounting policies set out below have been applied consistently by the Group companies to all periods presented in these consolidated financial statements. a)
Basis for consolidation
Subsidiaries Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. When assessing the impact, the existence and effect of potential voting rights that are currently exercisable or convertible should be considered. The financial statements for subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. When required, the accounting policies of subsidiaries have been modified or adapted to those of the Group. Affiliates and joint ventures (jointly controlled entities accounted for using the equity method) Affiliates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. A significant influence exists if a group holds from 20 to 50 per cent of votes in another entity. Affiliates are accounted for using the equity method. Upon initial recognition, they are measured at historical cost. The Group’s investment comprises goodwill established upon acquisition, and net value of losses incurred due to impairment. Affiliates are accounted for using the equity method. The consolidated financial statements include the Group’s share in profits and losses of affiliated entities, calculated using the equity method, after the alignment of accounting policies, from the date that significant influence commences until the date that it ceases. When the Group’s share of losses in a jointly controlled entity exceeds its share in the entity, the book value of that share (including all long-term investments) is reduced to nil, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of a jointly controlled entity. Transactions eliminated on consolidation Any balances, income and expenses, and unrealised gains and losses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with jointly controlled
Annual Report 2 0 0 8
Cetis, d. d.
Annual Report 2 0 0 8
entities are eliminated to the extent of the Group’s interest in the affiliate. Unrealised losses are eliminated in the same manner as unrealised gains, providing that there is no evidence of impairment. b)
Foreign currency
Transactions in foreign currency Any transactions disclosed in foreign currency are converted into the relevant functional currency of the Group companies at the exchange rate applicable on the date of transaction. Assets and liabilities expressed in a foreign currency are translated into EUR on the date of the event and at the end of the accounting period, using the (ECB) reference exchange rate of the Bank of Slovenia. Monetary assets and liabilities stated in a foreign currency at the balance sheet date are translated into functional currency at the applicable exchange rate. The foreign exchange gains or losses are the differences between the amortised cost in the functional currency at the beginning of the period, adjusted by the amount of effective interest and the payments effected during the accounting period, as well as the amortised cost expressed in a foreign currency and translated at the exchange rate at the end of the period. Non-monetary assets and liabilities stated in a foreign currency and measured at fair value are translated into the functional currency at the exchange rate effective on the date on which the fair value was set. Foreign exchange gains and losses are recognised in the income statement. Foreign entities Assets and liabilities of foreign entities are translated into EUR at the exchange rate effective on the balance sheet date. Revenues and expenses of foreign entities are translated into EUR at average exchange rates effective on the date of conversion. c)
Financial instruments
Non-derivative financial instruments Non-derivative financial instruments include investments in equity and debt securities, trade and other receivables, cash and cash equivalents, borrowings and loans, and trade and other liabilities. Non-derivative instruments are recognised initially at fair value, increased by the costs that are directly attributable to the transaction. Subsequent to initial recognition, non-derivative financial instruments are measured as explained below.
BUSINESS REPORT
Cash and cash equivalents comprise cash in hand and demand deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents in the Cash Flow Statement. Accounting of finance income and finance costs is described in point l) Finance income and finance costs. Available-for-sale financial assets The Group’s investments in equity securities and certain debt securities are classified as availablefor-sale financial assets. Subsequent to initial recognition, these investments are measured at fair value. The changes in fair value, except for impairment losses, are recognised directly in equity. When an investment is derecognised, the related gain or loss in equity is transferred to profit and loss. Investments at fair value through profit or loss An instrument is classified at fair value through profit or loss if it is held for trading, or is designated as such upon initial recognition. Financial instruments are designated at fair value through profit or loss if the Group is able to manage such investments, as well as make purchase and sale decisions based on their fair value. Upon initial recognition, attributable costs for a transaction are recognised in profit or loss when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and a change in fair value is recognised in profit or loss. Other Other non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment losses. Share capital Ordinary sharesavadne delnice Ordinary shares form an integral part of the share capital. Share buyback When own shares are bought back, the amount of consideration paid, including directly attributable costs, and excluding potential tax effect, is recognised as a change in equity. Repurchased shares are classified as own shares and deducted from equity. When own shares are sold, the amount received is recognised as an increase in equity, and the resulting surplus or loss in the transaction is recognised in equity.
105
BUSINESS REPORT
d)
Property, plant and equipment
Presentation and measurement Items of property, plant and equipment are recognised at cost, less accumulated depreciation expense and accumulated impairment loss. At the date of transition to IFRS, property, plant and equipment were carried at their hypothetical cost at 1 January 2005.
106
Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials, direct labour costs and any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the assets and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. Borrowing costs related to the purchase or construction of property are recognised in profit or loss as incurred. Parts of an item of property, plant and equipment with different useful lives are accounted for as separate items of property, plant and equipment.
Cetis, d. d.
Annual Report 2 0 0 8
Gains and losses on disposal of an item of property, plant and equipment are determined as the difference between the proceeds from disposal of the item compared to the carrying amount, and are recognised among ‘other operating income’ in the Income Statement. Subsequent costs related to property, plant and equipment The cost of replacing a part of an item of property, plant and equipment is recognised in the book value of the item if it is probable that future economic benefits related to that part will flow to the Group, and its purchase value can be reliably measured. All other costs, such as day-to-day servicing, are expensed in profit or loss when incurred. Depreciation Depreciation is calculated on a straight-line basis over the useful lives of each part of an item of property, plant and equipment. Land is not Depreciation rates are based on the estimated useful life of the assets as shown below:
In years min
In years max
Investment property
7
40
Buildings
7
40
Equipment for graphic activity
3
20
Laboratory equipment
3
10
Vehicles
5
8
Telephone sets, telegraph switchboard
3
5
Furniture
5
6
Typewriters, computer equipment
3
8
Computer equipment for fire safety
3
3
Measurement and control appliances
4
6
Useful life is determined and examined in accordance with the Rules on accounting and finance. Depreciation methods, useful life and residual value are reviewed at the reporting date in accordance with the Rules on accounting and finance.
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
e)
Intangible assets
Goodwill Goodwill (badwill) arises upon the acquisition of subsidiaries, affiliated companies and joint ventures. Acquisitions as from date of transition to IFRS In acquisitions made on or after 1 January 2006, goodwill is defined as the surplus or difference between the purchase price and the Group’s share in the net fair value of identified assets, liabilities and contingent liabilities of the acquired company. If the surplus is negative (badwill), it is directly recognised in the Income Statement.
Subsequent expenditure Subsequent expenditure related to intangible assets is capitalised only when it increases the future economic benefits arising from the specific asset to which it relates. All other expenditure is recognised in the income statement as expenditure when incurred. Depreciation Depreciation is calculated on a straight-line basis over the useful lives of intangible assets. Depreciation of an asset begins when the asset is available for use. The estimated useful lives for the current and comparative periods are as shown below.
Subsequent measurement Goodwill is carried at cost, reduced by any accumulated impairment losses. For the recipient of investments calculated on the basis of equity method, the book value of goodwill is included in the investment book value.
Depreciation rates are based on the useful life of the assets, as follows:
Research and development Expenditure on research activities to obtain new scientific and professional knowledge and understanding is recognised in the income statement among expenses when incurred.
f)
Development activities involve a plan or design for the production of new or substantially improved products and processes. An expense for development is recognised if it can be reliably measured, if the product or process is technically and operationally feasible, if there is a potential for future economic benefits, if the Group has adequate resources for the completion of development, and if it intends to use or sell such assets. The recognised expenditure comprises the cost of materials, direct labour costs and other costs which can be directly attributed to qualifying the asset for its intended use. Borrowing costs related to development of assets and other expenditure are recognised in the income statement as incurred. Capitalised development expenditure is measured at cost, less accumulated amortisation and incurred impairment losses. Other intangible assets Other intangible assets acquired by the Group, which have finite useful lives, are measured at cost, less accumulated depreciation expense and incurred impairment losses.
Intangible assets
In years min 3
In years max 10
Investment property
An investment property is a property owned in order to bring rent or increase the value of a long-term investment, or both. Investment property therefore creates cash flow which is highly independent of other assets owned by the company. As an investment property is defined: • Land owned to increase the value of a long-term investment, not for sale in the near future as part of regular business operations: - land for which the company has not determined its future use; - building owned or in financial lease, which is leased out on the basis of a single or multiple operational lease; - vacant building owned on the basis of single or multiple operational lease, and • in cases when, with regard to asset determination, a part of property is investment property and another part a tangible fixed asset, but they cannot be sold separately, the whole asset is determined as an investment property if the part which is a tangible fixed asset is insignificant; otherwise, the whole asset is recognised as a tangible fixed asset. Whether the proportion is significant or not is determined by the competent employee for the area. Measuring recognised value The company measures investment property based on a historical cost model. The historical cost of purchased investment property comprises its purchase price and all
107
BUSINESS REPORT
directly attributable costs. Directly attributable costs include, for example, attributable fees for legal services, tax on property transfer, and other costs of the transaction. The historical cost of a property constructed within the company comprises its cost up to the date when construction or development was completed. On that date, the property becomes investment property.
108
Disposal Investment property ceases to be recognised upon disposal, or when it is permanently withdrawn from use and no future economic benefits can be expected from its disposal. Profit or loss from discontinuation or disposal of investment property has to be established as the difference between net gains upon disposal and the book value of assets, and recognised in the income statement. Depreciation Investment property is depreciated at the same rate as investments used by the company. The method of determining their useful life is the same as that used to determine the useful life of tangible fixed assets. g)
Leased assets
Leases in terms of which the Group assumes all the essential risks and rewards of ownership are classified as finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the fair value or the present value of the minimum sum of lease payments, whichever is lower. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. h)
Inventories
Inventories are measured at historical cost or net realisable value, whichever is lower. The cost of inventories is based on the First-In-FirstOut method (FIFO), and includes expenditure incurred in acquiring the inventories, production or conversion costs, and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated
Cetis, d. d.
costs of completion and estimated costs of sale. i)
Impairment of assets
Financial assets A financial asset is assessed at each reporting date to determine whether there is any objective sign that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows arising from that asset. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows, discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its fair value. Significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed for impairment collectively, in groups that share similar credit risk characteristics. All impairment losses are recognised in the income statement for the period. Any current loss in respect of a financial asset which was not recognised directly in equity is transferred to profit or loss. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost and availablefor-sale financial assets that are debt securities, the reversal is recognised in profit or loss. For availablefor-sale financial assets that are equity securities, an impairment loss cannot be reversed through profit or loss. Non-financial assets At each reporting date, the book value of nonfinancial assets of the Group, other than inventories and deferred tax assets, is examined to discover any indication of impairment. If there is such an indication, then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinite useful lives, or that are not yet available for use, the recoverable amount is estimated at each reporting date. The recoverable amount of an asset or cashgenerating unit is the value in use or its fair value, less costs of sale, whichever is higher. In assessing value in use, estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
Annual Report 2 0 0 8
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (‘cash-generating units’). The goodwill acquired in a business combination is, for the purpose of impairment testing, allocated to cash-generating units that are expected to benefit from the synergies of the combination. An impairment is recognised if the book value of an asset or a cash-generating unit exceeds its recoverable amount. Impairment is recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the book value of any goodwill allocated to the units and then to reduce the book value of other assets in the unit (group of units) on a pro rata basis. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each balance sheet date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s book value does not exceed the book value that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised in previous periods. j)
Employee benefits
Other long-term employee benefits. The net liability of the Group that arises in connection with long-term employee benefits is a sum of future benefits paid to employees in exchange for their work performed in the current and previous periods. Thus calculated, the sum of benefits is discounted in order to determine its present value, and then reduced by the fair value of all related assets. At the reporting date, the discount rate is the recorded yield of AA rated bonds, with the maturity approximately the same as the maturity of the Group’s liabilities. The calculation is made using the projected unit credit method. Any actuarial gains and losses are recognised in the profit or loss in the period in which they occur. Short-term employee benefits Liabilities for short-term employee benefits are measured on an undiscounted basis and are expensed when the related service is provided. The liability is disclosed in the amount for which
payment is expected in the form of a premium, payable within twelve months after the expiry of the period of performing the work, or a profit distribution scheme, if the Group has a present legal or constructive obligation to make such payments due to previous work performed by the employee and such obligation can be measured reliably. k)
Provisions
A provision is recognised if, as a result of a past event, the Group has present legal or constructive obligations that can be estimated reliably, and it is probable that an outflow of factors enabling economic benefits will be required to settle the obligation. Provisions are determined by discounting 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. Warranties for products and services A provision for warranties is recognised when the underlying products or services are sold. The provision is based on historical warranty data and a weighting of all possible outcomes against their associated probabilities. l)
Revenues
Revenues from products sold Revenue from the sale of products is measured at fair value of the consideration received or the related receivables, net of returns and price reductions, trade discounts and volume rebates. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer; when certainty exists regarding recovery of the consideration and the associated costs or possible return of goods and when there is no further Group involvement with the products sold; and when the level of revenue can be reliably measured. Transfers of risks and rewards vary, depending on the individual terms of the contract of sale. For sales of goods, transfer usually occurs when the product is received at the customer’s warehouse; however, for some international shipments, transfer occurs upon loading goods onto the relevant carrier. Revenues from services Revenue from services rendered is recognised in the income statement in proportion to the stage of completion of the transaction at the reporting date. The stage of completion is assessed by reference to surveys of work performed.
109
BUSINESS REPORT
Rental income Rental income is recognised in income on a straight-line basis over the term of the lease. m)
110
Finance income and finance costs
Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income, gains on the disposal of available-for-sale financial assets and changes in the fair value of financial assets held for trading through profit or loss, which are recognised in the income statement. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Dividend income is recognised in the income statement on the date that the shareholder’s right to receive payment is exercised; in the case of quoted securities, this is usually the ex-dividend date. Finance costs comprise borrowing costs, dividends on preference shares classified as liabilities, foreign currency losses, changes in the fair value of financial assets at fair value through profit or loss, and impairment losses recognised on financial assets that are recognised in profit or loss. All borrowing costs are recognised in profit or loss, using the effective interest method. Exchange gains and losses are disclosed in net amounts. n)
Income tax
Income tax expense comprises current and deferred tax. Income tax expense is recognised in the income statement, except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised using the balance sheet liabilities method, taking into consideration temporary differences between the book value of assets and the liabilities for financial reporting purposes and the amounts used for taxation purposes. All temporary differences are taken into consideration. Deferred tax is recognised in the amount expected to be paid upon reversal of the temporary differences, in compliance with laws in force or substantively enacted on the reporting date.
Cetis, d. d.
Deferred tax assets and liabilities are offset if the Group has a legally enforceable right to offset current tax liabilities and assets, and if they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, when they intend to settle current tax liabilities and assets on a net basis, or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which a deferred tax asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Additional income tax that arises from the distribution of dividends is recognised at the same time as the liability to pay the related dividend is recognised. o)
Basic earnings per share
The Group presents basic earnings per share data for its ordinary shares. The basic earnings per share are calculated by dividing the profit or loss attributable to ordinary shareholders by the weighted average number of ordinary shares in the period. Diluted earnings per share are identical, as the Group holds neither any preference nor convertible shares. p)
Segment reporting
A segment is a distinguishable component of the Group that is engaged either in providing related products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and returns that are different from those of other segments. The Group’s segment reporting is based on business segments. Inter-segment pricing is determined on an arm’s length basis. Segment profit or loss, assets and liabilities include items directly attributable to a segment, as well as those that can be allocated to a segment on a reasonable basis. Unallocated assets include investments, whereas unallocated liabilities include capital.
Annual Report 2 0 0 8
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
r)
New standards and explanations not yet in effect A number of new standards, amendments to standards and explanations are not yet in effect for the year ended 31 December 2008, and have not been applied in preparing these financial statements: IFRS 8 – Operating Segments introduces the “management approach” to segment reporting. IFRS 8, which becomes mandatory for the Group’s 2009 financial statements, will require the disclosure of segment information based on the internal reports regularly reviewed by the Group’s Chief Operating Decision Maker in order to assess each segment’s performance and to allocate resources to them. Currently, the Group presents segment information in respect of its business segment. Revised IAS 23 – Borrowing Costs removes the option to expense borrowing costs and requires that an entity capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the purchase value of that asset. The revised IAS 23 will become mandatory for the Group’s 2009 financial statements and will constitute a change in accounting policy. In accordance with the transitional provisions, the Group will apply the revised IAS 23 to qualifying assets for which capitalisation of borrowing costs commences on or after the effective date. IFRIC 13 – Customer Loyalty Programmes addresses the accounting by entities that operate, or otherwise participate in, customer loyalty programmes for their customers. It relates to customer loyalty programmes under which the customer can redeem credits for awards such as free or discounted goods or services. It is not expected that IFRIC 13, which becomes mandatory for the Group’s 2009 financial statements, will have an impact on financial statements. 4.
Determining fair value
A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes for groups of assets based on the methods below. When applicable, further information on the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
a)
Property, plant and equipment
The fair value of property, plant and equipment recognised as a result of a business combination is based on market values. The fair value of property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing, wherein the parties had each acted knowledgeably, prudently and without compulsion. The market value of items of plant and equipment is based on the offered market price of similar items. b)
Intangible assets
The fair value of intangible assets is determined as the present value of estimated future cash flows expected to originate from their use and eventual sale. c)
Inventories
The fair value of inventories in business combinations is determined on the basis of their expected sales value achieved in ordinary business operations, reduced by the estimated cost of completion and the estimated costs of sale and an adequate margin related to the work for completion and sale of inventories. d)
Investment in equity and debt securities
The fair value of financial assets at fair value through profit or loss, held-to-maturity investments and available-for-sale financial assets is determined by reference to their quoted bid price at the reporting date. The fair value of held-to-maturity investments is determined for disclosure purposes only. e)
Trade and other receivables
The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. f)
Non-derivative financial liabilities
Fair value, which is specified for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. For finance leases, the market interest rate is determined by reference to similar lease agreements.
111
BUSINESS REPORT
5.
Financial risk management
The Group is exposed to the following risks arising from financial instruments: - credit risk, - liquiditi risk, - market risk. This section deals with the Group and its exposure to the above risks, its objectives, policies and procedures for risk measurement and management, and its equity management. 112
The Management is entirely responsible for designing the framework for the Group’s risk management. Risk management policies are designed to identify and analyse risks that can pose a threat to the Group. On this basis, appropriate restrictions and controls are determined, and risks are monitored and restrictions considered. The risk management policies and systems are subject to regular review, and updated information regarding market conditions and the activities of the Group is therefore regularly communicated. The Group endeavours, through training and risk management standards and procedures, to develop a disciplined and constructive environment in which all employees are aware of their role and obligations. Credit risk Credit risk is the risk of suffering financial loss should any of clients or parties to a financial instrument contract fail to meet their contractual obligations. Credit risk mainly occurs in relation to the Group’s trade receivables and investment securities. Trade and other receivables The Group’s exposure to credit risk mainly depends on individual client’s characteristics. The demographics of the Group’s client base, as well as payment risk in terms of the branch of industry or country in which a client operates does not have such a strong impact on credit risk. Approximately 2.5% of Group’s revenues may be attributed to sales transactions with one client alone. In geographical terms, there is no credit risk concentration. The Group shapes its credit policy on the basis of a creditworthiness analysis of each new client, which is made before the Group offers them its standard payment and delivery terms and conditions. The client review includes any external evaluations, if available, and in certain cases, bank references. Purchase limits – determined in the form of a maximum outstanding amount – are set for each client separately and reviewed every three months.
Cetis, d. d.
Any transactions with a client not meeting the standard creditworthiness test are carried out solely through advance payments. Ownership is retained in goods until they have been paid for in full. In the event of non-payment for goods, the Group’s claim is therefore secured. As for trade and other receivables, the Group requires no surety. The Group forms value adjustments for the amount of impairment, representing the amount of estimated losses arising from trade and other receivables, as well as investments. The main elements of this value adjustment are a special portion of the loss related to individual key risks, and the total loss, formed for groups of similar assets due to incurred losses not yet defined. The value adjustment for the total amount of loss is determined by taking into account historical data related to payment statistics for similar financial resources. Value adjustments for trade receivables are made on the basis of an analysis with regard to recovering each receivable. Adjustment is based on receivables which remain unpaid 90 days after maturity. Investments The Group reduces its credit risk exposure through investments in the liquid securities of contractual parties with adequate credit ratings. Guarantees In accordance with its policy, the Group provides financial guarantees or sureties solely to subsidiaries fully owned by the controlling company. As of 31 December 2008, the Company records guarantees granted under off-balance sheet items. Liquidity risk Liquidity risk is the risk arising from the Group’s inability to meet its financial obligations when they fall due. The Group manages to ensure the highest possible liquidity by always having sufficient liquid assets available to settle its obligations within the set time limits, both under normal and stressful circumstances, without incurring unacceptable losses or risking harm to the Group’s reputation. The valuation of products and services is based on activities aimed at monitoring the Group’s cash flow needs and optimising the return on investments. The Group also ensures it has sufficient cash (sight deposits) to cover operating expense for a period of 60 days, including servicing financial liabilities; the latter excludes any potential consequences of unpredictable extraordinary circumstances, such as natural disasters.
Annual Report 2 0 0 8
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
Interest rate risk The Group is exposed to interest rate risks, since a variable interest rate applies to most of its financial liabilities. The Group has so far had no specific hedging against changes to interest rates.
Market risk Market risk is the risk that changes in market prices, such as exchange rates, interest rates and equity instruments that may affect the Group’s revenues or the value of financial instruments. The objective of market risk management is to manage and control market risk exposure within reasonable limits, while optimising profit. The Group trades in financial instruments, and assumes financial obligations, both with the aim of managing market risks. All these transactions are carried out in compliance with the Group’s policies. In order to reduce fluctuations in profit or loss to the lowest possible level, the Group makes sustained efforts to use accounting treatment for risk protection purposes.
Capital management The Management Board has made a decision to keep a large volume of capital, in order to maintain the confidence of investors, creditors and the market, and the sustainable development of the Group. The Supervisory Board monitors the return on equity defined by the Group as basic earnings divided by average equity, less net profit for the financial year. During the reporting year, no changes related to capital management occurred in the Group. Neither the parent company nor its subsidiaries were subject to capital requirements determined by external bodies.
Currency risk The Group is exposed to currency risk in the spheres of both purchase and sales - namely in transactions in currencies that are not functional currencies of the Group companies. The Group conducts most of its transactions in EUR, HRK, USD, GBP, CHF and DKK. As far as borrowings are concerned, transactions are carried out in euros. The Group has undertaken no special hedging against currency risks.
Security printed matter Net sales revenue Net profit or loss Assets by business segment Unallocated assets Total assets Total liabilities
6.
Segment reporting
Breakdown per segment
Commercial printed matter
Other
Total
2008
2007
2008
2007
2008
2007
2008
2007
10.644
9.261
17.404
27.552
7.919
2.707
35.967
39.520
-647
-139
186
-243
-130
-41
-591
-423
12.795
11.035
18.978
31.008
8.971
3.226
40.744
45.270
13.443
16.479
12.795
11.035
18.978
31.008
8.971
3.226
54.187
61.749
7.508
7.081
12.540
22.202
5.661
2.070
25.709
31.354
Investments
525
1.561
1.134
2.963
397
452
2.056
4.976
Depreciation
1.422
1.165
1.776
2.666
903
341
4.101
4.171
Sales revenue stated under ‘Other’ comprises revenue from sale of materials, merchandise and property, plant and equipment.
The Group does business mainly in Europe, which is why it does not report by geographical segment.
113
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
Income Statement disclosures 1.
Revenue
In EUR thousand Sales revenue by type 114
Sale of products in domestic market Sale of services in domestic market
2008
2007
20.402
21.837
738
740
Gains from investment property
55
 
Rental revenue in domestic market
33
121
6.532
14.028
Sale of products in foreign market Sale of services in foreign market Sale of material and merchandise in domestic market Sale of material and merchandise in foreign market Total
2.
376
458
1.229
1.509
6.601
826
35.967
39.520
Expenses In EUR thousand
Expenses by primary type, change in value of inventories
2008
2007
Cost of goods and materials sold
4.913
4.942
Cost of materials and services used
18.265
20.661
Labour costs
10.127
10.421
4.120
4.171
621
928
291
-170
38.337
40.953
Depreciation and amortisation expense Other (operating) expense Change in inventories of finished products, work in progress and semi-manufactured products Total (operating) expense
Labour costs
In EUR thousand  
2008
2007
Gross wages and salaries
7.431
7.354
Pension insurance cost
798
814
Cost of other social insurance
581
604
Other labour cost
1.318
1.649
Total labour costs
10.127
10.421
Cetis, d. d.
Annual Report 2 0 0 8
BUSINESS REPORT
The costs of wages and salaries are accounted for in compliance with collective agreements, internal rules and regulations governing wages and other emoluments, the Decree on the amount of costs recognised as deductible, and individual employment agreements. Other labour costs comprise those of meal allowances, commuting allowances, holiday bonuses, retirement bonus, and payroll tax. 3.
Other operating income In EUR thousand
Item Gain in disposal of fixed assets Reversal of impairment of property, plant and equipment Income from reversal of provisions
2008
2007
269
107
95
188
476
Capitalised own products and services Reversal of value adjustments for trade receivables and inventories Indemnities, subsidies and grants received
212 16
29
Other
422
360
Total
1.203
1.011
4.
38
Net finance income/finance costs
In EUR thousand
2008
2007
Interest income
249
82
Share-based income
563
254
16
8
Foreign exchange gains Income from sale of investments Other finance income
1.585
541
13
1.541
- change in fair value of investments through profit or loss - other Total finance income Interest expense Foreign exchange losses
1.505 13
36
2.425
2.426
733
956
28
13
Loss in disposal of investments Other finance costs Finance costs arising from impairment Total finance costs Total net finance income
137 2
437
432
10
1.195
1.554
1.230
872
115
BUSINESS REPORT
5.
Cetis, d. d.
Annual Report 2 0 0 8
Taxes In EUR thousand
Current tax
2008
2007
84
60
Deferred tax (from income statement)
-96
217
Total
-12
277
Effective corporate income tax rates 116
In EUR thousand
2008
2008
2007
2007
Total profit or loss before tax
62
450
Tax effects:
Tax at general tax rate Adjustment for tax rate from other tax territories Tax exempt income Tax increased income Non-deductible expenses Losses for which no deferred tax is recognised
22,0%
14
23,0%
104
-13,0%
-8
-2,0%
-9
-466,6%
-288
-23,3%
-105
4,0%
2
209,5%
129
27,4%
124
-46
92,2%
415
Tax relief
-34,6%
-21
-21,0%
-95
Tax loss
364,9%
225
-43,1%
-194
Other changes to tax base
-30,9%
-19
8,3%
37
Total tax expense
-19,8%
-12
61,5%
277
Deferred taxes recognised directly in equity In EUR thousand Property, plant and equipment
2008
2007
27
-435
Investments
516
109
Total
543
-326
6.
Disclosure of auditor fees
The total amount spent on all auditing services amounted to EUR 19 thousand in 2008.
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
Disclosures of Consolidated Balance Sheet items
7.
Investment property
117
Investment property
In EUR thousand
2008
2007
Buildings
203
Total
203
Land
Movements in investment property
In EUR thousand
2008
2007
Value at cost
Balance at 1 January 2008
Additions
Disposals
Transfers from property, plant and equipment Other transfers
471
Balance at 31 December 2008
471
Value adjustment
Balance at 1 January 2008
Depreciation expense
12
Transfer from property, plant and equipment
256
Balance at 31 December 2008
268
Book value
Balance at 1 January 2008
Balance at 31 December 2008
203
The amount of income arising from investment property is disclosed under No 1.
BUSINESS REPORT
8.
Cetis, d. d.
Annual Report 2 0 0 8
Property, plant and equipment
In 2008, the Group invested EUR 909 thousand in buildings and equipment. Movements in property, plant and equipment
In EUR thousand Cost 118
Buildings
Land
Equipment
Other equipment
PPE in progress
Prepayments
Total
Balance at 1 January 2007
1.518
15.874
38.647
119
215
56.373
Arising on acquisition
2.392
1.516
1.204
5.112
Adjustment of the opening balance Acquisitions in the period
206
4.222
65
4.493
Change to PPE in progress
254
254
Transfers
-33
45
-92
80
Disposals
2
1.586
1.588
Reclassification
Balance at 31 December 2007
3.910
17.561
42.532
27
549
65
64.644
Balance at 1 January 2008
3.910
17.561
42.532
27
549
65
64.644
Transfer to investment property
-471
-471
Arising on acquisition
Transfer for available-for-sale assets
-85
-85
Adjustment of the opening balance
46
46
Acquisitions in the period
183
907
754
1.844
Change to PPE in progress
198
16
-1.149
-935
Transfers
Disposals
694
786
4.905
44
6.429
Reclassification Balance at 31 December 2008
3.216
16.685
38.596
27
69
21
58.614
Value adjustment
Balance at 1 January 2007
7.366
27.312
104
34.782
Depreciation expense
522
3.311
3.832
Disposals
1.273
1.273
Transfers
104
-104
Reclassification
Balance at 31 December 2007
7.888
29.453
37.341
Balance at 1 January 2008
7.888
29.453
37.341
Adjustment to the opening balance
11
11
Depreciation expense
525
3.278
3.803
Transfer to investment property
-268
-268
Disposals
207
4.474
4.681
Transfers
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
Land
Buildings
Equipment
Other equipment
PPE in progress
In EUR thousand PreTotal payments
Reclassification
Balance at 31 December 2008
7.938
28.268
36.206
Balance at 01.01. 2007
1.518
8.508
11.334
15
215
21.591
Balance at 31.12. 2007
3.910
9.673
13.080
27
549
65
27.304
Balance at 01.01. 2008
3.910
9.673
13.080
27
549
65
27.304
Balance at 31.12. 2008
3.216
8.747
10.328
27
69
21
22.408
Disposals made in 2008 mainly comprise the sale of commercially and technically outdated, yet still functional machinery. The Group secured its long-term borrowings with mortgages on real property, pledged plant and equipment, and liens on long-term investments, all of which are recognised in off-balance sheet records. Property, plant and equipment acquired under financial lease In EUR thousand Type Equipment
9.
2008
2007
2006
64
368
283
Intangible assets
Long-term property rights mainly include computer software for the renovation of the business information system. Development costs are the recognised costs of projects that prove to be feasible for the project completion and eligible for use or sale. The purpose is to complete the project and sell or use it in view of the probability of economic benefits and the capability of reliably measuring the costs attributable to the respective intangible asset. In 2008, the Group invested EUR 512 thousand in intangible assets. The Group disclosed goodwill in the amount of EUR 627 thousand arising from the acquisition of AMBA CO., d.o.o., Ljubljana subsidiary in 2007. Goodwill arises from the acquired company’s good position in foreign markets.
119
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
Movements in intangible assets
In EUR thousand Cost Balance at 1 January 2007 120
Goodwill
Deferred costs
Long-term property rights
Intangible assets in progress
Total
303
2.641
2.945
627
5 257
103 37
735 257 37
Transfer from investment in progress
Disposals
7
7
Reclassification
Balance at 31 December 2007
627
303
2.897
140
3.967
Balance at 1 January 2008
627
303
2.897
140
3.967
Arising on acquisition
Acquisitions in the period
329
329
Change to investment in progress
512
512
Adjustment to the opening balance
81
81
Transfer from investment in progress
-329
-329
Disposals
4
4
Arising on acquisition Acquisitions in the period Change to investment in progress
Reclassification
-1
-1
627
303
3.302
323
4.555
Value adjustment
Balance at 1 January 2007
79
1.370
1.449
Amortisation expense
58
281
339
Disposals
6
6
Balance at 31 December 2007
137
1.645
1.782
Balance at 1 January 2008
137
1.645
1.782
Amortisation expense
19
277
296
Balance at 31 December 2008
Adjustment to the opening balance
Disposals
2
2
Balance at 31 December 2008
156
1.921
2.076
Book value
Balance at 1 January 2007
225
1.271
1.496
Balance at 31 December 2007
627
167
1.252
140
2.184
Balance at 1 January 2008
627
166
1.252
140
2.185
Balance at 31 December 2008
627
147
1.381
323
2.478
Cetis, d. d.
Annual Report 2 0 0 8
10.
BUSINESS REPORT
Investments in affiliates
Affiliated companies include: Druckman Hungary, in which the Company holds a 33% stake, for which it has made value adjustment for the entire investment, since the affiliated company has not operated for several years and is not disclosed in movement in investments. • Lotaria Nacionale SH.A Rruga Kavajes, Porta Kry Esore, Misto Mame, Tirana. The stake is measured using the equity method.
•
In EUR thousand Type
2008
2007
Lotaria Nacionale SH.A Rruga Kavajes, Porta Kry Esore, Misto Mame, Tirana - 46,6 % ownership Druckman, Hungary – the company is not active KIG KGA, Production, Trade, Engineering d.o.o.
18
Total
18
In 2008, the company sold a 50% stake in the affiliated company KIG KGA d.o.o. Gains from the sale of the stake are recognised in financial revenue as revenue from disposal of investments. Due to new facts known in 2008 and 2009, financial revenue in the amount of EUR 70 thousand was recognised in consolidated financial statements for 2008, based on the equity method, arising from the recognition of loans granted to affiliated company in the full amount, as the loans will be repaid in full. Movements in investments in affiliates In EUR thousand Cost
Net amount
Balance at 1 January 2007
72
72
Balance at 31 December 2007
18
18
-18
-18
Disposal of investment Balance at 31 December 2008
11. Available-for-sale investments
In EUR thousand Type Available-for-sale investments
2008
2007
13.443
14.305
121
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
Movements in available-for-sale investments
In EUR thousand Balance at 1 January 2006 Purchase Sale Change in fair value 122
Balance at 1 January 2007 Purchase Sale Change in fair value Balance at 1 January 2008 Transfer from short-term investments Transfer to group companies Purchase Sale Change in fair value Balance at 31 December 2008
Cost
Value adjustment (impairment)
Net amount
12.998
-172
12.826
2.474
2.474
-2.230
172
-2.058
723
723
13.965
13.965
4.620
4.620
-4.718
-4.718
438
438
14.305
14.305
1.731
1.731
128
128
-32
-32
-2.433
-2.433
13.443
13.443
12. Loans
In EUR thousand Type Loans
2008
2007
334
1.249
Loans granted as at 31 December 2008 include loans to employees for the purchase of apartments and construction, funds invested in long-term bonds issued by a bank, and a granted deposit.
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
Movements in loans
In EUR thousand
Cost
Value adjustment (impairment)
Net amount
Balance at 1 January 2006
661
661
Increase
770
770
Repayments
93
93
Transfer to short-term loans
36
36
Exchange differences Balance at 1 January 2007
123
1.303
Increase
500
-301
199
Repayments
221
221
Transfer to short-term loans Balance at 31 December 2007 Increase Transfer to available-for-sale assets Repayments Transfer to short-term loans Balance at 31 December 2008
1.303
32
32
1.550
-301
1.249
1.187
-301
886
29
29
334
334
13. Non-current trade receivables
In EUR thousand Type
2008
2007
Other non-current trade receivables for affiliated companies
878
Skupaj
878
Movements in non-current trade receivables
In EUR thousand Balance at 1 January 2007 Increase
Cost
Value adjustment (impairment)
Net value
878
878
Balance at 31 December 2007
878
878
Balance at 1 January 2008
878
878
Transfer to non-current assets available for sale
878
878
Balance at 31 December 2008
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
14. Deferred tax assets and liabilities Movements in temporary differences in 2008 In EUR thousand Assets-liabilities
31.12.2008
31.12.2007
31.12.2008
31.12.2007
31.12.2008
31.12.2007
284
439
-284
-439
132
419
-111
49
52
Property, plant and equipment
124
Liabilities
Assets
Investments
445
21
26
Receivables
49
52
Inventories Provisions for retirement bonus Other provisions Tax loss Total
181
210
181
210
67
81
67
81
742
364
310
571
432
-207
The Group used a 21% tax rate in deferred tax accounting. Deferred tax liabilities are based on surpluses arising from the revaluation of available-for-sale investments, measured at fair value through equity. Deferred tax assets are based on provisions for anniversary bonuses and retirement bonuses, tax loss, and temporary differences arising from accounting for income tax on investments, receivables, inventories and other provisions to be recognised for tax purposes in subsequent periods. The Group recognised deferred tax assets for the tax loss based on the estimate that taxable profits will be available in the coming years, against which the deferred tax assets can be used in the future. In periods of tax loss utilisation, a decrease in deferred tax assets will represent a corresponding decrease in profits. Movements in temporary differences in 2007
In EUR thousand Property, plant and equipment Investments
1.1.2007
Recognised under income/expenses
Recognised under equity
-4
-435
-439
-224
4
109
-111
31.12.2007
Receivables
48
4
52
Inventories
25
-25
247
-37
210
Provisions for retirement bonus
18
-18
Tax loss
Other provisions
222
-141
81
Total
336
-217
-326
-207
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
Movements in temporary differences in 2008
In EUR thousand 1.1.2008
Recognised under income/expenses
Recognised under equity
31.12.2008
Property, plant and equipment
-439
128
27
-284
Investments
-111
14
516
419
Receivables
52
-3
49
Inventories Provisions for retirement bonus Other provisions Tax loss Total
210
-29
181
81
-14
67
-207
96
543
432
15. Non-current assets held for sale
Type Property, plant and equipment
In EUR thousand 2008
2007
85
Investment SNLS Gabon
2.297
Total
2.382
Non-current assets available for sale comprise assets to be sold probably for a short term. These assets are currently being marketed. 16. Inventories In EUR thousand Type
2008
2007
Material
1.972
2.126
267
539
1.180
1.287
331
234
3.750
4.186
Work in progress Products Merchandise Total
For the year 2008, the Group wrote off assets related to materials and products which were no longer usable. The largest product write-offs related to labels, plastic cards and wrappings, as well as documents, as a result of using inadequate material. Value adjustments are accounted for per type of inventory and movement. When reviewing inventories in warehouses storing items under complaint, inventories of materials, products and merchandise that showed no movement for more than 12 months, the Group applied the same policies as in preceding years.
125
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
17. Short-term financial investments at fair value In EUR thousand Type
126
2008
2007
Current investments
2.156
Total
2.156
Based on the EU Commission Regulation amending Regulation adopting certain international accounting standards (IAS 39 and IFRS 7), all current investments valued at fair value were transferred to long-term investments available for sale based on the investment balance at 30 June 2008. When accounting for the regular purchase or sale of a financial asset, the amount is recognised or reversed, respectively, taking into consideration the date of payment. Due to the drop in stock exchange quotations in financial markets, the company decided not to trade in those securities in the short-term. Pursuant to the Commission Regulation amending the Regulation adopting certain international accounting standards (IAS 39 and IFRS 7), a decision was made to transfer short-term financial investment at fair value to long-term investment available for sale, based on the investment balance at 30 June 2008. If the company could have reclassified the assets already on 1 January 2008, the net profit or loss for the business year would have been higher by EUR 425 thousand. If the reclassification were not performed, the profit or loss would be lower by EUR 582 thousand.
Value adjustment (impairment)
In EUR thousand
1.839
1.839
-98
-98
-188
-3
-185
610
10
600
Balance at 1 January 2008
2.163
7
2.156
Transfer to non-current investments (EU Commission Regulation)
-1.731
-1.731
-425
-425
Cost Balance at 1 January 2007 Transfer after allocation to available-for-sale shares Sale Change in fair value
Sale Change in fair value until transfer Balance at 31 December 2008
7
18. Short -term loans
In EUR thousand Type
2008
2007
Short-term loans
615
330
Short-term deposits
430
Current portion of long-term loans Total
29
32
1.074
362
Net amount
Cetis, d. d.
Annual Report 2 0 0 8
BUSINESS REPORT
19. Trade and other receivables
In EUR thousand Type
2008
2007
Current trade receivables
6.107
7.426
14
9
416
256
80
47
6.617
7.738
Current trade receivables from group companies Current trade receivables from affiliates Current trade receivables from third parties Current prepayments Total
 
20. Cash and cash equivalents
In EUR thousand Type Cash in banks, cheques and cash in hand Deposits in banks Total
2008
2007
88
503
954
500
1.042
1.003
21. Equity The total equity of the Group consists of issued capital, totalling EUR 10.015 thousand; share premium accounts amounting to EUR 17.859 thousand; legal and statutory reserves, totalling EUR 1.927 thousand; retained earnings, amounting to EUR 269 thousand; own shares (deducted from equity) in the amount of EUR 26 thousand; and fair value reserve, which is negative, amounting to EUR 1.576 thousand. The Group issued 200.000 unit shares, subscribed with the Central Securities Clearing Corporation (KDD). In EUR thousand Share capital
2008
2007
Share capital
10.015
10.015
Total
10.015
10.015
Capital reserves in the amount of EUR 17.859 thousand correspond to a simplified reversal of share capital by withdrawing shares amounting to EUR 2.215 thousand and general capital value adjustment amounting to EUR 15.644 thousand.
In EUR thousand Capital reserves
2008
2007
Simplified reduction in share capital by withdrawing shares General capital value adjustment
2.215 15.644
2.215 15.644
Total
17.859
17.859
127
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
Legal and statutory reserves amounting to EUR 1.927 thousand include legal reserves amounting to EUR 1.709 thousand, statutory reserves amounting to EUR 191 thousand, and reserves for own shares amounting to EUR 26 thousand. Legal reserves are formed every year in the amount of 5% from net profit for the period, remaining after covering any loss from previous periods, until legal reserves and capital reserves do not exceed the share set out in the Companies Act and the company’s Articles of Association. In EUR thousand Legal and statutory reserves
2008
2007
Legal reserves
1.709
1.709
Reserves for own shares 128
Statutory reserves Total
26
26
191
191
1.927
1.927
In 2008, the company acquired no own shares. At 31 December 2008, it reported ownership in 201 shares designated CETG. The shares are recognised at cost as a deductible item in equity. The fair value reserve in 2008 decreased because of a drop in exchange quotations. The accumulated reserve arising from surplus from value adjustment in long-term financial investments is negative, amounting to EUR 1.995 thousand. The company formed deferred receivables from the state on that basis in the amount of EUR 419 thousand. Capital value adjustment relates to currency differences arising from, and including financial statements of, subsidiary companies abroad in consolidated financial statements. The minority interest capital includes shares of minority interest in the subsidiary company Cetis Print, d.o.o., Belgrade. 22. Net earnings per share Net earnings per share are calculated by dividing basic net earnings per share by the weighted average number of shares as denominator. Diluted earnings per share are identical, as the Group holds no preferential or convertible shares.
In EUR thousand   Net earnings in EUR Weighted average number of ordinary shares Basic and diluted earnings per share in EUR
2008
2007
75.233
172.764
199.799
199.799
0,38
0,86
23. Borrowings Borrowings comprise long- and short-term borrowings, including the current portion of long-term borrowings. Long-term borrowings In EUR thousand Type
2008
2007
Bank loans
8.770
11.841
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
Short-term borrowings In EUR thousand Type
2008
2007
Current portion of long-term bank loans repayable within one year
5.475
3.011
Short-term bank loans
1.900
3.451
Other short-term loans Total
1.240 8.615
1.190 7.652
Guarantees granted
129
The guarantees granted amount to EUR 23.172 thousand and are recorded under off-balance sheet items. In EUR thousand Total repayment 2008
Interest 2008
Principal 2008
Short term loans of up to one year
4.833
150
4.683
Long-term borrowings, from 1 to 5 years
3.874
899
2.975
1.313 10.020
  1.049
1.313 8.971
Type
Long-term borrowings for the period of 5 years Total
The Group made no distinction between interest on long-term loans by maturity, and therefore the interest covers the period from 1 to 5 years. 24. Long-term operating liabilities
In EUR thousand Type
2008
Long-term operating liabilities arising from prepayments
2007 4
Long-term operating liabilities arising from finance lease contracts
26
74
Total
26
78
25. Provisions
In EUR thousand Type
2008
2007
Provisions for warranties
71
99
Provisions for legal action
29
89
Provisions for other costs Provisions for anniversary bonuses Provisions for retirement bonuses Total
23
40
246
247
701
767
1.070
1.242
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
Movements in provisions
In EUR thousand Type
31.12.2007
Made
99
Provisions for warranties
130
Used
Reversed
31.12.2008
43
71
71
60
29
26
23
Provisions for legal action
89
Provisions for other costs
40
9
Provisions for anniversary bonuses
246
35
32
3
246
767
1
9
58
701
1.241
88
41
218
1.070
Provisions for retirement bonuses Total
The Group reviewed the provisions made, taking account of changes and decreased total provisions for the purpose of long-term deferred expenses and provisions for long-term accrued costs. Provisions are made on the basis of contracts, legal bases and expert opinions. Provisions for retirement bonuses and anniversary bonuses. On the basis of a calculation for each employee using the projected unit method, prepared by a certified actuary, the provisions for retirement bonuses and anniversary bonuses were reduced by EUR 66 thousand. 26. Trade and other payables
In EUR thousand Type
2008
2007
Trade payables
5.627
6.917
Current trade payables based on prepayments
314
1.329
Payables to employees
611
644
Payables to state and other institutions
347
653
Other payables Total
298
427
7.197
9.970
The basis are the original documents that define an event in terms of time and substance. 27. Off-balance-sheet records In EUR thousand Type
2008
2007
14.001
19.290
Other bank guarantees, liens granted and shares
7.498
13.259
Tax loss
1.547
395
Mortgages
Investment and other reliefs
49
9
Other
77
77
Total
23.172
33.030
Cetis, d. d.
Annual Report 2 0 0 8
BUSINESS REPORT
Disclosures to Cash Flow Statement
The Cash Flow Statement was prepared under the indirect method, using data from the Balance Sheet as at 31 December 2008 and the Balance Sheet as at 31 December 2007, and data from the 2008 Income Statement, as well as the additional data required for the adjustment of inflows and outflows and for an adequate breakdown of major items. 28. Financial instruments – risk management Risk exposure and risk management Currency risks in the Group regarding Euro were almost entirely excluded. Almost all foreign transactions outside the EMU were also made in EUR. The highest currency risk in the Group is in Croatia, where the receivables of the company Cetis-ZG, d.o.o. are mainly denominated in domestic currency. The Group is aware of the importance attributed to the regular monitoring and management of financial risks to which the Company is exposed in the markets, and views it as a relevant precondition for successful operations and achieving strategic goals. In 2008, interest rate risks were predominant (a general growth in interest rates, except for new debts). The analysis of these risks resulted in an estimate that the interest rate risk was higher due to the new short-term borrowings of the Company or guarantees issued. The Group expects these risks to increase in the future as a result of the operations of the parent company and its subsidiaries. All the Group’s long-term debts are denominated in euros. Interest rates are based on market principles governing the price of money in the European banking market. Interest rate risks have not been hedged so far, as the Company assesses that the interest rate fixations offered are still above the variable rates, or that long-term changes in interest rates will allow more favourable finance costs during the whole borrowing period. Interest rate risks increased due to the extent of loans and sudden movements and increases in interest rates. The interest rate level was assessed as still acceptable for all long-term loans, with its contractually agreed variability, and taking into account their maturity. The Group’s exposure to interest rate risks is estimated to be high. Property risks and related risks in 2008 were systematically and analytically assigned to insurance companies. Liquidity risks are low in the Group over the short period of time as a result of efficient asset management, adequate credit lines for cash flow control, satisfactory financial flexibility and good access to necessary financial resources, whereby the Group takes into consideration the circumstances in the financial environment and financial markets.
131
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
Financial instruments – credit risk The highest credit risk exposure at the reporting date was as follows: In EUR thousand
132
Notes
Available-for-sale financial assets
11
Financial assets at fair value
17
Book value 2008
2007
13.443
14.305 2.156
Loans granted
12, 18
1.408
1.611
Current and non-current trade receivables
13, 19
6.617
8.616
20
1.042
1.003
22.510
27.692
Cash and cash equivalents Total
The highest credit risk exposure for borrowings at the reporting date by geographical Book value
In EUR thousand Domestic
2008
2007
840
398
Other European countries
327
Other regions – outside EU Total
568
886
1.408
1.611
Credit risk exposure
In EUR thousand
Notes
Book value 2008
2007
Receivables
6.617
8.616
Total
6.617
8.616
The highest credit risk exposure for trade receivables at the reporting date by geographical region was as follows: In EUR thousand
Book value 2008
2007
5.194
4.861
Euro zone countries
862
815
Other European countries
260
1.337
Other regions – Africa
301
1.603
6.617
8.616
Domestic
Total
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
Impairment losses Trade receivables at the reporting date:
Gross value
Impairment
Gross value
Impairment
In EUR thousand
2008
2008
2007
2007
Non-past-due
5.289
7.671
566
Past due 0-30 days
759
4
Past due 31-120 days
442
15
508
64
Past due 121-365 days
243
151
350
244
More than one year
1.166
1.112
1.036
1.207
Total
7.899
1.282
10.131
1.515
133
Movements in value adjustments due to impairment of trade receivables in the period
In EUR thousand
2008
2007
Balance 1 January
1.514
952
74
648
New value adjustments Written-off value adjustments
-55
-49
-251
-36
1.282
1.515
Paid written-off value adjustments Balance 31 December
Currency risk
In EUR thousand Trade receivables Accounts payable Secured bank loans Balance sheet gross exposure
EUR
HRK
USD
GBP
CHF
RSD
DKK
EUR
HRK
31.12.2008 5.112
8.991
-3.978 -4.450
3.247 -5
-33
892
8.165 -1
-13.086 -11.952
USD
GBP
CHF
DKK
31.12.2007 7.146
-6.950 -3.351
-121
-26
-111
-12
-121
-26
-111
-12
-4.752 4.541
-5
-33
4.139
-1
-3.537
3.795
BUSINESS REPORT
Cetis, d. d.
Annual Report 2 0 0 8
Sensitivity analysis A 10 per cent increase in the value of the euro against the HRK, USD, GBP, CHF and DKK at 31 December would result in a decrease in equity and profit or loss by EUR 58 thousand. This analysis assumes that all other variables, interest rates in particular, remain constant.
31.12.2008
134
Book value
Contractual cash flow
Up to 6 months
6 to 12 months
1 to 2 years
2 to 5 years
Over 5 years
13.086
-14.360
-4.276
-1.827
-3.569
-4.688
2.400
-2.551
-351
-2.200
-3.569
-4.688
6 to 12 months
1 to 2 years
2 to 5 years
Over 5 years
-3.446
-6.955
-1.350
In EUR thousand Transaction account overdraft Secured bank loans Other loans Accounts payable and other liabilities Total
7.012
-7.012
-7.012
22.498
-23.923
-11.639
3-month euribor 31.12.2008
4,684
6-month euribor 31.12.2008
4,707
31.12.2007
-4.027
Book value
Contractual cash flow
Up to 6 months
52
-54
-54
17.089
-18.890
-5.353
-1.786
1.189
-1.235
-301
-934
In EUR thousand Transaction account overdraft Secured bank loans Other loans Accounts payable and other liabilities Total
10.047
-10.047
-10.023
-8
28.377
-30.226
-15.731
-2.728
3-month euribor 31.12.2007
4,684
6-month euribor 31.12.2007
4,707
-16 -3.446
Interest rate risk At the reporting date, loan contracts concluded by the Group were with both fixed and variable interest rates. Book value 2008
2007
In EUR thousand Instruments with fixed interest rate Financial assets Financial liabilities Difference
2.279
1.223
-3.171
-4.280
-892
-3.057
Instruments with variable interest rate
Financial assets
718
Financial liabilities
-14.215
-15.212
Difference
-14.215
-14.494
-6.971
-1.350
Cetis, d. d.
BUSINESS REPORT
Annual Report 2 0 0 8
Sensitivity analysis of fair value for instruments with fixed interest rate A change in interest rates by one percentage point at the reporting date would result in an increase or decrease of the equity by EUR 41 thousand. Sensitivity analysis of cash flow for instruments with variable interest rate A change in interest rates by one percentage point at the reporting date would result in an increase (decrease) of the equity and profit or loss by EUR 35 thousand. 29. Fair value Overview of fair value and book value of assets and liabilities
Available-for-sale investments Loans Non-current trade receivables Non-current trade receivables Current investments at fair value through profit and loss Short-term loans Cash and cash equivalents
135
Book value 31.12.2008
Fair value 31.12.2008
Book value 31.12.2007
In EUR thousand Fair value 31.12.2007
13.443
13.443
14.305
14.305
334
334
1.249
1.249
878
878
6.617
6.617
7.738
7.738
2.156
2.156
1.074
1.074
362
362
1.042
1.042
1.003
1.003
Long-term borrowings
-8.770
-8.770
-11.841
-11.841
Short-term borrowings
-8.615
-8.615
-7.652
-7.652
Trade and other payables
-7.197
-7.197
-9.970
-9.970
Total
-2.072
-2.072
-1.771
-1.771
Available-for-sale investments are measured at fair value and depend on recognition of the investment at the rate applicable on 31 December 2008. Loans and borrowings are measured at amortised cost calculated using the method of effective interest rate that does not differ from the contractual interest rate. Accordingly, the contractual interest rate is used in the calculations. In trade and other receivables, the impairment to fair value is taken into account in view of when they are expected to be collected. Receivables are not discounted, due to their short-term nature. The same applies to trade and other payables that are not discounted owing to their short-term nature. Testing financial investments in terms of possible impairment The Group performed no impairment of financial investments. Upon acquiring an investment in mutual funds and other investment companies, the Group classifies them among long-term investments if the intention is to own such investment for more than one year. If such investment is listed on the stock exchange, it is entered in the books at fair value; if the investment is not listed, it is valued at cost. When an investment in mutual funds and other investment companies is valued at cost, it is tested five years from the date of acquisition to determine whether the investment should be impaired.
BUSINESS REPORT
136
Cetis, d. d.
Annual Report 2 0 0 8
Such investment is usually impaired if the purchase value in a period of five successive years exceeds the realisable value on the balance sheet cut-off date. When valued at fair value through capital, it is checked five years from the date of acquiring such investment for the probability that such investments need to be impaired. An investment is usually impaired when its fair value in five successive years is continuously lower than the investment purchase value. Impairment is performed in compliance with IAS 39. For all other financial investments valued at fair value through capital, verification of possible impairment was performed on the balance sheet date, comparing the percentage of decrease in fair value of a financial investment in the period from the date of its recognition up to the balance sheet cut-off date, as well as relative change in the Slovenian Share Index (SBI 20). The amount of financial investment required after checking for possible impairment represents an insignificant item in the company. For financial investments valued at cost, checking for possible impairment was performed on the balance sheet cut-off date. Checking for possible impairment of financial investments valued at cost was performed by comparing the investment book value from the most recent known statements to the investment purchase value. Insofar as the discrepancy from the book value was high, the review was performed by assessing the current value of future benefits. No impairment was required. 30. Related party transactions Relationships between related companies Transactions between the Group and related parties were based on contracts of sale, whereby market prices of products and services were used. Disclosures by groups of persons: members of the Management Board, Supervisory Board, and staff employed under individual employment contracts. Total remunerations received by groups of persons for the performance of functions or duties in the financial year: - Management Board EUR 267 thousand, - Other staff employed under individual employment contracts EUR 981 thousand, - Supervisory Board EUR 13 thousand. Loan repayments under earmarked loans granted by the Group to persons from these groups amounted to EUR 0,5 thousand in 2008. Post balance sheet events Major post balance sheet events are described in the introduction section of the Business Report. Simona PotoÄ?nik, MSc