TIDM74JJ
RNS Number : 2204V
Petrol AD
19 July 2018
CONSOLIDATED MANAGEMENT REPORT FOR 2017
ACCOMPANIED BY
INDEPENT AUDITOR'S REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED DECEMBER 31, 2017
(This document is a translation of the original Bulgarian
text,
in case of divergence the Bulgarian original shall prevail)
April 26, 2018
CONSOLIDATED MANAGEMENT REPORT
FOR 2017
This management report is prepared in accordance with the
requirements of Art. 100n, par.7 of the Public Offering of
Securities Act, Art. 45 and Art. 47 of the Accountancy Act, Art.
187E, and Art. 247 of the Commercial Law, Art. 32A, par. 1 and par.
2 and Appendix No.10 to 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
Selected performance indicators
Information pursuant to Art.39, item 2 of the Accountancy
Act
Financial indicators 2017 2016 2015 2014 2013
Net revenue BGN mln 479.1 487.8 662.5 1,021.9 1,194.8
------------------------- --------- ------- ------- -------- -------- --------
EUR mln 245 249.4 338.7 522.5 610.9
----------------------------------- ------- ------- -------- -------- --------
Gross margin from sales
of goods([1]) BGN mln 47.7 45.3 63.2 54.3 69.4
------------------------- --------- ------- ------- -------- -------- --------
EUR mln 24.4 23.2 32.3 27.8 35.5
----------------------------------- ------- ------- -------- -------- --------
% 10.1 9.4 9.7 5.4 5.9
----------------------------------- ------- ------- -------- -------- --------
EBITDA([2]) BGN mln (7.3) (7.5) (126.4) (80.5) 10.5
------------------------- --------- ------- ------- -------- -------- --------
EUR mln (3.7) (3.8) (64.6) (41.2) 5.4
----------------------------------- ------- ------- -------- -------- --------
% (1.5) (1.5) (18.8) (7.9) 0.9
----------------------------------- ------- ------- -------- -------- --------
EBIT([3]) BGN mln (8.8) (9.4) (131.8) (91.9) (2.1)
------------------------- --------- ------- ------- -------- -------- --------
EUR mln (4.5) (4.8) (67.4) (47.0) (1.1)
----------------------------------- ------- ------- -------- -------- --------
% (1.8) (1.9) (19.6) (9.0) (0.2)
----------------------------------- ------- ------- -------- -------- --------
Net profit (loss) BGN mln 1.4 (11.3) 102.9 (174.5) (28.1)
------------------------- --------- ------- ------- -------- -------- --------
EUR mln 0.7 (5.8) 52.6 (89.2) (14.4)
----------------------------------- ------- ------- -------- -------- --------
% 0.3 (2.3) 15.3 (17.0) (2.3)
----------------------------------- ------- ------- -------- -------- --------
Share price ([4]) BGN 0.44 0.478 0.63 2.39 3.53
------------------------- --------- ------- ------- -------- -------- --------
EUR 0.22 0.244 0.32 1.22 1.80
----------------------------------- ------- ------- -------- -------- --------
Assets BGN mln 100 95.9 109.5 398.2 533.9
------------------------- --------- ------- ------- -------- -------- --------
EUR mln 51.1 49.0 56.0 203.6 273.0
----------------------------------- ------- ------- -------- -------- --------
Debt([5]) BGN mln 41.6 41.7 50.4 348.7 392.8
------------------------- --------- ------- ------- -------- -------- --------
EUR mln 21.3 21.3 25.8 178.3 200.8
----------------------------------- ------- ------- -------- -------- --------
Shareholders' equity BGN mln (34.2) (36.3) (24.6) (128.3) (85.2)
------------------------- --------- ------- ------- -------- -------- --------
EUR mln (17.5) (18.6) (12.6) (65.6) (43.6)
----------------------------------- ------- ------- -------- -------- --------
Capital expenditure BGN mln 2.8 0.9 7.7 25.7 8.9
------------------------- --------- ------- ------- -------- -------- --------
EUR mln 1.4 0.5 3.9 13.1 4.6
----------------------------------- ------- ------- -------- -------- --------
Financial ratios 2017 2016 2015 2014 2013
Return on average capital employed (ROACE)([6]) (%) (262.6) (76.85) (691.96) (131.59) (1.69)
----------------------------------------------------- -------- -------- --------- --------- --------
Return on assets (ROA)([7]) (%) (8.99) (9.19) (51.91) (19.72) (0.37)
----------------------------------------------------- -------- -------- --------- --------- --------
Debt/assets (%) 41.64 43.43 46.06 87.57 73.58
----------------------------------------------------- -------- -------- --------- --------- --------
Equity/Assets (%) (34.17) (37.89) (22.47) (32.22) (15.97)
----------------------------------------------------- -------- -------- --------- --------- --------
Current liquidity (ratio)([8]) 0.84 0.71 0.82 0.55 0.58
----------------------------------------------------- -------- -------- --------- --------- --------
Goods turnover ratio (days)[9] 17 15 21 24 21
----------------------------------------------------- -------- -------- --------- --------- --------
Accounts receivable collection period (days)[10] 20 21 33 28 19
----------------------------------------------------- -------- -------- --------- --------- --------
Accounts payable payment period (days)[11] 30 19 37 49 63
----------------------------------------------------- -------- -------- --------- --------- --------
Operating ratios 2017 2016 2015 2014 2013
Sales of fuels (mln. liters) 298 331 399 572 624
-------------------------------------------- ------ ------ ------ ------ ------
Sales of fuels (thousand tons) 0.0 0.0 0.0 0.3 0.0
-------------------------------------------- ------ ------ ------ ------ ------
Number of operated fuel stations 328 334 334 337 336
-------------------------------------------- ------ ------ ------ ------ ------
Number of operated fuel storage facilities 2 1 1 2 14
-------------------------------------------- ------ ------ ------ ------ ------
Share of sales with credit cards 27% 24% 24% 26% 28%
-------------------------------------------- ------ ------ ------ ------ ------
Number of employees (end of period) 1,204 1,349 1,442 1,722 2,504
-------------------------------------------- ------ ------ ------ ------ ------
Group Profile
Information pursuant to Art. 48, par. 2, item 1 of the
Accountancy Act
Petrol today - energy for people
Petrol Group (the Group) is one of the largest players in the
market of fuels in Bulgaria. At the end of 2017 besides the Parent
company Petrol AD, 10 other subsidiaries are included (see Group
Structure). The main activities of the Group include storage,
wholesale and retail trading with fuels and other petroleum
products. At present, under the brand Petrol operates the most
well-developed retail distribution network of fuels in the
country.
As at December 31, 2017, the retail network comprises 328 fuel
stations evenly spread throughout the country providing national
coverage. In 2017, the Group continued the process of
reconstruction and modernization of the fuel stations included in
the retail network for distribution of fuels and other goods.
Network modernization covers several areas: programme for
modernization of existing facilities, a programme for installation
of Universal type fuel stations and a programme for installation of
LPG and CNG stations.
As at the end of 2017, all trade sites are equipped with systems
for collection of vapour emitted during unloading of fuels
complying with all environment protection requirements, while 135
of the managed sites were reconstructed into modern European style.
All kinds of unleaded gasoline and Euro diesel are sold in all
trade sites, LPG is offered in 193 of the fuel stations and four
sites offer methane. The sites also offer the full range of
Bulgarian and imported motor and transmission lubricants, brake and
antifreeze fluids, automobile cosmetics, spare parts and
accessories. In addition, the newly built and reconstructed sites
have fast-food places and some provide internet access to
customers. The stores at the sites offer more than 4,000 items of
leading Bulgarian and world producers of food, personal cosmetics,
gifts, accessories, newspapers, magazines and others.
In many sites, additional facilities were provided such as car
washes, inspection/service pits, pits for dismounting, mounting and
balance of tyres and other auto services. In all sites Visa,
MasterCard and Transcard are accepted. Customers can also withdraw
and pay in cash.
As at December 31, 2017 the wholesale sales are made through the
operated by the Group storage facility in Varna and through
purchases from other storage facilities operated by third party
counterparties.
As at December 31, 2017 the storage facility in Varna was
licensed in compliance with the Excise Duty and Tax Warehouse Act
(EDTWA), which provides an opportunity for temporary suspension of
excise duty taxation. The Group operates one port terminal for
loading and unloading of fuels, situated on the Black Sea coast. On
April 5, 2018 the Group has received a license for operation of tax
warehouse in SD Plovdiv in compliance with the EDTWA where excise
duty suspension regime could also be applied.
The activities of the Group concerning fuels wholesale and
retail trading of fuels are subject to strict control regarding the
implementation of ecological requirements for environmental
protection. In that relation the Group continues to invest in
constructing and renewing of systems for collection and recovery of
vapours (VRU) in the retail stations and storage facilities under
the requirements of Ordinance No 16 for restriction of the
emissions of volatile organic compounds in storing, loading or
unloading and transportation of petrol.
Quality control
The company's technical and ecological standards in trade sites
established by Petrol Group are at a higher level than mandatory
requirements in European Union. In the fuel stations and storage
facilities are stored fuels keeping all technological requirements,
in compliance with the assumed quality standards. The Management of
the Group relies on the high quality of the fuels sold. The Group's
policy excludes any compromises with the technology and the
ecological standards. The fuel stations comply with all applicable
regulations and with the best European and international
practices.
The uncompromising quality of the offered fuels is guaranteed by
laboratories, where with the help of modern technologies, the
strict control and quality analysis of fuel and petroleum products
are carried out. Experts on fuels quality are testing the Group's
retail stations several times per year. The Group works in closely
manner with various state institutions in the field of quality
control of liquid fuels.
Mission
The mission of Petrol Group is to accomplish a stable growth on
shareholders' return in a long term along with commitment to its
clients, employees, partners and generally to the society.
The Group's Management relies significantly on the professional
behavior, ethics and business integrity towards its partners. The
Management of the Group is led by its striving to high quality.
Strategy
The Group's main strategic objective is to maintain and to
develop its leading position in the Bulgarian retail and wholesale
fuel distribution market. To achieve this strategic goal, a
long-term strategy has been adopted, which includes several key
elements:
-- Increasing the efficiency of existing assets;
-- Optimizing and expanding the distribution network;
-- Expanding the products and services portfolio;
-- Strengthening and expanding the market presence.
Increasing the efficiency of existing assets
The Group will continue investing in modernization and
reconstruction of the existing trade sites included in the retail
and wholesale distribution networks. The budgeted investment will
be aimed not only at improving the technical condition and
appearance of trade sites, but also on reducing technological
losses from operation of equipment and compliance with
environmental requirements.
Optimizing and expanding the distribution network
The Group intends to continue the expansion of the distribution
network for retail sales. This will be achieved by opening new
sites on new locations and by consolidation of the Group's smaller
independent competitors through franchise/ dealership arrangements.
At the same time the process of optimizing the distribution network
will continue to be aimed at identifying unprofitable sites,
suspending their operations and eventually selling them.
The Group plans to continue the development of loyalty programs
for retail clients. By increasing the advertising of the newly
offered products and services under the Petrol brand, the Group
aims to strengthen the image of Petrol AD as an innovative company
working with care to the client, society and the environment.
Expanding the products and services portfolio
The Management of the Group places a high priority on being at
the forefront of customer demand for cleaner and improved
performance fuels. In that relation the Group plans to increase
rapidly its sales of compressed natural gas (CNG). Since 2009 the
Group offers a full range of branded Force Fuels - Blue Force Gas,
96 Extra Force and Pro Force Diesel. In 2016 the Group started to
offer a new branded diesel fuel, named Green Force Diesel. The new
diesel fuel is doped with the engineered in Germany high quality
supplement LIQUI MOLY. At the end of 2016 the offering of Gasoline
100 EXTRA Force has been launched. The highly octane new product
increases the efficiency of the engine performance, improves the
automobile dynamics and decreases the fuel consumption.
The innovative fuels contain additives, which accelerate power
of automobiles, reduce expense by up to 10% by improving system
efficiency, decrease carbon deposits in the fuel system and the
discharge of harmful emissions (CO2, CO, NOX) by approximately
70%.
In addition the Group intends to expand its product range by
offering non-petroleum products and services to meet the needs of
the modern consumer and to attract new clients, increasing the
sales of trade sites, the Group's operating profit and therefore
the returns to shareholders. The additional services include rental
of a part of the commercial areas (for example car-washes and
billboards), insurances etc.
Strengthening and expanding the market presence
The Parent company Petrol AD plans to further increase the sales
of fuel and non-fuel goods by investing in modernization of the
trade sites, including renovation and expansion of the total
commercial area. The Management aims to strengthen the position of
Petrol AD as an innovation company caring for the clients, the
society and the environment, by advertising the new products and
services with the brand Petrol more intensively.
Information pursuant to Art.39, item 5 of the Accountancy
Act
In 2017 the companies of the Group did not carried out research
and development activities.
Group Structure
Information pursuant to item. 7 of the Appendix No. 10 to the
Ordinance No. 2 of September 17, 2003
As at December 31, 2017 Petrol Group consists the Parent company
and 10 subsidiaries:
-- Elit Petrol AD is a joint-stock company incorporated and
registered at the Registry Agency in November 2008. The company was
for the purpose of management, running and renting of real estates.
As of 31 December 2017 Petrol Group owns 100% of its share capital.
In 2017 the company did not carried out commercial activity and did
not generate sales revenue. For 2017 the company reported a
negative EBITDA of BGN 536 thousand and net loss for the period of
BGN 1,381 thousand. As at December 31, 2017 the company owned total
assets of BGN 116 thousand and total liabilities of BGN 89,485
thousand, as a result at the end of 2017 the net assets of the
company are negative amounting to BGN 89,369 thousand;
-- Elit Petrol - Lovech AD is a public limited company
incorporated and registered in the Registry Agency in January 2015.
The main activity of the company includes processing, import,
export, business and other petroleum products and any other
activity not prohibited by law. As of December 31, 2017 the Group
owns 100% of the capital. In 2017 the company did not carried out
business activity and did not generate sales revenue. For 2017 the
company reported a negative EBITDA of BGN 36,096 thousand and net
loss for the period of BGN 36,111 thousand. As at December 31, 2017
the company owned total assets of BGN 4,176 thousand and total
liabilities of BGN 332 thousand, as a result at the end of 2017 the
net assets of the company are positive amounting to BGN 3,844
thousand;
-- Varna Storage EOOD was registered in Varna in 2011. The
company specializes in the processing, storage and trading with
petroleum and petroleum products. In August 2012, the company's
capital was increased by in-kind contribution by the Parent company
Petrol AD. The company is specialized in the processing, storage
and trading with petrol and petroleum products. As at December 31,
2017 the company is operator of SD Varna. Elit Petrol AD is a sole
owner of the capital. In 2017 the company generated total sales
revenue of BGN 4,609 thousand, positive EBITDA of BGN 1,086
thousand and net profit for the year amounting to BGN 1,343
thousand. As at December 31, 2017 the total assets of the company
amounted to BGN 6,494 thousand with total liabilities of BGN 19,924
thousand and negative net assets at the amount of BGN 13,430
thousand.
-- Petrol Technologies OOD is a limited liability company
incorporated in October 2014 and registered in Registry Agency with
UIC 203259540. The company's activities include IT consulting,
developing, administration and maintenance of computer networks and
servers and any other activity not prohibited by law. As at
December 31, 2017 Petrol AD owns 98.8% of the company's shares. For
2017 the company reported total revenue of BGN 142 thousand,
positive EBITDA of BGN 72 thousand and net loss for the period of
BGN 19 thousand. As at December 31, 2017 the total assets of the
company amounted to BGN 1,021 thousand, with total liabilities of
BGN 209 thousand and positive net assets of BGN 812 thousand;
-- Petrol Finances OOD is a limited liability company
established under the name Petrol Technologies EOOD in December
2014 and registered in the Registry Agency with registration number
20141216164853/16.12.2014. In February 2015 Petrol AD bought 99% of
the capital of Petrol Technologies OOD, which was subsequently
renamed to Petrol Finances OOD. The Company's scope of business
includes financial and accounting services, preparation of
financial analyzes, forecasts and recommendations for efficient
organization of the financial activity, as well as any other
activity not prohibited by law. As of December 31, 2017 Petrol
Group owns 99% of the company's capital. For 2017, the company
generated total revenue amounting to BGN 1,592 thousand, negative
EBITDA of BGN 22thousand and net loss for the period of BGN 25
thousand. As at December 31, 2017 the company owned total assets
for the amount of BGN 214 thousand, total liabilities of BGN 238
thousand and negative net assets of BGN 24 thousand;
-- Petrol Finance EOOD is a solely owned limited liability
company registered in the Commercial Register at the Registry
Agency on November 10, 2015 with registration 20151110101104 and
UIC 203776395. The Company's main business activity includes
financial and accounting services, preparation of financial
analyzes, forecasts and recommendations for efficient organization
of the financial activity, as well as any other activity not
forbidden by law. As of December 31, 2017 the Group owns 100% of
the company's capital. For 2017 the company was engaged in minimal
commercial activity, generating BGN 2 thousand total revenue;
-- Lozen Asset AD is a joint-stock company incorporated under
the Bulgarian legislation and registered in Commercial Register at
the Registry Agency in July 2015 with UIC 203624804. The company's
main activity includes acquisition, operation, management and
disposal of property, consultancy and any other activity not
prohibited by law. As at December 31, 2017 the Group owns 100% of
company's capital. For 2017 the company generated total revenue of
BGN 39 thousand, with negative EBITDA amounted to BGN 81 thousand
and net loss for the period of BGN 117 thousand. As at December 31,
2017 the company owned total assets of BGN 1,592 thousand, total
liabilities of BGN 154 thousand and positive net assets of BGN
1,438 thousand;
-- Storage Invest EOOD is a solely owned limited liability
company established in January 2017 under the Bulgarian legislation
and registered in the Commercial Register at the Registry Agency
with UIC 204418458. The Company's main activity includes production
and trading with goods and services in the field of industry,
construction, tourism, investments, mediation and representation in
the country and abroad. As at December 31, 2017 Petrol AD owned
100% of the company's shares. The company did not generate revenue
in 2017;
-- Storage Oil EAD is a solely owned joint stock company
established according to the Bulgarian legislation and registered
in the Commercial Register at the Registry Agency in April 2008
with UIC 110547104. The company's activity includes storage,
processing, import, export, marketing, supply and trading with
petrol and petroleum products, as well as any other activity, which
is not prohibited by law. As at December 31, 2017 the Group owned
100% of the capital. For 2017 the company reported total revenue of
BGN 5 thousand, negative EBITDA amounting to BGN 209 thousand and
net loss for the period of BGN 197 thousand. As at December 31,
2017 the company owned total assets of BGN 214 thousand, total
liabilities of BGN 386 thousand and negative net assets of BGN 172
thousand;
-- Petrol Properties EOOD is a solely limited liability company
incorporated under the Bulgarian legislation and registered in
Sofia City Court under company court file number 20902/2007 year,
respectively re-registered in the Trade Register at the Registry
Agency with UIC 175457505. The Company's scope of activity: trading
movable and immovable property, purchase of goods or other property
for the purpose of resale or processed form, internal and external
trade, commercial representation and agency of local and foreign
individuals and legal entities in the country and abroad,
consulting services and many other activities not prohibited by
law. As at December 31, 2017 Petrol AD owns 100% of the capital.
The company did not carry out commercial activity in 2017;
All subsidiaries have a registered address in the Republic of
Bulgaria. For additional information concerning the subsidiaries
included in the preparation of the consolidated financial report
see also note 29 and note 30 to the annual consolidated financial
report for 2017.
Information pursuant to Art. 39, item 7 of the Accountancy
Act
The Group has no registered branches.
Information pursuant to item 13 of the Appendix No. 10 to the
Ordinance No. 2 of September 17, 2003
The Group did not adopted investment policy for 2018 so it did
not carried out an assessment of the opportunities of the applied
investment intentions.
Management Bodies
Information pursuant to Art. 100l, par. 7 of the Public Offering
of Securities Act and Art. 48, par. 1 of the Accountancy Act
The Parent company has two-tier board structure, which includes
Management Board (MB) and Supervisory Board (SB). The names and the
functions of the members of the SB and MB of Petrol AD are
presented below. For members of the Management Board short
biographical information is presented:
Supervisory Board
Ivan Voinovski([12]) Chairman
"Petrol Correct" EOOD, Member
represented by Nikolay
Gergov
"Petrol Asset Management" Member
EOOD, represented by Armen
Nazaryan
Management Board
Grisha Ganchev Chairman of the Board
Georgi Tatarski Deputy of the MB and Chief Executive
Officer
Milko Dimitrov Member of the MB and Chief Executive
Officer
Lachezar Gramatikov Member of the MB
Kiril Shilegov Member of the MB
Grisha Danailov Ganchev was born on 10 December 1962 in Lovech.
He had obtained his bachelor's degree in "Accounting and Control"
from the University for National and World Economy- Sofia, obtained
a master's degree in "BM" from American International Academy, St.
Louis and a master's degree in "Law" from Blagoevgrad University
"Neophyte Rilski". In the period since 1990 to 1999, Mr. Ganchev
was Manager of "Litex Commerce" AD. Between 1999 to 2008 Mr.
Ganchev was a CEO of "Litex Commerce" AD. In the period since 2008
until May 2014 he was a chairman of the Supervisory Board of "Litex
Commerce" AD. Fluent in Russian and English.
Georgi Ivanov Tatarski was born on 2 September 1960 in Razlog.
He had obtained his bachelor's degree in "Technology of Mechanical
Engineering" from Moscow State Technological University and a
master's degree in "International Economic Relations" from the
Russian Academy of Foreign Trade in Moscow. He has worked
successively at management positions in "Mineralimpex" AD,
"Interbrands Marketing End Distribution Inc." OOD "Hydro Bulgaria"
EOOD, "Shell Gas Bulgaria" AD, "OMV Bulgaria" EOOD, "Opet Aygaz
Bulgaria" EAD. Fluent in English and Russian.
Milko Konstantinov Dimitrov was born on 6 June 1985 in Lovech.
He had obtained his bachelor's degree in "Investments and
Management of Financial Risk" and has a master's degree in
"Investment Management" from Cass Business School, City University,
London, UK. He was Executive Director of "Litex Commerce" AD and
CEO of "Litex" AD. Fluent in English.
Lachezar Nikolov Gramatikov was born on 2 October 1975. He has a
master's degree in "Macroeconomics" from the University of National
and World Economy Sofia. His professional experience includes
various management positions in "Petrol AD" and "EKO Bulgaria" EAD.
From March 2013 to June 2014 he took the position of Manager
"Business Development" in "EKO Bulgaria" EAD. As of June 2014
topped the Commerce Department in "Petrol AD", as a director of
"Trade and Marketing". Fluent in English.
Kiril Emilov Shilegov was born on 20 August 1977 in Sofia. He
had obtained his bachelor's degree in "Communication Engineering"
from the Technical University of Sofia. He started his work
experience in the "British Council - Sofia", where he worked on
projects related to the Ministry of Culture of the Republic of
Bulgaria, then continued his career in "Bridge Consort" AD and
"Elana Investment" AD. From 2007 to 2010 he took the position
"Senior Expert European Programmes" in "Elana Investment" AD.
Fluent in English.
Information pursuant to item 14 of the Appendix No.10 to the
Ordinance No.2 of September 17, 2003
In 2017, there were no changes in the core management principles
of the Group and the Parent company Petrol AD in particular.
Information pursuant to item 16 of the Appendix No.10 to the
Ordinance No.2 of September 17, 2003
On February 23, 2017 the Chairman of the Supervisory Board of
the Parent company passed away. In 2017 there were no other changes
concerning the members of the MB and SB of the Parent company.
Risk Factors influencing the activity of the Petrol Group
Information pursuant to Art.39, item 1 of the Accountancy Act
concerning the risks faced by the Company
Market Environment Analysis
The Group's results from operations are affected by a number of
factors, including macroeconomic conditions in Bulgaria,
competition, variation of gross margins, fluctuations in crude oil
and petroleum product prices, product mix, relationships with
suppliers, legislative changes, and changes in currency exchange
rates, weather conditions and seasonality.
Macroeconomic conditions in Bulgaria([13])
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.
In 2017, according to preliminary data of the National
Statistical Institute (NSI), Bulgaria reported an annual real
increase in the gross domestic product of 3.6%. While in 2016 the
goods and services produced in the country assessed on current
prices were estimated at BGN 94.13 billion, in 2017 they surged to
BGN 98.631 billion, reporting nominal surge of 4.8% on annual
basis. In 2017 the gross added value amounted to BGN 85.413
billion, while the real indicator increased by 3.7% compared to the
previous year.
For 2017 the number of the employees in the country decreased by
2.1% compared to the year earlier. As at the end of the year, the
unemployed reached BGN 232 thousand, while the unemployment rate
was 7.1%, which is reduction of 0.9% compared to the previous year.
The costs of the employers for 1 hour of their employees increased
by 11.8% compared to the end of 2016. According to NSI data, the
average annual total income per person increased by 8.1% in 2017
compared to 2016 reaching 5,586 thousand compared to average annual
total income of BGN 5,167 thousand for 2016. As a result the
cumulative increase of the total annual income reached 1.6 times
for the period from 2008 to 2017.
The annual inflation for 2017 measured based on the average
annual consumer price index was 2.1% compared to minus 0.8% for
2016. The inflation level for 2017 was mainly due to the positive
contribution of the prices of foods, education, houses and
transport services. Positive impact had also the increase in the
international prices of crude oil in the beginning of the year and
its translation over the domestic fuel, natural gas and heat
prices.
Competition
In the past few years a trend for customers gradually choosing
the well-known trade marks with traditions in retail fuel sales was
observed. As a result some small players were forced to drop out of
business or to sign franchise/dealership arrangements with the
major companies in the sector. As a result of the change in
customer preferences and the implementation of additional
legislation control by the government, the market share of the
small independent players continues to decline. The absence of
strategic deals in the retail sector and significant investment
programmes by the major players led to minimum change in the retail
market shares of the companies. In 2017, seven major companies
dominated on the retail market - LUKoil Bulgaria EOOD, Petrol AD,
OMV Bulgaria EOOD, Shell Bulgaria EAD, Eko Bulgaria EAD, Rompetrol
Bulgaria AD and NIS Petrol EOOD.
Concerning the wholesale market the fuel needs in the country
are met by the output of the refinery Lukoil Neftochim Burgas AD
and from import. The refinery sells oil products in the country
exclusively through Lukoil Bulgaria EOOD. Major importers of fuels
are OMV Bulgarian OOD, Rompetrol Bulgaria AD and Eko Bulgaria EAD.
The import of petroleum products in the country is carried out
mainly by the neighboring Bulgaria countries. This is determined by
the fact that some of the fuel market participants are economically
related to the owners of the capital of the refineries in those
countries. In 2017, the wholesale market followed the trend and
volatility of crude oil prices on international markets.
Gradual introduction of new environmental standards and
additional means of control by the government, increased the costs
for companies in the sector, but on the other hand minimized the
unfair competition, eliminating market participants who are part of
the grey economy.
Key trade partners
Information pursuant to item 2 of the Appendix No.10 to the
Ordinance No.2 of September 17, 2003
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. For 2017 the major
Company's supplier with share over 10% from the total sales and
distribution costs is Litex AD.
-- The headquarter address of Litex AD is 3 Lachezar Stanchev
Str. fl.14, Sofia. The company's business includes purchase,
production, processing of goods for sale, commission and any other
activity not forbidden by the law.
Revenues from the Group's operations are generated primarily
from two areas - retail sales and wholesale sales. Retail sales are
made through trade sites to large number of customers and during
2017 there is no client whose sales revenue to exceed 10% of total
sales revenue.
Trade margins
Approximately 90% of Petrol Group's sales revenue are formed of
wholesale and retail sales of fuels and a significant and lasting
decrease in gross margin from sales of fuels would negatively
reflect on the final financial results of Petrol Group.
In 2017, the average gross margin per liter of fuel has
increased compared to 2016. The latter is due to the higher retail
and wholesale gross margin of sales of fuels in 2017 compared to
2016.
Price fluctuations in crude oil and petroleum products
The Petrol 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 Petrol Group's Management.
Any future sharp fluctuations in the prices of fuels and
non-petroleum goods may lead to a deterioration of the financial
position of the Group.
Since the international quotations of crude oil serve as a basis
for purchasing and selling prices calculation, the volatility of
the crude oil and petroleum products prices impose significant
impact on the sales revenue and cost of goods sold of the oil
products sold. For 2017 the Brent crude oil international
quotations have surged, while from the mid of the year the price
has followed entirely uptrend. After the black gold quoted at
approx. USD 55 for a barrel at the beginning of 2017, price closed
at above USD 67 for a barrel at the end of the year, increasing by
almost 22% on annual basis.
Product mix
The fuels market can be conditionally divided to light fuels and
dark fuels according to the applied technological schemes of crude
oil fractioning in its processing. The dark fuels are mainly used
for heat energy production or are used in construction and form a
relatively low part of the fuels market (approx. 10-15%). The light
fuels are used mainly for ensuring the needs of the different types
of transport. The most widely distributed are motor gasoline A-95H
and diesel.
In 2017 the Bulgarian market of motor fuels did not undergo a
significant change. The last-years tendency of shifting from all
types of gasoline to LPG and diesel has remained. The increased
diesel consumption is explained by the arising of the modern diesel
engines and fact that the transportation industry use this type of
fuel. Additional factor for the lower gasoline consumption was the
usage of LPG systems for gasoline engines driven by the
significantly lower price of LPG compared to the prices of motor
gasolines. The branded fuels and CNG came widely into the market.
Due to their better quality, these fuels can offer acceleration of
the automobile power, fuel expense reduction, increased engine
life, etc.
The main activity of the Petrol Group companies includes trading
with motor gasoline, diesel, LPG and methane (CNG). Possible
widespread future penetration of the alternative substitutes of the
traditional fossil fuels would have significant impact on the sales
and financial results of the Group.
Interest risk
Risks arising from the increase of the price of Group's
financing (see Financial instruments and risks management);
Credit risk
Risk arising from the inability of the Group's contractors to
execute their contractual obligations, as a result the Group may
bear losses (see Financial instruments and risks management);
Extraordinary expenses
There is a risk from arising of unforeseen expenses, which
negatively reflect on the Group's financial position;
Political risk
Risks for the Group arising from global and regional political
and economic crises;
Legislation
The companies in the Group are accountable to various regulatory
bodies in the country. Future changes in regulatory framework,
regulating the activity of the companies in the Group, may have
negative impact on the financial results of the Petrol Group. Fuels
trading sector is one of the most strictly regulated and controlled
by the national institutions, as the provisions have increased with
every passing year. The regulations regarding the excise
legislation and environment protections, combined with the
requirements of the Stocks of Crude Oil and Petroleum Product Act
(SCOPPA), required access to significant financial and management
resources.
Thus, changes in the current legislation affect the financial
performance of the Group. Significant influence in this direction
proved the adoption in 2003 of the Stock of Crude Oil and Petroleum
Product Act (SCOPPA) requiring all liable parties (importers and
manufacturers) and the state to create and store inventories down
based on the average daily consumption of oil products in country's
territory during the previous year.
In terms of the Excise Duty and Tax Warehouse Act from January
1, 2018 a series of changes have been imposed among which:
-- Change of the definition for "energy product for heating".
With the modification of the definition the possibility for
exemption of excise duty for energy products is limited by issuing
an excise duty exemption end-user certificate (EDEEUC);
-- Alteration of the rules in which excise duty for losses due
to waste arising from storage and transport of excise goods is not
accrued until the release for consumption. The release now will be
applicable on condition that the losses due to waste are reported
in register "Ledger of warehouse log";
-- Change in terms of the transferred goods under exemption of
excise duty regime (EEDR) and determination of shortages. Following
the change, when receiving excise goods, moving under EEDR and the
receiver determines shortages (including EU deliveries of goods),
the Bulgarian excise duty is due by the sender even when the latest
is from other EU country. Analogically the Bulgarian sender has
excise liability to other EU country in case of shortages of
delivery;
-- Change in conditions required in transformation of licensed
warehouse keeper by the legal form in acquisition, merger or
division, provided that the change will reflected the existing
license (i.e. no license cessation required);
From January 1, 2012 the Renewable Energy Sources Act (RESA) has
introduced a requirement for consumption release of diesel fuel for
transport within the meaning of EDTWA to contain at least 5% by
volume biodiesel. From June 1, 2012 the rate was increased to at
least 6% vol. Upon the release of fuel for gasoline engines, it had
to contain bioethanol or ethers produced from bioethanol least 7%
vol. as of March 1, 2015. From September 1, 2018 the gasoline
should be with a content of bio-ethanol or ethers, produced from
bio-ethanol of minimum 8% vol. and from March 1, 2019 up to 9%
vol.
Pursuant to Ordinance No.3 of February 19, 2010 on the specific
requirements and control by the customs authorities of the means of
measurement of excise goods, the licensed warehouse keepers under
EDTWA must have installed automated measuring and level systems in
their tax warehouses which through an integrated communication
system for monitoring and control to transmit data electronically
to the automated systems for accountability of individuals and to
the information system of the Customs Agency.
The other major legal acts regulating the activity of fuel
market participants are related to environmental protection.
Pursuant to Ordinance No.16 from 12 August 1999 on restriction of
the emissions of volatile organic compounds in storing, loading or
unloading and transportation of petrol, the tanks storing gasoline
should have coating for reflecting at least 70% of solar radiation
and installed internal floating roofs or seals on external floating
roofs. In the storage depots where gasolines are stored, loaded or
unloaded should have a hydrocarbon vapour recovery systems, bottom
loading systems on tanktrucks, displays for control of overloading
and grounding etc.
According to Ordinance on the requirements for the quality of
liquid fuels, conditions, terms and ways of their control from
January 1, 2009 the fuel for diesel engines and motor gasoline must
have a maximum Sulphur content of 10 mg/kg (10 ppm).
Weather conditions and seasonality
The Group's results of operations are affected by weather
conditions and seasonal variations in demand oil products. The fuel
consumption is highest in the second and third quarters, which is
due to the annual vacations during the summer months as well as to
the agricultural producers, who usually increase their consumption
during autumn months.
Other risks
See section Contingent liabilities
Financial instruments and risk management
Information pursuant to item 12 of the Appendix No.10 to the
Ordinance No.2 of September 17, 2003 and Art.39, item 8 of the
Accountancy Act
Accounting classifications and fair values
The table below shows the carrying amounts and fair values of
the financial assets and financial liabilities, including their
levels in the fair value hierarchy. There is no information
included about the fair values of these short-term financial
instruments that Management believes that the book value in the
statement of financial position is a reasonable approximation of
fair value.
Loans Other Total Level
December 31, 2017 and receivables financial 3 fair
BGN'000 liabilities value
Financial assets
Loans granted, net 18,894 - 18,894 18,894
Trade and other receivables,
net 30,714 - 30,714 -
Cash and cash equivalents 7,271 - 7,271 -
----------------- ------------- ---------- ---------
56,879 - 56,879 18,894
----------------- ------------- ---------- ---------
Financial liabilities
Trade and other payables - (68,919) (68,919) -
Loans and borrowings - (41,622) (41,622) (37,663)
----------------- ------------- ---------- ---------
- (110,541) (110,541) (37,663)
----------------- ------------- ---------- ---------
Loans Other Total Level
December 31, 2016 and receivables financial 3 fair
BGN'000 liabilities value
Financial assets
Loans granted, net 30 - 30 30
Trade and other receivables,
net 34,536 - 34,536 -
Cash and cash equivalents 5,334 - 5,334 -
----------------- ------------- ---------- ---------
39,900 - 39,900 30
----------------- ------------- ---------- ---------
Financial liabilities
Trade and other payables - (79,807) (79,807) -
Loans and borrowings - (42,319) (42,319) (38,582)
----------------- ------------- ---------- ---------
- (122,126) (122,126) (38,582)
----------------- ------------- ---------- ---------
Fair values estimation
Trade and other receivables
Determining the fair value of trade and other receivables
includes the following:
-- analysis of analytical trail balances and reporting of internal transformations;
-- differentiation between receivables and payables, excluding
the presumption of future offsetting of receivables from different
customers;
-- valuation of receivables based on their collectability;
-- revaluation of receivables in foreign currencies at the
respective rates as at the date of the financial statements.
Debenture loan
The fair value of the debenture liability is determined based on
a quotable price as at the date of the consolidated financial
statement, in case the instrument is quoted at an active market. In
case it is not actively traded, the fair value is determined based
on alternative valuation techniques. The valuation techniques used
include analysis of discounted cash flows through expected future
cash flows and discount level in relation with the market, the
credit rating of the issuer, etc. The fair value is determined only
for disclosure purposes.
Trade and other payables
Determining the fair value of trade and other payables includes
the following:
-- complete review of payables as at the date of valuation;
-- identification of overdue payables and determination of interests and penalties due;
-- revaluation of payables in foreign currencies at rates as at
the date of the financial statements.
Receivables and payables related to trade loans
The fair value of the received and granted trade loans is
determined for disclosure purposes and is calculated based on the
present value of future cash flows of principal and interest
discounted at the market rate at the reporting date.
Financial risk management
Risk management framework
The use of financial instruments exposes the Group to market,
currency and interest rate risk. This section presents information
about the objectives, policies and processes for managing these
risks, as well as capital management.
Future uncertainty about the ability of customers to repay their
obligations, in accordance with the agreed conditions, may lead to
an increase of impairment losses on interest loans granted, trade
receivables, financial assets available-for-sale and other
financial instruments, as well as the values of other accounting
estimates in subsequent periods might materially differ from those
specified and recorded in these consolidated financial statements.
The Group's Management applies the necessary procedures to manage
these risks.
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 optimising the return. Because of the nature of its activity,
the Group is exposed to price, currency and interest rate risk.
Currency risk
The Group performs transactions in a currency other than its
functional currency, and thus it is exposed to risk, related to
potential foreign exchange rate fluctuations. Such risk arises
mainly from the fluctuations of the US dollar, since the Group
performs purchases and has received loans denominated in US
dollars. Transactions primarily denominated in euro do not expose
the Group to currency risk, since the Bulgarian lev is fixed to the
euro effective January 1, 1999.
Financial assets and liabilities denominated in US dollars are
presented in the following table:
December 31, 2017 December 31, 2016
USD'000 BGN'000 USD'000 BGN'000
Financial assets
Cash and cash equivalents 7 11 14 26
7 11 14 26
========= ========= ========= =========
Financial liabilities
Trade and other payables (727) (1,186) (812) (1,506)
(727) (1,186) (812) (1,506)
========= ========= ========= =========
The sensitivity analysis to currency risk is calculated based on
7% fluctuation in the exchange rate of the US dollar towards the
Bulgarian lev. The Management considers that it is a reasonably
possible fluctuation, based of statistical data for the dynamics of
fluctuations in the exchange rate in the previous period, based on
the daily deviation calculated for 250 days. If on December 31,
2017 the rate of the US dollar had decreased/increased by 7%
assuming that all other variables remained constant, loss after tax
would have increased/decreased by BGN 74 thousand.
Interest rate risk
The Group is exposed to interest rate risk as part of borrowings
have variable interest rate agreed as basis interest increased by a
certain margin. The Group continuously monitors and analyzes its
main interest rate exposures by developing various scenarios for
optimization as refinancing, renewal of existing loans, alternative
financing (contracts for the sale and leaseback of assets) and
calculates the impact of changing interest rates within a certain
range on the financial result.
As at the date of these consolidated financial statements, the
structure of the interest-bearing financial instruments is as
follows:
December December
31, 31,
2017 2016
BGN'000 BGN'000
Instruments with fixed interest rate
Financial assets 18,668 -
Financial liabilities (36,704) (35,977)
--------- ---------
(18,036) (35,977)
========= =========
Instruments with variable interest rate
Financial liabilities (2,359) (2,839)
--------- ---------
(2,359) (2,839)
========= =========
The sensitivity analysis of the interest rate risk is prepared
based on the presumption that interest positions with variable
interest rates as of the end of the reporting period have existed
in the same amount during the entire year and the reasonably
possible increase/decrease of the interest rate is by 27 basis
points. If the interest rates were higher/lower by 27 basis points,
and all other variables were constant, the profit after tax would
have been lower/higher by BGN 5 thousand.
Price risk
The Group is exposed to a risk of frequent and sharp
fluctuations in fuels prices and other tradable goods. In order to
decrease sensitivity to fluctuations in the prices of fuels, the
Group updates its selling prices on a daily basis in accordance
with the geographic region and the selling prices of its main
competitors.
In 2017, the Group held comparatively high inventory turnover.
For approximately 18 days the inventory makes a whole cycle, which
reduces the Group's price risk exposure.
Credit risk
Credit risk is the risk that one party to a financial instrument
fails to meet its obligation and thus causing loss to the other.
Financial assets that potentially expose the Group to credit risk
are mainly trade receivables and interest loans granted.
Exposure to credit risk
The carrying amount of financial assets represents the maximum
credit risk the Group is exposed to. The maximum exposure to credit
risk as at the reporting date is as follows:
December December
31, 31,
2017 2016
BGN'000 BGN'000
Loans granted 18,894 30
Trade and other receivables 30,714 34,536
Cash and cash equivalents 7,179 5,215
56,787 39,781
========= =========
Trade and other receivables
The Group is exposed to credit risk, in case its customers do
not pay their obligations in the expected term and amount. The
policy of the Group regarding credit risk is to sell goods and
services only to customers with an appropriate credit standing and
to use adequate collaterals as a means of reducing the risk of
financial losses. The creditworthiness of customers is estimated by
taking into consideration their financial position, past experience
and other factors. Credit limits have been stipulated and their
compliance is regularly monitored. In case of exceeding the credit
limits, interest on arrears is accrued. Retail sales are settled in
cash predominantly or by credit cards.
Impairment of trade and other receivables
Time structure of trade and other receivables at the reporting
date are not impaired, is as follows:
December December
31, 31,
2017 2016
BGN'000 BGN'000
Up to 30 days 743 812
31 - 120 days 291 690
121 - 210 days 187 1,931
Over 211 days 3,918 368
--------- ---------
5,139 3,801
========= =========
Cash and cash equivalents
Cash and cash equivalents of the Group are located in banks with
high ratings.
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. The goal of management is to maintain a constant
balance between continuity and flexibility of financial resources
using various forms of financing. Liquidity risk management
includes maintaining sufficient stocks of cash, arranging adequate
credit lines, preparation, analysis and updating cash flow
forecasts.
The following table presents the contractual maturities of
financial liabilities based on the earliest date on which the Group
may be required to pay them.
The table shows the undiscounted cash flows, including principal
and interest, excluding the effect of netting arrangements:
December 31, 2017 Carrying Contractual Up to Between
BGN'000 amount cash flows one year one and
five
years
Debentures 38,223 46,713 2,190 44,523
Loans from financial institutions 2,369 2,369 578 1,791
Trade loans from unrelated
parties 1,030 1,030 1,030 -
Trade and other payables 68,919 68,919 68,919 -
110,541 119,031 72,717 46,314
========= ============ ========== =========
December 31, 2016 Carrying Contractual Up to Between
BGN'000 amount cash one year one and
flows five
years
Debentures 38,815 51,775 3,056 48,719
Leaseback 2,839 2,839 524 2,315
Finance lease 665 665 665 -
Trade and other payables 79,807 79,807 79,807 -
122,126 135,086 84,052 51,034
========= ============ ========== =========
The Group does not expect cash flows included in the table to
occur significantly earlier or at significantly different
amounts.
In 2017, the Petrol Group did not use any financial instruments
for hedging-risk purposes.
The Group operates with ERP system, which supports the ongoing
reporting, analysis, planning, implementation and control of the
business processes in Petrol Group. The internal control system of
the Group monitors for the effective functioning of the Group's
reporting, preventive identification of risks accompanying
activities and the timely identification of potential errors and
shortcomings. At the same time, the Parent company's SB exercises
general and continuous control over the Parent-company's activity,
including the accompanying reporting and verifies the annual
financial statements and annual reports of Petrol AD (see also
Corporate management declaration).
Information pursuant to item 10 of the Appendix No.10 to the
Ordinance No.2 of September 17, 2003
In 2017, the Group did not issue any new security issues.
At a general meeting of Parent company's bondholders held in
December 2016 a decision has been made to extend the bond issue
term by 5 years to 26 January 2022. Simultaneously with the bond
term extension was decreased the interest rate from 8.375% to 5.5%
for the first year, 6% for the second year, 6.5% for the third
year, 7.5% for the fourth year and 8% for the fifth year.
Significant events occurred in 2017
Information pursuant to item 3 of the Appendix No.10 to the
Ordinance No.2 of September 17, 2003
In January 2017, the Parent company received a tax audit act on
corporate tax revision for 2013 and VAT until October 2014
amounting to BGN 222 thousand principal and BGN 68 thousand
interest. Bank guarantee of BGN 350 thousand was issued in order to
ceased the execution of the appealed audit act in January 2017. In
March 2017 the foreclosed properties, with carrying amount of BGN
578 thousand, which guaranteed the execution of the finalized audit
proceedings, were released by the National Revenue Agency.
In February 2017, continuing the measures for capital adequacy
of the Group, the Management Board of the Parent company convened
new Extraordinary General Meeting of Shareholders (EGMS) with a
decision agenda for reverse split of shares. EGMS was held with
77,951,767 presenting shares, representing 71,36% of the registered
capital, where 71,937,309 shares representing 65,85% (over 2/3 of
the presenting shares) were voted "For" the reverse split
procedure.
Several months of negotiations for improvement of the terms of
the contract for rent of the operated by the Group trade sites with
one of the major lessors, were concluded. As a result the
contracted rent for two-years period from January 1, 2016 was
decreased by 35%.
In February 2017, the Group purchased 32 200 company shares,
each with nominal value of BGN 1, representing 100% of the capital
of Storage Invest EOOD for acquisition price of BGN 33
thousand.
In relation to the received by the Parent company in October
decision of the Commission for Protection of Competition, claiming
for a violation, consisted of prohibited agreement and/or agreed
practice for price and other market data exchange for price
collaboration, and the written objections against the claimed by
CPC contentions, in March 2017 CPC ordered a decision, which
approved the measures proposed by the Parent company and by the
other parties in the proceedings, suspending the exchange of market
data. With the decision of March 2017 the Commission for Protection
of Competition terminated the file.
In March 2017, the Parent company received a tax audit act due
to the audit of corporate income tax for 2014 and VAT until June
2015 for BGN 663 thousand principal and BGN 138 thousand interest.
The Parent company appealed the act. In order to suspend the
enforcement of the appealed audit act, a bank guarantee in favor of
National Revenue Agency for BGN 940 thousand, ordered by the Parent
company, was issued. The bank guarantee is partly covered by BGN
300 thousand cash. In August 2017 the Director of "Appealing and
tax-security practice" department issued a decision which change
the appealed revision act 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 rest of the
additionally determined tax liabilities in the revision act are in
process of legal appealing. The issued bank guarantee to suspend
the enforcement of the appealed audit act in favor of the National
Revenue Agency of BGN 940 thousand, partly covered by BGN 300
thousand blocked cash, was replaced with new bank guarantee of BGN
94 thousand and blocked cash was released.
In April 2017, the Parent company granted an one-year trade loan
to a subsidiary with a credit limit to BGN 1,180 thousand and 6.7%
interest. In December 2017 the investment in the subsidiary was
sold and the outstanding loan principal of BGN 148 thousand was
reclassified as trade loan granted to unrelated parties.
In May 2017 was hold next EGMS when decision for reduction of
capital from BGN 109,249,612 to BGN 27,312,403 by decrease of
nominal value of the issued shares from BGN 4 to BGN 1 was voted.
The decision is conditional upon the decision of the EGMS
concerning the procedure of reverse split, which should be
confirmed by final entered into force court decision.
In June 2017 the Group signed a contract for borrowing money
with unrelated party with term August 31, 2017 and 5% annual
interest. The principal was entirely repaid within the contracted
term.
In July 2017, a contract for sale at a price of BGN 0.30 for
each of the 2,767,135 own Parent-company shares was signed. The
price was arranged in deferred payment schedule with 10% due in 3
days and the rest to the end of 2018.
In July 2017 the credit limit under the Group's Revolving credit
limit was increased from BGN 8,500 to BGN 9,500 (see also
Contingent liabilities).
In August 2017 the Group signed two contracts for granting
money, which requires the Group to grant to unrelated parties
interest bearing loans amounting to BGN 4,000 thousand and to BGN
500 thousand with 6.7% annual interest and with initial term of
December 31, 2017 and subsequently extended to December 31, 2018.
As at December 31, 2017 are granted BGN 3,820 thousand and BGN 500
thousand, respectively.
In October 2017 was hold a new EGMS where a decision repealing
the decisions taken on meetings hold in February and May 2017 was
voted. On the same meeting, a new decision for reverse split
procedure by merging 4 old shares in 1 new share with nominal of
BGN 4 and consequently decreasing of the Group's capital in order
to cover losses by decreasing the nominal value of the shares from
BGN 4 to BGN 1. At present, the decision of EGMS for merging of 4
old shares with nominal of BGN 1 into 1 new share with nominal of
BGN 4 was registered in Commercial register resulted in registered
share 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
capital structure of the Parent company was entered in the
registers of the Central Depository AD. At present, an application
for registration in Commercial Register of the decision of EGMS for
the second stage of the procedure was applied, which will decrease
the capital of the Group by decreasing the nominal value of the
shares from BGN 4 to BGN 1 in order to cover losses.
In November 2017 the issued in March 2016 revision act for BGN
543 principal and BGN 248 interest of the security payments
revision, appealed by the Parent company as unfounded and covered
by bank guarantee of BGN 800 thousand was entirely repealed with a
decision of Administration court - Sofia city. The tax
administration appealed against the decision and the dispute is
pending in Supreme Administrative Court.
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 with 6.7% annual
interest and term until December 31, 2018. As at December 31, 2017
the contracted amount was entirely granted.
In November 2017 the Group transferred the remaining 11 232 528
ordinary registered voting shares with nominal value of BGN 1 each,
representing 99.9999911% of the capital of Gryphon Power AD for BGN
21,800 thousand. As the transaction date the consolidated net
assets of the sold company were BGN 10,891 thousand. As a result of
the sale the Group reported a profit of BGN 10,909 thousand.
In December 2017, the Group signed a contract for granting
money, which requires the Group to grant interest bearing trade
loan up to BGN 3,000 thousand to unrelated party with 6.7% annual
interest and term until December 31, 2018. As at December 31, 2017
the contracted amount was entirely granted.
In December 2017, the Group sold to third party 100% of the
capital of BPI AD for BGN 4 thousand. As at the transaction date,
the consolidated net assets were negative amounting to BGN 1,087
thousand and the result of the sale was a profit of BGN 1,091
thousand.
In December 2017, the Group negotiated again the prices for
renting the trade sites with the two major lessors resulting in 28%
average decrease of actual rent prices from 2018.
In December 2017 the Group sold to third party 50 000 company
shares, representing 100% of the capital of Petrol Gas EOOD for BGN
2 thousand. As at the transaction date the consolidated net assets
were BGN 10 thousand and the result of the sale was loss of BGN 8
thousand.
Additional information concerning other Group events during the
period, which could be considered as significant is disclosed in
the notes to the consolidated annual financial report of the Group
for 2017.
Events after the reporting date
Information pursuant to Art. 39, item 3 of the Accountancy
Act
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 of BGN 1 to 1 new share with nominal 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 of BGN 1 into 1 new share with nominal 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 nominal of BGN 4 each. The change in the capital
structure of the Parent company was registered also in Central
Depositary AD. The application for registration of the voted on
EGMS decision for the second stage of the procedure is forthcoming
to be submitted and 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. As at the date of preparation of the actual
report the application is still not processed by CR. (see also note
32 to the annual consolidated financial report).
In March 2018 the Parent company sold 70,915,161 shares,
representing 99,999999% of the capital of Elit Petrol AD for the
total price of BGN 25 thousand, which was due in one-month
period.
In March 2018, the Parent company signed a contract for
purchasing of 1,873,700 shares, representing 100% of the capital of
Varna Storage EOOD for the total price of BGN 6,500 thousand,
determined by a market valuation accepted by both parties. The
price was offset with opposite receivables of the Parent company
from the seller.
As a continuation of the measures for optimization of Group's
business, in April 2018 the subsidiary received a license for
management of tax warehouse for storage of excise goods in SD
Plovdiv. The SD is rented by a subsidiary pursuant to a contract
signed in March 2017 for period of 10 years. (see also note 32 to
the annual consolidated financial report).
Unusual events and indicators
Information pursuant to item 5 of the Appendix No.10 to the
Ordinance No.2 of September 17, 2003
In relation to the received, by the Group in October 2016,
decision of the Commission for Protection of Competition, with a
claim for a violation consisting of prohibited agreement and/or
agreed practice for price and other market data exchange aiming
price collaboration, and the written objections against the claimed
by CPC contentions, in March 2017 CPC ordered a decision, which
approved the measures proposed by the Parent company and by the
other parties in the proceedings, suspending the exchange of market
data.
With the decision of March 2017, the Commission for Protection
of Competition terminated the file. (see also Events after the
reporting date and Contingent liabilities).
Results from operations
Information pursuant to item 11 of the Appendix No.10 to the
Ordinance No.2 of September 17, 2003
The Petrol Group has not disclosed any financial and operating
projections for 2017, thus there is no analysis of the ratios
between the reached and disclosed financial results.
Operating and financial data pursuant to item 1 and item 2 of
Appendix No.10 to the Ordinance No.2 of September 17, 2003 and Art.
39, item 1 and item 2 of the Accountancy Act
Revenue
In 2017 the consolidated revenue of the Group decreased to BGN
480.6 mln. (EUR 245.7 mln.), representing drop of 2% compared to
BGN 489 mln. (EUR 250 mln.) for 2016. The decrease of total revenue
in absolute value was due entirely to the lower by BGN 8.7 mln.
(EUR 4.4 mln.) sales revenue, as the other income increased by BGN
0.3 mln. (EUR 0.15 mln.). The decline of the sales revenue is due
mainly to the drop of 72% in wholesale sales revenue, as the
revenue in retail segment increased by 8%.
The table below presents the change of revenue during the period
2015 - 2017 on a consolidate base and by separate business
segments:
2017 2016 2015 % 2017/2016
Sales revenue BGN mln 479.1 487.8 662.5 (2%)
---------------------------- --------- ------ ------ ------ ------------
EUR mln 244.9 249.4 338.7
------------------------------------- ------ ------ ------ ------------
Other income BGN mln 1.5 1.2 10.5 25%
---------------------------- --------- ------ ------ ------ ------------
EUR mln 0.8 0.6 5.4
------------------------------------- ------ ------ ------ ------------
Total revenue, including: BGN mln 480.6 489.0 673.0 (2%)
---------------------------- --------- ------ ------ ------ ------------
EUR mln 245.7 250.0 344.1
------------------------------------- ------ ------ ------ ------------
Retail BGN mln 463.7 429.9 493.8 8%
--------------------------- --------- ------ ------ ------ ------------
EUR mln 237.1 219.8 252.5
------------------------------------- ------ ------ ------ ------------
share of total revenue % 96.5% 87.9% 73.4%
Wholesale BGN mln 16.2 58.5 176 (72%)
--------------------------- --------- ------ ------ ------ ------------
EUR mln 8.3 29.9 90
------------------------------------- ------ ------ ------ ------------
share of total revenue % 3.4% 12.0% 26.1%
Other activities BGN mln 0.7 0.6 3.2 17%
--------- ------ ------ ------ ------------
EUR mln 0.4 0.3 1.6
------------------------------------- ------ ------ ------ ------------
share of total revenue % 0.1% 0.1% 0.5%
--------------------------- --------- ------ ------ ------ ------------
As in all previous years the sales revenue of the Group in 2017
was almost entirely (98%) formed by sales of goods. In 2017, these
sales amounted to BGN 471.2 mln. (EUR 240.9 mln.) or with 2% less
than sales for 2016 of BGN 480.5 mln. (EUR 245.7 mln.). The decline
in the revenue from sales of goods in 2017 compared to the previous
year is due entirely due to the decrease by 3% in the revenue from
sales of fuels.
In 2017, the sales of goods comprised mainly (91%) retail and
wholesale sales of fuels, which amounts, after excluding
intra-Group sales, are as follows:
2017 2016 2015 % 2017/2016
Retail sales of fuels mln. BGN 419.0 387.9 457.7 8%
-------------------------- ---------- ------ ------ ------ ------------
mln. EUR 214.2 198.3 234
------------------------------------- ------ ------ ------ ------------
share of total sales of
fuels % 97.3% 87.6% 75.9%
Wholesale sales of fuels mln. BGN 11.8 54.9 145.3 (78.5%)
-------------------------- ---------- ------ ------ ------ ------------
mln. EUR 6.0 28.1 74.3
------------------------------------- ------ ------ ------ ------------
share of total sales of
fuels % 2.7% 12.4% 24.1%
Total sales of fuels BGN mln 430.8 442.8 603 (2.7%)
-------------------------- ---------- ------ ------ ------ ------------
EUR mln 220.2 226.4 308.3
------------------------------------- ------ ------ ------ ------------
The decrease in the sales revenue of fuels was due entirely to
the wholesale segment sales, which decreased by 78.5%. In 2017 the
retail sales revenue of fuels surged by 8% compared to the revenue
in 2016 (see also Retail sales and Wholesale sales).
As a result in the current year the relative share of the
wholesale sales revenue of fuels decreased in the total
consolidated revenue from sales of fuels of the Petrol Group at the
expense of retail sales revenue of fuels. While in 2016 the revenue
from wholesale sales of fuels was 12.4%, in 2016 it dropped to 2.7%
in the Group's total consolidated sales revenue of fuels.
The dynamics of sales revenue (in BGN millions) of the major
type of oil products, traded by the Group during the period 2015 -
2017 are presented on the following diagram:
Retail sales
The Group's retail sales are made through a network of retail
stations owned and/or operated by Petrol AD. These retail stations
are evenly spread throughout the country giving the Group
comprehensive geographic coverage. As of December 31, 2017 the
Group operated 328 working retail stations (2016: 334 retail
stations).
The results for the period 2015 - 2017 are as it follows:
2017 2016 2015 % 2017/2016
Retail sales volumes
(mln. liters) 289.7 290.5 301.6 (0.3%)
------------------------------------ ------ ------ ------ ------------
Incl. corporate clients 71 69 73 2.9%
------------------------------------ ------ ------ ------ ------------
Sales revenue BGN mln 419.0 387.9 457.7 8%
------------------------- --------- ------ ------ ------ ------------
EUR mln 214.2 198.3 234
----------------------------------- ------ ------ ------ ------------
In 2017, the Group reported a minimum decrease in retail sales
volumes compared to 2016. The decline of 0.3% in volumes for 2017
was entirely compensated by the higher average selling prices in
2017 compared to the prices in 2016, which led to 8% higher total
revenue from retail sales of fuels in 2017 on annual basis.
In 2017, the Group continued the process of reorganization of
retail network, started in 2015, including suspension of operation
and sale of unprofitable trade sites, termination of franchise and
dealership contracts with incorrect partners and concluding
agreements with new counterparties on the same franchise and
dealership programmes, etc.
The following table sets out the Group's retail sales of fuel by
major types of oil products for 2015 - 2017:
2017 2016 2015 % 2017/2016
Gasoline A-95H BGN mln 127 120.8 136.1 5.1%
----------------------------- --------- ------ ------ ------ ------------
EUR mln 64.9 61.8 69.6
--------------------------------------- ------ ------ ------ ------------
share of total retail sales
of fuels % 30.3% 31.1% 29.7%
Gasoline 96 Extra Force BGN mln 0.8 6.4 13.2 (87.5%)
----------------------------- --------- ------ ------ ------ ------------
EUR mln 0.4 3.3 6.7
--------------------------------------- ------ ------ ------ ------------
share of total retail sales
of fuels % 0.2% 1.6% 2.9%
Gasoline A-98 BGN mln 0.7 3.7 3.2 (81.1%)
----------------------------- --------- ------ ------ ------ ------------
EUR mln 0.4 1.9 1.6
--------------------------------------- ------ ------ ------ ------------
share of total retail sales
of fuels % 0.2% 1.0% 0.7%
Gasoline100 Extra Force BGN mln 3.7 - - -
--------- ------ ------ ------ ------------
EUR mln 1.9 - -
======================================= ====== ====== ====== ============
share of total retail sales
of fuels % 0.9% - -
============================= ========= ====== ====== ====== ============
Blue Force LPG BGN mln 46.7 43.3 50.7 7.9%
----------------------------- --------- ------ ------ ------ ------------
EUR mln 23.9 22.1 25.9
--------------------------------------- ------ ------ ------ ------------
share of total retail sales
of fuels % 11.1% 11.2% 11.1%
Green Force diesel BGN mln 13.2 - - -
--------- ------ ------ ------ ------------
EUR mln 6.7 - -
======================================= ====== ====== ====== ============
share of total retail sales
of fuels % 3.1% - -
============================= ========= ====== ====== ====== ============
Pro Force Diesel BGN mln 225.3 212.4 252.8 6.1%
----------------------------- --------- ------ ------ ------ ------------
EUR mln 115.2 108.6 129.3
--------------------------------------- ------ ------ ------ ------------
share of total retail sales
of fuels % 53.8% 54.8% 55.2%
Other fuel BGN mln 1.6 1.3 1.7 23.1%
----------------------------- --------- ------ ------ ------ ------------
EUR mln 0.8 0.7 0.9
--------------------------------------- ------ ------ ------ ------------
share of total retail sales
of fuels % 0.4% 0.3% 0.4%
----------------------------- --------- ------ ------ ------ ------------
Total retail sales of fuels BGN mln 419 387.9 457.7 8%
----------------------------- --------- ------ ------ ------ ------------
EUR mln 214.2 198.3 234
--------------------------------------- ------ ------ ------ ------------
In 2017, the Group reported an increase in the revenue from
retail sales of fuels, which is due entirely to the higher average
retail prices. The drop in the retail sale volumes of fuels on
annual basis was minimum amounting to 0.3%.
The highest growth in absolute value of BGN 13.2 mln. (EUR 6.7
mln.) reported the revenue from sales of Green Force diesel, whose
sales has started in the end of 2016. Additionally an increase of
BGN 12.9 mln. (EUR 6.6 mln.) reported the sales of diesel, which is
due entirely to the higher average selling price of the fuel in
2017.
The revenue from sales of Gasoline A-95H, Blue Force LPG
increased by BGN 6.2 mln. (EUR 3.1 mln.), BGN 3.4 mln. (EUR 1.7
mln.), respectively, which is due entirely to the higher average
selling prices in 2017. The revenue from sales of Gasoline A-96 and
Gasoline A-98 dropped by 87.5% and 81.1%, respectively compared to
2016, which is due entirely to the lower sales volumes in 2017
compared to 2016.
The dynamics of retail sales revenue (in BGN millions) of the
major types of oil products during the period 2015 - 2017 are
presented on the following diagram:
Wholesale sales
The Group's wholesale sales are made through the operated by the
Group SD Varna and by purchases from other storage depots of third
party entities.
The reported results from wholesale sales of fuels in 2015 -
2017 are, as follows:
2017 2016 2015 % 2017/2016
Volume of wholesale sales
(million litres)([14]) 8 41 98 (80.5%)
-------------------------------------- ----- ----- ------ ------------
Volume of wholesale sales
(thousand tonnes)([15]) 0 0 0 -
-------------------------------------- ----- ----- ------ ------------
Sales revenue BGN mln 11.8 54.9 145.3 (78.5%)
--------------------------- --------- ----- ----- ------ ------------
EUR mln 6 28.1 74.3
------------------------------------- ----- ----- ------ ------------
In 2017 the wholesale sales volumes of light fuels decreased by
32.6 mln. liters compared to the previous year. The decline is
almost entirely due to the decrease in sales of Gasoline A-95H and
diesel, which form almost 100% of total wholesale sales. The
highest drop of 26.9 mln. liters reported the sales of diesel. The
sales volumes of Gasoline A-95H shrank by 87% to 5.5 mln. liters,
compared to 2016. As a result of that in 2017 the total revenue
from wholesale sales of fuels decreased to 79% to BGN 11.8 mln.
(EUR 6 mln.), which is due entirely to the decrease in sales
volumes in 2017 compared to the previous year. The latter is a
direct result of the new legislative requirements for VAT guarantee
of the purchases of fuels, introduced in the second half of 2016
and the associated exit of part of the market participants from
wholesale trading.
The following table sets out the Group's wholesale sales of fuel
by major types of oil products:
2017 2016 2015 % 2017/2016
Gasoline A-95H mln. BGN 1.3 8.9 21 (86%)
-------------------------- ---------- ------ ------ ------ ------------
mln. EUR 0.6 4.6 10.7
------------------------------------- ------ ------ ------ ------------
share of total wholesale
sales of fuels % 11% 16.2% 14.4%
Gasoline -98 mln. BGN 0.06 0.4 0.7 (82%)
---------- ------ ------ ------ ------------
mln. EUR 0.03 0.2 0.4
------------------------------------- ------ ------ ------ ------------
share of total wholesale
sales of fuels % 0.5% 0.7% 0.5%
---------- ------ ------ ------ ------------
Diesel mln. BGN 10.4 45.6 123.6 (77%)
-------------------------- ---------- ------ ------ ------ ------------
mln. EUR 5.3 23.3 63.2
------------------------------------- ------ ------ ------ ------------
share of total wholesale
sales of fuels % 88.1% 83.1% 85.1%
Other fuels mln. BGN 0.04 0.0 0.0 -
-------------------------- ---------- ------ ------ ------ ------------
mln. EUR 0.03 0.0 0.0
------------------------------------- ------ ------ ------ ------------
share of total wholesale 0.4%
sales of fuels % - -
-------------------------- ---------- ------ ------ ------ ------------
Total wholesale sales
of fuels mln. BGN 11.8 54.9 145.3 (78.5%)
-------------------------- ---------- ------ ------ ------ ------------
mln. EUR 6 28.1 74.3
------------------------------------- ------ ------ ------ ------------
The highest decrease in wholesale segment of BGN 35.2 mln. (EUR
18 mln.) reported the sales of diesel fuel. The decrease is due
entirely to the decline in the sales volumes in 2017 compared to
the previous year. The revenue from sales of Gasoline A-95H
decreased by BGN 7.7 mln. (EUR 3.9 mln.) compared to the previous
year, also due to the lower sales volumes compared to the previous
period.
The dynamics in wholesale sales revenue of the major types of
petroleum products during the period 2015 - 2017 are presented on
the following diagram:
Gross margin
The Group's total gross margin, calculated as a percentage of
the consolidated net revenue from sales of goods increased from
9.4% in 2016 to 10.1% in 2017. The growth in absolute value is BGN
2.4 mln. (EUR 1.2 mln.) and is due to the increase of the
consolidated gross margin from sales of fuels and other goods. The
total gross margin from sales of fuels rose by 6% to BGN 40.8 mln.
(EUR 20.9 mln.) in 2017 compared to BGN 38.5 (EUR 19.7 mln.) in
2016. The gross margin from sales of lubricants and other goods
rose by 1% in 2017 to BGN 6.9 mln. (EUR 3.6 mln.) compared to BGN
6.8 mln. (EUR 3.5 mln.) in 2016.
Operating expenses
Hired services
In 2017, the hired services increased by BGN 3.1 mln. (EUR 1.6
mln.) to BGN 38.7 mln. (EUR 19.8 mln.). Compared to the previous
period the rise in 2017 is mainly formed by the higher expenses for
maintenance and repair, and dealer remunerations and commissions,
which increased respectively by BGN 1.5 mln. (EUR 0.8 mln.) and BGN
1.8 mln. (EUR 0.9 mln.). The increase in repair and maintenance is
due entirely to the fact that from the beginning of 2017 the Group
uses third party service for the maintenance of the fuel stations.
This led to decrease in 2017 in employee benefits, materials and
consumables, and hired services related to the maintenance of the
trade sites. The increase in commissions is due mainly to the
reported exchange commissions during the year, the payment of which
is cyclical and to the increase in minimum wage in 2017, which
reflects on the dealers' remunerations. In 2017 the largest
decrease of BGN 0.5 mln. (EUR 0.3 mln.) reported the security
expenses. The expenses for advertisement decreased by BGN 0.2 mln.
(EUR 0.1 mln.).
Employee benefits
In 2017, the employee benefits remained unchanged, amounting to
BGN 18.7 mln. (EUR 9.6 mln.). The reduction in employee benefits
related to the maintenance staff of trade site, resulting from the
outsourcing the service to third party from the beginning of 2017
were compensated by the increase of the minimum wage in 2017.
Depreciation and amortization
Depreciation and amortization charges on fixed tangible and
intangible assets are accrued based on the useful life of the
assets by applying the straight-line method (see also note 3.1 to
the consolidated financial report for 2017). In 2017, the Group
reported a decrease in depreciation expenses of 23% to BGN 1.5 mln.
(EUR 0.8 mln.), compared to BGN 1.9 mln. (EUR 1 mln.) in 2016.
Materials and consumables
In 2017, the Group did not reported significant change in
materials and consumables compared to 2016, amounting to BGN 4 mln.
(EUR 2.1 mln.).
Impairment losses of assets
The impairment losses for 2017 amounted to BGN 0.4 mln. (EUR 0.2
mln.), compared to BGN 0.5 mln. (EUR 0.25 mln.) for 2016. The
recognised impairment loss in 2017 is due entirely to the impaired
trade receivables amounting to BGN 0.6 mln. (EUR 0.3 mln.).
Simultaneously an impairment loss for BGN 0.2 mln. (EUR 0.1 mln.)
recognised in previous period was reversed (see also note 12 to the
consolidated financial report).
Other operating expenses
In 2017, the Group's other operating assets remained unchanged
compared to 2016, amounting to BGN 2.6 mln. (EUR 1.3 mln. In 2017,
the most significant weight in other operating expenses had the
representative expenses and sponsorship amounting to BGN 1 mln.
(EUR 0.5 mln.) and the reported during the year waste and shortages
of BGN 0.9 mln. (EUR 0.5 mln.).
Profit from operations
In 2017, the Group reported a negative result before net
financial expenses, taxes and amortization (EBITDA) at the amount
of BGN 7.3 mln. (EUR 3.7 mln.) compared to loss of BGN 7.5 mln.
(EUR 3.8 mln.) for 2016. The improvement of the indicator by BGN
0.2 mln. (EUR 0.1 mln.) is due mainly to the increase in the gross
margin from sales of fuels in 2017 compared to 2016. The Group's
operating expenses (excluding the depreciation and impairment
losses) increased by BGN 3 mln. (EUR 1.6 mln.). The increase in
operating expenses is due mainly to the higher amount of hired
services (see also Operating expenses).
The improvement of EBITDA in 2017 has a positive effect on
Group's earnings before interest and taxes (EBIT). The latter
reported a decrease in the operating loss to BGN 8.8 mln. (EUR 4.4
mln.) compared to BGN 9.4 mln. (EUR 4.8 mln.) in 2016. The positive
effect on this indicator has the decrease of depreciation and
amortization in 2017 by 23% compared to the previous year.
Net finance costs
In 2017, the Group reported net finance income of BGN 9.5 mln.
(EUR 4.9 mln.) compared to net finance expenses of BGN 1.2 mln.
(EUR 0.6 mln.) for 2016.
In 2017, the Group's finance income amounted to BGN 13 mln. (EUR
6.6 mln.) compared to BGN 4.5 mln. (EUR 2.3 mln.) for 2016. The
most significant effect on the total increase in the finance income
has the gain on sale of subsidiaries amounted to BGN 12 mln. (EUR
6.1 mln.) in 2016.
In 2017, the Group's finance costs amounted to 3.5 . . (1.8 . )
compared to BGN 5.7 mln. (EUR 2.9 mln.) for 2016. The decrease is
due mainly to the reported in 2017 lower with BGN 0.7 mln. (EUR 0.4
mln.) interest costs on debenture loans, resulted from the
renegotiated terms in the end of 2016 of Group's Eurobond issue and
to the decrease in interest due to budget by BGN 0.7 mln. (EUR 0.4
mln.) in 2017 (see also note 14 to the annual consolidated
financial statements for 2017).
Financial position
As at December 31, 2017 the Group's current liability ratio
increased to 0.84 compared to 0.71 for 2016 with increased current
assets and current liabilities. The improvement of the indicator is
due to the increase of the current assets by BGN 13.3 mln. (EUR 6.8
mln.) compared to the increase of the current liabilities by BGN
1.9 mln. (EUR 1 mln.) for the same period.
As at December 31, 2017 the consolidated indebtedness of the
Group including loans, borrowings and liabilities under finance
lease agreements did not change significantly compared to the
previous year, amounting to BGN 41.6 mln. (EUR 21.3 mln.). In 2017,
the Debt/Assets indicator decreased to 42% compared to 43% in the
end of 2016.
In 2017, the Group increased the inventories turnover period to
17 days compared to 15 days in 2016, which is due to the lower
averaged cost of goods sold in 2017 compared to a year earlier and
the higher end balance of the goods as at December 31, 2017. As at
December 31, 2017 the accounts receivable collection period
decreased to 20 days compared to 21 days in 2016.
Disclosure of additional information in compliance with
regulatory requirements
Information pursuant to the requirements of item 6, 8 and 9 of
the Appendix No. 10 to the Ordinance No. 2 of September 17,
2003
Loans and borrowings received by the issuer
Type of lender Annual interest Maturity Principal Purpose
rate
31 Dec.17
BGN'000
----------------------- ---------------- ---------- ---------- ---------------------
Working capital,
financing of
investment projects
and restructuring
Corporate bond of previous
holders 5.5-8% 26.1.2022 36,353 debt
----------------------- ---------------- ---------- ---------- ---------------------
Financial institution 3mEuribor+5.25% 30.5.2022 2,359 Investment loan
----------------------- ---------------- ---------- ---------- ---------------------
Total loans received 38,712
----------------------- ---------------- ---------- ---------- ---------------------
Loans granted by the issuer
Type of borrower Annual Maturity Outstanding Impairment Net Principal Purpose
interest Principal
rate
till Dec.31,
Dec.31, 2017
2017
BGN'000 BGN'000 BGN'000
------------------ ---------- ----------- ------------ ----------- -------------- ----------------
Trade company 9.50% 21.1.2017 21,034 21,034 0 Working capital
------------------ ---------- ----------- ------------ ----------- -------------- ----------------
Trade company 9.50% 21.1.2017 2,118 2,118 0 Working capital
------------------ ---------- ----------- ------------ ----------- -------------- ----------------
Trade company 9.50% 21.1.2017 44 44 0 Working capital
------------------ ---------- ----------- ------------ ----------- -------------- ----------------
Trade company 8.75% 17.7.2015 1,500 1,500 0 Working capital
------------------ ---------- ----------- ------------ ----------- -------------- ----------------
Trade company 6.70% 19.04.2018 148 0 148 Working capital
------------------ ---------- ----------- ------------ ----------- -------------- ----------------
Trade company 8.50% 26.8.2015 12 12 0 Working capital
------------------ ---------- ----------- ------------ ----------- -------------- ----------------
Trade company 6.70% 31.12.2017 3,820 0 3,820 Working capita
------------------ ---------- ----------- ------------ ----------- -------------- ----------------
Trade company 6.70% 31.12.2018 6,150 0 6,150 Working capita
------------------ ---------- ----------- ------------ ----------- -------------- ----------------
Trade company 6.70% 31.12.2018 3,000 0 3,000 Working capita
------------------ ---------- ----------- ------------ ----------- -------------- ----------------
Trade company 6.70% 31.12.2018 5,050 0 5,050 Working capita
------------------ ---------- ----------- ------------ ----------- -------------- ----------------
Trade company 6.70% 31.12.2018 500 0 500 Working capita
------------------ ---------- ----------- ------------ ----------- -------------- ----------------
Trade company 9.50% 30.6.2015 2,210 2,210 0 Working capital
------------------ ---------- ----------- ------------ ----------- -------------- ----------------
Subsidiary 9.50% 29.4.2014 104 104 0 Working capital
------------------ ---------- ----------- ------------ ----------- -------------- ----------------
Subsidiary 6.70% 31.12.2018 20 0 20 Working capital
------------------ ---------- ----------- ------------ ----------- -------------- ----------------
Subsidiary 9.00% 4.4.2017 3,953 243 3,710 Working capital
------------------ ---------- ----------- ------------ ----------- -------------- ----------------
Subsidiary 6.70% 31.12.2017 93 0 93 Working capital
------------------ ---------- ----------- ------------ ----------- -------------- ----------------
Total loans
granted 49,756 27,265 22,491
------------------ ---------- ----------- ------------ ----------- -------------- ----------------
Loans received by companies controlled by the issuer
Type of lender/depositor Annual Maturity Principal Purpose
interest
rate
Dec.31,
2017
BGN'000
-------------------------- ---------- ----------- ---------- ----------------
Parent company 9.50% 29.4.2014 104 Working capital
-------------------------- ---------- ----------- ---------- ----------------
Parent company 6.70% 31.12.2018 20 Working capital
-------------------------- ---------- ----------- ---------- ----------------
Parent company 9.00% 4.4.2017 3,953 Working capital
-------------------------- ---------- ----------- ---------- ----------------
Parent company 6.70% 31.12.2017 93 Working capital
-------------------------- ---------- ----------- ---------- ----------------
Trade company 6.70% 31.12.2018 99 Working capital
-------------------------- ---------- ----------- ---------- ----------------
Trade company 6.70% 31.12.2018 252 Working capital
-------------------------- ---------- ----------- ---------- ----------------
Total loans received 4,521
-------------------------- ---------- ----------- ---------- ----------------
Loans granted by companies controlled by the issuer
As at December 31, 2017 companies, controlled by the issuer,
granted no loans.
Contingent liabilities
As at December 31. 2017 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 8,322 thousand.
The Group is a joint co-debtor under loan agreement for BGN 35,000
thousand and stand-by credit for issuance of bank guarantees
amounted to BGN 10,000 thousand and also under bank loan agreement
for working capital amounted to BGN 30,000 thousand in favor of
unrelated supplier. 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. The Group has established a
special pledge on its cash receivables from contractors, amounting
to BGN 4,009 thousand on average monthly basis and pledge on its
cash in the bank account opened in the bank-creditor. The Group has
contingent liability, which secured the execution of the contract
for storage of third-party fuels amounted to BGN 30,000
thousand.
Under a bank agreement for revolving credit line concluded in
2016, bank guarantees were issued for a total amount as at December
31, 2017 of BGN 9,565 thousand, including BGN 5,800 thousand in
favor of third parties - Group's suppliers, BGN 1,244 thousand in
favor of National Revenue Agency, for issuance of appealed by the
Parent company revision acts and BGN 2,521 thousand to secure own
liabilities related to contracts under the Public Procurement Act.
The bank agreement is secured by mortgage and pledge of property,
pledge of all receivables on bank accounts (amounted to BGN 43
thousand as at December 31, 2017) of the Parent company and a
subsidiary, and blocked cash of BGN 186 thousand. 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.
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 31 December 2017 amounting to BGN 2,359
thousand.
In the previous reporting periods companies from the Group have
entered into the debt under two loan agreements of a subsidiary
(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 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
subsidiaries jointly to pay BGN 411 thousand to the bank - creditor
for legal fees and 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
subsidiaries 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 this consolidated financial
report, 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 consolidated
financial statements, 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 (see
also note 36).
As at December 31, 2017 the Group is severally liable for the
liabilities of BGN 3,029 thousand under loan agreement of a company
under general control until December 2015. In 2016, in compliance
with a cession agreement with third party, the Parent company
transferred the receivables arising from the loan agreement. The
transaction price is due to the cedant by the transferee after
receiving money from the debtor.
From 2013 a company from the Group is a guarantor of a loan
amounted to BGN 11,155 thousand, granted to unrelated party. The
subsidiary is also a joint debtor with a subsidiary (until December
2015) under receivables transfer agreement (cession) for BGN 74
thousand.
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, par. 2 of the CPA. 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, par. 1 of the CPA 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 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 CPA, 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 pending.
In October 2015, a bank in Bankruptcy, creditor of a subsidiary
whose debt to the same bank was repaid in 2014 by offsetting
acquired through cession agreements counter receivables of the bank
from third parties, has filed a claim to declare void the
deductions, in terms of bankruptcy creditors, amounted to BGN
36,252 thousand to EUR 6,052 thousand and USD 394 thousand. The
Group challenged the judicial claim.
In case of adverse developments in litigation and declaring the
deductions for relatively invalid against the creditors of the
bankruptcy, the effect for the subsidiary and the Group
respectively, will include the initial deployment of equal size
receivables and liabilities to the bank in bankruptcy, returning
the effect of the discounted value of the acquired receivables of
BGN 15,007 thousand and subsequent impairment due to uncollectible
receivables recorded at cost and subsequently eventual reversal of
allowance for uncollectability in the distribution of the
bankruptcy estate, which is unlikely. The Management does not
expect negative consequences for the Group, given that, as the date
of the preparation of this consolidated financial report, the
Parent company sold its interest in the subsidiary (see also note
36).
Disclosure of transactions with related parties
Information pursuant to item 4 of Appendix No. 10 to the
Ordinance No. 2 of September 17, 2003
Related parties that the Parent company controls and over which
it exercises significant influence are disclosed in note 29 to the
annual consolidated financial report for 2017.
The Parent company (Controlling company) is Petrol AD.
In 2016, the transactions with related parties include sales of
fuels for BGN 23 thousand to Petrol Eco Tour Invest EOOD and the
unsettled amounts as at December 31, 2016 are receivables amounted
to BGN 2 thousand.
In 2017, there were no transactions with related parties
All transactions between the Parent company and the subsidiaries
are eliminated for the purposes of these consolidated financial
statements. Detailed information on these transactions is disclosed
in the annual separate financial statements of the Parent company
for 2017.
Share capital
The registered and fully paid-in share capital of Petrol AD as
of December 31, 2017 amounts to BGN 109.25 million (EUR 55.86
million) and is distributed into 109,249,612 personal
dematerialized ordinary registered shares, with a par value of BGN
1 each. Each share provides a voting right in the General Meeting
of Shareholders (GMS), right to dividend and right to liquidation
share. The shares, issued by the Parent company are transferable
with no limitations or conditions, by its owner's free will, in
accordance with the Bulgarian legislation, and according to the
rules of Central Depository AD concerning the acquiring and
ordering with registered shares, as well as in compliance with the
regulations of the market they are traded on. Detailed information
about the rules and procedures for trading Petrol's shares is
available in the published prospectuses of the Parent company.
Information pursuant to Art.187e of the Commercial Act and Art.
39, item 6 of the Accountancy Act
In July 2017, a contract for sale at a price of BGN 0.30 for
each of the own 2,767,135 Parent-company shares was signed. The
price was arranged in deferred payment schedule with 10% due in 3
days and the rest to the end of 2018.
As at December 31, 2017 the Parent company did not hold common
uncertificated own shares.
The following table sets out information about the changes in
the structure of share capital:
In percentage 2017 2016 2015
Alpha Capital AD 28.85% 28.85% 28.85%
----------------------------- ------- ------- -------
Yulinor EOOD 23.11% 23.11% 23.11%
----------------------------- ------- ------- -------
Perfeto Consulting EOOD 16.43% 16.43% 16.43%
----------------------------- ------- ------- -------
Correct Pharm EOOD 10.98% 18.31% 18.31%
----------------------------- ------- ------- -------
Trans Express Oil EOOD 9.86% - -
----------------------------- ------- ------- -------
Corporate Commercial Bank
AD 5.51% 5.51% 5.51%
----------------------------- ------- ------- -------
VIP Properties EOOD. 2.26% 2.26% 2.26%
----------------------------- ------- ------- -------
Ministry of Economics 0.65% 0.65% 0.65%
----------------------------- ------- ------- -------
Other minority shareholders 2.35% 2.35% 2.34%
----------------------------- ------- ------- -------
El Trading EOOD - - 2.54%
----------------------------- ------- ------- -------
Petrol AD (purchased own
shares) - 2.53% -
----------------------------- ------- ------- -------
Total 100% 100% 100%
----------------------------- ------- ------- -------
As at the reporting date more than 5% of the capital of Petrol
AD is owned by Alpha Capital AD (28.85%), Yulinor EOOD (23.11%),
Perfeto Consulting EOOD (16.43%), Correct Pharm EOOD (10.98%),
Trans Express Oil EOOD (9.86%) and Corporate Commercial Bank
(5.51%).
Shares owned by other minor shareholders are held by investors,
which have acquired them through trading at the regulated stock
market and there is none of them who owns more than 5% of Company's
shares. The Parent company does not have shareholders with special
controlling rights.
As at December 31, 2017 the members of SB and MB, procurators
and senior management of Petrol AD did not own shares of the Parent
company.
Persons or entities directly or indirectly controlling Petrol
AD
By the meaning of paragraph 1, point 14 of the Public Offering
of Securities Act (POSA), one person or entity exercises directly
or indirectly control over the company, when that person or entity
holds over 50% of the votes of the GMS or may appoint directly or
indirectly more than half of the members of the company's bodies,
or may otherwise exercise a decisive influence on decision-making
in relation to the business of the legal entity.
As of December 31, 2017 no person holding more than 50% of votes
at the General Meeting of Shareholders of Petrol AD.
In 2017, the Parent company Petrol AD has not issued any new
issue of shares.
Information on pending legal, administrative or arbitration
proceedings amounting to at least 10% of equity of the Company
pursuant to item 20 of the Appendix No.10 to the Ordinance No.2 of
September 17, 2003
CCB AD - in bankruptcy 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 of a
subsidiary /till December 2015/ Naftex Petrol EOOD amounting to USD
29,983 thousand. 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 CPA. 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 guarantee, therefore the responsibility of the
latter has fallen by six months after the initially agreed period,
during which the creditor has not brought an action against the
principal debtor. The term of Art. 147, paragraph 1 of the CPA is
final and upon its expiration the Petrol AD's guarantee has been
terminated, so the Management expects the claim of the creditor
against Petrol AD to be finally rejected by the court. At present,
the court proceedings are pending and the Management expects
positive decision.
The company claimed receivables of BGN 8 367 thousand to Naftex
Petrol EOOD - in bankruptcy. The claimed receivables are included
in the prepared by the syndic list of the approved receivables
under Art. 686 of Commercial Act, but the same are appealed by
other creditor to the bankruptcy proceedings. At present, the
determination of existence of the receivables is an object of
pending court proceedings under Art. 694 of Commercial Act.
Stock market information
In 1998 the issue of shares of Petrol AD in the amount of
registered capital of the Company is registered for trading on the
Bulgarian Stock Exchange since January 15, 2007 the shares are
traded on the "B" segment of the Official market of the Bulgarian
stock exchange - Sofia.
The following table sets out summarized market information about
the trading of Parent company's shares on the Bulgarian Stock
Exchange - Sofia:
2017 2016 2015
Share capital as at 31
December BGN mln 109.3 109.3 109.3
------------------------------- --------- ------ ------ ------
EUR mln 55.9 55.9 55.9
----------------------------------------- ------ ------ ------
Share price as at 31 December BGN 0.439 0.478 0.63
------------------------------- --------- ------ ------ ------
EUR 0.224 0.244 0.32
----------------------------------------- ------ ------ ------
Market capitalization as
at 31 December BGN mln 47.9 52.1 69
------------------------------- --------- ------ ------ ------
EUR mln 24.5 26.6 34.9
----------------------------------------- ------ ------ ------
Highest price throughout
the year BGN 0.498 0.619 2.30
------------------------------- --------- ------ ------ ------
EUR 0.255 0.316 1.18
----------------------------------------- ------ ------ ------
Lowest price throughout
the year BGN 0.385 0.3 0.516
------------------------------- --------- ------ ------ ------
EUR 0.197 0.15 0.26
----------------------------------------- ------ ------ ------
Non-financial declaration
Human resource management
Information pursuant to Art.48, par.1 and par.2 of the
Accountancy Act
The Management believes that the employees of the Group play a
key role in the development of the business and the achievement of
common corporate goals and pays special attention to the
elaboration and development of a general strategy and policies
regarding human resource management. The policies in this field are
oriented towards achieving of responsibility and commitment of the
personnel during its performance of assigned tasks and goals.
Simultaneously the senior executive staff makes efforts to support
the mid-level management and the employees in order to fulfil the
Group's Management priorities.
The goals of the human resources development strategy and
policies are:
-- Keeping the employees with a high potential and assisting
their professional growth by planning their careers and introducing
bonus package systems;
-- Selection of new employees with significant potential and result-oriented personality;
-- Broadening the scope of the traineeship programmes;
-- Improvement of communications between the separate organizational bodies;
-- Development and introducing of new systems for career management of the key employees;
-- Development of a programme for introducing training for newly employed personnel.
The Group applies adequate criteria for selection of personnel
and has a professional and motivated team, which is capable of
pursuing the defined strategic and operational goals. An
organization network has been created for fair evaluation of the
personnel's individual and collective contribution, as well as for
evaluation of its content grade. The Group invests in its employees
by offering them adequate programmes for training and development
of the necessary professional and management skills. The Group's
policy is oriented towards providing of safe and healthy working
conditions, adequate remuneration and motivation system, and
opportunities for professional growth.
In 2017, the number of the personnel was 1,204 employees. Most
of the employees work in the Parent company (1,065 employees).
Among the other companies in the Group, the one with the largest
number of staff by the end of 2017 was Varna Storage EOOD (71
employees) and Petrol Finances OOD (54 employees).
Information in compliance with the requirements of Art. 247,
par.2 of the Commercial Act and item.18 and item.19 of the Appendix
No.10 to the Ordinance No.2 of September 17, 2003
Management Board:
Individuals
-- Grisha Danailov Ganchev - Chairman
-- Georgi Ivanov Tatarski - Vice Chairman and Executive Director
-- Milko Konstantinov Dimitrov - Member and Executive Director
-- Lachezar Nikolov Gramatikov - Member
-- Kiril Emilov Shilegov - Member
No legal entities are members of the Management Board
Supervisory Board:
Individuals - members of the Supervisory Board:
-- Ivan Alipiev Voinovski - Chairman of the Supervisory Board([16])
Legal entities - members of the Supervisory Board:
-- Petrol Correct EOOD UIC 203177666, represented on the
Supervisory Board by Nikolay Borislavov Gergov - Member of the
SB;
-- Petrol Asset Management EOOD, UIC 203176781, represented on
the Supervisory Board by Armen Lyudvigovich Nazaryan - Member of
the SB.
Procurators - the Parent company has no procurators.
Expiration date of current contracts with the members of the
Management and Supervisory Board as well as the period during which
they have held office:
Members of the Management Board:
-- Grisha Danailov Ganchev - Chairman - held the position since
05.06.2014 until present. Mandate for five years;
-- Georgi Ivanov Tatarski - Vice Chairman and Executive Director
- held the position since 05.06.2014 until present. Mandate for
five years;
-- Milko Konstantinov Dimitrov - Member - held the position
since 05.06.2014 until present. Mandate for five years;
-- Lachezar Nikolov Gramatikov - Member - held the position
since 27.10.2014 until present. Mandate for five years;
-- Kiril Emilov Shilegov - Member - held the position since
27.10.2014 until present. Mandate for five years.
Members of the Supervisory Board:
-- Ivan Alipiev Voynovski - Chairman - held the position since 14.10.2014 until 23.02.2017;
-- Petrol Correct EOOD, UIC 203177666, represented in SB by
Nikolay Borislavov Gergov - Member - held the position since
14.10.2014 until the present. Mandate for five years;
-- Petrol Asset Management EOOD, UIC 203176781, represented in
the SB by Armen Lyudvigovich Nazaryan - Member - held the position
since 18.01.2017. Mandate for five years.
Information pursuant to item 17 of the Appendix No.10 to the
Ordinance No.2 for the total remunerations received by the members
of the boards during the year
The total amount of accrued salaries of members of the
Management Board and Supervisory Board of Directors of the Parent
company, included in staff costs, amounted to BGN 1,314 thousand
(2016: BGN 1,327 thousand). The unsettled liabilities as at
December 31, 2017 amounting to BGN 89 thousand.
In 2017, there were no contingent or deferred remunerations.
As at December 31, 2017 the Group has no due amounts for
retirement benefits or other compensations for the members of the
Boards.
Signed agreements during 2017 under Art.240b of the Commercial
Act
In 2017, members of the Board of Directors or their related
parties did not enter into agreements under Art.240b of the CA that
go beyond ordinary business of the Group or significantly deviate
from market conditions.
Information pursuant to item 19 of the Appendix No.10 to the
Ordinance No.2 for arrangements with employees for participation in
the capital of Petrol AD, including through issuance of shares,
options and other securities of Petrol AD
There are no arrangements with employees for participation in
the capital of Petrol AD, including through issuance of shares,
options and other securities of Petrol AD.
Information pursuant to item 18 of the Appendix No.10 to the
Ordinance No.2 for the acquired and transferred shares and bonds by
the members of the boards of company
During the year, shares and bonds were not acquired and/or
transferred by the members of the boards of Petrol AD.
Members' rights to acquire shares and bonds of the company
The Statute of the Parent company does not provide specific
rights of the members of the MB and SB to acquire shares and bonds
of Petrol AD.
Granted to members options on shares by Petrol AD - type and
size of the securities, on which options are set, exercise price on
options, purchase price if any and term of the options
Petrol AD did not granted options on its shares in favor of the
members of SB and MB.
Participation of the members of MB and SB in companies as
general partners, possession of more than 25 percent of the capital
of another company, as well as their participation in the
Management of other companies or cooperatives as procurators,
managers or board members:
) Participation in management:
Grisha Danailov Ganchev, ID 6212103024
-- Chairman, Managing of Association of horse breeders in Bulgaria, UIC 175861533;
-- Chairman, Managing of the National Association for Horses, UIC 130290222;
-- Chairman, Managing the Bulgarian National Association for horse racing, UIC 115853902;
-- Member of the collective Management body of the Bulgarian Wrestling Federation, UIC 121505512;
-- Member of the Board of Directors of PFC CSKA - 1948 AD, UIC 200269839;
-- Member of the collective Management body of the Foundation Beautiful Lovech, UIC 110562063;
Milko Konstantinov Dimitrov, ID 8506063020
-- Manager of MKD Property EOOD, UIC 202188364;
-- Member of the collective Management body of the Bulgarian
National Association for horse racing UIC 115853902;
Georgi Ivanov Tatarski, ID 6009020101 - Is not involved in
management or supervisory body of another company;
Lachezar Nikolov Gramatikov, ID 7510020140
-- Manager of 4 G Consult EOOD, UIC 204808732;
-- Manager of Cedonik D, UIC 175344105;
Kiril Emilov Shilegov, ID 7708206927
-- Manager of Grand-K EOOD, UIC 203461378;
Petrol Correct EOOD, UIC 203177666 - Is not involved in
management or supervisory body of another company;
Nikolay Borislavov Gergov, ID 7803171884
-- Manager of Petrol Correct EOOD, UIC 203177666;
-- Member of the Board of the Bulgarian Wrestling Federation, UIC 121505512;
Petrol Asset Management EOOD, UIC 203176781 - Is not involved in
management or supervisory body of another company;
Armen Lyudvigovich Nazaaryan, ID 7403096301
-- Manager of Nazaryan Commerce OOD UIC 121406642
B) Holdings:
Grisha Danailov Ganchev, ID 6212103024 - no such holdings;
Milko Konstantinov Dimitrov, ID 8506063020
-- Sole owner of the capital of MKD Property EOOD, UIC 202188364;
Georgi Ivanov Tatarski, ID 6009020101
-- Partner with a 50% stake in the capital of MB Properties OOD, UIC 200977005;
Kiril Emilov Shilegov, ID 7708206927
-- Sole owner of the capital of Grand-K EOOD, UIC 203461378;
Lachezar Nikolov Gramatikov, ID 7510020140
-- Sole owner of the capital of 4 G Consult EOOD, UIC 204808732;
-- Sole owner of Cedonik D, UIC 175344105;
Petrol Correct EOOD, UIC 203177666 - no such holdings;
Nikolay Borislavov Gergov, ID 7803171884:
-- Sole shareholder of Petrol Correct EOOD, UIC 203177666;
Petrol Asset Management EOOD, UIC 203176781 - no such
holdings;
Armen Lyudvigovich Nazaryan, ID 7403096301
-- Partner with 33.33% stake in the capital of Nazaryan Commerce OOD, UIC 121406642;
Relations between Management Board and union employee
organizations - - there is no collective agreement
Information about the Director of Investor relations, including
telephone and correspondence address pursuant to item 21 of the
Appendix No.10 to the Ordinance No.2 of September 17, 2003
Director for connection with investors is Antoaneta Gyurova, tel
. 02 9690453, mailing address - Sofia, bul. "Cherni vrah" 43.
Environmental commitments
Following its privatisation in 1999, Petrol AD started the
implementation of an investment programme aimed to bring the
Group's facilities in line with the requirements of the best
environmental practices in the European Union. The Group's
operations include a number of activities which are governed by the
environmental or health and safety laws in Bulgaria, which also
cover historic environmental liabilities associated with past
environmental damage, storage and handling of petroleum products,
soil and groundwater contamination, waste management, water supply,
waste water management, atmospheric emissions, use and disposal of
hazardous materials and land use and planning requirements,
including community issues, associated with the development of new
green field retail stations.
The principal legislation acts in Bulgaria, which set out the
framework for environmental protection and sustainable development,
are the Environment Protection Act, the Water Act, the Waste
Management Act, the Air Purity Act, the Soil Protection Act, the
Underground Resources Act, RESA and various regulations on their
implementation. As part of Bulgaria's preparation for accession to
the European Union, each of these acts has been brought into line
with the European Union standards, with the new standards being
phased in over time.
Any failure by the Petrol AD or its subsidiaries to comply with
such acts may be a ground for civil and/or administrative
liability.
With regard to the Group's retail stations, the Bulgarian law
requires that a number of air, water, land and noise emissions are
monitored and recorded and processes established for minimizing
such emissions and rendering them harmless. The following are
monitored pursuant to these obligations:
-- Air emissions are monitored for dust, hydrogen sulphide,
sulphurous dioxide, nitrogen dioxide, lead aerosols, ammonia,
carbolic acid and hydrocarbon;
-- Water emissions are monitored for temperature, pH, dissolved
oxygen, conductance, turbidity, phosphates, copper, zinc, lead and
oil products;
-- Surrounding soil is monitored for pH, nitrate nitrogen,
copper, chlorides, phosphates, zinc, lead and oil products; and
-- Noise levels are monitored.
The Group is in compliance in all material respects with
environmental requirements currently applicable to its operations.
The Management of the Group believes, with the planned additional
investment, the companies will be able to maintain compliance with
known forthcoming requirements. The Group's intention is to
continue to ensure environmental compliance and pollution
prevention in advance of regulatory requirements.
Vapour recovery systems
One of the major areas in which the Group has invested, and will
continue to invest, is the meeting of the Bulgarian and European
Union requirements for the control of volatile organic compounds
(known as VOCs). VOCs are compounds containing carbon that
evaporate into the air, such as vapour arising from certain
petroleum products. European Union Directive 94/63/EC Directive on
VOCs emissions resulting from storage and distribution of petrol
set limits on the permitted levels of such emissions.
The Directive has been implemented in Bulgarian legislation in
the form of Ordinance No16 dated August 12, 1999, which limits the
emissions of VOCs connected with the storage, loading or unloading
and transportation of gasolines.
The legal acts set up very strict requirements to fuel stations,
fuel storage terminals, and fuel tank trucks. Pursuant to these
standards, the tanks of fuel stations are made with double walls
willed with inert liquid. The Group installed level measuring
systems reacting to the slightest changes in the level of fuel, as
well as systems for sending vapours back into the fuel tank truck
during unloading of the fuel. Thus all dangers of fuel leaks and
pollution with carbon oxides are minimized.
In order for the Group to be in line with the environmental
criteria, the loading and storage terminals are currently being
reconstructed. Floating roofs limiting the vapours to a minimum are
installed, new mounting platforms for down filling of fuel trucks
and vapour recovery system are built.
With a view to promote the consumption of biofuels and other
renewable fuels in transport sector and in compliance with the
adopted amendments to the Renewable Energy Source Act (RESA), since
the June 1, 2012 the Group offers fuel for diesel engines with a
minimum biodiesel content of 6% vol. and from September 2013 fuels
for motor engines with minimum 4% vol. of bioethanol additive.
According to the RESA the additive share was gradually increased to
7% vol. as at March 1, 2015. It is provided for additional increase
to 9% vol. of the content of bioethanol or ethers manufactured from
bioethanol from the beginning of March 2019.
ISO Certification
In December 2004, the Management Board of the Group decided to
obtain ISO certifications for quality management standards under
ISO 9001:2000 and environmental management system under ISO
14001:1996. This intention confirms the commitment of the
Management to implement the best European practices in process
management. This process includes the preparation, documentation
and implementation of written rules and procedures and an audit of
the procedures by an independent third party.
On October 11, 2007 Petrol AD successfully received certificate
under ISO 9001:2000. In September 2010 Petrol AD and its
subsidiaries successfully passed certification under ISO 9001:2008.
At present the Parent company is in process of preparation for
recertification under ISO 9001:2015, expecting to certificate until
the end of 2018.
Social policy and supported causes by Petrol Group
The functioning social policy (SP) of Petrol Group has been
developed in two major directions. The first direction focuses on
the intra-group social relationships with the employees with the
primary goal of increasing employee and company benefits of
interacting with each other. The second direction of social policy
is focused on the external environment and in particular on social
interaction possibilities of the Group with external social
subjects.
The social policy is fundamental in the business development
strategy of the Petrol Group, because the Management of the Parent
company believes that the care for the employees is a care for the
company. The social policy of Petrol AD constitutes a set of
measures and objectives, which regulate the social relationships
between the Company and the employees by joining their efforts in
the united social goals.
The Management has adopted a practice to develop a SP together
with its employees, thus ensuring feedback and guaranteeing the
effectiveness of the adopted measures and social policies. The
scope of Petrol Group's SP includes the remunerations policy,
selection of employees and opportunities for personnel development,
providing of adequate information and technology working
conditions, participation in trainings and seminars, selection of
holidays and opportunities for flexible working conditions
appropriate for the needs and specifics of the particular
employee.
The Social policy of the Group is built in compliance with the
long-term relationships between the companies in the Group and the
employees, outlining the perspectives of every particular employee
in the overall development vision of the Group. (see also Human
resources).
At the same time, the Management of the Group supports various
forums and events with social significance for the society. During
the reporting period, the Parent company has donated several
institutions, initiatives and causes, including Association
Christian Union, Association Give a smile, Association Window to
the world, Foundation Penkyov's Monastery Revival and others. The
Parent company systematically provides financial support to people
in need mainly related with treatment in the country and abroad and
purchase of medicines. In 2017 the Group participated in several
events and social projects organized by the Bulgarian Federation of
Artistic Gymnastics.
Outlook
Information pursuant to Art. 39 item 4 of the Accountancy Act
and Art. 247, par. 3 of the Commercial Act
The Group's management expectations are that in the coming years
as a result of growing consumer confidence toward the established
commercial brands, ensuring standard for quality of services, as
well as a consequence of changes in the regulations involving ever
greater financial resources of companies in the sector, many small
independent players would be forced out of fuel business or should
merge with one of the major market players in the sector. At the
same time, the expectations in terms of the levels of trade
margins, in particular on the retail market, are the margins to
stabilize around the average European levels.
Following the strategy for expansion of its retail market share,
the Group plans to attract new fuel stations under the Petrol brand
within the franchising program. In 2018, the Group's Management
will look for opportunities, through external funding to build
several new petrol stations at communication locations. With regard
to the implementation of corporate quality management and
environmental standards, in the next year, the Group will continue
the installation of energy-saving systems on the existing sites. At
the same time, the Group plans to continue the implementation of
investment programs for reconstruction and modernization of the
operated retail network.
In terms of wholesale trading, an active action for expansion of
market share has been taken since mid-2016, by securing the
long-term use of storage facilities - licensed fuel storage
facilities strategically located in the country through a
subsidiary and through direct licensing of the Parent company. The
Management is in the process of analyzing and exploring the
possibilities of increasing wholesale trading, including by import
of petroleum products. With the aim to improve the financial
position, the Management continues to analyze actively all expenses
and to look for hidden reserves for optimization. In order to
increase the efficiency of the main operating activity it is
necessary to restructure the storage facilities and to reduce the
losses from the storage services.
Corporate Governance Statement
Information pursuant to Art. 100n par.8 in conjunction with
par.7 item 1 of the Public Offering of Securities Act
The actions of the Management of Petrol Group and the Parent
company in particular, are focused on strengthening the principles
and traditions of good corporate governance, increasing the trust
of interest entities, namely shareholders, investors and
counterparties, as well as timely disclosure of accurate
information in accordance with the legal requirements.
In its activity, the Management of Petrol Group follows and
fulfils the adopted Program for application of the international
standards for good corporate governance (the Program). The
Management believes that the compliance with the highest standards
for corporate governance is essential for maintaining the
reputation of the Parent company (the Company) and the results of
its operations.
The board of directors of Petrol AD is guided by the principles
set forth in the Program for Good Corporate Governance of Petrol
AD, which has been prepared in accordance with the effective
Bulgarian commercial legislation, the Code of Corporate Governance
adopted by the Board of Directors of Bulgarian Stock Exchange -
Sofia, the Statute of Petrol AD and the Rules for procedure of the
management bodies of the Company.
The Program for Good Corporate Governance has been adopted by
the Management Board (MB) and its implementation is monitored by
the Supervisory Board (SB) of Petrol AD. The Program sets out the
main principles and policies of the Group that the management
bodies should comply with in order to achieve the goals set in the
Program, namely:
-- Protection of shareholders' rights and guaranteeing equality
amongst them (including minor and foreign shareholders);
-- Timely and accurate disclosure of information about all
issues relevant to the Group in compliance with the POSA, Law on
Measures against Market Abuse with Financial Instruments and the
other acts;
-- Providing strategic management of the Group, efficient
control over the work of the MB and the accountancy of the MB and
the SB to the GMS;
-- Creating interactive connection between the Management of the
Group and its shareholders and potential investors.
The main principles of the Good Corporate Governance Program of
the Parent company Petrol AD are disclosed in the announced Good
Corporate Governance Program of Petrol AD to the annual financial
report.
During the reporting period there were no changes in the basic
management principles of the economic group.
Shareholders' rights
The Program sets clearly the rights of the shareholders of
Petrol AD and the main goal of the managers' team is to ensure
their observation. The shareholders have the right to:
-- Participate and vote in the GMS;
-- Be equally treated in the GMS;
-- Request convocation of regular or extraordinary GMS;
-- Access the materials in writing, relevant to the agenda of the GMS;
-- Access to the records of the previous sessions of the GMS;
-- Make proposals for election of members of the SB and to vote for their electing;
-- Take part in the distribution of the Company's profit
commensurably to their participation of the share capital;
-- Receive regularly and timely information about corporate
events related to the activities and condition of Petrol AD;
-- Participate in the increase of the capital of Petrol AD and in tender offers.
-- Receive timely information in respect of notifications about tender offers.
Management System
Information pursuant to Art. 10, par. 1, character "h" from the
Directive 2004/25/EO of the European Parliament and of the Council
from April 21, 2004 on takeover bids
Petrol AD has two-tier board structure, which includes
Management Board (MB) and Supervisory Board (SB).
Management Board
The Company is managed and represented by MB with up to five
members, elected by SB for five years mandate.
The MB has the authority to:
-- to prepare the annual report and financial statements of the
Company and submit them for approval by the GMS;
-- to adopt projects and programs for the activity of the Company;
-- to make proposals for increase or decrease of the Company's capital to the GMS;
-- to elect and dismiss the executive directors;
-- to elect and dismiss the chairman and the deputy chairman of the MB;
-- to appoint on a labour agreement the Investor Relationship
Manager and to assist him in exercising his functions, and to
control their implementation;
-- to approve the organizational and management structure of the
Company and other internal regulations;
-- to open and close down branches and to make decisions to
acquire or terminate participations in the capital of other
domestic or foreign companies;
-- to make decisions for concluding deals under art. 114,
paragraph 1 of the POSA, in cases when it is authorized for that by
the GMS,
-- Appointing the Investor Relations Officer and assisting him /
her in exercising his / her duties and controlling their
performance;
-- Determining the way of exercising the voting rights on the
shares or shares held by Petrol AD in the capital of its
subsidiaries as a sole owner of the capital or as a shareholder and
/ or a partner in any general meeting of the shareholders or of the
partners of a subsidiary;
-- Discussing and resolving all issues other than those within
the competence of the General Assembly and the Supervisory
Board.
The MB shall take decisions by a simple majority of its members
if more than half of its members attend in person or are
represented by another member of the board, provided that one
attendant may represent only one absent, except for the decisions
for which the law and / or the Statute of the Parent company
require a qualified majority or unanimity of all members.
MB reports its activity at least once a month to the Supervisory
Board of the Company. MB adopts its Rule of Procedure, in which its
powers, duties and functions are clearly and precisely defined.
Supervisory Board
SB administrates and controls the MB for the compliance of its
activity with the legislation, the Statute and the decisions of the
GMS. The Supervisory Board is collective body, elected by and
directly reporting to the GMS.
SB consists of three members with 5 years mandate. At least 1/3
of the members of SB has to be independent bodies within the
meaning of Art. 116a, par.2 of the Public Offering of Securities
Act.
The SB controls generally and continuously the activities of the
Parent company, revises the annual financial statements and reports
of the Parent company, submits written annual reports for the final
results of the audits and analyses of the business to the GMS,
elects and dismisses the members of the MB, approves the
empowerment of ECOs to represent the Parent company authorized by
MB, defines the number of the ECOs, approves the financial plans
and investment programs of the Parent company, etc. The SB reports
for its activity to the GMS. The SB takes its decisions in
accordance with the authorities given to it by the GMS, the Statute
and the current legislation.
Members of the MB and SB can be re-elected without any
limitations. GMS determines the remuneration of the members of the
SB and the MB, taking into consideration the responsibility, the
engagement and the involvement of each board member with the
Management of the Parent company.
Disclosure of information
Being a public company Petrol AD submits to the Financial
Supervision Commission and the Bulgarian Stock Exchange - Sofia
periodical reports and notifications about insider information
under the Law on Measures against Market Abuse with Financial
Instruments. At the same time, the Company reveals regular
information to the public in a way that ensures it to reach the
widest possible number of people simultaneously and in a way that
does not discriminate them. For that purpose the Company uses the
services of the Service Finance Markets EOOD, which ensures
effective spreading of regular information to the public in all EU
member states. The Company prepares separate and consolidated
quarterly financial statements, annual report and separate and
consolidated annual financial statements; the MB presents the
latter for verification and review to the SB and to the elected by
the GMS certified auditor. The elected by the GMS auditor should be
independent of the MB and in particular of the executive director
of the Parent company and it should act independently of the
shareholders who have elected it.
The management bodies of the Parent company and the Investor
Relations Director should provide easy and timely access of the
shareholders and investors to the information, to which they are
legally entitled being shareholders and/or investors in order to
take informed and adequate investment decisions.
The information reported by the Parent company to the Finance
Supervising Commission and to the public should be included on the
web site of the Parent company for consideration by the
shareholders and those who are interested to invest in the shares
of the Parent company.
Control over the fulfillment of the Program
The control over the Program is exercised by the MB of the
Parent company. The effectiveness and efficiency of the Program is
assessed annually by the MB. The results of this assessment and
further measures proposed should be mentioned in the annual
financial report provided to the Financial Supervision Commission
and to the Bulgarian Stock Exchange - Sofia and the public.
With a view to improving and extending the Program, the MB
follows the trends in the theory, practice and legislation in the
field of corporate governance, which guarantees timely informing
the Parent company of the matters in the field and updating of the
Program.
Internal control and Risk Management systems
Information pursuant to item 15 of the Appendix No.10 to the
Ordinance 2 from 17.09.2003 and Art. 100n, para. 8, item 3 from the
Public Offering of Securities Act
The Group's internal control (IC) and risk management (RM)
systems are integrated in a comprehensive integrated process
implemented by the employees and the Management of Petrol Group.
The foundation of the IC and RM systems is the policies and
procedures developed and adopted by the Management of the Parent
company, which define the legality, expediency and last but not
least the economic efficiency of the Group's processes. The IC and
RM systems cover the authorities and responsibilities of the
separate units in the company, as well as the principles of their
interaction. The approved business and control procedures between
the separate departments in the company and the adopted cross-check
policy are a guarantee for the reliability and completeness of the
financial and operational information generated in the Group. In
addition the engagement and the close cooperation of the Management
with the employees of the Group's companies contributes for the
effective management and preventive measures regarding the
resources and intellectual property of Petrol AD.
The internal control and risk management systems of the Group
are characterized by the following main features:
-- Modern technological and information provision;
-- Qualified and informed employees;
-- Well organized intra-company processes;
-- Commitment and support from the Management;
The integration of the SAP/Retail in Petrol AD in 2003 and the
gradual introduction in other companies of the Group significantly
improves the speed of the information transfer by integrating
several systems in one integrated platform, which provides control
and monitoring of the processes from their set-up to the end of
their execution. As a result, mistakes from business process
fragmentation and cumbersome interaction between different
information platforms and systems are minimized. SAP platform
provides a smooth and timely flow of the information and business
processes on a group level as well as their reporting in the
Group's financial statements.
The highly qualified and knowledgeable staff is essential for
the successful integration of IC and RM systems. In this regard,
the subsidiary Petrol Finance OOD, specialized in providing
financial services, was established. In order to provide a quality
financial service, employees in the subsidiary twice a year take
part in tax-accounting seminars. Thus, the Management of the Parent
company Petrol AD ensures competent, professional expertise while
minimizing the possibility of omissions and errors in the financial
reporting process.
The policies and rules for information and documents flow
transferring, approved by the Management of the Parent company,
channel the daily work of the employees in different departments
and the correspondence between them, facilitating the analyses and
evaluations of the business processes and information flows in the
Group. The IC and RM process goes through the following stages:
-- Risk identification - it is implemented via control and
monitoring system of intra-company environment for potential risks
and errors;
-- Analysis and valuation of the risks - creation of risk
matrixes including future outcome scenarios with assessments of the
effects of the scenarios as well as preparation of reports with
proposals of opportunities for overcoming them;
-- Undertaking measures to avoid and prevent of the potential
risks - practical implementation of the prepared action proposals
on the basis of risk analysis and valuation;
The Management of the Group is directly involved in the process
of control and management of the risks related to the financial
reporting and business processes of the Group. Day-to-day
collaboration, holding of business and working meetings with
management staff improve the climate and working environment and
increase the efficiency and cost effectiveness of the working
process.
Information pursuant to Art. 10, par. 1, character "c" from the
Directive 2004/25/EO of the European Parliament and of the Council
from April 21, 2004 on takeover bids
Petrol AD is a public company registered on Bulgarian Stock
Exchange. Based on the information received from Central Depository
AD for the Parent company's shareholders structure as at December
31, 2017, there is no shareholder with higher share than 30 per
cent of the capital of Petrol AD. In 2017 there were no
transactions with shares of the Parent company resulted in crossing
the borders under Art.89 from the Directive 2001/34/EO of the
European Parliament and of the Council from May 28, 2001.
Information pursuant to Art. 10, par. 1, character "d" from the
Directive 2004/25/EO of the European Parliament and of the Council
from April 21, 2004 on takeover bids
Petrol AD has no shareholders with special control rights.
Information pursuant to Art. 10, par. 1, character "f" from the
Directive 2004/25/EO of the European Parliament and of the Council
from April 21, 2004 on takeover bids
As at December 31, 2017 Petrol AD did not hold common
uncertificated own shares. Petrol AD has no shareholders with
voting rights limitations.
Information pursuant to Art. 10, par. 1, character "j" from the
Directive 2004/25/EO of the European Parliament and of the Council
from April 21, 2004 on takeover bids
According to the Statute of the Company within 5 /five/ years
from the registration date of the amendment of the Statute in the
Commercial Register, namely October 14, 2014, the Management Board
in accordance with the Statute of the Company and current
legislation may take decisions to raise the capital of Petrol AD to
a nominal value of BGN 300 000 000 /three hundred millions/ by
issuing of new ordinary or preferred shares, eligible by law.
In the decision to increase the capital, the Management Board
shall determine the amount and purpose of any increase, the number
and type of new shares, their rights, the terms and conditions for
the transfer of rights within the meaning of -- 1, item 3 of the
Additional Provisions of the POSA issued against the existing
shares, the terms and conditions for the subscription of the new
shares, the amount of the issue value and the terms and conditions
for its payment, the investment intermediary entrusted with the
servicing of the capital increase and other necessary
conditions.
The redemption of own shares of the Parent company may be
carried out under the terms and conditions provided in POSA.
Responsibility of the Management
According to the Bulgarian Law, the Management must prepare
annual report on the activity, as well as financial statements for
each financial year, which present in true and fair view the
Group's consolidated financial position as of the end of the year,
its financial performance and cash flows, in compliance with the
applicable accounting framework. For reporting purpose under
Bulgarian accounting legislation the Company applies the
International Financial Reporting Standards (IFRS), as approved by
the European Union.
This responsibility includes: design, implementation and
maintenance of internal control system, related to the preparation
and truthful presentation of the financial statements, which do not
contain material errors, deviations and discrepancies, whether due
to fraud or error; selection and application of relevant accounting
policies; and preparation of accounting estimates, which are
reasonable in the particular circumstances.
The Management confirms that it has acted according to its
responsibilities and that the consolidated financial statements
have been prepared in full compliance with the International
Financial Reporting Standards (IFRS), as approved by the European
Union. The Management also confirms that in the preparation of the
report on the activity it has presented in true and fair view the
development and performance of the Group for the past period, as
well as its position and faced risks. The Managements has approved
for issue the report on the activity and the financial statements
for 2017.
Milko Dimitrov,
Executive Director
Petrol AD,
Georgi Tatarski,
Executive Director
Petrol AD,
April 2018
INDEPENT AUDITOR'S REPORT
ON THE CONSOLIDATED FINANCIAL STATEMENTS
INDEPENT AUDITOR'S REPORT
To the shareholders of
Petrol AD
Report on the Audit of the Consolidated Financial Statements
Qualified Opinion
We have audited the consolidated financial statements of Petrol
AD and its subsidiaries (the Group), which comprise the
consolidated statement of financial position as at December 31,
2017, and the consolidated statement of profit or loss and other
comprehensive income, consolidated statement of changes in equity
and consolidated statement of cash flows for the year then ended,
and notes to the consolidated financial statements, including a
summary of significant accounting policies.
In our opinion, except for the effects of the matter, described
in the paragraph of our report Basis for Qualified Opinion, the
applied consolidated financial statements present fairly, in all
material respects, the consolidated financial position of the Group
as at December 31, 2017 and its consolidated financial results of
its operations and the consolidated cash flows for the year then
ended, in accordance with the International Financial Reporting
Standards, adopted by the European Union (EU).
Basis for Qualified Opinion
As described in Note 27 Trade and other liabilities to the
consolidated financial statements, regarding the subsequent events
and litigations, corrections of the Group's obligations under
cession agreements and regress are possible, which as at December
31, 2017 totals BGN 39,942 thousand. We did not receive written
confirmations and we were unable to confirm with alternative
procedures obligations for BGN 24,090, included in Trade and other
payables in the consolidated statement of financial position as at
December 31, 2017 and presented to the Obligations under cession
agreements and regress in Note 27 Trade and other liabilities.
Because of this matter, we were unable to determine whether
corrections would be necessary in Trade and other payables
presented in the consolidated statement of financial position as at
December 31, 2017, therefore we were unable to determine if
corrections were needed and their effect on the consolidated
financial statements of the Group as at December 31, 2017.
Our auditor's report on the consolidated financial statements
for the year, ended December 31, 2017 is also modified in respect
of this matter.
We conducted our audit in accordance with International
Standards of Auditing (ISA). Our responsibilities under those
standards are further described in the Auditor's responsibilities
for the audit of the consolidated financial statements section in
our report. We are independent of the Group in accordance with the
Code of Ethics for Professional Accountants of the International
Ethics Standards Board for Accountants (IESBA code) and the ethics
requirements of the Independent Financial Audit Act (IFAA),
applicable in terms of our audit on the consolidated financial
statements in Bulgaria. We have also fulfilled our other ethics
responsibilities in accordance with the requirements of IFAA and
the IESBA code. We believe that the audit evidences we have
obtained are sufficient and appropriate to provide a basis of our
qualified opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note 2.7 Going concern basis of accounting
in the applied consolidated financial statements, which indicates
that as at December 31, 2017 the equity of the Group is negative
amounting to BGN 34,162 thousand, as a result of the accumulated
losses in previous reporting periods, and the current liabilities
exceeds the current assets by BGN 15,614 thousand. In addition, the
Group disclosed that it has assessed the uncertainties arising from
these circumstances, including possible effects from litigations
(disclosed in Note 35 Contingent liabilities), which indicate
material uncertainty, which may raise doubts regarding the ability
of the Group to continue as a going concern. In the same Note is
disclosed that the Group will be able to pay regularly the due
debenture and trade liabilities, loans and interest in accordance
with the contractual commitments entered into, and actions have
been taken to bring the Parent company in accordance with the
requirements of the Art.252, par.1, item 5 of the Commercial Act.
Additional information in this relation is disclosed in Note 24
Registered capital, 32 Capital Management and 36 Events after the
reporting date.
Our opinion is not modified in respect of this matter
Emphasis of Matter
We draw attention to the Note 30.6 Sale of interest in a
subsidiary to the consolidated financial statements, where is
disclosed that in December 2015 a contract with notarized
signatures was signed, whereby Petrol AD transferred to a company
outside the Group 100% of the interest in Naftex Petrol EOOD. The
change in the sole owner of the capital of Naftex Petrol EOOD was
filed timely for entry in Commercial Register at the Registry
Agency, but has not been recorded because of incompleteness in the
documents attached to the application. However, since the contract
of December 2015 has been signed properly according to the
prescribed by the Commercial Code form, it raises legal action
between the parties involved, due to which Petrol AD is no longer
the sole owner of Naftex Petrol EOOD and consequently is accepted
that the Group has lost control, the assets and the liabilities of
the subsidiary have been written off and a gain has been recognized
resulting from the loss of control in the consolidated statement of
profit or loss and other comprehensive income. As at the
transaction date the consolidated net assets of the subsidiary
amounted to BGN (314,452) thousand. The result of the sale of the
Group was a profit amounted to BGN 314,452 thousand.
In March 2016, the change of the sole owner of Naftex Petrol
EOOD has been repeatedly applied for entry in the Commercial
Register and a completed set of documents, as instructed by the
officials, has been submitted. The registration was suspended by
the court because of a shareholder's request of the Parent company,
on the grounds that the executives were not authorized to conclude
the agreement by the general meeting of the Parent company contrary
to the provisions of the POSA. The Management disclosed that before
the conclusion of the transaction, it was thoroughly checked for
compliance with the law and that it falls below the thresholds for
convening of GMS pursuant to Art. 114 of the POSA as documents
proving this circumstance are duly filed in the Commercial Register
with the application for registration of the change of the sole
owner of the company. For these reasons, the Management of Petrol
AD considers that the claim was unfounded and after a judgment in
favor of Petrol AD, a sale of shares will be recorded in the
register.
Our opinion is not modified in respect of this matter
Key Audit Matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the
consolidated financial statements of the current period. These
matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our
opinion thereon, but we do not provide a basis for a separate
opinion on these matters. In addition to those matters, described
in the Basis for Qualified Opinion section and the Material
Uncertainty to Going Concern section, we have determined the
matters, described below to be the key audit matters to be
communicated in our report.
1. Assessment and disclosure of trade and other receivables and
receivables on loans granted
We refer to the following Notes: 12. Impairment losses, 21.
Loans granted, 22. Trade and other receivables and 31. Financial
Instruments and risk management.
Key audit matter How our audit addressed the
key audit matter
On a historical basis for the Our audit procedures included,
levels of accounts receivable along with others:
collections, and based on consolidated * evaluation of the internal control system in regard
analysis, the separate categories to the processes related to loans granted;
of overdue (granted guarantees
and detailed analysis of the
credit risk and securities of * evaluation of the adequacy of the applied accounting
the respective debtors), is policy in regard to the trade and other payables and
accrued an impairment of interest loans granted;
bearing loans.
* age analysis of the trade
------------------------------------------------------------
In previous periods the Group receivables;
has regognised material impairments * sample of loans receivable to achieve sufficient
of receivables in the consolidated level of security that the book value of the loans
financial statements. granted do not exceed their recoverable amount.
Including where it was needed, we have study whether
Taking into account the presence there have been any conditions proving material
of significant level of estimation decrease in the value of the collaterals under loans
by the Management and the materiality granted.
level of the Trade and other
receivables and Loans granted
in the value of total assets, * evaluation of the internal control system in regard
we consider this matter as key to the processes related to loans granted;
for our audit.
* evaluation of the adequacy of the Group's reporting
in regard to the loans granted and trade and other
receivables and their impairment.
2. Contingent liabilities related to litigations
We refer to Note 35. Contingent liabilities
Key audit matter How our audit addressed the
key audit matter
In carrying out Group's operations, Our audit procedures included,
it is possible to arise a potential along with others:
risk of administrative and legal * review of the accrued expenses on legal services;
proceedings due to the inherent
uncertainty of their outcome.
The companies of the Group are * sending letters to lawyers, providing legal services
parties to legal proceedings, to the Group with a request for information regarding
the outcome of which may have the legal proceedings and actual or potential claims
a significant influence on the and disputes;
financial position and outlook
of the Group.
The key matters related to those * evaluation of the received answers and discussion of
proceedings are disclosed in selected matters;
the Note 35 Contingent liabilities
Whether to be recognised a provision
or disclosed a contingent liability * usage of our internal specialists and external expert
in the consolidated financial for assistance regarding the critical evaluation of
statements depends of the level the estimations and assumptions of the Group in
of significance of estimations regard to the contingent liabilities disclosed in the
and assumptions. The estimation notes to the consolidated financial statements;
is with an inherent subjectivity,
the risks are material.
On this basis, we consider the * evaluation whether the disclosures of the Group
matter related to legal proceedings, regarding the material legal proceedings adequately
where the companies of the Group explain the potential liabilities and correspond to
are parties as key audit matter. the information gathered by us.
-------------------------------------------------------------
Other information different of the consolidated financial
statements and auditor's report thereon
The management is responsible for the other information. The
other information comprises the information included in the
consolidated management report, including a corporate governance
statement, prepared by the management pursuant to chapter seven of
the Accountancy Act, but does not include the consolidated
financial statements and our audit report thereon, which we
received before the date of our audit report.
Our opinion on the consolidated financial statements does not
cover the other information and we do not express an audit opinion
or any form of assurance conclusion thereon, except otherwise
explicitly stated in our report and to the extent it is stated.
In connection with our audit of the consolidated financial
statements, our responsibility is to read the other information
and, in doing so, to consider whether the other information is
materially inconsistent with the consolidated financial statements
or with our knowledge obtained in the audit or otherwise appears to
be materially misstated.
If, based on our work we have performed, we conclude that there
is a material misstatement of this other information, we are
required to report this fact.
As disclosed above in Basis for Qualified Opinion section, we
were unable to confirm liabilities of the Group on cession
agreements and regress for BGN 24,090 thousand and to determine
whether corrections were necessary in Trade and other liabilities,
disclosed in the consolidated statement of financial position as at
December 31, 2017. Therefore, we were unable to conclude whether
the other information does not include uncorrected material
misstatement, related to this matter, in the financial indicators
and the inherent disclosures of this subject.
Responsibilities of the management and the persons, in charge of
the overall management for the consolidated financial
statements
The management is responsible for the preparation and fair
presentation of these consolidated financial statements in
accordance with IFRS, applied in EU and for such internal control
system, as the management determine is necessary to ensure the
preparation of the consolidated financial statements, which are
free from material misstatements, whether or not due to fraud or
error.
In preparing the consolidated financial statements, the
management is responsible for the assessment of the Group's ability
to continue as a going concern, disclosing, as applicable, matters,
related to going concern and using a going concern basis of
accounting, unless the management either intend to liquidate the
Group or to cease operations, or the management has no other
alternative but to do so.
The persons, in charge with the overall management, are
responsible for the supervision of the process of Group's financial
reporting.
Auditor's responsibilities for the audit of the consolidated
financial statements
Our objectives are to obtain reasonable assurance about whether
the consolidated financial statements as a whole are free from
material misstatements, whether or not due to fraud or error, and
to issue an auditor's report that includes our auditor's opinion.
Reasonable assurance is a high level of assurance, but it is not
guaranteed that an audit conducted in accordance with ISA will
always detect a material misstatement, when it exists.
Misstatements can arise from fraud or error and are considered
material, whether they can reasonably be expected, individually or
in the aggregate, to influence the economic decision of users taken
on the basis of these consolidated financial statements.
As a part of the audit in accordance with ISA, we exercise
professional judgment and maintain professional skepticism
throughout the whole audit. We also:
- identify and assess the risks of material misstatement of the
financial statements, whether or not due to fraud or error, develop
and perform audit procedures responsive to those risks, and obtain
audit evidences, which are 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 or evasion of
internal control;
- obtain an understanding of internal control relevant to the
audit in order to develop 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 the management;
- conclude on the appropriateness of the management's use of the
going concern basis of accounting and, based on the audit evidences
obtained, whether a material uncertainty exists, related to events
or conditions that may arise 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
financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit
evidences 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 financial statements, including the disclosures,
and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair
presentation;
- obtain sufficient appropriate audit evidences regarding the
financial information of the entities or business activities within
the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and
performance of the Group's audit. We remain solely responsible for
our audit opinion.
We communicate with the persons in charge with the overall
management, among the other matters, the planning scope and timing
of the audit and the significant audit findings, including any
significant deficiencies in the internal control that we identify
during the audit conducted by us.
We also provide the persons in charge with the overall
management a statement that we have complied with the relevant
ethical requirements related to the independence and to communicate
with them all relationships and other matters that may reasonably
be studied to bear on our independence and where applicable related
save measures.
Among the matters communicated with the persons in charge with
the overall management, we determine those matters, which were of
most significance in the audit of the consolidated financial
statements for the current period and which are therefore key audit
matters. We describe these matters in our auditor's report, except
in cases when law or regulation precludes public disclosure of
information about this matter or when, in extremely rare
circumstances, we decide that a matter should not be communicated
in our 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
Additional matters prescribed to report according to Accountancy
Act and Public Offering of Securities Act
In addition to our responsibilities and reporting according to
ISA, described above in Other information different of the
consolidated financial statements and auditor's report thereon
section regarding the consolidated management report, corporate
governance statement and consolidated non-financial declaration, we
complied with the procedures, added to the requirements under ISA,
according to Instructions regarding new and extended audit reports
and auditor's communication of the professional organization of the
registered auditors in Bulgaria, The Institute of the certified
public accountants (ISPA). These procedures concern the audits for
the existence and audits of the format and the content of this
other information on purpose to help us form an opinion regarding
whether the other information includes disclosures and reports,
pursuant to Chapter seven of the Accountancy Act and the Public
Offering of Securities Act, (Art. 100n, par.10 of POSA in relation
to Art. 100n, par.8, item 3 and 4 of POSA) applicable in
Bulgaria.
Opinion in relation to Art. 37, par. 6 of the Accountancy
Act
Based on the conducted procedures, our opinion is that:
a) The information included in the consolidated management
report for the financial year, for which the consolidated financial
statements were prepared, corresponds to the consolidated financial
statements.
b) The consolidated management report is prepared in accordance
with the requirements of the Chapter seven of the Accountancy Act
and Art. 100(n), par.7 of the Public Offering of Securities
Act.
c) In the corporate governance statement of the Group for the
financial year, for which the consolidated financial statements
were prepared, is presented pursuant to the requirements of Chapter
seven of the Accountancy Act and Art. 100(n), par.8 of the Public
Offering of Securities Act.
d) The consolidated non-financial declaration for the financial
year, for which the consolidated financial statements were
prepared, is presented and prepared in accordance with the
requirements of the Chapter seven of the Accountancy Act.
Opinion in relation to Art. 100(n), par.10 in relation to
Art.100(n), par.8, item 3 and 4 of the Public Offering of
Securities Act
Based on the conducted procedures and the obtained knowledge and
understanding on the Group's operations and the environment where
it operates, on our opinion, the description of the main
characteristics of the internal control and risk management systems
of the Group in relation to the process of financial reporting,
which is part of the consolidated management report (as section in
the corporate governance statement) and information under Art. 10,
par. 1, letters "c", "d", "f", "h" and "i" of the Directive
2004/25/EO of the European Parliament and to the Counsel of April,
21 2004 regarding the proposals for acquisitions, does not comprise
cases of significant misstatement.
Reporting pursuant to Art. 10 of the Regulations (EU) No
537/2014 in relation to the requirements of Art. 59 of the
Independent Financial Audit Act
Pursuant to the requirements of the Independent Financial Audit
Act in relation to Art.10 of Regulation (EU) No 537/2014, we report
additionally the information disclosed below:
- The audit company IsaAudit OOD is nominated for one year
period as a mandatory auditor of the consolidated financial
statements of Petrol AD for the year ended December 31, 2017, by
the General Meeting of Shareholders, convened on June 27, 2017.
- The audit of the consolidated financial statements of the
Company for the year ended December 31, 2017 is fourth consecutive
complete engagement of mandatory audit of this Group, conducted by
us.
- The management of Petrol AD confirmed to us, that there is no
selected and active audit committee pursuant to Art. 107 of the
Independent Financial Audit Act, therefore we present an additional
report, consistent with the requirements of Art. 60 of the
Independent Financial Audit Act to the Supervisory Board of Petrol
AD, as persons in charge with the overall management. We confirm
that the audit opinion expressed by us complies with the additional
report presented to the Supervisory Board.
- We confirm that prohibited non-audit services, appointed in
the Art. 64 of the Independent Financial Audit Act, were not
provided.
- We confirm that during the audit we maintained our independence of the Group.
- For the period, covered by our mandatory audit, except the
audit, we did not provide other services to the Group.
Audit company:
IsaAudit OOD
Director:
IZABELA DJALAZOVA
Registered auditor, responsible for the audit:
IZABELA DJALAZOVA
April 30, 2018
Consolidated financial statements
for the year ended December 31, 2017
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
For the year ended December 31, 2017
Note 2017 2016
BGN'000 BGN'000
reclassified
Revenue 6 479,083 487,817
Other income 7 1,509 1,243
Cost of goods sold 8 (423,450) (435,191)
Materials and consumables 9 (3,988) (3,935)
Hired services 10 (38,704) (35,572)
Employee benefits 11 (18,748) (18,710)
Depreciation and amortisation 16, 17 (1,486) (1,927)
Impairment losses 12 (374) (521)
Other expenses 13 (2,651) (2,636)
Finance income 14 12,992 4,466
Finance costs 14 (3,494) (5,659)
Profit (loss) before income tax 689 (10,635)
--------- -------------
Tax income (expense) 15 688 (685)
--------- -------------
Profit (loss) for the year 1,377 (11,320)
--------- -------------
Other comprehensive income
Items that will not be reclassified
to profit or loss:
Remeasurements of defined benefit
liability (asset) 26 (22) 78
Other comprehensive income for the
year (22) 78
--------- -------------
Total comprehensive income 1,355 (11,242)
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
For the year ended December 31, 2017
Note 2017 2016
BGN'000 BGN'000
reclassified
Profit (loss) attributable to:
Owners of the Parent company 1,377 (11,320)
Non-controlling interests - -
Profit (loss) for the year 1,377 (11,320)
======== =============
Other comprehensive income attributable
to:
Owners of the Parent company 1,355 (11,242)
Non-controlling interests - -
-------- -------------
Total comprehensive income for the
year 1,355 (11,242)
======== =============
Profit (loss) per share (BGN) 24 0.01 (0.10)
Georgi Tatarski Milko Dimitrov Prepared by Elena Pavlova
Executive Director Executive Director - Teofanova
April 26, 2018
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note 31 December
31 December 2016
2017 BGN'000
BGN'000 reclassified
Non-current assets
Property, plant and equipment and
intangible assets 16 14,398 24,430
Investment properties 17 1,812 1,835
Goodwill 18 40 32
Deferred tax assets 15 3,692 3,035
Other receivables 22 95 -
Total non-current assets 20,037 29,332
------------ ----------------
Current assets
Inventories 19 20,990 20,630
Loans granted 21 18,894 30
Trade and other receivables 22 32,733 40,548
Non-current assets held-for-sale 20 42 42
Cash and cash equivalents 23 7,271 5,334
Total current assets 79,930 66,584
------------ ----------------
Total assets 99,967 95,916
============ ================
Equity
Registered capital 24 109,250 106,482
General reserves 18,864 18,864
Accumulated loss (162,286) (161,702)
------------ --------------------
Total equity attributable to the
owners of the Parent company (34,172) (36,356)
------------ --------------------
Non-controlling interests 30.5. 10 10
------------ --------------------
Total equity (34,162) (36,346)
------------
Non-current liabilities
Loans and borrowings 25 38,144 38,292
Employee defined benefit obligations 26 441 340
Total non-current liabilities 38,585 38,632
------------ --------------------
Current liabilities
Trade and other payables 27 92,010 89,900
Loans and borrowings 25 3,478 3,362
Current income tax liabilities 28 56 368
Total current liabilities 95,544 93,630
------------ --------------------
Total liabilities 134,129 132,262
------------ --------------------
Total equity and liabilities 99,967 95,916
============ ====================
Georgi Tatarski Milko Dimitrov Prepared by Elena Pavlova - Teofanova
Executive Director Executive Director
April 26, 2018
COMPREHENSIVE STATEMENT OF CHANGES IN EQUITY
Equity attributable to the owners Non-controlling Total
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, 2016 109,250 18,864 (152,727) (24,613) 10 (24,603)
Comprehensive income
for the year
Loss for the year - - (11,320) (11,320) - (11,320)
Other comprehensive
income - - 78 78 - 78
Total comprehensive
income - - (11,242) (11,242) - (11,242)
----------- ---------- ------------ --------- ---------------- ---------
Transactions with
shareholders, recognized
directly in equity
Buy-back of ordinary
shares (2,768) - 2,267 (501) - (501)
Total transactions
with shareholders (2,768) - 2,267 (501) - (501)
----------- ---------- ------------ --------- ---------------- ---------
Balance at December
31, 2016 106,482 18,864 (161,702) (36,356) 10 (36,346)
=========== ========== ============ ========= ================ =========
Comprehensive income
for the year
Profit for the year - - 1,377 1,377 - 1,377
Other comprehensive
income - - (22) (22) - (22)
Total comprehensive
income - - 1,355 1,355 - 1,355
----------- ---------- ------------ --------- ---------------- ---------
Transactions with
shareholders, recognized
directly in equity
Sale of ordinary shares 2,768 - (1,939) 829 - 829
Total transactions
with shareholders 2,768 - (1,939) 829 - 829
----------- ---------- ------------ --------- ---------------- ---------
Balance at December
31, 2017 109,250 18,864 (162,286) (34,172) 10 (34,162)
=========== ========== ============ ========= ================ =========
Georgi Tatarski Milko Dimitrov Prepared by Elena Pavlova -
Executive Director Executive Director Teofanova
April 26, 2018
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended December 31, 2017
2017 2016
BGN'000 BGN'000
Cash flows from operating activities
Net profit (loss) before taxes 689 (10,635)
Adjustments for:
Depreciation/amortization of property, plant
and equipment and intangible assets 1,486 1,927
Interest expense and bank commissions, net 2,686 1,156
Shortages and normal loss, net of excess
assets 449 (411)
Provisions for unused paid leave and retirement
benefits 467 352
Impairment of assets 374 521
Profit on sale of assets (280) (67)
Receivables written-off 72 246
Payables written-off (134) (198)
Gain on sale of subsidiaries (11,992) -
(6,183) (7,109)
Change in trade payables 5,027 6,349
Change in inventories (1,779) (637)
Change in trade receivables 7,819 7,280
Cash flows from operating activities 4,884 5,883
Interest, bank fees and commissions paid (3,182) (3,210)
Income tax paid (285) (263)
-------- --------
Net cash from operating activities 1,417 2,410
Cash flows from investing activities
Payments for purchase of property, plant
and equipment (2,057) (716)
Proceeds from sale of property, plant and
equipment 1,638 630
Payments for loans granted, net (18,540) 107
Interest received on loans and deposits 81 151
Payments for acquisition of subsidiary and
other investments, net of cash acquired (349) (1,500)
Disposal and loss of control of subsidiary,
net of cash disposed of 18.944 -
Proceeds from (payments for) other investments 50 (1,824)
Net cash flows used in investing activities (233) (3,152)
Cash flows from financing activities
Proceeds from loans and borrowings 1,017 3,118
Repayment of loans and borrowings (487) (279)
Payments under leaseback agreements - (396)
Interest paid under leaseback agreements - (322)
Payments under finance lease agreements - (3,283)
Interest paid under finance lease agreements - (125)
Proceeds from sale of own shares 83 3
Proceeds (payments) under cession and other
agreements 140 662
Net cash flows from financing activities 759 (622)
Net increase (decrease) in cash flows during
the year 1,943 (1,364)
Cash and cash equivalents at the beginning
of the year 5,334 6,661
Effect of movements in exchange rates (192) 37
Cash and cash equivalents at the end of
the year (see also note 23) 7,085 5,334
========= ========
Georgi Tatarski Milko Dimitrov Prepared by Elena Pavlova -
Executive Director Executive Director Teofanova
April 26, 2018
Notes to the consolidated financial statements
for the year ended December 31, 2017
1. Legal status
Petrol AD (the Parent company) was registered in Bulgaria in
1990. The Company is registered with the Commercial Register at the
Bulgarian Registry Agency with UCN 831496285. As at the end of the
reporting year the registered address of the Parent company is 12
Targovska Street, Lovech Hotel, Lovech. As at December 31, 2017
shareholders of the Company are legal entities, the State - through
the Ministry of Economics and Energy, and individual shareholders
(see also note 24).
The main activity of Petrol AD and its subsidiaries (the Group)
is wholesale and retail trade with petroleum products and
non-petroleum goods. The Parent company is one of the oldest
trading companies in the Republic of Bulgaria operating the largest
network of petrol stations in the country.
These consolidated financial statements were approved for issue
by the Management Board of the Company on April 26, 2018.
2. Basis of preparation of these consolidated financial
statements and accounting principles
2.1. General
These consolidated financial statements have been prepared in
accordance with the International Financial Reporting Standards
(IFRS), as adopted by the Commission of European Union (EU).
These consolidated financial statements have been prepared on a
historical cost basis, except for the provisions and the defined
benefit liability, recognized at the present value of the expected
future payments.
2.2. Application of new and revised IFRS
2.2.1. Standards and interpretations effective and applied during the current reporting period
The Group has applied the following new standards and amendments
to standards, including any resulting changes in other standards
effective for reporting periods beginning on or after January 1,
2017:
-- Amendments to IAS 7 Statement of Cash Flows - Disclosure
initiative (issued in December 2014, endorsed for adoption by EU) -
The amendment is effective for annual periods beginning on or after
January 1, 2017. The amendment requires detailed reconciliation of
the opening and closing balances of all positions included as cash
flows arising from financial activity included in the statement of
cash flows. It is required additional disclosures for the change in
financial liabilities related to changes in financial activity,
changes in acquisition or loss of control of subsidiaries, changes
in foreign exchange rates, changes in fair values and other
amendments. The amendments are designed to improve the quality of
information provided to users of financial statements of the Group
and to evaluate changes in liabilities, arising from financing
activities, including both changes arising from cash flows and
non-cash changes. The disclosure of changes in financial
liabilities related to: changes from financial activity is in note
32.
-- Amendments to IAS 12 Income Taxes (issued in May 2014,
endorsed for adoption by EU). The amendments clarify the
recognition of deferred tax assets for unrealized losses. The
amendments are effective for annual periods beginning on or after
January 1, 2017. The narrow amendments clarify the recognition of
the deferred tax assets related to debt instruments measured at
fair value. The amendments clarify the following: 1) unrealised
losses on debt instruments measured at fair value and measured at
cost for tax purposes give rise to a deductible temporary
difference, 2) estimates for future taxable profits exclude tax
deductions resulting from the reversal of deductible temporary
differences, 3) where tax law restricts the utilisation of tax
losses, an entity would assess a deferred tax asset in combination
with other deferred tax assets of the same type, 4) deductions for
tax purposes, resulting from the reversal of deferred tax assets
are excluded from the prognosis of the future tax profits, used for
valuation of the recovery of these assets.
No changes in accounting policy have occurred since the
application of these new standards, except some new disclosures and
expansion of disclosures made in previous years.
2.2.2. New standards and interpretations, not yet applied
The Group has not applied the following new standards,
amendments and clarifications, which are already issued by the
International Accounting Standard Board (IASB), but are not
effective yet for the financial year beginning on January 1, 2017
or are effective as at January 1, 2017 but not yet endorsed by the
EU. The Management believes that it is appropriate to disclose the
following new or revised standards, new interpretations and
amendments to current standards in the financial statements of the
Group when they become effective. The Group estimated, where
applicable, the potential impact of all these new standards,
amendments and clarifications, which will be effective in the
future periods.
A. New standards, amendments and clarifications, which is not
expected to have a significant influence on the financial
reports:
-- Improvements in IFRS 2014 to 2016 cycle (issued in December 2016) - improvements in IFRS 12 (retrospectively effective in the annual periods beginning on or after January 1, 2017 - not yet endorsed by EU), IRFS 1 (effective for annual periods on or after January 1, 2018 - not yet endorsed by EU) and IAS 28 (retrospectively effective for annual periods on or after January 1, 2018 - not yet endorsed by the EU). These improvements contain partial amendments and corrections to these standards, mainly aiming to eliminate existing inconsistency or vagueness in application of the rules and requirements of the separate standards and to ensure the precision of the terminology. The amendments target the following objects and operations: a) the scope and the requirements to the disclosure under IFRS 12 are also valid for companies, classified under IFRS as held for sale, as held for distribution or as discontinued operations; b) delete of some of the exclusions for application under IFRS 1; and c) the choice of risk capital funds or other relative entities in terms of the valuation of their interests in associates or joint ventures as fair value in the profit and loss. The choice may be done on individual investment in its initial recognition (IAS 28).
-- Amendments to IFRS 2: Classification and Measurement of
Share-based Payment Transactions (issued on June 20, 2016 not yet
endorsed by the EU). The amendments are effective for annual
reporting periods beginning on or after January 1, 2018. Earlier
application is permitted. Specific transitional amendments are also
permitted. The Group's Management does not expect the applying of
the amendments to have any significant impact on Group's financial
statements as it does not have any share based payment agreements
or any other agreements with a net settlement feature for tax
withholding obligations related to share based payments;
-- Amendments to IFRS 9 Prepayment features with negative
compensation (issued on October 12, 2017 effective for annual
periods on or after January 1, 2019 not yet adopted by the EU). The
aim is to add a narrow-scope exception to IFRS 9 Financial
Instruments to allow instruments with symmetric prepayment options
to qualify for amortised cost or fair value through other
comprehensive income;
-- Amendments to IFRS 10 Consolidated Financial Statements and
IAS 28 Investments in Associates and Joint Ventures - regarding the
sales and contributions of assets between investor and its
associate or joint venture (effective date is indefinitely
postponed and indefinitely postponed procedure for endorsement by
EC). This amendment originates from the discrepancies between the
requirements and rules of IFRS 10 and IAS 28 (revised in 2011)
concerning the cases of transactions from an investor to its
associate or joint venture. The amendment mainly clarifies that the
partial gain or loss recognition for transactions between an
investor and its associate or joint venture only apply to the gain
or loss resulting from the sale or contribution of assets that do
not constitute a business - the gain or loss resulting from the
sale or contribution to an associate or a joint venture of assets
that constitute a business as defined in IFRS 3, is recognised in
full.
-- Amendments to IAS 28 Investments in Associates and Joint
Ventures (issued on October 12, 2017, effective for annual periods
on or after January 1, 2019 - not adopted by the EU). The
amendments aim is to clarify that an entity applies IFRS 9
Financial Instruments to long-term interests in an associate or
joint venture, but to which the equity method is not applied.
-- Amendments to IFRS 4 in relation to the application of IFRS 9
Financial Instruments with IFRS 4 Insurance Contracts (adopted by
EU) - effective for annual periods, beginning on or after January
1, 2018. This amendment is related with the need of synchronization
of the reporting by companies, issuing insurance contracts, which
fall in the scope of IFRS 9. The amendment provides two approaches
for reporting income or expenses arising from designated financial
assets - overlay approach and deferral approach.
-- Amendments to IAS 40 Investment property - regarding the
transfers of investment properties (issued on December 8, 2016,
effective for periods on or after January 1, 2018 - yet not adopted
by the EU). This amendment is related with the providing of
additional guidance on transfers to or from investment property and
more specifically, when transferring property under construction
and there is evident change of use.
-- IFRIC 22 Foreign Currency Transactions and Advance
Consideration (issued on December 8, 2016, effective for annual
periods beginning on or after January 1, 2018 - not yet endorsed by
the EU). This clarification treated the reporting of foreign
currency transactions or part of it in payment of advance
consideration, before the recognition of the asset, expense or
income. In these cases an asset on advance payments (advance
payments on purchase of assets or services) or liability on
deferred income (advance payments on sales) is reported as
non-monetary. When receiving advance payment considerations in
foreign currency the transaction date is used for determination of
the foreign exchange rate. If there are multiple payments or
receipts in advance, the entity shall determine a date of the
transaction for each payment or receipt of advance
consideration.
-- IFRIC 23 - Uncertainty over Income Tax Treatments (issued on
June 7, 2017, effective for annual periods beginning on or after
January 1, 2019 - not yet endorsed by the EU). The interpretation
clarifies the application of the requirements of IAS 12 Income
taxes, when existing uncertainty regarding the income taxes.
-- Improvements to IFFRS 2015 -2017 cycle (issued on December
12, 2017, effective for annual periods beginning on or after
January 1, 2019 - not yet endorsed by the EU), including the
following amendments of IFRS:
- IFRS 3 Business Combinations and IFRS 11 Joint Arrangements -
The Amendments to IFRS 3 clarifies that when a company acquires
control over other company, which is a joint venture, the first
should revalues its interest. The Amendments to IFRS 11 clarify
that when a company acquires a joint control over a company, which
is a joint venture, the first should not revalues the previously
held interest.
- IAS 12 Income Taxes - The Amendments clarify that all income
tax consequences of dividends (profit distributions) should be
recognized in profit and loss, despite how the tax arise.
- IAS 23 Borrowing Costs - The Amendments clarify that when a
qualifying asset is ready for its intended use or sale, an entity
treats any outstanding borrowings made specifically to obtain that
qualifying asset as part of the funds that it has borrowed
generally.
- IFRS 14 Regulatory Deferral Accounts (issued on January 30,
2014, not yet endorsed by the EU), effective for annual periods,
beginning on or after January 1, 2016. The purpose of the new
standard is to specify the financial reporting requirements for
regulatory deferral account balances that arise when an entity
provides good or services to customers at a price or rate that is
subject to rate regulation. The EC decides to wait the final
standard before starting the process of adoption.
- IFRS 17 Insurance Contracts (issued on May 18, 2017, not yet
endorsed by the EU), effective for annual periods, beginning on or
after January 1, 2021. The standard will substitute the effective
until now IFRS 4 for reporting of insurance contracts. It is not
expected to have significant impact on the financial statements of
the Group.
B. New standards, amendments and clarifications, which is
expected to have a significant influence on the financial
reports:
-- IFRS 9 Financial Instruments and consequent amendments, which
are effective for annual periods, beginning on or after January 1,
2018 - adopted by the EU. IFRS 9 is new standard for financial
instruments, which should substitute entirely IAS 39. IFRS 9
imposes requirements for recognition and valuation of financial
assets, financial liabilities and designated contracts for purchase
and sale of non-financial positions. IFRS 9 requires the
recognition and measurement of all recognized financial assets,
which are in the scope of IAS 39 Financial instruments, to be under
amortized cost or fair value. It is not necessary a revaluation of
the comparing information, but it is allowed to be done
retrospectively. The Management expects IFRS 9 to be applied in the
annual financial reports, when it becomes mandatory (from January
1, 2018)
At this stage, there are several effects of the application:
-- Classification of the financial assets, IFRS 9 determines new
classification and approach for measurement of the financial
assets, whose basis is the business model for management of the
financial assets and the characteristics of their cash flows. IFRS
9 includes three principle categories for classification of the
financial assets: measured at amortised cost, measured at fair
value through other comprehensive income and measured at fair value
through profit or loss. The initial assessment of the Group is that
taking into account the reported financial assets, as at December
31, 2017, with the effectiveness of the IFRS 9 and the new
requirements for classification, it will not have a significant
effect on the financial reports.
The borrowings and trade and other receivables are held to
receive contracted cash flows and it is expected to lead to cash
flows, representing only payments of principal and interest. The
Group analysed the contracted cash flows on these instruments and
concluded that all of them meet the requirements for measurement at
amortised cost according to IFRS 9. Consequently, a
reclassification of these instruments is not needed.
-- Impairment of financial assets - IFRS 9 substitutes the model
of the "transferred losses" from the IAS 39 with the model of
"expected credit losses". The new model for impairment will be
applied for financial assets, measured at amortised cost or at fair
value through other comprehensive income, excluding the investments
in capital instruments and contractual assets. According to IFRS 9,
the losses will be measured on two bases: 1. Expected credit losses
for the next 12 months after the date of the financial report or 2.
Expected credit losses for the entire term of the financial assets.
The first basis is applied when the credit risk is not increased
for the whole term from the date of the initial recognition to the
date of the financial report (and the credit risk is low as at the
date of the financial report). In the opposite case the second base
is applied.
Analysis of the measurement as at January 1, 2018
The Group is in process of analysis and measurement of the
effect arising from the application of the new model of impairment,
therefore it is unable to provide quantity data. The conclusions of
the preliminary analysis are:
Trade and other receivables, including contractual assets
The impairment requirements of IFRS 9 as at January 1, 2018 will
influence the non-impaired financial assets as at December 31,
2017. According to the preliminary assessment the IFRS 9 will not
lead to a significant increase in impairment losses on receivables
recognised under IAS 39.
Cash
The cash held in banks with high credit rating. The Group
believes that the cash is exhibited to a low credit risk. The
assessment of the application of impairment requirements under IFRS
9 as at January 1, 2018 is that the Group does not expect an
increase in impairment losses on cash toward the applicable
requirements of IAS 39.
Classifying Financial Liabilities -IFRS 9 remains broadly the
requirements of IAS 39 for classification of the financial
liabilities. The assessment of Group is that there are no
indications for significant changes, which influence the financial
reports by the classification of the financial liabilities under
IFRS 9 of January 1, 2018.
The changes in the accounting policy regarding the application
of IFRS 9 will be applied retrospectively, except that the Group
will benefit from permission of not recalculate the comparing data
for previous periods concerning the classifications and valuation
(incl. impairment). Pursuant to the applying of IFRS 9, the
differences between the carrying amounts of the financial assets
and financial liabilities will be recognised in retained earnings
as at January 1, 2018.
IFRS 15 Revenue from contracts with customers to the Standard
(issued in May 2014, adopted by the EU) - The issued new standard
is applicable for annual periods, beginning on or after January 1,
2018, substitutes the IAS 11, IAS 18 and their interpretations
(SIC-31 and IFRIC 13, 15 and 18). The Standard shall be applied
retrospectively, with some exclusions. The purpose is to unify the
requirements of IFRS with the Generally Accepted Accounting
Principles in USA. In the scope of the standard are the contracts
with customers and sales contracts of financial assets, which are
not related to the common activity (e.g. PPE). The Management
expects the IFRS 15 to be applied in the financial reports of the
Group, when it becomes mandatory and the applying of the new
standard to have a significant effect on the reported revenue.
Revenue from sales of goods - at present the revenue is
recognised when the goods are delivered to the customers, which is
accepted for the moment, when the client receive the goods and the
related risks and benefits are transferred. The revenue is
recognised when the revenue and expenses can be measured reliably,
the consideration is possible and there is not continuing control
of goods. Pursuant to IFRS 15 the revenue will be recognised, when
the client receive control of goods.
At present, for contracts, in which the client has the right to
return the goods, a revenue is recognised when it is possible to
measure reliably the returned-in-the-future goods and all other
recognition criteria for revenue recognition are fulfilled, and
liabilities for returned goods are recognised based on historical
experience and other significant factors. When it is impossible to
measure reliably the returned-in-the-future goods, the revenue
recognition is postponed to the moment when the return option
expired or until it is possible to make a reliable estimate.
Pursuant to IFRS 15 the revenue under these contracts will be
recognised to the degree that it is not probable the revenue to
deviate significantly. For these contracts for which the Group is
not able to make reliable close estimate of the goods, which will
be returned, the revenue will be recognised at the first moment
between the return period expiration and when it is possible to
make a reliable close estimate.
According to the Group's review the change is not expected to
have an effect on the financial report as at January 1, 2018.
Revenue from services - if related services under designated
contract are reported in different periods, the considerations is
distributed on the relative fair value between the periods. At
present the Group recognizes this revenue using the method of
percentage completion. Pursuant to IFRS 15 the total consideration
of the contract for services will be distributed between the
separate services on their particular price. The selling price will
be estimated on the prices on which the Group offers its services
in unit sales. Upon the Group's estimate it is not expected
significant differences concerning the recognition of revenue from
services from the applying of IFRS 15.
The Group plans to apply IFRS 15 modifying, retrospectively and
in accordance with par.B3 "b"with a cumulative effect of the
initial applying of the standard, recognised to the date of the
initial recognition (January 1, 2018). In this relation the Group
will not report comparing date for the previous period.
-- IFRS 16 Leases (not yet endorsed by the EU), effective for
annual periods beginning on or after January 1, 2019. The standard
will replace the existing IAS 17 and the current leases
interpretations - IFRIC 4, SIC - 15, SIC - 27. IFRS 16 requires the
lessees to recognize almost all leases in the balance/financial
statement and to apply a single lessee accounting model for all
leases, except some exclusions. The Group has made an initial
estimate of the potential influence on the financial statements of
the appliance of the IFRS 16, but does not finish yet a detailed
assessment. The actual influence of the application of IFRS 16 on
the financial reports for the period of first appliance will depend
on the future economic conditions, interest rates, as at January 1,
2019 and outstanding leases to this date. The last assessment will
determine if options on lease agreements should be exercised and
the degree to which the Group will choose to use potentially
practical expedients (benefits) and recognition exclusions, allowed
by the Standard.
-- Despite everything it is not expected a significant influence
regarding the reporting and presenting of the leases in the
financial reports. It is expected the operating leases, where the
Group is a lessee, to have the most significant effect on the
financial reports, arising by the recognition of new assets and
liabilities. The Group plans to apply IFRS 16 for the first time in
the financial reports for the year beginning on January 1, 2019. It
is planned a retrospective application with some exclusions. The
cumulative effect from the application of IFRS 16 will be
recognised in the retained earnings as at January 1, 2019, without
recalculation of the comparative information.
-- When the lessee applies this approach regarding the leases
classified as operating leases under IAS 17, it can make a choice
of several practical expedients/benefits during transition. The
Group is in the process of assessment of the potential effects of
the usage of these practical expedients/benefits.
The actual effect of the application of the new standards,
effective after December 31, 2017 may change, because the new
accounting policies are subject of changes until the reporting of
the first financial report where they will be applied.
2.3. Functional and presentation currency of the consolidated financial statements
Functional currency is the currency of the primary economic
environment, in which a company operates and primarily generates
and disburses cash. It reflects the main transactions, events and
conditions considered significant for the Group. These consolidated
financial statements are presented in Bulgarian levs, which is the
functional currency of Petrol Group. All financial information
presented in BGN has been rounded to the nearest thousand, except
when otherwise indicated.
2.4. Foreign currency
Transactions in foreign currency are initially recorded at
amounts denominated in BGN at the official exchange rate of the
Bulgarian National Bank (BNB) as of the date of the transaction.
Foreign exchange rate differences arising from settlement of
foreign exchange positions or from reporting these positions at
rates different from those of the initial recording, are reported
in profit and loss for the respective period. Since January 1, 1999
the Bulgarian Lev has been fixed against the Euro at rate 1.95583
BGN for 1 Euro.
The monetary positions denominated in foreign currency as at
December 31, 2017 and 2016 are stated in these consolidated
financial statements at the closing exchange rate of the Bulgarian
National Bank. The closing exchange rates of the BGN against USD as
at the end of current and prior reporting periods are as
follows:
December 31, 2017: 1 USD = 1.63081 BGN
December 31, 2016: 1 USD = 1.85545 BGN
2.5. Accounting assumptions and approximate estimates
The application of IFRS requires the Management to make certain
reasonable assumptions and accounting estimates in the preparation
of these consolidated financial statements, in order to determine
the value of some assets, liabilities, revenue and expenses. These
estimates and assumptions are based on the best estimate of the
Management, taking into account historical experience and analysis
of all factors, which have impact given the circumstances as at the
date of preparation of the consolidated financial statements. The
actual results could differ from the estimates presented in these
consolidated financial statements.
Information about assumptions and estimation uncertainties, that
have a significant risk of resulting in material adjustments in the
next financial year, are included in the following notes:
-- Note 15 - recoverability of deferred tax assets;
-- Note 18 - estimation of the recoverable amount of the reported goodwill arising from business combinations;
2.6. Basis of consolidation
2.6.1. Business combinations
The Group accounts for business combinations using the
acquisition method when control is transferred to the Group (see
also note 2.6.3). The consideration transferred in the acquisition
is generally measured at fair value, as are the acquired
identifiable net assets. The goodwill that arises is tested
annually for impairment (see also note 3.5.2.). Any gain from
bargain purchase is recognised immediately in profit or loss.
Transaction costs are expensed as incurred, except those related to
the issuance of debt or equity securities (see also note 3.4).
The consideration transferred does not include amounts related
to the settlement of the pre-existing relationships. Generally,
such amounts are recognised in profit or loss.
Any due contingent consideration is measured at fair value as at
the acquisition date. If the contingent consideration is classified
as equity it is not remeasured and settlement is accounted for
within equity. Otherwise, subsequent changes to the fair value of
the contingent consideration are recognised in profit and loss.
If share-based payment awards (replacement awards) are required
to be exchanged for awards held by the acquiree's employees
(acquiree's awards) and relate to past services, then all or a
portion of the amount of the acquirer's replacement awards is
included in measuring the consideration transferred in the business
combination. This determination is based on the market-based value
of the replacement awards compared with the market-based value of
the acquiree's awards and the extent to which the replacement
awards relate to pre-combination service.
2.6.2. Non-controlling interest
Non-controlling interest is the equity in a subsidiary not
attributed directly or indirectly to the Parent company.
Non-controlling interest is presented within equity in the
consolidated statement of financial position, separately from the
equity attributable to the owners of the Parent company.
Non-controlling interest is measured at its proportional share
of its identifiable net assets as at the acquisition date.
Any changes in the Group's interest in a subsidiary that do not
result in loss of control are accounted for in equity.
2.6.3. Subsidiaries
Subsidiaries are companies controlled by the Group. Control is
the power to govern the financial and operating policy of a
subsidiary in order to benefit from it. The financial statements of
the subsidiaries are included in the consolidated financial
statements from the date of control establishment until the date of
control suspension.
2.6.4. Loss of control
When the Group losses control of a subsidiary, it derecognizes
the assets and liabilities of the subsidiaries, non-controlling
interest and other components of equity related to the subsidiary.
Any resulting from the loss of control gain or loss is recognized
in profit or loss. Any interest retained in the former subsidiary
is measured at fair value when control is lost. Subsequently it is
recognized as an equity-accounted investee or an available-for-sale
financial asset depending on the level of influence retained.
2.6.5. Transactions eliminated on consolidation
Intra-group balances and transactions and any unrealised income
and expenses arising from intra-group transactions are eliminated.
Unrealised gains arising from transactions with associates and
joint ventures are eliminated against the investment up to the
interest of the Group in the company. Unrealised losses are
eliminated in the same way as unrealized gains, but only if there
is no evidence for impairment.
2.6.6. Goodwill
Goodwill arising on the acquisition of subsidiaries is measured
at cost less accumulated impairment losses (see also note
2.6.1.).
2.7 Going concern basis of accounting
For the year ending on December 31, 2017, the revenue decreased
by BGN 8,734 thousand, mainly due to narrowing the wholesale fuel
trading. Because of Management's analysis, the Group was
restructured toward long-term provision of the core business of the
Parent company. The Management intends to continue the developing
of the retail network through modernization and reconstruction of
the existing sites as well as through attracting new partners. As
at December 31, 2017 the Group's equity is negative at the amount
of BGN 34,162 thousand due to accumulated losses in previous
periods, and the current liabilities exceed current assets by BGN
15,614 thousand. According to Management's valuation of the
resulting uncertainties, including the potential effects of court
proceedings (see also note 35), which indicate significant
uncertainty, which could raise doubts about the Group's ability to
continue as a going concern, the current consolidated financial
statements are prepared on a presumption of going concern basis.
Measures have been taken to bring the Parent company in compliance
with the requirements of Art.252, par.1, item 5 of the Commercial
Act (see notes 24, 32 and 36). The Management has made an
assessment taking into account all available information on the
foreseeable future, which is at least, but not limited to, twelve
months from the end of the reporting period. This implies that the
Group will be able to pay its regularly due contractual and trade
obligations, loans and interests in accordance with the contractual
commitments.
3. Definition and valuation of items of the statement of
financial position and the statement of comprehensive income
3.1. Property, plant and equipment and intangible assets
Property, plant and equipment, and intangible assets are
measured initially at acquisition cost. If significant parts of an
item of property, plant and equipment have different useful lives,
they are accounted for as separate items (major components) of
property, plant and equipment.
After initial recognition property, plant and equipment, and
intangible assets are measured at cost less accumulated
depreciation and any accumulated impairment losses. (see also note
3.5.2.).
Subsequent costs, including replacement of a component of an
asset, are capitalised in the cost of the asset, only when it is
probable that future economic benefits associated with the
expenditure will flow to the Group. The carrying amount of the
replaced items is derecognized in accordance with the requirements
of IAS 16 Property, Plant and Equipment. All other subsequent costs
are recognized as incurred.
Gains or losses on disposal of property, plant and equipment
(calculated as a difference between the proceeds from disposal and
the carrying amount of the asset) are recognised net in the other
income/ expenses in profit or loss for the period.
When the use of a property, plant and equipment changes from
owner-occupied to investment property, the property is reclassified
as investment property.
Depreciation and amortisation are recognised over the estimated
useful lives applying the straight-line method. Depreciation and
amortisation are recognised in profit or loss of the current
period. Land, assets under construction and fully depreciated
assets are not depreciated/amortised.
The estimated useful lives are as follows:
Administrative and commercial buildings 25 years
Machinery, plant and equipment 2 - 25 years
Vehicles 4 - 10 years
Office equipment 7 years
Intangible assets 2 - 7 years
Depreciation/amortisation commences from the beginning of the
month following the month when the asset is available for use, and
ceases at the earlier of the date when the asset is classified as
held for sale in accordance with IFRS 5 Non-Current Assets Held for
Sale and Discontinued Operations and the date of its
derecognition.
As of the end of the reporting period, the Group's Management
reviews the useful life and the depreciation method of property,
plant and equipment and intangible assets. If any difference
between expectations and previous accounting estimates exists, the
relevant adjustments are made.
3.2. Investment property
Investment property is property held by the Group to accumulate
rent income or to increase the equity value, or both (including
property under construction for future use as investment
property).
Investment properties are carried at cost less depreciation and
any impairment losses (see also note 3.5.2.).
Any gain or loss on disposal of investment property (calculated
as a difference between the proceeds from disposal and the carrying
amount of the asset) is recognized in profit or loss for the
period.
Depreciation of investment properties are recognized in profit
or loss, over their estimated useful lives, applying the
straight-line method.
The estimated useful lives for the current and comparative
periods are as follows:
Administrative and trade buildings 25 years
Machinery, plant and equipment 2, 3 25 years
Vehicles 4-25 year
Office equipment 7 years
Intangible assets 2-10 years
As at the end of each reporting period, the Management of the
Group reviews useful lives and the depreciation/amortization method
of investment property. In case the Management identifies
differences between expectations and previous accounting estimates,
the relevant adjustments are made.
3.3. Inventory
Inventories are stated at the lower of cost and net realizable
value. The cost of inventories comprises purchase price,
transportation costs, custom duties, excise duties and other
similar costs. The net realizable value represents the estimated
selling price less estimated selling expenses.
Upon its consumption, the cost of inventories is measured using
weighted average cost method.
3.4. Financial instruments
The Group classifies non-derivative financial assets into the
loans granted and receivables category, and non-derivative
financial liabilities into the other financial liabilities
category.
3.4.1. Non-derivative financial assets and financial liabilities
- recognition and derecognition
The Group initially recognises loans, receivables and debt
securities issued on the date that they are originated. All other
financial assets and financial liabilities are initially recognised
on the trade date.
The Group derecognises a financial asset when the contractual
rights to the cash flows from the asset expire, or it transfers the
rights to receive the contractual cash flows on the financial asset
in a transaction in which substantially all the risks and rewards
of ownership of the financial asset are transferred, or it neither
transfers nor retains substantially all of the risks and rewards of
ownership and does not retain control over the transferred asset.
Any interest in such derecognised financial assets that is created
or retained by the Group is recognised as a separate asset or
liability.
The Group derecognises a financial liability when its
contractual obligations are discharged or cancelled, or expire.
Financial assets and liabilities are offset and the net amount
presented in the statement of financial position when, and only
when, the Group has a legal right to offset the amounts and intends
either to settle on a net basis or to realise the asset and settle
the liability simultaneously.
3.4.2. Non-derivative financial assets - measurement
Loans granted and receivables
These assets are initially recognised at fair value plus any
directly attributable transaction costs. Subsequent to initial
recognition they are measured at amortised cost using the effective
interest method less any impairment loss. Current receivables are
not amortised.
Cash and cash equivalents
In the statement of cash flows, cash comprises cash in hand,
cash at banks and cash in transit, except for restricted cash,
which the Group temporary has no right to use. Cash in transit
comprises cash collected from petrol stations as at the end of the
reporting period but actually received in the bank accounts of the
Group in the beginning of the next reporting period.
3.4.3. Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial
instruments not classified in previous categories. According to the
intentions and availability of the Management to sell these
financial assets in long-term or in one-year period, these
financial assets are recognised in the statement of financial
position of the Company as current or non-current financial
investments.
The regular purchases and sales of available-for-sale financial
assets are recognised on the trading date - the transaction date,
which the Company commits to purchase or sale the asset. After
their initial recognition the available-for-sale financial assets
are measured at fair value to the date of preparation of the
financial statements and any difference to that amount other than
impairment loss is recognised in other comprehensive income. The
accumulated differences from adjustments to fair value, upon
subsequent sale or impairment of the available-for-sale financial
assets, are recognised in profit or loss.
Tha fair value of the financial assets which have stock exchange
price from active market is determined on the basis of the valid
market quotations as at the end of the reporting period. After
their initial recognition the financial assets, which do not have
stock exchange price and their value can not be estimated reliably,
are accounted for at the acquisition price less any impairment loss
(see also note 3.5).
3.4.4. Non-derivative financial liabilities - measurement
Non-derivative financial liabilities are initially recognised at
fair value less any directly attributable transaction costs.
Subsequent to initial recognition, these liabilities are measured
at amortised cost using the effective interest method.
3.5. Impairment
3.5.1. Non-derivative financial assets
Financial assets, not classified as at fair value through profit
or loss, are assessed at each reporting date to determine whether
there is an objective evidence of impairment. Objective evidence
that financial assets are impaired includes:
-- default or delinquency by a debtor;
-- restructuring of an amount due to the Group on terms that the
Group would not consider otherwise;
-- indications that a debtor or issuer will enter bankruptcy;
-- adverse changes in the payment status of borrowers or issuers;
-- the disappearance of an active market for a security;
-- observable data indicating that there is measurable decrease
in expected cash flows from a group of financial assets.
Financial assets carried at amortised cost
The Group considers evidence of impairment for financial assets
measured at amortised cost (loans and receivables) at both a
specific asset and collective level. All individually significant
assets are individually assessed for impairment. Those found not to
be impaired are then collectively assessed for any impairment that
has been incurred but not yet individually identified. Assets that
are not individually significant are collectively assessed for
impairment. Collective assessment is carried out by grouping
together assets with similar risk characteristics.
In assessing collective impairment the Group uses historical
trends of the probability of default, the timing of recoveries and
the amount of loss incurred, adjusted according to the Management's
judgement as to whether the current economic and credit conditions
are such, that it would be possible for the actual losses to be
greater or less than the suggested by the historical trends.
An impairment loss is calculated as the difference between an
asset's carrying amount and the present value of the estimated
future cash flows discounted at the asset's original effective
interest rate. Losses are recognised in profit or loss and
reflected in an allowance account. When the Group considers that
there are no realistic prospects of recovery of the asset, the
relevant amounts are written off. If the amount of impairment loss
subsequently decreases and the decrease can be related objectively
to an event occurring after the impairment was recognised, then the
previously recognised impairment loss is reversed through profit or
loss.
3.5.2. Non-financial assets
The carrying amounts of the Group's non-financial assets (other
than inventories and deferred tax assets) are reviewed at each
reporting date to determine whether there is any indication of
impairment. If any such indication exists, then the asset's
recoverable amount is estimated. Intangible assets that have
indefinite useful lives, or that are not yet available for use, are
tested annually for impairment. An impairment loss is recognised if
the carrying amount of an asset or its related cash-generating unit
(CGU) exceeds its recoverable amount.
The recoverable amount of an asset or CGU is the greater of its
value in use and its fair value less costs to sell. In assessing
value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks
specific to the asset or CGU. For impairment testing, assets that
cannot be tested individually are grouped together into the
smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows of
other assets or CGUs.
An impairment loss is reversed only to the extent that the
asset's carrying amount does not exceed the carrying amount that
would have been determined, net of depreciation or amortisation, if
no impairment loss had been recognised.
3.6. Registered capital and redemption of own shares
The registered capital is the capital of the Parent company,
presented at historical cost as of the date of its
registration.
When at the end of the reporting period the Group - through
Parent company or its subsidiaries - has reacquired shares of the
Parent company, their par value is presented as a decrease in share
capital, and the difference below or above the par value - in
retained earnings, according to IAS 32 Financial Instruments:
Disclosure and Presentation.
3.7. Deferred income and deferred expenses
Deferred income and deferred expenses in the statement of
financial position of the Group comprises revenue and expenses,
which are prepaid in the current period, but relate to future
periods, such as guarantees, insurance, subscriptions, rent,
etc.
3.8. Employment benefits
Defined benefit plans
In accordance with the Labour Code, the Group has an obligation
to pay retirement benefits to its employees upon retirement, based
on the length of service, age and labour category. Since these
benefits qualify for defined benefits plan in accordance with IAS
19 Employee benefits, in accordance with the requirements of this
standard the Group recognises the present amount of the benefits as
a liability.
The Group's obligation in respect of defined benefit plans is
calculated separately for each plan by estimating the amount of
future benefit that employees have earned in the current and prior
periods and discounting that amount.
A qualified actuary using the projected unit credit method
performs the calculation annually. The Group determines the net
interest expense on the net defined benefit liability for the
period by applying the discount rate used to measure the defined
benefit obligation at the beginning of the annual period to the net
defined benefit liability.
The projected unit credit method presents a liability that may
arise in future, based on a number of assumptions. From this point
of view, the method is sensitive to assumptions of values of main
parameters, on which the obligation and the due amount are
dependent. The main assumptions, on which the amount of the
obligation is dependent, are based on demographic, financial and
other assumptions.
Remeasurements arising from defined benefit plans comprise
actuarial gains and losses and are recognised in other
comprehensive income. Net interest expense and other expenses
related to defined benefit plans are recognised in profit or
loss.
Short-term employee benefits
Short-term employee benefit obligations are expensed as the
related service is provided. A liability is recognised for the
amount expected to be paid if the Group has a present legal or
constructive obligation to pay this amount as a result of past
service provided by the employee and the obligation can be
estimated reliably.
3.9. Income tax
Income tax expense comprises current and deferred tax. It is
recognised in profit or loss except to the extent that it relates
to a business combination, or items recognised directly in equity
or in other comprehensive income.
Current tax is the expected tax payable or receivable on the
taxable income or loss for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to
tax payable or receivable in respect of previous years.
Deferred tax is recognised in respect of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation
purposes. Deferred tax is not recognised for:
-- temporary differences on the initial recognition of assets or
liabilities in a transaction that is not a business combination and
that affects neither accounting nor taxable profit or loss;
-- temporary differences related to investments in subsidiaries
and jointly controlled entities to the extent that it is probable
that they will not reverse in the foreseeable future;
-- taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to
be applied to temporary differences when they reverse, based on the
laws that have been enacted or substantively enacted by the
reporting date.
In accordance with the tax legislation enforceable for the years
ended 2017 and 2016 the tax rate applied in calculation of the tax
payables of the Group is 10%. For the calculation of the deferred
tax assets and liabilities as at December 31, 2017 and 2016 a tax
rate of 10% has been used.
Deferred tax assets and liabilities are offset if there is a
legally enforceable right to offset current tax liabilities and
assets, and they relate to income taxes levied by the same tax
authority.
A deferred tax asset is recognised for unused tax losses, tax
credits and deductible temporary differences, to the extent that it
is probable that future taxable profits will be available against
which they can be utilised. Deferred tax assets are reviewed at
each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realised.
In determining the amount of current and deferred tax the Group
takes into account the impact of uncertain tax positions and
whether the additional taxes and interest may be due. The Group
believes that the accruals for tax payables are sufficient for all
open tax periods for a number of factors, including interpretations
of tax law and prior experience. This assessment relies on
estimates and assumptions and may involve a series of judgments
about future events. New information may become available that
causes the Group to change its judgment regarding the adequacy of
existing tax liabilities; such changes to tax liabilities will
impact the tax expense in the period that such a determination is
made.
3.10. Revenue and expenses recognition
3.10.1. Revenue from sales of goods, services and other
income
Revenue is recognised when significant risks and rewards of
ownership have been transferred to the customer, recovery of the
consideration is probable, the associated costs and possible return
of goods can be estimated reliably, there is no continuing
management involvement with the goods, and the amount of revenue
can be measured reliably.
Revenue is recognised at the fair value of the consideration
received or receivable net of any granted discounts and including
the gross economic benefits received by or due to the Group. The
amounts gathered on behalf of third parties such as sales taxes
(value added tax) are excluded from revenue. Revenue generated from
sale of fuel is reported at its gross amount with the excise due,
which is considered an integral part of the price of the goods.
When the result of a transaction for services rendering can be
estimated reliably, revenue is recognised by reference to the stage
of completion of the transaction at the end of the reporting
period. When the outcome of a transaction cannot be reliably
estimated, the revenue is recognised to the extent that the
expenses recognised are recoverable.
Rental income from investment property is recognised as revenue
on a straight-line basis over the term of the lease. Lease
incentives granted are recognised as an integral part of the total
rental income, over the term of the lease. Rental income from other
property is recognised as other income.
Gain (loss) from the sale of property, plant and equipment, and
intangible assets and materials are presented as other income
(expenses).
When economic benefits are expected to arise in several
financial periods and their relation to revenue can only be
generally or indirectly estimated, expenses are recognised in
profit or loss based on procedures for systematic and rational
distribution.
In exchange of assets, revenue (expense) is reported as a result
of the exchange transaction to the amount of the difference between
the fair value of the received asset and the carrying amount of the
exchanged asset.
3.10.2. Finance income and finance costs
Finance income comprises interest income, gain on transactions
with own bonds, foreign exchange rate gains and other finance
income. Finance costs comprise interest expenses, foreign exchange
rate losses, bank fees, commissions and other financial
expenses.
Borrowing costs, which may be directly attributable to the
acquisition, construction or production of a qualifying asset prior
to its being ready for its intended use or sale, and necessarily
takes extended period of time, are capitalized in part of the cost
of the asset. All other finance income and costs are recognized in
profit or loss for all instruments, measured at amortized cost
using the effective interest rate method.
Income for equity interests is recognised when the Group is
entitled to receive the income.
Gains and losses from exchange rate differences are reported on
a net basis.
3.11. Leases
3.11.1. Determining whether an arrangement contains a lease
At inception of an arrangement, the Group determines whether
such an arrangement is or contains a lease. At inception or upon
reassessment of an arrangement that contains a lease, the Group
separates payments and other consideration required by the
arrangement into those for the lease and those for other elements
based on their relative fair values. If the Group concludes for a
finance lease that it is impracticable to separate the payments
reliably, then an asset and a liability are recognised at an amount
equal to the fair value of the underlying asset. Subsequently the
liability is reduced as payments are made and an imputed finance
charge on the liability is recognised using the Group's incremental
borrowing rate.
3.11.2. Leased assets
Assets held by the Group under leases, which transfer to the
Group substantially all of the risks and rewards of ownership, are
classified as finance leases. On initial recognition the leased
asset is measured at an amount equal to the lower of its fair value
and the present value of the minimum lease payments. Subsequent to
initial recognition, the asset is accounted for in accordance with
the accounting policy applicable to that asset.
Assets held under other leases are classified as operating
leases and are not recognised in the Group's consolidated statement
of financial position.
3.11.3. Lease payments
Payments made under operating leases are recognised in profit or
loss on a straight-line basis over the term of the lease. Lease
incentives received are recognised as an integral part of the total
lease expense, over the term of the lease.
Minimum lease payments made under finance leases are apportioned
between the finance expense and the reduction of the outstanding
liability. The finance expense is allocated to each period during
the lease term so as to produce a constant periodic rate of
interest on the remaining balance of the liability.
3.11.4. Operating lease
Costs incurred for assets leased under operating lease contracts
are recognized in profit or loss on a straight-line basis for the
term of the contract. Lease incentives received is recognised as a
reduction of the lease expenses on a straight-line basis for the
term of the lease contract.
Revenue realized from assets under operating lease contracts is
recognized in profit or loss on a straight-line basis for the term
of the contract. Initial costs, directly related to the conclusion
of the lease agreement, are capitalized in the cost of the asset
and are recognized as expenses on a straight-line basis for the
term of the lease contract.
3.12. Segments reporting
The information about operating segments in these consolidated
financial statements is presented in accordance with the operating
reports submitted to Group's Management. Based on these reports
decisions are taken in respect of the resources to be allocated to
the segment and the results of its activity are evaluated.
4. Determination of fair values
A number of the Group's accounting policies and disclosures
require the measurement of fair value, for both financial and
non-financial assets and liabilities.
The Group has an established control framework with respect to
the measurement of fair values. This includes a valuation team that
has overall responsibility for overseeing all significant fair
value measurements, including Level 3 fair values and reports
directly to the Management.
Significant unobservable inputs and valuation adjustments are
reviewed regularly. If third party information, such as broker
quotes or pricing services is used to measure fair values, then the
valuation team assesses the evidence obtained from third parties to
support the conclusion that such valuations meet the requirements
of IFRS, including the level in the fair value hierarchy in which
such valuations should be classified.
Significant valuation issues are reported to the Management of
the Group.
When measuring the fair value of an asset or liability, the
Group uses market observable data as far as possible. Fair values
are categorised into different level in a fair value hierarchy
based on the inputs in the valuation techniques as follows.
Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities.
Level 2: inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or
liability might be categorised in different levels of the fair
value hierarchy, then the fair value measurement is categorised in
its entirety in the same level of the fair value hierarchy as the
lowest level input that is significant to the entire
measurement.
The Group recognises transfers between levels of the fair value
hierarchy at end of the reporting period during which the change
has occurred.
Further information about the assumptions made in measuring fair
values is included in the following notes:
-- Note 17 - Investment property;
5. Segments reporting
The Group has identified the following operating segments, based
on the reports presented to the Group's Management, which are used
in the process of strategic decision-making:
-- Wholesale of fuels - wholesale of petroleum products in Bulgaria;
-- Retail of fuels - retail of petroleum and other products
through a network of petrol stations;
-- Other activities - financial and accounting services,
consultancy, rental income, maintenance and repairs and other
activities.
The segment information, presented to the Group's Management for
the years ended as of December 31, 2017 and 2016 is as follows:
2017 Wholesale Retail All other Total for
of fuels of fuels segments the Group
BGN'000 BGN'000 BGN'000 BGN'000
Total segment revenue 16,201 465,180 2,332 483,713
Intra-group revenue 1 1,475 1,645 3,121
Revenue from external
customers 16,200 463,705 687 480,592
Adjusted EBITDA 1,222 (8,662) 491 (6,949)
Depreciation/amortization - 1,362 124 1,486
Impairment 90 276 8 374
2016 Wholesale Retail All other Total for
of fuels of fuels segments the Group
BGN'000 BGN'000 BGN'000 BGN'000
Total segment revenue 58,569 432,709 7,298 498,576
Intra-group revenue 21 2,844 6,651 9,516
Revenue from external
customers 58,548 429,865 647 489,060
Adjusted EBITDA 572 (8,835) 1,269 (6,994)
Depreciation/amortization - 1,739 188 1,927
Impairment - (52) 573 521
The policies for recognition of revenue from intra-group sales
and sales to external clients for the purposes of the reporting by
segments do not differ from these applied by the Group for revenue
recognition in the consolidated statement of profit and loss and
other comprehensive income.
The Management of the Group evaluates the results of the
performance of the segments based on the adjusted EBITDA[17]. In
the calculation of the adjusted EBITDA the effect of the impairment
of assets is not taken into account. The reconciliation of the
adjusted EBITDA and the profit (loss) before tax is presented in
the table below:
2017 2016
BGN'000 BGN'000
Adjusted EBITDA - reporting segments (7,440) (8,263)
Adjusted EBITDA - all other segments 491 1,269
Depreciation/amortization (1,486) (1,927)
Impairment of assets (374) (521)
Finance income (costs), net 9,498 (1,193)
Loss before tax 689 (10,635)
========= =========
6. Revenue from sales
2017 2016
BGN'000 BGN'000
Sales of goods 471,186 480,481
Sales of services 7,897 7,336
--------- ---------
479,083 487,817
========= =========
Revenue from sales of goods comprises, as follows:
2017 2016
BGN'000 BGN'000
Fuels 430,849 442,842
Lubricants and other goods 40,337 37,639
--------- ---------
471,186 480,481
========= =========
7. Other income
2017 2016
BGN'000 BGN'000
Surpluses of assets 486 466
Gain on sale of property, plant and equipment,
including: 280 67
Income from sales 1,528 683
Carrying amount (1,248) (616)
Payables written-off 134 198
Penalties and indemnities 76 139
Insurance claims 67 54
Other 466 319
--------- ---------
1,509 1,243
========= =========
8. Cost of goods sold
2017 2016
BGN'000 BGN'000
Fuels 390,011 404,389
Lubricants and other goods 33,439 30,802
--------- ---------
423,450 435,191
========= =========
9. Materials and consumables
2017 2016
BGN'000 BGN'000
Electricity and heating 2,043 2,011
Spare parts 454 330
Office consumables 418 449
Fuels and lubricants 381 460
Advertising materials 224 183
Working clothes 218 200
Water supply 137 140
Other 113 162
3,988 3,935
========= =========
10. Hired services
2017 2016
BGN'000 BGN'000
Rents 16,623 16,338
Commissions and fees 10,458 8,697
Maintenance and repairs 3,442 1,934
Consulting and training 1,907 1,984
State, municipal fees and other costs 1,637 1,281
Communications 830 821
Security 827 1,306
Cash collection expense 774 753
Insurances 659 626
Advertising 512 726
Software licenses 243 221
Transport 128 143
Other 664 742
--------- ---------
38,704 35,572
========= =========
Rental costs include BGN 13,914 thousand (2016: 13,520 thousand)
for rent of petrol stations under operating lease agreements. In
February 2017 the Group has achieved a significant improvement of
the two-year rental price, beginning on January 1, 2016, in the
lease contract with one of the Group's major lessors. The
recalculation on straight-line basis concerning the current
reporting period is accounted for in 2016 and 2017.
The Group reports that the accrued considerations for
independent financial audit services for the companies included in
the consolidation for 2017 are at the amount of BGN 66 thousand.
The Group did not received other services from independent auditor,
except the audit of financial reports.
11. Personnel expenses
2017 2016
BGN'000 BGN'000
Wages and salaries 16,041 15,964
Social security contributions and benefits 2,707 2,756
--------- ---------
18,748 18,720
========= =========
12. Impairment losses
2017 2016
BGN'000 BGN'000
Recognised impairment loss on financial
assets, including: 586 1,381
Impairment loss on trade and other receivables 586 1,078
Impairment loss on loans granted - 268
Impairment loss on goodwill - 35
Impairment loss on other financial assets - -
Reversed impairment loss on financial assets,
including: (212) (860)
Reversed impairment loss on trade and other
receivables (212) (860)
374 521
========= =========
As at the end of the reporting period, the Group made a detailed
analysis of the collectability of trade and other receivables, and
receivables on interest-bearing loans granted. As a result of the
analysis, it has identified that, due to issues in the
collectability, there were indications for an allowance for
impairment on trade and other receivables at the amount of BGN 586
thousand (2016: trade and other receivables BGN 1,078 thousand and
on loans granted at the amount of BGN 268 thousand) to be
established.
In 2016, the goodwill at the amount of BGN 35 thousand arising
from the acquisition of BPI AD was fully impaired due to
termination of the lease-back agreement of the company's main
assets. The Group renounced the use of the assets and the right to
acquire the ownership.
13. Other expenses
2017 2016
BGN'000 BGN'000
Entertainment expenses and sponsorship 985 538
Scrap and shortages 907 877
Local taxes and taxes on expenses 448 636
Penalties and indemnities 90 110
Written-off receivables 72 246
Business trips 49 90
Other 100 139
--------- ---------
2,651 2,636
========= =========
14. Finance income and costs
2017 2016
BGN'000 BGN'000
Finance income
Interest income, including 416 431
Interest income on loans granted 264 185
Interest income on trade receivables 147 197
Other interest income 5 49
Gain on sale of subsidiaries, incl.: 11,992 -
Revenue from sales 21,806 -
Carrying amount of the Group's interest
in the net assets of the subsidiaries (9,814) -
Revenue from compensations 392 3,360
Net foreign exchange income 192 -
Gain on termination of lease-back agreement - 675
12,992 4,466
---------- ---------
Financial costs
Interest costs, including: (2,852) (5,010)
Interest expenses on debenture loans (2,536) (3,250)
Interest expenses to the state budget (158) (890)
Interest expenses on bank loans (130) (68)
Interest expenses on trade loans (15) -
Interest expenses on trade and other payables (13) (291)
Interest expenses on leasebacks - (396)
Interest expenses on finance lease - (115)
Net foreign exchange loss - (37)
Bank fees, commissions and other financial
expenses (642) (612)
---------- ---------
(3,494) (5,659)
---------- ---------
Finance income (costs), net 9,498 (1,193)
========== =========
In October 2016, the Group entered into an agreement to receive
a partial indemnity from pledge creditor at the amount of BGN
15,000 thousand. As at December 31, 2016 initially recognised
income of BGN 15,000 thousand is decreased by BGN 11,640 thousand
due to Management's estimation that the requirements for revenue
recognition according to IAS 18 Revenue are not met. The revenue
recongised in 2017 and 2016 is BGN 392 thousand and BGN 3,360
thousand, respectively, corresponds to the received/settled part of
the contracted indemnity until the date of report preparation.
15. Taxation
15.1. Tax expenses
Tax expense recognised in profit or loss includes the amount of
current and deferred income tax expenses in accordance with IAS 12
Income taxes.
2017 2016
BGN'000 BGN'000
Current tax expense 44 197
Change in deferred tax, including: (732) 488
Temporary differences recognised during
the year 163 583
Temporary differences arisen during the
year (152) (181)
Adjustments in temporary differences (743) 86
Tax (income) expense (688) 685
========= =========
15.2. Effective tax rate
The reconciliation between the accounting profit (loss) and tax
expense, as well as calculation of the effective tax rate as of
December 31, 2017 and 2016 is presented in the table below:
2017 2016
BGN'000 BGN'000
Profit (loss) before tax for the year 689 (10,635)
Applicable tax rate 10% 10%
Tax expense (benefit) at the applicable
tax rate 69 (1,064)
Tax effect of permanent differences 42 (174)
Tax adjustments for prior periods 743 86
Tax effect from consolidation adjustments (1,542) 1,837
--------- ---------
Tax expense (688) 685
========= =========
Effective tax rate - -
========= =========
The respective tax periods of the Group may be subject to
inspection by the tax authorities until the expiration of 5 years
from the end of the year in which a declaration was submitted, or
should have been submitted. Consequently additional taxes or
penalties may be imposed in accordance with the interpretation of
the tax legislation. The Group's management is not aware of any
circumstances, which may give rise to a contingent additional
liability in this respect.
In December 2014 tax audits of Parent company commenced,
encompassing social security contributions and personal income tax
for the period December 2008 till December 2013 and corporate
income tax and value added tax for 2013. Subsequently the corporate
income tax and VAT audits were prolonged till September 2016 and
the scope was increased till 2014 and June 2015, respectively. In
March 2016 a tax audit act related to social security contributions
for BGN 543 thousand principal and BGN 248 thousand interests was
issued. It is fully appealed against by the Parent company. In
April 2016 in order to suspend the execution of the appealed tax
audit act, a bank guarantee of BGN 800 thousand in favor of
National Revenue Agency was issued. In November 2017, the issued
revision act is entirely repealed with a decision of Administrative
Court - Sofia city. The tax administration appealed the decision
and now the contest is pending in SAC.
In January 2017, the Parent company received a tax audit act on
corporate tax revision for 2013 and VAT until October 2014
amounting to BGN 222 thousand principal and BGN 68 thousand
interest. Bank guarantee of BGN 350 thousand was issued in order to
ceased the execution of the appealed audit act in January 2017. In
March 2017 the foreclosed properties, with carrying amount of BGN
578 thousand, which guaranteed the execution of the finalized audit
proceedings, were released by the National Revenue Agency.
In March 2017, the Parent company received a tax audit act due
to the audit of corporate income tax for 2014 and VAT until June
2015 for BGN 663 thousand principal and BGN 138 thousand interest.
The Parent company appealed the act. In order to suspend the
enforcement of the appealed audit act, 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 covered
by BGN 300 thousand cash. In August 2017 the Director of "Appealing
and tax-security practice" department issued a decision which
change the appealed revision act 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 rest of the additionally determined tax liabilities in the
revision act are in process of legal appealing. The issued bank
guarantee to suspend the enforcement of the appealed audit act in
favor of the National Revenue Agency of BGN 940 thousand, partly
covered by BGN 300 thousand blocked cash, was replaced with new
bank guarantee of BGN 94 thousand and blocked cash was
released.
In 2015 and 2016 four subsidiaries received tax audit
assignments by National Revenue Agency encompassing corporate
income tax and VAT for different periods from 2009 to 2016. As at
December 31, 2016 the tax audits were closed with received tax
audit acts and report, indicating that two of the companies had no
additional liabilities other than already declared and for the
other two additional liabilities of BGN 13 thousand according to
tax audit act and BGN 34 thousand according to tax audit report,
which were fully appealed against for as unfounded. In the tax
audit act, issued in March 2017 related to the appealed tax audit
report, were taken into account all arguments included in the filed
objections of the subsidiary, dropping all tax payables.
15.3. Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities were recognized in respect
of the following positions:
Recognised Asset (liability) Recognised Asset
in profit as at December in profit (liability)
Asset (liability) and loss 31, 2016 and loss as at
as at January December
1, 2016 31, 2016
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
Property, plant and equipment (346) 43 (303) 19 (284)
Impairment of assets 3,674 (438) 3,236 583 3,819
Tax loss carry-forwards 34 (32) 2 22 24
Provisions for unused
paid leave and other provisions 70 4 74 15 89
Excess of interest payments
in accordance with CITA 83 (83) - 1 1
Other temporary differences,
including unpaid benefits
to individuals 8 18 26 17 43
3,523 (488) 3,035 657 3,692
The Company has the right to carry forward deferred tax assets
on tax losses until 2020.
15.4. Unrecognized deferred tax assets
As of December 31, 2017 the Group's Management reviews the
recoverability of deductible temporary differences and tax loss
carry forward, forming tax assets. Because of this review, the
Group's Management estimates that there might be no sufficient
taxable profits in the near future against which the assets will be
utilized. Consequently, the Group does not recognize tax assets on
the following deductible temporary differences and tax loss carry
forward and impairment of assets, incurred during the current and
previous reporting periods.
16. Property, plant, equipment and intangible assets
Land Buildings Plant Vehicles Other Assets Intangible Total
and under assets
equipment constr.
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
BGN'000
Cost
Balance at
January
1, 2016 15,791 12,606 22,983 732 4,384 991 4,178 61,665
Additions 63 36 360 - 175 295 5 934
Transfers - 3 467 - (24) (446) - -
Disposals (6,539) (2,191) (1,739) (42) (1,067) (775) (680) (13,033)
Balance at
December
31, 2016 9,315 10,454 22,071 690 3,468 65 3,503 49,566
Additions 2,066 - 258 - 238 162 32 2,756
Transfers - - 18 - 22 (40) - -
Disposals (172) - (318) (118) (171) (48) (52) (879)
Acquisitions
through
business
combinations (3,573) (3,790) (10,872) - (1,803) (46) - (20,084)
Balance at
December
31, 2017 7,636 6,664 11,157 572 1,754 93 3,483 31,359
Accumulated
depreciation
Balance at
January
1, 2016 - 5,655 13,855 660 3,161 - 4,040 27,371
Accumulated - 487 1,114 8 244 - 74 1,927
Disposals for
the year - (756) (1,708) (11) (1,007) - (680) (4,162)
Transfers - 1 1 - (2) - - -
Balance at
December
31, 2016 - 5,387 13,262 657 2,396 - 3,434 25,136
Accumulated - 335 874 3 200 - 27 1,439
Disposals for
the year - - (298) (100) (162) - (52) (612)
Disposals on
sale
of
subsidiary - (1,646) (5,892) - (1,464) - - (9,002)
Balance at
December
31, 2017 - 4,076 7,946 560 970 - 3,409 16,961
Carrying
amount
at January
1,
2016 15,791 6,951 9,128 72 1,223 991 138 34,294
Carrying
amount
at 31
December
31, 2016 9,315 5,067 8,809 33 1,072 65 69 24,430
Carrying
amount
at December
31,
2017 7,636 2,588 3,211 12 784 93 74 14,398
In 2017 due to disposal of subsidiaries, property, plant and
equipment with carrying amount of BGN 11,082 thousand are written
off from the consolidated report of the Group.
In December 2016 due to termination of leaseback agreement,
property, plant and equipment with carrying amount of BGN 6,975
thousand are written off from the consolidated report of the Group.
(see also note 25.4).
As at December 31, 2017 property, plant and equipment with
carrying amount of BGN 8,322 thousand were mortgaged and pledged as
collaterals for bank loans granted to the Parent company and
unrelated parties under bank guarantee agreement and bank
loans.
The under construction assets include mainly accrued expenses
related to the reconstruction of trade sites.
Management's impairment tests on property, plant and equipment,
confirm that there is no evidence or circumstances indicating a
sustained decline in the carrying amounts of assets, which
recoverable amount significantly differs from their carrying
amount.
17. Investment property
December December
31, 31,
2017 2016
BGN'000 BGN'000
Cost
Balance at the beginning of the year 1,835 -
Acquisitions 24
Acquisitions through business combinations - 1,835
Balance at the end of the year 1,859 1,835
Accumulated depreciation
Balance at the beginning of the year - -
Depreciation for the year 47 -
Balance at the end of the year 47 -
Carrying amount at the beginning of the - -
year
Carrying amount at the end of the year 1,812 1,835
Investment property representing land and building were acquired
through business combination in December 2016. The carrying amount
of the investment property as at December 31, 2017 and 2016 is a
maximum approximation of their fair value. The Group determines the
fair value of the investment property for reporting purposes, using
a valuation report of independent appraiser, which is calculated by
method of net assets value and discounted net cash flows.
18. Goodwill
December December
31, 31,
2017 2016
BGN'000 BGN'000
Cost 2,005 2,032
Impairment loss (1,965) (2,000)
40 32
========= =========
In February 2017 the Group acquired 32,200 company shares,
representing 100% of the capital of Storage Invest EOOD. As at
transaction date the Storage Invest EOOD is sole owner of the
capital of Storage Oil EAD, which is also included in the current
consolidated financial report. A goodwill of BGN 8 thousand is
recognised.
In December 2016 the Group acquired interest in Lozen Asset AD,
resulting in goodwill of BGN 29 thousand (see also note 30.3).
In 2016, the goodwill of BGN 35 thousand arising from the
acquisition of BPI AD is fully impaired due to termination of
lease-back agreement of the main assets of the company and the
Group's renouncement to use the assets and to acquire the ownership
of the assets. The goodwill is written off due to the disposal of
BPI AD in December 2017.
A goodwill of BGN 3 thousand is recognised with the acquisition
of the subsidiary Petrol Technologies OOD. The goodwill aroused
from the acquisition of Elit Petrol AD at the amount of BGN 1,965
thousand was impaired in previous periods.
19. Inventory
December December
31, 31,
2017 2016
BGN'000 BGN'000
Goods, including: 20,361 18,959
Fuels 12,581 11,455
Lubricants and other goods 7,780 7,504
Materials 629 1,671
---------
20,990 20,630
20. Non-current assets held for sale
December December
31, 31,
2017 2016
BGN'000 BGN'000
Non-current assets held for sale incl.: 42 42
Land 34 34
Buildings 8 8
42 42
21. Loans granted
December December
31, 31,
2017 2016
BGN'000 BGN'000
Loans granted to unrelated parties, including 18,894 30
Initial value 60,048 33,908
Allowance for impairment (41,154) (33,878)
18,894 30
In August 2017, the Group signed two granting money 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 with 6.7% annual interest and initially arranged
term until December 31, 2017, which subsequently was extended to
December 31, 2018. As at December 31, 2017 the granted amounts are
BGN 3,820 thousand and BGN 500 thousand, respectively.
In November 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 with 6.7% annual interest and
term until December 31, 2018. As at December 2017, the contracted
amount was entirely granted.
In December 2017, the Group signed a contract for granting
money, which requires the Group to grant interest bearing trade
loan up to BGN 3,000 thousand to unrelated party with 6.7% annual
interest and term until December 31, 2018. As at December 31, 2017
the contracted amount was entirely granted.
As disclosed in note 30, the Group sold to third parties the
interest in two subsidiaries - BPI AD and Petrol Gas EOOD in 2017,
resulting to the recognition, in the current consolidated financial
report, of loans granted to unrelated parties with total carrying
amount, net of impairment of BGN 155 thousand as at December 31,
2017.
As at December 31, 2017 and 2016 the trade loan and interest
receivables of BGN 32,063 thousand from Controlling company until
November 2013 are fully impaired due to insolvency proceedings and
difficult collection.
The Management has performed an analysis of loans granted in
order to determine their fair values and their respective level in
the fair value hierarchy. The Management of the Group considers
that the carrying amounts of the granted loans in the consolidated
statement of financial position are reasonable approximations of
their fair value as at December 31, 2017 and 2016 within Level 3
category.
22. Trade and other receivables
December December
31, 31,
2017 2016
BGN'000 BGN'000
Non-current receivables
Guarantees granted 95 -
95 -
Current receivables
Receivables from clients, including 24,198 27,782
Initial value 25,540 29,972
Allowance for impairment (1,342) (2,190)
Receivables under cession agreements, assumption
of debt and regress 4,550 4,767
Initial value 68,183 68,400
Allowance for impairment (63,633) (63,633)
Deferred expenses 1,528 5,050
Guarantees for participation in tender procedures 886 987
Advances granted, including 329 491
Initial value 405 780
Allowance for impairment (76) (289)
Litigations and writs 189 191
Initial value 210 277
Allowance for impairment (21) (86)
Tax refundable, incl.: 50 471
VAT 45 471
Other taxes 5 -
Receivables from related parties - 2
Other 1,003 807
Initial value 1,068 1,350
Allowance for impairment (65) (543)
--------- ---------
32,733 40,548
--------- ---------
32,828 40,548
========= =========
Receivables from related parties are disclosed in note 33.
The Management performed an analysis of the trade receivables in
order to determine their fair values and their level in the fair
value hierarchy. The Management considers that the carrying values
of the trade and other receivables in the consolidated statement of
financial position are reasonable approximations of their fair
value as at December 31, 2017 and 2016 within Level 3 category.
The Group considers that unimpaired overdue receivables are
collectible based on historical information about payments,
guarantees received and a detailed analysis of the credit risk and
collaterals of its customers.
The Group's exposure to credit and currency risk and impairment
losses, related to trade and other receivables, is disclosed in
note 31.
23. Cash and cash equivalents
December December
31, 31,
2017 2016
BGN'000 BGN'000
Cash in transit 3,946 2,836
Cash at banks 3,047 2,379
Cash on hand 92 119
Cash and cash equivalents in Statement of
Cash Flows 7,085 5,334
Blocked cash 186 -
--------- ---------
Cash and cash equivalents in the Statement
of Financial Position 7,271 5,334
========= =========
Cash in transit comprises cash collected from fuel stations as
at the end of the reporting period, but actually received in the
bank accounts of the Group in the beginning of the next reporting
period.
The amounts presented as blocked cash as at December 31, 2017 in
Cash and Cash Equivalents at the amount of BGN 186 thousand held at
a bank account that is blocked as a bank guarantee under a bank
loan agreement to serve as a security for a public tender
participation of the Parent company under Public Procurement
Act.
24. 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, reduced by
redeemed own shares as at December 31, 2017 and 2016.
As at December 31, 2017 and 2016 the shareholders in the Parent
company are as follows:
Shareholder December December
31, 31,
2017 2016
Alfa Capital AD 28.85% 28.85%
Yulinor EOOD 23.11% 23.11%
Perfeto consulting EOOD 16.43% 16.43%
Correct Pharm EOOD 10.98% 18.31%
Trans Express Oil EOOD 9.86% -
Corporate Commercial Bank AD 5.51% 5.51%
VIP Properties EOOD 2.26% 2.26%
The Ministry of Economy of the Republic
of Bulgaria 0.65% 0.65%
Petrol AD (purchased own shares) - 2.53%
Other minority shareholders 2.35% 2.35%
100.00% 100.00%
Pursuant to a decision of the Management Board of the Parent
company, in July 2016 the Group acquired 2,772,137 ordinary shares
with nominal value of BGN 1 each, representing 2,54% of the capital
of Petrol AD. In October 2016 the Group sold 5,002 shares to
unrelated entity.
In July 2017, a contract for sale at a price of BGN 0.30 for
each of the 2,767,135 own Parent-company shares was signed. The
price was arranged in deferred payment schedule with 10% due in 3
days and the rest to the end of 2018.
In February 2017, continuing the measures for capital adequacy
of the Group, the Management Board of the Parent company convened
new Extraordinary General Meeting of Shareholders (EGMS) with a
decision agenda for reverse split of shares. EGMS was held with
77,951,767 presenting shares, representing 71,36% of the registered
capital, where 71,937,309 shares representing 65,85% (over 2/3 of
the presenting shares) were voted "For" the reverse split
procedure.
In May 2017 was hold next EGMS when decision for reduction of
capital from BGN 109,249,612 to BGN 27,312,403 by decrease of
nominal value of the issued shares from BGN 4 to BGN 1 was voted.
The decision is conditional upon the decision of the EGMS
concerning the procedure of reverse split, which should be
confirmed by final entered into force court decision.
In October 2017 was hold a new EGMS where a decision repealing
the decisions taken on meetings hold in February and May 2017 was
voted. On the same meeting, a new decision for reverse split
procedure by merging 4 old shares in 1 new share with nominal of
BGN 4 and consequently decreasing of the Group's capital in order
to cover losses by decreasing the nominal value of the shares from
BGN 4 to BGN 1. In December 2017, the first step of the decision of
EGMS for merging of 4 old shares with nominal of BGN 1 into 1 new
share with nominal of BGN 4 was applied in Commercial register for
registration of share capital of the Parent company of BGN
109,249,612 distributed in 27,312,403 shares with nominal of BGN 4
each. The application was rejected and the Parent company appealed
the rejection (see also note 36).
The registered capital is presented net of own shares held by
the Group as at December 31, 2017 and 2016 respectively as
follows:
Shareholder December December
31, 31,
2017 2016
No of No of
shares shares
Registered capital of the Parent company 109,249,612 109,249,612
Own shares held, according to the Register
of Shareholders and a report from Central
Depository AD - (2,767,135)
109,249,612 106,482,477
Share capital of the Parent company (No
of shares) in these consolidated financial
statements 109,249,612 106,482,477
Share capital of the Parent company (No
of shares) in these consolidated financial
statements (BGN'000) 109,250 106,482
Share capital of the Group as per Statement
of Changes in Equity 109,250 106,482
Profit (loss) per share
The profit (loss) per share is calculated by dividing the net
loss for the period by the weighted average number of ordinary
shares held during the reporting period.
December December
31, 31,
2017 2016
Weighted average number of shares 107,680 108,069
Profit (loss) (BGN'000) 1,377 (11,320)
Profit (loss) per share (BGN) 0.01 (0.10)
=========
The weighted average number of shares in circulation in 2017 and
2016 is as follows:
December December
31, 31,
2017 2016
Number of shares at the beginning of the
year 106,482 109,250
Effect from sold (redeemed) own shares 1,198 (1,181)
Weighted average number of shares 107,680 108,069
========= =========
25. Loans and borrowings
December December
31, 31,
2017 2016
BGN'000 BGN'000
Non-current liabilities
Debenture loans 36,353 35,977
Loans from financial institutions 1,791 2,315
38,144 38,292
========= =========
Current liabilities
Debenture loans 1,870 2,838
Loans from financial institutions 578 524
Trade loans from unrelated parties 1,030 665
3,478 4,027
========= =========
41,622 42,319
========= =========
Additional information about the interest, currency and
liquidity risk, to which the Group is exposed as a result of the
loans received, is disclosed in note 31.
25.1. Debenture loans
In October 2006, the Parent company issued 2,000 registered
transferable bonds with fixed annual interest rate of 8.375% and
issue value 99.507% of the face value, 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
of 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, investment projects financing
and restructuring of the previous debt of the Group.
The debenture loan liabilities are presented in the statement of
financial position at amortised cost.
As at the date of these financial statements the nominal value
of the debenture loan is EUR 18,659 thousand and the fair value is
BGN 34,264 thousand (2016: BGN 35,078 thousand), estimated at
interest rate 13.43% (2016: 12.09%).
25.2. Loans from financial institutions
In July 2016, the Group 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%.
25.3. Trade loans from unrelated parties
As disclosed in note 30, the Group sold to third parties its
interest in Gryphon Power AD in 2017, resulting to a recognition,
in the current consolidated financial report, of liabilities on
loans received from unrelated parties with total amount of BGN 365
thousand as at December 31, 2017.
25.3. Leaseback agreements
In prior reporting periods, the Group has signed several
contracts for sale of property, where a commitment of the seller to
repurchase the assets, under the condition of a finance lease, was
agreed. That scheme, also known as leaseback, in fact represents
attracting financing, secured with the asset. Proceeds from
leaseback agreements are presented as liabilities under
interest-bearing loans received.
The leaseback agreement of the office in Sofia is signed for 15
years with nominal interest rate of 1m Euribor + 2.25% (min 5.25%).
In December 2016 the Group terminated of the contract by mutual
agreement. The lessor remain the owner of the assets withholding
all payments and the Group renounced the right to use and acquire
the assets. As a result the Group wrote off assets with carrying
amount of BGN 6,975 thousand and liabilities of BGN 7,650
thousand.
26. Obligation for defined benefit retirement compensations
As at December 31, 2017, the Group accrued obligation for
defined benefit retirement compensations amounting to BGN 441
thousand. The amount of the liability is determined based on an
actuarial valuation, based on assumptions for mortality,
disability, employment turnover, salary increases, etc.
The present value of the liability is calculated using a
discount factor of 2.0% (2016: 2.5%) and expected salary increases
of 4% (2016: between 2% and 4%).
The demographic assumptions are related to the likelihood
individuals to leave the plan before retirement due to various
reasons: withdrawal, staff reduction, illness, death, disability,
etc. They are based on statistical information about the population
and are attached to the staff structure by gender and age at the
time of the assessment.
The amount of the obligation for defined benefit retirement
compensations is determined as follows:
December December
31, 31,
2017 2016
BGN'000 BGN'000
Present value of defined benefit obligations
at January 1 340 413
Benefits paid by the plan (16) (63)
Adjustments related to business combinations - -
Past service cost - -
Current service cost 88 58
Interest cost 7 10
Expenses recognized in profit or loss 95 68
Remeasurements of defined benefit retirement
compensations recognised in other comprehensive
income 22 (78)
Present value of defined benefit obligations
at December 31 441 340
27. Trade and other payables
December December
31, 31,
2017 2016
BGN'000 BGN'000
Payables to suppliers 40,817 27,239
Obligations under cession agreements and
regress 39,942 50,782
Tax payables, including 6,005 7,606
Excise duty and other taxes 5,922 5,922
VAT 83 1,684
Payables to personnel and social security
funds 2,140 1,654
Advances received and deferred income 2,108 457
Other 998 1,497
92,010 89,235
The obligations under cession agreements and regress comprise
Group's liabilities to unrelated parties under contracts for
acquisition of receivables. Corrections related to subsequent
events and litigations are possible (see note 35).
The Group accrues unused paid leave provision of employees in
compliance with IAS 19 Employee Benefits. The movement of these
provisions for the period is as follows:
December December
31, 31,
2017 2016
BGN'000 BGN'000
Balance at the beginning of the year 359 327
Accrued during the year 372 284
Utilised during the year (302) (252)
Balance at the end of the year, including: 429 359
========= =========
Paid leaves 362 305
Social security on paid leaves 67 54
The balance at the end of the year is presented in the
consolidated statement of financial position together with current
payable to personnel.
The Management performed an analysis of trade payables in order
to determine their fair values and their level in the fair value
hierarchy. The Management of the Group considers that the carrying
amounts of the current payables in the consolidated statement of
financial position are reasonable approximations of their fair
value as at December 31, 2017 and 2016 within Level 3 category.
The Group's exposure to currency and liquidity risk related to
trade and other payables is disclosed in note 31.
28. Current income tax
December December
31, 31,
2017 2016
BGN'000 BGN'000
Income tax payable (refundable) at the beginning
of the year 368 (91)
Corporate income tax accrued 44 197
Corporate income tax paid (285) (263)
Disposals on business combinations (70) -
Other variations incl. corporate income
tax offset (1) 525
Refundable corporate income tax at the end
of the year 56 368
========= =========
In 2016, refundable taxes amounting to BGN 499 thousand are
offset with incurred interests pursuant to partially confirmed,
with SAC decision, findings in tax audit act of NRA on corporate
income tax audit of the Parent company for 2008 - 2012 and VAT for
January 2008 - March 2013.
29. Subsidiaries
The subsidiaries, included in the consolidation, over which the
Group has control as of December 31, 2017 and 2016 are as
follows:
Subsidiary Main activity Investment Investment
at December at December
31, 2017 31, 2016
Management, leasing and
Elit Petrol AD sale of real estate 100% 100%
Petrol Properties Trading movable and immovable
EOOD property 100% 100%
Trade with oil and oil
Varna Storage EOOD products 100% 100%
Petrol Finance Financial and accounting
EOOD services 100% 100%
Elit Petrol -Lovech Trade with oil and oil
AD products 100% 100%
Acquisition, management
Lozen Asset AD and exploitation of property 100% 100%
Production and trading
with goods and services,
Storage Invest investments and intermediary
EOOD activities 100% -
Processing and trading
Storage Oil EAD with oil and oil products 100% -
Petrol Finances Financial and accounting
OOD services 99% 99%
Petrol Technologies
OOD IT services and consultancy 98,80% 98,80%
Petrol Gas EOOD Wholesale of fuels - 100%
BPI AD Rental property - 100%
Trade with oil and oil
Gryphon Power AD products and rental property - 100%
30. Acquisition and sale of subsidiaries and non-controlling interest
30.1. Acquisition of subsidiaries
Acquired subsidiaries during the year ended December 31, 2017
(excluding established via in-kind contributions and additional
cash contributions)
Subsidiary Main activity Investment Increase Transferred
as at December during consideration
31, 2017 the period BGN'000
Production and
trading with goods
and services,
Storage Invest investments and
EOOD intermediary activities 100% 100% 33
Processing and
Storage Oil trading with oil
EAD and oil products 100% 100% -
33
Acquired subsidiaries in the year ending December 31, 2016
(excluding established via in-kind contributions and additional
cash contributions)
Subsidiary Main activity Investment Increase Transferred
as at December during consideration
31, 2016 the period BGN'000
Acquisition, management
Lozen Asset and exploitation
AD of property 100% 100% 1,850
1,850
30.2. Acquired assets and recognised liabilities as at date of acquisition
Acquired in the year ended December 31, 2017
Storage
Invest EOOD
Storage
Oil EAD
BGN'000
Current assets
Inventory 1
Cash 34
Total current assets 35
Total assets 35
Total liabilities
Trade and other liabilities 10
Total liabilities 10
Net assets 25
Acquired in the year ended December 31, 2016
Lozen Asset
AD
BGN'000
Non-current assets
Investment property 1,835
Current assets
Trade and other receivables 16
Total assets 1,851
Current liabilities
Trade and other payables 30
Total liabilities 30
Net assets 1,821
As at the acquisition date the assets and liabilities are stated
at fair value evaluated by licensed appraiser. According to the
valuation report a difference between the carrying value and fair
value is identified only in property, plant and equipment.
30.3. Goodwill arising in acquisition
For acquisitions during the year ended December 31, 2017 a
goodwill is recognised as follows:
Storage
Invest
EOOD
Storage
Oil EAD
BGN'000
Transferred consideration 33
(-) Fair value of net the assets as at the
date of acquisition by the Group (25)
Goodwill 8
========
For acquisitions during the year ended December 31, 2016 a
goodwill is recognised as follows:
Lozen
Asset
AD
BGN'000
Transferred consideration 1,850
(-)Fair value of net the assets as at the
date of acquisition by the Group (1,821)
Goodwill 29
========
30.4. Net cash flows from acquisition of subsidiary
In 2017 for the acquisition of Storage Invest EOOD and Storage
Oil EAD are paid BGN 33 thousand and are acquired BGN 34 thousand
cash. Net cash acquired of BGN 1 thousand is recognised in the
consolidated statement of cash flows.
In 2016 the consideration for the acquisition of Lozen Asset EAD
is paid partially at the amount of BGN 1,500 thousand. The unpaid
part of BGN 350 thousand, which is reported in trade and other
payables as at December 31, 2016, is paid in 2017. The net paid
cash stated in the consolidated statement of cash flows as at
December 31, 2017 and 2016 is BGN 350 thousand and BGN 1,500
thousand.
The following table summarizes changes in the non-controlling
interest in 2017 and 2016:
Financial Non-controlling Non-controlling
result interest interest
for the
year
BGN'000 % BGN'000
Non-controlling interest as of January
1, 2016 10
Share of Non-controlling interest
in
total comprehensive income
Petrol Finances OOD (49) 1% -
Petrol Technologies OOD 16 1,2% -
Petrol Finance EOOD (1) 1% -
Non-controlling interest as at December
31, 2016 10
The share of non-controlling interest
in total comprehensive income
Petrol Finances OOD (25) 1% -
Petrol Technologies OOD (19) 1,2% -
Petrol Finance EOOD - 1% -
Non-controlling interest as at 31
December, 31 2017 10
30.6. Sale of interest in a subsidiary
Sale of interest in subsidiaries in 2017:
In November 2017, the Group sold 100% of its interest in Gryphon
Power AD to third party for BGN 21,800 thousand consideration. As
at the transaction date, the consolidated net assets of the sold
company were at the amount of BGN 10,891 thousand. Pursuant to the
sale, the Group reported BGN 10,909 thousand profit.
In December 2017, the Group sold 100% of the capital in BPI AD
for BGN 4 thousand. As at the transaction date the consolidated net
assets are negative at the amount of BGN 1,087 thousand and the
result of the sale is a profit of BGN 1,091 thousand.
In December 2017, the Group sold to third party 100% of the
capital of Petrol Gas EOOD for BGN 2 thousand. As at the
transaction date the consolidated net assets are at the amount of
BGN 10 thousand. The result from the sale is a loss of BGN 8
thousand.
Disposal of interest in subsidiaries during previous years
In December 2015 a contract with notarized signatures, whereby
Petrol AD transferred to a company outside the Group 100% of Naftex
Petrol EOOD's equity shares against BGN 1. Changing the sole owner
of Naftex Petrol EOOD is filed timely for entry in the Commercial
register at the Registry Agency, but has not been recorded because
of incompleteness in the documents attached to the application.
However, since the contract, as at December 2015, has been
concluded properly according to the prescribed by the Commercial
Code form, it raises legal action between the parties involved, due
to which Petrol AD is no longer the sole shareholder of Naftex
Petrol EOOD. Consequently, it is accepted that the Group has lost
control and assets and liabilities of the subsidiary were written
off and the gain was recognized resulting from the loss of control
in the consolidated statement of profit or loss and other
comprehensive income. As at the transaction date the consolidated
net assets of the subsidiary amounted to BGN (314,452) thousand.
The result of the sale of the Group was a profit amounted to BGN
314,452 thousand.
In March 2016, the change of the sole owner of Naftex Petrol
EOOD has been repeatedly applied for registration with the
Commercial Register when a completed set of documents as instructed
by the officials has been submitted. The registration was suspended
by the court because of a request by a shareholder of the Parent
company, on the grounds that the sale contract was challenged in
court because executives were not authorized to conclude the
agreement by the general meeting of the company contrary to the
provisions of POSA. Before the conclusion of the transaction, it
was thoroughly checked for compliance with the law and that fall
below the thresholds for convening the General Meeting pursuant to
Art. 114 of the POSA as documents proving this circumstance are
duly implemented in the Commercial Register with the application
for registration of the change of the sole owner of the company.
For these reasons, the Management of Petrol AD considers that the
claim was unfounded and after a judgment in favor of Petrol AD, a
sale of shares will be recorded in the register.
31. Financial instruments and risk management
31.1. Accounting classifications and fair values
The table shows the transmission and fair values of financial
assets and financial liabilities, including their levels in the
fair value hierarchy. Not included information about the fair
values of these short-term financial instruments that management
believes that the carrying value in the consolidated statement of
financial position is a reasonable approximation of fair value.
Loans Other Total Level
December 31, 2017, and receivables financial 3 fair
BGN'000 granted liabilities value
Financial assets
Loans granted, net 18,894 - 18,894 18,894
Trade and other receivables,
net 30,714 - 30,714 -
Cash 7,271 - 7,271 -
----------------- ------------- ---------- ---------
56,879 - 56,879 18,894
----------------- ------------- ---------- ---------
Financial liabilities
Trade and other liabilities - (68,919) (68,919) -
Loans and borrowings - (41,622) (41,622) (37,663)
----------------- ------------- ---------- ---------
- (110,541) (110,541) (37,663)
----------------- ------------- ---------- ---------
Loans Other Total Level
December 31, 2016, and receivables financial 3 fair
BGN'000 granted liabilities value
Financial assets
Loans granted, net 30 - 30 30
Trade and other receivables,
net 34,536 - 34,536 -
Cash 5,334 - 5,334 -
----------------- ------------- ---------- ---------
39,900 - 39,900 30
----------------- ------------- ---------- ---------
Financial liabilities
Trade and other liabilities - (79,807) (79,807) -
Loans and borrowings - (42,319) (42,319) (38,582)
----------------- ------------- ---------- ---------
- (122,126) (122,126) (38,582)
----------------- ------------- ---------- ---------
31.2. Measurement of fair values
Trade and other receivables
Determining the fair value of trade and other receivables
includes the following:
-- analysis of analytical trail balances and reporting of internal transformations;
-- differentiation between receivables and payables, excluding
the presumption of future offsetting of receivables from different
customers;
-- valuation of receivables based on their collectability;
-- revaluation of receivables in foreign currencies at the
respective rates as at the date of the financial statements.
Debenture loan
The fair value of the debenture liability is determined based on
a quotable price as at the date of the consolidated financial
statement, in case the instrument is quoted at an active market. In
case it is not actively traded, the fair value is determined based
on alternative valuation techniques. The valuation techniques used
include analysis of discounted cash flows through expected future
cash flows and discount level in relation with the market, the
credit rating of the issuer, etc. The fair value is determined only
for disclosure purposes.
Trade and other payables
Determining the fair value of trade and other payables includes
the following:
-- complete review of payables as at the date of valuation;
-- identification of overdue payables and determination of interests and penalties due;
-- revaluation of payables in foreign currencies at rates as at
the date of the financial statements.
Receivables and payables in relation with trade loans
Fair values of received and granted trade loans are determined
for the purposes of disclosure and are calculated on the basis of
the present value of future cash flows of principals and interest
discounted at a market interest rate as at the date of the
financial statements.
31.3. Financial risk management
31.3.1. Risk management framework
The use of financial instruments exposes the Group to market,
credit and liquidity risk. In the present note information about
the purposes, policies and procedures in risk management and equity
management is presented.
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.
31.3.2. 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 optimising the return. Because of the nature of its activity,
the Group is exposed to price, currency and interest rate risk.
Currency risk
The Group performs transactions in a currency other than its
functional currency, and thus it is exposed to risk, related to
potential foreign exchange rate fluctuations. Such risk arises
mainly from the fluctuations of the US dollar, since the Group
performs purchases and has received loans denominated in US
dollars. Transactions primarily denominated in euro do not expose
the Group to currency risk, since the Bulgarian lev is fixed to the
euro effective January 1, 1999.
Financial assets and liabilities denominated in US dollars are
presented in the following table:
December 31, 2017 December 31, 2016
USD'000 BGN'000 USD'000 BGN'000
Financial assets
Cash and cash equivalents 7 11 14 26
7 11 14 26
========= ========= ========= =========
Financial liabilities
Trade and other payables (727) (1,186) (812) (1,506)
(727) (1,186) (812) (1,506)
========= ========= ========= =========
The sensitivity analysis to currency risk is calculated based on
7% fluctuation in the exchange rate of the US dollar towards the
Bulgarian lev. The Management considers that it is a reasonably
possible fluctuation, based of statistical data for the dynamics of
fluctuations in the exchange rate in the previous period, based on
the daily deviation calculated for 250 days. If as at December 31,
2017 the rate of the US dollar had decreased/increased by 7%
assuming that all other variables remained constant, loss after tax
would have increased/decreased by BGN 74 thousand, mainly as a
result of exchange rate differences from revaluation of trade
receivables and payables and bank loans in US dollars.
Interest rate risk
The Group is exposed to interest rate risk as part of borrowings
have variable interest rate agreed as basis interest increased by a
certain margin. The Group continuously monitors and analyzes its
main interest rate exposures by developing various scenarios for
optimization as refinancing, renewal of existing loans, alternative
financing (contracts for the sale and leaseback of assets) and
calculates the impact of changing interest rates within a certain
range on the financial result.
As at the date of these consolidated financial statements, the
structure of the interest-bearing financial instruments is as
follows:
December December
31, 31,
2017 2016
BGN'000 BGN'000
Instruments with fixed interest rate
Financial assets 18,668 -
Financial liabilities (36,704) (35,977)
--------- ---------
(18,036) (35,977)
========= =========
Instruments with variable interest rate
Financial liabilities (2,359) (2,839)
--------- ---------
(2,359) (2,839)
========= =========
The sensitivity analysis of the interest rate risk is prepared
based on the presumption that interest positions with variable
interest rates as of the end of the reporting period have existed
in the same amount during the entire year and the reasonably
possible increase/decrease of the interest rate is by 27 base
points. If the interest rates were higher/lower by 27 base points,
and all other variables were constant, the loss after tax would
have been lower/higher by BGN 5 thousand.
Price risk
The Group is exposed to a risk of frequent and sharp
fluctuations in fuels prices and other tradable goods. In order to
decrease sensitivity to fluctuations in the prices of fuels, the
Group updates its selling prices on a daily basis in accordance
with the geographic region and the selling prices of its main
competitors.
In 2017, the Group held comparatively high inventory turnover.
For approximately 18 days the inventory makes a whole cycle, which
reduces the Group's the price risk exposure.
31.3.3. Credit risk
Credit risk is the risk that one party to a financial instrument
fails to meet its obligation and thus causing loss to the other.
Financial assets that potentially expose the Group to credit risk
are mainly trade receivables and available-interest loans.
Exposure to credit risk
The carrying amount of financial assets represents the maximum
credit risk the Group is exposed to. The maximum exposure to credit
risk as at the reporting date is as follows:
December December
31, 31,
2017 2016
BGN'000 BGN'000
Loans granted 18,894 30
Trade and other receivables 30,714 34,536
Cash and cash equivalents 7,179 5,215
56,787 39,781
========= =========
Trade and other receivables
The Group is exposed to credit risk, in case its customers do
not pay their obligations in the expected term and amount. The
policy of the Group regarding credit risk is to sell goods and
services only to customers with appropriate credit standing and to
use adequate collaterals as a means of reducing the risk of
financial losses. The creditworthiness of customers is estimated by
taking into consideration their financial position, past experience
and other factors. Credit limits have been stipulated and their
compliance is regularly monitored. In case of exceeding the credit
limits, interest on arrears is accrued. Retail sales are settled in
cash predominantly or by credit cards.
Impairment of trade and other receivables
Time structure of trade and other receivables at the reporting
date are not impaired, is as follows:
31 December December
31, 31,
2017 2016
BGN'000 BGN'000
31,
Up to 30 days 743 812
31 - 120 days 291 690
121 - 210 days 187 1,931
Over 211 days 3,918 368
------------ ---------
5,139 3,801
============ =========
Cash and cash equivalents
Cash and cash equivalents of the Group are located in banks with
high ratings.
31.3.4. 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. The goal of management is to maintain a constant
balance between continuity and flexibility of financial resources
through the use of various forms of financing. Liquidity risk
management includes maintaining sufficient stocks of cash,
arranging adequate credit lines, preparation, analysis and updating
cash flow forecasts.
The following table presents the contractual maturities of
financial liabilities based on the earliest date on which the Group
may be required to pay them. The table shows the undiscounted cash
flows, including principal and interest, excluding the effect of
netting arrangements:
December 31, 2017 Carrying Contractual Up to Between
BGN'000 amount cash flows one year one and
five
years
Debentures 38,223 46,713 2,190 44,523
Loans from financial
institutions 2,369 2,369 578 1,791
Trade loan from unrelated
parties 1,030 1,030 1,030 -
Trade and other payables 68,919 68,919 68,919 -
110,541 119,031 72,717 46,314
========= ============ ==========
December 31, 2016 Carrying Contractual Up to Between
BGN'000 amount cash flows one year one and
five
years
Debentures 38,815 51,775 3,056 48,719
Loans from financial
institutions 2,839 2,839 524 2,315
Trade loan from unrelated
parties 665 665 665 -
Trade and other payables 79,807 79,807 79,807 -
122,126 135,086 84,052 51,034
========= ============ ==========
The Group does not expect cash flows included in the table to
occur significantly earlier or at significantly different
amounts.
32. Capital management
In order to ensure the going concern functioning of the Group,
the Management has undertaken series of purely procedural and
business oriented measures, aimed to bring the capital of the
Parent company in consistence with the requirements of Art. 252,
par. 1, item 5 of the CA and overall improvement of the financial
statement of the Group.
Some of the measures include the reduction of the registered
capital bellow the net assets of the Parent company. Holding of an
Extraordinary General Meeting of Shareholders (EGMS) in November
2016, where an proposal for reverse split (merging) of 4 old shares
with nominal value of BGN 1 to 1 share with nominal value of BGN 4
was voted, is the first step in this direction. As a result the
number of the issued shares will decrease from 109,249,612 shares
to 27,312,403 new shares maintaining the value of the registered
capital to BGN 109,249,612. The registration of the decision of the
EGMS in the Commercial Register of the Parent company's account was
suspended by the court at the request of the shareholder (see also
note 24 and note 36).
In February 2017, continuing the measures for capital adequacy
of the Group, the Management Board of the Parent company convened
new Extraordinary General Meeting of Shareholders (EGMS) with a
decision agenda for reverse split of shares. EGMS was held with
77,951,767 presenting shares, representing 71,36% of the registered
capital, where 71,937,309 shares representing 65,85% (over 2/3 of
the presenting shares) were voted "For" the reverse split
procedure.
In May 2017 was hold next EGMS when decision for reduction of
capital from BGN 109,249,612 to BGN 27,312,403 by decrease of
nominal value of the issued shares from BGN 4 to BGN 1 was voted.
The decision is conditional upon the decision of the EGMS
concerning the procedure of reverse split, which should be
confirmed by final entered into force court decision.
In October 2017 was hold a new EGMS where a decision repealing
the decisions taken on meetings hold in February and May 2017 was
voted. On the same meeting, a new decision for reverse split
procedure by merging 4 old shares in 1 new share with nominal of
BGN 4 and consequently decreasing of the Parent company's capital
in order to cover losses by decreasing the nominal value of the
shares from BGN 4 to BGN 1. In December 2017, an application for
registration in Commercial Register of the change in nominal value
and number of shares was applied, which was refused by the CR. The
Parent company appealed the refusal (see also note 36).
Additionally in December 2016 a procedure of rescheduling the
debenture loan to 2022 and decreasing the interest rate from 8.375%
to 5.5% for the first year, 6% for the second, 6.5% for the third,
7.5% for the fourth and 8% for the fifth year was successfully
closed (see also note 25.1).
Several months of negotiations to improve the terms of the lease
contract were closed in February 2017 with one of the major lessors
of the trade sites operated by the Group. As a result the agreed
rent for the two-year period beginning on January 1, 2016 was
reduced by 35% (see also note 10).
In December 2017, the Group negotiated again the prices for
renting the trade sites with the two major lessors resulting in 28%
average decrease of actual rent prices from 2018.
Since mid-2016 active actions have been taken for expansion of
the company's market share by ensuring the long-term use of the
storage depots - licensed warehouses with strategic locations in
the country for storage of fuels by a subsidiary or by direct
licensing of the Parent company. Currently the Management is in the
process of analyzing and research of the possibilities for
increasing the wholesale trading, including through import of oil
products. Aiming to improve the financial statement, the Management
continues to analyze actively all the cost items searching for
hidden reserves for optimization.
Comparison of the changes in the financial liabilities with cash
flows from financial operations and other non-monetary changes
Financial liabilities Total
Debenture Loans Trade Other
loans from financial loans financial
BGN'000 institutions liabilities
Carrying amount on
January 1, 2017 38,815 2,839 665 - 42,319
Changes resulted from
cash flows
Repayment of loans
and borrowings - (481) 1,017 - 536
Interest and commissions
paid (3,056) (120) (6) - (3,182)
Other proceeds - - - 140 140
Total changes resulted
from cash flows (3,056) (601) 1,011 140 (2,506)
Other non-monetary
changes
Capitalized interest
expenses on loans (72) - - - (72)
Accrued interest expense
on loans, borrowings
and other 2,536 130 15 - 2,681
Other changes related
with liabilities - 1 (661) (140) (800)
Total other non-monetary
changes 2,464 131 (646) (140) 1,809
Carrying amount as
at December 31, 2017 38,223 2,369 1,030 - 41,622
========= =============== =============== ============ =========
33. Disclosure of transactions with related parties
Related parties that the Parent company controls and over which
it exercises significant influence are disclosed in Notes 29.
The parent company (Controlling company) is Petrol AD.
In 2017 transactions with related parties have been not carried
out.
The transactions with related parties carried out in 2016
include sales of fuels to Petrol Eco Tour Invest EOOD at the amount
of BGN 23 thousand. The unsettled balances as at December 31, 2017
are receivables of BGN 2 thousand.
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 1,314 thousand (2016: 1,327
thousand) and unsettled liabilities of BGN 89 thousand as at
December 31, 2017.
34. Reclassifications
The reclassifications are changes in reporting of the separate
positions in the financial statements, aiming to represent more
accurately and fair the information in them. These
reclassifications are made retrospectively, adjusting the opening
balances of each affected position in the statement and presenting
additional statement of financial position as at the beginning of
the earliest comparative period.
In these consolidated financial statements, reclassifications
and recalculations of part of the information in the consolidated
statement of profit and loss and other comprehensive income and the
consolidated statement of financial position as at December 31,
2016 were made, in order to correspond and to be comparable to the
informaton in the same positions as at December 31, 2017.
The technical reclassifications of the comparable period are
presented in the next tables:
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
Note 2016 2016 2016
BGN'000 BGN'000 BGN'000
audited reclassifications reclassified
Hired services 10 (35,282) (290) (35,572)
Personnel expenses 11 (19,010) 290 (18,720)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note 2016 2016 2016
BGN'000 BGN'000 BGN'000
audited reclassifications reclassified
Current liabilities
Trade and other liabilities 27 89,900 (665) 89,235
Loans and borrowings 25 3,362 665 4,027
34. Contingent liabilities
As at December 31, 2017 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 8,322 thousand.
The Group is a joint co-debtor under loan agreement for BGN 35,000
thousand and stand-by credit for issuance of bank guarantees
amounted to BGN 10,000 thousand and also under bank loan agreement
for working capital amounted to BGN 30,000 thousand in favor of
unrelated supplier. 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. The Group has established a
special pledge on its cash receivables from contractors, amounting
to BGN 4,009 thousand on average monthly basis and pledge on its
cash in the bank account opened in the bank-creditor. The Group has
contingent liability, which secured the execution of the contract
for storage of third-party fuels amounted to BGN 30,000
thousand.
Under a bank agreement for revolving credit line concluded in
2016, bank guarantees were issued for a total amount as at December
31, 2017 of BGN 9,565 thousand, including BGN 5,800 thousand in
favor of third parties - Group's suppliers, BGN 1,244 thousand in
favor of National Revenue Agency, for issuance of appealed by the
Parent company revision acts and BGN 2,521 thousand to secure own
liabilities related to contracts under the Public Procurement Act.
The bank agreement is secured by mortgage and pledge of property,
pledge of all receivables on bank accounts (amounted to BGN 43
thousand as at December 31, 2017) of the Parent company and a
subsidiary, and blocked cash of BGN 186 thousand. 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.
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 31 December 2017 amounting to BGN 2,359
thousand.
In the previous reporting periods companies from the Group have
entered into the debt under two loan agreements of a subsidiary
(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 complaints 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 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
subsidiaries jointly to pay BGN 411 thousand to the bank - creditor
for legal fees and 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
subsidiaries have filed in time appeals against the court decision,
because of that the decision did not come into force. As at the
date of preparation of these consolidated financial statements the
dispute is pending before the court of appeal and the Group's
Management considers that there are reasonable grounds the decision
to be fully canceled.
As at the date of the preparation of these consolidated
financial statements, 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 (see
also note 36).
As at December 31, 2017 the Group is severally liable for the
liabilities of BGN 3,029 thousand under loan agreement of a company
under general control until December 2015. In 2016, in compliance
with a cession agreement with third party, the Parent company
transferred the receivables arising from the loan agreement. The
transaction price is due to the cedant by the transferee after
receiving money from the debtor.
From 2013 a company from the Group is a guarantor of a loan
amounted to BGN 11,155 thousand, granted to unrelated party. The
subsidiary is also a joint debtor with a subsidiary (until December
2015) under receivables transfer agreement (cession) for BGN 74
thousand.
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 CPA. At the time of conclusion of the
guarantee deadline of the arrangements between the lender and
subsidiary contractual framework for credit limit was 1 July 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 CPA 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 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 CPA, 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 pending.
In October 2015, a bank in Bankruptcy, creditor of a subsidiary
whose debt to the same bank was repaid in 2014 by offsetting
acquired through cession agreements counter receivables of the bank
from third parties, has filed a claim to declare void the
deductions, in terms of bankruptcy creditors, amounted to BGN
36,252 thousand to EUR 6,052 thousand and USD 394 thousand. The
Group challenged the judicial claim. In case of adverse
developments in litigation and declaring the deductions for
relatively invalid against the creditors of the bankruptcy, the
effect for the subsidiary and the Group respectively, will include
the initial deployment of equal size receivables and liabilities to
the bank in bankruptcy, returning the effect of the discounted
value of the acquired receivables of BGN 15,007 thousand and
subsequent impairment due to uncollectible receivables recorded at
cost and subsequently eventual reversal of allowance for
uncollectability in the distribution of the bankruptcy estate,
which is unlikely. The Management does not expect negative
consequences for the Group, given that, as the date of the
preparation of this consolidated financial report, the Parent
company sold its interest in the subsidiary (see also note 36).
36. Events after the reporting date
As it is disclosed in note 32 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 of BGN 1
to 1 new share with nominal 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 of BGN 1 into 1 new share
with nominal 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 nominal of BGN 4
each. The change in the capital structure of the Parent company was
registered also in Central Depositary AD. The application for
registration of the voted on EGMS decision for the second stage of
the procedure is forthcoming to be submitted and 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. As at
the date of preparation of the actual report the application is
still not processed by CR.
In March 2018 the Parent company sold 70,915,161 shares,
representing 99,999999% of the capital of Elit Petrol AD for the
total price of BGN 25 thousand, which was due in one-month
period.
In March 2018, the Parent company signed a contract for
purchasing of 1,873,700 shares, representing 100% of the capital of
Varna Storage EOOD for the total price of BGN 6,500 thousand,
determined by a market valuation accepted by both parties. The
price was offset with opposite receivables of the Parent company
from the seller.
As a continuation of the measures for optimization of Group's
business, in April 2018 the subsidiary received a license for
management of tax warehouse for storage of excise goods in SD
Plovdiv. The SD is rented by a subsidiary pursuant to a contract
signed in March 2017 for a period of 10 years (see also note
32).
[1] Gross margin is estimated as difference between revenue from
sales of goods and cost of goods sold, the percentage of gross
margin is calculated as gross margin is divided to the revenue.
[2] EBITDA (earnings before interest, tax, depreciation and
amortization).
[3] EBIT (earnings before interest and tax).
[4] Closing share price as of the end of respective year on
Bulgarian Stock Exchange - Sofia.
[5] Includes interest-bearing loans and financial lease
liabilities.
[6] ROACE (return on average capital employed) - is estimated as
ratio between the EBIT and the average invested capital. The latter
presents the difference between assets and current liabilities to
non-related parties (that are not part of Petrol Group).
[7] ROA (return on assets) - presents the ratio between the EBIT
and the average assets.
[8] Current liquidity - the ratio between current assets and
current liabilities
[9] Inventories turnover - presents the ratio between average
stocks and the cost of goods sold, multiplied by 365 days.
[10] Accounts receivable collection period - presents the ratio
between trade receivable from non-related parties and revenue from
non-related parties, multiplied by 365 days.
[11] Accounts payable payment period- presents the ratio between
trade payables to suppliers and the cost of goods sold, multiplied
by 365 days.
[12] On 23.02.2017 Ivan Alipiev Voinovski passed away
[13] Source: NSI, BNB
[14] Wholesale volumes for all types of gasoline, diesel and gas
oil are measured in litres
[15] Wholesale volumes for jet, LPG, heating oil and other heavy
fuels are measured in tonnes
[16] On February 23, 2017 Ivan Voinovski passed away
[17] EBITDA (earnings before interest, tax, depreciation and
amortization)
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
FR LLFIRDVIALIT
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July 19, 2018 12:30 ET (16:30 GMT)
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