We bought the Geodetic Institute of Slovenia because it was our competitor, not because of the archives on borders

The World Bank fund can enter Geofoto’s ownership structure with a stake of up to 18 percent. Together, we will go public in Vienna or Warsaw at the end of 2010 or the beginning of 2011 with 20 to 30 percent of Geofoto’s shares.

Interviewed by: Antonija Knežević
[email protected]
Photo: Dražen Lapić

The purchase of the Norwegian company Procapture, the acquisition of the Geodetic Institute of Slovenia, and the Macedonian company Zenit are just part of the news that has come from Croatia’s largest geodetic company in just six months, from March to August this year. Thanks to these acquisitions, Geofoto has earned the title of the second-largest geodetic company in Europe. Its rapid growth has caught the attention of the IFC, a World Bank fund, which has shown interest in purchasing a stake in the company. We spoke with Geofoto’s director and founder, Zvonko Biljecki, about how he has dominated the entire market in the region over the past 15 years, the collaboration with the IFC, going public, and future plans.

• How was the collaboration with the IFC established? What are the terms of this collaboration?
– The IFC is focused on the IT sector, specifically in the context of regional development. It is not a typical fund whose intention is to invest money and earn double or triple in five years… The collaboration with them was established primarily based on their interest. We are currently in an advanced stage of the negotiation process. We can publicly announce that all prerequisites have been created for the process to conclude with a contract. However, it should be noted that it is not yet finalized. The elements of the contract are mostly confidential, except for the fact that we will establish a partnership in the next five years, that the IFC can enter Geofoto’s ownership structure with a stake of up to 18 percent, and that we will jointly go public at the end of 2010 or the beginning of 2011. We have not yet decided which stock exchange; I prefer Vienna and Warsaw.

• What does the percentage that the IFC will purchase depend on?
– On its policy and the overall financing of the development of the Geofoto group in the next two years.

• What percentage will you go public with?
– It is unwise to go public without 150 to 250 million kuna. It is hard to say what that stake in Geofoto will be in two or three years. We certainly will not offer less than 20 or more than 30 percent on the stock exchange.

• What revenues do you plan to achieve in 2010?
– By that year, we plan revenues exceeding 300 million kuna for the entire group.

• Why did you decide to buy the Geodetic Institute of Slovenia?
– It is the largest geodetic institute in the former Yugoslavia. It was our biggest competitor, and we were its. I had been considering the purchase of GZS for a year and a half and testing the waters. Then the opportunity arose to buy a majority stake. Aware that the public might not accept that a Croatian company bought a Slovenian one, we entered this, in my opinion, controlled risk.

• The media in Slovenia were not favorable towards this acquisition?
– Of course, the media reacted negatively and used this purchase to exacerbate relations between Croatia and Slovenia. They even created a problem by stating that the GZS contains archival material about the border with Slovenia and that this is the main reason for the purchase! The archive about the border is indeed in GZS, but the primary reason we bought this company is to expand into the Southeast and Western European markets and to increase capacity. With their current 80, and tomorrow 100 or 120 people, we will be able to establish a balance between what we can sell and what we can produce. It is more logical for us to work with people who have almost identical education as we do than to have to relocate them to Indonesia or Pakistan.

• In which markets was GZS and what revenue did it have last year?
– By purchasing GZS, we also acquired Zenit, the largest Macedonian company. Besides the Macedonian market, GZS is also in Serbia, Bosnia and Herzegovina, Austria, Slovenia, and Germany. It has a military program and state cartography, and they are currently engaged in one of the most important projects in Croatia, the PHARE program – the project for the regulation of land registries and cadastres. GZS’s revenue until the end of this year is confidential as required by our contract. I can say that it is slightly less than Geofoto’s.

• How much is this acquisition worth?
– I bought GZS. More precisely, as Zvonko Biljecki, I bought 89 percent, and Infomax, the IT company I own, six percent. By the end of the year, the goal is to transfer the shares and stakes to Geofoto, and then I will transparently announce the value of the transaction. For now, I can only say that I consider this arrangement quite favorable. The goal is for GZS to become part of the Geofoto group d.d. or Geofoto holding d.d.

• How long will the integration of GZS into Geofoto take? What do you plan to do with the Slovenian company?
– We are currently working on connecting individual teams on specific projects. This type of acquisition is very simple because these are companies of the same value, the same profession, and almost identical ways of thinking. The merger of the companies will certainly take several months as we need to align and integrate them in all areas, from working hours, technological processes to quality control… Of course, not everything can be the same, but there are clear specifications. We are engineers, and for us, everything is mostly prescribed. In GZS, we plan to launch the GIS market as the Institute has not dealt with this until now, and it is a large market in Slovenia. We also plan to orient ourselves towards the EU. We already have one goal – to win a project in the UK in a competition planned for the end of the year.

• What revenues do you plan to achieve this year?
– We expect an increase of 60 to 70 percent compared to last year.

• With the acquisition?
– No, without it, just from organic growth.

• And together?
– Approximately 150 percent.

• Given that you bought GZS, does this mean you are abandoning the purchase of companies in Bosnia and Serbia?
– We negotiated the purchase of the Federal Geodetic Institute of BiH; however, the structure of employees, the financial situation it is in, and the semi-availability of political structures influenced the withdrawal. We also showed interest in purchasing the Belgrade Geokarta, but the Serbian government decided that it should remain exclusively a state institution.

• However, you are represented in those countries?
– We are currently working on several projects in Serbia, albeit medium and smaller ones. The political situation there is very unstable today, it does not ensure the initiation of large public works, and without that, there are no large projects. It is estimated that this will happen in two to three years. We have been in BiH for years, where we have worked on almost all major projects. There are many irregularities in the implementation of tenders in Bosnia, a lot of corruption, and pronounced national division… That is why many tenders have been canceled recently, which is why we have filed some lawsuits and won them.

• What lawsuits?
– We had the best offer for a job worth 3.5 million convertible marks, but it was eliminated without any reason, and the job was awarded to Angermeier, a company with three employees that cannot execute it. The contract with that company was signed before the appeal process was completed, and an advance of 600 thousand convertible marks was also paid to them. Because of this job, Minister Ferid Otajagić was soon dismissed. Of course, the money was never returned.

• Recently, you signed a cooperation agreement with the Bolivian armed forces. What does it specifically bring you?
– For Geofoto, this is a significant step as no private company has been allowed to survey the territory of Bolivia since the Bolivian armed forces have had an absolute monopoly on it. This is the only South American and Central American surveying service that is in the hands of the military and covers almost the entire area of Latin America. With the contract with the Bolivian armed forces, we managed to establish cooperation so that they will provide their aircraft, and we will provide technology, knowledge, and people. We are already starting to work on several projects in that country, and together we will operate in the entire market of Latin and Central America, first in Peru, Chile, and Argentina.

• Given that these are quite poor countries, what is the potential of that market?
– There is a lot of work. The potential is great because there is no competition. Several larger European companies have compromised themselves in that market by making poor projects or never completing them. That is why we registered a company in La Paz last July. In a short period, we managed to secure a large project in Nicaragua, and in perspective for this year, there are already three medium and one large project. It also works in our favor that there are no spatial data there, and without that, space cannot be managed. Given that these are countries rich in natural resources, this is very important. The countries are poor, but the price of our work is incomparably lower compared to what is obtained for it. Fortunately, many people there know the benefits of creating GIS (geographic information systems) and spatial databases. They know it; they just do not have the strength or companies to do it themselves.

• What other areas are interesting to you? Which countries are not in your focus?
– We are primarily oriented towards the region, specifically Slovenia, BiH, and Serbia, as well as Croatia. There is a significant boom in some jobs related to space in the Croatian market; it is still an exceptional market. Our areas of interest also include Austria, Germany, Scandinavian countries, all small Baltic states, and then the Middle East. We are negotiating the largest project we have ever undertaken in Sudan, Congo, and Angola. We will most likely start implementing it in April next year. We are also looking east, towards Ukraine, Kazakhstan, but the conditions for market competition have not yet been created there. When it comes to work permits and market competition, the Russian market is completely closed. The same goes for the USA. We are not interested in high-risk countries, which we do not want to enter for the safety of our people.

• What kind of project is it in Sudan?
– It is an irrigation project, or drainage, creating a canal network, or a spatial database for building that infrastructure. This is the first phase, and we intend to carry it out with Israeli partners. The project is worth approximately 25 million dollars.

• How do you manage to win jobs in tenders in competition with international corporations?
– First of all, we have all the necessary certificates, so we always meet all the requirements. Winning a job is not easy, especially if you are a Croatian company. It has happened that people who decided that Geofoto would carry out the project, based on the best offer in technical and financial terms, openly told us that our only obstacle was that they did not know who we were. It has happened that some people on the committee do not know where Croatia is, let alone about some Geofoto. Today, that is no longer the case, as Geofoto is the second-largest company in Europe in this field after the Blom group. The second condition for winning tenders is the best technical documentation and the economically best offer. Of course, that does not mean that you will get the job. For example, in Albania, we would not have contracted the project if our ambassador had not intervened, even though we had the best offer. Namely, for other companies in tenders, ambassadors from their countries often intervene; in this case, the French embassy intervened so that the French, who had a worse offer, would get the job. Our ambassador managed to protect Croatian interests. In short, nothing happens without a little politics.

• What percentage of tenders do you win?
– We win about 70 percent of tenders. We choose those where we have a chance; we assess well because the preparation of such projects is quite expensive and complex. The biggest problem is that we often get too many jobs. All of us entrepreneurs, subconsciously, out of fear of running out of work, take on a little more jobs.

• What are your further plans?
– Our ultimate goal is our own database that will facilitate management for the economy and citizens, help their development, and enable a simpler and more comfortable life. We want to own the data and concession it or sell it to other users. This business model is different from the current one, in which we carry out certain projects based on tenders for public works. We want to create our databases based on our knowledge and experiences and offer them on the market as a finished product. This can be done if you are large enough and financially strong… Such projects will allow us to work with less stress, as today it is difficult to plan what we will do in five years, given that our contracts are mostly two years long.