RNS Number:8489M
Petrol AD
28 November 2006
REVIEW REPORT
AND
CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2006
INCLUDING 3-rd QUARTER 2006 FINANCIALS
Content:
CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2006 INCLUDING 3-RD
QUARTER 2006 FINANCIALS ...................................Page 6
NOTES TO THE CONSOLIDATED FIANCIAL STATEMENTS ..............Page 12
CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2006
INCLUDING 3-RD QUARTER 2006 FINANCIALS
INCOME STATEMENT
For the period ended September 30, 2006
Notes September 30, September 30, 3 rd quarter, 3 rd quarter,
(1) 2006 2005 2006 2005
BGN'000 BGN'000 BGN'000 BGN'000
Revenue 6 967,034 960,299 335,498 394,842
Other income 7 15,332 5,363 3,193 3,610
Cost of goods sold 8 (878,721) (862,926) (306,080) (358,206)
Materials and consumables 9 (9,592) (6,553) (3,763) (2,372)
Hired services 10 (27,268) (26,022) (9,613) (9,540)
Employee benefits expenses 11 (19,607) (20,454) (6,803) (7,322)
Depreciation and amortization 12 (17,324) (4,754) (6,023)
expenses
(14,719)
Impairment of assets 13 (603) (6,212) 0 (1,960)
Other expenses 14 (6,992) (4,093) (2,569) (488)
Total operating expenses (957,502) (943,584) (333,582) (385,911)
Finance income 15 4,662 2,317 2,053 864
Finance cost 15 (9,321) (7,302) (4,037) (2,796)
Finance cost, net (4,659) (4,985) (1,984) (1,932)
Profit before taxation 20,205 17, 093 3,125 10,609
Income tax expense 16 (3,319) (3,618) (562) (2,227)
Net profit for the period 16, 886 13.475 2,563 8,382
Earnings per share (BGN) 31 0,15 0,12 0,02 0,07
These financial statements have been approved on behalf of Petrol AD by:
Svetoslav Yordanov Tsvetan Dimitrov
Chief Executive Officer Chief Financial Officer
November 27, 2006
(The accompanying notes from page 12 to page 55 are an integral part of these
consolidated financial statements)
BALANCE SHEET
as of September 30, 2006
Notes September 30, June 30, December 31,
(1) 2006 2006 2005
BGN'000 BGN'000 BGN'000
Non-current assets
Property, plant and equipment 17 198,906 199,293 202,817
Intangible assets 18 1,446 1,537 1,581
Investment property 19 19,566 19,777 19,594
Investments in associates 20 1,843 1,911 2,074
Goodwill, net 21 20,309 20,309 20,309
Total non-current assets 242,070 242,827 246,375
Current assets
Inventories 22 104,291 92,229 82,290
Trade and other receivables, net 23 153,261 158,890 102,319
Income tax recoverable 28 956 304 -
Cash and cash equivalents 24 25,916 8,425 11,490
Total current assets 284,424 259,848 196,099
Total assets 526,494 502,675 442,474
Current liabilities
Trade and other payables, net 25 195,975 148,728 114,418
Interest-bearing loans 26 70,812 99,833 86,180
Finance lease liabilities 27 1,732 1,487 428
Income tax payable 28 - - 3,396
Total current liabilities 244,551 250,048 204,422
Non-current liabilities
Interest-bearing loans 26 72,413 69,684 73,503
Finance lease liabilities 27 5,150 5,018 384
Deferred tax liabilities 16 2,748 2,824 2,660
Total non-current liabilities 80,311 77,526 76,547
Net assets 177,664 175,101 161,505
Equity and reserves
Share capital 29 109,250 109,250 109,250
Retained earnings 30,297 27,520 12,901
Revaluation reserve 30 27,483 27,697 28,865
Other reserves 10,634 10,634 10,489
Total equity and reserves 177,664 175,101 161,505
These financial statements have been approved on behalf of Petrol AD by:
Svetoslav Yordanov Tsvetan Dimitrov
Chief Executive Officer Chief Financial Officer
November 27, 2006
(The accompanying notes from page 12 to page 55 are an integral part of these
consolidated financial statements)
STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
For the period ended September 30, 2006
Share Revaluation Other Retained Total
capital
reserve reserves earnings
BGN'000
BGN'000 BGN'000 BGN'000 BGN'000
Balance at December 31, 2004 109,250 58,529 9,005 2,465 179,249
Change in the accounting policy
due to adoption of IFRS 3 - - - 3,136 3,136
Restated balance at January 1, 2005
(restated) 109,250 58,529 9,005 5,601 182,385
Revaluation reserve of disposed assets - (32 338) - 32 338
-
Net income, recognized
directly in equity - (32 338) - 32 338 -
Profit for the period - - - 13 475 13 475
Total income/expense
recognized for the period - (32 338) - 45 813 13 475
Distribution of profit to reserves - - 1 480 (1 480) -
Distribution of dividends - - - (13 030) (13 030)
Balance at September 30, 2005 109,250 26 191 10 485 36 904 182 830
Revaluation reserve of disposed
fixed assets - 2 674 - (2 674)
- -
Net income, recognized
directly in equity - (2 674) - 2 674 -
Profit for the period - - 4 954 4 954
-
Total income/expense
recognized for the period - (2 674) - 7 628 4 954
Loss on redeemed and sold
treasury shares, net - - - (26 286) (26 286)
Dividends written off
- -
- 7 7
Distribution of profit to reserves - 4 (4)
- -
Balance at December 31, 2005 109,250 28,865 10,489 12,901 161,505
Revaluation reserve of disposed assets - (1 382) - 1 382 -
-
Net income, recognized
directly in equity - (1 382) - 1 382 -
Profit for the period - - - 16 886 16 886
Total income/expense
recognized for the period - (1 382) - 18 268 16 886
Distribution of profit to reserves - - 145 (145) -
Distribution of dividends - - (727) (727)
-
Balance at 30 September, 2006 109,250 27,483 10,634 30,297 177,664
These financial statements have been approved on behalf of Petrol AD by:
Svetoslav Yordanov Tsvetan Dimitrov
Chief Executive Officer Chief Financial Officer
November 27, 2006
(The accompanying notes from page 12 to page 55 are an integral part of these
consolidated financial statements)
CASH FLOW STATEMENT
For the period ended September 30, 2006
September 30, September 30, 3 rd 3 rd quarter,
quarter,
2006 2005 2005
2006
BGN'000 BGN'000 BGN'000
BGN'000
Cash flows from operating activities
Net profit before taxation 20,205 17,093 3,125 10,609
Adjustments for
Depreciation/amortization of fixed assets 14,719 17,324 4,754 6,023
Exchange rate gains/losses not realized 227 0 490 0
Impairment of assets 603 6,212 - 1,960
Interest expenses and bank fees and commissions 9,321 5,031 4,173 754
Interest and other finance income (3,019) (1,853) (1,213) (472)
Accruals for annual paid leaves 1,202 1,351 342 903
Normal loss, shortages and wastages, net of 2,161 601 1,394 22
excess assets
Low cost assets written off 320 0 102 0
Net effect from applying the equity method 204 259 68 61
Loss on in-kind contributions - 31 - -
Gain on disposal of fixed assets and materials (4,521) (489) (2,058) (102)
Cash flows provided by operating activities 41,422 45,560 11,177 19,758
Interest and bank fees and commissions paid (7,470) (4,499) (2,460) (406)
Income tax paid (7,586) (4,581) (1,293) (946)
Operating profit before changes in working 26,366 36,480 7,424 18,406
capital
Increase/(decrease) in trade payables 80,712 (14,738) 47,975 19,998
Increase in inventories (21,971) (45,855) (11,366) (31,668)
Increase in trade receivables 19,086 (19,900) 28,679 (12,817)
Net cash provided by operating activities 104,193 (44, 013) 72,712 (6,081)
Cash flows from investing activities
Acquisition of fixed assets (7,606) (6,366) (4,310) (1,897)
Proceeds on disposal of fixed assets 4,336 1,266 (111) 757
Interest received 1,273 1,742 (4) 516
Cash received/(paid) for investment deposits and (70,028) 16,898 (23,893) (4,446)
granted loans, net
Net cash used in investing activities (72,025) 13,540 (28,318) (5,070)
CASH FLOW STATEMENT (continued)
For the period ended September 30, 2006
September 30, September 30, 3 rd 3 rd
quarter, quarter,
2006 2005
2006 2005
BGN'000 BGN'000
BGN'000 BGN'000
Cash flows from financing activities
Proceeds from borrowings 594,103 744,683 152,216 349,006
Repayments of borrowings (610,788) (715,892) (178,527) (335,922)
Finance lease capital cost payments (1,057) (629) (592) (175)
Net cash provided by financing activities (17,742) 28,162 (26,903) 12,909
Net decrease in cash and cash equivalents 14,426 (2,311) 17,491 1,758
Cash and cash equivalents at the beginning of 11,490 7,885 8,425 3,816
period
Cash and cash equivalents at the end of period 25,916 5,574 25,916 5,574
(see note 24)
These financial statements have been approved on behalf of Petrol AD by:
Svetoslav Yordanov Tsvetan Dimitrov
Chief Executive Officer Chief Financial Officer
November 27, 2006
(The accompanying notes from page 12 to page 55 are an integral part of these
consolidated financial statements)
Notes
to the consolidated financial statemenets
as of September 30, 2006
INCLUDING 3-rd QUARTER 2006
1. Legal status
Petrol AD (the Parent company) is registered in Sofia. The headquarters of the
Parent company is located at 43, Cherni Vruh Blvd. Sofia. As of June 30, 2006
the majority shareholder of Petrol AD is Petrol Holding AD with 76.03 %
ownership of the share capital. The remaining part of the Parent company's
shares is owned by other legal entities, the State - through the Ministry of
Economy and by individual shareholders (see note 29).
Effective from July 1, 1998 Petrol AD is registered as a public company in the
Public Register of the Financial Supervision Commission.
The main activities of Petrol AD and its subsidiaries (the Group) comprise
retail and wholesale of oil and non-oil products, rendering of transport and
other services. The Parent company is one of the oldest commercial companies in
Bulgaria and owns the largest network of gas stations in the country.
These consolidated financial statements have been approved for issue by the
management on November 27, 2006.
2. Basis for preparation of the consolidated financial statements and
accounting principles
2.1. Basis for preparation of the consolidated financial statements
The Group prepares and presents its consolidated financial statements in
accordance with International Financial Reporting Standards (IFRS) and the
Interpretations, issued by the International Financial Reporting Interpretations
Committee (IFRIC).
During the current period the Parent company has adopted all new and revised
IFRS, edition 2006 of the International Accounting Standards Board (IASB),
approved by the European Union Commission and the related Interpretations,
applicable for reporting periods, starting after January 1, 2006, which refer to
the Company's activities.
The Bulgarian Accountancy Act requires the application of IFRS, adopted by the
European Union Commission, which should be officially translated in Bulgarian,
approved also by the Council of Ministers of the Republic of Bulgaria, and
published in State Gazette (SG). As of the date of these financial statements
the only official edition in Bulgarian, approved by the Council of Ministers
with Decree No. 21/04.02.2003 and published in SG, issue 13 of 2003, is the one
of the core International Accounting Standards (IAS) of 2002. Management
believes, that the application of IFRS (the original 2006 edition in English) is
appropriate under these circumstances and accordingly provides the users of the
financial statements with useful and reliable information regarding the
financial position and the performance of the Parent company, and therefore has
chosen to apply this basis for the preparation of these financial statements.
2.1. Basis for preparation of the consolidated financial statements
(continued)
The main differences between the carrying amounts of assets and liabilities and
the amounts in the income statement, as reported in these consolidated financial
statements and as they would have been reported according to IAS, 2002 edition,
under the above Decree, result from the adoption of IFRS 3 Business Combinations
and application of the revision of IAS 27 Consolidated and Separate Financial
Statements.
In accordance with IFRS 3 Business Combinations, the goodwill arising from a
business combination, is stated in the balance sheet net of impairment loss,
according to the requirements of IAS 36 Impairment of Assets, and is not subject
to amortisation. The Standard does not allow the recognition of negative
goodwill. Accordingly, after reassessment of the initial recognition, any
subsequent excess of the acquirer's interest in the net fair values of the
acquired identifiable assets, liabilities and contingent liabilities over the
cost of the business combination, should be recognised immediately in the income
statement.
Until December 31, 2004, in accordance with the requirements of the then
applicable IAS 22 Business Combinations, the Group has adopted the policy of
amortising the goodwill on a systematic basis over its useful life, estimated at
5 years, based on an estimate of the period during which future economic
benefits are expected to flow to the enterprise. Negative goodwill has been
recognized in the consolidated income statement on a systematic basis over its
useful life, fixed at 5 years.
With regard to the requirements of the transitional provisions of IFRS 3
Business Combinations, the Group has effected changes in its accounting
policies, resulting from the issuance of a new standard, applicable for future
periods - from January 1, 2005, due to which these changes have no effect on the
consolidated financial statements for prior reporting periods.
As of January 1, 2005 the accumulated amortisation of goodwill is eliminated
with a corresponding decrease in goodwill and the carrying amount of negative
goodwill is derecognised with a corresponding adjustment to the opening balance
of retained earnings. As of the same date the Group discontinues amortising
goodwill.
In accordance with the previous revision of IAS 27 Consolidated and Separate
Financial Statements, the Group has adopted the policy not to consolidate
subsidiaries, if control is intended to be temporary because the subsidiary is
acquired and held exclusively with a view to its subsequent disposal in the near
future. Following the provisions of the Standard, in prior periods the Group
reported its interest in such subsidiaries in accordance with IAS 39 Financial
Instruments: Recognition and Measurement. In the revised IAS 27 Consolidated and
Separate Financial Statements, applicable since January 1, 2005, the texts
concerning the exclusion of subsidiaries from consolidation have been removed.
Accordingly, subsidiaries, on which the Group has exercised temporary control,
and which have not been disposed of as of September 30, 2006, are consolidated
retrospectively - as they would have been reported had the same accounting
policy been applied in prior reporting periods.
These consolidated financial statements are prepared under the historical cost
convention and represent interim financial statements, prepared in compliance
with IAS 34 Interim Financial Reporting.
These financial statements represent consolidated financial statements, the
preparation of which is required by the Bulgarian accounting legislation and
based on IAS 27 Consolidated and Separate Financial Statements.
2.2. Functional and presentation currency
The Group keeps its records and prepares its financial statements in the
national currency of the Republic of Bulgaria - the Bulgarian Lev, which is the
official currency of the primary economic environment in which the Group
operates. Effective January 1, 1999, the Bulgarian Lev is fixed to the EUR at
the rate of BGN 1.95583 = EUR 1.
These consolidated financial statements are presented in thousand Bulgarian
Levs, unless otherwise stated.
2.3. Foreign currency
Transactions in foreign currency are initially recorded at the official rate of
exchange of the Bulgarian National Bank (BNB) as of the date of the transaction.
The foreign exchange rate differences, arising upon the settlement of these
monetary positions or at restatement of these positions at rates, different from
those when initially recorded, are reported as financial income or financial
expenses for the period in which they arise.
The monetary positions denominated in foreign currency as of September 30, 2006,
June 30, 2006 and December 31, 2005 are stated in these consolidated financial
statements at the closing exchange rate of the BNB. The closing exchange rates
of BGN against USD as of the respective reporting periods are as follows:
September 30, 2006: USD 1 = BGN 1.54489
June 30, 2006: USD 1 = BGN 1.53845
December 31, 2005: USD 1 = BGN 1.65790
2.4. Subsidiaries and consolidation
These consolidated financial statements incorporate the financial statements of
the Parent company and its subsidiaries. A subsidiary is an entity that is
controlled by the Parent company. Control is the power to govern the financial
and operating policies of an enterprise so as to obtain benefits from its
activities.
For consolidation purposes, the separate financial statements of the Parent
company and its subsidiaries have been combined on a line-by-line basis by
adding together like items of assets, liabilities, equity, income and expenses.
For consolidation purposes all intragroup balances as of September 30, 2006 and
December 31, 2005, as well as all intragroup transactions and intragroup profits
and losses, including unrealised profits and losses as of September 30, 2006 and
2005 are eliminated in full.
The carrying amount of the Parent company's investment in each subsidiary and
the Parent company's portion of equity of each subsidiary are eliminated.
The results of subsidiaries, which have been acquired or disposed during the
year, are included in the consolidated income statement from the date of the
acquisition and respectively, till the control ceases.
2.5. Associates
An associate is an enterprise over which the Parent company has significant
influence. Significant influence is the right of participation in, but not
control over, the financial and operating policy decisions of the investee.
Interests in associates are presented in the balance sheet in accordance with
IAS 28 Investments in Associates, using the equity method of accounting,
according to which the investment is recorded initially at cost as adjusted by
post-acquisition changes in the investor's share in the net assets of the
associate.
2.6. Business combinations
In accordance with IFRS 3 Business combinations, a business combination is the
bringing together of separate enterprises or businesses into one reporting
entity. If an entity obtains control over another entity, which does not
represent a separate business, the bringing together of these enterprises is not
a business combination. When there is no business combination, the purchase
method cannot be used and instead of this the transaction should be presented as
a merger.
If the transaction meets the criteria for a business combination, it should be
determined if the business combination is involving companies under common
control. According to IFRS 3, two enterprises are under common control, when the
combining enterprises or businesses are ultimately controlled by the same party
(parties) both before and after the business combination and when the control is
not temporary (transitional).
IAS 22 Business Combinations (replaced by the effective IFRS 3 Business
Combinations) and IFRS 3 Business Combinations, applicable as of the date of the
present consolidated financial statements exclude from their scopes business
combinations involving entities under common control. IFRS do not provide
guidance for the accounting treatment of business combinations involving
companies under common control.
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors effective
from January 1, 2005, requires that upon absence of a specific Standard or
Interpretation, management should develop accounting policy, which is reliable
and relevant to the economic decision making needs of the users of the financial
statements. The acquirer should take into consideration the requirements and
guidance of standards and pronouncements of other international standard setting
bodies, other accounting literature and established best practices, treating
similar issues, to the extent that they do not conflict with sources of
directions of the IASB (including IFRS, Interpretations and Framework for
preparation and presentation of financial statements).
On the basis of these sources, management should select an appropriate policy
for reporting of business combinations involving entities under common control
and apply it consistently.
The present international practices provide guidance for two alternative methods
of accounting for business combinations involving entities under common control
- the purchase method and the method of uniting of interests.
Management believes that the use of the method of uniting of interests is not
appropriate, since its application for business combinations is not allowed by
IFRS 3. In addition, according to the international practices, the method of
uniting of interests can be applied in exceptionally rare circumstances, mostly
in the cases when it cannot be determined which of the combining enterprises is
the acquirer. According to IASB in most of the business combinations, as well as
in the particular situation, the acquirer can be identified.
2.6. Business combinations (continued)
Taking into account the above arguments, management has decided to adopt the
purchase method and apply it consistently for all similar transactions within
the Group for the current and prior reporting periods.
In October 2003 the ultimate controlling company, Petrol Holding AD, performs
reorganization of the companies and the business within the economic group, as a
result of which the Parent company acquires Naftex Petrol EOOD through purchase
from the controlling company. The cost of acquisition amounts to BGN 100,966
thousand, and is based on market valuation of BGN 1.058 per share, made by an
independent licensed appraiser, in compliance with the requirements of art. 114
of the Public Offering of Securities Act. The performed reorganization meets the
criteria for a business combination, as Petrol AD obtains control over the
business of Naftex Petrol EOOD - wholesale with fuels, which represents bringing
together of two separate businesses into one economic entity, within the meaning
of IFRS 3. As the ultimate controlling company before and after the transaction
is Petrol Holding AD, this is a business combination involving entities under
common control. The management accounted for that transaction in 2003, applying
the purchase method. The Group's management considers that the use of the
purchase method of accounting is appropriate within the given circumstances.
International Accounting Standard Board has deferred till the second phase of
Business Combination Standard project to deal with accounting methods for
business combination of companies under common control. Depending on the outcome
of this project in the future, further considerations to the accounting method
used might be required.
2.7. Goodwill
Goodwill represents the excess of the cost of acquisition over the Group's
interest in the net fair value of identifiable assets, liabilities and
contingent liabilities of the acquired entity as of the date of the exchange
operation and is recognised as an asset. When the acquisition cost is lower than
the net assets acquired by the Group, the acquirer should reassess the
identification and measurement of the acquiree's identifiable assets,
liabilities and contingent liabilities and the measurement of the cost of the
business combination and any excess remaining after that reassessment should be
recognized immediately in profit or loss
Subsequent to its initial recognition goodwill is not amortized, in compliance
with IFRS 3, applicable for reporting periods after March 31, 2004. At the end
of each reporting period a test for impairment is performed (see note 4).
2.8. Accounting estimates and reasonable assumptions
The preparation of the consolidated financial statements in accordance with IFRS
requires management to make certain accounting estimates and reasonable
assumptions that affect some of the reported amounts of assets, liabilities,
revenues and expenses. These estimates and assumptions are based on the best
estimate of management, taking into account historical experience and analysis
of all factors of significance in the circumstances as of the date of the
consolidated financial statements. The actual results could differ from those
estimates, presented in these consolidated financial statements.
2.9. Changes in accounting policy
The Group changes its accounting policy when this change is required by a
STANDARD or an Interpretation, or when the adopted change would lead to
presentation of reliable and more appropriate information about the effects of
transactions, other events or conditions, having effect on the entity's
financial position, financial performance or cash flows.
Change in accounting policy as a result of the application of a new Standard
should be accounted in accordance with the transitional provisions of the
respective IFRS (if any). Where there are no such provisions, the change is
applied retrospectively.
3. Definition and valuation of the balance sheet and income statement
items
3.1. Property, plant and equipment and intangible assets
Property, plant and equipment and intangible assets are recognized and initially
carried at cost, including the purchase price, import duties and non-refundable
taxes, as well as any costs directly attributable to bringing the asset to the
location and condition necessary for it to be capable of operating in the manner
intended by management. After initial recognition, property, plant and equipment
and intangible assets are stated at cost less accumulated depreciation/
amortization and accumulated impairment loss, if any (see note 3.3).
Some tangible fixed assets, available at December 31, 2002, have been revalued
by coefficients, based on the accounting legislation, applicable as of the end
of 2001, as a result of which a revaluation reserve has been created. In
compliance with the changes in accounting legislation, management has reviewed
all material tangible fixed assets as of December 31, 2002 to verify the
measurement of their carrying amount. Those assets, for which the carrying
amount was materially different from their fair value, were revalued to their
fair value as of the same date. The so formed revaluation reserve was added to
the revaluation reserve, resulting from the accounting legislation applicable as
of December 31, 2001.
When property, plant and equipment include parts with different useful lives,
such parts are recognized as separate assets.
Subsequent costs, including costs for replacement of an item of property, plant
and equipment are recognized in the carrying amount of the asset, if they
satisfy the recognition principle. The carrying amount of the replaced item is
derecognized in accordance with the requirements of IAS 16 Property, Plant and
Equipment. All other subsequent costs are recognized as expense for the period
as incurred.
Depreciation and amortization are charged over the estimated useful lives, using
the straight-line method.
The assets' estimated useful lives are as follows:
Useful life 2006 2005
25 years 25 years
Administrative and trade buildings
Machines and equipment 2, 3 and 25 years 2, 3 and 25 years
Vehicles 5 and 10 years 5 and 10 years
Office furniture 7 years 7 years
Intangible assets 2 and 7 years 2 and 7 years
3.1. Property, plant and equipment and intangible assets (continued)
Depreciation of an asset begins in the month following the month in which 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 when the asset is
derecognized.
Land, works of art, fixed assets under construction and fully depreciated assets
are not depreciated.
3.2. Investment property
Investment property is property held by the Group to earn rentals or for capital
appreciation, or for both.
Investment property is measured at cost less accumulated depreciation and
impairment loss, if any (see note 3.3).
Properties, part of which is used for Group's operations and another part - to
earn rentals, and these parts cannot be reported separately, are presented in
compliance with IAS 16 - Property, Plant and Equipment.
Depreciation on investment properties is charged to the income statement, by
applying the straight line method, on the basis of their estimated useful life,
as follows:
Useful life 2006 2005
25 years 25 years
Administrative and trade buildings
Machines and equipment 2, 3 and 25 years 2, 3 and 25 years
Office furniture 7 years 7 years
3.3. Impairment of property, plant and equipment and intangible assets,
investment property and goodwill
At each balance sheet date, the management reviews the carrying amounts of its
property, plant and equipment, intangible assets, investment property and
goodwill to determine whether there is any indication for impairment of these
assets. If any such indication exists, the recoverable amount of the respective
asset is estimated.. Where it is not possible to estimate the recoverable amount
of an individual asset, the Group estimates the recoverable amount of the
cash-generating unit, to which the asset belongs.
The recoverable amount is the higher of the asset's fair value less costs to
sell the asset and its value in use. If the recoverable amount of an asset (or
cash-generating unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (cash generating unit) is reduced to its
recoverable amount. Impairment loss is recognized in the income statement
immediately, unless the asset is carried at a revalued amount, in which case the
impairment loss is treated as a decrease in the revaluation reserve (see note
3.1).
Where an impairment loss subsequently reverses, the carrying amount of the asset
(cash generating unit) is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognized
for the asset (cash generating unit) in prior years. A reversal of an impairment
loss is recognized as income immediately, unless the relevant asset is carried
at a revalued amount, in which case the reversal of the impairment loss is
treated as an increase in the revaluation reserve.
3.3. Impairment of property, plant and equipment and intangible assets,
investment property and goodwill (continued)
An impairment loss is recognized for a cash-generating unit to which goodwill
was allocated if and only if the recoverable amount is lower than its carrying
amount. The impairment loss is allocated to reduce the carrying amount of the
assets in the cash-generating unit, first to reduce the carrying amount of
goodwill and then, the carrying amount of other assets in the unit, pro rata on
the basis of the carrying amount of each asset in the unit. The impairment loss
of goodwill is not subject to reversal.
3.4. Inventories
Inventories are stated at the lower of cost and net realizable value. Cost
comprises purchase price, transportation, customs duties and other costs
directly attributable to the acquisition. Net realisable value represents the
estimated selling price less all estimated cost to be incurred in selling.
Upon consumption, the cost of inventories is calculated using the following
methods:
Petroleum Specific identification price of each delivery
Fuel and other inventories Weighted average cost
Materials Weighted average cost
3.5. Financial instruments
A financial instrument is a contract that gives rise to both a financial asset
of one entity and a financial liability or equity instrument of another entity.
Financial assets/liabilities are recognized in the balance sheet only when the
Group becomes a party to the contractual provisions of the instrument.
On initial recognition financial assets/liabilities are measured at fair value
plus, in the case of a financial asset or financial liability not reported at
fair value through profit and loss, transaction costs, which are directly
attributable to the acquisition or issue of the financial assets/liabilities.
For the purposes of subsequent measurement, in the current and prior reporting
periods the Group classifies the financial assets and financial liabilities into
the following categories: loans granted and other trade receivables and
financial liabilities (other than those, reported at fair value in the income
statement). Classification under each category depends on the purpose and term
of the respective contract.
3.5.1. Trade and other receivables, net
Trade and other receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They are
originated when the Group provides cash, goods for sale or services having no
intention to trade them. Receivables are stated at amortized cost, excluding
current receivables, which are not subject to amortization. Based on an analysis
at each year end, the Group reviews whether any indications for impairment
exist.
3.5.2. Cash
Cash and cash equivalents comprise cash on hand and demand deposits and other
short-term highly liquid investments that are readily convertible to a known
amount of cash and are subject to an insignificant risk of change in value.
For the purposes of cash flow presentation, cash represents cash on hand and
cash in bank accounts.
3.5.3. Trade and other payables, net
Trade and other payables incurred as a result of purchases of goods and services
or receipts of cash, which are not classified as financial liabilities measured
at fair value through profit and loss, are stated in the balance sheet at
amortized cost. Current liabilities are not amortized.
3.5.4. Interest bearing loans
Interest bearing loans are initially recorded at the fair value of proceeds
received, net of transaction costs. After initial recognition, interest bearing
loans are measured at amortized cost, as any difference between the initial cost
and maturity cost is recognized in income statement over the loan period, using
the effective interest method. If no transaction costs have been incurred in
negotiating an interest bearing loan, the loan is not subject to amortisation.
The same applies to bank overdrafts, where the borrower is entitled to multiple
utilizations or repayments of the borrowed funds within a pre-determined
overdraft limit.
Finance costs, including direct issue costs, are accounted for on an accrual
basis to the income statement using the effective interest method, except for
transaction costs on bank overdrafts, which are recognized in the income
statement on a straight line basis over the overdraft period.
3.5.5. Share capital and purchased treasury shares
The share capital of the Parent company is presented at historical cost as of
the date of its registration.
When at the balance sheet date the Group has outstanding treasury shares -
shares of the Parent company, acquired by the Company or by other companies
within the Group, their nominal value is deducted from share capital, and the
difference paid below or above the nominal value - in retained earnings,
according to IAS 32 Financial Instruments: Disclosure and Presentation.
3.5.6. Risk assessment and management
Currency risk
The Group performs transactions denominated in foreign currency. As a result it
is exposed to the risk of possible deviations of the USD/BGN ratio. The Group
does not use derivative financial instruments for currency risk hedging, but is
sufficiently insured against this risk, as the national currency is fixed to the
EUR (see note 2.2).
3.5.6. Risk assessment and management (continued)
Interest rate risk
Financial instruments that potentially expose the Group to interest rate risk
are mainly bank loans received and deposits granted. As most of them bear
floating interest rate with fixed margin over the base interest rate (BIR) and
SOFIBOR, respectively LIBOR/EURIBOR, the Group is potentially exposed to
interest rate risk of its cash flows. The rest of the loans received by the
Group bear fixed interest rates, due to which the Group is potentially exposed
to interest rate risk of fair value, in case that market interest rates rise
significantly over or fall below the contracted rates.
Management believes that due to the negligible movement in market interest
rates, the Group is exposed to insignificant interest rate risk of cash flows
and fair value.
Information on the applicable interest rates is disclosed in the respective
notes.
Credit risk
Financial assets that potentially expose the Group to credit risk are primarily
its trade receivables. Basically, the Group is exposed to credit risk, in case
the clients do not meet their payment obligations. The Group's policy is
directed primarily to sales of goods and services in cash, as well as deferred
payment sales to clients with appropriate credit standing.
Credit risk of cash at banks is insignificant as the Group deals only with banks
with high credit rating.
3.6. Deferred income and expenses
Deferred income and deferred expense represent income and expense, which are
paid in the current, but refer to future accounting periods - guarantees,
insurance, subscription, rent, etc.
3.7. Income tax
Income tax expense comprises of current income tax and deferred tax.
The tax currently payable is based on the combined taxable profit (tax loss) for
the period of the Parent company and its subsidiaries, as reported in their
separate tax returns, by applying the effective tax rate according to the tax
legislation as of the date of the financial statements. Deferred tax is the
income tax expected to be payable (recoverable) on taxable (deductible)
temporary differences. Temporary difference is the difference between the
carrying amount of an asset or liability in the balance sheet and the
corresponding tax basis. Deferred income taxes are calculated using the balance
sheet liability method. Deferred tax liabilities are recognized for all taxable
temporary differences, whereas deferred tax assets are recognized for deductible
temporary differences, only to the extent that it is probable that taxable
profit will be available against which the deductible temporary difference can
be utilized.
3.7. Income tax (continued)
Deferred tax assets/liabilities are calculated at the tax rates that are
expected to apply in the period when the liability is settled or the asset
realized, based on the information available at the Group at the date of
preparation of these consolidated financial statements. Deferred tax is charged
or credited in the income statement, except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also dealt with
in equity.
Although income tax in Bulgaria is not calculated based on a consolidation
basis, the Group has adopted the policy of accruing deferred tax assets/
liabilities on all temporary differences, arising from the elimination of
unrealized intra-group income from sale of non-current assets, which are treated
as timing differences. These temporary differences are reversed by the
subsequent adjustments to depreciation expenses by the acquiring company or upon
disposal of the respective assets by the Group, when the profit on sale is
realized for the Group.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of the asset to be
recovered.
Deferred tax assets and liabilities are reported net when they are subject to an
unified tax regime.
In accordance with the tax legislation enforceable for 2006 and 2005, the tax
rate applied for the calculation of the Group's tax liabilities is 15%.
3.8. Revenue and expenses recognition
Revenues and expenses are accrued when they arise, regardless of cash receipts
and payments. They are reported in compliance with the matching concept.
Revenues and expenses are carried at the fair value of the consideration
received or receivable, less any discounts allowed by the entity.
Income from sales of goods is recognized when the significant risks and rewards
of ownership are transferred to the buyer.
Revenue from services is reported in the income statement for the period in
which they are provided.
Gains (losses) on sales of property, plant and equipment and intangible assets
are stated as other income or other expense.
3.8. Revenue and expenses recognition (continued)
Interest income/expense is accrued based on the effective interest rate, by
reference to the principal outstanding.
Profit (loss) arising from the exchange of assets is stated at the difference
between the fair value of the asset received and the carrying amount of the
asset exchanged.
3.9. Leases
A finance lease is a lease where an entity transfers substantially all the risks
and rewards incidental to ownership of an asset.
Assets acquired under finance lease are recognized at the lower of the fair
value of the leased asset and the present value of the minimum lease payments,
determined at the inception of the lease. The corresponding liability to the
lessor is included in the Group's balance sheet as obligations under finance
leases.
Lease payments are apportioned between interest charges and principal payments,
so as to achieve a constant rate of interest on the remaining balance of the
liability.
A finance lease gives rise to depreciation expense for depreciable assets, as
well as finance cost for each reporting period. The depreciation policy for
depreciable leased assets is consistent with that for depreciable assets that
are owned.
Costs incurred for assets leased under operating leases are recognized in the
income statement on a straight line basis over the lease term. The aggregate
benefit of all incentives is recognized as a reduction of the rental expenses on
a straight line basis over the lease term.
Lease income from operating leases is recognized as income on a straight line
basis over the lease term. Initial direct costs incurred in negotiating an
operating lease are added to the carrying amount of the leased asset and are
recognized as an expense on a straight line basis over the lease term.
3.10. Segment reporting
For the purposes of segment reporting, identifiable components from the Group's
activity (reportable segments) are established, each of them referring to the
provision of separate or group of products and services, which are subject to
risks and return, different from those of the other business segments.
The results, assets and liabilities of the segment comprise such elements, which
can be directly attributed to the segment, as well as elements, which can be
allocated to the segment on a reasonable basis. The liabilities of the segment
do not comprise deferred tax liabilities.
Capital expenditures of the segment represent investments, made in the period of
acquisition of segment assets, which are expected to be utilized by the segment
for more than one reporting period.
4. Critical accounting estimates and key sources of estimation
uncertainty
Upon application of the adopted accounting policy, management makes certain
estimates (other than the disclosed in note 2.8), which have significant effect
on the financial statements. Such estimates, by definition, may differ from
actual results. Due to their nature, they are subject to constant review and
update, and comprise the historical experience and other factors, including
expectation of future events, which management believes are reasonable under the
present circumstances.
A critical accounting estimate, which includes significant risk of considerable
adjustments to the carrying amount of assets and liabilities in subsequent
reporting periods, is the test for impairment of goodwill, arising from a
business combination.
As disclosed in notes 2.7 and 3.3, goodwill is not subject to amortisation, but
is reviewed for impairment at each year end, as well as at any time when any
indications for impairment exist. According to IAS 36 upon performance of
subsequent tests for impairment an entity can use the last detailed calculation
of the recoverable amount of the cash generating unit, to which goodwill is
allocated. This applies to the cases, when the assets and liabilities,
constituting the cash generating unit, have not changed significantly since the
last calculation; no events or circumstances with possible negative effect have
arisen in the current period; and upon current calculation of the recoverable
amount there is minimum probability that it might be lower than the current
carrying amount of the cash generating unit.
As of September 30, 2006 management has not identified indications for
impairment loss.
Test for impairment of the goodwill acquired at the acquisition of Naftex Petrol
EOOD (see also notes 2.6 and 21) has been performed as of December 31, 2005 by
using the methodology of the discounted net cash flows. This methodology is
based on current forecasts of net cash flows, prepared by management of the
subsidiary for a three-year period after December 31, 2005. The forecasted net
cash flows after the last available forecasted by management period, are
calculated at a 3% increase towards the latter, by applying the "eternal rent"
method with constantly increasing rate and discounting of the resulting terminal
value by observing the above stated methodology. The applied discount rate of 9%
is equal to the weighted average cost of the subsidiary's equity. As a result of
the applied methodology, the value of the investment in the subsidiary exceeds
the carrying amount of the investment before its elimination and the carrying
amount of goodwill as of December 31, 2005, and therefore goodwill has not been
impaired.
5. Changes in IFRS
In 2005 a new IFRS 7 is introduced - Financial Instruments: Disclosure. It
becomes effective for periods after January 1, 2007 and supersedes the reporting
requirements under IAS 32 - Financial Instruments: Disclosure and Presentation
and cancels IAS 30 - Disclosures in the Financial Statements of Banks and
Similar Financial Institutions.
In January 2006 the International Financial Reporting Interpretations Committee
has issued a new IFRIC 10 - Interim Financial Reporting and Impairment,
effective for annual periods after November 1, 2006, according to which an
entity should not reverse an impairment loss recognized in previous interim
financial statements in respect of goodwill or an investment in either an equity
instrument or a financial asset carried at cost.
6. Revenue
September 30, September 30, 3 rd quarter, 3 rd quarter,
2006 2005 2006 2005
BGN'000. BGN'000 BGN'000 BGN'000
Sales of goods 929,252 912,969 322,371 379,517
Sales of services 35,377 44,140 12,446 13,755
Sales of finished goods 2,405 3,190 681 1,570
Total 967,034 960,299
335,498 394,842
According to the terms of a fuel supply agreement, in the reported revenue for
the period ended September 30, 2005, the Parent company has included income
amounting to BGN 29,513 thousand. This amount includes increase in revenue
amounting to BGN 3,184 thousand. The calculation of these amounts includes an
amount of BGN 6,206 thousand, which represent increases of the Parent company's
remuneration for incurred operating expenses and discounts given to customers at
the amount of BGN 6,206 thousand. The management believes that the total amount
of BGN 32,697 thousand should be included in the calculation of Company's
remuneration according to this agreement and in the closing balance of trade
payables with this supplier, which are subject to negotiation. As at the date of
these consolidated financial statements, however, there are indications that
these receivables are doubtful and in the foreseeable future it will be not paid
by the counterparty due to which the Parent company has accrued an impairment
loss at the amount of BGN 6,206 (see note 13) in the current reporting period.
Revenue from sales of goods comprises:
September 30, September 30, 3 rd quarter, 3 rd quarter,
2006 2005 2006 2005
BGN'000 BGN'000 BGN'000 BGN'000
Heavy fuels (diesel oil, 545,500 529,990 203,165 247,624
industrial oil and gas oil)
Light fuels (gasoline) 359,881 363,341 109,552 124,602
Lubricants and other goods 23,871 19,638 9,654 7,291
0 0
Total 929,252 912,969 322,371 379,517
7. Other income
September 30, September 30, 3 rd quarter, 3 rd quarter,
2006 2005 2006 2005
BGN'000 BGN'000 BGN'000 BGN'000
Penalties 9,476 1,307 400 267
Gains on sales of 4,531 489 2,074 102
non-current assets,
including:
Revenue from sales of 7,000 642 2,655 217
non-current assets
Carrying amount of (2,469) -581 -115
non-current assets (153)
written-off
Insurance compensations 325 4 81 -109
Surplus of assets 247 256 19 168
Others 753 3,307 619 3,182
0 0
Total 15,332 5,363 3,193 3,610
As of September 30, 2006 the Group has recognized income from penalties under
contract signed with a supplier of fuels (the Counterparty). The management
believes that the penalty fee of BGN 8,195 thousand, charged for breach of
quantity provisions is part of and should be included in the sales revenue and
receivables from the Counterparty as of September 30, 2006.
8. Cost of goods sold
September 30, September 30, 3 rd quarter, 3 rd quarter,
2006 2005 2006 2005
BGN'000 BGN'000 BGN'000 BGN'000
Heavy fuels (diesel oil, 519,838 503,807 193,060 233,325
industrial oil and gas oil)
Light fuels (gasoline) 337,031 341,771 104,390 118,503
Lubricants and other goods 21,852 17,348 8,630 6,378
Total 878,721 862,926 306,080 358,206
9. Materials and consumables
September 30, September 30, 3 rd quarter, 3 rd quarter,
2006 2005 2006 2005
BGN'000 BGN'000 BGN'000 BGN'000
Fuels 2,447 1,792 942 620
Electricity 2,018 1,739 522 474
Spare parts 1,493 869 513 362
Office consumables 885 904 328 305
Protective clothes 364 161 85 139
Water supply 519 451 285 224
Heating 29 48 2 3
Others 1,837 589 1,086 245
Total 9,592 6,553 3,763 2,372
10. Hired services
September 30, September 30, 3 rd quarter, 3 rd quarter,
2006 2005 2006 2005
BGN'000 BGN'000 BGN'000 BGN'000
Transportation 6,115 3,717 2,094 1,333
Commissions 4,084 478 1,729 30
Advertising costs 3,416 497 850 182
Consulting and training 2,845 11,046 1,215 4,326
Maintenance and repairs 2,286 1,215 595 360
Security 1,838 1,723 523 655
Communications 1,484 1,974 466 689
Cash collection expenses 1,352 1,442 427 543
Rents 1,197 1,502 418 449
Insurances 730 454 243 116
Stock control expenses 424 336 424 336
State and municipal fees 589 545 162 215
Others 908 1,093 467 306
,
Total 27,268 26,022 9,613 9,540
11. Employee benefits expenses
September 30, September 30, 3 rd quarter, 3 rd quarter,
2006 2005 2006 2005
BGN'000 BGN'000 BGN'000 BGN'000
Wages and salaries 15,079 15,298 5,241 5,426
Social security 4,528 5,156
contributions
1,562 4,830
19,607 20, 454
Total 6,803 7,322
12. Depreciation and amortization expenses
September 30, September 30, 3 rd quarter, 3 rd quarter,
2006 2005 2006 2005
BGN'000 BGN'000 BGN'000 BGN'000
Depreciation of property, 13,706 16,022 4,417 5,571
plant and equipment
Depreciation of investment 628 917 211 299
property
Amortization of intangible 385 385 126 153
assets
Total 14,719 17,324 4,754 6,023
13. Impairment of assets
September 30, September 30, 3 rd quarter, 3 rd quarter,
2006 2005 2006 2005
BGN'000. BGN'000 BGN'000 BGN'000
Impairment non-current
assets and investment
property 576 - - -
Impairment of investments 27 - - -
Impairment of receivables 6,206 - 1,960
Impairment of inventory - 6 - -
Total 603 6,212 - 1,960
The main portion of impairment costs during the current period at the amount of
BGN 549 thousand incur in relation to the impairment of an investment property -
land, contributed in-kind by the Parent company in one of the subsidiaries (see
note 19).
During the current period the investment in the associate Petrol Engineering AD
has been entirely impaired (see note 20).
Impairment costs during the prior reporting period incurs in relation to
impairment of an account with a Counterparty, as disclosed in note 6 and
impairment of inventory.
14. Other expense
September 30, September 30, 3 rd quarter, 3 rd quarter,
2006 2005
2006 2005
BGN'000 BGN'000
BGN'000 BGN'000
Penalties and indemnities 1,656 1,114 504 2
Taxes and tax charges 1,284 1,396 227 153
Shortages of assets 1,442 630 526 64
Entertainment expenses and 540 352 80 46
sponsorship
Scraped inventories and 1,036 227 957 126
non-current assets
Business trips 306 325 121 195
Other 728 49 154 (98)
Total 6,992 4,093 2,569 488
15. Finance cost
September 30, September 30, 3 rd quarter, 3 rd quarter,
2006 2005
2006 2005
BGN'000 BGN'000
BGN'000 BGN'000
Finance income
Interest income 2,983 1,793 1,214 457
Foreign exchange rate gains, 1,088 85 285 13
net
Discount on purchased 591 439 554 394
receivables and other income
Total 4,662 2,317 2, 053 864
Finance cost
Interest expense (6,940) (5,657) (2,302) (1,838)
Loss on an in-kind - (31) - -
contribution in an associate
Bank fees, commissions and (2,381) (1,645) (1,735) (958)
other expenses
Total (9,321) (7,302) (4,037) (2,796)
16. Taxation
Tax expense in the income statement includes the amount of current and deferred
income taxes in accordance with the requirements of IAS 12 Income Taxes.
September 30, September 30, 3 rd quarter, 3 rd quarter,
2006 BGN'000 2005 BGN'000
2006 2005
BGN'000 BGN'000
Current tax expense 3,231 8,495 638 2,296
Change in deferred taxes,
including:
Temporary differences 712 (4,620) (527) 5
reversed during the year
Temporary differences (624) (257) 451 (74)
originated during the year
Total 88 (4,877) (76) (69)
Total tax expense 3,319 3,618 562 2,227
16. Taxation (continued)
The net deferred tax liabilities, presented in the balance sheet, arise as a
result of income taxes on taxable and deductible temporary differences, the
effect of which is as follows:
September 30, 2006 June 30, 2006 December 31, 2005
BGN'000
BGN'000 BGN'000
Temporary Tax Temporary Tax Temporary Tax
effect effect effect
difference difference difference
Balance at the beginning of the period
Tax loss to be carried forward (7,653) (1,148) 7,653 1,148 131 20
Impairment of assets (1,963) 295 1,963 295 2,820 423
Depreciation/amortization of non-current (5,221) 783 5,221 783 4,115 617
assets
Liabilities related to annual paid leave (1,392) 208 1,392 208 1,366 205
Revaluation reserve of non-current assets (33,959) (5,094) (33,959) (5,094) (69,653) (10,448)
Total (17,730) (2,660) (17,730) (2,660) (61,221) (9,183)
Originated during the period
Tax loss to be carried forward - - 7,653 1,148
Impairment of assets - - 559 84
Depreciation/amortization of non-current 2,701 405 6,071 910 1,994 299
assets
Liabilities related to annual paid leave 1,223 184 860 130 1,339 200
Total 3,924 589 6,931 1,040 11,545 1,731
Reversed during the period
Tax loss to be carried forward (7,653) (1,148) (7,653) (1,148) (131) (20)
Impairment of assets (48) (7) (48) (7) (1,416) (212)
Depreciation/amortization of non-current (1,703) (255) (1,128) (169) (888) (133)
assets
Liabilities related to annual paid leave (892) (134) (574) (86) (1,313) (197)
Revaluation reserve of non-current assets 5,784 867 1,374 206 35,694 5,354
Total (4,512) (677) (8,029) (1,204) 31,946 4,792
Balance at the end of the period
Tax loss to be carried forward 0 0 - - 7,653 1,148
Impairment of assets 1,915 288 1,915 288 1,963 295
Depreciation/amortization of non-current 6,334 950 10,164 1,524 5,221 783
assets
Liabilities related to annual paid leave 1,724 258 1,678 252 1,392 208
Revaluation reserve of non-current assets (28,288) (4,244) (32,585) (4,888) (33,959) (5,094)
Total (18,315) (2,748) (18,828) (2,824) (17,730) (2,660)
16. Taxation (continued)
The reconciliation of the tax expense to the accounting profit, and the
calculations of the effective tax rate as at June 30, 2006 and 2005, is as
follows:
September September 3 rd quarter, 3 rd quarter,
30, 30,
2006 2005 2006 2005
BGN'000 BGN'000. BGN'000 BGN'000
Consolidated accounting profit 20,205 17,093 3,125 10,609
Applicable tax rate 15 % 15 % 15 % 15 %
Income tax at the applicable tax rate 3,031 2,564 469 1,591
Combined tax effect on permanent differences 148 (4,526) 77 (4,647)
Tax effect on tax assets/liabilities 37 4,860 (46) 4,775
originated and unrecognized in the current
reporting period
Tax effect on consolidation adjustments 103 720 62 508
Total tax expense 3,319 3,618 562 2,227
Effective tax rate 16,43% 21,17% 17,98% 20,99%
17. Property, plant and equipment
Land Buildings Plant and Vehicles Other Assets under Total
equipment construction
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
Cost
Balance at January
1, 2005 50,623 69,104 154,851 15,486 21,652 3,802 315,518
Additions 235 10 1 439 164 156 5,480 7,484
Disposals (373) (719) (618) (73) (210) (454) (2,447)
Transfers - 19 - (5) (2,203) (2,189)
-
Balance at September 50, 485 68,395 155,691 15 577 21,593 6,625 318,366
30, 2005
Additions 56 5 693 1,325 2,079
Impairment loss (375) (6) (343) - - - (724)
Disposals (53) (43) (1,297) (142) (49) - (1,584)
Transfers 9 285 5,744 76 178 (5,602) 690
Balance at
December 31, 2005 50,122 68,636 159,795 16,204 21,722 2,348 318,827
Additions - 22 482 7,438 187 7,347 15,476
Impairment loss - - - (27) - - (27)
Disposals (295) (1,035) (2,136) (3,739) (1,145) (731) (9,081)
Transfers (1,445) (925) 819 88 274 (1,509) (2,698)
Balance at September 48,382 66,698 158,960 19,964 21,038 7,455 322,497
30, 2006
Accumulated
depreciation
Balance at January
1, 2005 - 30,708 51,993 6,965 7,352 - 97,018
Charged for the period - 1,537 10,601 1,686 2,198 - 16,022
Disposals for the - (582) (249) (61) (13) - (905)
period
Transfers - 3 23 - (26) - -
-
Balance at September 31,666 62,368 8,590 9,511 - 112,135
30, 2005 -
Charged for the period - 392 2,506 517 734 - 4,086
Disposals for the - (30) (77) (85) (19) - (211)
period
Balance at
December 31, 2005 - 31,965 64,797 9,022 10,226 - 116,010
Charged for the period - 1,297 8160 2,049 2,200 - 13,706
Disposals for the - (455) (1,116) (3,086) (1,073) - (5,730)
period
Transfers (328) (157) (13) 103 - (395)
-
Balance at September 32,479 71,684 7,972 11,456 - 123,591
30, 2006 -
Carrying amount at
January 1, 2005 50,623 38,396 102,858 8,521 14,300 3,802 218,500
Carrying amount at
September 30, 2005
50,485 36,729 93 323 6 987 12,082 6,625 206,231
Carrying amount at
December 31, 2005 50,122 36,671 94,998 7,182 11,496 2,348 202,817
Carrying amount at 48 382 34,219 87,276 11,992 9,582 7,455 198,906
June 30, 2006
17. Property, plant and equipment (continued)
The amount of the disposals for the current period includes assets (mostly
vehicles), sold in relation to the management's decision for reorganization
within the Group and modernization of the used assets, as well as assets in the
petrol depots, sold as scrap.
18. Intangible assets
Software Licenses Other Assets under Total
construction
BGN'000
BGN'000 BGN'000 BGN'000 BGN'000
Cost
Balance at January 777 84 369 723 1,953
1, 2005
Additions 397 504 37 9 947
Disposals (1) (17) - (18)
Transfers - (700) (700)
Balance at September 30, 2005 1,173 571 406 32 2,182
Additions 6 - - 24 30
Disposals (1) - - - (1)
Transfers - 443 - (4) 439
Balance at 1,178 1,014 406 52 2,650
December 31, 2005
Additions 118 8 - 110 236
Disposals (42) (23) - - (65)
Transfers 232 - (293) (12) (73)
Balance at September 30, 2006 1,486 999 113 150 2748
Accumulated amortization
Balance at January 299 42 170 - 511
1, 2005
Charged for the period 289 44 43 - 385
Disposals for the period (1) (1) - - (2)
Balance at September 30, 2005 596 85 213 - 894
Charged for the period 96 66 15 - 177
Disposals for the period (1) (1) - - (2)
Balance at 691 150 228 - 1,069
December 31, 2005
Charged for the period 253 111 21 - 385
Disposals for the period (31) (23) - - (54)
Transfers 96 - (194) - (98)
Balance at September 30, 2006 1,010 238 54 - 1,302
Carrying amount at
January 1, 2005 478 42 199 723 1,442
Carrying amount at 577 486 193 32 1,288
September 30, 2005
Carrying amount at
December 31, 2005 487 864 178 52 1,581
Carrying amount at
September 30, 2006 476 761 59 150 1,446
19. Investment property
Land Buildings Plant and Other Total
equipment
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
Cost
Balance at January 1, 2005 2,043 17,956 1,893 1,791 23,683
Additions 400 - - 6 406
Disposals - - - (5) (5)
Transfers - 473 62 7 542
Balance at September 30, 2005 2,443 18,429 1,955 1,799 24,626
Additions - 34 5 1 40
Disposals - - (9) (44) (53)
Transfers - 355 68 91 514
Balance at 2,443 18,818 2,019 1,847 25,127
December 31, 2005
Additions - 8 34 14 56
Disposals (680) (415) (295) (611) (2,001)
Impairment loss (549) - - - (549)
Transfers 1,445 1,073 25 228 2,771
Balance at September 30, 2006 2,659 19,484 1,783 1,478 25,404
Accumulated depreciation
Balance at January 1, 2005 - 2,118 1,290 941 4,349
Charged for the period - 530 174 213 917
Disposals for the period - - - (12) (12)
Balance at September 30, 2005 - 2 658 1464 1142 5264
Charged for the period - 193 42 56 291
Disposals for the period - - (5) (17) (22)
Balance at - 2,851 1,501 1,181 5,533
December 31, 2005
Charged for the period - 512 45 71 628
Disposals for the period - (109) (278) (429) (816)
Transfers - 328 (15) 180 493
Balance at September 30, 2006 - 3,582 1,253 1,003 5,838
Carrying amount at 2,043 15,838 603 850 19,334
January 1, 2005
Carrying amount at 2,443 15,771 491 657 19362
September 30, 2005
Carrying amount at 2,443 15,967 518 666 19,594
December 31, 2005
Carrying amount at 2,659 15,902 530 475 19,566
September 30, 2006
19. Investment property (continued)
As of September 30, 2006 investment properties comprise primarily a hotel
complex, administrative buildings and land.
The fair value of investment properties, based on the estimation of a certified
appraiser according to art. 72 of the Commercial Law, in relation to an in-kind
contribution to the share capital of the subsidiary Eurocapital Bulgaria EAD,
does not materially differ from and is higher than the assets' carrying amount
as of June 30, 2006. The valuation of the properties is as follows: for the
administrative buildings, land and other assets, contributed in-kind in March
2006 - BGN 7,313 thousand; for the hotel complex, contributed in-kind in April
2006 - BGN 14,522 thousand. After their transfer to Eurocapital Bulgaria EAD,
some items of property, plant and equipment have changed their purpose within
the Group - to assets, held to be rented out under operating lease or for
increase of the capital value. Those assets are transferred and presented in the
Group's balance sheet as of Sepptember 30, 2006 as investment properties.
As of September 30, June 30, 2006 and December 31, 2005 property, plant and
equipment, intangible assets and investment properties with total carrying
amount of BGN 47,940 thousand , BGN 70,354 thousand and BGN 74,398 thousand are
pledged/mortgaged as collaterals under bank loans granted to the Group and to
related parties (see also notes 26 and 36).
20. Investments in associates and other investments
For the nine month For the six month For the six month
ended
ended ended
December 31, 2005
September 30, 2006 June 30, 2005
BGN'000
BGN'000 BGN'000
Investments in Invest-ment Invest-ment Share of Invest-ment Share of Investment Share of
associates loss for loss for loss for
the the the period
period period
% BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
Varna Business
Services IID 42.69% 1,843 (204) 2,047 (108) 2,094 (259)
Petrol Engineering
AD 40.00% - - 27 - 27 -
Total 1,843 (204) 2,074 (108) 2,121 (259)
20. Investments in associates and other investments ( continued )
The aggregate amounts of the assets, liabilities, income, profit/(loss) of the
associates as at September 30, 2006 and December 31, 2005, are as follows:
Assets Liabilities Net Revenue Profit/
assets (loss)
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
September 30, 2006
Varna Business Services IID 6,923 2,606 4,317 1,072 (477)
Petrol Engineering AD 253 247 6 8 (3)
Total 7,176 2,853 4,323 1,080 (480)
June 30, 2006
Varna Business Services IID 7,173 2,697 4,476 693 (318)
Petrol Engineering AD 253 247 6 8 (3)
Total 7,426 2,944 4,482 701 (321)
December 31, 2005
Varna Business Services IID 7,254 2,460 4,794 1,487 (531)
Petrol Engineering AD 216 245 (29) 95 (25)
Total 7,470 2,705 4,765 1,582 (556)
21. Goodwill, net
Goodwill Negative Goodwill,
goodwill net
BGN'000 BGN'000 BGN'000
Cost
Balance at December 31, 2004 28,420 (4,194) 24,226
Offsetting by the depreciation on January 1, 2005 (8,111) 1,058 (7,053)
Transfer of negative goodwill to retained earnings - 3,136 3,136
at January 1, 2005 according to IFRS 3
Balance at December 31, 2005 20,309 - 20,309
Balance at September 30, 2006 20,309 - 20,309
Accumulated amortization
Balance at December 31, 2004 8,111 (1,058) 7,053
Offsetting by the carrying amount (8,111) 1,058 (7,053)
at January 1, 2005, according to IFRS 3
Balance at December 31, 2005 - - -
Balance at September 30, 2006 - - -
Carrying amount at January 1, 2005 20,309 (3,136) 17,173
(restated)
Carrying amount at December 31, 2005 20,309 - 20,309
Carrying amount at September 30, 2006 20,309 - 20,309
As disclosed in note 2.6 above, the acquisition of Naftex Petrol EOOD is a
result of the restructuring policy of the companies within the economic group -
Petrol Holding AD. According to the adopted accounting policy this acquisition
has been measured by using the purchase method, and as a result, goodwill of BGN
24,396 thousand has been recognized as at the acquisition date. As of September
30, 2006 and December 31, 2005 the carrying amount of this goodwill is BGN
18,297 thousand.
22. Inventories
September 30, June 30, December 31, 2005
2006 2006 BGN'000
BGN'000 BGN'000
Heavy fuels (diesel and industrial fuels, gas 57,157 46,803 24,843
fuel)
Light fuels (gasoline) 33,924 30,350 39,908
Lubricants and other goods 8,744 10,911 13,756
Materials 4,466 4,165 3,783
Total 104,291 92,229 82,290
In the balance sheet of the Parent company as of September 30, 2006 and December
31, 2005 inventories amounting to BGN 27,050 thousand and BGN 25,488 thousand,
respectively represent fuels at the gas stations delivered under a purchase
agreement with a Counterparty but not invoiced by the supplier as at the year
end. Applying the principle of substance over form and according to the terms of
the purchase agreement, all risks are transferred from the with a Counterparty
to the Parent company by the transfer of the fuels to the gas stations,
therefore the Parent company has adopted the policy to recognise these fuels in
the balance sheet (see note 25).
As of September 30, 2006 inventories (fuels) with a carrying amount of BGN
11,978 thousand are pledged as collateral for bank loans granted to the Group
(see note 26).
23. Trade and other receivables, net
September 30, June 30, December 31, 2005
2006 2006 BGN'000
BGN'000 BGN'000
Trade receivables and advances granted, net of 54,218 81,008 67,663
impairment losses
Related party receivables 94,966 70,417 23,293
VAT and excise duties refundable 14 4,077 8,313
Litigations and writs, net of impairment 571 553 264
losses
Other, net of impairment losses 3,492 2,835 2,786
Total 153,261 158,890 102,319
Related party receivables are further disclosed in note 34.
Receivables amounting to BGN 58,965, BGN 18,468 thousand and BGN 31,510 thousand
serve as collateral for loans received by the Group as of September 30, 2006,
June 30,2006 and December 31, 2005, respectively (see note 26).
Management believes that the carrying amount of trade and other receivables
approximates their fair value as of September 30, 2006 and December 31, 2005.
24. Cash and cash equivalents
September 30, June 30, December 31, 2005
2006 2006 BGN'000
BGN'000 BGN'000
Cash at banks 20,887 4,931 5,039
Cash in transfer 4,835 3,321 6,388
Cash on hand 194 173 63
25,916 8,425 11,490
Total
25. Trade and other payables, net
September 30, June 30, December 31, 2005
2006 2006 BGN'000
BGN'000 BGN'000
Payables to suppliers and advances received, 118,301 113,970 56,727
net
Relate party payables 25,949 25,087 47,718
Payables to personnel and Social Security 3,828 3,647 3,738
Funds
VAT and excise duties payable 24,392 1,624 2,172
Other 23,505 4,400 4,063
195,975 148,728 114,418
Total
Payables to related parties are further disclosed in note 34.
In the total amount of trade payables, as of December 30, 2006 and December 31,
2005 are included liabilities for delivered, but not invoiced fuels at the
amount of BGN 27,050 thousand and 25,488 thousand, respectively (see note 22).
The Group accrues liabilities for unused annual paid leave of employees in
compliance with IAS 19 Employee Benefits. The movement of these liabilities for
the reported periods is as follows:
September 30, June 30, December 31, 2005
2006 2006 BGN'000
BGN'000 BGN'000
Balance at the beginning of the period 1,409 1,409 1,376
Accrued during the period 1,202 860 1,351
Utilized during the period (933) (577) (1,318)
Balance at the end of the period, including: 1,678 1,692 1,409
For salaries on unused annual paid leave 1,349 1,350 1,130
For social security contributions on unused 329 342 279
annual paid leave
The balance at the end of the period is presented in the balance sheet together
with the short-term employee benefits.
Management believes that the stated in the balance sheet amounts of current
liabilities as of September 30, 2006 and December 31, 2005 correspond to their
fair value.
6. Interest-bearing loans
September 30 June 30, December 31,
2006 2006 2005
BGN'000 BGN'000 BGN'000
Current liabilities under interest-bearing
loans
Current portion of liabilities on bank loans 70,812 99,833 86,180
Total 70,812 99,833 86,180
Non-current liabilities under interest-bearing
loans
Long-term portion of liabilities on bank loans 57,517 54,799 58,639
Corporate bond 14,896 14,885 14,864
,
Total 72,413 69,684 73,503
Non-current liabilities under bank loans mature as follows:
September 30 June 30, December 31,
2006 2006 2005
BGN'000 BGN'000 BGN'000
Between one and two years 16,935 24,153 27,405
Between three and five years 40,582 30,646 31,234
57,517 54,799 58,639
Total
The bank loan liabilities analyzed by currency are as follows:
September 30, 2006 June 30, 2006 December 31, 2005
Original Original Original
currency currency currency
in thousands BGN'000 in thousands BGN'000 in thousands BGN'000
BGN 57,715 57,715 75,729 75,729 68,489 68,489
USD 4,666 7,179 1,208 2,003
EUR 36,104 70,614 36,672 71,724 38,003 74,327
Total 128,329 154,632 144, 819
The average interest rates for the nine months of 2006 on the bank loans are
4.31% and 6.99%, respectively.
Short-term and long-term loans granted to the Group are secured by mortgage of
land and buildings and pledge of non-current assets for the amount of BGN 47,940
thousand, receivables amounting to BGN 58,965 thousand, fuels for BGN 11,978
thousand (see also notes 17, 22 and 23).
In November 2003 the Parent company issued registered, dematerialised, ordinary,
interest bearing and freely transferable corporate bonds at a total amount of
BGN 15,000 thousand and a nominal value of BGN 1,000 per one bond. The maturity
of the corporate bond is 5 years. The interest rate on the bond is 8.375% per
annum. It is secured by a corporate guarantee, issued by the majority
shareholder of the Parent company. Interest is payable twice per year, at every
six months.
27. Obligations under finance lease
Minimum lease payments Present value of minimum lease payments
September June 30, December 31, September 30, June 30, December 31,
30,
2006 2005 2006 2006 2005
2006
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
BGN'000
Amounts payable under
finance leases:
Within one year 2,141 1,860 447 1,732 1,487 428
Over one year 5,823 5,700 389 5,150 5,018 384
Less: Interest payable (1,082) (1,055) (24) - - -
Amounts payable under 6,882 6,505 812 6,882 6,055 812
finance leases:
Present value of lease
obligations within one year
Less: Present value of -1,732 (1,487) -428
amount due for settlement
within 1 year
Present value of lease 5,150 5,018 384
obligations over one year
Assets acquired under finance leases comprise of vehicles. The lease term of the
contracts is between 3 to 6 years. The increase of the obligations under finance
lease during the current period is due to the obligations, originated in
relation to the newly signed lease contracts according to a decision for
renovation of the vehicles of the Group.
Management believes that the fair value of the obligations under finance leases
does not differ significantly from their carrying amount.
28. Current income tax payable
Income tax payables/receivables are calculated as the difference between the
accrued and the paid tax as of the balance sheet date.
September 30 June 30 December 31,
2006 2006 2005
BGN'000 BGN'000 BGN'000
Income tax payable as of January 1, net 3,396 3,396 2,327
Accrued corporate income tax 3,234 2,593 6,590
Corporate income tax paid (7,586) (6,293) (5,521)
Income tax payable (refundable) as of the (956) (304) 3,396
balance sheet date, net
29. Share capital
The share capital of the Group is presented at nominal value, according to the
court decision for registration. The fully paid-in share capital at the amount
of BGN 109,250 thousand is distributed into 109,249,612 registered shares with a
nominal value of BGN 1 each.
Shareholders of the Parent company as of September 30, 2006 and December 31,
2005 are as follows:
Shareholder September 30, June 30, December 31,
2006 2006 2004
% of share capital % of share capital % of share capital
Petrol Holding AD 76.03 76.03 76.03
Naftex Oil Shipping Corporation Limited 18.84 18.84 18.84
(United Arab Emirates)
Ministry of Economics 0.97 0.97 1.03
Other minority shareholders 4.16 4.16 4.10
Total 100.00 100.00 100.00
30. Revaluation reserve
The reserve of revaluation of non-current assets, net of accrued deferred tax,
as of September 30, 2006 and December 31, 2005, at the amount of
BGN 27,483 thousand and BGN 28,865 thousand, respectively, has been allocated as
a result of revaluations of property, plant and equipment and intangible assets,
carried out in the period 1997 - 2001, as well as of revaluation as of December
31, 2002 in compliance with the applicable Bulgarian accounting legislation (see
also note 3.1).
The revaluation reserve is transferred to retained earnings on the disposal of
the respective asset.
31. Earnings per share
Earnings per share is calculated by dividing the net profit for the period by
the weighted average number of ordinary shares outstanding during the reporting
period.
September 30, June 30 September 30,
2006 2006 2005
Weighted average number of shares (thousand) 109,250 109,250 109,250
Profit (BGN'000) 16,886 14,323 13,475
Earnings per share (BGN) 0,15 0.13 0,12
32. Dividends
According to a decision of the General meeting of the Parent company, held on
June 5, 2006 dividends at the amount of BGN 727 thousand have been distributed
in proportion to the participations of the shareholders (see also note 29).
33. Subsidiaries
The consolidated subsidiaries, on which the Group exercises controls as of
September 30, 2006 and December 31, 2005, are as follows:
Subsidiary Type of activity Investments Investments Investments
as of as of as of
September 30, June 30, December 31,
2006 2006 2005
Petrol Trans Express EOOD Transport services 100.0 % 100.0 % 100.0 %
Petrol Technica EOOD Service and maintenance
of gas stations 100.0 % 100.0 % 100.0 %
Petrol Storage EOOD Fuel storage 100.0 % 100.0 % 100.0 %
Petrol Trade EOOD Trade 100.0 % 100.0 % 100.0 %
BPI EAD Trade with fuels and rents 100.0 % 100.0 % 100.0 %
Naftex Petrol EOOD Wholesale with fuels 100.0 % 100.0 % 100.0 %
Eurocapital Bulgaria EAD Investment 100.0 % 100.0 % 100.0 %
Petrol Card Service EOOD Trade with fuels with fleet
cards 100.0 % 100.0 % 100.0 %
Translotto AD Lottery (after licensing by
the 99.9 % 99.9 % 99.9 %
State Gambling Commission)
Vratzata OOD Recreation services 99.4 % 99.4 % 99.4 %
Based on article 114 of the Law for Public Offering of Securities, General
meeting of the shareholders of the Parent company, held on June 5, 2006,
empowered the Managing Board and the Executive Director to conclude contacts for
the sale of the shares of the following companies: Vratzata OOD, Translotto AD,
Eurocapital Bulgaria EAD, Petrol Card Service EOOD, Petrol Engineering AD, Varna
Business Services OOD, BPI EAD, Petrol Trade EOOD (see also note 20). The sale
prices are determined based on evaluation of licensed appraisers and the
management believes, that these sales will not lead to losses for the Group.
As of the date of these consolidated financial statements the sale of the shares
can not be defined as highly probable, as there is not sufficient assurance that
it will be carried out within one year. Therefore, the management believes that
as of September 30, 2006 the net assets of the above stated companies, as well
as the investments in associates do not comply with the criteria held for sale
of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.
33. Subsidiaries (continued)
Net assets of subsidiaries as of September 30, 2006 and December 31, 2005,
included in these consolidated financial statements and reported after
consolidation adjustments, eliminations of intragroup accounts and unrealized
profits are as follows:
Petrol Card Petrol BPI EAD Vratzata Translotto Eurocapital
Service EOOD Trade EOOD OOD AD Bulgaria EAD
September 30, 2006
Non-current assets 14 0 6,791 470 1,641 19,567
Current assets 503 729 162 8 47 15,523
Non-current liabilities (125) (2521) (2,410) (21) (1,178) (36)
Current liabilities 0 0 0 (17) - 14
Net assets 392 (1,792) 4,543 440 510 35,068
June 30, 2006
Non-current assets 14 - 6,687 478 1,703 19,777
Current assets 505 786 151 12 15 14,945
Non-current liabilities (127) (2,552) (2,450) (18) (1,030) (24)
Current liabilities - - - (17) - -
Net assets 392 (1,766) 4,388 455 688 34,698
December 31, 2005
Non-current assets 14 - 6,977 493 1,829 1,393
Current assets 510 989 258 16 19 12,318
Non-current liabilities (131) (2,617) (2,596) (18) (779) (34)
Current liabilities - - - (17) - -
Net assets 393 (1,628) 4,639 474 1,069 13,677
Income and expenses of subsidiaries for the period ended September 30, 2006 and
2005, included in these consolidated financial statements and reported after
eliminations of intragroup turnovers are as follows:
Petrol Card Petrol BPI EAD Vratzata Translotto Eurocapital
Service EOOD Trade EOOD OOD AD Bulgaria EAD
September 30, 2006
Total revenue 0 0 0 9 0 2,963
Total operating expenses (1) (26) (677) (80) (483) (1,716)
Financial expenses, net 0 (138) (64) 0 (32) 558
Tax expense 0 0 0 0 0 (124)
Net profit/(loss) (1) (164) (741) (71) (515) 1,681
September 30, 2005
Total revenue 6,138 635 0 4 0 19
Total operating expenses (176) (885) (372) (40) (325) (226)
Financial expenses, net 0 76 (40) 0 (8) 383
Tax expense (2) 0 (3) 0 0 (28)
Net profit/(loss) 5,960 (174) (415) (36) (333) 148
34. Related parties transactions
The related parties, which the Parent company controls and over which it has
significant influence are disclosed in notes 33 and 20.
The ultimate controlling company of the Parent company is Petrol Holding AD.
Transactions with related parties for the current and prior reporting periods
are as follows:
Related Party
Petrol Holding AD controlling company
Varna Business Services OOD associated company
Izvor Bottling Company AD subsidiary of Petrol Holding AD
Eurobank AA subsidiary of Petrol Holding AD
till May 2005
Air Lazur - General Aviation EOOD subsidiary of Petrol Holding AD
from July 2005
Interhotel Bulgaria Burgas EOOD subsidiary of Petrol Holding AD
Morsko Kazino EAD subsidiary of Petrol Holding AD
Naftex Security EAD subsidiary of Petrol Holding AD
PFC Naftex AD subsidiary of Petrol Holding AD
Ross Oil EOOD subsidiary of Petrol Holding AD
Transhold Bulgaria Holding AD subsidiary of Petrol Holding AD
Jurex Consult AD subsidiary of Petrol Holding AD
Tema Sport OOD subsidiary of Petrol Holding AD
Transat AD subsidiary of Transhold Bulgaria Holding AD
Trans Telecom OOD subsidiary of Transhold Bulgaria Holding AD
TransCard AD subsidiary of Transhold Bulgaria Holding AD
Transcard Financial Services EAD subsidiary of TransCard AD
34. Related parties transactions (continued)
The transactions performed relate primarily to:
* purchase and sale of fuel and other goods;
* bank services;
* purchase and sale of property, plant and equipment;
* holding fees and services;
* rents;
* transport services;
* supply of materials;
* maintenance and servicing;
* legal consultations;
* communication services.
* other.
There are no unusual conditions or deviations from the average market prices in
these transactions.
Transactions with related parties for the first nine months of 2006 and 2005, as
follows:
Related parties September 30, September 30, September 30, September 30,
2006 2005 2006 2005
BGN'000 BGN'000 BGN'000 BGN'000
Sales of goods Sales of goods Purchases of Purchases of
and services and services goods and goods and
services services
Controlling company 731 8,131 3,386 11,294
Companies under common control 2,721 2,153 5,918 3,409
Associated companies 44 41 348 354
Total 3,496 10,325 9,652 15,057
Related parties September 30, September 30, September 30, September 30,
2006 2005 2006 2005
BGN'000 BGN'000 BGN'000 BGN'000
Financial Financial Financial Financial
income income expenses expenses
Controlling company 2,873 1,653 (188) (140)
Companies under common control - 12 - 38
Associated companies 0 44 0 (125)
Total 2,873 1,709 (188) (227)
34. Related parties transactions (continued)
The outstanding balances with related parties as of September 30, 2006 and
December 31, 2005 are as follows:
Related parties September 30, September 30, September 30, September 30,
2006 2005 2006 2005
BGN'000 BGN'000 BGN'000 BGN'000
Amounts Amounts Amounts Amounts
receivable receivable payable payable
Controlling company 94,071 47,590 24,286 27,359
Companies under common control 795 1,253 1,572 906
Associated companies 100 102 91 26
Total
Controlling company 94,966 48,945 25,949 28,291
The total amount of the compensations for the first nine months of 2006 of the
Supervisory and Managing Board members and the Executive Director of the Parent
company, included in employee benefits expenses is BGN 624 thousand.
35. Contingent liabilities
According to the Labor Code the Group has liabilities to the personnel when
entitled to retirement. The compensation due in accordance with current
legislation is calculated based on length of service, age and labor category of
the respective employee. As of June 30, 2006 the turnover of the personnel of
the Group is within the limit of 19.3% and the average age of the Group's
employees is 34 years. Based on the approximate calculation and the considerable
remoteness in time management considers that the amount of the estimated
contingent liabilities is insignificant. Therefore, the Group has not accrued
any provisions for these contingent liabilities in these consolidated financial
statements.
According to the Regulation for State and War-time Reserve Storage, adopted by
Decree No 312 of the Council of Ministers in 1996, the Group has liabilities to
the State Reserve by means of storage, safeguarding and refreshing of petrol
products. While performing such activity, certain contingent liabilities might
arise, concerning payment of extra wastage for safekeeping of oil products, in
case such wastage occurs. Similar contingencies also might occur on the basis of
the Act for Compulsory Reserves of Oil and Oil Products effective from 2003, and
concluded contracts with other parties, according to which the Group safeguards
oil products of third parties for payment in its own licensed petrol depots.
As of September 30, 2006 the Group has contingent liabilities for avalled
promissory notes to third parties for liabilities of related parties in the
amount of BGN 59,595 thousand and BGN 47,940 thousand mortgaged and/or pledged
as collateral assets of bank loans, granted to related parties (see note 19).
37. Environmental matters
In relation with the privatization of the Parent company in 1999, for most of
the Company's facilities (petrol depots and fuel-filling stations) reports for
the environmental impact of the Company's activities had been prepared and
approved by expert council to the Ministry of Environment and Water. Based on
these reports, consents by the Ministry of Environment and Water for the
exploitation of all Company's assets had been issued. Following its
privatization the Parent Company started the implementation of intensive
investment program aimed to bring the Company's facilities in line with the
requirements of the best environmental practices in Western Europe. Therefore,
the Company's outlets are reconstructed to be in line with the requirements of
the European Union Directive 94/63/EC which has been implemented in Bulgarian
legislation in the form of Ordinance No 16 dated 12 August 1999 (the Ordinance),
which limits the emission of volatile organic compounds connected with the
storage, loading or unloading and transportation of petrol. This Ordinance is
issued based on Art 9, Para 1 of the Law on Ambient Air Purity. The
reconstruction of the gas stations is preceded by preparation of ecological
characteristic for each investment proposal. These characteristics are presented
to the regional inspections (RIOSV) for issuance of construction permission.
During the period 2006 - 2009, 379 gas stations and 5 depots are going to be set
to the certain standards, depending on their technological characteristics and
observing the requirements of the Ordinance. The assumptions of the management
for the total value of the repairs for the cited period account for BGN 18,700
thousands as follows:
December 31, December 31, December 31, December 31, Total
2006 2007 2008 2009
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Number of gas stations 97 90 96 96 379
Number of petrol depots 4 1 - - 5
Total facilities 101 91 96 96 384
Estimated value of the
reconstruction, BGN'000 9,620 5,240 1,920 1,920 18,700
The actual amounts and the timing of the reconstructions could differ
significantly from the stated above preliminary estimations.
As of the date of these financial statements no obligating event has occurred in
accordance with the IAS 37 Provisions, Contingent Liabilities concerning
environmental commitments of the Group, under the legislation in Bulgaria, and
therefore no provisions have been accrued.
39. Post balance sheet events
As of the date of these consolidated financial statements the Group has obtained
a license for managing of a tax warehouse for seven petrol depots based on
article 20, paragraph 1 of the Excise Duties and Tax Warehouses Act, effective
July 1, 2006. This license allows receiving in the tax warehouses energy
products both under deferred excise payment regime and with paid excise; to
store in one joint reservoir energy products under deferred excise payment
regime and with paid excise; to store additives for energy products; to mix
energy products; to add additives to energy products for trade and technical
purposes; to mark energy products; to empty energy products' reservoirs and
remove the wastes from the bottom. The receiving and storage of energy products
under deferred excise payment regime is secured by bank guarantees at the amount
of BGN 33,150 thousand.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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