ZAGREB
HOLDING
ANNUAL
REPORT
Zagreb Holding Group
TABLE OF CONTENTS
I
Basic Information about Zagreb Holding Group .......................................................................3
II
Management Board’s Comment on 2023 Performance .............................................................6
III
Significant Business Events in 2023 ...................................................................................... 11
IV
Business Development Activities .......................................................................................... 22
V
Expected Development of the Group .................................................................................... 29
VI
2023 Management Report and Business Analysis .................................................................. 34
VII
Most Significant Risks to Which the Group is Exposed ........................................................... 38
VIII
Corporate Governance Statement ........................................................................................ 41
IX
Statement of Persons Responsible for Preparation of Financial Statements ............................. 46
X
Consolidated Annual Financial Statements for the Year Ended 31 December 2023 with
Independent Auditor’s Report .............................................................................................. 47
XI
Decision of Competent Body on Adoption of 2023 Annual Statements .................................. 146
BASIC INFORMATION
ABOUT ZAGREB
HOLDING GROUP
I
Zagreb Holding Ltd. (“the Company”) is a company wholly owned by the City of Zagreb. Its core business
operations are carried out through 12 subsidiaries:
1. AGM, Avenija Marina Držića 4, 10000 Zagreb
2. Arena Zagreb, Vice Vukova 8, 10000 Zagreb
3. Zagreb Bus Terminal, Avenija Marina Držića 4, 10000 Zagreb
4. City Waste Disposal, Radnička cesta 82, 10000 Zagreb
5. City Cemeteries, Aleja Hermana Bollea 27, 10000 Zagreb
6. Zagreb Freight Station, Jankomir 25, 10000 Zagreb
7. Zagreb Markets, Šubićeva 40/V, 10000 Zagreb
8. Vladimir Nazor, Maksimirska 51, 10000 Zagreb
9. Zagrebparking, Šubićeva 40/III, 10000 Zagreb
10. Zagreb Roads, Donje Svetice 48, 10000 Zagreb
11. Zagreb Digital City, Donje Svetice 48, 10000 Zagreb
12. Zrinjevac, Remetinečka cesta 15, 10000 Zagreb
The Group also owns five companies and an institution. Together, the subsidiaries, related companies and
the institution form the Zagreb Holding Group (“the Group”), with Zagreb Holding Ltd. as the leading
company in the creation of its business policies. The business group consists of:
1. the company Zagreb Holding Ltd.;
2. related companies Zagreb City Gasworks Ltd., Zagreb City Gasworks – Supply Ltd., City Housing and
Municipal Services Company Ltd., Water Supply and Drainage Ltd. and Zagreb Plakat Ltd.;
3. the institution Zagreb City Pharmacies;
4. Bjelovar City Gasworks Ltd., a subsidiary of the related company Zagreb City Gasworks Ltd.
The Group provides a wide range of services grouped into business areas of municipal, energy-related and
commercial activities. It also provides public water supply and drainage services and pharmaceutical
services.
Main activities of Group companies
•
gas distribution and supply
•
waste disposal and management
•
public water supply and drainage
•
cleaning and waste collection
•
landscaping and green space maintenance
•
public and unclassified state roads: construction, management, maintenance and protection,
including traffic lights and signs, machinery and asphalt production
•
real estate management and maintenance
•
public parking lot and garage services
•
storage and rental services
•
construction and management of electronic communication infrastructure and electronic
communication networks
•
supply and preparation of medications, supply of medical products and other healthcare products
5
Group companies operate primarily in the Croatian market.
Registered office: Ulica grada Vukovara 41, Zagreb
Court Reg. No.: 080042653
PIN: 85584865987
Share capital: EUR 421,666 thousand
Number of employees
as at 31 December 2023: 7,302
Number of bonds quoted on the Official Market of the Zagreb Stock: 305,000,000
Date of issue:
11 July 2023
Maturity date:
11 July 2028
Interest rate:
Fixed interest rate of 4.90%, paid semi-annually
MANAGEMENT BOARD S
COMMENT ON
2023 PERFORMANCE
II
7
MANAGEMENT BOARD’S COMMENT ON 2023 PERFORMANCE
Zagreb Holding Ltd. (“Company” or “Parent Company”) and its associated companies and institution (“Group”
or “ZGH Group”), as one of the key groups providing municipal services in Croatia, continued its ambitious
restructuring and sustainable development programme in 2023, focusing on sustainable and economically
efficient operational standards. The Group’s activities and strategic decisions reflect deep integration with
corporate and social aspects of the community it serves, with a special emphasis on infrastructural
improvements, energy efficiency and responsible resource management.
Financial performance for the year ended 31 December 2023
The decreasing inflationary pressure in 2023, previously implemented business stabilisation measures,
increased business activities of the Group’s operational components, and adjustment of the price of public
space maintenance services in accordance with rising costs caused by external factors, have all contributed
to the Group’s improved business results and higher profitability.
With a total of EUR 803.23 million in revenues and EUR 785.80 million in expenses, and items of revenues
and expenses not recognised in the profit and loss statement, the Group’s comprehensive income in 2023
increased by EUR 21.70 million (2023: EUR 22.33 million; 2022: EUR -0.51 million). Operating profit (EBIT)
in 2023 increased by EUR 24.83 million (2023: EUR 37.92 million; 2022: EUR 13.10 million). Earnings before
interest, taxes, depreciation and amortisation (EBITDA) amounted to EUR 92.07 million, which represents an
increase of EUR 23.82 million compared to the previous comparative reporting period.
In 2023, operating income amounted to EUR 786.39 million, representing an increase of EUR 141.01 million
(22%) compared to 2022.
The most significant increase in sales revenue pertained to the segment of gas supply and distribution,
cleaning and waste collection, and sale of medications, amounting to EUR 29.38 million in total. Sales revenue
from public road maintenance and management activities decreased because in 2022 there was no one-time
revenue related to managing construction waste caused by the earthquake. If this one-off effect is excluded,
the subsidiary generated higher revenues from its operating activities due to a larger volume of works
performed as part of the asphalting programme, works on unclassified roads, and works performed as part
of the municipal activities programme.
In 2023, operating expenses amounted to EUR 748.47 million, representing an increase of EUR 116.18 million
(18%) compared to 2022. The most significant increase pertained to (i) higher material costs due to higher
costs of goods sold
incurred by the company Zagreb City Gasworks – Supply Ltd. (ZCG–S) due to an increase
in the purchase price of gas for public gas supply services, and by the institution Zagreb City Pharmacies due
to more medications and other products sold; (ii) higher costs of raw materials and supplies caused by a
larger volume of works in the segment of municipal activities and water distribution; and (iii) higher staff
costs in accordance with the job classification carried out at the subsidiaries and in line with the benefits
arising from the ZGH Group’s Collective Bargaining Agreement.
As at 31 December 2023, assets amounted to EUR 2,118.92 million, which is a year-on-year increase of EUR
65.31 million. Non-current assets decreased by EUR 30.05 million due to (i) a decrease in property, plant and
equipment of EUR 37.90 million as a result of derecognition of non-current assets and reclassification as
investment property, which increased by EUR 31.79 million; and (ii) impairment of non-current receivables in
the amount of EUR 23.65 million due to a decrease in receivables from related parties.
Compared to 2022, current assets increased by EUR 95.36 million due to higher (i)
trade receivables and
other receivables
in the amount of EUR 81.89 million
–
mostly pertaining to receivables from the Republic of
Croatia under Amendments to the Regulation on Elimination of Disturbances in the Domestic Energy Market
– (1) subsidy for electricity costs and (2) the right of the gas supplier supplying the gas supplier obligated to
provide public services, or of the gas supplier obligated to provide public services, to receive compensation
for price differences, based on which ZCG–S has claimed a significant amount of funds for three quarterly
periods and (ii) higher cash and cash equivalents by EUR 41.38 million. The balance sheet item receivables
from related companies decreased by EUR 27.82 million.
The structure of non-current and current liabilities changed in a way that non-current liabilities increased by
EUR 248.98 million due to the issuance of new long-term bonds, whereas the old bonds were recognised as
at 31 December 2022 as current liabilities since they matured on 15 July 2023; therefore, as at 31 December
2023, current liabilities were lower by EUR 205.60 million. Furthermore, liabilities under long-term loans and
leases decreased by EUR 55.70 million due to the loan repayment in the amount of EUR 42.90 million and
due to the reclassification of EUR 23.47 million as a short-term liability.
8
Financial stability and market adjustments
In 2023, the Parent Company successfully completed the process of refinancing a bond in the amount of EUR
305 million, which, with a new issuance of bonds, represented the largest single issue of sustainability-linked
bonds in the history of the Republic of Croatia, as well as the first issue of sustainability-linked bonds by an
issuer exposed to municipal risk in the CEE region. These bonds attracted great public attention, as evidenced
by the record number of bids for non-government bonds that an issuer received in a single day. This bond
issuance also represents the largest investment by international financial institutions in a debt security in the
Croatian market. Not only does it demonstrate the investors’ trust in the Parent Company’s vision and
governance, but it also shows its ability to adjust to complex financial markets. This bond, featuring a fixed
interest rate of 4.90% and maturing in 2028, is intended to refinance existing liabilities. This strategy directly
contributes to the stability and predictability of the Parent Company’s financial operations, and by extension,
those of the Group.
Moreover, in 2023, international credit rating agencies increased the Parent Company’s credit rating. Standard
& Poor’s Global upgraded the rating from B to B+ with a positive outlook in July 2023. Moody’s has also raised
the rating of the City of Zagreb and Parent Company from stable to positive, affirming the Baa2 investment-
grade rating.
These changes in the credit rating, resulting from successful operational and financial restructuring and
successful refinancing of loans and bonds, reflect the stability and perspective of the Parent Company and
other Group members, as well as the investors’ trust in their ability to manage risks and achieve positive
business results.
Human resource development processes and organisational culture
In 2023, the Parent Company and certain Group members took important steps to improve employee benefits.
Irregularities that had been present in the employee reward system for many years were corrected by
amending the Parent Company’s Collective Bargaining Agreement (applicable until the end of March 2026).
This resulted in a wage bill increase of 24%, with more transparency and trust in people management
processes. Furthermore, the evaluation and new job classification ensured a fairer distribution of tasks and
responsibilities, resulting in greater organisational efficiency and employee satisfaction.
At the same time, considerable efforts were put into employee development through structured selection
processes and induction training, leading to stronger operational capacities. Emphasis was placed on
attracting and retaining candidates, and the process of hiring and training new workers has been significantly
improved. Moreover, specialised training programmes and development plans for subsidiaries have been
initiated, highlighting the importance of clear goals, work discipline tracking, and rewarding commitment and
professional success.
In the same year, the Group saw a significant increase in the number of operational workers in several
subsidiaries and associated companies, indicating their reputation as an attractive employer. The practice of
conducting exit interviews has also been introduced to gain a better understanding of the reasons for
employee departures and to improve working conditions. The Group has committed to training its employees
and organised specialised training aligned with its companies’ growth needs, while subsidiary development
plans are focused on improving operational excellence. Through these measures, the Group encourages
continuous process improvement and the development of a work culture that emphasises mutual respect,
personal growth and engagement.
Sustainable development and innovations
In 2023, the Parent Company adopted the Zagreb Holding Sustainability Strategy, which was also adopted
by ZGH Group members. The Parent Company’s sustainable development strategy lays the foundation for
long-term planning, which includes key objectives such as increasing the volume of separately collected
municipal waste and increasing the use of renewable energy sources. The successful implementation of solar
power plants on the Group’s facilities confirms not only the Group’s commitment to sustainability, but also its
ability to keep up with the latest technology and energy efficiency trends. The solarisation project, which
involves the construction of solar power plants on the rooftops of buildings and facilities, is essential for the
Group’s transition to self-sustainable energy consumption and cost efficiency.
9
Projects and infrastructure investments
The subsidiary Zagreb Roads carried out important road construction works, using funds provided by the EU
Solidarity Fund under the Contract for Road Paving Works. Projects such as the rehabilitation of Aleja Matije
Ljubeka and Sljemenska Cesta streets, and asphalting of the southern embankment, represent key steps in
improving the infrastructure of the City of Zagreb, at the same time highlighting the importance of promoting
sustainable transportation through the “Greenway” project.
The subsidiary City Waste Disposal also actively participated in improving infrastructure and sustainability,
focusing on waste recovery using its own resources and opening the largest recycling centre in August 2023.
Particular emphasis was placed on the projects to implement the ERP system and develop the e-platform.
Implementation of a single ERP system aims to standardise business processes and improve controlling and
reporting at the Company level, which will facilitate business operations and decision-making in the long run.
At the same time, the e-platform project is intended to modernise the system for the purpose of providing
citizens with easy access to Zagreb Holding’s services and to ensure better control over receivables and fee
collection.
The Parent Company plans to carry out a comprehensive project to rehabilitate municipal infrastructure from
2024 to 2026, including the procurement of modern waste management, tree planting and road maintenance
machinery to improve the quality of life for citizens and the city’s infrastructure. The project will allow for
more efficient waste collection and expansion of green spaces, as well as ensure traffic safety through the
modernisation of road maintenance equipment. Moreover, eco-friendly vehicles and equipment will contribute
to reducing emissions and preserving the environment.
In 2023, the project was in the phase of preparation for the equipment procurement process, and the
implementation period is expected to last from 2024 to 2026. This initiative represents a significant step
towards modernising infrastructure and improving the quality of life for citizens, at the same time contributing
to reducing the carbon footprint and preserving the environment.
In 2023, the Group started preparatory activities for making investments in automatic measuring devices and
measurement infrastructure, including the acquisition of meters, communication networks and network
devices, as well as the construction of a control centre. The establishment of a communication network for
remote gas and water meter reading is expected to begin in 2024. The complete communication network is
planned to be finished by the end of 2025. The upgrade of water meters and gas meters with modules that
allow remote reading is planned to begin in 2024.
Moreover, in 2023, Water Supply and Drainage Ltd. continued its preparatory activities for the project “Zagreb
2021–2027”, valued at EUR 322 million. These activities include the development of a feasibility study,
preparation of environmental documentation and resolving property rights issues. In March 2024, the project
application was submitted in accordance with the terms and conditions of the Prioritisation Call for Proposals
under the Competitiveness and Cohesion 2021–2027 Programme, which offers co-financing of up to 70% of
funds.
Projects financed under the EU Solidarity Fund, Recovery and Resilience Facility and other
grants
Zagreb Holding Ltd. successfully implemented the “Resnik Temporary Storage Facility” project, financed by
the EU Solidarity Fund, which covered EUR 4,581,503.68. The goal of the project was to establish an
environmentally friendly storage facility for construction waste generated during the reconstruction of
earthquake-damaged buildings. In addition, the subsidiary City Cemeteries successfully completed the initial
phases for three restoration projects involving cultural heritage damaged in the earthquake. These projects
are also financed by the EU Solidarity Fund, allowing for the restoration of important buildings, such as the
arcades and the Church of Christ the King at the Mirogoj Cemetery.
Zagreb City Gasworks Ltd. implemented three projects co-funded by the EU Solidarity Fund as part of the
programme of restoring infrastructure and facilities in the energy sector to a good working order. Damage to
the gas pipeline system was repaired, safe gas distribution was ensured and high levels of reliability and
efficiency in the distribution system were maintained. Similarly, Water Supply and Drainage Ltd. implemented
the projects of restoring earthquake-damaged water supply and sanitation facilities to good working order.
Significant funds were drawn down for all these projects, which contributed to the restoration of key water
infrastructure systems.
10
Impact of regulatory changes on business operations
As a provider of services of general economic interest, the Group’s operations are regulated by numerous
laws and subordinate legislation. Therefore, the Group is exposed to dynamic changes in legislation and the
regulatory framework. The prices of individual activities of the Group are influenced by regulators and the
City of Zagreb as a local self-government unit.
Based on a tender procedure for the provision of the Public Gas Supply Service in the Period from 2021 to
2024, in December 2020, Zagreb City Gasworks – Supply Ltd. (ZCG–S) was selected as the gas supplier for
13 distribution areas in Croatia. In March and April 2023, due to disruptions in the energy market, the Croatian
Government and the Croatian Energy Regulatory Agency (HERA) amended the Methodology for Determining
the Amount of Tariff Items for Public Service of Gas Supply and Guaranteed Supply and adopted the
Regulation on Elimination of Disturbances in the Domestic Energy Market. The new Regulation changed the
tariff items for public gas supply services, which led to changes in gas prices defined by the Methodology for
the gas supply period from 2021 to 2024. ZCG–S had the right to invoice end-users a lower price for gas in
accordance with the new Methodology starting June 2023. Also, in accordance with the Regulation, ZCG–S
submitted requests to the Ministry of Economy and Sustainable Development in order to receive compensation
for gas price differences arising from differences between the Methodology for the gas period 2021–2024 and
the amended Methodology. However, no decision regarding those requests has been received from the
Ministry as of the time of drafting this report.
Zagreb City Gasworks – Supply Ltd. (ZCG–S) generates revenue through the regulated activity of gas
distribution, where the tariff items for gas distribution are determined by the Croatian Energy Regulatory
Agency (HERA). HERA adopted the decision on the amount of tariff items for the third regulation period from
2022 to 2026, under which the “Ts2” tariff item (fixed monthly charge) remained unchanged for ZCG–S, while
“Ts1” (the tariff item for distributed gas quantity) was increased by 5% on average compared to 2022.
Crisis management and recovery
In July 2023, Zagreb was struck by a devastating windstorm, to which the Company responded by mobilising
its subsidiaries Zrinjevac, City Waste Disposal and Zagreb Roads, deploying all available resources to mitigate
the aftermath of the storm. This situation not only required an immediate response, but also prompted a risk
assessment and business continuity planning to strengthen resilience to future climate-related challenges.
In November and December 2023, the Company had to deal with a serious waste landslide at the Jakuševec–
Prudinec landfill, despite having all the required permits and prescribed control measures in place. The cause
of the incident is still unknown and an investigation program is currently underway to determine the causes
and circumstances of the event. The Company has been actively cooperating with relevant authorities to
understand the underlying condition of the landfill and implement measures to reduce the risk of similar
incidents in the future, as well as to create remediation plans, which is planned to be done during 2024.
Social contribution
The Group’s strategy also focuses on social contribution, which is reflected in initiatives such as building and
furnishing nursing homes and educational institutions. These initiatives, funded by public and private sources,
highlight the Group’s role in improving social services and infrastructure, which directly contributes to a higher
standard and quality of life in the community.
Challenges and perspectives
Although the Parent Company and Group members have made significant progress in many areas, the Group
faces many challenges, including adapting to rapidly changing energy and environmental regulations,
managing risks associated with global economic changes and the need for continuous investment in
technology modernisation and employee training. The future of the Group will depend on its ability to adapt
to these challenges, timely modernise its operations, maintain financial stability, and continue implementing
the defined sustainability strategy.
In conclusion, in 2023, the ZGH Group demonstrated how strategic planning and adaptability can lead to
significant improvements in efficiency, sustainability and social contribution. With continuous efforts to
implement innovations and improve operations, the Group is well positioned to keep playing a key role in the
municipal and economic development of the City of Zagreb.
SIGNIFICANT
BUSINESS EVENTS
IN 2023
III
12
COMPANY RESTRUCTURING PROCESS
Reorganisation and Collective Bargaining Agreement
In November 2022, negotiations were initiated at Zagreb Holding Ltd. (“Company”) to conclude an Annex
II
to the
Collective Bargaining Agreement
with the aim of redefining salary-related matters (base amount
for calculation of 2023 payroll), employees’ non-taxable cash receipts and job classification.
After the negotiations were suspended in December 2022, at the initiative of representative unions, a
mediation procedure in a collective labour dispute was initiated in accordance with the
Ordinance on the
Methods for the Election of Mediators and Procedure for Conducting Mediation in Collective Labour Disputes
.
The mediation procedure was successfully completed on 31 January 2023 by concluding an Agreement that
has the legal effect of a collective bargaining agreement. Amendments to the
Collective Bargaining
Agreement for Zagreb Holding Ltd. Employees
were concluded on 8 February 2023 and the Agreement will
remain in effect until 31 March 2026.
Afterwards, a new job evaluation was conducted and a new job classification was prepared and agreed
upon. The classification includes job complexity groups with associated positions, individual job complexity
coefficients for those positions and additional pay for difficult working conditions.
Positions beyond the scope of the complexity categories (expert and managerial positions) were also
evaluated and the coefficients for jobs of the same complexity were adjusted both within individual
organisational units and at the Company level.
The operations of all subsidiaries and corporate functions of the Company are described and documented
in rules on organisation, which also contain new job descriptions detailing the activities and requirements
of each position. Considering all of the above, new employment contracts were concluded with the
employees and the organisational restructuring process at the Company was therefore completed.
Each company of the Zagreb Holding Group Ltd. (“Group”) has its own collective bargaining agreement
which regulates the rights and obligations of the parties to that agreement and which contains the legal
rules governing the conclusion, content and termination of the employment relationship, social security
issues and other issues arising from or related to the employment relationship.
The collective bargaining agreement at the company City Housing and Municipal Services Company Ltd.
(“CHMSC”) had expired, due to which collective bargaining was initiated for the purpose of concluding a
new collective bargaining agreement. It was completed on 22 March 2023 by concluding the Collective
Bargaining Agreement for Employees at the City Housing and Municipal Services Company. The Agreement
was concluded for a fixed term until 31 March 2026.
In late 2023, collective bargaining about a new Collective Bargaining Agreement also started at the company
Water Supply and Drainage Ltd., since the term for which the previous Collective Bargaining Agreement
had been concluded was to expire on 31 January 2024, with an extension until 30 June 2024.
The collective bargaining agreements concluded at other Group companies are still in force.
Bond refinancing
The Company was very successful in completing the issuance of sustainability-linked bonds in the domestic
capital market. The bonds maturing in 2028 were issued with a total nominal value of EUR 305 million, with
a fixed annual interest rate of 4.90%. Net proceeds from the bond issuance were used to repay the existing
bonds at maturity, with a total nominal value of HRK 2.3 billion (EUR 305 million), which had a final maturity
date of 15 July 2023 (ticker: ZGHO-O-237A, ISIN code: HRZGHOO237A3).
The new issuance of Zagreb Holding bonds represents the largest single issue of sustainability-linked bonds
in the history of the Republic of Croatia, as well as the first issue of sustainability-linked bonds by an issuer
exposed to municipal risk in the CEE region, given that there had been no green bond or sustainability-
linked bond issuances by municipal issuers until the issuance of such bonds by Zagreb Holding. Also, the
total amount of bids collected represents the highest level of interest for non-government bonds received
by an issuer in a single day. This bond issuance also represents the largest investment by international
financial institutions in a debt security in the Croatian market.
13
Total investor interest during the subscription period exceeded EUR 480 million, with significant changes in
the structure of investors. The investor base included two renowned international financial institutions
(47.5%), domestic commercial banks (34%), mandatory and voluntary pension funds (15.6%), insurance
companies, investment funds and other legal and natural persons, with participation of over 20 domestic
institutional investors.
The final terms of the issuance and the level of interest in the bond registration book, achieved in particularly
challenging conditions in the capital market, are a testament to the financial market’s confidence in the
Company’s business strategy and vision, as well as to the Company’s strong position. This confidence is
also reflected in the support from the City of Zagreb, which provided an unconditional and irrevocable
guarantee for this bond issuance in the domestic capital market.
Through the innovative issuance of sustainability-linked bonds, the Company has committed to achieving
two predefined sustainability goals. The first goal involves increasing the volume of separately collected
municipal waste, while the second one focuses on increasing the share of electricity consumption from
renewable sources in total electricity consumption. The Company is expected to increase waste separation
through investments by 2028, thereby reducing 132,000 tonnes of landfill waste, and to increase the share
of renewable energy consumption from 50% to 70% of total energy consumption between 2023 and 2028.
Zagreb Holding Sustainability Strategy
The Company adopted the Zagreb Holding Sustainability Strategy for the period from 2023 to 2028, which
provides a framework for future strategic decisions and business financing activities in an environmentally
and socially responsible manner.
In line with its long-term strategic goals, the Group has found that the environmental impact of its operations
will depend mostly on adequate resource management, including waste management, water extraction and
protection and increasing the use of energy from renewable sources. Accordingly, the Group has defined
its sustainable strategy based on the following objectives.
Primary objectives:
1. To improve the waste management system based on circular economy principles by increasing the
amount of separately collected waste that can be further processed and used for sustainability of materials
and energy.
2. As part of its commitment to environmental sustainability, the Group will work on increasing the use
of electricity from renewable energy sources in its own consumption. The company Water Supply and
Drainage Ltd. (“WSD”) has been recognised as a key company for sustainable resource management, being
the largest consumer of electricity. By installing solar power plants, it will significantly contribute to reducing
its carbon footprint.
3. To achieve its objective of reducing water losses, the Group will make larger and more frequent
investments in infrastructure to improve its water management practices. The Group will also implement a
series of measures to reduce its own water consumption.
Secondary objectives:
4. Take steps to reduce CO
2
emissions, primarily in areas where quick and effective results can be
achieved, such as replacing transport and work vehicles.
5. Participate in and promote projects aimed at achieving affordable housing (e.g., building rental
apartments and allocating them based on social criteria).
6. Improve the general quality of life in the City of Zagreb through a series of projects in the area of
urban environment, access to healthy food and infrastructure that supports local (and more distant)
agricultural activities and the production of food and other products.
7. Continue to comply with and continuously improve labour regulations that define procedures and
measures for the protection of employees’ dignity and protection against discrimination, and maintain
commitment to employment principles that exclude discrimination and guarantee equal opportunities and
rights for all.
14
Credit rating
During 2023, two international credit rating agencies upgraded the credit rating of the Company: Standard
& Poor’s Global, which upgraded the rating from B with a stable outlook to B+ with a positive outlook in
July 2023 and reaffirmed that rating in November 2023; and Moody’s, which raised the credit outlook of the
City of Zagreb and the Company from stable to positive, affirming the Baa2 investment-grade rating.
Since the beginning of the operational and financial restructuring process, international agencies increased
the Company’s rating three times, taking into account the successful refinancing of short-term loans with a
long-term club loan in 2022, achievement of positive business results after many years and successful
refinancing of a bond worth EUR 305 million.
As stated in the report, the Company’s key advantage lies in its diversity and exposure to a wide range of
utility services it provides to the City of Zagreb, its full owner. At the same time, one of the most significant
risks is the complexity of the Group’s structure, whose individual business activities depend on the decisions
of the City of Zagreb.
GROUP PROJECTS
Subsidiary Zagreb Roads
Between 8 February 2023 and 30 June 2023, road and cycle lane improvements were carried out in Aleja
Matije Ljubeka street. Also, between 14 March 2023 and 31 July 2023, road development works were carried
out in Sljemenska Cesta street.
The development works carried out in these streets are valued at approximately EUR 4.8 million (excl. VAT)
in total. Works in both streets were conducted based on the
Contract for Road Paving Works
with EU
Solidarity Fund
, which had been concluded with the Fund by the City Office for Local Self-Administration,
Civil Protection and Safety.
In October 2023, asphalting works were started on the southern embankment from the Sava Bridge to the
west, covering a stretch of 1,660 meters. The embankment is developed by laying green eco-asphalt
produced at the asphalt plant of the subsidiary Zagreb Roads in Rakitje. This is the fifth construction phase
under the “Greenway” pilot project. With the “Greenway – Main State Cycling Route No. 2” project, the plan
is to make a cycle path along the Sava River from the border with Slovenia to Lijevi Dubrovčak, with a total
length of 121.6 km. Asphalting works will be followed by landscaping works, installation of benches and
equipment, and finishing works at the rest area near the pedestrian bridge.
City Waste Disposal’s pilot project for the construction of underground waste containers for disposal of
mixed municipal waste in ZG bags, waste plastic, paper and bio-waste, in which the subsidiary Zagreb Roads
is the contractor for construction works, was initiated in September 2022 with the installation of the first
underground container system in Masarykova Ulica street. By 30 March 2024, containers have been set up
at 22 locations in the centre of the City. The underground container system consists of three or four types
of special-purpose underground containers, with a volume of five or three cubic metres. Along with
electronic cards used to open the underground containers, all households also receive an educational and
informational leaflet containing all the necessary information for proper container use. The project for the
construction of underground waste containers continues and the goal is to cover about 50 locations in the
City of Zagreb by the end of 2024.
City Waste Disposal
In 2023, the subsidiary City Waste Disposal focused on recovering waste using its own resources, rather
than handing it over to external recovery operators. Therefore, all bulky waste produced in the City of
Zagreb is recovered using its own resources, resulting in positive effects on cost management compared to
disposal with an external recovery operator.
“Thousands of hardworking hands for 100 years of Zagreb City Waste Disposal” – under this motto, a series
of events throughout 2023 were held to celebrate the subsidiary’s grand 100
th
anniversary.
In addition to 10 stationary and 10 mobile recycling centres in the City of Zagreb, another one was opened
in August 2023. This is the largest and most modern recycling centre yet and it can be used to dispose of
42 types of waste. The new recycling centre covers an area of 5,500 m
2
and serves 45,000 citizens. The
project’s value is about EUR 1.2 million, approximately EUR 600,000 of which is covered by the grant
provided under the agreement concluded by the City of Zagreb with the Ministry of Economy and Sustainable
Development (“MESD”) and the Environmental Protection and Energy Efficiency Fund (“EPEEF”).
15
Subsidiary Zrinjevac
The 57
th
Floraart International Garden Show was held from 18 to 21 May 2023, co-organised by the City of
Zagreb and Zagreb Holding Ltd., subsidiary Zrinjevac.
The 2023 exhibit was co-financed by the City of Zagreb with EUR 225,700.00. The show took place outdoors,
in Bundek Park, with exhibits spread across 300+ thousand square meters.
There were 170 exhibitors from Croatia and abroad participating in the show. It was estimated that 120,000
people visited the show over four days. The exhibition has an important economic aspect contributing to
the development of entrepreneurship and tradesmanship and it has become an important segment of the
Zagreb’s tourist offer.
In 2023, the subsidiary Zrinjevac also celebrated its 120
th
anniversary.
Water Supply and Drainage Ltd. – WSD
Projects planned for co-funding under the Operational Programme Competitiveness
and Cohesion 2021–2027
In 2023, WSD continued working on preparatory activities for the project “Project Zagreb 2021–2027
(Improvement of Municipal Water Supply Infrastructure)”. The goal of the project is to reconstruct and
expand the public water supply and drainage system for the Zagreb agglomeration area, along with
additional works to upgrade the central wastewater treatment facility in Zagreb. The project is valued at
EUR 322 million.
The preparatory activities carried out in 2023 included the following: development of a feasibility study,
preparation of environmental documentation, participation in the procedure for obtaining an environmental
impact assessment approval from the authorities and resolving property rights issues.
On 15 March 2024, the project application for “Project Zagreb 2021–2027” was submitted in accordance
with the terms and conditions of the Prioritisation Call for Proposals under the Competitiveness and Cohesion
2021–2027 Programme, announced by the MESD, which offers co-financing of up to 70% of funds.
City Housing and Municipal Services Company Ltd. – CHMSC
The subsidiary’s activities include management and maintenance of residential and commercial premises.
Based on management agreements concluded with co-owners, the subsidiary operates smoothly, without
any significant deviations.
In 2023, interest in contracting new, smaller residential buildings continued, especially older buildings,
where there is a significant demand and need for a façade rehabilitation programme of the City of Zagreb
and for funding from the Republic of Croatia after the earthquake. The deadline for submitting proposals
for post-earthquake rehabilitation to the Ministry of Physical Planning, Construction and State Assets was
31 December 2023.
Considering the free market, there were proactive approaches by competitors, featuring new methods of
providing services and services themselves, which led to a partial reduction in the total square footage under
management, despite contracted buildings. As at 31 December 2023, management agreements covered:
165,897 premises with a total surface area of 9,242,753 m
2
.
The storm that hit continental Croatia, particularly the Zagreb area, on 19 July 2023, caused significant
material damage. Significant material damage was found on many residential buildings managed by the
Company, with a total of 1,290 claims (871 for roof damage, 74 for floods and 345 for other issues). All
reported damage to the buildings has been repaired and further reported to relevant insurance companies.
In 2023, CHMSC also continued to carry out tasks related to the energy renovation of multi-apartment
buildings. On 22 May 2023, a call for proposals for energy renovation of earthquake-damaged multi-
apartment buildings was announced on the website of the Ministry of Physical Planning, Construction and
State Assets. Through the call, co-funding will be provided for the preparation of project documentation and
the energy renovation of multi-apartment buildings damaged by the earthquakes on 22 March and 28/29
December 2020 in the City of Zagreb, Krapina-Zagorje County, Zagreb County, Sisak-Moslavina County and
Karlovac County, which were labelled as buildings with reduced usability based on preliminary post-
earthquake inspections by the City of Zagreb.
16
IMPACT OF REGULATORY CHANGES ON BUSINESS OPERATIONS
As a provider of services of general economic interest, the Group’s operations are regulated by numerous
laws and subordinate legislation. Therefore, the Group is exposed to dynamic changes in legislation and the
regulatory framework. The prices of individual activities of the Group are influenced by regulators and the
City of Zagreb as a local self-government unit. Some of the activities of the Group, including the pricing of
services based on such activities, are managed by regulatory bodies of the Republic of Croatia, such as the
Croatian Energy Regulatory Agency (HERA), whereas others are under the significant influence of the City
of Zagreb. On the other hand, the costs of providing these services are under the influence of the market,
where prices can vary on a weekly or a monthly basis. Segments of the Group’s operations that are most
affected by regulatory influence are energy operations and waste management activities, i.e. operations of
the related companies Zagreb City Gasworks Ltd. (“ZCG”), ZCG–S and the subsidiary City Waste Disposal.
City Waste Disposal
City Waste Disposal’s business result in 2023 was mostly affected by the Decision on the Provision of the
Public Service of Municipal Waste Collection in the City of Zagreb (Official Gazette of the City of Zagreb
7/2022, 19/2022, 33/2022; ( “Decision”)), adopted under the Waste Management Act (Official Gazette
84/2021, 142/23), as well as by the Decision on Municipal Order (Official Gazette of the City of Zagreb
15/2023, Official Gazette 138/2023, Official Gazette of the City of Zagreb 42/2023).
The Decision introduced the implementation of a new public service billing system, impacting not only the
subsidiary’s financial status, but also the operational segment of its business.
Zagreb City Gasworks – Supply Ltd. – ZCG–S
Change in the Methodology for Determining the Amount of Tariff Items for Public Service of Gas Supply and
Guaranteed Supply and adoption of the Regulation on Elimination of Disturbances in the Domestic Energy
Market
In December 2020, following a public tender, ZCG–S was designated by the Croatian Energy Regulatory
Agency (HERA) as the supplier obligated to provide public services in 13 distribution areas in the Republic
of Croatia. To supply gas to end consumers in those areas, it concluded a gas supply contract with the
selected supplier for the period from 1 April 2021 to 1 October 2024. The contract price was defined using
the formula according to the Methodology for Determining the Amount of Tariff Items for Public Service of
Gas Supply and Guaranteed Supply (Official Gazette 108/20), applicable at the time of concluding the
contract.
In March and April 2023, due to disruptions in the Croatian energy market, the Croatian Government made
an intervention in the gas market by adopting the Regulation on Elimination of Disturbances in the Domestic
Energy Market (Official Gazette 31/23 – hereinafter: “Regulation”), which led to changes in the final price
of gas for public supply services by HERA. This was implemented by adopting the Decision on the Amount
of Tariff Items for the Public Gas Supply Service and amendments to the 2020 Methodology. As a result, in
April 2023, a new Methodology for Determining the Amount of Tariff Items for Public Service of Gas Supply
and Guaranteed Supply (Official Gazette 38/23) was adopted and entered into force.
Under the new Decision on the Amount of Tariff Items for the Public Gas Supply Service and 2023
Methodology, ZCG–S had the right to invoice end-users the gas price of EUR 41.00/MWh until 31 May 2023
and EUR 47.60/MWh from 1 June 2023 to 31 December 2023. At the same time, in line with the Framework
Agreement with the supplier, applying the methodology defined by the Croatian Financial Services
Supervisory Agency for the public service provision period from 2021 to 2024, the gas price was EUR
105.6/MWh.
On 6 July 2023, the Croatian Government adopted the Regulation on Amendments to the Regulation on
Elimination of Disturbances in the Domestic Energy Market (Official Gazette 74/2023). These amendments,
as outlined in the explanation of the proposal, aimed to allow energy operators in the gas market to receive
compensation for potential costs arising from the implementation of the new Methodology in 2023.
Based on said amendments to the Regulation, by 31 December 2023, ZCG–S promptly submitted to the
MESD three quarters’ worth of claims for reimbursement of the difference in gas prices, namely for the
April–June, July–September and October–December 2023 quarters. The difference in the purchase and
selling price of gas applicable to households, which ZCG–S has disclosed as receivables from the state,
amounts to EUR 81,788,933.
As of the time of drafting this report, the MESD has still not made a decision regarding any of the submitted
claims.
17
Zagreb City Gasworks Ltd. – ZCG
ZCG generates revenue through the regulated activity of gas distribution, and the regulator (Croatian Energy
Regulatory Agency – HERA) defines the amount of tariff items for periodic regulation periods, which is
determined using the Methodology for Determining the Amount of Tariff Items for Gas Distribution (Official
Gazette 48/2018). The Methodology classifies calculation measuring points according to 12 tariff models,
depending on annual gas consumption. The gas distribution price consists of the “Ts1” tariff item, which
pertains to the distributed amount of gas determined for each distribution system operator separately, and
the “Ts2” tariff item, which represents a fixed monthly charge.
Accordingly, HERA adopted the Decision on the Amount of Tariff Items for Gas Distribution for the third
regulation period from 2022 to 2026 (Official Gazette 108/2022), applicable to all distribution system
operators in Croatia since 1 October 2022. The adopted “Ts2” tariff item (fixed monthly charge) applicable
to ZCG in 2023 remained unchanged, while “Ts1” (the tariff item for distributed gas quantity) was increased
by 5% on average compared to 2022.
PROJECTS FINANCED UNDER THE EU SOLIDARITY FUND
Zagreb Holding Ltd.
The Grant Agreement for the Resnik Temporary Storage Facility project was concluded on 11 November
2022, with a total value of EUR 4,581,503.68. The objective of the Resnik Temporary Storage Facility project
was to put in place a system for adequate management of materials generated by demolition and/or
construction waste generated during the reconstruction of earthquake-damaged buildings in the City of
Zagreb area.
The project was successfully completed on 30 June 2023 and it included the procurement of equipment for
processing construction material, valued at EUR 1,867,000 in total.
As part of the project, the base and site for temporary storage of materials generated by demolition and/or
construction waste generated during the reconstruction of earthquake-damaged buildings were prepared in
Tišinska Ulica street (valued at EUR 105,152.10.). The project also financed the cost of storing materials
generated by demolition and/or construction waste generated during the reconstruction of earthquake-
damaged buildings until the Resnik Temporary Storage Facility became operational, which amounted to EUR
757.967,34.
Subsidiary City Cemeteries
The company City Cemeteries, a subsidiary of Zagreb Holding, applied to the call for grants “Implementation
of measures of protection of cultural heritage damaged in the earthquake of 22 March 2020 in the area of
the City of Zagreb” with three projects. The projects were submitted for funding the project documentation,
as detailed below, and the subsidiary obtained approval for a grant from the EU Solidarity Fund in the
amount of EUR 626,759.59:
1. “Preparation of Project Documentation and Implementation of Measures to Protect the Arcades and
the Church of Christ the King at the Mirogoj Cemetery”. The aim of the project was to prepare the
project and technical documentation for the reconstruction of the arcades and Church of Christ the
King, protected cultural property at the Mirogoj Cemetery, for the purpose of repairing the damage
caused by the earthquake in March 2020. The project was completed on 30 June 2023. The next
stage of the reconstruction will be financed by insurance funds.
2. “Preparation of Project Documentation and Implementation of Measures to Protect the Mortuary at
the Mirogoj Cemetery”. The aim of the project is the complete renovation of the protected cultural
property at the Mirogoj Cemetery – Mortuary – for the purpose of repairing the damage caused by
the earthquake in March 2020. As part of the project, by 30 June 2023, the project and technical
documentation was completed and financed by the EU Solidarity Fund. The project continues in 2024
and it will be funded under the 2021–2026 Recovery and Resilience Facility, with an allocation of EUR
3,469,497.16.
3. “Preparation of Project Documentation and Implementation of Measures to Protect the Office Building
at the Mirogoj Cemetery”. The aim of the project was the complete renovation of the office building,
protected cultural property at the Mirogoj Cemetery, for the purpose of repairing the damage caused
by the earthquake in March 2020. By 30 June 2023, the project and technical documentation was
completed and the first phase of works was completed (mostly demolition of unstable parts of the
building damaged by the earthquake), all of which was financed by the EU Solidarity Fund. The
project continued in the second half of 2023 with funding from the 2021–2026 Recovery and
Resilience Facility (EUR 1,682,055) and the state budget (EUR 963,473.72). The project was
completed in March 2024.
18
Zagreb City Gasworks Ltd.
As part of the programme “Restoring Infrastructure and Facilities in the Energy Sector to a Good Working
Order” (FSEU.2021.ENERGETIKA.MINGOR and FSEU.2022.ENERGETIKA.MINGOR), in the period between
22 March 2020 and 31 December 2023, three projects financed by the EU Solidarity Fund were carried out:
“Repairing Earthquake-Damaged Infrastructure, Buildings and Gas Pipeline System Facilities of the City of
Zagreb”
The aim of the project was to ensure the regular functioning of gas installations in the buildings in the City
of Zagreb following the earthquake on 22 March 2020. Total project value was EUR 60,028.64. ZCG carried
out activities to suspend the supply of natural gas to 462 end consumers in buildings, as well as works to
recommission the natural gas pipeline in a total of 444 buildings in the City of Zagreb. To carry out these
activities, grant funds were paid in the amount of EUR 60,007.93.
“Reconstruction of the High-Pressure Pipeline on Most Slobode (Liberty Bridge)”
The goal of the project was to reconstruct the high-pressure pipeline on Liberty Bridge due to damage to
the gas distribution system infrastructure of the City of Zagreb caused by the earthquake. The project was
financed partly by the EU Solidarity Fund (EUR 400,710.07) and partly from the ZCG’s own funds (EUR
128,782.31).
“Repairing Leaks in the Petruševec–Radnička High-Pressure Pipeline”
Total project value was EUR 42,512.27, with the EU Solidarity Fund grant covering EUR 31,396.44. As some
of the end customers were large-scale consumers, ZCG managed to repair the leaks without suspending
the gas supply to avoid causing technical and material issues or production delays for the end customers.
All three projects met their objectives and contributed to the maintenance and development of a reliable,
safe and efficient gas distribution system, ensuring good quality of gas supply.
Water Supply and Drainage Ltd. – WSD
The grant agreement for activities financed from the EU Solidarity Fund under the project “Restoring the
water supply and sanitation facilities damaged in the earthquake to good working order VIO1” was
concluded on 3 June 2022. The total value of the project is EUR 4,905,748, and eligible costs amount to
EUR 4,120,194, with a co-financing rate of 100%. EUR 2,177,488.25 was paid out in 2023.
The second grant agreement for activities financed from the EU Solidarity Fund under the project “Restoring
the water supply and sanitation facilities damaged in the earthquake to good working order VIO2” was
concluded on 16 September 2022. The total value of the project is EUR 2,079,025, and eligible costs amount
to EUR 1,513,064, with a co-financing rate of 100%. In the first six months of 2023, EUR 1,344,185.08 was
paid out, while approval for the reimbursement of EUR 66,720.75 is expected in 2024.
OTHER PROJECTS CO-FINANCED BY GRANTS
City of Zagreb’s solarisation projects
Activities on the project “Solarisation of Institutions of the City of Zagreb” (SOLIZAG) have continued, with
the subsidiary City Waste Disposal participating as a project partner. The project consists of eight pilot
projects, which involve the construction of solar power plants at eight locations for self-supply purposes.
The pilot project includes the construction of a solar power plant on the rooftop of a facility at the Jakuševec
Service and Operational Centre. The solar power plant is intended to generate electricity for the facility’s
own needs.
The contracted value for the construction of the power plant is EUR 41,688.53, EUR 29,862.63 of which is
covered by the grant awarded under the EEA financial mechanism (2014–2020).
On 30 March 2023, the Company concluded with the contractor the Agreement for the Construction of
Photovoltaic Systems on the Rooftops of Buildings in the City of Zagreb and Company-owned Buildings,
valued at EUR 41,668.54 excluding VAT.
On 13 November 2023, the contractor completed all the necessary works to commission the power plant
and submitted the required documents to HEP ODS to obtain a permit for permanent operation, which is
currently pending.
19
Solar power plants on the rooftops of Zagreb Holding’s buildings
PVMax project for 2023
In 2022, the Company started preparatory activities for a project to build solar power plants on the rooftops
of buildings owned by the Zagreb Holding Group (so-called PVMax project). For the purpose of this project,
the North-West Croatia Regional Energy and Climate Agency (REGEA) provides the Company with technical,
financial and legal consulting services. A detailed technical analysis identified 16 buildings grouped for the
construction of 11 solar power plants, for which REGEA created conceptual designs. Based on the designs,
grid connection approvals were requested from HEP ODS d.o.o. Approvals were granted for five power
plants; however, it was found that the technical conditions for connecting the other six power plants to the
grid are more complex. Therefore, proposals for the preparation of a study of the optimal technical solution
for connection to the electricity grid (EOTRP) were received. The proposals were paid in 2023 (a total of
EUR 18,581.20 plus VAT) and the preparation of the studies is expected. Besides the aforementioned project
activities, in 2023, a market analysis was initiated for the purpose of the solar power plants
project/construction.
The next phase of the project will take place in 2024, when the contracting for the preparation of the main
designs and the contracting for construction will occur.
Preparatory activities were also started to gather documentation and analyse the potential of the Jakuševec
Landfill for constructing a solar power plant. Due to a landslide that occurred in 2023, these activities have
been temporarily suspended.
As part of the PVMax project, which is co-financed by the EU and the Republic of Croatia, the company
WSD concluded an agreement with REGEA for the purpose of developing conceptual designs for solar power
plants. Conceptual designs were created for the following solar power plants: Mala Mlaka solar power plant
(power of 9,900 kW, construction by 2028), Sašnak solar power plant (power of 7,000 kW, construction by
2028), Bukovac solar power plant (power of 400 kW, construction by 2024), Oporovec solar power plant
(power of 400 kW, construction by 2024), Cerje solar power plant (power of 425 kW, construction by 2026),
Laščina solar power plant (power of 200 kW, construction by 2025), Lisičina solar power plant (power of
350 kW, construction by 2025), Jačkovina solar power plant (power of 50 kW, construction by 2025),
Sokolovac solar power plant (power of 200 kW, construction by 2025), Folnegovićeva solar power plant
(power of 500 kW, construction by 2025), Zagorska solar power plant (power of 200 kW, construction by
2025), Lončarićev Put solar power plant (power of 200 kW, construction by 2025), Bizek solar power plant
(power of 100 kW, construction by 2026). There is a total of 13 solar power plants, 11 of which are
integrated and two of which are stand-alone power plants.
In 2023, a public procurement procedure was initiated for the design and construction of the solar power
plants Bukovac (power of 400 kW) and Oporovec (power of 400 kW) based on the conceptual design made
using the design–build principle, self-financed by WSD.
The agreement for the design and construction of the Bukovac solar power plant was signed on 28 July
2023 and the following activities were completed: design, delivery of equipment and installation of solar
collectors, and installation of inverters and switchgears in the field. The solar power plant will be
commissioned once HEP reconstructs the substation.
The agreement for the design and construction of the Oporovec solar power plant was concluded on 19
March 2024 and the contractor will be given possession of the site by 12 April 2024.
In October 2022, the company WSD applied to the public call announced by the EPEEF for co-financing
project documentation for the construction of solar power plants in the water supply services sector. In
April 2023, an agreement was concluded with the EPEEF for co-financing the development of main designs
for six solar power plants – Cerje, Laščina, Jačkovina, Sokolovac, Folnegovićeva and Zagorska. Design work
for all six solar power plants has been contracted through a public procurement procedure. So far, designs
have been completed for five solar power plants, all except Sokolovac.
The project for preparing documentation is co-financed by the EPEEF at a rate of 40%, or up to the
maximum of EUR 53,089.
The total power of the solar power plants applied to the EPEEF’s call is 1,575 kW, distributed as follows:
Cerje 425 kW, Laščina 200 kW, Jačkovina 50 kW, Sokolovac 200 kW, Folnegovićeva 500 kW, Zagorska 200
kW.
Studies of the optimal technical solution for connection to the electricity grid (EOTRP) have been made for
the Bukovac, Oporovec, Lisičina, Sokolovac, Folnegovićeva, Zagorska, and Lončarićev Put solar power
plants, while the preparation of a study for the Sašnak solar power plant has been requested.
Grid connection approvals have been obtained for the Bukovac, Oporovec, Cerje, Laščina, Lisičina,
Jačkovina, Folnegovićeva, Zagorska, and Bizek solar power plants.
20
WSD and Zagreb Holding are focused on the implementation of large-scale solar power plant projects:
Sašnjak and Mala Mlaka. Conceptual designs for both power plants were delivered by REGEA in 2024 and
preparations for the terms of reference and the documentation necessary to create the main design are
currently in progress.
Procurement of N1 electric vehicles through the EPEEF
On 20 September 2022, the Company concluded the Agreement on Regulating Mutual Relations for Co-
financing the Purchase of Energy-Efficient Vehicles with the EPEEF. The vehicles were procured for the
subsidiaries City Cemeteries and Zrinjevac.
A public tender was carried out on 4 December 2023, based on which six N1 vehicles were procured, four
for the subsidiary City Cemeteries, which will be used for landscaping activities at cemeteries, and two for
the subsidiary Zrinjevac. Of the total procurement value of EUR 231,000, EUR 55,743.58 will be financed
using the EPEEF funds. The EPEEF funds are expected to be paid out in 2024.
Application to the EPEEF for the procurement of an all-purpose automatic baler for the
subsidiary City Waste Disposal
On 2 May 2023, the Company applied to the “Public call for encouraging measures for the separate collection
of municipal waste (ZO 2-2023)”. The Company applied for co-financing the purchase of an APB – an all-
purpose automatic 60-ton baling machine with equipment for receiving, sorting and baling secondary raw
materials for the requirements of the subsidiary City Waste Disposal.
The estimated value of the baling machine procurement is EUR 237,100.00, EUR 81,348.09 of which is
financed by the EPEEF. The deadline for purchasing the baler is 12 months from the day the decision and
contract are received by the beneficiary, i.e. August 2024.
Public facilities for the City of Zagreb
In 2023, the Group continued the construction of public facilities for the City of Zagreb.
The construction and furnishing of the Markuševec Nursing Home were completed and the facility was
handed over to the City for management in September 2023. The Markuševec Nursing Home can
accommodate 92 elderly people, with 12 places intended for accommodating people suffering from
Alzheimer’s disease and other forms of dementia.
Also, the construction and furnishing of the 12
th
Grammar School in Dubrava was completed in early 2023
and the building was handed over to the City for management in January 2023, with the intention of starting
classes in the second semester. The 12
th
Grammar School in Dubrava covers a surface area of 7,500 m
2
,
featuring 28 classrooms, 4 laboratory classrooms, a basketball and gymnastics hall, a multimedia hall, an
outdoor fitness trail and an outdoor playground.
Water Management Plan for 2023 – Water Supply and Drainage Ltd. and Hrvatske Vode
Projects co-financed by Hrvatske Vode in accordance with the 2023 Water
Management Plan
According to the 2023 Water Management Plan adopted by Hrvatske Vode, the Co-financing Agreement for
the Construction of Water Supply Facilities in the Zagreb Agglomeration Area was concluded for the total
amount of EUR 796,337.50, with Hrvatske Vode covering 80% and WSD covering 20% of the sum. In line
with the Agreement, WSD drew down the full amount in the first half of 2023. On 27 November 2023,
following a reallocation of funds in Hrvatske Vode’s Plan, an annex to the Co-financing Agreement was
concluded for the amount of EUR 453,662.50. The funds were drawn down in full in 2023.
According to the 2023 Water Management Plan adopted by Hrvatske Vode, the Co-financing Agreement for
the Programme to Reduce Losses in the Water Supply Systems in the Republic of Croatia, Water Supply
System Area Covered by Water Supply and Drainage Ltd. Zagreb was concluded for the total amount of
EUR 472,711.25, with Hrvatske Vode covering 80% and WSD covering 20% of the sum. In 2023, WSD drew
down EUR 70,077.60, i.e. used 15% of the funds under the Agreement.
21
According to the 2023 Water Management Plan adopted by Hrvatske Vode, the Agreement for Co-financing
Project Documentation in the Zagreb Agglomeration Area was concluded for the total amount of EUR
158,823.53, with Hrvatske Vode covering 85% and WSD covering 15% of the sum. In 2023, WSD drew
down EUR 144,136.97, i.e. used 91% of the funds under the Agreement.
According to the 2023 Water Management Plan adopted by Hrvatske Vode, the Co-financing Agreement for
the Construction of Water Supply Facilities in the Zagreb Water Supply Zone was concluded for the total
amount of EUR 165,903.75, with Hrvatske Vode covering 80% and WSD covering 20% of the sum. The
funds were drawn down in full in 2023.
According to the 2023 Water Management Plan adopted by Hrvatske Vode, the Co-financing Agreement for
the Construction of Water Supply Facilities in the Zagreb Water Supply Zone, Water Investigation Works,
was concluded for the total amount of EUR 100,000.00, with Hrvatske Vode covering 80% and WSD covering
20% of the sum. On 27 November 2023, following a reallocation of funds in Hrvatske Vode’s Plan, an annex
to the Co-financing Agreement was concluded for the amount of EUR 33,181.25. The funds were drawn
down in full in 2023.
PROJECTS CO-FUNDED AND PLANNED TO BE CO-FUNDED BY THE RECOVERY AND
RESILIENCE FACILITY
In the preceding period, following the first Call for Project Proposals, on 23 December 2021, WSD concluded
the Grant Agreement for the Construction of the Public Water Supply System in the City of Zagreb and
Zagreb County Area for the total amount of EUR 6,922,869 (80% EU funds, 10% Hrvatske Vode and 10%
public water supply service provider). Under this Agreement, the total amount of EUR 2,671,192 was
approved for retroactive financing in 2022. The European Court of Auditors inspected individual project
elements in March 2023, which was followed by an on-site inspection by Hrvatske Vode on 18 May 2023.
The inspections were completed without any issues regarding the implementation of the project. Retroactive
financing in the amount of EUR 513,768.03 was approved in 2023.
In December 2022, an application was submitted to the second Call for Proposals for “Financing the
Implementation of Investment Projects Relating to Smaller Sections of the Public Water Supply and Public
Sanitation Systems under the National Recovery and Resilience Plan 2021–2026”. The company submitted
applications for investments totalling approximately EUR 13.3 million. In 2023, the application was corrected
and updated, and a grant agreement for the applied amount of EUR 17.5 million is expected to be concluded
in 2024.
BUSINESS
DEVELOPMENT
ACTIVITIES
IV
23
In line with the Group’s business goals, technological development trends, and the requirements of our
external stakeholders (our customers/users/taxpayers), the Group’s business development activities are
primarily focused on circular economy, sustainable business and the implementation of a new waste collection
model, as well as on the digitalisation of our business, and improvement of the quality of the services provided
to our users.
Construction waste -> Resnik
A positive example of circular material management is the use of materials generated by removal of waste
during the reconstruction of earthquake-damaged buildings in the City of Zagreb for the construction of the
temporary construction waste storage facility Resnik. Another example is the reuse of old asphalt from road
surfaces generated by the subsidiary Zagreb Roads during regular road maintenance in the City of Zagreb.
The construction waste generated in the City of Zagreb is stored and then recovered at the construction
waste recycling plant. The material obtained (after completing the end-of-waste procedure) is then used by
the City of Zagreb for various purposes. By recovering concrete, asphalt and other construction waste,
valuable raw materials and subbase materials are obtained, which are used in road construction instead of
new stone materials from quarries.
The temporary construction waste storage facility Resnik was constructed pursuant to the Act on
Reconstruction of Earthquake-Damaged Buildings, which prescribes the obligation to temporarily store
materials generated by demolition and/or construction waste generated during the reconstruction of
earthquake-damaged buildings. The City of Zagreb carries out the procedure for the construction of the
storage facility, while Zagreb Holding, using funds from the EU Solidarity Fund, has acquired mobile machines
for processing the demolished parts of earthquake-damaged buildings, valued at EUR 1,867,000.
For the entire Resnik Temporary Storage Facility project, a grant agreement was concluded for the amount
of EUR 4,581,503.68.
THE GROUP’S ORGANISATIONAL CULTURE AND HUMAN RESOURCE DEVELOPMENT PROCESSES
In 2023, employee benefits were significantly improved and irregularities and injustices that had been present
in the employee reward system for many years were corrected when a new job classification was made. In
the amendments to the Collective Bargaining Agreement, the base amount for calculation of salary and non-
taxable payments were increased, and job complexity coefficients were adjusted based on the job evaluation.
By adjusting the coefficients of comparable positions at the Company level, salaries for the same or
comparable jobs were matched.
During 2023, the Group continued to devote its efforts to employee development and to strengthen its
operational capacities through intensive recruitment for operational roles.
Recruitment is carried out based on a well-structured and objective selection process, which involves carrying
out psychological testing and interviews to assess the candidate’s abilities, personality traits, motivation and
interest in the advertised position. Additionally, interviews with supervising managers are conducted to
evaluate the level of knowledge and skills the candidate possesses in relation to the job requirements.
Consistent implementation of this procedure has a positive impact on the Company’s reputation and helps
candidates realise that the recruitment process is fair and equal for all candidates.
In 2023, an Onboarding Program was launched as well, which includes an introductory seminar for new
employees and the acquisition of theoretical and practical skills needed for positions with specific working
conditions. During the introductory seminar, employees receive information about the Company’s and or
Group member’s activities. The value system and desired behaviours are also explained to them clearly, just
like the rights and obligations that employees have and the benefits that the Group offers.
In 2023, the number of operational workers at the subsidiaries City Waste Disposal, Zagreb Roads and
Zrinjevac increased by 239 compared to 2022. The total number of new employees at the Group level in 2023
was 696 (including seasonal workers). Based on the response to job openings and low rates of voluntary
turnover, it can be concluded that the Group has been recognised as an attractive employer for operational
jobs.
The Group’s affiliated companies have also focused on hiring operational and professional staff with an
engineering background, establishing objective and transparent selection processes to choose top-quality
candidates.
The practice of conducting exit interviews has also been introduced to gain a better understanding of the
reasons for employee departures and to improve working conditions for the Group’s employees based on the
feedback.
24
To enhance the skills and competencies of employees that will contribute to the expected growth and
development of the Company, specialised training sessions were organised and successfully conducted based
on identified needs.
The Group has also taken on the obligation of covering the costs of employee training for the periodic training
of drivers for the transport of goods and/or passengers. The process of providing professional training to new
employees has also been improved to allow them to start working independently as quickly as possible. The
entire process has been significantly shortened and enhanced.
To improve processes and implement the best people management practices, development plans have been
drawn up for the subsidiary City Waste Disposal and the company WSD. The improvement plan defines
management practices the implementation of which should lead to increased operational excellence. Good
management practices involve setting clear goals for employees or a group of employees, monitoring the
achievement of those goals, tracking work discipline during task execution and providing proper feedback
about one’s achievements as well as about any detected issues.
Employees are expected to comply with the established rules and procedures and to take responsibility for
the results of their work. In cases of violations of work obligations and discipline by employees, appropriate
measures were taken. At the same time, dedication to work and willingness to be proactive in exceptional
circumstances are recognised, so employees exhibiting such traits received bonuses for their extraordinary
efforts and results in dealing with the aftermath of the storm that hit Zagreb in July 2023.
By implementing these measures, the Group promotes continuous improvement of processes and fosters a
culture where rules of conduct are clear and transparent, mutual respect between managers and employees
is expected and encouraged, personal development and learning are promoted and engagement and
professional success are rewarded.
CUSTOMER RELATIONS
My Clean Zagreb
At the end of 2023, the “My Clean Zagreb” campaign was designed and preparatory activities for its
implementation were started. The goal of the campaign is to educate citizens, promote positive behaviours
in waste sorting and disposal and raise awareness that keeping the city clean is a shared responsibility of the
subsidiary City Waste Disposal and the citizens of Zagreb. Some of the topics covered by the campaign include
proper disposal of bulky waste, using recycling centres for waste disposal and reducing the volume of
discarded plastic and paper.
Communication channels which will be used in the campaign include displays at ZGH and City offices, e-
communication channels, posters and banners, and meetings and roundtable discussions with representatives
of residents in apartment buildings.
The campaign will take place starting from Q2 2024.
DIGITALISATION PROJECTS
Single ERP system
The project’s terms of reference define the implementation of an information system (ERP), which covers
accounting, finance, controlling and reporting functionalities, intended to consolidate the heterogeneous IT
infrastructure related to the Group’s business systems. At the moment, there are eight business systems
covering the same area, which represents a business challenge in every aspect.
The aim of implementing an integral information system is to:
• standardise business processes in the area of accounting, finance and controlling,
• enable unified insight and control of business processes supported by the ERP system at the
level of individual subsidiaries or companies, as well as at the level of the entire Zagreb Holding,
• enable a unified reporting method at the level of individual subsidiaries or companies, as well
as at the level of the entire Zagreb Holding,
• reduce the need for manual data entry/document creation through the integration of ERP
system functionalities and connectivity with other specialised applications,
• create unified process and data foundations that will allow for easier integration with other
necessary solutions.
Project preparation took place throughout 2023 and the project was officially started in February 2024. The
expected timeframe for implementing and deploying the new ERP system to production is Q1 2026. The
system will be a significant improvement in the Company’s and the Group’s operations. The most significant
advancement achieved by implementing a unified ERP system should be reflected in the unification of business
processes and the adoption of the best global practices in the area of accounting, finance and controlling.
25
GIS (geographic information system) platform
A geographic information system (GIS) is a tool for collecting, processing, inventorying, analysing and
applying data in activities using spatial data, which is necessary for the Group to perform its operations
effectively. The project aims to develop a standardised and flexible GIS with a single-access public (web)
portal, which will enable the integration of spatial data from all subsidiaries and related companies within the
Group.
The goal of the project is to integrate different GISs into a single unified solution. The single system will
consolidate infrastructure data from the following Group members: ZCG, WSD, Zagreb Digital City, Zagreb
Roads, Zrinjevac, Zagrebparking and City Cemeteries, and it will also be connected to the GIS used by the
city administration. The single GIS will optimise business processes by providing more efficient infrastructure
management and data about underground infrastructure will be available in one place. Also, the project
includes the development of a unified data reporting and inspection system, connectivity with external spatial
data sources and users, and improvement of business processes related to spatial data within the Company.
This system is expected to lead to increased efficiency, enhanced collaboration among the subsidiaries and
more effective decision-making processes, which will contribute to resource optimisation and the provision of
higher-quality services to citizens. In 2023, terms of reference were prepared and an as-is assessment was
carried out.
E-platform and new Register
The project launched in 2019 was intended for designing a platform that would serve as an interface where
citizens could view ZGH services they use, sign up for new services and manage service payments. The
prerequisite for production is to clean up civil registration data and to integrate the platform with a more
modern system which will replace the current one.
The “New Register” project involves the creation of a registry of all Group service users, i.e. consolidation of
all user databases. The goal of the project is to improve the system for timely and efficient tracking of
receivables and fee collection as well as to create a single bill for service users based on all the services
provided by the Group. The procurement and financing are covered by the City of Zagreb. The announcement
of the call for proposals for the new Register is planned for H1 2024. Considering all procedural challenges,
the new system is expected to be operational by Q3 2025. At the same time, the implementation of an e-
Platform adaptation project is being planned.
CORPORATE SOCIAL RESPONSIBILITY
Based on the key strategic guidelines, the Zagreb Holding Group has defined numerous measures and
initiatives to achieve sustainability goals and generally improve the management of scarce valuable resources.
This section outlines several significant projects the implementation of which is already underway or planned
for the upcoming period, through which the Group is contributing or will contribute to sustainable
development goals. Some of these projects are in the development phase and are described in more detail
in the “Significant Business Events” section, while others are still in the early stages and are described in the
“Expected Development of the Group” section.
1. Waste management -> sustainability goal: Improved waste management
Asphalt plant
Reconstruction of the asphalt plant which will recycle old asphalt in production. The capacity of the
reconstructed plant will increase asphalt production to 160 tonnes per hour, i.e. 200,000 tonnes per year. In
2023, the project was in the phase of carrying out preparatory activities for the procurement of project and
technical documentation and studies.
Described in more detail in the “Expected Development of the Group” section.
Waste pre-treatment
Expansion of the wastewater treatment facility in the City of Zagreb to combine biogas production with
sustainable waste management. In 2023, the project was in the phase of carrying out the procedure for
procurement of project and technical documentation.
Described in more detail in the “Expected Development of the Group” section.
26
Sorting plant
Construction of a waste sorting plant that will reduce waste volume to produce purer recycled materials,
consequently decreasing the amount of waste sent to landfills and reducing greenhouse gas emissions. The
sorting plant is an integral part of the future waste management centre. In 2023, the latter project was in
the phase of carrying out preparatory activities for the procedure for procurement of project and technical
documentation.
Described in more detail in the “Expected Development of the Group” section.
Underground containers
Construction of underground and semi-underground waste containers at 50 locations in the city centre to
reduce visual pollution in the centre of Zagreb and achieve better recycling results. The pilot project has
begun and the expected completion of implementation is by the end of 2026. By 30 March 2024, containers
have been set up at 22 locations in the centre of Zagreb.
Described in more detail in the “Significant Business Events” section.
2. Infrastructure -> sustainability goal: Improved water management and reduced CO
2
emissions
Project Zagreb
Investment in the wastewater treatment system to achieve sustainable operations and reduce the use of
natural resources by minimising water losses and revitalising the water supply network. The “zero zone”
project involves the rehabilitation and improvement of the infrastructure as well as the implementation of
monitoring processes to reduce water losses in the short to medium term. On 15 March 2024, the project
application for “Project Zagreb 2021–2027” was submitted in accordance with the terms and conditions of
the Prioritisation Call for Proposals under the Competitiveness and Cohesion 2021–2027 Programme,
announced by the MESD, which offers co-financing of up to 70% of funds.
Described in more detail in the “Significant Business Events” section.
Smart metering (gas and water) – LoRaWAN project
Investment in automatic measuring devices and measurement infrastructure; procurement of meters, a
communication network, network devices and the construction of a control centre. During 2023, the project
was in the procurement preparation phase.
The establishment of a communication network for remote gas and water meter reading is expected to begin
in 2024. The complete communication network is planned to be finished by the end of 2025.
The upgrade of water meters and gas meters with modules that allow remote reading is planned to begin in
2024.
Described in more detail in the “Expected Development of the Group” section.
Machinery / trucks
In the 2024–2026 investment period, Zagreb Holding plans to carry out a project to rehabilitate municipal
infrastructure. This comprehensive project involves the procurement of modern machinery and devices for
waste management, tree planting and road maintenance to improve the quality of life for citizens and enhance
the city’s infrastructure. This will also have a positive impact on achieving greater efficiency and reducing the
carbon footprint of older machinery. Modernising waste management equipment and devices will allow for
more efficient collection and preparation of waste for recovery and recycling. By renewing the municipal
infrastructure for tree planting purposes, the expansion and preservation of green spaces in the City will be
ensured. A key part of the project is the modernisation of road maintenance equipment, through which Zagreb
Holding aims to ensure safety and comfort for all road users. This includes quicker and more efficient repair
of cracks, asphalt renewal and ensuring adequate road signs and road surface marking, at the same time
reducing overall environmental emissions by using eco-friendly vehicles, equipment and machinery.
In 2023, the project was in the phase of preparation for the equipment procurement process and the
implementation period is expected to last from 2024 to 2026.
27
3. Renewable energy -> sustainability goal: Renewable energy with the aim of reducing CO
2
submissions
Solar power plants on the rooftops of Zagreb Holding’s buildings, water pumping stations and at landfill site
The project involves installing photovoltaic panels on properties owned by the Group to achieve energy and
financial savings. In 2023, the project was in the process of obtaining approval for grid connection and
developing conceptual solutions, with an expected implementation period of 36 months.
The construction of two 9.9 MW power plants in Mlaka and Sašnjak and two power plants with the capacity
of 400 kW and 350 kW in Bukovac and Oporovec respectively is in the initial phase, with an expected
implementation period of up to 48 months.
Described in more detail in the “Significant Business Events” section.
4. Household- and nutrition-related services -> sustainability goal: Affordable living (including responsible
consumption)
Logistics and Distribution Centre for fruits, vegetables and other food products
The project involves expanding production by establishing a sorting and packaging facility and increasing
leasing capacity for interested organisations. In 2023, a preliminary study was made for a wholesale market,
along with preparatory documentation for conducting a full study.
Described in more detail in the “Expected Development of the Group” section.
5. Customer services -> sustainability goal: Affordable living
Public garage construction
The project involves the construction of a public garage in Klaićeva Ulica street, with a planned capacity of
800 parking spaces. In 2023, a pre-investment study was made, along with the terms of reference for the
preparation of project documentation. In early 2024, a public procurement procedure was announced for the
preparation of project and technical documentation. The planned implementation period is 36 months.
Described in more detail in the “Expected Development of the Group” section.
Southern arcades at Mirogoj Cemetery
Construction of new arcades at the Mirogoj Cemetery with 440 graves and 3,462 columbarium niches. In
2023, the project was in the phase of preparing a pre-investment study, which was completed in March 2024.
Described in more detail in the “Expected Development of the Group” section.
28
SPONSORSHIPS AND DONATIONS
The governance framework, principles, criteria and the procedure for awarding sponsorships and donations
at the Company are defined by the Sponsorships and Donations Policy, which is aligned with the Croatian
Government’s Regulation on the Criteria, Standards and Procedures of Financing and Contracting Programs
and Projects of Interest to the Public Good Implemented by Associations (Official Gazette 26/2015, 37/2021).
The applications for sponsorships and donations are reviewed by a committee appointed by the Company’s
Management Board. Before they accept the position, the members of the committee sign a declaration of
impartiality and confidentiality. Also, the members commit to recuse themselves from reviewing applications
where a conflict of interests exists or is likely to occur.
ZCG and WSD have also formed their own committees that review sponsorship and donation applications and
that manage the process of reviewing donation applications as per the Sponsorships and Donations Policy. At
other Group members, these decisions are made by their directors.
The Sponsorships and Donations Policy of Zagreb Holding is an indicator of the company’s corporate social
responsibility policy and its investments in the community. All approved sponsorships and donations are
published on the Company’s website.
Realised sponsorships and donations
In 2023, the Company supported projects aimed at environmental protection, humanitarian projects and
projects in arts and culture, science and education, health and sports. It also supported a number of major
sports events of significance for the City of Zagreb and the Republic of Croatia.
Overall, the Company provided support to projects in the form of services provided by the Group worth EUR
193,024.50 in total.
The Company participated as one of the partners in the Medvednica Nature Park clean-up campaign, run by
the Medvednica Nature Park Public Institution on 18 March 2023 as a celebration of the International Day of
Forests (21 March) and World Water Day (22 March). The subsidiary City Waste Disposal provided its services
as part of the campaign.
The Group is the Croatian Leukaemia and Lymphoma Society’s partner in the fund-raising campaign titled
“Ubaci čep za skupi lijek”, in which it participates by ensuring collection points at 20 recycling centres in the
City of Zagreb where citizens can bring plastic bottle caps, and by donating all the costs incurred by the
subsidiary City Waste Disposal during the provision of these services.
Moreover, the subsidiaries Zagreb Markets and Zrinjevac sponsor, through their services, the “Začin Ljubavi”
campaign, which was held one day in April, May, June and September 2023 at city markets in Zagreb, as well
as World Hospice and Palliative Care Day, which was celebrated at the Cvjetni Trg square in October 2023.
The Group also supported major sports events of significance for the City of Zagreb and the Republic of
Croatia, such as the Audi FIS Ski World Cup “Snow Queen Trophy” 2023, Boris Hanžeković International
Memorial Track and Field Tournament, WRC Croatia Rally 2023 race, 49
th
Zagreb “Zagreb Delta Rally” race,
“Cro Race” cycling race, U13 European Table Tennis Championships and WTT Contender Zagreb 2023, “Terry
Fox Run” charity race, “Advent Run” charity race, and the “Milky Way” charity race.
Clean-up without Borders – 8
th
International Children’s Eco Patrol
The Group is one of the co-organisers and founders of the International Children’s Diving Eco Patrol, which
has been taking place since 2016 in cooperation with the HRVI Nemo Adriatic Diving Club and the agency
Promocija ronjenja d.o.o.
Through its services, the Group also sponsored the “Greencajt Festival” in May 2023, the “Support
Sustainability” conference in September 2023 and the “Ana Rukavina” charity concert in November 2023.
With support from expert partners and sponsors, in November 2023, the Company, Zagreb Innovation Centre
and City of Zagreb organised ZGHACKL – a team competition among Zagreb primary school students aimed
at developing solutions that bring city spaces into the digital age, making Zagreb ‘more open’. The goal of
the competition was to design, create and present the most innovative solution that would allow citizens to
easily search and have a public access to information about the availability of city spaces and the ability to
book them. The competition involved nine teams with over 40 participants in total. The event was promoted
via social networks and traditional media (newspapers, websites, radio, television).
EXPECTED DEVELOPMENT
OF THE GROUP
V
30
The Group’s strategy is based on four pillars aimed at achieving internal efficiency, reducing debt, fostering
innovation and providing higher-quality services to service users:
1. Operational excellence with a focus on cost efficiency and synergy, a quality management system,
utilisation of all internal potentials, automation and digitalisation aimed at increasing internal
efficiency and better communication with service users and employees.
2. Growth and development with a focus on digitalisation and smart city development, innovation,
investments and EU funds, unlocking investment potential by reducing debt, corporate social
responsibility, new services and portfolio expansion, utilisation of the synergy of the Group’s broad
service portfolio with the aim of activating sales potentials.
3. People and organisational culture with a focus on modern HR processes, a culture of trust, mutual
respect, transparency and ethical behaviour, engaged employees and agile organisation.
4. Sustainable business leading to the development of a green and circular economy and strengthening
operational capacities, contributing to higher quality of services and socially responsible behaviour.
The primary function of the Group’s development goals is to improve relations with the users of municipal
services by increasing service quality and availability.
The organisational, operational and financial restructuring activities that have been carried out mark the end
of the Group’s financial stabilisation process, while its business transformation and commitment to the
sustainable development strategy contribute to the Group’s self-sustaining operations. The successful bond
issuance has led to increased profitability and had a positive impact on business operations.
The Company’s objective is to establish sustainable operations through a long-term strategic framework for
sustainability management.
The Group has adopted a sustainable business strategy leading to the development of a green and circular
economy and contributing to higher quality of services and socially responsible behaviour.
Strategic Pillars
Operational
excellence
Growth and
development
People and
organisational
structure
Sustainable
business
(ESG)
New organisational design and
structure
Cost efficiency and synergy
Quality management system
Utilisation of all potentials
Digitalisation and smart city
development
Innovation, investments and
EU funds
Corporate social responsibility
New services and portfolio
expansion
Strengthening operational
capacities
Modern HR processes
Culture of trust, mutual respect
and ethical behaviour
Engaged employees
Agile organisation
High-quality, reliable and
innovative services
Quality management
Development of a corporate
culture of equality and
transparency
Sustainable resource management
and circular economy
QoL (environment, infrastructure,
housing)
31
The sustainability strategy is part of the Group’s Business Strategy and stems from the Group’s sustainable
development goals.
The long-term strategic goals, which include environmental, social and governance areas, are interconnected.
The Group has focused its strategy on the following key components/objectives:
GROUP’S STRATEGIC PROJECTS
Zagreb Centre for Waste Management – ZCWM and plastic sorting plant
The Waste Management Plan of the Republic of Croatia provides for the construction of a waste management
centre, which includes the treatment of municipal waste and non-hazardous waste remaining after recovery
of materials and other non-hazardous waste. As part of that activity, the City of Zagreb plans to construct a
plant for different waste streams. The components of the future waste management centre include:
Plant A) Pre-treatment of bio-waste
Expansion of the wastewater treatment facility in the City of Zagreb or construction of an independent facility
to combine biogas production with sustainable waste management – constructing a bio-waste pre-treatment
plant to accept waste from the City of Zagreb with a total capacity of 30,000 tonnes per year. Indicative
actions include the following: public procurement procedure for project and technical documentation, issuance
of permits and public procurement procedure for the construction and equipment.
Plant B) Sorting plant
By implementing the project, the amount of waste deposited in landfills will be reduced (170,000 tonnes per
year), greenhouse gas emissions will be decreased and a new resource will be gained as a raw material for
the production of new products in line with the principle of circular economy. The plant will have the capacity
of 30,000 tonnes per year. Indicative actions include the following: public procurement procedure for project
and technical documentation, issuance of permits and public procurement procedure for the construction and
equipment.
Plant C) Mixed municipal waste processing
The aim of the project is further processing of mixed municipal waste. The Company will provide technical
support to define the project.
High-quality,
reliable and
innovative services
Quality
management
Urbanisation and
environmental
protection
Quality of
urban life
• Innovative services
and development of
services
(digitalisation and
smart city
development)
• Customer
satisfaction
• Employment,
professional
development and equal
opportunities
• Stable sources of
funding
• Development of a
corporate culture and
internal communication
• Use of EU funds
• Strategic and active
governance
• Transparency
• Risk management
• Sustainable resource
management
• Fight against climate
change
• Environmental
responsibility in the
supply chain
• Air quality
• Housing quality
• Green public spaces
• High-quality
infrastructure
• Partnerships
• Participatory
management –
cooperation with
citizens, associations, and
local communities
Strategic Goals
32
Rakitje Asphalt Plant
One of the Company’s strategic plans is to expand the existing Benninghoven mixing plant and replace the
old Gradis mixing plant with a new asphalt plant. With these investments, the Benninghoven plant will be
able to produce eco-asphalt through an automated process, increasing the use of recycled material. By
replacing the old plant with a new one, it will be possible to use recycled asphalt to produce new bituminous
mixtures with recycled materials in the base course and wearing course. At the same time, using new
technology that can use a larger quantity of old asphalt to produce high-quality new asphalt and thus reduce
the amount of waste, the subsidiary Zagreb Roads will be able to produce different asphalt mixtures for base
and wearing courses with varying gradations. Depending on the source (mineral raw materials or waste), it
will be able to produce traditional asphalt concrete or recycled asphalt.
The aim is to increase the production of asphalt mixtures using 80% of recycled materials and 20% of mineral
raw materials. The remaining 20% of old asphalt waste that cannot be used in the production of recycled
asphalt will be used at the plant of the subsidiary Zagreb Roads for the production of bulk construction
material.
Both plants, or the new asphalt factory, would produce asphalt at a rate of 400 tonnes per hour, with a
targeted annual capacity of 200,000 tonnes. In 2023, the project was in the phase of carrying out preparatory
activities for the procedure for procurement of project and technical documentation, as well as the preparation
of a study on the feasibility of producing recycled mixtures and a study on the feasibility of producing hot
bituminous mixtures using recycled asphalt aggregate.
LoRaWAN project
LoRaWAN is a low-power, wide area networking protocol built on top of the LoRa radio modulation technique.
It wirelessly connects devices to the internet and manages communication between end-node devices and
network gateways. Usage of LoRaWAN in industrial spaces and smart cities is growing because it is an
affordable long-range, bi-directional communication protocol with very low power consumption — devices
can run for ten years on a small battery. It uses the unlicensed ISM (Industrial, Scientific, Medical) radio
bands for network deployments.
The project includes the construction of infrastructure and a telephone narrowband network consisting of
600–900 transmitters. Once established, the network can be used for sensor technology that will be able to
collect information to improve the Group’s services.
During 2023, the project was in the procurement preparation phase. The establishment of a communication
network for remote gas and water meter reading is expected to begin in 2024. The complete communication
network is planned to be finished by the end of 2025. The upgrade of water meters and gas meters with
modules that allow remote reading is planned to begin in 2024.
Public garage
The purpose of the project is to reduce congestion in public street parking areas to improve the safety of all
road users (pedestrians, cyclists, drivers). The garage will be located in Klaićeva Ulica street, with a planned
capacity of 800 parking spaces. Indicative actions include the preparation of a feasibility study, project and
technical documentation and construction works. This project would free up spaces that were previously used
for parking, leading to an improved urban environment and promoting sustainable transportation options,
such as walking, cycling and public transport, consequently reducing traffic congestion and encouraging
sustainable mobility.
In 2023, a pre-investment study was made, along with the terms of reference for the preparation of project
documentation. In early 2024, a public procurement procedure was announced for the preparation of project
and technical documentation. The planned implementation period is 36 months.
33
The Group’s strategic projects that were in the preparatory phase during 2023 include:
1. Construction of southern arcades at Mirogoj Cemetery
The primary goal of the project is to expand the capacity of the Mirogoj Cemetery and properly develop the
area located in its southern peripheral part, leading to a better use of the existing protected cultural heritage.
The project involves a stretch approximately 1,050 meters long, south of the existing Herman Bolle’s arcades,
where the construction of a columbarium enclosure wall and new southern arcades is planned. A service yard
for the technical services department and a parking zone with 194 parking spaces is also planned to be
constructed as part of this project.
The project would provide additional 440 burial plots and 3,462 niches, which would resolve the problem of
a shortage of burial spaces at the Mirogoj Cemetery for a certain period of time.
2. Park&Ride
The project concerns the use of large parking lots connected to the public city transport by integrating parking
permits with ZET’s public transport permits. The aim is to reduce traffic in the city and encourage the use of
public transport.
3. Logistics and Distribution Centre (LDC) for fruits, vegetables and food products
Construction of the Logistics and Distribution Centre for consolidating multiple business processes, including
expanding production by establishing a sorting and packaging facility and increasing leasing capacity for
interested organisations.
4. Revitalisation, renovation and construction of Zagreb’s markets
Improving public city markets with more features to promote cultural and food tourism. The scope of the
project includes roofing the market areas and adding new complexes with sports/recreation and
creative/educational facilities. The construction of a new market in Vrapče and renovation of the Trešnjevka,
Utrine and Dolac markets is planned in 2024. The plan is also to prepare a comprehensive, complete and
unified strategy for the development of all markets in Zagreb, providing a foundation for future planned
construction, renovation or revitalisation of individual markets.
2023 MANAGEMENT
REPORT AND BUSINESS
ANALYSIS
VI
35
PERFORMANCE
In 2023, the Zagreb Holding Group generated a profit of EUR 16.34 million. Considering an increase in
operating income of 22% against an increase in operating expenses at a rate of 18%, operating profit
(EBIT) in 2023 was EUR 37.92 million, with positive EBITDA of EUR 92.07 million. Financing activities
produced a loss of EUR 20.49 million, which is a 69% increase compared to 2022, in line with the long-
term borrowing in Q4 2022 and the higher interest rate on bonds (bond issuance from July 2023 – 4.9%;
bond issuance from July 2016 – 3.875%).
Description
Jan-
Dec/2023
Jan-
Dec/2022
restated
Change
EUR 000
EUR 000
in %
1
2
3
4=2/3
Operating income
786,392
645,382
22%
Operating expenses
(748,471)
(632,287)
18%
Finance income
16,839
16,619
1%
Finance expenses
(37,324)
(28,720)
30%
Total income
803,231
662,001
21%
Total expenses
(785,795)
(661,007)
19%
Profit before tax
17,436
994
Tax (expense)
(1,094)
(595)
Profit for the year
16,342
399
OTHER COMPREHENSIVE INCOME
Items that will never be reclassified to profit or loss
Real estate revaluation gains (net)
4,990
206
Profit from valuation of available-for-sale financial assets
(net)
3,073
82
Tax on other comprehensive income
(1,451)
(52)
Items that can be reclassified to profit or loss
-
-
Profit based on effective cash flow hedges
(758)
-
Effect of changes in foreign exchange rates
-
(1,146)
Tax on other comprehensive income
136
-
TOTAL COMPREHENSIVE INCOME / (LOSS) FOR
THE YEAR
22,332
(511)
EBIT
37,921
13,095
190%
EBITDA
92,073
68,258
35%
Loss from financing activities
(20,485)
(12,101)
69%
REVENUES
In 2023, total revenues amounted to EUR 803.23 million, increasing by EUR 141.23 million (21%) year
over year.
Sales revenue amounted to EUR 591.38 million (2022: EUR 564.98 million), while other operating income
was EUR 195.01 million (2022: EUR 80.40 million). Total year-over-year increase in sales revenue was
EUR 26.40 million (5%), while the increase in other operating income was EUR 114.61 million (143%).
The most significant increase in sales revenue pertained to (i) gas supply and distribution, amounting to
EUR 12.77 million, due to a 16% increase in sales prices for households applicable from 1 June 2023;
(ii) cleaning and waste collection, amounting to EUR 7.85 million due to the introduction of a new
municipal waste disposal model and the new price list applicable to municipal services for maintaining
the cleanliness of public areas in the City of Zagreb; (iii) medication sales, amounting to EUR 8.76 million,
due to increasing demand for prescription and over-the-counter medications.
36
Sales revenue decreased in the following segments: (i) public road management and maintenance, in
the amount of EUR 8.62 million, as a result of lower revenues from the Budget of the City of Zagreb,
since revenue from the disposal of construction waste caused by the earthquake (EUR 27.17 million) was
recognised in 2022. If this one-off effect is excluded, the subsidiary generated higher revenues from its
operating activities by EUR 18.39 million due to a larger volume of works performed as part of the
asphalting programme, works on unclassified roads, and works performed as part of the municipal
activities programme.
Other operating income increased mostly due to the Croatian Government’s subsidy for electricity costs
and the collection of value-adjusted interest receivables and the short-term portion of loans to the related
companies ZET Ltd. and CHMSC Ltd.
EXPENSES
In 2023, operating expenses amounted to EUR 748.47 million, representing an increase of EUR 116.18
million (18%) compared to 2022.
This increase resulted from (i) higher costs of goods sold in the amount of EUR 80.10 million – incurred
by the company ZCG–S (EUR 73.07 million) due to an increase in the purchase price of gas for public
gas supply services, and by the institution Zagreb City Pharmacies (EUR 6.25 million) due to more
medications sold; (ii) higher costs of raw materials and supplies (EUR 26.86 million) caused by a larger
volume of works in the segment of municipal activities and water distribution; and (iii) higher staff costs
in accordance with the job classification carried out at the subsidiaries and in line with the benefits arising
from the ZGH Group’s Collective Bargaining Agreement.
Value adjustment costs decreased due to less value adjustment of non-current and current assets.
37
STATEMENT OF FINANCIAL POSITION
A condensed statement of assets, equity and liabilities derived from the Statement of Financial Position as at
31 December 2023 compared to the balance as at 31 December 2022 is presented below.
Share
Share
Rate of
change
2023/2022
Description
31 Dec 2023
31 Dec 2022
restated
In EUR 000
%
In EUR 000
%
%
Non-current assets
1,714,275
81%
1,744,323
85%
-2%
Current assets
405,625
19%
310,265
15%
31%
Total assets
2,119,900
100%
2,054,588
100%
3%
Equity
642,559
30%
620,632
30%
4%
Non-current liabilities
1,144,900
54%
895,919
44%
28%
Current liabilities
332,441
16%
538,037
26%
-38%
Total equity and liabilities
2,119,900
100%
2,054,588
100%
3%
As at 31 December 2023, the Group’s total assets amounted to EUR 2,119.90 million, representing an
increase of EUR 65.31 million compared to 31 December 2022. Non-current assets decreased by EUR
30.05 million (2%) due to (i) a decrease in property, plant and equipment due to derecognition of non-
current assets and reclassification to investment property, which, with the effect of the increase in fair
value, consequently increased by EUR 31.79 million; and (ii) a decrease in non-current receivables
amounting to EUR 23.65 million due to lower receivables from the member of the company. The value
of current assets increased by EUR 95.36 million (31%) due to higher (i) trade receivables and other
receivables related to the increase in receivables from the Republic of Croatia based on the Amendments
to the Regulation on Elimination of Disturbances in the Domestic Energy Market regulating the right of
the gas supplier supplying the gas supplier obligated to provide public services, or of the gas supplier
obligated to provide public services, to receive compensation for price differences, under which the
company ZCG–S claims the amount of EUR 81.80 million for three quarters; (ii) balance of cash and cash
equivalents in the amount of EUR 41.38 million and lower receivables from affiliated companies –
member of the company in the amount of EUR 27.82 million due to the collection of receivables from
the City of Zagreb from 2022 arising from managing construction waste caused by the earthquake.
In the structure of equity and liabilities, equity increased by the current year’s profit. Non-current
liabilities increased by EUR 248.98 million due to lower loan payables and reclassification to current
liabilities (EUR 55.70 million) and new bond issuance (EUR 302.62 million). Old bonds that matured on
15 July 2023 were recognised as at 31 December 2022 as current liabilities, which decreased with the
issuance of new bonds. In addition, under the Group’s current liabilities, trade payables increased by
EUR 86.55 million due to obligations related to the company ZCG–S. Because of these deviations, current
liabilities decreased by EUR 205.60 million.
OTHER STATEMENTS
Pursuant to Article 21a, paragraph 8, item (b) of the Accounting Act, the standalone non-financial report
will be published on the Company’s website www.zgh.hr.
MOST SIGNIFICANT RISKS
TO WHICH THE GROUP
IS EXPOSED
VII
39
The risk management framework, as an important segment of business sustainability, supports strategic
priorities, at the same time ensuring financial security and flexibility. In 2023, the Company carried out
organisational restructuring and established an organisational structure with clearly defined authorities and
responsibilities. This process further improved risk management practices at all levels of the organisation,
with an appropriate system of internal controls that allows not only for monitoring and mitigating risks, but
also for improving decision-making processes, ensuring that all operations are aligned with strategic goals
and regulatory requirements. Moreover, the Company further stabilised its financial operations by refinancing
the existing bond with a sustainability-linked instrument.
Due to its specific corporate and management structure as well as the scope and diversity of the services it
provides, the Group faces numerous risks, which was particularly evident over the last three years. The storm
that hit Zagreb in July 2023 brought climate risks and crisis-related risks to the fore, also highlighting the
risks related to the Company’s resilience, i.e. its capacity to take timely action and restore normalcy as quickly
as possible.
In 2023, business operations continued to be directly affected by inflation, primarily on the cost side. The
Company and the Group felt this impact through changes in prices achieved via public procurement processes
and through the continuing support for socially sensitive policies of the City of Zagreb, ensuring that these
effects are not passed on to citizens, thereby affecting limitations in the ability to adjust the prices of municipal
services, changes in the waste management model and the risk of stagnation in the Group’s operating income.
The Group’s operations are also constantly affected by regulatory risks, which also have a direct impact on
operating income.
As a provider of services of general economic interest, the Group’s operations are regulated by numerous
laws and subordinate legislation. Therefore, the Group is exposed to dynamic changes in legislation and the
regulatory framework. The prices of individual activities of the Group are influenced by regulators and the
City of Zagreb as a local self-government unit. Some of the activities of the Group, including the pricing of
services based on such activities, are managed by regulatory bodies of the Republic of Croatia, such as the
Croatian Energy Regulatory Agency (HERA), whereas others are under the significant influence of the City of
Zagreb. On the other hand, the costs of providing these services are under the influence of the market, where
prices can vary on a weekly or a monthly basis. Segments of the Group’s operations that are most affected
by regulatory influence are gas supply and waste management, i.e. operations of the related company ZCG–
S and subsidiary City Waste Disposal.
The Company finds the potential for annulling negative financial consequences of regulatory and
macroeconomic – mostly inflationary – changes primarily in responsible corporate governance and relying on
synergy between all subsidiaries.
The organisational restructuring that has been carried out has provided the foundation for financial
stabilisation by refinancing existing financial instrument obligations, which made it possible to control risks
associated with financial stability. Financial risk management involves, above all, the management of interest
rate risk, credit risk and liquidity risk.
The Group’s interest rate risk arises from long-term loans and leases, and bonds issued. Since most of the
long-term interest-bearing debt is contracted with a fixed interest rate through a bond, and since a derivative
instrument has been arranged as an active hedge against interest rate risk until 31 December 2025 for the
remaining portion of the interest-bearing debt linked to a variable interest rate, the Group’s exposure to cash
flow interest rate risk has been minimised. On the other hand, the Company is potentially exposed to fair
value interest rate risk. Since the Group has no significant interest-income-generating assets, the Group’s
revenues and cash flow from operating activities are not significantly dependent on changes in market interest
rates. The Group continuously monitors changes in interest rates, taking into account potential refinancing
and alternative financing options. Based on that, the Group calculates the impact of interest rate changes on
its profit and loss account.
The Group’s assets subject to credit risk primarily include cash, trade receivables and other receivables. The
Group is not significantly exposed to credit risk, considering that it maintains a high level of collection for its
services from the City of Zagreb and from its customers.
Liquidity risk at the Parent Company and Group member level is managed by continuously monitoring the
planned cash flow, comparing it against the actual inflow and outflow of cash, and making adjustments as
required. The Parent Company and Group members manage this risk further by ensuring a sufficient amount
of cash reserves and availability of funds, as required, by taking out special-purpose lines of credit. On the
other hand, the Group settles all its liabilities by the due date, and by utilising the synergistic effects of its
wide range of services, it also affects revenue growth and reduction of external service costs. Also, by
commercialising and/or selling non-operating assets, it intends to decrease indebtedness and increase
liquidity.
40
MATERIALISED BUSINESS RISKS
Dealing with the aftermath of the storm
In July 2023, Zagreb was struck by a devastating windstorm. In coordination with city services, the Group
engaged the subsidiaries Zrinjevac, City Waste Disposal, Zagreb Roads and the company WSD, using all
available machinery in public areas to deal with the aftermath of the storm. Following the materialisation of
this climate risk, the Group also addressed its resilience risk and business continuity plans, i.e., its ability to
adopt better practices for preventing future risks and building a resilient system.
Landslide at Jakuševec landfill
In November and December 2023, a waste landslide occurred at the Prudinec–Jakuševec landfill. It is a
landfill site being constructed in accordance with its building permit, holding all operating permits and an
environmental permit that specifies the activities and control measures for the landfill’s operations.
Landfilling works are performed by the contractor in line with the project documentation and an expert site
inspector supervises the contractor’s work in accordance with the Building Act.
The cause of the landslide is still unknown, and preparations for an investigation program (carried out as
an integral part of the evidence collection process) are currently underway to understand the underlying
condition of the landfill and determine the cause and circumstances leading to the landslide.
Jakuševec composting facility:
Due to the landslide at the northern part of the Prudinec/Jakuševec waste landfill, one part of the Prudinec
composting facility has been disabled. Since that day, the Prudinec composting facility has been out of order
and all bio-waste recovery is performed at the Markuševac composting facility.
In December 2023, the Company obtained a waste management permit for the Markuševac composting
facility to recover waste containing higher amounts of green waste.
CORPORATE
GOVERNANCE
STATEMENT
VIII
42
The Company devotes careful attention to corporate governance, which represents a significant factor in the
Company’s business operations, providing an incentive for the Management Board and the Supervisory Board
to fulfil the interests and ensure the protection of stakeholders, service users and the Company as a whole.
The Code of Corporate Governance of the company Zagreb Holding Ltd. was enacted by the following
Company bodies: Management Board on 23 December 2015, Supervisory Board on 11 May 2016, and the
Company’s General Assembly on 12 May 2016. The Code is published on the Company’s website.
The purpose of the Code is to establish, maintain and further enhance high standards of corporate governance
and business transparency to ensure efficient business operations and responsible resource management for
the development of the company Zagreb Holding Ltd., all in the best interest of citizens of Zagreb as users
of municipal and public services, as well as of all other interest and influence groups and stakeholders with
which the Company and Group engage in business and legal transactions.
In the financial year 2023, the Company essentially complied with and implemented the recommendations
set forth by the Code, publishing all information the publication of which is required under the applicable
regulations and the publication of which is in the best interest of investors and all stakeholders.
Management and management organisation
The Company has the following bodies: Management Board, Supervisory Board and General Assembly.
Company’s General Assembly
The Company’s Assembly is composed of the City of Zagreb as the sole member of the Company. In 2023,
the Assembly consisted of the following members pursuant to the
Conclusion on the Representatives of the
City of Zagreb in the Assemblies of the Company Zagreb Holding Ltd., where the City of Zagreb is the 100%
owner
, since 7 June 2021:
- Tomislav Tomašević,
- Danijela Dolenec, and
- Luka Korlaet.
The Company Assembly normally convenes once a year. However, the Assembly must also convene whenever
this is required by the Company’s interests as well as in cases prescribed by the law or the Company’s Articles
of Association. The Company Assembly adopts decisions on the Company’s financial statements; use of profit
and loss coverage; alienation and encumbrance of the Company’s real estate; investments in the development
and construction of new facilities and investments in other companies; the Company’s annual operational
plan; increase or reduction in the Company’s share capital; appointment and dismissal of Management Board
members; appointment and dismissal of Supervisory Board members; status changes; amendments to the
Articles of Association and winding up of the Company. In addition to these matters, the Assembly also
decides upon any other issues falling under its scope of authority pursuant to the applicable laws, the
Company’s Articles of Association and other by-laws.
The Company’s Assembly is convened by the Management Board in the manner and within the time limit
specified by law. The Assembly may also be convened by the Supervisory Board in cases prescribed by law
or the Company’s Articles of Association, as well as by the member of the Company.
The Assemblies of the Group’s related companies, whose founder and sole holder of interests is Zagreb
Holding Ltd., consist of Zagreb Holding Ltd. as the sole member.
Supervisory Board
The Supervisory Board supervises the management of the Company’s operations in accordance with the
Companies Act, the Company’s Articles of Association, Rules of Procedure of the Supervisory Board and other
applicable regulations.
The Company’s Assembly elects and dismisses the members of the Supervisory Board, who are appointed for
a four-year term. One member of the Supervisory Board serves as a representative of the workers and is
elected and dismissed in line with the provisions of the Labour Act. Members of the Supervisory Board
regularly receive detailed information and reports about the Company’s state, management and activities in
order to be able to efficiently fulfil their obligation of supervising the management of the Company’s
operations.
The Supervisory Board’s report on performed supervision of the Company management is an integral part of
the Company’s annual reports that are submitted to the Company Assembly.
43
In 2023, the Supervisory Board of the Company had the following structure:
- Suzana Brenko (since 14 June 2021),
- Ratko Bajakić (from 14 June 2021 to 13 February 2023),
- Damir Topić (from 14 June 2021 to 21 December 2023),
- Kristijan Starčević (since 13 February 2023),
- Andro Pavuna (since 22 December 2023),
- Martina Jurišić (since 22 December 2023),
- Željko Matijašec (since 22 December 2023).
Meetings of the Supervisory Board are called as needed, in accordance with the Company’s business
challenges. The President of the Supervisory Board convenes and presides at the meeting of the Supervisory
Board. The President may convene the meeting on his own initiative, at the request of a Supervisory Board
member or at the suggestion of the Company’s Management Board. Supervisory Board meetings must be
convened at least once in a quarter. If necessary or when required by authorised persons, they may be
convened more often, which is the practice of the current Supervisory Board. Meetings are called to discuss
different topics and are not limited to the topics set forth by the Articles of Association and legislation. For
this reason, no annual work plan of the Supervisory Board had been adopted. Instead, there is a general plan
to hold meetings once a month (every third Tuesday) in order to ensure timely discussion of current
challenges and risks to which the Company is exposed. In case of an emergency, meetings can also be held
over the phone. The functioning of the Supervisory Board is defined by the Rules of Procedure of the
Company’s Supervisory Board.
Audit Committee – a subcommittee of the Supervisory Board
In addition, the Supervisory Board exercises internal control and supervision through the Audit Committee,
which provides expert support to the Supervisory and Management Board required for them to efficiently
fulfil the obligations of corporate governance, risk management, financial reporting and control of the
Company.
The Audit Committee is an expert advisory body of the Supervisory Board consisting of Supervisory Board
members and/or members appointed by the Supervisory Board. It assists the Supervisory Board in its work
and, in accordance with legal regulations and internal policies, performs tasks associated with financial
reporting, internal auditing and internal control system. In addition, the Audit Committee also monitors the
effectiveness of external audit activities as well as their independence and objectivity. The functioning of the
Audit Committee is defined by the Rules of Procedure of the Audit Committee of Zagreb Holding. The Audit
Committee consists of four members, one of whom is also a member of the Supervisory Board.
Management Board
The Company’s Management Board manages the Company’s affairs independently and on its own
responsibility, making all decisions based exclusively on its own judgment. The Management Board must
always act exclusively to the benefit of the Company, taking into account the interests of the employees and
broader community in order to increase the value of the Company’s assets.
When managing the Company’s affairs, the Management Board has the authority to: plan and program the
Company’s business operations, analyse the market, develop the Company’s investment program, oversee
the Company’s funds, implement the decisions of the General Assembly, ensure the Company’s liquidity and
take measures to improve it, review the Company’s business report during the financial year, submit the
Company’s business reports to the Supervisory Board in accordance with the Companies Act, convene General
Assembly meetings, propose profit distribution and measures to cover losses, and perform other tasks
stipulated by law and the Articles of Association.
In 2023, the Management Board of the Company had the following structure:
- Ivan Novaković – Member/President of the Management Board (since 3 September 2021),
- Matija Subašić-Maras – Member of the Management Board (since 15 September 2021),
- Boris Sesar – Member of the Management Board (from 3 September 2021 to 31 March 2023),
- Dubravko Karačić – Member of the Management Board (since 13 December 2021), and
- Damir Novinić – Member of the Management Board (since 1 August 2023).
44
Members of the Management Board are appointed for a four-year term.
The Management Board manages the Company’s operations in line with the Articles of Association and legal
regulations. Members of the Management Board represent the Company individually and independently,
unless a special decision by a member of the Company requires a member of the Management Board to
represent the Company jointly with other members of the Management Board or jointly with one other
member who is authorised to represent the Company independently and individually. If more than one
member of the Management Board is appointed, one of them shall be appointed president of the Management
Board. The scopes of authority of the members of the Management Board are defined by a special decision
of the Company Assembly.
The Management Board is responsible for ensuring that the Company maintains business and other books
and business documentation, prepares bookkeeping documents, makes realistic evaluations of its assets and
liabilities and compiles financial and other statements in line with accounting regulations and standards and
with valid laws and regulations.
Over the course of the financial year, the Management Board submits reports on the Company’s operations
to the Supervisory Board in accordance with the Companies Act.
Responsibility of the heads of subsidiaries and Management Boards of related companies
Heads of subsidiaries of the company Zagreb Holding Ltd., members of the Management Boards of related
companies and heads of related institutions are responsible for the operations of the subsidiaries, related
companies and institutions and for the performance of all duties and tasks falling under the scope of the
operations of the subsidiaries, related companies and institutions, as well as for the accuracy of all financial
data submitted to the Company.
Heads of subsidiaries of the company Zagreb Holding Ltd., members of the Management Boards of related
companies and heads of related institutions must prepare a proposal for the annual business and service
provision plan for the subsidiaries, related companies and institutions under their management; they must
operate within the scope of the adopted annual plans and may not deviate from the planned financial values;
and they must report these matters to the Company’s Management Board and the General Assembly of the
related companies on a quarterly basis.
The responsibilities and obligations of members of the related companies are defined in the Articles of
Association of each related company.
Internal control system
The Company ensures the efficiency of the internal control system in financial reporting, consisting of different
records and methods implemented to initiate, identify, analyse, classify and record business events, including
all measures and procedures to be implemented in connection with the accounting statement of business
events and compilation of reliable financial statements.
The Internal Audit Department is in charge of reviewing the efficiency of the internal control system which
organises and supervises the flow of accurate, concrete and integral information about the Company. The
Company engages independent external auditors as an important corporate governance instrument to ensure
that the financial statements adequately provide a true and fair view of the Company’s overall position. The
Company carries out continuous internal control system monitoring and assessment activities, including:
conducting a self-assessment process at least once a year, in accordance with the regulations governing the
submission of the Fiscal Responsibility Statement; activities of the Internal Audit Department, whose primary
task is to evaluate the internal control system in accordance with the Act on the Internal Control System in
the Public Sector; implementing recommendations given by the Department; and implementing orders and
suggestions from external auditors — the State Audit Office and commercial audits.
Diversity policy
As regards the implementation of the diversity policy, the Company’s primary objective is to ensure the
application of the principle of equal opportunities and diversity in all processes and functions and to integrate
it into the day-to-day decision-making process. In this context, special importance is attached to implementing
anti-discrimination measures, ensuring equality among people irrespective of age, gender, ethnic, national or
any other group to which they belong, and to building an inclusive work environment. In order to ensure the
implementation of the diversity policy as one of the elements of corporate social responsibility, the Company
adopted the Code of Conduct as a legal framework and established the Ethics Committee. Moreover, for the
purpose of protecting potential whistle-blowers, the Company has also appointed an Irregularities Officer and
Deputy Irregularities Officer and adopted the Policy on Whistleblowing and Appointing an Irregularities Officer
and Deputy Irregularities Officer. The Ethics Committee and the Irregularities Officer, each within the scope
of their competence, have the task to identify actions that represent discrimination on any basis and to
propose sanctions for such behaviour.
45
Special attention is devoted to the protection and promotion of the rights of persons with disabilities. The
Company is one of the entities responsible for the implementation of measures and activities as prescribed
by the 2022–2025 Zagreb Strategy for Equalisation of Opportunities for Persons with Disabilities. The aim of
these measures and activities is to ensure complete integration of persons with disabilities through their
integration into important public spheres of life by allowing them to participate on equal terms in the political,
public and cultural life; through their integration into educational processes; into labour market; health and
rehabilitation system; social protection; legal protection and protection against violence; into research,
development, etc. One of the elements identified in the Strategy – vocational rehabilitation and employment
– is a key factor for ensuring social inclusion and economic independence of persons with disabilities,
considering that any form of work or employment is a precondition for their integration into an ordinary life
routine.
Conflict of interest and anticorruption
The basic principles of the Code are the following: lawfulness, transparency and public operation;
segregation – clearly defined procedures for the work of supervisory boards, management boards and other
bodies and structures that make important decisions; prevention of conflict of interest; effective internal
oversight; development of personal accountability; corporate social responsibility.
Anticorruption programme
In accordance with the guidelines of the Anti-Corruption Programme for Companies Majority-Owned by Local
and Regional Self-Government Units, adopted by the Ministry of Justice and Public Administration for the
period from 2021 to 2022, on 20 May 2021, the Company’s Management Board adopted the Action Plan for
the Implementation of the Anti-Corruption Programme for Zagreb Holding Ltd. for the period from 2021 to
2022, which it continued to implement in 2023 as well.
The Action Plan was adopted with the aim of strengthening anti-corruption activities and enhancing integrity,
accountability and transparency at the level of Zagreb Holding as a company owned by the City of Zagreb.
The anti-corruption policy is an integral part of the following documents: Code of Corporate Governance of
the Company Zagreb Holding Ltd. with Guidelines for Zagreb Holding Group and the Code of Conduct.
The Company is a member of the anticorruption platform “Zviždač” (“Whistleblower”), established with the
aim of improving anti-corruption activities by making a unified system for reporting irregularities in the work
of city administration bodies and the companies owned by the City of Zagreb.
Besides this platform, irregularities detected at the Group can also be reported to the Irregularities Officer in
accordance with the Policy on Whistleblowing and Appointing an Irregularities Officer and Deputy
Irregularities Officer and in accordance with the Whistleblower Protection Act.
Conflict of interest
A conflict of interest exists when a member of the Supervisory Board and/or the Management Board is not
impartial regarding a matter under consideration, or when their connections with other companies,
individuals or businesses suggest that they might have interests that are not necessarily aligned with the
interests of the Company and can potentially influence the decision-making process based on interests or
biases that do not necessarily correspond with the Company’s interests. Members of the Supervisory Board
and the Management Board may not make decisions based on personal interests or interests of persons
with whom they have a close relationship.
Also, in the context of public procurement, suppliers must sign a declaration on the existence or absence
of conflict of interest, in accordance with the Public Procurement Act. Based on the declarations, a list of
economic operators with whom contracting authorities may not conclude contracts is made. This list is
available on the Company’s website.
President of the Management Board:
Ivan Novaković
46
STATEMENT OF PERSONS
RESPONSIBLE FOR
PREPARATION OF
FINANCIAL STATEMENTS OF
THE GROUP
IX
47
STATEMENT OF PERSONS RESPONSIBLE FOR PREPARATION OF FINANCIAL STATEMENTS OF
ZAGREB HOLDING GROUP IN ACCORDANCE WITH THE CAPITAL MARKET ACT
We hereby declare that the following is true to our best knowledge:
▪
International Financial Reporting Standards were followed in the preparation of the audited
consolidated financial statements of Zagreb Holding Group for the period from 1 January 2023 to 31
December 2023. The statements give a full and true view of the assets and liabilities, profits and
losses, financial position and operations of the issuer.
▪
Consolidated Management Report of Zagreb Holding Group for the period from 1 January 2023 to
31 December 2023 gives a true view of the development, performance and position of the issuer,
along with a description of the major risks to which the issuer is exposed.
In Zagreb, 26 April 2024
Ivan Novaković
President of the Management Board
Dubravko Karačić
Member of the Management Board
Matija Subašić-Maras
Member of the Management Board
Damir Novinić
Member of the Management Board
CONSOLIDATED ANNUAL
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31
DECEMBER 2023
with Independent
Auditor’s Report
X.
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 49
Page
Responsibility for Consolidated Annual Financial Statements
50
Independent Auditor’s Report
51–59
Consolidated Statement of Comprehensive Income
60
Consolidated Statement of Financial Position
61–62
Consolidated Statement of Changes in Equity
63
Consolidated Cash Flow Statement
64–65
Notes to Consolidated Financial Statements
66–145
ZAGREB HOLDING Ltd. and affiliated companies
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 50
RESPONSIBILITY FOR CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
The Management Board is responsible for ensuring that consolidated annual financial statements of Zagreb Holding
Ltd., Zagreb, Ulica grada Vukovara 41 (“Company”) and its affiliated companies (“the Group”) for 2023 are prepared
in compliance with the International Financial Reporting Standards adopted by the European Union (“IFRS”) so that
they provide a true and fair view of the Group’s consolidated financial position, consolidated performance,
consolidated cash flows and consolidated changes in equity for the relevant period.
The Management Board has a reasonable expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. Consequently, the Management Board has prepared the
consolidated annual financial statements based on the going concern assumption.
In preparing the consolidated annual financial statements, the Management Board is responsible for:
• selecting and consistently applying appropriate accounting policies in accordance with applicable financial
reporting standards;
• making reasonable and prudent judgments and estimates;
• preparing consolidated annual financial statements on a going concern basis unless such basis is
inappropriate.
The Management Board is responsible for keeping proper accounting records which disclose with reasonable
accuracy at any time the Group’s consolidated financial position, consolidated performance, consolidated changes
in equity and consolidated cash flows, as well as for ensuring that the financial statements comply with the Croatian
Accounting Act and the International Financial Reporting Standards as adopted by the European Commission. The
Management Board is also responsible for safeguarding the Group’s assets and hence for taking justifiable steps to
prevent and detect any frauds or other irregularities.
The Management Board is also responsible for the preparation and contents of the Management Report and of the
Corporate Governance Statement in line with the Croatian Accounting Act. The Company’s separate annual financial
statements have been issued separately, at the same time as the consolidated financial statements.
The Management Board approved the publication of consolidated annual financial statements on 26 April 2024.
Ivan Novaković
President of the Management Board
Dubravko Karačić
Member of the Management Board
Matija Subašić-Maras
Member of the Management Board
Damir Novinić
Member of the Management Board
Zagreb Holding Ltd., Zagreb
Ulica grada Vukovara 41
10000 Zagreb
Republic of Croatia
Phone: +385 1 2395 741
Fax: +385 1 2303 691
E-mail: bdo-croatia.hr
BDO Croatia d.o.o.
10000 Zagreb
Radnička cesta 180
Phone: +385 22 218 893
Fax: +385 22 218 796
E-mail: info@sibenskirevicon.hr
Šibenski Revicon d.o.o.
22000 Šibenik
Ulica Stjepana Radića 44a
BDO Croatia d.o.o. Šibenski Revicon d.o.o.
Registered with the Commercial Court in Zagreb Registered with the Commercial Court in Zadar
under No.: 080044149 under No.: 060161790
PIN: 76394522236 PIN: 52321849300
INDEPENDENT AUDITOR’S REPORT
to the Owner of Zagreb Holding Group Ltd. and affiliated companies, Zagreb
Report on the Audit of Consolidated Annual Financial Statements
Qualified Opinion
We have performed an audit of the consolidated annual financial statements of the Zagreb Holding
Group Ltd., Ulica grada Vukovara 41, 10 000 Zagreb (“Group”), which include the Consolidated
Statement of Financial Position as at 31 December 2023, Consolidated Statement of Comprehensive
Income, Consolidated Cash Flow Statement, Consolidated Statement of Changes in Equity for the year
then ended, and Notes to the Consolidated Financial Statements, including information about
significant accounting policies.
In our opinion, except for possible adjustments and with the qualified opinion expressed in the “Basis
for Qualified Opinion” section, the enclosed consolidated annual financial statements give a true and
fair view of the Group’s consolidated financial position as at 31 December 2023, consolidated
financial performance and consolidated cash flows for the year then ended, in accordance with the
International Financial Reporting Standards (IFRS) adopted by the EU.
Basis for Qualified Opinion
Investment property
As stated in Note 19 “Investment property” to the consolidated annual financial statements, as at 31
December 2023, the Group recognised the value of investment property in the amount of EUR 254,198
thousand (31 December 2022: EUR 222,407 thousand), which is measured using the fair value model
in accordance with the requirements of the International Accounting Standard 40 Investment
Property. Said amount includes certain items of investment property in the amount of EUR 180,118
thousand (31 December 2022: EUR 180,118 thousand) for which the Group did not carry out a fair
value measurement in accordance with the International Financial Reporting Standard 13 Fair Value
Measurement for 2023 and 2022. Consequently, during our audit, we did not receive adequate and
appropriate audit evidence to make sure that the recognised value of investment property in the
Consolidated Statement of Financial Position as at 31 December 2023 and 31 December 2022
represents their fair value, and we are unable to determine the effects of adjustments, if any, on
the enclosed consolidated annual financial statements.
Recognition and measurement of property in accordance with the International Accounting Standard
16 Property, Plant and Equipment
As stated in Note 18 “Property, plant and equipment” to the consolidated annual financial
statements, as at 31 December 2023, the Group recognised the value of buildings and residential
buildings in the amount of EUR 739,623 thousand (31 December 2022: EUR 757,251 thousand).
Buildings in the amount of EUR 15,508 thousand, which are an integral part of the aforementioned
amount, are not used by the Group, the Group has no control over them and they have been the
subject of legal disputes for many years. We did not receive adequate and appropriate audit evidence
regarding the future benefits that will be derived from these buildings. This represents a deviation
from the asset recognition requirements under the International Accounting Standard 16 Property,
Plant and Equipment. Consequently, in the Consolidated Statement of Financial Position of the Group
as at 31 December 2023, the value of property, plant and equipment was overstated by EUR 15,508
thousand, revaluation reserves were overstated by EUR 11,298 thousand (31 December 2022: EUR
11,298 thousand) and deferred tax liabilities were overstated by EUR 2,480 thousand (31 December
2022: EUR 2,480 thousand).
52
INDEPENDENT AUDITOR’S REPORT (continued)
Report on the Audit of Consolidated Annual Financial Statements (continued)
Basis for Qualified Opinion (continued)
Non-current receivables and other non-current liabilities
As stated in Notes 23 “Non-current receivables” and 33 “Other non-current liabilities”, as at 31 December
2023, the Group recognised financial assets in the amount of EUR 36,102 thousand and financial liabilities
in the amount of EUR 36,422 thousand (31 December 2022: EUR 43,043 thousand and EUR 43,364 thousand,
respectively), which pertain to receivables and liabilities under loans for apartment buildings where the
Group is the building manager and has the role of a broker in transactions between apartment buildings
and third parties. Said financial assets and financial liabilities do not meet the recognition criteria
prescribed by the International Financial Reporting Standards. Consequently, as at 31 December 2023, the
financial assets were overstated by EUR 36,102 thousand (31 December 2022: EUR 43,043 thousand) and
financial liabilities were overstated by EUR 36,422 thousand (31 December 2022: EUR 43,364 thousand),
while the Group’s accumulated loss was overstated by an expected credit loss in the amount of EUR 321
thousand (31 December 2022: EUR 321 thousand).
We conducted our audit in accordance with the International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the “Auditor’s Responsibilities for the Audit
of Consolidated Annual Financial Statements” section of our Auditor’s Report. We are independent of the
Group in accordance with the International Code of Ethics for Professional Accountants, including the
International Independence Standards issued by the International Ethics Standards Board of Accountants
(IESBA) (IESBA Code) and with other rules of ethics applying to our audit of the consolidated annual
financial statements in the Republic of Croatia, and we have fulfilled our other ethical responsibilities in
accordance with these requirements and the IESBA Code. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our qualified opinion.
Emphasis of Matter
Ownership of properties
As described in Notes 18 “Property, plant and equipment” and 19 “Investment property” to the
consolidated annual financial statements, certain municipal land registers are not completely updated
and do not reflect the status of ownership of properties. The process of registering land and buildings in
land registers is currently in progress. Although the Group possesses relevant documents proving
ownership, there is uncertainty regarding the registration of ownership of assets held. Our qualified
opinion is not modified in respect of this matter.
Related party relationships
We draw attention to Note 23 “Non-current receivables”, 25 “Receivables from related parties” and 36
“Liabilities payable to related companies” to the consolidated annual financial statements, which disclose
balances from related parties. Transactions and balances disclosed in the consolidated annual financial
statements result from the Company’s business model, ownership and governance method. The Company’s
Management Board continuously reviews the business model and related party relationships and,
depending on the results of the review, the amounts disclosed in the consolidated annual financial
statements may be affected. Our qualified opinion is not modified in respect of this matter.
53
INDEPENDENT AUDITOR’S REPORT (continued)
Report on the Audit of Consolidated Annual Financial Statements (continued)
Key Audit Matter
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated annual financial statements of the current period. These matters were addressed
in the context of our audit of the consolidated annual financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters. We have determined the
matter described below to be the key audit matter to be communicated in our Independent Auditor’s
Report:
Key Audit Matter
How We Addressed the Key Audit Matter
Revenue recognition
In 2023, in the Consolidated Statement of
Comprehensive Income, the Group recognised sales
revenue in the amount of EUR 591,378 thousand (for the
year ended 31 December 2022: EUR 564,978 thousand).
Revenues consist of the fair value of the consideration
received or receivables, mostly for the services
provided and products or goods sold in the Group’s
regular course of business. Revenues are recognised net
of value added tax, quantity discounts and sales
discounts.
The Group’s sales revenue includes different types of
activities, as stated in Note 7 “Segment information”.
Also, the characteristic of most of the aforementioned
activities is that revenues consist of a large number of
transactions that individually have a low value, in line
with the Group’s activities and business model.
In accordance with the International Financial
Reporting Standard 15 Revenue from Contracts with
Customers, sales revenue is recognised when the Group
has provided a service, delivered goods to the
customer, when it no longer affects control of the
goods, and when there is no unfulfilled obligation that
could affect the customer’s acceptance of the
products.
Delivery is complete when products are shipped to a
designated location, risks of loss have transferred to the
customer, and when one of the following conditions has
been met: the customer has accepted the products in
accordance with the contract, or the deadline for the
acceptance of the products has expired, or the Group
has objective evidence that all acceptance criteria
have been satisfied.
Our audit procedures related to this area
included, among other things:
- Gaining an understanding of the sales process
by interviewing key sales personnel;
- Gaining an understanding of key controls
related to the recognition of sales revenue;
- Examining the design and operational
effectiveness of key controls
related to the accuracy and consistency of
revenue recognition;
- Performing tests of details on a sample in
order to identify unusual or irregular items
and the correct allocation of revenue
between reporting periods;
- Comparison of external confirmations of the
amount of trade receivables based on a
sample as at the reporting date and the
balances disclosed in the Group’s books as at
the same date.
- Assessment of compliance of the sales
revenue recognition policy with the
International Financial Reporting Standard
15 Revenue from Contracts with Customers;
54
INDEPENDENT AUDITOR’S REPORT (continued)
Report on the Audit of Consolidated Annual Financial Statements (continued)
Key Audit Matter (continued)
Key Audit Matter (continued)
How We Addressed the Key Audit Matter
(continued)
Revenue recognition (continued)
Considering the significance of sales revenue
recognised in the Consolidated Statement of
Comprehensive Income and the revenue recognition
risk, we have concluded that the accuracy of revenues
recognised based on transactions, appropriateness of
the allocation of total transaction value among several
elements in a transaction package, completeness of
revenues recognised based on reliance on the collection
system in certain parts, and recognition in the correct
reporting period represent the key audit matters.
Related disclosures in the consolidated annual financial
statements
See Notes 3q) and 6 to the consolidated annual financial
statements.
Our audit procedures related to this area
included, among other things (continued):
- Assessment of the adequacy of disclosures
related to sales revenue recognition in
accordance with the International Financial
Reporting Standard 15 Revenue from
Contracts with Customers.
Other Matter
Audit of the consolidated annual financial statements for the year ended 31 December 2022
The consolidated annual financial statements of the Group for the year ended 31 December 2022 were
audited by another auditor, who expressed an unmodified opinion about the statements on 17 April 2023.
Non-financial report for the year ended 31 December 2023
We draw attention to the Management Report of the Group, where the website on which the Group’s
standalone non-financial report will be published has been specified, in accordance with Article 21a,
paragraph 8, item (b) of the Accounting Act. Our opinion is not modified in respect of this matter.
55
INDEPENDENT AUDITOR’S REPORT (continued)
Report on the Audit of Consolidated Annual Financial Statements (continued)
Other Information
Management is responsible for the other information. Other information include the Management Report
and Corporate Governance Statement included in the Annual Report, but does not include the consolidated
annual financial statements and our Independent Auditor’s Report thereon. Our opinion on the
consolidated annual financial statements does not cover other information.
In connection with our audit of the consolidated annual financial statements, our responsibility is to read
the other information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated annual financial statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated.
With respect to the Management Report and Corporate Governance Statement, we also performed
procedures required by the Accounting Act. These procedures involve verifying whether the Management
Report has been prepared in accordance with Articles 21 and 24 of the Accounting Act, whether the non-
financial report has been prepared in accordance with Article 21a of the Accounting Act and whether the
Corporate Governance Statement contains information specified in Article 22 of the Accounting Act. Based
on the procedures performed, to the extent determinable by us, we hereby report that:
1. the information indicated in the enclosed Management Report and Corporate Governance
Statement complies, in all material respects, with the enclosed consolidated annual financial
statements;
2. the enclosed Management Report has been prepared in accordance with Articles 21 and 24 of the
Accounting Act;
3. the enclosed Corporate Governance Statement includes the information specified in Article 22 of
the of the Accounting Act;
4. After we have read the standalone non-financial report, if we conclude that it contains a
material misstatement, we are required to communicate the matter to those charged with
governance of the Group.
Based on our knowledge and understanding of the Group’s operations and its surroundings acquired by us
while performing the audit of the consolidated annual financial statements, we are obligated to report
any finding of significant misstatements in the enclosed Management Report and Corporate Governance
Statement. We have nothing to report in this respect, except as stated in the “Basis for Qualified Opinion”
section.
Responsibilities of the Management Board and Those Charged with Governance for the Consolidated
Annual Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated annual financial
statements in accordance with the International Financial Reporting Standards and for such internal
control as management determines is necessary to enable the preparation of consolidated annual financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated annual financial statements, management is responsible for assessing the
Group’s ability to continue as a going concern, for disclosing, where applicable, matters related to its
treatment as a going concern, and for using the going concern basis of accounting unless management
either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
56
INDEPENDENT AUDITOR’S REPORT (continued)
Report on the Audit of Consolidated Annual Financial Statements (continued)
Auditor’s Responsibilities for the Audit of Consolidated Annual Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated annual financial
statements as a whole are free from material misstatement, whether due to fraud or error, and to issue
an Independent Auditor’s Report that includes our opinion. Reasonable assurance is a high level of
assurance, but it is not a guarantee that an audit conducted in accordance with ISAs will always detect a
material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these consolidated annual financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional
scepticism throughout the audit. We also:
▪ Identify and assess the risks of material misstatement of the consolidated annual financial
statements, whether due to fraud or error, design and perform audit procedures responsive to
those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
▪ Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
▪ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
▪ Determine the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, determine whether there is any material uncertainty
related to events or circumstances that may cast significant doubt on the Group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required to
draw attention in our Auditor’s Report to the related disclosures in the consolidated annual
financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our Auditor’s Report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
▪ Evaluate the overall presentation, structure and content of the consolidated annual financial
statements, including the disclosures, and whether the consolidated annual financial statements
represent the underlying transactions and events in a manner that achieves fair presentation.
▪ We obtain sufficient appropriate audit evidence regarding the financial information of the entities
and business activities within the Group to express an opinion on the consolidated annual financial
statements. We are responsible for the direction, supervision and performance of the Group audit.
We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, amongst other matters, the planned
scope and timing of our audit as well as significant findings, including any significant deficiencies in
internal control that we identify during our audit.
57
INDEPENDENT AUDITOR’S REPORT (continued)
Report on the Audit of Consolidated Annual Financial Statements (continued)
Auditor’s Responsibilities for the Audit of Consolidated Annual Financial Statements (continued)
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, actions
taken to eliminate threats or safeguards applied.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated annual financial statements of the current
period and are therefore the key audit matters.
We describe these matters in our Auditor’s Report unless law or regulation precludes public disclosure
about the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our Auditor’s Report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
On 25 September 2023, the General Assembly of the Group appointed us to audit the consolidated annual
financial statements for 2023.
As at the date of this Report, we have been engaged to carry out a statutory audit of the Group’s
consolidated annual financial statements for the first time for 2023, which represents a one-year
engagement.
In the audit of the Group’s consolidated annual financial statements for 2023, we determined materiality
for the consolidated annual financial statements as a whole in the amount of EUR 4,260 thousand, which
is approximately 2% of the sales revenue generated in 2023. We chose sales revenue as the benchmark for
determining materiality because, in our view, it is the most appropriate benchmark to measure the
Group’s performance.
Our audit opinion is consistent with the additional report to the Group’s Audit Committee prepared in
accordance with the provisions of Article 11 of Regulation (EU) No. 537/2014.
During the period between the start date of the audited consolidated annual financial statements of the
Group for 2023 and the date of this Report, we did not provide prohibited non-audit services to the
Company and the companies controlled by it, nor did we provide services of designing and implementing
internal control or risk management procedures related to the preparation and/or control of financial
information or services of designing and implementing financial information technology systems in the
financial year preceding the aforementioned period, and we maintained independence from the Group
during the performance of the audit. In accordance with Article 11 of Regulation (EU) No. 537/14, this
information is provided in the additional report to the audit committee.
Report based on the requirements of Commission Delegated Regulation (EU) 2018/815 supplementing Directive
2004/109/EC of the European Parliament and of the Council with regard to regulatory technical standards on the
specification of a single electronic reporting format
Report on the auditor’s assurance about compliance of financial statements, prepared under the provisions
of Article 462, paragraph 5 of the Capital Market Act (Official Gazette 65/18, 17/20, 83/21 and 151/22)
by applying the requirements of the Commission Delegated Regulation (EU) 2018/815, establishing a single
electronic reporting format for issuers (ESEF Regulation)
58
INDEPENDENT AUDITOR’S REPORT (continued)
Report on the Audit of Consolidated Annual Financial Statements (continued)
Report on Other Legal and Regulatory Requirements (continued)
Report based on the requirements of Commission Delegated Regulation (EU) 2018/815 supplementing Directive
2004/109/EC of the European Parliament and of the Council with regard to regulatory technical standards on the
specification of a single electronic reporting format (continued)
We have carried out this engagement with reasonable assurance about whether the consolidated annual
financial statements prepared for the purpose of public disclosure under Article 462, paragraph 5 of the
Capital Market Act, which are contained in the enclosed electronic file zagrebackiholding-2023-12-31-hr,
have been prepared in accordance with the requirements of the ESEF Regulation in all material respects.
Responsibilities of Management and Those Charged with Governance
The Group’s Management Board is responsible for the preparation and content of consolidated annual
financial statements in accordance with the ESEF Regulation.
The Company’s Management Board is also responsible for maintaining an internal control system that
provides reasonable assurance about the preparation of consolidated annual financial statements without
material non-compliance with the requirements of the ESEF Regulation, whether due to fraud or error.
The Group’s Management Board is responsible for the preparation and content of consolidated annual
financial statements in accordance with the ESEF Regulation.
The Company’s Management Board is also responsible for maintaining an internal control system that
provides reasonable assurance about the preparation of consolidated annual financial statements without
material non-compliance with the requirements of the ESEF Regulation, whether due to fraud or error.
The Group’s Management Board is also responsible for:
- public disclosure of consolidated annual financial statements contained in the annual report in a
valid XHTML format; and
- choosing and selecting XBRL tags in accordance with the requirements of the ESEF Regulation.
Those charged with governance are responsible for overseeing the preparation of consolidated
annual financial statements in ESEF format as part of the financial reporting process.
Auditor’s Responsibilities
Our responsibility is to express a conclusion based on the obtained audit evidence whether the
consolidated annual financial statements have been prepared without material non-compliance with the
requirements of the ESEF Regulation. We have carried out this reasonable assurance engagement in
accordance with the International Standard on Assurance Engagements (ISAE) 3000 (Revised), Assurance
Engagements Other than Audits or Reviews of Historical Financial Information.
Procedures Performed
The nature, timing and extent of the procedures selected depend on the auditor’s judgment. Reasonable assurance
is a high level of assurance, but it is not a guarantee that the scope of the test will always detect a material non-
compliance with the ESEF Regulation. As part of the selected procedures, we performed the following activities:
- we read the requirements of the ESEF Regulation;
- we obtained an understanding of the Group’s internal control relevant to the application of the
ESEF Regulation;
- we identified and assessed the risks of material non-compliance with the ESEF Regulation, whether
due to fraud or error; and
- based on that, designed and performed procedures to respond to the assessed risks and to obtain
reasonable assurance for the purpose of expressing our conclusion.
59
INDEPENDENT AUDITOR’S REPORT (continued)
Report on the Audit of Consolidated Annual Financial Statements (continued)
Report on Other Legal and Regulatory Requirements (continued)
Report based on the requirements of Commission Delegated Regulation (EU) 2018/815 supplementing
Directive 2004/109/EC of the European Parliament and of the Council with regard to regulatory technical
standards on the specification of a single electronic reporting format (continued)
Procedures Performed (continued)
The objective of our procedures was to assess whether:
- The consolidated annual financial statements included in the annual report have been prepared
in a valid XHTML format;
- The data contained in the consolidated annual financial statements required by the ESEF
Regulation has been tagged and that all tags fulfil the following conditions:
▪ XBRL was used to tag data;
▪ core XBRL taxonomy elements with the narrowest accounting meaning defined in the
ESEF Regulation were used unless an extension taxonomy element was created in
accordance with Annex IV of the ESEF Regulation;
▪ Tags comply with the common rules on markups in accordance with the ESEF Regulation.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our conclusion.
Conclusion
In our opinion, based on the audit procedures performed and evidence obtained, the consolidated
annual financial statements presented in ESEF format, contained in the aforementioned enclosed
electronic file and prepared pursuant to the provisions of Article 462, paragraph 5 of the Capital Market
Act for the purpose of public disclosure, comply with the requirements of Articles 3, 4 and 6 of the
ESEF Regulation for the year ended 31 December 2023 in all material respects.
In addition to this conclusion and the opinion contained in this Independent Auditor’s Report for the
enclosed consolidated annual financial statements and annual report for the year ended 31 December
2023, we do not express any opinion on the information contained in these presentations or on any
other information contained in the aforementioned file.
The partners engaged in the audit which resulted in this Independent Auditor’s Report are Marina
Tonžetić and Radovan Lucić.
Hrvoje Stipić, Chairman of the
Management Board
Radovan Lucić,
Director and Certified Auditor
Marina Tonžetić, Certified Auditor
BDO Croatia d.o.o.
Radnička cesta 180
10 000 Zagreb
Šibenski Revicon d.o.o.
Ulica Stjepana Radića 44a
22 000 Šibenik
26 April 2024
ZAGREB HOLDING Ltd. and affiliated companies
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 60
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2023
2023 | 2022 | ||
Note | restated | ||
EUR 000 | EUR 000 | ||
Sales revenue | 6, 7 | ||
Other operating income | 8 | ||
Operating income | |||
Cost of material and services | 9 | ( | ( |
Staff costs | 10 | ( | ( |
Depreciation and amortisation | 11 | ( | ( |
Value adjustment | 12 | ( | ( |
Provisions | 13 | ( | ( |
Other operating expenses | 14 | ( | ( |
Operating expenses | ( | ( | |
NET OPERATING PROFIT | |||
Finance income | 15 | ||
Finance expenses | 16 | ( | ( |
NET FINANCE EXPENSES | ( | ( | |
PROFIT BEFORE TAX | |||
Tax expense | 17 | ( | ( |
PROFIT FOR THE YEAR | |||
Attributable to: | |||
owner of the Company | ( | ||
non-controlling interests | |||
Other comprehensive income | |||
Items that will never be reclassified to profit or loss | |||
Real estate revaluation gains (net) | 17, 37 | ||
Profit from valuation of available-for-sale financial | 17, 37 | ||
assets (net) | |||
Tax on other comprehensive income | ( | ( | |
Items that can be reclassified to profit or loss | |||
Loss based on effective cash flow hedges | ( | ||
Effect of changes in foreign exchange rates | ( | ||
Tax on other comprehensive income | |||
Total comprehensive income/(loss) for the year | ( | ||
Total comprehensive income attributable to: | ( | ||
owner of the Company | ( | ||
non-controlling interests |
The following accounting policies and notes form an integral part of these consolidated annual financial
statements.
ZAGREB HOLDING Ltd. and affiliated companies
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 61
Consolidated Statement of Financial Position
as at 31 December 2023
Note
31 Dec 2023 | 31 Dec 2022 | 1 Jan 2022 | ||
restated | restated | |||
EUR 000 | EUR 000 | EUR 000 | ||
NON-CURRENT ASSETS | ||||
Property, plant and equipment | 18 | |||
Investment property | 19 | |||
Right-of-use assets | 20 | |||
Intangible assets and goodwill | 21 | |||
Financial assets | 22 | |||
Non-current receivables | 23 | |||
Deferred tax assets | 17 | |||
Total non-current assets | ||||
CURRENT ASSETS | ||||
Inventories | 24 | |||
Receivables from related parties | 25 | |||
Trade receivables and other receivables | 26 | |||
Financial assets | 27 | |||
Cash and cash equivalents | 28 | |||
Total current assets | ||||
TOTAL ASSETS |
The following accounting policies and notes form an integral part of these consolidated annual financial
statements.
ZAGREB HOLDING Ltd. and affiliated companies
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 62
Consolidated Statement of Financial Position / continued
as at 31 December 2023
Note
31 Dec 2023 | 31 Dec 2022 | 1 Jan 2022 | ||
restated | restated | |||
EUR 000 | EUR 000 | EUR 000 | ||
NON-CURRENT LIABILITIES | ||||
Loans and leases payable | 29 | |||
Liabilities for issued bonds | 30 | |||
Provisions | 31 | |||
Deferred income | 32 | |||
Deferred tax liability | 17 | |||
Other non-current liabilities | 33 | |||
Derivative financial liabilities | 34 | |||
Total non-current liabilities | ||||
CURRENT LIABILITIES | ||||
Trade payables and other liabilities | 35 | |||
Liabilities payable to related | 36 | |||
parties | ||||
Loans and leases payable | 29 | |||
Liabilities for issued bonds | 30 | |||
Current maturity of deferred | 32 | |||
income | ||||
Current corporate tax liability | ||||
Total current liabilities | ||||
TOTAL LIABILITIES | ||||
NET ASSETS | ||||
EQUITY | ||||
Share capital | ||||
Revaluation reserves | ||||
Fair value reserves | ||||
Other reserves | ||||
Accumulated loss | ( | ( | ( | |
Non-controlling interests | ||||
Total equity | 37 | |||
TOTAL EQUITY AND LIABILITIES |
The following accounting policies and notes form an integral part of these consolidated annual financial
statements.
ZAGREB HOLDING Ltd. and affiliated companies
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 63
Consolidated Statement of Changes in Equity
for the year ended 31 December 2023
Share | Revaluation | Fair value | Other | Accumulated | Parent’s | Non- | ||
capital | reserves | reserves | reserves | loss | ownership | controlling | Total | |
In EUR thousand | interest | interest | ||||||
Balance as at 31 Dec 2021 (restated) | ( | |||||||
Effects of restatement | ( | |||||||
Balance as at 1 Jan 2022 (restated) | ( | |||||||
Comprehensive income | ||||||||
Profit for the year | ( | ( | ||||||
Gains on valuation of financial assets (net) | ||||||||
Real estate revaluation gains (net) | ||||||||
Effect of changes in foreign exchange rates | ( | ( | ( | ( | ( | ( | ( | |
Other comprehensive income | ( | ( | ( | ( | ( | ( | ||
Total comprehensive income | ( | ( | ( | ( | ( | |||
Transactions with owners recognised directly in equity | ||||||||
Payment of profit to non-controlling (minority) | ( | ( | ||||||
interests | ||||||||
Total transactions with owners recognised | ( | ( | ||||||
directly in equity | ||||||||
Balance as at 31 Dec 2022 | ( | |||||||
Comprehensive income | ||||||||
Profit for the year | ||||||||
Gains on valuation of financial assets (net) | ||||||||
Real estate revaluation gains (net) | ||||||||
Other comprehensive income | ||||||||
Total comprehensive income | ||||||||
Transactions with owners recognised directly in equity | ||||||||
Payment of profit to non-controlling (minority) | ( | ( | ||||||
interests | ||||||||
Total transactions with owners recognised | ( | ( | ||||||
directly in equity | ||||||||
Balance as at 31 Dec 2023 | ( |
The following accounting policies and notes form an integral part of these consolidated annual financial statements.
ZAGREB HOLDING Ltd. and affiliated companies
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 64
Consolidated Cash Flow Statement
for the year ended 31 December 2023
2023 | 2022 | |
restated | ||
EUR 000 | EUR 000 | |
Profit before tax | ||
Finance expenses recognised in profit or loss | ||
Finance income recognised in profit or loss | ( | ( |
Value adjustment of receivables from related parties | ||
Value adjustment of trade receivables | ||
Value adjustment of inventories | ||
Value adjustment of other current assets | ||
Value adjustment of other non-current assets | ||
Net change in the fair value of investment property | ( | ( |
Depreciation and amortisation | ||
Increase / (decrease) in long-term provisions | ( | |
Increase / (decrease) in deferred income | ( | |
Other adjustments | ||
Increase in inventories | ( | ( |
Increase in trade receivables | ( | ( |
Decrease / (increase) in receivables from related companies | ( | |
(Increase) / decrease in receivables from employees | ( | |
Increase in receivables from the state | ( | ( |
Decrease in other receivables | ||
Increase in trade payables and liabilities payable to related | ||
parties | ||
(Decrease) / increase in taxes and contributions payable | ( | |
Increase / (decrease) in liabilities payable to employees | ( | |
Decrease in other liabilities | ( | ( |
Net cash generated from operations | ( |
The following accounting policies and notes form an integral part of these consolidated annual financial
statements.
ZAGREB HOLDING Ltd. and affiliated companies
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 65
Consolidated Cash Flow Statement / continued
for the year ended 31 December 2023
2023 | 2022 | |
restated | ||
EUR 000 | EUR 000 | |
Cash flow from operating activities (continued) | ||
Cash generated from operations | ( | |
Paid corporate tax | ( | |
Interest paid | ( | ( |
Net cash from operating activities | ( | |
Cash flow from investing activities | ||
Purchase of tangible and intangible assets and investment | ( | ( |
property | ||
Expenses for / gains on advance payments for current assets | ( | |
Expenses for advance payments for non-current assets | ( | |
Gains on sale of tangible assets | ||
Receipts from non-current receivables | ||
Expenses for current financial assets | ( | ( |
Expenses for / gains on non-current financial assets | ( | |
Interest charged | ||
Dividend received | ||
Payment of profit to non-controlling (minority) interests | ( | ( |
Net cash from investing activities | ( | |
Cash flow from financing activities | ||
Long-term loans and borrowings | ||
Repayment of long-term loans and borrowings | ( | ( |
Short-term loans and borrowings | ||
Repayment of short-term loans and borrowings | ( | |
Bonds issued | ||
Bond repayment | ( | |
Net cash from financing activities | ( | |
Net increase in cash | ||
Cash as at 1 Jan | ||
Cash as at 31 Dec |
The following accounting policies and notes form an integral part of these consolidated annual financial
statements.
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 66
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 67
1/ GENERAL INFORMATION / CONTINUED
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 68
1/ GENERAL INFORMATION / CONTINUED
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 69
1 / GENERAL INFORMATION / CONTINUED
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 70
1 / GENERAL INFORMATION / CONTINUED
Affiliates
Management Board of affiliated companies
1 Zagreb City Gasworks Ltd.
Tomislav Mazal from 11 March 2019 to 11 November
2021, Miroslav Živko from 11 November 2021 to 26
September 2022, Goran Popović from 26 September
2022 to 30 November 2023, Davor Mayer, Member of
the Management Board/Director since 1 December
2023
2 Zagreb City Gasworks – Supply Ltd.
Jeronim Tomas since 11 November 2021
3 Zagreb Plakat Ltd.
Kruno Ian Bodegray from 1 April 2019 to 28 February
2022, Vlatka Smolković from 25 November 2021 to 13
February 2022, Emilio Gašpić since 14 February 2022,
Toni Rončević since 1 March 2022
4 Zagreb City Pharmacies
Nadica Jambrek from 7 July 2018 to 6 July 2022, Marijo
Vukušić since 6 July 2022
5 City Housing and Municipal Services Company Ltd.
Marko Šarić since 18 June 2021
6 Water Supply and Drainage Ltd.
Davor Poljak from 11 November 2021 to 3 March 2023,
Marko Blažević since 3 March 2023
7 Bjelovar City Gasworks Ltd.*
Srećko Ezgeta since 23 April 2008
*Bjelovar City Gasworks Ltd. is a company 100% owned by the affiliated company Zagreb City Gasworks Ltd.
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 71
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 72
2 / BASES FOR PREPARATION OF CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
The consolidated annual financial statements have been presented for the Group and they comprise consolidated
annual financial statements of the Company and its affiliates.
The Management Board approved the issuing of these consolidated annual financial statements on 26 April 2024
for submission to and adoption by the General Assembly.
The Group has made certain adjustments to the figures disclosed in the previous consolidated annual financial
statements where necessary, as explained in Note 5.
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 73
2/ BASES FOR PREPARATION OF CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS / CONTINUED
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 74
2/ BASES FOR PREPARATION OF CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS / CONTINUED
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 75
3/ BASIC ACCOUNTING POLICIES / CONTINUED
b/ Right-of-use assets / continued
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 76
3/ BASIC ACCOUNTING POLICIES / CONTINUED
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 77
3/ BASIC ACCOUNTING POLICIES / CONTINUED
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 78
3/ BASIC ACCOUNTING POLICIES / CONTINUED
e/ Financial assets / continued
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 79
3/ BASIC ACCOUNTING POLICIES / CONTINUED
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 80
3/ BASIC ACCOUNTING POLICIES / CONTINUED
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 81
3/ BASIC ACCOUNTING POLICIES / CONTINUED
k/ Corporate tax / continued
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 82
3/ BASIC ACCOUNTING POLICIES / CONTINUED
n/ Financial liabilities and equity instruments issued by the Group / continued
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 83
3/ BASIC ACCOUNTING POLICIES / CONTINUED
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 84
3/ BASIC ACCOUNTING POLICIES / CONTINUED
q/ Revenue recognition / continued
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 85
3/ BASIC ACCOUNTING POLICIES / CONTINUED
r/ Leases / continued
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 86
3/ BASIC ACCOUNTING POLICIES / CONTINUED
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 87
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 90
4/ USE OF ESTIMATES AND JUDGMENTS IN THE PREPARATION OF
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS AND ESTIMATING FAIR
VALUE / CONTINUED
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 91
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 93
5/ COMPARABLE DATA AND ADJUSTMENTS OF OPENING BALANCES /
CONTINUED
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 94
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 100
7/ SEGMENT INFORMATION / CONTINUED
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 101
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 102
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 103
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 104
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 105
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 106
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 108
17/ CORPORATE TAX / CONTINUED
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 109
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 111
18/ PROPERTY, PLANT AND EQUIPMENT / CONTINUED
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 112
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 113
19/ INVESTMENT PROPERTY / CONTINUED
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 114
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 115
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 116
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 118
23/ NON-CURRENT RECEIVABLES / CONTINUED
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 119
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 120
26/ TRADE RECEIVABLES AND OTHER RECEIVABLES / CONTINUED
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 121
26/ TRADE RECEIVABLES AND OTHER RECEIVABLES / CONTINUED
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 122
26/ TRADE RECEIVABLES AND OTHER RECEIVABLES / CONTINUED
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 123
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 126
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 127
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 128
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 129
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 130
35/ TRADE PAYABLES AND OTHER LIABILITIES / CONTINUED
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 131
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 132
37/ CAPITAL AND RESERVES / CONTINUED
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 133
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 134
38/ RELATED-PARTY TRANSACTIONS AND BALANCES / CONTINUED
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 135
39/ EMPLOYEE BENEFITS / CONTINUED
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 136
41/ FINANCIAL INSTRUMENTS
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 137
41/ FINANCIAL INSTRUMENTS / CONTINUED
Financial risk management objectives
To be able to predict potential situations that could have a negative impact on its operations and fulfilment of its objectives,
the Group identifies financial risks, determines their potential impact on the Group’s future operations and manages
financial risks. The Group makes an effort to mitigate, avoid and overcome various forms of financial risks that it encounters
in its operations in order to increase business security. Particular financial risks are accepted when they are considered
economically justified.
The most important risks and the methods used to manage them are described below. In 2022, the Group did not use any
derivative instruments for risk management. The Group does not use any derivative instruments for speculation purposes.
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 138
41/ FINANCIAL INSTRUMENTS / CONTINUED
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 142
41/ FINANCIAL INSTRUMENTS / CONTINUED
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 143
41/ FINANCIAL INSTRUMENTS / CONTINUED
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 144
44/ CONTINGENT LIABILITIES / CONTINUED
ZAGREB HOLDING Ltd. and affiliated companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS / CONTINUED
for the year ended 31 December 2023
2023 ANNUAL REPORT / CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 145
Ivan Novaković
President of the Management Board
Dubravko Karačić
Member of the Management Board
Matija Subašić-Maras
Member of the Management Board
Damir Novinić
Member of the Management Board
Addendum: Decision of Competent Body on Adoption of 2023 Annual Financial Statements
146
Pursuant to Article 441 of the Companies Act (Companies Act (Official Gazette 111/93, 34/99, 121/99, 52/00, 118/03,
107/07, 146/08, 137/09, 152/11 – official consolidated text, 111/12, 125/11, 68/13, 110/15, 40/19, 34/22, 114/22, 18/23,
130/23) and Article 31 of the Memorandum of Association of Zagreb Holding Ltd., Zagreb, Ulica grada Vukovara 41
(full text of 30 September 2021), at the 37
th
meeting held on 29 April 2024, the Assembly of Zagreb Holding Ltd.
unanimously adopted the following
DECISION
1. The consolidated annual financial statements of Zagreb Holding Ltd. for 2023 are adopted, as follows:
a) Statement of Financial Position with the sum of assets and liabilities in the amount of EUR
2,119,900,105.73.
b) Statement of Comprehensive Income with the following items:
- total income EUR 803,231,102.75
- total expenses EUR 785,794,344.50
- profit before tax EUR 17,436,758.25
- tax expense EUR 1,093,815.64
- profit after tax EUR 16,342,942.61
- other comprehensive income (net) EUR 5,990,113.44
c) Notes to Financial Statements for 2023.
2. The Decision of the Company’s Management Board on Adoption of Consolidated Annual Financial
Statements of Zagreb Holding Ltd. for 2023, Class: 400-07/24-01/17, File No.: 01-01/372-24-03 of 26 April
2024, constitutes an integral part of this Conclusion.
MEMBER OF THE COMPANY’S ASSEMBLY
CITY OF ZAGREB
REPRESENTED BY
REPRESENTATIVES OF THE MEMBER
Tomislav Tomašević, Master of Political Science
___________________________
Danijela Dolenec, PhD
___________________________
Luka Korlaet, PhD
____________________________
Class: 740-15/24-03/07
File No.: 01-01/7-24-05
Addendum: Decision of Competent Body on Adoption of 2023 Annual Financial Statements
147
Pursuant to Article 441 of the Companies Act (Companies Act (Official Gazette 111/93, 34/99, 121/99, 52/00, 118/03,
107/07, 146/08, 137/09, 152/11 – official consolidated text, 111/12, 125/11, 68/13, 110/15, 40/19, 34/22, 114/22, 18/23,
130/23) and Article 31 of the Memorandum of Association of Zagreb Holding Ltd., Zagreb, Ulica grada Vukovara 41
(full text of 30 September 2021), at the 37
th
meeting held on 29 April 2024, the Assembly of Zagreb Holding Ltd.
unanimously adopted the following
DECISION
1. The consolidated Annual Report, which contains the consolidated annual financial statements of the
company Zagreb Holding Ltd. and its affiliated companies for the year ended 31 December 2023, together
with the Independent Auditor’s Report, is adopted.
2. The consolidated Annual Report, which contains the consolidated annual financial statements of the
company Zagreb Holding Ltd. and its affiliated companies for the year ended 31 December 2023, together
with the Independent Auditor’s Report, constitutes an integral part of this Decision.
MEMBER OF THE COMPANY’S ASSEMBLY
CITY OF ZAGREB
REPRESENTED BY
REPRESENTATIVES OF THE MEMBER
Tomislav Tomašević, Master of Political Science
___________________________
Danijela Dolenec, PhD
___________________________
Luka Korlaet, PhD
___________________________
Class: 740-15/24-03/07
File No.: 01-01/7-24-03