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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 2022 to Jun 2024
TIDM74JJ
RNS Number : 1555I
Petrol AD
30 November 2022
PETROL AD
Legal Entity Identifier (LEI): 4851003SBNLWFQX4XS80
30 November 2022
Petrol AD ("74JJ"), announces the publication of its
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
OF PETROL GROUP
AND CONDENSED EXPLANATORY NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODED SEPTEMBER 30, 2022
(This document is a translation of the original Bulgarian document,
in case of divergence the Bulgarian original shall prevail)
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
For the period ended September 30
Hot Features
Premium
2022 2021
BGN'000 BGN'000
restated
Continuing operations
Revenue 559,208 362,770
Other income 5,144 3,664
Cost of goods sold (504,971) (317,465)
Materials and consumables (5,525) (2,911)
Hired services (25,208) (25,791)
Employee benefits (15,921) (15,499)
Depreciation and amortisation (2,444) (2,610)
Reversal of (impairment) losses (39) 6
Other expenses (582) (811)
Finance income 1,015 1,064
Finance costs (3,316) (3,371)
Profit (loss) before tax 7,361 (954)
--------- ---------
Tax income (expense) (159) 63
--------- ---------
Profit (loss) for the period from
continuing operations 7,202 (891)
--------- ---------
Discontinued operation
Profit (loss) from discontinued operation
(net of income tax) (273) 876
Profit (loss) for the period 6,929 (15)
--------- ---------
Total comprehensive income for the
period 6,929 (15)
Profit (loss) attributable to:
Owners of the Parent company 6,929 (15)
Non-controlling interest - -
Profit (loss) for the period 6,929 (15)
========= =========
Total comprehensive income attributable
to:
Owners of the Parent company 6,929 (15)
Non-controlling interest - -
--------- ---------
Total comprehensive income for the
period 6,929 (15)
========= =========
Profit (loss) per share (BGN) from
continuing operations and discontinued
operation 0.25 (0.00)
Profit (loss) per share (BGN) from
continuing operations 0.26 (0.03)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Sept. 30 Dec. 31
2022 2021
BGN'000 BGN'000
Non-current assets
Property, plant and equipment and
intangible assets 38,905 40,632
Investment properties 1,613 1,650
Right-of-use asset 5,344 6,851
Goodwill 57 57
Deferred tax assets 2,388 2,465
Trade loans granted 2,808 3,708
Total non-current assets 51,115 55,363
--------- ---------
Current assets
Inventories 25,681 20,866
Loans granted 19,990 18,423
Trade and other receivables 36,670 28,349
Cash and cash equivalents 2,378 4,027
Total current assets 84,719 71,665
--------- ---------
Total assets 135,834 127,028
========= =========
Equity
Registered capital 109,250 109,250
Reserves 42,635 43,278
Accumulated loss (141,627) (149,199)
--------- ---------
Total equity attributable to the
owners of the Parent company 10,258 3,329
--------- ---------
Non-controlling interests 24 24
--------- ---------
Total equity 10,282 3,353
---------
Non-current liabilities
Loans and borrowings 49,801 41,724
Liabilities under lease agreements 3,797 4,799
Employee defined benefit obligations 805 870
Total non-current liabilities 54,403 47,393
--------- ---------
Current liabilities
Trade and other payables 67,797 73,183
Loans and borrowings 1,797 1,139
Liabilities under lease agreements 1,451 1,766
Income tax liability 104 194
Total current liabilities 71,149 76,282
--------- ---------
Total liabilities 125,552 123,675
--------- ---------
Total equity and liabilities 135,834 127,028
========= =========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Equity attributable to the owners of the Non-controlling Total
Parent company interests equity
Registered General Reval. Accumulated Total
capital reserves reserve profit
(loss)
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
Balance at
January
1, 2021 109,250 18,864 24,818 (124,153) 28,779 23 28,802
Changes in
equity
for 2021
Comprehensive
income
for the period
Loss for the
period - - - (25,387) (25,387) 1 (25,386)
Other
comprehensive
income - - - (63) (63) - (63)
---------
Total
comprehensive
income - - - (25,450) (25,450) 1 (25,449)
----------- --------- --------- ------------ ----------- ---------------- ----------
Transfer of
revaluation
reserve of
sold assets
to retained
earnings,
net of taxes - - (404) 404 - - -
----------- --------- --------- ------------ ----------- ---------------- ----------
Balance at
December
31, 2021 109,250 18,864 24,414 (149,199) 3,329 24 3,353
=========== ========= ========= ============ =========== ================ ==========
Changes in equity for the
period of 2022
Comprehensive
income
for the period
Profit for the
period - - - 6,929 6,929 - 6,929
Total
comprehensive
income - - - 6,929 6,929 - 6,929
----------- --------- --------- ------------ ----------- ---------------- ----------
Transfer of
revaluation
reserve of
sold assets
to retained
earnings,
net of taxes - - (643) 643 - - -
Balance at
September
30, 2022 109,250 18,864 23,771 (141,627) 10,258 24 10,282
=========== ========= ========= ============ =========== ================ ==========
CONSOLIDATED STATEMENT OF CASH FLOWS
For the period ended September 30
2022 2021
BGN'000 BGN'000
Cash flows from operating activities
Receipts from customers 721,736 534,891
Payments to suppliers (734,529) (470,500)
VAT and excise paid to the budget, net (2,038) (42,070)
Payments related to personnel (14,193) (15,796)
Income tax paid (143) -
Other cash flows from operating activities,
net 17,985 1,621
---------- ----------
Net cash flows from operating activities (11,182) 8,146
Cash flows from investing activities
Payments for purchase of property, plant
and equipment (2,129) (643)
Proceeds from sale of property, plant and
equipment 5,919 1,818
Payments for loans granted (3,469) (535)
Proceeds from loans granted 3,043 439
Interest received on loans and deposits 713 7
Payments for investments acquired (25)
Proceeds from other investments 3 20
Net cash flows used in investing activities 4,055 1,106
Cash flows from financing activities
Proceeds from loans 9,600 152
Repayment of loans and borrowings (513) (1,957)
Lease payments (1,649) (3,591)
Interest, bank fees and commissions paid,
net (1,917) (3,490)
Other cash flows from financing activities,
net (287) (210)
Net cash flows from financing activities 5,234 (9,096)
Net decrease in cash flows during the period (1,893) 156
Cash at the beginning of the period 4,027 2,773
Effect of movements in exchange rates 203 (11)
---------- ----------
Cash as per cash flow statement at the
end of the period 2,337 2,918
Restricted cash 41 51
---------- ----------
Cash as per statement of financial position 2,378 2,969
========== ==========
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 Economy and Industry and individuals.
The main activity of Petrol AD and its subsidiaries (the Group) is related with trading of petrol products, non-oil products, merchandise and services.
These explanatory notes are prepared according to the requirements of Art. 100o1, par.5 of the Public Offering of Securities Act (POSA) and Appendix 4 to the Ordinance No 2 of November 09, 2021 for initial and subsequent disclosure of information during public offering of securities and admission of securities to trading on a regulated market by the public companies and other issuers of securities, and represent information about important events occurred during the third quarter of 2022. The explanatory notes reflect their influence on the results in the statements for the third quarter of 2022 and describe of the main risks and uncertainties, which stay ahead of the Petrol Group for the rest of the financial year and comprise information for transactions with related parties and/or interested parties, as well as information for emerging significant receivables and/or payables during the same period.
II. Information on important events, occurred in the third quarter of 2022 and cumulatively from the beginning of the financial year to the end of the current quarter
General
These interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the Commission of the European Union (EU).
These interim consolidated financial statements have been prepared under the historical cost convention, except for provisions, assets and liabilities under IFRS 16 reported at the present value of expected future payments. When compiling it, the same accounting policy and calculation methods applied in the last annual financial statement have been followed.
Property, plant, equipment, intangible assets and non-current assets held for sale
From January 1, 2020 the Group has changed its approach to the subsequent valuation of property, plant and equipment under the revaluation model under IAS 16 and intangible assets under IAS 38. The revaluation model provides, after initial recognition for an asset, any property, plant and equipment whose fair value may to be measured reliably, to be carried at revalued amount, which is the fair value of the asset at the date of revaluation less any subsequent accumulated depreciation as well as subsequent accumulated impairment losses. The revalued (to fair) value of property, plant and equipment and intangible assets was initially determined through a market valuation by an independent appraiser. Revaluations should be carried out at sufficiently regular intervals to ensure that the carrying amount does not differ materially from the fair value that would be determined using the fair value at the statement of financial position date.
As at September 30, 2022 the Group has property, plant, equipment and intangible assets with total carrying amount of BGN 38,905 thousand.
Property, plant and equipment with a carrying amount of BGN 20,906 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.
Investment property
The investment properties of the Group, representing a land and a building, were acquired in December 2016 through a business combination. The carrying amount of the investment property is the maximum approximation of their fair value, which as at September 30, 2022 is BGN 1,613 thousand. The Group measures the fair value of investment property for disclosure purposes using an appraisal of an independent appraiser done using the methods of market comparison, rental income capitalization and the method of depreciated replacement cost. As at September 30, 2022 the fair value of the investment properties is BGN 1,987 thousand. The investment properties are part of a set of assets serving to secure liabilities of up to BGN 1,500 thousand under a revolving credit line agreement signed in 2016.
Leases
The consolidated statement of financial position as at September 30, 2022 presents the following items and amounts related to lease agreements:
Consolidated statement of financial position September
30, 2022
BGN'000
Right-of-use assets, incl.: 5,344
Properties (lands and buildings) 5,287
Transport vehicles 37
Machinery, plants and equipment 20
Liabilities under leases, incl.: (5,248)
Current liabilities (1,451)
Non-current liabilities (3,797)
The Group has chosen to use the exclusions, provided by the Standard for lease contracts which ended within 12 months and lease contracts for which the base asset is with low value. The analysis of the terms of the main rent contracts for petrol stations shows that they should be treated as short-term within the scope of the exclusion, because they do not have a guaranteed period, the rent price is determined for six months periods, and both parties have the right to cease the contract for any petrol site with one to three months advance notice without any onerous sanctions, that would justify the Group's assessment of the probability of exercising the termination option by landlords as unlikely.
Loans Granted
As at 30 September, 2022 the Group reports receivables on short-term trade loans, net of impairment at the total amount of BGN 22,798 thousand, including BGN 19,990 thousand short-term receivables. The loans are granted to unrelated parties with the following interest rates and maturity:
Debtor Net Receivables Principal Interest Annual
as at Accrued interest
Sept.30,2022 impairment
BGN'000 %
BGN'000 BGN'000 BGN'000 Maturity
31 December
Company 8,441 8,107 1,384 (1,050) 6.70% 2022
31 December
Company 4,398 4,045 1,105 (752) 6.70% 2022
31 December
Company 4,355 3,555 1,547 (747) 5.00% 2025
31 December
Company 3,142 3,000 888 (746) 5.00% 2022
31 December
Company 884 907 89 (112) 6.70% 2019
31 December
Company 718 715 3 - 5.00% 2022
31 December
Company 429 - 429 - 6.70% 2019
Company 379 314 65 - 7.00% 7 August 2022
31 December
Company 52 121 5 (74) 5.00% 2022
28 October
Company - 5,190 - (5,190) 0.00% 2015
28 October
Company - 2,210 - (2,210) 9.50% 2015
Company - 1,500 133 (1,633) 8.75% 17 July 2015
31 December
Company - 1,263 303 (1,566) 6.70% 2022
21 January
Company - 44 - (44) 9.50% 2017
31 December
Company - 22 3 (25) 6.70% 2022
26 August
Company - 12 1 (13) 8.50% 2015
--------- ---------------- ---------- ---------- --------------
22,798 31,005 5,955 (14,162)
========= ================ ========== ========= ============ ========== ==============
Cash and cash equivalents
As at September 30, 2022 the Group reported cash amounted to BGN 2,378 thousand as BGN 41 thousand are blocked as collateral under enforcement cases.
In the notes under Appendix No4 of Ordinance No2 and the Public Offering of Securities Act (POSA), as cash equivalents of BGN 1,344 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 Sept. 30,
2022
Alfa Capital AD 28.85 %
Yulinor EOOD 23.11 %
Perfeto Consulting EOOD 16.43 %
Trans Express Oil EOOD 9.82 %
Petrol Bulgaria AD 7.05 %
Corporate Commercial Bank AD 5.49 %
Storage Invest EOOD 3.66 %
VIP Properties EOOD 2.02 %
The Ministry of Economy of the Republic of Bulgaria 0.65 %
Other minority shareholders 2.92 %
----------
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 new 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 Parent company's capital after a resumption of the registration proceedings following the pronouncing on the legal proceedings initiated be the minority shareholders request. At present the court proceedings requesting a cancellation of the decisions taken on EGMS in November 2018 are pending.
In February 2019 was held a new EGMS, where the decision for reduction of capital was voted again and a decision for substitution of the deceased member of Supervisory Board Ivan Voynovski with Rumen Konstantinov was taken. A refusal on the application for registration of these circumstances in the file of the Parent company was enacted, which was appealed by the Parent company within the statutory term. In addition to the refusal, the registration proceeding was ceased on request of minority shareholders until the RC - Lovech rules on. In May 2019 the Lovech Regional Court enacted a decision, which repealed the enacted refusal and turn back the case to the Registry Agency for registration of the application after a resumption of the ceased registration proceedings. At present, the court proceedings requesting a cancellation of the decisions taken on EGMS in February 2019 are pending.
Current income tax liabilities and tax audits
As at September 30, 2022 the Group has current corporate tax liabilities of BGN 104 thousand.
In August 2022 the Parent company received an ordinance for tax audit of the declared and paid corporate tax and taxes on expenses for the period 2016-2021 and value added tax for the period December 2016 - July 2022. As at the time of the issuance of these explanatory notes the tax audit is not completed.
Loans and borrowings and factoring liabilities
As at September 30, 2022 the Group has total liabilities under received bank, debenture and trade loans of BGN 51,598 thousand, including BGN 1,797 thousand current liabilities.
Bank loans
In July 2016, the Parent company entered into an investment loan agreement, prepaying the liabilities on finance lease contract from November 2015. Collateral of the loan is a 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 per cent. In April 2020 the Group renegotiated the terms of the investment loan agreement, as the interest rate on regular principal was reduced to 3mEuribor + 3.5 per cent, but not less than 3.5 per cent. With an annex from the beginning of 2021, the term of the loan has been extended until September 30, 2022. As at the date of the preparation of these explanatory notes the credit is fully paid.
In September 2018 the Group 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 per cent annually. The credit is secured with a special pledge of its goods in turnover, 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 and special pledge on goods in turnover, representing oil products. In June 2019 the loan was partially repaid and the limit for working capital decreased from BGN 7,500 thousand to BGN 7,000 thousand as at December 31, 2020. In January 2020 the Parent company renegotiated the terms of the used credit line granted to it by a commercial bank under a revolving credit line agreement and achieved a reduction of the annual compound interest of SIR + 5,2802 per cent, but not less than 5.5 per cent. In March 2021 and September 2021 the Group repaid BGN 1,650 thousand principal of this tranche of the credit line. In December 2021 the bank granted additional tranche for BGN 100 thousand and the repayment term is extended to December 15, 2024. As at September 30, 2022 the Group has a principal liability under this loan for BGN 5,400 thousand.
In April 2022 the Parent company negotiated an increase for working capital under this credit line by a new tranche with a maximum amount of BGN 4,500 thousand, as with the same amount the line for bank guarantees was decreased. The amount is received and as at September 30, 2022 the Group has an principal liability under this tranche for BGN 4,500 thousand. The contracted annual interest is Savings-based Interest Rate (SIR) plus added margin of 4.174 points, but not less than 4.25 per cent. The payment term is until December 16, 2024.
In June 2022 the Parent company negotiated another increase for working capital under this credit line by a new tranche with a maximum amount of BGN 3,600 thousand, as with the same amount the line for bank guarantees was decreased. The amount is received and as at September 30, 2022 the Group has an principal liability under this tranche for BGN 3,600 thousand. The contracted annual interest is Savings-based Interest Rate (SIR) plus added margin of 4.1764 points, but not less than 4.25 per cent. The payment term is until December 14, 2024.
On September 30, 2022 the Group received a letter from the bank-creditor for one-sided increase of the added margin to the interest rate by 0.5 per cent on the granted by the bank three tranches, due to changed interest environment and high inflation rates.
Debenture loans
In October 2006, the Parent company issued 2,000 registered transferable bonds with fixed annual interest rate of 8.375 per cent and emission value of 99.507 per cent of the nominal, which is determined at EUR 50,000 per bond. The purpose of the bond issue is to provide funds for working capital, investment projects financing and restructuring of previous Group's debt. The principal was due in one payment at the maturity date and the interest was paid once per year. At the general meetings of the bondholders conducted in October and December 2011, it was decided to extend the term of the issue until January 26, 2017. On December 23, 2016, a procedure for extension of the bond issue to 2022 and reduction of the interest rate in the range from 5.5 per cent to 8 per cent was successfully completed.
In September 2020, the Parent company successfully completed a procedure for renegotiation of the terms of the debenture loan. The maturity of the principal of the debenture loan is deferred until January 2027, and the agreed interest rate is reduced to 4.24 per cent per year, as the periodicity of the due interest (coupon) payments is every six months - in January and in July of each year until the maturity of the loan.
As at the date of preparation of these financial statements the nominal value of the debenture loan is EUR 18,659 thousand.
The liabilities under the debenture loan are disclosed in the statement of financial position at amortised cost. The annual effective interest rate after the term extension of the bond issue is 4.67 per cent. (incl. 4.24 per cent annual coupon rate).
Factoring
In February 2019 the Group entered into an agreement with a commercial bank for factoring with special terms and without regress for transferring of preliminary approved receivables with a maximum period of the deferred payments up to 120 days from the date of invoice issuance with a payment in advance of 90 per cent of the value of the transferred receivables including VAT. The commission for factoring services is 0.35 per cent of the total value of the transferred invoices plus additional annual taxes. The interest for the amounts paid in advance is Base Deposit Index for Legal Entities + 1.95 per cent, accrued daily and paid on monthly basis at the end of every calendar month. In November 2021 a new Annex for special terms with a regression right, decrease of the commission to 0.13 per cent on the total amount of the transferred invoices including VAT, and decrease of the interest to Base Deposit Index for Legal Entities + 1.60 per cent accrued daily and paid on monthly basis at the end of every calendar month, was signed. As at September 30, 2022, the Group has BGN 717 thousand exposure under this factoring agreement.
Operating lease agreements
The Group is lessee under operating lease agreements. As at September 30, 2022 the recognised rental expenses in the statement of profit or loss and other comprehensive income, include expense at the amount of BGN 8,442 thousand for renting of fuel stations under operating lease, which fall within the exceptions of IFRS 16 and which agreements include clause stipulating that both parties have the right to cease the agreement for each separate fuel station or as a whole with an immaterial penalty.
Subsidiaries
The Parent company (the Controlling company) is Petrol AD. The subsidiaries included in the consolidation, over which the Group has control as at September 30, 2022 and December 31, 2021 are as follows:
Subsidiary Main activity Ownership Ownership
interest interest
Petrol Properties Trading movable and immovable 100 per 100 per
EOOD property cent cent
Varna Storage Trade with petrol and petroleum 100 per 100 per
EOOD products cent cent
Petrol Finance Financial and accounting 100 per 100 per
EOOD services cent cent
Elit Petrol -Lovech Trade with petrol and petroleum 100 per 100 per
AD products cent cent
Lozen Asset AD Acquisition, management and 100 per 100 per
exploitation of property cent cent
Kremikovtsi Oil Processing, import, export
EOOD and trading with petroleum 100 per 100 per
products cent cent
Shumen Storage Processing, import, export
EOOD and trading with petroleum 100 per 100 per
products cent cent
Office Estate Ownership and management 100 per 100 per
EOOD of real estates cent cent
Svilengrad Oil Processing, import, export
EOOD and trading with petroleum 100 per 100 per
products cent cent
Varna 2130 EOOD Trade with petrol and petroleum 100 per 100 per
products cent cent
Petrol Export Export wholesale trading 100 per
EOOD with fuels cent -
Petrol Investment Acquisition, management and 99,98 per -
AD exploitation of property cent
Petrol Finances Financial and accounting 99 per 99 per
OOD services cent cent
Petrol Technologies IT services and consultancy 98,80 per 98,80 per
OOD cent cent
Petrol Technology IT services and consultancy 98,80 per 98,80 per
OOD cent cent
In the period from May to the end of June 2022, through share purchase agreements, Petrol AD acquired 4,999 (four thousand nine hundred and ninety-nine) shares with a nominal value of BGN 10 (ten), which represent 99.98 per cent of the capital of Petrol Investment AD.
In July 2022, in order to separate and facilitate the administration of the wholesale export trading with fuels, the Group established a new subsidiary Petrol Export EOOD.
Contingent liabilities, including information for newly arising significant liabilities for the reporting period
As at September 30, 2022 the Group has contingent liabilities, including issued mortgages and pledges of property, plant and equipment and non-current assets held for sale, which serve as a collateral for bank loans granted to the Group and unrelated parties and credit limits for issuance of bank guarantees with total carrying amount of BGN 20,906 thousand, including in favour of First Investment Bank AD BGN 16,125 thousand, Investbank AD - BGN 3,415 thousand and DSK AD - BGN 1,366 thousand.
Pursuant to an agreement from October 17, 2018 and its annexes, the Group is a joint debtor and a guarantor on a promissory note for the amount of BGN 48,750 thousand in favour of Investbank AD under a credit facility on unrelated party - supplier, including, including limit for overdraft and limit for stand-by credit for issuance of bank guarantees in favour of Customs Agency. The total amount of the utilized funds and issued bank guarantees of all borrower's exposures to the Bank shall not exceed BGN 45,000 thousand. In relation to this credit agreement, the Group has established a special pledge on its cash in the bank account opened in Investbank AD with total amount of BGN 10 thousand as at September 30, 2022 and a special pledge on receivables from contractors for BGN 4,000 thousand average monthly turnover.
Pursuant to an agreement from June 22, 2020 and annexes, the Group is a joint debtor and a guarantor on a promissory note in favour of Investbank AD for BGN 7,000 thousand under overdraft credit agreement, received by unrelated party - supplier.
Pursuant to an agreement from June 17, 2021 the Group is a joint debtor in favour of Investbank AD under credit line for bank guarantees for BGN 600 thousand, received by an unrelated party - supplier.
Pursuant to an agreement from February 24, 2022 the Group is a joint debtor in favour of Investbank AD under an investment credit line agreement for USD 1,260 thousand, received by unrelated party - supplier.
The Group bears a joint obligation according to an debt agreement from January 13, 2017 on an obligation of a subsidiary until March 2018 - Elit Petrol AD for BGN 2,346 thousand as at September 30, 2022.
Under a bank agreement for revolving credit line signed on September 21, 2016, bank guarantees were issued for a total amount of BGN 5,078 thousand as at September 30, 2022, including BGN 2,250 thousand in favor of third parties - Group's suppliers, BGN 500 thousand in favour of Ministry of Economy for securing the operations of the Parent company related to its registration under the Law on the Administrative Regulation of Economic Activities Related to Oil and Petroleum Products, and BGN 2,028 thousand to secure own liabilities related to contracts under the Public Procurement Act. 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 September 30, 2022 amounting to BGN 219 thousand. In July 2017 the credit limit under the revolving credit line was increased from BGN 8,500 thousand to BGN 9,500 thousand. Assets amounted to BGN 1,500 thousand, owned by a subsidiary, additionally secured the credit limit. 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. In March 2021, the Group partially repays BGN 270 thousand principal of this tranche and in September 2021 another BGN 1,380 thousand.
In December 2021 the bank granted an additional tranche at the amount of BGN 100 thousand, and the repayment term of the loan was extended until December 15, 2024. As at September 30, 2022 the Group has a liability under this credit line of BGN 5,400 thousand.
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 of BGN 245 thousand. In April 2020 a final decision on the pending case was ruled. The court held that the Group is responsible as a guarantor for the obligations of the subsidiary under the cession contract. The Court of Appeal annulled the decision of the first-instance court in its entirety and found that the Group's claim under the warranty agreement had been established jointly with the other related party. The decision of the Court of Appeal was appealed by the Parent company in the Supreme Court of Cassation, but was not allowed to appeal. The Group has filed a claim to establish the non-existence of these receivables, and the case initiated is pending. A collateral at the amount of BGN 25 thousand to the court's account was admitted for a future claim against the provision of a guarantee in favor of the Group, as a result of which the enforcement proceedings initiated against the Group for these receivables were suspended. By a decision of November 2021, the Court recognized as established on the negative claim filed by the Parent company that the Group does not owe the defendant these claims. The decision of November 2021 was appealed by the defendant and the case is currently pending at second instance.
The funds given as collateral under Art. 180 and Art. 181 of the Law on Obligations and Contracts (LOC) at the amount of BGN 245 thousand in the case initiated against the Group in 2015, together with the amount of BGN 93 thousand, were collected by the bailiff in the course of the enforcement proceedings initiated against the Group. However, they have not been distributed due to the suspension of the enforcement case, based on the security of a future claim provided in favor of the Group and remain blocked on the account of the bailiff until the final conclusion of the litigation.
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 claims 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 court dispute is pending in the appeal court. The Group's Management considers that there are grounded chances the Decision to be entirely repealed.
As at the date of the preparation of these explanatory notes, the filed proceedings against the subsidiaries - joint debtors for estimation of the bank receivables due to the loan agreement for USD 20,000 thousand is pending before the first-instance court. The Management expects favorable decision by the competent court. In 2018 the Parent company sold its interest in one of co-debtor subsidiaries and the potential risk for the Group is reduced to the court proceedings against the second subsidiary.
A creditor of a subsidiary (until December 2015) unreasonably claimed in court the responsibility of the Parent company under a contract of guarantee for liabilities arising from a contract for a framework credit limit as a result of that the bank accounts of the Parent company amounting to USD 29,983 thousand were garnished. This claim was disputed in court by Petrol AD because the liability as guarantor has not occurred and / or extinguished pursuant to Art. 147, par. 2 of the LOC. At the time of conclusion of the guarantee deadline of the arrangements between the lender and subsidiary contractual framework for credit limit was July 1, 2014. The term of the framework credit limit was extended without the consent of the customer, therefore the responsibility of the latter has fallen by six months after initially agreed period, during which the creditor has brought an action against the principal debtor. The term under Art. 147, par. 1 of the LOC is final and upon its expiration the Parent company's guarantee has been terminated, so the objection of the Parent company was granted by the court and imposed liens on bank accounts were lifted.
Following the cancellation of the writ of execution, pursuant to order proceedings, which imposed liens on bank accounts of the Parent company, the creditor has initiated legal claim proceedings under Art. 422 of the CPC to establish the same claims against the subsidiary (until December 2015) and the guarantor Parent company. In these proceedings the objections are repeated that liability as guarantor has not occurred and / or extinguished pursuant to Art. 147, par. 2 of the LOC, and therefore the Management expects that the claim of the creditor against the Parent company will be dismissed permanently by a court decision on those cases. At present, the case is suspended due to the existence of a preliminary ruling, which is important for the correct resolution of the case.
On November 4, 2021, the Group signed with Allianz Bank Bulgaria AD a factoring agreement with regress and interest rate of Base Deposit Index for Legal Entities +1.6%, but not less than 1.6 per cent per year on the amount of the advance provided. As at September 30, 2022, the Group has liabilities at the amount of BGN 717 thousand related with financing received under this factoring agreement.
The Group deposited as a collateral under Agreement for purchase of electricity the amount of BGN 50 thousand in favour of CEZ Trade Bulgaria EAD.
As at September 30, 2022 cash in Group's bank account for BGN 41 thousand are blocked under enforcement proceedings against the Group.
In May 2020, the Parent company received from the Commission for Protection of Competition a decision for initiated proceedings to establish any violations under Art. 15 and Art. 21 of LPC and / or under Art. 101 and Art. 102 of the Treaty on the Functioning of the European Union (TFEU) in determining the prices of mass automotive fuels in the production / import - storage - wholesale - retail trade, both at the individual horizontal and vertical levels, by eleven companies, including the Parent company. At present, the proceedings in the case are pending at the CPC.
Other significant events occurred during the reporting quarter and cumulatively from the beginning of the financial year
As a result of the negative impact and the consequences of the global pandemic and the widespread of the new coronavirus COVID-19, the Group has undertaken series of measures for reorganizing the activities of some of its trade sites, establishing a reduced working time of part of the personnel, renegotiation of the terms with contractors, deferral of liabilities and optimization of costs. At the end of March 2020 the Employment Agency opens an application procedure under Art. 1 of Decree No 55 from March 30, 2020 determining the terms and conditions for the payment of compensation to employers in order to preserve the employees under the State of Emergency, announced with a decision by the Parliament on March 13, 2020, substituted later by Decree No 151 from 2020. In 2022 the Group continued to submit application documents under this program for the months it fulfill the requirements and until September 30, 2021 the Group reported revenue from State financing at the amount of BGN 147 thousand.
In connection with the drastic increase in electricity prices in 2021 and as a result of an approved program of the Council of Ministers for granting compensation to businesses, the Group has reported for the nine months of 2022 income from financing under this measure at the amount of BGN 1,818 thousand.
At the end of February 2022, the subsidiary Varna Storage OOD returned a License No. 544 for tax warehouse operation, issued by the Customs Agency, due to inability to negotiate an acceptable level of remuneration for the leased storage depot, subject to the license. In these explanatory notes, the operations has been classified as discontinued and the comparative period of the income statement has been restated.
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 897 thousand, and the unsettled liabilities as at September 30, 2022 are at the amount of BGN 79 thousand.
During the reporting period of 2022 no other related party transactions took place.
IV. Risks and uncertainties ahead of the Group for the rest of the financial year
Macroeconomic environment
The Petrol Group's activity is influenced by the general economic condition of the country and in particular the degree of the successful adoption of the market-oriented economic reforms by the government, changes in the gross domestic product (GDP) and the purchasing power of the Bulgarian customers. In the long term the change in the fuels consumption in the country is commensurate with the GDP.
At the end of 2019, a new coronavirus was identified in China. Due to the fast widespread of the virus across the world at the beginning of 2020, the World Health Organization declared a global pandemic. On March 13, 2020 the Parliament declared a state of emergency on request of the Government of Republic of Bulgaria and on March 24, 2020 the Law on Measures and Actions during a State of Emergency became effective. In order to restrict the widespread of coronavirus infection, an Order of the Health Minister was issued for the introduction of anti-epidemic measures, which directly affect the business activity of the Group. Part of the measures include extension and interruption of the administrative deadlines, extension of the of administrative acts, suspension of the procedural court terms and the statute of limitations, changes in the labor legislation, referring to new working hours, suspension of work and / or reduction of working hours and use of leave, etc. The pandemic causes a significant reduction in economic activity in the country and raises significant uncertainty about future processes in macroeconomics in 2020 and beyond.
The Group's Management monitors the emergence of risks and negative consequences in the outcome of the pandemic with COVID-19, currently assessing the possible effects on the assets, liabilities and activities of the Group, striving to comply with contractual commitments, despite the uncertainties and force majeure circumstances. In view of the introduced anti-epidemic measures and restrictions in the pandemic, which cause a significant reduction in economic activity and creates significant uncertainty about future business processes, there is a real risk of a decline in sales of the Group. However, Management believes that it will be able to successfully bring the Group out of the state of emergency in which it is placed
At the end of February 2022, a number of countries (including the United States, the United Kingdom, Canada, Switzerland, Japan and the EU) imposed sanctions on certain legal entities and individuals in Russia due to its official recognition of two regions separating from Ukraine, the Donetsk Republic and the Luhansk Republic and the military operations on the territory of Ukraine started on February 24, 2022. Subsequently, additional sanctions against Russia were announced. The recent events arising from the military conflict in Ukraine have created challenges for businesses located and operating there. As a result of the beginning of 2022, there has been a significant increase in the fuel prices - a sector in which the Group also operates.
The Group has no assets in the affected countries, no direct relationships with counterparties operating in these countries. The Management is in the process of analyzing the risks and effects on the Group.
The arising military conflict and the imposed by EU, US economic, financial and other sanctions on Russia to end the conflict are blocking economic activity between the European Union and Russia, restricting payments and the free movement of people, goods and services.
The military conflict has further affected the prices of many goods, resources and services, as Russia is a major exporter of fossil fuels, metals and other resources, and the purpose of sanctions imposed by the European Union and the United States is to limit Russia's economic activity. Fossil fuels are still a major part of the process from the creation to final consumption of almost all goods in the EU, as a result of which a future uncertainty about prices and availability of fossil fuels and other resources worsens the economic prospects for the EU and Bulgaria in particular.
As the main activity of the Petrol Group is wholesale and retail trade and storage of fuels and other petroleum products, a lasting increase in international fossil fuel prices will have a negative impact on the Group's sales, leading to significant losses and deterioration of the financial condition and operational results of the Petrol Group. As the majority of fossil fuel supplies in the country are of Russian origin, a potential complete ban on fuel supplies from Russia could lead to a shortage of fuels in the country and problems for the Petrol Group to secure its sales, with the risk of closure of retail petrol stations, temporary working hours and other negative consequences. To respond to this scenario, the Group's management is examining the possibility of importing fuels from third countries, thus being able to reduce the potential future consequences for the Petrol Group of the EU and the US sanctions imposed on Russia and potential reciprocal sanctions.
On April 26, 2022 the Ministry of Energy announced to the public that Bulgargaz EAD has received notification that the supplies of natural gas from Gazprom Export would be ceased as of April 27, 2022. The Bulgaria has fully fulfilled its obligations and made all payments required under this agreement, in a timely manner, strictly and in accordance with the clauses of the agreement. The ministry assures that they have taken steps for alternative agreements for the supply of natural gas and to deal with the situation. As of the date of preparation of this consolidated report, the Management Board of the Parent-company is not able to assess the future effects on the activities of the Group.
The Group's results from operations are affected by a number of factors, including macroeconomic conditions in Bulgaria, competition, variation of gross margins, fluctuations in crude oil and petroleum
product prices, product mix, relationships with suppliers, legislative changes, and changes in currency exchange rates, weather conditions and seasonality. In 2021 and the nine months of 2022, the Group suffered negative consequences from the drastic increase in the prices of electricity and raw materials, both on the domestic and global markets.
The plans for the future development of the company are closely related and depend to a greater extent to the stated expectations for changes in the market environment. The Management continues to follow the program outlined and started in the beginning of 2014 for restructuring the activities of Petrol Group, aiming to concentrate the efforts to optimize and develop the core business - wholesale and retail trading with fuels. With the aim to improve the financial position, the Management continues to analyze actively all expenses and to look for hidden reserves for optimization.
Future uncertainty about the ability of customers to repay their obligations, in accordance with the agreed conditions, may lead to an increase of impairment losses on interest loans granted, trade receivables, financial assets available-for-sale and other financial instruments, as well as the values of other accounting estimates in subsequent periods might materially differ from those specified and recorded in these consolidated financial statements. The Group's Management applies the necessary procedures to manage these risks.
The Group's Management activities are directed to validation of the principles and traditions of good corporate governance, increasing the trust of the interested parties, namely shareholders, investors and counterparties, and to disclosure of timely and precise information in accordance with the legal requirements.
Legislature
The Parent company is supervised by a number of regulatory bodies in the country and a potential change in the regulatory framework, regulating the Parent company's activity may have a negative impact on the Group's financial results. In July 2018 the Government of the Republic of Bulgaria adopted a new Law for Administrative Regulation of the Economic Activities, Related to Petrol and Petroleum Products, which aims to provide security and predictability in trading with petrol and petroleum products and increase the energy security of the country. Due to its core business, this law will affect the Group. As at the date of issuance of these financial statements, the Parent company is entered in the register to the Ordinance on the terms and conditions for keeping a register of entities carrying out economic activities related to oil and petroleum products for the wholesale trading activity and has issued a bank guarantee in favor of the Ministry of Economy at the amount of BGN 500 thousand. As at the date of issuance of these financial statements, the registration procedure of the Parent company for retail trading with oil and petroleum products is finished.
Suppliers
Due to the specific of the primary business of Petrol Group, namely retail and wholesale trading with fuels, the Group's fuels supplies are provided by a small number of suppliers, as a result of which the Group is at risk of discontinuation of relationships with key suppliers, which may lead to a short-term depletion of inventories and trading activity difficulties;
Petrol Group's wholesale and retail trading with fuels, lubricants and other goods, and storage of fuels is carried out through its own and rented from third parties petrol stations and storage facilities. There is a risk from a suspension of the relationships with the lessors and termination of the lease agreements for the petrol stations and/or storage facilities, which can have a significant negative impacts on Petrol Group as deteriorating of sales, worsening of the financial results and substantial loss of market share.
Competition
In the last few years, there has been a tendency for consumers to increasingly turn to established and well-known brands with a tradition in fuel retail. As a result, some small retailers were forced to close down or enter into franchise or dealership agreements with one of the major market participants. Due to the general decline in economic activity, consumer attitudes and the introduction of additional regulatory control by the government, the share of small independent players continues to decline.
The lack of strategic deals and significant investments by large participants in the retail fuel market has led to a minimal change in the market shares of companies in the sector;
Price risk
The Group is at risk of frequent and sharp changes in prices of fuels and non-petroleum goods. Because of that, the future financial results may diverge significantly from the expectations of the Group's Management. Any future sharp fluctuations in the price of fuels and non-petroleum goods may lead to a deterioration of the financial position of the Group;
Market risk
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;
Climate conditions and seasonality
Climate conditions and seasonal fluctuations in demand for certain petroleum products affect the Group's operating results. Gasoline and diesel demand peaked in the second and third quarters, due to both the summer holiday season and the increased demand from farmers, who traditionally increase their consumption during the autumn season
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.
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November 30, 2022 12:25 ET (17:25 GMT)
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