TIDM74JJ
RNS Number : 5336D
Petrol AD
26 June 2019
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
OF PETROL GROUP
AND CONDENSED EXPLANATORY NOTES TO THE INTERIM CONSOLIDATED
FINANCIAL STATEMENTS FOR THE PERIODED MARCH 31, 2019
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
For the period ended March 31
2019 2018
BGN'000 BGN'000
Revenue 114,253 107,621
Other income 158 3,944
Cost of goods sold (101,772) (95,939)
Materials and consumables (916) (920)
Hired services (8,986) (8,190)
Employee benefits (5,005) (4,389)
Depreciation and amortisation (957) (239)
Impairment losses 64 4
Other expenses (146) (209)
Finance income 485 55,000
Finance costs (1,081) (833)
Profit (loss) before tax (3,903) 55,850
--------- --------
Tax income (expense) 1 49
--------- --------
Profit (loss) for the period (3,902) 55,899
--------- --------
Total comprehensive income for the
period (3,902) 55,899
Profit (loss) attributable to:
Owners of the Parent company (3,902) 55,899
Non-controlling interest - -
Profit (loss) for the period (3,902) 55,899
========= ========
Total comprehensive income attributable
to:
Owners of the Parent company (3,902) 55,899
Non-controlling interest - -
--------- --------
Total comprehensive income for the
period (3,902) 55,899
========= ========
Profit (loss) per share (BGN) (0.14) 0.51
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
March 31 Dec. 31
2019 2018
BGN'000 BGN'000
Non-current assets
Property, plant and equipment and
intangible assets 13,542 13,498
Investment properties 1,781 1,793
Right-of-use asset 12,529 -
Goodwill 19,827 19,827
Deferred tax assets 4,187 4,186
Trade and other receivables 95 95
Total non-current assets 51,961 39,399
-------- --------
Current assets
Trade and other receivables 44,943 36,948
Inventories 22,509 23,977
Loans granted 19,428 22,124
Non-current assets held-for-sale 3,459 3,459
Cash and cash equivalents 4,673 4,265
Total current assets 95,012 90,773
-------- --------
Total assets 146,973 130,172
======== ========
Equity
Registered capital 109,250 109,250
General reserves 18,864 18,864
Accumulated loss (112,459) (108,557)
--------- ---------
Total equity attributable to the
owners of the Parent company 15,655 19,557
--------- ---------
Non-controlling interests 9 9
--------- ---------
Total equity 15,664 19,566
---------
Non-current liabilities
Loans and borrowings 45,396 45,471
Trade and other payables 13,108 -
Employee defined benefit obligations 533 533
Total non-current liabilities 59,037 46,004
--------- ---------
Current liabilities
Trade and other payables 71,059 61,844
Loans and borrowings 1,213 2,758
Total current liabilities 72,272 64,602
--------- -------------------
Total liabilities 131,309 110,606
========= ===================
Total equity and liabilities 146,973 130,172
========= ===================
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Equity attributable to the Non-controlling Total
owners of the Parent company interests equity
Registered General Accumulated Total
capital reserves profit
(loss)
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
Balance at January
1, 2018 109,250 18,864 (164,473) (36,359) 10 (36,349)
Comprehensive income
for the period
Profit for the period - - 55,899 55,899 - 55,899
----------- ---------- ------------ --------- ---------------- ---------
Total comprehensive
income - - 55,899 55,899 - 55,899
----------- ---------- ------------ --------- ---------------- ---------
Balance at March 31,
2018 109,250 18,864 (108,574) 19,540 10 19,550
=========== ========== ============ ========= ================ =========
Comprehensive income
for the period
Profit for the period - - 31 31 (1) 30
Other comprehensive
income - - (14) (14) - (14)
Total comprehensive
income - - 17 17 (1) 16
----------- ---------- ------------ --------- ---------------- ---------
Balance at December
31, 2018 109,250 18,864 (108,557) 19,557 9 19,566
=========== ========== ============ ========= ================ =========
Comprehensive income
for the period
Loss for the period - - (3,902) (3,902) - (3,902)
----------- ---------- ------------ --------- ---------------- ---------
Total comprehensive
income - - (3,902) (3,902) - (3,902)
----------- ---------- ------------ --------- ---------------- ---------
Balance at March 31,
2019 109,250 18,864 (112,459) 15,655 9 15,664
=========== ========== ============ ========= ================ =========
CONSOLIDATED STATEMENT OF CASH FLOWS
For the period ended March 31
2019 2018
BGN'000 BGN'000
Cash flows from operating activities
Receipts from customers 154,485 166,605
Payments to suppliers (127,068) (150,093)
VAT and excise paid to the budget, net (16,800) (11,467)
Payments related to personnel (4,993) (4,511)
Income tax paid - (15)
Other cash flows from operating activities,
net 45 (660)
---------- ----------
Net cash flows from operating activities 5,669 (141)
Cash flows from investing activities
Payments for purchase of property, plant
and equipment (226) (908)
Proceeds from sale of property, plant and
equipment 51 3,522
Payments for loans granted, net (2,988) (4,017)
Interest received on loans and deposits 5,905 -
Payments for acquisition of subsidiary and
other investments, net of cash acquired - 16
Disposal and loss of control of subsidiary,
net of cash disposed of - (71)
Proceeds from other investments (5,605) 530
Net cash flows used in investing activities (2,863) (928)
Cash flows from financing activities
Proceeds from loans and borrowings 19 100
Repayment of loans and borrowings (87) (131)
Lease payments (439) -
Interest paid under loans (2,309) (2,040)
Payments under cession and other agreements 415 (115)
Net cash flows from financing activities (2,401) (2,186)
Net increase (decrease) in cash flows during
the period 405 (3,255)
Cash at the beginning of the period 4,265 7,271
Effect of movements in exchange rates 3 3
---------- ----------
Cash as per cash flow statement at the end
of the period 4,673 4,019
---------- ----------
Restricted cash - 186
---------- ----------
Cash as per statement of financial position 4,673 4,205
========== ==========
I. General Information
Petrol AD (the Parent company) was registered in Bulgaria in
1990 and entered in the Commercial Register to the Registry Agency
with UIC 831496285. The headquarter address of the Parent company
is 12 Tyrgovska Str., Hotel Lovetch in Lovetch city. As at the end
of the reporting period shareholders are legal entities, the
country - through the Ministry of Energy and individuals.
The main activity of Petrol AD and its subsidiaries (the Group)
is related with trading of petrol products and non-petrol goods and
services.
These explanatory notes are prepared according to the
requirements of Art. 100o1, par.5 of the Public Offering of
Securities Act (POSA) in relation to Art. 33, par.1, item.2 of the
Ordinance No 2 of September 17, 2003 on the prospectuses in public
offering and admission of securities for trading on a regulated
market and for disclosure of information by the public companies
and other issuers of securities, and represent information about
important events occurred during the first quarter of 2019. The
explanatory notes reflect their influence on the results in the
statements for the first quarter of 2019 and describe of the main
risks and uncertainties, which stay ahead of the Petrol Group in
the rest of the financial year and comprise information for
transactions with related parties and/or interested parties, as
well as information for emerging significant receivables and/or
payables during the same period.
II. Information on important events, occurred in the first quarter of 2019
Property, plant, equipment and intangible assets
As at March 31, 2019 the Group has property, plant, equipment
and intangible assets with total carrying amount of BGN 13,542
thousand.
As at March 31, 2019 property, plant and equipment with carrying
amount of BGN 11,105 thousand are mortgaged or pledged as
collaterals under bank loans, granted to the Group and to unrelated
parties, under credit limit agreements for issuance of bank
guarantees.
In 2018 the Group has acquired trade sites - petrol stations and
storage facilities on purpose to sell them. As at March 31, 2019
the carrying amount of the available in the balance sheet
non-current assets, acquired on purpose to sell them subsequently
is BGN 3,459 thousand.
Investment property
The investment properties of the Group, consisted of a land and
a building, are part of aggregated assets for BGN 1,500 thousand,
which serve as a collateral for a credit limit under contract for
revolving credit line signed in 2016.
Leases
The Group has adopted IFRS 16 Leases (issued on January 13,
2016), endorsed by the EU on October 31, 2017 and published in
Official newspaper on November 9, 2017, for the first time in the
financial statements for the year, beginning on January 1, 2019.
The Group chooses to apply a modified retrospective approach, as
the cumulative effect of the appliance is recognised to the date of
the initial appliance of IFRS 16 in the beginning balance of the
equity and a comparing information is not recalculated. The
expected effect on the financial statements is related to
irrevocable contracts for operating leases under which the Group is
lessee and therefore the recognition of new assets and new
liabilities.
The Group recognizes the liability on the lease contract to the
date of the initial appliance of the IFRS 16 for the irrevocable
lease contracts, classified before as an operating lease according
to IAS 17 at present value of the outstanding lease payments,
discounted with the differential interest rate to the date of the
first appliance. The "right to use" asset will be recognised right
before the date of the initial appliance as an amount in the
statement of financial position equal to the liability under the
lease contract, corrected with the sum of all paid in advance or
accrued lease payments related to this lease contract.
The Group will choose to use the exclusions, provided by the
Standard for lease contracts, which ended within 12 months and
lease contracts for which the base asset is with low value. The
analysis of the terms of the main rent contracts for petrol
stations shows that they should be treated as short-term within the
scope of the exclusion, because they do not have a guaranteed
period, the rent price is determined for six months periods, and
both parties have the right to cease the contract for any petrol
site with one to three months advance notice without any onerous
sanctions, that would justify the Group's assessment of the
probability of exercising the termination option by landlords as
unlikely.
Loans Granted
In January 2019 the Group granted a cash loan to an unrelated
party with a credit limit up to BGN 5,500 thousand, in tranches for
the period until December 31, 2019 at 6.7% interest rate. As at
March 31, 2019 the Group has receivables at the amount of BGN 2,920
thousand principal and BGN 70 thousand interest.
In February 2018 the Group granted a cash loan to an unrelated
party at the amount of BGN 2,000 at 6.7% annual interest rate and
repayment term until December 31, 2018. With annexes from the end
of 2018 the credit limit was increased to BGN 3,500 thousand and
the loan term was prolonged to December 31, 2019. As at March 31,
2019 the granted funds are at the amount of BGN 2,060 thousand
principal and BGN 133 thousand interest.
In March 2018 the Group entered into an agreement for granting a
loan to unrelated party at the amount of BGN 1,961 thousand at 5.5%
annual interest and repayment period until December 31, 2018. At
the end of 2018, according to a signed trade agreement between the
parties, the loan was partially offset with outstanding opposite
trade liabilities under an agreement for goods supplies. With an
additional agreement from December 2018 the term of loan agreement
was prolonged until December 31, 2019. In 2019 the Group continues
to offset the receivables with due trade liabilities under the
agreement for goods supplies. As at March 31, 2019 the Group
reports receivables under this loan at the amount of BGN 608
thousand principal and BGN 6 thousand interest.
In March 2018 the Group entered into an agreement for granting a
cash loan to unrelated party with a credit limit up to BGN 300
thousand at 6.7% annual interest and repayment period until
December 31, 2018. With an annex from the end of 2018 the term of
the loan was prolonged until December 31, 2019. In 2019 the loan
limit was increased, and as at March 31, 2019 the granted funds
under this contract were BGN 312 thousand principal and BGN 12
thousand interest.
In August 2017, the Group signed two cash loan agreements,
according to which the Group has a liability to grant to unrelated
parties interest bearing loans up to BGN 4,000 thousand and up to
BGN 500 thousand at 6.7% annual interest. Subsequently the terms of
contracts are annexed. The initially contracted repayment period
was extended to December 31, 2019. As at March 31, 2019 the
carrying amounts of the receivables are BGN 4,589 thousand and BGN
555 thousand, respectively.
In November 2017 the Group signed two contracts for granting
interest bearing loans with unrelated parties amounting up to BGN
5,050 thousand and up to BGN 6,150 thousand at 6.7% annual interest
and term until December 31, 2019. As at March 31, 2019 the granted
amounts under these contracts are BGN 4,806 net of impairments
principal and BGN 486 interest.
In December 2017, the Group signed a contract for granting cash
loan, which requires the Group to grant interest bearing loan up to
BGN 3,000 thousand to unrelated party at 6.7% annual interest and
term until December 31, 2019. As at March 31, 2019 the contracted
amount was entirely granted.
Cash and cash equivalents
As at March 31, 2019 the Group reported cash amounted to BGN
4,673 thousand.
In the notes under Art. 33a2 of Ordinance No2 from the Public
Offering of Securities Act (POSA), as cash equivalents of BGN 3,934
thousand, is presented the cash collected from the trade sites as
at the end of the reporting period and actually registered in the
Group's bank accounts at the beginning of the next reporting
period.
Registered capital
The Group's registered capital is presented at its nominal
value. The registered capital of the Group represents the
registered capital of the Parent company Petrol AD.
As at the end of the reporting period shareholders in the Parent
company are as follows:
Shareholder March 31,
2019
Alfa Capital AD 28.85%
Yulinor EOOD 23.11%
Perfeto consulting EOOD 16.43%
Correct Pharm EOOD 10.98%
Trans Express Oil EOOD 9.86%
Corporate Commercial Bank AD 5.51%
VIP Properties EOOD 2.26%
The Ministry of Economy of the Republic
of Bulgaria 0.65%
Other minority shareholders 2.35%
----------
100.00%
==========
The Management of the Parent company has undertaken series of
measures related to optimization of its capital adequacy. At
several General Meetings of Shareholders (GMS) held in the period
of 2016 - 2017 a decision for reverse-split procedure for merging 4
old shares with a nominal value of BGN 1 into 1 share with a
nominal value of BGN 4 and consequent decrease of the capital of
the Parent company in order to cover losses by decreasing the
nominal value of the shares from BGN 4 to BGN 1, was voted. In
March 2018, following a decision of the Lovech Regional Court,
which repealed the refusal of the Commercial Register to register
the decision voted on EGMS for merging 4 old shares with a nominal
value of BGN 1 into 1 new share with a nominal value of BGN 4, the
applied change was registered in CR resulting in registered capital
of the Parent company of BGN 109 249 612, distributed in 27 312 403
shares with a nominal value of BGN 4 each. The change in the
capital structure of the Parent company was registered also in
Central Depositary AD. The submitted on April 2018 application for
registration of the voted on EGMS decision for the second stage of
the procedure of the Parent company's capital to be decreased by
decreasing the nominal value of the shares from BGN 4 to BGN 1 in
order to cover losses, was refused by the Commercial Register.
On EGMS of Petrol AD held on November 8, 2018 the decision to
decrease the capital of the Parent company in order to cover losses
by decreasing the nominal value of the shares from BGN 4 to BGN 1
was voted again. A refusal of the application for registration of
the decision in CR was enacted, which was appealed by the Parent
company within the statutory term. The minority shareholders
disputed the decision of the EGMS and additionally to the refusal
the application proceeding was postponed until the pronouncing of
the Lovech Regional Court on the court proceedings, initiated on
minority shareholders request. In March 2019 the Lovech Regional
Court enacted a decision, which rules the CR to register the
decrease of the capital after a resumption of the registration
proceedings following the pronouncing on the legal proceedings
initiated be the minority shareholders request.
In February 2019 was held a new EGMS, where the decision for
reduction of capital was voted again and a decision for
substitution of the deceased member of Supervisory Board Ivan
Voynovski with Rumen Konstantinov was taken. A refusal on the
application for registration of these circumstances in the file of
the Parent company was enacted, which was appealed by the Parent
company within the statutory term. In addition to the refusal, the
registration proceeding was ceased on request of minority
shareholders until the RC - Lovech rules on.
Current income tax liabilities and tax audits
As at March 31, 2019 the Group has no current tax
liabilities.
In January 2017, the Parent company received a tax audit
assessment on corporate tax revision for 2013 and VAT until October
2014 amounting to BGN 222 thousand principal and BGN 68 thousand
interest.
In order to cease the enforcement of the appealed tax assessment
in January 2017, a bank guarantee of BGN 350 thousand was issued.
In order to secure the additionally calculated interest liabilities
on this tax assessment, in February 2019 was issued an additional
bank guarantee for BGN 60 thousand. In April 2019 the
Administrative Court - Sofia city enacted a decision, which
entirely repealed the obligation for VAT amounting to BGN 112
thousand principal and BGN 37 thousand interest and considerably
reduced the corporate tax liability from BGN 110 principal and BGN
31 thousand interest to BGN 24 thousand principal and BGN 2
thousand interest.
In March 2017, the Parent company received a tax assessment due
to an tax audit of corporate income tax for 2014 and VAT until June
2015 for BGN 663 thousand principal and BGN 138 thousand interest.
The tax assessment is in process of being appealed. In order to
suspend the enforcement of the appealed tax assessment, ordered by
the Parent company, a bank guarantee in favor of National Revenue
Agency for BGN 940 thousand was issued. The bank guarantee is
partly secured by BGN 300 thousand cash.
In August 2017 the Director of "Appealing and tax-security
practice" department issued a decision which change the appealed
tax assessment of the Parent company on corporate income tax for
2014 and VAT until June 2015 and reduce the additional tax
liabilities from BGN 663 thousand to BGN 65 thousand principal and
from BGN 138 thousand to BGN 15 thousand interest. The issued bank
guarantee to suspend the enforcement of the appealed tax audit
assessment in favor of the National Revenue Agency of BGN 940
thousand, partly secured by BGN 300 thousand blocked cash, was
replaced with new bank guarantee of BGN 94 thousand and the blocked
cash was released. The rest of the decreased tax liabilities was
appealed in court in higher judicial body. As a result in February
2019, following the final decision of Supreme Administrative Court
(SAC) the court proceeding was partly won and the liabilities
according to tax assessment reduced to BGN 13 thousand principal,
related to additionally calculated VAT and BGN 5 thousand accrued
interest. As at the date of preparation of these consolidated
financial statements the liability is fully paid and the bank
guarantee released and given back by National Revenue Agency (NRA).
The liabilities are accounted as correcting events as at December
31, 2018 and are recognised in the result for 2018.
In November 2017 the issued tax assessment from March 2016 on
the security contributions tax audit for BGN 543 thousand principal
and BGN 248 thousand interest, appealed entirely by the Parent
company as unjustified and secured by a bank guarantee of BGN 800
thousand, was entirely repealed due to decision of Administrative
Court - Sofia city. The tax administration appealed the decision
and SAC repealed the decision of AC - Sofia city and returned the
court proceeding to the initial judicial body for new examination.
In order to secure the additionally calculated interest liabilities
on this tax assessment, an additional bank guarantee for BGN 255
thousand was issued in February 2019.
Loans and borrowings
As at March 2019 the Group has total liabilities under received
bank, debenture and trade loans of BGN 46,609 thousand, including
BGN 1,213 thousand current liabilities.
In December 2018 the Group entered into an agreement for sale of
receivables with commercial bank under a contract for sale of
receivables (standard factoring) with total limit of advance
payment up to BGN 550 thousand and Saving-based Interest Rate (SIR)
for BGN plus added amount of 3,7157 points, but not less than 4%
annually on the received advance payment. As at December 31 2018
the Group received an advance payment of BGN 280 thousand on this
factoring agreement. In January 2019 the factoring agreement was
ceased and the Group has no utilized limits on it.
In February 2019 the Group entered into a factoring agreement
with a commercial bank with special terms with no right of regress
for approved in advance receivables with maximum repayment period
of 120 days from the date of invoice issuance with advance payment
of 90% of the amount of the transferred receivables with added VAT.
The commission consideration for factoring services is 0.35% on the
total amount of the transferred invoices plus additional annual
fees. The interest price for the advance payments is Basis Deposit
Index for Entities + 1,95%, daily accrued daily and monthly
withdrawn at the end of each calendar month. As at March 31, 2019
the Group has transferred receivables upon this factoring contract
at the amount of BGN 400 thousand.
Bank loans
In July 2016, the Parent company entered into an investment loan
agreement, prepaying the liabilities on finance lease contract from
November 2015. Collateral of the loan is mortgage of property,
acquired through finance lease and pledge of receivables. The term
of the contract is May 2022 and the contracted interest rate is
3mEuribor+5.25%. As at March 31, 2019 the liabilities under the
bank loan amounting to BGN 575 thousand current liabilities and BGN
1,136 thousand non-current liabilities.
In September 2018 the Parent company entered into a
credit-overdraft agreement on current account in commercial bank,
intended for working capital with maximum allowed amount of BGN
2,000 thousand and repayment period until January 31, 2019 and
contracted interest rate as Savings-based Interest Rate (SIR) plus
added amount of 6,1872 points, but cumulatively not less than 6.5%
annually. The credit is secured with a special pledge of its goods
in turnover at the amount of BGN 2,418 thousand, representing oil
products and with pledge of receivables on bank accounts. In
December 2018, as a result of a signed annex to an agreement from
2016 for revolving credit line with the same bank, the Group
negotiated an increase of the amount of the credit line of BGN
9,500 thousand with an additional amount of BGN 11,500 thousand, by
which the total amount of credit line rose to BGN 21,000 thousand.
The line is separated in total limit of BGN 13,500 for issuance of
bank guarantees and BGN 7,500 for refinancing of the received
credit-overdraft of BGN 2,000 thousand and the rest for working
capital. The increased amount of the credit limit on the revolving
credit line is covered additionally with establishment of mortgages
and pledges of properties, plants and equipment with book value of
BGN 3,693 thousand as at March 31, 2019 and special pledge on goods
in turnover, representing oil products with book value of BGN 2,421
thousand as at March 31, 2019.
Debenture loans
In October 2006, the Parent company issued 2,000 registered
transferable bonds with fixed annual interest rate of 8.375% and
emission value of 99.507% of the nominal, which is determined at
EUR 50,000 per bond. The principal is due in one payment at the
maturity date. The bond term is 5 years and the maturity date is in
October 2011. At the general meetings of the bondholders conducted
in October and December 2011, it was decided to extend the term of
the issue until January 26, 2017. On 23 December 2016, a procedure
for extension of the bond issue to 2022 and reduction of the
interest rate in the range from 5.5% to 8% was successfully
completed.
After the prolongation of the debenture loan, the annual
effective interest rate is 6.78%. The purpose of the bond issue is
to provide funds for working capital, financing of investment
projects and restructuring of the previous debt of the Group.
The debenture loan liabilities are presented in the statement of
financial position at amortized cost. As at March 31, 2019 the
nominal value of the debenture loan is EUR 18,659 thousand.
Operating lease agreements
The Group is lessee under operating lease agreements. The
recognised expenses for rent of fuel stations, rented under
operating lease for the period ended March 31, 2019 are at the
amount of BGN 3,958 thousand.
Subsidiaries
The Parent company (the Controlling company) is Petrol AD. The
subsidiaries included in the consolidation, over which the Group
has control as at March 31, 2019 are as follows:
Subsidiary Main activity Share (%)
of the Group
Petrol Properties Trading with movable assets
EOOD and real estates 100%
Varna Storage EOOD Trade with oil and oil products 100%
Petrol Finance EOOD Financial and accounting services 100%
Elit Petrol - Lovech
AD Trade with oil and oil products 100%
Acquisition, management and
Lozen Asset AD exploitation of property 100%
Production and trading with
goods and services, investments
Storage Invest EOOD and intermediary activities 100%
Processing and trading with
Storage Oil EAD oil and oil products 100%
Petrol Finances OOD Financial and accounting services 99%
Petrol Technologies
OOD IT services and consultancy 98,80%
Contingent liabilities, including information for newly arising
significant liabilities for the reporting period
As at March 31, 2019 the Group has contingent liabilities,
including issued mortgages and pledges of property, plant and
equipment, which serve as a collateral for bank loans granted to
the Group and unrelated parties and credit limits for issuance of
bank guarantees with total carrying amount of BGN 11,105 thousand.
The Group is a joint co-debtor under loan agreement of unrelated
supplier, including limit for overdraft for BGN 25,000 thousand and
stand-by credit for issuance of bank guarantees in favour of
Customs Agency amounted to BGN 20,000 thousand. The total amount of
the utilized funds and issued bank guarantees of all borrower's
exposures to the Bank shall not exceed BGN 45,000 thousand. In
relation to this credit agreement, the Group has established a
special pledge on its cash in the bank account opened in the
bank-creditor with total amount of BGN 8 thousand as at March 31,
2019 and a special pledge on receivables from contractors for BGN
4,000 thousand average monthly turnover.
The Group has contingent liability, which secured the
enforcement of the contract for storage of third-party fuels
amounted to BGN 30,000 thousand.
The Group bears a joint obligation according to a contract for
debt from January 2017 on an obligation of a subsidiary until
February 2018 for BGN 2,346 thousand as at March 31, 2019.
Under a bank agreement for revolving credit line signed in 2016,
bank guarantees were issued for a total amount of BGN 9,850
thousand as at March 31, 2019, including BGN 5,950 thousand in
favor of third parties - Group's suppliers, BGN 1,465 thousand in
favor of National Revenue Agency, for issuance of appealed by the
Parent company revision acts and BGN 2,435 thousand to secure own
liabilities related to contracts under the Public Procurement Act.
The bank agreement is secured by mortgages of property, pledge of
plants and equipment, pledge of all receivables on bank accounts of
the Parent company and a subsidiary. In July 2017 the credit limit
under the revolving credit line was increased from BGN 8,500
thousand to BGN 9,500 thousand. Assets amounted to BGN 1,500
thousand, owned by a subsidiary, additionally secured the credit
limit. With annex from December 2018 the limit is increased to BGN
21,000 thousand and is additionally secured with mortgages and
pledge of property, plants and equipment, and special pledge of
goods in turnover, namely oil products with book value of BGN 2,421
thousand as at March 31, 2019.
In December 2018 the Group entered into an agreement for sale of
receivables with commercial bank under a contract for sale of
receivables (standard factoring) with total limit of advance
payment up to BGN 550 thousand and with drawn amount as at December
31, 2018 of BGN 280 thousand, secured with pledge of receivables on
bank accounts. In January 2019 the factoring agreement was ceased
and the Group has no utilized limits on it.
As a collateral of an investment loan signed in July 2016, a
mortgage of property, acquired through the investment loan and a
pledge of receivables, arising from opened bank accounts of the
Parent company to the amount of the outstanding balance of the
loan, which as at the March 31, 2019 amounting to BGN 1,704
thousand.
In September 2018 the Group entered into a short-term debt
contract for overdraft on current account intended for working
capital. Following the refinancing as a result of the increased
credit limit of the revolving credit line, the overdraft is fully
repaid with no obligations as at March 31, 2019.
There is a pending litigation in relation to a signed in 2015
guarantee contract of the liabilities of a subsidiary until
February 2018, arising of a cession contract with outstanding book
value as at March 31, 2019 of BGN 245 thousand. The cash granted as
a collateral under Art. 180 and Art. 181 of Law on Obligations and
Contracts (LOC) amounting to BGN 245 thousand is disclosed as other
receivables on guarantees. A request to release the cash was
deposited, but the court dismissed the appeal.
In the previous reporting periods companies from the Group have
entered into the debt under two loan agreements of a subsidiary
with a bank-creditor (until December 2015) for USD 15,000 thousand
and USD 20,000 thousand, respectively. In 2015 the bank -creditor
acquired court orders for immediate execution and receiving orders
against the subsidiaries - joint debtors. In relation to the
complains filed by the subsidiaries, the competent court has
revoked the immediate enforcement orders and has invalidated the
receiving orders. In October and December 2015 the creditor has
filed claims under Art. 422 of Civil Procedure Code (CPC) against
the subsidiaries for the existence of the receivables under each
loan agreement. The court proceedings of the creditor are still
pending.
In December 2016 the first instance court decreed a decision
(the Decision) which admit for established that the bank has a
receivable amounted to USD 15,527 thousand from the subsidiaries -
joint debtors, arising from a signed loan agreement for USD 15,000
thousand. With the same decision the court has ordered the
joint-debtors to pay BGN 411 thousand to the bank - creditor for
legal advisory fees and court dispute expenses and BGN 538 thousand
state fee in favor of the judiciary state for the ordered
proceedings and BGN 538 thousand state fee for claim proceedings.
In January 2017, the co-debtors have filed in time appeals against
the court decision, because of that the decision did not come into
force. As at the date of the preparation of these explanatory
notes, the dispute is pending in the appeal court. The Group's
Management considers that there are grounded chances the Decision
to be entirely repealed.
As at the date of the preparation of these explanatory notes,
the filed proceedings against the subsidiaries - joint debtors for
estimation of the bank receivables due to the loan agreement for
USD 20,000 thousand is pending before the first-instance court. The
Management expects favorable decision by the competent court. As at
the date of the preparation of this financial report the Parent
company sold its interest in one of co-debtor subsidiaries and the
potential risk for the Group is reduced to the court proceedings
against the second subsidiary.
A creditor of a subsidiary (until December 2015) unreasonably
claimed in court the responsibility of the Parent company under a
contract of guarantee for liabilities arising from a contract for a
framework credit limit as a result of that the bank accounts of the
Parent company amounting to USD 29,983 thousand were garnished.
This claim was disputed in court by Petrol AD because the liability
as guarantor has not occurred and / or extinguished pursuant to
Art. 147, paragraph 2 of the Law on Obligations and Contracts
(LOC). At the time of conclusion of the guarantee deadline of the
arrangements between the lender and subsidiary contractual
framework for credit limit was July 1, 2014.
The term of the framework credit limit was extended without the
consent of the customer, therefore the responsibility of the latter
has fallen by six months after initially agreed period, during
which the creditor has brought an action against the principal
debtor. The term of Art. 147, paragraph 1 of the Law on Obligations
and Contracts (LOC) is final and upon its expiration the company's
guarantee has been terminated, so the objection of the Parent
company was granted by the court and imposed liens on bank accounts
lifted.
After the writ of execution, pursuant to order proceedings, was
canceled on which were imposed liens on bank accounts of the Parent
company, the creditor has initiated legal claim proceedings under
Art. 422 of the Civil Procedure Code (CPC) to establish the same
claims against the subsidiary (until December 2015) and the
guarantor Petrol AD. In these proceedings the objections are
repeated, that liability as guarantor has not occurred and / or
extinguished pursuant to Art. 147, par. 2 of the LOC, and therefore
the Management expects that the claim of the creditor against the
Parent company will be dismissed permanently by a court decision on
those cases. At present, the claim proceedings are ceased, due to
preliminary legal dispute, which is important for the proper
solving of the case.
Other significant events occurred during the reporting
quarter
As it is disclosed above, the Group's Management has taken a
series of measures to optimize the capital adequacy of the Parent
company. As a result of several general meetings of shareholders
hold in 2016 and 2017, a decision for reverse split procedure was
voted for merging 4 old shares with nominal value of BGN 1 into 1
new share with nominal value of BGN 4 and subsequent decrease of
the Parent company's capital to cover losses by decreasing the
nominal value of the shares from BGN 4 to BGN 1. In March 2018,
following a decision of the Lovech Regional Court, which repealed
the refusal of the Commercial Register to register the decision
voted on EGMS for merging 4 old shares with nominal value of BGN 1
into 1 new share with nominal value of BGN 4. The applied change
was registered in Commercial Register (CR) resulting in registered
capital of the Parent company of BGN 109 249 612, distributed in 27
312 403 shares with nominal of BGN 4 each.
The change in the capital structure of the Parent company was
registered also in Central Depositary AD. In the beginning of April
2018 the application was submitted for registration of the voted on
EGMS decision for the second stage of the procedure for decreasing
the Parent company's capital by decreasing the nominal value of the
shares from BGN 4 to BGN 1 in order to cover losses. As at the date
of preparation of the actual explanatory notes, the applications is
rejected by the CR.
On EGMS of Petrol AD held on November 8, 2018 the decision to
decrease the capital of the Parent company in order to cover losses
by decreasing the nominal value of the shares from BGN 4 to BGN 1
was voted again. A refusal of the application for registration of
the decision in CR was enacted, which was appealed by the Parent
company within the statutory term. The minority shareholders
disputed the decision of the EGMS and additionally to the refusal
the application proceeding was postponed until the pronouncing of
the Lovech Regional Court on the court proceedings, initiated on
minority shareholders request. In March 2019 the Lovech Regional
Court enacted a decision, which rules the CR to register the
decrease of the capital after a resumption of the registration
proceedings following the pronouncing on the legal proceedings
initiated be the minority shareholders request.
In February 2019 was held a new EGMS, where the decision for
reduction of capital was voted again and a decision for
substitution of the deceased member of Supervisory Board Ivan
Voynovski with Rumen Konstantinov was taken. A refusal on the
application for registration of these circumstances in the file of
the Parent company was enacted, which was appealed by the Parent
company within the statutory term. In addition to the refusal, the
registration proceeding was ceased on request of minority
shareholders until the RC - Lovech rules on.
III. Disclosure of transactions with related parties
The total amount of the accrued remunerations of the members of
Management and Supervisory Board of the Parent company, included in
the personnel expenses, amounted to BGN 336 thousand, and the
unsettled liabilities as at March 31, 2019 are at the amount of BGN
116 thousand.
In the first quarter of 2019 transactions with related parties
have been not carried out.
IV. Risks and uncertainties ahead of the Group for the rest of
the financial year
Macroeconomic environment
The Petrol Group's activity is influenced by the general
economic condition of the country and in particular the degree of
the successful adoption of the market-oriented economic reforms by
the government, changes in the gross domestic product (GDP) and the
purchasing power of the Bulgarian customers. In the long term the
change in the fuels consumption in the country is commensurate with
the GDP.
As a result of the global financial and economic crisis, the
Bulgarian economy has been experiencing a continuing decline in its
development which affects a wide range of industries. This leads to
a noticeable deterioration in cash flows and reduction in income
and eventually - to a significant deterioration of the economic
environment in which the Group operates. In addition, there is a
significant increase in price risk, market risk, credit risk,
liquidity risk, interest rate risk, operating risk and other types
of financial risks, which the Group is exposed to.
As a result, there has been an increase in uncertainty about the
customers' ability to repay their obligations in accordance with
the agreed terms. Therefore, the amount of impairment losses on
loans granted, sales receivables and on the values of other
accounting estimates, might differ substantially in future
reporting periods from the reported ones in these consolidated
financial statements. The Management of the Group applies the
necessary procedures to manage these risks.
Legislature
The Parent company is supervised by a number of regulatory
bodies in the country and a potential change in the regulatory
framework, regulating the Parent company's activity may have a
negative impact on the Group's financial results. In July 2018 the
Government of the Republic of Bulgaria adopted a new Law for
Administrative Regulation of the Economic Activities, Related to
Petrol and Petroleum Products, which aims to provide security and
predictability in trading with petrol and petroleum products and
increase the energy security of the country. Due to its core
business, this law will affect the Group.
Suppliers
Due to the specific of the primary business of Petrol Group,
namely retail and wholesale trading with fuels, the Group's fuels
supplies are provided by a small number of suppliers, as a result
of which the Group is at risk of discontinuation of relationships
with key suppliers, which may lead to a short-term depletion of
inventories and trading activity difficulties;
Competition
Retail trading with petroleum products is carried out in highly
competitive market as the products offered in the sector are
homogenous and entire substitutes of the offered products by other
companies in the sector. In addition, the regulatory framework
stipulates an exact specification of the minimum requirements of
the fuels offered at the trade stations and all market participants
should comply with the imposed legal requirements;
Price risk
The Group is at risk of frequent and sharp changes in prices of
fuels and non-petroleum goods. Because of that, the future
financial results may diverge significantly from the expectations
of the Group's Management. Any future sharp fluctuations in the
price of fuels and non-petroleum goods may lead to a deterioration
of the financial position of the Group;
Market risk
Market risk is the risk that changes in market prices, such as
foreign exchange rates, interest rates and equity prices will
affect the Group's income or the value of its holdings of financial
instruments. The objective of market risk management is to manage
and control market risk exposures within acceptable parameters,
while optimizing the return. Because of the nature of its activity,
the Group is exposed to price and currency risk.
The Group is exposed to the risk of change in currency rate,
movement in the interest rates and the prices of the capital
instruments, which may impact the Group's financial instruments or
the value of its investments.
Interest rate risk
Risks arising from the increase in the price of the Group's
financing;
Credit risk
The risk of inability of the Group's trade partners to fulfill
their contractual obligations, which may lead to losses for the
Group;
Exceptional costs
There is a risk of incurring unforeseeable costs, which to
affect negatively the financial position of the Group;
Political risk
Risks to the Group arising from global and regional political
and economic crises;
Liquidity risk
Liquidity risk is the risk that the Group may not be able to
meet its financial obligations when they fall due. The policy is
aimed at ensuring sufficient liquidity with which to serve
liabilities when they fall due, including abnormal and emergency
situations.
Georgi Tatarski Milko Dimitrov Prepared by Elena Pavlova
Executive Director Executive Director - Teofanova
May 30, 2019
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
QRFPGUCGQUPBGWQ
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June 26, 2019 09:22 ET (13:22 GMT)
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