adriatica.net: 53 companies and brands integrate into Atlas and Kompas

All operational business will be conducted through Atlas, which will thus become three times larger than it is now, while financial operations will be handled through Kompas. Another new development is the division of operations into three divisions: Tourism, Logistics, and Hotels & Resorts, thereby entering a completely different segment of business.

Written by: Željka Laslavić
[email protected]
Photo: Željko Jelenski

The moment that everyone in the tourism industry has been eagerly awaiting has arrived – the restructuring of Croatia’s largest tour operator, adriatica.net Group. The forecasts for the company’s survival have not been rosy so far, as the company has been constantly acquiring competitors in the Croatian and foreign markets that had completely different management styles, and everyone was wondering how such a system would be harmonized. The answer to that question is the recent decision of the Management Board regarding a monistic management system – by the end of the year, adriatica.net Group will form a board of directors and break down activities into several divisions. About 53 companies and brands will integrate into two large companies – Atlas and Kompas, which are also the two most recognized brands in the agency business in the Croatian and Slovenian markets. Recently, adriatica.net also signed a contract with the Slovenian company Unior d.d., becoming the main agent for the sale of accommodation in Slovenia’s Rogla.

Preparations for the London Stock Exchange

Until now, the company’s structure has been somewhat confusing, as adriatica.net Group consolidated all acquired companies, while adriatica.net d.o.o. represented the agency that interacts with suppliers, consolidating the sales points of adriatica.net travel center and online sales. All operational business will now be conducted through Atlas, which will thus become three times larger than it is now, while financial operations will be handled through Kompas. The result of the restructuring should be the adriatica.net holding, with synergy among all companies in various sectors – Sales, Marketing, Controlling, Human Resources, IT platform, and so on.

– We expect that Kompas in Slovenia, with the integrated companies, will have between 170 and 180 million euros in revenue this year, while the integrated Atlas will have between 150 and 160 million euros. With some additional acquisitions in Serbia, we expect similar revenues. This business model is quite logical if you are present in five countries with five companies of similar size and one holding with about fifty employees, representing the synergy of business processes. With lower operating costs, we will achieve greater efficiency, aiming to increase market share and profitability – explains Marko Vojković, CEO and co-owner of adriatica.net Group, estimating that through the integration of companies into Atlas and Kompas, adriatica.net could increase gross profit by two and a half to three million euros next year, making the company more flexible for further investments and acquisitions.

After Croatia and Slovenia, the integration of operations in Serbia will follow, where adriatica.net has acquired Jolly travel and announced some additional acquisitions, followed by Germany and the Netherlands, where it operates through ID Riva and Kompas. adriatica.net announced its intention to enter the London Stock Exchange in 2010, and the restructuring process is a kind of preparation for the entire process. Atlas is already on the stock exchange, having achieved 25 percent higher revenues than last year in the first six months, around 82 million kuna. Recently, adriatica.net recapitalized Kompas, in which it now holds a 92 percent ownership stake and which now, instead of adriatica.net Group, holds shares in Atlas.

– Cash flow will go through the operational business of Atlas, and at the end of the year, the balance sheet will be consolidated with Kompas and then transferred to the holding. Kompas has an internationally developed network, with 30 companies in different countries, and it is simpler for us to consolidate all finances through Kompas in Slovenia, which has had ISO 9001 certification for six years, and the euro is our primary currency, thus reducing financing risk. Until now, we have had three or four consecutive consolidations, which was a very undesirable situation for auditors. In this way, we have simplified it and freed up space for further diversifications – concludes Vojković. Regardless of the restructuring, adriatica.net plans to grow in all existing markets and enter new ones. Vojković mentioned two new business moves – entering the agency market in Bulgaria and Israel, while he did not want to disclose the third acquisition in Central Europe as it is, as he says, a partnership agreement.

Division of operations into three divisions

Another new development in the restructuring process is the division of operations into three divisions. All transportation operations will be extracted from the Tourism division and a Logistics division will be formed, which will include Atlas’s 50 buses, eight excursion boats, and the Sixt rent-a-car, with one thousand and five hundred cars. However, the most interesting is the third division, Hotels & Resorts, through which the company enters a completely different segment of business and faces a completely different type of competition. Until now, it has actually been logical for adriatica.net to eventually appear in the hotel business, especially considering that the co-owner of the company, Emporion, is receiving increasingly larger contracts in construction. Emporion is also one of the contractors in the resort of Brune Orešar Novi hotels & resorts, which is considered one of the first luxury resorts in Croatia.

All the strongest global tour operators like TUI and Thompson have long had their resorts and clubs all over the world. For now, the hotel business in adriatica.net is in the conceptual phase, and it is still unclear whether it will participate as a management company or an investor. However, to enter this business, the company must achieve a satisfactory size, consolidate emitting markets, and strengthen its capital. This is one of the reasons why the company is going public – to raise capital for investment in hospitality.
– In the same way that we consolidated the agency business, we will do the same in the future with hotels, to make a bigger leap in certain markets. We do not intend to enter greenfield projects, but rather to appear in the market partly through organic growth and partly through acquisitions – announces Vojković.

Last year loss, this year profit

Many perceive adriatica.net as an agency that sells low-budget accommodation and arrangements for tourists with lower purchasing power. The company plans to change its sales structure; adriatica.net will reportedly no longer sell cheap arrangements on the Adriatic but, for example, accommodation in deluxe hotels in Dubrovnik, and the structure of the company’s clients will change in parallel with the development of destinations. In the ownership structure, 50 percent of the company’s shares belong to Emporion, i.e., Vojković, and 50 to EPH, i.e., WAZ. Vojković states that interest in purchasing adriatica.net has existed for the past five years, with the most interested parties being funds and banks, but that Emporion does not plan to sell in the next three years until it reaches maximum capital growth. Likewise, EPH, which is a passive shareholder in the whole story, has reportedly shown no interest in exiting the project.

– According to some valuation methods, the value of adriatica.net is around 100 million euros, which is not a small amount that someone would spend without clear goals in tourism. It is good for the company that there is a whole range of potential investors who strategically want to enter ownership – explains Vojković. He did not want to speak about specific names in the boards of directors yet, but emphasized that there will be no major surprises in the leadership, that there will be no personnel acquisitions, but that leading positions will be taken by people from the company, with new mandates and goals in line with the organization of work. Most likely, the current board members Ivor Vucelić, Ivan Zec, Stjepan Orešković, Janez Pergar, and Marko Vojković will remain in the board of the holding and also in the executive function of subsidiaries, while others will manage the operational business. Vucelić, responsible for operational business, and Zec, responsible for finance, are Vojković’s acquisitions from Agrokor, with which adriatica.net has a signed strategic partnership agreement, and reportedly both have ownership stakes in adriatica.net.

Disagreement with official data

Last year, the company ended with a planned loss of about four million kuna, while this year operational profit has grown more than planned. At the end of the year, Vojković expects around 2.3 billion kuna in revenue and about four million kuna in profit.
– This year, by mid-July, we achieved total sales at the level of the entire last year, which shows that our intention was to grow. We have invested a lot in offices and new products. In the next two years, we expect a difficult period in all industries, especially tourism, and there will no longer be room for those who do not give their maximum and all their resources for the company. So far, we have not had problems with staff; for every open position, we receive an average of 50 to 100 applications, so we can conduct quality selection – claims Vojković.

With his way of thinking and statements, the head of the company often manages to upset tourism structures in the country, especially Niko Bulić. Recently, a seemingly created conflict between Vojković and Minister of Tourism Damir Bajs regarding statistics on overnight stays and tourist arrivals has emerged in the media. Vojković claimed that tourism traffic is declining by three to four percent, while Bajs was very optimistic with a two percent growth compared to last year. Generally, there is an impression that in the tourism industry, adriatica.net keeps its distance when it comes to tourism institutions, HTZ, the Ministry, and the Association of Croatian Travel Agencies. Some call it arrogance and haughtiness, while others see it as a good decision. adriatica.net is either hated or praised in Croatia as the only real change in the Croatian agency market and generally in tourism, except for a few investments in hospitality.