3rd Quarter Results

Petrol AD

06 December 2023

 

PETROL AD

Legal Entity Identifier (LEI): 4851003SBNLWFQX4XS80

06 December 2023

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

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

OF PETROL GROUP

AND CONDENSED EXPLANATORY NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED SEPTEMBER 30, 2023

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

 in case of divergence the Bulgarian original shall prevail)

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

AND OTHER COMPREHENSIVE INCOME

For the period ended September 30

		2023 BGN'000		2022 BGN'000
Continuing operations
Revenue		436,341		559,208
Other income		665		5,144
Cost of goods sold		(392,118)		(504,971)
Materials and consumables		(3,441)		(5,525)
Hired services		(15,424)		(25,208)
Employee benefits		(18,033)		(15,921)
Depreciation and amortisation		(9,701)		(2,444)
Impairment losses		(53)		(39)
Other expenses		(859)		(582)
Finance income		1,822		1,015
Finance costs		(4,448)		(3,316)
Profit (loss) before tax		(5,249)		7,361
Tax income (expense)		130		(159)
Profit (loss) for the period from continuing operations		(5,119)		7,202
Discontinued operation
Loss from discontinued operation (net of income tax)		-		(273)
Profit (loss) for the period		(5,119)		6,929
Total comprehensive income for the period		(5,119)		6,929
Profit (loss) attributable to:
Owners of the Parent company		(5,119)		6,929
Non-controlling interest		-		-
Profit (loss) for the period		(5,119)		6,929
Total comprehensive income attributable to:
Owners of the Parent company		(5,119)		6,929
Non-controlling interest		-		-
Total comprehensive income for the period		(5,119)		6,929
Profit (loss) per share (BGN) from continuing operations and discontinued operation		(0.19)		0.25
Profit (loss) per share (BGN) from continuing operations		(0.19)		0.26

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

		Sept. 30 2023 BGN'000		Dec. 31 2022 BGN'000
Non-current assets
Property, plant and equipment and intangible assets		80,234		44,434
Investment properties		1,564		1,601
Right-of-use asset		44,003		52,578
Goodwill		5,999		57
Deferred tax assets		1,063		1,896
Trade loans granted		3,022		2,808
Other long-term receivables		55,000		-
Total non-current assets		190,885		103,374
Current assets
Inventories		17,740		26,306
Loans granted		36,457		19,641
Trade and other receivables		38,045		34,051
Cash and cash equivalents		3,447		8,773
Total current assets		95,689		88,771
Total assets		286,574		192,145
Equity
Registered capital		109,250		109,250
Reserves		46,702		47,415
Accumulated loss		(141,051)		(136,645)
Total equity attributable to the owners of the Parent company		14,901		20,020
Non-controlling interests		38		38
Total equity		14,939		20,058
Non-current liabilities
Loans and borrowings		154,588		49,811
Liabilities under lease agreements		36,000		42,834
Employee defined benefit obligations		807		807
Total non-current liabilities		191,395		93,452
Current liabilities
Trade and other payables		69,269		64,517
Loans and borrowings		703		1,184
Liabilities under lease agreements		9,589		12,912
Income tax liability		679		22
Total current liabilities		80,240		78,635
Total liabilities		271,635		172,087
Total equity and liabilities		286,574		192,145

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

			Equity attributable to the owners of the Parent company								Non-controlling interests		Total equity
	Registered capital		General reserves		Reval. reserve		Accumulated profit (loss)		Total
	BGN'000		BGN'000		BGN'000		BGN'000		BGN'000		BGN'000		BGN'000
Balance at January 1, 2022	109,250		18,864		24,414		(149,199)		3,329		24		3,353
Changes in equity for 2022
Comprehensive income for the period
Profit /(loss) for the year	-		-		-		11,705		11,705		(1)		11,704
Remeasurement on defined benefits obligations	-		-		-		86		86		-		86
Remeasurement on property, plant and equipment	-		-		5,445		-		5,445		17		5,462
Other comprehensive income	-		-		(545)		-		(545)		(2)		(547)
Total other comprehensive income	-		-		4,900		86		4,986		15		5,001
Total comprehensive income	-		-		4,900		11,791		16,691		14		16,705
Transfer of revaluation reserve of assets to the accumulated profit, net of taxes	-		-		(763)		763		-		-		-
Balance at December 31, 2022	109,250		18,864		28,551		(136,645)		20,020		38		20,058
Changes in equity for the period of 2023
Comprehensive income for the period
Loss for the period	-		-		-		(5,119)		(5,119)		-		(5,119)
Total comprehensive income	-		-		-		(5,119)		(5,119)		-		(5,119)
Transfer of revaluation reserve of assets to the accumulated profit, net of taxes	-		-		(713)		713		-		-		-
Balance at September 30, 2023	109,250		18,864		27,838		(141,051)		14,901		38		14,939

CONSOLIDATED STATEMENT OF CASH FLOWS

For the period ended September 30

	2023 BGN'000		2022 BGN'000
Cash flows from operating activities
Receipts from customers	537,083		721,736
Payments to suppliers	(517,092)		(734,529)
Refunded (paid) VAT and excise to the budget, net	4,460		(2,038)
Payments related to personnel	(17,464)		(14,193)
Income tax paid	(22)		(143)
Other cash flows from operating activities, net	507		17,985
Net cash flows from operating activities	7,472		(11,182)
Cash flows from investing activities
Payments for purchase of property, plant and equipment	(198)		(2,129)
Proceeds from sale of property, plant and equipment	1,760		5,919
Payments for loans granted	(2,330)		(3,469)
Proceeds from loans granted	3,503		3,043
Interest received on loans and deposits	50		713
Payments for investments acquired	(50,431)		(25)
Proceeds from other investments	(55,000)		3
Net cash flows used in investing activities	(102,646)		4,055
Cash flows from financing activities
Proceeds from loans	106,498		9,600
Repayment of loans and borrowings	(1,850)		(513)
Lease payments	(12,049)		(1,649)
Interest, bank fees and commissions paid, net	(2,098)		(1,917)
Other cash flows from financing activities, net	(682)		(287)
Net cash flows from financing activities	89,819		5,234
Net decrease in cash flows during the period	(5,355)		(1,893)
Cash at the beginning of the period	8,773		4,027
Effect of movements in exchange rates	(12)		203
Cash as per cash flow statement at the end of the period	3,406		2,337
Restricted cash	41		41
Cash as per statement of financial position	3,447		2,378

I.         General Information

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

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

These explanatory notes are prepared according to the requirements of Art. 100o1, par.5 of the Public Offering of Securities Act (POSA) and Appendix 4 to the Ordinance No 2 of November 09, 2021 for initial and subsequent disclosure of information during public offering of securities and admission of securities to trading on a regulated market by the public companies and other issuers of securities, and represent information about important events occurred during the third quarter of 2023. The explanatory notes reflect their influence on the results in the statements for the third quarter of 2023 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 September 30, 2023 the Group has property, plant, equipment and intangible assets with total carrying amount of BGN 80,234 thousand.

Property, plant and equipment with a carrying amount of BGN 61,534 thousand are mortgaged or pledged as collaterals under bank loans, granted to the Group and to unrelated parties, under credit limit agreements for issuance of bank guarantees.

Investment property

The investment properties of the Group, representing a land and a building, were acquired in December 2016 through a business combination. The carrying amount of the investment property is the maximum approximation of their fair value, which as at September 30, 2023 is BGN 1,564 thousand. The Group measures the fair value of investment property for disclosure purposes using an appraisal of an independent appraiser done using the methods of market comparison, rental income capitalization and the method of depreciated replacement cost. As at September 30, 2023 the fair value of the investment properties is BGN 2,061 thousand. The investment properties are part of a set of assets serving to secure liabilities of up to BGN 1,500 thousand under a revolving credit line agreement signed in 2016.

Leases

The consolidated statement of financial position as at September 30, 2023 presents the following items and amounts related to lease agreements:

Consolidated statement of financial position	September  30, 2023
	BGN'000
Right-of-use assets, incl.:	44,033
Properties (lands and buildings)	43,414
Transport vehicles	581
Machinery, plants and equipment	8
Liabilities under leases, incl.:	(45,589)
Current liabilities Non-current liabilities	(9,589) (36,000)

Depreciation costs of right-of-use assets, incl.:		8,666
Properties (lands and buildings)		8,386
Machinery, plants and equipment		254
Transport vehicles		26
Interest for right-of-use assets on lease agreements		1,720
Total		10,386

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.

Long-term Deposits in Banks

In September 2023, the Group provided cash to a commercial bank under the Debt Product Agreement against interest tied to the Bank's Base Interest Rate (BIR) plus an allowance of 2.9093 points for a period of ten years. As of September 30, 2023, the deposited amounts total BGN 55,000 thousand. The Group has entered into an agreement for the blocking of these funds in order to ensure the fulfillment of the credit line granted by the same bank, with the same term.

Loans Granted

As at 30 September, 2023 the Group reports receivables on short-term trade loans, net of impairment at the total amount of BGN 39,479 thousand, including BGN 36,457 thousand short-term receivables. The loans are granted to unrelated parties with the following interest rates and maturity:

Debtor - Local Legal Entity	Net Receivables as at Sept.30,2023 BGN'000	Principal BGN'000	Interest BGN'000	Accrued impairment BGN'000	Annual interest %	Maturity
Company	7,843	7,909	-	(66)	7.00%	31.dec.23
Company	5,830	5,830	-	-	7.00%	31.dec.23
Company	5,700	5,410	1,377	(1,087)	6.70%	31. dec.23
Company	5,559	4,672	1,937	(1,050)	6.70%	31. dec.23
Company	4,749	3,555	1,727	(533)	5.00%	31. dec.25
Company	3,612	3,645	-	(33)	7.00%	31. dec.23
Company	3,508	3,000	1,040	(532)	5.00%	31. dec.23
Company	1,138	1,204	163	(229)	6.70%	31. dec.19
Company	1,068	1,036	32	-	5.00%	31. dec.23
Company	400	313	87	-	7.00%	07.aug.23
Company	67	65	2	-	6.70%	31. dec.23
Company	5	121	12	(128)	5.00%	31. dec.23
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	-	1,258	388	(1,646)	6.70%	31.dec.23
Company	-	44	-	(44)	9.50%	21.jan.17
Company	-	23	4	(27)	6.70%	31.dec.23
Company	-	12	1	(13)	8.50%	26.aug.15
Company	-	-	429	(429)	6.70%	31.dec.19
	39,479	46,997	7,332	(14,850)

Cash and cash equivalents

As at September 30, 2023 the Group reported cash amounted to BGN 3,447 thousand as BGN 41 thousand are blocked as collateral under enforcement cases.

In the notes under Art.15 par.1 of Ordinance No2 and the Public Offering of Securities Act (POSA), as cash equivalents of BGN 2,407 thousand, is presented the cash collected from the trade sites as at the end of the reporting period and actually registered in the Group's bank accounts at the beginning of the next reporting period.

Registered capital

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

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

Shareholder	Sept. 30, 2023
Alfa Capital AD	28.85 %
Yulinor EOOD	23.11 %
Perfeto Consulting EOOD	16.43 %
Trans Express Oil EOOD	9.82 %
Petrol Bulgaria AD	7.05 %
Gryphon Power AD	5.49 %
Storage Invest EOOD	3.66 %
VIP Properties EOOD	1.79 %
The Ministry of Energy of the Republic of Bulgaria	0.65 %
Other minority shareholders	3.15 %
	100.00 %

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

At the EGMS of Petrol AD held on November 8, 2018 the decision to decrease the capital of the Parent company in order to cover losses by decreasing the nominal value of the shares from BGN 4 to BGN 1 was voted again. A refusal of the application for registration of the decision in CR was enacted, which was appealed by the Parent company within the legal term. Minority shareholders disputed the decision of the EGMS and additionally to the refusal, the application proceedings was postponed until the pronouncing of the Lovech Regional Court on the court proceedings, initiated on minority shareholders request. In March 2019 Lovech Regional Court enacted a decision, which indicates CR to register the decrease of the capital after a resumption of the registration proceedings after the pronouncing on the legal proceedings initiated by the minority shareholders.

In February 2019 was held a new EGMS, where the decision for reduction of capital was voted again and a decision for substitution of the deceased member of Supervisory Board Ivan Voynovski with Rumen Konstantinov was taken. A refusal on the application for registration of these circumstances in the file of the Parent company was enacted, which was appealed by the Parent company within the statutory term. In addition to the refusal, the registration proceeding was 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 in order to cover losses by reducing the nominal value of the shares from BGN 4 to BGN 1.

Current income tax liabilities and tax audits

As at September 30, 2023 the Group has current corporate tax liabilities of BGN 679 thousand.

In August 2022 the Parent company received an ordinance for tax audit of the declared and paid corporate tax and taxes on expenses for the period 2016-2021 and value added tax for the period December 2016 - July 2022. The term for the completion of the revision, according to the latest extension order, is September 30, 2023. As of the date of issuance of these explanatory notes, the audit was completed without significant findings and an audit report was delivered to the Parent company.

Loans and borrowings and factoring liabilities

As at September 30, 2023 the Group has total liabilities under received bank, debenture and trade loans of BGN 155,291 thousand, including BGN 703 thousand current liabilities.

Bank loans

In September 2018 the Group entered into a credit-overdraft agreement on current account in commercial bank, intended for working capital with maximum allowed amount of BGN 2,000 thousand and repayment period until January 31, 2019 and contracted interest rate as Savings-based Interest Rate (SIR) plus added amount of 6,1872 points, but cumulatively not less than 6.5 per cent annually. The credit is secured with a special pledge of its goods in turnover, representing oil products and with pledge of receivables on bank accounts. In December 2018, as a result of a signed annex to an agreement from 2016 for revolving credit line with the same bank, the Group negotiated an increase of the amount of the credit line of BGN 9,500 thousand with an additional amount of BGN 11,500 thousand, by which the total amount of credit line rose to BGN 21,000 thousand. The line is separated in total limit of BGN 13,500 for issuance of bank guarantees and BGN 7,500 for refinancing of the received credit-overdraft of BGN 2,000 thousand and the rest for working capital.

The increased amount of the credit limit on the revolving credit line is covered additionally with establishment of mortgages and pledges of properties, plants and equipment and special pledge on goods in turnover, representing oil products. In June 2019 the loan was partially repaid and the limit for working capital decreased from BGN 7,500 thousand to BGN 7,000 thousand as at December 31, 2020. In January 2020 the Parent company renegotiated the terms of the used credit line granted to it by a commercial bank under a revolving credit line agreement and achieved a reduction of the annual compound interest of SIR + 5,2802 per cent, but not less than 5.5 per cent. In March 2021 and September 2021 the Group repaid BGN 1,650 thousand principal of this tranche of the credit line. In December 2021 the bank granted additional tranche for BGN 100 thousand and the repayment term is extended to December 15, 2024. As at September 30, 2023 the Group has a principal liability under this loan for BGN 5,400 thousand.

In April 2022 the Parent company negotiated an increase for working capital under this credit line by a new tranche with a maximum amount of BGN 4,500 thousand, as with the same amount the line for bank guarantees was decreased. The amount is received and as at September 30, 2023 the Group has an principal liability under this tranche for BGN 4,500 thousand. The contracted annual interest is Savings-based Interest Rate (SIR) plus added margin of 4.174 points, but not less than 4.25 per cent. The payment term is until December 16, 2024.

In June 2022 the Parent company negotiated another increase for working capital under this credit line by a new tranche with a maximum amount of BGN 3,600 thousand, as with the same amount the line for bank guarantees was decreased. The amount is received and as at September 30, 2023 the Group has an principal liability under this tranche for BGN 3,600 thousand. The contracted annual interest is Savings-based Interest Rate (SIR) plus added margin of 4.1764 points, but not less than 4.25 per cent. The payment term is until December 14, 2024.

On September 30, 2022 the Group received a letter from the bank-creditor for one-sided increase of the added margin to the interest rate by 0.5 per cent on the granted by the bank three tranches, due to changed interest environment and high inflation rates.

In April 2023, the Parent company negotiated a new tranche for working capital in the amount of BGN 1,000 thousand under the granted revolving credit line with a repayment term of May 31, 2023. As a result of the new tranche, the total limit under the granted revolving credit line amounts to BGN 19,900 thousand. The agreed annual interest is in the amount of Savings-based Interest Rate (SIR) per BGN, increased by a margin of 5.3608 points, but not less than 5.5 per cent. The maturity date of this tranche is November 1, 2023, and a repayment plan of five equal monthly principal installments of BGN 200,000 each has been agreed upon. The amount under the tranche has been fully utilized, and the obligation under the tranche as at the date of this report is BGN 402 thousand.

In July 2023, the Parent company entered into an agreement with a commercial bank for the granting of a revolving credit line in the amount of BGN 220,000 thousand, intended to be used including, but not limited to, investment purposes, working capital, issuing bank guarantees and letters of credit. The funds can be used and repaid multiple times until August 15, 2033, and the deadline for repayment of all obligations arising from the credit line is until September 15, 2033. The annual interest that is due on the borrowed amount consists of the Bank's Base Interest Rate (BIRa) for BGN applied by the bank plus an allowance in the amount of 3.21 points, but not less than 5.9 per cent. The credit line is secured by a special pledge of a commercial enterprise of Petrol AD, the subsidiaries Kremikovtsi Oil EOOD, Shumen Storage EOOD, Office Estate EOOD, Crystal Asset Property EOOD, Crystal Assets Trade EOOD and unrelated legal entities, guarantee by an unrelated entity, contractual mortgages on real estate properties of co-debtors, including unrelated entities, financial security on account receivables in 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, additionally approved by the bank and with additional agreed terms and annexes between the parties.

In July 2023, based on the revolving line agreement with a total limit of BGN 220,000 thousand, a tranche No1 in the amount of BGN 90,000 thousand is agreed with an Annex No.1, as an investment loan for the purchase of assets and company shares with an utilization period until October 30, 2023. The interest rate and repayment term do not differ from those agreed in the main agreement. As at September 30, 2023, the Group has an obligation under this tranche for a principal in the amount of BGN 49,750 thousand.

In July 2023, based on the revolving credit line agreement with a total limit of BGN 220,000 thousand, a tranche No2 in the amount of BGN 30,000 thousand is agreed with an Annex No.2, for working capital, for refinancing obligations under an existing revolving credit line granted by the same bank and for payment under bank guarantees and letters of credit. The term of utilization is until August 14, 2033. The interest rate and repayment term do not differ from those agreed in the main agreement. As at September 30, 2023, the Group has no utilization or obligation under this tranche.

In July 2023, based on the revolving line agreement with a total limit of BGN 220,000 thousand, tranche No.3 in the amount of BGN 55,000 thousand is agreed with an Annex No.3, for working capital in the form of an overdraft. The deadline for repeated utilization and use of the amount under this tranche is until August 14, 2033. The interest rate and repayment term do not differ from those agreed in the main agreement. As at September 30, 2023, the Group has an obligation under this tranche for principal in the amount of BGN 39,998 thousand.

In July 2023, based on the revolving line agreement with a total limit of BGN 220,000 thousand, tranche No.4 in the amount of BGN 45,000 thousand is agreed with an Annex No4, as a revolving credit for working capital. The term for utilization and use of the amount under this tranche is until August 14, 2033. The interest rate and repayment term do not differ from those agreed in the main agreement. As at September 30, 2023, the Group has an obligation under this tranche for principal in the amount of BGN 15,000 thousand.

Debenture loans

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

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

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

The liabilities under the debenture loan are disclosed in the statement of financial position at amortised cost. The annual effective interest rate after the term extension of the bond issue is 4.67 per cent. (incl. 4.24 per cent annual coupon rate).

Factoring

In February 2019 the Group entered into an agreement with a commercial bank for factoring with special terms and without regress for transferring of preliminary approved receivables with a maximum period of the deferred payments up to 120 days from the date of invoice issuance with a payment in advance of 90 per cent of the value of the transferred receivables including VAT. The commission for factoring services is 0.35 per cent of the total value of the transferred invoices plus additional annual taxes. The interest for the amounts paid in advance is Base Deposit Index for Legal Entities + 1.95 per cent, accrued daily and paid on monthly basis at the end of every calendar month. In November 2021 a new Annex for special terms with a regression right, decrease of the commission to 0.13 per cent on the total amount of the transferred invoices including VAT, and decrease of the interest to Base Deposit Index for Legal Entities + 1.60 per cent accrued daily and paid on monthly basis at the end of every calendar month, was signed. As at September 30, 2023, the Group has BGN 167 thousand exposure under this factoring agreement.

Operating lease agreements

The Group is lessee under operating lease agreements. As at September 30, 2023 the recognised rental expenses in the statement of profit or loss and other comprehensive income, include expense at the amount of BGN 488 thousand for renting of fuel stations under operating lease, which fall within the exceptions of IFRS 16 and which agreements include clause stipulating that both parties have the right to cease the agreement for each separate fuel station or as a whole with an immaterial penalty.

Subsidiaries

The Parent company (the Controlling company) is Petrol AD. The subsidiaries included in the consolidation, over which the Group has control as at September 30, 2023 are as follows:

Subsidiary	Main activity	Ownership interest
Petrol Properties EOOD	Trading movable and immovable property	100 per cent
Varna Storage EOOD	Trade with petrol and petroleum products	100 per cent
Petrol Finance EOOD	Financial and accounting services	100 per cent
Elit Petrol -Lovech AD	Trade with petrol and petroleum products	100 per cent
Lozen Asset AD	Acquisition, management and exploitation of property	100 per cent
Kremikovtsi Oil EOOD	Processing, import, export and trading with petroleum products	100 per cent
Shumen Storage EOOD	Processing, import, export and trading with petroleum products	100 per cent
Office Estate EOOD	Ownership and management of real estates	100 per cent
Svilengrad Oil EOOD	Processing, import, export and trading with petroleum products	100 per cent
Varna 2130 EOOD	Trade with petrol and petroleum products	100 per cent
Petrol Export EOOD	Export wholesale trading with fuels	100 per cent
Bulgaria Cargo Rail EOOD	Export and transport of petrol and petroleum products	100 per cent
Crystal Asset Trade EOOD	Local and international trading with goods and services	100 per cent
Crystal Asset Property EOOD	Local and international trading with goods and services	100 per cent
Petrol Oil Recycling EOOD	Management, collection and recycling of wastes of petrol products	100 per cent
Petrol Investment AD	Acquisition, management and exploitation of property	99,98 per cent
Petrol Finances OOD	Financial and accounting services	99 per cent
Petrol Technologies OOD	IT services and consultancy	98,80 per cent
Petrol Technology OOD	IT services and consultancy	98,80 per cent

In June 2023, a new subsidiary company named Petrol Oil Recycling EOOD was established by a cash contribution. In return for the cash contribution, the Parent company acquires 5,000 (five thousand) company shares, representing 100% of the capital.

In July 2023, a contract for the purchase and sale of company shares was signed, according to which the Parent company must transfer to a third party 1,841,700 company shares, each with a nominal value of one lev, representing 100% of the capital of Svilengrad Oil EOOD. No payments were made under this contract and in November 2023 an agreement for retrospective cancelation of the contract was signed.

In September 2023, with a contract for the transfer of company shares and an investment bank loan, Petrol AD acquired 364,512 company shares with a nominal value of one share of 100 BGN, which represent 100 per cent of the capital of Crystal Asset Property EOOD. The transferred remuneration is in the amount of BGN 42,000 thousand. As of the date of acquisition, the assets and liabilities are presented at their fair value assessed by a licensed appraiser. According to the valuation report, a difference between carrying value and fair value was identified only for property, plant and equipment. As a result, the Group has recognized goodwill in the amount of BGN 4,426 thousand. The payment of the consideration for the acquisition of Crystal Asset Property EOOD is entirely with bank credit and is presented in the consolidated statement of cash flows net of the acquired cash and is in the amount of BGN 41,990 thousand.

In September 2023, with a contract for the transfer of company shares and an investment bank loan, Petrol AD acquired 66,958 company shares with a nominal value of one share of 100 BGN, which represent 100% of the capital of Crystal Assets Trade EOOD, for consideration in the amount of BGN 8,500 thousand. As of the date of acquisition, the assets and liabilities are presented at their fair value assessed by a licensed appraiser, as there is a difference between the transfer value and the fair value only for property, machinery and equipment. The Group recognized goodwill in the amount of BGN 1,516 thousand. The consideration for the acquisition of Crystal Assets Trade EOOD was paid in full with a bank loan. In the consolidated statement of cash flows, the payment is presented net of the acquired funds and is in the amount of BGN 8,441 thousand.

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

As at September 30, 2023 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 61,534 thousand, including in favour of First Investment Bank AD BGN 56,083 thousand, Investbank AD - BGN 3,383 thousand and DSK AD - BGN 2,068 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 10 thousand as at September 30, 2023 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.

Pursuant to an agreement from February 24, 2022 the Group is a joint debtor in favour of Investbank AD under an investment credit line agreement for USD 1,260 thousand, granted to an unrelated party - supplier, repaid in full on June 26, 2023, and the joint-liability is waived.

The Group bears a joint obligation according to an debt agreement from January 13, 2017 on an obligation of a subsidiary until March 2018 - Elit Petrol AD for BGN 2,346 thousand as at September 30, 2023.

Under a bank agreement for revolving credit line signed on September 21, 2016, bank guarantees were issued for a total amount of BGN 5,378 thousand as at September 30, 2023, including BGN 2,850 thousand in favor of third parties - Group's suppliers, BGN 500 thousand in favour of Ministry of Economy for securing the operations of the Parent company related to its registration under the Law on the Administrative Regulation of Economic Activities Related to Oil and Petroleum Products, and BGN 2,028 thousand to secure own liabilities related to contracts under the Public Procurement Act. As at September 30, 2023, the contract is secured by a pledge on all of the Group's receivables on bank accounts to secure liabilities up to the amount of the credit limit with a book value as at September 30, 2023 in the amount of BGN 262 thousand, as well as with mortgages of properties and pledges of machinery and equipment, as well as with a set of assets of a subsidiary at the 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 in the course of 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 final conclusion of the litigation.

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

In December 2016 the first-instance court decreed a decision (the Decision) which admit for established that the bank has a receivable amounted to USD 15,527 thousand from the subsidiaries - joint debtors, arising from a signed loan agreement for USD 15,000 thousand. With the same decision the court has ordered the joint-debtors to pay BGN 411 thousand to the bank - creditor for legal advisory fees and court dispute expenses and BGN 538 thousand state fee in favor of the judiciary state for the ordered proceedings and BGN 538 thousand state fee for claim proceedings. In January 2017, the co-debtors 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 are 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.

In March 2021, the Group signed with First Investment Bank AD an agreement for the purchase of receivables under commercial invoices (standard factoring). The agreement is secured by a pledge of receivables on the Group's bank accounts opened in the bank, with a book value as of September 30, 2023 in the amount of BGN 262 thousand.

In November 2021, the Group signed with Allianz Bank Bulgaria AD a factoring agreement with regress and interest rate of Base Deposit Index for Legal Entities +1.6 per cent, but not less than 1.6 per cent per year on the amount of the advance provided. As at September 30, 2023, the Group has liabilities at the amount of BGN 167 thousand related with financing received under this factoring agreement.

As at September 30, 2023, 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.

According to an agreement for a revolving credit line 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 factual relations of Petrol AD, Kremikovtsi Oil EOOD, Shumen Storage EOOD, Office Estate EOOD, Crystal Asset Property EOOD, Crystal Assets Trade EOOD. For a security under the same agreement, the Group has provided a pledge of receivables on bank accounts opened in the bank, including deposited funds under a contract for a debt product with a book value as at September 30, 2023 in the amount of BGN 55,000 thousand.

Other significant events occurred during the reporting quarter and cumulatively from the beginning of the financial year

With a Decree No. 739 of 26.10.2021, amended by a Decree No. 771 of 06.11.2021 and a Decree No. 885 of 16.12.2021, the Council of Ministers adopted a program for compensating non-residential end customers of electricity. The program aims to protect and assist all non-residential end-users in coping with the effects of fluctuating electricity prices. At the end of the reporting period, the Group received and reported revenue from financing under this program in the amount of BGN 141 thousand.

III.      Disclosure of transactions with related parties

The total amount of the accrued remunerations of the members of Management and Supervisory Board of the Parent company, included in the personnel expenses, amounted to BGN 923 thousand, and the unsettled liabilities as at September 30, 2023 are at the amount of BGN 68 thousand, including BGN 56 thousand to personnel and BGN 12 thousand obligations to related entities.

During the reporting period of 2023 no other related party transactions took place.

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.

At the end of 2019, a new coronavirus was identified in China. Due to the fast widespread of the virus across the world at the beginning of 2020, the World Health Organization declared a global pandemic. On March 13, 2020 the Parliament declared a state of emergency on request of the Government of Republic of Bulgaria and on March 24, 2020 the Law on Measures and Actions during a State of Emergency became effective. In order to restrict the widespread of coronavirus infection, an Order of the Health Minister was issued for the introduction of anti-epidemic measures, which directly affect the business activity of the Group. Part of the measures include extension and interruption of the administrative deadlines, extension of the of administrative acts, suspension of the procedural court terms and the statute of limitations, changes in the labor legislation, referring to new working hours, suspension of work and / or reduction of working hours and use of leave, etc. The pandemic causes a significant reduction in economic activity in the country and raises significant uncertainty about future processes in macroeconomics in 2020 and beyond.

The Group's Management monitors the emergence of risks and negative consequences in the outcome of the pandemic with COVID-19, currently assessing the possible effects on the assets, liabilities and activities of the Group, striving to comply with contractual commitments, despite the uncertainties and force majeure circumstances. In view of the introduced anti-epidemic measures and restrictions in the pandemic, which cause a significant reduction in economic activity and creates significant uncertainty about future business processes, there is a real risk of a decline in sales of the Group. However, Management believes that it will be able to successfully bring the Group out of the state of emergency in which it is placed.

At the end of February 2022, a number of countries (including the United States, the United Kingdom, Canada, Switzerland, Japan and the EU) imposed sanctions on certain legal entities and individuals in Russia due to its official recognition of two regions separating from Ukraine, the Donetsk Republic and the Luhansk Republic and the military operations on the territory of Ukraine started on February 24, 2022. Subsequently, additional sanctions against Russia were announced. The recent events arising from the military conflict in Ukraine have created challenges for businesses located and operating there. As a result of the beginning of 2022, there has been a significant increase in the fuel prices - a sector in which the Group also operates.

The Group has no assets in the affected countries, no direct relationships with counterparties operating in these countries. The Management is in the process of analyzing the risks and effects on the Group.

The arising military conflict and the imposed by EU, US economic, financial and other sanctions on Russia to end the conflict are blocking economic activity between the European Union and Russia, restricting payments and the free movement of people, goods and services.

The military conflict has further affected the prices of many goods, resources and services, as Russia is a major exporter of fossil fuels, metals and other resources, and the purpose of sanctions imposed by the European Union and the United States is to limit Russia's economic activity. Fossil fuels are still a major part of the process from the creation to final consumption of almost all goods in the EU, as a result of which a future uncertainty about prices and availability of fossil fuels and other resources worsens the economic prospects for the EU and Bulgaria in particular.

As the main activity of the Petrol Group is wholesale and retail trade and storage of fuels and other petroleum products, a lasting increase in international fossil fuel prices will have a negative impact on the Group's sales, leading to significant losses and deterioration of the financial condition and operational results of the Petrol Group. As the majority of fossil fuel supplies in the country are of Russian origin, a potential complete ban on fuel supplies from Russia could lead to a shortage of fuels in the country and problems for the Petrol Group to secure its sales, with the risk of closure of retail petrol stations, temporary working hours and other negative consequences. To respond to this scenario, the Group's management is examining the possibility of importing fuels from third countries, thus being able to reduce the potential future consequences for the Petrol Group of the EU and the US sanctions imposed on Russia and potential reciprocal sanctions.

The Group's results from operations are affected by a number of factors, including macroeconomic conditions in Bulgaria, competition, variation of gross margins, fluctuations in crude oil and petroleum

product prices, product mix, relationships with suppliers, legislative changes, and changes in currency exchange rates, weather conditions and seasonality. In 2023, the Group continues to suffer negative consequences from the drastic increase in the prices of electricity and raw materials, both on the domestic and global markets.

The plans for the future development of the company are closely related and depend to a greater extent to the stated expectations for changes in the market environment. The Management continues to follow the program outlined and started in the beginning of 2014 for restructuring the activities of Petrol Group, aiming to concentrate the efforts to optimize and develop the core business - wholesale and retail trading with fuels. With the aim to improve the financial position, the Management continues to analyze actively all expenses and to look for hidden reserves for optimization.

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.

The Group's Management activities are directed to validation of the principles and traditions of good corporate governance, increasing the trust of the interested parties, namely shareholders, investors and counterparties, and to disclosure of timely and precise information in accordance with the legal requirements.

Legislature

The Parent company is supervised by a number of 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 impacts on Petrol Group as deteriorating of sales, worsening of the financial results and substantial loss of market share.

Competition

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

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

Price risk

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

Market risk

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

Interest rate risk

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

Credit risk

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

Exceptional costs

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

Political risk

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

Climate conditions and seasonality

Climate conditions and seasonal fluctuations in demand for certain petroleum products affect the Group's operating results. Gasoline and diesel demand peaked in the second and third quarters, due to both the summer holiday season and the increased demand from farmers, who traditionally increase their consumption during the autumn season.wa

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.

 

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