TIDMPAN
RNS Number : 5754H
Pan European Terminals PLC
21 June 2013
This announcement replaces the previous announcement at 7.00am
this morning (RNS number 5443H) in which the AIM ticker was stated
as PET instead of PAN. In all other respects the announcement is
not changed.
21 June 2013
Pan European Terminals PLC
("PAN" or "the Company")
FINAL RESULTS
For the Year Ended 31 December 2012
Pan European Terminals (AIM: PAN), which provides transhipment
and storage facilities into Europe and Russia for the hydro-carbon
industry, is pleased to announce its final results for the year
ended 31 December 2012.
HIGHLIGHTS
-- Revenues increased 32% to GBP20.6m (2011: GBP15.6m)
-- Underlying Profit before Tax (pre non-recurring expenses) of GBP4.87m (2011: GBP5.05m)
-- Non-recurring items include:
- GBP2.45m bad debt provision
- GBP1.27m of other one-off costs
-- Profit before Tax GBP1.15m, after GBP1.31m of finance costs
-- Strategic milestones achieved with:
- Ownership or management of 385,000 cubic meters of refined
product tanks
- Doubling of revenue at Baltic Top due to new diesel
customers
- Successful integration of Dan Balt acquisition, refurbishment
of facility to be completed by end June 2013. New contract for
2013
-- Reclassified Rosbunker asset to investment with fair value of GBP22.5m
-- Refinancing of GBP8.5m Loan Note on more favourable terms
-- Recurring central overheads reduced (for second straight year) by 35% to GBP1.2m
-- Net Assets increased to GBP47.6m (2011: GBP44m)
-- Group cash in bank at 20 June 2013 is GBP2.4m (at 31 December 2012: GBP1.1m)
Simon Escott, CEO of PAN, commented, "We have made good progress
in Europe this year, due to the solid performance from Petro Broker
and the successful acquisition and refurbishment of Dan Balt, both
of which gives us a strong base for the future. In Kaliningrad,
Baltic Top showed significant growth, while we are hopeful of a
swift resolution with the Rosbunker terminal, due to the ongoing
progress there.
"We continue to carefully look at opportunities for expansion
within our existing facilities and also at new acquisition targets
in different geographic locations that meet our strict criteria for
acquisition. This will ensure economic and environmental risk is
managed going forward, whilst giving us the best opportunity to
offer our growing client base, flexibility, better service and
competitive rates for 2013 onwards. It is the Group's intention to
publish an update on progress made in 2013 in due course"
The Company's Annual Report for the year ended 31 December 2012
will be sent to shareholders by 28 June 2013 and will be available
to view at www.peterminals.com.
Enquiries:
Pan European Terminals plc Tel: +44 (0)20 3145 1908
Simon Escott, Chief Executive Mob: +44 (0)972 009 5800
Westhouse Securities Ltd (Nomad and Broker) Tel: +4 (0)20 7601 6000
Richard Johnson / Antonio Bossi
Leander (Financial PR) Tel: +44 (0)7795 168 157
Christian Taylor-Wilkinson
Chairman's Statement
It is with great pleasure that we can report to shareholders
that your board's strategy of growth is beginning to show results.
We continue to grow our revenues within Europe, reflecting the
accuracy of our name change to Pan European Terminals, and all our
European terminals are operating at full capacity paving the way
for a brighter year ahead.
The year under review did see the Group report lower than
anticipated profit, mainly as a result of the high one off costs.
However, your Board is confident that the Group will return to a
strong profit in 2013.
As expected, operations in 2012 continued to grow. Despite the
impact from our successful efforts to maintain our 50% holding of
the Rosbunker asset in Kaliningrad, revenue has increased by 32% as
a direct result of good figures from Petro Broker International BV
(Holland), Baltic Top (Kaliningrad) and the integration of Dan Balt
AS (Denmark) into the Group structure.
With regards to our ongoing acquisition programme, we are
pleased to report that both of our recent acquisitions have been
integrated quickly and efficiently, and have achieved the targets
we anticipated pre-acquisition and are growing steadily. Both have
expanded their customer base which is important to the integrated
model that we advocate of building bulk for our clients.
As stated in the accounts and the Financial Overview below, we
have taken the appropriate action to classify Rosbunker as an
investment, and as such, profits from this operation will only be
taken when cash is received from this investment. This has the
benefit of aligning the accounts with the Board's intention to
quickly reach a positive resolution for the Group. The Board has
identified several strategic options, all of which are at an
advanced stage of discussion - and each will ensure that the result
is in the best interests of all our shareholders. The change in
current accounting treatment on this asset has no impact on the
cash receipts of the Group and is therefore recognised as a pure
accounting matter.
With the expanded group now fully operational we are confident
that we have a significant presence in the transhipment market and
are building critical mass to allow us to grow this position and
the Group. There are new opportunities available to us which we are
pursuing vigorously, having shown that we have the ability to
successfully integrate new acquired assets in a timely and cost
effective manner. Our model of expansion will continue to be
handled in a careful and calculated way to ensure growth in value
for shareholders.
Richard Healey
Chairman
20 June 2013
Chief Executive's Statement
Operations
Our European operations performed better than expected during
the year, with progress in 2013 expected to show similar growth. In
Russia, Baltic Top showed significant revenue growth and, despite
the present status at Rosbunker, we are confident of reaching a
positive solution on this investment in the near future.
Profit (pre-management fee) at Petro Broker International (PBI)
rose by 29%, whilst an additional 120,000 cubic metres of tank
storage was added to the PBI facility in October 2012 for diesel
oil. This will add further to profit generation in 2013. The new
storage is being let to customers on long term agreements but at
lower margins than other products, as is the case in the diesel oil
market.
As expected, Dan Balt did not make a contribution to profit, due
to our obligation to service inherited contracts, all of which
expired by 31 December 2012. However, we are modernising the
terminal in accordance with our plans and paving the way for a
successful 2013. This has included replacing the loading pumps and
valves, as announced with the fund raising on 22 May 2012. The
project was expanded and all the fuel oil tanks have been
refurbished, re-calibrated and re-inspected and the main boiler has
also been re-configured in order to give greater efficiency in cold
weather, such as experienced in February and March 2013. After
completion of the engineering planning, work commenced in late 2012
and the full refurbishment will be completed by the end of June
2013, on schedule and on budget. Together with the Aabenraa Port
Authority, we have also upgraded the discharge lines to ensure
speedier discharge for our clients, which increases our overall
competitiveness in the market place. Finally, as announced on 29
January 2013 a major new contract has been signed for this facility
and we are actively looking to increase the use of our space. The
molasses contract has been renegotiated and now runs through to the
end of 2014.
Baltic Top had an excellent year with a near 50% increase in
sales, although on lower margins than that of the rest of the Group
and is a credit to the efforts of our Russian General Director, who
has shown that our Russian operations can be profitable and enhance
value for the Group. The terminal has now commenced supplying
diesel oil to larger companies and traders active in the diesel and
gasoline market and other large organisations in the Kaliningrad
region, which we view as a positive market opportunity for us. In
2013, we plan to increase our margins now that we have captured a
bigger market share.
Rosbunker
The Directors have carefully considered the status of its
Rosbunker asset and the well documented events that have occurred
during 2012. Given the limitation on control of the asset during
the year, it has been decided that the most appropriate approach
for the purpose of these accounts is to treat the asset as an
investment for the whole of the 2012 year.
The reason behind re-classifying Rosbunker from associate to
investment is clear: As an associate, the Group must be able to
exercise significant influence over the asset in an operational and
financial capacity. However, due to the ongoing court proceedings,
this has not been possible and therefore the Directors believe the
most appropriate accounting policy is to treat the holding as an
investment thereby effectively "ring-fencing" the asset for the
purposes of these accounts.
Therefore, no income from the asset has been recognised in the
Group accounts for 2012 (with the exception of the fair value
uplift explained in note 5 and 25), and the asset has been restated
to its fair value of GBP22.5m as at 31 December 2012. Shareholders
should note that the asset has been classified as an associate
since 2010 and during this period the Group has not received any
cash distributions from its Rosbunker operations and therefore,
this accounting treatment is deemed to be the most appropriate in
the circumstances. The change in accounting policy has no effect on
the cash generated by the Group.
The Directors continue to pursue direct control of the asset
and, by the end of 2012, had made encouraging headway within the
Russian courts. Further, the Group's current 50% holding in
Rosbunker is now deemed secure and protected under Russian law.
Concurrently, other options for the resolution of the situation
are also being pursued by the Directors, and a number of attractive
corporate transactions are under negotiation, one of which is with
a large Russian financial institution. The Directors consider any
one of these possible solutions to be strategically positive for
the Group's future.
The Directors are confident that any of these options will
ensure cash flow is returned to the Group by 1 April 2014 at the
latest.
Post balance sheet event
On 25 April 2013, Hurley Investments Limited, acquired from
Shelton Petroleum A.S 19% of Pan European Ordinary Stock, taking
their holding to 19.95%. The Directors feel this is a very positive
step for the Group as it supports our plans for the future.
Outlook
As our Chairman has stated, the outlook for 2013 is bright, due
to the continuing successes within Europe and also Russia. We are
looking at new opportunities for expansion within our existing
facilities and also at new acquisition targets in different
geographic locations. This will ensure economic and environmental
risk is managed going forward, whilst giving us the best
opportunity to serve our growing client base.
Simon Escott
Chief Executive Officer
20 June 2013
Financial Overview
Turnover has increased by 32% to GBP20.6m in 2012 (2011:
GBP15.6m) primarily due to a large increase in sales volume at
Baltic Top. However, the margins to date on these new sales have
been low as we have had to undercut the competition to enter this
market and we are now working hard to increase these to more
competitive levels; we can already note this improvement in Q1
2013. Overall, 2012 was a good year for the Baltic Top facility
with good progress being made on new sales areas and trading is
continuing well during 2013.
Our Terminal in Holland, Petro Broker International, again
performed very well in 2012 with similar levels of turnover (2012:
GBP6.9m and 2011: GBP7.8m) and gross profit (2012: GBP2.8m and
2011: GBP3.0m) to last year. However, we have substantially reduced
the overheads in Holland to GBP346,000 in 2012 compared to
GBP654,000 in 2011, and these are expected to drop further in 2013
as the full year effect of the savings becomes apparent. The
additional 120,000 cubic metre storage facility taken on in October
2012 will further increase profit generation albeit at a lower
margin as these tanks are used for diesel oil.
As expected, Dan Balt in Denmark made a small loss before tax in
2012 but is forecast to make good levels of profit in 2013 as new
oil transhipment contracts commenced in 2013, including a major new
customer for the Group. The Group has upgraded valves, pumping
equipment, and other facilities and equipment at the Terminal -
most of the cost of which was covered by the fund raising in May
with the remainder coming from cashflow generated by the Group.
The change in the Rosbunker accounting treatment is discussed in
Note 5 and 25 in the accounts and from an accounting perspective
profit is now only recognised when cash is received from that
investment. The asset is included in the Group accounts as at 31
December 2012 at its estimated fair value of GBP22.5m.
Management successfully negotiated a refinancing of its $11m
secured loan notes in November 2012 and were able to obtain a more
favourable interest rate of 10% per annum on the GBP8.5m Loan Note.
This is due for repayment in November 2015 although the Loan Note
also carries an ability to convert to ordinary shares at the option
of the Group and subject to shareholder approval. The full interest
cost to the Group in 2012 was GBP1,309,000 including an amount of
GBP323,000 for the write off of previously capitalised loan note
issue costs upon re-financing, compared to GBP232,000 in 2011. This
cost is expected to reduce to approximately GBP900,000 in 2013.
The majority of the overhead costs of running the Group are
incurred at Group Head Office. The central overheads in 2012 were
GBP4.96m (2011 GBP1.90m) which included one-off costs of GBP3.72m
leaving GBP1.24m as our normal recurring overheads. Of the GBP3.72m
of one-off costs, GBP2.45m related to bad debt provisions on older
debts. The Directors remain confident that these monies are
properly due. Please refer to note 16 for details of the work
performed in respect of the debts that have been provided for. The
remaining one-off costs include GBP333,000 in relation to legal
costs in Russia, GBP372,000 relating to the Dan Balt acquisition
costs, GBP250,000 on a debt settlement on trading and GBP181,000 in
relation to the loan note restructuring costs.
Management will continue a rigorous policy to maintain
efficiency in overheads across the Group. At the centre, the
recurring overheads of GBP1.24m (2011 GBP1.90m) are down by 35%
even though a 32% increase in sales was achieved in the 2012 year.
To date this policy has resulted in a reduction of total overheads
(excluding one-off costs) from 72% of total gross profit in 2011 to
56% in the 2012 year.
Including the reclassification of the Rosbunker investment at
its revised fair value of GBP22.5m, the Group total assets are now
stated at GBP47.6m in the Statement of Financial Position as at 31
December 2012 (2011: GBP44.0m). The Group had cash reserves of
GBP1.1m at the year end (2011 GBP1.6m). Cash generation remains
strong and is more than sufficient to fund ongoing operations.
Should funding be required for any acquisitions or expansion,
management believe that there are routes available as and when
projects arise.
Adrian Simpson
Finance Director
20 June 2013
Directors' report
The Directors present their report and audited financial
statements for the year ended 31 December 2012.
Results and dividends
The Group made a profit after tax for the year of GBP677,000
(2011: GBP4,725,000). The Directors do not recommend the payment of
a dividend for the year.
Principal activities
The Group's principal activities during the year were the
operation of hydrocarbon transhipment terminals in the Europort,
Rotterdam, Aabenraa Denmark and Baltysk on Russia's Baltic Sea
coast. The Group also carries out trading in refined products.
Business review and future developments
Following a review of the activities of the Rosbunker Terminal
over the past year, the Directors have decided that the asset
should be treated as an Investment for the whole of the 2012 year
as outlined in Notes 5 and 25. This is deemed to be the most
appropriate approach whilst the impending permanent solution is
quickly decided upon. The CEO has successfully protected the
Group's 50% interest in the Terminal and we will obtain the
necessary Court orders to give us back access to the cashflow which
we know the Terminal is capable of generating.
On 3 September 2012 the Group changed its name from Baltic Oil
Terminals plc to Pan European Terminals plc to reflect the Group's
increased focus on operations in Europe.
A review of the business and the future developments of the
Group is presented in the Chairman's statement on page 1, the Chief
Executive's Statement on page 2 and in the Financial Overview on
page 4.
Shares issued in the year are disclosed in note 19.
Principal Risks and Uncertainties
These are disclosed in Note 4.
Key Performance Indicators
The Group monitors KPI's on a regular basis and where they
differ significantly from expectations an investigation is
undertaken. The following KPI's are monitored on a regular
basis;
Storage contracts - the Group has approximately 385,000 cubic
metres of Tank storage at PBI, Dan Balt and Baltic Top plus
facilities at Rosbunker. The Holland facility was fully let in 2012
as was the Danish terminal but on contracts that had been inherited
from the vendor in 2011. These contracts all expired on or before
31 December 2012 and the Group has since commenced more profitable
Oil Transhipment arrangements including a major new customer. The
position on contracts and storage availability is continually
monitored to ensure Tanks remain let to customers at market
rates.
Group cash flows are monitored daily and surplus cash in
subsidiaries is regularly controlled by the centre to ensure cash
in different currencies is aggregated to pay creditors on time and
earn interest. At the year end the Group had cash balances of
GBP1.1m (2011 GBP1.6m).
Going concern
The Directors believe that the Group is well placed to manage
its business risk successfully. The Directors have reviewed future
forecasts and commitments on projects, which when compared to the
current cash available, lead the Directors to have a reasonable
expectation that the Group has adequate financial resources to
continue in operational existence for the next twelve months. The
Directors have made this assessment by reviewing future and
existing contracts. For this reason, they continue to adopt the
going concern basis in preparing the financial statements.
On 19 November 2012, the Directors successfully completed a
re-financing of its $11m secured fixed rate loan notes. The loan
notes were repaid from the proceeds of an GBP8.5m secured
convertible fixed rate loan note which matures on 19 November 2015
and carries interest at 10% per annum.
On 27 March 2013 the Company issued 4,500,000 new ordinary
shares to a strategic investor at an issue price of 19.65p per
share raising proceeds of GBP0.9m. The proceeds of the share issue
were used to strengthen the Group's balance sheet and to provide
additional working capital.
Creditor Payment Terms
The Group had trade payables of GBP1,553,000 at 31 December 2012
(2011: GBP1,285,000), and generally settles within 30 days. It is
the Group's policy to settle balances with creditors in accordance
with agreed terms of supply and with market practice in the
relevant country.
The Company had trade payables of GBP348,000 at 31 December 2012
(2011: GBP291,000). It is the Company's policy to settle creditors
on or shortly after the due date which is usually 30 days from the
date of invoice.
Share Placing
On 22 May 2012 the Company issued 7,307,694 new ordinary shares
to certain institutional investors at an issue price of 13p per
share raising proceeds of GBP0.95m. The Group used the proceeds of
the share issue to partially progress its fuel oil optimisation
project at the Group's refined product terminal in Aabenraa,
Denmark. Please refer to note 19 for details of the work performed
at the Dan Balt terminal.
Directors
The Directors who served during the year and to the date of
signing these accounts were as follows:
Simon Escott Chief Executive Officer
Adrian Simpson Finance Director Appointed 12 April 2012
Richard Healey Non-executive Chairman
Louis Castro Non-executive Director
Auditors
Grant Thornton UK LLP offer themselves for reappointment as
auditors in accordance with section 489 of the Companies Act 2006.
A resolution to reappoint them will be proposed at the forthcoming
Annual General Meeting.
Directors' statement as to disclosure of information to
auditors
The Directors who were members of the Board at the time of
approving the Directors' report are listed on page 5. Having made
enquiries of fellow Directors and of the Group's auditors, each of
these Directors confirms that:
-- to the best of each Director's knowledge and belief, there is
no information relevant to the preparation of their report of which
the Group's auditors are unaware; and
-- each Director has taken all the steps a Director might
reasonably be expected to have taken to be aware of relevant audit
information and to establish that the Group's auditors are aware of
that information.
On behalf of the Board
Simon Escott
Director
20 June 2013
Statement of Directors' responsibilities
The directors are responsible for preparing the Directors'
Report and the financial statements in accordance with applicable
law and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
have to prepare the financial statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted by
the European Union. Under company law the directors must not
approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs and profit
or loss of the company and group for that period. In preparing
these financial statements, the directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgments and accounting estimates that are reasonable and prudent; and
- state whether applicable IFRSs have been followed, subject to
any material departures disclosed and explained in the financial
statements.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the company's
transactions and disclose with reasonable accuracy at any time the
financial position of the company and enable them to ensure that
the financial statements comply with the Companies Act 2006 They
are also responsible for safeguarding the assets of the company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The directors confirm that:
- so far as each director is aware, there is no relevant audit
information of which the company's auditor is unaware; and
- the directors have taken all the steps that they ought to have
taken as directors in order to make themselves aware of any
relevant audit information and to establish that the auditors are
aware of that information.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
company's website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Directors' remuneration review
The Company discloses certain information relating to Directors'
remuneration in this report, which is not audited.
Remuneration committee
The Company established a Remuneration Committee in April
2006.
The committee meets as required. Executive Directors invited to
attend do not vote on their own remuneration or incentives.
The committee advises the Board on Group remuneration policy and
may obtain advice from independent remuneration consultants
appointed by the Company. The Remuneration committee members are
Louis Castro (Chairman) and Richard Healey.
Remuneration policy
The Company's policy is to maintain levels of remuneration for
the Directors that are comparable and competitive with peer
companies, so as to attract and retain individuals of the highest
calibre, by rewarding them as appropriate to their contribution to
the Group's performance.
Terms of appointment
The terms of each Director's appointment are set out in their
service agreement which are effective for an indefinite period but
may be terminated in accordance with specified notice periods.
Each service agreement sets out details of basic salary, fees,
benefits in kind and share option grants.
Basic salaries
The basic salary of each Executive Director is established by
reference to their responsibilities and individual performance.
Fees
The fees paid to Non-executive Directors are determined by the
Board and reviewed periodically to reflect current rates and
practice commensurate with the size of the Company and their
roles.
Share options
The Company operates a policy of granting share options to all
employees and Directors as a long-term incentive and retention
plan. The share options are exercisable over varying periods and at
varying strike prices dependent upon satisfying appropriate
performance conditions. The right to exercise is subject to terms
related to continuing employment.
Currently, there were no new share options issued in the current
year and all previous share options granted have expired.
On behalf of the Board of Directors of Pan European Terminals
plc.
Adrian Simpson
Company Secretary
20 June 2013
Report of the Independent auditor to the members of Pan European
Terminals plc
We have audited the group financial statements of Pan European
Terminals plc for the year ended 31 December 2012 which comprise
the consolidated income statement, the consolidated statement of
comprehensive income, the consolidated statement of financial
position, the consolidated statement of cash flows, the
consolidated statement of changes in equity and the related notes.
The financial framework that has been applied in their preparation
is applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditors' report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors' Responsibilities
statement, the directors are responsible for the preparation of the
group financial statements and for being satisfied that they give a
true and fair view. Our responsibility is to audit and express an
opinion on the group financial statements in accordance with
applicable law and International Standards on Auditing (UK and
Ireland). Those standards require us to comply with the Auditing
Practices Board's (APB's) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements
is provided on the APB's website at
www.frc.org.uk/apb/scope/private.cfm.
Basis for qualified opinion on financial statements
Included in the consolidated income statement is an amount of
GBP2.8m related to the de-recognition of the group's investment in
ZAO Rosbunker ("Rosbunker"), previously accounted for as an
associate using the equity accounting method for the year ended 31
December 2011. Further detail is given in Notes 5 and 25. We were
unable to obtain sufficient, appropriate audit evidence about the
carrying amount of the group's investment in Rosbunker as at 31
December 2011, because we were unable to access the financial
information and supporting documentation. Our audit opinion on the
financial statements for the year end 31 December 2011 was modified
accordingly. Since opening balances affect the determination of the
gain we were unable to determine whether adjustments to the results
of operations might be necessary for the year ended 31 December
2012.
Qualified opinion on financial statements
In our opinion, except for the effects of the matters described
in the Basis for Qualified Opinion paragraph, the group financial
statements:
- give a true and fair view of the state of the Group's affairs
as at 31 December 2012 and of its profit for the year then
ended;
- have been properly prepared in accordance with IFRS as adopted by the European Union; and
- have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors' Report
for the financial year for which the group financial statements are
prepared is consistent with the group financial statements.
Matters on which we are required to report by exception
In respect solely of the limitation on our work referred to
above:
- we have not obtained all the information and explanations that
we considered necessary for the purpose of our audit
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if, in
our opinion:
- certain disclosures of directors' remuneration specified by law are not made.
Other matter
We have reported separately on the parent company financial
statements of Pan European Terminals plc for the year ended 31
December 2012.
Philip Westerman
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
20 June 2013
Consolidated income statement
For the year ended 31 December 2012
Notes 2012 2011
GBP'000 GBP'000
--------------------------------------------------- ------ ---------- ---------
Revenue 6 20,590 15,550
Cost of sales (16,026) (10,878)
--------------------------------------------------- ------ ---------- ---------
Gross Profit 4,564 4,672
--------------------------------------------------- ------ ---------- ---------
Administrative expenses - recurring (2,549) (3,383)
Administrative expenses - non-recurring 7 (3,722) -
Total administrative expenses (6,271) (3,383)
--------------------------------------------------- ------ ---------- ---------
Operating (loss) / profit before taxation
and finance items 7 (1,707) 1,289
Share of profits of associates - 3,944
Investment fair value gain on initial recognition 25 2,801 -
Investment fair value gain during the year 25 1,362 -
Finance income 10 - 47
Finance costs 10 (1,309) (232)
--------------------------------------------------- ------ ---------- ---------
Profit before taxation 1,147 5,048
Taxation 11 (470) (323)
--------------------------------------------------- ------ ---------- ---------
Profit for the year 677 4,725
--------------------------------------------------- ------ ---------- ---------
Attributable to:
Equity shareholders of the Company 677 4,725
--------------------------------------------------- ------ ---------- ---------
677 4,725
--------------------------------------------------- ------ ---------- ---------
Earnings per share attributable to equity
shareholders of the Company:
Basic and diluted 12 0.69p 5.01p
--------------------------------------------------- ------ ---------- ---------
Consolidated statement of comprehensive income
For the year ended 31 December 2012
2012 2011
GBP'000 GBP'000
--------------------------------------------------------- --------- ---------
Profit after tax 677 4,725
--------------------------------------------------------- --------- ---------
Other comprehensive expenses
Exchange differences on translating foreign operations (150) (664)
--------------------------------------------------------- --------- ---------
Other comprehensive expenses for the year, net
of tax (150) (664)
Total comprehensive income for the year attributable
to equity shareholders 527 4,061
--------------------------------------------------------- --------- ---------
Total comprehensive income for the year 527 4,061
--------------------------------------------------------- --------- ---------
Consolidated statement of financial position
As at 31 December 2012
Notes 2012 2011
GBP'000 GBP'000
-------------------------------------------- ------ --------- ---------
Non current assets
Intangible assets 13 - -
Property, plant and equipment 14 6,360 6,911
Investment in associates 24 1,189 19,508
Fair value of investments 25 22,481 -
Goodwill 13 11,598 11,598
-------------------------------------------- ------ --------- ---------
41,628 38,017
-------------------------------------------- ------ --------- ---------
Current assets
Inventories 15 864 198
Trade and other receivables 16 2,957 3,613
Prepayments and other current assets 17 1,040 521
Cash and cash equivalents 18 1,143 1,614
-------------------------------------------- ------ --------- ---------
6,004 5,946
-------------------------------------------- ------ --------- ---------
TOTAL ASSETS 47,632 43,963
-------------------------------------------- ------ --------- ---------
Share capital 19 1,018 945
Share premium 19 50,437 49,600
Other reserves - Equity - foreign exchange
reserves (1,368) (1,218)
Retained losses (14,366) (15,043)
-------------------------------------------- ------ --------- ---------
Total equity 35,721 34,284
-------------------------------------------- ------ --------- ---------
Non current liabilities
Borrowings 20 8,500 6,792
Deferred tax liabilities 11 486 526
-------------------------------------------- ------ --------- ---------
8,986 7,318
Current liabilities
Trade and other payables 21 2,880 2,188
Borrowings 22 45 173
-------------------------------------------- ------ --------- ---------
2,925 2,361
-------------------------------------------- ------ --------- ---------
Total liabilities 11,911 9,679
-------------------------------------------- ------ --------- ---------
TOTAL EQUITY AND LIABILITIES 47,632 43,963
-------------------------------------------- ------ --------- ---------
Consolidated cash flow statement
For the year ended 31 December 2012
Notes 2012 2011
GBP'000 GBP'000
------------------------------------------------------ ------ --------- ---------
Cash flows from operating activities
Profit before taxation 1,147 5,048
Adjustments to reconcile profit before taxation
to net cash outflows from operating activities
Share of profits of associates 24 - (3,944)
Investments fair value gain (4,163) -
Finance costs 1,309 185
Foreign exchange gain (24) (541)
Depreciation of property, plant and equipment 14 431 179
Amortisation of intangible assets 13 - 1
Loss on disposal of property, plant and equipment 8 18
Increase in inventories (666) (98)
Increase / (decrease) in trade and other receivables 137 (349)
Increase / (decrease) in trade and other payables 313 (779)
------------------------------------------------------ ------ --------- ---------
Cash outflow from operations (1,508) (280)
Income tax paid (115) (12)
Interest paid (1,026) (192)
------------------------------------------------------ ------ --------- ---------
Net cash outflow from operating activities (2,649) (484)
------------------------------------------------------ ------ --------- ---------
Cash flows from investing activities
Finance income - 47
Purchase of property, plant and equipment 14 (30) (60)
Purchase of subsidiary, gross of cash acquired - (6,550)
Cash acquired as part of purchase of subsidiary - 174
------------------------------------------------------ ------ --------- ---------
Net cash outflows from investing activities (30) (6,389)
------------------------------------------------------ ------ --------- ---------
Cash flows from financing activities
Proceeds from shares issued net of issue costs 19 910 -
Proceeds from borrowings 20 8,500 6,792
Repayment of borrowings 20/22 (7,202) (204)
------------------------------------------------------ ------ --------- ---------
Net cash inflows from financing activities 2,208 6,588
------------------------------------------------------ ------ --------- ---------
Decrease in cash and cash equivalents (471) (285)
Cash and cash equivalents at beginning of
year 1,614 1,899
Decrease in cash and cash equivalents (471) (285)
------------------------------------------------------ ------ --------- ---------
Cash and cash equivalents at end of year 1,143 1,614
------------------------------------------------------ ------ --------- ---------
Consolidated statement of changes in equity
For the year ended 31 December 2012
Attributable to equity shareholders of the
parent
------------------------- --------------------------------------------------------------------------
Foreign
currency
Share premium transaction Retained
Share capital GBP'000 adjustment losses Total
GBP'000 GBP'000 GBP'000 equity
GBP'000
------------------------- ---------------- ---------------- ------------- ----------- ----------
At 1 January 2011 936 49,351 (554) (19,768) 29,965
Exchange differences
on translating foreign
operations - - (664) - (664)
Profit for the year - - - 4,725 4,725
------------------------- ---------------- ---------------- ------------- ----------- ----------
Total comprehensive
income for the year - - (664) 4,725 4,061
------------------------- ---------------- ---------------- ------------- ----------- ----------
Shares issued during
the year 9 249 - - 258
------------------------- ---------------- ---------------- ------------- ----------- ----------
At 31 December 2011
and 1 January 2012 945 49,600 (1,218) (15,043) 34,284
------------------------- ---------------- ---------------- ------------- ----------- ----------
Exchange differences
on translating foreign
operations - - (150) - (150)
Profit for the year - - - 667 667
------------------------- ---------------- ---------------- ------------- ----------- ----------
Total comprehensive
income for the year - - (150) 667 527
------------------------- ---------------- ---------------- ------------- ----------- ----------
Transactions with
owners - shares issued
during the year 73 837 - - 910
------------------------- ---------------- ---------------- ------------- ----------- ----------
At 31 December 2012 1,018 50,437 (1,368) (14,366) 35,721
------------------------- ---------------- ---------------- ------------- ----------- ----------
Notes to the consolidated financial statements
1. General information
Pan European Terminals plc is a public limited company listed on
the Alternative Investment Market of the London Stock Exchange and
is registered in England. The registered office is 1 - 6 Yarmouth
Place, London, W1J 7BU. The principal activity of the Group is the
development and operation of hydrocarbon transhipment terminals in
the Netherlands, Denmark and the Russian Federation, and trading in
refined products.
The Group's financial statements for the year ended 31 December
2012 were authorised for issue by the Board of Directors on 20 June
2013 and the statement of financial position was signed on the
Board's behalf by Simon Escott.
2. Accounting policies
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below. These
policies have been consistently applied to all the years presented,
unless otherwise stated.
2.1 Basis of preparation
The Group's financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union.
The consolidated financial statements have been prepared on a
historical cost basis, except for investments that have been
measured at fair value.
No material changes to accounting policies arose as a result of
new standards adopted in the period.
The consolidated financial statements are presented in pounds
sterling ("GBP") and all monetary amounts are rounded to the
nearest thousand (GBP'000) except when otherwise indicated.
The preparation of financial statements requires management to
make estimates and assumptions that affect the amounts reported for
assets and liabilities as at the balance sheet date and the amounts
reported for revenues and expenses during the year. The nature of
estimation means that actual outcomes could differ from those
estimates.
The key sources of estimation uncertainty that have a
significant risk of causing material adjustment to the carrying
amounts of assets and liabilities within the next financial year
are the measurement and impairment of goodwill. The measurement of
intangible assets other than goodwill on a business combination
involves estimation of future cash flows and the selection of a
suitable discount rate. The Group determines whether goodwill is
impaired on an annual basis and this requires an estimation of the
value in use of the cash generating units to which the intangible
assets are allocated. This involves estimation of future cash flows
and choosing a suitable discount rate.
2.2 Basis of consolidation
The consolidated financial statements reflect the Group's
financial position as at 31 December 2012 and the Group's financial
performance for the period from 1 January 2012 to 31 December
2012.
(a) Subsidiaries
Subsidiaries are those enterprises controlled by the Group.
Control exists when the Group has the power, directly or
indirectly, to govern the financial and operating policies of an
enterprise so as to obtain benefits from its activities.
Subsidiaries are consolidated from the date on which control is
transferred to the Group and cease to be consolidated from the date
on which control is transferred out of the Group. On acquisition of
a subsidiary, the purchase consideration is allocated to the
assets, liabilities and contingent liabilities on the basis of
their fair value at the date of acquisition. The excess of the cost
of the acquisition over the fair value of the Group's share of
identifiable net assets of the subsidiary acquired is recognised as
positive goodwill. Following initial acquisition positive goodwill
is measured at cost less any impairment losses. Acquisition costs
are expensed as incurred.
The financial statements of subsidiaries are prepared for the
same reporting year as the Company, using consistent accounting
policies. All inter company balances and transactions, including
unrealised profits arising from inter company transactions, have
been eliminated in full. Unrealised losses are eliminated in the
same way as unrealised gains except that they are only eliminated
to the extent that there is no evidence of impairment.
(b) Associates
An associate is an entity over which the Group is in a position
to exercise significant influence through participation in the
financial and operating policy decisions of the investee, but which
is not a subsidiary or a jointly controlled entity. The results,
assets and liabilities of an associate are incorporated in these
financial statements using the equity method of accounting.
(c) Investments
All equity investments are measured at fair value in the
statement of Financial Position with value changes recognised in
profit or loss except for those investments which the Group has
elected to report value changes in "other comprehensive
income".
2.3 Segment reporting
Operating segments are those components of the business where
results are regularly reviewed by the Board to assess their
performance and to make resource allocation decisions. The
operating segments are identified by either trading or terminals
activity and the similarity of their economic characteristics and
not by their geographical area of operation
2.4 Foreign currency translation
The functional currency for each entity in the Group is
determined as the currency of the primary economic environment in
which it operates. Transactions in foreign currencies are initially
recorded in the functional currency by applying the spot exchange
rate ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are re-translated at
the functional currency rate of exchange ruling at the year end.
All differences are taken to the income statement. Non-monetary
items that are measured in terms of historical cost in a foreign
currency are translated using the exchange rates as at the dates of
the initial transactions.
The assets and liabilities of foreign operations are translated
into sterling at the rate of exchange ruling at the year end.
Income and expenses are translated at average exchange rates for
the year. The resulting exchange differences are taken directly to
other comprehensive income. On disposal of a foreign entity, the
deferred cumulative amount in equity relating to that particular
foreign operation is recognised in the income statement.
2.5 Oil and gas assets
The Group's entire capitalised oil and gas assets relate to
properties that are in the exploration and evaluation stage. The
Group accounts for oil and gas properties under IFRS 6 'Exploration
for and Evaluation of Mineral Resources'. Property, plant and
equipment acquired as part of a business combination is recorded at
fair value at the acquisition date. All subsequent additions are
recorded at historical cost of acquisition or construction. The
Group does not currently have proven oil and gas reserves.
(a) Pre-licence award costs
Costs incurred prior to the award of oil and gas licences,
concessions and other exploration rights are expensed in the income
statement.
(b) Licence acquisition costs
Oil and gas licence acquisition costs are capitalised within
intangible exploration assets and amortised on a straight-line
basis over the period of the licence.
(c) Exploration and evaluation
Geological and geophysical exploration costs are charged against
income as incurred. The direct costs associated with an exploration
well, exploratory drilling and directly related overheads, are
capitalised as an intangible asset pending determination of proven
reserves. These costs are excluded from depletion until
commerciality is determined or impairment occurs. Intangible assets
also include fair value of exploration assets obtained through
acquisitions. The costs of unsuccessful exploratory wells are
expensed upon determination that the well does not justify
commercial development.
Exploration and evaluation assets shall be assessed for
impairment when facts and circumstances suggest that the carrying
amount of an exploration and evaluation asset may exceed its
recoverable amount. When facts and circumstances suggest that the
carrying amount exceeds the recoverable amount, an entity shall
measure, present and disclose any resulting impairment loss in
accordance with IAS 36 'Impairment of assets'.
2.6 Non oil and gas assets
(a) Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated
depreciation and impairment losses. Such cost includes costs
directly attributable to making the asset capable of operating as
intended.
Depreciation is provided on all property, plant and equipment,
other than freehold land, at rates calculated to write off the
cost, less estimated residual value based on prices prevailing at
the year end, of each asset evenly over its expected useful life as
follows:
Buildings - 50 years
Plant and equipment - 5 to 25 years
Office equipment - 3 years
Computer equipment - 3 years
Depreciation of an item of property, plant and equipment begins
when it is available for use and when it is in the location and
condition necessary for it to be capable of operating in the manner
intended by management.
(b) Construction in progress
Assets in the course of construction are capitalised as a
separate component of property, plant and equipment. On completion,
the cost of construction is transferred to the appropriate
category. The Group has storage tanks located in Russia with a book
value of GBP2.05m that are awaiting deployment in one of the
Group's terminals.
The cost of a property, plant and equipment comprises its
purchase price and any costs directly attributable to bringing it
into working condition for its intended use.
Construction in progress is not depreciated.
Borrowing costs directly attributable to the construction of
assets that necessarily take a substantial period of time to get
ready for their intended use are added to the cost of those assets,
until such time as the assets are substantially ready for their
intended use.
2.7 Impairment
The carrying amounts of property, plant and equipment are
reviewed for impairment if events or changes in circumstances
indicate the carrying value may not be recoverable. If there are
indicators of impairment, an exercise is undertaken to determine
whether the carrying values are in excess of their recoverable
amount. Such review is undertaken on an asset by asset basis,
except where such assets do not generate cash flows independent of
other assets, in which case the review is undertaken at the cash
generating unit level.
If the carrying amount of an asset or its cash generating unit
exceeds the recoverable amount, a provision is recorded to reflect
the asset at the lower amount. Impairment losses are recognised in
the income statement.
(a) Calculation of recoverable amount
The recoverable amount of assets is the greater of their value
in use and fair value less costs to sell. In assessing value in
use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks
specific to the asset. For an asset that does not generate cash
inflows largely independent of those from other assets, the
recoverable amount is determined for the cash generating unit to
which the asset belongs. The Group's cash generating units are the
smallest identifiable groups of assets that generate cash inflows
that are largely independent of the cash inflows from other assets
or groups of assets.
(b) Reversals of impairment
An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount. An impairment
loss is reversed only to the extent that the asset's carrying
amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if no impairment
loss had been recognised.
2.8 Goodwill
Goodwill represents the excess of the cost of an acquisition
over the fair value of the Group's share of the net identifiable
assets of the acquired subsidiary at the date of acquisition.
Goodwill is tested annually for impairment and carried at cost less
accumulated impairment losses. Impairment losses on goodwill are
not reversed. Gains and losses on the disposal of an entity include
the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose
of impairment testing. The allocation is made to those
cash-generating units or groups of cash-generating units that are
expected to benefit from the business combination in which the
goodwill arose identified according to operating segment.
2.9 Financial assets
Financial assets are initially recognised at fair value plus
transaction costs. Financial assets classified as held for trading
and other assets designated as such on inception are included in
this category. Financial assets are classified as held for trading
if they are acquired for sale in the short term. Derivatives are
also classified as held for trading unless they are designated as
effective hedging instruments or as financial guarantee contracts.
Assets are carried in the balance sheet at fair value with gains or
losses recognised in the income statement.
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market, do not qualify as trading assets and have not been
designated as either fair value through profit and loss or
available-for-sale. Such assets are carried at amortised cost using
the effective interest method if the time value of money is
significant. Gains and losses are recognised in the income
statement when the loans and receivables are derecognised or
impaired, as well as through the amortisation process.
2.10 Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss includes
financial assets designated upon initial recognition at fair value
through profit or loss. Financial assets at fair value through
profit and loss are carried in the statement of financial position
at fair value with net changes in fair value recognised in finance
costs in the income statement.
Financial assets designated upon initial recognition at fair
value through profit and loss are designated at their initial
recognition date and only if the criteria under IAS 39 are
satisfied. The Group has designated financial assets at fair value
through profit or loss.
2.11 Impairment of financial assets
The Group assesses at the year end whether a financial asset or
group of financial assets is impaired.
If there is objective evidence that an impairment loss on assets
carried at amortised cost has been incurred, the amount of the loss
is measured as the difference between the asset's carrying amount
and the present value of estimated future cash flows discounted at
the financial asset's original effective interest rate (i.e. the
effective interest rate computed at initial recognition). The
carrying amount of the asset is reduced, through the use of an
allowance account. The amount of the loss shall be recognised in
administration costs.
If, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event
occurring after the impairment was recognised, the previously
recognised impairment loss is reversed. Any subsequent reversal of
an impairment loss is recognised in the income statement, to the
extent that the carrying value of the asset does not exceed its
amortised cost at the reversal date. In relation to trade
receivables, a provision for impairment is made when there is
objective evidence (such as the probability of insolvency or
significant financial difficulties of the debtor) that the Group
will not be able to collect all of the amounts due under the
original terms of the invoice. The carrying amount of the
receivable is reduced through use of an allowance account. Impaired
debts are derecognised when they are assessed as irrecoverable.
2.12 Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost includes all costs incurred in bringing each product to
its present location and condition, as follows:
-- Raw materials, consumables and goods for resale - purchase
cost on a first-in, first-out basis.
-- Finished goods - cost of direct materials and labour plus
attributable overheads based on a normal level of activity,
excluding borrowing costs.
2.13 Cash and cash equivalents
Cash and short-term deposits comprise cash at banks and in hand
and short-term deposits with an original maturity of three months
or less.
For the purpose of the consolidated cash flow statement, cash
and cash equivalents consist of cash and cash equivalents as
defined above, net of outstanding bank overdrafts.
2.14 Financial liabilities
Except for derivatives, financial liabilities are recognised
initially at fair value net of transaction costs and carried
subsequently at amortised cost under the effective interest
method.
Obligations for trade payables, loans and borrowings are
recognised when the Group becomes party to the related contracts
and are measured initially at the fair value of consideration
received less directly attributable transaction costs.
After initial recognition, interest-bearing loans and borrowings
are subsequently measured at amortised cost using the effective
interest method.
Gains and losses arising on the repurchase, settlement or
otherwise cancellation of liabilities are recognised respectively
in finance revenue and finance cost.
2.15 Derecognition of financial assets and liabilities
A financial asset or liability is generally derecognised when
the contract that gives rise to it is settled, sold, cancelled or
expires.
Where an existing financial liability is replaced by another
from the same lender on substantially different terms, or the terms
of an existing liability are substantially modified, such an
exchange or modification is treated as a derecognition of the
original liability and the recognition of a new liability, such
that the difference in the respective carrying amounts together
with any costs or fees incurred are recognised in profit or
loss.
2.16 Income tax
Current tax assets and liabilities are measured at the amount
expected to be recovered from or paid to the taxation authorities,
based on tax rates and laws that are enacted or substantively
enacted by the year end.
Deferred income tax is recognised on all temporary differences
arising between the tax bases of assets and liabilities and their
carrying amounts in the financial statements, with the following
exceptions:
-- where the temporary difference arises from the initial
recognition of goodwill or of an asset or liability in a
transaction that is not a business combination that at the time of
the transaction affects neither accounting nor taxable profit or
loss;
-- in respect of taxable temporary differences associated with
investments in subsidiaries, associates and joint ventures, where
the timing of the reversal of the temporary differences can be
controlled and it is probable that the temporary differences will
not reverse in the foreseeable future;
-- and deferred income tax assets are recognised only to the
extent that it is probable that taxable profit will be available
against which the deductible temporary differences, carried forward
tax credits or tax losses can be utilised.
Deferred income tax assets and liabilities are measured on an
undiscounted basis at the tax rates that are expected to apply when
the related asset is realised or liability is settled, based on tax
rates and laws enacted or substantively enacted at the year
end.
Income tax is charged or credited directly to equity if it
relates to items that are credited or charged to equity. Otherwise
income tax is recognised in the income statement.
2.17 Revenue
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Group and the revenue can be
reliably measured. Revenue is measured at the fair value of
consideration received or receivable. Revenue excludes any
applicable sales taxes.
Transhipment service revenue is recognised at the point of
loading hydrocarbon product onto the customers export vessel.
Trading revenue is recognised when the risks and rewards of
hydrocarbon product ownership pass to the customer. The associated
costs of acquiring the hydrocarbon product are recognised in cost
of sales.
When the risks and rewards of hydrocarbon product ownership do
not pass to the Group the Group is acting as an agent between the
supplier and customer and recognises the margin between the cost of
the hydrocarbon product and the selling price as revenue.
The Group provides heated storage facilities for customer
product which is billed monthly in advance plus additional services
such as Ship to Ship transfers.
The Group has a fuel distribution business in Russia which
recognises revenue on despatch of product to the customer.
2.18 Financial income and expenses
Financial income and expenses comprise interest expense on
borrowings, amortisation of issue costs and interest income on
funds invested.
Interest income is recognised as it accrues, calculated in
accordance with the effective interest rate method.
2.19 Going concern
The financial statements have been prepared on the going concern
basis, which assumes that the Company and its subsidiaries will
continue in operational existence for the foreseeable future. The
Board has performed a review of the next 12 months cash flows from
the date of signing of the accounts and is confident that with
current operations, the refinancing of the loan notes, recent share
placing and the existing Group cash balance is sufficient to meet
liabilities as they fall due. The Directors are not aware of any
material uncertainties that might cast significant doubt on the
Group's ability to continue as a going concern.
3. Capital management
Management controls the capital of the Group in order to provide
the shareholders with adequate returns and ensure that the Group
can fund its operations and continue as a going concern.
The Group's debt and capital includes ordinary share capital and
financial liabilities, supported by financial assets.
There are no externally imposed capital requirements.
Management effectively manages the Group's capital by assessing
the Group's financial risks and adjusting its capital structure in
response to changes in these risks and in the market. These
responses include the management of debt levels, distributions to
shareholders and share issues.
There have been no changes in the strategy adopted by management
to control the capital of the Group since the prior year.
4. Risk management
The Group's activities expose it to a variety of financial
risks: market risk (including currency risk, interest rate risk and
price risk), credit risk, liquidity risk and other risks and
uncertainties. The Group operates a risk management programme where
risks are identified and discussed at Board level and appropriate
mitigation measures are implemented.
(a) Market risk
(i) Currency risk
The Group operates internationally and is exposed to foreign
currency risk arising from various currency exposures, primarily
with respect to the US Dollar, Euro and Russian Rouble.
The Group's cash flows generated from the terminals and trading
divisions are in US Dollars. Only a proportion of the cash earned
from transhipment is converted into Roubles to pay local overheads.
There is a currency risk associated with the movement in exchange
rate between the Rouble and the Dollar as the Group converts a
proportion of US Dollars into Roubles at regular intervals to meet
the Rouble expenditure as it falls due. Where there is a
significant exposure to currency risk the Group enters into forward
contracts to tie into the current exchange rate to mitigate the
risk.
The presentation currency of the Pan European Terminals plc
Group is GBP. The functional currencies of the underlying entities
are mainly US Dollar, Euro and Russian Roubles. The assets and
liabilities of the underlying entities are re-translated at the
closing rate into the presentation currency therefore any currency
movements affect the carrying value of the assets and liabilities
in the Consolidated Statement of Financial Position of Pan European
Terminals plc.
At 31 December 2012, if the GBP currency had
weakened/strengthened by 10% against the US Dollar with all other
variables held constant, post tax loss for the year would have been
GBP16,000 (2011: GBP37,000) higher/lower. At 31 December 2012, if
the currency had weakened/strengthened by 10% against the Euro with
all other variables held constant, post tax loss for the year would
have been GBP235,000 (2011: GBP238,000) higher/lower. This is
mainly due to the retranslation of subsidiary balance sheets and
results using the closing exchange for the statement of financial
position and the average exchange rate for the income
statement.
(ii) Interest rate risk
The Group is not currently exposed to risks associated with
interest rate movements on borrowings as these are at a fixed
interest rate.
The Group is currently exposed to interest rate movements on its
cash deposits as cash is mainly held in readily available bank
accounts. Where there is sufficient cash held in these bank
accounts it is placed on the short term money markets where the
interest earned is fixed.
(iii) Price risk
The Group's revenue is not generally correlated to oil or
commodity prices. In the terminals division revenue is derived from
fixed prices earned from handling the customer's product. In the
trading division the Group earns a margin between the purchase
price of product and the selling price. This margin is determined
through purchasing product at a given number of basis points below
Platz (the oil product price index) and selling it at a given
number of points above. Although the Platz index is correlated to
the underlying commodity price the margin between the purchase and
selling price will generally be fixed. As the purchase and sale of
the product is done under letters of credit, the prices and margins
are fixed in advance therefore the Group is not exposed to any
price movements between the time of purchase and sale.
(b) Credit risk
The Group's trade receivables arise in both the terminals and
trading division. The Group considers the risk of not realising
trade receivable balances as low, but where debts are overdue
provisions are considered and made as necessary as set out in note
16. In the terminals division the transhipment and product handling
fees are paid prior to the release of the product onto the vessel.
As the fees are a relatively small proportion of the value of the
customer's product the terminal is handling, the Group rarely
encounters default on the payment of debts. If on the rare occasion
the customer defaults then the Group holds the customers product as
security against the outstanding debt. In the Trading division
product is purchased and sold using letters of credit therefore the
transactions carried out are guaranteed by the banks issuing the
letters of credit. The Group uses letters of credit from reputable
European banks only.
The Group incurs capital expenditure in the development and
maintenance of its terminals division. Material and labour
requirements are generally paid for in advance in Russia so there
is a risk of non-performance of contractors. To mitigate this risk
the Group has a policy of dealing with only reputable contractors
and building merchants.
(c) Liquidity risk
Liquidity risk is the risk that obligations associated with
financial liabilities will not be met. The Group has performed a
cash flow forecast through to 30 June 2015 which has provided the
directors with assurance that the Group has sufficient cash to meet
its financial liabilities as they fall due.
(d) Potential taxation issues
As the Group operates in a number of jurisdictions, monitoring
of cross border tax issues and repatriation of funds will be
required. The Group has developed adequate presence in its key
jurisdictions of the UK, Cyprus, the Netherlands, Denmark and
Russia to manage the risks that changing tax legislation may
present. The Group charges a management fee to its subsidiaries in
the Netherlands and Denmark. The Directors have obtained
independent professional advice from transfer pricing specialists
and are confident that management fees are charged on an arms
length basis.
(e) Title and control over Assets
The Group has undertaken all the customary due diligence and
legal due diligence in the verification of title to and control of
its assets and share of assets.
(f) Political risk is the risk that assets will be lost through
expropriation, unrest or war. The Group minimises political risk by
operating in countries with relatively stable political systems,
established fiscal codes and a respect for the rule of law.
(g) A change or breach of regulatory and local legal
requirements.
Regulatory compliance is managed with the assistance of external
advisors. Changes in legal requirements are monitored by the
management team and with the use of external advisors where
required.
5. Significant accounting judgements, estimates and assumptions
The Group makes estimates and assumptions concerning the future.
The resulting estimates will by definition, seldom equal the actual
results. Estimates and judgements are continually evaluated and are
based on historical experience and other factors, including
expectations of future events that are believed to be reasonable
under the circumstances. Many of the amounts included in the
financial statements involve the use of judgement and/or
estimation. These judgements and estimates are based on
managements' best knowledge of the relevant facts and
circumstances, having regard to prior experience, but actual
results may differ from the amounts included in the financial
statements. The Board has considered the critical accounting
estimates and assumptions used in the historical financial
information and concluded that the areas of judgement that have the
most significant effect on the amounts recognised in the financial
statements concern:
Going concern
As detailed in the Directors' report, the Directors have
complete confidence that their efforts will generate sufficient
ongoing cash to meet the Company's outgoings for the foreseeable
future. The Directors have refinanced the Loan Notes on more
favourable commercial terms which includes an extension to the
maturity date of the debt of November 2015. The Company has
completed a share placing on 27 March 2013 raising proceeds of
GBP0.9m. On this basis the Directors believe it is appropriate to
prepare these financial statements on a going concern basis. Please
also refer to note 2.19.
Rosbunker Asset
The Directors have carefully considered the status of its
Rosbunker asset and the well documented events that have occurred
during 2012. Given the limitation on control of the asset during
the year, it has been decided that the most appropriate approach
for the purpose of these accounts is to treat the asset as an
Investment for the whole of the 2012 year.
The reason behind re-classifying Rosbunker from associate to
investment is clear: As an associate, the Group must be allowed to
exercise significant influence over the asset in an operational and
financial capacity. However, due to the ongoing court proceedings,
this has not been possible and therefore the Directors believe the
most appropriate accounting policy is to treat the holding as an
investment thereby effectively "ring-fencing" the asset for the
purposes of these accounts.
Therefore, no income from the asset has been recognised in the
Group accounts for 2012, and the asset has been restated to its
estimated fair value of GBP22.5m. Shareholders should note that the
asset has been classified as an associate since 2010 and during
this period the Group has not received any cash distributions from
its Rosbunker operations and therefore, this accounting treatment
is deemed to be the most appropriate in the circumstances. The
change in accounting policy has no effect on the cash generated by
the Group.
The Directors continue to pursue direct control of the asset
and, by the end of 2012, had made encouraging headway within the
Russian courts. Further, the Group's current 50% holding in
Rosbunker is now deemed secure and protected under Russian law.
Concurrently, other options for the resolution of the situation
are also being pursued by the Directors, and a number of attractive
corporate transactions are under negotiation, one of which is with
a large Russian financial institution. The Directors consider any
one of these possible solutions to be strategically positive for
the Group's future.
Should the asset remain within the Group, the Directors are
confident that any of these options will ensure cash flow is
returned to the Group by 1 April 2014 at the latest.
The Directors would highlight that they have applied a number of
significant estimates and judgements in determining the above. The
increase in fair value recognised in the financial statements
reflects the status of actions taken to date and the plans in place
to ensure a return to joint control over the asset and therefore
access to its share of operating cash flows in the future. Please
also refer to note 25 for details of the estimates and assumptions
used in the calculations of the fair value of the investment.
Receivables
The Directors have carefully reviewed all of the outstanding
receivables to the Group at the year end. Provisions of GBP2.45
million have been made for certain items which are past due, and
where the Directors believe that not all of the receivables will be
recovered. In making their assessments, the Directors have
considered several factors including the age and size of the debt,
the trading pattern of the customer and their relative financial
strength. Where necessary, confirmations of the debts have been
sought from customers. There are still a number of significantly
overdue receivables but the Directors are satisfied that the
balances included in the Statement of Financial Position as at 31
December 2012 are recoverable at the amounts stated therein.
6. Segment information
The Group considers that its activities be split into two key
areas, terminal and trading activities. An operating segment is a
component of the Group engaged in terminal or trading activities
that is regularly reviewed by the Chief Operating Decision Maker
for the purposes of making economic decisions. In addition, Head
Office costs are disclosed separately and added to the sector
result in arriving at an operating profit.
The terminals operating segment provides terminal handling and
storage services on behalf of clients wishing to export oil
products and has bases in the Netherlands, Denmark and Russia. The
trading operating segment matches buyers and sellers of hydrocarbon
product and takes a margin on the product sold.
The following table analyses the sector revenue and result and
reconciles the sector result to the profit after tax.
(a) Operating segments - year ended 31 December 2012
Terminals Trading Unallocated Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ---------- --------- ------------ ---------
Revenue 20,590 - - 20,590
Segment operating profit /
(loss) 2,810 (2,450) (2,067) (1,707)
Investment fair value gain 4,163 - - 4,163
Finance costs - net (note
10) - - (1,309) (1,309)
Tax charge (470) - - (470)
------------------------------- ---------- --------- ------------ ---------
Segment profit / (loss) for
the year 6,503 (2,450) (3,376) 677
------------------------------- ---------- --------- ------------ ---------
Assets and liabilities
Segment assets 45,961 285 1,386 47,632
Segment liabilities (11,421) - (490) (11,911)
------------------------------- ---------- --------- ------------ ---------
Segment net assets 34,540 285 896 35,721
Total assets includes
Property, plant and equipment 6,360 - - 6,360
Goodwill 11,598 - - 11,598
Investments 22,481 - - 22,481
------------------------------- ---------- --------- ------------ ---------
The following significant non-cash items are included in the
segment results:
-- Terminals - depreciation of GBP431,000.
(b) Operating segments - year ended 31 December 2011
Terminals Trading Unallocated Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ---------- --------- ------------ ---------
Revenue 15,301 249 - 15,550
Segment operating profit /
(loss) 3,058 (61) (1,708) 1,289
Share of profits of associates 3,944 - - 3,944
Finance costs - net (note
10) - - (185) (185)
Tax charge (323) - - (323)
-------------------------------- ---------- --------- ------------ ---------
Segment profit / (loss) for
the year 6,679 (61) (1,893) 4,725
-------------------------------- ---------- --------- ------------ ---------
Assets and liabilities
Segment assets 39,862 2,821 1,280 43,963
Segment liabilities (9,176) - (503) (9,679)
-------------------------------- ---------- --------- ------------ ---------
Segment net assets 30,686 2,821 777 34,284
Total assets includes
Property, plant and equipment 6,911 - - 6,911
Goodwill 11,598 - - 11,598
-------------------------------- ---------- --------- ------------ ---------
The following significant non-cash items are included in the
segment results:
-- Terminals - depreciation of GBP146,000.
(c) Geographical disclosure - year ended 31 December 2012
Rest of Russian
UK Europe Federation Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ---------- --------- ------------ ----------
Revenue - 7,907 12,683 20,590
------------------------------- ---------- --------- ------------ ----------
Results
Operating (loss) / profit
for the year (2,848) 839 302 (1,707)
------------------------------- ---------- --------- ------------ ----------
Other segment information
Segment assets 3,913 15,364 28,355 47,632
------------------------------- ---------- --------- ------------ ----------
Total assets
Property, plant and equipment 1,095 3,220 2,045 6,360
Goodwill - 9,710 1,888 11,598
Investments - - 22,481 22,481
------------------------------- ---------- --------- ------------ ----------
(d) Geographical disclosure - year ended 31 December 2011
Rest of Russian
UK Europe Federation Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ---------- --------- ------------ ----------
Revenue 443 7,867 7,240 15,550
------------------------------- ---------- --------- ------------ ----------
Results
Operating (loss) / profit
for the year (448) 1,116 621 1,289
------------------------------- ---------- --------- ------------ ----------
Other segment information
Segment assets 6,390 14,026 23,547 43,963
------------------------------- ---------- --------- ------------ ----------
Total assets
Property, plant and equipment 1,141 3,632 2,138 6,911
Goodwill - 9,710 1,888 11,598
------------------------------- ---------- --------- ------------ ----------
7. Operating (loss)/profit
The operating (loss)/profit is stated after
charging/(crediting):
2012 2011
GBP'000 GBP'000
------------------------------- --------- ---------
Depreciation and amortisation 431 179
Foreign currency (gain)/loss (164) 106
------------------------------- --------- ---------
Non-recurring administrative expenses consists of the
following:
2012 2011
GBP'000 GBP'000
--------------------------------------- --------- ---------
Loan note refinancing costs 181 -
Russian legal costs 333 -
Dan Balt acquisition costs 372 -
Bad debt provisions - see note 16 2,448 -
Payments to settle old trading dispute 250 -
Other terms 138 -
--------------------------------------- --------- ---------
Total non-recurring administration 3,722 -
expenses
--------------------------------------- --------- ---------
The Russian legal costs relate to the protection of the
Rosbunker assets and are not expected to recur when the Group's
control is reinstated.
The Dan Balt acquisition costs have arisen from a one off
finders fee from the Danish terminal acquired at the end of
2011.
8. Staff costs and Directors' emoluments
(a) Staff costs
2012 2011
GBP'000 GBP'000
----------------------- --------- ---------
Wages and salaries 763 888
Social security costs 72 83
Other pension costs - -
----------------------- --------- ---------
835 971
----------------------- --------- ---------
The average monthly number of employees during the year was as
follows:
2012 2011
Number Number
----------------- -------- --------
Operational 21 28
Administrative 21 24
----------------- -------- --------
Total employees 42 52
----------------- -------- --------
(b) Directors' emoluments
2012 2011
GBP'000 GBP'000
-------------------------------------- --------- ---------
Directors' emoluments 269 190
Pension costs - defined contribution - -
plan
-------------------------------------- --------- ---------
269 190
-------------------------------------- --------- ---------
The directors constitute the only key personnel of the
Group.
There were no gains made by Directors on the exercise of share
options during the year (2011: nil).
Total emoluments Total emoluments
2012 2011
GBP'000 GBP'000
---------------- ----------------- -----------------
Simon Escott 120 150
Adrian Simpson 61 -
Richard Healey 52 24
Louis Castro 36 4
Stanley Buck - 12
---------------- ----------------- -----------------
269 190
---------------- ----------------- -----------------
The total emoluments paid to directors consists of basic salary
only.
Simon Escott's remuneration for services as a Director are
invoiced by and paid to an independent third party consultancy
business. Emoluments for Richard Healey and Adrian Simpson are
invoiced by and paid to their own service companies. Louis Castro
is engaged directly as a consultant by the Group.
9. Auditors' remuneration
2012 2011
GBP'000 GBP'000
------------------------------------------ --------- ---------
Fees payable to the Company's auditor
consist of:
Audit of the group financial statements 75 82
Taxation services 15 -
------------------------------------------ --------- ---------
90 82
------------------------------------------ --------- ---------
10. Finance income and costs
2012 2011
GBP'000 GBP'000
--------------------------- --------- ---------
Finance income:
Bank interest receivable - 47
--------------------------- --------- ---------
- 47
--------------------------- --------- ---------
Finance costs:
Bank loans and overdrafts - 64
Loan note interest 986 168
Loan note issue costs 323 -
--------------------------- --------- ---------
1,309 232
--------------------------- --------- ---------
The issue costs associated with the 2011 $11m secured fixed rate
loan note of GBP323,000 were charged to finance costs upon the
re-financing on 19 November 2012 (note 20).
11. Taxation
(a) Tax on profit on ordinary activities
Current income tax charged in the income statement:
2012 2011
GBP'000 GBP'000
--------------------------------------------- --------- ---------
Corporation tax:
Current tax on profits for the year 494 357
Deferred tax:
Origination and reversal of temporary
timing differences (24) (34)
--------------------------------------------- --------- ---------
Tax charge reported in the income statement 470 323
--------------------------------------------- --------- ---------
A management charge of GBP1,048,000 was charged to PBI and Dan
Balt for its proportion of central overheads incurred by Pan
European Terminals plc during the year ended 31 December 2012
(2011: GBP1,287,000).
(b) Reconciliation of the total tax charge
2012 2011
GBP'000 GBP'000
------------------------------------------------------------- --------- ---------
Profit before tax 1,147 5,048
------------------------------------------------------------- --------- ---------
Accounting profits multiplied by the
UK standard rate of corporation tax
of 24.5% (2011: 28%) 281 1,312
* UK tax losses not utilised - 36
* Russian tax losses utilised (56) (1,025)
1,265 -
* Tax losses carried forward
(1,113) -
* Income not deductible for tax purposes
150 -
* Expenses not deductible for tax purposes
(11) -
* Effect of different corporate tax rates in different
tax jurisdictions
(39) -
* Timing differences
- Other (7) -
------------------------------------------------------------- --------- ---------
Total tax charge for the year 470 323
------------------------------------------------------------- --------- ---------
(c) Deferred tax
The deferred tax included in the Statement of Financial Position
is as follows:
2012 2011
GBP'000 GBP'000
----------------------------------- --------- ---------
Balance bought forward 526 72
Foreign exchange adjustment (16) (8)
Acquisition fair value adjustment - 496
Income statement credit (24) (34)
----------------------------------- --------- ---------
Deferred tax liability 486 526
----------------------------------- --------- ---------
The deferred tax liability consists of temporary differences on
the timing of depreciation in the income statement and the claiming
of capital allowances in the corporate tax returns.
The Group has tax losses which arose in the UK of GBP12,356,000
(2011: GBP11,554,000) and in Russia of GBPNil (2011: GBP1,730,000)
that are available indefinitely for offset against future taxable
profits of those companies in which the losses arose. Deferred tax
assets have not been recognised in respect of these losses due to
uncertainty as to whether such amounts will be realised.
No deferred tax has been recognised on the fair value gain of
the investments as it is held through a Cypriot intermediary
holding company and in accordance with Cypriot tax legislation no
capital gains tax would become liable on a disposal of the Group's
interest in the investment.
12. Earnings per share (EPS)
Basic EPS is calculated by dividing the net profit for the year
attributable to ordinary equity shareholders of the Company by the
weighted average number of ordinary shares of 1 pence each
outstanding during the year.
The following reflects the income and adjusted share data used
in the EPS computation.
2012 2011
GBP'000 GBP'000
--------------------------------------------- ----------- -----------
Profit attributable to equity shareholders
of the company 677 4,725
--------------------------------------------- ----------- -----------
2012 2011
Number Number
--------------------------------------------- ----------- -----------
Number of shares
Weighted average number of ordinary
shares of 1 pence each for EPS calculation 97,957,142 94,383,016
--------------------------------------------- ----------- -----------
Earnings per shares - basic and diluted 0.69p 5.01p
--------------------------------------------- ----------- -----------
13. Intangible assets
Exploration
assets Licenses Goodwill Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ------------ --------- --------- --------
Cost
At 1 January 2011 5,279 643 4,896 10,818
Foreign exchange adjustment (83) (26) - (109)
Additions - - 3,498 3,498
Additions through acquisition - - 3,617 3,617
----------------------------------- ------------ --------- --------- --------
At 31 December 2011 5,196 617 12,011 17,824
Foreign exchange adjustment (130) (20) - (150)
----------------------------------- ------------ --------- --------- --------
At 31 December 2012 5,066 597 12,011 17,674
----------------------------------- ------------ --------- --------- --------
Amortisation and impairment
At 1 January 2011 5,279 642 413 6,334
Foreign exchange adjustment (83) (26) - (109)
Amortisation charge - 1 - 1
----------------------------------- ------------ --------- --------- --------
At 31 December 2011 and 1 January
2012 5,196 617 413 6,226
Foreign exchange adjustment (130) (20) - (150)
----------------------------------- ------------ --------- --------- --------
At 31 December 2012 5,066 597 413 6,076
----------------------------------- ------------ --------- --------- --------
Net book value
At 31 December 2012 - - 11,598 11,598
----------------------------------- ------------ --------- --------- --------
At 31 December 2011 - - 11,598 11,598
----------------------------------- ------------ --------- --------- --------
Impairment tests for goodwill
Goodwill is allocated to the Group's four cash-generating units
(CGUs) Dan Balt, Petro Broker, Baltic Top and TDKN. An amount of
GBP3,617,000 is allocated to the Dan Balt CGU, GBP6,092,000 to
Petro Broker, GBP814,000 to Baltic Top and GBP1,075,000 to TDKN
(2011: GBP3,617,000, GBP6,092,000, GBP814,000 and GBP1,075,000
respectively). The country of operation of Dan Balt is Denmark,
Petro Broker is the Netherlands and Baltic Top and TDKN are
Russia.
The recoverable amount of a CGU is determined based on value in
use calculations. The value in use is calculated from the net
present value of future cash flows from each CGU over a period of
10 years. The future cash flows are based on a 3 year financial
projection from 2013 to 2016 and then a 3% growth rate on 2016 cash
flows is assumed from 2017 onwards. The 3% growth rate is assumed
to arise from increases in unit price and volume related synergies.
The future cash flows were discounted at a rate of 10% which
represents the Group's weighted average cost of capital. The
recoverable amount of each CGU was in excess of the goodwill
carrying value and therefore no impairment provisions were
required.
The Directors have performed a sensitivity analysis on the 3
year financial projections and the key assumptions used in the net
present value calculations and are confident that there is low risk
that the carrying value of the CGUs exceed the recoverable
amount.
14. Property, plant and equipment
Computer
Land and Plant and and office Construction
buildings machinery equipment in progress Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ------------ ----------- ------------ ------------- --------
Cost
At 1 January 2011 290 1,686 256 3,804 6,036
Foreign exchange adjustment (17) (95) - (7) (119)
Additions - - - 60 60
Additions through acquisition 674 3,045 - - 3,719
Disposals - (18) - - (18)
------------------------------- ------------ ----------- ------------ ------------- --------
At 31 December 2011 and 1
January 2012 947 4,618 256 3,857 9,678
Foreign exchange adjustment (19) (81) - (116) (216)
Additions 17 11 2 - 30
Disposals - (21) - - (21)
------------------------------- ------------ ----------- ------------ ------------- --------
At 31 December 2012 945 4,527 258 3,741 9,471
------------------------------- ------------ ----------- ------------ ------------- --------
Depreciation
At 1 January 2011 31 550 247 1,747 2,575
Foreign exchange adjustment (1) (8) - 22 13
Depreciation charge 19 155 5 - 179
------------------------------- ------------ ----------- ------------ ------------- --------
At 31 December 2011 and 1
January 2012 49 697 252 1,769 2,767
Foreign exchange adjustment - 2 - (76) (74)
Depreciation charge 143 283 5 - 431
Disposals - (13) - - (13)
------------------------------- ------------ ----------- ------------ ------------- --------
At 31 December 2012 192 969 257 1,693 3,111
------------------------------- ------------ ----------- ------------ ------------- --------
Net book value
At 31 December 2012 753 3,558 1 2,048 6,360
------------------------------- ------------ ----------- ------------ ------------- --------
At 31 December 2011 898 3,921 4 2,088 6,911
15. Inventory
2012 2011
GBP'000 GBP'000
------------- --------- ---------
Consumables 864 198
------------- --------- ---------
16. Trade and other receivables (current)
2012 2011
GBP'000 GBP'000
------------------- --------- ---------
Trade receivables 2,957 3,613
------------------- --------- ---------
There is no difference between the carrying value and fair value
of financial assets.
At 31 December 2012, trade receivables of GBP1,998,000 (2011:
GBP3,038,000) were past due but not impaired. The ageing analysis
of these trade receivables is as follows:
2012 2011
GBP'000 GBP'000
------------------------ --------- ---------
Current 959 -
3 to 6 months past due - -
Over 6 months past due 1,998 3,038
------------------------ --------- ---------
2,957 3,038
------------------------ --------- ---------
The Directors have performed a detailed review of all debtors
that are past due and have made impairment provisions of GBP2.45
million for certain debts as at 31 December 2012 (provision 2011:
GBPnil). The provision was made due to backwardation in the fuel
oil market that prevented the supplier and thus our customer from
supplying product at a commercial rate. The Group, together with
the customer, have made numerous efforts to re-structure the debt
by switching from fuel oil to gasoil. Because this has, so far,
been unsuccessful, it was decided to provide in total for these
debts. However, the Group continues to work with the customer to
reach a cash generative solution, and has received a proposal from
this customer to discharge this debt through the assignment of
gasoil.
17. Prepayments and other current assets
2012 2011
GBP'000 GBP'000
-------------------------------------- --------- ---------
Advances paid for goods and services 976 448
VAT reclaimable 64 73
-------------------------------------- --------- ---------
1,040 521
-------------------------------------- --------- ---------
18. Cash and cash equivalents
2012 2011
GBP'000 GBP'000
-------------------------- --------- ---------
Cash at bank and in hand 1,143 1,614
-------------------------- --------- ---------
Cash at bank earns interest at floating rates based on daily
bank deposit rates. Short-term deposits are made for varying
periods of between one day and one month depending on the immediate
cash requirements of the Group, and earn interest at the respective
short-term deposit rates.
19. Share capital and reserves
(a) Allotted and called up share capital
2012 2011
---------------------------- -------------------------
Number GBP Number GBP
----------------------------------- ------------ -------------- -------------- ---------
Allotted and called up share
capital
Ordinary shares of 1 pence each 101,825,110 1,018,251 94,517,416 945,174
----------------------------------- ------------ -------------- -------------- ---------
Number of Share capital Share premium Total
shares GBP'000 GBP'000 GBP'000
----------------------------------- ------------ -------------- -------------- ---------
Ordinary shares of 1 pence each
issued and fully paid
At 1 January 2011 93,641,416 936 49,351 50,287
Shares issued 876,000 9 249 258
----------------------------------- ------------ -------------- -------------- ---------
At 31 December 2011 and 1 January
2012 94,517,416 945 49,600 50,545
Shares issued 7,307,694 73 837 910
----------------------------------- ------------ -------------- -------------- ---------
At 31 December 2012 101,825,110 1,018 50,437 51,455
----------------------------------- ------------ -------------- -------------- ---------
On 22 May 2012 the Company issued 7,307,694 new ordinary shares
of 1p each at 13p per share with certain institutional investors,
to raise GBP0.95m before expenses. The Group has used the proceeds
of the share issue to progress its fuel oil optimisation project at
the Company's refined product terminal in Aabenraa, Denmark.
Engineering commenced in June 2012 and the project was expanded in
late 2012 to include not only the original increase in pump
capacity but also the pipe lines, boiler, discharge lines and
tanks, etc. The expanded project is financed by the Placing and
working capital and is expected to be completed by the end of June
2013, on schedule.
On 28 February 2011 the Company issued 876,000 ordinary shares
to a consultant to the Company in discharge of outstanding
consultancy fees with a fair value of GBP258,000.
(b) Ordinary shares - rights at general meetings
At general meetings of the Company each member present or by
proxy has one vote on a show of hands, and on a poll every member
who is present in person or by proxy has one vote per every
ordinary share.
20. Borrowings (non current liabilities)
2012 2011
GBP'000 GBP'000
----------------------------------- --------- ---------
Loan notes 8,500 7,115
Loan note issue costs capitalised - (323)
----------------------------------- --------- ---------
8,500 6,792
----------------------------------- --------- ---------
On 19 November 2012, the Directors successfully completed a
re-financing of its $11m secured fixed rate loan notes. The loan
notes were repaid from the proceeds of an GBP8.5m secured
convertible fixed rate Loan Note which matures on 19 November 2015
and carries interest at 10% per annum. The Group has given security
over its assets except those in Cyprus and Russia in respect of the
Loan Note. The Loan Note carries the possibility of a conversion to
equity at 22 pence per share contingent on a special resolution
being passed by the shareholders on or before 30 November 2013.
The issue costs associated with the $11m secured fixed rate loan
note of GBP323,000 were charged to finance costs upon the
re-financing on 19 November 2012.
As the option to convert the Loan Note into ordinary share
capital lies with the Group, the Directors deem it appropriate to
treat the Loan Note as debt in the Group accounts.
21. Trade and other payables (current)
2012 2011
GBP'000 GBP'000
------------------------------------- --------- ---------
Trade payables 1,553 1,285
Salaries and related payables - 15
Corporation tax payable 399 -
Other payables and accrued expenses 928 888
------------------------------------- --------- ---------
2,880 2,188
------------------------------------- --------- ---------
There is no material difference between the fair value and
carrying value of financial liabilities.
These financial liabilities are all due within 6 months.
22. Borrowings (current liabilities)
2012 2011
GBP'000 GBP'000
----------------- --------- ---------
Loan notes - 40
Bank borrowings - 8
Other loans 45 125
----------------- --------- ---------
45 173
----------------- --------- ---------
There is no difference between the carrying value and fair value
of financial liabilities.
23. Financial instruments
Capital Management Policies and Procedures
The Group's capital management objectives are:
- To ensure the Group's ability to continue as a going concern, and
- To provide an adequate return to shareholders.
These objectives will be achieved by effectively managing the
Group's existing assets and by strategically investing in new
projects.
The Group monitors capital on the basis of the carrying amount
of equity, less cash and cash equivalents as presented on the face
of the consolidated statement of financial position.
The Group sets the amount of capital in proportion to its
overall financing structure, i.e. equity and financial liabilities.
The Group manages the capital structure and makes adjustments to it
in the light of changes in the economic conditions and the risk
characteristics of the underlying assets. Capital for the reporting
periods under review is summarised as follows:
2012 2011
GBP'000 GBP'000
------------------------------------ --------- ---------
Total equity 35,721 34,284
Less: cash and cash equivalents (1,143) (1,614)
------------------------------------ --------- ---------
Capital 34,578 32,670
------------------------------------ --------- ---------
Total equity 35,721 34,284
Borrowings (8,545) (6,965)
------------------------------------ --------- ---------
Overall financing 27,176 27,319
------------------------------------ --------- ---------
Capital to overall financing ratio 1.27 1.20
------------------------------------ --------- ---------
The disclosures detailed below are as required by IFRS 7
Financial Instruments: Disclosures. The Company's principal
treasury objective is to provide sufficient liquidity to meet
operational cash flow requirements and to allow the Group to take
advantage of new growth opportunities whilst maximising shareholder
value. The Company operates controlled treasury policies which are
monitored by the Board to ensure that the needs of the Company are
met as they evolve. The impact of the risks required to be
discussed in accordance with IFRS 7 are detailed below.
Liquidity and funding risk
The objective of the Group in managing funding risk is to ensure
that it can meet its financial obligations as and when they fall
due as shown below:
Current Non-current
Within 6 months 1 to 2 years 2 to 3 years
2012 2011 2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ --------- --------- --------- --------- --------- ---------
Trade & other payables 2,880 2,188 - - - -
Borrowings 45 173 - 6,792 8,500 -
------------------------ --------- --------- --------- --------- --------- ---------
Totals 2,925 2,361 - 6,792 8,500 -
------------------------ --------- --------- --------- --------- --------- ---------
Credit risk
The Group's principal financial assets are bank balances and
cash, trade and other receivables and investments in other Group
companies, which represent the Group's maximum exposure to credit
risk in relation to financial assets.
The Group's credit risk is primarily attributable to its trade
and other receivables. It is the policy of the Group to present the
amounts in the balance sheet net of allowances for doubtful
receivables, estimated by the Group's Directors based on prior
experience and the current economic environment.
The credit risk on liquid funds is limited because the
counterparties are banks with high credit ratings assigned by
international credit rating agencies.
The Group's credit risk is confined to a small number of
counterparties and customers and these are individually managed by
the Directors accordingly.
Foreign exchange risk
The Group's transactional foreign exchange exposure arises from
income, expenditure and purchase and sale of assets denominated in
foreign currencies. As each material commitment is made, the risk
in relation to currency fluctuations is assessed by the Directors
and regularly reviewed. The Group does not have a hedging programme
in place at this time.
Foreign currency denominated financial assets and liabilities,
translated into GBP at the closing rate, are as follows:
2012 2011
Financial Financial Financial Financial
assets liabilities Exposure assets liabilities Exposure
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----- ---------- ------------- --------- ---------- ------------- ---------
USD 86 - 86 736 7,115 (6,379)
RUR - - - - - -
EUR 7 - 7 98 - 98
DKK - - - - - -
GBP - - - - - -
----- ---------- ------------- --------- ---------- ------------- ---------
The following table illustrates the sensitivity of the net
result for the year and equity in regards to the Group's financial
assets and financial liabilities that are held in a currency other
than the functional currency of the underlying Group entity. There
is limited exposure to the income statement in this area as the
underlying Group entities generally trade with third parties in the
same currency as their functional currency.
It assumes a +/-5% change of the GBP-USD, GBP-RUR, GBP-EUR and
GBP-DKK for the year ended 31 December 2012 (2011: 5%). The
sensitivity analysis is applied to the Group's foreign currency
financial instruments held at the balance sheet date. If the GBP
had weakened by 5% against USD, RUR, EUR and DKK (the other main
functional currencies of the Group entities), this would have had
the following impact by currency:
2012 2011
Net result Net result
for year Equity for year Equity
GBP'000 GBP'000 GBP'000 GBP'000
----- ----------- -------- ----------- --------
USD 11 (700) 26 844
RUR - (630) 15 (656)
EUR - 149 - 153
DKK - 146 - 153
GBP - - - -
----- ----------- -------- ----------- --------
If GBP had strengthened against these respective currencies,
there would be an equal and opposite effect on the net result for
the year and equity.
Exposures to foreign exchange rates vary during the year
depending on the volume of overseas transactions. Nonetheless, the
analysis above is considered to be representative of the Group's
exposure to currency risk.
Interest rate risk
The Group has minimal exposure to interest rate risk in respect
of the cash balances held with banks and other highly rated
counterparties as cash is generally held in readily available
current accounts and earns a minimal rate of interest. If the
interest rate the Group received had increased/decreased by 0.1
percent during the year, the net result for the year would have
been increased/reduced by GBPnil (2011: GBP4,000). There would have
been no impact on other equity. The trade and other payables,
borrowings and the other financial liabilities are carried at
amortised cost. All the financial assets are considered to be cash
and receivables. The fair values of all financial assets and
financial liabilities are not considered to be materially different
from their carrying values.
Weighted average Variable Fixed
effective interest interest interest Non-interest
2012 rate rate rate bearing Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ -------------------- ---------- ---------- ------------- ----------
Assets
Cash 0.1% 1,143 - - 1,143
Trade and other receivables - - 2,957 2,957
Prepayments and other
current assets - - 1,040 1,040
------------------------------------ -------------------- ---------- ---------- ------------- ----------
Total financial assets 1,143 - 3,997 5,140
Liabilities
Trade and other payables - - (2,880) (2,880)
Borrowings - current (45) - - (45)
Borrowings - non-current - (8,500) - (8,500)
------------------------------------ -------------------- ---------- ---------- ------------- ----------
Total financial liabilities (45) (8,500) (2,880) (11,425)
------------------------------------ -------------------- ---------- ---------- ------------- ----------
Net financial assets/(liabilities) 1,098 (8,500) 1,117 (6,285)
------------------------------------ -------------------- ---------- ---------- ------------- ----------
Weighted average Variable Fixed
effective interest interest interest Non-interest
2011 rate rate rate bearing Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ -------------------- ---------- ---------- ------------- ----------
Assets
Cash 2.0% 1,614 - - 1,614
Trade and other receivables - - 3,613 3,613
Prepayments and other
current assets - - 521 521
------------------------------------ -------------------- ---------- ---------- ------------- ----------
Total financial assets 1,614 - 4,134 5,748
Liabilities
Trade and other payables - - (2,188) (2,188)
Borrowings - current (173) - - (173)
Borrowings - non-current - (6,792) - (6,792)
------------------------------------ -------------------- ---------- ---------- ------------- ----------
Total financial liabilities (173) (6,792) (2,188) (9,153)
------------------------------------ -------------------- ---------- ---------- ------------- ----------
Net financial assets/(liabilities) 1,441 (6,792) 1,946 (3,405)
------------------------------------ -------------------- ---------- ---------- ------------- ----------
24. Investment in associates
2012 2011
GBP'000 GBP'000
------------------------------------- --------- ---------
Group share of Rosbunker net assets - 17,533
Rosbunker goodwill - 785
Group share of Polex net assets 100 100
Polex goodwill 1,089 1,090
------------------------------------- --------- ---------
1,189 19,508
------------------------------------- --------- ---------
The Directors have reviewed the carrying value of the investment
in Polex and consider that the fair value of underlying land assets
supports the accounts carrying value.
The following table summarises the movements in the Rosbunker
investments in associates:
GBP'000
---------------------------------------------- ---------
At 31 December 2011 (at cost plus cumulative
share of profits, and including goodwill) 18,318
De-recognition of associated undertaking
on 1 January 2012 (18,318)
---------------------------------------------- ---------
At 31 December 2012 -
---------------------------------------------- ---------
The following table illustrates summarised financial information
of the Group's investment in Rosbunker:
Share of Rosbunker balance sheet (50%):
2012 2011
GBP'000 GBP'000
------------------------------------- ---------- ---------
Non-current assets - 9,902
Current assets - 11,002
------------------------------------- ---------- ---------
Share of gross assets - 20,904
Current liabilities - 3,371
Non-current liabilities - -
------------------------------------- ---------- ---------
Share of gross liabilities - 3,371
Share of net assets - 17,533
------------------------------------- ---------- ---------
Share of Rosbunker income statement
(50%):
2012 2011
GBP'000 GBP'000
------------------------------------- ---------- ---------
Revenue - 5,434
Net profit/(loss) before tax - 3,944
------------------------------------- ---------- ---------
The Rosbunker investment in associates in the year ended 31
December 2011 includes an amount of goodwill of GBP785,000.
The Directors have reviewed the accounting treatment of the
Group's 50% investment in Rosbunker. The Directors consider that
effective from 1 January 2012, the Group was no longer
realistically able to exercise significant influence over the asset
and have therefore concluded that the asset should be treated as an
investment for the whole of the year ended 31 December 2012, and at
the 31 December 2012 reporting date. This conclusion has been
reached following detailed consideration of the events that
occurred during 2012 as further explained in the Chief Executive's
statement. The 1 January de-recognition date represents the
Directors best estimate of when the change in the level of control
and influence the Group could affect occurred.
The investment in associate was previously accounted for using
equity accounting. The Directors have undertaken an exercise to
ascertain the fair value the investment at 1 January 2012 by
reference to the discounted value of expected future cash flows. At
1 January 2012 the fair value has been assessed as GBP21,119,000
(note 25), resulting in a fair value gain in the income statement
on de-recognition of the investment in associates of GBP2.8
million.
The Directors would highlight that they have applied a number of
significant estimates and judgements in determining the above. The
increase in fair value recognised in the financial statements
reflects the status of actions taken to date and the plans in place
to ensure a return to joint control over the asset and therefore
access to its share of operating cash flows in the future. Further
detail is given in the Significant Judgements and Estimates section
on page 25 and also in the Chief Executive's statement.
Details of the assumptions applied in determining the fair value
are included in note 25.
The following table illustrates summarised financial information
of the Group's investment in OOO Polex Service:
Share of Polex Service balance sheet (50%):
2012 2011
GBP'000 GBP'000
--------------------------------- --------- ---------
Non-current assets 87 87
Current assets 76 76
--------------------------------- --------- ---------
Share of gross assets 163 163
Current liabilities 63 63
Non-current liabilities - -
--------------------------------- --------- ---------
Share of gross liabilities 63 63
Share of net assets 100 100
--------------------------------- --------- ---------
Share of Polex income statement
(50%):
2012 2011
GBP'000 GBP'000
--------------------------------- --------- ---------
Revenue - -
Net profit/(loss) before tax - -
--------------------------------- --------- ---------
The Polex investments in associates at 31 December 2012 includes
goodwill of GBP1,089,500 (2011: GBP1,089,500).
25. Investments
The Group's investments consist wholly of the Rosbunker asset as
follows:
2012 2011
GBP'000 GBP'000
-------------------------- --------- ---------
Fair value of investments 22,481 -
-------------------------- --------- ---------
GBP'000
----------------------------------- --------
At 1 January 2012 -
Initial recognition of investment
at fair value (note 24) 21,119
Increase in fair value in 2012 1,362
----------------------------------- --------
Fair value 31 December 2012 22,481
----------------------------------- --------
A total amount of GBP4,163,000 has been recognised in the income
statement in 2012 from the increase in value of the investment on
initial recognition on 1 January 2012 and the increase in the fair
value of the investment during 2012.
As disclosed in note 24, the Directors have determined the most
appropriate accounting treatment for the 50% shareholding is to be
as an investment to be held at fair value from 1 January 2012. The
fair value gain on the investment from 1 January 2012 to 31
December 2012 has been recognised in the income statement. The fair
value of the investment at 1 January and 31 December 2012 has been
estimated based on the discounted value of expected future cash
flows that will be available to the Group from distributions.
The Directors are considering a number of options to resolve the
situation at Rosbunker, all of which are believed will provide cash
flow back to the Group by 1 April 2014. Therefore the fair value
has been arrived at on the assumption that cash flows will resume
to the Group by latest 1 April 2014 and on the basis of a 10%
discount rate, 5 years of cash flows plus a terminal value which
has been estimated at 6 years of cash flow which results in a
terminal value of GBP22.48 million.
The annual expected cash flows of Rosbunker start at GBP3.46
million in 2014 (discounted for 9 months cash flow) through to
GBP3.781 million in 2017 based upon the Group's 50% share of cash
flow, the current capacity of the terminal and the current sales
price per tonne that the terminal operates at.
A sensitivity analysis has been carried out on the fair value
figures to test their reasonableness. If cash receipts were delayed
by 6 months to 1 October 2014 and using a 12% discount rate, the
fair value drops to GBP19,198,000.
If cash receipts were being received by 1 October 2013 and using
an 8% discount rate, the fair value increases to GBP26,148,000.
The Directors are satisfied with the discount rate of 10% (being
the Group average) and the cash flows starting from 1 April 2014
which results in the fair value used of GBP22,481,000.
The following table illustrates the sensitivity analysis
performed;
Discount factor
8% 10% 12%
Cash flow starting date GBP'000 GBP'000 GBP'000
------------------------- -------- -------- --------
1 October 2013 26,148 24,621 23,138
1 April 2014 23,968 22,481 21,053
1 October 2014 22,024 20,577 19,198
------------------------- -------- -------- --------
Financial assets (the Group's investment in Rosbunker) measured
at fair value in the statement of financial position are valued
based on the level 3 measurement of the fair value hierarchy. This
grouping is determined based on the lowest level of significant
inputs used in fair value measurement, as follows:
- level 3 - inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
The hierarchy of the fair value measurement of the Group's
financial assets and financial liabilities are as follows:
Investment
GBP'000
-------------------------- -----------
Opening balance 21,119
Gain in income statement 1,362
-------------------------- -----------
Total 22,481
-------------------------- -----------
26. Related party disclosures
During the year the Group engaged with an independent third
party company to provide consultancy services to its overseas
operations in Denmark, Holland and Russia. These services are
considered to have been provided under normal commercial terms and
on an arms-length basis.
The Group's Chief Executive Officer's (Mr Escott) remuneration
for services as a director of the Group are invoiced through this
company as disclosed in note 8. In addition, Mr Escott was engaged
as a consultant by this company to provide services to them which
formed part of the amounts then invoiced to the Group. These
services were all provided under normal commercial terms and on an
arms-length basis with a value of GBP70,000 in the year to 31
December 2012. There were no amounts owing under this arrangement
at 31 December 2012.
27. Post balance sheet events
On 27 March 2013 the Company issued 4,500,000 new ordinary
shares to a strategic investor at an issue price of 19.65p per
share raising proceeds of GBP0.9m. The proceeds of the share issue
were used to strengthen the Group's balance sheet and to provide
additional working capital.
28. Principal subsidiaries, associates and investments
Principal activity Country of Percentage Percentage
incorporation equity interest equity interest
held by the held by the
Group at Group at
31 December 31 December
2012 % 2011 %
--------------------------------- ---------------------- -------------------- ----------------- -----------------
Baltic Petroleum Intermediate holding
Limited company UK 100 100
Baltic Terminals Intermediate holding
Limited company UK 100 100
Baltic Petroleum Intermediate holding
(E&P) Limited company UK 100 100
Caspian Finance Limited Finance company UK 100 100
Baltic Hydrocarbons
Limited Oil Services UK 100 100
Zauralneftegaz Limited Oil E&P UK 50 50
Tetoil Limited Oil Services UK 100 100
Tetoil Baltic Limited Oil Services UK 100 100
OOO Zauralneftegaz Oil E&P Russian Federation 50 50
OJSC Tetoil Oil Services Russian Federation 100 100
OJSC Tetoil Baltic Oil Services Russian Federation 100 100
OOO Polex Service Oil Services Russian Federation 50 50
Intermediate holding
Pazega Limited company Cyprus 100 100
OOO Baltic Top Oil Services Russian Federation 100 100
OOO Otelbiznesstroy Oil Services Russian Federation 100 100
Intermediate holding
Yuri Trading Limited company Cyprus 100 100
OOO Torgovy Dom Kaliningradneft Oil Services Russian Federation 65 65
Baltica Hydrocarbons Intermediate holding
Limited company Cyprus 100 100
Arblade Holdings Intermediate holding
Limited company Cyprus 100 100
Intermediate holding
OOO Agroprom (1) company Russian Federation 50 50
ZAO Rosbunker (1) Oil Services Russian Federation 50 50
Edgeview Ventures British Virgin
Limited (1) Finance company Islands 50 50
North Oil Trading
Limited (1) Oil Services Panama 50 50
North Oil Bunker British Virgin
Limited (1) Oil Services Islands 50 50
Petro Broker International
B.V Oil Services Netherlands 100 100
Haahr Tank-Lager
A/S Oil Services Denmark 100 100
Dan Balt Terminals Intermediate holding
Limited company UK 100 100
--------------------------------- ---------------------- -------------------- ----------------- -----------------
(1) These companies are treated as an investment as at 31
December 2012 (note 25).
The Company has operational control over Zauralneftegaz Limited
and OOO Zauralneftegaz by virtue of there being 50 A ordinary
shares and 50 B ordinary shares of GBP1 each. The A and B ordinary
shares of GBP1 rank pari passu other than the A ordinary shares
have an additional vote at general meeting thereby giving the
Company as shareholder of the A shares control of the company.
29. Capital commitments
At 31 December 2012, there were amounts contracted for but not
provided in the financial statements of GBP489,000 (2011:
GBPnil).
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FMGZVNMNGFZG
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