Report v1.2 · Web viewIndustrial Holding Bulgaria PLC is a joint stock company (PLC), registered...

INDUSTRIAL HOLDING BULGARIA PLC INTERIM MANAGEMENT REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

30 June 2017

INDUSTRIAL HOLDING BULGARIA PLCTable of Contents

General Information iConsolidated Income Statement 1Consolidated Statement of Comprehensive Income 2Consolidated Statement of Financial Position 3Consolidated Statement of Cash Flows 5Consolidated Statement of Changes in Equity 6Notes to the Consolidated Financial Statements1. Corporate information 92.1. Basis of preparation 102.2 Summary of significant accounting policies 115. Operating segments 296. Acquisition of non-controlling interests 307. Revenue 318. Other operating income 318а. Gain on sale of fixed assets 329. Change in stock of work-in-progress and finished products 3210. Self-constructed assets in progress 3213. Costs of personnel 3215. Finance income and finance costs 3316. Income tax 3417. Property, plant and equipment 3418. Intangible assets 3619. Assets classified as held for sale 3721. Investment property 3824. Inventories 3924а. Work in progress 3925. Trade and other receivables 3926. Cash and cash equivalents 4027. Share capital and reserves 4028. Earnings per share 4229. Interest-bearing loans and borrowings 4430. Financing 4831. Provisions 4933. Trade and other payables 5034. Financial instruments 5035. Related party disclosures 5436. Commitments and contingencies 6039. Events after the reporting date 61

INDUSTRIAL HOLDING BULGARIA PLCGeneral Information

Managing BoardDaneta Angelova ZhelevaBoyko Nikolov NoevBorislav Emilov GavrilovEmilian Emilov Abadjiev

Registered address and address of managementSofia 1606Krasno Selo area42 Damyan Gruev Street

Register and registration number 121631219

Supervisory BoardKonstantin Kuzmov ZografovDZH AD, represented by Elena Petkova KirchevaSnejana Ilieva Hristova

Audit Committee Maxim SirakovSnejana Hristova Boryana Dimova

AuditorErnst & Young Audit OODPolygraphia Office Centre47 A, Tsarigradsko shosе Blvd., fl.41124 SofiaBULGARIA

i

INDUSTRIAL HOLDING BULGARIA PLCCONSOLIDATED INCOME STATEMENTFOR THE PERIOD ENDED 31 JUNE 2017

BGN’000 Notes 30 June 2017 30 June 2016

Revenue 7 43,290 39,242Other operating income 8 2,300 1,288

Changes in stock of work in progress and finished goods 9 731 1,226Self-constructed assets in progress 10 59 850Costs of materials (12,142) (12,893)Costs of hired services (7,858) (9,946)Depreciation/amortisation expenses 17,18 (7,614) (7,146)Costs of personnel 13 (12,032) (12,074)Other operating expenses (1,310) (1,445)Operating profit / (loss) 5,424 (898)

Finance income 15 5 104Finance costs 15 (2,789) (3,312)Profit / (Loss) before taxes 2,640 (4,106)

Income tax expense 16 (516) (468)Profit / (Loss) for the year 2,124 (4,574)

Attributable to: Equity holders of the parent 1,981 (4,628) Non-controlling interests 143 54

2,124 (4,574)

Net earnings per shareBasic earnings per share attributable to equity holders of the parent (BGN) 28 0.026 (0.061)Diluted earnings per share attributable to equity holders of the parent (BGN) 28 0.025 -

The notes on pages 8 to 49 form an integral part of these consolidated financial statements. The consolidated financial statements were authorised for issue by resolution of the Management Board and the Supervisory Board dated 29 August 2017.

Daneta ZhelevaChief Executive Officer

Ivan RashkovPreparer

1

INDUSTRIAL HOLDING BULGARIA PLCCONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD ENDED 30 JUNE 2017

BGN’000 Notes 30 June 2017 30 June 2016

Profit / (Loss) for the year 2,124 (4,574)

Other comprehensive income / (loss)Other comprehensive income/ (loss) to be reclassified to profit or loss in subsequent periods - -Exchange differences on translation of financial statements of foreign operations (9,817) (2,216)Income tax effect - -

(7,693) (2,216)(7,693) (2,216)

Other comprehensive income to be reclassified to profit or loss in subsequent periods, net of taxes - -Other comprehensive income / (loss) not to be reclassified to profit or loss in subsequent periods - -

Other comprehensive income for the year, net of taxes (7,693) (2,216)

Total comprehensive income for the year, net of taxes (7,693) (6,790)

Attributable to: Equity holders of the parent (7,836) (6,844) Non-controlling interests 143 54

(7,693) (6,790)




2

INDUSTRIAL HOLDING BULGARIA PLCCONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2017

BGN’000 Notes30 June 2017

31 December 2016

AssetsNon – current assetsProperty, plant and equipment 17 370,421 391,317Intangible assets 18 4,450 5,088Investment properties 21 7,813 7,900Goodwill 18 9,130 9,130Deferred tax assets 16 10 10Total non-current assets 391,824 413,445

Current assetsInventories 24 16,918 17,057Trade and other receivables 25 8,438 5,535Income tax receivable 27 10Cash and cash equivalents 26 2,476 2,837Total current assets 27,859 25,439Assets classified as held for sale 19 8,063 8,216TOTAL ASSETS 427,746 447,100




3

INDUSTRIAL HOLDING BULGARIA PLCCONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2017(Continued)BGN’000 Notes 30 June 2017 31 December 2016

EquityShare capital 27 77,400 77,400Share premium 27 30,604 30,604Treasury shares redeemed 27 (709) (907)

Equity component of convertible bonds issued 27 - -Other reserves 27 90,894 90,831Translation reserve 27 18,295 28,112Retained earnings 56,765 54,794

273,249 280,834Non-controlling interests 5,584 5,664Total equity 278,833 286,498

LiabilitiesNon – current liabilitiesInterest-bearing loans and borrowings 29 3,667 6,246Debenture loan 29 - 49,976Trade and other payables 33 10,452 11,413Financing 30 2,394 2,458

Retirement benefit liability 655 706Deferred tax liabilities 16 9,218 9,106Total non-current liabilities 26,386 79,905

Current liabilitiesInterest-bearing loans and borrowings 29 48,764 56,054Debenture loan 29 50,547 568Trade and other payables 33 22,668 23,645Provisions 31 71 66Financing 30 185 215Income tax liability 292 149Total current liabilities 122,527 80,697Total liabilities 148,913 160,602TOTAL EQUITY AND LIABILITIES 427,746 447,100




4

INDUSTRIAL HOLDING BULGARIA PLCCONSOLIDATED CASH FLOW STATEMENT FOR THE PERIOD ENDED 30 JUNE 2017BGN’000 Notes 30 June

201730 June

2016

Operating activitiesReceipts from customers 42,573 43,784Payments to suppliers (20,318) (25,221)Personnel and social security payments (11,947) (12,114)Corporate income tax paid (264) (272)Exchange rate differences (80) (49)Other payments (1,067) (198)Net cash flows from operating activities, net 8,897 5,930

Investing activitiesProceeds from sale of property, plant and equipment 693 55Payments relating to self-constructed fixed assets (878) (1,572)Loans granted - (55)Proceeds from sale of shares and other receivables - 21Acquisition of additional shares of subsidiaries 6 (1,521) (1,611)Interest received from loans granted, deposits and current bank accounts - 4Proceeds from government grants 30 - 16Other proceeds (3) -Net cash flows (used in) / from investing activity (1,709) (3,142)

Financing activitySale of treasury shares 238 -Payment on redemption of securities 27 - (19)Interest-bearing loans and borrowings received 915 3,424Interest-bearing loans and borrowings repaid (6,067) (4,857)Dividends paid (86) (95)Interest, fees and commissions on loans paid (2,472) (2,369)Other payments (77) (66)Net cash flows used in financing activities, net (7,549) (3,982)

Net decrease in cash and cash equivalents (361) (1,194)Cash and cash equivalents at 1 January 26 2,837 3,839Cash and cash equivalents at 30 June 26 2,476 2,645




5

INDUSTRIAL HOLDING BULGARIA PLCINTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE PERIOD ENDED 30 JUNE 2017

Attributable to equity holders of the parent

BGN’000Share capital Share

premiumTreasury

shares redeemed

Additional and

statutory reserves

Equity component

Revaluation reserves

Translation reserve

Retained earnings

Total Non-controlling

interest

Total equity

At 1 January 2017 77,400 30,604 (907) 4,512 - 86,319 28,112 54,794 280,834 5,664 286,498Total comprehensive income for the year

Profit / (Loss) for the period - - - - - - - 1,981 1,981 143 2,124Other comprehensive income/ (loss) for the period (Note 27) - - - - - - (9,817) - (9,817) - (9,817)Total comprehensive income/ (loss) for the year - - - - - - (9,817) 1,981 (7,836) 143 (7,693)Transactions with shareholders recognised in equityTransfer form profit to reserves - - - 113 - - - (113) - - -Dividends paid - - - - - - - - - (197) (197)Acquisition of non-controlling interest (Note 6) - - - - - 20 - (7) 13 (26) (13)Sale of non-controlling interest - - - - - - - - - - -Treasury shares sold / (redeemed) - - 198 - - - - 40 238 - 238Other transfers - - - - - - - - - - -Total transactions with shareholders - - 198 113 - 20 - (80) 251 (223) 28Transfer of revaluation reserve on assets sold and transfer to held-for-sale assets to retained earnings - - - - - (70) - 70 - - -At 30 June 2017 77,400 30,604 (709) 4,625 - 86,269 18,295 56,765 273,249 5,584 278,833




Attributable to equity holders of the parent

6

INDUSTRIAL HOLDING BULGARIA PLCINTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE PERIOD ENDED 30 JUNE 2017

BGN’000Share capital Share

premiumTreasury

shares redeemed

Additional and

statutory reserves

Equity component

Revaluation reserves

Translation reserve

Retained earnings

Total Non-controlling

interest

Total equity

At 1 January 2016 77,400 30,604 (873) 4,097 2,507 86,367 23,285 62,724 286,111 7,119 293,230Total comprehensive income for the year

(Loss)/ Profit for the period - - - - - - - (4,628) (4,628) 54 (4,574)Other comprehensive income/ (loss) for the period (Note 27) - - - - - - (2,216) - (2,216) - (2,216)Total comprehensive income/ (loss) for the year - - - - - - (2,216) (4,628) (6,844) 54 (6,790)Transactions with shareholders recognised in equityTransfer form profit to reserves - - - 436 - - - (436) - - -Dividends paid - - - - - - - - - (155) (155)Acquisition of non-controlling interest (Note 6) - - - 16 - 228 - 27 271 (333) (62)Sale of non-controlling interest - - - - - - - - - - -Treasury shares redeemed - - (19) - - - - - (19) - (19)Other transfers - - - - (2,507) - - - (2,507) - (2,507)Total transactions with shareholders - - (19) 452 (2,507) 228 - (409) (2,255) (488) (2,743)Transfer of revaluation reserve on assets sold and transfer to held-for-sale assets to retained earnings - - - - - (4) - 4 - - -At 30 June 2016 77,400 30,604 (892) 4,549 - 86,591 21,069 57,691 277,012 6,685 283,697




7

INDUSTRIAL HOLDING BULGARIA PLCNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30 JUNE 2017

1. Corporate information

The consolidated financial statements of Industrial Holding Bulgaria PLC (the Company or IHB PLC) and its subsidiaries (the Group) for the period ended 30 June 2017 were authorised for issue by resolution of the Management Board and the Supervisory Board dated 29 August 2017.

Industrial Holding Bulgaria PLC is a joint stock company (PLC), registered in the Republic of Bulgaria under Company File N 13081 / 1996 with headquarters and registered office at 42 Damyan Gruev Str., Sofia, Bulgaria. The financial year of the Company ends on 31 December.

Initially, the Company has been established as a Privatisation Fund according to the Privatisation Funds Act under the company name Privatisation Fund Bulgaria PLC.

The General Meeting of Shareholders held on 27 February 1998 passed a decision to reorganize the activities of Privatisation Fund Bulgaria PLC into a holding co1mpany and to change its name from Privatisation Fund Bulgaria PLC to Industrial Holding Bulgaria PLC. The Company’s registered capital amounted to BGN 77,400,634 at 30 June 2017. The company has a two-tier system of governance, comprising Supervisory Board and Management Board.

As of 30 June 2017 Industrial Holding Bulgaria PLC had 10 direct subsidiaries (2016: 10), no associates (2016: Nil), and 12 indirect subsidiaries (2016: 12 indirect subsidiaries), collectively referred to as “the Group”. For further details, see Note 35.

The scope of activity of the Group includes production and trading activities in the area of heavy machinery, shipbuilding, ship repair and transportation, real estate transactions, port services, support services from/to vessels and road motor vehicles, maintenance and repair, and other services.

The activity of no one of the Group companies is not limited by time or other condition of termination.

The Company is registered with the Register kept by the Registry Agency under unified identification code (UIC) 121631219. It is registered pursuant to the Value Added Tax Act. Industrial Holding Bulgaria and some of its subsidiaries (IHB Eclectic PLC) are listed on the Bulgarian Stock Exchange, Sofia. In May 2017 ZMM Bulgaria Holding AD, a subsidiary of Industrial Holding Bulgaria PLC, sent a public notification to the other shareholders of the public company IHB Electric AD, Financial Supervision Commission and Bulgarian Stock Exchange – Sofia AD, for its intention to register a tender offer under article 149а, paragraph 1 of the Public Offering of Securities Act (POSA) for the acquisition of the shares of the other shareholders of IHB Electric AD.

The Company’s management comprises its Management Board. Those charged with governance are presented by the Audit Committee and the Supervisory Board of the Company.

8


2.1. Basis of preparation

The consolidated financial statements have been prepared on a historical cost basis, with the exception of land, buildings and certain specialised equipment that are measured at revalued amount less accumulated depreciation, investment properties that are measured at fair value, and derivative financial instruments that are measured at fair value.

The consolidated financial statements have been presented in Bulgarian lev (BGN) and all figures have been rounded to the nearest thousand Bulgarian lev (BGN’000), unless stated otherwise.

Statement of compliance

The consolidated financial statements of Industrial Holding Bulgaria PLC have been prepared in accordance with International Financial Reporting Standards as endorsed in the European Union (IFRS, endorsed by EU). Reporting framework "IFRS as adopted by the EU" is essentially the defined national basis of accounting "IAS, as adopted by the EU", specified in the Accountancy Act and defined in paragraph 8 of its Additional provisions.

These interim financial statements do not contain all information and data to be disclosed in the annual financial statements and shall be read together with the annual consolidated financial statements of the Group as at 31 December 2016, published on 2 May 2017.

Basis of consolidation

The consolidated financial statements comprise the financial statements of Industrial Holding Bulgaria PLC and its subsidiaries for the period ended as at 30 June 2017.

Subsidiaries are fully consolidated from the date of their acquisition, being the date on which Industrial Holding Bulgaria PLC obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as that of the parent company, using consistent accounting policies. All intra-group balances, income and expenses, unrealised gains and losses, and dividends resulting from intra-group transactions are eliminated.

The profit and loss, as well as each component of other comprehensive income, is allocated between the equity holders of the parent and the non-controlling interest in accordance with the respective effective equity interests. Such allocation is made even in case that the profits and losses attributable to the non-controlling interest result in a deficit balance at the reporting date.

Change in ownership of a subsidiary that do not result in change of control, is presented as an equity transaction. If Industrial Holding Bulgaria PLC losses its control over a subsidiary, it shall:

- Derecognise assets (including goodwill) and liabilities of the subsidiary;- Derecognise the carrying amount of non-controlling interest ;- Derecognise the cumulative differences from converting foreign currency, reported in equity;- Recognise the fair value of the consideration received;- Acknowledge the investment retained at fair value;- Acknowledge the outcome of the transaction on loss of control in the profit or loss for the period;- Reclassify the share of the parent company of the components previously recognised in other comprehensive

income to profit or loss.9


Industrial Holding Bulgaria PLC has prepared and presented separate financial statements for the period ended 30 June 2017, in which the investments in subsidiaries, associates and joint ventures have been stated at acquisition cost, less any accumulated impairment losses. The separate financial statements of Industrial Holding Bulgaria PLC were approved for issue by resolution of the Managing Board and the Supervisory Board, and published on 28 July 2017.

Going concern

The consolidated financial statements of the Group have been prepared on a going concern basis.

2.2 Summary of significant accounting policies

а) Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The cost of acquisition is measured as the aggregate of the consideration transferred, measured at fair value as of the acquisition date, and the amount of any non-controlling interest in the acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are taken to profit or loss for the period.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for the purposes of their appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

If a business combination is achieved in stages, the fair value at the acquisition date of the acquirer’s previously held equity interest in the acquiree is remeasured, through profit and loss, to the fair value as at the acquisition date.

Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is classified as an asset or a liability is recognised in accordance with IAS 39 Financial Instruments: Recognition and Measurement, in profit or loss. If the contingent consideration is classified as equity instrument, it should not be remeasured until it is finally settled within equity.

Goodwill is initially measured at cost, being the excess of the consideration paid over the net identifiable assets acquired and liabilities assumed by the Group. If this consideration is lower than the fair value of the subsidiary’s net assets, the difference is recognised in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

Where goodwill has been allocated to cash-generating units and part of the operation within those units is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining

10


the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

If the initial accounting for of a business combination is not completed by the end of the reporting period in which the combination occurs because the fair values to be set for the identifiable assets acquired and liabilities assumed of the acquiree or the amount of the consideration transferred, or the value of non-controlling participation can be determined only provisionally, the Group accounts for the combination using those provisional values. The Group recognises adjustments to those provisional values as a result of the finalisation of the initial reporting within twelve months from the date of acquisition and retrospectively from that date.

b) Foreign currency translation

These financial statements are presented in Bulgarian lev (BGN), which is also the parent company’s functional and presentation currency. Each Group entity determines its own functional currency and the items included in the financial statements of each entity are measured using that functional currency.

i. Transactions and balances

Transactions in foreign currencies are initially recorded at the functional currency rates at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the closing exchange rate published by Bulgarian National Bank, effective for the reporting date. Differences arising on settlement or translation of monetary items are recognised in the income statement with the exception of monetary items that are designated as part of an effective hedge of a net investment of a foreign operation. These are recognised in other comprehensive income until the net investment is disposed of, at which time they are reclassified to the income statement. Any tax effects attributable to exchange differences on those monetary items in foreign currencies are also recognised in equity.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the initial transaction (acquisition). Non-monetary assets and liabilities measured at fair value in a foreign currency are translated into the functional currency using the average exchange rate. Any exchange differences arising on this translation are recognised in the income statement with the exception of differences arising on translating into the functional currency of available-for-sale equity instruments or items that meet the criteria for recognition as an effective cash flow hedge, which are recognised in other comprehensive income.

ii. Group companies

Assets and liabilities of foreign operations, including goodwill and fair value adjustments, are translated into Bulgarian lev at the exchange rate on the reporting date and their income statements are translated at the exchange rates on the date of the transactions. Any exchange differences arising on this conversion are recognised in other comprehensive income. Upon disposal of a foreign operation, the component of other comprehensive income relating to that foreign operation is reclassified to the income statement.

c) Revenue recognition

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 regardless of when the payment is being made. Revenue is measured at the fair value of the

11


consideration received or due based on the agreed payment terms, excluding discounts, rebates, and other sales taxes or customs duties. The Group analyses its selling arrangements against specific criteria to determine whether it acts as a principal or as an agent. It has concluded that it acts as principal in some arrangements and as agent in others. The following specific recognition criteria must also be met before revenue is recognised:

Sales of finished products, goods and materialsRevenue from sales of finished products, goods and materials is recognised when the significant risks and rewards of ownership have been transferred to the buyer, usually on their dispatch.

Rendering of servicesRevenue from rendering of services is recognised by reference to the stage of completion. Stage of completion is measured by reference to expenses incurred to date as a percentage of total estimated expenses for rendering of the service. Where the transaction (contract) outcome cannot be estimated reliably, revenue is recognised only to the extent that the expenses incurred are eligible to be recovered.

Revenue from ship repair services is recognised by reference to the stage of completion of the transaction, which may be either the partial acceptance of the work done or the full completion of the ship repair service.

The sections are constructed primarily by using materials provided by the contracting party and therefore, revenue is recognised as revenue from rendering of services. The stage of completion is evidenced by drawing up acceptance protocols, signed by the contracting party, for periodic acceptance of the work performed under each of the contracts.

Revenue from voyage charters is recognised by reference to the stage of completion, measured based on the passed voyage days as compared to the total voyage days (on the basis of loading-unloading operations). Therefore, revenue is recognised based on the estimated duration of each voyage from the first to the last port of unloading.

Revenue from time charters is recognised in the income statement on a straight line basis over the term of the charter contract. Any additional payments received under charter contracts are recognised as an integral part of the total time charter income for the term of the charter.

Revenue from port activitiesRevenue from warehouse services is recognised on a straight line basis over the contract term. Revenue from cargo processing is recognised by reference to the stage of completion as at the reporting date. The stage of completion is measured based on the actual work done under the contract as at the reporting date.

Rental incomeRental income is recognised in the income statement on a straight line basis for the duration of the rental agreement. Any additional payments received are recognised as an integral part of the total rental income for the period of the rent.

Interest incomeInterest income is recognised using the effective interest method that is the rate that discounts exactly the estimated future cash flows over the estimated useful life of the financial instrument, or a shorter period, where appropriate, to the carrying amount of the financial asset. Interest income is included in the finance income in the income statement.

Dividend incomeDividend income is recognised when the right to receive them is established.

12


d) Taxes

Current income taxCurrent income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantially enacted by the reporting date in the countries in which the Group carries out its activities.

13


Current income tax is recognised directly in the equity (and not in the income statement) where the tax relates to items that have been recognised directly in the equity. Management analyses the individual items of the tax return for which the applicable tax provisions are subject to interpretation and recognises provisions where appropriate.

Deferred income tax

Deferred income tax is provided using the liability method on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences: except where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in

a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in jointly controlled entities, where the timing of the reversal of the temporary differences can be controlled by the Group and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised:

except where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in jointly controlled entities, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred income tax assets is reviewed by the Group at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity. Deferred income tax assets and deferred income tax liabilities are offset by the Group only if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.

Value added tax (“VAT”)Revenue, expenses and assets are recognised net of the amount of value added tax (VAT) except:

where the VAT incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the VAT is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

14


receivables and payables that are stated with the amount of VAT included.

The net amount of VAT recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

e) Employee benefits

Short-term employee benefits include salaries, interim and annual bonuses, social security contributions and paid annual leave of current employees expected to be settled wholly within 12 months after the end of the reporting period. They are recognised as an employee benefit expense in the profit or loss or included in the cost of an asset when service is rendered to the Group company and measured at the undiscounted amount of the expected cost of the benefit.

The Group companies operate a defined benefit plan arising from the requirement of the Bulgarian labour legislation to pay two or six gross monthly salaries to its employees upon retirement, depending on the length of their service. These retirement benefits are unfunded. The cost of providing benefits under the retirement benefit plan is determined by the Group using the projected unit credit method. Re-measurements, comprising of actuarial gains and losses, are recognised immediately in the statement of financial position with a corresponding debit or credit to retained earnings through other comprehensive income in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods. Past service costs are recognised in profit or loss on the earlier of:

The date of the plan amendment or curtailment, and The date the restructuring-related costs are recognised.

Interest expense is calculated by applying the discount rate to the defined benefit liability. The changes in the latter (service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements) are recognised in the consolidated income statement, within “Employee benefit expense”.

15


f) Financial instruments - initial recognition and subsequent measurement

Financial assets

Initial recognition

Financial assets within the scope of IAS 39 Financial Instruments: Recognition and Measurement are classified as either financial assets at fair value through profit or loss, or loans and receivables, or held to maturity investments, or available for sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial assets upon initial recognition.Financial assets are recognised initially at fair value plus, in the case of investments not carried at fair value through profit or loss, directly attributable transaction costs. Purchases or sales of financial assets that require the transfer of the asset over a period of time established normally by regulation or practice in the respective market (regular way purchases) are recognised on the trading (the date of the transaction), i.e. the date when the Group has committed to buy or sell the asset.

Subsequent measurementThe subsequent measurement of the financial assets depends on their classification as follows:

Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate method (EIR), less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fee or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the income statement. Impairment losses are recognised in the consolidated income statement in other expenses.

Investments available for sale Available-for-sale financial investments include equity securities that are designated as available-for-sale or are not classified in any of the other categories. The Group has no available for sale financial investments – equity investments.

DerecognitionA financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when:

the contractual rights to receive cash flows from the asset have expired; the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the

received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its contractual rights to receive cash flows from a financial asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the financial asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

16


Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Impairment of financial assets

The Group assesses, at each reporting date, whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy/announce over-indebtedness or other financial reorganisation and when observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Financial assets carried at amortised costFor financial assets carried at amortised cost the Group first assesses individually whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has 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 (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial assets original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate.

17


The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement. Interest income is recognised as part of finance income in the income statement. Loans, together with the associated allowance, are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is recognised in the consolidated income statement.

Investments available for sale and investments in associatesIf there is objective evidence that an investment in unquoted equity instruments not measured at fair value, as the latter cannot be properly measured, is impaired, the amount of the impairment loss is measured as the difference between the financial instrument’s book value and the value expected to be recovered from it, if it can be measured reliably. An impairment testing of the associates is carried out in accordance with IAS 36. Impairment losses are recognised in the income statement and are not reversed.

Financial liabilities

Initial recognition and measurementFinancial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial liabilities at initial recognition.

Financial liabilities are recognised initially at fair value and in the case of loans and borrowings, plus directly attributable transaction costs.

The Group’s financial liabilities include trade and other payables, interest bearing loans and borrowings, and debenture loans.

Subsequent measurementThe measurement of financial liabilities depends on their classification as follows:

Loans and borrowingsSubsequent to initial recognition, loans and borrowings are measured at amortised cost using the EIR method. Gains and losses relating to loans and borrowings are recognised in the income statement when the liabilities are derecognised, as well as through the amortisation process.

Amortised cost is calculated by taking into account any discounts or premiums on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance cost in the income statement.

18


Derecognition A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Gains on derecognition of financial liabilities are recognised as other operating income in the consolidated income statement.

When 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, and the difference in the respective carrying amounts is recognised in the consolidated income statement.

g) Offsetting of financial instrumentsFinancial assets and financial liabilities are offset and the net amount reported in the statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and the Group intends to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

h) Fair value measurementThe Group reports its financial instruments, such as, derivatives, as well as non-financial assets, such as investment properties and land, buildings and specialised equipment, at fair value at each reporting date. The Group does not report available-for-sale financial assets at fair value.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

In the principal market for the asset or liability, or In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible to by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement

is directly or indirectly observable Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement

is unobservable.

19


For assets and liabilities that are recognised at fair value in the financial statements on a recurring basis, the Group determines whether transfer(s) have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

The Group’s management sets the policies and procedures to apply to both the regular fair value measurements, such as those of land, buildings and specialised equipment and investment property, and to ad hoc fair value measurements, such as those of assets held for sale/distribution to owners.

External independent valuers are involved usually for valuation of significant assets, such as land, buildings and specialised equipment and investment property. Involvement of valuation experts is decided upon annually by the Group’s management.

At the end of each financial year, management analyses the movements in the values of assets and liabilities which are required to be re-measured or re-assessed as per the Group’s accounting policies. For this analysis, the major inputs applied in the latest valuation are verified by agreeing the information in the valuation computation to contracts and other relevant documents.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks and the level of the fair value hierarchy as explained above.

i) Share capital

The share capital is presented at the par value of shares issued and paid. Any proceeds from shares issued over their nominal value are stated as issue premium. Costs directly attributable to the issue of ordinary shares are recognised in decrease of equity, net of any tax effects.

j) Cash dividends and non-cash distributions to equity owners A liability to make cash or non-cash distributions to equity holders is recognised when the distribution is authorised and is no longer at the discretion of the Group. A corresponding amount is recognised directly in equity.

Non-cash distributions are measured at the fair value of the assets to be distributed with fair value re-measurement recognised directly in equity.

Upon distribution of non-cash assets, any difference between the carrying amount of the liability and the carrying amount of the assets distributed is recognised in the profit or loss for the period.

k) Redemption (buy back) of treasury shares

Own equity instruments that are redeemed (redeemed treasury shares) are recognised at the fair value of the consideration transferred and are deducted from equity. The Group recognises neither gain nor loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments. Any difference between the nominal amount and the fair value of the consideration transferred, in the event of cancellation of redeemed shares, is recognised as decrease/increase of share premium. No dividends are allocated to redeemed voting shares.

l) Convertible bonds

Convertible bonds are separated into liability and equity components based on the terms of the contract. 20


On issuance of convertible bonds, the fair value of the liability component is determined using the fair value of an equivalent non-convertible bond. This amount is classified as a financial liability measured at amortised cost (net of any transaction costs) until it is extinguished on conversion or redemption.

The remaining portion of the proceeds is allocated to the conversion option that is recognised as equity instrument. The conversion option recognised as equity instrument is not remeasured in subsequent years.

Transaction costs are apportioned between the liability and equity components of the convertible bonds based on the allocation of the proceeds when the instrument is recognised initially.

On conversion of convertible bonds at maturity, the Group derecognises the liability component and recognises it in the equity. The original equity component continues to be reported as equity (although it can be transferred into another equity component). There is no gain or loss on conversion at maturity.

With respect to determining and reporting the equity component of the Group’s debenture loan as at the reporting date, further details are presented in Note 29a.

m) Non-current assets held for sale and discontinued operations

The Group classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale rather than through continuing use. They are measured at the lower of their carrying amount and fair value less costs to sell.

The criteria for non-current assets and disposal group classification is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Actions required to complete the actual sale should indicate that it is unlikely that significant changes to the sale will be made or that the sale with be withdrawn. Management must be committed to the sale expected within one year from the date of the classification.

Property, plant and equipment or intangible assets are not depreciated or amortised once classified as held for sale.

Assets and liabilities classified as held for sale are presented separately as current items in the statement of financial position.A disposal group qualifies as discontinued operation if it is:

A component of the Company that is a CGU or a group of CGUsClassified as held for sale or distribution or already disposed in such a way, orA major line of business or major geographical area

Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the statement of comprehensive income.

n) Property, plant and equipment

21


Property, plant and equipment are stated at cost or at revalued amount (see below), net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing part of the property, plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts of property, plant and equipment are required to be replaced at intervals, the Group recognises such parts as individual assets with specific useful lives and depreciates them accordingly. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and/or equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in the profit or loss as incurred.

Subsequent to initial recognition, land, buildings and certain specialised equipment are measured at fair value less accumulated depreciation on buildings and impairment losses recognised after the date of the revaluation. Revaluations are performed with sufficient frequency (usually at 5-year intervals) to ensure that the fair value of a revalued asset does not differ materially from its carrying amount. When their fair value is significantly changed at shorter time intervals, revaluation shall be performed more frequently. The last revaluation of land, buildings and special equipment was carried out by independent appraisers as at 31 December 2013, except for the revaluation of land, buildings and special equipment of Odessos PBM AD, which was carried out as at 31 December 2014 and the revaluation of land and buildings of IHB Electric AD – as at 31 December 2016.

Motor vehicles and other fixed assets, including the ships and fixed tangible assets under construction, are measured in the financial statements at acquisition cost, less accumulated depreciation and impairment losses.

The increase in the asset’s carrying amount as a result of revaluation (revaluation surplus) is reported as revaluation reserve in other comprehensive income. However, to the extent that it reverses a revaluation deficit of the same asset previously recognised as an expense in the income statement, the revaluation surplus is recognised in in the income statement as well. The decrease in the asset’s carrying amount as a result of revaluation (revaluation deficit) is recognised as an expense in the income statement, except to the extent that it offsets an existing revaluation reserve for the same asset. Any depreciation accumulated as at the date of the revaluation, is derecognised against a decrease of the asset’s book value. The so-calculated deemed cost of the asset is adjusted to the asset’s fair value. On asset derecognition, the corresponding revaluation reserve is transferred to accumulated profits and losses.

The so-calculated deemed cost of the asset is adjusted to the asset’s fair value. On asset derecognition, the corresponding revaluation reserve is transferred to accumulated profits and losses.

Self-constructed assets The cost of self-constructed assets includes the cost of materials, direct labour and the appropriate proportion of indirect production overheads; costs directly attributable to bringing the asset to a working condition for its intended use; initial estimate of the costs of dismantling and removing the assets and restoring the site on which they are located, and capitalized interest expenses.

Depreciation is calculated on a straight-line basis over the useful life of the assets, which are defined as follows:

Buildings 7 – 50 yearsSpecialised equipment 5 – 50 yearsPlant and equipment 4 – 50 yearsMotor vehicles (including ships) 2 – 30 yearsShip repairing 2 – 5 yearsFixtures and fittings 5 – 15 years

22


An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the consolidated income statement for the period when the asset is derecognised.

The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.

23


o) Investment property

Investment properties are measured initially at cost, including transaction costs. Costs of replacement of parts of investment properties are stated at carrying amount when incurred, if they meet the recognition criteria; costs of current maintenance of investment properties are excluded from the carrying amount.

Subsequent to initial recognition, investment properties are measured at fair value, which reflects the market conditions at the reporting date. Gains or losses arising from changes in the fair value of investment properties are recognised in the consolidated income statement in the period in which they arise.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property is included in the income statement in the period in which the property is derecognised.

Transfers are made to or from investment property only when there is a change in use of the property. When an investment property is transferred to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. When an owner-occupied property becomes an investment property, the Group accounts for such property and equipment in accordance with its accounting policies for property, plant and equipment up to the date of change in use of the property.

p) LeaseThe determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date: whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset.

The Group as a lesseeFinance leases that transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised directly in the consolidated income statement.

A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

Operating lease payments are recognised as an expense in the income statement for the period on a straight-line basis over the lease term.

The Group as a lessor Leases, in which the Group does not transfer substantially all the risks and benefits of ownership of an asset, are classified as operating leases. Initial direct costs incurred by the Group in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised as an expense over the lease term on the same basis as the lease income. Contingent rents are recognised as revenue in the period in which they are earned.

q) Borrowings costs

24


Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

r) Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses.

The useful lives of intangible assets are assessed by the Group as either finite or indefinite.

Intangible assets with finite lives are amortised over their useful lives and tested for impairment when there are indications that their value is impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at each financial year. Changes in the expected useful life or pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates.

Intangible assets with finite useful lives are amortized on a straight line basis estimated useful lives as follows:

Patents, licenses and trademarks 2 – 20 yearsSoftware 2 – 10 yearsLeasehold improvements 14.7 years

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the consolidated income statement for the period when the asset is derecognised.

25


s) Inventories

Inventories are valued at the lower of cost and net realisable value.

Costs, incurred in bringing each inventory to its present location and condition, are accounted for as follows:

Materials – purchase cost on a weighted average cost basisFinished goods and work in progress

– cost of direct materials and labour, general overheads, provisional fixed costs, distributed based on the allocation of the direct labour cost and the quantity of finished products.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

t) Impairment of non-financial assetsThe Group assesses at each reporting date whether there are indications that an asset may be impaired. If any such indication exists, or when an annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs to sell and its value in use. It is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

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. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, or other available information on the fair value of an asset or cash-generating unit.

Impairment calculations are based on detailed budgets and forecast calculations, which are prepared separately for each CGU to which the individual assets are allocated. These budgets and forecast calculations usually cover a period of five years. For longer periods is calculated index for long-term growth and it is applied after the fifth year of the future cash flows.

Impairment losses are recognised as other expenses in the consolidated income statement or as a separate item, if material, with the exception of impairment losses on assets that were revalued in prior periods and the revaluation was recognised in other comprehensive income. In this case, the impairment loss is also recognised in other comprehensive income to the extent of previously recognised revaluation of the asset.

26


The Group assesses whether there is any indication that an impairment loss of an asset other than goodwill recognised in prior periods may no longer exist or may have decreased. If such indication exists, the Group estimates the recoverable amount of the asset or the cash-generating unit. An impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal of an impairment loss is limited so that the carrying amount of the asset does not exceed its recoverable amount nor exceed the carrying amount (net of depreciation ) that would have been determined, had no impairment loss been recognised for the asset in prior years. Such reversal of an impairment loss is recognised in the consolidated income statement, unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.

The Group applies the following criteria in testing for impairment of specific assets:

Goodwill The Group carries out an impairment testing of goodwill annually or more frequently when events or changes in circumstances indicate that it might be impaired.

Goodwill is tested for impairment and the recoverable amount of the cash-generating units to which the goodwill relates is assessed. Where the recoverable amount of the cash-generating units is less than their carrying amount an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods.

u) Cash and cash equivalentsCash and cash equivalents in the statement of financial position comprise cash on hand and in bank accounts, and short-term deposits with an original maturity of three months or less.

For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above.

v) Provisions

General Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement, net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as finance costs.

27


Warranty provisionWarranty provisions are recognised when the product is sold or the service is provided. Assumptions used to calculate the provision for warranties are based on historical experience about warranty claims raised, taking into account the probability of such costs in the future.

Onerous contractsA provision for onerous contracts is recognised when the expected economic benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision for onerous contracts is established, the Group recognises all impairment losses on the assets associated with that contract.

w) Earnings per shareBasic earnings per share amounts are calculated by dividing the net profit for the year attributable to the holders of ordinary shares of the parent by the weighted average number of the ordinary shares outstanding during the period.

Diluted earnings per share are calculated by dividing the net profit for the year accruing to the equity owners of the parent company (after adjustments for interest on convertible bonds) by the weighted average number of the ordinary shares for the year increased by the weighted average number ordinary shares that would be issued on conversion of all dilutive potential convertible bonds.

x) Government grants (deferred financing)

Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the costs, which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset.

5. Operating segmentsThe Group has the following operating segments:

Maritime transportation: ship management, commercial maritime transportation, the related production, technical, logistics and intermediary activities, ship brokerage and ship agency activities.

Port activity: provision of port services and auxiliary activities from / to ships and road motor vehicles, unloading and uploading of containers, warehousing, docker, freight and cargo services, transportation and shipment, utility services, waste management, rent of elevating machines and other.

Machine building: Manufacture and sale of metal-cutting, metal-processing and other machines and components for the machine-building industry; manufacture, repairs and sale of electrical machines; and metalworking.

Shipbuilding and ship repairing: Manufacture and repairing of ships, finishing works, reconstruction of all kinds of vessels and related services. The efforts are devoted to construction of ship components; conversion and manufacture of metal constructions for the needs of ship-building operations; design and automation of the plant engineering and technological activities, and retrofitting the equipment in compliance with the new requirements of IMO.

Other operations: Advisory services, real estate transactions, certification and classification, attestation and technical supervision on ships, ship exploitation, sale of goods, and other activities not forbidden by law.

28


6. Acquisition of non-controlling interests

Acquisition of subsidiaries in 2017 and 2016 During the period January 2017 – June 2017, as also in the period January 2016 – June 2016, the Group neither acquired nor incorporated new companies.In the first six months of 2017 the Group paid BGN 1,508 thousand for the acquisition of additional shares of Odessos PBM AD (In the first six months of 2016: BGN 1,549 thousand for the acquisition of additional shares of Odessos PBM AD).

Acquisition of additional shares of IHB Electric in the first six months of 2017 In the first six months of 2017, the Group, through ZMM Bulgaria Holding AD, acquired additional share of 0.16% of the capital of IHB Electric AD, representing 1,972 ordinary voting shares with par value of BGN each, for the amount of BGN 13 thousand. Thus, the Group’s share reached 93.96% of the capital of IHB Electric AD.

In the first six months of 2017, the treasury shares of IHB Electric AD redeemed comprised 9,241 ordinary shares (2016: BGN 9,241 ordinary shares). As a result of the buy back, the Group’s share of the voting rights at the GMS of IHB Electric AD was increased by 0.76% .

The following table shows the acquired additional shares of IHB Electric AD:

BGN’000Agreed amount to be paid in cash 13Transfer to revaluation reserve 20Transfer to additional and statutory reserves -Carrying amount of the additional shares of IHB Electric AD (26)

Difference recognized in retained earnings 7

29


Acquisition of additional shares of IHB Electric in the first six months of 2016

In the first quarter of 2016 the Group acquired additional share of 2.13% of the capital of IHB Electric AD, representing 25,860 ordinary voting shares with par value of BGN each, for the amount of BGN 62 thousand. At 30 June the amount was paid in full. Thus, the Group’s share reached 87.31% of the capital of IHB Electric AD.

The following table shows the acquired additional share of the capital of IHB Electric AD:

BGN’000

Cash consideration to be paid to non-controlling interest 62

Transfer to revaluation reserve 228

Transfer to additional statutory reserves 16

Carrying amount of the additional share of IHB Electric AD (333)

Difference recognised in retained earnings (27)

7. RevenueBGN’000 30 June

201730 June

2016

Sale of services 18,467 14,059 Including chartering services 16,656 11,891Sale of products 14,659 13,878Ship repairing 5,724 2,524Port activity 4,284 4,334Construction of sections for ships - 4,195Sale of goods and materials 156 252

43,290 39,242

8. Other operating income BGN’000 30 June

201730 June

2016

Rental income 1,058 1,014Income from financing (Note 30) 94 90Gain on sale of fixed assets (Note 8a) 793 37Other income 355 147

2,300 1,288

30


8а. Gain on sale of fixed assetsBGN’000 Note 30 June

201730 June

2016

Gain on sale of fixed assets 1035 37Carrying amount of assets sold (242) -

8 793 37

9. Change in stock of work-in-progress and finished products

BGN’000 30 June 2017

30 June 2016

ZMM Sliven AD 1,299 571Bulyard Shipping Industry AD 390 106IHB Metal Castings AD (26) 48ZMM Nova Zagora AD (22) 64IHB Electric AD (921) 421KRZ Port Bourgas 11IHB Shipdesign AD 16

731 1,226

10. Self-constructed assets in progress

BGN’000 30 June 2017

30 June 2016

Odessos PBM AD 31 4KRZ Port Bourgas AD 23 9Bulyard Shipping Industry AD 5 837

59 850

13. Costs of personnel

BGN’000 30 June 2017

30 June 2016

Salaries (10,279) (10,325)Social security contributions (1,753) (1,749)

(12,032) (12,074)

The average number of employees of the Group for the period January 2017 - June 2017 is 1,083 employees (January 2016 - June 2016: 1,227 employees).

15. Finance income and finance costs

31


BGN’000 30 June 2017

30 June 2016

Finance incomeInterest income 4 6Other finance income 1 4Income from valuation at fair value of forward contracts - 90Gain on sale of available-for-sale investments - 4

5 104

Finance costsInterest expenses (2,504) (2,553)Foreign currency losses, net (187) (607)Other financial costs (98) (146)Revaluation of cash flow hedge - (6)

(2,789) (3,312)

Interest expenses for the period January 2017 - June 2017 originate primarily from cash loans from banks and non-financial institutions amounting to BGN 1,167 thousand (for the period January 2016 - June 2016 amounting to BGN 1,003 thousand), interest on debenture loan amounting to BGN 1,250 thousand (for the period January 2016 - June 2016 amounting to BGN 1,252 thousand), interest on deferred payments to suppliers relating to the purchase of shares and other amounting to BGN 85 thousand (for the period January 2016 - June 2016 amounting to BGN 249 thousand).

Exchange rate differences are due primarily to the revaluation of bank loans denominated in Japanese Yen, used by Group companies, as also to the USD liabilities on deferred payment of shares acquired in Odessos PBM AD and Bulport Logistics AD.

32


16. Income taxThe main components of income tax expense for the periods ended 30 June 2017 and 30 June 2016 include:

Consolidated income statement30 June

201730 June

2016

BGN’000Current income tax charge (394) (444)

Deferred tax relating to origination and reversal of temporary differences (122) (24)

Income tax expense recognised in the consolidated income statement (516) (468)

17. Property, plant and equipment

BGN’000

Land and buildings

Plant and equipment

Other non-current assets

Ships FTAsin progress

Total

At 1 January 2016 151,885 70,014 8,411 242,113 1,281 473,704

Additions - 990 64 - 4,882 5,936Impairment in decrease of revaluation reserve, recognized in other comprehensive income

(891) - - - - (891)

Impairment in decrease of profit or loss (476) - - - - (476)

Disposals (188) (1,829) (365) - - (2,382)

Transfers 258 2,532 496 1,595 (4,881) -

Transfer from materials - 110 56 - - 166

Transfer to investment property (Note 21) (98) - - - (310) (408)

Transfer to non-current assets held for sale (6,063) (815) (3) - - (6,881)

Derecognised depreciation of revalued FTAs (411) - - - - (411)Derecognised depreciation due to transfer of non-current assets held for sale

- (2,391) (4) - - (2,395)

Effect of currency translation - 7 - 7,008 2 7,017

At 31 December 2016 144,016 68,618 8,655 250,716 974 472,979

At 1 January 2017 144,016 68,618 8,655 250,716 974 472,979

Additions 12 370 14 - 890 1,286Disposals (25) (265) (88) - - (378)

Transfers 305 201 96 - (602) -

Transfer to intangible assets - - - - (43) (43)

Effect of currency translation - (14) - (15,131) (13) (15,158)

At 30 June 2017 144,308 68,910 8,677 235,585 1,206 458,686

BGN’000

Land and buildings

Plant and equipment

Other non-current

assets

Ships FTAsin progress

Total

Depreciation and impairment

At 1 January 2016 1,966 24,060 5,433 40,339 - 71,798

Depreciation charges for the year 1,047 2,865 778 9,004 13,694

Depreciation of revalued FTAs written off (411) - - - - (411)

33


Depreciation written off due to transfer to non-current assets held for sale

- (2,391) (4) - - (2,395)

Disposals (34) (645) (345) - - (1,024)

At 31 December 2016г. 2,568 23,889 5,862 49,343 - 81,662

At 1 January 2017 2,568 23,889 5,862 49,343 - 81,662

Depreciation charges for the year 499 1,374 393 4,656 - 6,922Depreciation of revalued FTAs written off (5) (232) (82) - - (319)Depreciation written off due to transfer to non-current assets held for sale

- - - - - -

Disposals - - - - - -

At 30 June 2017 3,062 25,031 6,173 53,999 - 88,265

Net book value:

At 31 December 2015 149,919 45,954 2,978 201,774 1,281 401,906

At 31 December 2016 141,448 44,729 2,793 201,373 974 391,317

At 30 June 2017 141,246 43,879 2,504 181,586 1,206 370,421

Assets pledged In relation to the issuance of bank guarantees and/or letters of credit in favour of suppliers and utilised bank loans, mortgages and registered pledges were subscribed on property, plant, equipment, installations, motor vehicles, including on the three out of the five vessels, owned by Group entities, with total net book value of BGN 210,572 thousand as at 30 June 2017 (2016: BGN 224,229 thousand) (Note 29b). This amount includes also all property, plant and equipment of KRZ Port Bourgas AD amounting to BGN 28,968 thousand (2016: BGN 29,100 thousand) – a company, which was pledged to the benefit of a commercial bank as at 30 June 2017 for securing a loan contract and a contract for issuance of bank guarantees in favour of the parent company.

34


Plant and equipment under finance leasesFixed tangible assets with net book value as of 30 June 2017 of BGN 1 thousand (2016: BGN 300 thousand) have been acquired under finance lease terms. As at the date of the consolidated financial statements the outstanding portion of the finance lease contract amounted to BGN 0 (2016: BGN 24 thousand).

Property, plant and equipment under constructionAssets under construction represent machines and equipment purchased still to be brought to a working condition for their intended use, as well as expenses on overhaul of existing assets not yet completed as of 30 June 2017 amounting to BGN 430 thousand (2016: BGN 547 thousand); expenses on the expansion of the port KRZ-Port Bourgas AD amounting to BGN 439 thousand (2016: BGN 218 thousand); costs of facilities and improvement of existing assets facilitating the other ports amounting to BGN 337 thousand (2016: BGN 209 thousand).

Capitalized borrowing costs In the period January 2017 – June 2017 and in 2016, the Group had no borrowings costs capitalized in the assets’ value.

18. Intangible assets

BGN’000

Patents and trademarks

Software Other intangible assets

Total

Carrying amountAt 31 December 2015 3,081 607 2,309 5,997At 31 December 2016 2,885 440 1,763 5,088

At 30 June 2017 2,774 386 1,290 4,450

The amortization charge for intangible assets for the period ending 30 June 2017 amounts to BGN 692 thousand (20156 BGN 901 thousand).

The amount of patents and trademarks includes an intangible asset recognized in the business combination for the acquisition of Odessos PBM AD in connection with the certificate of use of the port valid until 30 May 2049. The carrying amount of the asset as at 30 June 2017 amounts to BGN 2,128 thousand.

(i) Goodwill

BGN’000 GoodwillAt 1 January 2016 9130At 31 December 2016 9,130

At 30 June 2017 9,130

A significant portion of goodwill (BGN 5,082 thousand) as at 30 June 2017 is due to the acquisition of Odessos AD

19. Assets classified as held for sale

The main items of assets classified as held for sale are as follows:

35


30 June 2017

2016

BGN’000Land and buildings 7,318 7,384Plant and equipment 728 815Other fixed assets 17 17Assets classified as held for sale 8,063 8,216

In the period January 2017 - June 2017, IHB Electric AD sold plant and equipment classified as held for sale with carrying amount of BGN 87 thousand.

In December 2016, the Board of Directors of the subsidiary IHB Electric AD passed a decision to sell land, plant and equipment and other assets located in the city of Sofia with carrying amount of BGN 6,895 thousand; as a result, these assets were reclassified as non-current assets held for sale as at 31 December 2016. The assets are measured at their carrying amount, which is the lower of their carrying amount and their fair value less costs to sell. In the period January 2017 - June 2017, Bulyard Shipping Industry AD sold buildings as assets held for sale with carrying amount of BGN 153 thousand and reclassified a building amounting to BGN 87 thousand from investment property to assets held for sale.In December 2013 the Board of Directors of ZMM Nova Zagora AD passed a decision to sell land and buildings located in the town of Nova Zagora with carrying amount of BGN 1,168 thousand; as a result, these assets were reclassified as non-current assets held for sale. A commission agreement was concluded with an agent, according to which land and buildings are marketed actively on the real estate market. Management is of the opinion that these properties meet the criteria of being classified as held for sale as at 30 June 2017 and has applied an extension of the period, allowed by IFRS 5, which is necessary to complete the sale due to the following reasons:

Illiquid real estate market, which is beyond the company’s control; The company continues to be committed to its plan for the sale of these assets and has a valid intermediation

contract for seeking a buyer; The properties have been offered actively on the market at a price that is reasonable in view of the illiquid real

estate market in the region.The assets are measured at their carrying amount, which is the lower of their carrying amount and their fair value less costs to sell.

Assets pledgedAt 30 June 2017 there were no assets pledged classified as non-current assets held for sale (2016: BGN 89 thousand).

21. Investment property

Investment properties at 30 June 2017 comprise warehouses in Varna city, which are leased out.

Fair value reconciliation As at 30 June 2017

BGN’000 Commercial and

Warehouses Total

36


office properties

At 1 January 87 7,813 7,900Derecognized (87) - (87)

At 30 June 2017 - 7,813 7,813

As at 31 December 2016BGN’000 Commerci

al and office

properties

Warehouses Total

At 1 January 240 7,347 7,587Transfers of property, plant and equipment (Note 17) - 98 98Improvements, transfers of FTAs in progress (Note 17) - 310 310Revaluation in the consolidated income statement (Note 8) - 58 58Transfer to assets held for sale(Note 19) (153) - (153)

At 31 December 87 7,813 7,900

Assets pledged In connection with bank loans used, mortgages on investment properties owned by the Group for the total carrying amount of BGN 6,371 thousand as at 30 June 2017 (2016: BGN 6,371 thousand) were registered (Note 29b).

The Group evaluates investment property annually.

Fair value measurementThe fair value of the commercial and office properties, and warehouses has been determined by an independent accredited valuer by employing the method of capitalization of future income.

In assessing the fair value of the commercial and office properties, and warehouses by employing the method of capitalization of future income, the calculated adjusted annual net rental income has been capitalised over the estimated residual useful life of the asset.

24. Inventories

BGN’000 30 June 2017 2016

Raw materials, materials and consumables 10,068 10,931Work in progress (Note 24а) 5,382 4,430Finished products 1,467 1,695Goods 1 1

37


16,918 17,057

24а. Work in progress

BGN’000 30 June 2017 2016

Work-in-progress in machine building 4,822 4,271Other related to shipbuilding and ship repairing 560 159

5,382 4,430

25. Trade and other receivables

BGN’000 30 June 2017 2016

Trade receivables 6,567 4,663Related party receivables (Note 35) 35 21Advance payments and prepayments 726 266Receivables on government grants (Note 30) - -Tax receivables 812 416Court receivables 36 36Other receivables 262 133

8,438 5,535

38


26. Cash and cash equivalents

BGN’000 30 June 2017 2016

Cash with banks – related parties (Note 35) 1,869 2,213Cash with banks 454 429Cash on hand 153 195Cash and cash equivalents recognized in the consolidated statement of financial position 2,476 2,837

27. Share capital and reserves

The share capital is reported at par value in accordance with the court registration.

BGN’000 30 June 2017 2016

77,400,643 ordinary shares with par value of BGN 1 each 77,400 77,40077,400 77,400

The capital of the Group comprises of 77,400,643 dematerialized registered voting shares with nominal value of BGN 1 each, which are traded at the Bulgarian Stock Exchange. The share capital has been subscribed at its par value and is fully paid. There are no preference or bearer shares.

The shareholders of Industrial Holding Bulgaria PLC as at 30 June 2017 holding over a 5% of the Group’s capital are as follows:

ShareholderNumber of shares as at

30 June 201730 June

2017 2016

Venside Enterprises AD 20,399,604 26.36% 26.36%BULLS AD 13,037,921 16.84% 16.84%MUPF Allianz Bulgaria AD 5,379,344 6.95% 6.48%DZH AD 4,732,574 6.11% 6.11%Other 33,851,200 43.74% 44.21%

77,400,643 100.00% 100.00%

39


Reconciliation of shares issued:Number of

shares Amount

BGN’000

Ordinary shares issued and fully paid

At 1 January 2016 77,400,643 77,400

At 31 December 2016 77,400,643 77,400

At 30 June 2017 77,400,643 77,400

Reconciliation of premium reserve Amount

BGN’000

At 1 January 2016 30,604At 31 December 2016 30,604At 30 June 2017 30,604

Statutory and additional reservesStatutory reserves are set aside by joint-stock companies as profit distribution in accordance with the provisions of Art. 246 of the Commercial Act. They are set aside until they reach one-tenth or more of the capital. The sources that form the statutory reserves include at least one-tenth of the net profit, share premium and funds envisaged in the articles of association or decision of the General Meeting of Shareholders. The statutory reserves may only be used to cover losses from the current and prior reporting periods. The statutory and additional reserves amounted to BGN 4,625 thousand as at 30 June 2017 (2016 : BGN 4,512 thousand).

Treasury shares redeemedIn relation to the decision dated December 2015 of the General Meeting of Shareholders for share redemption, the Managing Board of Holding Bulgaria PLC passed a decision that the number of shares to be bought every year for a period of four years shall be up to 3% of the registered capital of the Company comprising 67,978,543 shares as at 31 December 2012, or up to 2,039,356 shares per year. In 2016 the General Meeting passed a decision to extend the term of redemption of treasury shares for one more year, i.e. to the allowed 5 years after the date of passing the decision, by keeping unchanged the other parameters (such as maximum number, minimum and maximum price, etc.).

In 2017 the General Meeting passed a new decision to buy back its treasury shares in an annual amount of up to 3% of the registered capital and a term of five years as of 17 December 2017 at a minimum price of BGN 0.70 per share and maximum price of BGN 1.20 per share. The total amount of shares redeemed shall not exceed 10% of the registered capital.

The investment intermediary chosen for the redemption of the shares is Allianz Bank Bulgaria PLC.

In 2013, 967,141 shares were redeemed at an average price of BGN 0.794 per share and costs of acquisition amounting to BGN 3 thousand. In 2014, 6,125 shares were redeemed at a price of BGN 0.84 per share. In 2015, 11,600 treasury shares were sold at a price of BGN 1.07 per share and additional 127,589 shares were bought at an average price of BGN 0.851

40


per share. In 2016, additional 41,730 shares were bought at an average price of BGN 0.816 per share. The total number of treasury shares held as at 31 December 2016 is 1,130,985 shares.

Over the period January – June 2017, 247,000 shares were sold at an average price of BGN 0.963 per share. The total number of treasury shares held as at 30 June 2017 is 883 985 shares.

Revaluation reserveThe revaluation reserve is used to record increases in the fair value of land, buildings and specialised equipment (net of any deferred tax effects), and decreases to the extent that such decreases relate to an increase of the value of the same asset previously recognised in other comprehensive income. The revaluation reserve amounted to BGN 86,269 thousand as at 30 June 2017 (2016 : BGN 86,319 thousand).

Reserves from translation of financial statements of foreign operationsThe reserves from translation of financial statements of foreign operations represent exchange differences due to the translation of financial statements of companies with functional currencies other than the Bulgarian lev, as also due to the translation of net investments in foreign operations for the purposes of their consolidation. Such reserves are reclassified to profit or loss in the period of disposal of the relevant investments in foreign subsidiaries.

Other equity reserves

Other transfers relate to the equity component of convertible bonds issued, as disclosed in Note 29a.

28. Earnings per share

Basic earnings per share are calculated by dividing the financial result for the year by the weighted average number of ordinary shares outstanding for the year.

The calculation of basic earnings per share as of 30 June 2017 is based on the net profit attributable to the equity holders of the parent amounting to BGN 1,981 thousand (30 June 2016: loss amounting to BGN 4,628 thousand) and the weighted average number of the ordinary shares outstanding during the period ended 30 June 2017 of 76,432 thousand (30 June 2016: 76,292 thousand).

Diluted earnings per share are calculated by dividing the net profit for the year attributable to the holders of ordinary shares (after adjusting for interest on the convertible bonds) by the weighted average number of ordinary shares for the year increased by the weighted average number of ordinary shares that would have been issued had all potential convertible bonds been converted.

41


The calculations are as follows:

BGN’000 30 June 2017 30 June 2016

Net profit / (loss) for the year 2,124 (4,574)Net profit / (loss), attributable to the equity holders of the parent 1,981 (4,628)Interest expense on debenture loans, net of taxes 1,124 -Net profit / (loss), attributable to the equity holders of the parent as diluted earnings per share 3,105 -

Weighted average number of ordinary sharesIn thousands of shares 30 June 2017 30 June 2016Ordinary shares issued as at 1 January 76,269 76,311Treasury shares sold / (redeemed) 247 (24)New share issue in circulation - -Number of ordinary shares as at the end of the respective period 76,516 76,287Weighted average number of shares as at 30 June 76,432 76,292

In thousands of shares 30 June 2017 30 June 2016Weighted average number of ordinary shares as at 30 June 76,432 -Weighted average effect of convertible bonds 50,000 -Weighted average number of ordinary shares adjusted for the effect of convertible bonds 126,432 -

Basic earnings per share attributable to the equity holders of the parent (in BGN) 0.026 (0.061)Diluted earnings per share attributable to the equity holders of the parent (in BGN) 0.025 -

In 2016, diluted earnings per share were not calculated as the potential ordinary shares are antidilutive with respect to earnings per share since their conversion into ordinary shares would decrease any losses per share. The antidilutive effect of potential ordinary shares on the earnings per share is ignored when calculating the diluted earnings per share.

42


29. Interest-bearing loans and borrowings

This note contains information about the contractual terms and conditions of the Group’s loans. For further details on the Group’s exposure to interest rate and currency risks, see Note 34 Financial instruments.

BGN’000 30 June 2017 2016Long-term liabilitiesSecured bank loans 3,667 6,246Lease payables - -

3,667 6,246

BGN’000 30 June 2017 2016Debenture loanLong-term portion - 49,976

- 49,976

Current liabilitiesShort-term portion of secured bank loans 48,764 56,030Lease payables - 24

48,764 56,054

Debenture loanShort-term portion 50,547 568

50,547 568

29а Debenture loan

BGN’000 30 June 2017 2016Debenture loan 50,000 50,000Transaction costs (15) (24)Interest charged 562 568

50,547 50,544incl. long-term portion - 49,976incl. short-term portion 50,547 568

The Capital component of convertible bonds issued component in the consolidated statement of financial position has been transferred to the component of Non-current liabilities – Debenture loan as at 31 December 2016. This transfer was considered immaterial to the consolidated financial statements as a whole. The reason for making the transfer was to achieve convergence in the way of calculating the interest expenses on the debenture loan with the actual interest cash flows. The transfer was reported in the financial statements for the year ended 31 December 2016, but it was not reported in the financial statements by quarters and therefore, the comparative data should be reclassified.

At 30 June 2017 the liabilities on the debenture loan from related parties under IAS 24 amounted to BGN 36,156 thousand (2016: BGN 36,154 thousand). For further details, see Note 35.

43


On 20 October 2014 the Supervisory Board of Industrial Holding Bulgaria PLC passed a decision to convene an extraordinary general meeting of the shareholders of Industrial Holding Bulgaria PLC, which was held on 04 December 2014 under the following agenda:

I. Decision for the issuance under the conditions of an initial public offering of an issue of dematerialized, interest-bearing, convertible, freely-transferable and unsecured bonds with the following parameters:

Total nominal and issue value of the debenture loan: Up to BGN 50,000,000; Nominal value per bond: BGN 100. Issue value per bond: BGN 100. Number of bonds: Up to 500,000; Minimal amount at which the loan is deemed as concluded: the loan shall be deemed as concluded upon

subscription and payment of bonds of a total nominal value of no less than BGN 30,000,000; Term (maturity) of the debenture loan: 3 /three/ years (36 months); Interest rate: 5% per annum; Interest payment: in every 6 months. Procedure for conversion of bonds into shares (conversion procedure): conversion - on the bond’s maturity

date each bondholder shall be entitled, under the terms and conditions of the debenture loan and the Prospectus for public offering of the issue of convertible bonds, instead of repayment of the bonds held, to exchange (convert) them for such a number of shares as would correspond to the conversion ratio valid at the time of the exchange.Purpose of the debenture loan: the funds raised through the issue will be used to reimburse the debenture loan under a previous issue of convertible bonds - ISIN 2100006134, issued by Industrial Holding Bulgaria PLC, as well as to refinance the investments in KRZ-Port Bourgas AD and other projects of Industrial Holding Bulgaria PLC and its subsidiaries.

By decisions N 106-E dated 18.02.2015 and N 127-E dated 25.02.2015 the Financial Supervision Commission approved the Prospectus for the initial public offering by Industrial Holding Bulgaria PLC of an issue of 500,000 dematerialized, convertible, freely transferable, unsecured bonds with nominal and issue price of BGN 100 each, bearing a 5.00% annual fixed interest rate payable in every six months and a term of the debenture loan of 36 months.

44


The public offering of the convertible bonds of Industrial Holding Bulgaria PLC closed successfully with the following results:• Closing date of the public offering – 09 April 2015;• Total number of the rights issued – 67,978,543;• Total number of the convertible bonds offered for subscription – 500,000;• Number of convertible bonds subscribed and paid– 499,996;• Amount received from the subscribed and paid convertible bonds in the special escrow account opened with Allianz

Bank Bulgaria AD – BGN 49,999,600.00.The terms and conditions of the debenture loan with ISIN code BG 2100003156 require compliance with certain financial ratios to the maturity date of the bond issue. Issuer is obliged to maintain Liabilities / Assets ratio not higher than 65%, Interest Coverage ratio not lower than 1.2. and Interest-bearing Debt / Assets ratio not higher than 50%. These financial indicators are calculated and reported quarterly, on an individual basis. If the specified financial ratios are not complied with, IHB PLC should take actions to bring the ratios according to the parameters set within a six-month period.The financial ratios was complied with by the issuer as at 30 June 2017, in accordance with its commitments.

29b. Bank loans

Short-term

BGN’000Currency Interest rate, % Maturity

30 June 2017

2016

Secured bank credit amounting to BGN 19,345 thousand (JPY 1,122,594 thousand)- short-term portion JPY

JBIC+2.5% 2018 2,148 2,224

Secured investment credit amount of BGN 814 thousand - short-term portion BGN

1 М SOFIBOR +2.9%

but min 2.9%

2019 103 103

Secured bank credit amounting to USD 11,000 thousand - short-term portion USD

1 М LIBOR + 2.5%

but min 2.95%

2017 1,770 2,830

Secured bank credit amounting to USD 37,300 thousand* USD

1 М LIBOR + 2.25%

2018 44,546 50,676

Secured investment loan amounting to EUR 400 thousand - short-term portion

EUR 3 М EURIBOR + 2.9%

but min 2.9%

2020 197 197

Finance lease amounting to EUR 170 thousand: short-term portion EUR

Annual interest rate-4%

2017 - 17

Finance lease contract for delivery of equipment – BGN 65 thousand EUR

1 М EURIBOR + spread 3.89-4%

2017 - 7

48,764 56,054 * As of 01 January 2017 the interest rate terms and conditions on the secured bank loan amounting to USD 37,300 thousand were negotiated and the floating component was changed from 3 М LIBOR to 1 М LIBOR.

Long-term45


BGN’000Currency Interest rate, % Maturity

30 June 2017

2016

Long-termCredit line for working capital amounting to BNG 4,000 thousand (2015: BGN 3,000 thousand) BGN

1 М SOFIBOR +2.9% 2018 2,621 3,078

Secured bank loan amounting to BGN 19,345 thousand (JPY 1,122,594 thousand) JPY JBIC+2.5% 2018 - 1,112

Secured bank credit amounting to USD 11,000 thousand USD

1 М LIBOR + 2,5%, (min 2.95%) 2018 602 1,453

Secured investment credit amount of BGN 814 thousand - long-term portion BGN

1 М SOFIBOR +2.9% 2019 89 149

Secured investment loan amounting to EUR 400 thousand – long-term portion EUR

3 М EURIBOR + 2.9% but min 2.9% 2020 355 454

3,667 6,246

The liabilities on bank credit and lease contracts from related parties under IAS 24 amounted to BGN 46,918 thousand as at 30 June 2017 (2016: BGN 54,983 thousand). For further details, see Note 35.

The bank loans are secured by mortgages on land and buildings, and registered pledges on plant, equipment and motor vehicles, including ships owned by the Group companies, with total carrying amount of BGN 216,943 thousand as at 30 June 2017 (2016: BGN 230,600 thousand). Also, KRZ Port Bourgas AD has been pledged as an entity (Note 36).

The Group’s unutilized limits on bank loans amounted to BGN 1,379 thousand as at 30 June 2017.

46


30. Financing

BGN’000 30 June 2017 2016

At 1 January 2,673 2,889Received over the year - -Recognized in the consolidated income statement (Note 8) (94) (216)At the period-end 2,579 2,673

Short-term 185 215Long-term 2,394 2,458

As at 30 June 2017 the Group reported financing, the most significant of which are as follows: Financing under Operational Programme "Development of the Competitiveness of the Bulgarian Economy 2007-

2013" for the purchase of new equipment. The total value of approved financing is BGN 1,059 thousand and as of the reporting date the amount is fully received. The remaining balance at 30 June 2017 amounts to BGN 877 thousand.

Financing under Operational Programme " Development of the Competitiveness of the Bulgarian Economy" of the Bulgarian Small and Medium Enterprises Promotion Agency (BAMEPA) for the purchase of a technological line for production of copper wire coils. The total amount of the approved financing by BAMEPA is BGN 421 thousand and the last tranche thereof amounting to BGN 336 thousand was received in 2012. The remaining balance at 30 June 2017 amounts to BGN 271 thousand.

Financing under OP "Competitiveness" of MIET, ERDF OP "Competitiveness" for implementation of a new insulation system. The total eligible cost is BGN 693 thousand, of which BGN 346 thousand will be financed under OP "Competitiveness". The project was completed successfully in 2014. The remaining balance at 30 June 2017 amounts to BGN 281 thousand.

Financing under OP "Competitiveness" for implementation of new equipment. The scope of the project provides for investments in the acquisition of tangible and intangible assets – customised software for designing of measuring devices. The cost of the project is BGN 325 thousand, with 10% co-financing by the Group equal to BGN 32 thousand. The approved project subsidy amounting to BGN 101 thousand was reimbursed finally in 2015. The remaining balance at 30 June 2017 amounts to BGN 210 thousand.

90% financing of the supply of new equipment. The total value of the approved project cost is BGN 399 thousand, and the cost of financing is BGN 359 thousand, or 90% of the eligible costs, which include also consultancy costs incurred in connection with obtaining financing. The amount of BGN 359 thousand was transferred to the bank account of the relevant subsidiary in March 2015. The remaining balance of unamortised financing at 30 June 2017 amounts to BGN 298 thousand.

47


Financing of the implementation of an innovative technological project. The approved financing for purchase of equipment and auxiliary services is BGN 716 thousand. The project is completed. The full payment under the project amounts to BGN 529 thousand and is less than the amount of the approved financing as the Group, as a whole, has reached the maximum amount of government grants at the level of the Group of Industrial Holding Bulgaria PLC. The remaining balance at 30 June 2017 amounts to BGN 427 thousand.

All terms and conditions relating to the above financing have been complied with as at the date of approval of the financial statements. There are certain limitations imposed by government agencies, which require that the assets shall remain at disposal of a Group company and not be sold in the period between 2017 and 2020; otherwise, the financing shall be refunded.

31. Provisions

BGN’000 Guarantees Lawsuits TotalAt 1 January 2016 66 10 76Provisions arising during the year 15 - 15Utilised (15) - (15)Unutilised provision reversed (Note 8) - (10) (10)At 31 December 2016 66 - 66

At 1 January 2017 66 - 66Provisions arising during the year 15 - 15Utilised (10) - (10)Unutilised provision reversed (Note 8) - - -At 30 June 2017 71 - 71

Incl.Long-term - - -Short-term 71 - 71

Guarantee The warranty provision relates primarily to commitments for warranty maintenance under contracts executed by IHB Electric AD in prior years. The calculations of the provision are based on estimates made on the basis of historical data on warranties on similar products and services. Warranties for periods longer than one year after the date of the financial statements are presented as long-term liabilities.

Litigation provisionsThe provision of BGN 10 thousand accrued in 2016 was reversed as unutilized due to the expiry of its period of limitation.

48


33. Trade and other payables

BGN’000 Note 30 June 2017 2016

Trade payables 11,769 13,556Payables to related parties 35 15,165 15,150Advances and prepayments 2,875 3,237Payables to personnel 1,542 1,672Social security payables 426 422Payables to the State budget 387 265Fair value of interest rate swap - -Other 956 756

33,120 35,058incl. short-term portion 22,668 23,645incl. long-term portion 10,452 11,413

Trade payables consist of liabilities amounting to BGN 8,068 thousand (2016 : BGN 10,161 thousand), which were incurred in connection with the purchase of shares in Odessos PBM AD and Bulport Logistics AD in 2014, which have been deferred and are to be paid by the end of 2017. The liability is only a short-term one and comprises interest accrued amounting to BGN 87 thousand (2016 : BGN 53 thousand).

34. Financial instrumentsFinancial risk management

Overview The Group is exposed to the following risks relating to the use of financial instruments:

credit risk liquidity risk; market risk operating risk.

This Note discloses information on the Group’s exposure to each of the aforementioned risks, the Group’s objectives, policies and processes for measuring and managing those risks, as also for managing the Group’s capital.

General risk management considerations

The Group’s risk management policy is elaborated in such a way as to identify and analyse the risks facing the Group, to set limits for assuming risks and controls, to monitor the risks and the compliance with the limits set. This policy is subject to regular review to identify possible changes in the market conditions and the Group’s operations. The Group, through its training and management standards and procedures, aims to develop a constructive control environment where all employees understand their roles and duties.

The Audit Committees of some of the Group companies observe how management ensures compliance with the risk management policies and review the adequacy within the risk management framework regarding the risks facing the Group. The Internal Audit Department supports the Audit Committee of the Company. The Internal Audit Department

49


handles both planned and unannounced checks of the risk management controls and procedures, the results of which are reported to the Audit Committees.

Credit riskThe credit risk, to which the Group is exposed, is the risk of possible financial loss if a client or a party to a financial instrument fails to perform its contractual obligations. The credit risk is mainly related to receivables from clients.

Other receivablesThe Group’s credit risk exposure depends on the customer’s individual characteristics, which vary from one sector to another. This exposure may also depend on the risk of non-payment specific to the industry or the markets in which the Group companies operate. As this risk is different for the different sectors, it is managed by sectors in view of the weight of each sector within the investment portfolio of Industrial Holding Bulgaria PLC. Therefore, the Group's risk is diversified. The credit policies of the Group companies require the solvency of each new customer to be analysed before offering standard terms of delivery and payment.The Group recognises impairment allowance being its estimate of losses relating to trade and other receivables. The impairment allowance comprises a specific loss component that relates to individually significant exposures and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified. The collective component is determined based on historical data on payments related to similar financial assets.

GuaranteesIt is a policy of the Group to issue financial guarantees only to subsidiaries and only after obtaining the preliminary approval of the Managing and Supervisory Boards.

Liquidity risk Liquidity risk is the probability that the Group will be unable to meet all its obligations, which are settled in cash or through another financial asset. The Group's approach to managing the liquidity risk is to secure sufficient liquidity, wherever possible, so as to cover its liabilities, in both ordinary and abnormal conditions, ensuring the Group will not suffer unacceptable losses or reputation damages.The Group elaborates financial planning to cover its expenses and current payables for a period of 30 days, including settlement of financial liabilities; this planning excludes the potential effect of extraordinary circumstances that may not be foreseen under usual conditions.

Market riskMarket risk is the risk that affects the Group’s revenue or the value of its investments due to fluctuations resulting from changes in market prices, such as exchange rates, interest rates or prices of equity instruments. The objective of market risk management is to control the exposure to market risk within acceptable limits through return rate optimization.

Currency risk The Group is exposed to currency risk as it performs purchases and/or sales and/or receives loans in currencies, other than the functional currency - the Bulgarian lev. The main part of these transactions is denominated in EUR and USD. Effective 1999, the exchange rate BGN/EUR is fixed at ratio of EUR 1 : BGN 1.95583.Interest on loans is denominated in the currency of the loan. Generally, loans are denominated in currencies that match the cash flows generated by the underlying operations of the counterparty to the loan, primarily BGN and Euro, but also

50


USD. This provides an economic hedge without derivatives being entered into and therefore, hedge accounting is not applied in these circumstances.

The Group’s management has minimised the payments in currencies, other BGN and EUR, aiming at minimizing the Group’s exposure to currency risk. Some of the companies are exposed to limited currency risk on purchases and/or sales and/or receiving loans denominated in currencies other than the functional currency. The Group also recognises commercial obligations arising from the purchase of shares in USD (Note 33).

Interest rate risk

The Group companies are exposed to interest rate risk mainly with respect to its loans bearing floating (variable) interest rates corresponding to the current market prices. Interest rate risk is managed through using loans with fixed interest rates.

The Group manages the interest rate risk by signing fixed-rate loans.

Operating riskOperating risk is the risk of direct or indirect losses due to lots of reasons relating to the processes, personnel, technologies and infrastructure of the Group, as well as to external factors, other than credit, market and liquidity risks, such as those originating from legal and regulatory requirements and generally accepted standards of corporate behaviour. Operating risks arise from all transactions of the Group.

The Group's objective is to manage operational risk to avoid financial losses and damage to the Group's reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity.

The primary responsibility for developing and implementing operational risk control is assigned to senior management within each business unit. This responsibility is supported by the development of overall Group standards for the operational risk management in the following areas:

requirements for proper allocation of liabilities, including independent authorization of transactions requirements for reconcilement and monitoring of transactions compliance with the regulatory and other legal requirements control documentation and procedures requirements for periodic assessment of operating risks and adequacy of controls and procedures for dealing

with risks identified requirements for reporting operating losses and proposed corrective measures training and professional development ethic and business standards risk diminishing, including insurance, where effective.

Compliance with the Group’s standards has been supported by a program for periodic reviews to be carried out by the Internal Audit. The results from the reviews of Internal Audit are discussed with the managing staff of the business unit they relate to, in the form of summaries provided to the Audit Committee and senior management of the Group.

Capital managementThe policy of the Managing Board (MB) is to maintain a strong capital base so as to maintain investor, creditor and market confidence, and to sustain future development of the business. The capital consists of share capital, reserves and

51


retained earnings. The MB seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position. There were no changes in the Group’s approach to capital management in both years of 2017 and 2016.

52


35. Related party disclosures

The consolidated financial statements of the Group include the following companies:

Equity interestCountry of registration 30 June 2017 2016

% %Industrial Holding Bulgaria PLC Bulgaria Parent company Parent companyPrivate Engineering EAD Bulgaria 100.00 100.00ZMM Bulgaria Holding AD Bulgaria 100.00 100.00ZMM Sliven AD Bulgaria 95.98 95.98ZMM Nova Zagora AD Bulgaria 93.57 93.57IHB Metal Castings AD* Bulgaria 100.00 100.00IHB Electric AD Bulgaria 93.96 93.80KRZ Port Bourgas AD Bulgaria 99.65 99.65KLVK AD Bulgaria 100.00 100.00International Industrial Holding Bulgaria AG Switzerland 100.00 100.00Maritime Holding AD Bulgaria 61.00 61.00Bulgarian Register of Shipping EAD Bulgaria 61.00 61.00Bulyard AD – in liquidation Bulgaria 98.00 98.00Bulyard Shipping Industry AD Bulgaria 99.98 99.98IHB Shipping Co EAD Bulgaria 100.00 100.00Emona LTD Marshal Islands 100.00 100.00Karvuna LTD Marshal Islands 100.00 100.00Odria LTD Marshal Islands 100.00 100.00Tirista LTD Marshal Islands 100.00 100.00Serdika LTD Marshal Islands 100.00 100.00Bulport Logistics AD Bulgaria 100.00 100.00Odessos PBM AD Bulgaria 90.00 90.00IHB Shipdesign AD Bulgaria 70.00 70.00

The discontinuance of the activity of Bulyard AD (in liquidation), Sofia, was registered with the Commercial Register on 21 December 2016 and a liquidation procedure was initiated. The term for completion of the liquidation procedure was set at six months as of 21 December 2016.

53


The Group is of the opinion that in accordance with the definitions of IAS 24 it is a related party with:

I. Persons exercising control within the meaning of IAS 24 Bulls AD, a company that directly or indirectly through a subsidiary holds 43.20% of Industrial Holding

Bulgaria PLC, a share, which in view of the scattered shareholding structure of Industrial Holding Bulgaria PLC as a former privatisation fund with more than 50,000 shareholders and the quorums at the General Meeting of Shareholders (GMS) over the last two years, have allowed that a majority vote and de facto control is exercised at the GMS of Industrial Holding Bulgaria PLC;

Dimitar Zhelev, a person exercising control over Bulls AD and husband of Daneta Zheleva, the Chief Executive Officer of Industrial Holding Bulgaria PLC.

The judgement as to whether control is exercised, as described above, is subject to regular review.

In connection with the financial statements for the period ended 30 June 2017, management assumes that the above judgments are relevant to the comparative period as well (the period ended 30 June 2016) and therefore, the disclosures of comparative data with respect to related parties were reclassified.

II. Key management personnel

III. Entities under the joint control of the persons exercising control within the meaning of IAS 24 (under item i)

IV. Entities, over which the persons that have control within the meaning of IAS 24 (under item i) also exercise significant influence or are members of their key management personnel

Related party receivablesBGN’000 Note 30 June

20172016

Entities, over which the persons that have control within the meaning of IAS 24 (under item i) also exercise significant influence or are members of their key management personnel 35 21

25 35 21

Cash with banks – related partiesBGN’000 Note 30 June

20172016

Entities, over which the persons that have control within the meaning of IAS 24 (under item i) also exercise significant influence or are members of their key management personnel 1,869 2,213

26 1,869 2,213

Payables to related parties on bank loans and lease contractsBGN’000 Note 30 June

20172016

Entities, over which the persons that have control within the meaning of IAS 24 (under item i) also exercise

54


significant influence or are members of their key management personnel 46,918 54,983

29б 46,918 54,983

Payables to related parties on debenture loanBGN’000 Note 30 June

20172016

Persons exercising control within the meaning of IAS 24 22,327 22,325Key management personnel 30 30Entities under the joint control of the persons exercising control within the meaning of IAS 24 (under item i)

13,799 13,79929а 36,156 36,154

Trade and other payables to related partiesBGN’000 Note 30 June

20172016

Loan payables (incl. interest)Persons exercising control within the meaning of IAS 24 12,893 12,799Entities under the joint control of the persons exercising control within the meaning of IAS 24 (under item i) 2,205 2,266

15,098 15,065

Other liabilitiesEntities, over which the persons that have control within the meaning of IAS 24 (under item i) also exercise significant influence or are members of their key management personnel 67 85

67 85

33 15,165 15,150

55


Sale transactions

BGN’000 Type of transaction 30 June 2017

30 June 2016

Entities, over which the persons that have control within the meaning of IAS 24 (under item i) also exercise significant influence or are members of their key management personnel

Sale of services 57 72


Other sales 7 120

Total 64 192

Purchase transactions BGN’000 Type of transaction 30 June

201730 June

2016


Purchase of services

698 715


Purchase of FTAs

- -Total 698 715

56


Bank loans and lease contracts from related parties

BGN’000

Amounts received/ (granted)

Amounts (paid)/refun

ded

Interest (expenses)/

income Interest paid


30 June 2017

- (4,031) (770) (817)


30 June 2016

- (2,517) (798) (889)

30 June 2017 - (4,031) (770) (817)30 June 2016 - (2,517) (798) (889)

Debenture loans from related parties

BGN’000



ded



Persons exercising control within the meaning of IAS 24

30 June 2017

- - (552) (551)


30 June 2016

- - (553) (552)

Key management personnel 30 June 2017

- - (1) (1)

Key management personnel 30 June 2016

- - (1) (1)

Entities under the joint control of the persons exercising control within the meaning of IAS 24 (under item i)

30 June 2017

- - (341) (340)


30 June 2016

- - (342) (341)

30 June 2017 - - (894) (892)

30 June 2016 - - (896) (894)

57


Loans from related parties included in trade and other payables

BGN’000



ded




30 June 2017

815 (157) (201) (196)


30 June 2016

733 (400) (79) (77)


30 June 2017

- (59) (45) (46)


30 June 2016

509 (11) (42) (27)

30 June 2017 815 (216) (246) (242)

30 June 2016 1,242 (411) (121) (104)

Other finance costsBGN’000 30 June

201730 June

2016


77 110

Terms and conditions of related party transactions

The sales to and purchases from related parties are made at contractual prices. Outstanding balances at the period-end are unsecured (except for loans), interest free (except for loans) and the settlement is made in cash. There have been no guarantees provided to or received for related party payables or receivables, except for the ones listed below. For the period ended 30 June 2017, the Group had not written down related party receivables as at 30 June 2017 (2016: Nil). A review for impairment is made every financial year through examining the financial position of the related party and the market in which the related party operates.

58


36. Commitments and contingencies

Legal claims No significant legal claims have been initiated against the Group.

A claim was filed by a client against the subsidiary IHB Electric AD under a contract for the manufacture of two hydro-generators. IHB Electric AD refused to recognise the claims as the defects found were not in the equipment supplied by IHB Electric AD and initiated a lawsuit against the client in Germany. In 2017 and at the date of the financial statements, no decision in substance was issued. In view of all evidence collected and the expectation that the decision on the lawsuit will be favourable for IHB Electric AD, no provision was recognised in relation to the lawsuit.

Guarantees

According to a contract signed with a commercial bank for granting a credit limit for issuance of bank guarantees, letters of credit and working capital financing of the Holding and/or Group entities with a limit of BGN 10,000 thousand, as at 30 June 2017 bank guarantees amounting to BGN 533 thousand (2016: BGN 1,056 thousand) were issued to the following Group companies: IHB Electric AD, IHB Metal Castings AD, KRZ Port Bourgas AD, ZMM Bulgaria AD, and Odessos PBM AD, as also letters of credits amounting to BGN 87 thousand (2016: BGN 0) and a revolving credit line was opened for working capital financing amounting to BGN 4,000 thousand (2016: BGN 4,000 thousand). As at 30 June 2017 the amount utilised by the subsidiary IHB Electric AD under this revolving credit line for working capital financing was BGN 2,249 thousand and by ZMM Sliven AD – BGN 372 thousand. As at 30 June 2017 the unutilised limit under this bank loan amounted to BGN 1,379 thousand. The contract with the bank is secured by a second ranking registered pledge on the commercial enterprise of KRZ Port-Bourgas AD, as a combination of rights, obligations and factual relations, with entry into the major assets into the relevant registers.

Collateral At the date of these financial statements, the shares acquired in November 2014 by Industrial Holding Bulgaria PLC in Odessos PBM AD and the shares acquired by KLVK AD in Bulport Logistics AS are pledged in order to secure payment of the price under the contracts until its full payment in 2017.

OtherThe Group’s management believes that no material risks exist as a result of the dynamic fiscal and regulatory environment in Bulgaria, which might require adjustments in the financial statements for the period ended 31 June 2017.

59


39. Events after the reporting date

In August 2017 the Group repaid early the amount of BGN 413 thousand from its liability relating to the purchase of shares of Odessos PBM.

For the period from 30 June 2017 to the date of approval of these consolidated financial statements, the Group has sold 74,344 of its treasury shares at a weighted average price per share of BGN 1,027 and has not acquired other of its treasury shares.

Besides the disclosed above, no other significant events have occurred after 30 June, which require additional adjustments and/or disclosures in the consolidated financial statements of the Group the period ended 30 June 2017.

60

Date post:	22-Mar-2021
Category:	Documents
Upload:	others
View:	1 times
Download:	0 times

Report v1.2 · Web viewIndustrial Holding Bulgaria PLC is a joint stock company (PLC), registered...

Documents