Petrol AD 3rd Quarter Results

RNS Number : 0001P

Petrol AD

05 December 2024

 

PETROL AD

 

 

Legal Entity Identifier (LEI): 4851003SBNLWFQX4XS80

 

05 December 2024

 

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 PERIOD ENDED SEPTEMBER 30, 2024

 

(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

 

		2024 BGN'000		2023 BGN'000
Continuing operations
Revenue		386,138		436,341
Other income		2,360		665
Cost of goods sold		(335,241)		(392,118)
Materials and consumables		(2,730)		(3,441)
Hired services		(15,388)		(15,424)
Employee benefits		(17,674)		(18,033)
Depreciation and amortisation		(5,994)		(9,701)
Reintegration of (Impairment) losses		1,306		(53)
Other expenses		(1,626)		(859)
Finance income		7,405		1,822
Finance costs		(14,951)		(4,448)
Profit (loss) before tax		3,605		(5,249)
Tax income (expense)		(710)		130
Profit (loss) for the period		2,895		(5,119)
Total comprehensive income for the period		2,895		(5,119)
Profit (loss) attributable to:
Owners of the Parent company		2,895		(5,119)
Non-controlling interest		-		-
Profit (loss) for the period		2,895		(5,119)
Total comprehensive income attributable to:
Owners of the Parent company		2,895		(5,119)
Non-controlling interest		-		-
Total comprehensive income for the period		2,895		(5,119)
Profit (loss) per share (BGN)		0.11		(0.19)

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

		Sept. 30 2024 BGN'000		Dec. 31 2023 BGN'000
Non-current assets
Property, plant and equipment and intangible assets		114,631		118,627
Investment properties		1,515		1,552
Right-of-use asset		7,307		9,363
Goodwill		6,514		6,514
Deferred tax assets		2,427		2,593
Trade loans granted		68,957		34,334
Other long-term receivables		54,475		54,475
Total non-current assets		255,826		227,458
Current assets
Inventories		13,076		15,971
Loans granted		51,874		53,698
Trade and other receivables		30,783		28,202
Cash and cash equivalents		2,534		3,388
Total current assets		98,267		101,259
Total assets		354,093		328,717
Equity
Registered capital		109,250		109,250
Reserves		45,508		45,845
Accumulated loss		(128,973)		(132,205)
Total equity attributable to the owners of the Parent company		25,785		22,890
Non-controlling interests		38		38
Total equity		25,823		22,928
Non-current liabilities
Loans and borrowings		234,147		212,554
Liabilities under lease agreements		5,788		7,005
Deferred tax liabilities		1,171		1,069
Trade and other payables		-		262
Employee defined benefit obligations		691		691
Total non-current liabilities		241,797		221,581
Current liabilities
Trade and other payables		58,366		68,291
Loans and borrowings		24,381		11,696
Liabilities under lease agreements		2,147		2,955
Income tax liability		1,579		1,266
Total current liabilities		86,473		84,208
Total liabilities		328,270		305,789
Total equity and liabilities		354,093		328,717

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

			Equity attributable to the owners of the Parent company								Non-controlling interests		Total equity
	Registered capital		General reserves		Reval. reserve		Accumulated profit (loss)		Total
	BGN'000		BGN'000		BGN'000		BGN'000		BGN'000		BGN'000		BGN'000
Balance at January 1, 2023	109,250		18,864		28,551		(136,645)		20,020		38		20,058
Changes in equity for 2023
Comprehensive income for the period
Profit for the year	-		-		-		2,645		2,645		-		2,645
Remeasurement on defined benefits obligations	-		-		-		225		225		-		225
Total other comprehensive income	-		-		-		225		225		-		225
Total comprehensive income	-		-		-		2,870		2,870		-		2,870
Transfer of revaluation reserve of assets to the accumulated profit, net of taxes	-		-		(1,570)		1,570		-		-		-
Balance at December 31, 2023	109,250		18,864		26,981		(132,205)		22,890		38		22,928
Changes in equity for the period ended September 30, 2024
Comprehensive income for the period
Profit for the period	-		-		-		2,895		2,895		-		2,895
Total comprehensive income	-		-		-		2,895		2,895		-		2,895
Transfer of revaluation reserve of assets to the accumulated profit, net of taxes	-		-		(337)		337		-		-		-
Balance at September 30, 2024	109,250		18,864		26,644		(128,973)		25,785		38		25,823

 

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

For the period ended September 30

 

	2024 BGN'000				2023 BGN'000
Cash flows from operating activities
Profit / (loss) for the year	2,895				(5,119)
Adjustments for:
Tax (income) / expense	710				(130)
Depreciation/amortization of property, plant and equipment, intangible assets and right-of-use assets	5,994				9,701
Interest expense and bank commissions, net	7,552				3,317
Shortages and normal loss, net of excess assets	(28)				74
Provisions for unused paid leave and retirement benefits	562				547
Impairment (Reversal) of assets	(1,306)				53
Receivables written-off	337				-
Profit from sale of subsidiaries	(27)				-
Profit on sale of assets	(1,901)				(237)
	14,788				8,206
Change in trade payables	(6,895)				(6,515)
Change in inventories	2,582				8,481
Change in trade receivables	(1,692)				(3,740)
Cash flows from operating activities	8,783				6,432
Interest, bank fees and commissions paid	(10,446)				(2,780)
Income tax paid	(150)				(22)
Net cash from operating activities	(1,813)				3,630
Cash flows from investing activities
Payments for purchase of property, plant and equipment		(488)				(198)
Proceeds from disposal of property, plant and equipment		3,184				1,760
Payments for loans granted, net		(35,531)				(53,827)
Interest received on loans and deposits		248				50
Payments to acquire investments in subsidiaries and other investments, net of cash acquired		-				(50,431)
Proceeds from cession agreements		8,468				-
Net cash flows used in investing activities		(24,119)				(102,646)
Cash flows from financing activities
Proceeds from loans and borrowings		39,103				106,898
Repayment of loans and borrowings		(7,200)				(1,850)
Paid dividends		(5,044)				-
Payments under lease agreements		(1,830)				(12,049)
Net cash flows from financing activities		25,029				92,999
Net increase (decrease) in cash flows during the year		(903)				(6,017)
Cash and cash equivalents at the beginning of the year		3,347				8,732
Effect of movements in exchange rates		(24)				691
Cash and cash equivalents at the end of the period		2,420				3,406

 

 

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 2024. The explanatory notes reflect their influence on the results in the statements for the third quarter of 2024 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 2024 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, property, plant and equipment recognized as a result  of business combination and carried at fair value. 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

 

The initial revalued (to fair) value of property, plant and equipment and intangible assets has been initially determined by an independent appraiser's through market valuation prepared and applied in the accounting policy as of 1 January 2020. Based on the NSI Consumer Price Index in December 2022 compared to the same month in 2021, which shows an annual inflation rate of 16.9%, Management has made a judgement that there could be a material variance in the fair values of the assets and has assigned new market valuations as at December 31, 2022. In these interim consolidated financial statements, property, plant and equipment and intangible fixed assets are presented at the valuations prepared by an independent valuer as at December 31, 2022, which used the intermediate comparisons method, capitalised rental income and property value methods to determine fair value.

 

As at September 30, 2024 the Group has property, plant, equipment and intangible assets with total carrying amount of BGN 114,631 thousand.

 

Property, plant and equipment with a carrying amount of BGN 100,756 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 with a carrying amount of BGN 1,515 thousand, were acquired in December 2016 through a business combination. 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, 2024 the fair value of the investment properties is BGN 2,358 thousand. The investment properties serving to secure liabilities under a revolving credit line agreement.

 

Leases

 

The consolidated statement of financial position as at September 30, 2024 presents the following items and amounts related to lease agreements:

 

Consolidated statement of financial position	September  30, 2024
	BGN'000
Right-of-use assets, incl.:	7,307
Properties (lands and buildings)	6,958
Transport vehicles	332
Machinery, plants and equipment	17
Liabilities under leases, incl.:	(7,935)
Current liabilities Non-current liabilities	(2,147) (5,788)

 

Depreciation costs of right-of-use assets, incl.:		1,990
Properties (lands and buildings)		1,655
Transport vehicles		329
Machinery, plants and equipment		6
Interest for right-of-use assets on lease agreements		380
Total		2,370

 

As a result of the amendments entered into in 2022 to the operating lease agreements for the retail outlets, which extended the term of the agreements to the end of 2027 in order to secure the Group's operations in the long term and provided for a significant termination penalty in respect of each retail outlet, these agreements ceased to meet the criteria for exceptions under the standard and assets and liabilities under lease agreements were recognised in accordance with the requirements of IFRS 16. In 2023, the Group has acquired control of many the companies from which it has leased retail premises under long-term leases in 2022, resulting in a significant reduction in assets, lease liabilities as well as depreciation and interest expenses.

 

The Group has leased various assets: lands, petrol stations, small offices and buildings, transport vehicles, copying machines. The agreements are usually for 3 to 10 years but may include extension options.

 

Long-term Deposits in Banks

 

In September 2023, the Group provided cash to a commercial bank under the Debt Product Agreement against interest tied to the Bank's Base Interest Rate (BIR) plus a margin of 2.9093 points for a period of ten years until August 15, 2033. The amounts deposited total BGN 55,000 thousand. The Parent company has entered into agreements for the blocking of these funds to secure the performance of a credit line granted to the Parent company by the same bank, with the same term. As at September 30, 2024, an impairment charge of BGN 525 thousand has been made on the cash provided in accordance with the policy for the recognition of expected credit losses on financial assets and its carrying amount is BGN 54,475 thousand.

 

Loans Granted

 

As at 30 September, 2024 the Group reports receivables on short-term trade loans, net of impairment at the total amount of BGN 120,831 thousand, including BGN 51,874 thousand short-term receivables. The loans are granted to unrelated parties with the following interest rates and maturity:

 

Debtor - Local Legal Entity	Net Receivables as at Sept. 30,2024   BGN'000	Principal       BGN'000	Interest       BGN'000	Accrued impairment   BGN'000	Annual interest     %	Maturity
Company	23,886	23,870	16	-	6.70%	31.dec.25
Company	20,471	19,500	999	(28)	6.70%	Principal-31.dec.28 Interest - currently
Company	15,695	14,800	895	-	7.20%	31.dec.28
Company	9,716	9,580	687	(551)	7.00%	31.dec.24
Company	8,278	7,786	558	(66)	7.00%	31.dec.24
Company	6,926	6,925	1	-	6.70%	31.dec.25
Company	6,215	5,829	412	(26)	7.00%	31.dec.24
Company	6,078	5,793	1,748	(1,463)	6.70%	31.dec.24
Company	4,886	3,555	1,908	(577)	5.00%	Principal -31.dec.25 Interest - currently
Company	3,806	3,582	257	(33)	7.00%	31.dec.24
Company	3,706	3,000	1,193	(487)	5.00%	31.dec.24
Company	3,194	3,208	217	(231)	7.00%	31.dec.24
Company	2,419	2,360	59	-	5.00%	31.dec.24
Company	2,058	1,935	134	(11)	7.00%	31.dec.24
Company	1013	986	66	(39)	7.00%	31.dec.24
Company	781	729	52	-	7.20%	31.dec.24
Company	690	591	127	(28)	6.70%	31.dec.19
Company	515	489	33	(7)	7.00%	31.dec.24
Company	422	313	109	-	7.00%	07.aug.25
Company	72	65	7	-	6.70%	31.dec.24
Company	4	121	18	(135)	5.00%	31.dec.24
Company	-	5,190		(5,190)	0.00%	28.oct.15
Company	-	2,210		(2,210)	9.50%	28.oct.15
Company	-	1,500	133	(1,633)	8.75%	17.jul.15
Company	-	44	-	(44)	9.50%	21.jan.17
Company	-	12	1	(13)	8.50%	26.aug.15
Company	-		429	(429)	6.70%	31.dec.19
Company	-	1,258	474	(1,732)	6.70%	31.dec.24
Company	-	22	6	(28)	6.70%	31.dec.24
	120,831	125,253	10,539	(14,961)

 

 

 

Cash and cash equivalents

 

As at September 30, 2024 the Group reported cash amounted to BGN 2,534 thousand as BGN 114 thousand are blocked as collateral under enforcement cases.

 

In the notes under Art.15 par.1 of Ordinance No2 and the Public Offering of Securities Act (POSA), as cash equivalents of BGN 1,322 thousand, is presented the cash collected from the trade sites as at the end of the reporting period and 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, 2024
Alfa Capital AD	28.85 %
Storage Invest EOOD	26.77 %
Perfeto Consulting EOOD	16.43 %
Trans Express Oil EOOD	9.82 %
Petrol Bulgaria AD	7.05 %
Gryphon Power AD	5.39 %
The Ministry of Energy of the Republic of Bulgaria	0.65 %
Other minority shareholders	5.04 %
	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.

 

At the 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 legal term. Minority shareholders disputed the decision of the EGMS and additionally to the refusal, the application proceedings was postponed until the pronouncing of the Lovech Regional Court on the court proceedings, initiated on minority shareholders request. In March 2019 Lovech Regional Court enacted a decision, which indicates CR to register the decrease of the capital after a resumption of the registration proceedings after the pronouncing on the legal proceedings initiated by the minority shareholders.

 

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 proceedings ceased on request of minority shareholders until the Regional Court - 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.

 

At the EGMS of Petrol AD convened on March 29, 2023, a decision was again voted to reduce the capital of the Parent company to cover losses by reducing the nominal value of the shares from BGN 4 to BGN 1.

 

Current income tax liabilities and tax audits

 

As at September 30, 2024 the Group has current corporate tax liabilities of BGN 1,579 thousand.

 

Loans and borrowings and factoring liabilities

 

As at September 30, 2024 the Group has total liabilities under received bank, debenture and trade loans of BGN 258,528 thousand, including BGN 24,381 thousand current liabilities.

 

Bank loans

 

In July 2023, the Parent company entered into an agreement with a commercial bank for a revolving line of credit in the amount of BGN 220,000 thousand to be used for purposes including, but not limited to, investment purposes, working capital, issuance of bank guarantees and opening letters of credit. The funds may be drawn down and repaid repeatedly until August 15, 2033 and the repayment period for all obligations arising from the credit line is until September 15, 2033. The annual interest payable on the amount drawn down consists of the Base Interest Rate (BLPA) for the leva applied by the Bank plus a surcharge of 3.21 percentage points, but not less than 5.9%. The credit line is secured by a specific pledge of the commercial enterprise of Petrol AD, subsidiaries Kremikovtzi Oil Ltd, Shumen Storage Ltd, Office Estate Ltd, Crystal Asset Properties Ltd, Crystal Asset Trade Ltd, Crystal Asset Bulgaria Ltd, Prima Asset Bulgaria Ltd, Prima Asset Trade Ltd, Prima Consult Properties Ltd, Prima Land Property Ltd. and unrelated parties, suretyship by an unrelated party, contractual mortgages on real estate of co-borrowers, including unrelated parties, suretyship and financial security over accounts receivable with the bank and cash deposited by the borrower under a debt product agreement.

 

The funds under the revolving credit line with a total credit limit of BGN 220,000 thousand are provided in tranches further approved by the Bank and further terms agreed by annexes between the parties.

 

In July 2023, due to the revolving credit line agreement with a total credit limit of BGN 220,000 thousand, an annex agreed to grant tranche 1 in the amount of BGN 90,000 thousand as an investment loan for the purchase of assets and company shares with a drawdown period until October 30, 2023. The interest rate and the final repayment term do not differ from those agreed in the main contract. The funds under this tranche have been drawn down and as of September 30, 2024, the principal liability amounts to BGN 80,250 thousand and interest of BGN 256 thousand.

 

In July 2023, due to the revolving credit line agreement with a total limit of BGN 220,000 thousand, an annex agreed to grant tranche No. 2 in the amount of BGN 30,000 thousand for working capital, funds for refinancing obligations under an existing revolving credit line granted by the same bank and funds for payment of bank guarantees and letters of credit. The drawdown period is until August 14, 2033. The interest rate and repayment deadline do not differ from those agreed in the main contract. In November 2023, the funds under tranche No. 2 were drawn down and the Group has a principal obligation of BGN 24,621 thousand and interest for BGN 5 thousand as at September 30, 2024.

 

In July 2023, due to the revolving line agreement with a total limit of BGN 220,000 thousand, an annex agrees to disburse tranche No. 3 in the amount of BGN 55,000 thousand as working capital in the form of an overdraft. The period for multiple drawdown and utilization of the amount under this tranche is up to August 14, 2033. The interest rate and repayment deadline do not differ from those agreed in the main contract. As at September 30, 2024, the Group has a principal obligation of BGN 54,992 thousand and interest for BGN 2,806 thousand under this tranche.

 

In July 2023, due to the revolving line agreement with a total limit of BGN 220,000 thousand, an annex agreed to grant tranche No. 4 in the amount of BGN 45,000 thousand as a revolving working capital loan. The drawdown and utilisation of the amount under this tranche shall be up to August 14, 2033. The interest rate and the final repayment term do not differ from those agreed in the main agreement. As at September 30, 2024 the Group has a liability under this tranche for the principal amount of BGN 45,000 thousand and interest for BGN 1,081 thousand.

 

In November 2023, the Group signed a bank loan agreement in the amount of BGN 3,000 thousand intended to finance Group's working capital, at an annual interest rate of BIRA per BGN of the creditor bank, increased by a margin of 2.61 points, but not less than 5.9% on an annual basis. The repayment plan is for 5 (five) years with equal monthly installments on principal, the deadline for repayment is November 25, 2028. The loan is secured by mortgages of fixed tangible assets owned by the Parent company and a subsidiary co-debtor under the contract, pledge of plant and equipment machinery, subrogation to the obligation of a subsidiary, as well as financial collateral by providing a pledge under the Personal Income Tax Act on the receivables on the accounts opened by the parent company and the co-debtor in the creditor bank. As at September 30, 2024, the Group's principal obligation amounted to BGN 2,500 thousand and interest for BGN 3 thousand.

 

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 4.51 per cent. (incl. 4.24 per cent annual coupon rate).

 

Trade Loans Received

 

In January 2023, the Parent company obtained a short-term loan from an unrelated party trading company with a credit limit of BGN 2,000 thousand and interest at 5% on the amount drawn down. The loan has an outstanding principal amount. The liability as at September 30, 2024 amounts to BGN 2 thousand for interest.

 

The trade loans payable from related parties are disclosed in the related party note in this notification.

 

Factoring

 

In August 2024, an addendum to an agreement dated March 10, 2021 for the purchase of receivables under commercial invoices (standard factoring) with a commercial bank agreed an aggregate advance limit of up to BGN 6,000 thousand at an annual interest rate of BLPA per BGN applied by the factor, increased by a mark-up of 1.01 percentage points but not less than 4.5% per annum on the amount of the advance granted. The agreement is secured by a pledge of receivables in the Group's bank accounts opened with the Bank, As at September 30, 2024, no receivables or payables have been assigned in relation to the funding received under this factoring agreement.

 

Operating lease agreements

 

The Group is lessee under operating lease agreements. As at September 30, 2024 the recognised rental expenses in the statement of profit or loss and other comprehensive income, include expense at the amount of BGN 342 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, 2024 are as follows:

 

Subsidiary	Main activity	Ownership interest Sept.30, 2024
Varna Storage Ltd.	Trade with petrol and petroleum products	100 per cent
Petrol Finance Ltd.	Financial and accounting services	100 per cent
Elit Petrol -Lovech JSC	Trade with petrol and petroleum products	100 per cent
Lozen Asset JSC	Acquisition, management and exploitation of property	100 per cent
Petrol Properties Ltd.	Trading movable and immovable property	100 per cent
Kremikovtsi Oil Ltd.	Processing, import, export and trading with petroleum products	100 per cent
Shumen Storage Ltd.	Processing, import, export and trading with petroleum products	100 per cent
Office Estate Ltd.	Ownership and management of real estates	100 per cent
Svilengrad Oil Ltd.	Processing, import, export and trading with petroleum products	100 per cent
Varna 2130 Ltd.	Trade with petrol and petroleum products	100 per cent
Bulgaria Cargo Rail Ltd.	Export and transport of petrol and petroleum products	100 per cent
Crystal Assets Trade Ltd.	Lease of real estate and equipment	100 per cent
Crystal Asset Property Ltd.	Lease of real estate and equipment	100 per cent
Crystal Assets Bulgaria Ltd.	Lease of real estate and equipment	100 per cent
Prima Assets Bulgaria Ltd.	Lease of real estate and equipment	100 per cent
Prima Assets Trade Ltd.	Lease of real estate and equipment	100 per cent
Prima Consult Property Ltd.	Lease of real estate and equipment	100 per cent
Prima Lend Property Ltd.	Lease of real estate and equipment	100 per cent
Petrol Oil Recycling Ltd.	Management, collection and recycling of wastes of petrol products	100 per cent
Sandanski Storage Ltd.	Rental of real estate and equipment, acquisition, management, operation and disposal of real estate	100 per cent
Petrol Investment JSC	Acquisition, management and exploitation of property	99,98 per cent
Petrol Finances Ltd.	Financial and accounting services	99 per cent
Petrol Technologies Ltd.	IT services and consultancy	98,80 per cent
Petrol Technology Ltd.	IT services and consultancy	98,80 per cent

 

In May 2024, by means of a contract for sale and purchase of company shares, the Parent company transferred to a third party 50 company shares, each with a nominal value of BGN 1,000, representing 100% of the capital of Petrol Export Ltd., for a sale price of BGN 50 thousand. At the date of the transaction the consolidated net assets amounted to BGN 23 thousand and the result of the sale was a gain of BGN 27 thousand.

 

In July 2024, a subsidiary company - Sandanski Storage Ltd. was established and entered in the Commercial Register by way of an in-kind contribution. The capital of the company is divided into 223 070 shares, each of which has a nominal value of BGN 10.

 

Contingent liabilities, including information for newly arising significant liabilities for the reporting period

 

As at September 30, 2024 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 100,756 thousand, including in favour of First Investment Bank AD BGN 95,438 thousand, Investbank AD - BGN 3,270 thousand and DSK AD - BGN 2,048 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 47,667 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 44,000 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 165 thousand as at September 30, 2024 and a special pledge on receivables from contractors for BGN 4,000 thousand average monthly turnover.

 

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.

 

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, 2024.

 

Under a bank agreement for revolving credit line from 2023, with a total limit of BGN 220,000 thousand and sublimit of BGN 30,000 thousand for refinancing liabilities, including for issuance of bank guarantees and letter of credit, bank guarantees were issued for a total amount of BGN 5,066 thousand as at September 30, 2024, including BGN 3,750 thousand in favor of third parties - Group's suppliers, BGN 500 thousand in favour of Ministry of Economy to its registration under the Law on the Administrative Regulation of Economic Activities Related to Oil and Petroleum Products and BGN 816 thousand to secure own liabilities related to contracts under the Public Procurement Act. As at September 30, 2024 the contract is secured by a pledge of all receivables on bank accounts of the Parent company to cover contract obligations and а mortgages of real estate and pledge of plants and equipment, as well as assets owned by a subsidiary totaling BGN 1,500 thousand.

 

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 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 consolidated financial statements, 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 court proceedings against the second subsidiary.

 

Corporate Commercial bank AD (in insolvency) - 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 the Group because the liability as guarantor has not occurred and / or extinguished pursuant to Art. 147, par. 2 of the LOC. At the time of signing of the guarantee agreement, the deadline of the arrangements between the lender and subsidiary contractual framework for credit limit was July 1, 2014. The term of the framework credit limit was extended without the consent of the customer, therefore the responsibility of the latter has fallen by six months after initially agreed period, during which the creditor has brought an action against the principal debtor. The term of Art. 147, par. 1 of the LOC is final and upon its expiration the company's guarantee has been terminated, so the objection of the Parent company was granted by the court and imposed liens on bank accounts lifted.

 

After the writ of execution, pursuant to order proceedings, was canceled on which were imposed liens on bank accounts of the Parent company, the creditor has initiated legal claim proceedings under Art. 422 of the CPC to establish the same claims against the subsidiary (until December 2015) and the guarantor the 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.

 

The Group has claimed its receivables from the subsidiary (until December 2015). The claims are included in the list of admitted claims under Art. 686 of the Commercial Companies Code prepared by the insolvency administrator, but they are disputed by another creditor in the insolvency proceedings. Now, the pending court proceedings to establish the existence of these claims pursuant to Art. 694 of the Commercial Companies Code have been concluded with a decision and the court has accepted the Group's claims up to the amount of BGN 4,794 thousand.

 

As at September 30, 2024, cash in the Group's bank accounts amounting to BGN 114 thousand is blocked in enforcement proceedings to which the Group is a party.

 

As collateral, a promissory note in the amount of BGN 15 thousand has been issued to the Parent company's counterparty under a deferred fuel purchase agreement signed in 2023.

 

Under a revolving credit line agreement signed in 2023 with a total limit of BGN 220,000 thousand. In July 2023, a pledge of a commercial enterprise was established as a set of rights and obligations and de facto relations of Petrol AD, Kremikovtzi Oil Ltd, Shumen Storage Ltd, Office Estate Ltd, Crystal Asset Property Ltd, Crystal Asset Trade Ltd, Crystal Asset Bulgaria Ltd, Prima Asset Bulgaria Ltd, Prima Asset Trade Ltd, Prima Consult Property Ltd, Prima Land Property Ltd As collateral under the same agreement, the Group has pledged receivables from bank accounts opened with the Bank, including funds deposited under a debt product agreement with a carrying amount as at September 30, 2024, net of impairment under IFRS 9, of BGN 54,475 thousand.

 

Pursuant to the covenants under a bank loan agreement entered into in November 2023, the Group has established a mortgage on property and a pledge of plant and equipment with a total carrying amount as at September 30, 2024 of BGN 3,030 thousand. The agreement is also secured by a pledge over all of the Parent company's receivables on bank accounts with a book value as at September 30, 2024 for BGN 19 thousand.

 

Pursuant to an agreement dated May 2024, the Parent company is a guarantor under an overdraft agreement granted to an unrelated party - a commercial counterparty as at September 30, 2024 with a credit limit of BGN 1,400 thousand. In connection with this credit commitment, it has established a pledge in favor of the creditor bank over cash receivables on bank accounts and has mortgages on real estate with a carrying value as at September 30, 2024 of BGN 1,926 thousand.

 

In August 2024, an annex to the Agreement of March 10, 2021 for the purchase of receivables under commercial invoices (standard factoring) with a commercial bank agreed a total advance limit of up to BGN 6,000 thousand. The agreement is secured by a pledge of receivables on bank accounts opened with the bank with a carrying amount as at September 30, 2024 of BGN 75 thousand.

 

 

III.      Disclosure of transactions with related parties

 

The Parent company (Controlling company) is Petrol AD. It has a two-tier management system, which includes a Management Board (MB) and a Supervisory Board (SB). Below are the names and functions of the members of the Supervisory and Management Board of Petrol AD.

 

Supervisory Board
Ivan Voynovski[1]	Chairman
Petrol Correct EOOD, represented by Nikolay Gergov	Member
Petrol Asset Management EOOD, represented by Armen Nazaryan	Member
Management Board
Grisha Ganchev	Chairman of the Management Board
Georgy Tatarski	Deputy chairman of MB and Executive director
Milko Dimitrov	Member of MB and Executive director
Lachezar Gramatikov	Member of MB
Kiril Shilegov	Member of MB

 

The total amount of the accrued remunerations of the members of Management and Supervisory Board of the Parent company, included in the personnel expenses as at September 30, 2024, amounts to BGN 1,117 thousand and unsettled liabilities of BGN 71 thousand, including BGN 59 thousand liabilities to personnel and BGN 12 thousand liabilities to legal entities.

 

Related parties of the Petrol Group are the shareholder with significant influence in the Parent company, Storage Invest ltd. and its related parties.

 

Included in purchases from related parties - a shareholder with significant influence - for the period ending September 30, 2024 are lease costs of property, plant and equipment amounting to BGN 43 thousand, accounted for as lease expenses in accordance with the provisions of IFRS 16 in the statement of profit or loss and other comprehensive income, including depreciation expense and interest expense. Included in sales to related parties - a shareholder with significant influence - for the period ending September 30, 2024 is service revenue of BGN 1 thousand.

 

Related party	June 30, 2024			June 30, 2024
	BGN'000			BGN'000
	Receivables			Payables
Other related parties	2,220			11,591
Short-term loans	-			10,349
Shareholder with a significant influence	-			46
	2,220			11,637

 

In September 2024, the Group obtained a short-term loan from a related party trading company. The loan has a credit limit of BGN 24,000 thousand and bears interest at 3M EURIBOR plus a 2%-point premium, but not less than 5% on the drawn amount and has a maturity date of December 31, 2024. The liability at September 30, 2024 is BGN 10,344 thousand principal and BGN 5 thousand interest.

 

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. In 2023, the rate of increase in consumer price inflation starts to slow down, with the consumer price index recording single-digit annual growth towards the end of the year. During the year, the central banks of the leading economies, in their efforts to normalize the rampant inflation, continued to raise key interest rates, but this did not lead to a significant reversal of the upward trend in prices that began in 2020. The situation in Bulgaria follows the global trend of rising prices, as at the end of the year, the consumer price index published by the National Statistical Institute recorded an annual growth of 4.7%, with inflation reaching double-digit increases by the middle of the year, following the significant growth in 2022. The main reason for the double-digit inflation increases in the first half of 2023 are the double-digit increases in the food and beverage, fuels and other energy, and accommodation and food services groups, which for the first six months of the year posted average monthly increases of 18.9% for food and beverage, 14.8% for fuels and other energy, and 15.8% for restaurants and accommodation. By the end of the year, the catering sector showed the highest inflation rate of 9.4%, while food, non-food and service expenditure declined to levels of 5.7%, 3.1% and 4.9% respectively. The main reasons for the increase in the inflation rate in 2023 remain the anti-crisis recovery and development measures taken in the last three years by the European Union and the Bulgarian government in particular, the emerging military conflict in Ukraine in February 2022, as well as the disruption caused by sanctions and the change, in some cases, of the supply chains that led to the rise in prices of fuels and other goods and resources caused by increased demand and limited supply.

The Group's Management monitors the emergence of risks and negative consequences following the COVID-19 pandemic and the military conflict between Russia and Ukraine, 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 effects of the pandemic, military conflict and high inflation, which are challenging economic activity in the country and creating significant uncertainty about future business developments, there is a real risk of a decline in sales and losses for the Group.

 

Despite the shocks caused by COVID-19 and the war in Ukraine, the country's economy grew in the past reporting period, covering a wide range of industries and sectors. However, the country currently faces several challenges and future risks. The ongoing military conflict between Russia and Ukraine is creating the conditions for a lasting humanitarian crisis, shortages of raw materials and supplies, rising inflation and geopolitical turmoil that could extend to Bulgaria. At the same time, commodity prices continue to rise, and high prices are likely to persist. On the other hand, the pandemic has not completely subsided and new outbreaks are possible. This leads to the risk of a slowdown in cash flows and payments, an increase in intercompany indebtedness, a reduction in earnings and, ultimately, an overall deterioration in the economic environment in the country in which the Group operates. The macroeconomic environment in the country, as well as the level of political stability, has a significant impact on the price, market, credit, liquidity, interest rate, operational and other risks to which the Group is exposed.

 

The Group's operation results are affected by several 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 2024, the Group continues to suffer negative impacts from commodity price volatility, both domestically and globally, inflation rates, and geopolitical uncertainty.

 

The Group's future development plans are closely linked to the stated expectations of changes in the market environment. The management continues to follow the outlined restructuring program of the Petrol Group's activities, which has to be changed as a result of the rapidly changing market environment and the risks and difficulties encountered, with the aim of concentrating efforts in the direction of optimizing the core business - retail and wholesale fuel trading, and at the same time developing and expanding the Group's activities in line with climate changes and new prospects. In order to improve the financial position, the Management continues to actively analyze all cost items in search of hidden reserves for their optimization, including closing or leasing underperforming petrol stations, increasing the number of self-service petrol stations, or switching to a mixed mode of operation.

 

In the coming years, the Group's performance will also depend on the ability to make investments and the successful implementation of new projects. The Group's investments will be preferably focused to build new petrol stations, modernize others, provide them with charging stations and increase Petrol AD's sales and market share, mainly by transforming the petrol stations operated by the Group into modern full-service and leisure facilities. Following the acquisition in 2023 of the shares of seven companies owning 190 petrol stations, Petrol AD will be able to plan its investment programme more easily, seeking the best realisation of the assets managed by the Group.

 

There is significant uncertainty about the ability of the customers to repay their obligations in accordance with the agreed terms. Therefore, the amount of impairment losses on loans granted, receivables and the amounts of other accounting estimates, in the subsequent reporting periods could differ materially from those determined and reported in these explanatory notes. The Group's management implements the necessary procedures to manage these risks.

 

Legislature

 

The Parent company is supervised by several 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.

 

Major commercial partners

 

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 impact on Petrol Group as deteriorating of sales, worsening of the financial results and substantial loss of market share.

 

In the second half of 2023, Petrol AD acquired seven subsidiaries, owners of petrol stations, through an investment loan of BGN 90,000 thousand. The Group operates these outlets through operating lease agreements. The loan agreement is secured by a pledge of the trading businesses of Crystal Asset Property Ltd, Crystal Asset Trade Ltd, Crystal Asset Bulgaria Ltd, Prima Asset Bulgaria Ltd, Prima Asset Trade Ltd, Prima Consult Property Ltd, Prima Land Property Ltd. The acquired control will help Petrol AD in the long term in the core business of the Group, but at the same time there is a risk that in the event of a sustained deterioration in the market conditions due to internal or external factors and/or a significant loss of market share, it will become unable to service its credit obligations.

 

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.

 

 

---

[1] [1] Ivan Alipiev Voinovski - died on February 23, 2017. On February 18, 2019, an EGMS of Petrol AD was held, where was voted a replacement of the deceased Ivan Voynovski. The application for entry in the CR was rejected, which was appealed by Petrol AD within the statutory term, and the registration proceedings were suspended at the request of minority shareholders until the District Court - Lovech rules on proceedings for annulment of decisions taken. In May 2019, the Lovech District Court ruled with a decision revoking the refusal and returning the file to the Registry Agency to make the requested entry after the resumption of the suspended registration proceedings. At present, the court proceedings on the claims for annulment of the decisions of EGMS from February 2019 are pending.

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