TIDM74JJ
RNS Number : 8009G
Petrol AD
27 November 2020
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
OF PETROL GROUP
AND CONDENSED EXPLANATORY NOTES TO THE INTERIM CONSOLIDATED
FINANCIAL STATEMENTS FOR THE PERIODED SEPTEMBER 30, 2020
(This document is a translation of the original Bulgarian
document,
in case of divergence the Bulgarian original text shall
prevail)
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
For the period ended September 30
2020 2019
BGN'000 BGN'000
Revenue 295,976 410,100
Other income 1,824 1,384
Cost of goods sold (250,407) (359,586)
Materials and consumables (2,659) (2,787)
Hired services (26,223) (28,831)
Employee benefits (14,535) (16,239)
Depreciation and amortisation (4,183) (2,825)
Impairment losses (2,181) 310
Other expenses (501) (816)
Finance income 1,432 1,849
Finance costs (3,809) (6,252)
Loss before tax (5,266) (3,693)
--------- ---------
Tax income (expense) 474 (5)
--------- ---------
Loss for the period (4,792) (3,698)
--------- ---------
Other comprehensive income
Items that will not be reclassified
to profit or loss:
Revaluation 27,730 -
Income tax relating to items not reclassified (2,767) -
--------- ---------
Other comprehensive income for the
period 24,963 -
Total comprehensive income for the
period 20,171 (3,698)
Loss attributable to:
Owners of the Parent company (4,792) (3,698)
Non-controlling interest - -
Loss for the period (4,792) (3,698)
========= =========
Total comprehensive income attributable
to:
Owners of the Parent company 20,171 (3,698)
Non-controlling interest - -
--------- ---------
Total comprehensive income for the
period 20,171 (3,698)
========= =========
Loss per share (BGN) (0.18) (0.14)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Sept. 30 Dec. 31
2020 2019
BGN'000 BGN'000
Non-current assets
Property, plant and equipment and
intangible assets 40,757 14,489
Investment properties 1,711 1,746
Right-of-use asset 12,573 10,221
Goodwill 19,844 19,844
Investments 3 -
Deferred tax assets 1,924 4,216
Total non-current assets 76,812 50,516
-------- --------
Current assets
Trade and other receivables 34,442 35,002
Inventories 18,012 21,076
Loans granted 25,826 25,998
Non-current assets held-for-sale 42 3,472
Cash and cash equivalents 3,017 3,486
Total current assets 81,339 89,034
-------- --------
Total assets 158,151 139,550
======== ========
Equity
Registered capital 109,250 109,250
Reserves 43,765 18,864
Accumulated loss (120,262) (113,564)
--------- ---------
Total equity attributable to the
owners of the Parent company 32,753 14,550
--------- ---------
Non-controlling interests 23 23
--------- ---------
Total equity 32,776 14,573
---------
Non-current liabilities
Loans and borrowings 43,731 44,652
Liabilities under lease agreements 8,190 7,715
Employee defined benefit obligations 656 656
Total non-current liabilities 52,577 53,023
--------- ---------
Current liabilities
Trade and other payables 65,285 66,554
Loans and borrowings 2,624 2,735
Liabilities under lease agreements 4,888 2,662
Current income tax liabilities 1 3
Total current liabilities 72,798 71,954
--------- -------------------
Total liabilities 125,375 124,977
========= ===================
Total equity and liabilities 158,151 139,550
========= ===================
COMPREHENSIVE STATEMENT OF CHANGES IN EQUITY
Equity attributable to the Non-controlling Total
owners of the Parent company interests equity
Registered General Reval. Accumulated Total
capital reserves reserve profit
(loss)
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
Balance at
January
1, 2019 109,250 18,864 - (108,557) 19,557 9 19,566
Comprehensive
income
for the period
Loss for the
period - - - (3,698) (3,698) - (3,698)
----------- ---------- --------- ------------ -------- ---------------- --------
Total
comprehensive
income - - (3,698) (3,698) - (3,698)
Transactions with
shareholders,
recognized
directly
in equity
Sale of a
subsidiary
with a
non-controlling
interest - - - - - (9) (9)
----------- ---------- --------- ------------ -------- ---------------- --------
Total
transactions
with
shareholders
recognized
in equity - - - - - (9) (9)
----------- ---------- --------- ------------ -------- ---------------- --------
Balance at
September
30, 2019 109,250 18,864 - (112,255) 15,859 - 15,859
=========== ========== ========= ============ ======== ================ ========
Comprehensive
income
for the period
Loss for the
period - - - (1,283) (1,283) 1 (1,282)
Other
comprehensive
income - - - (26) (26) - (26)
---------
Total
comprehensive
income - - - (1,309) (1,309) 1 (1,308)
----------- ---------- --------- ------------ -------- ---------------- --------
Acquisition of
a subsidiary
with a
non-controlling
interest - - - - - 22 22
---------
Total
transactions
with
shareholders
recognized
in equity - - - - - 22 22
---------
Balance at
December
31, 2019 109,250 18,864 - (113,564) 14,550 23 14,573
=========== ========== ========= ============ ======== ================ ========
Comprehensive
income
for the period
Loss for the
period - - - (4,792) (4,792) - (4,792)
Other
comprehensive
income - - 24,963 (1,968) 22,995 - 22,995
----------- ---------- --------- ------------ -------- ---------------- --------
Total
comprehensive
income - - 24,963 (6,760) 18,203 - 18,203
----------- ---------- --------- ------------ -------- ---------------- --------
Transfer of
revaluation
reserve of sold
assets
to retained
earnings - - (62) 62 - - -
Balance at
September
30, 2020 109,250 18,864 24,901 (120,262) 32,753 23 32,776
=========== ========== ========= ============ ======== ================ ========
CONSOLIDATED STATEMENT OF CASH FLOWS
For the period ended September 30
2020 2019
BGN'000 BGN'000
Cash flows from operating activities
Receipts from customers 441,255 567,281
Payments to suppliers (378,262) (483,297)
VAT and excise paid to the budget, net (42,513) (57,745)
Payments related to personnel (13,815) (15,567)
Income tax paid (3) -
Other cash flows from operating activities,
net (1,274) (706)
---------- ----------
Net cash flows from operating activities 5,388 9,966
Cash flows from investing activities
Payments for purchase of property, plant
and equipment (454) (428)
Proceeds from sale of property, plant and
equipment 40 308
Payments for loans granted, net (2,470) (7,907)
Repayment of loans granted 3,146 7,617
Interest received on loans and deposits 97 105
Proceeds from sale of subsidiaries, net
of cash disposed 173
Payments for other investments 158 (4,714)
Net cash flows used in investing activities 517 (4,846)
Cash flows from financing activities
Proceeds from loans and borrowings - 19
Repayment of loans and borrowings (241) (1,054)
Lease payments (3,532) (2,508)
Interest and bank fees and commissions paid,
net (2,567) (2,598)
Proceeds from other investments (168) 538
Net cash flows from financing activities (6,508) (5,603)
Net decrease in cash flows during the period (603) (483)
Cash at the beginning of the period 3,486 4,265
Effect of movements in exchange rates 4 18
---------- ----------
Cash as per cash flow statement at the
end of the period 2,887 3,800
---------- ----------
Restricted cash 130 -
---------- ----------
Cash as per statement of financial position 3,017 3,800
========== ==========
Notes
to the interim consolidated financial report
for the period ended September 30, 2020
I. General Information
Petrol AD (the Parent company) was registered in Bulgaria in
1990 and entered in the Commercial Register to the Registry Agency
with UIC 831496285. The headquarter address of the Parent company
is 12 Targovska Str., Hotel Lovech in Lovech city. As at the end of
the reporting period shareholders are legal entities, the country -
through the Ministry of Energy and individuals.
The main activity of Petrol AD and its subsidiaries (the Group)
is related with trading of petrol products and non-petrol goods and
services.
These explanatory notes are prepared according to the
requirements of Art. 100o1, par.5 of the Public Offering of
Securities Act (POSA) in relation to Art. 33, par.1, item.2 of the
Ordinance No 2 of September 17, 2003 on the prospectuses in public
offering and admission of securities for trading on a regulated
market and for disclosure of information by the public companies
and other issuers of securities, and represent information about
important events occurred during the first quarter of 2020. The
explanatory notes reflect their influence on the results in the
statements for the first quarter of 2020 and describe of the main
risks and uncertainties, which stay ahead of the Petrol Group in
the rest of the financial year and comprise information for
transactions with related parties and/or interested parties, as
well as information for emerging significant receivables and/or
payables during the same period.
II. Information on important events, occurred in the third
quarter of 2020 and cumulatively from the beginning of the
financial year to the end of the current quarter
General
These interim consolidated financial statements have been
prepared in accordance with the International Financial Reporting
Standards (IFRS) adopted by the Commission of the European Union
(EU).
These interim consolidated financial statements have been
prepared under the historical cost convention, except for
provisions, assets and liabilities under IFRS 16 reported at the
present value of expected future payments. When compiling it, the
same accounting policy and calculation methods applied in the last
annual financial statement have been followed, with the exception
of the accounting policy for non-current tangible and intangible
assets, which has been replaced from the beginning of 2020 by the
revaluation model, as the Management considers the revaluation
model reflects more objectively the non-current tangible and
intangible assets held.
Property, plant, equipment and intangible assets
From January 1, 2020 the Group has changed its approach to the
subsequent valuation of property, plant and equipment under the
revaluation model under IAS 16 and intangible assets under IAS 38.
The revaluation model provides, after initial recognition for an
asset, any property, plant and equipment whose fair value may to be
measured reliably, to be carried at revalued amount, which is the
fair value of the asset at the date of revaluation less any
subsequent accumulated depreciation as well as subsequent
accumulated impairment losses. The revalued (to fair) value of the
property, plant, equipment and intangible assets was initially
determined by a market appraisal done by an independent appraiser.
Revaluations should be carried out at sufficiently regular
intervals to ensure that the carrying amount does not differ
materially from the fair value that would be determined using the
fair value at the statement of financial position date.
As at September 30, 2020 the Group has property, plant,
equipment and intangible assets with total carrying amount of BGN
40,757 thousand.
As at September 31, 2020 property, plant and equipment with
carrying amount of BGN 22,509 thousand are mortgaged or pledged as
collaterals under bank loans, granted to the Group and to unrelated
parties, under credit limit agreements for issuance of bank
guarantees.
In 2018 the Group has acquired trade sites - petrol stations and
storage facilities on purpose to sell them. The classified in
previous reporting periods as held for sale non-current assets
amounting to BGN 3,430 thousand as of January 1, 2020 do not meet
the criteria for recognition as such and are reclassified as
property, plant and equipment.
Investment property
The investment properties of the Group, consisted of a land and
a building, are part of aggregated assets for BGN 1,500 thousand,
which serve as a collateral for a credit limit under contract for
revolving credit line signed in 2016.
Leases
The consolidated statement of financial position as at March 31,
2020 presents the following items and amounts related to lease
agreements:
Consolidated statement of financial position September
30, 2020
BGN'000
Right-of-use assets, incl.: 12,573
Properties (lands and buildings) 4,435
Transport vehicles 899
Machinery, plants and equipment 7,239
Liabilities under leases, incl.: (13,078)
Current liabilities (4,888)
Non-current liabilities (8,190)
The Group has chosen to use the exclusions, provided by the
Standard for lease contracts, which ended within 12 months and
lease contracts for which the base asset is with low value. The
analysis of the terms of the main rent contracts for petrol
stations shows that they should be treated as short-term within the
scope of the exclusion, because they do not have a guaranteed
period, the rent price is determined for six months periods, and
both parties have the right to cease the contract for any petrol
site with one to three months advance notice without any onerous
sanctions, that would justify the Group's assessment of the
probability of exercising the termination option by landlords as
unlikely.
Loans Granted
As at September 30, 2020 the Group accounted for receivables
under short-term loans granted, net of impairment losses at the
amount of BGN 25,826 thousand.
In February 2020, the Group s granted a cash loan to an
unrelated party with a credit limit of up to BGN 1,000 thousand for
a period up to December 18, 2020 at interest rate of 5.7%. The
Group makes counter-offsets against trade receivables under a
contract for goods supply. As of September 30, 2020 the Group has
receivables at the amount of BGN 283 thousand principal and BGN 2
thousand interest.
In March 2020 the Group entered into an agreement for granting a
cash loan to an unrelated party with a credit limit of BGN 2,000
thousand at 10% annual interest rate and repayment term until
December 31, 2020. As at September 30, 2020 the principal and
interest receivables under this agreement are BGN 500 thousand and
4 thousand respectively.
In January 2019 the Group granted a cash loan to an unrelated
party with a credit limit of up to BGN 5,500 thousand with an
interest rate of 6.7% and additionally annexed until December 31,
2020. As of September 30, 2020 the receivables under the contract
amount to BGN 5,181 thousand principal, net of impairment under
IFRS 9 and BGN 542 thousand interest.
In April 2019 the Group entered into an agreement for granting a
cash loan to an unrelated party with credit limit up to BGN 1,300
thousand at 6.7% annual interest rate. As September 30, 2020 the
receivables under this contract are at the amount of BGN 1,296
thousand principal and BGN 128 thousand interest.
In May 2019 the Group granted a cash loan to an unrelated party
with credit limit up to BGN 10 thousand and interest rate of 6.7%.
As at September 30, 2020 the granted funds are at the amount of BGN
1 thousand.
In August 2019 the Group granted a cash loan to an unrelated
party with credit limit up to BGN 1,000 thousand with interest rate
of 6.7%, available in tranches for one year since the date of
signing. In 2019, the loan limit has been increased. As at
September 30, 2020 the Group has principal and interest receivables
of BGN 135 thousand and BGN 1 thousand respectively.
In August 2019 the Group entered into an agreement for granting
a cash loan to an unrelated party with a credit limit of BGN 1,000
at 7% annual interest and one-year repayment term. With an annex
the term is prolonged to August 2021. As at September 30, 2020 the
principal and interest receivables are BGN 313 thousand and BGN 21
thousand respectively.
In February 2018 the Group granted a cash loan to unrelated
party at the amount of BGN 2,000 thousand, subsequently the amount
was increased to BGN 3,500 thousand at 6.7% interest and refund
period until December 31, 2018. With annexes from the end of 2019
the credit limit was increased up to BGN 5,000 thousand and the
term of loan was prolonged to December 31, 2020. As at September
30, 2020 the receivables under this loan are BGN 2,381 thousand
principal and BGN 485 thousand interest net of impairment.
In March 2018 the Group entered into an agreement for granting a
cash loan to unrelated party with a credit limit up to BGN 300
thousand at 6.7% annual interest and repayment period until
December 31, 2018. With annexes the term of the loan was prolonged
and the credit limit increased. As at September 30, 2020 the
granted funds under this agreement were BGN 720 thousand principal
and BGN 66 thousand interest.
In November 2017 the Group signed two contracts for granting
interest bearing loans with unrelated parties amounting up to BGN
5,050 thousand and up to BGN 6,150 thousand at 6.7% annual
interest. The deadline is annexed to December 31, 2020. As at
September 30, 2020 the granted funds under these contracts are BGN
3,729 thousand principal net of impairments and BGN 955 thousand
interest and BGN 4,443 thousand net of impairments principal and
BGN 1,069 thousand interest.
In December 2017 the Group signed a contract for granting cash
loan, which requires the Group to grant interest bearing loan up to
BGN 3,000 thousand to unrelated party at 6.7% annual interest and
term until December 31, 2020. As at September 30, 2020 the
principal and interest receivables under this agreement are BGN
2,508 thousand and BGN 571 thousand respectively.
Cash and cash equivalents
As at September 30, 2020 the Group reported cash amounted to BGN
3,017 thousand, as BGN 130 thousand are blocked as collateral under
enforcement cases.
In the notes under Art. 33a2 of Ordinance No2 from the Public
Offering of Securities Act (POSA), as cash equivalents of BGN 1,674
thousand, is presented the cash collected from the trade sites as
at the end of the reporting period and actually registered in the
Group's bank accounts at the beginning of the next reporting
period.
Registered capital
The Group's registered capital is presented at its nominal
value. The registered capital of the Group represents the
registered capital of the Parent company Petrol AD.
As at the end of the reporting period shareholders in the Parent
company are as follows:
Shareholder September
30,
2020
Alfa Capital AD 28.85%
Yulinor EOOD 23.11%
Perfeto consulting EOOD 16.43%
Correct Pharm EOOD 10.98%
Trans Express Oil EOOD 9.86%
Corporate Commercial Bank AD 5.51%
VIP Properties EOOD 2.26%
The Ministry of Economy of the Republic
of Bulgaria 0.65%
Other minority shareholders 2.35%
----------
100.00%
==========
The Management of the Parent company has undertaken series of
measures related to optimization of its capital adequacy. At
several General Meetings of Shareholders (GMS) held in the period
of 2016 - 2017 a decision for reverse-split procedure for merging 4
old shares with a nominal value of BGN 1 into 1 share with a
nominal value of BGN 4 and consequent decrease of the capital of
the Parent company in order to cover losses by decreasing the
nominal value of the shares from BGN 4 to BGN 1, was voted. In
March 2018, following a decision of the Lovech Regional Court,
which repealed the refusal of the Commercial Register (CR) to
register the decision voted on EGMS for merging 4 old shares with a
nominal value of BGN 1 into 1 new share with a nominal value of BGN
4, the applied change was registered in CR resulting in registered
capital of the Parent company of BGN 109 249 612, distributed in 27
312 403 shares with a nominal value of BGN 4 each. The change in
the capital structure of the Parent company was registered also in
Central Depositary AD. The submitted in April 2018 application for
registration of the voted on EGMS decision for the second stage of
the procedure of the Parent company's capital to be decreased by
decreasing the nominal value of the shares from BGN 4 to BGN 1 in
order to cover losses, was refused by the Commercial Register.
At EGMS of Petrol AD held on November 8, 2018 the decision to
decrease the capital of the Parent company in order to cover losses
by decreasing the nominal value of the shares from BGN 4 to BGN 1
was voted again. A refusal of the application for registration of
the decision in CR was enacted, which was appealed by the Parent
company within the statutory term. The minority shareholders
disputed the decision of the EGMS and additionally to the refusal
the application proceeding was postponed until the pronouncing of
the Lovech Regional Court on the court proceedings, initiated on
minority shareholders request. In March 2019 the Lovech Regional
Court enacted a decision, which rules the CR to register the
decrease of the capital after a resumption of the registration
proceedings following the pronouncing on the legal proceedings
initiated by the minority shareholders request.
In February 2019 was held a new EGMS, where the decision for
reduction of capital was voted again and a decision for
substitution of the deceased member of Supervisory Board Ivan
Voynovski with Rumen Konstantinov was taken. A refusal on the
application for registration of these circumstances in the file of
the Parent company was enacted, which was appealed by the Parent
company within the statutory term. In addition to the refusal, the
registration proceeding was ceased on request of minority
shareholders until the Lovech Regional Court rules on. In May 2019
the Lovech Regional Court enacted a decision, which repealed the
enacted refusal and turn back the case to the Registry Agency for a
registration of the application after a resumption of the ceased
registration proceedings. At present, the court proceedings for
repealing of the decisions of EGMS from February 2019 are
pending.
Current income tax liabilities and tax audits
In November 2017 the issued tax assessment from March 2016 on
the security contributions tax audit for BGN 543 thousand principal
and BGN 248 thousand interest, appealed entirely by the Parent
company as unjustified and secured by a bank guarantee of BGN 800
thousand, was entirely repealed due to decision of Administrative
Court - Sofia city. The tax administration appealed the decision
and SAC repealed the decision of AC - Sofia city and returned the
court proceeding to the initial judicial body for new examination.
In order to secure the additionally calculated interest liabilities
on this tax assessment, an additional bank guarantee for BGN 255
thousand was issued in February 2019.
Current income tax liabilities and tax audits (continued)
With a decision from March 2020 the first-instance court has
partially annulled the appealed tax assessment, as a result the
liabilities of the Parent company have been reduced to BGN 53
thousand. The Appel and Tax Insurance Practice has appealed the
decision of the first-instance court and as at the date of
preparation of these explanatory notes the Supreme Administrative
Court has ruled a final decision, which leaves into force the
decision of the first-instance court. The Parent company has taken
actions the issued bank guarantees at the amount of BGN 800
thousand and BGN 255 thousand to be released by the tax
administration in order to be cancelled.
Loans and borrowings and factoring
As at September 30, 2020 the Group has total liabilities under
received bank, debenture and trade loans of BGN 46,355 thousand,
including BGN 2,624 thousand current liabilities.
Bank loans
In July 2016, the Parent company entered into an investment loan
agreement, prepaying the liabilities on finance lease contract from
November 2015. Collateral of the loan is mortgage of property,
acquired through finance lease and pledge of receivables. The term
of the contract is May 2022 and the contracted interest rate is
3mEuribor+5.25%. In April 2020 the Parent company has renegotiated
the terms under the investment loan agreement, as the agreed
interest rate on principal was reduced to 3mEuribor plus 3.5%, but
not less than 3.5%. As at September 30, 2020 the liabilities under
the bank loan amounting to BGN 633 thousand current liabilities and
BGN 412 thousand non-current liabilities.
In September 2018 the Parent company entered into a
credit-overdraft agreement on current account in commercial bank,
intended for working capital with maximum allowed amount of BGN
2,000 thousand and repayment period until January 31, 2019 and
contracted interest rate as Savings-based Interest Rate (SIR) plus
added amount of 6,1872 points, but cumulatively not less than 6.5%
annually. The credit is secured with a special pledge of its goods
in turnover, representing oil products and with a pledge of
receivables on bank accounts. In December 2018, as a result of a
signed annex to an agreement from 2016 for revolving credit line
with the same bank, the Group negotiated an increase of the amount
of the credit line of BGN 9,500 thousand with an additional amount
of BGN 11,500 thousand, by which the total amount of credit line
rose to BGN 21,000 thousand. The line is separated in total limit
of BGN 13,500 for issuance of bank guarantees and BGN 7,500 for
refinancing of the received credit-overdraft of BGN 2,000 thousand
and the rest for working capital. The increased amount of the
credit limit on the revolving credit line is covered additionally
with establishment of mortgages and pledges of properties, plants
and equipment with a carrying amount of BGN 6,543 thousand as at
June 30, 2020. In June 2019 the loan was partially repaid and the
limit for working capital decreased from BGN 7,500 thousand to BGN
7,000 thousand as at September 30, 2020. In January 2020 the Parent
company renegotiated the terms of the used credit line granted to
it by a commercial bank under a revolving credit line agreement
dated September 21, 2016, with a credit limit of BGN 7,000 thousand
and achieved a reduction of the annual compound SIR + 5,2802%, but
not less than 5.5%.
Debenture loans
In October 2006, the Parent company issued 2,000 registered
transferable bonds with fixed annual interest rate of 8.375% and
emission value of 99.507% of the nominal, which is determined at
EUR 50,000 per bond. The principal is due in one payment at the
maturity date and the interest is paid once per year. At the
general meetings of the bondholders conducted in October and
December 2011, it was decided to extend the term of the issue until
January 26, 2017. On 23 December 2016, a procedure for extension of
the bond issue to 2022 and reduction of the interest rate in the
range from 5.5% to 8% was successfully completed. The annual
effective interest rate following the extension the maturity of the
issue is 6.78%. Following the extension of the debenture loan, the
annual effective interest rate is 6.78%. The purpose of the bond
issue is to provide funds for working capital, financing of
investment projects and restructuring of the previous debt of the
Group. The debenture loan liabilities are presented in the
statement of financial position at amortized cost. As at the date
of preparation of these financial statements the nominal value of
the debenture loan is EUR 18,659 thousand.
In September 2020 the Group successfully finalized a procedure
for renegotiation of the bond terms. The maturity of the principal
was extended until January 2027, the interest rate was decreased to
4.24% per annum and the regularity of the due interest (coupon)
payments is every six months - in January and in July of every year
until the bond maturity.
Factoring
In February 2019 the Group entered into an agreement with a
commercial bank for factoring with special terms and without
regress for transferring of preliminary approved receivables with a
maximum period of the deferred payments up to 120 days from the
date of invoice issuance with a payment in advance of 90% of the
value of the transferred receivables including VAT. The commission
for factoring services is 0.35% of the total value of the
transferred invoices plus additional annual taxes. The interest for
the amounts paid in advance is Base Deposit Index for Legal
Entities + 1.95%, accrued daily and paid on monthly basis at the
end of every calendar month. As of September 30, 2020, the Group
has receivables under this agreement at the amount of BGN 57
thousand.
In December 2019 the Group entered into an agreement with a
commercial bank for purchasing of trade receivables (standard
factoring) with a total limit of the advanced payments up to BGN
430 thousand and interest rate based on savings in BGN increased by
a markup of 3.7767 points, but not less than 4% per annum on the
amount of the advanced payment. The contract is secured with
receivables on Group's bank accounts, opened in the bank with a
carrying amount of BGN 344 thousand as at September 30, 2020. As of
September 30, 2020, the Group has no outstanding estimates under
this factoring agreement.
Operating Lease
The Group is lessee under operating lease agreements. The
recognised expenses for rent of fuel stations, rented under
operating lease for the period ended September 30, 2020 are at the
amount of BGN 11,208 thousand.
Subsidiaries
The Parent company (the Controlling company) is Petrol AD. The
subsidiaries included in the consolidation, over which the Group
has control as at September 30, 2020 and December 31, 2019 are as
follows:
Subsidiary Main activity Ownership Ownership
interest interest
Sept.
30
2020 Dec.31
2019
Varna Storage Trade with petrol and petroleum
EOOD products 100% 100%
Petrol Finance
EOOD Financial and accounting services 100% 100%
Elit Petrol -Lovech Trade with petrol and petroleum
AD products 100% 100%
Acquisition, management and
Lozen Asset AD exploitation of property 100% 100%
Petrol Properties Trading movable and immovable
EOOD property 100% 100%
Kremikovtsi Oil Processing, import, export and
EOOD trading with petroleum products 100% 100%
Shumen Storage Processing, import, export and
EOOD trading with petroleum products 100% 100%
Office Estate Ownership and management of
EOOD real estates 100% 100%
Svilengrad Oil Processing, import, export and
EOOD trading with petroleum products 100% 100%
Trade with petrol and petroleum
Varna 2130 EOOD products 100% 100%
Petrol Finances
OOD Financial and accounting services 99% 99%
Petrol Technologies
OOD IT services and consultancy 98,80% 98,80%
Contingent liabilities, including information for newly arising
significant liabilities for the reporting period
As at September 30, 2020 the Group has contingent liabilities,
including issued mortgages and pledges of property, plant and
equipment and non-current assets held for sale, 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 22,509 thousand.
The Group is a joint co-debtor under loan agreement of unrelated
supplier, including limit for overdraft and limit for stand-by
credit for issuance of bank guarantees in favour of Customs Agency.
The total amount of the utilized funds and issued bank guarantees
of all borrower's exposures to the Bank shall not exceed BGN 45,000
thousand. In relation to this credit agreement, the Group has
established a special pledge on its cash in the bank account opened
in the bank-creditor with total amount of BGN 51 thousand as at
September 30, 2020 and a special pledge on receivables from
contractors for BGN 4,000 thousand average monthly turnover.
The Group bears a joint obligation according to a contract for
debt from January 2017 on an obligation of a subsidiary until
February 2018 for BGN 2,346 thousand as at September 30, 2020.
Under a bank agreement for revolving credit line signed in 2016,
bank guarantees were issued for a total amount of BGN 9,888
thousand as at September 30, 2020, including BGN 6,550 thousand in
favor of third parties - Group's suppliers, BGN 1,055 thousand in
favor of National Revenue Agency to secure the appealed by the
Parent company tax assessment, BGN 500 thousand to secure the
activity of the Parent company in relation to its registration
under the Law on the Administrative Regulation of Economic
Activities Related to Oil and Petroleum Products, and BGN 1,783
thousand to secure own liabilities related to contracts under the
Public Procurement Act. The bank agreement is secured by mortgages
of property, pledge of plants and equipment, pledge of all
receivables on bank accounts of the Parent company and a
subsidiary. In July 2017 the credit limit under the revolving
credit line was increased from BGN 8,500 thousand to BGN 9,500
thousand. Assets amounted to BGN 1,500 thousand, owned by a
subsidiary, additionally secured the credit limit. With annex from
December 2018 the limit is increased to BGN 21,000 thousand and is
additionally secured with mortgages and pledge of property, plants
and equipment, and special pledge of goods in turnover, namely
petroleum products. In June 2019, the credit limit for working
capital granted under this credit line was partially repaid as its
amount decreased from BGN 7,500 thousand to BGN 7,000 thousand.
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 amounting to BGN 1,026 thousand as at September 30,
2020 were established.
In relation to a signed in 2015 guarantee contract for
obligations of another subsidiary, arising of a cession contract
with outstanding book value as at June 30, 2020 of BGN 245
thousand, the Court ruled a final decision on this pending
litigation. The Court assumed that the Parent company is
responsible as a guarantor for the obligations of the subsidiary
under the cession agreement. The Court of Appeal has entirely
annulled the decision of the first instance court and admitted the
receivable of the Parent company under the guarantee contract
jointly with the other related party. The decision of the appellate
court was appealed by the Parent company before the Supreme Court
of Cassation, but was not allowed for further appeal. The Group
intends to file a claim to establish the non-existence of these
receivables. Collateral for the future claim against the provision
of a guarantee at the amount of BGN 25 thousand to the account of
the court was admitted in favour of the Group, as a result of which
the enforcement proceedings initiated against the Group for these
claims were suspended. The funds given as a collateral under Art.
180 and Art. 181 of Law on Obligations and Contracts (LOC) on this
litigation against the Group from 2015 amounting to BGN 245
thousand together with the amount of BGN 93 thousand were collected
by the bailiff in the course of enforcement proceedings initiated
against the Group. However the funds have been not yet distributed
due to the suspension of the enforcement proceedings, based on the
granted in favour of the Group collateral for future claims and are
blocked on bank account of the bailiff until the final conclusion
of the litigation proceedings.
In the previous reporting periods companies from the Group have
entered into the debt under two loan agreements of a subsidiary
with a bank-creditor (until December 2015) for USD 15,000 thousand
and USD 20,000 thousand, respectively. In 2015 the bank -creditor
acquired court orders for immediate execution and receiving orders
against the subsidiaries - joint debtors. In relation to the
complains filed by the subsidiaries, the competent court has
revoked the immediate enforcement orders and has invalidated the
receiving orders. In October and December 2015 the creditor has
filed claims under Art. 422 of Civil Procedure Code (CPC) against
the subsidiaries for the existence of the receivables under each
loan agreement. The court proceedings of the creditor are still
pending.
In December 2016 the first instance court decreed a decision
(the Decision) which admit for established that the bank has a
receivable amounted to USD 15,527 thousand from the subsidiaries -
joint debtors, arising from a signed loan agreement for USD 15,000
thousand. With the same decision the court has ordered the
joint-debtors to pay BGN 411 thousand to the bank - creditor for
legal advisory fees and court dispute expenses and BGN 538 thousand
state fee in favor of the judiciary state for the ordered
proceedings and BGN 538 thousand state fee for claim proceedings.
In January 2017, the co-debtors have filed in time appeals against
the court decision, because of that the decision did not come into
force. As at the date of the preparation of these explanatory
notes, the dispute is pending in the appeal court. The Group's
Management considers that there are grounded chances the Decision
to be entirely repealed.
As at the date of the preparation of these explanatory notes,
the filed proceedings against the subsidiaries - joint debtors for
estimation of the bank receivables due to the loan agreement for
USD 20,000 thousand is pending before the first-instance court. The
Management expects favorable decision by the competent court. In
2018 the Parent company sold its interest in one of co-debtor
subsidiaries and the potential risk for the Group is reduced to the
court proceedings against the second subsidiary.
A creditor of a subsidiary (until December 2015) unreasonably
claimed in court the responsibility of the Parent company under a
contract of guarantee for liabilities arising from a contract for a
framework credit limit as a result of that the bank accounts of the
Parent company amounting to USD 29,983 thousand were garnished.
This claim was disputed in court by Petrol AD because the liability
as guarantor has not occurred and / or extinguished pursuant to
Art. 147, par. 2 of the LOC. At the time of conclusion of the
guarantee deadline of the arrangements between the lender and
subsidiary contractual framework for credit limit was July 1, 2014.
The term of the framework credit limit was extended without the
consent of the customer, therefore the responsibility of the latter
has fallen by six months after initially agreed period, during
which the creditor has brought an action against the principal
debtor. The term of Art. 147, par. 1 of the LOC is final and upon
its expiration the company's guarantee has been terminated, so the
objection of the Parent company was granted by the court and
imposed liens on bank accounts lifted.
After the writ of execution, pursuant to order proceedings, was
canceled on which were imposed liens on bank accounts of the Parent
company, the creditor has initiated legal claim proceedings under
Art. 422 of the CPC to establish the same claims against the
subsidiary (until December 2015) and the guarantor Petrol AD. In
these proceedings the objections are repeated, that liability as
guarantor has not occurred and / or extinguished pursuant to Art.
147, par. 2 of the LOC, and therefore the Management expects that
the claim of the creditor against the Parent company will be
dismissed permanently by a court decision on those cases. At
present, the case is suspended due to the existence of a
preliminary ruling, which is important for the correct resolution
of the case.
In December 2019, the Parent company entered into an agreement
with a commercial bank for the purchase of trade receivables
(standard factoring) with a total advance limit of up to BGN 430
thousand and an interest rate based on savings for BGN, increased
by a mark-up of 3.7767 points, but not less than 4% per annum on
the amount of the granted advance. The contract is secured by a
pledge of receivables on opened bank accounts of the Parent Company
with a book value as at September 30, 2020 at the amount of BGN 344
thousand.
The Group is a joint debtor and avalist of a promissory note
under a loan agreement - overdraft from a financial institution,
granted to an unrelated entity - a major fuel supplier with a total
amount of BGN 60,975 thousand.
The Group has signed a promissory note as collateral to the
contract for purchase of electricity for the amount of BGN 100
thousand.
As of September 30, 2020 funds in bank accounts at the amount of
BGN 130 thousand are blocked under enforcement proceedings to which
the Group is a party.
Other significant events occurred during the reporting quarter
and cumulatively from the beginning of the year
From the beginning of 2019, the Bulgarian legislation has in
force the Law on the Administrative Regulation of Economic
Activities Related to Oil and Petroleum Products. The operation of
the law directly affected the core business of the Group. In
September 2020 the Parent company was entered in the register to
the Ordinance on the terms and conditions for keeping a register of
entities engaged in economic activities related to oil and
petroleum products for wholesale economic activity and has issued a
bank guarantee in favour of the Ministry of Economy at the amount
of BGN 500 thousand. As of the date of publication of these
explanatory notes the Parent company is registered for retail
trading with oil and petroleum products.
In May 2020, the Parent company received from the Commission for
Protection of Competition (CPC) a decision for initiated
proceedings to establish any violations under Art. 15 and Art. 21
of LPC and / or under Art. 101 and Art. 102 of the Treaty on the
Functioning of the European Union (TFEU) in determining the prices
of mass automotive fuels in the production / import - storage -
wholesale - retail trade, both at the separate horizontal levels
and vertically, by eleven companies, including the Parent company.
In July 2020, the same decision was received by a subsidiary of the
Group. At present the proceedings have not been completed.
The Group's Management has taken a series of measures to
optimize the capital adequacy of the Group. As a result of several
general meetings of shareholders hold in 2016 and 2017, a decision
for reverse split procedure was voted for merging 4 old shares with
nominal value of BGN 1 into 1 new share with nominal value of BGN 4
and subsequent decrease of the Parent company's capital to cover
losses by decreasing the nominal value of the shares from BGN 4 to
BGN 1. In March 2018, following a decision of the Lovech Regional
Court, which repealed the refusal of the Commercial Register to
register the decision voted on EGMS for merging 4 old shares with
nominal value of BGN 1 into 1 new share with nominal value of BGN
4. The applied change was registered in Commercial Register (CR)
resulting in registered capital of the Parent company of BGN 109
249 612, distributed in 27 312 403 shares with nominal of BGN 4
each. The change in the capital structure of the Parent company was
registered also in Central Depositary AD. In the beginning of April
2018 the application was submitted for registration of the voted on
EGMS decision for the second stage of the procedure for decreasing
the Parent company's capital by decreasing the nominal value of the
shares from BGN 4 to BGN 1 in order to cover losses. As at the date
of preparation of the actual explanatory notes, the applications is
rejected by the CR.
On EGMS of Petrol AD held on November 8, 2018 the decision to
decrease the capital of the Parent company in order to cover losses
by decreasing the nominal value of the shares from BGN 4 to BGN 1
was voted again. A refusal of the application for registration of
the decision in CR was enacted, which was appealed by the Parent
company within the statutory term. The minority shareholders
disputed the decision of the EGMS and additionally to the refusal
the application proceeding was postponed until the pronouncing of
the Lovech Regional Court on the court proceedings, initiated on
minority shareholders request. In March 2019 the Lovech Regional
Court enacted a decision, which rules the CR to register the
decrease of the capital after a resumption of the registration
proceedings following the pronouncing on the legal proceedings
initiated be the minority shareholders request.
In February 2019 was held a new EGMS, where the decision for
reduction of capital was voted again and a decision for
substitution of the deceased member of Supervisory Board Ivan
Voynovski with Rumen Konstantinov was taken. A refusal on the
application for registration of these circumstances in the file of
the Parent company was enacted, which was appealed by the Parent
company within the statutory term. In addition to the refusal, the
registration proceeding was ceased on request of minority
shareholders until the RC - Lovech rules on. In May 2019 the Lovech
Regional Court enacted a decision, which repealed the enacted
refusal and turn back the case to the Registry Agency for
registration of the applied entry after a resumption of the ceased
registration proceedings. At present, the court proceedings for
repealing of the decisions of EGMS from February 2019 are
pending.
The next measure for capital adequacy is a change in the
accounting policy regarding non-current tangible assets - property,
plant and equipment, equipment and intangible assets from the ones
applied in its financial statements until 2019, including the
acquisition price model, with application from the beginning of
2020 of the other applicable model - the revaluation model, which
the Management considers to reflect more objectively the held
non-current tangible and intangible assets.
III. Disclosure of transactions with related parties
The total amount of the accrued remunerations of the members of
Management and Supervisory Board of the Parent company, included in
the personnel expenses, amounted to BGN 878 thousand, and the
unsettled liabilities as at September 30, 2020 are at the amount of
BGN 73 thousand.
In the first quarter of 2020 transactions with related parties
have been not carried out.
IV. Risks and uncertainties ahead of the Group for the rest of
the financial year
Macroeconomic environment
The Petrol Group's activity is influenced by the general
economic condition of the country and in particular the degree of
the successful adoption of the market-oriented economic reforms by
the government, changes in the gross domestic product (GDP) and the
purchasing power of the Bulgarian customers. In the long term the
change in the fuels consumption in the country is commensurate with
the GDP.
At the end of 2019, a new coronavirus was identified in China.
Due to the fast widespread of the virus across the world at the
beginning of 2020, the World Health Organization declared a global
pandemic. On March 13, 2020 the Parliament declared a state of
emergency on request of the Government of Republic of Bulgaria and
on March 24, 2020 the Law on Measures and Actions during a State of
Emergency became effective. In order to restrict the widespread of
coronavirus infection, an Order of the Health Minister was issued
for the introduction of anti-epidemic measures, which directly
affect the business activity of the Group. Part of the measures
include extension and interruption of the administrative deadlines,
extension of the of administrative acts, suspension of the
procedural court terms and the statute of limitations, changes in
the labor legislation, referring to new working hours, suspension
of work and / or reduction of working hours and use of leave, etc.
The pandemic causes a significant reduction in economic activity in
the country and raises significant uncertainty about future
processes in macroeconomics in 2020 and beyond.
The Group's Management monitors the emergence of risks and
negative consequences in the outcome of the pandemic with Covid-19,
currently assessing the possible effects on the assets, liabilities
and activities of the Group, striving to comply with contractual
commitments, despite the uncertainties and force majeure
circumstances. In view of the introduced anti-epidemic measures and
restrictions in the pandemic, which cause a significant reduction
in economic activity and creates significant uncertainty about
future business processes, there is a real risk of a decline in
sales of the Group. However, Management believes that it will be
able to successfully bring the Group out of the state of emergency
in which it is placed
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.
The plans for the future development of the company are closely
related and depend to a greater extent to the stated expectations
for changes in the market environment. The Management continues to
follow the program outlined and started in the beginning of 2014
for restructuring the activities of Petrol Group, aiming to
concentrate the efforts to optimize and develop the core business -
wholesale and retail trading with fuels. With the aim to improve
the financial position, the Management continues to analyze
actively all expenses and to look for hidden reserves for
optimization.
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 andrecorded in these consolidated financial statements.
The Group's Management applies the necessary procedures to manage
these risks.
The Group's Management activities are directed to validation of
the principles and traditions of good corporate governance,
increasing the trust of the interested parties, namely
shareholders, investors and counterparties, and to disclosure of
timely and precise information in accordance with the legal
requirements.
Legislature
The Parent company is supervised by a number of regulatory
bodies in the country and a potential change in the regulatory
framework, regulating the Parent company's activity may have a
negative impact on the Group's financial results. In July 2018 the
Government of the Republic of Bulgaria adopted a new Law for
Administrative Regulation of the Economic Activities, Related to
Petrol and Petroleum Products, which aims to provide security and
predictability in trading with petrol and petroleum products and
increase the energy security of the country. Due to its core
business, this law will affect the Group. As at the date of
issuance of these explanatory notes, the Parent company is entered
in the register to the Ordinance on the terms and conditions for
keeping a register of entities carrying out economic activities
related to oil and petroleum products for the wholesale and retail
trading activity and has issued a bank guarantee in favor of the
Ministry of Economy at the amount of BGN 500 thousand.
Suppliers
Due to the specific of the primary business of Petrol Group,
namely retail and wholesale trading with fuels, the Group's fuels
supplies are provided by a small number of suppliers, as a result
of which the Group is at risk of discontinuation of relationships
with key suppliers, which may lead to a short-term depletion of
inventories and trading activity difficulties;
Petrol Group's wholesale and retail trading with fuels,
lubricants and other goods is carried out through its own and
rented from third parties petrol stations and storage facilities. A
risk from the suspension of the relationships with the lessors and
discontinuation of the lease contracts of the petrol stations
and/or storage facilities existed, which can have a negative
impacts on Petrol Group as decrease in sales, worsening the
financial results and loss of market share.
Competition
In the last few years, there has been a tendency for consumers
to increasingly turn to established and well-known brands with a
tradition in fuel retail. As a result, some small retailers were
forced to close down or enter into franchise or dealership
agreements with one of the major market participants. Due to the
general decline in economic activity, consumer attitudes and the
introduction of additional regulatory control by the government,
the share of small independent players continues to decline.
The lack of strategic deals and significant investments by large
participants in the retail fuel market has led to a minimal change
in the market shares of companies in the sector;
Price risk
The Group is at risk of frequent and sharp changes in prices of
fuels and non-petroleum goods. Because of that, the future
financial results may diverge significantly from the expectations
of the Group's Management. Any future sharp fluctuations in the
price of fuels and non-petroleum goods may lead to a deterioration
of the financial position of the Group;
Market risk
Market risk is the risk that changes in market prices, such as
foreign exchange rates, interest rates and equity prices will
affect the Group's income or the value of its holdings of financial
instruments. The objective of market risk management is to manage
and control market risk exposures within acceptable parameters,
while optimizing the return. Because of the nature of its activity,
the Group is exposed to price and currency risk.
The Group is exposed to the risk of change in currency rate,
movement in the interest rates and the prices of the capital
instruments, which may impact the Group's financial instruments or
the value of its investments.
Interest rate risk
Risks arising from the increase in the price of the Group's
financing;
Credit risk
The risk of inability of the Group's trade partners to fulfill
their contractual obligations, which may lead to losses for the
Group;
Exceptional costs
There is a risk of incurring unforeseeable costs, which to
affect negatively the financial position of the Group;
Political risk
Risks to the Group arising from global and regional political
and economic crises;
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.
Liquidity risk
Liquidity risk is the risk that the Group may not be able to
meet its financial obligations when they fall due. The policy is
aimed at ensuring sufficient liquidity with which to serve
liabilities when they fall due, including abnormal and emergency
situations.
Georgi Tatarski Milko Dimitrov
Executive Director Executive Director
November 27, 2020
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END
QRTPPGGUGUPUGCM
(END) Dow Jones Newswires
November 27, 2020 09:07 ET (14:07 GMT)
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