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Annual Report - Management of Capital Assets of RS and SSH in 2016 submitted to Parliament
Pursuant to Article 67 of ZSDH-1, which has imposed the task of monitoring business performance of SOEs, the Annual Report - Management of Capital Assets of RS and SSH in 2016 has been prepared by Slovenian Sovereign Holding (SSH). When doing so, SSH took into consideration recommendations regarding best practice in corporate governance suggested by the OECD Guidelines on Corporate Governance of State-Owned Enterprises.
The data regarding the performance of companies for 2016 show that, after 2015, the growth in the profitability of equity stakes of RS and SSH continued in 2016, approaching the target ROE indicators set in the State Assets Management Strategy. The total ROE of RS's and SSH's portfolios amounted to 4.7 % in 2015 and it increased to 6.0% in 2016. It is worth pointing out that high returns on equity for both portfolios have been achieved despite the fact that the RS's portfolio includes two thirds of strategic assets whose priority is the attainment of strategic goals, that is, the realisation of important social interests. The State Assets Management Strategy has set strategic goals for companies with state capital assets which have been defined as strategic or important, and an overall economic objective in regard to state capital assets in the form of targeted profitability of the portfolio. It must be taken into account that both of the above mentioned objectives - the attainment of certain strategic goals which are often connected with public funds, and high profitability - are often mutually exclusive which hampers the attainment of high profitability arising from the state capital assets portfolio.
In addition to good work carried out by Management Boards, Supervisory Boards and employees employed in SOEs, improved economic conditions also contributed to the successful business performance of companies under SSH management (3.1% GDP growth in 2016, increased employment and household spending), and following extensive capital increases in banks in the 2013-2015 period, the two largest state-owned banks started to show good results, paying out record-high dividends for 2016. Asset management related results are good not only from the aspect of the growth in the profitability of equity stakes as compared to previous years but also from the aspect of dividend pay-outs. The profitability of some significant companies from the portfolio grew faster also when compared to benchmarked companies. This demonstrates the role of SSH functioning as an active owner which, while paying attention to development goals of companies and with specific knowledge of their operations, sets ambitious goals to companies and oversees their achievement.
Successfully closed processes of sale and activities for acquisition of capital assets.
By the end of 2016, eight companies were sold which were stated on the list of 15 companies to be sold and approved by the National Assembly in 2013. In 2016, shares in Adria Airways, d.d., were sold, and the sale of Nova KBM, d.d. was also finally completed. SSH also sold minor assets held in seven companies which have been defined as portfolio assets.
In 2017, two important transactions were also closed, specifically the sales of shares of Paloma, d. d., and of Cimos, d. d.. SSH took part in activities connected with the process of transforming the legal organizational status of Geoplin, d.o.o., and signed an Equity Swap Agreement (not yet realised) on the basis of which Petrol, d.d., would become a majority owner of Geoplin, d.o.o. and RS a majority owner of Plinovodi, d.o.o. with RS maintaining a 25-ownership stake in Geoplin, d.o.o., Ljubljana.
In 2016, SSH also pursued activities in connection with the acquisition of capital assets. Thus, following the transfer of liabilities and bonds of Sava, d.d. against payment, and after a successful compulsory composition of Sava, d.d., SSH acquired a 22.56% ownership interest in the said company. SSH also acquired stocks in its own behalf and on behalf of the Republic of Slovenia in Polzela, d.d., and Petrol, d.d., in which case the process for the acquisition of 3.03% shareholding was completed in 2017.
In 2017, RS received the total of EUR 200 million of dividends.
From the aspect of dividends received, 2017 was a record-hitting year. For the financial year of 2016, companies with RS's direct ownership stake and managed by SSH paid out dividends in the amount of EUR 211 million, which was by EUR 69 million or 49% more than in the preceding year. The highest dividends were paid out by both banks wholly owned by the state, i.e. Abanka, d.d., and NLB,d.d., specifically, the total of EUR 133 million. On account of the participation in the profit generated by companies in which SSH holds ownership stake, in 2017 (for FY 2016), SSH received dividends amounting to EUR 46 million or by EUR 2.1 million (4.8 %) more than in the preceding year.
Appendix: Annual Report - Management of Capital Assets of RS and SSH in 2016
SSH Conference held on 23 October 2017
