STRATEGY AND BUDGET FOR 2021 - SIF Oltenia
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STRATEGY AND BUDGET FOR 2021
S.I.F OLTENIA S.A.
Strategy and budget for 2021
General considerations on the economic background
Externally
The COVID-19 pandemic has had and is having a severe social and economic impact on the
entire globe. According to a report by the International Monetary Fund in January 2021,
Europe’s real Gross Domestic Product fell by about 40% in the second quarter of 2020.
The effects of the pandemic would have been much more severe if European governments
had not implemented fiscal packages to support businesses and the general public, with job
retention programs leading to the maintenance of at least 54 million jobs. Central banks have
engaged in the implementation of substantial monetary facilities, both through conventional
and unconventional means, to support credit flow and prevent financial market disruptions.
Although the advent of vaccines has raised hopes of a change in the evolution of the
pandemic, new variants of the virus are concerns about future developments. Against this
background, the global economy is expected to grow by 5.5% in 2021 and by 4.2% in 2022.
It is expected that the dynamics of recovery will vary significantly from one country to
another, depending on access to medical interventions and the effectiveness of the political
and economic system.
The increase in SARS COV 2 virus infections from the end of 2020 (including new variants
of the virus) as well as logistical problems with the global vaccine distribution lead to the
idea that many aspects of health and the economic policy sector need to be reviewed to limit
the damage from the economic contraction of 2020.
The International Monetary Fund estimates that fiscal deficits in most countries will decline
in 2021. Oil prices are expected to rise in 2021 by just over 20% from 2020, but will remain
well below the 2019 average. Non-oil commodity prices are also expected to rise in 2021.
Consistent with the recovery in global activity, it is estimated that the volume of global trade
will increase by about 8% in 2021. The services sector is expected to recover more slowly
and the tourism sector will be affected until the risk of infection is significantly reduced.
Internally
At the national level, the National Commission for Strategy and Prognosis estimates that for
the period 2021-2024, the average annual rate of economic growth is 4.7%, with a peak in
2023 of 5%, the year in which it is expected to achieve a more consistent absorption of
European funds. The most dynamic sector is expected to be construction, for which the
average annual rate of gross value added would be 8.1%, in line with the estimated growth in
investment. Also, for the tertiary sector an average annual advance of 4.2% is estimated, the
emphasis being on the development of modern services (IT, enterprise services, etc.). For the
industrial sector, the average annual growth rate is estimated at 4.8%. The forecast is based
on a prudent absorption of EU funds on the two axes, the financial framework for the 2014-
2020 programming period.
For the period 2021-2024, the National Commission for Strategy and Prognosis expects that
annual increases will be recorded, above the national level, respectively, of 4.9% in 2021,
5.2% in 2022, 5.4% in 2023 and 5.3 % in 2024, under the influence of investment flows from
cohesion funds. The cost of land and buildings will remain low, even against the background
of upward real estate developments.
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Strategy and budget for 2021
Investment objectives for 2021
S.I.F. Oltenia S.A.’s main objective is to increase the performance of its portfolio by
increasing the value of assets under management correlated with the increase in investment
income.
We believe that in 2021, the sectors that continue to offer opportunities are health services,
technology, retail, consumer goods, energy and logistics. S.I.F. Oltenia S.A. will seek to
improve its portfolio performance by taking advantage of the opportunities offered by
macroeconomic developments.
The positive evolution of the profitability indicator of the Romanian banking system in recent
years determines us to maintain a high exposure of the portfolio managed in this sector.
The main objectives for 2021 are:
▪ improving the portfolio, by pursuing a balance of risk-return. The investments
made will be in line with the company’s risk profile and the applicable prudential limits,
targeting the capital market and the money market as a matter of priority, without affecting
the company’s financial situation, which will be financed from its own sources.
The performance and future potential of the companies that will be the subject of investment
will be analysed in advance, as well as the inflows and outflows from the portfolio taking into
account the changes in the market due to the current economic context. The investments
intended to be made by S.I.F. Oltenia S.A. are within the express limitations provided by the
normative framework in force.
Listed companies, unlisted companies that can add value to the company’s asset portfolio,
new listings on the stock market and public sale/ purchase offers can be opportunities that
will be analysed by the management of S.I.F. Oltenia S.A.
▪ management of portfolio holdings
The activity of the companies in the portfolio - especially those in which we hold controlling
or majority holdings - will be further monitored, the main objectives being:
− evaluating the real potential of companies;
− estimating the investment necessary for the development of the activity;
− improving economic and financial results;
− promoting efficient management;
− establishing the modalities regarding a possible capitalization of the held
participations.
The company believes that many of the economic sectors represented in the portfolio will feel
the effects of this global crisis. As a result, S.I.F. Oltenia S.A. will carefully monitor
macroeconomic and sectorial developments, in order to implement a prudent approach to
capitalizing on investment opportunities, within the assumed risk limits.
▪ strengthening the portfolio by identifying those returns with a solid dividend
yield.
The company’s revenues are largely based on dividends received from portfolio companies.
The financial-banking sector and the pharmaceutical sector have been and, in the medium and
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Strategy and budget for 2021
long term, will be sectors that will traditionally distribute dividends to their shareholders.
However, S.I.F. Oltenia S.A. monitors and analyses developments in the regulation and
supervision of these sectors, in order to identify certain decisions or recommendations of
supervisors, which may have an impact on the dividend policy of companies in the portfolio
of S.I.F. Oltenia S.A. For this purpose, S.I.F. Oltenia S.A. analyses the recommendations
formulated by the European Central Bank, the National Bank of Romania or the Financial
Supervisory Authority, in the exercise of their legal responsibilities, in order to maintain the
systemic stability of the financial-banking market.
▪ share buy-back programme
Rewarding the company’s shareholders through own shares within the buy-back programmes
carried out by S.I.F. Oltenia S.A. proved to have a positive impact, both for the company and
for its own shareholders. By running such programs we consider that shareholders will have
an additional benefit, with a positive impact on the share price of SIF5 and the reduction of
the discount to the unit value of net assets.
▪ improving transparency and corporate governance mechanisms
The company carries out its activity in accordance with the provisions of the Romanian
legislation and pays special attention to the observance of the rights of its shareholders. S.I.F.
Oltenia S.A. makes every effort to ensure a fair treatment of all its shareholders, providing
them with relevant and current information that will enable them to exercise their rights in a
fair manner. The company also pays close attention to strengthening corporate governance
mechanisms at the company level.
The trust of shareholders and investors is closely linked to both the financial performance of
the company but also to a transparent communication, so that access to information is the
same for all those concerned. The relevant information is published on the Bucharest Stock
Exchange website and on its own website, both in Romanian and in English.
In the current pandemic context, for the protection of shareholders, at general shareholders
meetings, the company makes every effort to ensure that access to information documents is
properly carried out, mainly using electronic means of communication. The voting procedure
shall be made available to shareholders in a timely manner so that their vote can be cast with
all the information on which to exercise their rights.
Transparent communication and compliance with the principles of corporate governance
underlie investor confidence in the company’s management.
• adapting company documents to legislative changes
The entry into force of Law no. 243/2019 on the regulation of alternative investment funds
and for the amendment and completion of some normative acts determined the alignment of
the company’s operating documents to the new legislative provisions. The necessary
documentation for the authorization of S.I.F. Oltenia S.A. as an Alternative Investment Fund
for Retail Investors (A.I.F.R.I.) was submitted to the Financial Supervisory Authority
The company shall ensure that its documents are constantly linked to any legislative changes
requested by the regulatory authorities.
P|4S.I.F OLTENIA S.A.
Strategy and budget for 2021
Budget of Revenues and Expenses for 2021
To support the Budget of revenues and expenses for the year 2021, the following hypotheses
were considered:
➢ estimated gross dividends to be collected from portfolio companies;
➢ realizing the revenues, expenses and net result as at December 31, 2020;
➢ Expenses with salaries, allowances, salaries related contributions and similar
expenses, estimated based on total salaries for January 2021, potential salaries
increases during the year, a reward fund for employees according to Remuneration
Policy;
➢ endowments - mainly representing computers, office equipment and software
licenses, etc.;
➢ Corporate Social Responsibility related expenses;
➢ Financial investments according to the established objectives;
➢ Macroeconomic factors, geopolitical factor, estimated evolution of the international
markets and of the Romanian economy.
- RON -
Indicators Proposals 2021
I. Total income 69,108,117
II. Total expenditure 38,864,265
III. Profit before tax 30,243,852
IV. Profit tax 1,512,193
V. Net profit 28,731,660
Income estimated to be achieved in 2021 mainly include dividend income that represents
the gross amount estimated to be collected in 2021, from portfolio companies, for the
financial year 2020. This income estimation was based on the public information released by
listed companies in the portfolio and based on the preliminary results of non-listed
companies. An income reduction is expected compared to the previous year, considering the
difficult economic environment expected also during 2021;
Total expenses estimated for 2021 include:
➢ Commission expenses include commissions (fees) payable mainly to Depozitarul
Central for keeping the records of shareholders, depository bank, to Bucharest Stock
Exchange, and financial investment services companies, being in line with the prior
years budgeted amounts
➢ Amortization and reward fund provision. Reward fund provision is in line with the
budgeted amount from prior years.
➢ Expenses with personnel, administrators and executives, representing salaries,
allowances, awards, social contributions were increased by approximately 30%
compared with 2020. This increase includes the increased in salaries due to
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Strategy and budget for 2021
replacement of retired personnel or that is going to be retired during current year
which will be done in market conditions, but also an increase of the salaries for the
current employees. Additionally, in this category were included the expenses with the
reward fund payments related to 2019 and 2020, amounts to be compensated with the
income from restatement of provisions from prior years amounting to approximately
10,1 million RON.
➢ Other expenses mainly include expenses for energy and water, maintenance expenses,
cosumables and external services, including the ones related to Corporate Social
Responsibility, this last category is increased compared with 2020 mainly due to
restrictions from 2020 due to COVID-19. Additionally, management wishes to
increase the Corporate Social Responsibility activities in order to be in line with the
international best practices.
➢ Expenses with other taxes, taxes and related fees include mainly the fees payable to
FSA and tax on income from gross dividends, this being with 10% higher compared
with the ones from 2020.
Gross profit estimated for 2021 is in amount of RON 30.2 million.
Net result proposed to be achieved in 2021 is in amount of RON 28.7 million.
This proposal was approved by the Board of Directors in the meeting of 18th March 2021
and was signed on its behalf by:
Sorin-Iulian Cioacă Mihai Trifu
President / General Manager Vice President / Deputy General Manager
Elena Sichigea
Economic Director
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