TIDM74JJ
RNS Number : 9666U
Petrol AD
03 August 2020
CONSOLIDATED MANAGEMENT REPORT FOR 2019
ACCOMPANIED BY
INDEPENT AUDITOR'S REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED DECEMBER 31, 2019
(This document is a translation of the original Bulgarian
text,
in case of divergence the Bulgarian original shall prevail)
July 16, 2020
Table of contents
Consolidated management report for
2019.................................................................................
3
Independent auditor's report on the consolidated financial
statements..................................... 61
Consolidated financial statements for the year ended December
31, 2019............................... 71
Notes to the consolidated financial
statements..........................................................................
79
CONSOLIDATED MANAGEMENT REPORT
FOR 2019
This management report is prepared in accordance with the
requirements of Art. 100n, par.7 of the Public Offering of
Securities Act, Art. 45 and Art. 47 of the Accountancy Act, Art.
187E, and Art. 247 of the Commercial Act, Art. 32A, par. 1 and par.
2 and Appendix No.10 to the Ordinance No.2 of September 17, 2003 on
the prospectuses in public offering and admission of securities for
trading on a regulated market and for disclosure of information
Selected performance indicators
Information pursuant to Art.39, item 2 of the Accountancy
Act
Financial indicators 2019 2018 2017 2016 2015
Net revenue BGN mln 538.5 526.8 479.1 487.8 662.5
------------------------- --------- ------ ------ ------- ------- --------
EUR mln 275.3 269.3 245 249.4 338.7
----------------------------------- ------ ------ ------- ------- --------
Gross margin from sales
of goods BGN mln 56.9 49.3 47.7 45.3 63.2
------------------------- --------- ------ ------ ------- ------- --------
EUR mln 29.1 25.2 24.4 23.2 32.3
----------------------------------- ------ ------ ------- ------- --------
% 10.8 9.5 10.1 9.4 9.7
----------------------------------- ------ ------ ------- ------- --------
EBITDA BGN mln 4.1 5.4 (7.3) (7.5) (126.4)
------------------------- --------- ------ ------ ------- ------- --------
EUR mln 2.1 2.8 (3.7) (3.8) (64.6)
----------------------------------- ------ ------ ------- ------- --------
% 0. 7 1.0 (1.5) (1.5) (18.8)
----------------------------------- ------ ------ ------- ------- --------
EBIT BGN mln 0.2 4.5 (8.8) (9.4) (131.8)
------------------------- --------- ------ ------ ------- ------- --------
EUR mln 0.1 2.3 (4.5) (4.8) (67.4)
----------------------------------- ------ ------ ------- ------- --------
% 0.0 0.8 (1.8) (1.9) (19.6)
----------------------------------- ------ ------ ------- ------- --------
Net profit (loss) BGN mln (5.0) 55.9 1.4 (11.3) 102.9
------------------------- --------- ------ ------ ------- ------- --------
EUR mln (2.6) 28.6 0.7 (5.8) 52.6
----------------------------------- ------ ------ ------- ------- --------
% (0.9) 10.4 0.3 (2.3) 15.3
----------------------------------- ------ ------ ------- ------- --------
Share price BGN 0.715 0.985 0.44 0.478 0.63
------------------------- --------- ------ ------ ------- ------- --------
EUR 0.37 0.50 0.22 0.244 0.32
----------------------------------- ------ ------ ------- ------- --------
Assets BGN mln 139.6 130.2 100 95.9 109.5
------------------------- --------- ------ ------ ------- ------- --------
EUR mln 71.4 66.6 51.1 49.0 56.0
----------------------------------- ------ ------ ------- ------- --------
Debt BGN mln 47.4 48.2 41.6 41.7 50.4
------------------------- --------- ------ ------ ------- ------- --------
EUR mln 24.2 24.6 21.3 21.3 25.8
----------------------------------- ------ ------ ------- ------- --------
Shareholders' equity BGN mln 14.6 19.6 (34.2) (36.3) (24.6)
------------------------- --------- ------ ------ ------- ------- --------
EUR mln 7.5 10.0 (17.5) (18.6) (12.6)
----------------------------------- ------ ------ ------- ------- --------
Capital expenditure BGN mln 2.5 1.1 2.8 0.9 7.7
------------------------- --------- ------ ------ ------- ------- --------
EUR mln 1.3 0.6 1.4 0.5 3.9
----------------------------------- ------ ------ ------- ------- --------
Financial ratios 2019 2018 2017 2016 2015
Return on average capital employed
(ROACE) (%) 0.25 12.82 (262.6) (76.85) (691.96)
--------------------------------------- ------ ------ -------- -------- ---------
Return on assets (ROA) (%) 0.12 3.90 (8.99) (9.19) (51.91)
--------------------------------------- ------ ------ -------- -------- ---------
Debt/assets (%) 33.96 37.05 41.64 43.43 46.06
--------------------------------------- ------ ------ -------- -------- ---------
Equity/Assets (%) 10.44 15.03 (34.17) (37.89) (22.47)
--------------------------------------- ------ ------ -------- -------- ---------
Current liquidity (ratio) 1.24 1.41 0.84 0.71 0.82
--------------------------------------- ------ ------ -------- -------- ---------
Goods turnover ratio (days) 17 17 17 15 21
--------------------------------------- ------ ------ -------- -------- ---------
Accounts receivable collection period
(days) 18 17 20 21 33
--------------------------------------- ------ ------ -------- -------- ---------
Accounts payable payment period
(days) 40 35 30 19 37
--------------------------------------- ------ ------ -------- -------- ---------
Operating ratios 2019 2018 2017 2016 2015
Sales of fuels (mln. liters) 297.6 292.2 289.2 324.8 391.9
-------------------------------------------------------------- ------ ------ ------ ------ ------
Sales of fuels (thousand tons) 2.2 1.5 1.6 1.1 1.3
-------------------------------------------------------------- ------ ------ ------ ------ ------
Number of fuel stations under "Petrol" brand (end of period) 320 322 328 334 334
-------------------------------------------------------------- ------ ------ ------ ------ ------
Number of operated fuel storage facilities (end of period) 1 2 2 1 1
-------------------------------------------------------------- ------ ------ ------ ------ ------
Share of sales revenue with credit cards 26% 25% 24% 21% 19%
-------------------------------------------------------------- ------ ------ ------ ------ ------
Number of employees (end of period) 1,247 1,181 1,204 1,349 1,442
-------------------------------------------------------------- ------ ------ ------ ------ ------
Group Profile
Information pursuant to Art. 48, par. 2, item 1 of the
Accountancy Act
Petrol today - energy for people
Petrol Group (the Group) is one of the largest players in the
fuels market in Bulgaria. At the end of 2019 besides the Parent
company Petrol AD, twelve other subsidiaries are included in Petrol
Group (see Group Structure). The major activities of the Group
include storage, wholesale and retail trading with fuels and other
petroleum products. At present, under the Petrol brand operates the
most well-developed retail distribution network of fuels in the
country.
As at December 31, 2019, the retail network comprises 320
filling stations evenly spread throughout the country providing
national coverage. In 2019, the Group continued the process of
reconstruction and modernization of the filling stations included
in the retail network for distribution of fuels and other goods.
Network modernization includes several areas: a programme for
modernization of existing facilities, a programme for installation
of Universal type filling stations and a programme for installation
of LPG and CNG stations.
As at the end of 2019, all trade sites are equipped with systems
for collection of vapour emitted during unloading of fuels
complying with all environmental protection requirements , while
135 of the managed sites were reconstructed into a modern European
style. All kinds of unleaded gasoline and Euro diesel are sold in
all filling stations, LPG is offered in 192 of the fuel stations
and four sites offer methane. The sites also offer a full range of
Bulgarian and imported motor and transmission lubricants, brake and
antifreeze fluids, automobile cosmetics, spare parts and
accessories. In addition, the newly built and reconstructed sites
have fast-food places and some provide internet access to
customers. The stores at the sites offer more than 4,000 items of
leading Bulgarian and world producers of food, personal cosmetics,
gifts, accessories, newspapers, magazines and others.
Additional facilities and services are provided in many sites
such as car washes, inspection/service pits, pits for dismounting,
mounting and balance of tyres and other auto services. In all sites
Visa, MasterCard and Transcard are accepted. Customers can also
withdraw and pay in cash.
The wholesale trading and storage of fuels during 2019 are made
through the operated by the Group storage depots in Varna and
Plovdiv and through purchases from other storage facilities
operated by third party operators.
As at December 31, 2019 the storage depot in Varna operated by
Petrol Group is licensed for operation of tax warehouse in
compliance with the Excise Duty and Tax Warehouse Act (EDTWA),
which provides an opportunity for temporary suspension of excise
duty taxation. The Group operates one port terminal for loading and
unloading of fuels, located at the Black Sea coast.
The activities of the Group concerning wholesale and retail
trading of fuels are subject to strict control regarding the
implementation of ecological requirements for environmental
protection. In that relation the Group continues to invest in the
construction and renovation of systems for collection and recovery
of vapours (VRU) in the retail trade stations and storage
facilities under the requirements of Ordinance No 16 for
restriction of the emissions of volatile organic compounds in
storing, loading or unloading and transportation of petrol.
Quality control
The company's technical and ecological standards in trade sites
established by Petrol Group are at a higher level than mandatory
requirements in European Union. In the petrol stations and storage
facilities are stored fuels keeping all technological requirements,
in compliance with the assumed quality standards. The Management of
the Group relies on the high quality of the sold fuels. The Group's
policy excludes any compromises with the technology and the
ecological standards. The fuel stations comply with all applicable
regulations and with the best European and international
practices.
The uncompromising quality of the offered fuels is guaranteed by
laboratories, where with the help of modern technologies, the
strict control and quality analysis of fuel and petroleum products
are carried out. Experts on fuels quality are testing the Group's
retail stations several times per year. The Group works in closely
manner with various state institutions in the field of quality
control of liquid fuels.
Mission
The mission of Petrol Group is to accomplish a stable growth on
shareholders' return in a long term along with commitment to its
clients, employees, partners and generally to the society.
The Group's Management relies significantly on the high
professional behavior, ethics and business integrity towards its
partners in achieving the ambitious corporate goals. The Management
of the Group is led by its striving to high quality.
Strategy
The Group's major strategic objective is to maintain and to
develop its leading position in the Bulgarian retail and wholesale
fuel distribution market. To achieve this strategic goal, a
long-term strategy has been adopted, which includes several key
elements:
-- Increasing the efficiency of managed assets;
-- Optimizing and expanding the distribution network;
-- Expanding the portfolio of products and services;
-- Strengthening and expanding the market presence.
Increasing the efficiency of managed assets
The Group will continue to invest in the modernization and
reconstruction of the existing trade sites included in the retail
and wholesale distribution networks. The budgeted investment will
be aimed not only at improving of the technical condition and
appearance of trade sites, but also at reducing the technological
losses from operation of equipment and compliance with
environmental requirements.
Optimizing and expanding the distribution network
The Group intends to continue the expansion of the distribution
network for retail sales. This will be achieved by opening new
sites on new locations and by consolidation of the Group's smaller
independent competitors through franchise/ dealership arrangements.
At the same time the process of optimizing the distribution network
will continue to be aimed at identifying unprofitable sites,
suspending their operations and eventually selling them.
The Group plans to continue the development of loyalty programs
for retail clients. By increasing the advertising of the newly
offered products and services under the Petrol brand, the Group
aims to strengthen the image of Petrol AD as an innovative company
working with care to the client, society and the environment.
Expanding the portfolio of products and services
The Management of the Group places a high priority on being at
the forefront of customer demand for cleaner and improved
performance fuels. In that relation the Group plans to increase
rapidly its sales of compressed natural gas (CNG). Since 2009 the
Group offers a full range of branded Force Fuels - Blue Force Gas,
Gasoline 96 Extra Force and Pro Force Diesel. In 2016 the Group
started to offer a new branded diesel fuel, named Green Force
Diesel. The new diesel fuel is blended with the engineered in
Germany high quality supplement LIQUI MOLY. At the end of 2016 the
offering of Gasoline 100 eXXtra Force has also been launched. The
highly octane new product successfully replaces the Gasoline 96
Extra Force, as increases the efficiency of the engine performance,
improves the automobile dynamics and decreases the fuel
consumption.
The innovative fuels contain additives, which accelerate power
of automobiles, reduce expense by up to 10% by improving system
efficiency, decrease carbon deposits in the fuel system and the
discharge of harmful emissions (CO2, CO, NOX) by approximately
70%.
In addition the Group intends to expand its product range by
offering non-petroleum products and services to meet the needs of
the modern consumer and to attract new clients, increasing the
sales of trade sites, the Group's operating profit and therefore
the returns to shareholders. The additional services include rental
of a part of the commercial areas (for example car-washes and
billboards), insurances etc.
Strengthening and expanding the market presence
The Parent company Petrol AD plans to further increase the sales
of petroleum and non-petroleum goods by investing in modernization
of the trade sites, including renovation and expansion of the total
commercial area. The Management aims to strengthen the position of
Petrol AD as an innovative company caring for the clients, the
society and the environment, by advertising the new products and
services with the Petrol brand more intensively.
Information pursuant to Art.39, item 5 of the Accountancy
Act
In 2019 the companies of the Group did not carried out research
and development activities.
Group Structure
Information pursuant to item. 7 of the Appendix No. 10 to the
Ordinance No. 2 of September 17, 2003
As at December 31, 2019 Petrol Group consists the Parent company
and 12 subsidiaries:
-- Varna Storage EOOD was registered in Varna in 2011. In August
2012, the company's capital was increased by an in-kind
contribution by the Parent company Petrol AD. The company
specializes in the processing, storage and trading with petroleum
and petroleum products. As at December 31, 2019 the company is
operator of SD Varna. The Petrol Group is a sole owner of the
capital as at December 31, 2019. In 2019 the company generated
total revenue of BGN 7,902 thousand, positive EBITDA of BGN 3,092
thousand and net profit for the year at the amount of BGN 2,441
thousand. As at December 31, 2019 the total assets of the company
amounted to BGN 7,346 thousand with total liabilities of BGN 15,639
thousand and negative net assets at the amount of BGN 8,293
thousand.
-- Petrol Technologies OOD is a limited liability company
incorporated in October 2014 and registered in Registry Agency with
UIC 203259540. The company's activities include IT consulting,
developing, administration and maintenance of computer networks and
servers and any other activity not prohibited by law. As at
December 31, 2019 the Group owns 98.8% of the company's shares. For
2019 the company reported total revenue of BGN 179 thousand,
positive EBITDA of BGN 131 thousand and net loss for the period of
BGN 17 thousand. As at December 31, 2019 the total assets of the
company amounted to BGN 1,104 thousand, with total liabilities of
BGN 389 thousand and positive net assets of BGN 715 thousand;
-- Petrol Finances OOD is a limited liability company
established under the name Petrol Technologies EOOD in December
2014 and registered in the Registry Agency with registration number
20141216164853/16.12.2014. In February 2015 Petrol AD bought 99% of
the capital of Petrol Technologies EOOD, which was subsequently
renamed to Petrol Finances OOD. The Company's scope of business
includes financial and accounting services, preparation of
financial analyzes, forecasts and recommendations for efficient
organization of the financial activity, as well as any other
activity not prohibited by law. As of December 31, 2019 Petrol
Group owns 99% of the company's capital. For 2019, the company
generated total revenue amounting to BGN 1,595 thousand, positive
EBITDA of BGN 81 thousand and net profit for the period of BGN 72
thousand. As at December 31, 2019 the company owned total assets
for the amount of BGN 270 thousand, total liabilities of BGN 207
thousand and negative net assets of BGN 63 thousand;
-- Petrol Finance EOOD is a solely owned limited liability
company registered in the Commercial Register at the Registry
Agency on November 10, 2015 with registration 20151110101104 and
UIC 203776395. The Company's main business activity includes
financial and accounting services, preparation of financial
analyzes forecasts and recommendations for efficient organization
of the financial activity, as well as any other activity not
forbidden by law. As of December 31, 2019 the Group owns 100% of
the company's capital. For 2019 the company was engaged in minimal
commercial activity, generating total revenue of BGN 3
thousand;
-- Lozen Asset AD is a joint-stock company incorporated under
the Bulgarian legislation and registered in Commercial Register at
the Registry Agency in July 2015 with UIC 203624804. The company's
main activity includes acquisition, operation, management and
disposal of property, consultancy and any other activity not
prohibited by law. As at December 31, 2019 the Group owns 100% of
company's capital. For 2019 the company generated total revenue of
BGN 48 thousand, with negative EBITDA amounted to BGN 80 thousand
and net loss for the period of BGN 140 thousand. As at December 31,
2019 the company owned total assets of BGN 2,925 thousand, total
liabilities of BGN 1,757 thousand and positive net assets of BGN
1,168 thousand;
-- Elit Petrol - Lovech AD is a joint-stock company incorporated
and registered in the Registry Agency in January 2015. The main
activity of the company includes processing, import, export,
business and other petroleum products and any other activity not
prohibited by law. As of December 31, 2019 the Group owns 100% of
the capital. In 2019 the company did not carried out business
activity and did not generate sales revenue. For 2019 the company
reported a negative EBITDA of BGN 9 thousand and net loss for the
period of BGN 73 thousand. As at December 31, 2019 the company
owned total assets of BGN 2,384 thousand and total liabilities of
BGN 377 thousand, as a result at the end of 2019 the net assets of
the company are positive amounting to BGN 2,007 thousand;
-- Petrol Properties EOOD is a solely owned limited liability
company incorporated under the Bulgarian legislation and registered
in Sofia City Court under company court file number 20902/2007,
respectively re-registered in the Commercial Register at the
Registry Agency with UIC 175457505. The Company's scope of
activity: trading with movable and immovable property, purchase of
goods or other property for the purpose of resale in initial or
processed form, internal and external trading, commercial
representation and agency of local and foreign individuals and
legal entities in the country and abroad, consulting services and
many other activities not prohibited by law. As at December 31,
2019 the Group owns 100% of the capital. The company did not carry
out commercial activity in 2019 and not generated revenue;
-- Kremikovtsi Oil EOOD is newly established solely owned
company incorporated under the Bulgarian legislation and registered
in Commercial Register at the Registry Agency with UIC 205714200 in
June 2019. The company was established with a contribution in-kind
by Petrol AD of the assets to the SD Kremikovtsi, including land,
buildings and removable property. The company's core business is
processing, import, export and trading with oil and petroleum
products. As at December 31, 2019 the Group is a sole owner of the
company's capital. The company's total revenue for 2019 is BGN 10
thousand, with negative EBITDA at the amount of BGN 6 thousand and
net loss of BGN 6 thousand. As at December 31, 2019 the company
owns total assets of BGN 1,745 thousand and positive net assets of
BGN 1,734 thousand;
-- Shumen Storage EOOD is newly established solely owned company
incorporated under the Bulgarian legislation and registered in
Commercial Register at the Registry Agency with UIC 205714218 in
June 2019. The company was established with a contribution in-kind
by Petrol AD of the assets to the SD Shumen, including land and
buildings. The company's core business is processing, import,
export and trading with oil and petroleum products. As at December
31, 2019 the Group is a sole owner of the company's capital. The
company's total revenue for 2019 is BGN 19 thousand, with positive
EBITDA at the amount of BGN 15 thousand and net profit of BGN 7
thousand. As at December 31, 2019 the company owns total assets of
BGN 1,659 thousand and positive net assets of BGN 1,657
thousand;
-- Office Estate EOOD is newly established solely owned company
incorporated under the Bulgarian legislation and registered in
Commercial Register at the Registry Agency with UIC 205754383 in
July 2019. The company was established with a contribution in-kind
by Petrol AD of land and buildings in Sofia city. The company's
core business is deals, management and ownership of real estates
and any other activity not prohibited by law. As at December 31,
2019 the Group is a sole owner of the company's capital. The
company's total revenue for 2019 is BGN 7 thousand and net loss of
BGN 4 thousand. As at December 31, 2019 the company owns total
assets of BGN 1,545 thousand and positive net assets of BGN 1,537
thousand;
-- Svilengrad Oil EOOD is newly established solely owned company
incorporated under the Bulgarian legislation and registered in
Commercial Register at the Registry Agency with UIC 205818576 in
September 2019. The company was established with a contribution
in-kind by Petrol AD of the assets to the SD Svilengrad, including
land, buildings and movable property. The company's core business
is processing, import, export and trading with oil and petroleum
products and any other activity not prohibited by law. As at
December 31, 2019 the Group is a sole owner of the company's
capital. The company's total revenue for 2019 is BGN 5 thousand,
with positive EBITDA at the amount of BGN 1 thousand and net loss
of BGN 9 thousand. As at December 31, 2019 the company owns total
assets of BGN 1,833 thousand and positive net assets of BGN 1,833
thousand;
-- Varna 2130 EOOD is newly established solely owned company
incorporated under the Bulgarian legislation and registered in
Commercial Register at the Registry Agency with UIC 205838664 in
September 2019. The company was established with a contribution
in-kind by Petrol AD of the assets to the filling station in Varna
city, including land, buildings and movable property. The company's
core business is processing, import, export and trading with oil
and petroleum products and any other activity not prohibited by
law. As at December 31, 2019 the Group is a sole owner of the
company's capital. The company's total revenue for 2019 is BGN 25
thousand, with negative EBITDA at the amount of BGN 18 thousand and
net loss of BGN 27 thousand. As at December 31, 2019 the company
owns total assets of BGN 1,538 thousand, total liabilities of BGN
65 thousand and positive net assets of BGN 1,473 thousand.
All subsidiaries have a registered address in the Republic of
Bulgaria. For additional information concerning the subsidiaries
included in the preparation of the consolidated financial report
(see also note 30 and note 31 to the annual consolidated financial
report for 2019).
Information pursuant to Art. 39, item 7 of the Accountancy
Act
The Group has no registered branches.
Information pursuant to item 13 of the Appendix No. 10 to the
Ordinance No. 2 of September 17, 2003
The Group has not adopted an investment policy for 2020 so it
has not carried out an assessment of the opportunities of the
applied investment intentions.
Management Bodies
Information pursuant to Art. 100l, par. 7 of the Public Offering
of Securities Act and Art. 48, par. 1 of the Accountancy Act
The Parent company has two-tier board structure, which includes
Management Board (MB) and Supervisory Board (SB). The names and the
functions of the members of the SB and MB of Petrol AD are
presented below. For members of the Management Board short
biographical information is presented:
Supervisory Board
Ivan Voinovski Chairman
"Petrol Correct" EOOD, represented by Nikolay Member
Gergov
"Petrol Asset Management" EOOD, represented Member
by Armen Nazaryan
Management Board
Grisha Ganchev Chairman of the
Board
Georgi Tatarski Deputy of the
MB and Chief Executive
Officer
Milko Dimitrov Member of the
MB and Chief Executive
Officer
Lachezar Gramatikov Member of the
MB
Kiril Shilegov Member of the
MB
Grisha Danailov Ganchev was born on 10 December 1962 in Lovech.
He had obtained his bachelor's degree in "Accounting and Control"
from the University for National and World Economy- Sofia, obtained
a master's degree in "BM" from American International Academy, St.
Louis and a master's degree in "Law" from Blagoevgrad University
"Neophyte Rilski". In the period since 1990 to 1999, Mr. Ganchev
was Manager of "Litex Commerce" AD. Between 1999 to 2008 Mr.
Ganchev was a CEO of "Litex Commerce" AD. In the period since 2008
until May 2014 he was a chairman of the Supervisory Board of "Litex
Commerce" AD. Fluent in Russian and English.
Georgi Ivanov Tatarski was born on 2 September 1960 in Razlog.
He had obtained his bachelor's degree in "Technology of Mechanical
Engineering" from Moscow State Technological University and a
master's degree in "International Economic Relations" from the
Russian Academy of Foreign Trade in Moscow. He has worked
successively at management positions in "Mineralimpex" AD,
"Interbrands Marketing End Distribution Inc." OOD "Hydro Bulgaria"
EOOD, "Shell Gas Bulgaria" AD, "OMV Bulgaria" EOOD, "Opet Aygaz
Bulgaria" EAD. Fluent in English and Russian.
Milko Konstantinov Dimitrov was born on 6 June 1985 in Lovech.
He had obtained his bachelor's degree in "Investments and
Management of Financial Risk" and has a master's degree in
"Investment Management" from Cass Business School, City University,
London, UK. He was Executive Director of "Litex Commerce" AD and
CEO of "Litex" AD. Fluent in English.
Lachezar Nikolov Gramatikov was born on 2 October 1975. He has a
master's degree in "Macroeconomics" from the University of National
and World Economy Sofia. His professional experience includes
various management positions in "Petrol AD" and "EKO Bulgaria" EAD.
From March 2013 to June 2014 he took the position of Manager
"Business Development" in "EKO Bulgaria" EAD. As of June 2014
topped the Commerce Department in "Petrol AD", as a director of
"Trade and Marketing". Fluent in English.
Kiril Emilov Shilegov was born on 20 August 1977 in Sofia. He
had obtained his bachelor's degree in "Communication Engineering"
from the Technical University of Sofia. He started his work
experience in the "British Council - Sofia", where he worked on
projects related to the Ministry of Culture of the Republic of
Bulgaria, then continued his career in "Bridge Consort" AD and
"Elana Investment" AD. From 2007 to 2010 he took the position
"Senior Expert European Programmes" in "Elana Investment" AD.
Fluent in English.
Information pursuant to item 14 of the Appendix No.10 to the
Ordinance No.2 of September 17, 2003
In 2019, there were no changes in the core management principles
of the Group and the Parent company Petrol AD in particular.
Information pursuant to item 16 of the Appendix No.10 to the
Ordinance No.2 of September 17, 2003
On February 23, 2017 the Chairman of the Supervisory Board of
the Parent company passed away. On EGMS held in February 2019 a
decision for the replacement of the deceased member of the
Supervisory Board Ivan Voynovski with Rumen Konstantinov was taken.
The application for registration of these circumstances in the
account of the Parent company was refused, which was disputed by
the Parent company within the statutory term.
In addition to the refusal, the registration proceedings were
suspended by a request of minority shareholders until the
pronouncing of the Lovech Regional Court on applications for
annulment of the decision. In May 2019 the Lovech Regional Court
enacted a decision, which repealed the enacted refusal and turn
back the case to the Registry Agency for registration of the
applied entry after a resumption of the ceased registration
proceedings. At present, the court proceedings for repealing of the
decisions of EGMS from February 2019 are pending.
In 2019 there are no changes in terms of the members of MB and
SB of the Parent company.
Risk Factors influencing the activity of Petrol Group
Information pursuant to Art.39, item 1 of the Accountancy Act
concerning the risks faced by the Company
Market Environment Analysis
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.
Macroeconomic conditions in Bulgaria
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 2019, according to preliminary data of the National
Statistical Institute (NSI), Bulgaria reported an annual real
increase in the gross domestic product of 3.4% (2018: 3.1%), as a
fifth year in a row of over 3% annual increase. Fundamental effect
for the increase has the private consumption, which has increased
by 5.8% in 2019, influenced by the low interest levels, increased
bank lending, higher persons' income and the increased employment.
While in 2018 the goods and services produced in the country
assessed on current prices were estimated at BGN 109.695 billion,
in 2019 they surged to BGN 118.669 billion, reporting a nominal
surge of 8.2% on annual basis. In 2019 the gross added value
amounted to BGN 102,269 billion, while the nominal indicator
increased by 7.5% compared to the previous year.
According to preliminary data of National Statistical Institute
as at the end of 2019 the number of the employees in the country is
3,222.7 thousand. For the fourth trimester of 2019 the unemployed
are BGN 138.5 thousand, while the unemployment rate decreased by
0.6% compared to the previous year. In 2019 the unemployment rate
reached the lowest historical value of 4.2% (2018: 5.2%). For 2019
the labor productivity has increased by 3% (2018: 3.2%). According
to NSI data, the average monthly remuneration per person reached
BGN 1,349 thousand (2018: BGN 1,205 thousand) and rose by 12% on
annual basis.
The annual inflation measured for 2019 based on the average
annual consumer price index was 3.1% compared to 2.8% for 2018.
Following the widespread of Covid 19 coronavirus across the
world at the beginning of 2020, the World Health Organization
announced the situation, caused by the new corona virus as a world
pandemic. As a result of the widespread and fast spread of the
virus, several governments in Europe imposed a state of emergency.
In March 2020 were reported the first cases of infected people in
Bulgaria. On March 13, 2020 with a decision of the Parliament a
state of emergency was imposed. On purpose to limit the spread of
the corona virus infection an Order of the Health Minister was
issued for introduction of anti-epidemic measures, which directly
affected the trade activity of the Group. The imposed anti-epidemic
measures significantly limit the economic activity in the country
and business subjects' relationship.
A possible long-term slowdown of the economic activity in the
country would lead to a decrease in Group's revenue, regular
payment difficulties and operating losses.
Competition
In the past few years a trend for customers gradually choosing
the well-known trade marks with traditions in retail fuel sales was
observed. As a result some small players were forced to drop out of
business or to sign franchise/dealership arrangements with the
major companies in the sector. As a result of the change in
customer preferences and the implementation of additional
legislation control by the government, the market share of the
small independent players continues to decline. The absence of
strategic deals in the retail sector and significant investment
programmes by the major players led to minimum change in the retail
market shares of the companies. In 2019, seven major companies
dominated on the retail market - LUKoil Bulgaria EOOD, Petrol AD,
OMV Bulgaria EOOD, Shell Bulgaria EAD, Eko Bulgaria EAD, Rompetrol
Bulgaria AD and NIS Petrol EOOD.
Concerning the wholesale market the fuel needs in the country
are met by the output of the refinery Lukoil Neftochim in Burgas,
the refinery "Insa oil" in Ruse and from import. The refinery in
Burgas sells its oil products in the country exclusively through
Lukoil Bulgaria EOOD. Major importers of fuels are OMV Bulgarian
OOD, Insa Oil EOOD, Rompetrol Bulgaria AD and Eko Bulgaria EAD. The
import of petroleum products in the country is carried out mainly
by the neighboring Bulgaria countries. This is determined by the
fact that some of the fuel market participants are economically
related to the owners of the capital of the refineries in those
countries. In 2019, the wholesale market followed the trend and
volatility of crude oil prices on international markets.
Gradual introduction of new environmental standards and
additional means of control by the government, increased the costs
for companies in the sector, but on the other hand minimized the
unfair competition, eliminating market participants who are part of
the grey economy.
Key trade partners
Information pursuant to item 2 of the Appendix No.10 to the
Ordinance No.2 of September 17, 2003
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. For 2019 the major
Company's supplier with share over 10% from the total sales and
distribution costs is Litex AD.
-- The headquarter address of Litex AD is 3 Lachezar Stanchev
Str. fl.14, Sofia. The company's business includes purchase,
production, processing of goods for sale, commission and any other
activity not forbidden by the law.
Group's revenue from operations are generated primarily from two
segments - retail sales and wholesale sales. In 2019 there is no
client the sales revenue to which to exceed 10% of total sales
revenue. Petrol Group's wholesale and retail trading with fuels,
lubricants and other goods is carried out through its own and
rented from third parties petrol stations and storage facilities. A
risk from the suspension of the relationships with the lessors and
discontinuation of the lease contracts of the petrol stations
and/or storage facilities existed, which can have a negative
impacts on Petrol Group as decrease in sales, worsening the
financial results and loss of market share.
Trade margins
Approximately 90% of Petrol Group's sales revenue are formed of
wholesale and retail sales of fuels and a significant and lasting
decrease in gross margin from sales of fuels would negatively
reflect on the final financial results of Petrol Group.
In 2019, the average gross margin per liter of fuel (methane in
kg) has increased compared to 2018. The increase is due to the
higher retail gross margin of sales of fuels in 2019 compared to
2018.
Price fluctuations in crude oil and petroleum products
The Petrol 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 Petrol Group's Management.
Any future sharp fluctuations in the prices of fuels and
non-petroleum goods may lead to a deterioration of the financial
position of the Group.
Since the international quotations of crude oil serve as a basis
for the calculation of purchasing and selling prices, the
volatility of the crude oil and petroleum products prices have a
significant impact on the sales revenue and cost of goods sold of
the oil products. For 2019 the international quotations of Brent
crude oil have moved in consolidation without clearly defined
direction while only in the first quarter of 2019 the price has
followed entirely a uptrend, reaching the highest level for the
year of 76 us dollars for a barrel. Following the quotations of the
black gold at approx. USD 54 for a barrel at the beginning of 2019,
the price closed at above USD 67 for a barrel at the end of the
year, increasing by almost 24% on annual basis.
Product mix
The fuels market can be conditionally divided to light fuels and
dark fuels according to the applied technological schemes of crude
oil fractioning in its processing. The dark fuels are mainly used
for heat energy production or are used in construction and form a
relatively small part of the fuels market (approx. 10-15%). The
light fuels are used mainly for ensuring the needs of the different
types of transport. The most widely distributed are motor gasoline
A-95H and diesel.
In 2019 the Bulgarian market of motor fuels has not undergone a
significant change. The last-years tendency of shifting from all
types of gasoline to LPG and diesel has remained. The increased
diesel consumption is explained by the arising of the modern diesel
engines and fact that the transportation industry use this type of
fuel. Additional factor for the lower gasoline consumption was the
usage of LPG systems for gasoline engines driven by the
significantly lower price of LPG compared to the prices of motor
gasolines. The branded fuels and CNG came widely into the market.
Due to their better quality, these fuels can offer acceleration of
the automobile power, fuel expense reduction, increased engine
life, etc.
The main activity of the Petrol Group's companies includes
trading with motor gasoline, diesel, LPG and methane (CNG).
Possible widespread future penetration of alternative substitutes
of the traditional fossil fuels would have significant impact on
the sales and financial results of Petrol Group.
Interest risk
Risks arising from the increase of the price of Group's
financing (see also Financial instruments and risks
management);
Credit risk
Risk arising from the inability of the Group's counterparties to
execute their contractual obligations, as a result the Group may
bear losses (see also Financial instruments and risks
management);
Extraordinary expenses
There is a risk from arising of unforeseen expenses, which to
reflect negatively on the Group's financial position;
Political risk
Risks for the Group arising from global and regional political
and economic crises;
Legislation
The companies in the Group are accountable to various regulatory
bodies in the country. Future changes in regulatory framework,
regulating the activity of the companies in the Group, may have
negative impact on the financial results of the Group. Fuels
trading sector is one of the most strictly regulated and controlled
by the national institutions, as the provisions have increased with
every passing year. The regulations regarding the excise
legislation and environment protections, combined with the
requirements of the Stocks of Crude Oil and Petroleum Product Act
(SCOPPA), required access to significant financial and management
resources.
Thus, changes in the current legislation affect the financial
performance of the Group. Significant influence in this direction
proved the adoption in 2003 of the Stock of Crude Oil and Petroleum
Product Act (SCOPPA) requiring all liable parties (importers and
manufacturers) and the state to create and store inventories down
based on the average daily consumption of oil products in country's
territory during the previous year. The adopted changes in 2020 for
registration of the parties carried out activities related with oil
and petroleum products in connection with The Law of the
Administrative Regulation of the Economic Activities related to Oil
and Petroleum Products additionally burden financially and
operatively the market participants.
In terms of the Excise Duty and Tax Warehouse Act from January
1, 2020 a series of changes have been imposed among which:
-- Obligation for implementation in the tax warehouses for
processing and storage of energy products with codes under Combined
Nomenclature 2710 12 to 2710 20 a system for video monitoring and
control. The system has to meet exact requirements and to
allow:
-- Real time visual control;
-- Permanent video records on server;
-- Identification of the plate number of the vehicles;
-- Possibility for real time remove access and remove inspection
of the stored in the system data by the custom authorities;
-- The following additional requirements for issuance of a
excise duty exemption end-user certificate (EDEEUC) were also
adopted:
-- The person is obligated to use automatic reporting systems,
which allow a real time control of the energy products quantities,
which are delivered and used in the certain facility, as well as
the commodities, materials, processed or stored goods, signed in
the request for excise duty exemption end-user certificate;
-- The person must independently and at his own expense to
provide internet access of the customs authorities to the automated
reporting systems, when energy products with codes under Combined
Nomenclature 2710 12 to 2710 20 will be delivered and used in the
facility;
-- The person uses measuring and control devices, which meet the
applicable and normative requirements.
From January 1, 2012 the Renewable Energy Sources Act (RESA) has
introduced a requirement for consumption release of diesel fuel for
transport within the meaning of EDTWA to contain at least 5% by
volume biodiesel. From June 1, 2012 the rate was increased to at
least 6% vol. Upon the release of fuel for gasoline engines, it had
to contain bioethanol or ethers produced from bioethanol least 7%
vol. as of March 1, 2015. From September 1, 2018 the gasoline
should be with a content of bio-ethanol or ethers, produced from
bio-ethanol of minimum 8% vol. and from March 1, 2019 up to 9%
vol.
Pursuant to Ordinance No.3 of February 19, 2010 on the specific
requirements and control by the customs authorities of the means of
measurement of excise goods, the licensed warehouse keepers under
EDTWA must have installed automated measuring and level systems in
their tax warehouses which through an integrated communication
system for monitoring and control to transmit data electronically
to the automated systems for accountability of individuals and to
the information system of the Customs Agency.
The other major legal acts regulating the activity of fuel
market participants are related to environmental protection.
Pursuant to Ordinance No.16 from 12 August 1999 on restriction of
the emissions of volatile organic compounds in storing, loading or
unloading and transportation of petrol, the tanks storing gasoline
should have coating for reflecting at least 70% of solar radiation
and installed internal floating roofs or seals on external floating
roofs. In the storage depots where gasolines are stored, loaded or
unloaded should have a hydrocarbon vapour recovery systems, bottom
loading systems on tanktrucks, displays for control of overloading
and grounding etc.
According to Ordinance on the requirements for the quality of
liquid fuels, conditions, terms and ways of their control from
January 1, 2009 the fuel for diesel engines and motor gasoline must
have a maximum Sulphur content of 10 mg/kg (10 ppm).
Weather conditions and seasonality
The Group's results of operations are affected by weather
conditions and seasonal variations in demand oil products. The fuel
consumption is highest in the second and third quarters, which is
due to the annual vacations during the summer months as well as to
the agricultural producers, who usually increase their consumption
during autumn months.
Other risks
See section Contingent liabilities
Financial instruments and risk management
Information pursuant to item 12 of the Appendix No.10 to the
Ordinance No.2 of September 17, 2003 and Art.39, item 8 of the
Accountancy Act
Accounting classifications and fair values
The table below shows the carrying amounts and fair values of
the financial assets and financial liabilities, including their
levels in the fair value hierarchy. There is no information
included about the fair values of these short-term financial
instruments that Management believes that the book value in the
statement of financial position is a reasonable approximation of
fair value.
Financial assets and liabilities Fair value
level
3
Debt At fair Liabilities Total
instruments value at amortised
at amortised through cost
December 31, 2019 cost profit
BGN'000 or loss
Financial assets
Loans granted, net 25,998 - - 25,998 -
Trade and other receivables,
net 31,568 - - 31,568 -
Cash and cash equivalents 3,486 - - 3,486 -
Financial assets measured
at fair value through
profit and loss - 2,235 - 2,235 2,235
-------------- --------- -------------- ---------- -----------
61,052 2,235 - 63,287 2,235
============== ========= ============== ========== ===========
Financial liabilities
Trade and other liabilities - - (57,463) (57,463) -
(4 3 ,
Loans and borrowings - - (47,387) (47,387) 971 )
-------------- --------- -------------- ---------- -----------
(4 3
, 9 7
- - (104,850) (104,850) 1 )
============== ========= ============== ========== ===========
Financial assets and liabilities Fair value
level
3
Debt At fair Liabilities Total
instruments value at amortised
at amortised through cost
December 31, 2018 cost profit
BGN'000 or loss
Loans granted, net 22,124 - - 22,124 -
Trade and other receivables,
net 34,048 - - 34,048 -
Cash and cash equivalents 4,265 - - 4,265 -
Financial assets measured
at fair value through
profit and loss - 2,285 - 2,285 2,285
-------------- --------- -------------- --------- -----------
60,437 2,285 - 62,722 2,285
============== ========= ============== ========= ===========
Financial liabilities
Trade and other liabilities - - (51,261) (51,261) -
Loans and borrowings - - (48,229) (48,229) (44,254)
-------------- --------- -------------- --------- -----------
- - (99,490) (99,490) (44,254)
============== ========= ============== ========= ===========
Fair values estimation
Trade and other receivables
Determining the fair value of trade and other receivables
includes the following:
-- analysis of analytical trail balances and reporting of internal transformations;
-- differentiation between receivables and payables, excluding
the presumption of future offsetting of receivables from different
customers;
-- valuation of receivables based on their collectability;
-- revaluation of receivables in foreign currencies at the
respective rates as at the date of the financial statements.
Debenture loan
The fair value of the debenture liability is determined based on
a quotable price as at the date of the consolidated financial
statement, in case the instrument is quoted at an active market. In
case it is not actively traded, the fair value is determined based
on alternative valuation techniques. The valuation techniques used
include analysis of discounted cash flows through expected future
cash flows and discount level in relation with the market, the
credit rating of the issuer, etc. The fair value is determined only
for disclosure purposes.
Trade and other payables
Determining the fair value of trade and other payables includes
the following:
-- complete review of payables as at the date of valuation;
-- identification of overdue payables and determination of due interests and penalties;
-- revaluation of payables in foreign currencies at rates as at
the date of the financial statements.
Receivables and payables related to trade loans
The fair value of the received and granted trade loans is
determined for disclosure purposes and is calculated based on the
present value of future cash flows of principal and interest
discounted at the market rate at the reporting date.
Financial risk management
Risk management framework
The use of financial instruments exposes the Group to market,
currency and interest rate risk. This section presents information
about the objectives, policies and processes for managing these
risks, as well as capital management.
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.
Market risk
Market risk is the risk that changes in market prices, such as
foreign exchange rates, interest rates and equity prices will
affect the Group's income or the value of its holdings of financial
instruments. The objective of market risk management is to manage
and control market risk exposures within acceptable parameters,
while optimising the return. Because of the nature of its activity,
the Group is exposed to price, currency and interest rate risk.
Currency risk
The Group performs transactions in a currency other than its
functional currency, and thus it is exposed to risk, related to
potential foreign exchange rate fluctuations. Such risk arises
mainly from the fluctuations of the US dollar, since the Group
performs purchases and has received loans denominated in US
dollars. Transactions primarily denominated in euro do not expose
the Group to currency risk, since the Bulgarian lev is fixed to the
euro effective January 1, 1999.
Financial assets and liabilities denominated in US dollars are
presented in the following table:
December 31, 2019 December 31, 2018
USD'000 BGN'000 USD'000 BGN'000
Financial assets
Cash and cash equivalents 7 12 7 12
7 12 7 12
========= ========= ========= =========
The sensitivity analysis to currency risk is calculated based on
5% fluctuation in the exchange rate of the US dollar towards the
Bulgarian lev. The Management considers that it is a reasonably
possible fluctuation, based of statistical data for the dynamics of
fluctuations in the exchange rate in the previous period, based on
the daily deviation calculated for 250 days. If on December 31,
2019 the rate of the US dollar had decreased/increased by 5%
assuming that all other variables remained constant, loss after tax
would have increased/decreased by BGN 1 thousand as a result of
exchange rates differences from revaluation of cash in US
dollars.
Interest rate risk
The Group is exposed to interest rate risk as part of borrowings
have variable interest rate agreed as basis interest increased by a
certain margin. The Group continuously monitors and analyzes its
main interest rate exposures by developing various scenarios for
optimization as refinancing, renewal of existing loans, alternative
financing (contracts for the sale and leaseback of assets) and
calculates the impact of changing interest rates within a certain
range on the financial result.
As at the date of these consolidated financial statements, the
structure of the interest-bearing financial instruments is as
follows:
December December
31, 31,
2019 2018
BGN'000 BGN'000
Instruments with fixed interest rate
Financial assets 23,010 20,560
Financial liabilities (36,910) (36,890)
--------- ---------
(13,900) (16,330)
========= =========
Instruments with variable interest rate
Financial liabilities (8,267) (9,291)
--------- ---------
(8,267) (9,291)
========= =========
The sensitivity analysis of the interest rate risk is prepared
based on the presumption that interest positions with variable
interest rates as of the end of the reporting period have existed
in the same amount during the entire year and the reasonably
possible increase/decrease of the interest rate is by 16 basis
points. If the interest rates were higher/lower by 16 basis points,
and all other variables were constant, the loss after tax
would have been higher/lower by BGN 12 thousand .
Price risk
The Group is exposed to a risk of frequent and sharp
fluctuations in fuels prices and other tradable goods. In order to
decrease sensitivity to fluctuations in the prices of fuels, the
Group updates its selling prices on a daily basis in accordance
with the geographic region and the selling prices of its main
competitors.
In 2019, the Group held comparatively high inventory turnover.
For approximately 17 days the inventory makes a whole cycle, which
reduces the Group's price risk exposure.
Credit risk
Credit risk is the risk that one party to a financial instrument
fails to meet its obligation and thus causing loss to the other.
Financial assets that potentially expose the Group to credit risk
are mainly trade receivables and interest loans granted.
Exposure to credit risk
The carrying amount of financial assets represents the maximum
credit risk the Group is exposed to. The maximum exposure to credit
risk as at the reporting date is as follows:
December December
31, 31,
2019 2018
BGN'000 BGN'000
Loans granted 25,998 22,124
Trade and other receivables 33,803 36,333
Cash and cash equivalents 3,407 4,189
63,208 62,646
========= =========
Trade and other receivables
The Group is exposed to credit risk, in case its customers do
not pay their obligations in the expected term and amount. The
policy of the Group regarding credit risk is to sell goods and
services only to customers with an appropriate credit standing and
to use adequate collaterals as a means of reducing the risk of
financial losses. The creditworthiness of customers is estimated by
taking into consideration their financial position, past experience
and other factors. Credit limits have been stipulated and their
compliance is regularly monitored. In case of exceeding the credit
limits, interest on arrears is accrued. Retail sales are settled in
cash predominantly or by credit cards.
Impairment of trade and other receivables
Time structure of trade and other receivables at the reporting
date are not impaired, is as follows:
December December
31, 31,
2019 2018
BGN'000 BGN'000
Up to 30 days 2,864 1,746
31 - 120 days 1,553 1,709
121 - 210 days 480 590
Over 211 days 4,054 6,991
--------- ---------
8,951 11,036
========= =========
Cash and cash equivalents
Cash and cash equivalents of the Group are located in banks with
high ratings.
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. The goal of management is to maintain a constant
balance between continuity and flexibility of financial resources
using various forms of financing. Liquidity risk management
includes maintaining sufficient stocks of cash, arranging adequate
credit lines, preparation, analysis and updating cash flow
forecasts.
The following table presents the contractual maturities of
financial liabilities based on the earliest date on which the Group
may be required to pay them.
The table shows the undiscounted cash flows, including principal
and interest, excluding the effect of netting arrangements:
December 31, 2019 Carrying Contractual Up to Between
BGN'000 amount cash flows one year one and
five
years
Debentures 39,119 44,522 2,372 42,150
Loans from financial institutions 8,267 8,267 524 7,743
Trade loans from unrelated
parties 1 1 1 -
Trade and other payables 57,463 57,463 57,463 -
104,850 110,253 60,360 49,893
========= ============ ========== =========
December 31, 2018 Carrying Contractual Up to Between
BGN'000 amount cash one year one and
flows five
years
Debentures 38,744 46,502 2,040 44,462
Loans from financial institutions 9,291 9,291 524 8,767
Trade loans from unrelated
parties 194 194 194 -
Trade and other payables 51,261 51,261 51,261 -
99,490 107,248 54,019 53,229
========= ============ ========== =========
The Group does not expect cash flows included in the table to
occur significantly earlier or at significantly different
amounts.
In 2019 the Petrol Group did not use any financial instruments
for hedging-risk purposes.
The Group operates with ERP system, which supports the ongoing
reporting, analysis, planning, implementation and control of the
business processes in Petrol Group. The internal control system of
the Group monitors for the effective functioning of the Group's
reporting, preventive identification of risks accompanying
activities and the timely identification of potential errors and
shortcomings. At the same time, the Parent company's SB exercises
general and continuous control over the Parent-company's activity,
including the accompanying reporting and verifies the annual
financial statements and annual reports of Petrol AD (see also
Corporate management declaration).
Information pursuant to item 10 of the Appendix No.10 to the
Ordinance No.2 of September 17, 2003
In 2019 the Group did not issue any new security issues.
Significant events occurred in 2019
Information pursuant to item 3 of the Appendix No.10 to the
Ordinance No.2 of September 17, 2003
In January 2019 the Group granted a cash loan to an unrelated
party with a credit limit up to BGN 5,500 thousand, available in
tranches until December 31, 2019 and interest rate of 6.7%. As at
December 31, 2019 the term of the loan has been extended with
another year. The Group has receivables under this loan of BGN
4,621 thousand principal, net of impairment losses under IFRS 9 and
BGN 252 thousand interest.
The decision for capital decrease was voted again on a new EGMS
held in February 2019. On the same EGMS was also taken a decision
for replacement of the deceased member of the Supervisory Board
Ivan Voynovski with Rumen Konstantinov. The application for
registration of these circumstances in the account of the Parent
company was refused, which was disputed within the legal term by
the Parent company. In addition to the refusal, the registration
proceedings was postponed by a request of minority shareholders
until the pronouncing of the Lovech Regional Court. In May 2019 the
Lovech Regional Court enacted a decision, which repealed the
enacted refusal and turn back the case to the Registry Agency for a
registration of the application after a resumption of the ceased
registration proceedings. At present, the court proceedings for
repealing of the decisions of EGMS from February 2019 are
pending.
In February 2019 the Group entered into an agreement with a
commercial bank for factoring with special terms and without
regress for transferring of preliminary approved receivables with a
maximum period of the deferred payments up to 120 days from the
date of invoice issuance with a payment in advance of 90% of the
value of the transferred receivables including VAT. The commission
for factoring services is 0.35% of the total value of the
transferred invoices plus additional annual taxes. The interest for
the amounts paid in advance is Base Deposit Index for Legal
Entities plus 1.95%, accrued daily and paid on monthly basis at the
end of every calendar month. As at December 31, 2019 the Group has
receivables under this factoring agreement at the amount of BGN 12
thousand.
In February 2019, an additional bank guarantee was issued at the
amount of BGN 255 thousand aiming to secure the additionally
accumulated liabilities for interests on tax amended assessment
issued in March 2016 of the Parent company under a tax assessment
for social security contributions for BGN 543 thousand and BGN 248
thousand interest. With a decision from March 2020 the first
instance court repealed partially the disputed amended assessment,
as a result of that the liabilities of the Parent company decreased
by BGN 53 thousand. The Appeal and Tax Insurance Practice (ATIP)
disputes the decision of the first instance court. At present, the
case is pending.
In April 2019 through a cession agreement with an unrelated
party the Group sold fully impaired in previous periods receivables
under loans granted and due interest at the amount of BGN 32,063
thousand, granted to a Controlling company until November 2013.
In April 2019 the Group entered into an agreement for granting a
cash loan to an unrelated party with credit limit up to BGN 1,300
thousand at 6.7% annual interest and repaying period until December
31, 2019. As at December 31, 2019 the receivables under this
contract are at the amount of BGN 1,292 thousand principal and BGN
63 thousand interest.
In April 2019 the Group sold 5,940,000 shares, representing 100%
of the capital of Storage Oil EAD for the total amount of BGN 50
thousand. As at transaction date, the consolidated net assets are
negative at the amount of BGN 263 thousand and the written off
reputation at the amount of BGN 7 thousand. The result of the sale
is a profit at the amount of BGN 306 thousand.
In May 2019 the Group granted a cash loan to an unrelated party
with credit limit up to BGN 10 thousand, repayment period until
December 31, 2019 and interest rate of 6.7%. As at December 31,
2019 the granted funds are at the amount of BGN 6 thousand.
In June 2019 two new subsidiaries were established and
registered in the Commercial Register - Kremikovtsi Oil EOOD and
Shumen Storage EOOD. Lands, buildings, plants and equipment with
total carrying amount of BGN 605 thousand and market value of BGN
1,740 thousand determined by
experts appointed by the Registry Agency were transferred by
contribution in-kind in the capital of Kremikovtsi Oil EOOD. The
capital of the company is distributed in 1,740,397 shares, each
with BGN 1 nominal value. Lands and buildings with total carrying
amount of BGN 1,416 thousand and market value of BGN 1,650 thousand
determined by experts appointed by the Registry Agency were
transferred by contribution in-kind in the capital of Shumen
Storage EOOD. The capital of Shumen Storage EOOD is distributed in
1,650,000 shares, each with BGN 1 nominal value.
In July the subsidiary Office Estate EOOD is established and
registered in the Commercial Register by a contribution in-kind of
lands and buildings with total carrying amount of BGN 80 thousand
and market value of BGN 1,541 thousand determined by experts
appointed by the Registry Agency. The capital of the company is
distributed in 1,541,000 shares, each with BGN 1 nominal value.
In August 2019 the Group sold to an unrelated party all of its
owned 32 200 company shares each with nominal value of BGN 1, which
represented 100% of the capital of Storage Invest EOOD for the
selling price of BGN 47 thousand, fully paid at the day of signing
of contract for sale.
In August 2019 the Group granted a cash loan to an unrelated
party with credit limit up to BGN 1,000 thousand with interest rate
of 6.7%, available in tranches for one year since the date of
signing. As at December 31, 2019 the loan limit is increased and
the Group has receivables at the amount of BGN 664 thousand
principal, net of impairment losses under IFRS 9 and BGN 26
thousand interest.
In September 2019 two new subsidiaries were established and
registered in the Commercial Register - Svilengrad Oil EOOD and
VARNA 2130 EOOD. Land, buildings, plants and equipment with total
carrying amount of BGN 3,285 thousand and market value of BGN 1,842
thousand, determined by experts appointed by the Registry Agency
were transferred by contribution in-kind in the capital of
Svilegrad Oil EOOD. The company's capital is distributed in
1,841,700 shares each with nominal value of BGN 1. Land, buildings,
plants and equipment with total carrying amount of BGN 709 thousand
and market value of BGN 1,500 thousand, determined by experts
appointed by the Registry Agency were transferred by contribution
in-kind in the capital of Varna 2130 EOOD. The company's capital is
distributed in 1,499,810 shares each with nominal value of BGN
1.
In December 2019 the Group bought from third party 8,210 company
shares, each with nominal value of BGN 100, representing 98.80% of
the capital of Petrol Technologies OOD for the purchase price of
BGN 1,850 thousand, which is paid in instalments by the Parent
company in January 2020.
In December 2019 the Group entered into an agreement with a
commercial bank for purchasing of trade receivables (standard
factoring) with a total limit of the advanced payment up to BGN 430
thousand and interest rate based on savings in BGN increased by a
markup of 3.7767 points, but not less than 4% per annum on the
amount of the advanced payment. As at December 31, 2019 the Group
received in advance under this contract the amount of BGN 347
thousand. The contract is secured by a pledge of receivables on
open bank accounts of the Parent company with a book value as at
December 31, 2019 of BGN 47 thousand.
In February 2018 the Group granted a cash loan to unrelated
party at the amount of BGN 2,000 thousand, subsequently the amount
was increased to BGN 3,500 thousand at 6.7% interest and refund
period until December 31, 2018. With annexes from the end of 2019
the credit limit was increased up to BGN 5,000 thousand and the
term of loan was prolonged to December 31, 2020. As at December
2019 the receivables under this loan are BGN 4,401 thousand
principal and BGN 276 thousand interest net of impairment.
In March 2018 the Group entered into an agreement for granting
loan to unrelated party at the amount of BGN 1,961 thousand at 5.5%
annual interest and refund period until December 31, 2018. At the
end of 2018 according to the signed trade agreement between the
parties, the loan was partially offset with outstanding opposite
trade liabilities under an agreement for supply of goods. With an
additional agreement from December 2018 the term of loan agreement
was prolonged until December 31, 2019. In 2019, the Group continues
to offset against due trade obligations under the contract for the
supply of goods. In June 2019, the loan was fully repaid.
In March 2018 the Group entered into an agreement for granting
loan to unrelated party with credit limit up to BGN 300 thousand at
6.7% annual interest and refund period until December 31, 2018.
With an annex from the end of 2018 the term of the loan was
prolonged until December 31, 2019. In 2019 the limit under loan
agreement is increased. As at December 31, 2019 the granted funds
under this contract were principal of BGN 528 thousand and interest
of BGN 34 thousand.
In May 2018 unrelated party repaid the outstanding amount of BGN
148 thousand under trade loan, granted on April 19, 2017 with a
credit limit of BGN 1,180 thousand. The loan was fully repaid.
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 of Savings-based interest rate (SIR) plus added amount of
6,1872 points, but cumulatively not less than 6.5% annually. The
credit is covered with a special pledge of its goods in turnover at
the amount of BGN 2,419 thousand, representing oil products and
with a pledge of receivables on bank accounts. In December 2018, as
a result of a signed annex to an agreement from 2016 for revolving
credit line with the same bank, the Group negotiated an increase of
the amount of the credit line of BGN 9,500 thousand with an
additional amount of BGN 11,500 thousand, by which the total amount
of credit line rose to BGN 21,000 thousand. The line is separated
in total limit of BGN 13,500 for issuance of bank guarantees and a
limit of BGN 7,500 for refinancing of the received credit-overdraft
of BGN 2,000 thousand and the rest for working capital. The
increased amount of the credit limit on the revolving credit line
is covered additionally with establishment of mortgages and pledges
of properties, plants and equipment with book value of BGN 3,416
thousand as at December 31, 2019 and a special pledge on goods in
turnover, representing oil products. In June 2019, the credit limit
for working capital granted under this credit line was partially
repaid as its amount decreased from BGN 7,500 thousand to BGN 7,000
thousand.
In August 2017, the Group signed two cash loan agreements,
according to which the Group has a liability to grant to unrelated
parties interest bearing loans up to BGN 4,000 thousand and up to
BGN 500 thousand with 6.7% annual interest. Subsequently the terms
of contracts are annexed. The initially contracted repayment period
is extended to December 31, 2019. In March and April 2019 the
principals under these trade loans were repaid.
In November 2017 the Group signed two contracts for granting
interest bearing loans with unrelated parties amounting up to BGN
5,050 thousand and up to BGN 6,150 thousand with 6.7% annual
interest. The repaid period is annexed until December 31, 2020. As
at December 31, 2019 the granted funds on these contracts are
respectively net of impairment principal of BGN 4,224 thousand,
interest of BGN 734 thousand, and net of impairment principal of
BGN 4,443 thousand and interest of BGN 818 thousand.
In December 2017, the Group signed a contract for granting
money, which requires the Group to grant an interest bearing trade
loan up to BGN 3,000 thousand to unrelated party at 6.7% annual
interest. The repaid period is until December 31, 2019. As at
December 31, 2019 the contracted amount was entirely granted.
Additional information concerning other Group events during the
period, which could be considered as significant is disclosed in
the notes to the consolidated annual financial report of the Group
for 2019.
Events after the reporting date
Information pursuant to Art. 39, item 3 of the Accountancy
Act
As disclosed in these financial statements for 2019 in Note 2.8.
Changes in accounting policy the Group has adopted a change in its
accounting policy regarding non-current tangible assets - property,
plant and equipment from the model applied in its financial
statements until 2019 including the cost of acquiring model, with
the application of the revaluation model, which the Management
considers to reflect more objectively the value of the held
non-current tangible assets.
In January 2020 the Parent company renegotiated the terms of the
credit line granted to it by a commercial bank under a revolving
credit line agreement dated September 21, 2016, with a credit limit
of BGN 7,000 thousand and achieved a reduction of the annual
compound interest rate of based on savings in BGN + 5,2802%, but
not less than 5.5%.
In February 2020, through an investment intermediary, the Parent
company purchased from a third party 7,091,517 ordinary
dematerialized registered shares with a nominal value of BGN 1
each, representing 10% of the capital of Elit Petrol AD, for a
total purchase price amounted to BGN 3 thousand, which was fully
paid by the Parent company in the same month.
As disclosed in Note 15.2. Effective tax rate, in February 2020
the Supreme Administrative Court, with a final decision, partially
revoked the decision of the Sofia-city Administrative Court from
April 2019 on the obligations of the Parent company under the
amended assessment as a result of tax audit of corporate income
taxation for 2013 and VAT until October 2014, as at the date of
preparation of these financial statements the final liability at
the amount of BGN 136 thousand principal and BGN 84 thousand
interest has been fully paid, and the bank guarantees released and
returned by the National Revenue Agency. The liabilities were
accounted as correcting events as of December 31, 2019 and are
reflected in the result for 2019.
In March 2020, with a decision of the first-instance court, the
appealed by the Parent company amended assessment from March 2016
on the tax audit for social security contributions for BGN 543
thousand principal and BGN 248 thousand interest was partially
revoked, as a result of which the liabilities of the Parent company
have been reduced to BGN 53 thousand. The Appeal and Tax Insurance
Practice have appealed the decision of the first-instance court. At
present, the case is pending.
From the beginning of 2020 the Group and the entire world
economy are exposed to the negative influence and consequences of
the pandemic of the spread of a new coronavirus Covid-19. In the
first quarter of 2020, the Group's sales were significantly
affected by the restrictive measures for free movement and travel
of people imposed by the Government of the Republic of Bulgaria by
the adopted at the end of March 2020 Law on Measures and Actions
during a State of Emergency. Due to the restrictions the Group's
sales revenue for March 2020 decreased by about 28% compared to
March 2019, and the sales revenue for April 2020 - decrease by
approx. 50% compared to the revenue for April 2019. As a result,
the Group has taken a series of actions to reorganise the
activities of some of its trade sites, as well as to establish
reduced working hours for some of the personnel. As of 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. In
April 2020, companies of the Group submitted applications documents
under this procedure. However, the Group will continue to carry out
its activity under the established regime of operation and in
compliance with all precautions to restrict the infection and
widespread of Covid-19, in accordance with the instructions adopted
by the Council of Ministers and recommendations of the health
authorities of the Republic of Bulgaria to ensure the health and
working efficiency of its employees.
At the end of 2019, the Parent company received a letter from
the Bulgarian National Bank with instructions to notify the Bank,
providing a description of the functional characteristics of the
respective types of Transcard Fleet cards that the Parent company
provides to its customers, including the applicable contracts and
the general conditions, as well as information on the number and
the value of the payment transactions performed for the previous 12
months. With a Decision of February 07, 2020 of the Management
Board of the Bulgarian National Bank, the Parent company is entered
in the Register of Service Providers under Art. 2, para. 3 of the
Law on Payment Services and Payment Systems (LPSPS) with the
activity of providing services performed on the basis of payment
instruments, allowing the user to acquire goods or services only in
the premises of the issuer or within a limited network of service
providers, which have concluded a commercial contract with the
issuer (Art. 2, para. 1, item 11, letter "a" of LPSPS).
From the beginning of 2019 the Law on the Administrative
Regulation of Economic Activities Related to Oil and Petroleum
Products become effective. The effect of the law directly affects
the main activity of the Parent company. As of the date of issuance
of these financial statements, the Parent company has submitted
within the statutory deadlines applications for entry in the
register to the Ordinance on the terms and conditions for keeping a
register of persons carrying out economic activities related to oil
and petroleum products. At present, the registration proceedings
are pending.
In April 2020, the Parent company renegotiated the terms under
the investment loan agreement from July 2016, as the agreed
interest rate on principal was reduced to 3mEuribor plus 3.5%, but
not less than 3.5%.
In May 2020, the Parent company received from the the Commission
for Protection of Competition (CPC) a decision for initiated
proceedings to establish any violations under Art. 15 and Art. 21
of LPC and / or under Art. 101 and Art. 102 of the Treaty on the
Functioning of the European Union (TFEU) in determining the prices
of mass automotive fuels in the production / import - storage -
wholesale - retail trade, both at the individual horizontal levels
and vertically, by eleven companies, including the Parent company.
In July 2020, the same decision was received by a subsidiary of the
Group. At present, the proceedings in the case are pending at the
CPC.
Unusual events and indicators
Information pursuant to item 5 of the Appendix No.10 to the
Ordinance No.2 of September 17, 2003
See Events after the reporting date and Contingent
liabilities.
Results from operations
Information pursuant to item 11 of the Appendix No.10 to the
Ordinance No.2 of September 17, 2003
The Petrol Group has not disclosed any financial and operating
projections for 2019, thus there is no analysis of the ratios
between the reached and disclosed financial results.
Operating and financial data pursuant to item 1 and item 2 of
Appendix No.10 to the Ordinance No.2 of September 17, 2003 and Art.
39, item 1 and item 2 of the Accountancy Act
Revenue
In 2019 the consolidated revenue of the Group increased to BGN
540.9 mln. (EUR 276.6 mln.), representing an increase of 1%
compared to 535.9 mln. (EUR 274 mln.) for 2018. The growth in total
revenue in absolute value in 2019 was due entirely to the higher by
BGN 11.7 mln. (EUR 6 mln.) sales revenue of fuels and goods, while
the other income decreased by BGN 6.7 mln. (EUR 3.4 mln.). The
increase in sales revenue in 2019 is due mainly to the growth by
181% in wholesale sales revenue and the increase by 13% in sales of
lubricants and other goods, as the revenue from retail sales of
fuels dropped by 3% on annual basis. In addition the revenue from
sales of services increased by BGN 1.1 mln. (EUR 0.6 mln.) or 12%
on annual basis.
The table below presents the change of revenue during the period
2017 - 2019 on a consolidate base and by separate business
segments:
% 201
201 9 /201
9 2018 2017 8
Sales revenue BGN mln 538.5 526.8 479.1 2%
---------------------------- --------- ------ ------ ------ --------
EUR mln 275.4 269.3 244.9
------------------------------------- ------ ------ ------ --------
Other income BGN mln 2.4 9.1 1.5 (74)%
---------------------------- --------- ------ ------ ------ --------
EUR mln 1.2 4.7 0.8
------------------------------------- ------ ------ ------ --------
Total revenue, including: BGN mln 540.9 535.9 480.6 1%
---------------------------- --------- ------ ------ ------ --------
EUR mln 276.6 274.0 245.7
------------------------------------- ------ ------ ------ --------
Retail segment BGN mln 506.7 463.7 429.9 (2)%
--------------------------- --------- ------ ------ ------ --------
EUR mln 259.1 237.1 219.8
------------------------------------- ------ ------ ------ --------
share of total revenue % 93.7% 96.5% 87.9%
Wholesale segment BGN mln 33.1 16.2 58.5 111%
--------------------------- --------- ------ ------ ------ --------
EUR mln 16.9 8.2 29.9
------------------------------------- ------ ------ ------ --------
share of total revenue % 6.1% 3.4% 12.0%
Other activities segment BGN mln 1.1 0.7 0.6 57%
--------- ------ ------ ------ --------
EUR mln 0.6 0.4 0.3
------------------------------------- ------ ------ ------ --------
share of total revenue % 0.2% 0.1% 0.1%
--------------------------- --------- ------ ------ ------ --------
As in all previous years the sales revenue of the Group in 2019
was almost entirely (98.1%) formed by sales of fuels and oher
goods. In 2019, these sales amounted to BGN 528.1 mln. (EUR 270.0
mln.) or with 2.1% more than sales for 2018 of BGN 517.5 mln. (EUR
264.6 mln.). The increase by BGN 10.6 mln. (EUR 5.4 mln.) in the
revenue from sales of fuels and other goods in 2019 compared to the
previous year is due to the increase by BGN 5.7 mln. (EUR 2.9 mln.)
in the revenue from sales of other goods and to the increase by BGN
4.9 mln. (EUR 2.5 mln.) in revenue from sales of fuels.
In 2019, the revenue from sales of goods comprised mainly
(90.7%) retail and wholesale sales of fuels, which amounts, after
excluding intra-Group sales, are as follows:
% 201
201 201 9 /201
9 8 2016 8
Retail sales of fuels mln. BGN 453.0 464.9 419.0 (3%)
-------------------------- ---------- ------ ------ ------ --------
mln. EUR 231.6 237.7 214.2
------------------------------------- ------ ------ ------ --------
share of total sales of
fuels % 94.6% 98% 97.3%
Wholesale sales of fuels mln. BGN 26.1 9.3 11.8 181%
-------------------------- ---------- ------ ------ ------ --------
mln. EUR 13.3 4.8 6.0
------------------------------------- ------ ------ ------ --------
share of total sales of
fuels % 5.4% 2% 2.7%
Total sales of fuels BGN mln 479.1 474.2 430.8 1%
-------------------------- ---------- ------ ------ ------ --------
EUR mln 244,9 242.5 220.2
------------------------------------- ------ ------ ------ --------
The increase in the sales revenue of fuels was due entirely to
the wholesale sales of fuels, which rose by 181%. The revenue from
retail sales of fuels decreased by 3% compared to the revenue in
2018 (see also Retail sales and Wholesale sales).
As a result in the current year the relative share of the
wholesale sales revenue of fuels decreased in the total
consolidated revenue from sales of fuels of the Petrol Group at the
expense of retail sales revenue of fuels. While in 2018 the revenue
from wholesale sales of fuels was 2%, in 2019 it rose to 5.4% in
the Group's total consolidated sales revenue of fuels.
Retail sales
The Group's retail sales are made through a network of retail
stations owned and/or operated by Petrol AD. These retail stations
are evenly spread throughout the country giving the Group
comprehensive geographic coverage. As of December 31, 2019 the
Group operated 320 working retail stations (2018: 322 retail
stations).
The results for the period 2017 - 2019 are as it follows:
% 201
9 /201
201 9 201 8 2017 8
Retail sales volumes
(mln. liters) 280.9 288.0 282.7 (2.5%)
------------------------------------ ------ ------ ------ --------
10.1
Incl. corporate clients 81.7 74.2 71.2 %
------------------------------------ ------ ------ ------ --------
Sales revenue BGN mln 453.0 464.9 419.0 (3%)
------------------------- --------- ------ ------ ------ --------
EUR mln 231.6 237.7 214.2
----------------------------------- ------ ------ ------ --------
In 2019, the Group reported an increase by 2.5% in retail sales
volumes compared to 2018. The decrease in volumes in combination
with the lower average selling retail prices in 2019 compared to
the prices in 2018, led to 3% lower total revenue from retail sales
of fuels compared to 2018. With regard to the main fuels, a
decrease in the average retail selling prices during the reporting
period compared to 2018 was observed for Gasoline A-95 and Blue
Force LPG, while the average selling price of diesel fuel
increased.
In 2019, the Group continued the process of reorganization of
retail network, started in 2015, including suspension of operation
and sale of unprofitable trade sites, termination of franchise and
dealership contracts with incorrect partners and concluding
agreements with new counterparties on the same franchise and
dealership programmes, etc.
The following table sets out the Group's retail sales of fuel by
major types of oil products for 2017 - 2019:
% 201
201 9 /201
9 2018 2017 8
Gasoline A-95H BGN mln 121.2 132.3 127 (8.4%)
----------------------------- --------- ------ ------ ------ --------
EUR mln 62.0 67.6 64.9
--------------------------------------- ------ ------ ------ --------
share of total retail sales
of fuels % 26.8% 28.5% 30.3%
Gasoline 96 Extra Force BGN mln - - 0.8 -
----------------------------- --------- ------ ------ ------ --------
EUR mln 0.4
--------------------------------------- ------ ------ ------ --------
share of total retail sales
of fuels % 0.2%
Gasoline A-98 BGN mln - - 0.7 -
----------------------------- --------- ------ ------ ------ --------
EUR mln 0.4
--------------------------------------- ------ ------ ------ --------
share of total retail sales
of fuels % 0.2%
Gasoline100 Extra Force BGN mln 5.2 4.9 3.7 6.1%
--------- ------ ------ ------ --------
EUR mln 2.7 2.5 1.9
======================================= ====== ====== ====== ========
share of total retail sales
of fuels % 1.2% 1.1% 0.9%
============================= ========= ====== ====== ====== ========
Blue Force LPG BGN mln 43.7 48.9 46.7 (10.6%)
----------------------------- --------- ------ ------ ------ --------
EUR mln 22.3 25.0 23.9
--------------------------------------- ------ ------ ------ --------
share of total retail sales
of fuels % 9.6% 10.5% 11.1%
Green Force diesel BGN mln 22.3 18.1 13.2 23.2%
--------- ------ ------ ------ --------
EUR mln 11.4 9.3 6.7
======================================= ====== ====== ====== ========
share of total retail sales
of fuels % 4.9% 3.9% 3.1%
============================= ========= ====== ====== ====== ========
Pro Force Diesel BGN mln 258.2 259.2 225.3 (0.4%)
----------------------------- --------- ------ ------ ------ --------
EUR mln 132.0 132.5 115.2
--------------------------------------- ------ ------ ------ --------
share of total retail sales
of fuels % 57.0% 55.7% 53.8%
Other fuel BGN mln 2.4 1.5 1.6 60.0%
----------------------------- --------- ------ ------ ------ --------
EUR mln 1.2 0.8 0.8
--------------------------------------- ------ ------ ------ --------
share of total retail sales
of fuels % 0.5% 0.3% 0.4%
----------------------------- --------- ------ ------ ------ --------
Total retail sales of fuels BGN mln 453.0 464.9 419 (3%)
----------------------------- --------- ------ ------ ------ --------
EUR mln 231.6 237.7 214.2
--------------------------------------- ------ ------ ------ --------
The highest drop in absolute value of BGN 11.1 mln. (EUR 5.7
mln.) reported the revenue from sales of Gasoline A-95H.
Additionally a decrease by BGN 5.2 mln. (EUR 2.7 mln.) and by BGN 1
mln. (EUR 0.5 mln.) reported the sales of Blue Force LPG and diesel
fuel.
The revenue from sales of Gasoline A-100 eXXtra Force, Green
Force Diesel and methane increased by BGN 0.3 mln. (EUR 0.16 mln.),
BGN 4.2 mln. (EUR 2.1 mln.) and BGN 0.9 mln. (EUR 0.4 mln.),
respectively, which is due to the higher average selling prices in
2019 and to the increase in sales.
Wholesale sales
The Group's wholesale sales are made through the operated by the
Group SD Varna and by purchases from other storage depots of third
party entities.
The reported results from wholesale sales of fuels in 2017 -
2019 are, as follows:
% 201
201 9 /201
9 2018 2017 8
Volume of wholesale sales
(million litres) 18.9 5.6 8.1 237.5%
-------------------------------------- ----- ----- ----- --------
Volume of wholesale sales
(thousand tonnes) 0 0.1 0 (100%)
-------------------------------------- ----- ----- ----- --------
Sales revenue BGN mln 26.1 9.3 11.8 181%
--------------------------- --------- ----- ----- ----- --------
EUR mln 13.3 4.8 6
------------------------------------- ----- ----- ----- --------
In 2019 the wholesale sales volumes of light fuels increased by
13.3 mln. liters compared to 2018, as the sales volumes of heavy
fuels dropped by 0.1 thousand tonnes. The growth is entirely due to
the increase in sales of Gasoline A-95H, diesel fuel and LPG, which
form 96% of total wholesale sales.
The highest growth of BGN 10 mln. (EUR 5.1 mln.) on annual basis
reported the sales of diesel fuel. The increase is due entirely to
the increase in sales volumes in 2019 compared to the previous year
as the average selling price decreased in 2019 compared to
2018.
The sales revenue of Gasoline A-95H rose by BGN 5 mln. (EUR 2.6
mln.), compared to 2018 again due to the increase in sales compared
to the previous period. As a result of that in 2019 the total
revenue from wholesale sales of fuels increased by 181% to BGN 26.1
mln. (EUR 13.3) mln.
The following table sets out the Group's wholesale sales of fuel
by major types of oil products:
% 201
201 9 /201
9 2018 2017 8
Gasoline A-95H mln. BGN 5.5 0.4 1.3 1,275%
-------------------------- ---------- ------ ------ ------ --------
mln. EUR 2.8 0.2 0.6
------------------------------------- ------ ------ ------ --------
share of total wholesale
sales of fuels % 21.1% 4.4% 11%
Gasoline -98 mln. BGN 0.00 0.06 0.06 (100%)
---------- ------ ------ ------ --------
mln. EUR 0.00 0.03 0.03
------------------------------------- ------ ------ ------ --------
share of total wholesale
sales of fuels % 0.0% 0.7% 0.5%
---------- ------ ------ ------ --------
Diesel mln. BGN 17.9 7.8 10.4 129.5%
-------------------------- ---------- ------ ------ ------ --------
mln. EUR 9.1 4.0 5.3
------------------------------------- ------ ------ ------ --------
share of total wholesale
sales of fuels % 68.6% 84.0% 88.1%
Other fuels mln. BGN 2.7 1 0.04 170%
-------------------------- ---------- ------ ------ ------ --------
mln. EUR 1.4 0.6 0.03
------------------------------------- ------ ------ ------ --------
share of total wholesale
sales of fuels % 10.3% 10.9% 0.4%
-------------------------- ---------- ------ ------ ------ --------
Total wholesale sales
of fuels mln. BGN 26.1 9.3 11.8 181%
-------------------------- ---------- ------ ------ ------ --------
mln. EUR 13.3 4.8 6
------------------------------------- ------ ------ ------ --------
Gross margin
The Group's total gross margin, calculated as a percentage of
the consolidated net revenue from sales of goods increased from
9.5% in 2018 to 10.8% in 2019. Despite the increase of gross margin
as percentage of revenue, the indicator rose by BGN 7.6 mln. (EUR
3.8 mln.) in absolute value due to the increase of the consolidated
gross margin from sales of fuels and other goods. The total gross
margin from sales of fuels rose to BGN 49 mln. (EUR 25.1 mln.) in
2019 compared to BGN 42 (EUR 21.5 mln.) in 2018. The gross margin
from sales of lubricants and other goods rose in 2019 to BGN 7.9
mln. (EUR 4 mln.) compared to BGN 7.3 mln. (EUR 3.7 mln.) in
2018.
Operating expenses
Hired services
In 2019, the hired services increased by BGN 2.9 mln. (EUR 1.5
mln.) to BGN 38.7 mln. (EUR 19.8 mln.). Compared to the previous
period, the increase in 2019 is mainly due to the higher operating
lease expenses, maintenance and repairs, commission costs and
state, municipal and other taxes, which increased respectively by
BGN 2 mln. (EUR 1 mln.), BGN 0.7 mln. (EUR 0.4 mln.), BGN 0.3 mln.
(EUR 0.15 mln.) and BGN 0.2 mln. (EUR 0.1 mln.). In 2019
significant decrease by BGN 0.2 mln. (EUR 0.1 mln.) and BGN 0.1
mln. (EUR 0.05 mln.) reported the consultancy and education
expenses and advertising costs.
Employee benefits
In 2019, the employee benefits increased, amounting to BGN 21.8
mln. (EUR 11.1 mln.) compared to BGN 19.3 mln. (EUR 9.9 mln.) in
2018. The main reason for the growth by BGN 2.5 mln. (EUR 1.3 mln.)
was the increase of the minimum wage in the beginning of 2019.
Depreciation and amortization
Depreciation and amortization charges on fixed tangible and
intangible assets are accrued based on the useful life of the
assets by applying the straight-line method (see also note 3.1 to
the consolidated financial report for 2019). In 2019, the Group
reports an increase in depreciation expenses to BGN 3.9 million
(EUR 2 million) compared to BGN 0.9 million (EUR 0.5 million) in
2018. The increase is due to the right-of-use assets included in
the consolidated statement of financial position under lease
agreements at the amount of BGN 10.2 mln. (EUR 5.2 mln.) and the
accrued depreciation expense at the amount of BGN 3 mln. (EUR 1.5
mln.) on the right-of-use assets.
Materials and consumables
In 2019, the Group the expenses for materials and consumables
reported a minimum drop compared to 2018, amounting to BGN 4.0
mlnl. (EUR 2.05 mln.) compared to BGN 4.1 mln. (EUR 2.1 mln.) in
2018.
Impairment losses of assets
For 2019 the Group reports a net reversed impairment loss of BGN
1 mln. (EUR 0.5 mln.), compared to a net impairment loss for 2018
of BGN 0.8 mln. (EUR 0.4 mln.). The net reversed impairment loss is
a result of the collected trade receivables from unrelated parties
during the period and impaired in previous periods at the amount of
BGN 0.4 mln. (EUR 0.2 mln.) and the collected trade loans granted
at the amount of BGN 1.4 mln. (EUR 0.7 mln.). The recognized
impairment loss in 2018 is due to impaired trade receivables on
loans granted at the amount of BGN 0.6 mln. (EUR 0.3 mln.), as well
as impaired trade and other receivables at the amount of BGN 0.26
mln. (0.13 mln). (see also Note 12 to the consolidated financial
statements).
Other operating expenses
In 2019, the Group's other operating expenses amounting to BGN
2.1 mln. (EUR 1.0 mln.) compared to BGN 2.2 mln. (EUR 1.1 mln.) for
2018. The decline by BGN 0.1 mln. (EUR 0.05mln.) is due to a
greater extent to the lower by BGN 0.4 mln. (EUR 0.2 mln.) scrap
and shortages. The most significant weight in other operating
expenses in 2019 had the local taxes and taxes on expenses
amounting to BGN 0.7 mln. (EUR 0.4 mln.), which increased by BGN
0.3 mln. (EUR 0.15 mln.) in 2018.
Profit from operations
In 2019, the Group reported a positive result before net
financial expenses, taxes and amortization (EBITDA) at the amount
of BGN 4.1 mln. (EUR 2.1 mln.) compared to a profit of BGN 5.4 mln.
(EUR 2.8 mln.) for 2018. Main reasons for the decrease of the
indicator are the decrease in other income by BGN 6.7 mln. (EUR 3.4
mln.), the increase by BGN 2.9 mln. (EUR 1.5 mln) in hired services
and the increase by BGN 2.5 mln. (EUR 1.3 mln.) in personnel
expenses, which are partially compensated by the increase in gross
margin by BGN 7.6 mln. (EUR 3.9 mln.) and the reported net reversed
impairment loss in 2019 amounting to BGN 1 mln. (EUR 0.5 mln.).
The drop of EBITDA in 2019 has a negative effect on Group's
earnings before interest and taxes (EBIT). For 2019 the Group
reported operating profit before financial costs and taxes
amounting to BGN 0.2 mln. (EUR 0.1 mln.) compared to operating
profit of BGN 4.5 mln. (EUR 2.8 mln.) in 2018. Additional negative
effect on this indicator has the increase of depreciation and
amortization in 2019 by BGn 3 mln. (EUR 1.5 mln.) compared to the
previous year, due to the recognised in the financial statement of
financial position right-of-use assets in accordance with IFRS
16.
Net finance costs
In 2019 the Group reported net finance costs of BGN 5.2 mln.
(EUR 2.6 mln.) compared to net finance income of BGN 51.2 mln. (EUR
26.2 mln.) for 2018.
In 2019 the Group's finance income amounted to BGN 2.3 mln. (EUR
1.15 mln.) compared to BGN 56.3 mln. (EUR 28.8 mln.) for 2018. The
most significant effect on the total decrease in the finance income
has the gain on sale of subsidiaries amounted to BGN 54.6 mln. (EUR
27.9 mln.) in 2018. (see also Note 14 to the annual consolidated
financial report for 2019).
In 2019, the Group's finance costs amounted to BGN 7.5 mln. (EUR
3.8 mln.) compared to BGN 5.1 mln. (EUR 2.6 mln.) for 2018. The
increase is due mainly to the reported loss on cession agreements
amounting to BGN 3.1 mln. (EUR 1.6 mln.), due to sales to third
parties of uncollectible receivables. In 2019 the Group reported a
decrease by BGN 1.7 mln. (EUR 0.9 mln.) in the reported loss of
revaluation of financial assets.
Financial position
As at December 31, 2019 the Group's current liability ratio
declined to 1.24 compared to 1.41 for 2018. The decrease of the
indicator is due to the increased current liabilities by BGN 7.4
mln. (EUR 3.8 mln.) and to the decreased current assets by BGN 1.7
mln. (EUR 0.9 mln.) for the same period. The increase in current
liabilities is due greatly to the higher trade payables to
suppliers by BGN 11.8 mln. (EUR 6 mln.). In addition during the
current period short-term liabilities under leasing contracts under
IFRS 16 of BGN 2.7 mln. (EUR 1.4 mln.) were reported.
As at December 31, 2019 the consolidated indebtedness of the
Group including loans and borrowings decreased, amounting to BGN
47.4 mln. (EUR 24.2 mln.) compared to BGN 48.2 mln. (EUR 24.6 mln.)
for the previous year. The decline is due to the repaid during the
year debt. In 2019 Debt/Assets ratio decreased to 34% compared to
37% at the end of 2018. As at December, 31 2019 the Debt/Equity
ratio was 325%.
In 2019, the Group's inventories turnover period remained the
same of 17 days. As at December 31, 2018 the accounts receivable
collection period increased to 18 days compared to 17 days in
2018.
Capital management
In order to ensure the going concern functioning of the Group,
the Management has undertaken series of purely procedural and
business oriented measures (see also section Outlook), aimed to
bring the capital of the Parent company in consistence with the
requirements of Art. 252, par. 1, item 5 of the Commercial Act (CA)
and overall improvement of the financial position of the Group.
Some of the measures include the decrease of the registered
capital bellow the net assets of the Parent company. The first step
in this direction was the holding of several Extraordinary General
Meeting of Shareholders (EGMS) in 2016 and 2017, where a proposal
for reverse split (merging) of 4 old shares with nominal value of
BGN 1 into 1 new share with nominal value of BGN 4 and consequently
decreasing of the Parent company's capital 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 ruled decision by the Lovech
Regional Court, which canceled the refusal of the Commercial
Register for registration of the voted on EGMS decision for merging
4 old shares with BGN 1 nominal in 1 new share with nominal of BGN
4, the applied change was registered in CR. As a result of that the
registered capital of the Parent company is BGN 109,249,612
distributed in 27,312,403 shares with nominal of BGN 4 each. The
change in structure of the capital was registered also in Central
Depository AD. The Commercial Register enacted a refusal on the
submitted on April 2018 application for registration of the
decision of ERSM for the second stage of the procedure reducing the
nominal value of the shares from BGN 4 to BGN 1 in order to cover
losses.
On EGSM 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 was given on the application for
registration of the decision in CR, which was appealed by the
Parent company within the legal 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 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.
The decision for decreasing the capital was voted again on a new
EGMS held in February 2019. On the same EGMS was also taken a
decision for replacement of the deceased member of the Supervisory
Board Ivan Voynovski with Rumen Konstantinov. The application for
registration of these circumstances in the account of the Parent
company was refused, which was disputed within the statutory period
by the Parent company.
In addition to the refusal, the registration proceedings were
suspended by a request of minority shareholders until the
pronouncing of the Lovech Regional Court on applications for
annulment of the decision. In May 2019 the Lovech Regional Court
enacted a decision, which repealed the enacted refusal and turn
back the case to the Registry Agency for registration of the
applied entry after a resumption of the ceased registration
proceedings. At present, the court proceedings for repealing of the
decisions of EGMS from February 2019 are pending.
The next capital adequacy measure that the Group has taken, as
disclosed in Note 2.8. Changes in the accounting policy to the
consolidated financial statements for 2019 is a change in the
accounting policy regarding non-current tangible assets - property,
plant and equipment from the applied model in its financial
statements until 2019, including a cost model, with application
from the beginning of 2020 of the other applicable model - the
revaluation model, which the Management considers to reflect more
objectively the held non-current tangible assets.
According to preliminary estimates, the expected effect as at
December 31, 2019 is an increase in the value of non-current
tangible assets by not less than BGN 22,000 thousand and net assets
by not less than BGN 19,800 thousand, which will be reflected in
the consolidated financial statements for 2020.
To carry out its business activity the Group needs free capital
to provide the necessary working capital, to pay its obligations on
timely manner and to follow its investment intentions. Major
sources of liquidity are cash and its equivalents, long-term and
short-term loans, the decrease of receivables collection period and
extension of the liabilities paying period.
The major indicators which give a better information on the
financial position of the Group, are disclosed in section Selected
performance indicators and Financial position.
Disclosure of additional information in compliance with
regulatory requirements
Information pursuant to the requirements of item 6, 8 and 9 of
the Appendix No. 10 to the Ordinance No. 2 of September 17,
2003
Loans granted by the issuer
Type of borrower Annual Maturity Outstanding Impairment Net Principal Purpose
interest Principal
rate
till Dec.31,
Dec.31, 2019
2019
BGN'000 BGN'000 BGN'000
--------------------- ---------- ----------- ------------ ----------- -------------- ----------------
Trade company 9.50% 21.1.2017 44 44 0 Working capital
--------------------- ---------- ----------- ------------ ----------- -------------- ----------------
Trade company 8.75% 17.7.2015 1,500 1,500 0 Working capital
--------------------- ---------- ----------- ------------ ----------- -------------- ----------------
Trade company 8.50% 26.8.2015 12 12 0 Working capital
--------------------- ---------- ----------- ------------ ----------- -------------- ----------------
31.12.20
Trade company 6.70% 20 4,935 612 4,323 Working capital
--------------------- ---------- ----------- ------------ ----------- -------------- ----------------
31.12.20
Trade company 6.70% 20 3,000 372 2,628 Working capital
--------------------- ---------- ----------- ------------ ----------- -------------- ----------------
31.12.20
Trade company 6.70% 20 4,790 566 4,224 Working capital
--------------------- ---------- ----------- ------------ ----------- -------------- ----------------
Trade company 9.50% 31.12.2020 2,210 2,210 0 Working capital
--------------------- ---------- ----------- ------------ ----------- -------------- ----------------
31.12.20
Trade company 6.70% 20 4,402 1 4,401 Working capital
--------------------- ---------- ----------- ------------ ----------- -------------- ----------------
6.70 31.12.201
Trade company % 9 528 0 528 Working capital
--------------------- ---------- ----------- ------------ ----------- -------------- ----------------
6.70 31.12.20
Trade company % 20 5,177 556 4,621 Working capital
--------------------- ---------- ----------- ------------ ----------- -------------- ----------------
6.70
Trade company % 01.08.2020 673 9 664 Working capital
--------------------- ---------- ----------- ------------ ----------- -------------- ----------------
31.12.20
Subsidiary 6.70% 20 9,785 337 9,448 Working capital
--------------------- ---------- ----------- ------------ ----------- -------------- ----------------
9 . 5
Subsidiary 0 % 29.4.2014 104 104 0 Working capital
--------------------- ---------- ----------- ------------ ----------- -------------- ----------------
31.12.20
Subsidiary 6.70% 20 210 24 186 Working capital
--------------------- ---------- ----------- ------------ ----------- -------------- ----------------
Subsidiary 6.70% 31.12.2020 2 - 2 Working capital
--------------------- ---------- ----------- ------------ ----------- -------------- ----------------
Subsidiary 6.70% 31.12.2020 1,591 171 1,420 Working capital
--------------------- ---------- ----------- ------------ ----------- -------------- ----------------
Total loans granted 38,963 6,518 32,445
--------------------- ---------- ----------- ------------ ----------- -------------- ----------------
Loans and borrowings received by the issuer
Type of lender Annual interest Maturity Principal Purpose
rate
31 Dec.19
BGN'000
----------------------- ----------------------- ----------- ---------- -----------------
Working capital,
financing of
investment
projects and
restructuring
Corporate bond of previous
holders 5.5-8% 26.1.2022 36,909 debt
----------------------- ----------------------- ----------- ---------- -----------------
Financial institution 3mEuribor+5.25% 30.5.2022 1,267 Investment
loan
----------------------- ----------------------- ----------- ---------- -----------------
Financial institution BIR + koef. 15.12.2021 7,000 Investment
for mrkt. environment loan
----------------------- ----------------------- ----------- ---------- -----------------
Total loans received 45,176
----------------------- ----------------------- ----------- ---------- -----------------
Loans received by companies controlled by the issuer
Type of lender Annual Maturity Principal Purpose
interest
rate
Dec.31,
2019
BGN'000
---------------------- ---------- ----------- ---------- ----------------
Parent company 9.50% 29.4.2014 104 Working capital
---------------------- ---------- ----------- ---------- ----------------
Parent company 6.70% 31.12.2020 210 Working capital
---------------------- ---------- ----------- ---------- ----------------
Parent company 6.70% 31.12.2020 2 Working capital
---------------------- ---------- ----------- ---------- ----------------
31.12.20
Parent company 6.70% 20 1,591 Working capital
---------------------- ---------- ----------- ---------- ----------------
31.12.20
Parent company 6.70% 20 9,785 Working capital
---------------------- ---------- ----------- ---------- ----------------
Total loans received 11,692
---------------------- ---------- ----------- ---------- ----------------
Loans granted by companies controlled by the issuer
Category Annual interest Maturity Principal Purpose
Lender/depositor Dec.31,
2019
BGN'000
--------------------- ---------------- ----------- ---------- ----------------
Trade company 7.00 % 7.8.2020 153 Working capital
--------------------- ---------------- ----------- ---------- ----------------
Trade company 6.70% 31.12.2020 1,292 Working capital
--------------------- ---------------- ----------- ---------- ----------------
Trade company 6.70% 31.12.2020 6 Working capital
--------------------- ---------------- ----------- ---------- ----------------
31.12.20
Trade company 5.00 % 20 88 Working capital
--------------------- ---------------- ----------- ---------- ----------------
Total loans granted 1,539
--------------------- ---------------- ----------- ---------- ----------------
Contingent liabilities
As at December 31, 2019 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 12,912 thousand.
The Group is a joint co-debtor under loan agreement of unrelated
supplier, including limit for overdraft and limit for stand-by
credit for issuance of bank guarantees in favour of Customs Agency.
The total amount of the utilized funds and issued bank guarantees
of all borrower's exposures to the Bank shall not exceed BGN 45,000
thousand. In relation to this credit agreement, the Group has
established a special pledge on its cash in the bank account opened
in the bank-creditor with total amount of BGN 5 thousand as at
December 31, 2019 and a special pledge on receivables from
contractors for BGN 4,000 thousand average monthly turnover.
The Group bears a joint obligation according to a contract for
debt from January 2017 on an obligation of a subsidiary until
February 2018 for BGN 2,346 thousand as at December 31, 2019.
Under a bank agreement for revolving credit line signed in 2016,
bank guarantees were issued for a total amount of BGN 9,232
thousand as at December 31, 2019, including BGN 6,000 thousand in
favor of third parties - Group's suppliers, BGN 1,465 thousand in
favor of National Revenue Agency, for issuance of appealed by the
Parent company amended assessment and BGN 1,767 thousand to secure
own liabilities related to contracts under the Public Procurement
Act. The bank agreement is secured by mortgages of property, pledge
of plants and equipment, pledge of all receivables on bank accounts
of the Parent company and a subsidiary. In July 2017 the credit
limit under the revolving credit line was increased from BGN 8,500
thousand to BGN 9,500 thousand. Assets amounted to BGN 1,500
thousand, owned by a subsidiary, additionally secured the credit
limit. With annex from December 2018 the limit is increased to BGN
21,000 thousand and is additionally secured with mortgages and
pledge of property, plants and equipment, and special pledge of
goods in turnover, namely petroleum products. In June 2019, the
credit limit for working capital granted under this credit line was
partially repaid as its amount decreased from BGN 7,500 thousand to
BGN 7,000 thousand.
As a collateral of an investment loan signed in July 2016, a
mortgage of property, acquired through the investment loan and a
pledge of receivables, arising from opened bank accounts of the
Parent company to the amount of the outstanding balance of the
loan, which as at the December 31, 2019 amounting to BGN 1,267
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 with outstanding book
value as at December 31, 2019 of BGN 245 thousand. In April a final
decision on the pending case was ruled. The court held that the
Parent company is responsible as a guarantor for the obligations of
the subsidiary under the cession contract. The cash granted as a
collateral under Art. 180 and Art. 181 of Law on Obligations and
Contracts (LOC) amounting to BGN 245 thousand is disclosed as other
receivables on guarantees. A request to release the cash was
deposited, but the court dismissed the appeal.
In the previous reporting periods companies from the Group have
entered into the debt under two loan agreements of a subsidiary
with a bank-creditor (until December 2015) for USD 15,000 thousand
and USD 20,000 thousand, respectively. In 2015 the bank -creditor
acquired court orders for immediate execution and receiving orders
against the subsidiaries - joint debtors. In relation to the
complains filed by the subsidiaries, the competent court has
revoked the immediate enforcement orders and has invalidated the
receiving orders. In October and December 2015 the creditor has
filed claims under Art. 422 of Civil Procedure Code (CPC) against
the subsidiaries for the existence of the receivables under each
loan agreement. The court proceedings of the creditor are still
pending.
In December 2016 the first instance court decreed a decision
(the Decision) which admit for established that the bank has a
receivable amounted to USD 15,527 thousand from the subsidiaries -
joint debtors, arising from a signed loan agreement for USD 15,000
thousand. With the same decision the court has ordered the
joint-debtors to pay BGN 411 thousand to the bank - creditor for
legal advisory fees and court dispute expenses and BGN 538 thousand
state fee in favor of the judiciary state for the ordered
proceedings and BGN 538 thousand state fee for claim proceedings.
In January 2017, the co-debtors have filed in time appeals against
the court decision, because of that the decision did not come into
force. As at the date of the preparation of these explanatory
notes, the dispute is pending in the appeal court. The Group's
Management considers that there are grounded chances the Decision
to be entirely repealed.
As at the date of the preparation of these explanatory notes,
the filed proceedings against the subsidiaries - joint debtors for
estimation of the bank receivables due to the loan agreement for
USD 20,000 thousand is pending before the first-instance court. The
Management expects favorable decision by the competent court. In
2018 the Parent company sold its interest in one of co-debtor
subsidiaries and the potential risk for the Group is reduced to the
court proceedings against the second subsidiary.
A creditor of a subsidiary (until December 2015) unreasonably
claimed in court the responsibility of the Parent company under a
contract of guarantee for liabilities arising from a contract for a
framework credit limit as a result of that the bank accounts of the
Parent company amounting to USD 29,983 thousand were garnished.
This claim was disputed in court by Petrol AD because the liability
as guarantor has not occurred and / or extinguished pursuant to
Art. 147, par. 2 of the LOC. At the time of conclusion of the
guarantee deadline of the arrangements between the lender and
subsidiary contractual framework for credit limit was July 1, 2014.
The term of the framework credit limit was extended without the
consent of the customer, therefore the responsibility of the latter
has fallen by six months after initially agreed period, during
which the creditor has brought an action against the principal
debtor. The term of Art. 147, par. 1 of the LOC is final and upon
its expiration the company's guarantee has been terminated, so the
objection of the Parent company was granted by the court and
imposed liens on bank accounts lifted.
After the writ of execution, pursuant to order proceedings, was
canceled on which were imposed liens on bank accounts of the Parent
company, the creditor has initiated legal claim proceedings under
Art. 422 of the CPC to establish the same claims against the
subsidiary (until December 2015) and the guarantor Petrol AD. In
these proceedings the objections are repeated, that liability as
guarantor has not occurred and / or extinguished pursuant to Art.
147, par. 2 of the LOC, and therefore the Management expects that
the claim of the creditor against the Parent company will be
dismissed permanently by a court decision on those cases. At
present, the case is suspended due to the existence of a
preliminary rulling, which is important for the correct resolution
of the case.
In December 2019, the Parent company entered into an Agreement
with a commercial bank for the purchase of trade receivables
(standard factoring) with a total advance limit of up to BGN 430
thousand and an interest rate based on savings for BGN, increased
by a mark-up of 3.7767 points, but not less than 4% per annum on
the amount of the granted advance. The contract is secured by a
pledge of receivables on opened bank accounts of the Parent Company
with a book value as at December 31, 2019 at the amount of BGN 47
thousand.
Information pursuant to item 4 of Appendix No. 10 to the
Ordinance No. 2 of September 17, 2003
Related parties that the Parent company controls and over which
it exercises significant influence are disclosed in Note 30 to the
annual consolidated financial report.
The Parent company (Controlling company) is Petrol AD.
All transactions between the Parent company and the subsidiaries
are eliminated for the purposes of these consolidated financial
statements. Detailed information on these transactions is disclosed
in the annual separate financial statements of the Parent company
for 2019.
In 2019, there were no transactions with related parties.
Share capital
The registered and fully paid-in share capital of Petrol AD as
of December 31, 2019 amounts to BGN 109.25 million (EUR 55.86
million) and is distributed into 27,312,403 personal dematerialized
ordinary registered shares, with a par value of BGN 4 each. Each
share provides a voting right in the General Meeting of
Shareholders (GMS), right to dividend and right to liquidation
share. The shares, issued by the Parent company are transferable
with no limitations or conditions, by its owner's free will, in
accordance with the Bulgarian legislation, and according to the
rules of Central Depository AD concerning the acquiring and
ordering with registered shares, as well as in compliance with the
regulations of the market they are traded on. Detailed information
about the rules and procedures for trading Petrol's shares is
available in the published prospectuses of the Parent company.
Information pursuant to Art.187e of the Commercial Act and Art.
39, item 6 of the Accountancy Act
In 2019 the Parent company did not carry out transactions
subject to notification under Art. 187e of Commercial Act.
As at December 31, 2019 the Parent company did not hold common
uncertificated own shares.
The following table sets out information about the changes in
the structure of share capital:
In percentage 201 9 201 8 201 7
Alpha Capital AD 28.85% 28.85% 28.85%
----------------------------- ------- ------- -------
Yulinor EOOD 23.11 23.11 23.11
----------------------------- ------- ------- -------
Perfeto Consulting EOOD 16.43 16.43 16.43
----------------------------- ------- ------- -------
Correct Pharm EOOD 10.98 10.98 10.98
----------------------------- ------- ------- -------
Trans Express Oil EOOD 9.86 9.86 9.86
----------------------------- ------- ------- -------
Corporate Commercial Bank
AD 5.51 5.51 5.51
----------------------------- ------- ------- -------
VIP Properties EOOD 2.26 2.26 2.26
----------------------------- ------- ------- -------
Ministry of Economics 0.65 0.65 0.65
----------------------------- ------- ------- -------
Other minority shareholders 2.35 2.35 2.35
----------------------------- ------- ------- -------
Total 100% 100% 100%
----------------------------- ------- ------- -------
As at the date of these financial statements more than 5% of the
capital of Petrol AD is owned by Alpha Capital AD (28.85%), Yulinor
EOOD (23.11%), Perfeto Consulting EOOD (16.43%), Correct Pharm EOOD
(10.98%), Trans Express Oil EOOD (9.86%) and Corporate Commercial
Bank (5.51%).
Shares owned by other minor shareholders are held by investors,
which have acquired them through trading at the regulated stock
market and none of them owns more than 5% of Parent company's
shares. The Parent company does not have shareholders with special
controlling rights.
As at December 31, 2019, according to a list of shareholders,
received from Central Depository AD, the members of SB and MB,
procurators and senior management of Petrol AD did not own shares
of the Parent company.
Persons or entities directly or indirectly controlling Petrol
AD
By the meaning of paragraph 1, point 14 of the Public Offering
of Securities Act (POSA), one person or entity exercises directly
or indirectly control over the company, when that person or entity
holds over 50% of the votes of the GMS or may appoint directly or
indirectly more than half of the members of the company's bodies,
or may otherwise exercise a decisive influence on decision-making
in relation to the business of the legal entity.
As of December 31, 2019 no person holds more than 50% of votes
at the General Meeting of Shareholders of Petrol AD.
In 2019, the Parent company Petrol AD has not issued any new
issue of shares.
Information on pending legal, administrative or arbitration
proceedings amounting to at least 10% of equity of the Company
pursuant to item 20 of the Appendix No.10 to the Ordinance No.2 of
September 17, 2003
CCB AD - in bankruptcy has claimed in court a responsibility of
the Parent company under a contract of guarantee for obligations
arising from a contract for a framework credit limit of a
subsidiary /till December 2015/ Naftex Petrol EOOD amounting to USD
29,983 thousand. This claim was disputed in court by Petrol AD
because the obligation as guarantor has not occurred and / or has
been extinguished on the basis of Art. 147, paragraph 2 of the Law
on Obligations and Contracts. At the time of signing the guarantee
contract, the deadline of the arrangements between the lender and
the subsidiary under the contractual framework for credit limit,
was July 1, 2014.
The term of the framework credit limit was extended without the
consent of the guarantee, therefore the responsibility of the
latter has fallen by six months after the initially agreed period,
during which the creditor has not brought an action against the
principal debtor. The term of Art. 147, paragraph 1 of the CPA is
final and upon its expiration the Petrol AD's guarantee has been
terminated, so the Management expects the claim of the creditor
against Petrol AD to be finally rejected by the court. At present,
the court proceedings are suspended until concluding of other court
proceedings to declare as invalid the set-offs, carried out by the
main debtor Naftex Petrol EOOD. The set-offs repaid part of the
liabilities on the received credit limit. The Management expects
positive outcome for Petrol AD following the resumption of the
suspended court proceedings.
The Parent company claimed receivables of BGN 8,367 thousand to
Naftex Petrol EOOD - in bankruptcy. The claimed receivables are
included in the prepared by the syndic list of the approved
receivables under Art. 686 of Commercial Act, but the same were
appealed by other creditor to the bankruptcy proceedings. At
present, the pending court proceedings to establish the existence
of these receivables under Art. 694 of the CA has ended with a
decision, as the court has accepted the receivables of the company
up to the amount of BGN 4,794 thousand.
Stock market information
In 1998 the issue of shares of Petrol AD in the amount of
registered capital of the Company is registered for trading on the
Bulgarian Stock Exchange since January 15, 2007 the shares are
traded on the "B" segment of the Official market of the Bulgarian
stock exchange - Sofia.
The following table sets out summarized market information about
the trading of Parent company's shares on the Bulgarian Stock
Exchange - Sofia:
201 9 201 8 201 7
Share capital as at 31
December BGN mln 109.3 109.3 109.3
------------------------------- --------- ------ ------ ------
EUR mln 55.9 55.9 55.9
----------------------------------------- ------ ------ ------
Share price as at 31 December BGN 0.715 0.985 0.439
------------------------------- --------- ------ ------ ------
EUR 0.37 0.504 0.224
----------------------------------------- ------ ------ ------
Market capitalization as
at 31 December BGN mln 19.5 26.8 47.9
------------------------------- --------- ------ ------ ------
EUR mln 10.0 13.7 24.5
----------------------------------------- ------ ------ ------
Highest price throughout
the year BGN 1.10 1.80 0.498
------------------------------- --------- ------ ------ ------
EUR 0.56 0.92 0.255
----------------------------------------- ------ ------ ------
Lowest price throughout
the year BGN 0.56 0.57 0.385
------------------------------- --------- ------ ------ ------
EUR 0.28 0.29 0.197
----------------------------------------- ------ ------ ------
Non-financial declaration
Human resource management
Information pursuant to Art.48, par.1 and par.2 of the
Accountancy Act
The Management believes that the employees of the Group play a
key role in the development of the business and the achievement of
common corporate goals and pays special attention to the
elaboration and development of a general strategy and policies
regarding human resource management. The policies in this field are
oriented towards achieving of responsibility and commitment of the
personnel during its performance of assigned tasks and goals.
Simultaneously the senior executive staff makes efforts to support
the mid-level management and the employees in order to fulfil the
Group's Management priorities.
The goals of the human resources development strategy and
policies are:
-- Keeping the employees with a high potential and assisting
their professional growth by planning their careers and introducing
bonus package systems;
-- Selection of new employees with significant potential and result-oriented personality;
-- Broadening the scope of the traineeship programmes;
-- Improvement of communications between the separate organizational bodies;
-- Development and introducing of new systems for career management of the key employees;
-- Development of a programme for introducing training for newly employed personnel.
The Group applies adequate criteria for selection of personnel
and has a professional and motivated team, which is capable of
pursuing the defined strategic and operational goals. An
organization network has been created for fair evaluation of the
personnel's individual and collective contribution, as well as for
evaluation of its content grade. The Group invests in its employees
by offering them adequate programmes for training and development
of the necessary professional and management skills. The Group's
policy is oriented towards providing of safe and healthy working
conditions, adequate remuneration and motivation system, and
opportunities for professional growth.
In 2019, the number of the personnel was 1,247 employees. Most
of the employees work in the Parent company (1,113 employees).
Among the other companies in the Group, the one with the largest
number of staff by the end of 2019 was Varna Storage EOOD (70
employees) and Petrol Finances OOD (50 employees).
Information in compliance with the requirements of Art. 247,
par.2 of the Commercial Act and item.18 and item.19 of the Appendix
No.10 to the Ordinance No.2 of September 17, 2003
Management Board:
Individuals
-- Grisha Danailov Ganchev - Chairman
-- Georgi Ivanov Tatarski - Vice Chairman and Executive Director
-- Milko Konstantinov Dimitrov - Member and Executive Director
-- Lachezar Nikolov Gramatikov - Member
-- Kiril Emilov Shilegov - Member
No legal entities are members of the Management Board
Supervisory Board :
Individuals - members of the Supervisory Board:
-- Ivan Alipiev Voinovski - Chairman of the Supervisory Board[16]
Legal entities - members of the Supervisory Board:
-- Petrol Correct EOOD UIC 203177666, represented on the
Supervisory Board by Nikolay Borislavov Gergov - Member of the
SB;
-- Petrol Asset Management EOOD, UIC 203176781, represented on
the Supervisory Board by Armen Lyudvigovich Nazaryan - Member of
the SB.
Procurators - the Parent company has no procurators.
Expiration date of current contracts with the members of the
Management and Supervisory Board as well as the period during which
they have held office:
Members of the Management Board:
-- Grisha Danailov Ganchev - Chairman - held the position since
05.06.2014 until present. Mandate for five years;
-- Georgi Ivanov Tatarski - Vice Chairman and Executive Director
- held the position since 05.06.2014 until present. Mandate for
five years;
-- Milko Konstantinov Dimitrov - Member - held the position
since 05.06.2014 until present. Mandate for five years;
-- Lachezar Nikolov Gramatikov - Member - held the position
since 27.10.2014 until present. Mandate for five years;
-- Kiril Emilov Shilegov - Member - held the position since
27.10.2014 until present. Mandate for five years.
Members of the Supervisory Board :
-- Ivan Alipiev Voynovski - Chairman - held the position since 14.10.2014 until 23.02.2017;
-- Petrol Correct EOOD, UIC 203177666, represented in SB by
Nikolay Borislavov Gergov - Member - held the position since
14.10.2014 until the present. Mandate for five years;
-- Petrol Asset Management EOOD, UIC 203176781, represented in
the SB by Armen Lyudvigovich Nazaryan - Member - held the position
since 18.01.2017. Mandate for five years.
Information pursuant to item 17 of the Appendix No.10 to the
Ordinance No.2 for the total remunerations received by the members
of the boards during the year
The total amount of accrued remunerations of key management of
the Parent company, included in personnel costs, amounted to BGN
1,402 thousand (2018: BGN 1,397 thousand). The unsettled
liabilities as at December 31, 2019 amounting to BGN 120 thousand
(2018: BGN 116 thousand).
In 2019, there were no contingent or deferred remunerations.
As at December 31, 2019 the Group has no due amounts for
retirement benefits or other compensations for the members of the
Boards.
Signed agreements during 2019 under Art.240b of the Commercial
Act
In 2019, members of the Board of Directors or their related
parties did not enter into agreements under Art.240b of the CA that
go beyond the ordinary business of the Group or significantly
deviate from market conditions.
Information pursuant to item 19 of the Appendix No.10 to the
Ordinance No.2 for arrangements with employees for participation in
the capital of Petrol AD, including through issuance of shares,
options and other securities of Petrol AD
There are no arrangements with employees for participation in
the capital of Petrol AD, including through issuance of shares,
options and other securities of Petrol AD.
Information pursuant to item 18 of the Appendix No.10 to the
Ordinance No.2 for the acquired and transferred shares and bonds by
the members of the boards of the company
During the year, shares and bonds have been not acquired and/or
transferred by the members of the boards of Petrol AD.
Members' rights to acquire shares and bonds of the company
The Statute of the Parent company does not provide specific
rights of the members of the MB and SB to acquire shares and bonds
of Petrol AD.
Granted to members options on shares by Petrol AD - type and
size of the securities, on which options are set, exercise price on
options, purchase price if any and term of the options
Petrol AD did not granted options on its shares in favor of the
members of SB and MB.
Participation of the members of MB and SB in companies as
general partners, possession of more than 25 per cent of the
capital of another company, as well as their participation in the
Management of other companies or cooperatives as procurators,
managers or board members:
) Participation in management:
Grisha Danailov Ganchev, ID 6212103024
-- Chairman, Managing of Association of horse breeders in Bulgaria, UIC 175861533;
-- Chairman, Managing of the National Association for Horses, UIC 130290222;
-- Chairman, Managing of the Bulgarian National Association for horse racing, UIC 115853902;
-- Member of the collective Management body of the Bulgarian Wrestling Federation, UIC 121505512;
-- Member of the Board of Directors of PFC CSKA - 1948 AD, UIC 200269839;
-- Member of the collective Management body of the Foundation Beautiful Lovech, UIC 110562063;
Milko Konstantinov Dimitrov, ID 8506063020
-- Manager of MKD Property EOOD, UIC 202188364;
-- Member of the collective Management body of the Bulgarian
National Association for horse racing UIC 115853902;
Georgi Ivanov Tatarski, ID 6009020101 - Is not involved in
management or supervisory body of another company;
Lachezar Nikolov Gramatikov, ID 7510020140
-- Manager of 4 G Consult EOOD, UIC 204808732;
-- Manager of 3M Properties EOOD, UIC 205603399;
Kiril Emilov Shilegov, ID 7708206927
-- Manager of Grand-K EOOD, UIC 203461378;
-- Manager of Shumen Storage EOOD , UIC 205714218;
-- Manager of Office Estate EOOD , UIC 205754383;
-- Manager of VARNA 2130 EOOD , UIC 205838664;
-- Manager of Svilengrad Oil EOOD , UIC 205818576;
-- Manager of Kremikovsi Oil EOOD , UIC 20571420;
Petrol Correct EOOD, UIC 203177666 - Is not involved in
management or supervisory body of another company;
Nikolay Borislavov Gergov, ID 7803171884
-- Manager of Petrol Correct EOOD, UIC 203177666;
-- Member of the Board of the Bulgarian Wrestling Federation, UIC 121505512;
Petrol Asset Management EOOD, UIC 203176781 - Is not involved in
management or supervisory body of another company;
Armen Lyudvigovich Nazaaryan, ID 7403096301
-- Manager of Petrol Asset Management EOOD, UIC 203176781
B) Holdings:
Grisha Danailov Ganchev, ID 6212103024
-- Partner with a 38.1% of the capital of PFC CSKA-1948 AD, UIC 200269839
Milko Konstantinov Dimitrov, ID 8506063020
-- Sole owner of the capital of MKD Property EOOD, UIC 202188364;
Georgi Ivanov Tatarski, ID 6009020101
-- Partner with a 50% share in the capital of MB Properties OOD, UIC 200977005;
Kiril Emilov Shilegov, ID 7708206927
-- Sole owner of the capital of Grand-K EOOD, UIC 203461378;
Lachezar Nikolov Gramatikov, ID 7510020140
-- Sole owner of the capital of 4 G Consult EOOD, UIC 204808732;
-- Sole owner of the capital of 3M Properties EOOD, UIC 205603399;
Petrol Correct EOOD, UIC 203177666 - no such holdings;
Nikolay Borislavov Gergov, ID 7803171884:
-- Sole owner of the capital of Petrol Correct EOOD, UIC 203177666;
Petrol Asset Management EOOD, UIC 203176781 - no such
holdings;
Armen Lyudvigovich Nazaryan, ID 7403096301
-- Sole owner of the capital of Petrol Asset Management, UIC 203176781;
Relations between Management Board and union employee
organizations - - there is no collective agreement.
Information about the Director of Investor relations, including
telephone and correspondence address pursuant to item 21 of the
Appendix No.10 to the Ordinance No.2 of September 17, 2003
Director for connection with investors is Antoaneta Gyurova, tel
. 02 9690453, mailing address - Sofia, bul. "Cherni vrah" 43.
Environmental commitments
Following its privatisation in 1999, Petrol AD started the
implementation of an investment programme aimed to bring the
Group's facilities in line with the requirements of the best
environmental practices in the European Union. The Group's
operations include a number of activities which are governed by the
environmental or health and safety laws in Bulgaria, which also
cover historic environmental liabilities associated with past
environmental damage, storage and handling of petroleum products,
soil and groundwater contamination, waste management, water supply,
waste water management, atmospheric emissions, use and disposal of
hazardous materials and land use and planning requirements,
including community issues, associated with the development of new
green field retail stations.
The principal legislation acts in Bulgaria, which set out the
framework for environmental protection and sustainable development,
are the Environment Protection Act, the Water Act, the Waste
Management Act, the Air Purity Act, the Soil Protection Act, the
Underground Resources Act, RESA and various regulations on their
implementation. As part of Bulgaria's preparation for accession to
the European Union, each of these acts has been brought into line
with the European Union standards, with the new standards being
phased in over time.
Any failure by the Petrol AD or its subsidiaries to comply with
such acts may be a ground for civil and/or administrative
liability.
With regard to the Group's retail stations, the Bulgarian law
requires that a number of air, water, land and noise emissions are
monitored and recorded and processes established for minimizing
such emissions and rendering them harmless. The following are
monitored pursuant to these obligations:
-- Air emissions are monitored for dust, hydrogen sulphide,
sulphurous dioxide, nitrogen dioxide, lead aerosols, ammonia,
carbolic acid and hydrocarbon;
-- Water emissions are monitored for temperature, pH, dissolved
oxygen, conductance, turbidity, phosphates, copper, zinc, lead and
oil products;
-- Surrounding soil is monitored for pH, nitrate nitrogen,
copper, chlorides, phosphates, zinc, lead and oil products; and
-- Noise levels are monitored.
The Group is in compliance in all material respects with
environmental requirements currently applicable to its operations.
The Management of the Group believes, with the planned additional
investment, the companies will be able to maintain compliance with
known forthcoming requirements. The Group's intention is to
continue to ensure environmental compliance and pollution
prevention in advance of regulatory requirements.
Vapour recovery systems
One of the major areas in which the Group has invested, and will
continue to invest, is the meeting of the Bulgarian and European
Union requirements for the control of volatile organic compounds
(known as VOCs). VOCs are compounds containing carbon that
evaporate into the air, such as vapour arising from certain
petroleum products. European Union Directive 94/63/EC Directive on
VOCs emissions resulting from storage and distribution of petrol
set limits on the permitted levels of such emissions.
The Directive has been implemented in Bulgarian legislation in
the form of Ordinance No16 dated August 12, 1999, which limits the
emissions of VOCs connected with the storage, loading or unloading
and transportation of gasolines.
The legal acts set up very strict requirements to fuel stations,
fuel storage terminals, and fuel tank trucks. Pursuant to these
standards, the tanks of fuel stations are made with double walls
willed with inert liquid. The Group installed level measuring
systems reacting to the slightest changes in the level of fuel, as
well as systems for sending vapours back into the fuel tank truck
during unloading of the fuel. Thus all dangers of fuel leaks and
pollution with carbon oxides are minimized. In order for the Group
to be in line with the environmental criteria, the loading and
storage terminals are currently being reconstructed. Floating roofs
limiting the vapours to a minimum are installed, new mounting
platforms for down filling of fuel trucks and vapour recovery
system are built.
With a view to promote the consumption of biofuels and other
renewable fuels in transport sector and in compliance with the
adopted amendments to the Renewable Energy Source Act (RESA), since
the June 1, 2012 the Group offers fuel for diesel engines with a
minimum biodiesel content of 6% vol. and from September 2013 fuels
for motor engines with minimum 4% vol. of bioethanol additive.
According to the RESA the additive share was gradually increased to
7% vol. as at March 1, 2015. It is provided for additional increase
to 9% vol. of the content of bioethanol or ethers manufactured from
bioethanol from the beginning of March 2019.
ISO Certification
In December 2004, the Management Board of the Group decided to
obtain ISO certifications for quality management standards under
ISO 9001:2000 and environmental management system under ISO
14001:1996. This intention confirms the commitment of the
Management to implement the best European practices in process
management. This process includes the preparation, documentation
and implementation of written rules and procedures and an audit of
the procedures by an independent third party.
On October 11, 2007 Petrol AD successfully received certificate
under ISO 9001:2000. In September 2010 Petrol AD and its
subsidiaries successfully passed certification under ISO 9001:2008.
At present the Parent company has a certificate for ISO 9001:2015
received on September 5, 2018.
Social policy and supported causes by Petrol Group
The functioning social policy (SP) of Petrol Group has been
developed in two major directions. The first direction focuses on
the intra-group social relationships with the employees with the
primary goal of increasing employee and company benefits of
interacting with each other. The second direction of social policy
is focused on the external environment and in particular on social
interaction possibilities of the Group with external social
subjects.
The social policy is fundamental in the business development
strategy of the Petrol Group, because the Management of the Parent
company believes that the care for the employees is a care for the
company. The social policy of Petrol AD constitutes a set of
measures and objectives, which regulate the social relationships
between the Company and the employees by joining their efforts in
the united social goals.
The Management has adopted a practice to develop a SP together
with its employees, thus ensuring feedback and guaranteeing the
effectiveness of the adopted measures and social policies. The
scope of Petrol Group's SP includes the remunerations policy,
selection of employees and opportunities for personnel development,
providing of adequate information and technology working
conditions, participation in trainings and seminars, selection of
holidays and opportunities for flexible working conditions
appropriate for the needs and specifics of the particular
employee.
The Social policy of the Group is built in compliance with the
long-term relationships between the companies in the Group and the
employees, outlining the perspectives of every particular employee
in the overall development vision of the Group. (see also Human
resources).
At the same time, the Management of the Group supports various
forums and events with social significance for the society. During
the reporting period, the Parent company has donated several
institutions, initiatives and causes, including Association
Christian Union, Association Give a smile, Bulgarian Christmas and
others. The Parent company systematically provides financial
support to people in need mainly related with treatment in the
country and abroad and purchase of medicines. In 2019 the Group
participated in several events and social projects, including
events organized by the Bulgarian Federation of Artistic
Gymnastics.
Outlook
Information pursuant to Art. 39 item 4 of the Accountancy Act
and Art. 247, par. 3 of the Commercial Act
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.
Due to the arising at the beginning of 2020 pandemic situation,
the Group's management expectations are that in the coming years
the competition mainly in the retail market to increase, as many
small independent players would be forced out of fuel business. At
the same time, the expectations in terms of the levels of trade
margins, in particular on the retail market, are the margins to
stabilize around the average European levels.
The plans for the future development of the company are closely
related with the stated expectations for changes in the market
environment, in particular, sector of trading with fuels. 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.
Following the strategy for expansion of its retail market share,
the Group plans to attract new fuel stations under the Petrol brand
within the franchising program. Additionally in 2020, the Group's
Management will look for opportunities, through external funding to
build several new petrol stations at excellent locations. With
regard to the implementation of corporate quality management and
environmental standards, in the following year, the Group will
continue the installation of energy-saving systems on the existing
sites. Additionally, the Group plans to continue the implementation
of the investment programs for reconstruction and modernization of
the operated retail network.
In the coming years the results of the Group will also depend on
the possibilities to carry out the investments and the successful
delivering of new projects. The investments of the Group will be
focused predominantly on the development of new sites on attractive
locations and increasing the sales and market share of Petrol AD,
mainly through transformation of the trade sites managed by the
Parent - company into modern places for complex customer
service.
In terms of wholesale trading, in 2020 the management will
continue the active action for expansion of market share that has
been taken since mid-2016, by securing the long-term use of storage
facilities - licensed fuel storage facilities strategically located
in the country through a subsidiary and through direct licensing of
the Parent company. The Management is in the process of analyzing
and exploring the possibilities of increasing wholesale trading,
including by import of petroleum products.
With the aim to improve the financial position, the Management
continues to analyze actively all expenses and to look for hidden
reserves for optimization. In order to increase the efficiency of
the main operating activity it is necessary to restructure the
storage facilities and to reduce the losses from the storage
services.
Corporate Governance Statement
Information pursuant to Art. 100n par.8 in conjunction with
par.7 item 1 of the Public Offering of Securities Act
The actions of the Management of Petrol Group and the Parent
company in particular, are focused on strengthening the principles
and traditions of good corporate governance, increasing the trust
of interest entities, namely shareholders, investors and
counterparties, as well as timely disclosure of accurate
information in accordance with the legal requirements.
In its activity, the Management of Petrol Group follows and
fulfils the adopted Program for application of the international
standards for good corporate governance (the Program). The
Management believes that the compliance with the highest standards
for corporate governance is essential for maintaining the
reputation of the Parent company (the Company) and the results of
its operations.
The board of directors of Petrol AD is guided by the principles
set forth in the Program for Good Corporate Governance of Petrol
AD, which has been prepared in accordance with the effective
Bulgarian commercial legislation, the Code of Corporate Governance
adopted by the Board of Directors of Bulgarian Stock Exchange -
Sofia, the Statute of Petrol AD and the Rules for procedure of the
management bodies of the Company.
The Program for Good Corporate Governance has been adopted by
the Management Board (MB) and its implementation is monitored by
the Supervisory Board (SB) of Petrol AD. The Program sets out the
main principles and policies of the Group that the management
bodies should comply with in order to achieve the goals set in the
Program, namely:
-- Protection of shareholders' rights and guaranteeing equality
amongst them (including minor and foreign shareholders);
-- Timely and accurate disclosure of information about all
issues relevant to the Group in compliance with the POSA, Law on
Measures against Market Abuse with Financial Instruments and the
other acts;
-- Providing strategic management of the Group, efficient
control over the work of the MB and the accountancy of the MB and
the SB to the GMS;
-- Creating interactive connection between the Management of the
Group and its shareholders and potential investors.
The main principles of the Good Corporate Governance Program of
the Parent company Petrol AD are disclosed in the announced Good
Corporate Governance Program of Petrol AD to the annual financial
report.
During the reporting period there were no changes in the basic
management principles of the economic group.
Shareholders' rights
The Program sets clearly the rights of the shareholders of
Petrol AD and the main goal of the managers' team is to ensure
their observation. The shareholders have the right to:
-- Participate and vote in the GMS;
-- Be equally treated in the GMS;
-- Request convocation of regular or extraordinary GMS;
-- Access the materials in writing, relevant to the agenda of the GMS;
-- Access to the records of the previous sessions of the GMS;
-- Make proposals for election of members of the SB and to vote for their electing;
-- Take part in the distribution of the Company's profit
commensurably to their participation of the share capital;
-- Receive regularly and timely information about corporate
events related to the activities and condition of Petrol AD;
-- Participate in the increase of the capital of Petrol AD and in tender offers.
-- Receive timely information in respect of notifications about tender offers.
Management System
Information pursuant to Art. 10, par. 1, character "h" from the
Directive 2004/25/EC of the European Parliament and of the Council
from April 21, 2004 on takeover bids
Petrol AD has two-tier board structure, which includes
Management Board (MB) and Supervisory Board (SB).
Management Board
The Company is managed and represented by MB with up to five
members, elected by SB for five years mandate.
The MB has the authority to:
-- to prepare the annual report and financial statements of the
Company and submit them for approval by the GMS;
-- to adopt projects and programs for the activity of the Company;
-- to make proposals for increase or decrease of the Company's capital to the GMS;
-- to elect and dismiss the executive directors;
-- to elect and dismiss the chairman and the deputy chairman of the MB;
-- to appoint on a labour agreement the Investor Relationship
Manager and to assist him in exercising his functions, and to
control their implementation;
-- to approve the organizational and management structure of the
Company and other internal regulations;
-- to open and close down branches and to make decisions to
acquire or terminate participations in the capital of other
domestic or foreign companies;
-- to make decisions for concluding deals under art. 114,
paragraph 1 of the POSA, in cases when it is authorized for that by
the GMS,
-- Appointing the Investor Relations Officer and assisting him /
her in exercising his / her duties and controlling their
performance;
-- Determining the way of exercising the voting rights on the
shares or shares held by Petrol AD in the capital of its
subsidiaries as a sole owner of the capital or as a shareholder and
/ or a partner in any general meeting of the shareholders or of the
partners of a subsidiary;
-- Discussing and resolving all issues other than those within
the competence of the General Assembly and the Supervisory
Board.
The MB shall take decisions by a simple majority of its members
if more than half of its members attend in person or are
represented by another member of the board, provided that one
attendant may represent only one absent, except for the decisions
for which the law and / or the Statute of the Parent company
require a qualified majority or unanimity of all members.
MB reports its activity at least once a month to the Supervisory
Board of the Company. MB adopts its Rule of Procedure, in which its
powers, duties and functions are clearly and precisely defined.
Supervisory Board
SB administrates and controls the MB for the compliance of its
activity with the legislation, the Statute and the decisions of the
GMS. The Supervisory Board is collective body, elected by and
directly reporting to the GMS.
SB consists of three members with 5 years mandate. At least 1/3
of the members of SB has to be independent bodies within the
meaning of Art. 116a, par.2 of the Public Offering of Securities
Act.
The SB controls generally and continuously the activities of the
Parent company, revises the annual financial statements and reports
of the Parent company, submits written annual reports for the final
results of the audits and analyses of the business to the GMS,
elects and dismisses the members of the MB, approves the
empowerment of ECOs to represent the Parent company authorized by
MB, defines the number of the ECOs, approves the financial plans
and investment programs of the Parent company, etc. The SB reports
for its activity to the GMS. The SB takes its decisions in
accordance with the authorities given to it by the GMS, the Statute
and the current legislation.
Members of the MB and SB can be re-elected without any
limitations. GMS determines the remuneration of the members of the
SB and the MB, taking into consideration the responsibility, the
engagement and the involvement of each board member with the
Management of the Parent company.
Disclosure of information
Being a public company Petrol AD discloses to the Financial
Supervision Commission and the Bulgarian Stock Exchange - Sofia
periodical reports and notifications of insider information under
the Law on Measures against Market Abuse with Financial
Instruments. At the same time, the Company reveals regular
information to the public in a way that ensures it to reach the
widest possible number of people simultaneously and in a way that
does not discriminate them. For that purpose the Company uses the
services of the Service Finance Markets EOOD, which ensures
effective spreading of regular information to the public in all EU
member states. The Company prepares separate and consolidated
quarterly financial statements, annual report and separate and
consolidated annual financial statements; the MB presents the
latter for verification and review to the SB and to the elected by
the GMS certified auditor. The elected by the GMS auditor should be
independent of the MB and in particular of the executive director
of the Parent company and it should act independently of the
shareholders who have elected it.
The management bodies of the Parent company and the Investor
Relations Director should provide easy and timely access of the
shareholders and investors to the information, to which they are
legally entitled being shareholders and/or investors in order to
take informed and adequate investment decisions.
The information reported by the Parent company to the Finance
Supervising Commission and to the public should be included on the
web site of the Parent company for consideration by the
shareholders and those who are interested to invest in the shares
of the Parent company.
Control over the fulfillment of the Program
The control over the Program is exercised by the MB of the
Parent company. The effectiveness and efficiency of the Program is
assessed annually by the MB. The results of this assessment and
further measures proposed should be mentioned in the annual
financial report provided to the Financial Supervision Commission
and to the Bulgarian Stock Exchange - Sofia and the public.
With a view to improving and extending the Program, the MB
follows the trends in the theory, practice and legislation in the
field of corporate governance, which guarantees timely informing
the Parent company of the matters in the field and updating of the
Program.
Internal control and Risk Management systems
Information pursuant to item 15 of the Appendix No.10 to the
Ordinance No.2 from 17.09.2003 and Art. 100n, par. 8, item 3 from
the Public Offering of Securities Act
The Group's internal control (IC) and risk management (RM)
systems are integrated in a comprehensive integrated process
implemented by the employees and the Management of Petrol Group.
The foundation of the IC and RM systems is the policies and
procedures developed and adopted by the Management of the Parent
company, which define the legality, expediency and last but not
least the economic efficiency of the Group's processes. The IC and
RM systems cover the authorities and responsibilities of the
separate units in the company, as well as the principles of their
interaction. The approved business and control procedures between
the separate departments in the company and the adopted cross-check
policy are a guarantee for the reliability and completeness of the
financial and operational information generated in the Group. In
addition the engagement and the close cooperation of the Management
with the employees of the Group's companies contributes for the
effective management and preventive measures regarding the
resources and intellectual property of Petrol AD.
The internal control and risk management systems of the Group
are characterized by the following main features:
-- Modern technological and information provision;
-- Qualified and informed employees;
-- Well organized intra-company processes;
-- Commitment and support from the Management.
The integration of the SAP/Retail in Petrol AD in 2003 and the
gradual introduction in other companies of the Group significantly
improves the speed of the information transfer by integrating
several systems in one integrated platform, which provides control
and monitoring of the processes from their set-up to the end of
their execution. As a result, mistakes from business process
fragmentation and cumbersome interaction between different
information platforms and systems are minimized. SAP platform
provides a smooth and timely flow of the information and business
processes on a group level as well as their reporting in the
Group's financial statements.
The highly qualified and knowledgeable staff is essential for
the successful integration of IC and RM systems. In this regard,
the subsidiary Petrol Finance OOD, specialized in providing
financial services, was established. In order to provide a quality
financial service, employees in the subsidiary twice a year take
part in tax-accounting seminars. Thus, the Management of the Parent
company Petrol AD ensures competent, professional expertise while
minimizing the possibility of omissions and errors in the financial
reporting process.
The policies and rules for information and documents flow
transferring, approved by the Management of the Parent company,
channel the daily work of the employees in different departments
and the correspondence between them, facilitating the analyses and
evaluations of the business processes and information flows in the
Group. The IC and RM process goes through the following stages:
-- Risk identification - it is implemented via control and
monitoring system of intra-company environment for potential risks
and errors;
-- Analysis and valuation of the risks - creation of risk
matrixes including future outcome scenarios with assessments of the
effects of the scenarios as well as preparation of reports with
proposals of opportunities for overcoming them;
-- Undertaking measures to avoid and prevent of the potential
risks - practical implementation of the prepared action proposals
on the basis of risk analysis and valuation;
The Management of the Group is directly involved in the process
of control and management of the risks related to the financial
reporting and business processes of the Group. Day-to-day
collaboration, holding of business and working meetings with
management staff improve the climate and working environment and
increase the efficiency and cost effectiveness of the working
process.
Information pursuant to Art. 10, par. 1, character "c" from the
Directive 2004/25/EC of the European Parliament and of the Council
from April 21, 2004 on takeover bids
Petrol AD is a public company registered on Bulgarian Stock
Exchange. Based on the information received from Central Depository
AD for the Parent company's shareholders structure as at December
31, 2019, there is no shareholder with higher share than 30 per
cent of the capital of Petrol AD. In 2019 there were no
transactions with shares of the Parent company resulted in crossing
the borders under Art.89 from the Directive 2001/34/EC of the
European Parliament and of the Council from May 28, 2001.
Information pursuant to Art. 10, par. 1, character "d" from the
Directive 2004/25/EC of the European Parliament and of the Council
from April 21, 2004 on takeover bids
Petrol AD has no shareholders with special control rights.
Information pursuant to Art. 10, par. 1, character "f" from the
Directive 2004/25/EC of the European Parliament and of the Council
from April 21, 2004 on takeover bids
As at December 31, 2019 Petrol AD did not hold common
uncertificated own shares. Petrol AD has no shareholders with
voting rights limitations.
Information pursuant to Art. 10, par. 1, character "j" from the
Directive 2004/25/EC of the European Parliament and of the Council
from April 21, 2004 on takeover bids
According to the Statute of the Company within 5 /five/ years
from the registration date of the amendment of the Statute in the
Commercial Register, namely October 14, 2014, the Management Board
in accordance with the Statute of the Company and current
legislation may take decisions to raise the capital of Petrol AD to
a nominal value of BGN 300 000 000 /three hundred millions/ by
issuing of new ordinary or preferred shares, eligible by law.
In the decision to increase the capital, the Management Board
shall determine the amount and purpose of any increase, the number
and type of new shares, their rights, the terms and conditions for
the transfer of rights within the meaning of -- 1, item 3 of the
Additional Provisions of the POSA issued against the existing
shares, the terms and conditions for the subscription of the new
shares, the amount of the issue value and the terms and conditions
for its payment, the investment intermediary entrusted with the
servicing of the capital increase and other necessary
conditions.
The redemption of own shares of the Parent company may be
carried out under the terms and conditions provided in POSA.
Responsibility of the Management
According to the Bulgarian Law, the Management must prepare
annual report on the activity, as well as financial statements for
each financial year, which present in true and fair view the
Group's consolidated financial position as of the end of the year,
its financial performance and cash flows, in compliance with the
applicable accounting framework. For reporting purpose under
Bulgarian accounting legislation the Company applies the
International Financial Reporting Standards (IFRS), as approved by
the European Union.
This responsibility includes: design, implementation and
maintenance of internal control system, related to the preparation
and truthful presentation of the financial statements, which do not
contain material errors, deviations and discrepancies, whether due
to fraud or error; selection and application of relevant accounting
policies; and preparation of accounting estimates, which are
reasonable in the particular circumstances.
The Management confirms that it has acted according to its
responsibilities and that the consolidated financial statements
have been prepared in full compliance with the International
Financial Reporting Standards (IFRS), as approved by the European
Union. The Management also confirms that in the preparation of the
report on the activity it has presented in true and fair view the
development and performance of the Group for the past period, as
well as its position and faced risks. The Managements has approved
for issue the report on the activity and the financial statements
for 2019.
Georgi Tatarski, Milko Dimitrov,
Executive Director Executive Director
July 2020
INDEPENT AUDITOR'S REPORT
ON THE CONSOLIDATED FINANCIAL STATEMENTS
INDEPENT AUDITOR'S REPORT
To the shareholders of
Petrol AD
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of Petrol
AD and its subsidiaries (the Group), which comprise the
consolidated statement of financial position as at December 31,
2019, and the consolidated statement of profit or loss and other
comprehensive income, consolidated statement of changes in equity
and consolidated statement of cash flows for the year then ended,
and explanatory notes to the consolidated financial statements,
including a summary of significant accounting policies.
In our opinion the applied consolidated financial statements
present fairly, in all material respects, the consolidated
financial position of the Group as at December 31, 2019 and its
consolidated financial results of its operations and the
consolidated cash flows for the year then ended, in accordance with
the International Financial Reporting Standards (IFRS), adopted by
the European Union (EU).
Basis for Opinion
We conducted our audit in accordance with International
Standards of Auditing (ISA). Our responsibilities under those
standards are further described in the Auditor's responsibilities
for the audit of the consolidated financial statements section in
our report. We are independent of the Group in accordance with the
Code of Ethics for Professional Accountants (including the
International Independence Standards) of the International Ethics
Standards Board for Accountants (IESBA code) and the ethics
requirements of the Independent Financial Audit Act (IFAA),
applicable in terms of our audit on the consolidated financial
statements in Bulgaria. We have also fulfilled our other ethics
responsibilities in accordance with the requirements of IFAA and
the IESBA code. We believe that the audit evidences we have
obtained are sufficient and appropriate to provide a basis of our
qualified opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note 2.7 Going concern basis of accounting
in the applied consolidated financial statements, which indicates
that as at December 31, 2019 the equity of the Group amounting to
BGN 14,550 thousand and is under the registered capital of the
Parent company by BGN 94,677 thousand, as a result of the
accumulated losses mainly in previous reporting periods. In
addition, the Group disclosed that it has assessed the
uncertainties arising from these circumstances, including possible
effects from litigations (disclosed in Note 35 Contingent
liabilities), which indicate material uncertainty, which may raise
doubts regarding the ability of the Group to continue as a going
concern. In the same Note is disclosed that the Group will be able
to pay regularly the due debenture and trade liabilities, loans and
interest in accordance with the contractual commitments entered
into, and actions have been taken to bring the Parent company in
accordance with the requirements of the Art.252, par.1, item 5 of
the Commercial Act. Additional information in this relation is
disclosed in Note 25 Registered capital, Note 33 Capital Management
and 36 Events after the reporting date.
Our opinion is not modified in respect of this matter.
Emphasis of Matter
We draw attention to:
1. Note 33 Capital Management of the explanatory notes to the
consolidated financial statements, where it is disclosed that at
the beginning of 2020, due to the global widespread of a new
coronavirus Covid-19, difficulties have arisen in the business and
economic activity of many entities, legislative changes have been
disclosed as a consequence of Covid-19. It has been disclosed that
the Covid-19 pandemic causes a significant decrease in economic
activity in the country and creates significant uncertainty about
future processes in the macroeconomics in 2020 and beyond. The
Management of the Group shall monitor the occurrence of risks and
negative consequences as a result of the Covid-19 pandemic, and
shall currently estimate the possible effects on the Group's
assets, liabilities and activities, seeking to comply as much as
possible to the contractual commitments made, despite the
uncertainties and force majeure existed. In view of the introduced
anti-epidemic measures and restrictions in the pandemic, which
cause a significant reduction in economic activity and create
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. Additional
information related to Covid-19 is disclosed in Note 36 Events
after the reporting date of the notes to the consolidated financial
statements.
2. Note 31.6. Disposal of interest in subsidiaries to the
consolidated financial statements, where is disclosed that in
December 2015 a contract with notarized signatures was signed,
whereby Petrol AD transferred to a company outside the Group 100%
of the interest in Naftex Petrol EOOD. The change in the sole owner
of the capital of Naftex Petrol EOOD was filed timely for entry in
Commercial Register at the Registry Agency, but has not been
recorded because of incompleteness in the documents attached to the
application. However, since the contract of December 2015 has been
signed properly according to the prescribed by the Commercial Code
form, it raises legal action between the parties involved, due to
which Petrol AD is no longer the sole owner of Naftex Petrol EOOD,
and consequently is accepted that the Group has lost control. The
assets and the liabilities of the subsidiary have been written off
and a gain has been recognized resulting from the loss of control
in the consolidated statement of profit or loss and other
comprehensive income. As at the transaction date the consolidated
net assets of the subsidiary amounted to BGN (314,452) thousand.
The result of the sale of the Group was a profit amounted to BGN
314,452 thousand.
In March 2016, the change of the sole owner of Naftex Petrol
EOOD has been repeatedly applied for entry in the Commercial
Register and a completed set of documents,
as instructed by the officials, has been submitted. The
registration was suspended by the court because of a shareholder's
request of the Parent company, on the grounds that the executives
were not authorized to conclude the agreement by the general
meeting of the Parent company contrary to the provisions of the
POSA. The Management disclosed that before the conclusion of the
transaction, it was thoroughly checked for compliance with the law
and that it falls below the thresholds for convening of GMS
pursuant to Art. 114 of the (Public Offering of Securities Act
(POSA) as documents proving this circumstance are duly filed in the
Commercial Register with the application for registration of the
change of the sole owner of the company. For these reasons, the
Management of Petrol AD considers that the claim was unfounded and
after a judgment in favor of Petrol AD, the disposal of shares will
be recorded in the register. It is disclosed that the court
proceedings are pending at the Regional Court - Troyan city.
Our opinion is not modified in respect of this matter
Key Audit Matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the
consolidated financial statements of the current period. These
matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our
opinion thereon, but we do not provide a basis for a separate
opinion on these matters. In addition to those matters, described
in the Material Uncertainty to Going Concern section, we have
determined the matters, described below to be the key audit matters
to be communicated in our report.
1. Assessment and disclosure of the financial assets, disclosed
in the consolidated statement of financial position as Trade and
other receivables and Receivables on loans granted
We refer to the following Explanatory Notes to the enclosed
consolidated financial statements for the year ended December 31,
2019, regarding the assessment, classification and presentation of
the financial assets of IFRS 9, 12. Impairment losses, 14. Finance
income and costs, 22. Loans granted, 23. Trade and other
receivables and 32. Financial Instruments and risk management.
Key audit matter How our audit addressed the
key audit matter
Given the existence of a significant Our audit procedures included,
level of Management's estimates along with others:
of the expected credit losses * evaluation of the internal control system in regard
on financial assets and the to the processes related to current financial assets;
material significance of Trade
and other receivables and Loans
granted in the total assets * evaluation of the adequacy of the applied accounting
(44 per cent as at December policy in regard to the trade and other receivables
31, 2019), we consider this and loans granted and its consistency with the IFRS 9
issue to be key for our audit. Financial instruments;
The levels of impairment, management
estimates and other additional
information are disclosed in * verification of the business model of the Group in
the Explanatory Notes to which relation to the classification of the financial
we refer. assets;
In addition, in previous periods,
the Group has recognized significant
impairment losses on investments * verification and valuation of the adopted models for
and receivables. Determining the expected credit loss regarding the financial
the impairment of financial assets, reported at amortized cost;
assets has been identified as
a key audit issue for us in
our audit reports for the years * verification of the qualification and assessment of
ended December 31, 2017 and the independency and the objectivity of the hired by
December 31, 2018. the Group appraiser;
* we used our expert in the review of the valuation of
the receivables
at fair value in profit or
loss, prepared by the independent
licensed appraiser hired by
the Group;
* valuation of the system for internal control
regarding the processes related to loans granted;
* valuation of the adequacy of the Group's disclosures
regarding the loans granted and trade and other
receivables and their impairment.
-------------------------------------------------------------
2. Uncertainties related to future outcome of litigations
We refer to the explanatory note 35 Contingent liabilities and
36 Events after the reporting date to the applied consolidated
financial report, where the uncertainties related to the future
outcome of the litigations are disclosed.
Key audit matter How our audit addressed the
key audit matter
In carrying out Group's operations, Our audit procedures included,
it is possible to arise a potential along with others:
risk of administrative and legal * review of the accrued expenses on legal services;
proceedings due to the inherent
uncertainty of their outcome.
The companies of the Group are * sending letters to lawyers, providing legal services
parties to legal proceedings, to the Group with a request for information regarding
the outcome of which may have the legal proceedings and actual or potential claims
a significant influence on the and disputes;
financial position and outlook
of the Group.
The key matters related to those * evaluation of the received answers and discussion of
proceedings are disclosed in selected matters;
the Note 35 Contingent liabilities
and Note 36 Events after the
reporting date. * usage of our internal specialists and external expert
Whether to be recognised a provision for assistance regarding the critical evaluation of
or disclosed a contingent liability the estimations and assumptions of the Group in
in the consolidated financial regard to the contingent liabilities disclosed in the
statements depends of the level notes to the consolidated financial statements;
of significance of estimations
and assumptions. The estimation
is with an inherent subjectivity, * evaluation whether the disclosures of the Group
the risks are material. regarding the material legal proceedings adequately
On this basis, we consider the explain the potential liabilities and correspond to
matter related to legal proceedings the information gathered by us.
against the companies of the
Group as key audit matter.
-------------------------------------------------------------
3. Right-of-use assets and Liabilities under leases
We refer to explanatory Note: 2.8. Changes in accounting policy;
Note 10. Hired services and 18. Assets and liabilities under leases
to the enclosed consolidated financial statements, which disclose
the policies and effects of applying IFRS 16.
Key audit matter How our audit addressed the
key audit matter
For the purposes of its core business, Our audit procedures included,
the Group enters into a significant along with others:
number of lease agreements as - researching inquiries and
a lessee. These operations are updating of our understanding
an essential component of the about the process of concluding
total volume of transactions. and monitoring lease contracts
The Group also benefits from the with counterparties. Inspection
exceptions given by IFRS 16 Leases and review of internal policy
for leases for which the lease and procedures in conducting
term expires within 12 months the process. Identification
and underlying asset is of low of current procedures for introduction,
value. maintenance and control of a
For the new model and the inherent database of existing contracts;
increased complexity of the calculations - gaining an understanding of
and more significant management's management's approach to developing
estimations in the analysis and the key criteria, assumptions
evaluation of the concluded contracts and estimations used in the
regarding: the presence or not analysis and the evaluation
of control over the use of a given of the terms of leases;
asset; identification of the asset - review and assessment of the
under the contract; the term of adequacy, consistency and continuing
the contract, incl. extension appropriateness of the applied
options; the components of the policy for reporting the lease
consideration; the effects of contracts by the Group as a
changes in the terms of the contract; lessee, the adopted approach
the possibility to apply the exceptions and model for analysis and evaluation
in the standard, the differential of lease contracts and reporting
interest rate, etc. of recognized right-of-use assets
Due to the significance of the and respectively liabilities
above circumstances: a) the specifics under leases and the related
of the accounting, containing income and expenses reported
significant management's estimates in the profit or loss for the
and assumptions and the inherent year, in accordance with the
high uncertainty in determining requirements of IFRS 16 Leases;
the estimate of right-of-use assets - review and evaluation, on
and liabilities under leases and a sample basis, of the results
the related costs in the current of the analysis performed by
profit or loss, and b) the materiality the Group of the signed new
of these items for the entire lease agreements and modifications
financial statements of the Group, of the already signed ones.
we have identified this issue Review and inspection of supporting
as a key audit issue. information and documents on
key assumptions and inputs;
- critical analysis and assessment
of the adequacy of the main
estimations and assumptions
used by the Group's management,
including regarding: the approach
and argumentation on the identified
contracts as lease contracts;
the determination of the non-lease
elements; lease term and extension
options; and the applied differential
interest rate; as well as the
depreciation periods and the
treatment of the effects of
changes in lease agreements;
- investigating inquiries and
inspecting of documents for
the existence of arrangements
in other contracts of the Group,
which could contain lease elements;
- verification of the mathematical
and calculation logic of the
formulas used in the calculations
of the value and recalculation
of the right-of-use assets,
the liabilities under leases
as at December 31, 2019, and
the respective interest and
depreciation expenses for 2019;
- assessment and verification
of the completeness, appropriateness
and adequacy of the disclosures
in the consolidated financial
statements of the Group, related
to the assets and liabilities
under leasing contracts and
the income and expenses arising
from them.
------------------------------------------ -----------------------------------------
Other information different of the consolidated financial
statements and auditor's report thereon
The management is responsible for the other information. The
other information comprises the information included in the
consolidated management report, including a corporate governance
statement, prepared by the management pursuant to Chapter seven of
the Accountancy Act, but does not include the consolidated
financial statements and our audit report thereon, which we
received before the date of our audit report.
Our opinion on the consolidated financial statements does not
cover the other information and we do not express an audit opinion
or any form of assurance conclusion thereon, except otherwise
explicitly stated in our report and to the extent it is stated.
In connection with our audit of the consolidated financial
statements, our responsibility is to read the other information
and, in doing so, to consider whether the other information is
materially inconsistent with the consolidated financial statements
or with our knowledge obtained in the audit or otherwise appears to
be materially misstated.
If, based on our work we have performed, we conclude that there
is a material misstatement of this other information, we are
required to report this fact.
We do not have anything to report on this matter.
Responsibilities of the management and the persons, in charge of
the overall management for the consolidated financial
statements
The management is responsible for the preparation and fair
presentation of these consolidated financial statements in
accordance with IFRS, applied in EU and for such internal control
system, as the management determine is necessary to ensure the
preparation of the consolidated financial statements, which are
free from material misstatements, whether or not due to fraud or
error.
In preparing the consolidated financial statements, the
Management is responsible for the assessment of the Group's ability
to continue as a going concern, disclosing, as applicable, matters,
related to going concern and using a going concern basis of
accounting, unless the Management either intend to liquidate the
Group or to cease operations, or the Management has no other
alternative but to do so.
The persons, in charge with the overall management, are
responsible for the supervision of the process of Group's financial
reporting.
Auditor's responsibilities for the audit of the consolidated
financial statements
Our objectives are to obtain reasonable assurance about whether
the consolidated financial statements as a whole are free from
material misstatements, whether or not due to fraud or error, and
to issue an auditor's report that includes our auditor's opinion.
Reasonable assurance is a high level of assurance, but it is not
guaranteed that an audit conducted in accordance with ISA will
always detect a material misstatement, when it exists.
Misstatements can arise from fraud or error and are considered
material, whether they can reasonably be expected, individually or
in the aggregate, to influence the economic decision of users taken
on the basis of these consolidated financial statements.
As a part of the audit in accordance with ISA, we exercise
professional judgment and maintain professional skepticism
throughout the whole audit. We also:
- identify and assess the risks of material misstatement of the
financial statements, whether or not due to fraud or error, develop
and perform audit procedures responsive to those risks, and obtain
audit evidences, which are sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override or evasion of
internal control;
- obtain an understanding of internal control relevant to the
audit in order to develop audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Group's internal control;
- evaluate the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related disclosures
made by the management;
- conclude on the appropriateness of the management's use of the
going concern basis of accounting and, based on the audit evidences
obtained, whether a material uncertainty exists, related to events
or conditions that may arise significant doubt on the Group's
ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in
our auditor's report to the related disclosures in the consolidated
financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit
evidences obtained up to the date of our auditor's report. However,
future events or conditions may cause the Group to cease to
continue as a going concern.
- evaluate the overall presentation, structure and content of
the consolidated financial statements, including the disclosures,
and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair
presentation;
- obtain sufficient appropriate audit evidences regarding the
financial information of the entities or business activities within
the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and
performance of the Group's audit. We remain solely responsible for
our audit opinion.
We communicate with the persons in charge with the overall
management, among the other matters, the planning scope and timing
of the audit and the significant audit findings, including any
significant deficiencies in the internal control that we identify
during the audit conducted by us.
We also provide the persons in charge with the overall
management a statement that we have complied with the relevant
ethical requirements related to the independence and to communicate
with them all relationships and other matters that may reasonably
be studied to bear on our independence and where applicable related
save measures.
Among the matters communicated with the persons in charge with
the overall management, we determine those matters, which were of
most significance in the audit of the consolidated financial
statements for the current period and which are therefore key audit
matters. We describe these matters in our auditor's report, except
in cases when law or regulation precludes public disclosure of
information about this matter or when, in extremely rare
circumstances, we decide that a matter should not be communicated
in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of
such communication.
Report on other legal and regulatory requirements
Additional matters prescribed to report according to Accountancy
Act and Public Offering of Securities Act
In addition to our responsibilities and reporting according to
ISA, described above in Other information different to the
consolidated financial statements and auditor's report thereon
section regarding the consolidated management report, corporate
governance statement and consolidated non-financial declaration, we
complied with the procedures, added to the requirements under ISA,
according to Instructions regarding new and extended audit reports
and auditor's communication of the professional organization of the
registered auditors in Bulgaria, The Institute of the certified
public accountants (ISPA). These procedures concern the audits for
the existence and audits of the format and the content of this
other information on purpose to help us form an opinion regarding
whether the other information includes disclosures and reports,
pursuant to Chapter seven of the Accountancy Act and the Public
Offering of Securities Act, (Art. 100n, par.10 of POSA in relation
to Art. 100n, par.8, item 3 and 4 of POSA) applicable in
Bulgaria.
Opinion in relation to Art. 37, par. 6 of the Accountancy
Act
Based on the conducted procedures, our opinion is that:
a) The information included in the consolidated management
report for the financial year, for which the consolidated financial
statements were prepared, corresponds to the consolidated financial
statements.
b) The consolidated management report is prepared in accordance
with the requirements of the Chapter seven of the Accountancy Act
and Art. 100(n), par.7 of the Public Offering of Securities
Act.
c) In the corporate governance statement of the Group for the
financial year, for which the consolidated financial statements
were prepared, is presented pursuant to the requirements of Chapter
seven of the Accountancy Act and Art. 100(n), par.8 of the Public
Offering of Securities Act.
d) The consolidated non-financial declaration for the financial
year, for which the consolidated financial statements were
prepared, is presented and prepared in accordance with the
requirements of the Chapter seven of the Accountancy Act.
Opinion in relation to Art. 100(n), par.10 in relation to
Art.100(n), par.8, item 3 and 4 of the Public Offering of
Securities Act
Based on the conducted procedures and the obtained knowledge and
understanding on the Group's operations and the environment where
it operates, on our opinion, the description of the main
characteristics of the internal control and risk management systems
of the Group in relation to the process of financial reporting,
which is part of the consolidated management report (as section in
the corporate governance statement) and information under Art. 10,
par. 1, letters "c", "d", "f", "h" and "i" of the Directive
2004/25/EC of the European Parliament and to the Counsel of April,
21 2004 regarding the proposals for acquisitions, does not comprise
cases of significant misstatement.
Reporting pursuant to Art. 10 of the Regulations (EU) No
537/2014 in relation to the requirements of Art. 59 of the
Independent Financial Audit Act
Pursuant to the requirements of the Independent Financial Audit
Act in relation to Art.10 of Regulation (EU) No 537/2014, we report
additionally the information disclosed below:
- The audit company IsaAudit OOD is nominated for one year
period as a mandatory auditor of the consolidated financial
statements of Petrol AD for the year ended December 31, 2019, by
the General Meeting of Shareholders, convened on June 26, 2019.
- The audit of the consolidated financial statements of the
Company for the year ended December 31, 2019 is sixth consecutive
complete engagement of mandatory audit of this Group, conducted by
us.
- We confirmed that the audit opinion expressed by us is
consistent with the additional report, presented to the audit
committee of the Company, pursuant to the requirements of Art. 60
of the Independent Financial Audit Act.
- We confirm that prohibited non-audit services, appointed in
the Art. 64 of the Independent Financial Audit Act, were not
provided.
- We confirm that during the audit we maintained our independence of the Group.
- For the period, covered by our mandatory audit, except the
audit, we did not provide other services to the Group.
Audit company:
IsaAudit OOD
Director:
IZABELA DJALAZOVA
Registered auditor, responsible for the audit:
BOZHIDAR NACHEV
July 28, 2020
Consolidated financial statements
for the year ended December 31, 2019
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
For the year ended December 31, 2019
Note 2019 2018
BGN'000 BGN'000
Revenue 6 538,499 526,777
Other income 7 2,397 9,095
Cost of goods sold 8 (471,238) (468,229)
Materials and consumables 9 (4,013) (4,105)
Hired services 10 (38,693) (35,752)
Employee benefits 11 (21,780) (19,324)
Depreciation and amortisation 16, 17,18 (3,889) (931)
Impairment losses 12 979 (840)
Other expenses 13 (2,096) (2,204)
Finance income 14 2,341 56,308
Finance costs 14 (7,546) (5,118)
Profit (loss) before income tax (5,039) 55,677
--------- ---------
Tax income 15 59 252
--------- ---------
Profit (loss) for the year (4,980) 55,929
--------- ---------
Other comprehensive income
Items that will not be reclassified
to profit or loss:
Remeasurements of defined benefit
liability (asset) 27 (26) (14)
Other comprehensive income for the
year (26) (14)
--------- ---------
Total comprehensive income (5,006) 55,915
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
For the year ended December 31, 2019
Note 2019 2018
BGN'000 BGN'000
Profit (loss) attributable to:
Owners of the Parent company (4,981) 55,930
Non-controlling interests 1 (1)
Profit for the year (4,980) 55,929
======== ========
Other comprehensive income attributable
to:
Owners of the Parent company (5,007) 55,916
Non-controlling interests 1 (1)
-------- --------
Total comprehensive income for the
year (5,006) 55,915
======== ========
Profit per share (BGN) 25 (0.18) 2.05
Georgi Tatarski Milko Dimitrov Prepared by Elena Pavlova
Executive Director Executive Director - Teofanova
July 16, 2020
The notes on pages 79 to 141 are integral part of these
consolidated financial statements
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note 31 December 31 December
2019 2018
BGN'000 BGN'000
Non-current assets
Property, plant and equipment and
intangible assets 16 14,489 13,498
Investment property 17 1,746 1,793
Right-of-use assets 18 10,221 -
Goodwill 19 19,844 19,827
Deferred tax assets 15 4,216 4,186
Other receivables 23 - 95
Total non-current assets 50,516 39,399
----------- -----------
Current assets
Inventories 20 21,076 23,977
Loans granted 22 25,998 22,124
Trade and other receivables 23 35,002 36,948
Non-current assets held-for-sale 21 3,472 3,459
Cash and cash equivalents 24 3,486 4,265
Total current assets 89,034 90,773
----------- -----------
Total assets 139,550 130,172
=========== ===========
Note 31 December 31 December
2019 2018
BGN'000 BGN'000
Equity
Registered capital 25 109,250 109,250
General reserves 18,864 18,864
Accumulated loss (113,564) (108,557)
----------- -----------
Total equity attributable to the
owners of the Parent company 14,550 19,557
----------- -----------
Non-controlling interests 31.5. 23 9
----------- -----------
Total equity 14,573 19,566
-----------
Non-current liabilities
Loans and borrowings 26 44,652 45,471
Liabilities under lease agreements 18 7,715 -
Employee defined benefit obligations 27 656 533
Total non-current liabilities 53,023 46,004
----------- -----------
Current liabilities
Trade and other payables 28 66,554 61,844
Loans and borrowings 26 2,735 2,758
Liabilities under lease agreements 18 2,662 -
Current income tax liabilities 29 3 -
Total current liabilities 71,954 64,602
----------- -------------
Total liabilities 124,977 110,606
----------- -------------
Total equity and liabilities 139,550 130,172
=========== =============
Georgi Tatarski Milko Dimitrov Prepared by Elena Pavlova
Executive Director Executive Director - Teofanova
July 16, 2020
The notes on pages 79 to 141 are integral part of these
consolidated financial statements
COMPREHENSIVE STATEMENT OF CHANGES IN EQUITY
Equity attributable to the owners Non-controlling Total
of the Parent company interests equity
Registered General Accumulated Total
capital reserves profit
(loss)
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
Balance at January 1,
2018 109,250 18,864 (164,473) (36,359) 10 (36,349)
Comprehensive income
for the year
Profit for the year - - 55,930 55,930 (1) 55,929
Other comprehensive
income - - (14) (14) - (14)
Total comprehensive
income - - 55,916 55,916 (1) 55,915
----------- ---------- ------------ --------- ---------------- ---------
Balance at December
31, 2018 109,250 18,864 (108,557) 19,557 9 19,566
=========== ========== ============ ========= ================ =========
Comprehensive income
for the year
Loss for the year - - (4,981) (4,981) 1 (4,980)
Other comprehensive
income - - (26) (26) - (26)
Total comprehensive
income - - (5,007) (5,007) 1 (5,006)
----------- ---------- ------------ --------- ---------------- ---------
Transactions with
shareholders,
recognized directly
in equity
Acquisition of a subsidiary
with a non-controlling
interest - - - - 22 22
Sale of a subsidiary
with a non-controlling
interest - - - - (9) (9)
----------- ---------- ------------ --------- ---------------- ---------
Total transactions with
shareholders recognized
in equity - - - - 13 13
Balance at December
31, 2019 109,250 18,864 (113,564) 14,550 23 14,573
=========== ========== ============ ========= ================ =========
Georgi Tatarski Milko Dimitrov Prepared by Elena
Executive Director Executive Director Pavlova - Teofanova
July 16, 2020
The notes on pages 79 to 141 are integral part of these
consolidated financial statements
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended December 31, 2019
2019 2018
BGN'000 BGN'000
Cash flows from operating activities
Net profit before taxes (5,039) 55,677
Adjustments for:
Depreciation/amortization of property, plant
and equipment, intangible assets and 3,889 931
Interest expense and bank commissions, net 5,737 1,736
Shortages and normal loss, net of excess
assets (972) (352)
Provisions for unused paid leave and retirement
benefits 673 539
Impairment of assets (979) 840
Profit on sale of assets (159) (7,164)
Payables written-off (63) (17)
Revaluation of financial assets at fair value
through profit or loss 50 1,742
Gain on sale of subsidiaries (561) (54,621)
2,576 (689)
Change in trade payables 7,254 10,757
Change in inventories 3,728 (2,660)
Change in trade receivables 92 (7,813)
Cash flows from operating activities 13,650 (405)
Interest, bank fees and commissions paid (2,286) (2,516)
Income tax paid - (56)
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Net cash from operating activities 11,364 (2,977)
2019 2018
BGN'000 BGN'000
Cash flows from investing activities
Payments for purchase of property, plant
and equipment (591) (5,156)
Proceeds from disposal of property, plant
and equipment 356 7,939
Payments for loans granted, net (2,770) (5,572)
Interest received on loans and deposits 105 15
Payments for acquisition of subsidiary and
other investments, net of cash acquired 6 16
Disposal and loss of control of subsidiary,
net of cash disposed of 173 2,753
Payments for other investments (4,715) (6,677)
Net cash flows used in investing activities (7,436) (6,682)
Cash flows from financing activities
Proceeds from loans and borrowings 19 7,587
Repayment of loans and borrowings (1,229) (820)
Proceeds from sale of own shares - 25
Payments under lease agreements (3,476) -
Net cash flows from financing activities (4,686) 6,792
Net increase (decrease) in cash flows during
the year (758) (2,867)
Cash and cash equivalents at the beginning
of the year 4,265 7,085
Effect of movements in exchange rates (21) 47
Cash and cash equivalents at the end of
the year ( see also note 24 ) 3,486 4,265
========= =========
Georgi Tatarski Milko Dimitrov Prepared by Elena
Executive Director Executive Director Pavlova - Teofanova
July 16, 2020
The notes on pages 79 to 141 are integral part of these
consolidated financial statements
Notes to the consolidated financial statements
for the year ended December 31, 2019
1. Legal status
Petrol AD (the Parent company) was registered in Bulgaria in
1990. The Company is registered with the Commercial Register at the
Bulgarian Registry Agency with UCN 831496285. As at the end of the
reporting year the registered address of the Parent company is 12
Targovska Street, Lovech Hotel, Lovech. As at December 31, 2019
shareholders of the Parent company are legal entities, the State -
through the Ministry of Energy, and individual shareholders (see
also Note 25).
The main activity of Petrol AD and its subsidiaries (the Group)
is wholesale and retail trade with petroleum products and
non-petroleum goods. The Parent company is one of the oldest
trading companies in the Republic of Bulgaria operating the largest
network of petrol stations in the country.
These consolidated financial statements were approved for issue
by the Management Board of the Company on July 16, 2020.
2. Basis of preparation of these consolidated financial
statements and accounting principles
2.1. General
These consolidated financial statements have been prepared in
accordance with the International Financial Reporting Standards
(IFRS), as adopted by the Commission of European Union (EU).
These consolidated financial statements have been prepared on a
historical cost basis, except for the provisions and the defined
benefit liability, recognized at the present value of the expected
future payments.
2.2. Application of new and revised IFRS
2.2.1. Standards and interpretations effective and applied during the current reporting period
The following amendments of the existing standards, issued by
the IASB and endorsed by the EU are effective from January 1,
2019:
-- IFRS 16 Leases (issued on January 13, 2016), endorsed by the
EU on October 31, 2017 and published in Official newspaper on
November 9, 2017. The standard will replace the existing until this
moment standard for reporting of leases - IAS 17 and the current
directives for leases - IFRIC 4, SIC-15 and SIC-27. IFRS 16
requires lessees to recognize most of the leases in the statement
of financial position and to apply single model of recognition for
all leases, with some exclusions. The definition for lease is
focused on the definition of control in IFRS 10 and IFRS 15. New
reporting and disclosure requirements are introduced. For the
lessees, it is provided all lease agreements over 12 months to be
recognized as fight-of-use asset, which shall be depreciated for
the term of contract and respectively to report a liability upon
these contracts. Exceptions are provided for short-term leases and
leases with inconsiderable value.
-- Further, the classification of cash flows will also be
affected, as the payments on operating lease according to IAS 17
are reported as operating cash flows, in contrast to the model,
laid down in IFRS 16, the lease payments will be separated to
principal payments and interest payments, which will be reported,
respectively, as cash flows from financing activities and cash
flows from operating activities. The reporting for lessors does not
change essentially, but it is possible to have grounds for
reclassifications.
-- The Group has chosen to apply a modified retrospective
approach, as the cumulative effect of the appliance is recognised
to the date of the initial appliance of IFRS 16 Leases in the
beginning balance of the equity and a comparing information is not
recalculated. The Group has chosen to apply the standard to
contracts, which were previously identified as leases in
application of IAS 17 and IFRIC 4.
-- The Group has chosen to use the exclusions, proposed 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.
-- Amendments to IFRS 9: Prepayment features with negative
compensation (issued on October 12, 2017), approved by EU on March
22, 2018, published in Official newspaper on March 26, 2018. The
existing requirements of IFRS 9 regarding termination rights are
amended to allow measurement at amortized cost (or, depending on
the business model, at fair value through OCI), even in the case of
payment of negative compensation.
IFRIC 23 Uncertainty Over Income Tax Treatments - (issued on
June 7, 2017, adopted by the EC on October 23, 2018). Guidance is
provided for the application of the requirements for the
recognition and measurement of IAS 12 Income Taxes when there is
uncertainty about the tax treatment of income taxes (i.e.
uncertainty as to whether the tax treatment chosen by the entity
will be accepted by the tax authorities under the tax legislation).
When there is uncertainty, an entity recognizes and measures
current or deferred tax liabilities or assets in accordance with
IAS 12 by determining taxable profits, tax losses, tax bases and
rates;
-- Amendments to various standards Annual improvements to IFRS
(cycle 2015-2017) - (issued on December 12, 2017, approved by the
EC on March 14, 2019, published in the Official Journal of the EU
on March 15, 2019);
-- Amendments to IAS 19 Employee Benefits - Amendment,
shortening or settlement of the plan - (issued on October 12, 2017,
approved by the EC on March 13, 2019, published in the EU Official
Journal on March 14, 2019). The amendment requires entities to use
updated actuarial assumptions to determine the cost of current work
experience and net interest for the remaining period of the annual
reporting period after a change in plan, dismissal or settlement.
Additionally, amendments in the disclosure of the effect of changes
in defined benefit plans, redundancies or settlements in relation
to the upper asset limit are included.
Amendments to IAS 28 Investments in Associates and Joint
Ventures (issued on October 12, 2017, approved by the EC on
February 8, 2019, published in the Official Journal of the EU on
February 11, 2019).
The adoption of these amendments to existing standards did not
result in changes in the Group's accounting policies, with the
exception of the application of IFRS 16. The effect of the
application of IFRS 16 is disclosed in the note Changes in
accounting policy.
2.2.2. New standards and interpretations, not yet applied
The following new or revised standards, new interpretations and
amendments to existing standards that have been issued by the
International Accounting Standards Board (IASB) at the reporting
date but are not yet effective for annual periods beginning on or
after January 1, 2019 or are not approved for implementation by the
EU and accordingly not taken into account in the preparation of
these financial statements.
-- IFRS 17 Insurance Contracts (issued on May 18, 2017, not yet
adopted by the EC). An entirely new accounting standard for all
types of insurance contracts, which will replace the current IFRS 4
and define a new model for reporting insurance contracts, which
takes into account all accounting aspects that are relevant to them
and aims to be more useful and consistent for insurers. They are
not expected to have an impact on the Group's financial
statements;
-- Amendments to the Conceptual Framework for Financial
Reporting (effective for annual periods beginning on or after
January 1, 2020) The amendments include revised definitions of
assets and liabilities, as well as new guidance on their
measurement, derecognition, presentation and disclosure. The
Amendments to the Conceptual Framework are accompanied by changes
to references to the Conceptual Framework in the International
Financial Reporting Standards, incl. IFRS 2, IFRS 3, IFRS 6, IFRS
14, IAS 1, IAS 8, IAS 34, IAS 37, IAS 38, IFRIC 12, IFRIC 19, IFRIC
20, IFRIC 22 and SIC 32 (the amendments to the references were
issued on March 29, 2018, approved by the EC on November 29, 2019,
published in the Official Journal of the EU on December 6, 2019,
effective from January 1, 2020). Some references indicate to which
version of the Conceptual Framework the statements in those
standards should referencing to (the IASC framework adopted by the
IASB in 2001, the IASB framework of 2010, or the new revised
framework of 2018), others explicitly indicate the definitions in
the standard have not been updated in accordance with the new
amendments to the framework;
-- Amendments to IFRS 3 Business Combinations - (effective for
annual periods beginning on or after January 1, 2020, not adopted
by the EC). The amendment concerns the amended definition for
business and the difficulties encountered by the acquirer in
determining whether acquiring a business or a combination of
assets;
-- Amendments to IFRS 10 Consolidated Financial Statements and
IAS 28 Investments in Associates and Joint Ventures - regarding the
sale or contribution of assets between an investor and its
associates or joint ventures (with effective date deferred, subject
to determination by IASB). These changes are aimed at resolving the
accounting treatment of sales or contributions of assets between an
investor and its associates or joint ventures.
-- Amendments to IAS 1 Presentation of Financial Statements, IAS
8 Accounting Policies, Changes in Accounting Estimates and Errors,
IAS 10 Events after the Reporting Period, IAS 34 Interim Financial
Reporting and IAS 37 Provisions, Contingent Liabilities and
Contingent Assets (effective for annual periods beginning on or
after January 1, 2020, published amendments to IAS 1 and IAS 8 on
October 31, 2018, adopted by the EC on November 29, 2019. The EC
has decided that following the amendments to IAS 1 and IAS 8 should
also amend IAS 10, IAS 34 and IAS 37, published in the Official
Journal of the EU on December 10, 2019).
The management is in the process of researching, analyzing and
evaluating the effects of the changes in the Conceptual Framework
and the above standards, which will affect the accounting policy
and the values and classifications of the Group's assets,
liabilities, operations and results in the following reporting
periods.
2.3. Functional and presentation currency of the consolidated financial statements
Functional currency is the currency of the primary economic
environment, in which a company operates and primarily generates
and disburses cash. It reflects the main transactions, events and
conditions considered significant for the Group. These consolidated
financial statements are presented in Bulgarian levs, which is the
functional currency of Petrol Group. All financial information
presented in BGN has been rounded to the nearest thousand, except
when otherwise indicated.
2.4. Foreign currency
Transactions in foreign currency are initially recorded at
amounts denominated in BGN at the official exchange rate of the
Bulgarian National Bank (BNB) as of the date of the transaction.
Foreign exchange rate differences arising from settlement of
foreign exchange positions or from reporting these positions at
rates different from those of the initial recording, are reported
in profit and loss for the respective period. Since January 1, 1999
the Bulgarian Lev has been fixed against the Euro at rate 1.95583
BGN for 1 Euro.
The monetary positions denominated in foreign currency as at
December 31, 2019 and 2018 are stated in these consolidated
financial statements at the closing exchange rate of the Bulgarian
National Bank. The closing exchange rates of the BGN against USD as
at the end of current and prior reporting periods are as
follows:
December 31, 2019: 1 USD = 1.74099 BGN
December 31, 2018: 1 USD = 1.70815 BGN
2.5. Accounting assumptions and approximate estimates
The application of IFRS requires the Management to make certain
reasonable assumptions and accounting estimates in the preparation
of these consolidated financial statements, in order to determine
the value of some assets, liabilities, revenue and expenses. These
estimates and assumptions are based on the best estimate of the
Management, taking into account historical experience and analysis
of all factors, which have impact given the circumstances as at the
date of preparation of the consolidated financial statements. The
actual results could differ from the estimates presented in these
consolidated financial statements.
Information about assumptions and estimation uncertainties, that
have a significant risk of resulting in material adjustments in the
next financial year, are included in the following notes:
-- Note 15 - recoverability of deferred tax assets;
-- Note 19 - estimation of the recoverable amount of the
reported goodwill arising from business combinations ;
2.6. Basis of consolidation
2.6.1. Business combinations
The Group accounts for business combinations using the
acquisition method when control is transferred to the Group. The
consideration transferred with the acquisition is generally
measured at fair value, as the acquired identifiable net assets.
The arising goodwill is tested annually for impairment. Any gain
from bargain purchase is recognised immediately in profit or loss.
Transaction costs are expensed as incurred, except those related to
the issuance of debt or equity securities.
The consideration transferred does not include amounts related
to the settlement of the pre-existing relationships. Generally,
such amounts are recognised in profit or loss.
Any due contingent consideration is measured at fair value as at
the acquisition date. If the contingent consideration is classified
as equity it is not remeasured and settlement is accounted for
within equity. Otherwise, subsequent changes to the fair value of
the contingent consideration are recognised in profit and loss.
If share-based payment awards (replacement awards) are required
to be exchanged for awards held by the acquiree's employees
(acquiree's awards) and relate to past services, then all or a
portion of the amount of the acquirer's replacement awards is
included in measuring the consideration transferred in the business
combination. This determination is based on the market-based value
of the replacement awards compared with the market-based value of
the acquiree's awards and the extent to which the replacement
awards relate to pre-combination service.
2.6.2. Non-controlling interest
Non-controlling interest is the equity in a subsidiary not
attributed directly or indirectly to the Parent company.
Non-controlling interest is presented within equity in the
consolidated statement of financial position, separately from the
equity attributable to the owners of the Parent company.
Non-controlling interest is measured at its proportional share
of its identifiable net assets as at the acquisition date.
Any changes in the Group's interest in a subsidiary that do not
result in loss of control are accounted for in equity.
2.6.3. Subsidiaries
Subsidiaries are companies controlled by the Group. Control is
the power to govern the financial and operating policy of a
subsidiary in order to benefit from it. The financial statements of
the subsidiaries are included in the consolidated financial
statements from the date of control establishment until the date of
control suspension.
2.6.4. Loss of control
When the Group losses control of a subsidiary, it derecognizes
the assets and liabilities of the subsidiaries, non-controlling
interest and other components of equity related to the subsidiary.
Any resulting from the loss of control gain or loss is recognized
in profit or loss. Any interest retained in the former subsidiary
is measured at fair value when control is lost. Subsequently it is
recognized as an equity-accounted investee or an available-for-sale
financial asset depending on the level of influence retained.
2.6.5. Transactions eliminated on consolidation
Intra-group balances and transactions and any unrealised income
and expenses arising from intra-group transactions are eliminated.
Unrealised gains arising from transactions with associates and
joint ventures are eliminated against the investment up to the
interest of the Group in the company. Unrealised losses are
eliminated in the same way as unrealized gains, but only if there
is no evidence for impairment.
2.6.6. Goodwill
Goodwill arising on the acquisition of subsidiaries is measured
at cost less accumulated impairment losses.
2.7 Going concern basis of accounting
As at December 31, 2019 the Group's equity is negative at the
amount of BGN 14,550 thousand and is lower by BGN 94,677 thousand
than the registered capital of the Parent company, due to
accumulated losses in previous periods. According to Management's
valuation of the resulting uncertainties, including the potential
effects of court proceedings (see also Note 35), which indicate
significant uncertainty that could raise doubts about the Group's
ability to continue as a going concern, the current consolidated
financial statements are prepared on a presumption of going concern
basis. Measures have been taken to bring the capital of the Parent
company in compliance with the requirements of Art.252, par.1, item
5 of the Commercial Act (see Notes 25, 33 and 36). The Management
has made an assessment taking into account all available
information on the foreseeable future, which is at least, but not
limited to, twelve months from the end of the reporting period.
This implies that the Group will be able to pay its regularly due
contractual and trade obligations, loans and interests in
accordance with the contractual commitments.
2.8 Changes in Accounting Policy
The adopted accounting policy is consistent with the applied in
the previous year, with the exception of the new IFRS 16, which is
applied for the first time from January 1, 2019.
The Group uses the modified retrospective approach and the
cumulative effect of the initial applying IFRS 16 Lease is
recognized as at January 1, 2019 in the opening balance of retained
earnings and no comparative information is recalculated. When
adopting IFRS 16 Leases, the Group recognizes lease liabilities as
at January 1, 2019 for leases previously classified as operating
leases in accordance with IAS 17. Lease liabilities are measured at
the present value of the remaining lease payments, discounted by a
differential interest rate for 2019 - 6.67%. The right-of-use asset
is an amount equal to the lease liability, adjusted by the amount
of any lease payments or accruals in advance related to that lease
recognized in the statement of financial position immediately
before the date of initial application.
The Group uses the exceptions proposed by the standard for lease
contracts for which the lease term expires within 12 months and for
which the underlying asset has a low value. The analysis of the
terms of the main leases of retail trade sites shows that they
should be treated as short-term within the scope of the exceptions
because they do not have a guaranteed validity period, the rental
price is set for six months and both parties have the right to
terminate the contract with a notice of 1 to 3 months without
onerous sanctions that would give the Group reason to assess the
probability of exercising the termination option by the landlords
as unlikely.
In applying IFRS 16 for the first time, the Group uses the
following practical measures:
-- One discount rate is applied for a portfolio of leasing
contracts with similar characteristics
-- an assessment is made as to whether the leases are onerous in
accordance with IAS 37 Provisions, Contingent Liabilities and
Contingent Assets, immediately before the date of initial
application as an alternative to performing an impairment
review.
-- leasing contracts, the term of which expires within 12 months
from the date of initial application, are reported as short-term
leases.
-- the initial direct costs are excluded of the valuation of the
right-of-use assets as of the date of initial application;
-- an ex post evaluation is used, in determining the term of the
leasing contract, for contracts containing options for extension or
termination.
The effect of the initial application of IFRS 16 as at December
31, 2019 for each individual item in the statement of financial
position is disclosed in Note 18 Assets and liabilities under lease
agreements.
The Group initially applied IFRS 16 on January 1, 2019 in
accordance with the selected transition methods, the comparative
information has not been restated.
At the end of 2019 the Group has undertaken preparations for a
change in its accounting policy regarding non-current tangible
assets - property, plant and equipment from the applied policy in
the financial statements until 2019, including a cost model,
according to which the assets are reported at cost less accumulated
depreciation and any impairment losses, by applying from the
beginning of 2020 the revaluation model, which the Management
considers to reflect more objectively the owned non-current
tangible assets. The revaluation model provides that after the
initial recognition of an asset, any property, plant and equipment
whose fair value can be measured reliably is carried at revalued
amount, which is the fair value of the asset at the date of
revaluation less any subsequent accumulated depreciation, and
subsequent accumulated impairment losses. Revaluations should be
made on a regular basis to ensure that the carrying amount does not
differ materially from the value that would have been determined
using fair value at the date of the consolidated statement of
financial position.
According to preliminary estimates, the expected effect as at
December 31, 2019 is an increase in the value of non-current
tangible assets by not less than BGN 22,000 thousand and net assets
by not less than BGN 19,800 thousand, with the intention to be
reflected in the first interim consolidated report for 2020,
prepared for publication on the BSE, with a corresponding
recalculation of the comparative period.
3. Definition and valuation of items of the consolidated
statement of financial position and the consolidated statement
profit or loss and other comprehensive income
3.1. Property, plant and equipment and intangible assets
Property, plant and equipment, and intangible assets are
measured initially at acquisition cost. If significant parts of an
item of property, plant and equipment have different useful lives,
they are accounted for as separate items (major components) of
property, plant and equipment.
After initial recognition property, plant and equipment, and
intangible assets are measured at cost less accumulated
depreciation and any accumulated impairment losses. (see also note
3.5.2.).
Subsequent costs, including replacement of a component of an
asset, are capitalised in the cost of the asset, only when it is
probable that future economic benefits associated with the
expenditure will flow to the Group. The carrying amount of the
replaced items is derecognized in accordance with the requirements
of IAS 16 Property, Plant and Equipment. All other subsequent costs
are recognized as incurred.
Gains or losses on disposal of property, plant and equipment
(calculated as a difference between the proceeds from disposal and
the carrying amount of the asset) are recognised net in the other
income/ expenses in profit or loss for the year.
When the use of a property, plant and equipment changes from
owner-occupied to investment property, the property is reclassified
as investment property.
Depreciation and amortisation are recognised over the estimated
useful lives applying the straight-line method. Depreciation and
amortisation are recognised in profit or loss of the current
period. Land, assets under construction and fully depreciated
assets are not depreciated/amortised.
The estimated useful lives are as follows:
Administrative and commercial buildings 25 years
Machinery, plant and equipment 2 - 25 years
Vehicles 4 - 10 years
Office equipment 7 years
Intangible assets 2 - 7 years
Depreciation/amortisation commences from the beginning of the
month following the month when the asset is available for use, and
ceases at the earlier of the date when the asset is classified as
held for sale in accordance with IFRS 5 Non-Current Assets Held for
Sale and Discontinued Operations and the date of its
derecognition.
As of the end of the reporting period, the Group's Management
reviews the useful life and the depreciation method of property,
plant and equipment and intangible assets. If any difference
between expectations and previous accounting estimates exists, the
relevant adjustments are made.
3.2. Investment property
Investment property is property held by the Group to accumulate
rent income or to increase the equity value, or both (including
property under construction for future use as investment property).
Investment properties are carried at cost less depreciation and any
impairment losses.
Any gain or loss on disposal of investment property (calculated
as a difference between the proceeds from disposal and the carrying
amount of the asset) is recognized in profit or loss for the
period.
Depreciation of investment properties are recognized in profit
or loss, over their estimated useful lives, applying the
straight-line method.
The estimated useful lives for the current and comparative
periods are as follows:
Administrative and trade buildings 25 years
Intangible assets 2-10 years
As at the end of each reporting period, the Management of the
Group reviews useful lives and the depreciation/amortization method
of investment property. In case the Management identifies
differences between expectations and previous accounting estimates,
the relevant adjustments are made.
3.3. Inventory
Inventories are stated at the lower of cost and net realizable
value. The cost of inventories comprises purchase price,
transportation costs, custom duties, excise duties and other
similar costs. The net realizable value represents the estimated
selling price less estimated selling expenses.
Upon its consumption, the cost of inventories is measured using
weighted average cost method.
3.4. Financial instruments
3.4.1. Non-derivative financial assets and financial liabilities - recognition, assessment and derecognition
The Group recognizes a financial asset or a financial liability
in the statement of financial position, only when the Group is a
party under contractual terms of these financial instruments.
Initially all financial assets and financial liabilities are
recognised at fair value. The fair value of particular
asset/liability in its initial recognition is the contract price.
The contract price for financial assets/liabilities, excluding
these, which are classified at fair value through profit or loss,
includes the deal expenses, which directly reference to the
acquisition/issuance of the financial instrument. The transaction
expenses, incurred during the acquisition of financial asset and
the issuance of a financial liability, classified at fair value
through profit or loss, are accounted immediately as expense.
The Group recognizes a financial asset, using the settlement
date of the transaction, thus an asset is recognised on the day it
is received by the Group and is written-off on the day it is given
by the Group.
Financial asset is written-off by the Group, when the
contractual rights on the cash flows from this asset mature or when
the Group transferred this rights through transaction, in which all
significant risks and benefits, arising from the ownership of the
asset are transferred to the buyer. Each investment in already
transferred financial asset, which the Group retains, is recognized
separately as particular asset or liability.
In cases when the Group retains all or a greater part of the
risks and rewards, related to the assets, the latter are not
written-off from the statement of financial position (example for
such transactions are repos with buy-back options).
In transactions, where the Group neither retains nor transfers
the risks and rewards, related to financial assets, the latter is
written-off from the statement of financial position when and only
when the Group has lost control on it. The rights and liabilities,
which the Group retains in these cases, are reported separately as
asset and liability. In transactions, where the Group retains
control on the asset, its reporting in the statement of financial
position continues, but to the amount determined by the level of
investment retention in the asset and risk bearing by the Group of
change in asset value.
The Group derecognises a financial liability when its
contractual obligations are discharged or cancelled, or expire.
3.4.2. Subsequent measurement of financial assets
Subsequent assessment of the financial assets depends on their
classification in their initial recognition as assets. The Group
classifies the financial assets in category as measured at
amortised cost.
The classification is determined based on the business model of
management of the particular class financial assets and the
contractual characteristics of the cash flows. Investments in debt
instruments, which the Group holds as a business model to collect
the contractual cash flows, are classified as financial assets
carried at amortised cost.
Financial assets carried at amortised cost
Debt instruments, which the Group holds as a business model to
collect contractual cash flows and in which the contractual cash
flows raise payments only of principal and interest, are carried at
amortised cost. Following the initial recognition, the assets are
carried at amortised cost. The accounting at amortised cost
requires the appliance of the effective interest rate method. The
amortised cost of a financial asset is the value of the financial
asset based on its initial accounting, decreased by the repayments
on principal plus or minus accumulated depreciation with the usage
of the method of the effective interest rate for each difference
between the initial value and the value at maturity and decreased
with the impairment. The following financial assets of the Group
belong to this category, depending of the chosen financial model
and the characteristics of the cash flows from them: trade
receivables, loans and borrowings, receivables on loans granted,
receivables on cessions and other receivables.
Financial assets, carried at fair value through profit or
loss
This category of financial assets is separated in two
sub-categories: financial assets held for sale and financial
assets, which are not classified in other categories. Particular
financial asset is classified in this category, if it is acquired
to be sold in short time or its contractual characteristics do not
meet the condition to raised payments only for principal and
interest.
3.4.3. Subsequent assessment of financial liabilities
The subsequent assessment of the financial liabilities depends
on their classification in their initial recognition. The Group
classifies the financial liabilities in the following category:
Liabilities, carried at amortised cost
These liabilities are carried at amortised cost through the
effective interest rate method. The elements, classified as trade
and other liabilities usually are not assessed again, because the
liabilities are with high level of safety and the settlement is
short-term. Usually this category comprises the following financial
liabilities: trade liabilities, loans and borrowings, liabilities
on received deposits, other liabilities.
3.5. Impairment
3.5.1. Non-derivative financial assets
The impairment model expected credit losses is applied for
financial assets, assessed at amortised cost or at fair value
through other comprehensive income, excluding the investments in
capital instruments and contract assets. According to IFRS 9, the
losses are measured through one of the following bases: 1. Expected
credit losses for the next twelve months after the date of
financial report or 2. Expected credit losses for the whole term of
the financial assets. The first base is applied when the credit
risk does not increase significantly from the date of the initial
recognition until the date of financial statements (and the credit
risk is low to the date of financial statements). In the opposite
case, the second base is applied. The Group applies the second base
for the trade receivables and contract assets (whether or not are
with or without a significant financial component). The increase of
the credit risk is monitored and determined based on the
information for risk factors as default, significant deterioration
of the financial statement of the debtor and other.
For financial assets, carried at amortised cost, if in the next
period the amount of impairment loss decreases and the drop may be
objectively connected with an event, which arises after the
impairment is recognised, the impairment losses recognised before
are reimbursed (directly, or through correction of corrective
account for trade receivables) in profit or loss. However, the
reimbursement may not result to carrying amount of the financial
asset, which surpasses the amortised cost, which would have been on
the date of the reimbursement, if not impairment have been
recognized.
3.5.2. Non-financial assets
The carrying amounts of the Group's non-financial assets (other
than inventories and deferred tax assets) are reviewed at each
reporting date to determine whether there is any indication of
impairment. If any such indication exists, then the asset's
recoverable amount is estimated. Intangible assets that have
indefinite useful lives, or that are not yet available for use, are
tested annually for impairment. An impairment loss is recognised if
the book value of an asset or its related cash-generating unit
(CGU) exceeds its recoverable amount.
The recoverable amount of an asset or CGU is the greater of its
value in use and its fair value less costs to sell. In assessing
value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks
specific to the asset or CGU. For impairment testing, assets that
cannot be tested individually are grouped together into the
smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows of
other assets or CGUs.
An impairment loss is reversed only to the extent that the
asset's book value does not exceed the book value that would have
been determined, net of depreciation or amortisation, if no
impairment loss had been recognised.
3.6. Registered capital and repurchase of own shares
The registered capital is the capital of the Parent company,
presented at historical cost as of the date of its
registration.
When at the end of the reporting period the Group - through
Parent company or its subsidiaries - has reacquired shares of the
Parent company, their nominal value is presented as a decrease in
share capital, and the difference below or above the nominal value
- in retained earnings, according to IAS 32 Financial Instruments:
Disclosure and Presentation.
3.7. Deferred income and prepaid expenses
Deferred income and prepaid expenses in the statement of
financial position of the Group comprises revenue and expenses,
which are prepaid in the current period, but relate to future
periods, such as guarantees, insurance, subscriptions, rent,
etc.
3.8. Employment benefits
Defined benefit plans
In accordance with the Labour Code, the Group has an obligation
to pay retirement benefits to its employees upon retirement, based
on the length of service, age and labour category. Since these
benefits qualify for defined benefits plan in accordance with IAS
19 Employee benefits, in accordance with the requirements of this
standard the Group recognises the present amount of the benefits as
a liability. The Group's obligation in respect of defined benefit
plans is calculated separately for each plan by estimating the
amount of future benefit that employees have earned in the current
and prior periods and discounting that amount.
A qualified actuary using the projected unit credit method
performs the calculation annually. The Group determines the net
interest expense on the net defined benefit liability for the
period by applying the discount rate used to measure the defined
benefit obligation at the beginning of the annual period to the net
defined benefit liability.
The projected unit credit method presents a liability that may
arise in future, based on a number of assumptions. From this point
of view, the method is sensitive to assumptions of values of main
parameters, on which the obligation and the due amount are
dependent. The main assumptions, on which the amount of the
obligation is dependent, are based on demographic, financial and
other assumptions.
Remeasurements arising from defined benefit plans comprise
actuarial gains and losses and are recognised in other
comprehensive income. Net interest expense and other expenses
related to defined benefit plans are recognised in profit or
loss.
Short-term employee benefits
Short-term employee benefit obligations are expensed as the
related service is provided. A liability is recognised for the
amount expected to be paid if the Group has a present legal or
constructive obligation to pay this amount as a result of past
service provided by the employee and the obligation can be
estimated reliably.
3.9. Income tax
Income tax expense comprises current and deferred tax. It is
recognised in profit or loss except to the extent that it relates
to a business combination, or items recognised directly in equity
or in other comprehensive income.
Current tax is the expected tax payable or receivable on the
taxable income or loss for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to
tax payable or receivable in respect of previous years.
Deferred tax is recognised in respect of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation
purposes. Deferred tax is not recognised for:
-- temporary differences on the initial recognition of assets or
liabilities in a transaction that is not a business combination and
that affects neither accounting nor taxable profit or loss;
-- temporary differences related to investments in subsidiaries
and jointly controlled entities to the extent that it is probable
that they will not reverse in the foreseeable future;
-- taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to
be applied to temporary differences when they reverse, based on the
laws that have been enacted or substantively enacted by the
reporting date.
In accordance with the tax legislation enforceable for the years
ended 2019 and 2018 the tax rate applied in calculation of the tax
payables of the Group is 10%.
Deferred tax assets and liabilities are offset if there is a
legally enforceable right to offset current tax liabilities and
assets, and they relate to income taxes levied by the same tax
authority.
A deferred tax asset is recognised for unused tax losses, tax
credits and deductible temporary differences, to the extent that it
is probable that future taxable profits will be available against
which they can be utilised. Deferred tax assets are reviewed at
each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realised.
In determining the amount of current and deferred tax the Group
takes into account the impact of uncertain tax positions and
whether the additional taxes and interest may be due. The Group
believes that the accruals for tax payables are sufficient for all
open tax periods for a number of factors, including interpretations
of tax law and prior experience. This assessment relies on
estimates and assumptions and may involve a series of judgments
about future events. New information may become available that
causes the Group to change its judgment regarding the adequacy of
existing tax liabilities; such changes to tax liabilities will
impact the tax expense in the period that such a determination is
made.
3.10. Revenue and expenses recognition
3.10.1. Revenue from contracts with clients
A contract is an agreement between two or more parties, which
generates rights and obligations for the parties. A client is a
party, which has entered into an agreement with the Group to
receive goods or services, which are subject of the normal
operations of the Group, in exchange for a consideration.
The Group recognizes revenue to report the transfer of the goods
or services promised to clients to the amount reflected the
consideration, which the Group has a right as an exchange for the
transferred goods and services.
The transfer of goods or services is based on the conception for
the transfer of control upon them, the ability to manage the usage
of assets and to receive in essence all other rewards from it. The
control includes and the ability for prevention other companies to
manage the usage of asset and to receive the rewards from it.
The revenue from contracts with clients is recognised over time,
reflecting the contractual work done by the Group or in exact
moment, when the control on goods or services is transferred to the
client.
The revenue form contract with clients is recognised based on
the policies and models in IFRS 15.
3.10.2. Finance income and finance costs
Finance income comprises interest income, gain on transactions
with own bonds, foreign exchange rate gains, gains from revaluation
of financial assets accrued at fair value through profit or loss
and other. Finance costs comprise interest expenses, foreign
exchange rate losses, loss from revaluation of financial assets
accrued at fair value through profit or loss, bank fees,
commissions and other finance costs.
Borrowing costs, which may be directly attributable to the
acquisition, construction or production of a qualifying asset prior
to its being ready for its intended use or sale, and necessarily
takes extended period of time, are capitalized in part of the cost
of the asset. All other finance income and costs are recognized in
profit or loss for all instruments, measured at amortized cost
using the effective interest rate method.
Gains and losses from exchange rate differences are reported on
a net basis.
3.11. Leases
3.11.1. Accounting policy, applied on January 1, 2019
Right-of-use assets and lease liability
Lease contracts may contain both lease and non-lease components.
For a contract that contains a lease component and one or more
additional lease components or non-lease components, the Group
allocates the consideration under the contract for each lease
component based on the relative unit price of the lease component
and the aggregate unit price of non-lease components. Until the
financial year 2018, leases of property, plant and equipment are
classified either as a finance lease or as an operating lease. As
at January 1, 2019, leasing assets are recognised as a right-of-use
asset and a lease liability from the date on which the lease assets
are available for use by the Group. At the initial date, the lessee
shall measure the lease liability at the present value of lease
payments not paid at that date. Lease payments are discounted at
the differential interest rate of 6.67%.
At the initial date, the lease payments included in the
measurement of the lease liability comprise the following payments
for the right-of-use underlying asset during the term of the lease
contract, which are not paid at the initial date: fixed payments
(including essentially fixed payments), less lease incentives to be
received, variable lease payments depending on an index or
percentage, which are measured at the value of the index or
percentage at the initial date, amounts expected to be owed by the
lessee under the residual value guarantees, the exercise price of
the purchase option, if it is sufficiently certain that the lessee
will exercise this option and the payment of penalties for
termination of the lease, if within the lease term, the contract
reflects the exercise of the option to terminate the contract by
the lessee. Periods in respect of which there is an option to
extend the lease term, if it is sufficiently certain that the Group
will exercise that option, are also included in the calculation of
lease payments.
At the initial date, the Group measures the lease liability at
the present value of the lease payments that have not been paid as
of that date. Lease payments are discounted at the differential
interest rate - the rate that the Group would be required to pay
for borrowing, for a similar period and with similar collateral,
funds required to obtain an asset with a similar value as the
right-of-use asset in a similar economic environment.
After the initial date, the Group recognizes in profit or loss,
unless the costs are included in the carrying amount of another
asset according to other applicable standards, the interest on the
lease liability and the variable lease payments that are not
included in the assessment of the lease liability in the period
during which the event or circumstance that led to these payments
occurred.
The cost of acquiring an asset includes the amount of the
initial assessment of the lease liability, the lease payments made
before or on the initial date, less the lease incentives received,
the initial direct costs incurred by the Group and an estimate of
the costs incurred by the Group for dismantling and relocation of
the underlying asset, restoration of the site on which the asset is
located, or restoration of the underlying asset to the condition
required under the terms and conditions of the lease, unless these
costs are incurred for the production of inventories. The liability
for these costs is recognised by the Group at the initial date or,
as a result of the use of the underlying asset over a specified
period.
If ownership of the asset is transferred to the lessee under the
lease contract until the end of the term of the lease contract or
if the cost of the right-of-use asset included the exercise option
to purchase by the lessee, the lessee depreciates the right-of-use
asset from the effective date until the end of the useful life of
the underlying asset. Otherwise, the lessee depreciates the
right-of-use asset from the initial date until the end of the
useful life of the right-of-use asset or until the expiration of
the lease contract, whichever occurs earlier.
The Group has chosen to apply the standard in terms of
contracts, which were previously identified as leases in applying
of IAS 17 and IFRIC 4.
The Group has chosen to use the exceptions proposed by the
standard for leases with lease term, which expired within 12 months
and leases with underlying asset of low value.
Lease payments under short-term leases or for low-value assets
are reported as current expenses on a straight-line basis over the
term of the contract or on another systematic basis, similar to the
operating lease accounting rules under IAS 17.
3.11.2. Accounting policy, applied before January 1, 2019
At inception of an arrangement, the Group determines whether
such an arrangement is or contains a lease. At inception or upon
reassessment of an arrangement that contains a lease, the Group
separates payments and other consideration required by the
arrangement into those for the lease and those for other elements
based on their relative fair values. If the Group concludes for a
finance lease that it is impracticable to separate the payments
reliably, then an asset and a liability are recognised at an amount
equal to the fair value of the underlying asset. Subsequently the
liability is reduced as payments are made and an imputed finance
charge on the liability is recognised using the Group's incremental
borrowing rate.
Assets held by the Group under leases, which transfer to the
Group substantially all of the risks and rewards of ownership, are
classified as finance leases. On initial recognition the leased
asset is measured at an amount equal to the lower of its fair value
and the present value of the minimum lease payments. Subsequent to
initial recognition, the asset is accounted for in accordance with
the accounting policy applicable to that asset. Assets held under
other leases are classified as operating leases and are not
recognised in the Group's consolidated statement of financial
position.
Payments made under operating leases are recognised in profit or
loss on a straight-line basis over the term of the lease. Lease
incentives received are recognised as an integral part of the total
lease expense, over the term of the lease.
Minimum lease payments made under finance leases are apportioned
between the finance expense and the reduction of the outstanding
liability. The finance expense is allocated to each period during
the lease term to produce a constant periodic rate of interest on
the remaining balance of the liability.
Costs incurred for assets leased under operating lease contracts
are recognized in profit or loss on a straight-line basis for the
term of the contract. Lease incentives received is recognised as a
reduction of the lease expenses on a straight-line basis for the
term of the lease contract.
The incurred revenue from assets under operating lease contracts
is recognized in profit or loss on a straight-line basis for the
term of the contract. Initial costs, directly related to the
conclusion of the lease agreement, are capitalized in the cost of
the asset and are recognized as expenses on a straight-line basis
for the term of the lease contract.
3.12. Segments reporting
The information about operating segments in these consolidated
financial statements is presented in accordance with the operating
reports submitted to Group's Management. Based on these reports
decisions are taken in respect of the resources to be allocated to
the segment and the results of its activity are evaluated.
4. Determination of fair values
A number of the Group's accounting policies and disclosures
require the measurement of fair value, for both financial and
non-financial assets and liabilities.
The Group has an established control framework with respect to
the measurement of fair values. This includes a valuation team that
has overall responsibility for overseeing all significant fair
value measurements, including Level 3 fair values and reports
directly to the Management.
Significant unobservable inputs and valuation adjustments are
reviewed regularly. If third party information, such as broker
quotes or pricing services is used to measure fair values, then the
valuation team assesses the evidence obtained from third parties to
support the conclusion that such valuations meet the requirements
of IFRS, including the level in the fair value hierarchy in which
such valuations should be classified. Significant valuation issues
are reported to the Management of the Group.
When measuring the fair value of an asset or liability, the
Group uses market observable data as far as possible. The fair
values are categorised into different level in a fair value
hierarchy based on the inputs in the valuation techniques as
follows.
-- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
-- Level 2: inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or
liability might be categorised in different levels of the fair
value hierarchy, then the fair value measurement is categorised in
its entirety in the same level of the fair value hierarchy as the
lowest level input that is significant to the entire
measurement.
The Group recognises transfers between levels of the fair value
hierarchy at end of the reporting period during which the change
has occurred.
Further information about the assumptions made in measuring fair
values is included in the following Note 17 - Investment
property.
5. Segments reporting
The Group has identified the following operating segments, based
on the reports presented to the Group's Management, which are used
in the process of strategic decision-making:
-- Wholesale of fuels - wholesale of petroleum products in Bulgaria;
-- Retail of fuels - retail of petroleum and other products
through a network of petrol stations;
-- Other activities - financial and accounting services,
consultancy, rental income, maintenance and repairs and other
activities.
The segment information, presented to the Group's Management for
the years ended as of December 31, 2019 and 2018 is as follows:
2019 Wholesale Retail All other Total for
of fuels of fuels segments the Group
BGN'000 BGN'000 BGN'000 BGN'000
Total segment revenue 33,056 506,778 2,685 542,519
Intra-group revenue 5 76 1,542 1,623
Revenue from external
customers 33,051 506,702 1,143 540,896
Adjusted EBITDA 4,526 (2,509) 1,059 3,076
Depreciation/amortization 1,143 2,584 162 3,889
Impairment - (984) 5 (979)
2018 Wholesale Retail All other Total for
of fuels of fuels segments the Group
BGN'000 BGN'000 BGN'000 BGN'000
Total segment revenue 15,699 519,465 2,239 537,403
Intra-group revenue 9 23 1,499 1,531
Revenue from external
customers 15,690 519,442 740 535,872
Adjusted EBITDA 3,269 2,446 543 6,258
Depreciation/amortization 5 778 148 931
Impairment 67 774 (1) 840
The policies for recognition of revenue from intra-group sales
and sales to external clients for the purposes of the reporting by
segments do not differ from these applied by the Group for revenue
recognition in the consolidated statement of profit and loss and
other comprehensive income.
The Management of the Group evaluates the results of the
performance of the segments based on the adjusted EBITDA. In the
calculation of the adjusted EBITDA the effect of the impairment of
assets is not taken into account. The reconciliation of the
adjusted EBITDA and the profit (loss) before tax is presented in
the table below:
2019 2018
BGN'000 BGN'000
Adjusted EBITDA - reporting segments 2,017 5,715
Adjusted EBITDA - all other segments 1,059 543
Depreciation/amortization (3,889) (931)
Impairment 979 (840)
Finance income (cost), net (5,205) 51,190
(5,039
Profit (loss) before tax ) 55,677
========= =========
6. Revenue from sales
2019 2018
BGN'000 BGN'000
Sales of goods 528,147 517,531
Sales of services 10,352 9,246
--------- ---------
538,499 526,777
========= =========
Revenue from sales of goods comprises, as follows:
2019 2018
BGN'000 BGN'000
Fuels 479,140 474,194
Lubricants and other goods 49,007 43,337
--------- ---------
528,147 517,531
========= =========
7. Other income
2019 2018
BGN'000 BGN'000
Surpluses of assets 1,584 1,327
Penalties and indemnities 193 55
Gain on sale of property, plant and equipment,
including: 159 7,164
Income from sales 313 9,241
Carrying amount (154) (2,077)
Insurance claims 83 47
Payables written-off 63 17
Other 315 485
--------- ---------
2,397 9,095
========= =========
8. Cost of goods sold
2019 2018
BGN'000 BGN'000
Fuels 430,136 432,223
Lubricants and other goods 41,102 36,006
--------- ---------
471,238 468,229
========= =========
9. Materials and consumables
2019 2018
BGN'000 BGN'000
Electricity and heating 2,070 2,134
Fuels and lubricants 473 467
Office consumables 466 434
Spare parts 297 350
Working clothes 252 218
Advertising materials 176 253
Water supply 138 133
Other 141 116
4,013 4,105
========= =========
10. Hired services
2019 2018
BGN'000 BGN'000
Rents 15,822 13,825
Commissions and fees 11,904 11,616
Maintenance and repairs 3,847 3,169
Consulting and training 1,874 2,106
State, municipal fees and other costs 849 601
Communications 843 827
Cash collection expense 762 774
Security 653 544
Insurances 605 665
Advertising 408 530
Software licenses 297 252
Transport 101 147
Other 728 696
--------- ---------
38,693 35,752
========= =========
Rental costs for 2019 include BGN 15,629 thousand in connection
with trade sites leased under operating leases, which fall under
the exceptions of IFRS 16 and whose agreements contain a clause
stipulating that both parties have the right to terminate the
contract for individual sites or entirely against a minor
sanction.
Rental costs for 2018 include BGN 11,225 thousand for rent of
filling stations under operating lease agreements.
In 2019 the Group reports that the accrued considerations for
independent financial audit services for the companies included in
the consolidation for 2019 are at the amount of BGN 60 thousand
(2018: BGN 64 thousand).
11. Personnel expenses
2019 2018
BGN'000 BGN'000
Wages and salaries 18,504 16,528
Social security contributions and benefits 3,276 2,796
--------- ---------
21,780 19,324
========= =========
12. Impairment losses
2019 2018
BGN'000 BGN'000
Recognised impairment loss on financial
assets, including: 826 877
Impairment loss on trade and other receivables 261 260
Impairment loss on loans granted 565 617
Reversed impairment loss on financial assets,
including: (1,805) (37)
Reversed impairment loss on trade and other
receivables (402) (37)
Reversed impairment loss on trade loans (1,403) -
granted
(979) 840
========= =========
As at the end of the reporting period, the Management of the
Group made a detailed analysis of the collectability of trade and
other receivables, and receivables on interest-bearing loans
granted. As a result of the analysis and the applying of IFRS 9
Financial Instruments, it is identified that, there were
indications for an impairment allowance on trade and other
receivables at the amount of BGN 261 thousand and loans granted BGN
565 thousand (2018: other receivables of BGN 260 thousand and loans
granted of BGN 617 thousand) to be accrued. For the period January
- December 2019 the Group has reversed impairment on trade and
other receivables at the amount of BGN 402 thousand, as well as
reversed impairment on trade loans granted at the amount of BGN
1,403 thousand.
13. Other expenses
2019 2018
BGN'000 BGN'000
Local taxes and taxes on expenses 727 380
Scrap and shortages 612 975
Entertainment expenses and sponsorship 525 408
Penalties and indemnities 118 305
Business trips 37 34
Other 77 102
--------- ---------
2,096 2,204
========= =========
14. Finance income and costs
2019 2018
BGN'000 BGN'000
Finance income
Interest income, including 1,759 1,640
Interest income on loans granted 1,577 1,488
Interest income on trade receivables 181 151
Other interest income 1 1
Gain on sale of subsidiaries, incl.: 561 54,621
Revenue from sales 997 25
Carrying amount of the Group's interest
in the net assets of the subsidiaries (436) 54,596
Net foreign exchange income 21 47
2,341 56,308
--------- ----------
Financial costs
Interest costs, including: (3,982) (2,860)
Interest expenses on debenture loans (2,596) (2,560)
Interest on leases (693) -
Interest expenses on bank loans (538) (143)
Interest expenses to the state budget (118) (109)
Interest expenses on trade loans (4) (27)
Interest expenses on trade and other payables (33) (21)
Loss on cession agreements (3,056) -
Revaluation of financial assets measured
at fair value through profit or loss (50) (1,742)
Bank fees, commissions and other financial
expenses (458) (516)
--------- ----------
(7,546) (5,118)
--------- ----------
Finance income (costs), net (5,205) 51,190
========= ==========
The gain from disposal of subsidiaries at the amount of BGN
54,621 thousand is made in March 2018, when the Group has sold 100%
of Elit Petrol's capital for BGN 25 thousand. As at the transaction
date Elit petrol AD is sole owner of the capital of Varna Storage
EOOD. The consolidated net assets of both companies are negative
amounting to BGN 54,596 thousand.
15. Taxation
15.1. Tax expenses
Tax expense recognised in profit or loss includes the amount of
current and deferred income tax expenses in accordance with IAS 12
Income taxes.
2019 2018
BGN'000 BGN'000
Current tax expense 3 -
Change in deferred tax, including: (62) (252)
Temporary differences recognised during
the year 303 (46)
Temporary differences arisen during the
year (311) (208)
Adjustments in temporary differences (54) 2
Tax income (59) (252)
========= =========
15.2. Effective tax rate
The reconciliation between the accounting profit (loss) and tax
expense, as well as calculation of the effective tax rate as of
December 31, 2019 and 2018 is presented in the table below:
2019 2018
BGN'000 BGN'000
Profit (loss) before tax for the year (5,039) 55,677
Applicable tax rate 10% 10%
Tax expense (benefit) at the applicable
tax rate (504) 5,568
Tax effect of permanent differences 131 101
Tax adjustments for prior periods 9 2
Tax effect from consolidation adjustments 305 (5,923)
--------- ---------
Tax income (59) (252)
========= =========
Effective tax rate - -
========= =========
The respective tax periods of the Group may be subject to
inspection by the tax authorities until the expiration of 5 years
from the end of the year in which a declaration was submitted, or
should have been submitted. Consequently additional taxes or
penalties may be imposed in accordance with the interpretation of
the tax legislation. The Group's management is not aware of any
circumstances, which may give rise to a contingent additional
liability in this respect.
In January 2017, the Parent company received an amended
assessment on corporate tax revision for 2013 and VAT until October
2014 amounting to BGN 222 thousand principal and BGN 68 thousand
interest. In January 2017, a bank guarantee at the amount of BGN
350 thousand was issued in order to cease the execution of the
appealed amended assessment. In order to secure the additionally
accumulated interest liabilities under this amended assessment, in
February 2019 an additional bank guarantee in the amount of BGN 60
thousand was issued. In April 2019, the Sofia City Administrative
Court ruled a decision that completely canceled the VAT liability
of BGN 112 thousand principal and BGN 37 thousand interest and
significantly reduced the corporate tax liability from BGN 110
thousand principal and BGN 31 thousand interest to BGN 24 thousand
principal and BGN 2 thousand interest. In February 2020, with a
final decision of the Supreme Administrative Court, the Decision of
April 2019 of the Sofia City Administrative Court was partially
revoked, as at the date of preparation of these financial
statements, the obligation was fully paid and the bank guarantees
released and returned from National Revenue Agency (NRA). The
liabilities are accounted for as correcting events as of December
31, 2019 and are reflected in the result for 2019.
In March 2017, the Parent company received a tax audit act due
to the audit of corporate income tax for 2014 and VAT until June
2015 for BGN 663 thousand principal and BGN 138 thousand interest.
In order to suspend the enforcement of the appealed audit
assessment, ordered by the Parent company, a bank guarantee in
favor of National Revenue Agency for BGN 940 thousand was issued.
The bank guarantee is partly covered by BGN 300 thousand cash. In
August 2017 the Director of Appeal and Tax Insurance Practice
department issued a decision, which change the appealed revision
act of the Parent company on corporate income tax for 2014 and VAT
until June 2015 and reduce the additional tax liabilities from BGN
663 thousand to BGN 65 thousand principal and from BGN 138 thousand
to BGN 15 thousand interest. The issued bank guarantee to suspend
the enforcement of the appealed audit assessment in favor of the
National Revenue Agency of BGN 940 thousand, partly secured by BGN
300 thousand blocked cash, was replaced with new bank guarantee of
BGN 94 thousand and the blocked cash was released. The rest of the
decreased tax liabilities was appealed in court in higher judicial
body. As a result in February 2019 following the final decision of
Supreme Administrative Court (SAC) the court proceeding was partly
won and the liabilities according to tax assessment reduced to BGN
13 thousand principal, related to additional VAT and BGN 5 thousand
accrued interest. As at the date of preparation of these financial
statements the liability is fully paid and the bank guarantee
released and given back by National Revenue Agency (NRA). The
liabilities are accounted for as correcting events as at December
31, 2018 and are recognised in the result for 2018.
In November 2017 the issued amended assessment from March 2016
on the security contributions tax audit for BGN 543 thousand
principal and BGN 248 thousand interest, appealed entirely by the
Parent company as unjustified and secured by a bank guarantee of
BGN 800 thousand, was entirely repealed due to decision of
Administrative Court - Sofia city. The tax administration appealed
the decision and SAC repealed the decision of AC - Sofia city and
returned the court proceeding to the initial judicial body for new
examination. In order to secure the additionally accumulated
interest liabilities under this amended assessment, in February
2019 an additional bank guarantee at the amount of BGN 255 thousand
was issued. With a decision from March 2020. the first-instance
court has partially annulled the appealed amended assessment, as a
result the liabilities of the Parent company have been reduced to
BGN 53 thousand. The Appel and Tax Insurance Practice have appealed
the decision of the first-instance court and the case is currently
pending.
15.3. Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities were recognized in respect
of the following positions:
Asset Recognised Recognised Asset Recognised Asset
(liability) in equity in profit (liability) in profit (liability)
as at and loss as at and loss as at
December December December
31, 2017 31, 2018 31, 2019
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
Property, plant and
equipment (284) - 86 (198) 23 (175)
Impairment of assets 3,819 242 131 4,192 (85) 4,107
Tax loss carry-forwards 24 - 15 39 (30) 9
Provisions for unused
paid leave and other
provisions 89 - 16 105 20 125
Excess of interest
payments in accordance
with CITA 1 - 2 3 101 104
Other temporary differences,
including unpaid benefits
to individuals 43 - 2 45 1 46
------------- ----------- ----------- ------------- ----------- -------------
3,692 242 252 4,186 30 4,216
============= =========== =========== ============= =========== =============
The Company has the right to carry forward deferred tax assets
on tax losses until 2024.
15.4. Unrecognized deferred tax assets
As of December 31, 2019 the Group's Management reviews the
recoverability of deductible temporary differences and tax loss
carry forward, forming tax assets. Because of this review, the
Group's Management estimates that there might be no sufficient
taxable profits in the near future against which the assets will be
utilized. Consequently, the Group does not recognize tax assets on
the following deductible temporary differences and tax loss carry
forward and impairment of assets, incurred during the current and
previous reporting periods.
16. Property, plant, equipment and intangible assets
Land Buildings Plant Vehicles Other Assets Intangible Total
and under assets
equipment constr.
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
BGN'000
Cost
Balance at
January
1, 2018 7,636 6,664 11,157 572 1,754 93 3,483 31,359
Additions 26 - 363 - 71 451 163 1,074
Transfers - 32 121 - 182 (335) - -
Disposals (704) (665) (893) - (202) (24) (86) (2,574)
Balance at
December
31, 2018 6,958 6,031 10,748 572 1,805 185 3,560 29,859
Additions 439 926 392 - 110 434 225 2,526
Transfers - 103 69 - 170 (342) - -
Disposals (196) (299) (1,493) - (241) (33) (3,110) (5,372)
Balance at
December
31, 2019 7,201 6,761 9,716 572 1,844 244 675 27,013
Accumulated
depreciation
Balance at
January
1, 2018 - 4,076 7,946 560 970 - 3,409 16,961
Accumulated - 201 491 - 141 - 55 888
Disposals for
the year - (506) (781) - (169) - (32) (1,488)
Balance at
December
31, 2018 - 3,771 7,656 560 942 - 3,432 16,361
Accumulated - 171 441 1 184 - 17 814
Disposals for
the year - (75) (1,390) - (189) - (2,997) (4,651)
Balance at
December
31, 2019 - 3,867 6,707 561 937 - 452 12,524
Carrying
amount
at January 1,
2018 7,636 2,588 3,211 12 784 93 74 14,398
Carrying
amount
at 31
December
31, 2018 6,958 2,260 3,092 12 863 185 128 13,498
Carrying
amount
at December
31,
2019 7,201 2,894 3,009 11 907 244 223 14,489
As at December 31, 2019 property, plant and equipment with
carrying amount of BGN 9,495 thousand (2018: BGN 13,490 thousand)
were mortgaged and pledged as collaterals for bank loans granted to
the Parent company and unrelated parties under bank guarantee
agreement and bank loans.
The under construction assets include mainly accrued expenses
related to the reconstruction of trade sites.
Management's impairment tests on property, plant and equipment,
confirm that there is no evidence or circumstances indicating a
sustained decline in the carrying amounts of assets, which
recoverable amount significantly differs from their carrying
amount.
17. Investment property
December December
31, 31,
2019 2018
BGN'000 BGN'000
Cost
Balance at the beginning of the year 1,883 1,859
Acquisitions - 24
Balance at the end of the year 1,883 1,883
Accumulated depreciation
Balance at the beginning of the year 90 47
Depreciation for the year 47 43
Balance at the end of the year 137 90
Carrying amount at the beginning of the
year 1,793 1,812
Carrying amount at the end of the year 1,746 1,793
Investment property representing land and building were acquired
through business combination in December 2016. The carrying amount
of the investment property as at December 31, 2019 and 2018 is a
maximum approximation of their fair value. The Group determines the
fair value of the investment property for reporting purposes, using
a valuation report of independent appraiser, which is calculated by
method of net assets value and discounted free cash flows. The
investment properties are part of a set of assets, which worth BGN
1,500 thousand, serving to secure the credit limit under a
revolving credit line agreement concluded in 2016.
18. Assets and liabilities under leases
The consolidated statement of financial position as at December
31, 2019 presents the following items and amounts related to lease
agreements:
Consolidated statement of financial position December 31,
2019
Right-of-use assets, incl.: 10,221
Properties (lands and buildings) 5,513
Transport vehicles 378
Machinery, plants and equipment 4,330
Liabilities under leases, incl. : (10,377)
Current liabilities (2,662)
Non-current liabilities (7,715)
Net effect on equity (156)
Costs recognised in the consolidated statement of comprehensive
income
Consolidated statements of comprehensive December 31,
income 2019
Depreciation costs of right-of-use assets,
incl.: 3,028
Properties (lands and buildings) 1,374
Transport vehicles 567
Machinery, plants and equipment 1,087
Interest for right-of-use assets on lease
contracts 693
Total 3,721
The total outgoing cash flow under lease agreements for
right-of-use assets as at December 31, 2019 is BGN 3,476 thousand.
The amount does not include the value added tax paid.
In the previous 2018, the Group has no recognized assets under
lease contracts classified as financial lease under IAS 17
Leases.
19. Goodwill
December December
31, 31,
2019 2018
BGN'000 BGN'000
Cost 19,8 44 19,827
Impairment loss - -
19,8
44 19,827
========= =========
The recognised goodwill as at December 31, 2019 arose as a
result of the acquisition of the subsidiaries: Varna Stoarge EOOD
at the amount of BGN 19,787 thousand, Lozen Asset ADat the amount
of BGN 29 thousand and Petrol Technologies OOD at the amount of BGN
28 thousand.
20. Inventory
December December
31, 31,
2019 2018
BGN'000 BGN'000
Goods, including: 20,469 23,374
Fuels 12,733 15,324
Lubricants and other goods 7,736 8,050
Materials 607 603
---------
21,076 23,977
21. Non-current assets held for sale
December December
31, 31,
2019 2018
BGN'000 BGN'000
Non-current assets held for sale incl.: 3,472 3,459
Land 2,379 2,379
Buildings 708 695
381 381
4 4
3,472 3,459
In 2018 the Group has acquired trade sites - filling stations
and storage depots with a carrying amount of BGN 3,417 thousand as
at December 31, 2018 are mortgaged or pledged as collateral for
bank loans granted to the Parent company with the intention to sell
them. Non-current assets held for sale with a carrying amount of
BGN 3,417 thousand are mortgaged or pledged as collateral for a
bank loan granted to the Parent company.
22. Loans granted
December December
31, 31,
2019 2018
BGN'000 BGN'000
Loans granted to unrelated parties, including 25,998 22,124
Initial value 37,230 66,500
Allowance for impairment (11,232) (44,376)
25,998 22,124
In January 2019 the Group granted a cash loan to an unrelated
party with a credit limit up to BGN 5,500 thousand, available in
tranches until December 31, 2019 and interest rate of 6.7%. As at
December 31, 2019 the term of the loan has been extended with
another year. The Group has receivables under this loan of BGN
4,621 thousand principal, net of impairment losses under IFRS 9 and
BGN 252 thousand interest.
In April 2019 the Group entered into an agreement for granting a
cash loan to an unrelated party with credit limit up to BGN 1,300
thousand at 6.7% annual interest and repaying period until December
31, 2019. As at December 31, 2019 the receivables under this
contract are at the amount of BGN 1,292 thousand principal and BGN
63 thousand interest.
In May 2019 the Group granted a cash loan to an unrelated party
with credit limit up to BGN 10 thousand, repayment period until
December 31, 2019 and interest rate of 6.7%. As at December 31,
2019 the granted funds are at the amount of BGN 6 thousand.
In August 2019 the Group granted a cash loan to an unrelated
party with credit limit up to BGN 1,000 thousand with interest rate
of 6.7%, available in tranches for one year since the date of
signing. As at December 31, 2019 the loan limit is increased and
the Group has receivables at the amount of BGN 664 thousand
principal, net of impairment losses under IFRS 9 and BGN 26
thousand interest.
In February 2018 the Group granted a cash loan to unrelated
party at the amount of BGN 2,000 thousand, subsequently the amount
was increased to BGN 3,500 thousand at 6.7% interest and refund
period until December 31, 2018. With annexes from the end of 2019
the credit limit was increased up to BGN 5,000 thousand and the
term of loan was prolonged to December 31, 2020. As at December
2019 the receivables under this loan are BGN 4,401 thousand
principal and BGN 276 thousand interest net of impairment.
In March 2018 the Group entered into an agreement for granting
loan to unrelated party at the amount of BGN 1,961 thousand at 5.5%
annual interest and refund period until December 31, 2018. At the
end of 2018 according to the signed trade agreement between the
parties, the loan was partially offset with outstanding opposite
trade liabilities under an agreement for supply of goods. With an
additional agreement from December 2018 the term of loan agreement
was prolonged until December 31, 2019. In 2019, the Group continues
to offset against due trade obligations under the contract for the
supply of goods. In June 2019, the loan was fully repaid.
In March 2018 the Group entered into an agreement for granting
loan to unrelated party with credit limit up to BGN 300 thousand at
6.7% annual interest and refund period until December 31, 2018.
With an annex from the end of 2018 the term of the loan was
prolonged until December 31, 2019. In 2019 the limit under loan
agreement is increased. As at December 31, 2019 the granted funds
under this contract were principal of BGN 528 thousand and interest
of BGN 34 thousand.
In May 2018 unrelated party repaid the outstanding amount of BGN
148 thousand under trade loan, granted on April 19, 2017 with a
credit limit of BGN 1,180 thousand. The loan was fully repaid.
In August 2017 the Group signed two cash loan agreements,
according to which the Group has a liability to grant to unrelated
parties interest bearing loans up to BGN 4,000 thousand and up to
BGN 500 thousand with 6.7% annual interest. Subsequently the terms
of contracts are annexed. The initially contracted repayment period
is extended to December 31, 2019. In March and April 2019 the
principals under these trade loans were repaid.
In November 2017 the Group signed two contracts for granting
interest bearing loans with unrelated parties amounting up to BGN
5,050 thousand and up to BGN 6,150 thousand with 6.7% annual
interest. The repaid period is annexed until December 31, 2020. As
at December 31, 2019 the granted funds on these contracts are
respectively net of impairment principal of BGN 4,224 thousand,
interest of BGN 734 thousand, and net of impairment principal of
BGN 4,443 thousand and interest of BGN 818 thousand.
In December 2017 the Group signed a contract for granting money,
which requires the Group to grant an interest bearing trade loan up
to BGN 3,000 thousand to unrelated party at 6.7% annual interest.
The repaid period is until December 31, 2019. As at December 31,
2019, the contracted amount was entirely granted.
In April 2019 through a cession agreement with an unrelated
party the Group sold fully impaired in previous periods receivables
under loans granted and due interest at the amount of BGN 32,063
thousand, granted to a Controlling company until November 2013.
23. Trade and other receivables
December December
31, 31,
2019 2018
BGN'000 BGN'000
Non-current receivables
Guarantees granted - 95
- 95
Current receivables
Receivables from clients, including 26,449 25,527
Initial value 27,636 26,664
Allowance for impairment (1,187) (1,137)
Receivables under cession agreements, assumption
of debt and regress 3,378 6,725
Initial value 4,161 8,129
Allowance for impairment (783) (1,404)
Financial assets, measured at fair value
through profit or loss 2,235 2,285
Guarantees for participation in tender procedures 913 921
Prepaid expenses 889 411
Tax refundable, incl.: 31 93
VAT 31 93
Advances granted, including 252 92
Initial value 322 168
Allowance for impairment (70) (76)
Litigations and writs - -
Initial value 10 10
Allowance for impairment (10) (10)
Other 855 894
Initial value 885 951
Allowance for impairment (30) (57)
--------- ---------
35,002 36,948
--------- ---------
35,002 37,043
========= =========
In accordance with the established policy, the Group provides
its clients a credit period, after which an interest for delay is
charged on the unpaid balance. An interest for delay is provided
for in every particular contract. As at the end of every reporting
period the Group carries out a detailed review and analysis of the
significant due trade receivables and the assessed as uncollectible
are impaired. All other unsecured trade receivables, usually due
with more than 365 days, are impaired because the historical
experience show that such receivables are non-recoverable.
The Group considers that unimpaired overdue receivables are
collectible based on historical information about payments,
guarantees received and a detailed analysis of the credit risk and
collaterals of its customers.
The Group's exposure to credit and currency risk and impairment
losses, related to trade and other receivables, is disclosed in
Note 32.
24. Cash and cash equivalents
December December
31, 31,
2019 2018
BGN'000 BGN'000
Cash in transit 2,075 2,713
Cash at banks 1,332 1,476
Cash on hand 79 76
3,486 4,265
========= =========
Cash in transit comprises cash collected from fuel stations as
at the end of the reporting period, but actually received in the
bank accounts of the Group in the beginning of the next reporting
period.
25. 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 December 31, 2019 and 2018 the shareholders in the Parent
company are as follows:
Shareholder December December
31, 31,
2019 2018
Alfa Capital AD 28.85% 28.85%
Yulinor EOOD 23.11% 23.11%
Perfeto consulting EOOD 16.43% 16.43%
Correct Pharm EOOD 10.98% 10.98%
Trans Express Oil EOOD 9.86% 9.86%
Corporate Commercial Bank AD 5.51% 5.51%
VIP Properties EOOD 2.26% 2.26%
The Ministry of Economy of the Republic
of Bulgaria 0.65% 0.65%
Other minority shareholders 2.35% 2.35%
100.00% 100.00%
The Management of the Parent company has undertaken series of
measures in order to optimize the capital adequacy of the company.
As a result of the several General Meetings of Shareholders held
during 2016 and 2017 a decision for reverse split procedure for
merging 4 old shares with nominal of BGN 1 into 1 new share with
nominal of BGN 4 and subsequent decrease of 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 cancelled the refusal
of the Commercial Register (CR) to register the decision taken on
EGMS for merging of 4 old shares with BGN 1 nominal in 1 new share
with BGN 4 nominal. The submitted change was registered in
Commercial Register and the registered capital of the Parent
company of BGN 109,249,612 was distributed in 27,312,403 shares
with nominal of BGN 4 each. The change in capital structure was
registered also in the register of Central Depository AD. The
Commercial Register enacted a refusal on the submitted on April
2018 application for registration of the decision of EGMS for the
second stage of the procedure reducing the nominal value of the
shares from BGN 4 to BGN 1 in order to cover losses.
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 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. (see also Note 33).
On EGMS held in February 2019 a decision for the replacement of
the deceased member of the Supervisory Board Ivan Voynovski with
Rumen Konstantinov was taken. The application for registration of
these circumstances in the account of the Parent company was
refused, which was disputed within the legal term by the Parent
company. In addition to the refusal, the registration proceedings
was postponed by a request of minority shareholders until the
pronouncing of the Lovech Regional Court on applications for
annulment of the decision. In May 2019 the Lovech Regional Court
enacted a decision, which repealed the enacted refusal and turn
back the case to the Registry Agency for registration of the
applied entry after a resumption of the ceased registration
proceedings. At present, the court proceedings for repealing of the
decisions of EGMS from February 2019 are pending.
The procedure for distribution of profits and coverage of losses
is provided in the Commercial Act and the Articles of Association
of the Parent company.
Profit (loss) per share
The profit (loss) per share is calculated by dividing the net
loss for the period by the weighted average number of ordinary
shares held during the reporting period.
December December
31, 31,
2019 2018
Weighted average number of shares
(BGN'000) 27,312 27,312
Profit (loss) (BGN'000) (4,980) 55,929
Profit (loss) per share (BGN) (0.18) 2.05
=========
The weighted average number of shares in circulation in 2019 and
2018 is as follows:
December December
31, 31,
2019 2018
Number of shares at the beginning of the
year 27,312 109,250
Effect from merging the nominal value of
shares - (81,938)
Weighted average number of shares 27,312 27,312
========= =========
26. Loans and borrowings
December December
31, 31,
2019 2018
BGN'000 BGN'000
Non-current liabilities
Debenture loans 36,909 36,704
Loans from financial institutions 7,743 8,767
44,652 45,471
========= =========
Current liabilities
Debenture loans 2,210 2,040
Loans from financial institutions 524 524
Trade loans from unrelated parties 1 194
2,735 2,758
========= =========
47,387 48,229
========= =========
Additional information about the interest, currency and
liquidity risk, to which the Group is exposed as a result of the
loans received, is disclosed in Note 32.
26.1. Debenture loans
In October 2006, the Parent company issued 2,000 registered
transferable bonds with fixed annual interest rate of 8.375% and
issue value 99.507% of the face value, which is determined at EUR
50,000 per bond. The principal is due in one payment at the
maturity date. The bond term is 5 years and the maturity date is in
October 2011. At the general meetings of the bondholders conducted
in October and December 2011, it was decided to extend the term of
the issue until January 26, 2017. On December 23, 2016, a procedure
of extension of the bond issue to 2022 and reduction of the
interest rate in the range from 5.5% to 8% was successfully
completed.
After the prolongation of the debenture loan, the annual
effective interest rate is 6.78%. The purpose of the bond issue is
to provide funds for working capital, investment projects financing
and restructuring of the previous debt of the Group.
The debenture loan liabilities are presented in the statement of
financial position at amortised cost.
As at the date of these financial statements the nominal value
of the debenture loan is EUR 18,659 thousand and the fair value is
BGN 35,703 thousand (2018: BGN 34,769 thousand), calculated at
interest rate 16.92% (2018: 15.20%).
26.2. Loans from financial institutions
In July 2016, the Parent company entered into an investment loan
agreement, prepaying the liabilities on finance lease contract from
November 2015. Collateral of the loan is mortgage of property,
acquired through finance lease and pledge of receivables. The term
of the contract is May 2022 and the contracted interest rate is
3mEuribor+5.25%. As at December 31, 2019 the liabilities under the
bank loan amounting to BGN 524 thousand current liabilities and BGN
743 thousand non-current liabilities. (see also Note 36 Events
after the reporting date).
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% annually. The
credit is secured with a special pledge of its goods in turnover at
the amount of BGN 2,419 thousand, representing oil products and
with pledge of receivables on bank accounts. In December 2018, as a
result of a signed annex to an agreement from 2016 for revolving
credit line with the same bank, the Group negotiated an increase of
the amount of the credit line of BGN 9,500 thousand with an
additional amount of BGN 11,500 thousand, by which the total amount
of credit line rose to BGN 21,000 thousand. The line is separated
in total limit of BGN 13,500 for issuance of bank guarantees and
BGN 7,500 for refinancing of the received credit-overdraft of BGN
2,000 thousand and the rest for working capital. The increased
amount of the credit limit on the revolving credit line is covered
additionally with establishment of mortgages and pledges of
properties, plants and equipment with book value of BGN 3,416
thousand as at December 31, 2019 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. (see also Note 36 Events
after the reporting date).
26.3. Factoring
In December 2018 the Group entered into an agreement with a
commercial bank for sale of receivables (standard factoring) with
total limit of advance payment up to BGN 550 thousand and interest
rate based on savings for BGN, increased with a mark-up of 3.7157
points, but not less than of 4% per annum on the amount of the
advanced payment. As at December 31, 2018 the Parent company
received in advance under this contract for factoring the amount of
BGN 280 thousand. In January 2019 the factoring agreement was
terminated and the Parent company does not have available limits on
it.
In February 2019 the Group entered into an agreement with a
commercial bank for factoring with special terms and without
regress for transferring of preliminary approved receivables with a
maximum period of the deferred payments up to 120 days from the
date of invoice issuance with a payment in advance of 90% of the
value of the transferred receivables including VAT. The commission
for factoring services is 0.35% of the total value of the
transferred invoices plus additional annual taxes. The interest for
the amounts paid in advance is Base Deposit Index for Legal
Entities + 1.95%, accrued daily and paid on monthly basis at the
end of every calendar month. As at December 31, 2019 the Group has
receivables under this factoring agreement at the amount of BGN 12
thousand.
In December 2019 the Group entered into an agreement with a
commercial bank for purchasing of trade receivables (standard
factoring) with a total limit of the advanced payments up to BGN
430 thousand and interest rate based on savings in BGN increased by
a markup of 3.7767 points, but not less than 4% per annum on the
amount of the advanced payment. As at December 31, 2019 the Group
received in advance under this contract the amount of BGN 347
thousand. The contract is secured by a pledge of receivables on
open bank accounts of the Parent company with a book value as at
December 31, 2019 of BGN 47 thousand.
27. Obligation for defined benefit retirement compensations
As at December 31, 2019, the Group accrued obligation for
defined benefit retirement compensations amounting to BGN 656
thousand. The amount of the liability is determined based on an
actuarial valuation, based on assumptions for mortality,
disability, employment turnover, salary increases, etc. The present
value of the liability is calculated using a discount factor of
0.68% (2018: 1.25%) and increase of the expected salary by 4%
(2018: 4%).
The demographic assumptions are related to the likelihood
individuals to leave the plan before retirement due to various
reasons: withdrawal, staff reduction, illness, death, disability,
etc. They are based on a statistical information about the
population and are attached to the staff structure by gender and
age at the time of the assessment.
The amount of the obligation for defined benefit retirement
compensations is determined as follows:
December December
31, 31,
2019 2018
BGN'000 BGN'000
Present value of defined benefit obligations
at January 1 533 441
Benefits paid by the plan (23) (46)
Past service cost 102 26
Current service cost 4 93
Interest cost 14 5
Expenses recognized in profit or loss 120 124
Remeasurements of defined benefit retirement
compensations recognised in other comprehensive
income 26 14
Present value of defined benefit obligations
at December 31 656 533
28. Trade and other payables
December December
31, 31,
2019 2018
BGN'000 BGN'000
Payables to suppliers 56,453 44,680
Tax payables, including 5,938 6,858
Excise duty and other taxes 5,418 6,740
VAT 520 118
Payables to personnel and social security
funds 2,491 2,360
Advances received and deferred income 637 1,339
Payables to related parties 12 12
Obligations under cession agreements and
regress - 5,606
Other 1,023 989
66,554 61,844
The Group accrues unused paid leave provision of employees in
compliance with IAS 19 Employee Benefits. The movement of these
provisions for the period is as follows:
December December
31, 31,
2019 2018
BGN'000 BGN'000
Balance at the beginning of the year 500 429
Accrued during the year 527 415
Utilised during the year (419) (344)
Balance at the end of the year, including: 608 500
========= =========
Paid leaves 512 422
Social security on paid leaves 96 78
The balance at the end of the year is presented in the
consolidated statement of financial position together with current
payable to personnel.
The Group's exposure to currency and liquidity risk related to
trade and other payables is disclosed in Note 32.
29. Current income tax
December December
31, 31,
2019 2018
BGN'000 BGN'000
Income tax payable at the beginning of the
year - 56
Corporate income tax accrued 3 -
Corporate income tax paid - (56)
Refundable corporate income tax at the end 3 -
of the year
================ =========
30. Subsidiaries
The subsidiaries, included in the consolidation, over which the
Group has control as of December 31, 2019 and 2018 are as
follows:
Subsidiary Main activity Investment Investment
at December at December
31, 2019 31, 2018
Trade with petrol and petroleum
Varna Storage EOOD products 100% 100%
Petrol Finance Financial and accounting
EOOD services 100% 100%
Elit Petrol -Lovech Trade with petrol and petroleum
AD products 100% 100%
Acquisition, management
Lozen Asset AD and exploitation of property 100% 100%
Petrol Properties Trading movable and immovable
EOOD property 100% 100%
Processing, import, export
Kremikovtsi Oil and trading with petroleum
EOOD products 100% -
Processing, import, export
Shumen Storage and trading with petroleum
EOOD products 100% -
Ownership and management
Office Estate EOOD of real estates 100% -
Processing, import, export
Svilengrad Oil and trading with petroleum
EOOD products 100% -
Trade with petrol and petroleum
Varna 2130 EOOD products 100% -
Petrol Finances Financial and accounting
OOD services 99% 99%
Petrol Technologies
OOD IT services and consultancy 98,80% 98,80%
Processing and trading
with petrol and petroleum
Storage Oil EAD products - 100%
Production and trading
with goods and services,
Storage Invest investments and intermediary
EOOD activities - 100%
In June 2019 two new subsidiaries Kremikovtsi Oil EOOD and
Shumen Storage EOOD were established by contribution in-kind of
lands, buildings, plants and equipment, and registered in the
Commercial Register. The capital of Kremikovtsi Oil EOOD is
distributed in 1,740,397 shares, each with BGN 1 nominal value and
the capital of Shumen Storage EOOD is distributed in 1,650,000
shares, each with BGN 1 nominal value.
In July a subsidiary Office Estate EOOD is established and
registered in the Commercial Register by a contribution in-kind of
assets. The capital of the company is distributed in 1,541,000
shares, each with BGN 1 nominal value.
In September 2019 two new subsidiaries Svilengrad Oil EOOD and
Varna 2130 EOOD were established and registered in the Commercial
Register . The capital of Svilengrad Oil EOOD is distributed in
1,841,700 shares, each with BGN 1 nominal value. The capital of
Varna 2130 EOOD is distributed in 1,499,810 shares each with BGN 1
nominal value.
31. Acquisition and sale of subsidiaries and non-controlling interest
31.1. Acquisition of subsidiaries
Acquired subsidiaries during the year ended December 31, 2019
(excluding established by in-kind contributions and additional cash
contributions)
Subsidiary Main activity Investment Increase Transferred
as at December during consideration
31, 2019 the period BGN'000
Petrol Technologies IT services and 98,80% 98,80%
OOD consultancy % % 1,850
1,850
Acquired subsidiaries during the year ended December 31, 2018
(excluding established by in-kind contributions and additional cash
contributions)
Subsidiary Main activity Investment Increase Transferred
as at December during consideration
31, 2018 the period BGN'000
Trade with petrol
Varna Storage and petroleum
EOOD products 100% 100% 6,500
6,500
31.2. Acquired assets and recognised liabilities as at date of acquisition
Acquired in the year ended December 31, 2019
BGN'000
Non-current assets
Property, plant and equipment, intangible assets and
investment property 1,713
Right-of-use assets 99
Deferred tax assets 13
Total non-current assets 1,825
Current assets
Loans granted 91
Trade and other receivables 311
Cash and cash equivalents 6
Total current assets 408
Total assets 2,233
Non-current liabilities 73
Current liabilities
Liabilities under leases 29
Trade and other receivables 287
Total liabilities 316
Net assets, incl.: 1,844
Share of the non-controlling interest in the net assets (22)
Share of the Group in net assets 1,822
Acquired in the year ended December 31, 2018
BGN'000
Non-current assets 15
Current assets
Trade and other receivables 6,786
Loans granted 24
Cash and cash equivalents 16
Total current assets 6,826
Total assets 6,841
Non-current liabilities
Defined benefits obligations 44
Total non-current liabilities 44
Current liabilities
Trade and other liabilities 19,407
Loans 677
Total current liabilities 20,084
Total liabilities 20,128
Net assets (13,287)
As at the acquisition date the assets and liabilities are stated
at fair value evaluated by licensed appraiser. According to the
valuation report a difference between the carrying value and fair
value is identified only in property, plant and equipment.
31.3. Goodwill arising in acquisition
For acquisitions during the year ended December 31, 2019 a
goodwill is recognised as follows:
BGN'000
Transferred consideration 1,850
Fair value of the net assets as at the date
of acquisition by the Group (1,822)
Goodwill 28
For acquisitions during the year ended December 31, 2018 a
goodwill is recognised as follows:
BGN'000
Transferred consideration 6,500
Fair value of the net assets as at the date
of acquisition by the Group 13,287
Goodwill 19,787
========
31.4. Net cash flows from acquisition of subsidiary
As at December 31, 2019 the consideration for the acquisition of
Petrol Technologies EOOD has not been paid and is reported in trade
and other liabilities. As a result of the acquisition the Group has
recognised in 2019 acquired cash at the amount of BGN 6
thousand.
The consideration of BGN 6500 thousand for the acquisition of
Varna Storage EOOD in 2018 was settled against opposite receivables
of the Group from the seller company and cash of BGN 16 thousand
was acquired.
31.5. Acquisition of non-controlling interest
The following table summarizes changes in the non-controlling
interest in 2019 and 2018:
Financial Non-controlling Non-controlling
result interest interest
for the
year
BGN'000 % BGN'000
Non-controlling interest as of January
1, 2018 10
Share of Non-controlling interest
in
total comprehensive income
Petrol Finances OOD 15 1% -
Petrol Technologies OOD (80) 1,2% (1)
Petrol Finance EOOD - 1% -
Non-controlling interest as at December
31, 2018 9
Effect from sale of non-controlling
interest (9)
Effect from acquisition of non-controlling
interest 22
The share of non-controlling interest
in total comprehensive income
Petrol Finances OOD 72 1% 1
Petrol Technologies OOD - 1,2% -
Petrol Finance EOOD - 1% -
Non-controlling interest as at December,
31 2019 23
31.6. Disposal of interest in a subsidiary
Disposal of interest in subsidiaries in 2019:
In April 2019 the Group sold 5,940,000 shares, representing 100%
of the capital of Storage Oil EAD for the total amount of BGN 50
thousand. As at transaction date, the consolidated net assets are
negative at the amount of BGN 263 thousand and the written off
reputation at the amount of BGN 7 thousand. The result of the sale
is a profit at the amount of BGN 306 thousand.
In August 2019 the Group sold to an unrelated party all of its
owned 32 200 company shares each with nominal value of BGN 1, which
represented 100% of the capital of Storage Invest EOOD for the
selling price of BGN 47 thousand, fully paid at the day of signing
of contract for sale.
Disposal of interest in subsidiaries in 2018:
In March 2018 the Group sold 100% of the capital of Elit Petrol
AD for BGN 25 thousand. As at the transaction date Elit Petrol AD
was a sole owner of the capital of Varna Storage EOOD. The
consolidated net assets of both companies are negative at the
amount of BGN 54,596 thousand. The result from the sale is a profit
of BGN 54,621 thousand.
Disposal of interest in subsidiaries during previous years
In December 2015 a contract with notarized signatures, whereby
Petrol AD transferred to a company outside the Group 100% of Naftex
Petrol EOOD's equity shares against BGN 1. Changing the sole owner
of Naftex Petrol EOOD is filed timely for entry in the Commercial
register at the Registry Agency, but has not been recorded because
of incompleteness in the documents attached to the application.
However, since the contract, as at December 2015, has been
concluded properly according to the prescribed by the Commercial
Code form, it raises legal action between the parties involved, due
to which Petrol AD is no longer the sole shareholder of Naftex
Petrol EOOD. Consequently, it is accepted that the Group has lost
control and assets and liabilities of the subsidiary were written
off and the gain was recognized resulting from the loss of control
in the consolidated statement of profit or loss and other
comprehensive income. As at the transaction date the consolidated
net assets of the subsidiary amounted to BGN 314,452 thousand. The
result of the sale of the Group was a profit amounted to BGN
314,452 thousand.
In March 2016, the change of the sole owner of Naftex Petrol
EOOD (subsidiary until December 2015) has been repeatedly applied
for registration with the Commercial Register when a completed set
of documents as instructed by the officials has been submitted. The
registration was suspended by the court because of a request by a
shareholder of the Parent company, on the grounds that the sale
contract was challenged in court because executives were not
authorized to conclude the agreement by the general meeting of the
company contrary to the provisions of POSA. Before the conclusion
of the transaction, it was thoroughly checked for compliance with
the law and that fall below the thresholds for convening the
General Meeting pursuant to Art. 114 of the POSA as documents
proving this circumstance are duly implemented in the Commercial
Register with the application for registration of the change of the
sole owner of the company. For these reasons, the Management of
Petrol AD considers that the claim was unfounded and after a
judgment in favor of Petrol AD, a sale of shares will be recorded
in the register. At present the court proceedings are pending at
Regional Court - Troyan city.
32. Financial instruments and risk management
32 .1. Accounting classifications and fair values
The table shows the transmission and fair values of financial
assets and financial liabilities, including their levels in the
fair value hierarchy. Not included information about the fair
values of these short-term financial instruments that management
believes that the carrying value in the consolidated statement of
financial position is a reasonable approximation of fair value.
December 31, 2019 Financial assets and liabilities Fair value
BGN'000 level
3
Debt At fair Liabilities Total
instruments value at amortised
at amortised through cost
cost profit
or loss
Financial assets
Loans granted, net 25,998 - - 25,998 -
Trade and other receivables,
net 31,568 - - 31,568 -
Cash and cash equivalents 3,486 - - 3,486 -
Financial assets measured
at fair value through
profit and loss - 2,235 - 2,235 2,235
-------------- --------- -------------- ---------- -----------
61,052 2,235 - 63,287 2,235
============== ========= ============== ========== ===========
Financial liabilities
Trade and other liabilities - - (57,463) (57,463) -
Loans and borrowings - - (47,387) (47,387) (43,971)
-------------- --------- -------------- ---------- -----------
- - (104,850) (104,850) (43,971)
============== ========= ============== ========== ===========
December 31, 2018 Financial assets and liabilities Fair value
BGN'000 level
3
Debt At fair Liabilities Total
instruments value at amortised
at amortised through cost
cost profit
or loss
Financial assets
Loans granted, net 22,124 - - 22,124 22,124
Trade and other receivables,
net 34,048 - - 34,048 -
Cash and cash equivalents 4,265 - - 4,265 -
Financial assets measured
at fair value - 2,285 - 2,285 2,285
-------------- --------- -------------- --------- -----------
60,437 2,285 - 62,722 24,409
============== ========= ============== ========= ===========
Financial liabilities
Trade and other liabilities - - (51,261) (51,261) -
Loans and borrowings - - (48,229) (48,229) (44,254)
-------------- --------- -------------- --------- -----------
- - (99,490) (99,490) (44,254)
============== ========= ============== ========= ===========
32 .2. Measurement of fair values
Trade and other receivables
Determining the fair value of trade and other receivables
includes the following:
-- analysis of analytical trail balances and reporting of internal transformations;
-- differentiation between receivables and payables, excluding
the presumption of future offsetting of receivables from different
customers;
-- valuation of receivables based on their collectability;
-- revaluation of receivables in foreign currencies at the
respective rates as at the date of the financial statements.
Debenture loan
The fair value of the debenture liability is determined based on
a quotable price as at the date of the consolidated financial
statement, in case the instrument is quoted at an active market. In
case it is not actively traded, the fair value is determined based
on alternative valuation techniques. The valuation techniques used
include analysis of discounted cash flows through expected future
cash flows and discount level in relation with the market, the
credit rating of the issuer, etc. The fair value is determined only
for disclosure purposes.
Trade and other payables
Determining the fair value of trade and other payables includes
the following:
-- complete review of payables as at the date of valuation;
-- identification of overdue payables and determination of interests and penalties due;
-- revaluation of payables in foreign currencies at rates as at
the date of the financial statements.
Receivables and payables in relation with trade loans
Fair values of received and granted trade loans are determined
for the purposes of disclosure and are calculated on the basis of
the present value of future cash flows of principals and interest
discounted at a market interest rate as at the date of the
financial statements.
32 .3. Financial risk management
32.3.1. Risk management framework
The use of financial instruments exposes the Group to market,
credit and liquidity risk. In the present note information about
the purposes, policies and procedures in risk management and equity
management is presented.
As a result of the global financial and economic crisis, the
Bulgarian economy has been experiencing a continuing decline in its
development which affects a wide range of industries. This leads to
a noticeable deterioration in cash flows and reduction in income
and eventually - to a significant deterioration of the economic
environment in which the Group operates. In addition, there is a
significant increase in price risk, market risk, credit risk,
liquidity risk, interest rate risk, operating risk and other types
of financial risks, which the Group is exposed to.
As a result, there has been an increase in uncertainty about the
customers' ability to repay their obligations in accordance with
the agreed terms. Therefore, the amount of impairment losses on
loans granted, sales receivables and on the values of other
accounting estimates, might differ substantially in future
reporting periods from the reported ones in these consolidated
financial statements. The Management of the Group applies the
necessary procedures to manage these risks.
32.3.2. Market risk
Market risk is the risk that changes in market prices, such as
foreign exchange rates, interest rates and equity prices will
affect the Group's income or the value of its holdings of financial
instruments. The objective of market risk management is to manage
and control market risk exposures within acceptable parameters,
while optimising the return. Because of the nature of its activity,
the Group is exposed to price, currency and interest rate risk.
Currency risk
The Group performs transactions in a currency other than its
functional currency, and thus it is exposed to risk, related to
potential foreign exchange rate fluctuations. Such risk arises
mainly from the fluctuations of the US dollar, since the Group
performs purchases and has received loans denominated in US
dollars. Transactions primarily denominated in euro do not expose
the Group to currency risk, since the Bulgarian lev is fixed to the
euro effective January 1, 1999.
Financial assets and liabilities denominated in US dollars are
presented in the following table:
December 31, 2019 December 31, 2018
USD'000 BGN'000 USD'000 BGN'000
Financial assets
Cash and cash equivalents 7 12 7 12
7 12 7 12
========= ========= ========= =========
The sensitivity analysis to currency risk is calculated based on
5% fluctuation in the exchange rate of the US dollar towards the
Bulgarian lev. The Management considers that it is a reasonably
possible fluctuation, based of statistical data for the dynamics of
fluctuations in the exchange rate in the previous period, based on
the daily deviation calculated for 250 days. If as at December 31,
2019 the rate of the US dollar had decreased/increased by 5%
assuming that all other variables remained constant, loss after tax
would have increased/decreased by BGN 1 thousand, as a result of
currency exchange rate differences and revaluation of cash in US
dollars. .
Interest rate risk
The Group is exposed to interest rate risk as part of borrowings
have variable interest rate agreed as basis interest increased by a
certain margin. The Group continuously monitors and analyzes its
main interest rate exposures by developing various scenarios for
optimization as refinancing, renewal of existing loans, alternative
financing (contracts for the sale and leaseback of assets) and
calculates the impact of changing interest rates within a certain
range on the financial result.
As at the date of these consolidated financial statements, the
structure of the interest-bearing financial instruments is as
follows:
December December
31, 31,
2019 2018
BGN'000 BGN'000
Instruments with fixed interest rate
Financial assets 23,010 20,560
Financial liabilities (36,910) (36,890)
--------- ---------
(13,900) (16,330)
========= =========
Instruments with variable interest rate
Financial liabilities (8,267) (9,291)
--------- ---------
(8,267) (9,291)
========= =========
The sensitivity analysis of the interest rate risk is prepared
based on the presumption that interest positions with variable
interest rates as of the end of the reporting period have existed
in the same amount during the entire year and the reasonably
possible increase/decrease of the interest rate is by 16 basis
points. If the interest rates were higher/lower by 16 basis points,
and all other variables were constant, the loss after tax would
have been higher/lower by BGN 12 thousand .
Price risk
The Group is exposed to a risk of frequent and sharp
fluctuations in fuels prices and other tradable goods. In order to
decrease sensitivity to fluctuations in the prices of fuels, the
Group updates its selling prices on a daily basis in accordance
with the geographic region and the selling prices of its main
competitors.
In 2019, the Group held comparatively high inventory turnover.
For approximately 17 days the inventory makes a whole cycle, which
reduces the Group's price risk exposure.
31.3.3. Credit risk
Credit risk is the risk that one party to a financial instrument
fails to meet its obligation and thus causing loss to the other.
Financial assets that potentially expose the Group to credit risk
are mainly trade receivables and available-interest loans.
Exposure to credit risk
The carrying amount of financial assets represents the maximum
credit risk the Group is exposed to. The maximum exposure to credit
risk as at the reporting date is as follows:
December December
31, 31,
2019 2018
BGN'000 BGN'000
Loans granted 25,998 22,124
Trade and other receivables 33,803 36,333
Cash and cash equivalents 3,407 4,189
63,208 62,646
========= =========
Trade and other receivables
The Group is exposed to credit risk, in case its customers do
not pay their obligations in the expected term and amount. The
policy of the Group regarding credit risk is to sell goods and
services only to customers with appropriate credit standing and to
use adequate collaterals as a means of reducing the risk of
financial losses. The creditworthiness of customers is estimated by
taking into consideration their financial position, past experience
and other factors. Credit limits have been stipulated and their
compliance is regularly monitored. In case of exceeding the credit
limits, interest on arrears is accrued. Retail sales are settled in
cash predominantly or by credit cards.
Impairment of trade and other receivables
Time structure of trade and other receivables at the reporting
date are not impaired, is as follows:
31 December December
31, 31,
2019 2018
BGN'000 BGN'000
Up to 30 days 2,864 1,746
31 - 120 days 1,553 1,709
121 - 210 days 480 590
Over 211 days 4,054 6,991
------------ ---------
8,951 11,036
============ =========
Cash and cash equivalents
Cash and cash equivalents of the Group are located in banks with
high ratings.
31.3.4. 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. The goal of management is to maintain a constant
balance between continuity and flexibility of financial resources
through the use of various forms of financing. Liquidity risk
management includes maintaining sufficient stocks of cash,
arranging adequate credit lines, preparation, analysis and updating
cash flow forecasts.
The following table presents the contractual maturities of
financial liabilities based on the earliest date on which the Group
may be required to pay them. The table shows the undiscounted cash
flows, including principal and interest, excluding the effect of
netting arrangements:
December 31, 2019 Carrying Contractual Up to Between
BGN'000 amount cash one year one and
flows five
years
Debentures 39,119 44,522 2,372 42,150
Loans from financial
institutions 8,267 8,267 524 7,743
Trade loan from unrelated
parties 1 1 1 -
Trade and other payables 57,463 57,463 57,463 -
104,850 110,253 60,360 49,893
December 31, 2018 Carrying Contractual Up to Between
BGN'000 amount cash flows one year one and
five
years
Debentures 38,744 46,502 2,040 44,462
Loans from financial
institutions 9,291 9,291 524 8,767
Trade loan from unrelated
parties 194 194 194 -
Trade and other payables 51,261 51,261 51,261 -
99,490 107,248 54,019 53,229
========= ============ ==========
The Group does not expect cash flows included in the table to
occur significantly earlier or at significantly different
amounts.
33. Capital management
In order to ensure the going concern functioning of the Group,
the Management has undertaken series of purely procedural and
business oriented measures, aimed to bring the capital of the
Parent company in consistence with the requirements of Art. 252,
par. 1, item 5 of the Commercial Act (CA) and overall improvement
of the financial position of the Group.
The Management of the Parent company has undertaken series of
measures in order to optimize the capital adequacy of the company.
As a result of the several General Meetings of Shareholders held
during 2016 and 2017 a decision for reverse split procedure for
merging 4 old shares with nominal of BGN 1 into 1 new share with
nominal of BGN 4 and subsequent decrease of 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 cancelled the refusal
of the Commercial Register (CR) to register the decision taken on
EGMS for merging of 4 old shares with BGN 1 nominal in 1 new share
with BGN 4 nominal. The submitted change was registered in
Commercial Register and the registered capital of the Parent
company of BGN 109,249,612 was distributed in 27,312,403 shares
with nominal of BGN 4 each. The change in capital structure was
registered also in the register of Central Depository AD. The
Central Depository enacted a refusal on the submitted on April 2018
application for registration of the decision of ERSM for the second
stage of the procedure reducing the nominal value of the shares
from BGN 4 to BGN 1 in order to cover losses.
On EGSM 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 was given on the application for
registration of the decision in CR, which was appealed by the Group
within the statutory term. The 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, the Lovech Regional
Court ruled a decision instructing Commercial Register to reflect
the reduction of capital after the resumption of the registration
proceedings and ruling on the cases initiated at the request of the
minority shareholders.
The decision for decreasing the capital was voted again on a new
EGMS held in February 2019. On the same EGMS was also taken a
decision for replacement of the deceased member of the Supervisory
Board Ivan Voynovski with Rumen Konstantinov. The application for
registration of these circumstances in the account of the Parent
company was refused, which was disputed within the legal term by
the Parent company.
In addition to the refusal the registration proceedings was
postponed by a request of minority shareholders until the
pronouncing of the Lovech Regional Court. In May 2019 the Lovech
Regional Court enacted a decision, which repealed the enacted
refusal and turn back the case to the Registry Agency for a
registration of the application after a resumption of the ceased
registration proceedings. At present, the court proceedings for
repealing of the decisions of EGMS from February 2019 are
pending.
Next capital adequacy measure, which the Group has taken, as
disclosed in Note 2.8. Changes in accounting policy is a change in
accounting policy in relation to non-current tangible assets -
property, plant and equipment of the policy applied in its
financial statements until 2019 including the cost model, with the
application from the beginning of 2020 of the other applicable
model - the revaluation model, which the Management considers to
reflect more objectively the value of the held non-current tangible
assets. According to preliminary estimates, the expected effect as
of December 31, 2019 is an increase in the value of non-current
tangible and intangible assets by BGN 22,000 thousand. and net
assets of BGN 19,800 thousand, which will be reflected in the
financial statements for 2020.
To carry out its business activity the Group needs free capital
to provide the necessary working capital, to pay its obligations on
timely manner and to follow its investment intentions. Major
sources of liquidity are cash and its equivalents, intra-group cash
flows, long-term and short-term loans, the decrease of receivables
collection period and extension of the liabilities paying
period.
The major ratios, which give an information about the financial
position of the Group are disclosed in Selected performance
indicators from the Annual Management Report of Petrol Group for
2019.
During the current period, the Group's current liability ratio
decreased to 1.24 compared to 1.41 as at December 31, 2018. The
decrease of the indicator is due to the increased current
liabilities by BGN 7,352 thousand. The change is a result at most
extent to the increase of trade receivables during the current
period by BGN 11,773 thousand as at December 31, 2019 comparing to
a year earlier.
The materials turnover ratio as at December 31, 2019 decreased,
as the necessary time for the materials to make a full cycle is 17
days as compared to 18 days for 2018. During the current period the
average turnover of trade receivables is 18 days reducing compared
to 2018 (22 days).
As at December 31, 2019 the consolidated indebtedness of the
Group including all interest bearing liabilities (including
short-term and long-term interest bearing non-commercial
liabilities, excluding the liabilities under leases under IFRS 16),
decreases by BGN 842 thousand to BGN 47,387 thousand as at the end
of 2019. The decrease in debt is entirely due to the repaid
liabilities on loans and borrowings at the amount of BGN 1,229
thousand during the year.
The Group's Management expectations are that in the coming years
as a result of a growing competition mainly in retail market, part
of the small independent players would be forced out gradually of
fuel business. At the same time, the expectations in terms of the
levels of trade margins, in particular on the retail market, are
the margins to stabilize around the average European levels.
At the end of 2019, a new coronavirus was identified in China.
Due to the fast widespread of the virus across the world at the
beginning of 2020, the World Health Organization declared a global
pandemic. On March 13, 2020 the Parliament declared a state of
emergency on request of the Government of Republic of Bulgaria and
on March 24, 2020 the Law on Measures and Actions during a State of
Emergency became effective. In order to restrict the widespread of
coronavirus infection, an Order of the Health Minister was issued
for the introduction of anti-epidemic measures, which directly
affect the business activity of the Group. Part of the measures
include extension and interruption of the administrative deadlines,
extension of the of administrative acts, suspension of the
procedural court terms and the statute of limitations, changes in
the labor legislation, referring to new working hours, suspension
of work and / or reduction of working hours and use of leave, etc.
The pandemic causes a significant reduction in economic activity in
the country and raises significant uncertainty about future
processes in macroeconomics in 2020 and beyond.
The Group's Management monitors the emergence of risks and
negative consequences in the outcome of the pandemic with Covid-19,
currently assessing the possible effects on the assets, liabilities
and activities of the Group, striving to comply with contractual
commitments, despite the uncertainties and force majeure
circumstances. In view of the introduced anti-epidemic measures and
restrictions in the pandemic, which cause a significant reduction
in economic activity and creates significant uncertainty about
future business processes, there is a real risk of a decline in
sales of the Group. However, Management believes that it will be
able to successfully bring the Group out of the state of emergency
in which it is placed
The 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.
In the coming years the results of the Group will also depend on
the possibilities to carry out the investments and the successful
delivering of new projects. The investments of the Group will be
focused predominantly on the development of new sites and
increasing the sales and market share of Petrol AD, mainly through
transformation of the trade sites managed by the Parent - company
into modern places for complex customer service.
Following the strategy of expanding the market share in retail
market, the Group plans to attract new sites under Petrol brand
through the franchise program.
In the next year the Management of the Group will direct its
effort towards conducting an active marketing campaign. It is
provided marketing activities - games, promotions and other,
supported by enough media appearances to increase the sales of
fuels. The Management will continue to develop its card system and
plans to create a loyalty clients system.
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.
Comparison of the changes in the financial liabilities with cash
flows from financial operations and other non-monetary changes
201 9 Financial liabilities Total
BGN'000
Debenture Loans Trade Lease Other
loans from loans liabilities financial
financial liabilities
institutions
Carrying amount
at January 1, 2019 38,744 9,291 194 13,058 - 61,287
Changes in result
of cash flows
Payments on loans
and borrowings - (1,024) (205) (3,476) - (4,705)
Payments for interest
and commissions (2,189) (538) (7) - (1) (2,735)
Proceeds from loans
received - - 19 - - 19
Total changes in
result of cash flows (2,189) (1,562) (193) (3,476) (1) (7,421)
Other non-monetary
changes
Capitalized interest
expenses on loans (32) - - - - (32)
Accrued interest
expense on loans,
borrowings and other 2,596 538 - 693 - 3,827
Other changes related
with liabilities - - - 102 1 103
Total other non-monetary
changes 2,564 538 - 795 1 3,898
Carrying amount
as at December 31,
2019 39,119 8,267 1 10,377 - 57,764
========= ============= ====== ============ ============ =========
2018 Financial liabilities Total
BGN'000
Debenture Loans Trade Other
loans from financial loans financial
institutions liabilities
Carrying amount at
January 1, 2018 38,223 2,369 1,030 - 41,622
Changes in result
of cash flows
Payments on loans
and borrowings - (568) (252) - (820)
Payments for interest
and commissions (2,007) (153) (32) - (2,192)
Proceeds from loans
received - 7,500 87 - 7,587
Other proceeds - - - 25 25
Total changes in
result of cash flows (2,007) 6,779 (197) 25 4,600
Other non-monetary
changes
Capitalized interest
expenses on loans (32) - - - (32)
Accrued interest expense
on loans, borrowings
and other 2,560 143 27 - 2,730
Other changes related
with liabilities - - (666) (25) (691)
Total other non-monetary
changes 2,528 143 (639) (25) 2,007
Carrying amount as
at December 31, 2018 38,744 9,291 194 - 48,229
========= =============== ====== ============ =======
34. Disclosure of transactions with related parties
Related parties that the Parent company controls and over which
it exercises significant influence are disclosed in note 30.
The parent company (Controlling company) is Petrol AD.
In 2019 transactions with related parties have been not carried
out.
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 1,402 thousand (2018: 1,397
thousand) and unsettled liabilities of BGN 120 thousand.
35. Contingent liabilities
As at December 31, 2019 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 12,912 thousand.
The Group is a joint co-debtor under loan agreement of unrelated
supplier, including limit for overdraft and limit for stand-by
credit for issuance of bank guarantees in favour of Customs Agency.
The total amount of the utilized funds and issued bank guarantees
of all borrower's exposures to the Bank shall not exceed BGN 45,000
thousand. In relation to this credit agreement, the Group has
established a special pledge on its cash in the bank account opened
in the bank-creditor with total amount of BGN 5 thousand as at
December 31, 2019 and a special pledge on receivables from
contractors for BGN 4,000 thousand average monthly turnover.
The Group bears a joint obligation according to a contract for
debt from January 2017 on an obligation of a subsidiary until
February 2018 for BGN 2,346 thousand as at December 31, 2019.
Under a bank agreement for revolving credit line signed in 2016,
bank guarantees were issued for a total amount of BGN 9,232
thousand as at December 31, 2019, including BGN 6,000 thousand in
favor of third parties - Group's suppliers, BGN 1,465 thousand in
favor of National Revenue Agency, for issuance of appealed by the
Parent company amended assessment and BGN 1,767 thousand to secure
own liabilities related to contracts under the Public Procurement
Act. The bank agreement is secured by mortgages of property, pledge
of plants and equipment, pledge of all receivables on bank accounts
of the Parent company and a subsidiary. In July 2017 the credit
limit under the revolving credit line was increased from BGN 8,500
thousand to BGN 9,500 thousand. Assets amounted to BGN 1,500
thousand, owned by a subsidiary, additionally secured the credit
limit. With annex from December 2018 the limit is increased to BGN
21,000 thousand and is additionally secured with mortgages and
pledge of property, plants and equipment, and special pledge of
goods in turnover, namely petroleum products. In June 2019, the
credit limit for working capital granted under this credit line was
partially repaid as its amount decreased from BGN 7,500 thousand to
BGN 7,000 thousand.
As a collateral of an investment loan signed in July 2016, a
mortgage of property, acquired through the investment loan and a
pledge of receivables, arising from opened bank accounts of the
Parent company to the amount of the outstanding balance of the
loan, which as at the December 31, 2019 amounting to BGN 1,267
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 with outstanding book
value as at December 31, 2019 of BGN 245 thousand. In April a final
decision on the pending case was ruled. The court held that the
Parent company is responsible as a guarantor for the obligations of
the subsidiary under the cession contract. The cash granted as a
collateral under Art. 180 and Art. 181 of Law on Obligations and
Contracts (LOC) amounting to BGN 245 thousand is disclosed as other
receivables on guarantees. A request to release the cash was
deposited, but the court dismissed the appeal.
In the previous reporting periods companies from the Group have
entered into the debt under two loan agreements of a subsidiary
with a bank-creditor (until December 2015) for USD 15,000 thousand
and USD 20,000 thousand, respectively. In 2015 the bank -creditor
acquired court orders for immediate execution and receiving orders
against the subsidiaries - joint debtors. In relation to the
complains filed by the subsidiaries, the competent court has
revoked the immediate enforcement orders and has invalidated the
receiving orders. In October and December 2015 the creditor has
filed claims under Art. 422 of Civil Procedure Code (CPC) against
the subsidiaries for the existence of the receivables under each
loan agreement. The court proceedings of the creditor are still
pending.
In December 2016 the first instance court decreed a decision
(the Decision) which admit for established that the bank has a
receivable amounted to USD 15,527 thousand from the subsidiaries -
joint debtors, arising from a signed loan agreement for USD 15,000
thousand. With the same decision the court has ordered the
joint-debtors to pay BGN 411 thousand to the bank - creditor for
legal advisory fees and court dispute expenses and BGN 538 thousand
state fee in favor of the judiciary state for the ordered
proceedings and BGN 538 thousand state fee for claim proceedings.
In January 2017, the co-debtors have filed in time appeals against
the court decision, because of that the decision did not come into
force. As at the date of the preparation of these explanatory
notes, the dispute is pending in the appeal court. The Group's
Management considers that there are grounded chances the Decision
to be entirely repealed.
As at the date of the preparation of these explanatory notes,
the filed proceedings against the subsidiaries - joint debtors for
estimation of the bank receivables due to the loan agreement for
USD 20,000 thousand is pending before the first-instance court. The
Management expects favorable decision by the competent court. In
2018 the Parent company sold its interest in one of co-debtor
subsidiaries and the potential risk for the Group is reduced to the
court proceedings against the second subsidiary.
A creditor of a subsidiary (until December 2015) unreasonably
claimed in court the responsibility of the Parent company under a
contract of guarantee for liabilities arising from a contract for a
framework credit limit as a result of that the bank accounts of the
Parent company amounting to USD 29,983 thousand were garnished.
This claim was disputed in court by Petrol AD because the liability
as guarantor has not occurred and / or extinguished pursuant to
Art. 147, par. 2 of the LOC. At the time of conclusion of the
guarantee deadline of the arrangements between the lender and
subsidiary contractual framework for credit limit was July 1, 2014.
The term of the framework credit limit was extended without the
consent of the customer, therefore the responsibility of the latter
has fallen by six months after initially agreed period, during
which the creditor has brought an action against the principal
debtor. The term of Art. 147, par. 1 of the LOC is final and upon
its expiration the company's guarantee has been terminated, so the
objection of the Parent company was granted by the court and
imposed liens on bank accounts lifted.
After the writ of execution, pursuant to order proceedings, was
canceled on which were imposed liens on bank accounts of the Parent
company, the creditor has initiated legal claim proceedings under
Art. 422 of the CPC to establish the same claims against the
subsidiary (until December 2015) and the guarantor Petrol AD. In
these proceedings the objections are repeated, that liability as
guarantor has not occurred and / or extinguished pursuant to Art.
147, par. 2 of the LOC, and therefore the Management expects that
the claim of the creditor against the Parent company will be
dismissed permanently by a court decision on those cases. At
present, the case is suspended due to the existence of a
preliminary rulling, which is important for the correct resolution
of the case.
In December 2019, the Parent company entered into an Agreement
with a commercial bank for the purchase of trade receivables
(standard factoring) with a total advance limit of up to BGN 430
thousand and an interest rate based on savings for BGN, increased
by a mark-up of 3.7767 points, but not less than 4% per annum on
the amount of the granted advance. The contract is secured by a
pledge of receivables on opened bank accounts of the Parent Company
with a book value as at December 31, 2019 at the amount of BGN 47
thousand.
35. Events after the reporting date
As disclosed in these financial statements in Note 2.8. Changes
in accounting policy, the Group has adopted a change in its
accounting policy regarding non-current tangible assets - property,
plant and equipment from the model applied in its financial
statements until 2019 including the cost model, with the
application from the beginning of 2020 of the other applicable
model - the revaluation model, which the Management considers to
reflect more objectively the value of the held non-current tangible
assets.
In January 2020 the Parent company renegotiated the terms of the
credit line granted to it by a commercial bank under a revolving
credit line agreement dated September 21, 2016, with a credit limit
of BGN 7,000 thousand and achieved a reduction of the annual
compound interest rate of based on savings in BGN + 5,2802%, but
not less than 5.5%.
In February 2020, through an investment intermediary, the Parent
company purchased from a third party 7,091,517 ordinary
dematerialized registered shares with a nominal value of BGN 1
each, representing 10% of the capital of Elit Petrol AD, for a
total purchase price amounted to BGN 3 thousand, which was fully
paid by the Parent company in the same month.
As disclosed in Note 15.2. Effective tax rate, in February 2020
the Supreme Administrative Court, with a final decision, partially
revoked the decision of the Sofia-city Administrative Court from
April 2019 on the obligations of the Parent company under the
amended assessment as a result of tax audit of corporate income
taxation for 2013 and VAT until October 2014, as at the date of
preparation of these financial statements the final liability at
the amount of BGN 136 thousand principal and BGN 84 thousand
interest has been fully paid, and the bank guarantees released and
returned by the National Revenue Agency. The liabilities were
accounted as correcting events as of December 31, 2019 and are
reflected in the result for 2019.
In March 2020, with a decision of the first-instance court, the
appealed by the Parent company amended assessment from March 2016
on the tax audit for social security contributions for BGN 543
thousand principal and BGN 248 thousand interest was partially
revoked, as a result of which the liabilities of the Parent company
have been reduced to BGN 53 thousand. The Appeal and Tax Insurance
Practice have appealed the decision of the first-instance court. At
present, the case is pending.
As it is disclosed in Note 33 Capital Management, from the
beginning of 2020 the Group and the entire world economy are
exposed to the negative influence and consequences of the pandemic
of the spread of a new coronavirus Covid-19. In the first quarter
of 2020, the Group's sales were significantly affected by the
restrictive measures for free movement and travel of people imposed
by the Government of the Republic of Bulgaria by the adopted at the
end of March 2020 Law on Measures and Actions during a State of
Emergency. Due to the restrictions the Group's sales revenue for
March 2020 decreased by about 28% compared to March 2019, and the
sales revenue for April 2020 - decrease by approx. 50% compared to
the revenue for April 2019. As a result, the Group has taken a
series of actions to reorganise the activities of some of its trade
sites, as well as to establish reduced working hours for some of
the personnel. As of 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. In April 2020, companies of the Group
submitted applications documents under this procedure. However, the
Group will continue to carry out its activity under the established
regime of operation and in compliance with all precautions to
restrict the infection and widespread of Covid-19, in accordance
with the instructions adopted by the Council of Ministers and
recommendations of the health authorities of the Republic of
Bulgaria to ensure the health and working efficiency of its
employees.
At the end of 2019, the Parent company received a letter from
the Bulgarian National Bank with instructions to notify the Bank,
providing a description of the functional characteristics of the
respective types of Transcard Fleet cards that the Parent company
provides to its customers, including the applicable contracts and
the general conditions, as well as information on the number and
the value of the payment transactions performed for the previous 12
months. With a Decision of February 07, 2020 of the Management
Board of the Bulgarian National Bank, the Parent company is entered
in the Register of Service Providers under Art. 2, par.3 of the Law
on Payment Services and Payment Systems (LPSPS) with the activity
of providing services performed on the basis of payment
instruments, allowing the user to acquire goods or services only in
the premises of the issuer or within a limited network of service
providers, which have concluded a commercial contract with the
issuer (Art. 2, par. 1, item 11, letter "a" of LPSPS).
From the beginning of 2019 the Law on the Administrative
Regulation of Economic Activities Related to Oil and Petroleum
Products become effective. The effect of the law directly affects
the main activity of the Parent company. As of the date of issuance
of these financial statements, the Parent company has submitted
within the statutory deadlines applications for entry in the
register to the Ordinance on the terms and conditions for keeping a
register of persons carrying out economic activities related to oil
and petroleum products. At present, the registration proceedings
are pending.
In April 2020, the Parent company renegotiated the terms under
the investment loan agreement from July 2016, as the agreed
interest rate on principal was reduced to 3mEuribor plus 3.5%, but
not less than 3.5%.
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. In July 2020, the
same decision was received by a subsidiary of the Group. At
present, the proceedings in the case are pending at the CPC.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR KKNBNBBKDOFK
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August 03, 2020 08:54 ET (12:54 GMT)
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