RNS Number:0031J
Petrol AD
03 December 2007
CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2007
Table of contents
Consolidated financial statements as of September 30, 2007.................3
Notes to the consolidated financial statements ............................8
CONSOLIDATED INCOME STATEMENT
For the nine months ended September 30, 2007
Notes Nine months Nine months Three months Three months
ended ended ended ended September
(1) September September September 30,
30, 30, 30,
2007 2006 2007 2006
BGN'000 BGN'000 BGN'000 BGN'000
(restated) (restated)
Revenue 6 952,180 988,379 391,568 356,843
Other income 7 2,244 6,534 790 2,597
Total operating revenue 954,424 994,913 392,358 359,440
Cost of goods sold 8 (832,469) (900,066) (345,796) (327,425)
Materials 9 (8,349) (9,592) (2,885) (3,789)
Hired services 10 (26,818) (27,268) (10,136) (9,613)
Employee benefits expenses 11 (22,221) (19,607) (7,200) (6,803)
Depreciation and amortization expenses (13,185) (4,536) (4,754)
12 (14,719)
Other expenses 13 (8,534) (6,993) (3,741) (1,947)
Finance income 14 14,211 4,108 11,309 1,499
Finance costs 14 (37,734) (8,563) (7,463) (3,415)
Share of loss of associates 19 (200) (204) (34) (68)
Profit before tax 19,125 12,009 21,876 3,125
Income tax expense 15 (1,968) (3,319) (1,383) (562)
Net profit for the period 17,157 8,690 20,493 2,563
Earnings per share (BGN) 33 0.16 0.08 0.19 0.02
These consolidated financial statements have been approved on behalf of Petrol
AD by:
Svetoslav Yordanov Desislava Todorova
Executive Director Chief Accountant
October 26, 2007
(The accompanying notes from page 8 to page 50 are an integral part of these
consolidated financial statements)
CONSOLIDATED BALANCE SHEET
as of September 30, 2007
Notes September June 30, December 31,
30,
(1)
2007 2007 2006
BGN'000 BGN'000 BGN'000
Non-current assets
Property, plant and equipment 16 217,034 210,790 201,614
Intangible assets 17 1,288 1,343 1,400
Investment property 18 20,662 19,545 18,252
Investments in associates and other investments 19 1,616 1,650 1,816
Goodwill 20 20,309 20,309 20,309
Interest-bearing loans granted 21 44,698 44,698 44,698
Total non-current assets 305,607 298,335 288,089
Current assets
Inventories 22 118,749 122,290 137,968
Trade and other receivables, net 23 148,255 131,010 107,731
Interest-bearing loans granted 21 24,226 27,366 39,746
Cash and cash equivalents 24 34,083 36,608 62,987
Non-current assets, held for sale 25 1,387 2,466 1,387
Total current assets 326,700 319,740 349,819
Total assets 632,307 618,075 637,908
Current liabilities
Trade and other payables, net 26 156,386 175,980 188,886
Interest-bearing loans 27 76,127 62,885 56,953
Finance lease liabilities 28 2,099 2,108 1,955
Current income tax 29 1,640 1,155 328
Retirement benefits obligations 30 32 32 32
Liabilities directly associated with non-current 25
assets, held for sale
87 -
-
Total current liabilities 236,284 242,247 248,154
Non-current liabilities
Interest-bearing loans 27 207,145 207,071 207,217
Finance lease liabilities 28 3,859 4,370 4,955
Deferred tax liabilities 15 397 257 1,689
Retirement benefits obligations 30 438 438 438
Total non-current liabilities 211,839 212,136 214,299
Net assets 184,184 163,692 175,455
Equity
Share capital 31 109,250 109,250 109,250
Retained earnings 27,794 7,143 26,723
Revaluation reserve 32 28,275 28,536 28,817
Other reserves 18,865 18,763 10,665
Total equity 184,184 163,692 175,455
These consolidated financial statements have been approved on behalf of Petrol
AD by:
Svetoslav Yordanov Desislava Todorova
Executive Director Chief Accountant
October 26, 2007
(The accompanying notes from page 8 to page 50 are an integral part of these
consolidated financial statements)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the nine months ended September 30, 2007
Share Revaluation Other Retained Total
capital reserve reserves earnings
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
Balance at January 1, 2006 109,250 28,865 10,489 12,901 161,505
Revaluation reserve of disposed
non-current assets - (1,382) - 1,382 -
Net income, recognized directly in
equity - (1,382) - 1,382 -
Profit for the period - - - 8,690 8,690
Total income (expenses) recognized in
the period - (1,382) - 10,072 8,690
Allocation of profit to the reserves - - 145 (145) -
Dividends - - - (727) (727)
Balance at September 30, 2006 109,250 27,483 10,634 22,101 169,468
Revaluation reserve of disposed
non-current assets - (266) - 266 -
Change in the tax rate of deferred
tax liabilities, recognized in equity - 1,600 - - 1,600
Net income, recognized directly in
equity - 1,334 - 266 1,600
Profit for the period - - - 4,387 4,387
Total income (expenses) recognized in
the period - 1,334 - 4,653 5,987
Allocation of profit to the reserves - - 31 (31) -
Balance at December 31, 2006 109,250 28,817 10,665 26,723 175,455
Revaluation reserve of disposed
non-current assets - (542) - 542 -
Net income, recognized directly in -
equity - - (542) - 542
Profit for the period - - - 17,157 17,157
Total income (expenses) recognized in
the period - (542) - 17,699 17,157
Allocation of profit to the reserves - - 8,200 (8,200) -
Dividends - - - (8,428) (8,428)
Balance at September 30, 2007 109,250 28,275 18,865 27,794 184,184
These consolidated financial statements have been approved on behalf of Petrol
AD by:
Svetoslav Yordanov Desislava Todorova
Executive Director Chief Accountant
October 26, 2007
(The accompanying notes from page 8 to page 50 are an integral part of these
consolidated financial statements)
CONSOLIDATED CASH FLOW STATEMENT
For the nine months ended September 30, 2007
Nine months Nine months Three months Three months
ended ended ended ended
September September September September
30, 30, 30, 30,
2007 2006 2007 2006
BGN'000 BGN'000 BGN'000 BGN'000
(restated) (restated)
Cash flows from operating activities
Net profit before taxation 19,125 12,009 21,876 3,125
Adjustments for:
Depreciation (amortization) of non-current assets 13,185 14,719 4,536 4,754
Interest expenses and bank fees and commissions, net 19,631 7,831 7,413 2,683
Interest income and other financial income (5,545) (3,020) (1,801) (1,214)
Shortages and scrapped assets,
net of excess assets 2,497 1,493 1,585 726
Provisions for unused annual paid leave and
retirement benefits 2,375 1,202 183 342
Low cost assets written off - 218 - -
Net effect from applying the equity method 200 204 34 68
(Gain) loss on disposal and liquidation of assets (511) (4,393) 23 (1,930)
Gain on sale of subsidiaries (8,601) - (8,601) -
Loss (gain) on dealing with derivatives 18,103 732 (907) 732
Unrealized foreign exchange loss (gain) (40) 227 (10) 490
Impairment 16 603 8 -
Cash flows provided by operating activities 60,435 31,825 24,339 9,776
Interest and bank fees and commissions paid (5,246) (7,470) (1,377) (2,460)
Income taxes paid (1,933) (7,586) (756) (1,293)
Operating profit before changes in working capital 53,256 16,769 22,206 6,023
Increase (decrease) in trade payables (40,563) 105,012 (14,534) 46,445
(Increase) decrease in inventories 17,258 (23,383) 2,374 (12,778)
(Increase) decrease in trade receivables (33,627) 3,633 (17,131) 30,860
Net cash generated by operating activities (3,676) 102,031 (7,085) 70,550
Cash flows from investing activities
Acquisition of non-current assets (35,417) (7,606) (13,434) (4,310)
Proceeds on disposal of non-current assets 1,485 7,549 242 3,102
Proceeds on sales of subsidiaries, net of cash 9,202 - 9,202 -
disposed
Payments (proceeds) on dealing with derivatives (15,758) (1,163) 3,345 (1,163)
Interest received on investment loans and deposits
and other financial income 1,835 1,273 657 (4)
Cash paid for investment deposits and granted loans,
net 15,467 (70,028) 3,087 (23,893)
Net cash used in investing activities (23,186) (69,975) 3,099 (26,268)
CONSOLIDATED CASH FLOW STATEMENT (continued)
For the nine months ended September 30, 2007
Nine months Nine months Three months Three months
ended ended ended ended
September September September September
30, 30, 30, 30,
2007 2006 2007 2006
BGN'000 BGN'000 BGN'000 BGN'000
(restated) (restated)
Cash flows from financing activities
Proceeds from bank and trade loans 384,908 594,103 134,201 152,216
Bank and trade loans and bond issue repaid (377,122) (610,788) (123,967) (178,527)
Finance lease payments (1,567) (945) (518) (480)
Dividends (8,261) - (8,256) -
Net cash provided by (used in) financing activities (2,042) (17,630) 1,460 (26,791)
Net increase (decrease) in cash and cash equivalents (28,904) 14,426 (2,526) 17,491
for the period
Cash and cash equivalents at the beginning of period 62,987 11,490 36,609 8,425
Cash and cash equivalents at the end of period (see 34,083 25,916 34,083 25,916
also note 24)
These consolidated financial statements have been approved on behalf of Petrol
AD by:
Svetoslav Yordanov Desislava Todorova
Executive Director Chief Accountant
October 26, 2007
(The accompanying notes from page 8 to page 50 are an integral part of these
consolidated financial statements)
Notes
to the consolidated financial statemenets
as of September 30, 2007
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 September 30,
2007 the majority shareholder of
Petrol AD is Petrol Holding AD with 68,99 % ownership of the share capital. The
remaining part of the Parent company's share capital is owned by other legal
entities, the State - through the Ministry of Economy and by individual
shareholders (see note 31).
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
services and maintenance. The Parent company is one of the oldest commercial
companies in Bulgaria and owns the largest network of fuel stations in the
country.
These consolidated financial statements have been approved for issue by the
management on October 26, 2007.
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), issued by
the International Accounting Standards Board (IASB) and the interpretations,
issued by the International Financial Reporting Interpretations Committee
(IFRIC), approved by the European Commission. The Bulgarian Accountancy Act (the
Act), effective for 2007 requires the application of IFRS, adopted by the
European Commission. Based on the amendments of the Act, effective January 1,
2007 direct application of the updated version of IFRS is allowed. IFRS as
adopted by the European Commission do not differ from IFRS, issued by the IASB,
and are effective for reporting periods ended as of September 30, 2007, except
for certain requirements for hedge reporting in accordance with the IAS 39
Financial Instruments: Recognition and Measurement, which has not been adopted
by the Commission. The management believes that if the hedge requirements has
been approved by the Commission it would have no influence on the consolidated
financial statements.
These interim consolidated financial statement for the first nine months of 2007
have been prepared in accordance to the IAS 34 Interim Financial Reporting and
include the full set of financial statements in compliance with IAS 1
Presentation of Financial Statements. The accounting policies adopted are
consistent with those to the annual period ended December 31, 2006.
These consolidated financial statements are prepared under the historical cost
convention, except for the assets (liabilities), which are stated at fair value
- financial assets (liabilities), including derivatives, reported at fair value
in the income statement.
2.2. Functional and presentation currency of the consolidated
financial statements
Functional currency is the currency of the primary economic environment in which
an entity operates and in which it primary generates and expends cash. A Group's
functional currency reflects the underlying transactions, events and conditions
that are relevant to it.
The Group keeps its records and prepares its financial statements in the
national currency of the Republic of Bulgaria - the Bulgarian Lev, which is
adopted by the Company as its functional currency. 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.
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 in the income statement for the period in which they arise.
The monetary positions denominated in foreign currency as of September 30, 2007
and December 31, 2006 are stated in these consolidated financial statements at
the closing exchange rate of BNB. The closing exchange rates of BGN against USD
as of the respective reporting period are as follows:
September 30, 2007 1 USD = BGN 1.37939
December 31, 2006 1 USD = BGN 1.48506
2.4. Subsidiary companies and consolidation
The 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 intra-group balances as at September 30, 2007 and
December 31, 2006 and intra-group transactions, as well as all intra-group
profits and losses, including unrealized profits and losses as of September 30,
2007 and 2006 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, till the date at which 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 invitee.
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 parent 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 Ultimate parent 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 a
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 parent 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 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 recognized as an asset. When the acquisition cost is lower than
the fair value of 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 also note 4).
2.8. Accounting estimates and reasonable assumptions
The preparation of the consolidated financial statements in accordance with IFRS
requires management to make some 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. Errors in prior reporting periods and changes in accounting policy
Prior year errors represent omissions and misstatements in the consolidated
financial statements of the Group for prior periods, arising as a result of
omitted or inaccurately used reliable information. This is information, which
was available when the consolidated financial statements for those periods have
been authorised for issue or which could reasonably be expected to have been
obtained and taken into account upon preparation and presentation of those
consolidated financial statements. Prior year errors can arise upon recognition,
measurement, presentation or disclosure of elements of the consolidated
financial statements. They are restated retrospectively by restating the
comparative information for the prior periods or the opening balances of assets,
liabilities and equity (if the errors occurred before the earliest prior period
presented). The restatement is reported in the first consolidated financial
statements authorised for issuance after the errors have been identified.
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. Assets, acquired by means of a business combination are
carried at fair value. 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 items of property, plant and equipment 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 and
a cost that is significant in relation to the total cost of the item, 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.
3.1. Property, plant and equipment and intangible assets (continued)
The assets' estimated useful lives are as follows:
Useful life 2007 2006
25 years 25 years
Administrative and trade buildings
Machines, fixtures 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
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, 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).
When some properties comprise portion that is held to be used in Group's
operations, another portions to earn rentals, and these portions cannot be
reported separately, these properties 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 2007 2006
25 years 25 years
Administrative and trade buildings
Machines, fixtures 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.
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 could not be reversed.
3.4. Non-current assets and disposal groups, held for sale
Non-current assets (or disposal groups) are classified as held for sale if their
carrying amounts would be recovered principally through a sale transaction
rather than through continuing use. This condition is regarded to be met only
when the asset (disposal group) is available for immediate sale in its present
condition and its sale is highly probable.
Non-current assets (or disposal groups), held for sale are measured at the lower
of carrying amount and fair value, less costs to sell.
3.5. Inventories
Inventories are stated at lower of cost and net realizable value. Cost comprises
purchase price, transportation, customs duties and other similar costs. Net
realizable value represents the estimated selling price less all estimated costs
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
3.6. Financial instruments
A financial instrument is any contract that gives rise to a financial asset of
one entity and a financial liability or equity instrument of another entity.
Financial assets (liabilities) are recognized in the consolidated balance sheet
only when the Group becomes a party to the contractual provisions of the
instrument. Financial assets are removed from the balance sheet after the
contractual rights for receiving cash flows are expired or the asset is
transferred and the transfer meets the derecognition requirements under IAS 39
Financial Instruments: Recognition and Measurement. Financial liability is
removed from the consolidated balance sheet when, and only when, it is
extinguished - that is when the obligation specified in the contract is
discharged, cancelled, or expires.
On initial recognition financial assets (liabilities) are measured at fair
value. Transaction costs, which are directly attributable to the acquisition or
issue of the financial assets (liabilities) are included in their value, except
when the financial assets (liabilities) are measured at fair value through
profit or loss.
For the purposes of subsequent measurement, the Group classifies the financial
assets and financial liabilities into the following categories: financial assets
and financial liabilities reported at fair value through profit or loss, loans
granted and other trade receivables and other financial liabilities (other than
those, measured at fair value through profit or loss). Classification under each
category depends on the purpose and term of the respective contract.
3.6.1. Financial assets (liabilities), measured at fair value through profit
or loss
This category of financial instruments are acquired with the purpose of trading.
This category includes derivatives, which comprises options and futures
contracts, concluded on the American stock exchanges (CME and NYMEX), expect if
derivatives are designated and effective hedging instrument.
After their initial recognition these financial assets are measured at fair
value as of the reporting date and differences from this value are recognized in
the income statement for the period when they arise.
3.6.2. 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 originate
when the Group provides cash, goods for sale or services having no intention to
trade them. Receivables are stated at amortized cost by applying the effective
interest method, excluding current receivables, which are not subject to
amortization.
3.6.3. Cash and cash equivalents
Cash and cash equivalents comprise 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, cash in
transfer, as well as margin deposits, which are short-term collaterals on
options and futures contracts concluded by the Group. Cash in transfer comprise
cash, collected by the fuel stations as of the balance sheet date, but actually
received at the bank accounts of the Group at the beginning of the following
reporting period.
3.6.4. Trade and other payables, net
Trade and other payables incurred because 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.
3.6.5. Interest bearing loans
Interest bearing loans are initially recorded at the fair value of proceeds
received, net of transaction cost. 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 amortization.
The same applies to bank overdrafts, where the borrower is entitled to multiple
borrowings or repayments of the borrowed funds within a pre-determined overdraft
limit.
Financial expenses, including direct issue costs, are accounted for on an
accrual basis in 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.
Interest bearing loans are considered short-term when they should be settled not
later than twelve months after the balance sheet date.
3.6.6. Share capital
The share capital of the Parent company is presented at historical cost as of
the date of its registration.
3.6.7. Risk assessment and management
Market risk
Market risk arises when the value of financial instruments fluctuates as a
result of changes in market prices. Market risk relates to trading with
short-term financial assets, reported at fair value.
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).
Interest rate risk
Financial instruments that potentially expose the Group to interest rate risk
are mainly loans received and loans granted. Most of them bear fixed interest
rate, due to which the Group is potentially exposed to fair value interest rate
risk, in case that market interest rates rise significantly over or fall below
the contracted rates. As the rest of the loans bear floating interest rate with
fixed margin over the base interest rate (BIR) and SOFIBOR, respectively LIBOR/
EURIBOR, the Group is potentially exposed to cash flow interest rate risk.
Management believes that due to the limit movement in market interest rates, the
Group is not exposed to significant fair value and cash flows interest rate
risks.
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 and loans granted. 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, in
advance, as well as sales on credit to clients with appropriate credit rating.
Credit risk of cash at banks is insignificant as the Group deals only with banks
with high credit rating.
3.7. Retirement benefits to employees
The Government of the Republic of Bulgaria is to provide pensions according to
defined retirement benefits schemes. Costs related to payment of contributions
under these schemes are recognized by the Group in profit or loss in the period
they occur.
In accordance with the Labour Code, the Group has an obligation to pay
retirement benefits to its employees, based on length of service, age and labour
category. As these retirement benefits meet the definition of other long-term
employee benefits according to IAS 19 Employee benefits and its provisions, the
Group recognizes the present amount of the benefits as a liability. All
actuarial gains and losses and past service cost are recognized immediately in
the income statement.
3.8. Deferred income and deferred expense
Deferred income and deferred expense represents income and expense, which is
paid in the current, but refer to future accounting periods - guarantees,
insurance, subscription, rent, etc.
3.9. Income tax
Income tax expense comprises current income tax and deferred tax.
The tax currently payable is based on the combined taxable profit (tax loss) for
the year of the Parent company and its subsidiaries, as reported in their
separate corporate 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 tax expected to be payable (recoverable) in future periods on taxable
(deductible) temporary differences. Temporary difference is the difference
between the carrying amount of an asset or liability in the balance sheet and
its tax base. 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.
3.9. 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 tax rates that have been enacted or substantively enacted
by the balance sheet date. 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 charged or credited in equity.
Although income tax in Bulgaria is not calculated 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 the benefit of all or a part of the
deferred tax asset to be utilized.
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 2007
and 2006, the tax rate applied for the calculation of the Group's current tax
liabilities is 10 % and 15 %. Deferred tax assets and liabilities as of
September 30, 2007 are calculated by using the tax rate at 10%, applicable for
2007.
3.10. Revenue and expenses recognition
Revenue and expenses are accrued when they arise, regardless of cash receipts
and payments. They are reported in compliance with the matching concept.
Revenue is measured at the fair value of the consideration received or
receivable, presented net of any discounts allowed by the Group, value added tax
and other taxes directly linked to the turnover, but gross with excise duty.
Revenue from sales of goods and production is recognized when:
* The significant risks and rewards of ownership of the goods or production
are transferred to the buyer;
* The Group retains neither continuing managerial involvement to the degree
usually associated with ownership nor effective control over the goods and
production sold;
* It is probable that economic benefits associated with the transaction
will flow to the Group;
* Income and expenses, directly arising from the transaction can be
measured reliably.
When the outcome of a transaction involving rendering of services can be
estimated reliably, revenue recognition is based on the stage of completion of
the transaction at the balance sheet date. If the outcome cannot be estimated
reliably, revenue is recognized only to the of the expenses recognized that are
recoverable.
Gains or losses on sales of property, plant and equipment and intangible assets
are stated as other income or other expense.
Interest income (expense) is accrued by using the effective interest method.
3.11. Leases
A finance lease is a lease that 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 finance lease obligations.
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 expense 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.
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.
4. Critical accounting estimates and key sources of estimation uncertainty
In the application of the adopted accounting policy, management makes certain
estimates (other than the disclosed in note 2.8), which have significant effect
on these 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 the 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.
The impairment test of the goodwill from the acquisition of Naftex Petrol EOOD
(see also notes 2.6 and 20) has been performed as of September 30, 2007 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. The net cash flows for the periods after the last
forecast 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 of September 30, 2007, according to the calculation performed under
the above methodology, the estimated value of the investment in the subsidiary
exceeds the sum of carrying amount of the investment before its elimination and
the carrying amount of goodwill, goodwill has not been impaired.
5. Changes in IFRS
The stated below IFRS, IFRS revisions, and IFRIC, have been approved by IASB and
IFRIC as of the date of the consolidated financial statements, but are effective
for annual periods beginning on or after September 30, 2007.
IFRS or IFRIC, effective date Title of IFRS or IFRIC
IFRS 8, effective for reporting periods beginning on or Operating Segments
after January 1, 2009
IFRIC 12, effective for reporting periods beginning on or Service Concession Agreements
after January 1, 2008
IFRIC 13, effective for reporting periods beginning on or Customer Loyalty Programmes
after July 1, 2008
IFRIC 14, effective for reporting periods beginning on or IAS 19: The Limit on a Defined Benefit Asset
after January 1, 2008 Minimum Funding Requirements and their
Interaction
Amendment to IAS 23, effective for reporting periods Borrowing Costs
beginning on or after January 1, 2009
Amendments to IAS 1, effective for reporting periods Presentation of Financial Statements: A Revised
beginning on or after January 1, 2009 Presentation
IFRIC 12 Concession Service Agreements and amendments to IAS 23 Borrowing Costs
have been suggested, but as of the date on which these consolidated financial
statements have been approved for issue, are not endorsed by the European
Commission. No suggestion for endorsement of the amendments to IAS 1
Presentation of Financial Statements: A Revised Presentation, IFRIC 13 Customer
Loyalty Programmes and IFRIC 14 IAS 19: The Limit on a Defined Benefit Asset
Minimum Funding Requirements and their Interaction, have been made as of the
same date.
6. Revenue
Nine months Nine months Three months Three months
ended ended ended ended
September 30, September 30, September 30, September 30,
2007 2006 2007 2006
BGN'000 BGN'000 BGN'000 BGN'000
(restated) (restated)
Sales of goods 912,718 950,597 378,680 343,716
Sales of services 36,406 33,358 11,839 11,519
Rental income 2,364 2,019 779 927
Sales of finished goods 692 2,405 270 681
Total 952,180 988,379 391,568 356,843
Until December 31, 2005, according to the terms of a fuel supply agreement with
a counterparty (the Counterparty), the Parent company has recognized income in
the revenue, which represents increase of the remuneration of the Company for
incurred operating expenses and discounts given to customers. The management
believes that the total amount of BGN 25,830 thousand as of December 31, 2005 is
correct and is in accordance with the terms of the agreement. Considering the
fact that the above amount is disputed by the Counterparty and it is unlikely to
be paid in the near future, as of December 31, 2005 the management has found
indications for this receivable to be doubtful. Due to these facts the Parent
company has fully impaired this receivable.
Due to the intense disagreements with the Counterparty and the uncertain
collection of the receivables, as well as on the grounds of revenue recognition
principle of IAS 18 Revenue, from January 1, 2006 the Parent company excludes
revenue from the income statement and presents this claim off balance. The
increase of the remuneration, which is not included in these consolidated
financial statements as at September 30, 2007 and 2006 amounts to BGN 3,883
thousand and BGN 5,233 thousand respectively (as at June 30, 2007 - BGN 2,990
thousand, as at December 31, 2006 - BGN 7,263 thousand).
Revenue from sales of goods comprises:
Nine months Nine months Three months Three months
ended September ended September ended September ended September
30, 30, 30, 30,
2007 2006 2007 2006
BGN'000 BGN'000 BGN'000 BGN'000
(restated) (restated)
Light fuels (gasoline, diesel oil and jet 879,382 920,470 365,515 332,721
oil)
Lubricants and other goods 30,381 23,871 11,595 9,654
Heavy fuels (heating oil) 2,955 6,256 1,570 1,341
Total 912,718 950,597 378,680 343,716
Effective July 1, 2006, the new Excise Duties and Tax Warehouses Act ("The Act")
was enforced in Bulgaria. One of the major changes introduced by the Act was the
deferred payment regime for the excise duty payable on behalf of the fuel stored
in licensed tax warehouses. In accordance with the Act the excise duty payable
arises not earlier than the date of shipping the quantities stored in licensed
tax warehouses and delivering them to the customers or moving them to a
not-licensed warehouse. As a result, under the new regime excise duties payable
were no longer part of the cost of goods stored licensed tax warehouses. Based
on the new regulations, the Group adopted the policy to account for and present
revenue from sales of goods and cost of goods sold through licensed tax
warehouses net of excise duties payable.
6. Revenue (continued)
Effective January 1, 2007 Bulgaria became a member of the European Union (EU).
Immediately after the accession all the EU legislation in force was
automatically adopted by the country, including the regulations, directives and
other interpretive documents in the field of accounting and financial reporting
promulgated in the Official Journal of the EU. Under the Fourth Council
Directive (78/660/EEC of 25 July 1978) the net turnover comprises the amounts
derived from the sale of products and the provision of services falling within
the company's ordinary activities, after deduction of sales rebates and of value
added tax and other taxes directly linked to the turnover. According to the
provisions of the Interpretative Communication Concerning Certain Articles of
the Fourth and the Seventh Council Directives (98/C 16/04) the expression "other
taxes directly linked to the turnover" excludes excise duty. Considering the
recommendations of this officially published interpretive guidance, during the
current period the management changed the previously applied presentation policy
by including the excise duties payable in the revenue and costs of goods sold
through licensed tax warehouses. Accordingly, the comparative data for the
respective period of 2006 is restated in the current consolidated financial
statements.
7. Other income
Nine months Nine months Three months Three months
ended ended ended ended
September 30, September 30, September 30, September 30,
2007 2006 2007 2006
BGN'000 BGN'000 BGN'000 BGN'000
(restated) (restated)
Income from penalties 698 1,280 436 400
Gain on sales of non-current assets and 555 4,531 17 2,074
materials, incl.:
Revenue from sales of non-current assets 1,220 7,000 27 2,655
and materials
Carrying amount of non-current assets and (665) (2,469) (10) (581)
materials written-off
Surplus of assets 391 247 238 19
Insurance claims 182 325 8 81
Other 418 151 91 23
Total 2,244 6,534 790 2,597
In June 2006 the Group recognized income from penalties amounting to BGN 8,196
thousand, calculated to a supplier because of a quantitative non-execution of a
fuel supply contract. As of December 31, 2006 the income has been reversed,
because the management has assessed that the income recognition criteria in
accordance with IAS 18 Revenue have not been met. As a result the income from
penalties as reported in the consolidated financial statements as of June 30,
2006 and September 30, 2006 was decreased by the amount of BGN 8,196 thousand
and restated in the present consolidated financial statements.
8. Cost of goods sold
Nine months Nine months Three months Three months
ended ended ended ended
September 30, September 30, September 30, September 30,
2007 2006 2007 2006
BGN'000 BGN'000 BGN'000 BGN'000
(restated) (restated)
Light fuels (gasoline, diesel oil and gas 803,838 872,054 334,668 317,396
oil)
Lubricants and other goods 25,808 21,852 9,599 8,630
Heavy fuels (heating oil) 2,823 6,160 1,529 1,399
Total 832,469 900,066 345,796 327,425
9. Materials
Nine months Nine months Three months Three months
ended ended ended ended
September 30, September 30, September 30, September 30,
2007 2006 2007 2006
BGN'000 BGN'000 BGN'000 BGN'000
Fuels 2,195 2,447 778 942
Electricity 1,977 2,018 696 522
Spare parts 1,726 1,493 874 513
Advertising materials 932 1,665 55 1,138
Office consumables 881 657 254 270
Water supply 263 519 105 285
Working clothes 203 364 56 85
Heating 31 29 3 2
Disposals of assets with low value - 218 - -
Other expense 141 182 64 32
Total 8,349 9,592 2,885 3,789
10. Hired services
Nine months Nine months Three months Three months
ended ended ended ended
September 30, September 30, September 30, September 30,
2007 2006 2007 2006
BGN'000 BGN'000 BGN'000 BGN'000
Commissions 7,190 4,508 3,634 2,153
Advertisement costs 3,962 3,416 1,588 850
Transportation 2,698 6,115 1,061 2,094
Consulting and training 2,608 2,845 773 1,215
Maintenance and repairs 2,156 2,286 658 595
Security 1,792 1,838 586 523
Communications 1,260 1,484 378 466
Rents 1,229 1,197 451 418
Cash collection 1,102 1,352 367 427
Insurances 1,021 730 139 243
State and municipal fees 386 589 53 162
Other expense 1,414 908 448 467
Total 26,818 27,268 10,136 9,613
11. Employee benefits expenses
Nine months Nine months Three months Three months
ended ended ended ended
September 30, September 30, September 30, September 30,
2007 2006 2007 2006
BGN'000 BGN'000 BGN'000 BGN'000
Wages and salaries 17,443 15,079 5,658 5,241
Social security contributions and benefits 4,778 4,528 1,542 1,562
Total 22,221 19,607 7,200 6,803
12. Depreciation and amortization expenses
Nine months Nine months Three months Three months
ended ended ended ended
September 30, September 30, September 30, September 30,
2007 2006 2007 2006
BGN'000 BGN'000 BGN'000 BGN'000
Depreciation of property, plant and 12,412 13,706 4,297 4,417
equipment
Depreciation of investment property 491 628 164 211
Amortization of intangible assets 282 385 75 126
Total 13,185 14,719 4,536 4,754
13. Other expenses
Nine months Nine months Three months Three months
ended September ended September ended September ended September
30, 30, 30, 30,
2007 2006 2007 2006
BGN'000 BGN'000 BGN'000 BGN'000
Entertainment expenses and sponsorship 2,502 540 792 80
Shortages of assets 2,142 1,442 1,256 526
Taxes and tax charges 1,751 1,284 699 227
Scraped non-current assets 746 298 567 219
Penalties and indemnities 592 1,656 157 504
Business trips 296 306 99 121
Insurance claims 207 398 99 80
Loss from liquidation of non-current 44 138 40 144
assets, incl.:
Revenue from liquidation of non-current (222) (602) (92) (122)
assets
Net book value of scraped non-current 266 740 132 266
assets
Impairment loss 16 603 8 -
Preservations of assets - 163 - -
Other 238 165 24 46
Total 8,534 6,993 3,741 1,947
14. Finance income and costs
Nine months Nine months Three months Three months
ended September ended September ended September ended September
30, 30, 30, 30,
2007 2006 2007 2006
BGN'000 BGN'000 BGN'000 BGN'000
Finance income
Interest income 5,193 2,983 1,800 1,214
Gain on sale of subsidiaries, incl.: 8,601 - 8,601 -
Income from sale 9,376 - 9,376 -
Carrying amount of the Group's interest (775) - (775) -
in the net assets of subsidiary
Gain on dealings with derivatives, - - 907 -
including
Gain from dealings - - 3,345 -
Revaluations at fair value - - (2,438) -
Foreign exchange rate gains 65 1,088 - 285
Discount of purchased receivable 52 33 - -
Other finance income 300 4 1 -
Total 14,211 4,108 11,309 1,499
Finance costs
Interest expense (17,571) (6,940) (5,899) (2,302)
Losses on dealings with derivatives, (18,103) (732) - (732)
incl.:
Loss from dealings (15,758) (1,163) - (1,163)
Revaluations at fair value (2,345) 431 - 431
Foreign exchange rate losses - - (50) -
Bank fees, commissions and taxes (2,060) (891) (1,514) (381)
Total (37,734) (8,563) (7,463) (3,415)
During the first nine months of 2007 the Group sold two of its subsidiaries to
the Ultimate parent company. The first one - New Co Zagora EOOD was sold in July
and the second one - Trans Operator AD in September. The interest of the Group
in the net assets of these companies is presented below. The net assets of New
Co Zagora EOOD were presented in June consolidated financial statements as
disposal group, held for sale.
14. Finance income and costs (continued)
New Co Zagora Trans Total
EOOD Operator AD
Property, plant and equipment and intangible assets 759 1,400 2,159
Trade and other receivables 383 1 384
Cash 64 110 174
Trade and other payables (94) (1,833) (1,927)
Income tax payable (2) - (2)
Deferred tax liability (13) - (13)
Total net assets 1,097 (322) 775
Minority interest - - -
Group's interest 1,097 (322) 775
Consideration received, satisfied in cash 9,376 - 9,376
Cash disposed of (64) (110) (174)
Net cash flow as stated in the cash flow statement 9,312 (110) 9,202
15. 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.
Nine months Nine months Three months Three months
ended September ended September ended September ended September
30, 30, 30, 30,
2007 2006 2007 2006
BGN'000 BGN'000 BGN'000 BGN'000
Current tax expense 3,247 3,231 1,243 638
Change in deferred taxes, including:
Temporary differences reversed during the 51 712 11 (492)
period
Temporary differences originated during (1,330) (624) 129 416
the period
Total change in deferred taxes (1,279) 88 140 (76)
Total tax expense 1,968 3,319 1,383 562
15. Taxation (continued)
Nine months Nine months Three months Three months
ended September ended ended ended September
30, 30,
September 30, September 30,
2007 2006 2007 2006
BGN'000 BGN'000 BGN'000 BGN'000
(restated) (restated)
Consolidated accounting profit 19,125 12,009 21,876 3,125
Applicable tax rate 10% 15% 10% 15%
Income tax at the applicable tax rate 1,913 1,801 2,188 468
Combined tax effect on permanent (9) 1,378 90 78
differences
Tax effect on tax assets originated and 79 37 53 (46)
unrecognized in the current reporting
period
Tax effect on consolidation adjustments (15) 103 (948) 62
Total tax expense 1,968 3,319 1,383 562
Effective tax rate 10.29% 27.64% 6.32% 17.98%
15. Taxation (continued)
September 30, June 30, December 31,
2007 2007 2006
BGN'000 BGN'000 BGN'000
Temporary Tax Temporary Tax Temporary Tax
difference effect difference effect difference effect
Balance at the beginning of the period
Tax loss to be carried forward - - - - 7,653 1,148
Impairment of assets 1,940 194 1,940 194 1,963 295
Property, plant and equipment (20,972) (2,096) (20,972) (2,096) (28,738) (4,311)
Liabilities related to unused paid leave 2,124 213 2,124 213 1,392 208
and retirement benefits
Total (16,908) (1,689) (16,908) (1,689) (17,730) (2,660)
Originated during the period
Tax loss to be carried forward 8,678 868 12,234 1,223 - -
Impairment of assets - - - - 32 3
Property, plant and equipment (351) (35) (9) (1) 5,827 584
Liabilities related to unused paid leave 2,375 237 2,192 221 1,726 173
and retirement benefits
Subsequent measurement of financial
instruments 2,601 260 162 16 - -
Total 13,303 1,330 14,579 1,459 7,585 760
Reversed during the period
Tax loss to be carried forward - - - - (7,653) (1,148)
Impairment of assets - - - - (55) (8)
Property, plant and equipment 402 40 202 20 1,939 291
Liabilities related to unused paid leave (912) (91) (604) (60) (994) (149)
and retirement benefits
Total (510) (51) (402) (40) (6,763) (1,014)
Adjustment originated from the change in
tax rate
Impairment of assets - - - - - (96)
Property, plant and equipment - - - - - 1,340
Liabilities related to unused paid leave
and retirement benefits - - - - - (19)
-
Total - - - - - 1,225
Included in disposal group
Property, plant and equipment - - 133 13 - -
Total - - 133 13 - -
Disposed in business combinations
Property, plant and equipment 133 13 - - - -
Total 133 13 - - - -
Balance at the end of the period
Tax loss to be carried forward 8,678 868 12,234 1,223 - -
Impairment of assets 1,940 194 1,940 194 1,940 194
Property, plant and equipment (20,788) (2,078) (20,646) (2,064) (20,972) (2,096)
Liabilities related to unused paid leave 3,587 359 3,712 374 2,124 213
and retirement benefits
Subsequent measurement of financial
instruments 2,601 260 162 16 - -
Total (3,982) (397) (2,598) (257) (16,908) (1,689)
16. 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, 2006 50,122 68,636 159,795 16,204 21,722 2,348 318,827
Additions - 22 482 7,428 187 6,644 14,763
Impairment - - - (27) - - (27)
Disposals (295) (1,035) (2,136) (3,579) (1,145) (28) (8,218)
Transfers (1,445) (925) 819 88 274 (1,509) (2,698)
Balance at September 30, 2006 48,382 66,698 158,960 20,114 21,038 7,455 322,647
Additions 17 - 84 352 149 6,540 7,142
Disposals (2) (360) (2,818) (230) (67) - (3,477)
Transfers (48) 112 928 - (8) (984) -
Balance at December 31, 2006 48,349 66,450 157,154 20,236 21,112 13,011 326,312
Additions 1,156 - 601 797 80 28,849 31,483
Disposals (465) (822) (1,458) (146) (102) (28) (3,021)
Disposed in business (19) (470) (7,498) - (28) (84) (8,099)
combinations
Transfers 4,577 13,999 10 1,733 (20,319) -
-
Balance at September 30, 2007 49,021 69,735 162,798 20,897 22,795 21,429 346,675
Accumulated depreciation
Balance at January 1, 2006 - 31,965 64,797 9,022 10,226 - 116,010
Charged for the period - 1,297 8,160 2,049 2,200 - 13,706
Disposals - (455) (1,116) (2,936) (1,117) - (5,624)
Transfers (328) (157) (13) 103 - (395)
-
Balance at September 30, 2006 - 32,479 71,684 8,122 11,412 - 123,697
Charged for the period - 427 2,254 626 794 - 4,101
Disposals (143) (2,748) (142) (67) - (3,100)
-
Balance at December 31, 2006 - 32,763 71,190 8,606 12,139 - 124,698
Charged for the period - 1,293 6,617 2,253 2,249 - 12,412
Disposals - (383) (901) (142) (74) - (1,500)
Disposed in business - (86) (5,860) - (23) - (5,969)
combinations
Transfers - - (4) - 4 - -
Balance at September 30, 2007 - 33,587 71,042 10,717 14,295 - 129,641
Carrying amount at
January 1, 2006 50,122 36,671 94,998 7,182 11,496 2,348 202,817
Carrying amount at
September 30, 2006 48,382 34,219 87,276 11,992 9,626 7,455 198,950
Carrying amount at
December 31, 2006 48,349 33,687 85,964 11,630 8,973 13,011 201,614
Carrying amount at 49,021 36,148 91,756 10,180 8,500 21,429 217,034
September 30, 2007
17. Intangible assets
Software Licenses Other Assets under Total
construction
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
Cost
Balance at January 1, 2006 1,178 1,014 406 52 2,650
Additions 119 8 - 110 237
Disposals (31) (23) - - (54)
Transfers 232 - (293) (12) (73)
Balance at September 30, 2006 1,498 999 113 150 2,760
Additions 6 2 2 60 70
Disposals - - (2) - (2)
Balance at December 31, 2006 1,504 1,001 113 210 2,828
Additions 5 15 75 104 199
Disposed in business combinations (21) (15) - - (36)
Balance at September 30, 2007 1,488 1,001 188 314 2,991
Accumulated amortization
Balance at January 1, 2006 691 150 228 - 1,069
Charged for the period 253 111 21 - 385
Disposals (30) (23) - - (53)
Transfers 96 - (194) - (98)
Balance at September 30, 2006 1,010 238 55 - 1,303
Charged for the period 86 37 4 - 127
Disposals (1) - (1) - (2)
Balance at December 31, 2006 1,095 275 58 - 1,428
Charged for the period 144 112 26 - 282
Disposed in business combinations (7) - - - (7)
Balance at September 30, 2007 1,232 387 84 - 1,703
Carrying amount at
January 1, 2006 487 864 178 52 1,581
Carrying amount at
September 30, 2006
488 761 58 150 1,457
Carrying amount at
December 31, 2006
409 726 55 210 1,400
Carrying amount at 256 614 104 314 1,288
September 30, 2007
18. Investment property
Land Buildings Plant and Other Total
equipment
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
Cost
Balance at January 1, 2006 2,443 18,818 2,019 1,847 25,127
Additions - 8 34 14 56
Disposals (680) (415) (295) (611) (2,001)
Impairment (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
Additions - 101 12 46 159
Transfers to held for sale (390) (814) (4) (221) (1,429)
Balance at December 31, 2006 2,269 18,771 1,791 1,303 24,134
Additions 2,899 - - 7 2,906
Disposals - - (5) - (5)
Balance at September 30, 2007 5,168 18,771 1,786 1,310 27,035
Accumulated depreciation
Balance at January 1, 2006 - 2,851 1,501 1,181 5,533
Charged for the period - 521 36 71 628
Disposals - (109) (278) (429) (816)
Transfers - 328 (15) 180 493
Balance at September 30, 2006 - 3,591 1,244 1,003 5,838
Charged for the period - 60 - 26 86
Disposals - - - - -
Transfers to held for sale - (42) - - (42)
Balance at December 31, 2006 - 3,609 1,244 1,029 5,882
Charged for the period - 387 26 78 491
Balance at September 30, 2007 - 3,996 1,270 1,107 6,373
Carrying amount at 2,443 15,967 518 666 19,594
January 1, 2006
Carrying amount at 2,659 15,893 539 475 19,566
September 30, 2006
Carrying amount at 2,269 15,162 547 274 18,252
December 31, 2006
Carrying amount at 5,168 14,775 516 203 20,662
September 30, 2007
18. Investment property (continued)
The more significant part of additions to property, plant and equipment for the
first nine months of the current year represent expenses incurred for the
construction of new or renewal of existing fuel stations in accordance with
adopted investment plan of the Parent Company.
Non-current assets and investment properties with total carrying amount as of
September 30, 2007 amounting to BGN 49,764 thousand are pledged as collateral
under bank and trade loans granted to the Ultimate parent company (see also note
38).
19. Investments in associates and other investments
For the nine months For the twelve months For the nine months
ended ended ended
September 30, 2007 December 31, 2006 September 30, 2006
Investments in associates % of Value of Share in Value of Share in Value of Share in
capital investments loss investments loss investments loss
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
Varna Business Services
IID 42.69% 1,616 (200) 1,816 (231) 1,843 (204)
Petrol Engineering AD, - -
net of impairment 40.00% - - - - - -
Total 1,616 (200) 1,816 (231) 1,843 (204)
Capital 3000 AD, - -
net of impairment 6.92% - - - - - -
Total 1,616 (200) 1,816 (231) 1,843 (204)
The investments in Petrol Engineering AD and Capital 3000 AD have been fully
impaired in previous reporting periods.
The total amounts of the assets, liabilities, income and loss of the associate
company Varna Business Services IID and Petrol Engineering AD as at September
30, 2007, June 30, 2007 and December 31, 2006 are as follows:
Assets Liabilities Net Revenue Profit
assets (loss)
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
September 30, 2007
Varna Business Services IID 6,584 2,798 3,786 1,350 (469)
Petrol Engineering AD 219 172 47 84 40
Total 6,803 2,970 3,833 1,434 (429)
June 30, 2007
Varna Business Services IID 6,602 2,738 3,864 854 (391)
Petrol Engineering AD 231 196 35 30 28
Total 6,833 2,934 3,899 884 (363)
December 31, 2006
Varna Business Services IID 7,191 2,936 4,255 2,116 (539)
Petrol Engineering AD 235 255 (20) 223 9
Total 7,426 3,191 4,235 2,339 (530)
20. Goodwill
The goodwill presented in the consolidated financial statements of the Group
arises from the acquisition of two subsidiary companies - BPI EAD and Naftex
Petrol EOOD. The acquisition of the latter was a result of the restructuring
policy of the companies within the group of the Ultimate parent company - Petrol
Holding AD. According to the adopted accounting policy these acquisitions have
been measured by using the purchase method. As of September 30, 2007 the
goodwill amounts to BGN 20,309 thousand.
21. Interest bearing loans granted
Interest bearing loans granted comprise of loans granted to related parties (see
also note 36). The loan granted to the Ultimate parent company, payable in
October 2011, with contracted interest rate of 3 m. SOFIBOR plus a fixed margin
of 2%, is presented as a long term loan. The portion of the same loan payable
within one year period is presented as current receivable under interest bearing
loans. The remaining part of short term loans represent loans to Ultimate parent
company and companies under common control with interest rate fixed at 3 m.
SOFIBOR plus a fixed margin of 1%.
22. Inventories
September 30, June 30, December 31,
2007 2007 2006
BGN'000 BGN'000 BGN'000
Light fuels (gasoline, diesel oil and jet oil) 104,528 108,719 126,472
Lubricants and other goods 8,287 8,728 7,299
Materials 4,423 4,697 4,080
Heavy fuels (heating oil) 1,511 146 117
Total 118,749 122,290 137,968
As of September 30, 2007 available and future inventories amounting totally to
BGN 58,678 thousand, BGN are pledged as securities for bank loans utilized by
the Group (see also note 27 and 38).
23. Trade and other receivables, net
September 30, June 30, December 31,
2007 2007 2006
BGN'000 BGN'000 BGN'000
Trade receivables and advances granted, 107,818 107,221 93,389
net of impairment losses
Related party receivables 16,097 4,809 9,472
VAT and excise duties refundable 12,128 8,197 -
Litigations and writs, net of impairment losses 5,236 484 547
Other, net of impairment losses 6,976 10,299 4,323
Total 148,255 131,010 107,731
23. Trade and other receivables, net (continued)
Due to a technical error current trade receivables and advances granted and
current payables to suppliers and advances received as at December 31, 2006
were understated by the amount of BGN 25,830 thousand, as reported in the
consolidated financial statements for these periods. The presentation error was
discovered in the current reporting period and was corrected retrospectively in
the comparative amounts of the respective items in compliance with the
requirements of IAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors (see also note 26).
Trade receivables as of September 30, 2007, June 30, 2007 and December 31, 2006
do not include Company's claims against the Counterparty, at the cumulative
amount respectively of BGN 11,146 thousand, BGN 10,253 thousand and BGN 7,263
thousand, excluding VAT (see also note 6).
A court guarantee related to the claim against the Counterparty amounting to BGN
4,719 thousand forms significant part of other receivable as of June 30, 2007.
The amount is transformed into receivable under litigations and writs as of
September 30, 2007.
As of September 30, 2007 a subsidiary of the Group has receivables amounting to
BGN 19,595 thousand (see also note 27 and 38), which are pledged as collateral
under utilized bank loans.
Related party receivables are presented in note 36.
Group's management believes that the carrying amount of trade and other
receivables approximates to their fair value as of September 30, 2007, June 30,
2007 and December 31, 2006.
24. Cash and cash equivalents
September 30, June 30, December 31,
2007 2007 2006
BGN'000 BGN'000 BGN'000
Cash at banks 26,978 30,972 56,325
Cash in transfer 6,906 5,323 6,472
Cash on hand 199 313 190
Total in balance sheet 34,083 36,608 62,987
Cash included in a disposal group - 1 -
Total in cash flow 34,083 36,609 62,987
The cash in transfer comprises of cash, collected from the fuel stations as of
the balance sheet date, but deposited in the Group's bank accounts at the
beginning of the next reporting period. Cash at banks as at September 30, 2007,
June 30, 2007 and December 31, 2006 includes also restricted cash on margin
deposits amounting to BGN 4,769 thousand, BGN 9,830 and thousand BGN 1,855
thousand respectively.
25. Non-current assets, held for sale
The major classes of assets and liabilities classified as held for sale are as
follows:
September 30, June 30, December 31,
2007 2007 2006
BGN'000 BGN'000 BGN'000
Land, buildings and other assets held for sale 1,387 1,387 1,387
Assets of the subsidiary company New Co Zagora
EOOD - 1,079 -
Total 1,387 2,466 1,387
Liabilities associated with non-current assets
held for sale - 87 -
Land, buildings and other assets held for sale
In 2006 the Group classified some of its investment properties, mainly land and
buildings, as non-current assets, held for sale. The Group management believes
that the sale of these assets is very probable, since it has engaged itself in a
plan of sale and has initiated steps in locating buyers.
Net assets of subsidiary company New Co Zagora EOOD
The net assets of subsidiary New Co Zagora EOOD were presented as disposal group
held for sale as of June 30, 2007 as the Group intended to dispose of them. The
subsidiary was sold in July 2007 to the Ultimate parent company.
September 30, June 30, December 31,
2007 2007 2006
BGN'000 BGN'000 BGN'000
Property, plant and equipment - 759 -
Trade and other receivables - 319 -
Cash and cash equivalent - 1 -
Assets of subsidiary company New Co Zagora EOOD
classified as held for sale - 1,079 -
Trade and other payables - (74) -
Deferred tax - (13) -
Liabilities of subsidiary company New Co Zagora
EOOD with assets classified as held for sale - (87) -
Net assets of subsidiary company New Co Zagora
EOOD classified as held for sale - 992 -
26. Trade and other payables, net
September 30, June 30, December 31,
2007 2007 2006
BGN'000 BGN'000 BGN'000
Payables to suppliers and advances received, net 121,739 110,537 121,681
VAT and excise duties payable 18,701 23,812 57,407
Payables to personnel and social security funds 5,334 5,326 3,790
Relate party payables 2,635 30,654 2,022
Withholding tax payable 1,261 - -
Other 6,716 5,651 3,986
Total 156,386 175,980 188,886
The Group has adopted the policy to present its payables to the Counterparty net
of its receivables decreased by the accrued impairment of these receivables. As
it was disclosed in note 23, due to a technical error, when calculating the net
balance payable to the Counterparty as of December 31, 2006 the amount of
impairment of BGN 25,830 thousand accrued in previous accounting periods was not
taken into account. The error does not affect equity, but as a result current
trade receivables and advances granted and current payables to suppliers and
advances received as at December 31, 2006 were understated by the amount of BGN
25,830 thousand, as reported in the consolidated financial statements for these
periods. The presentation error was discovered in the current reporting period
and was corrected retrospectively in the comparative amounts of the respective
items under the requirement of IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors.
Related party payables are disclosed in note 36.
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,
2007 2007 2006
BGN'000 BGN'000 BGN'000
Balance at the beginning of the period 1,667 1,667 1,409
Accrued during the period 2,375 2,192 1,263
Utilized during the period (918) (605) (1,005)
Disposed in business combinations (7) - -
Balance at the end of the period, including: 3,117 3,254 1,667
For salaries on unused paid leave 2,464 2,651 1,357
For social security contributions on unused paid 653 603 310
leaves
The balance at the end of the period is presented in the balance sheet together
with the current liabilities to employees and Social security funds. The Group's
management believes that the carrying amount of the Group's current liabilities,
presented in the balance sheet as of September 30, 2007, June 30, 2007 and
December 31, 2006, approximates to their fair value.
27. Interest-bearing loans
September 30, June 30, December 31,
2007 2007 2006
BGN'000 BGN'000 BGN'000
Current liabilities under interest-bearing loans
Current portion of liabilities on bank loans 56,794 46,429 48,741
Current portion of liabilities on trade loans from
related parties
3,903 5,435 5,157
Current portion of liabilities on debenture loans 15,430 11,021 3,055
Total 76,127 62,885 56,953
Non-current liabilities under interest-bearing loans
Non-current portion of liabilities on bank loans 70 282 725
Non-current portion of liabilities on debenture loans 207,075 206,789 206,492
Total 207,145 207,071 207,217
Total current liabilities under interest-bearing loans 283,272 269,956 264,170
Non-current liabilities under bank loans mature within the period of one to two
years.
The liabilities under interest-bearing loans analyzed by currency type are as
follows:
September 30, June 30, December 31,
2007 2007 2006
Currency type Original BGN'000 Original BGN'000 Original BGN'000
currency currency currency
in thousands in thousands in thousands
BGN, including:
Bank loans 55,925 55,925 45,446 45,446 47,308 47,308
Debenture loans 15,361 15,361 15,035 15,035 15,011 15,011
Trade loans 3,903 3,903 5,435 5,435 5,157 5,157
EUR, including:
Bank loans 480 939 647 1,265 1,104 2,158
Debenture loans 105,911 207,144 103,677 202,775 99,465 194,536
Total 283,272 - 269,956 - 264,170
27. Interest-bearing loans (continued)
In November 2003 the Parent company issued registered, dematerialized, ordinary,
interest-bearing and freely transferable corporate bonds at the total amount of
BGN 15,000 thousand, with BGN 1,000 par value per 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 a year, for the term of the loan.
In October 2006 the Parent company issued 2,000 registered, transferable notes
with fixed annual interest rate of 8.375% and issue price - 99.507% of the
principal amount determined at EUR 50,000 for each note. The maturity date of
the bond is in 5 years period. The issue is secured by Group's receivables under
loans, granted to related parties and a corporate guarantee, issued by a
subsidiary. The transaction costs for the bond issue amount to BGN 3,049
thousand. Interest is paid annually. The annual effective interest rate is
8.557%.
28. Finance lease liabilities
Minimum lease payments Present value of minimum lease
payments
September June 30, December September June 30, December
30, 2007 2007 31, 2006 30, 2007 2007 31, 2006
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
Amounts payable under finance
leases
Within one year 2,490 2,458 2,360 2,099 2,108 1,955
More than one year 4,317 5,022 5,558 3,859 4,370 4,955
Less: Interest payable (849) (1,002) (1,008) - - -
Present value of finance lease
obligations 5,958 6,478 6,910 5,958 6,478 6,910
Less: Present value of finance (2,099) (2,108) (1,955)
lease obligations with maturity
less than 1 year
Present value of finance lease 3,859 4,370 4,955
obligations with maturity over 1
year
Assets acquired by the Group under finance leases comprise mainly of vehicles.
The lease term of the contracts is between 3 to 6 years.
Management believes that the fair value of the obligations under finance leases
does not differ significantly from their carrying amount.
29. Current income tax
Income tax payable includes the amount of the corporate income tax for the
current and prior reporting periods, payable as of the balance sheet date.
September 30, June 30, December 31,
2007 2007 2006
BGN'000 BGN'000 BGN'000
Income tax payable as of January 1, net 328 328 3,396
Accrued corporate income tax 3,247 2,004 4,562
Corporate income tax paid (1,933) (1,177) (7,630)
Disposed in business combination (2) - -
Income tax payable at the end of the period, net 1,640 1,155 328
30. Liabilities for retirement benefits to employees
As of December 31, 2006 the Group has accrued liabilities for retirement
benefits at the amount of BGN 470 thousand. This amount was based on an actuary
valuation taking into consideration assumptions for mortality, disability,
employment turnover, salaries' growth, etc. The present value of the liability
was calculated by applying a discount factor of 4%.
31. Share capital
The share capital is presented at par 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 par value of
BGN 1 each.
Shareholders of the Parent company are as follows:
Shareholder September 30, June 30, December 31,
2007 2007 2006
% of share capital % of share capital % of share capital
Petrol Holding AD 68.99 68.99 71.75
Naftex Refining and Petrochemical 18.84 18.84 18.84
Engineering Services (former Naftex Oil
Shipping Corporation Limited)
Ministry of Economics 0.86 0.86 0.94
Other minority shareholders 11.31 11.31 8.47
Total 100.00 100.00 100.00
32. Revaluation reserve
The reserve of revaluation of non-current assets, net of accrued deferred tax,
as of September 30, 2007, June 30, 2007 and December 31, 2006 at the amount of
BGN 28,275 thousand, BGN 28,536 thousand and BGN 28,817 thousand, respectively,
is 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 changes of 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.
33. Earnings per share
Earnings per share are calculated by dividing the net distributable profit by
the weighted average number of ordinary shares during the reporting period.
There are no dilutive instruments in issue.
Nine months Nine months Three months Three months
ended ended ended ended
September 30, September 30, September 30, September 30,
2007 2006 2007 2006
BGN'000 BGN'000 BGN'000 BGN'000
Weighted average number of shares ('000) 109,250 109,250 109,250 109,250
Profit (BGN'000) 17,157 8,690 20,493 2,563
Earnings per share (BGN) 0.16 0.08 0.19 0.02
34. Dividends
According to the decision of the General meeting of the shareholders of the
Parent company, held on June 11, 2007, dividends at the amount of BGN 8,428
thousand have been distributed in proportion to the participations of the
shareholders (see also note 31). Dividends amounting to BGN 8,261 thousand are
paid till September 30, 2007.
35. Subsidiaries
The consolidated subsidiaries, on which the Parent company exercises control as
of September 30, 2007, June 31,2007 and December 31, 2006, are as follows:
Subsidiary Main activities Investments Investments Investments
as of as of as of
September 30, June 30, December 31,
2007 2007 2006
Petrol Trans Express EOOD Transport services 100.0% 100.0% 100.0%
Petrol Technica EOOD Service and maintenance 100.0% 100.0% 100.0%
of fuel stations
New Co Zagora EOOD (Petrol Electricity generating - 100.0% 100.0%
Storage EOOD)
Petrol Trade EOOD Trade 100.0% 100.0% 100.0%
BPI EAD Trade with fuels and 100.0% 100.0% 100.0%
rents
Naftex Petrol EOOD Wholesale with fuels 100.0% 100.0% 100.0%
Eurocapital Bulgaria EAD Investing activities 100.0% 100.0% 100.0%
Petrol Card Service OOD Trade with fuels with 100.0% 100.0% 100.0%
fleet cards
Trans Operator AD (Translotto Trade, intermediation and - 99.9% 99.9%
AD) representation
Vratzata EOOD Recreation services 100.0% 100.0% 100.0%
Petrol Gaz OOD Trade with petrol 90.0% 90.0% -
products
During the first nine months of 2007 the Group disposed of two subsidiaries -
New Co Zagora EOOD and Trans Operator AD by selling them to the Ultimate parent
company. A new subsidiary Petrol Gaz OOD was established in May 2007 with main
activity - wholesale of fuels (especially gas).
36. Related parties transactions
The Parent company exercises control and significant influence over related
parties, disclosed in note 19 and 35. The Ultimate parent company is Petrol
Holding AD.
During the first nine months of 2007 and 2006 the Group has performed
transactions with the following related parties:
Related party
Petrol Holding AD ultimate parent company
Varna Business Services OOD associate
Izvor Bottling Company AD subsidiary of Petrol Holding AD
Air Lazur - General Aviation EOOD subsidiary of Petrol Holding AD
Interhotel Bulgaria Burgas EOOD subsidiary of Petrol Holding AD
Naftex Security EAD subsidiary of Petrol Holding AD
PFC Naftex AD subsidiary of Petrol Holding AD till August 2006
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
PSFC Chernomorets AD subsidiary of Petrol Holding AD
Balneohotel Pomorie AD subsidiary of Petrol Holding AD
Transat AD subsidiary of Transhold Bulgaria Holding AD
Trans Telecom EOOD subsidiary of Transhold Bulgaria Holding AD
Transcard AD subsidiary of Transhold Bulgaria Holding AD
Transcard Financial Services EAD subsidiary of Transcard AD
The transactions performed relate primarily to:
* purchase and sale of liquid fuels and other goods;
* purchase and sale of property, plant and equipment;
* holding fees and services;
* rents;
* supply of materials;
* maintenance and servicing;
* legal consultations;
* telecommunication services;
* other.
There are no unusual conditions or deviations from the average market prices in
these transactions.
36. Related parties transactions (continued)
During the first nine months of 2007 and 2006 transactions with related parties
are as follows:
Related party Nine months ended Nine months ended Three months Three months
September 30, September 30, ended September ended September
30, 30,
2007 2006 2007 2006
BGN'000 BGN'000 BGN'000 BGN'000
Sale of goods, Sale of goods, Sale of goods, Sale of goods,
non-current non-current non-current non-current
assets and assets and assets and assets and
services services services services
Ultimate parent company 564 731 172 303
Companies under common control 3,287 2,721 1,058 1,095
Associates 30 44 8 10
Total 3,881 3,496 1,238 1,408
Related party Nine months ended Nine months ended Three months Three months
September 30, September 30, ended September ended September
30, 30,
2007 2006 2007 2006
BGN'000 BGN'000 BGN'000 BGN'000
Purchase of Purchase of Purchase of Purchase of
goods, goods, goods, goods,
non-current non-current non-current non-current
assets and assets and assets and assets and
services services services services
Ultimate parent company 2,547 3,386 860 324
Companies under common control 74,644 5,918 43,691 1,743
Associates 369 348 135 141
Total 77,560 9,652 44,686 2,208
Related party Nine months Nine months Three months ended Three months ended
ended September ended September September 30, September 30,
30, 30,
2007 2006 2007 2006
BGN'000 BGN'000 BGN'000 BGN'000
Finance Finance Finance Finance
income income income income
Ultimate parent company 13,006 2,873 10,570 1,174
Companies under common control 15 - 6 -
Total 13,021 2,873 10,576 1,174
Related party Nine months Nine months Three months ended Three months ended
ended September ended September September 30, September 30,
30, 30,
2007 2006 2007 2006
BGN'000 BGN'000 BGN'000 BGN'000
Finance Finance Finance Finance
costs costs costs costs
Ultimate parent company 222 188 83 59
Total 222 188 83 59
36. Related parties transactions (continued)
The outstanding balances with related parties as of September 30, 2007, June 30,
2007 and December 31, 2006 are as follows:
Related party September 30, June 30, December 31,
2007 2007 2006
BGN'000 BGN'000 BGN'000
Amounts Amounts Amounts
receivable receivable receivable
Ultimate parent company, incl.: 73,190 75,135 85,372
Interest-bearing loans - non current portion 44,698 44,698 44,698
Interest-bearing loans - current portion 24,175 27,315 39,695
Companies under common control, incl.: 11,722 1,630 8,441
Interest-bearing loans - current portion 51 51 51
Associates 109 108 103
Total 85,021 76,873 93,916
Related party September 30, June 30, December 31,
2007 2007 2006
BGN'000 BGN'000 BGN'000
Amounts Amounts Amounts
payable payable payable
Ultimate parent company, incl.: 5,084 12,482 5,863
Interest-bearing loans - current portion 3,903 5,435 5,157
Companies under common control 1,280 21,038 1,207
Associates 146 80 60
Others 28 2,489 49
Total 6,538 36,089 7,179
37. Segment reporting
September 30, 2007 Wholesale Retail Other Elimi-nations Consolidated
of fuels of fuels activities
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
External sales 378,676 566,511 9,237 - 954,424
Inter-segment sales 52,274 2,562 10,961 (65,797) -
Total revenue 430,950 569,073 20,198 (65,797) 954,424
Result of the segment 15,119 24,187 3,542 - 42,848
Share of net loss of associates - - (200) - (200)
Foreign exchange rate gains, net - - - - 65
Loss on dealings with derivatives - - - - (18,103)
Gain on sale of subsidiaries - - - - 8,601
Interest expenses and fees and other - - - - (14,086)
financial expenses, net
Tax expense - - - - (1,968)
Net profit of the Group - - - - 17,157
Depreciation and amortization (2,036) (7,641) (3,508) - (13,185)
Impairment of assets (5) (11) - - (16)
September 30, 2006 Wholesale Retail Other Elimi-nations Consolidated
of fuels of fuels activities
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
External sales 518,509 463,157 13,247 - 994,913
Inter-segment sales 34,655 3,293 12,618 (50,566) -
Total revenue 553,164 466,450 25,865 (50,566) 994,913
Result of the segment 791 10,956 4,921 - 16,668
Share of net loss of associates - - (204) - (204)
Foreign exchange rate gains, net - - - - 1,088
Loss on dealings with derivatives - - - - (732)
Interest expenses and fees and other - - - - (4,811)
financial expenses, net
Tax expense - - - - (3,319)
Net profit of the Group - - - - 8,690
Depreciation and amortization (1,889) (8,887) (3,943) - (14,719)
Impairment of assets (27) (576) - (603)
37. Segment reporting (continued)
Wholesale Retail Other Consolidated
of fuels of fuels activities
BGN'000 BGN'000 BGN'000 BGN'000
September 30, 2007
Segment assets 284,484 280,244 65,963 630,691
Investment in equity method associates - - 1,616 1,616
Segment liabilities 114,466 322,165 11,095 447,726
Capital expenditure 2,981 27,273 4,334 34,588
December 31, 2006
Segment assets (restated) 307,138 267,902 61,052 636,092
Investment in equity method associates - - 1,816 1,816
Segment liabilities (restated) 146,803 301,827 12,134 460,764
Capital expenditure 3,856 9,972 8,599 22,427
38. Contingent assets and liabilities
Contingent liabilities
As of September 30, 2007 the Group has contingent liabilities under guaranteed
promissory notes to third parties for liabilities of related parties, at the
amount of BGN 46,884 thousand, and for available and future assets are mortgaged
and/or pledged as collateral under bank and trade loans, granted to the Group
and to related parties, at the amount of BGN 128,037 thousand.
As at September 30, 2007 contingent liabilities arising on bank guarantees
issued by a Group company in favour of the Customs Agency according to the
requirements of Excise Duties and Tax Warehouses Act amount to BGN 38,566
thousand. Bank guarantees amounting to BGN 864 thousand were issued in relation
to public orders.
Contingent assets
In 2006 the Group has recognized income from penalties amounting to BGN 8,196
thousand, calculated to a supplier because of a quantitative non-execution of a
fuel supply contract. As of December 31, 2006 the income has been reversed,
because the management has assessed that the income recognition criteria in
accordance with IAS 18 Revenue have not been met (see note 7). In view of this
fact as of September 30, 2007 a contingent asset amounting to BGN 8,196 thousand
arises for the Group, because the receivable from the counterparty was not
recognized in the consolidated financial statements, but the management believes
that it has reasonable and justifiable legal grounds to claim this receivable.
As of September 30, 2007 bank guarantees at the amount of BGN 2,710 thousand;
promissory notes at the amount of BGN 3,430 thousand, mortgage at the amount of
BGN 1,407 thousand serve as collateral for receivables from customers.
39. Environment
In relation to the privatization of Petrol AD in 1999 for most of the Company's
sites (storage facilities and fuel stations) reports for valuation of the
influence on the environment are prepared and approved by a council of experts
with the Ministry of Environment and Waters (MoEW). Based on these reports
Permissions for Exploitation of MoEW are issued. After the privatization the
Parent company undertakes a large-scale investment programme aiming to set its
sites in compliance with the best European practices. Hence, the sites are
reconstructed in compliance with Directive 94/63/EC, which has been transferred
to the Bulgarian legislation by means of Regulation No 16 of August 12, 1999
(the Regulation) on the control of volatile organic compound emissions resulting
from the storage, loading or unloading and transportation of petrol, issued
based on Art. 9, par. 1 of the Clean Air Act. The reconstruction of the fuel
stations is preceded by environmental characteristics for each investment offer.
These characteristics are presented to the Regional Inspections of Environment
and Waters (RIEW) for construction permission.
During the period 2007 - 2009, depending on the technological characteristics
and by observing the requirements of the Regulation, 282 fuel stations and 11
storage facilities will be set in compliance with the respective standards. The
approximate estimation of the management of the total value of the
reconstructions for the whole period amounts to BGN 23,780 thousand.
The actual results and the time for construction works may differ significantly
from the approximate estimates.
As of the date of these consolidated financial statements there is no obligating
event under IAS 37 - Provisions, Contingent Liabilities and Contingent Assets,
related to the commitment of the Company for environment protection, according
to the current legislation in Bulgaria, and therefore no provisions have been
accrued.
40. Legal proceeding
On February 13, 2007, in reply to a letter from Lukoil Bulgaria EOOD (the
Counterparty) dated January 17, 2007, the Parent company officially requests the
Counterparty to pay its debt of BGN 83,973 thousand within 20 days of the date
of the letter. The Parent company's claims are based on the contract for sale of
fuels, signed by the parties in July 2001 (see also note 6), according to which
the Counterparty should pay to the Parent company remuneration, calculated under
a formula specified in the contract, and also should reimburse the Parent
company for some expenses (budget), related to the contract execution. The total
Parent company's claim of BGN 83,973 thousand includes claim for non-reimbursed
expenses, related to the contract execution, at the amount of BGN 43,568
thousand, and claim for an additional remuneration at total amount of BGN 40,405
thousand. The claimed amounts do not include interest on overdue payment, which
should be calculated additionally.
The Parent company's claims are related to depreciation charges under the signed
contract not covered by the Counterparty, expenses at the actual amount spent
not covered by the Counterparty, as well as expenses incurred by the Parent
company for discounts given to customers as a result of its marketing policy.
Until December 31, 2005 the Parent company has recognized only part of the
claims (see also note 6), as it was convinced in its entitlement to receive
them, based on the concluded contract. In the view of the intensifying
disagreement with the Counterparty, arising doubt of the collectibility of these
receivables; and the grounds for revenue recognition in compliance with IAS 18
Revenue, since January 1, 2006 the Parent company ceased to include these
receivables, and respectively revenue, in its financial statements, and started
to present these claims off balance sheet.
In reply to the Parent company's request for payment of the claimed amounts
under the signed contract, the Counterparty filed an appeal with the Petrich
District Court for securing a future claim of the Counterparty against the
Parent company, at the approximate amount of BGN 60,000 thousand. The security
measure, requested by the Counterparty, for real estates owned by the Parent
company (99 fuel stations) to be placed under interdiction, has been satisfied.
These fuel stations have been mortgaged under a contract between the Ultimate
parent company and the Counterparty, signed in 2001.
In March 2007 the Counterparty filed a claim against the Parent company at the
amount of BGN 89,557 thousand, including principal of BGN 70,946 thousand and
penalty interest for delay of BGN 18,611 thousand, in relation to the contract
signed by the parties in July 2001. The Counterparty's claims for the principal,
according to the filed statement of claim, are based on "incorrect execution of
transactions, reported by the Company, at the amount of BGN 59,585 thousand" and
"amounts retained by the Company in the form of reported lower sales at the
amount of BGN 11,361 thousand". The first hearing of the court took place in May
2007. The Counterparty was asked by the court to specify its claim in a more
understandable manner and to make a breakdown of the amount claimed for the each
of the five years envisaged in the claim. During the second hearing in September
2007, the court accepted Counterparty's claim and decided to proceed with it on
the next hearing.
On its turn Parent company filed a partial claim against the Counterparty for
BGN 117,982 thousand, including principal of BGN 84,878 thousand, value added
tax amounting to BGN 16,975 thousand and penalty interest of BGN 16,129 thousand
for unpaid expenses due to the Parent company since 2001. The first hearing of
the court took place in June 2007. As a result the court appointed an
independent expert to carry out an accounting investigation with regard to the
filed claim. During the second hearing in September 2007 claimant's defense
challenged the findings and conclusions as stated in the expert's report and as
a result the court decided to appoint new three-expert accounting investigation.
40. Legal proceeding (continued)
In view of the fact that the lawsuit is in its initial phase and the parties'
counter claims are significant, the Parent company has not accrued provisions
for obligations arising on the lawsuit in the present consolidated financial
statements. The Parent company's management believes that the Counterparty's
claims are unfounded, whereas the Parent company's claims are in full compliance
with the Company's rights under the retail fuel supply agreement, signed in July
2001. The Parent company is confident in the strength of its legal position
based on legal opinion sought from both in-house and outside lawyers and law
firms, including reputed international law firms represented in Bulgaria.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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