The SIA – Strategy in Action program, a key and integral part of the prestigious ELITE program of the London Stock Exchange, is now available in Croatia. The program represents an excellent opportunity for small and medium-sized companies in Croatia. Through appropriate support and education, the program ensures the quality of corporate management required by investors on the capital market, and it will help Croatian entrepreneurs to co-create, activate and implement their organization’s Strategy, create strategic plans for growth and scalability, open access to capital, create opportunities with investors and prepare them for going public. 

The program was brought to Croatia by the COTRUGLI Business School, becoming the exclusive representative of the program for Southeast Europe. At the same time, the project’s strategic partners in Croatia are the European Bank for Reconstruction and Development (EBRD), Privredna banka Zagreb d.d. and the Zagreb Stock Exchange. 

To convey the importance of this program to Croatian entrepreneurs from the SME sector, we spoke with Mr Nikola Dujmović, CEO at SPAN d.d., which passed the ELITE program on the London Stock Exchange before entering the capital market. Mr Dujmović emphasized the great value of the program, stressing that it primarily taught them how to structure operations and processes, and he also revealed something about the company’s operations, market trends in the IT sector, the lack of quality workforce and the company’s listing on the stock market. Read the entire conversation below. 

SPAN has been on the market for almost 30 years. Today, you count nearly 800 employees and 1200 satisfied clients. What did it look like in the beginning? 

In the nineties, everyone started in a garage, including us. We opened a small shop on Tesla Street in Zagreb, wanting to deal with software. At that time, everyone mainly dealt with hardware because it was lucrative and profitable. Then, we decided to create the future ourselves; we started a company modelled on the ones in developed countries, which sold services, not equipment, software installations and programs. At that time, I was a programmer, and my partner was an electrical engineer with experience in telecommunications; that’s how we started, so it’s a typical “garage story”. 

If we were starting today, we would be called a startup, but at that time, there were no other sources of financing, such as venture capital, and banks primarily funded startups.  

Companies usually have to have business plans and strategies. Did any of them foresee this kind of success? 

If we didn’t have hope, we wouldn’t even have started, we didn’t open a company to close it, but we didn’t even hope to reach today’s figures. They told us that success is to have 150 employees, and we are approaching 800 people. However, these are huge numbers for the Croatian market. We are a micro company in global terms. Even with McDonald’s, to whom we are one of 14 international IT partners, we are the last in terms of size, and the second to last is ten times our size! So, what is considered significant in Croatia is micro-sized in the global arena. Some of our more considerable users know to entreat us whether we can carry out demanding projects on our micro backs. Of course, we can, because not everyone or all 500 do them, but smaller groups of 30 or 50 people. 

Our story coincided with the fact that we worked for a foreign market, forcing us to grow, whether we wanted to or not. However, success is a relative term, we even had more capital when there were a hundred of us, but it is difficult for such small companies to survive abroad. We successfully adapted and succeeded largely thanks to our HR department, which we hired at the right time because when you grow like us, you need the best possible employees who need to know how to find, keep and manage them. 

Companies must find ways to retain employees and attract new ones

People are the key and missing link in the market, especially in IT companies. How do you deal with the labour shortage problem? 

Intelligent people are always in short supply, especially in our industry. Companies must find quality ways to retain employees and then, by example, attract new ones. With us, one of those ways was the ESOP, which we now see from our internal research results that significantly increased colleagues’ satisfaction. At the same time, our employee churn (churn) dropped significantly. Employees now stay longer on average at SPAN. 

Accelerated digitization means different things, depending on the size and activity of the company. As SPAN focuses on a wide range of IT services, do you know which technological trends prevail in the market? How do you keep up with the rest of the world?

The Covid pandemic and the war in Ukraine significantly accelerated digitization. Regarding trends, they boil down to two main ones – cloud and security. Today, three big giants on the market, Google, Amazon and Microsoft, are fighting for supremacy over the cloud. Cloud is dominant today, which is understandable because it has solved many technical problems that we have not been able to solve for years, such as application integration, connectivity, and security. Everything valuable in the company is now digitized, therefore, also vulnerable. Hacker attacks are becoming more common; therefore, security is a fundamental part of modern technological trends. 

We have been dealing with security for years, and this fall, we launched the Span Cyber ​​Security Center with our Israeli partners to further strengthen the business community in the region for today’s security challenges. 

There is another risk, especially in Croatia, and that is bribery. How did you manage to develop your anti-bribery system? 

That’s right, we developed our system, and we don’t sell it to clients. Still, we certified it through the ISO standard for our internal use as our anti-corruption system within the company, with which all employees are familiar. Why? So our clients are not exploited, not only when money is involved but also when gifts for personal and professional use are involved. Unfortunately, this is a typical case not only in Croatia but also in the Balkans. 

We strictly adhere to these anti-corruption standards, especially with large foreign clients, because due to such corrupt behaviour, not only projects and clients are lost, but also our reputation in front of future clients. We have adhered to our standards since the foundation. We have only officially certified them as an ISO standard to show our clients that we are reliable.

No fear of expanding

As you already mentioned, big foreign clients, you are one of the biggest exporters in Croatia, and you generate more than 65% of your income on the world market.

I will, immodestly, say that we are good at what we do; the numbers you point out confirm that. Every company goes through market cycles, sometimes worse, sometimes better, and we are again in an upward phase. We hired 50 new people last month alone. We would employ 500 of them if there were because we are thinking about expansion. We have no fear of size. Globally, we are not big anyway, but after all the messages from the government, there is a fear of taxing extra profits; even though we should not enter that category, we grew on our resources and efforts. But we will survive that and all the challenges we have faced since our foundation in 1992.

SPAN is the first IT company to go public. However, few people know that you took that step after going through the prestigious Elite program the London Stock Exchange conducted. Since just such a program, ‘Strategy in Action, is being launched in Croatia under the direction of the COTRUGLI business school and partners, what would you highlight as an essential thing that the program provided you? What can other entrepreneurs learn?

The key is that the program forces you to structure business and processes. For us engineers, I admit, it sometimes got on our nerves, but when we were preparing to go public, it became clear what it was for. So, the fact that we were doing well was not enough; we had to structure it into a story that was understandable to investors. When we arrived in London, we realized that there are many companies like ours and that we will only impress people with the mere fact of what we do and how we are doing. We had to put our entire business into a story that would interest investors. When forced to structure your whole business, you suddenly see solutions that you have not seen before, and at the same time, you improve your communication skills. Not all program participants will go to the stock market. Still, they will undoubtedly come out with more knowledge, experience and skills and thus be armed to run their company more efficiently and successfully.

Strategy in Action (SiA) is a vital component of the London ELITE program and is now available in Croatia. Do you expect to hear something new that can help in doing business on the domestic market?

There always needs to be more knowledgeable. In addition, our market is relatively shallow, partly because only some companies decide to enter the capital market and (release) part of the ownership stake. But even if no one wants to go anywhere else for capital but the bank, it is good to know how to plan the business for the turbulent times ahead strategically. Of course, how much knowledge they apply depends on the participants rather than on the lecturers or the program.

After completing the Elite program, you went on the stock market. Why have the stock market and IPO practically not existed in Croatia since the last financial crisis, not, for example, concluding a strategic partnership?

Because we achieved a kind of strategic partnership way back in 2000 when we sold 60% of the company to Hungarians, but already in 2007, we made the first management buyout, the purchase of their share. Namely, a strategic partnership was not the best option for us; it disrupted the entire dynamics of the company’s business. We did not appreciate that prospect.

So, IPO remains an option? Through the public offering, you sold 578,200 offered shares (29.5%) and collected more than one hundred million Croatian kunas. Are you satisfied, and did you expect such interest?

We are delighted. There may have been a little excitement on the listing day itself because we know the price at which the shares were issued. 

However, we were undoubtedly surprised by the interest of investors. For HRK 160, they wanted to buy more than one million shares or 79% more than the number offered. For a price of HRK 175, they wanted to buy almost 810,000 shares or 40% more than what was offered; we finally decided on the maximum price.

Employees buying shares exceeded all expectations

What was the interest of employees in buying shares?

Of course, there was interest, and we knew there would be because about a year before going public, we asked employees if they were interested. Many of them declared that they would be happy to buy shares. It turned out that the demand was three times higher than the supply, exceeding all expectations, which is a sign of the confidence of both external investors and employees in our success. Some people told me before the IPO that they didn’t know if there was capital or interest in listing technology companies, but in the end, as many as 75% of the new shareholders were citizens, and the most pleasing thing was that the interest of employees was higher than in the survey and that In this gloomy time, the IPO of SPAN was one of the brighter topics that connected the company’s employees. After going public, our story continues; the real work of proving our value begins.

In the meantime, the war happened, and inflation went up. What business results do you expect this year and in such circumstances?

The results for the first nine months show that we are still on an upward trajectory. SPAN Group’s total revenues amount to more than HRK 650 million, an 11% increase compared to last year. EBITDA before non-recurring items increased by 68% and amounts to more than HRK 55 million. Span Group achieved a net profit of HRK 39.4 million, a growth of 162% compared to the same period last year. Services achieved the highest revenue growth in the Group with high added value, the most in the business segment Software Development and Business Solutions, which grew by 66% , and in the Infrastructure Services, Cloud and Cyber ​​Security segment, which grew by 56% in nine months. 

The decline in revenue in the Ukrainian market, where Microsoft provided free use of its products and services until the end of the year to all SPAN users in that country, was fully compensated by revenue growth in all other markets and all business segments. We offer all interested partners on our website a short video with the latest results and data we update every three months.

So, the IPO was a strong tailwind, and the Elite program gave it the wind. How much did it help determine the plan and strategic priorities before going public?

It helped the most with structured thinking because we were not used to that, as I think is the case for most domestic companies. There we had the opportunity to listen to lecturers, such as a mentor in London whom I misjudged at first – she pleasantly surprised me when she mentioned how she collects and tests Ducati motorcycles. I later found out that she works as a consultant at the London Stock Exchange, which is surprising for our circumstances. However, precisely such people and lecturers are the Elite program’s great value. New connections in new sectors are certainly an advantage, for expansion on the foreign market this is very important, but also the possibility of hearing about other people’s experiences in the same industry.

Given your experience in London, would you recommend the SiA program to Croatian entrepreneurs?

There is no doubt at all that it is essential for domestic companies. Even if they do not plan to go public through an IPO, it is necessary to know how to diversify financial sources and secure technological and human capacities strategically. If you need to figure out where you are thin, which part of the business is the weakest link, how will you manage all other aspects of the company? How will you ever do business in a world where volatility is constant if you don’t know what tomorrow will bring? With a strategy, this will be possible; it helps you to maintain business continuity. The program is treasured, and this interview proves it. I gained invaluable experience and knowledge, so my message to entrepreneurs is to join the SiA program and learn to plan strategically now and in the future.

To learn more about the SiA program, visit the link.

Cover photo credits: Vedran Peteh / Cropix