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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Pan European Terminals | LSE:PAN | London | Ordinary Share | GB00B12V3082 | ORD 1P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 22.00 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMPAN
RNS Number : 5754H
Pan European Terminals PLC
21 June 2013
This announcement replaces the previous announcement at 7.00am this morning (RNS number 5443H) in which the AIM ticker was stated as PET instead of PAN. In all other respects the announcement is not changed.
21 June 2013
Pan European Terminals PLC
("PAN" or "the Company")
FINAL RESULTS
For the Year Ended 31 December 2012
Pan European Terminals (AIM: PAN), which provides transhipment and storage facilities into Europe and Russia for the hydro-carbon industry, is pleased to announce its final results for the year ended 31 December 2012.
HIGHLIGHTS
-- Revenues increased 32% to GBP20.6m (2011: GBP15.6m) -- Underlying Profit before Tax (pre non-recurring expenses) of GBP4.87m (2011: GBP5.05m) -- Non-recurring items include:
- GBP2.45m bad debt provision
- GBP1.27m of other one-off costs
-- Profit before Tax GBP1.15m, after GBP1.31m of finance costs -- Strategic milestones achieved with:
- Ownership or management of 385,000 cubic meters of refined product tanks
- Doubling of revenue at Baltic Top due to new diesel customers
- Successful integration of Dan Balt acquisition, refurbishment of facility to be completed by end June 2013. New contract for 2013
-- Reclassified Rosbunker asset to investment with fair value of GBP22.5m -- Refinancing of GBP8.5m Loan Note on more favourable terms -- Recurring central overheads reduced (for second straight year) by 35% to GBP1.2m -- Net Assets increased to GBP47.6m (2011: GBP44m) -- Group cash in bank at 20 June 2013 is GBP2.4m (at 31 December 2012: GBP1.1m)
Simon Escott, CEO of PAN, commented, "We have made good progress in Europe this year, due to the solid performance from Petro Broker and the successful acquisition and refurbishment of Dan Balt, both of which gives us a strong base for the future. In Kaliningrad, Baltic Top showed significant growth, while we are hopeful of a swift resolution with the Rosbunker terminal, due to the ongoing progress there.
"We continue to carefully look at opportunities for expansion within our existing facilities and also at new acquisition targets in different geographic locations that meet our strict criteria for acquisition. This will ensure economic and environmental risk is managed going forward, whilst giving us the best opportunity to offer our growing client base, flexibility, better service and competitive rates for 2013 onwards. It is the Group's intention to publish an update on progress made in 2013 in due course"
The Company's Annual Report for the year ended 31 December 2012 will be sent to shareholders by 28 June 2013 and will be available to view at www.peterminals.com.
Enquiries:
Pan European Terminals plc Tel: +44 (0)20 3145 1908
Simon Escott, Chief Executive Mob: +44 (0)972 009 5800
Westhouse Securities Ltd (Nomad and Broker) Tel: +4 (0)20 7601 6000
Richard Johnson / Antonio Bossi
Leander (Financial PR) Tel: +44 (0)7795 168 157
Christian Taylor-Wilkinson
Chairman's Statement
It is with great pleasure that we can report to shareholders that your board's strategy of growth is beginning to show results. We continue to grow our revenues within Europe, reflecting the accuracy of our name change to Pan European Terminals, and all our European terminals are operating at full capacity paving the way for a brighter year ahead.
The year under review did see the Group report lower than anticipated profit, mainly as a result of the high one off costs. However, your Board is confident that the Group will return to a strong profit in 2013.
As expected, operations in 2012 continued to grow. Despite the impact from our successful efforts to maintain our 50% holding of the Rosbunker asset in Kaliningrad, revenue has increased by 32% as a direct result of good figures from Petro Broker International BV (Holland), Baltic Top (Kaliningrad) and the integration of Dan Balt AS (Denmark) into the Group structure.
With regards to our ongoing acquisition programme, we are pleased to report that both of our recent acquisitions have been integrated quickly and efficiently, and have achieved the targets we anticipated pre-acquisition and are growing steadily. Both have expanded their customer base which is important to the integrated model that we advocate of building bulk for our clients.
As stated in the accounts and the Financial Overview below, we have taken the appropriate action to classify Rosbunker as an investment, and as such, profits from this operation will only be taken when cash is received from this investment. This has the benefit of aligning the accounts with the Board's intention to quickly reach a positive resolution for the Group. The Board has identified several strategic options, all of which are at an advanced stage of discussion - and each will ensure that the result is in the best interests of all our shareholders. The change in current accounting treatment on this asset has no impact on the cash receipts of the Group and is therefore recognised as a pure accounting matter.
With the expanded group now fully operational we are confident that we have a significant presence in the transhipment market and are building critical mass to allow us to grow this position and the Group. There are new opportunities available to us which we are pursuing vigorously, having shown that we have the ability to successfully integrate new acquired assets in a timely and cost effective manner. Our model of expansion will continue to be handled in a careful and calculated way to ensure growth in value for shareholders.
Richard Healey
Chairman
20 June 2013
Chief Executive's Statement
Operations
Our European operations performed better than expected during the year, with progress in 2013 expected to show similar growth. In Russia, Baltic Top showed significant revenue growth and, despite the present status at Rosbunker, we are confident of reaching a positive solution on this investment in the near future.
Profit (pre-management fee) at Petro Broker International (PBI) rose by 29%, whilst an additional 120,000 cubic metres of tank storage was added to the PBI facility in October 2012 for diesel oil. This will add further to profit generation in 2013. The new storage is being let to customers on long term agreements but at lower margins than other products, as is the case in the diesel oil market.
As expected, Dan Balt did not make a contribution to profit, due to our obligation to service inherited contracts, all of which expired by 31 December 2012. However, we are modernising the terminal in accordance with our plans and paving the way for a successful 2013. This has included replacing the loading pumps and valves, as announced with the fund raising on 22 May 2012. The project was expanded and all the fuel oil tanks have been refurbished, re-calibrated and re-inspected and the main boiler has also been re-configured in order to give greater efficiency in cold weather, such as experienced in February and March 2013. After completion of the engineering planning, work commenced in late 2012 and the full refurbishment will be completed by the end of June 2013, on schedule and on budget. Together with the Aabenraa Port Authority, we have also upgraded the discharge lines to ensure speedier discharge for our clients, which increases our overall competitiveness in the market place. Finally, as announced on 29 January 2013 a major new contract has been signed for this facility and we are actively looking to increase the use of our space. The molasses contract has been renegotiated and now runs through to the end of 2014.
Baltic Top had an excellent year with a near 50% increase in sales, although on lower margins than that of the rest of the Group and is a credit to the efforts of our Russian General Director, who has shown that our Russian operations can be profitable and enhance value for the Group. The terminal has now commenced supplying diesel oil to larger companies and traders active in the diesel and gasoline market and other large organisations in the Kaliningrad region, which we view as a positive market opportunity for us. In 2013, we plan to increase our margins now that we have captured a bigger market share.
Rosbunker
The Directors have carefully considered the status of its Rosbunker asset and the well documented events that have occurred during 2012. Given the limitation on control of the asset during the year, it has been decided that the most appropriate approach for the purpose of these accounts is to treat the asset as an investment for the whole of the 2012 year.
The reason behind re-classifying Rosbunker from associate to investment is clear: As an associate, the Group must be able to exercise significant influence over the asset in an operational and financial capacity. However, due to the ongoing court proceedings, this has not been possible and therefore the Directors believe the most appropriate accounting policy is to treat the holding as an investment thereby effectively "ring-fencing" the asset for the purposes of these accounts.
Therefore, no income from the asset has been recognised in the Group accounts for 2012 (with the exception of the fair value uplift explained in note 5 and 25), and the asset has been restated to its fair value of GBP22.5m as at 31 December 2012. Shareholders should note that the asset has been classified as an associate since 2010 and during this period the Group has not received any cash distributions from its Rosbunker operations and therefore, this accounting treatment is deemed to be the most appropriate in the circumstances. The change in accounting policy has no effect on the cash generated by the Group.
The Directors continue to pursue direct control of the asset and, by the end of 2012, had made encouraging headway within the Russian courts. Further, the Group's current 50% holding in Rosbunker is now deemed secure and protected under Russian law.
Concurrently, other options for the resolution of the situation are also being pursued by the Directors, and a number of attractive corporate transactions are under negotiation, one of which is with a large Russian financial institution. The Directors consider any one of these possible solutions to be strategically positive for the Group's future.
The Directors are confident that any of these options will ensure cash flow is returned to the Group by 1 April 2014 at the latest.
Post balance sheet event
On 25 April 2013, Hurley Investments Limited, acquired from Shelton Petroleum A.S 19% of Pan European Ordinary Stock, taking their holding to 19.95%. The Directors feel this is a very positive step for the Group as it supports our plans for the future.
Outlook
As our Chairman has stated, the outlook for 2013 is bright, due to the continuing successes within Europe and also Russia. We are looking at new opportunities for expansion within our existing facilities and also at new acquisition targets in different geographic locations. This will ensure economic and environmental risk is managed going forward, whilst giving us the best opportunity to serve our growing client base.
Simon Escott
Chief Executive Officer
20 June 2013
Financial Overview
Turnover has increased by 32% to GBP20.6m in 2012 (2011: GBP15.6m) primarily due to a large increase in sales volume at Baltic Top. However, the margins to date on these new sales have been low as we have had to undercut the competition to enter this market and we are now working hard to increase these to more competitive levels; we can already note this improvement in Q1 2013. Overall, 2012 was a good year for the Baltic Top facility with good progress being made on new sales areas and trading is continuing well during 2013.
Our Terminal in Holland, Petro Broker International, again performed very well in 2012 with similar levels of turnover (2012: GBP6.9m and 2011: GBP7.8m) and gross profit (2012: GBP2.8m and 2011: GBP3.0m) to last year. However, we have substantially reduced the overheads in Holland to GBP346,000 in 2012 compared to GBP654,000 in 2011, and these are expected to drop further in 2013 as the full year effect of the savings becomes apparent. The additional 120,000 cubic metre storage facility taken on in October 2012 will further increase profit generation albeit at a lower margin as these tanks are used for diesel oil.
As expected, Dan Balt in Denmark made a small loss before tax in 2012 but is forecast to make good levels of profit in 2013 as new oil transhipment contracts commenced in 2013, including a major new customer for the Group. The Group has upgraded valves, pumping equipment, and other facilities and equipment at the Terminal - most of the cost of which was covered by the fund raising in May with the remainder coming from cashflow generated by the Group.
The change in the Rosbunker accounting treatment is discussed in Note 5 and 25 in the accounts and from an accounting perspective profit is now only recognised when cash is received from that investment. The asset is included in the Group accounts as at 31 December 2012 at its estimated fair value of GBP22.5m.
Management successfully negotiated a refinancing of its $11m secured loan notes in November 2012 and were able to obtain a more favourable interest rate of 10% per annum on the GBP8.5m Loan Note. This is due for repayment in November 2015 although the Loan Note also carries an ability to convert to ordinary shares at the option of the Group and subject to shareholder approval. The full interest cost to the Group in 2012 was GBP1,309,000 including an amount of GBP323,000 for the write off of previously capitalised loan note issue costs upon re-financing, compared to GBP232,000 in 2011. This cost is expected to reduce to approximately GBP900,000 in 2013.
The majority of the overhead costs of running the Group are incurred at Group Head Office. The central overheads in 2012 were GBP4.96m (2011 GBP1.90m) which included one-off costs of GBP3.72m leaving GBP1.24m as our normal recurring overheads. Of the GBP3.72m of one-off costs, GBP2.45m related to bad debt provisions on older debts. The Directors remain confident that these monies are properly due. Please refer to note 16 for details of the work performed in respect of the debts that have been provided for. The remaining one-off costs include GBP333,000 in relation to legal costs in Russia, GBP372,000 relating to the Dan Balt acquisition costs, GBP250,000 on a debt settlement on trading and GBP181,000 in relation to the loan note restructuring costs.
Management will continue a rigorous policy to maintain efficiency in overheads across the Group. At the centre, the recurring overheads of GBP1.24m (2011 GBP1.90m) are down by 35% even though a 32% increase in sales was achieved in the 2012 year. To date this policy has resulted in a reduction of total overheads (excluding one-off costs) from 72% of total gross profit in 2011 to 56% in the 2012 year.
Including the reclassification of the Rosbunker investment at its revised fair value of GBP22.5m, the Group total assets are now stated at GBP47.6m in the Statement of Financial Position as at 31 December 2012 (2011: GBP44.0m). The Group had cash reserves of GBP1.1m at the year end (2011 GBP1.6m). Cash generation remains strong and is more than sufficient to fund ongoing operations. Should funding be required for any acquisitions or expansion, management believe that there are routes available as and when projects arise.
Adrian Simpson
Finance Director
20 June 2013
Directors' report
The Directors present their report and audited financial statements for the year ended 31 December 2012.
Results and dividends
The Group made a profit after tax for the year of GBP677,000 (2011: GBP4,725,000). The Directors do not recommend the payment of a dividend for the year.
Principal activities
The Group's principal activities during the year were the operation of hydrocarbon transhipment terminals in the Europort, Rotterdam, Aabenraa Denmark and Baltysk on Russia's Baltic Sea coast. The Group also carries out trading in refined products.
Business review and future developments
Following a review of the activities of the Rosbunker Terminal over the past year, the Directors have decided that the asset should be treated as an Investment for the whole of the 2012 year as outlined in Notes 5 and 25. This is deemed to be the most appropriate approach whilst the impending permanent solution is quickly decided upon. The CEO has successfully protected the Group's 50% interest in the Terminal and we will obtain the necessary Court orders to give us back access to the cashflow which we know the Terminal is capable of generating.
On 3 September 2012 the Group changed its name from Baltic Oil Terminals plc to Pan European Terminals plc to reflect the Group's increased focus on operations in Europe.
A review of the business and the future developments of the Group is presented in the Chairman's statement on page 1, the Chief Executive's Statement on page 2 and in the Financial Overview on page 4.
Shares issued in the year are disclosed in note 19.
Principal Risks and Uncertainties
These are disclosed in Note 4.
Key Performance Indicators
The Group monitors KPI's on a regular basis and where they differ significantly from expectations an investigation is undertaken. The following KPI's are monitored on a regular basis;
Storage contracts - the Group has approximately 385,000 cubic metres of Tank storage at PBI, Dan Balt and Baltic Top plus facilities at Rosbunker. The Holland facility was fully let in 2012 as was the Danish terminal but on contracts that had been inherited from the vendor in 2011. These contracts all expired on or before 31 December 2012 and the Group has since commenced more profitable Oil Transhipment arrangements including a major new customer. The position on contracts and storage availability is continually monitored to ensure Tanks remain let to customers at market rates.
Group cash flows are monitored daily and surplus cash in subsidiaries is regularly controlled by the centre to ensure cash in different currencies is aggregated to pay creditors on time and earn interest. At the year end the Group had cash balances of GBP1.1m (2011 GBP1.6m).
Going concern
The Directors believe that the Group is well placed to manage its business risk successfully. The Directors have reviewed future forecasts and commitments on projects, which when compared to the current cash available, lead the Directors to have a reasonable expectation that the Group has adequate financial resources to continue in operational existence for the next twelve months. The Directors have made this assessment by reviewing future and existing contracts. For this reason, they continue to adopt the going concern basis in preparing the financial statements.
On 19 November 2012, the Directors successfully completed a re-financing of its $11m secured fixed rate loan notes. The loan notes were repaid from the proceeds of an GBP8.5m secured convertible fixed rate loan note which matures on 19 November 2015 and carries interest at 10% per annum.
On 27 March 2013 the Company issued 4,500,000 new ordinary shares to a strategic investor at an issue price of 19.65p per share raising proceeds of GBP0.9m. The proceeds of the share issue were used to strengthen the Group's balance sheet and to provide additional working capital.
Creditor Payment Terms
The Group had trade payables of GBP1,553,000 at 31 December 2012 (2011: GBP1,285,000), and generally settles within 30 days. It is the Group's policy to settle balances with creditors in accordance with agreed terms of supply and with market practice in the relevant country.
The Company had trade payables of GBP348,000 at 31 December 2012 (2011: GBP291,000). It is the Company's policy to settle creditors on or shortly after the due date which is usually 30 days from the date of invoice.
Share Placing
On 22 May 2012 the Company issued 7,307,694 new ordinary shares to certain institutional investors at an issue price of 13p per share raising proceeds of GBP0.95m. The Group used the proceeds of the share issue to partially progress its fuel oil optimisation project at the Group's refined product terminal in Aabenraa, Denmark. Please refer to note 19 for details of the work performed at the Dan Balt terminal.
Directors
The Directors who served during the year and to the date of signing these accounts were as follows:
Simon Escott Chief Executive Officer Adrian Simpson Finance Director Appointed 12 April 2012 Richard Healey Non-executive Chairman Louis Castro Non-executive Director
Auditors
Grant Thornton UK LLP offer themselves for reappointment as auditors in accordance with section 489 of the Companies Act 2006. A resolution to reappoint them will be proposed at the forthcoming Annual General Meeting.
Directors' statement as to disclosure of information to auditors
The Directors who were members of the Board at the time of approving the Directors' report are listed on page 5. Having made enquiries of fellow Directors and of the Group's auditors, each of these Directors confirms that:
-- to the best of each Director's knowledge and belief, there is no information relevant to the preparation of their report of which the Group's auditors are unaware; and
-- each Director has taken all the steps a Director might reasonably be expected to have taken to be aware of relevant audit information and to establish that the Group's auditors are aware of that information.
On behalf of the Board
Simon Escott
Director
20 June 2013
Statement of Directors' responsibilities
The directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have to prepare the financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the company and group for that period. In preparing these financial statements, the directors are required to:
- select suitable accounting policies and then apply them consistently; - make judgments and accounting estimates that are reasonable and prudent; and
- state whether applicable IFRSs have been followed, subject to any material departures disclosed and explained in the financial statements.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006 They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors confirm that:
- so far as each director is aware, there is no relevant audit information of which the company's auditor is unaware; and
- the directors have taken all the steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Directors' remuneration review
The Company discloses certain information relating to Directors' remuneration in this report, which is not audited.
Remuneration committee
The Company established a Remuneration Committee in April 2006.
The committee meets as required. Executive Directors invited to attend do not vote on their own remuneration or incentives.
The committee advises the Board on Group remuneration policy and may obtain advice from independent remuneration consultants appointed by the Company. The Remuneration committee members are Louis Castro (Chairman) and Richard Healey.
Remuneration policy
The Company's policy is to maintain levels of remuneration for the Directors that are comparable and competitive with peer companies, so as to attract and retain individuals of the highest calibre, by rewarding them as appropriate to their contribution to the Group's performance.
Terms of appointment
The terms of each Director's appointment are set out in their service agreement which are effective for an indefinite period but may be terminated in accordance with specified notice periods.
Each service agreement sets out details of basic salary, fees, benefits in kind and share option grants.
Basic salaries
The basic salary of each Executive Director is established by reference to their responsibilities and individual performance.
Fees
The fees paid to Non-executive Directors are determined by the Board and reviewed periodically to reflect current rates and practice commensurate with the size of the Company and their roles.
Share options
The Company operates a policy of granting share options to all employees and Directors as a long-term incentive and retention plan. The share options are exercisable over varying periods and at varying strike prices dependent upon satisfying appropriate performance conditions. The right to exercise is subject to terms related to continuing employment.
Currently, there were no new share options issued in the current year and all previous share options granted have expired.
On behalf of the Board of Directors of Pan European Terminals plc.
Adrian Simpson
Company Secretary
20 June 2013
Report of the Independent auditor to the members of Pan European Terminals plc
We have audited the group financial statements of Pan European Terminals plc for the year ended 31 December 2012 which comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of cash flows, the consolidated statement of changes in equity and the related notes. The financial framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors' Responsibilities statement, the directors are responsible for the preparation of the group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the group financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the APB's website at www.frc.org.uk/apb/scope/private.cfm.
Basis for qualified opinion on financial statements
Included in the consolidated income statement is an amount of GBP2.8m related to the de-recognition of the group's investment in ZAO Rosbunker ("Rosbunker"), previously accounted for as an associate using the equity accounting method for the year ended 31 December 2011. Further detail is given in Notes 5 and 25. We were unable to obtain sufficient, appropriate audit evidence about the carrying amount of the group's investment in Rosbunker as at 31 December 2011, because we were unable to access the financial information and supporting documentation. Our audit opinion on the financial statements for the year end 31 December 2011 was modified accordingly. Since opening balances affect the determination of the gain we were unable to determine whether adjustments to the results of operations might be necessary for the year ended 31 December 2012.
Qualified opinion on financial statements
In our opinion, except for the effects of the matters described in the Basis for Qualified Opinion paragraph, the group financial statements:
- give a true and fair view of the state of the Group's affairs as at 31 December 2012 and of its profit for the year then ended;
- have been properly prepared in accordance with IFRS as adopted by the European Union; and - have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors' Report for the financial year for which the group financial statements are prepared is consistent with the group financial statements.
Matters on which we are required to report by exception
In respect solely of the limitation on our work referred to above:
- we have not obtained all the information and explanations that we considered necessary for the purpose of our audit
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
- certain disclosures of directors' remuneration specified by law are not made.
Other matter
We have reported separately on the parent company financial statements of Pan European Terminals plc for the year ended 31 December 2012.
Philip Westerman
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
20 June 2013
Consolidated income statement
For the year ended 31 December 2012
Notes 2012 2011 GBP'000 GBP'000 --------------------------------------------------- ------ ---------- --------- Revenue 6 20,590 15,550 Cost of sales (16,026) (10,878) --------------------------------------------------- ------ ---------- --------- Gross Profit 4,564 4,672 --------------------------------------------------- ------ ---------- --------- Administrative expenses - recurring (2,549) (3,383) Administrative expenses - non-recurring 7 (3,722) - Total administrative expenses (6,271) (3,383) --------------------------------------------------- ------ ---------- --------- Operating (loss) / profit before taxation and finance items 7 (1,707) 1,289 Share of profits of associates - 3,944 Investment fair value gain on initial recognition 25 2,801 - Investment fair value gain during the year 25 1,362 - Finance income 10 - 47 Finance costs 10 (1,309) (232) --------------------------------------------------- ------ ---------- --------- Profit before taxation 1,147 5,048 Taxation 11 (470) (323) --------------------------------------------------- ------ ---------- --------- Profit for the year 677 4,725 --------------------------------------------------- ------ ---------- --------- Attributable to: Equity shareholders of the Company 677 4,725 --------------------------------------------------- ------ ---------- --------- 677 4,725 --------------------------------------------------- ------ ---------- --------- Earnings per share attributable to equity shareholders of the Company: Basic and diluted 12 0.69p 5.01p --------------------------------------------------- ------ ---------- ---------
Consolidated statement of comprehensive income
For the year ended 31 December 2012
2012 2011 GBP'000 GBP'000 --------------------------------------------------------- --------- --------- Profit after tax 677 4,725 --------------------------------------------------------- --------- --------- Other comprehensive expenses Exchange differences on translating foreign operations (150) (664) --------------------------------------------------------- --------- --------- Other comprehensive expenses for the year, net of tax (150) (664) Total comprehensive income for the year attributable to equity shareholders 527 4,061 --------------------------------------------------------- --------- --------- Total comprehensive income for the year 527 4,061 --------------------------------------------------------- --------- ---------
Consolidated statement of financial position
As at 31 December 2012
Notes 2012 2011 GBP'000 GBP'000 -------------------------------------------- ------ --------- --------- Non current assets Intangible assets 13 - - Property, plant and equipment 14 6,360 6,911 Investment in associates 24 1,189 19,508 Fair value of investments 25 22,481 - Goodwill 13 11,598 11,598 -------------------------------------------- ------ --------- --------- 41,628 38,017 -------------------------------------------- ------ --------- --------- Current assets Inventories 15 864 198 Trade and other receivables 16 2,957 3,613 Prepayments and other current assets 17 1,040 521 Cash and cash equivalents 18 1,143 1,614 -------------------------------------------- ------ --------- --------- 6,004 5,946 -------------------------------------------- ------ --------- --------- TOTAL ASSETS 47,632 43,963 -------------------------------------------- ------ --------- --------- Share capital 19 1,018 945 Share premium 19 50,437 49,600 Other reserves - Equity - foreign exchange reserves (1,368) (1,218) Retained losses (14,366) (15,043) -------------------------------------------- ------ --------- --------- Total equity 35,721 34,284 -------------------------------------------- ------ --------- --------- Non current liabilities Borrowings 20 8,500 6,792 Deferred tax liabilities 11 486 526 -------------------------------------------- ------ --------- --------- 8,986 7,318 Current liabilities Trade and other payables 21 2,880 2,188 Borrowings 22 45 173 -------------------------------------------- ------ --------- --------- 2,925 2,361 -------------------------------------------- ------ --------- --------- Total liabilities 11,911 9,679 -------------------------------------------- ------ --------- --------- TOTAL EQUITY AND LIABILITIES 47,632 43,963 -------------------------------------------- ------ --------- ---------
Consolidated cash flow statement
For the year ended 31 December 2012
Notes 2012 2011 GBP'000 GBP'000 ------------------------------------------------------ ------ --------- --------- Cash flows from operating activities Profit before taxation 1,147 5,048 Adjustments to reconcile profit before taxation to net cash outflows from operating activities Share of profits of associates 24 - (3,944) Investments fair value gain (4,163) - Finance costs 1,309 185 Foreign exchange gain (24) (541) Depreciation of property, plant and equipment 14 431 179 Amortisation of intangible assets 13 - 1 Loss on disposal of property, plant and equipment 8 18 Increase in inventories (666) (98) Increase / (decrease) in trade and other receivables 137 (349) Increase / (decrease) in trade and other payables 313 (779) ------------------------------------------------------ ------ --------- --------- Cash outflow from operations (1,508) (280) Income tax paid (115) (12) Interest paid (1,026) (192) ------------------------------------------------------ ------ --------- --------- Net cash outflow from operating activities (2,649) (484) ------------------------------------------------------ ------ --------- --------- Cash flows from investing activities Finance income - 47 Purchase of property, plant and equipment 14 (30) (60) Purchase of subsidiary, gross of cash acquired - (6,550) Cash acquired as part of purchase of subsidiary - 174 ------------------------------------------------------ ------ --------- --------- Net cash outflows from investing activities (30) (6,389) ------------------------------------------------------ ------ --------- --------- Cash flows from financing activities Proceeds from shares issued net of issue costs 19 910 - Proceeds from borrowings 20 8,500 6,792 Repayment of borrowings 20/22 (7,202) (204) ------------------------------------------------------ ------ --------- --------- Net cash inflows from financing activities 2,208 6,588 ------------------------------------------------------ ------ --------- --------- Decrease in cash and cash equivalents (471) (285) Cash and cash equivalents at beginning of year 1,614 1,899 Decrease in cash and cash equivalents (471) (285) ------------------------------------------------------ ------ --------- --------- Cash and cash equivalents at end of year 1,143 1,614 ------------------------------------------------------ ------ --------- ---------
Consolidated statement of changes in equity
For the year ended 31 December 2012
Attributable to equity shareholders of the parent ------------------------- -------------------------------------------------------------------------- Foreign currency Share premium transaction Retained Share capital GBP'000 adjustment losses Total GBP'000 GBP'000 GBP'000 equity GBP'000 ------------------------- ---------------- ---------------- ------------- ----------- ---------- At 1 January 2011 936 49,351 (554) (19,768) 29,965 Exchange differences on translating foreign operations - - (664) - (664) Profit for the year - - - 4,725 4,725 ------------------------- ---------------- ---------------- ------------- ----------- ---------- Total comprehensive income for the year - - (664) 4,725 4,061 ------------------------- ---------------- ---------------- ------------- ----------- ---------- Shares issued during the year 9 249 - - 258 ------------------------- ---------------- ---------------- ------------- ----------- ---------- At 31 December 2011 and 1 January 2012 945 49,600 (1,218) (15,043) 34,284 ------------------------- ---------------- ---------------- ------------- ----------- ---------- Exchange differences on translating foreign operations - - (150) - (150) Profit for the year - - - 667 667 ------------------------- ---------------- ---------------- ------------- ----------- ---------- Total comprehensive income for the year - - (150) 667 527 ------------------------- ---------------- ---------------- ------------- ----------- ---------- Transactions with owners - shares issued during the year 73 837 - - 910 ------------------------- ---------------- ---------------- ------------- ----------- ---------- At 31 December 2012 1,018 50,437 (1,368) (14,366) 35,721 ------------------------- ---------------- ---------------- ------------- ----------- ----------
Notes to the consolidated financial statements
1. General information
Pan European Terminals plc is a public limited company listed on the Alternative Investment Market of the London Stock Exchange and is registered in England. The registered office is 1 - 6 Yarmouth Place, London, W1J 7BU. The principal activity of the Group is the development and operation of hydrocarbon transhipment terminals in the Netherlands, Denmark and the Russian Federation, and trading in refined products.
The Group's financial statements for the year ended 31 December 2012 were authorised for issue by the Board of Directors on 20 June 2013 and the statement of financial position was signed on the Board's behalf by Simon Escott.
2. Accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
2.1 Basis of preparation
The Group's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.
The consolidated financial statements have been prepared on a historical cost basis, except for investments that have been measured at fair value.
No material changes to accounting policies arose as a result of new standards adopted in the period.
The consolidated financial statements are presented in pounds sterling ("GBP") and all monetary amounts are rounded to the nearest thousand (GBP'000) except when otherwise indicated.
The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the year. The nature of estimation means that actual outcomes could differ from those estimates.
The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are the measurement and impairment of goodwill. The measurement of intangible assets other than goodwill on a business combination involves estimation of future cash flows and the selection of a suitable discount rate. The Group determines whether goodwill is impaired on an annual basis and this requires an estimation of the value in use of the cash generating units to which the intangible assets are allocated. This involves estimation of future cash flows and choosing a suitable discount rate.
2.2 Basis of consolidation
The consolidated financial statements reflect the Group's financial position as at 31 December 2012 and the Group's financial performance for the period from 1 January 2012 to 31 December 2012.
(a) Subsidiaries
Subsidiaries are those enterprises controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. On acquisition of a subsidiary, the purchase consideration is allocated to the assets, liabilities and contingent liabilities on the basis of their fair value at the date of acquisition. The excess of the cost of the acquisition over the fair value of the Group's share of identifiable net assets of the subsidiary acquired is recognised as positive goodwill. Following initial acquisition positive goodwill is measured at cost less any impairment losses. Acquisition costs are expensed as incurred.
The financial statements of subsidiaries are prepared for the same reporting year as the Company, using consistent accounting policies. All inter company balances and transactions, including unrealised profits arising from inter company transactions, have been eliminated in full. Unrealised losses are eliminated in the same way as unrealised gains except that they are only eliminated to the extent that there is no evidence of impairment.
(b) Associates
An associate is an entity over which the Group is in a position to exercise significant influence through participation in the financial and operating policy decisions of the investee, but which is not a subsidiary or a jointly controlled entity. The results, assets and liabilities of an associate are incorporated in these financial statements using the equity method of accounting.
(c) Investments
All equity investments are measured at fair value in the statement of Financial Position with value changes recognised in profit or loss except for those investments which the Group has elected to report value changes in "other comprehensive income".
2.3 Segment reporting
Operating segments are those components of the business where results are regularly reviewed by the Board to assess their performance and to make resource allocation decisions. The operating segments are identified by either trading or terminals activity and the similarity of their economic characteristics and not by their geographical area of operation
2.4 Foreign currency translation
The functional currency for each entity in the Group is determined as the currency of the primary economic environment in which it operates. Transactions in foreign currencies are initially recorded in the functional currency by applying the spot exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are re-translated at the functional currency rate of exchange ruling at the year end. All differences are taken to the income statement. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.
The assets and liabilities of foreign operations are translated into sterling at the rate of exchange ruling at the year end. Income and expenses are translated at average exchange rates for the year. The resulting exchange differences are taken directly to other comprehensive income. On disposal of a foreign entity, the deferred cumulative amount in equity relating to that particular foreign operation is recognised in the income statement.
2.5 Oil and gas assets
The Group's entire capitalised oil and gas assets relate to properties that are in the exploration and evaluation stage. The Group accounts for oil and gas properties under IFRS 6 'Exploration for and Evaluation of Mineral Resources'. Property, plant and equipment acquired as part of a business combination is recorded at fair value at the acquisition date. All subsequent additions are recorded at historical cost of acquisition or construction. The Group does not currently have proven oil and gas reserves.
(a) Pre-licence award costs
Costs incurred prior to the award of oil and gas licences, concessions and other exploration rights are expensed in the income statement.
(b) Licence acquisition costs
Oil and gas licence acquisition costs are capitalised within intangible exploration assets and amortised on a straight-line basis over the period of the licence.
(c) Exploration and evaluation
Geological and geophysical exploration costs are charged against income as incurred. The direct costs associated with an exploration well, exploratory drilling and directly related overheads, are capitalised as an intangible asset pending determination of proven reserves. These costs are excluded from depletion until commerciality is determined or impairment occurs. Intangible assets also include fair value of exploration assets obtained through acquisitions. The costs of unsuccessful exploratory wells are expensed upon determination that the well does not justify commercial development.
Exploration and evaluation assets shall be assessed for impairment when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount. When facts and circumstances suggest that the carrying amount exceeds the recoverable amount, an entity shall measure, present and disclose any resulting impairment loss in accordance with IAS 36 'Impairment of assets'.
2.6 Non oil and gas assets
(a) Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and impairment losses. Such cost includes costs directly attributable to making the asset capable of operating as intended.
Depreciation is provided on all property, plant and equipment, other than freehold land, at rates calculated to write off the cost, less estimated residual value based on prices prevailing at the year end, of each asset evenly over its expected useful life as follows:
Buildings - 50 years Plant and equipment - 5 to 25 years Office equipment - 3 years Computer equipment - 3 years
Depreciation of an item of property, plant and equipment begins when it is available for use and when it is in the location and condition necessary for it to be capable of operating in the manner intended by management.
(b) Construction in progress
Assets in the course of construction are capitalised as a separate component of property, plant and equipment. On completion, the cost of construction is transferred to the appropriate category. The Group has storage tanks located in Russia with a book value of GBP2.05m that are awaiting deployment in one of the Group's terminals.
The cost of a property, plant and equipment comprises its purchase price and any costs directly attributable to bringing it into working condition for its intended use.
Construction in progress is not depreciated.
Borrowing costs directly attributable to the construction of assets that necessarily take a substantial period of time to get ready for their intended use are added to the cost of those assets, until such time as the assets are substantially ready for their intended use.
2.7 Impairment
The carrying amounts of property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable. If there are indicators of impairment, an exercise is undertaken to determine whether the carrying values are in excess of their recoverable amount. Such review is undertaken on an asset by asset basis, except where such assets do not generate cash flows independent of other assets, in which case the review is undertaken at the cash generating unit level.
If the carrying amount of an asset or its cash generating unit exceeds the recoverable amount, a provision is recorded to reflect the asset at the lower amount. Impairment losses are recognised in the income statement.
(a) Calculation of recoverable amount
The recoverable amount of assets is the greater of their value in use and 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. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash generating unit to which the asset belongs. The Group's cash generating units are the smallest identifiable groups of assets that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets.
(b) Reversals of impairment
An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. 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.
2.8 Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose identified according to operating segment.
2.9 Financial assets
Financial assets are initially recognised at fair value plus transaction costs. Financial assets classified as held for trading and other assets designated as such on inception are included in this category. Financial assets are classified as held for trading if they are acquired for sale in the short term. Derivatives are also classified as held for trading unless they are designated as effective hedging instruments or as financial guarantee contracts. Assets are carried in the balance sheet at fair value with gains or losses recognised in the income statement.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, do not qualify as trading assets and have not been designated as either fair value through profit and loss or available-for-sale. Such assets are carried at amortised cost using the effective interest method if the time value of money is significant. Gains and losses are recognised in the income statement when the loans and receivables are derecognised or impaired, as well as through the amortisation process.
2.10 Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss includes financial assets designated upon initial recognition at fair value through profit or loss. Financial assets at fair value through profit and loss are carried in the statement of financial position at fair value with net changes in fair value recognised in finance costs in the income statement.
Financial assets designated upon initial recognition at fair value through profit and loss are designated at their initial recognition date and only if the criteria under IAS 39 are satisfied. The Group has designated financial assets at fair value through profit or loss.
2.11 Impairment of financial assets
The Group assesses at the year end whether a financial asset or group of financial assets is impaired.
If there is objective evidence that an impairment loss on assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the financial asset's original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced, through the use of an allowance account. The amount of the loss shall be recognised in administration costs.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the income statement, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. In relation to trade receivables, a provision for impairment is made when there is objective evidence (such as the probability of insolvency or significant financial difficulties of the debtor) that the Group will not be able to collect all of the amounts due under the original terms of the invoice. The carrying amount of the receivable is reduced through use of an allowance account. Impaired debts are derecognised when they are assessed as irrecoverable.
2.12 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost includes all costs incurred in bringing each product to its present location and condition, as follows:
-- Raw materials, consumables and goods for resale - purchase cost on a first-in, first-out basis.
-- Finished goods - cost of direct materials and labour plus attributable overheads based on a normal level of activity, excluding borrowing costs.
2.13 Cash and cash equivalents
Cash and short-term deposits comprise cash at banks and in hand and short-term deposits with an original maturity of three months or less.
For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.
2.14 Financial liabilities
Except for derivatives, financial liabilities are recognised initially at fair value net of transaction costs and carried subsequently at amortised cost under the effective interest method.
Obligations for trade payables, loans and borrowings are recognised when the Group becomes party to the related contracts and are measured initially at the fair value of consideration received less directly attributable transaction costs.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.
Gains and losses arising on the repurchase, settlement or otherwise cancellation of liabilities are recognised respectively in finance revenue and finance cost.
2.15 Derecognition of financial assets and liabilities
A financial asset or liability is generally derecognised when the contract that gives rise to it is settled, sold, cancelled or expires.
Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, such that the difference in the respective carrying amounts together with any costs or fees incurred are recognised in profit or loss.
2.16 Income tax
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates and laws that are enacted or substantively enacted by the year end.
Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements, with the following exceptions:
-- where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss;
-- in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future;
-- and deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised.
Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the year end.
Income tax is charged or credited directly to equity if it relates to items that are credited or charged to equity. Otherwise income tax is recognised in the income statement.
2.17 Revenue
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of consideration received or receivable. Revenue excludes any applicable sales taxes.
Transhipment service revenue is recognised at the point of loading hydrocarbon product onto the customers export vessel.
Trading revenue is recognised when the risks and rewards of hydrocarbon product ownership pass to the customer. The associated costs of acquiring the hydrocarbon product are recognised in cost of sales.
When the risks and rewards of hydrocarbon product ownership do not pass to the Group the Group is acting as an agent between the supplier and customer and recognises the margin between the cost of the hydrocarbon product and the selling price as revenue.
The Group provides heated storage facilities for customer product which is billed monthly in advance plus additional services such as Ship to Ship transfers.
The Group has a fuel distribution business in Russia which recognises revenue on despatch of product to the customer.
2.18 Financial income and expenses
Financial income and expenses comprise interest expense on borrowings, amortisation of issue costs and interest income on funds invested.
Interest income is recognised as it accrues, calculated in accordance with the effective interest rate method.
2.19 Going concern
The financial statements have been prepared on the going concern basis, which assumes that the Company and its subsidiaries will continue in operational existence for the foreseeable future. The Board has performed a review of the next 12 months cash flows from the date of signing of the accounts and is confident that with current operations, the refinancing of the loan notes, recent share placing and the existing Group cash balance is sufficient to meet liabilities as they fall due. The Directors are not aware of any material uncertainties that might cast significant doubt on the Group's ability to continue as a going concern.
3. Capital management
Management controls the capital of the Group in order to provide the shareholders with adequate returns and ensure that the Group can fund its operations and continue as a going concern.
The Group's debt and capital includes ordinary share capital and financial liabilities, supported by financial assets.
There are no externally imposed capital requirements.
Management effectively manages the Group's capital by assessing the Group's financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues.
There have been no changes in the strategy adopted by management to control the capital of the Group since the prior year.
4. Risk management
The Group's activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk, liquidity risk and other risks and uncertainties. The Group operates a risk management programme where risks are identified and discussed at Board level and appropriate mitigation measures are implemented.
(a) Market risk
(i) Currency risk
The Group operates internationally and is exposed to foreign currency risk arising from various currency exposures, primarily with respect to the US Dollar, Euro and Russian Rouble.
The Group's cash flows generated from the terminals and trading divisions are in US Dollars. Only a proportion of the cash earned from transhipment is converted into Roubles to pay local overheads. There is a currency risk associated with the movement in exchange rate between the Rouble and the Dollar as the Group converts a proportion of US Dollars into Roubles at regular intervals to meet the Rouble expenditure as it falls due. Where there is a significant exposure to currency risk the Group enters into forward contracts to tie into the current exchange rate to mitigate the risk.
The presentation currency of the Pan European Terminals plc Group is GBP. The functional currencies of the underlying entities are mainly US Dollar, Euro and Russian Roubles. The assets and liabilities of the underlying entities are re-translated at the closing rate into the presentation currency therefore any currency movements affect the carrying value of the assets and liabilities in the Consolidated Statement of Financial Position of Pan European Terminals plc.
At 31 December 2012, if the GBP currency had weakened/strengthened by 10% against the US Dollar with all other variables held constant, post tax loss for the year would have been GBP16,000 (2011: GBP37,000) higher/lower. At 31 December 2012, if the currency had weakened/strengthened by 10% against the Euro with all other variables held constant, post tax loss for the year would have been GBP235,000 (2011: GBP238,000) higher/lower. This is mainly due to the retranslation of subsidiary balance sheets and results using the closing exchange for the statement of financial position and the average exchange rate for the income statement.
(ii) Interest rate risk
The Group is not currently exposed to risks associated with interest rate movements on borrowings as these are at a fixed interest rate.
The Group is currently exposed to interest rate movements on its cash deposits as cash is mainly held in readily available bank accounts. Where there is sufficient cash held in these bank accounts it is placed on the short term money markets where the interest earned is fixed.
(iii) Price risk
The Group's revenue is not generally correlated to oil or commodity prices. In the terminals division revenue is derived from fixed prices earned from handling the customer's product. In the trading division the Group earns a margin between the purchase price of product and the selling price. This margin is determined through purchasing product at a given number of basis points below Platz (the oil product price index) and selling it at a given number of points above. Although the Platz index is correlated to the underlying commodity price the margin between the purchase and selling price will generally be fixed. As the purchase and sale of the product is done under letters of credit, the prices and margins are fixed in advance therefore the Group is not exposed to any price movements between the time of purchase and sale.
(b) Credit risk
The Group's trade receivables arise in both the terminals and trading division. The Group considers the risk of not realising trade receivable balances as low, but where debts are overdue provisions are considered and made as necessary as set out in note 16. In the terminals division the transhipment and product handling fees are paid prior to the release of the product onto the vessel. As the fees are a relatively small proportion of the value of the customer's product the terminal is handling, the Group rarely encounters default on the payment of debts. If on the rare occasion the customer defaults then the Group holds the customers product as security against the outstanding debt. In the Trading division product is purchased and sold using letters of credit therefore the transactions carried out are guaranteed by the banks issuing the letters of credit. The Group uses letters of credit from reputable European banks only.
The Group incurs capital expenditure in the development and maintenance of its terminals division. Material and labour requirements are generally paid for in advance in Russia so there is a risk of non-performance of contractors. To mitigate this risk the Group has a policy of dealing with only reputable contractors and building merchants.
(c) Liquidity risk
Liquidity risk is the risk that obligations associated with financial liabilities will not be met. The Group has performed a cash flow forecast through to 30 June 2015 which has provided the directors with assurance that the Group has sufficient cash to meet its financial liabilities as they fall due.
(d) Potential taxation issues
As the Group operates in a number of jurisdictions, monitoring of cross border tax issues and repatriation of funds will be required. The Group has developed adequate presence in its key jurisdictions of the UK, Cyprus, the Netherlands, Denmark and Russia to manage the risks that changing tax legislation may present. The Group charges a management fee to its subsidiaries in the Netherlands and Denmark. The Directors have obtained independent professional advice from transfer pricing specialists and are confident that management fees are charged on an arms length basis.
(e) Title and control over Assets
The Group has undertaken all the customary due diligence and legal due diligence in the verification of title to and control of its assets and share of assets.
(f) Political risk is the risk that assets will be lost through expropriation, unrest or war. The Group minimises political risk by operating in countries with relatively stable political systems, established fiscal codes and a respect for the rule of law.
(g) A change or breach of regulatory and local legal requirements.
Regulatory compliance is managed with the assistance of external advisors. Changes in legal requirements are monitored by the management team and with the use of external advisors where required.
5. Significant accounting judgements, estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting estimates will by definition, seldom equal the actual results. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Many of the amounts included in the financial statements involve the use of judgement and/or estimation. These judgements and estimates are based on managements' best knowledge of the relevant facts and circumstances, having regard to prior experience, but actual results may differ from the amounts included in the financial statements. The Board has considered the critical accounting estimates and assumptions used in the historical financial information and concluded that the areas of judgement that have the most significant effect on the amounts recognised in the financial statements concern:
Going concern
As detailed in the Directors' report, the Directors have complete confidence that their efforts will generate sufficient ongoing cash to meet the Company's outgoings for the foreseeable future. The Directors have refinanced the Loan Notes on more favourable commercial terms which includes an extension to the maturity date of the debt of November 2015. The Company has completed a share placing on 27 March 2013 raising proceeds of GBP0.9m. On this basis the Directors believe it is appropriate to prepare these financial statements on a going concern basis. Please also refer to note 2.19.
Rosbunker Asset
The Directors have carefully considered the status of its Rosbunker asset and the well documented events that have occurred during 2012. Given the limitation on control of the asset during the year, it has been decided that the most appropriate approach for the purpose of these accounts is to treat the asset as an Investment for the whole of the 2012 year.
The reason behind re-classifying Rosbunker from associate to investment is clear: As an associate, the Group must be allowed to exercise significant influence over the asset in an operational and financial capacity. However, due to the ongoing court proceedings, this has not been possible and therefore the Directors believe the most appropriate accounting policy is to treat the holding as an investment thereby effectively "ring-fencing" the asset for the purposes of these accounts.
Therefore, no income from the asset has been recognised in the Group accounts for 2012, and the asset has been restated to its estimated fair value of GBP22.5m. Shareholders should note that the asset has been classified as an associate since 2010 and during this period the Group has not received any cash distributions from its Rosbunker operations and therefore, this accounting treatment is deemed to be the most appropriate in the circumstances. The change in accounting policy has no effect on the cash generated by the Group.
The Directors continue to pursue direct control of the asset and, by the end of 2012, had made encouraging headway within the Russian courts. Further, the Group's current 50% holding in Rosbunker is now deemed secure and protected under Russian law.
Concurrently, other options for the resolution of the situation are also being pursued by the Directors, and a number of attractive corporate transactions are under negotiation, one of which is with a large Russian financial institution. The Directors consider any one of these possible solutions to be strategically positive for the Group's future.
Should the asset remain within the Group, the Directors are confident that any of these options will ensure cash flow is returned to the Group by 1 April 2014 at the latest.
The Directors would highlight that they have applied a number of significant estimates and judgements in determining the above. The increase in fair value recognised in the financial statements reflects the status of actions taken to date and the plans in place to ensure a return to joint control over the asset and therefore access to its share of operating cash flows in the future. Please also refer to note 25 for details of the estimates and assumptions used in the calculations of the fair value of the investment.
Receivables
The Directors have carefully reviewed all of the outstanding receivables to the Group at the year end. Provisions of GBP2.45 million have been made for certain items which are past due, and where the Directors believe that not all of the receivables will be recovered. In making their assessments, the Directors have considered several factors including the age and size of the debt, the trading pattern of the customer and their relative financial strength. Where necessary, confirmations of the debts have been sought from customers. There are still a number of significantly overdue receivables but the Directors are satisfied that the balances included in the Statement of Financial Position as at 31 December 2012 are recoverable at the amounts stated therein.
6. Segment information
The Group considers that its activities be split into two key areas, terminal and trading activities. An operating segment is a component of the Group engaged in terminal or trading activities that is regularly reviewed by the Chief Operating Decision Maker for the purposes of making economic decisions. In addition, Head Office costs are disclosed separately and added to the sector result in arriving at an operating profit.
The terminals operating segment provides terminal handling and storage services on behalf of clients wishing to export oil products and has bases in the Netherlands, Denmark and Russia. The trading operating segment matches buyers and sellers of hydrocarbon product and takes a margin on the product sold.
The following table analyses the sector revenue and result and reconciles the sector result to the profit after tax.
(a) Operating segments - year ended 31 December 2012
Terminals Trading Unallocated Total GBP'000 GBP'000 GBP'000 GBP'000 ------------------------------- ---------- --------- ------------ --------- Revenue 20,590 - - 20,590 Segment operating profit / (loss) 2,810 (2,450) (2,067) (1,707) Investment fair value gain 4,163 - - 4,163 Finance costs - net (note 10) - - (1,309) (1,309) Tax charge (470) - - (470) ------------------------------- ---------- --------- ------------ --------- Segment profit / (loss) for the year 6,503 (2,450) (3,376) 677 ------------------------------- ---------- --------- ------------ --------- Assets and liabilities Segment assets 45,961 285 1,386 47,632 Segment liabilities (11,421) - (490) (11,911) ------------------------------- ---------- --------- ------------ --------- Segment net assets 34,540 285 896 35,721 Total assets includes Property, plant and equipment 6,360 - - 6,360 Goodwill 11,598 - - 11,598 Investments 22,481 - - 22,481 ------------------------------- ---------- --------- ------------ ---------
The following significant non-cash items are included in the segment results:
-- Terminals - depreciation of GBP431,000.
(b) Operating segments - year ended 31 December 2011
Terminals Trading Unallocated Total GBP'000 GBP'000 GBP'000 GBP'000 -------------------------------- ---------- --------- ------------ --------- Revenue 15,301 249 - 15,550 Segment operating profit / (loss) 3,058 (61) (1,708) 1,289 Share of profits of associates 3,944 - - 3,944 Finance costs - net (note 10) - - (185) (185) Tax charge (323) - - (323) -------------------------------- ---------- --------- ------------ --------- Segment profit / (loss) for the year 6,679 (61) (1,893) 4,725 -------------------------------- ---------- --------- ------------ --------- Assets and liabilities Segment assets 39,862 2,821 1,280 43,963 Segment liabilities (9,176) - (503) (9,679) -------------------------------- ---------- --------- ------------ --------- Segment net assets 30,686 2,821 777 34,284 Total assets includes Property, plant and equipment 6,911 - - 6,911 Goodwill 11,598 - - 11,598 -------------------------------- ---------- --------- ------------ ---------
The following significant non-cash items are included in the segment results:
-- Terminals - depreciation of GBP146,000.
(c) Geographical disclosure - year ended 31 December 2012
Rest of Russian UK Europe Federation Total GBP'000 GBP'000 GBP'000 GBP'000 ------------------------------- ---------- --------- ------------ ---------- Revenue - 7,907 12,683 20,590 ------------------------------- ---------- --------- ------------ ---------- Results Operating (loss) / profit for the year (2,848) 839 302 (1,707) ------------------------------- ---------- --------- ------------ ---------- Other segment information Segment assets 3,913 15,364 28,355 47,632 ------------------------------- ---------- --------- ------------ ---------- Total assets Property, plant and equipment 1,095 3,220 2,045 6,360 Goodwill - 9,710 1,888 11,598 Investments - - 22,481 22,481 ------------------------------- ---------- --------- ------------ ----------
(d) Geographical disclosure - year ended 31 December 2011
Rest of Russian UK Europe Federation Total GBP'000 GBP'000 GBP'000 GBP'000 ------------------------------- ---------- --------- ------------ ---------- Revenue 443 7,867 7,240 15,550 ------------------------------- ---------- --------- ------------ ---------- Results Operating (loss) / profit for the year (448) 1,116 621 1,289 ------------------------------- ---------- --------- ------------ ---------- Other segment information Segment assets 6,390 14,026 23,547 43,963 ------------------------------- ---------- --------- ------------ ---------- Total assets Property, plant and equipment 1,141 3,632 2,138 6,911 Goodwill - 9,710 1,888 11,598 ------------------------------- ---------- --------- ------------ ---------- 7. Operating (loss)/profit
The operating (loss)/profit is stated after charging/(crediting):
2012 2011 GBP'000 GBP'000 ------------------------------- --------- --------- Depreciation and amortisation 431 179 Foreign currency (gain)/loss (164) 106 ------------------------------- --------- ---------
Non-recurring administrative expenses consists of the following:
2012 2011 GBP'000 GBP'000 --------------------------------------- --------- --------- Loan note refinancing costs 181 - Russian legal costs 333 - Dan Balt acquisition costs 372 - Bad debt provisions - see note 16 2,448 - Payments to settle old trading dispute 250 - Other terms 138 - --------------------------------------- --------- --------- Total non-recurring administration 3,722 - expenses --------------------------------------- --------- ---------
The Russian legal costs relate to the protection of the Rosbunker assets and are not expected to recur when the Group's control is reinstated.
The Dan Balt acquisition costs have arisen from a one off finders fee from the Danish terminal acquired at the end of 2011.
8. Staff costs and Directors' emoluments
(a) Staff costs
2012 2011 GBP'000 GBP'000 ----------------------- --------- --------- Wages and salaries 763 888 Social security costs 72 83 Other pension costs - - ----------------------- --------- --------- 835 971 ----------------------- --------- ---------
The average monthly number of employees during the year was as follows:
2012 2011 Number Number ----------------- -------- -------- Operational 21 28 Administrative 21 24 ----------------- -------- -------- Total employees 42 52 ----------------- -------- --------
(b) Directors' emoluments
2012 2011 GBP'000 GBP'000 -------------------------------------- --------- --------- Directors' emoluments 269 190 Pension costs - defined contribution - - plan -------------------------------------- --------- --------- 269 190 -------------------------------------- --------- ---------
The directors constitute the only key personnel of the Group.
There were no gains made by Directors on the exercise of share options during the year (2011: nil).
Total emoluments Total emoluments 2012 2011 GBP'000 GBP'000 ---------------- ----------------- ----------------- Simon Escott 120 150 Adrian Simpson 61 - Richard Healey 52 24 Louis Castro 36 4 Stanley Buck - 12 ---------------- ----------------- ----------------- 269 190 ---------------- ----------------- -----------------
The total emoluments paid to directors consists of basic salary only.
Simon Escott's remuneration for services as a Director are invoiced by and paid to an independent third party consultancy business. Emoluments for Richard Healey and Adrian Simpson are invoiced by and paid to their own service companies. Louis Castro is engaged directly as a consultant by the Group.
9. Auditors' remuneration 2012 2011 GBP'000 GBP'000 ------------------------------------------ --------- --------- Fees payable to the Company's auditor consist of: Audit of the group financial statements 75 82 Taxation services 15 - ------------------------------------------ --------- --------- 90 82 ------------------------------------------ --------- ---------
10. Finance income and costs
2012 2011 GBP'000 GBP'000 --------------------------- --------- --------- Finance income: Bank interest receivable - 47 --------------------------- --------- --------- - 47 --------------------------- --------- --------- Finance costs: Bank loans and overdrafts - 64 Loan note interest 986 168 Loan note issue costs 323 - --------------------------- --------- --------- 1,309 232 --------------------------- --------- ---------
The issue costs associated with the 2011 $11m secured fixed rate loan note of GBP323,000 were charged to finance costs upon the re-financing on 19 November 2012 (note 20).
11. Taxation
(a) Tax on profit on ordinary activities
Current income tax charged in the income statement:
2012 2011 GBP'000 GBP'000 --------------------------------------------- --------- --------- Corporation tax: Current tax on profits for the year 494 357 Deferred tax: Origination and reversal of temporary timing differences (24) (34) --------------------------------------------- --------- --------- Tax charge reported in the income statement 470 323 --------------------------------------------- --------- ---------
A management charge of GBP1,048,000 was charged to PBI and Dan Balt for its proportion of central overheads incurred by Pan European Terminals plc during the year ended 31 December 2012 (2011: GBP1,287,000).
(b) Reconciliation of the total tax charge
2012 2011 GBP'000 GBP'000 ------------------------------------------------------------- --------- --------- Profit before tax 1,147 5,048 ------------------------------------------------------------- --------- --------- Accounting profits multiplied by the UK standard rate of corporation tax of 24.5% (2011: 28%) 281 1,312 * UK tax losses not utilised - 36 * Russian tax losses utilised (56) (1,025) 1,265 - * Tax losses carried forward (1,113) - * Income not deductible for tax purposes 150 - * Expenses not deductible for tax purposes (11) - * Effect of different corporate tax rates in different tax jurisdictions (39) - * Timing differences - Other (7) - ------------------------------------------------------------- --------- --------- Total tax charge for the year 470 323 ------------------------------------------------------------- --------- ---------
(c) Deferred tax
The deferred tax included in the Statement of Financial Position is as follows:
2012 2011 GBP'000 GBP'000 ----------------------------------- --------- --------- Balance bought forward 526 72 Foreign exchange adjustment (16) (8) Acquisition fair value adjustment - 496 Income statement credit (24) (34) ----------------------------------- --------- --------- Deferred tax liability 486 526 ----------------------------------- --------- ---------
The deferred tax liability consists of temporary differences on the timing of depreciation in the income statement and the claiming of capital allowances in the corporate tax returns.
The Group has tax losses which arose in the UK of GBP12,356,000 (2011: GBP11,554,000) and in Russia of GBPNil (2011: GBP1,730,000) that are available indefinitely for offset against future taxable profits of those companies in which the losses arose. Deferred tax assets have not been recognised in respect of these losses due to uncertainty as to whether such amounts will be realised.
No deferred tax has been recognised on the fair value gain of the investments as it is held through a Cypriot intermediary holding company and in accordance with Cypriot tax legislation no capital gains tax would become liable on a disposal of the Group's interest in the investment.
12. Earnings per share (EPS)
Basic EPS is calculated by dividing the net profit for the year attributable to ordinary equity shareholders of the Company by the weighted average number of ordinary shares of 1 pence each outstanding during the year.
The following reflects the income and adjusted share data used in the EPS computation.
2012 2011 GBP'000 GBP'000 --------------------------------------------- ----------- ----------- Profit attributable to equity shareholders of the company 677 4,725 --------------------------------------------- ----------- ----------- 2012 2011 Number Number --------------------------------------------- ----------- ----------- Number of shares Weighted average number of ordinary shares of 1 pence each for EPS calculation 97,957,142 94,383,016 --------------------------------------------- ----------- ----------- Earnings per shares - basic and diluted 0.69p 5.01p --------------------------------------------- ----------- -----------
13. Intangible assets
Exploration assets Licenses Goodwill Total GBP'000 GBP'000 GBP'000 GBP'000 ----------------------------------- ------------ --------- --------- -------- Cost At 1 January 2011 5,279 643 4,896 10,818 Foreign exchange adjustment (83) (26) - (109) Additions - - 3,498 3,498 Additions through acquisition - - 3,617 3,617 ----------------------------------- ------------ --------- --------- -------- At 31 December 2011 5,196 617 12,011 17,824 Foreign exchange adjustment (130) (20) - (150) ----------------------------------- ------------ --------- --------- -------- At 31 December 2012 5,066 597 12,011 17,674 ----------------------------------- ------------ --------- --------- -------- Amortisation and impairment At 1 January 2011 5,279 642 413 6,334 Foreign exchange adjustment (83) (26) - (109) Amortisation charge - 1 - 1 ----------------------------------- ------------ --------- --------- -------- At 31 December 2011 and 1 January 2012 5,196 617 413 6,226 Foreign exchange adjustment (130) (20) - (150) ----------------------------------- ------------ --------- --------- -------- At 31 December 2012 5,066 597 413 6,076 ----------------------------------- ------------ --------- --------- -------- Net book value At 31 December 2012 - - 11,598 11,598 ----------------------------------- ------------ --------- --------- -------- At 31 December 2011 - - 11,598 11,598 ----------------------------------- ------------ --------- --------- --------
Impairment tests for goodwill
Goodwill is allocated to the Group's four cash-generating units (CGUs) Dan Balt, Petro Broker, Baltic Top and TDKN. An amount of GBP3,617,000 is allocated to the Dan Balt CGU, GBP6,092,000 to Petro Broker, GBP814,000 to Baltic Top and GBP1,075,000 to TDKN (2011: GBP3,617,000, GBP6,092,000, GBP814,000 and GBP1,075,000 respectively). The country of operation of Dan Balt is Denmark, Petro Broker is the Netherlands and Baltic Top and TDKN are Russia.
The recoverable amount of a CGU is determined based on value in use calculations. The value in use is calculated from the net present value of future cash flows from each CGU over a period of 10 years. The future cash flows are based on a 3 year financial projection from 2013 to 2016 and then a 3% growth rate on 2016 cash flows is assumed from 2017 onwards. The 3% growth rate is assumed to arise from increases in unit price and volume related synergies. The future cash flows were discounted at a rate of 10% which represents the Group's weighted average cost of capital. The recoverable amount of each CGU was in excess of the goodwill carrying value and therefore no impairment provisions were required.
The Directors have performed a sensitivity analysis on the 3 year financial projections and the key assumptions used in the net present value calculations and are confident that there is low risk that the carrying value of the CGUs exceed the recoverable amount.
14. Property, plant and equipment
Computer Land and Plant and and office Construction buildings machinery equipment in progress Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ------------------------------- ------------ ----------- ------------ ------------- -------- Cost At 1 January 2011 290 1,686 256 3,804 6,036 Foreign exchange adjustment (17) (95) - (7) (119) Additions - - - 60 60 Additions through acquisition 674 3,045 - - 3,719 Disposals - (18) - - (18) ------------------------------- ------------ ----------- ------------ ------------- -------- At 31 December 2011 and 1 January 2012 947 4,618 256 3,857 9,678 Foreign exchange adjustment (19) (81) - (116) (216) Additions 17 11 2 - 30 Disposals - (21) - - (21) ------------------------------- ------------ ----------- ------------ ------------- -------- At 31 December 2012 945 4,527 258 3,741 9,471 ------------------------------- ------------ ----------- ------------ ------------- -------- Depreciation At 1 January 2011 31 550 247 1,747 2,575 Foreign exchange adjustment (1) (8) - 22 13 Depreciation charge 19 155 5 - 179 ------------------------------- ------------ ----------- ------------ ------------- -------- At 31 December 2011 and 1 January 2012 49 697 252 1,769 2,767 Foreign exchange adjustment - 2 - (76) (74) Depreciation charge 143 283 5 - 431 Disposals - (13) - - (13) ------------------------------- ------------ ----------- ------------ ------------- -------- At 31 December 2012 192 969 257 1,693 3,111 ------------------------------- ------------ ----------- ------------ ------------- -------- Net book value At 31 December 2012 753 3,558 1 2,048 6,360 ------------------------------- ------------ ----------- ------------ ------------- -------- At 31 December 2011 898 3,921 4 2,088 6,911
15. Inventory
2012 2011 GBP'000 GBP'000 ------------- --------- --------- Consumables 864 198 ------------- --------- ---------
16. Trade and other receivables (current)
2012 2011 GBP'000 GBP'000 ------------------- --------- --------- Trade receivables 2,957 3,613 ------------------- --------- ---------
There is no difference between the carrying value and fair value of financial assets.
At 31 December 2012, trade receivables of GBP1,998,000 (2011: GBP3,038,000) were past due but not impaired. The ageing analysis of these trade receivables is as follows:
2012 2011 GBP'000 GBP'000 ------------------------ --------- --------- Current 959 - 3 to 6 months past due - - Over 6 months past due 1,998 3,038 ------------------------ --------- --------- 2,957 3,038 ------------------------ --------- ---------
The Directors have performed a detailed review of all debtors that are past due and have made impairment provisions of GBP2.45 million for certain debts as at 31 December 2012 (provision 2011: GBPnil). The provision was made due to backwardation in the fuel oil market that prevented the supplier and thus our customer from supplying product at a commercial rate. The Group, together with the customer, have made numerous efforts to re-structure the debt by switching from fuel oil to gasoil. Because this has, so far, been unsuccessful, it was decided to provide in total for these debts. However, the Group continues to work with the customer to reach a cash generative solution, and has received a proposal from this customer to discharge this debt through the assignment of gasoil.
17. Prepayments and other current assets
2012 2011 GBP'000 GBP'000 -------------------------------------- --------- --------- Advances paid for goods and services 976 448 VAT reclaimable 64 73 -------------------------------------- --------- --------- 1,040 521 -------------------------------------- --------- ---------
18. Cash and cash equivalents
2012 2011 GBP'000 GBP'000 -------------------------- --------- --------- Cash at bank and in hand 1,143 1,614 -------------------------- --------- ---------
Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and one month depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates.
19. Share capital and reserves
(a) Allotted and called up share capital
2012 2011 ---------------------------- ------------------------- Number GBP Number GBP ----------------------------------- ------------ -------------- -------------- --------- Allotted and called up share capital Ordinary shares of 1 pence each 101,825,110 1,018,251 94,517,416 945,174 ----------------------------------- ------------ -------------- -------------- --------- Number of Share capital Share premium Total shares GBP'000 GBP'000 GBP'000 ----------------------------------- ------------ -------------- -------------- --------- Ordinary shares of 1 pence each issued and fully paid At 1 January 2011 93,641,416 936 49,351 50,287 Shares issued 876,000 9 249 258 ----------------------------------- ------------ -------------- -------------- --------- At 31 December 2011 and 1 January 2012 94,517,416 945 49,600 50,545 Shares issued 7,307,694 73 837 910 ----------------------------------- ------------ -------------- -------------- --------- At 31 December 2012 101,825,110 1,018 50,437 51,455 ----------------------------------- ------------ -------------- -------------- ---------
On 22 May 2012 the Company issued 7,307,694 new ordinary shares of 1p each at 13p per share with certain institutional investors, to raise GBP0.95m before expenses. The Group has used the proceeds of the share issue to progress its fuel oil optimisation project at the Company's refined product terminal in Aabenraa, Denmark. Engineering commenced in June 2012 and the project was expanded in late 2012 to include not only the original increase in pump capacity but also the pipe lines, boiler, discharge lines and tanks, etc. The expanded project is financed by the Placing and working capital and is expected to be completed by the end of June 2013, on schedule.
On 28 February 2011 the Company issued 876,000 ordinary shares to a consultant to the Company in discharge of outstanding consultancy fees with a fair value of GBP258,000.
(b) Ordinary shares - rights at general meetings
At general meetings of the Company each member present or by proxy has one vote on a show of hands, and on a poll every member who is present in person or by proxy has one vote per every ordinary share.
20. Borrowings (non current liabilities)
2012 2011 GBP'000 GBP'000 ----------------------------------- --------- --------- Loan notes 8,500 7,115 Loan note issue costs capitalised - (323) ----------------------------------- --------- --------- 8,500 6,792 ----------------------------------- --------- ---------
On 19 November 2012, the Directors successfully completed a re-financing of its $11m secured fixed rate loan notes. The loan notes were repaid from the proceeds of an GBP8.5m secured convertible fixed rate Loan Note which matures on 19 November 2015 and carries interest at 10% per annum. The Group has given security over its assets except those in Cyprus and Russia in respect of the Loan Note. The Loan Note carries the possibility of a conversion to equity at 22 pence per share contingent on a special resolution being passed by the shareholders on or before 30 November 2013.
The issue costs associated with the $11m secured fixed rate loan note of GBP323,000 were charged to finance costs upon the re-financing on 19 November 2012.
As the option to convert the Loan Note into ordinary share capital lies with the Group, the Directors deem it appropriate to treat the Loan Note as debt in the Group accounts.
21. Trade and other payables (current)
2012 2011 GBP'000 GBP'000 ------------------------------------- --------- --------- Trade payables 1,553 1,285 Salaries and related payables - 15 Corporation tax payable 399 - Other payables and accrued expenses 928 888 ------------------------------------- --------- --------- 2,880 2,188 ------------------------------------- --------- ---------
There is no material difference between the fair value and carrying value of financial liabilities.
These financial liabilities are all due within 6 months.
22. Borrowings (current liabilities)
2012 2011 GBP'000 GBP'000 ----------------- --------- --------- Loan notes - 40 Bank borrowings - 8 Other loans 45 125 ----------------- --------- --------- 45 173 ----------------- --------- ---------
There is no difference between the carrying value and fair value of financial liabilities.
23. Financial instruments
Capital Management Policies and Procedures
The Group's capital management objectives are:
- To ensure the Group's ability to continue as a going concern, and - To provide an adequate return to shareholders.
These objectives will be achieved by effectively managing the Group's existing assets and by strategically investing in new projects.
The Group monitors capital on the basis of the carrying amount of equity, less cash and cash equivalents as presented on the face of the consolidated statement of financial position.
The Group sets the amount of capital in proportion to its overall financing structure, i.e. equity and financial liabilities. The Group manages the capital structure and makes adjustments to it in the light of changes in the economic conditions and the risk characteristics of the underlying assets. Capital for the reporting periods under review is summarised as follows:
2012 2011 GBP'000 GBP'000 ------------------------------------ --------- --------- Total equity 35,721 34,284 Less: cash and cash equivalents (1,143) (1,614) ------------------------------------ --------- --------- Capital 34,578 32,670 ------------------------------------ --------- --------- Total equity 35,721 34,284 Borrowings (8,545) (6,965) ------------------------------------ --------- --------- Overall financing 27,176 27,319 ------------------------------------ --------- --------- Capital to overall financing ratio 1.27 1.20 ------------------------------------ --------- ---------
The disclosures detailed below are as required by IFRS 7 Financial Instruments: Disclosures. The Company's principal treasury objective is to provide sufficient liquidity to meet operational cash flow requirements and to allow the Group to take advantage of new growth opportunities whilst maximising shareholder value. The Company operates controlled treasury policies which are monitored by the Board to ensure that the needs of the Company are met as they evolve. The impact of the risks required to be discussed in accordance with IFRS 7 are detailed below.
Liquidity and funding risk
The objective of the Group in managing funding risk is to ensure that it can meet its financial obligations as and when they fall due as shown below:
Current Non-current Within 6 months 1 to 2 years 2 to 3 years 2012 2011 2012 2011 2012 2011 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ------------------------ --------- --------- --------- --------- --------- --------- Trade & other payables 2,880 2,188 - - - - Borrowings 45 173 - 6,792 8,500 - ------------------------ --------- --------- --------- --------- --------- --------- Totals 2,925 2,361 - 6,792 8,500 - ------------------------ --------- --------- --------- --------- --------- ---------
Credit risk
The Group's principal financial assets are bank balances and cash, trade and other receivables and investments in other Group companies, which represent the Group's maximum exposure to credit risk in relation to financial assets.
The Group's credit risk is primarily attributable to its trade and other receivables. It is the policy of the Group to present the amounts in the balance sheet net of allowances for doubtful receivables, estimated by the Group's Directors based on prior experience and the current economic environment.
The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies.
The Group's credit risk is confined to a small number of counterparties and customers and these are individually managed by the Directors accordingly.
Foreign exchange risk
The Group's transactional foreign exchange exposure arises from income, expenditure and purchase and sale of assets denominated in foreign currencies. As each material commitment is made, the risk in relation to currency fluctuations is assessed by the Directors and regularly reviewed. The Group does not have a hedging programme in place at this time.
Foreign currency denominated financial assets and liabilities, translated into GBP at the closing rate, are as follows:
2012 2011 Financial Financial Financial Financial assets liabilities Exposure assets liabilities Exposure GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ----- ---------- ------------- --------- ---------- ------------- --------- USD 86 - 86 736 7,115 (6,379) RUR - - - - - - EUR 7 - 7 98 - 98 DKK - - - - - - GBP - - - - - - ----- ---------- ------------- --------- ---------- ------------- ---------
The following table illustrates the sensitivity of the net result for the year and equity in regards to the Group's financial assets and financial liabilities that are held in a currency other than the functional currency of the underlying Group entity. There is limited exposure to the income statement in this area as the underlying Group entities generally trade with third parties in the same currency as their functional currency.
It assumes a +/-5% change of the GBP-USD, GBP-RUR, GBP-EUR and GBP-DKK for the year ended 31 December 2012 (2011: 5%). The sensitivity analysis is applied to the Group's foreign currency financial instruments held at the balance sheet date. If the GBP had weakened by 5% against USD, RUR, EUR and DKK (the other main functional currencies of the Group entities), this would have had the following impact by currency:
2012 2011 Net result Net result for year Equity for year Equity GBP'000 GBP'000 GBP'000 GBP'000 ----- ----------- -------- ----------- -------- USD 11 (700) 26 844 RUR - (630) 15 (656) EUR - 149 - 153 DKK - 146 - 153 GBP - - - - ----- ----------- -------- ----------- --------
If GBP had strengthened against these respective currencies, there would be an equal and opposite effect on the net result for the year and equity.
Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless, the analysis above is considered to be representative of the Group's exposure to currency risk.
Interest rate risk
The Group has minimal exposure to interest rate risk in respect of the cash balances held with banks and other highly rated counterparties as cash is generally held in readily available current accounts and earns a minimal rate of interest. If the interest rate the Group received had increased/decreased by 0.1 percent during the year, the net result for the year would have been increased/reduced by GBPnil (2011: GBP4,000). There would have been no impact on other equity. The trade and other payables, borrowings and the other financial liabilities are carried at amortised cost. All the financial assets are considered to be cash and receivables. The fair values of all financial assets and financial liabilities are not considered to be materially different from their carrying values.
Weighted average Variable Fixed effective interest interest interest Non-interest 2012 rate rate rate bearing Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ------------------------------------ -------------------- ---------- ---------- ------------- ---------- Assets Cash 0.1% 1,143 - - 1,143 Trade and other receivables - - 2,957 2,957 Prepayments and other current assets - - 1,040 1,040 ------------------------------------ -------------------- ---------- ---------- ------------- ---------- Total financial assets 1,143 - 3,997 5,140 Liabilities Trade and other payables - - (2,880) (2,880) Borrowings - current (45) - - (45) Borrowings - non-current - (8,500) - (8,500) ------------------------------------ -------------------- ---------- ---------- ------------- ---------- Total financial liabilities (45) (8,500) (2,880) (11,425) ------------------------------------ -------------------- ---------- ---------- ------------- ---------- Net financial assets/(liabilities) 1,098 (8,500) 1,117 (6,285) ------------------------------------ -------------------- ---------- ---------- ------------- ---------- Weighted average Variable Fixed effective interest interest interest Non-interest 2011 rate rate rate bearing Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ------------------------------------ -------------------- ---------- ---------- ------------- ---------- Assets Cash 2.0% 1,614 - - 1,614 Trade and other receivables - - 3,613 3,613 Prepayments and other current assets - - 521 521 ------------------------------------ -------------------- ---------- ---------- ------------- ---------- Total financial assets 1,614 - 4,134 5,748 Liabilities Trade and other payables - - (2,188) (2,188) Borrowings - current (173) - - (173) Borrowings - non-current - (6,792) - (6,792) ------------------------------------ -------------------- ---------- ---------- ------------- ---------- Total financial liabilities (173) (6,792) (2,188) (9,153) ------------------------------------ -------------------- ---------- ---------- ------------- ---------- Net financial assets/(liabilities) 1,441 (6,792) 1,946 (3,405) ------------------------------------ -------------------- ---------- ---------- ------------- ----------
24. Investment in associates
2012 2011 GBP'000 GBP'000 ------------------------------------- --------- --------- Group share of Rosbunker net assets - 17,533 Rosbunker goodwill - 785 Group share of Polex net assets 100 100 Polex goodwill 1,089 1,090 ------------------------------------- --------- --------- 1,189 19,508 ------------------------------------- --------- ---------
The Directors have reviewed the carrying value of the investment in Polex and consider that the fair value of underlying land assets supports the accounts carrying value.
The following table summarises the movements in the Rosbunker investments in associates:
GBP'000 ---------------------------------------------- --------- At 31 December 2011 (at cost plus cumulative share of profits, and including goodwill) 18,318 De-recognition of associated undertaking on 1 January 2012 (18,318) ---------------------------------------------- --------- At 31 December 2012 - ---------------------------------------------- ---------
The following table illustrates summarised financial information of the Group's investment in Rosbunker:
Share of Rosbunker balance sheet (50%):
2012 2011 GBP'000 GBP'000 ------------------------------------- ---------- --------- Non-current assets - 9,902 Current assets - 11,002 ------------------------------------- ---------- --------- Share of gross assets - 20,904 Current liabilities - 3,371 Non-current liabilities - - ------------------------------------- ---------- --------- Share of gross liabilities - 3,371 Share of net assets - 17,533 ------------------------------------- ---------- --------- Share of Rosbunker income statement (50%): 2012 2011 GBP'000 GBP'000 ------------------------------------- ---------- --------- Revenue - 5,434 Net profit/(loss) before tax - 3,944 ------------------------------------- ---------- ---------
The Rosbunker investment in associates in the year ended 31 December 2011 includes an amount of goodwill of GBP785,000.
The Directors have reviewed the accounting treatment of the Group's 50% investment in Rosbunker. The Directors consider that effective from 1 January 2012, the Group was no longer realistically able to exercise significant influence over the asset and have therefore concluded that the asset should be treated as an investment for the whole of the year ended 31 December 2012, and at the 31 December 2012 reporting date. This conclusion has been reached following detailed consideration of the events that occurred during 2012 as further explained in the Chief Executive's statement. The 1 January de-recognition date represents the Directors best estimate of when the change in the level of control and influence the Group could affect occurred.
The investment in associate was previously accounted for using equity accounting. The Directors have undertaken an exercise to ascertain the fair value the investment at 1 January 2012 by reference to the discounted value of expected future cash flows. At 1 January 2012 the fair value has been assessed as GBP21,119,000 (note 25), resulting in a fair value gain in the income statement on de-recognition of the investment in associates of GBP2.8 million.
The Directors would highlight that they have applied a number of significant estimates and judgements in determining the above. The increase in fair value recognised in the financial statements reflects the status of actions taken to date and the plans in place to ensure a return to joint control over the asset and therefore access to its share of operating cash flows in the future. Further detail is given in the Significant Judgements and Estimates section on page 25 and also in the Chief Executive's statement.
Details of the assumptions applied in determining the fair value are included in note 25.
The following table illustrates summarised financial information of the Group's investment in OOO Polex Service:
Share of Polex Service balance sheet (50%):
2012 2011 GBP'000 GBP'000 --------------------------------- --------- --------- Non-current assets 87 87 Current assets 76 76 --------------------------------- --------- --------- Share of gross assets 163 163 Current liabilities 63 63 Non-current liabilities - - --------------------------------- --------- --------- Share of gross liabilities 63 63 Share of net assets 100 100 --------------------------------- --------- --------- Share of Polex income statement (50%): 2012 2011 GBP'000 GBP'000 --------------------------------- --------- --------- Revenue - - Net profit/(loss) before tax - - --------------------------------- --------- ---------
The Polex investments in associates at 31 December 2012 includes goodwill of GBP1,089,500 (2011: GBP1,089,500).
25. Investments
The Group's investments consist wholly of the Rosbunker asset as follows:
2012 2011 GBP'000 GBP'000 -------------------------- --------- --------- Fair value of investments 22,481 - -------------------------- --------- --------- GBP'000 ----------------------------------- -------- At 1 January 2012 - Initial recognition of investment at fair value (note 24) 21,119 Increase in fair value in 2012 1,362 ----------------------------------- -------- Fair value 31 December 2012 22,481 ----------------------------------- --------
A total amount of GBP4,163,000 has been recognised in the income statement in 2012 from the increase in value of the investment on initial recognition on 1 January 2012 and the increase in the fair value of the investment during 2012.
As disclosed in note 24, the Directors have determined the most appropriate accounting treatment for the 50% shareholding is to be as an investment to be held at fair value from 1 January 2012. The fair value gain on the investment from 1 January 2012 to 31 December 2012 has been recognised in the income statement. The fair value of the investment at 1 January and 31 December 2012 has been estimated based on the discounted value of expected future cash flows that will be available to the Group from distributions.
The Directors are considering a number of options to resolve the situation at Rosbunker, all of which are believed will provide cash flow back to the Group by 1 April 2014. Therefore the fair value has been arrived at on the assumption that cash flows will resume to the Group by latest 1 April 2014 and on the basis of a 10% discount rate, 5 years of cash flows plus a terminal value which has been estimated at 6 years of cash flow which results in a terminal value of GBP22.48 million.
The annual expected cash flows of Rosbunker start at GBP3.46 million in 2014 (discounted for 9 months cash flow) through to GBP3.781 million in 2017 based upon the Group's 50% share of cash flow, the current capacity of the terminal and the current sales price per tonne that the terminal operates at.
A sensitivity analysis has been carried out on the fair value figures to test their reasonableness. If cash receipts were delayed by 6 months to 1 October 2014 and using a 12% discount rate, the fair value drops to GBP19,198,000.
If cash receipts were being received by 1 October 2013 and using an 8% discount rate, the fair value increases to GBP26,148,000.
The Directors are satisfied with the discount rate of 10% (being the Group average) and the cash flows starting from 1 April 2014 which results in the fair value used of GBP22,481,000.
The following table illustrates the sensitivity analysis performed;
Discount factor 8% 10% 12% Cash flow starting date GBP'000 GBP'000 GBP'000 ------------------------- -------- -------- -------- 1 October 2013 26,148 24,621 23,138 1 April 2014 23,968 22,481 21,053 1 October 2014 22,024 20,577 19,198 ------------------------- -------- -------- --------
Financial assets (the Group's investment in Rosbunker) measured at fair value in the statement of financial position are valued based on the level 3 measurement of the fair value hierarchy. This grouping is determined based on the lowest level of significant inputs used in fair value measurement, as follows:
- level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The hierarchy of the fair value measurement of the Group's financial assets and financial liabilities are as follows:
Investment GBP'000 -------------------------- ----------- Opening balance 21,119 Gain in income statement 1,362 -------------------------- ----------- Total 22,481 -------------------------- -----------
26. Related party disclosures
During the year the Group engaged with an independent third party company to provide consultancy services to its overseas operations in Denmark, Holland and Russia. These services are considered to have been provided under normal commercial terms and on an arms-length basis.
The Group's Chief Executive Officer's (Mr Escott) remuneration for services as a director of the Group are invoiced through this company as disclosed in note 8. In addition, Mr Escott was engaged as a consultant by this company to provide services to them which formed part of the amounts then invoiced to the Group. These services were all provided under normal commercial terms and on an arms-length basis with a value of GBP70,000 in the year to 31 December 2012. There were no amounts owing under this arrangement at 31 December 2012.
27. Post balance sheet events
On 27 March 2013 the Company issued 4,500,000 new ordinary shares to a strategic investor at an issue price of 19.65p per share raising proceeds of GBP0.9m. The proceeds of the share issue were used to strengthen the Group's balance sheet and to provide additional working capital.
28. Principal subsidiaries, associates and investments
Principal activity Country of Percentage Percentage incorporation equity interest equity interest held by the held by the Group at Group at 31 December 31 December 2012 % 2011 % --------------------------------- ---------------------- -------------------- ----------------- ----------------- Baltic Petroleum Intermediate holding Limited company UK 100 100 Baltic Terminals Intermediate holding Limited company UK 100 100 Baltic Petroleum Intermediate holding (E&P) Limited company UK 100 100 Caspian Finance Limited Finance company UK 100 100 Baltic Hydrocarbons Limited Oil Services UK 100 100 Zauralneftegaz Limited Oil E&P UK 50 50 Tetoil Limited Oil Services UK 100 100 Tetoil Baltic Limited Oil Services UK 100 100 OOO Zauralneftegaz Oil E&P Russian Federation 50 50 OJSC Tetoil Oil Services Russian Federation 100 100 OJSC Tetoil Baltic Oil Services Russian Federation 100 100 OOO Polex Service Oil Services Russian Federation 50 50 Intermediate holding Pazega Limited company Cyprus 100 100 OOO Baltic Top Oil Services Russian Federation 100 100 OOO Otelbiznesstroy Oil Services Russian Federation 100 100 Intermediate holding Yuri Trading Limited company Cyprus 100 100 OOO Torgovy Dom Kaliningradneft Oil Services Russian Federation 65 65 Baltica Hydrocarbons Intermediate holding Limited company Cyprus 100 100 Arblade Holdings Intermediate holding Limited company Cyprus 100 100 Intermediate holding OOO Agroprom (1) company Russian Federation 50 50 ZAO Rosbunker (1) Oil Services Russian Federation 50 50 Edgeview Ventures British Virgin Limited (1) Finance company Islands 50 50 North Oil Trading Limited (1) Oil Services Panama 50 50 North Oil Bunker British Virgin Limited (1) Oil Services Islands 50 50 Petro Broker International B.V Oil Services Netherlands 100 100 Haahr Tank-Lager A/S Oil Services Denmark 100 100 Dan Balt Terminals Intermediate holding Limited company UK 100 100 --------------------------------- ---------------------- -------------------- ----------------- -----------------
(1) These companies are treated as an investment as at 31 December 2012 (note 25).
The Company has operational control over Zauralneftegaz Limited and OOO Zauralneftegaz by virtue of there being 50 A ordinary shares and 50 B ordinary shares of GBP1 each. The A and B ordinary shares of GBP1 rank pari passu other than the A ordinary shares have an additional vote at general meeting thereby giving the Company as shareholder of the A shares control of the company.
29. Capital commitments
At 31 December 2012, there were amounts contracted for but not provided in the financial statements of GBP489,000 (2011: GBPnil).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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