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| Name | Symbol | Market | Type |
|---|---|---|---|
| Petrol 4.24% | LSE:74JJ | London | Bond |
| Price Change | % Change | Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0 | - |
From Jun 2019 to Jun 2024
TIDM74JJ
RNS Number : 5336D
Petrol AD
26 June 2019
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
OF PETROL GROUP
AND CONDENSED EXPLANATORY NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODED MARCH 31, 2019
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
For the period ended March 31
Hot Features
Premium
2019 2018
BGN'000 BGN'000
Revenue 114,253 107,621
Other income 158 3,944
Cost of goods sold (101,772) (95,939)
Materials and consumables (916) (920)
Hired services (8,986) (8,190)
Employee benefits (5,005) (4,389)
Depreciation and amortisation (957) (239)
Impairment losses 64 4
Other expenses (146) (209)
Finance income 485 55,000
Finance costs (1,081) (833)
Profit (loss) before tax (3,903) 55,850
--------- --------
Tax income (expense) 1 49
--------- --------
Profit (loss) for the period (3,902) 55,899
--------- --------
Total comprehensive income for the
period (3,902) 55,899
Profit (loss) attributable to:
Owners of the Parent company (3,902) 55,899
Non-controlling interest - -
Profit (loss) for the period (3,902) 55,899
========= ========
Total comprehensive income attributable
to:
Owners of the Parent company (3,902) 55,899
Non-controlling interest - -
--------- --------
Total comprehensive income for the
period (3,902) 55,899
========= ========
Profit (loss) per share (BGN) (0.14) 0.51
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
March 31 Dec. 31
2019 2018
BGN'000 BGN'000
Non-current assets
Property, plant and equipment and
intangible assets 13,542 13,498
Investment properties 1,781 1,793
Right-of-use asset 12,529 -
Goodwill 19,827 19,827
Deferred tax assets 4,187 4,186
Trade and other receivables 95 95
Total non-current assets 51,961 39,399
-------- --------
Current assets
Trade and other receivables 44,943 36,948
Inventories 22,509 23,977
Loans granted 19,428 22,124
Non-current assets held-for-sale 3,459 3,459
Cash and cash equivalents 4,673 4,265
Total current assets 95,012 90,773
-------- --------
Total assets 146,973 130,172
======== ========
Equity
Registered capital 109,250 109,250
General reserves 18,864 18,864
Accumulated loss (112,459) (108,557)
--------- ---------
Total equity attributable to the
owners of the Parent company 15,655 19,557
--------- ---------
Non-controlling interests 9 9
--------- ---------
Total equity 15,664 19,566
---------
Non-current liabilities
Loans and borrowings 45,396 45,471
Trade and other payables 13,108 -
Employee defined benefit obligations 533 533
Total non-current liabilities 59,037 46,004
--------- ---------
Current liabilities
Trade and other payables 71,059 61,844
Loans and borrowings 1,213 2,758
Total current liabilities 72,272 64,602
--------- -------------------
Total liabilities 131,309 110,606
========= ===================
Total equity and liabilities 146,973 130,172
========= ===================
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Equity attributable to the Non-controlling Total
owners of the Parent company interests equity
Registered General Accumulated Total
capital reserves profit
(loss)
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
Balance at January
1, 2018 109,250 18,864 (164,473) (36,359) 10 (36,349)
Comprehensive income
for the period
Profit for the period - - 55,899 55,899 - 55,899
----------- ---------- ------------ --------- ---------------- ---------
Total comprehensive
income - - 55,899 55,899 - 55,899
----------- ---------- ------------ --------- ---------------- ---------
Balance at March 31,
2018 109,250 18,864 (108,574) 19,540 10 19,550
=========== ========== ============ ========= ================ =========
Comprehensive income
for the period
Profit for the period - - 31 31 (1) 30
Other comprehensive
income - - (14) (14) - (14)
Total comprehensive
income - - 17 17 (1) 16
----------- ---------- ------------ --------- ---------------- ---------
Balance at December
31, 2018 109,250 18,864 (108,557) 19,557 9 19,566
=========== ========== ============ ========= ================ =========
Comprehensive income
for the period
Loss for the period - - (3,902) (3,902) - (3,902)
----------- ---------- ------------ --------- ---------------- ---------
Total comprehensive
income - - (3,902) (3,902) - (3,902)
----------- ---------- ------------ --------- ---------------- ---------
Balance at March 31,
2019 109,250 18,864 (112,459) 15,655 9 15,664
=========== ========== ============ ========= ================ =========
CONSOLIDATED STATEMENT OF CASH FLOWS
For the period ended March 31
2019 2018
BGN'000 BGN'000
Cash flows from operating activities
Receipts from customers 154,485 166,605
Payments to suppliers (127,068) (150,093)
VAT and excise paid to the budget, net (16,800) (11,467)
Payments related to personnel (4,993) (4,511)
Income tax paid - (15)
Other cash flows from operating activities,
net 45 (660)
---------- ----------
Net cash flows from operating activities 5,669 (141)
Cash flows from investing activities
Payments for purchase of property, plant
and equipment (226) (908)
Proceeds from sale of property, plant and
equipment 51 3,522
Payments for loans granted, net (2,988) (4,017)
Interest received on loans and deposits 5,905 -
Payments for acquisition of subsidiary and
other investments, net of cash acquired - 16
Disposal and loss of control of subsidiary,
net of cash disposed of - (71)
Proceeds from other investments (5,605) 530
Net cash flows used in investing activities (2,863) (928)
Cash flows from financing activities
Proceeds from loans and borrowings 19 100
Repayment of loans and borrowings (87) (131)
Lease payments (439) -
Interest paid under loans (2,309) (2,040)
Payments under cession and other agreements 415 (115)
Net cash flows from financing activities (2,401) (2,186)
Net increase (decrease) in cash flows during
the period 405 (3,255)
Cash at the beginning of the period 4,265 7,271
Effect of movements in exchange rates 3 3
---------- ----------
Cash as per cash flow statement at the end
of the period 4,673 4,019
---------- ----------
Restricted cash - 186
---------- ----------
Cash as per statement of financial position 4,673 4,205
========== ==========
I. General Information
Petrol AD (the Parent company) was registered in Bulgaria in 1990 and entered in the Commercial Register to the Registry Agency with UIC 831496285. The headquarter address of the Parent company is 12 Tyrgovska Str., Hotel Lovetch in Lovetch city. As at the end of the reporting period shareholders are legal entities, the country - through the Ministry of Energy and individuals.
The main activity of Petrol AD and its subsidiaries (the Group) is related with trading of petrol products and non-petrol goods and services.
These explanatory notes are prepared according to the requirements of Art. 100o1, par.5 of the Public Offering of Securities Act (POSA) in relation to Art. 33, par.1, item.2 of the Ordinance No 2 of September 17, 2003 on the prospectuses in public offering and admission of securities for trading on a regulated market and for disclosure of information by the public companies and other issuers of securities, and represent information about important events occurred during the first quarter of 2019. The explanatory notes reflect their influence on the results in the statements for the first quarter of 2019 and describe of the main risks and uncertainties, which stay ahead of the Petrol Group in the rest of the financial year and comprise information for transactions with related parties and/or interested parties, as well as information for emerging significant receivables and/or payables during the same period.
II. Information on important events, occurred in the first quarter of 2019
Property, plant, equipment and intangible assets
As at March 31, 2019 the Group has property, plant, equipment and intangible assets with total carrying amount of BGN 13,542 thousand.
As at March 31, 2019 property, plant and equipment with carrying amount of BGN 11,105 thousand are mortgaged or pledged as collaterals under bank loans, granted to the Group and to unrelated parties, under credit limit agreements for issuance of bank guarantees.
In 2018 the Group has acquired trade sites - petrol stations and storage facilities on purpose to sell them. As at March 31, 2019 the carrying amount of the available in the balance sheet non-current assets, acquired on purpose to sell them subsequently is BGN 3,459 thousand.
Investment property
The investment properties of the Group, consisted of a land and a building, are part of aggregated assets for BGN 1,500 thousand, which serve as a collateral for a credit limit under contract for revolving credit line signed in 2016.
Leases
The Group has adopted IFRS 16 Leases (issued on January 13, 2016), endorsed by the EU on October 31, 2017 and published in Official newspaper on November 9, 2017, for the first time in the financial statements for the year, beginning on January 1, 2019. The Group chooses to apply a modified retrospective approach, as the cumulative effect of the appliance is recognised to the date of the initial appliance of IFRS 16 in the beginning balance of the equity and a comparing information is not recalculated. The expected effect on the financial statements is related to irrevocable contracts for operating leases under which the Group is lessee and therefore the recognition of new assets and new liabilities.
The Group recognizes the liability on the lease contract to the date of the initial appliance of the IFRS 16 for the irrevocable lease contracts, classified before as an operating lease according to IAS 17 at present value of the outstanding lease payments, discounted with the differential interest rate to the date of the first appliance. The "right to use" asset will be recognised right before the date of the initial appliance as an amount in the statement of financial position equal to the liability under the lease contract, corrected with the sum of all paid in advance or accrued lease payments related to this lease contract.
The Group will choose to use the exclusions, provided by the Standard for lease contracts, which ended within 12 months and lease contracts for which the base asset is with low value. The analysis of the terms of the main rent contracts for petrol stations shows that they should be treated as short-term within the scope of the exclusion, because they do not have a guaranteed period, the rent price is determined for six months periods, and both parties have the right to cease the contract for any petrol site with one to three months advance notice without any onerous sanctions, that would justify the Group's assessment of the probability of exercising the termination option by landlords as unlikely.
Loans Granted
In January 2019 the Group granted a cash loan to an unrelated party with a credit limit up to BGN 5,500 thousand, in tranches for the period until December 31, 2019 at 6.7% interest rate. As at March 31, 2019 the Group has receivables at the amount of BGN 2,920 thousand principal and BGN 70 thousand interest.
In February 2018 the Group granted a cash loan to an unrelated party at the amount of BGN 2,000 at 6.7% annual interest rate and repayment term until December 31, 2018. With annexes from the end of 2018 the credit limit was increased to BGN 3,500 thousand and the loan term was prolonged to December 31, 2019. As at March 31, 2019 the granted funds are at the amount of BGN 2,060 thousand principal and BGN 133 thousand interest.
In March 2018 the Group entered into an agreement for granting a loan to unrelated party at the amount of BGN 1,961 thousand at 5.5% annual interest and repayment period until December 31, 2018. At the end of 2018, according to a signed trade agreement between the parties, the loan was partially offset with outstanding opposite trade liabilities under an agreement for goods supplies. With an additional agreement from December 2018 the term of loan agreement was prolonged until December 31, 2019. In 2019 the Group continues to offset the receivables with due trade liabilities under the agreement for goods supplies. As at March 31, 2019 the Group reports receivables under this loan at the amount of BGN 608 thousand principal and BGN 6 thousand interest.
In March 2018 the Group entered into an agreement for granting a cash loan to unrelated party with a credit limit up to BGN 300 thousand at 6.7% annual interest and repayment period until December 31, 2018. With an annex from the end of 2018 the term of the loan was prolonged until December 31, 2019. In 2019 the loan limit was increased, and as at March 31, 2019 the granted funds under this contract were BGN 312 thousand principal and BGN 12 thousand interest.
In August 2017, the Group signed two cash loan agreements, according to which the Group has a liability to grant to unrelated parties interest bearing loans up to BGN 4,000 thousand and up to BGN 500 thousand at 6.7% annual interest. Subsequently the terms of contracts are annexed. The initially contracted repayment period was extended to December 31, 2019. As at March 31, 2019 the carrying amounts of the receivables are BGN 4,589 thousand and BGN 555 thousand, respectively.
In November 2017 the Group signed two contracts for granting interest bearing loans with unrelated parties amounting up to BGN 5,050 thousand and up to BGN 6,150 thousand at 6.7% annual interest and term until December 31, 2019. As at March 31, 2019 the granted amounts under these contracts are BGN 4,806 net of impairments principal and BGN 486 interest.
In December 2017, the Group signed a contract for granting cash loan, which requires the Group to grant interest bearing loan up to BGN 3,000 thousand to unrelated party at 6.7% annual interest and term until December 31, 2019. As at March 31, 2019 the contracted amount was entirely granted.
Cash and cash equivalents
As at March 31, 2019 the Group reported cash amounted to BGN 4,673 thousand.
In the notes under Art. 33a2 of Ordinance No2 from the Public Offering of Securities Act (POSA), as cash equivalents of BGN 3,934 thousand, is presented the cash collected from the trade sites as at the end of the reporting period and actually registered in the Group's bank accounts at the beginning of the next reporting period.
Registered capital
The Group's registered capital is presented at its nominal value. The registered capital of the Group represents the registered capital of the Parent company Petrol AD.
As at the end of the reporting period shareholders in the Parent company are as follows:
Shareholder March 31,
2019
Alfa Capital AD 28.85%
Yulinor EOOD 23.11%
Perfeto consulting EOOD 16.43%
Correct Pharm EOOD 10.98%
Trans Express Oil EOOD 9.86%
Corporate Commercial Bank AD 5.51%
VIP Properties EOOD 2.26%
The Ministry of Economy of the Republic
of Bulgaria 0.65%
Other minority shareholders 2.35%
----------
100.00%
==========
The Management of the Parent company has undertaken series of measures related to optimization of its capital adequacy. At several General Meetings of Shareholders (GMS) held in the period of 2016 - 2017 a decision for reverse-split procedure for merging 4 old shares with a nominal value of BGN 1 into 1 share with a nominal value of BGN 4 and consequent decrease of the capital of the Parent company in order to cover losses by decreasing the nominal value of the shares from BGN 4 to BGN 1, was voted. In March 2018, following a decision of the Lovech Regional Court, which repealed the refusal of the Commercial Register to register the decision voted on EGMS for merging 4 old shares with a nominal value of BGN 1 into 1 new share with a nominal value of BGN 4, the applied change was registered in CR resulting in registered capital of the Parent company of BGN 109 249 612, distributed in 27 312 403 shares with a nominal value of BGN 4 each. The change in the capital structure of the Parent company was registered also in Central Depositary AD. The submitted on April 2018 application for registration of the voted on EGMS decision for the second stage of the procedure of the Parent company's capital to be decreased by decreasing the nominal value of the shares from BGN 4 to BGN 1 in order to cover losses, was refused by the Commercial Register.
On EGMS of Petrol AD held on November 8, 2018 the decision to decrease the capital of the Parent company in order to cover losses by decreasing the nominal value of the shares from BGN 4 to BGN 1 was voted again. A refusal of the application for registration of the decision in CR was enacted, which was appealed by the Parent company within the statutory term. The minority shareholders disputed the decision of the EGMS and additionally to the refusal the application proceeding was postponed until the pronouncing of the Lovech Regional Court on the court proceedings, initiated on minority shareholders request. In March 2019 the Lovech Regional Court enacted a decision, which rules the CR to register the decrease of the capital after a resumption of the registration proceedings following the pronouncing on the legal proceedings initiated be the minority shareholders request.
In February 2019 was held a new EGMS, where the decision for reduction of capital was voted again and a decision for substitution of the deceased member of Supervisory Board Ivan Voynovski with Rumen Konstantinov was taken. A refusal on the application for registration of these circumstances in the file of the Parent company was enacted, which was appealed by the Parent company within the statutory term. In addition to the refusal, the registration proceeding was ceased on request of minority shareholders until the RC - Lovech rules on.
Current income tax liabilities and tax audits
As at March 31, 2019 the Group has no current tax liabilities.
In January 2017, the Parent company received a tax audit assessment on corporate tax revision for 2013 and VAT until October 2014 amounting to BGN 222 thousand principal and BGN 68 thousand interest.
In order to cease the enforcement of the appealed tax assessment in January 2017, a bank guarantee of BGN 350 thousand was issued. In order to secure the additionally calculated interest liabilities on this tax assessment, in February 2019 was issued an additional bank guarantee for BGN 60 thousand. In April 2019 the Administrative Court - Sofia city enacted a decision, which entirely repealed the obligation for VAT amounting to BGN 112 thousand principal and BGN 37 thousand interest and considerably reduced the corporate tax liability from BGN 110 principal and BGN 31 thousand interest to BGN 24 thousand principal and BGN 2 thousand interest.
In March 2017, the Parent company received a tax assessment due to an tax audit of corporate income tax for 2014 and VAT until June 2015 for BGN 663 thousand principal and BGN 138 thousand interest. The tax assessment is in process of being appealed. In order to suspend the enforcement of the appealed tax assessment, ordered by the Parent company, a bank guarantee in favor of National Revenue Agency for BGN 940 thousand was issued. The bank guarantee is partly secured by BGN 300 thousand cash.
In August 2017 the Director of "Appealing and tax-security practice" department issued a decision which change the appealed tax assessment of the Parent company on corporate income tax for 2014 and VAT until June 2015 and reduce the additional tax liabilities from BGN 663 thousand to BGN 65 thousand principal and from BGN 138 thousand to BGN 15 thousand interest. The issued bank guarantee to suspend the enforcement of the appealed tax audit assessment in favor of the National Revenue Agency of BGN 940 thousand, partly secured by BGN 300 thousand blocked cash, was replaced with new bank guarantee of BGN 94 thousand and the blocked cash was released. The rest of the decreased tax liabilities was appealed in court in higher judicial body. As a result in February 2019, following the final decision of Supreme Administrative Court (SAC) the court proceeding was partly won and the liabilities according to tax assessment reduced to BGN 13 thousand principal, related to additionally calculated VAT and BGN 5 thousand accrued interest. As at the date of preparation of these consolidated financial statements the liability is fully paid and the bank guarantee released and given back by National Revenue Agency (NRA). The liabilities are accounted as correcting events as at December 31, 2018 and are recognised in the result for 2018.
In November 2017 the issued tax assessment from March 2016 on the security contributions tax audit for BGN 543 thousand principal and BGN 248 thousand interest, appealed entirely by the Parent company as unjustified and secured by a bank guarantee of BGN 800 thousand, was entirely repealed due to decision of Administrative Court - Sofia city. The tax administration appealed the decision and SAC repealed the decision of AC - Sofia city and returned the court proceeding to the initial judicial body for new examination. In order to secure the additionally calculated interest liabilities on this tax assessment, an additional bank guarantee for BGN 255 thousand was issued in February 2019.
Loans and borrowings
As at March 2019 the Group has total liabilities under received bank, debenture and trade loans of BGN 46,609 thousand, including BGN 1,213 thousand current liabilities.
In December 2018 the Group entered into an agreement for sale of receivables with commercial bank under a contract for sale of receivables (standard factoring) with total limit of advance payment up to BGN 550 thousand and Saving-based Interest Rate (SIR) for BGN plus added amount of 3,7157 points, but not less than 4% annually on the received advance payment. As at December 31 2018 the Group received an advance payment of BGN 280 thousand on this factoring agreement. In January 2019 the factoring agreement was ceased and the Group has no utilized limits on it.
In February 2019 the Group entered into a factoring agreement with a commercial bank with special terms with no right of regress for approved in advance receivables with maximum repayment period of 120 days from the date of invoice issuance with advance payment of 90% of the amount of the transferred receivables with added VAT. The commission consideration for factoring services is 0.35% on the total amount of the transferred invoices plus additional annual fees. The interest price for the advance payments is Basis Deposit Index for Entities + 1,95%, daily accrued daily and monthly withdrawn at the end of each calendar month. As at March 31, 2019 the Group has transferred receivables upon this factoring contract at the amount of BGN 400 thousand.
Bank loans
In July 2016, the Parent company entered into an investment loan agreement, prepaying the liabilities on finance lease contract from November 2015. Collateral of the loan is mortgage of property, acquired through finance lease and pledge of receivables. The term of the contract is May 2022 and the contracted interest rate is 3mEuribor+5.25%. As at March 31, 2019 the liabilities under the bank loan amounting to BGN 575 thousand current liabilities and BGN 1,136 thousand non-current liabilities.
In September 2018 the Parent company entered into a credit-overdraft agreement on current account in commercial bank, intended for working capital with maximum allowed amount of BGN 2,000 thousand and repayment period until January 31, 2019 and contracted interest rate as Savings-based Interest Rate (SIR) plus added amount of 6,1872 points, but cumulatively not less than 6.5% annually. The credit is secured with a special pledge of its goods in turnover at the amount of BGN 2,418 thousand, representing oil products and with pledge of receivables on bank accounts. In December 2018, as a result of a signed annex to an agreement from 2016 for revolving credit line with the same bank, the Group negotiated an increase of the amount of the credit line of BGN 9,500 thousand with an additional amount of BGN 11,500 thousand, by which the total amount of credit line rose to BGN 21,000 thousand. The line is separated in total limit of BGN 13,500 for issuance of bank guarantees and BGN 7,500 for refinancing of the received credit-overdraft of BGN 2,000 thousand and the rest for working capital. The increased amount of the credit limit on the revolving credit line is covered additionally with establishment of mortgages and pledges of properties, plants and equipment with book value of BGN 3,693 thousand as at March 31, 2019 and special pledge on goods in turnover, representing oil products with book value of BGN 2,421 thousand as at March 31, 2019.
Debenture loans
In October 2006, the Parent company issued 2,000 registered transferable bonds with fixed annual interest rate of 8.375% and emission value of 99.507% of the nominal, which is determined at EUR 50,000 per bond. The principal is due in one payment at the maturity date. The bond term is 5 years and the maturity date is in October 2011. At the general meetings of the bondholders conducted in October and December 2011, it was decided to extend the term of the issue until January 26, 2017. On 23 December 2016, a procedure for extension of the bond issue to 2022 and reduction of the interest rate in the range from 5.5% to 8% was successfully completed.
After the prolongation of the debenture loan, the annual effective interest rate is 6.78%. The purpose of the bond issue is to provide funds for working capital, financing of investment projects and restructuring of the previous debt of the Group.
The debenture loan liabilities are presented in the statement of financial position at amortized cost. As at March 31, 2019 the nominal value of the debenture loan is EUR 18,659 thousand.
Operating lease agreements
The Group is lessee under operating lease agreements. The recognised expenses for rent of fuel stations, rented under operating lease for the period ended March 31, 2019 are at the amount of BGN 3,958 thousand.
Subsidiaries
The Parent company (the Controlling company) is Petrol AD. The subsidiaries included in the consolidation, over which the Group has control as at March 31, 2019 are as follows:
Subsidiary Main activity Share (%)
of the Group
Petrol Properties Trading with movable assets
EOOD and real estates 100%
Varna Storage EOOD Trade with oil and oil products 100%
Petrol Finance EOOD Financial and accounting services 100%
Elit Petrol - Lovech
AD Trade with oil and oil products 100%
Acquisition, management and
Lozen Asset AD exploitation of property 100%
Production and trading with
goods and services, investments
Storage Invest EOOD and intermediary activities 100%
Processing and trading with
Storage Oil EAD oil and oil products 100%
Petrol Finances OOD Financial and accounting services 99%
Petrol Technologies
OOD IT services and consultancy 98,80%
Contingent liabilities, including information for newly arising significant liabilities for the reporting period
As at March 31, 2019 the Group has contingent liabilities, including issued mortgages and pledges of property, plant and equipment, which serve as a collateral for bank loans granted to the Group and unrelated parties and credit limits for issuance of bank guarantees with total carrying amount of BGN 11,105 thousand. The Group is a joint co-debtor under loan agreement of unrelated supplier, including limit for overdraft for BGN 25,000 thousand and stand-by credit for issuance of bank guarantees in favour of Customs Agency amounted to BGN 20,000 thousand. The total amount of the utilized funds and issued bank guarantees of all borrower's exposures to the Bank shall not exceed BGN 45,000 thousand. In relation to this credit agreement, the Group has established a special pledge on its cash in the bank account opened in the bank-creditor with total amount of BGN 8 thousand as at March 31, 2019 and a special pledge on receivables from contractors for BGN 4,000 thousand average monthly turnover.
The Group has contingent liability, which secured the enforcement of the contract for storage of third-party fuels amounted to BGN 30,000 thousand.
The Group bears a joint obligation according to a contract for debt from January 2017 on an obligation of a subsidiary until February 2018 for BGN 2,346 thousand as at March 31, 2019.
Under a bank agreement for revolving credit line signed in 2016, bank guarantees were issued for a total amount of BGN 9,850 thousand as at March 31, 2019, including BGN 5,950 thousand in favor of third parties - Group's suppliers, BGN 1,465 thousand in favor of National Revenue Agency, for issuance of appealed by the Parent company revision acts and BGN 2,435 thousand to secure own liabilities related to contracts under the Public Procurement Act. The bank agreement is secured by mortgages of property, pledge of plants and equipment, pledge of all receivables on bank accounts of the Parent company and a subsidiary. In July 2017 the credit limit under the revolving credit line was increased from BGN 8,500 thousand to BGN 9,500 thousand. Assets amounted to BGN 1,500 thousand, owned by a subsidiary, additionally secured the credit limit. With annex from December 2018 the limit is increased to BGN 21,000 thousand and is additionally secured with mortgages and pledge of property, plants and equipment, and special pledge of goods in turnover, namely oil products with book value of BGN 2,421 thousand as at March 31, 2019.
In December 2018 the Group entered into an agreement for sale of receivables with commercial bank under a contract for sale of receivables (standard factoring) with total limit of advance payment up to BGN 550 thousand and with drawn amount as at December 31, 2018 of BGN 280 thousand, secured with pledge of receivables on bank accounts. In January 2019 the factoring agreement was ceased and the Group has no utilized limits on it.
As a collateral of an investment loan signed in July 2016, a mortgage of property, acquired through the investment loan and a pledge of receivables, arising from opened bank accounts of the Parent company to the amount of the outstanding balance of the loan, which as at the March 31, 2019 amounting to BGN 1,704 thousand.
In September 2018 the Group entered into a short-term debt contract for overdraft on current account intended for working capital. Following the refinancing as a result of the increased credit limit of the revolving credit line, the overdraft is fully repaid with no obligations as at March 31, 2019.
There is a pending litigation in relation to a signed in 2015 guarantee contract of the liabilities of a subsidiary until February 2018, arising of a cession contract with outstanding book value as at March 31, 2019 of BGN 245 thousand. The cash granted as a collateral under Art. 180 and Art. 181 of Law on Obligations and Contracts (LOC) amounting to BGN 245 thousand is disclosed as other receivables on guarantees. A request to release the cash was deposited, but the court dismissed the appeal.
In the previous reporting periods companies from the Group have entered into the debt under two loan agreements of a subsidiary with a bank-creditor (until December 2015) for USD 15,000 thousand and USD 20,000 thousand, respectively. In 2015 the bank -creditor acquired court orders for immediate execution and receiving orders against the subsidiaries - joint debtors. In relation to the complains filed by the subsidiaries, the competent court has revoked the immediate enforcement orders and has invalidated the receiving orders. In October and December 2015 the creditor has filed claims under Art. 422 of Civil Procedure Code (CPC) against the subsidiaries for the existence of the receivables under each loan agreement. The court proceedings of the creditor are still pending.
In December 2016 the first instance court decreed a decision (the Decision) which admit for established that the bank has a receivable amounted to USD 15,527 thousand from the subsidiaries - joint debtors, arising from a signed loan agreement for USD 15,000 thousand. With the same decision the court has ordered the joint-debtors to pay BGN 411 thousand to the bank - creditor for legal advisory fees and court dispute expenses and BGN 538 thousand state fee in favor of the judiciary state for the ordered proceedings and BGN 538 thousand state fee for claim proceedings. In January 2017, the co-debtors have filed in time appeals against the court decision, because of that the decision did not come into force. As at the date of the preparation of these explanatory notes, the dispute is pending in the appeal court. The Group's Management considers that there are grounded chances the Decision to be entirely repealed.
As at the date of the preparation of these explanatory notes, the filed proceedings against the subsidiaries - joint debtors for estimation of the bank receivables due to the loan agreement for USD 20,000 thousand is pending before the first-instance court. The Management expects favorable decision by the competent court. As at the date of the preparation of this financial report the Parent company sold its interest in one of co-debtor subsidiaries and the potential risk for the Group is reduced to the court proceedings against the second subsidiary.
A creditor of a subsidiary (until December 2015) unreasonably claimed in court the responsibility of the Parent company under a contract of guarantee for liabilities arising from a contract for a framework credit limit as a result of that the bank accounts of the Parent company amounting to USD 29,983 thousand were garnished. This claim was disputed in court by Petrol AD because the liability as guarantor has not occurred and / or extinguished pursuant to Art. 147, paragraph 2 of the Law on Obligations and Contracts (LOC). At the time of conclusion of the guarantee deadline of the arrangements between the lender and subsidiary contractual framework for credit limit was July 1, 2014.
The term of the framework credit limit was extended without the consent of the customer, therefore the responsibility of the latter has fallen by six months after initially agreed period, during which the creditor has brought an action against the principal debtor. The term of Art. 147, paragraph 1 of the Law on Obligations and Contracts (LOC) is final and upon its expiration the company's guarantee has been terminated, so the objection of the Parent company was granted by the court and imposed liens on bank accounts lifted.
After the writ of execution, pursuant to order proceedings, was canceled on which were imposed liens on bank accounts of the Parent company, the creditor has initiated legal claim proceedings under Art. 422 of the Civil Procedure Code (CPC) to establish the same claims against the subsidiary (until December 2015) and the guarantor Petrol AD. In these proceedings the objections are repeated, that liability as guarantor has not occurred and / or extinguished pursuant to Art. 147, par. 2 of the LOC, and therefore the Management expects that the claim of the creditor against the Parent company will be dismissed permanently by a court decision on those cases. At present, the claim proceedings are ceased, due to preliminary legal dispute, which is important for the proper solving of the case.
Other significant events occurred during the reporting quarter
As it is disclosed above, the Group's Management has taken a series of measures to optimize the capital adequacy of the Parent company. As a result of several general meetings of shareholders hold in 2016 and 2017, a decision for reverse split procedure was voted for merging 4 old shares with nominal value of BGN 1 into 1 new share with nominal value of BGN 4 and subsequent decrease of the Parent company's capital to cover losses by decreasing the nominal value of the shares from BGN 4 to BGN 1. In March 2018, following a decision of the Lovech Regional Court, which repealed the refusal of the Commercial Register to register the decision voted on EGMS for merging 4 old shares with nominal value of BGN 1 into 1 new share with nominal value of BGN 4. The applied change was registered in Commercial Register (CR) resulting in registered capital of the Parent company of BGN 109 249 612, distributed in 27 312 403 shares with nominal of BGN 4 each.
The change in the capital structure of the Parent company was registered also in Central Depositary AD. In the beginning of April 2018 the application was submitted for registration of the voted on EGMS decision for the second stage of the procedure for decreasing the Parent company's capital by decreasing the nominal value of the shares from BGN 4 to BGN 1 in order to cover losses. As at the date of preparation of the actual explanatory notes, the applications is rejected by the CR.
On EGMS of Petrol AD held on November 8, 2018 the decision to decrease the capital of the Parent company in order to cover losses by decreasing the nominal value of the shares from BGN 4 to BGN 1 was voted again. A refusal of the application for registration of the decision in CR was enacted, which was appealed by the Parent company within the statutory term. The minority shareholders disputed the decision of the EGMS and additionally to the refusal the application proceeding was postponed until the pronouncing of the Lovech Regional Court on the court proceedings, initiated on minority shareholders request. In March 2019 the Lovech Regional Court enacted a decision, which rules the CR to register the decrease of the capital after a resumption of the registration proceedings following the pronouncing on the legal proceedings initiated be the minority shareholders request.
In February 2019 was held a new EGMS, where the decision for reduction of capital was voted again and a decision for substitution of the deceased member of Supervisory Board Ivan Voynovski with Rumen Konstantinov was taken. A refusal on the application for registration of these circumstances in the file of the Parent company was enacted, which was appealed by the Parent company within the statutory term. In addition to the refusal, the registration proceeding was ceased on request of minority shareholders until the RC - Lovech rules on.
III. Disclosure of transactions with related parties
The total amount of the accrued remunerations of the members of Management and Supervisory Board of the Parent company, included in the personnel expenses, amounted to BGN 336 thousand, and the unsettled liabilities as at March 31, 2019 are at the amount of BGN 116 thousand.
In the first quarter of 2019 transactions with related parties have been not carried out.
IV. Risks and uncertainties ahead of the Group for the rest of the financial year
Macroeconomic environment
The Petrol Group's activity is influenced by the general economic condition of the country and in particular the degree of the successful adoption of the market-oriented economic reforms by the government, changes in the gross domestic product (GDP) and the purchasing power of the Bulgarian customers. In the long term the change in the fuels consumption in the country is commensurate with the GDP.
As a result of the global financial and economic crisis, the Bulgarian economy has been experiencing a continuing decline in its development which affects a wide range of industries. This leads to a noticeable deterioration in cash flows and reduction in income and eventually - to a significant deterioration of the economic environment in which the Group operates. In addition, there is a significant increase in price risk, market risk, credit risk, liquidity risk, interest rate risk, operating risk and other types of financial risks, which the Group is exposed to.
As a result, there has been an increase in uncertainty about the customers' ability to repay their obligations in accordance with the agreed terms. Therefore, the amount of impairment losses on loans granted, sales receivables and on the values of other accounting estimates, might differ substantially in future reporting periods from the reported ones in these consolidated financial statements. The Management of the Group applies the necessary procedures to manage these risks.
Legislature
The Parent company is supervised by a number of regulatory bodies in the country and a potential change in the regulatory framework, regulating the Parent company's activity may have a negative impact on the Group's financial results. In July 2018 the Government of the Republic of Bulgaria adopted a new Law for Administrative Regulation of the Economic Activities, Related to Petrol and Petroleum Products, which aims to provide security and predictability in trading with petrol and petroleum products and increase the energy security of the country. Due to its core business, this law will affect the Group.
Suppliers
Due to the specific of the primary business of Petrol Group, namely retail and wholesale trading with fuels, the Group's fuels supplies are provided by a small number of suppliers, as a result of which the Group is at risk of discontinuation of relationships with key suppliers, which may lead to a short-term depletion of inventories and trading activity difficulties;
Competition
Retail trading with petroleum products is carried out in highly competitive market as the products offered in the sector are homogenous and entire substitutes of the offered products by other companies in the sector. In addition, the regulatory framework stipulates an exact specification of the minimum requirements of the fuels offered at the trade stations and all market participants should comply with the imposed legal requirements;
Price risk
The Group is at risk of frequent and sharp changes in prices of fuels and non-petroleum goods. Because of that, the future financial results may diverge significantly from the expectations of the Group's Management. Any future sharp fluctuations in the price of fuels and non-petroleum goods may lead to a deterioration of the financial position of the Group;
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return. Because of the nature of its activity, the Group is exposed to price and currency risk.
The Group is exposed to the risk of change in currency rate, movement in the interest rates and the prices of the capital instruments, which may impact the Group's financial instruments or the value of its investments.
Interest rate risk
Risks arising from the increase in the price of the Group's financing;
Credit risk
The risk of inability of the Group's trade partners to fulfill their contractual obligations, which may lead to losses for the Group;
Exceptional costs
There is a risk of incurring unforeseeable costs, which to affect negatively the financial position of the Group;
Political risk
Risks to the Group arising from global and regional political and economic crises;
Liquidity risk
Liquidity risk is the risk that the Group may not be able to meet its financial obligations when they fall due. The policy is aimed at ensuring sufficient liquidity with which to serve liabilities when they fall due, including abnormal and emergency situations.
Georgi Tatarski Milko Dimitrov Prepared by Elena Pavlova Executive Director Executive Director - Teofanova
May 30, 2019
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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June 26, 2019 09:22 ET (13:22 GMT)
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