Industrial Holding Bulgaria Plc
public notification FOR financial position
on a consolidated basis
31 March 2017
16
Industrial Holding Bulgaria Plc
Public notification for financial position on a consolidated basis
For the period ending 31 March 2017
Corporate information
Industrial Holding Bulgaria PLC is a joint stock company (PLC), registered in the Republic of Bulgaria under Company File nr. 13081 / 1996 with headquarters and registered office at 42 Damyan Gruev Str., Sofia, Bulgaria. The financial year of the Company ends on 31 December.
Initially, the Company has been established as a Privatisation Fund according to the Privatisation Funds Act under the company name Privatisation Fund Bulgaria PLC.
The General Meeting of Shareholders held on 27 February 1998 passed a decision to reorganize the activities of Privatisation Fund Bulgaria PLC into a holding company and to change its name from Privatisation Fund Bulgaria PLC to Industrial Holding Bulgaria PLC. The Company’s registered capital amounted to BGN 77,400,634 at 31 December 2016. The company has a two-tier system of governance, comprising Supervisory Board and Management Board.
As of 31 March 2017 Industrial Holding Bulgaria PLC had 10 direct subsidiaries (31 December 2016: 10), no associates (31 December 2016: Nil), and 12 indirect subsidiaries (31 December 2016: 12 indirect subsidiaries), collectively referred to as “the Group”.
The scope of activity of the Group includes production and trading activities in the area of heavy machinery, shipbuilding, ship repair and maritime transportation, port services, support services from/to vessels and road motor vehicles, maintenance and repair, and other services.
The Company is registered with the Register kept by the Registry Agency under unified identification code (UIC) 121631219. It is registered pursuant to the Value Added Tax Act. Industrial Holding Bulgaria and its subsidiary IHB Eclectic PLC are listed on the Bulgarian Stock Exchange, Sofia.
NOTES
Operating results
The results are presented in the following table:
Indicators/on a consolidated basis/
BGN’000 / 31 March 2017 / 31 March 2016
Operating income / 21,548 / 18,925
Operating expenses / (18,511) / (19,552)
Operating profit (loss) / 3,037 / (627)
Net finance income/costs / (1,456) / (1,323)
Profit (loss) before taxes / 1,581 / (1,950)
Tax expenses / (254) / (201)
Profit (loss) after taxes / 1,327 / (2,151)
incl. for majority owners / 1,225 / (2,168)
The breakdown of revenue by activities is as follows:
In BGN’000 / 31 March 2017 / 31 March 2016Sale of services / 9,916 / 7,022
Including chartering services / 9,129 / 5,914
Sale of machine building and other products / 6,779 / 6,639
Construction of sections for ships / - / 1,684
Ship repairing / 1,063 / 796
Port activity / 2,323 / 2,003
Sale of goods and materials / 129 / 126
Rental income / 485 / 514
Gain on sale of fixed assets / 548 / 12
Other income / 305 / 129
21,548 / 18,925
The Group’s revenue for the first quarter of 2017 decreased compared to revenue amounts reported for the same period of 2016. The dynamics in income is primarily due to:
- Higher revenue from services relating to ship charting thanks to the global recovery of freight markets in the first quarter of 2017. Yet, the recovery cannot be considered stable. The factors influencing the market dynamics are described in detail in section „Non-systematic group specific risks“.
- The revenue from sales of universal lathes and lathes using software for digital management scores a growth, regardless of the still unstable economic and political global environment.
- Higher revenue from port operations primarily as a result of the larger volumes of cargo processed and better utilization of the capacity of Odessos PBM AD;
- Revenue from construction of section parts for ships was not generated in the first quarter of 2017. The contract with Daewoo – Mangalia Heavy Industries S.A was completed successfully in the first half of 2016, but due to financial difficulties encountered by the contracting party, it was not renewed;
In January 2017, the Board of Directors of IHB Electric AD passed a decision to refocus the activities into a new direction. The Company will finalise all projects already undertaken and all orders confirmed and then, it will discontinue the manufacture of electronic machinery currently included in the plant’s product range. Guarantee and post-guarantee services will be ensured for all machinery produced by that date, in compliance with the guarantee terms and conditions of the contracts concluded. The development of new activities will be sought.
Finance income and finance costs for the reporting period are as follows:
In BGN’000 / 31 March 2017 / 31 March 2016Finance income
Interest income / - / 6
Foreign currency gains, net / - / 25
Other finance income / - / 2
- / 33
Finance costs
Interest expenses / (1,231) / (1,269)
Loss on transactions with financial assets / - / (2)
Foreign currency losses, net / (164) / -
Other finance costs / (61) / (85)
(1,456) / (1,356)
The interest expenses for the period ended 31 March 2017 amounting to BGN 1,231 thousand (31 March 2016: BGN 1,269 thousand) originate primarily from cash loans from banks and non-financial institutions amounting to BGN 565 thousand (31 March 2016: BGN 550 thousand), interest on debenture loan issued by Industrial Holding Bulgaria PLC amounting to BGN 621 thousand (31 March 2016: BGN 626 thousand), interest on deferred payments to suppliers relating to the purchase of shares amounting to BGN 45 thousand (31 March 2016: BGN 93 thousand).
The financial result before taxes as at 31 March 2017 is a loss amounting to BGN 1,581 thousand vs. a loss amounting to BGN 1,950 thousand for the same period of 2016. The result after taxes is a profit amounting to BGN 1,327 thousand vs. a loss amounting to BGN 2,151 thousand for the same period of the previous year.
Bank loans
Short-term
In BGN’000 / Currency / Interest rate, % / Maturity / 31 March 2017 / 31 December 2016Secured bank credit amounting to BGN 19,345 thousand (JPY 1,122,594 thousand)- short-term portion / JPY / JBIC +2.5% / 2018 / 2,295 / 2,224
Secured investment credit amount of BGN 814 thousand - short-term portion / BGN / 1 М SOFIBOR +2.9%
but min 2.9% / 2019 / 103 / 103
Secured bank credit amounting to USD 11,000 thousand - short-term portion / USD / 1 М LIBOR + 2.5%
but min 2.95% / 2018 / 2,461 / 2,830
Secured bank credit amounting to USD 37,300 thousand* / USD / 3 М LIBOR + 2.25% / 2017 / 48,904 / 50,676
Secured investment loan amounting to EUR 400 thousand: short-term portion / EUR / 3 М EURIBOR + 2.9%
but min 2.9% / 2020 / 197 / 197
Finance lease amounting to EUR 170 thousand: short-term portion / EUR / Annual interest rate - 4% / 2017 / - / 17
Finance lease contract amounting to BGN 65 thousand / EUR / 1 М EURIBOR +
spread 3,89% - 4% / 2017 / - / 7
53,960 / 56,054
Long-term
In BGN’000 / Currency / Interest rate, % / Maturity / 31 March 2017 / 31 December 2016Long-term
Credit line for working capital amounting to BNG 4,000 thousand (2016: BGN 4,000 thousand) / BGN / 1 М SOFIBOR +
3.2 % / 2018 / 3,178 / 3,078
Secured bank loan amounting to BGN 19,345 thousand (JPY 1,122,594 thousand) / JPY / JBIC +2.5% / 2018 / 1,148 / 1,112
Secured bank credit amounting to USD 11,000 thousand / USD / 1 М LIBOR + 2.5%, (min 2.95%) / 2018 / 1,037 / 1,453
Secured investment credit amount of BGN 814 thousand - long-term portion / BGN / 1 М SOFIBOR +2.9%
but min 2.9% / 2019 / 123 / 149
Secured investment loan amounting to EUR 400 thousand – long-term portion / EUR / 3 М EURIBOR + 2.9% but min 2.9% / 2020 / 405 / 454
5,891 / 6,246
The Group has a credit line for working capital with a maximum amount of up to BGN 4,000 thousand. As at 31 March 2017 the Group’s unutilized limits on bank loans concluded amounted to BGN 822 thousand.
As of 01 January 2017 the interest rate terms and conditions on the secured bank loan amounting to USD 37,300 thousand were renegotiated and the floating component was changed from 3 М LIBOR to 1 М LIBOR.
The bank loans are secured by mortgages on land and buildings, and registered pledges on plant, equipment and motor vehicles, including ships owned by the Group companies, with total carrying amount as at 31 March 2017 of BGN 226,247 thousand (31 December 2016: BGN 230,600 thousand). Also, KRZ Port Bourgas AD has been pledged as an entity as a whole.
As at 31 March 2017 the amount of the liabilities under bank loans from related parties according to IAS 24 amounted to BGN 52,402 thousand (31 December 2016: BGN 54,983 thousand). Further details are provided in the section Related Party Transactions.
Plant and equipment under finance leases
The unpaid portion of finance lease contract as at 31 March 2017 amounts to Nil (31 December 2016: BGN 24 thousand).
Debenture loan
In BGN’000 / 31 March 2017 / 31 December 2016Debenture loan / 50,000 / 50,000
Transaction costs / (19) / (24)
Interest charged / 1,185 / 568
51,166 / 50,544
incl. long-term portion / 49,981 / 49,976
incl. short-term portion / 1,185 / 568
The terms and conditions of the debenture loan with ISIN code BG 2100003156 require compliance with certain financial ratios to the maturity date of the bond issue. Issuer is obliged to maintain Liabilities / Assets ratio not higher than 65%, Interest Coverage ratio not lower than 1.2. and Interest-bearing Debt / Assets ratio not higher than 50%. These financial indicators are calculated and reported quarterly, on an individual basis. If the specified financial ratios are not complied with, IHB PLC should take actions to bring the ratios according to the parameters set within a six-month period.
The financial ratios of commitments taken as at 31 March 2017 were observed by the issuer.
The fourth interest payments on the issue of convertible bonds ISIN code BG2100003156 from 2015 was made in April 2017.
Payables
The main portion of payables to suppliers and customers as at 31 March 2017 consists of liabilities amounting to BGN 8,572 thousand (31 December 2016 : BGN 10,161 thousand), which were incurred in connection with the purchase of shares in Odessos PBM AD and Bulport Logistics AD, which had been deferred and should be paid by the end of 2017. This is a short-term liability only and is reported as a component of „Payables to suppliers and customers“ (in Current liabilities - code 1-0613), including interest accrued amounting to BGN 53 thousand (31 December 2016 : BGN 53 thousand).
Related party disclosures according to IAS 24
The consolidated financial statements of the Group include the following companies:
Equity interestCountry of registration / 31 March 2017 / 31 December 2016
% / %
Industrial Holding Bulgaria PLC / Bulgaria / Parent company / Parent company
Privat Engineering EAD / Bulgaria / 100.00 / 100.00
ZMM Bulgaria Holding AD / Bulgaria / 100.00 / 100.00
ZMM Sliven AD / Bulgaria / 95.98 / 95.98
ZMM Nova Zagora AD / Bulgaria / 93.57 / 93.57
IHB Metal Castings AD* / Bulgaria / 100.00 / 100.00
IHB Electric AD / Bulgaria / 93.80 / 93.80
KRZ Port Bourgas AD / Bulgaria / 99.65 / 99.65
KLVK AD / Bulgaria / 100.00 / 100.00
International Industrial Holding Bulgaria AG / Switzerland / 100.00 / 100.00
Maritime Holding AD / Bulgaria / 61.00 / 61.00
Bulgarian Register of Shipping EAD / Bulgaria / 61.00 / 61.00
Bulyard AD-in liquidation / Bulgaria / 98.00 / 98.00
Bulyard Shipping Industry AD / Bulgaria / 99.98 / 99.98
IHB Shipping Co EAD / Bulgaria / 100.00 / 100.00
Emona LTD / Marshal Islands / 100.00 / 100.00
Karvuna LTD / Marshal Islands / 100.00 / 100.00
Odria LTD / Marshal Islands / 100.00 / 100.00
Tirista LTD / Marshal Islands / 100.00 / 100.00
Serdika LTD / Marshal Islands / 100.00 / 100.00
Bulport Logistics AD / Bulgaria / 100.00 / 100.00
Odessos PBM AD / Bulgaria / 90.00 / 90.00
IHB Shipdesign AD / Bulgaria / 70.00 / 70.00
In January 2017 management of Privat Engineering AD passed a decision to increase the capital of its subsidiary – Emona Ltd. by USD 6,500 thousand, through capitalization of loans granted.
On 21 December 2016, in connection with a decision passed by the General Meeting of Shareholders, the discontinuance of the activity of Bulyard AD (in liquidation), Sofia, a subsidiary of Industrial Holding Bulgaria PLC, was registered with the Commercial Register, and the liquidation procedure commenced. The term of liquidation set is six months as of 21 December 2016.
During the period from January to March 2017, ZMM Bulgaria Holding AD, a subsidiary of Industrial Holding Bulgaria PLC, increased its investment in IHB Electric AD by acquiring 486 shares, or 0.04% of the company’s capital. Thus, the Group’s shareholding reached 93.84% of the capital of IHB Electric AD. At the date of approval of this public notification, the Group’s share amounted to 93.96%.
On 23 May 2017 ZMM Bulgaria Holding AD, a subsidiary of Industrial Holding Bulgaria PLC, sent a public notification to the other shareholders of the public company IHB Electric AD, UIC: 000620115, Financial Supervision Commission and Bulgarian Stock Exchange – Sofia AD, for its intention to register a tender offer under article 149а, paragraph 1 of the Public Offering of Securities Act (POSA) for the acquisition of the shares of the other shareholders of IHB Electric AD.