1st Quarter Results

Petrol AD

31 May 2024

 

PETROL AD

Legal Entity Identifier (LEI): 4851003SBNLWFQX4XS80

31 May 2024

Petrol AD ("74JJ"), announces the publication of its

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

OF PETROL GROUP

AND CONDENSED EXPLANATORY NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH 31, 2024

(This document is a translation of the original Bulgarian document,

 in case of divergence the Bulgarian original shall prevail)

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

AND OTHER COMPREHENSIVE INCOME

For the period ended March 31

		2024 BGN'000		2023 BGN'000
Revenue		114,382		138,700
Other income		159		208
Cost of goods sold		(100,479)		(125,023)
Materials and consumables		(828)		(1,321)
Hired services		(4,838)		(4,955)
Employee benefits		(5,669)		(5,890)
Depreciation and amortisation		(2,002)		(3,211)
Impairment losses		(22)		(19)
Other expenses		(181)		(278)
Finance income		2,457		686
Finance costs		(4,379)		(1,489)
Loss before tax		(1,400)		(2,592)
Tax income (expense)		(183)		24
Loss for the period		(1,583)		(2,568)
Total comprehensive income for the period		(1,583)		(2,568)
Loss attributable to:
Owners of the Parent company		(1,583)		(2,568)
Non-controlling interest		-		-
Loss for the period		(1,583)		(2,568)
Total comprehensive income attributable to:
Owners of the Parent company		(1,583)		(2,568)
Non-controlling interest		-		-
Total comprehensive income for the period		(1,583)		(2,568)
Loss per share (BGN)		(0.06)		(0.09)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at March 31, 2024

					March 31 2024 BGN'000				Dec. 31 2023 BGN'000
Non-current assets
Property, plant and equipment and intangible assets					117,514				118,627
Investment properties					1,539				1,552
Right-of-use asset					8,676				9,363
Goodwill					6,514				6,514
Deferred tax assets					2,562				2,593
Trade loans granted					37,604				34,334
Deposits					54,475				54,475
Total non-current assets					228,884				227,458
Current assets
Inventories					13,983				15,971
Loans granted					54,847				53,698
Trade and other receivables					30,690				28,202
Cash and cash equivalents					3,498				3,388
Total current assets					103,018				101,259
Total assets					331,902				328,717
	Equity
	Registered capital			109,250				109,250
	Reserves			45,787				45,845
	Accumulated loss			(133,730)				(132,205)
	Total equity attributable to the owners of the Parent company			21,307				22,890
	Non-controlling interests			38				38
	Total Equity			21,345				22,928
	Non-current liabilities
	Trade and other payables			262				262
	Loans and borrowings			215,132				212,554
	Liabilities under lease agreements			6,365				7,005
	Deferred tax liabilities			1,114				1,069
	Employee defined benefit obligations			691				691
	Total non-current liabilities			223,564				221,581
Current liabilities
Trade and other payables				67,798				68,291
Loans and borrowings				14,252				11,696
Liabilities under lease agreements				3,570				2,955
Income tax liability				1,373				1,266
Total current liabilities				86,993				84,208
Total liabilities				310,557				305,789
Total equity and liabilities				331,902				328,717

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the period ended March 31, 2024

			Equity attributable to the owners of the Parent company								Non-controlling interests		Total equity
	Registered capital		General reserves		Reval. reserve		Accumulated profit (loss)		Total
	BGN'000		BGN'000		BGN'000		BGN'000		BGN'000		BGN'000		BGN'000
Balance at January 1, 2023	109,250		18,864		28,551		(136,645)		20,020		38		20,058
Changes in equity for 2023
Comprehensive income for the year
Profit for the year	-		-		-		2,645		2,645		-		2,645
Remeasurement on defined benefits obligations	-		-		-		225		225		-		225
Total other comprehensive income	-		-		-		225		225		-		225
Total comprehensive income	-		-		-		2,870		2,870		-		2,870
Transfer of revaluation reserve of assets to accumulated profit, net of taxes	-		-		(1,570)		1,570		-		-		-
Balance at December 31, 2023	109,250		18,864		26,981		(132,205)		22,890		38		22,928
Changes in equity for the period, ended March 31, 2024
Comprehensive income for the period
Loss for the period	-		-		-		(1,583)		(1,583)		-		(1,583)
Total comprehensive income	-		-		-		(1,583)		(1,583)		-		(1,583)
Transfer of revaluation reserve of assets to accumulated profit, net of taxes	-		-		(58)		58		-		-		-
Balance at March 31, 2024	109,250		18,864		26,923		(133,730)		21,307		38		21,345

CONSOLIDATED STATEMENT OF CASH FLOWS

For the period ended March 31

		2024 BGN'000				2023 BGN'000
Cash flows from operating activities
Loss for the period		(1,583)				(2,568)
Adjustments for:
Tax (income) / expense		183				(24)
Depreciation/amortization of property, plant, equipment and intangible assets, right-of-use assets		2,002				3,211
Interest expenses and bank commissions, net		1,939				1,135
Shortages and normal loss, net of excess assets		(16)				92
Provisions for unused paid leave and retirement benefits		306				261
Impairment of assets		22				19
Profit on sale of assets		(42)				(1)
		2,811				2,125
Change in trade payables		1,041				(11,191)
Change in inventories		2,011				7,240
Change in trade receivables		(1,544)				1,547
Cash flows from operating activities		4,319				(279)
Interest, bank fees and commissions paid		(3,788)				(1,008)
Net cash from operating activities		531				(1,287)
Cash flows from investing activities
Payments for purchase of property, plant and equipment, excl. VAT			(36)				(16)
Proceeds from disposal of property, plant and equipment, excl. VAT			166				219
Payments for loans granted, net			(3,193)				(889)
Interest received on loans and deposits			248				-
Net cash flows used in investing activities			(2,815)				(686)
Cash flows from financing activities
Proceeds from loans and borrowings			4,987				-
Repayment of loans and borrowings			(800)				(500)
Payments of dividend			(1,120)				-
Payments under lease agreements			(656)				(2,714)
Net cash flows from financing activities			2,411				(3,214)
Net increase (decrease) in cash flows during the period			127				(5,187)
Cash and cash equivalents at the beginning of the period			3,347				8,732
	Effect of movements in exchange rates		(17)				(332)
Cash and cash equivalents at the end of the period (excl. blocked cash)			3,457				3,213

I.         General Information

Petrol AD (the Parent company) was registered in Bulgaria in 1990 and entered in the Commercial Register to the Registry Agency with UIC 831496285. The headquarter address of the Parent company is 12 Tyrgovska Str., Hotel Lovetch in Lovetch city. As at the end of the reporting period shareholders are legal entities, the country - through the Ministry of Economy and Industry and individuals.

The main activity of Petrol AD and its subsidiaries (the Group) is related to the trading of petrol products, non-oil products, merchandise, and services.

These explanatory notes are prepared according to the requirements of Art. 100o1, par.5 of the Public Offering of Securities Act (POSA) and Appendix 4 to the Ordinance No 2 of November 09, 2021 for initial and subsequent disclosure of information during public offering of securities and admission of securities to trading on a regulated market by the public companies and other issuers of securities, and represent information about important events occurred during the first quarter of 2024. The explanatory notes reflect their influence on the results in the statements for the first quarter of 2024 and describe of the main risks and uncertainties, which stay ahead of the Petrol Group for the rest of the financial year and comprise information for transactions with related parties and/or interested parties, as well as information for emerging significant receivables and/or payables during the same period.

II.        Information on important events, occurred in the third quarter of 2023 and cumulatively from the beginning of the financial year to the end of the current quarter

General

These interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the Commission of the European Union (EU).

These interim consolidated financial statements have been prepared under the historical cost convention, except for provisions, assets and liabilities under IFRS 16 reported at the present value of expected future payments. When compiling it, the same accounting policy and calculation methods applied in the last annual financial statement have been followed.

Property, plant, equipment, intangible assets and non-current assets held for sale

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

As at March 31, 2024 the Group has property, plant, equipment and intangible assets with a total carrying amount of BGN 117,514 thousand. Property, plant and equipment with a carrying amount of BGN 101,964 thousand are mortgaged or pledged as collaterals under bank loans, granted to the Group and to unrelated parties, under credit limit agreements for issuance of bank guarantees.

Investment property

The investment properties, representing a land property and a building with a carrying value as at 31 March 2024 of BGN 1,539 thousand, were acquired in December 2016 through a business combination. The Group has estimated their fair value for disclosure purposes using an independent valuer's valuation which has been carried out using the amortised cost method, the median comparison method, the capitalisation of future rental income method. The fair value of the investment properties at March 31, 2024 is BGN 2,358 thousand. The investment properties serve as collateral for obligations under a bank loan agreement.

Leases

The consolidated statement of financial position as at March 31, 2024 presents the following items and amounts related to lease agreements:

Consolidated statement of financial position	March  31, 2024
	BGN'000
Right-of-use assets, incl.:	8,676
Properties (lands and buildings)	8,096
Transport vehicles	560
Machinery, plants and equipment	20
Liabilities under leases, incl.:	(9,935)
Current liabilities Non-current liabilities	(3,570) (6,365)

Depreciation costs of right-of-use assets, incl.:		687
Properties (lands and buildings)		570
Machinery, plants and equipment		114
Transport vehicles		3
Interest for right-of-use assets on lease agreements		148
Total		835

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

The Group has leased various assets: land, retail premises, small offices and buildings, vehicles, photocopiers. The leases are normally for a period of 3 to 10 years but may contain extension options.

Long-term Deposits in Banks

In September 2023, the Parent Company has deposited cash with a commercial bank under Debt Product Agreements (pursuant to Regulation 575/2013 of the European Parliament and of the Council of June 26, 2013) against interest linked to the Bank's Base Rate (BBR) plus a margin of 2.9093 points for ten-years term, maturing on August 15, 2033. As at March 31, 2024, the amounts deposited are BGN 55,000 thousand. The Parent company has entered into agreements for the blocking of these funds to secure the performance of a credit line granted to the Parent Company by the same bank, with the same term. As at March 31, 2024, an impairment charge of BGN 525 thousand has been made on the cash provided, in accordance with the policy for recognition of expected credit losses on financial assets.

Loans Granted

As at March 31, 2024 the Group reports receivables on trade loans granted, net of impairment at the total amount of BGN 92,451 thousand, including BGN 54,847 thousand current receivables. The loans are granted to unrelated parties with the following interest rates and maturity:

Debtor - Local Legal Entity	Receivables as at March 31,2024, net	Principal	Interest	Accrued impairment	Annual interest	Maturity
	BGN'000	BGN'000	BGN'000	BGN'000	%
Company	19,809	19,500	337	(28)	6.70%	Principal -31.dec.28 Interest - currently
Company	15,154	14,800	354	-	7.20%	31.dec.28
Company	9,637	9,840	348	(551)	7.00%	31.dec.24
Company	8,125	7,909	282	(66)	7.00%	31.dec.24
Company	6,012	5,830	208	(26)	7.00%	31.dec.24
Company	5,718	4,672	2,096	(1,050)	6.70%	31.dec.24
Company	5,508	5,410	1,561	(1,463)	6.70%	31.dec.24
Company	4,795	3,555	1,817	(577)	5.00%	Principal 31.dec.25 Interest - currnetly
Company	3,768	3,670	131	(33)	7.00%	31.dec.24
Company	3,630	3,000	1,117	(487)	5.00%	31.dec.24
Company	3,121	3,248	105	(232)	7.00%	31.dec.24
Company	2,095	2,040	66	(11)	7.00%	31.dec.24
Company	1,362	1,384	207	(229)	6.70%	31.dec.19
Company	978	984	32	(38)	7.00%	31.dec.24
Company	907	883	24	-	5.00%	31.dec.24
Company	851	829	22	-	7.20%	31.dec.24
Company	498	490	15	(7)	7.00%	31.dec.24
Company	412	313	99	-	7.00%	07.aug.24
Company	70	65	5	-	6.70%	31.dec.24
Company	1	121	15	(135)	5.00%	31.dec.24
Company	-	5,190	-	(5,190)	0.00%	28.oct.15
Company	-	2,210	-	(2,210)	9.50%	28.oct.15
Company	-	1,500	133	(1,633)	8.75%	17 jul.15
Company	-	1,259	431	(1,690)	6.70%	31.dec.24
Company	-	44	-	(44)	9.50%	21.jan.17
Company	-	22	5	(27)	6.70%	31.dec.24
Company	-	12	1	(13)	8.50%	26.aug.15
Company	-	-	429	(429)	6.70%	31.dec.19
	92,451	98,780	9,840	(16,169)

Cash and cash equivalents

As at March 31, 2024 the Group reported cash amounted to BGN 3,498 thousand as BGN 41 thousand are blocked as collateral under enforcement court cases.

In the notes under Art.15 par.1 of Ordinance No2 and the Public Offering of Securities Act (POSA), as cash equivalents of BGN 2,829 thousand, is presented the cash collected from the trade sites as at the end of the reporting period and registered in the Group's bank accounts at the beginning of the next reporting period.

Registered capital

The Group's registered capital is presented at its nominal value. The registered capital of the Group represents the registered capital of the Parent company Petrol AD.

As at the end of the reporting period shareholders in the Parent company are as follows:

Shareholder	March 31, 2024
Alfa Capital AD	28.85 %
Storage Invest EOOD	26.77 %
Perfeto Consulting EOOD	16.43 %
Trans Express Oil EOOD	9.82 %
Petrol Bulgaria AD	7.05 %
Gryphon Power AD	5.39 %
The Ministry of Energy of the Republic of Bulgaria	0.65 %
Other minority shareholders	5.04 %
	100.00 %

The Management of the Parent company has undertaken series of measures related to optimization of its capital adequacy. At several General Meetings of Shareholders (GMS) held in the period of 2016 - 2017 a decision for reverse-split procedure for merging 4 old shares with a nominal value of BGN 1 into 1 new share with a nominal value of BGN 4 and consequent decrease of the capital of the Parent company in order to cover losses by decreasing the nominal value of the shares from BGN 4 to BGN 1, was voted. In March 2018, following a decision of the Lovech Regional Court, which repealed the refusal of the Commercial Register to register the decision voted on EGMS for merging 4 old shares with a nominal value of BGN 1 into 1 new share with a nominal value of BGN 4, the applied change was registered in CR resulting in registered capital of the Parent company of BGN 109 249 612, distributed in 27 312 403 shares with a nominal value of BGN 4 each.

The change in the capital structure of the Parent company was registered also in Central Depositary AD. The submitted-on April 2018 application for registration of the voted on EGMS decision for the second stage of the procedure of the Parent company's capital to be decreased by decreasing the nominal value of the shares from BGN 4 to BGN 1 to cover losses, was refused by the Commercial Register.

At the EGMS of Petrol AD held on November 8, 2018 the decision to decrease the capital of the Parent company in order to cover losses by decreasing the nominal value of the shares from BGN 4 to BGN 1 was voted again. A refusal of the application for registration of the decision in CR was enacted, which was appealed by the Parent company within the legal term.

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

In February 2019 was held a new EGMS, where the decision for reduction of capital was voted again and a decision for substitution of the deceased member of Supervisory Board Ivan Voynovski with Rumen Konstantinov was taken. A refusal on the application for registration of these circumstances in the file of the Parent company was enacted, which was appealed by the Parent company within the statutory term. In addition to the refusal, the registration proceedings were ceased on request of minority shareholders until the Regional Court - Lovech rules on.

In May 2019 the Lovech Regional Court enacted a decision, which repealed the enacted refusal and turn back the case to the Registry Agency for registration of the application after a resumption of the ceased registration proceedings. At present, the court proceedings requesting a cancellation of the decisions taken on EGMS in February 2019 are pending.

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

Current income tax liabilities and tax audits

As at March 31, 2024 the Group has current corporate tax liabilities of BGN 1,373 thousand.

Loans and borrowings and factoring liabilities

As at March 31, 2024 the Group has total liabilities under received bank, debenture and trade loans of BGN 229,384 thousand, including BGN 14,252 thousand current liabilities.

Bank loans

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

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

In July 2023, due to the revolving credit line agreement with a total credit limit of BGN 220,000 thousand, an annex agreed to grant tranche No. 1 in the amount of BGN 90,000 thousand as an investment loan for the purchase of assets and company shares with a drawdown period until October 30, 2023. The interest rate and the final repayment term do not differ from those agreed in the main contract. The funds under this tranche have been drawn down and as at March 31, 2024 the Group has a principal liability of BGN 86,250 thousand and BGN 1,316 thousand interest liability.

In July 2023, due to the revolving credit line agreement with a total limit of BGN 220,000 thousand, an annex agreed to grant tranche No. 2 in the amount of BGN 30,000 thousand for working capital, funds for refinancing obligations under an existing revolving credit line granted by the same bank and funds for payment of bank guarantees and letters of credit. The drawdown period is until August 14, 2033. The interest rate and repayment deadline do not differ from those agreed in the main contract. In November 2023, the funds under tranche No. 2 were drawn down and the Group has a principal obligation of BGN 24,621 thousand and interest for BGN 147 thousand as at March 31, 2024.

In July 2023, due to the revolving line agreement with a total limit of BGN 220,000 thousand, an annex agrees to disburse tranche No. 3 in the amount of BGN 55,000 thousand as working capital in the form of an overdraft. The period for multiple drawdown and utilization of the amount under this tranche is up to 14 August 2033. The interest rate and repayment deadline do not differ from those agreed in the main contract. As at March 31, 2024, the Group has a principal obligation of BGN 55,000 thousand and interest for BGN 941 thousand under this tranche.

In July 2023, due to the revolving line agreement with a total limit of BGN 220,000 thousand, an annex agreed to grant tranche No. 4 in the amount of BGN 45,000 thousand as a revolving working capital loan. The drawdown and utilisation of the amount under this tranche shall be up to 14 August 2033. The interest rate and the final repayment term do not differ from those agreed in the main agreement. As at March 31, 2024 the Group has a liability under this tranche for the principal amount of BGN 21,200 thousand and interest for BGN 345 thousand.

In November 2023, the Group signed a bank loan agreement in the amount of BGN 3,000 thousand intended to finance Group's working capital, at an annual interest rate of BIRA per BGN of the creditor bank, increased by a margin of 2.61 points, but not less than 5.9% on an annual basis. The repayment plan is for 5 (five) years with equal monthly installments on principal, the deadline for repayment is November 25, 2028. The loan is secured by mortgages of fixed tangible assets owned by the Parent company and a subsidiary co-debtor under the contract, pledge of plant and equipment machinery, subrogation to the obligation of a subsidiary, as well as financial collateral by providing a pledge under the Personal Income Tax Act on the receivables on the accounts opened by the parent company and the co-debtor in the creditor bank. As at March 31, 2024, the Group's principal obligation amounted to BGN 2,900 thousand and BGN 20 thousand interest.

Debenture loans

In October 2006, the Parent company issued 2,000 registered transferable bonds with fixed annual interest rate of 8.375 per cent and emission value of 99.507 per cent of the nominal, which is determined at EUR 50,000 per bond. The purpose of the bond issue is to provide funds for working capital, investment projects financing and restructuring of previous Group's debt. The principal was due in one payment at the maturity date and the interest was paid once per year. At the general meetings of the bondholders conducted in October and December 2011, it was decided to extend the term of the issue until January 26, 2017. On December 23, 2016, a procedure for extension of the bond issue to 2022 and reduction of the interest rate in the range from 5.5 per cent to 8 per cent was successfully completed.

In September 2020, the Parent company successfully completed a procedure for renegotiation of the terms of the debenture loan. The maturity of the principal of the debenture loan is deferred until January 2027, and the agreed interest rate is reduced to 4.24 per cent per year, as the periodicity of the due interest (coupon) payments is every six months - in January and in July of each year until the maturity of the loan.

As at the date of preparation of these financial statements the nominal value of the debenture loan is EUR 18,659 thousand.

The liabilities under the debenture loan are disclosed in the statement of financial position at amortised cost. The annual effective interest rate after the term extension of the bond issue is 4.52 per cent. (incl. 4.24 per cent annual coupon rate).

Trade loan received

In January 2023, the Parent company obtained a short-term loan from an unrelated party trading company with a credit limit of BGN 2,000 thousand and interest at 5% on the amount drawn down. The loan has an outstanding principal amount. The liability as at March 31, 2024 is BGN 2 thousand for interest.

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

Operating lease agreements

The Group is lessee under operating lease agreements. As at March 31, 2024 the recognised rental expenses in the statement of profit or loss and other comprehensive income, include expense at the amount of BGN 94 thousand for renting of fuel stations under operating lease, which fall within the exceptions of IFRS 16 and which agreements include clause stipulating that both parties have the right to cease the agreement for each separate fuel station or as a whole with an immaterial penalty.

Subsidiaries

The Parent company (the Controlling company) is Petrol AD. The subsidiaries included in the consolidation, over which the Group has control as at March 31, 2024 are as follows:

Subsidiary	Main activity	Investment as at March 31, 2024
Varna Storage Ltd	Trade of petrol and petroleum products	100%
Petrol Finance Ltd	Financial and accounting services	100%
Elit Petrol -Lovech JSC	Trade of petrol and petroleum products	100%
Lozen Asset JSC	Acquisition, management and exploitation of property	100%
Petrol Properties Ltd	Trading movable and immovable property	100%
Kremikovtsi Oil Ltd	Processing, import, export and trading with petroleum products	100%
Shumen Storage Ltd	Processing, import, export and trading with petroleum products	100%
Office Estate Ltd	Ownership and management of real estates	100%
Svilengrad Oil Ltd	Processing, import, export and trading with petroleum products	100%
Varna 2130 Ltd	Trade of petrol and petroleum products	100%
Petrol Export Ltd	Trade of fuels for export	100%
Bulgaria Cargo Rail Ltd	Export and transport of petrol and petroleum products	100%
Crystal Assets Trade Ltd	Real estate management	100%
Crystal Asset Property Ltd	Real estate management	100%
Crystal Assets Bulgaria Ltd	Real estate management	100%
Prima Assets Bulgaria Ltd	Real estate management	100%
Prima Assets Trade Ltd	Real estate management	100%
Prima Consult Property Ltd	Real estate management	100%
Prima Lend Property Ltd	Real estate management	100%
Petrol Oil Recycling Ltd	Management and processing of collection and recycling of waste oil products	100%
Petrol Investment JSC	Acquisition, management, operation and disposal of real estates	99.98%
Petrol Finances Ltd	Financial and accounting services	99%
Petrol Technologies Ltd	IT services and consultancy	98,80%
Petrol Technology Ltd	IT services and consultancy	98,80%

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

As at March 31, 2024 the Group has contingent liabilities, including issued mortgages and pledges of property, plant and equipment and non-current assets held for sale, which serve as a collateral for bank loans granted to the Group and unrelated parties and credit limits for issuance of bank guarantees with total carrying amount of BGN 103,503 thousand, including in favour of First Investment Bank AD BGN 98,124 thousand, Investbank AD - BGN 3,322 thousand and DSK AD - BGN 2,057 thousand.

Pursuant to an agreement from October 17, 2018 and its annexes, the Group is a joint debtor and a guarantor on a promissory note for the amount of BGN 48,750 thousand in favour of Investbank AD under a credit facility on unrelated party - supplier, including, including limit for overdraft and limit for stand-by credit for issuance of bank guarantees in favour of Customs Agency. The total amount of the utilized funds and issued bank guarantees of all borrower's exposures to the Bank shall not exceed BGN 44,000 thousand. In relation to this credit agreement, the Group has established a special pledge on its cash in the bank account opened in Investbank AD with total amount of BGN 145 thousand as at March 31, 2024 and a special pledge on receivables from contractors for BGN 4,000 thousand average monthly turnover.

Pursuant to an agreement from June 17, 2021 the Group is a joint debtor in favour of Investbank AD under credit line for bank guarantees for BGN 600 thousand, received by an unrelated party - supplier.

The Group bears a joint obligation according to an debt agreement from January 13, 2017 on an obligation of a subsidiary until March 2018 - Elit Petrol AD for BGN 2,346 thousand as at March 31, 2024.

Under a revolving credit line agreement signed in 2023 with a total limit of BGN 220,000 thousand and a sub-limit of BGN 30,000 thousand for the refinancing of liabilities, including the issuance of bank guarantees and letters of credit, there are bank guarantees issued for a total amount of BGN 5,296 thousand as at March 31, 2024, including BGN 3,750 thousand under contracts with the Group's third party suppliers, a BGN 500 thousand bank guarantee in favour of the Ministry of Economy securing the Group's activities in connection with its registration under the Law on Administrative Regulation of Economic Activities Related to Petroleum and Petroleum Products, and bank guarantees securing the Group's obligations under contracts in connection with the Public Procurement Law in the amount of BGN 1,046 thousand. As at March 31, 2024, the contract is secured by a pledge over the Group's receivables on bank accounts to secure liabilities as well as mortgages on immovable property and pledges on plant and machinery and an aggregate of assets of a subsidiary for an amount of BGN 1,500 thousand.

There is a pending litigation in relation to a signed in 2015 guarantee contract of the liabilities of a subsidiary until February 2018, arising of a cession contract of BGN 245 thousand. In April 2020 a final decision on the pending case was ruled. The court held that the Group is responsible as a guarantor for the obligations of the subsidiary under the cession contract. The Court of Appeal annulled the decision of the first-instance court in its entirety and found that the Group's claim under the warranty agreement had been established jointly with the other related party. The decision of the Court of Appeal was appealed by the Parent company in the Supreme Court of Cassation, but was not allowed to appeal.

The Group has filed a claim to establish the non-existence of these receivables, and the case initiated is pending. A collateral at the amount of BGN 25 thousand to the court's account was admitted for a future claim against the provision of a guarantee in favor of the Group, as a result of which the enforcement proceedings initiated against the Group for these receivables were suspended. By a decision of November 2021, the Court recognized as established on the negative claim filed by the Parent company that the Group does not owe the defendant these claims. The decision of November 2021 was appealed by the defendant and the case is currently pending at second instance. In August 2022, the Sofia Court of Appeal overturned the decision of the first instance court in its entirety. The decision of the CAS has been appealed and the case is currently pending before the Supreme Court of Cassation. The funds given as collateral under Art. 180 and Art. 181 of the Law on Obligations and Contracts (LOC) at the amount of BGN 245 thousand in the case initiated against the Group in 2015, together with the amount of BGN 93 thousand, were collected by the bailiff during the enforcement proceedings initiated against the Group. However, they have not been distributed due to the suspension of the enforcement case, based on the security of a future claim provided in favor of the Group and remain blocked on the account of the bailiff until the conclusion of the litigation.

In the previous reporting periods Group's companies have entered into debt under two loan agreements of a subsidiary with a bank-creditor (until December 2015) for USD 15,000 thousand and USD 20,000 thousand, respectively. In 2015 the bank -creditor acquired court orders for immediate execution and receiving orders against the subsidiaries - joint debtors. In relation to the claims filed by the subsidiaries, the competent court has revoked the immediate enforcement orders and has invalidated the receiving orders. In October and December 2015 the creditor filed claims under Art. 422 of Civil Procedure Code (CPC) against the subsidiaries for the existence of the receivables under each loan agreement. The court proceedings of the creditor are still pending.

In December 2016 the first-instance court decreed a decision (the Decision) which admit for established that the bank has a receivable amounted to USD 15,527 thousand from the subsidiaries - joint debtors, arising from a signed loan agreement for USD 15,000 thousand. With the same decision the court has ordered the joint-debtors to pay BGN 411 thousand to the bank - creditor for legal advisory fees and court dispute expenses and BGN 538 thousand state fee in favor of the judiciary state for the ordered proceedings and BGN 538 thousand state fee for claim proceedings. In January 2017, the co-debtors have filed in time appeals against the court decision, because of that the decision did not come into force. As at the date of the preparation of these explanatory notes, the court dispute is pending in the appeal court. The Group's Management considers that there are grounded chances the Decision to be entirely repealed.

As at the date of the preparation of these explanatory notes, the filed proceedings against the subsidiaries - joint debtors for estimation of the bank receivables due to the loan agreement for USD 20,000 thousand is pending before the first-instance court. The Management expects favorable decision by the competent court. In 2018 the Parent company sold its interest in one of co-debtor subsidiaries and the potential risk for the Group is reduced to the court proceedings against the second subsidiary.

A creditor of a subsidiary (until December 2015) unreasonably claimed in court the responsibility of the Parent company under a contract of guarantee for liabilities arising from a contract for a framework credit limit as a result of that the bank accounts of the Parent company amounting to USD 29,983 thousand were garnished. This claim was disputed in court by Petrol AD because the liability as guarantor has not occurred and / or extinguished pursuant to Art. 147, par. 2 of the LOC. At the time of conclusion of the guarantee deadline of the arrangements between the lender and subsidiary contractual framework for credit limit was July 1, 2014. The term of the framework credit limit was extended without the consent of the customer, therefore the responsibility of the latter has fallen by six months after initially agreed period, during which the creditor has brought an action against the principal debtor. The term under Art. 147, par. 1 of the LOC is final and upon its expiration the Parent company's guarantee has been terminated, so the objection of the Parent company was granted by the court and imposed liens on bank accounts were lifted.

Following the cancellation of the writ of execution, pursuant to order proceedings, which imposed liens on bank accounts of the Parent company, the creditor has initiated legal claim proceedings under Art. 422 of the CPC to establish the same claims against the subsidiary (until December 2015) and the guarantor Parent company. In these proceedings the objections are repeated that liability as guarantor has not occurred and / or extinguished pursuant to Art. 147, par. 2 of the LOC, and therefore the Management expects that the claim of the creditor against the Parent company will be dismissed permanently by a court decision on those cases. At present, the case is suspended due to the existence of a preliminary ruling, which is important for the correct resolution of the case.

The Group claims its receivables to the subsidiary (until December 2015). The presented claims are included in the list of accepted claims prepared by the receiver under Art. 686 of the Criminal Code, but the same is contested by another creditor in the bankruptcy proceedings. Currently, the pending legal proceedings to establish the existence of these claims pursuant to Art. 694 of the Criminal Code ended with a decision, and the court accepted the claims of the Group up to the amount of BGN 4,794 thousand.

As at March 31, 2024, funds in the Group's bank accounts in the amount of BGN 41 thousand have been blocked in enforcement cases to which the Group is a counterparty.

As collateral, a promissory note in the amount of BGN 15,000 was issued to a counterparty of the Parent company under a contract concluded in 2023 for the purchase of fuels with deferred payment.

Under a revolving credit line agreement signed in 2023 with a total limit of BGN 220,000 thousand. In July 2023, a pledge of a commercial enterprise was established as a set of rights and obligations and de facto relations of Petrol AD, Kremikovtzi Oil Ltd, Shumen Storage Ltd, Office Estate Ltd, Crystal Asset Property Ltd, Crystal Asset Trade Ltd, Crystal Asset Bulgaria Ltd, Prima Asset Bulgaria Ltd, Prima Assets Trade Ltd, Prima Consult Property Ltd, Prima Land Property Ltd As collateral under the same agreement, the Group has pledged receivables from bank accounts opened with the Bank, including funds deposited under a debt product agreement with a carrying amount as at March 31, 2024 of BGN 54,576 thousand.

Pursuant to the covenants under a bank loan agreement entered into in November 2023, the Group has established a mortgage on property and a pledge of plant and equipment with a total carrying amount as at March 31, 2024 of BGN 3,049 thousand. The agreement is also secured by a pledge over bank accounts receivable with a carrying value as at March 31, 2024 of BGN 2 thousand.

III.      Disclosure of transactions with related parties

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

Supervisory Board
Ivan Voinovski[1]	Chairman
"Petrol Correct" EOOD, represented by Nikolay Gergov	Member
"Petrol Asset Management" EOOD, represented by Armen Nazaryan	Member
Management Board
Grisha Ganchev	Chairman of the Board
Georgi Tatarski	Deputy of the MB and Chief Executive Officer
Milko Dimitrov	Member of the MB and Chief Executive Officer
Lachezar Gramatikov	Member of the MB
Kiril Shilegov	Member of the MB

The total amount of accrued remuneration to key management personnel of the Parent vompany included in staff costs amounts to BGN 274 thousand and the outstanding payables as at March 31, 2024 amount to BGN 81 thousand, of which BGN 69 thousand is presented as payables to staff and BGN 12 thousand as payables to related parties.

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

Included in purchases from related parties - a shareholder with significant influence - for the first quarter of 2024 are rental expenses for property, plant and equipment in the amount of BGN 14 thousand, accounted for as lease expenses in accordance with the provisions of IFRS 16 in the statement of profit or loss and other comprehensive income, including depreciation expense and interest expense and BGN 1 thousand service income.

Related party	March 31 2024		March 31 2024
	BGN'000		BGN'000
	Receivables		Liabilities
Other related parties, incl:	2,866		12,994
Interest on trade loans	-		2
Shareholder with significant influence	-		48
	2,866		13,042

IV. Risks and uncertainties ahead of the Group for the rest of the financial year

Macroeconomic environment

The Petrol Group's activity is influenced by the general economic condition of the country and in particular the degree of the successful adoption of the market-oriented economic reforms by the government, changes in the gross domestic product (GDP) and the purchasing power of the Bulgarian customers. In the long term the change in the fuels consumption in the country is commensurate with the GDP.

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

The Group's management monitors the emergence of risks and negative consequences as a result of the pandemic caused by COVID-19, the military conflict between Russia and Ukraine and the high levels of inflation, making ongoing assessments of the possible effects on the Group's assets, liabilities and operations, seeking to comply as far as possible with contractual commitments, despite the force majeure circumstances that have arisen. In view of the effects of the pandemic, military conflict and high inflation, which are challenging economic activity in the country and creating significant uncertainty about future business developments, there is a real risk of a decline in sales and losses for the Group.

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

The Group's results of operations are influenced by several factors, such as macroeconomic conditions in Bulgaria, competition, gross margin dynamics, crude oil and petroleum product price dynamics, product mix, supplier relationships, regulatory changes, changes in foreign exchange rates, weather conditions, seasonality, etc. In 2024, the Group will continue to suffer negative impacts from commodity price volatility, both domestically and globally, inflation rates, and geopolitical uncertainty.

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

In the coming years, the Group's performance will also depend on the ability to make investments and the successful implementation of new projects. The Group's investments will be prioritised towards the construction of new outlets and the refurbishment of the currently managed ones, with the aim of increasing Petrol AD's sales and market share, mainly by transforming the outlets managed by the Group into modern, full-service locations. Following the acquisition in 2023 of the shareholdings of seven companies owning 190 petrol stations, Petrol AD will be able to plan its investment program more easily, seeking the best realization of the assets managed by the Group.

Future uncertainty about the ability of customers to repay their obligations, in accordance with the agreed conditions, may lead to an increase of impairment losses on interest loans granted, trade receivables, financial assets available-for-sale and other financial instruments, as well as the values of other accounting estimates in subsequent periods might materially differ from those specified and recorded in these consolidated financial statements. The Group's Management applies the necessary procedures to manage these risks.

Legislature

The Parent company is supervised by several regulatory bodies in the country and a potential change in the regulatory framework, regulating the Parent company's activity may have a negative impact on the Group's financial results. In July 2018 the Government of the Republic of Bulgaria adopted a new Law for Administrative Regulation of the Economic Activities, Related to Petrol and Petroleum Products, which aims to provide security and predictability in trading with petrol and petroleum products and increase the energy security of the country. Due to its core business, this law will affect the Group. As at the date of issuance of these financial statements, the Parent company is entered in the register to the Ordinance on the terms and conditions for keeping a register of entities carrying out economic activities related to oil and petroleum products for the wholesale trading activity and has issued a bank guarantee in favor of the Ministry of Economy at the amount of BGN 500 thousand. As at the date of issuance of these financial statements, the registration procedure of the Parent company for retail trading with oil and petroleum products is finished.

Suppliers

Due to the specific of the primary business of Petrol Group, namely retail and wholesale trading with fuels, the Group's fuels supplies are provided by a small number of suppliers, as a result of which the Group is at risk of discontinuation of relationships with key suppliers, which may lead to a short-term depletion of inventories and trading activity difficulties.

Petrol Group's wholesale and retail trading with fuels, lubricants and other goods, and storage of fuels is carried out through its own and rented from third parties petrol stations and storage facilities. There is a risk from a suspension of the relationships with the lessors and termination of the lease agreements for the petrol stations and/or storage facilities, which can have a significant negative impact on Petrol Group as deteriorating of sales, worsening of the financial results and substantial loss of market share.

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

Competition

In the last few years, there has been a tendency for consumers to increasingly turn to established and well-known brands with a tradition in fuel retail. As a result, some small retailers were forced to close or enter into franchise or dealership agreements with one of the major market participants. Due to the general decline in economic activity, consumer attitudes and the introduction of additional regulatory control by the government, the share of small independent players continues to decline.

The lack of strategic deals and significant investments by large participants in the retail fuel market has led to a minimal change in the market shares of companies in the sector;

Price risk

The Group is at risk of frequent and sharp changes in prices of fuels and non-petroleum goods. Because of that, the future financial results may diverge significantly from the expectations of the Group's Management. Any future sharp fluctuations in the price of fuels and non-petroleum goods may lead to a deterioration of the financial position of the Group;

Market risk

The Group is exposed to the risk of change in currency rate, movement in the interest rates and the prices of the capital instruments, which may impact the Group's financial instruments or the value of its investments.

Interest rate risk

Risks arising from the increase in the price of the Group's financing;

Credit risk

The risk of inability of the Group's trade partners to fulfill their contractual obligations, which may lead to losses for the Group;

Exceptional costs

There is a risk of incurring unforeseeable costs, which to affect negatively the financial position of the Group;

Political risk

Risks to the Group arising from global and regional political and economic crises;

Climate conditions and seasonality

Weather conditions and seasonal fluctuations in demand for certain petroleum products impact the Group's results of operations. Gasoline demand peaks in the second and fourth quarters due to both the annual holiday season in the summer months and increased demand from farmers who traditionally increase their consumption in the autumn season.

Liquidity risk

Liquidity risk is the risk that the Group may not be able to meet its financial obligations when they fall due. The policy is aimed at ensuring sufficient liquidity with which to serve liabilities when they fall due, including abnormal and emergency situations.

Georgi Tatarski CEO

Milko Dimitrov CEO

Prepared by Yana Borisova and Yavor Batov Managers of Petrol Finance Ltd.

May 30 2024

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

 

END