AI assistant
Asbis Enterprises PLC — Interim / Quarterly Report 2017
Aug 8, 2017
5509_rns_2017-08-08_f9c9cf4a-f235-45b5-9967-09491ec495b5.pdf
Interim / Quarterly Report
Open in viewerOpens in your device viewer
INTERIM REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2017
Limassol, 8 August 2017
| Page | ||
|---|---|---|
| PART I | ADDITIONAL INFORMATION | 4 |
| PART II | FINANCIAL STATEMENTS | 21 |
DIRECTORS' REPORT ON THE COMPANY'S AND GROUP'S OPERATIONS
We have prepared this report as required by Paragraph 82 section 1 point 2 of the Regulation of the Ministry of Finance dated 19 February 2009 on current and periodic information to be published by issuers of securities and conditions of recognition of information required by the law of non-member country as equal.
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
In this six month report all references to the Company apply to ASBISc Enterprises Plc and all references to the Group apply to ASBISc Enterprises Plc and its consolidated subsidiaries. Expressions such as "we", "us", "our" and similar apply generally to the Group (including its particular subsidiaries, depending on the country discussed), unless from the context it is clear that they apply to the Company alone.
Financial and Operating Data
This six month report contains financial statements of, and financial information relating to the Group. In particular, this six month report contains our interim consolidated financial statements for the six months ended 30 June 2017. The financial statements appended to this six month report are presented in U.S. dollars and have been prepared in accordance with International Accounting Standard ("IAS") 34.
The functional currency of the Company is U.S. dollars. Accordingly, transactions in currencies other than our functional currency are translated into U.S. dollars at the exchange rates prevailing on the applicable transaction dates.
Certain arithmetical data contained in this six month report, including financial and operating information, have been subject to rounding adjustments. Accordingly, in certain instances, the sum of the numbers in a column or a row in tables contained in this six month report may not conform exactly to the total figure given for that column or row.
Currency Presentation
Unless otherwise indicated, all references in this six month report to "U.S. \$" or "U.S. dollars" are to the lawful currency of the United States; all references to "€" or the "Euro" are to the lawful currency of the member states of the European Union that adopt the single currency in accordance with the EC Treaty, which means the Treaty establishing the European Community (signed in Rome on 25 March 1957), as amended by the Treaty on European Union (signed in Maastricht on 7 February 1992) and as amended by the Treaty of Amsterdam (signed in Amsterdam on 2 October 1997) and includes, for this purpose, Council Regulations (EC) No. 1103/97 and No. 974/98; and all references to "PLN" or "Polish Zloty" are to the lawful currency of the Republic of Poland.
All references to U.S. dollars, Polish Zloty, Euro and other currencies are in thousands, except share and per share data, unless otherwise stated.
FORWARD-LOOKING STATEMENTS
This six month report contains forward-looking statements relating to our business, financial condition and results of operations. You can find many of these statements by looking for words such as "may", "will", "expect", "anticipate", "believe", "estimate" and similar words used in this six month report. By their nature, forward-looking statements are subject to numerous assumptions, risks and uncertainties. Accordingly, actual results may differ materially from those expressed or implied by the forward-looking statements. We caution you not to place undue reliance on such statements, which speak only as of the date of this six month report.
The cautionary statements set out above should be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. We do not undertake any obligation to review or confirm analysts' expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this six month report.
Part I Additional information
1. Overview
ASBISc Enterprises Plc is one of the leading distributors of Information Technology ("IT") products in Europe, Middle East and Africa ("EMEA") Emerging Markets: Central and Eastern Europe, the Baltic States, the Former Soviet Union, the Middle East and Africa, combining a broad geographical reach with a wide range of products distributed on a "one-stop-shop" basis. Our main focus is on the following countries: Slovakia, Poland, Czech Republic, Romania, Croatia, Slovenia, Bulgaria, Serbia, Hungary, Middle East countries (i.e. United Arab Emirates, Iraq, Qatar and other Gulf states), Russia, Belarus, Kazakhstan and Ukraine.
The Group distributes IT components (to assemblers, system integrators, local brands and retail) as well as A-branded finished products like desktop PCs, laptops, servers, and networking to SMB and retail. Our IT product portfolio encompasses a wide range of IT components, blocks and peripherals, and mobile IT systems. We currently purchase the majority of our products from leading international manufacturers, including Apple, Intel, Advanced Micro Devices ("AMD"), Seagate, Western Digital, Samsung, Microsoft, Toshiba, Dell, Acer, Lenovo and Hitachi. In addition, a significant part of our revenue is comprised of sales of IT products under our private labels, Prestigio and Canyon.
ASBISc commenced business in 1990 in Belarus and in 1995 we incorporated our holding Company in Cyprus and moved our headquarters to Limassol. Our Cypriot headquarters support, through two master distribution centres (located in the Czech Republic and the United Arab Emirates), our network of 31 warehouses located in 24 countries. This network supplies products to the Group's in-country operations and directly to its customers in approximately 60 countries.
The Company's registered and principal administrative office is at Diamond Court, 43 Kolonakiou Street, Ayios Athanasios, CY-4103 Limassol, Cyprus.
2. Executive summary for the three and six month periods ended June 30th, 2017
During Q2 2017 and H1 2017 the Company's results improved significantly as compared to the corresponding periods of 2016. The Company achieved a double digit growth in revenues, strong gross profit margins and controlled expenses. As a result, net profit after taxation in Q2 and H1 2017 was significantly more as compared to the corresponding periods of 2016. We also had significant improvements in cash flow from operations year-on-year. Thus, having seen H1 2017 results, the Company's Directors believe that in the remaining of the year the Company will continue its strong performance and deliver the forecasted results.
The principal events of the three months period ended June 30th, 2017, were as follows:
- In Q2 2017 revenues increased by 12.81% to U.S.\$ 280,130 from U.S.\$ 248,320 in Q2 2016.
- In Q2 2017 gross profit increased by 7.34% to U.S.\$ 15,102 from U.S.\$ 14,069 in Q2 2016.
- In Q2 2017 gross profit margin was at 5.39% as compared to 5.67% in Q2 2016.
- In Q2 2017 selling expenses increased by 10.89% to U.S.\$ 7,247 from U.S.\$ 6,535 in Q2 2016.
- In Q2 2017 administrative expenses decreased by 1.05% to U.S.\$ 3,942 from U.S.\$ 3,984 in Q2 2016.
- In Q2 2017 EBITDA amounted to U.S.\$ 4,469 as compared to U.S.\$ 4,069 in Q2 2016.
- The Company finished Q2 2017 with a net profit after tax amounting to U.S.\$ 461, a 109,19% growth compared to U.S.\$ 220 in Q2 2016.
The following table presents revenues breakdown by regions in the three month period ended June 30th, 2017 and 2016 respectively (in U.S.\$ thousand):
| Region | Q2 2017 | Q2 2016 | Change % |
|---|---|---|---|
| Former Soviet Union | 128,954 | 93,953 | +37.25% |
| Central and Eastern Europe | 91,340 | 102,124 | -10.56% |
| Middle East and Africa | 37,225 | 36,570 | +1.79% |
| Western Europe | 20,489 | 6,864 | +198.51% |
| Other | 2,122 | 8,810 | -75.91% |
| Grand Total | 280,130 | 248,320 | +12.81% |
The principal events of the six month period ended June 30th, 2017, were as follows:
- Revenues increased by 14.66% to U.S.\$ 570,331 from U.S.\$ 497,414 in H1 2016.
- Gross profit increased by 10.48% to U.S.\$ 30,241 from U.S.\$ 27,371 in H1 2016.
- Gross profit margin amounted to 5.30% as compared to 5.50% in H1 2016.
- Selling expenses increased by 11.36% to U.S.\$ 14,120 from U.S.\$ 12,680 in H1 2016.
- Administrative expenses increased by 4.43% to U.S.\$ 8,222 from U.S.\$ 7,872 in H1 2016.
- EBITDA amounted to U.S.\$ 8,985 as compared to U.S.\$ 7,871 in H1 2016.
- As a result the Company increased its net profit after tax by 62,83% to U.S.\$ 1,011 as compared to U.S.\$ 621 in H1 2016.
The following table presents revenues breakdown by regions in the six month periods ended June 30th, 2017 and 2016 respectively (in U.S.\$ thousand):
| Region | H1 2017 | H1 2016 | Change % |
|---|---|---|---|
| Former Soviet Union | 268,691 | 167,878 | +60.05% |
| Central and Eastern Europe | 182,653 | 201,537 | -9.37% |
| Middle East and Africa | 73,622 | 80,440 | -8.48% |
| Western Europe | 41,624 | 29,631 | +40.47% |
| Other | 3,742 | 17,928 | -79.13% |
| Grand Total | 570,331 | 497,414 | +14.66% |
3. Summary historical financial data
The following data sets out our summary historical consolidated financial information for the periods presented. You should read the information in conjunction with the interim condensed consolidated
financial statements and results of operations contained elsewhere in this interim report.
For your convenience, certain U.S. \$ amounts as of and for the three and six months ended 30 June 2017 and 2016, have been converted into Euro and PLN as follows:
- Individual items of the statement of financial position based at average exchange rates quoted by the National Bank of Poland for a given balance sheet date December 31st, 2016, that is: 1 US\$ = 4.1793 PLN and 1 EUR = 4.4240 PLN and June 30th, 2017, that is: 1 US\$ = 3.7062 PLN and 1 EUR = 4.2265 PLN.
- Individual items in the income statement and statement of cash flows based at exchange rates representing the arithmetic averages of the exchange rates quoted by the National Bank of Poland for the last day of each month in a given period 1 January to 30 June 2017, that is: 1 US\$ = 3.8964 PLN and 1 EUR = 4.2474 PLN and 1 January to 30 June 2016, that is: 1 US\$ = 3.9360 PLN and 1 EUR = 4.3805 PLN.
- Individual items in the income statement and statement of cash flows for separate Q2 2017 and Q2 2016 – based at exchange rates representing the arithmetic averages of the exchange rates quoted by the National Bank of Poland for the last day of each month in a given period 1 April to 30 June 2017, that is: 1 US\$ = 3.7704 PLN and 1 EUR = 4.2057 PLN and 1 April to 30 June 2016, that is: 1 US\$ = 3.9303 PLN and 1 EUR = 4.4051 PLN.
| Period from | Period from | |||||
|---|---|---|---|---|---|---|
| 1 January to 30 June 2017 | 1 January to 30 June 2016 | |||||
| USD | PLN | EUR | USD | PLN | EUR | |
| Revenue | 570,331 | 2,222,239 | 523,200 | 497,414 | 1,957,823 | 446,941 |
| Cost of sales | (540,090) | (2,104,407) | (495,458) | (470,043) | (1,850,089) | (422,347) |
| Gross profit | 30,241 | 117,832 | 27,742 | 27,371 | 107,734 | 24,594 |
| Selling expenses | (14,120) | (55,016) | (12,953) | (12,680) | (49,907) | (11,393) |
| Administrative expenses | (8,222) | (32,034) | (7,542) | (7,872) | (30,986) | (7,074) |
| Profit from operations | 7,900 | 30,782 | 7,247 | 6,819 | 26,841 | 6,127 |
| Financial expenses | (6,656) | (25,936) | (6,106) | (6,538) | (25,735) | (5,875) |
| Financial income | 483 | 1,880 | 443 | 266 | 1,045 | 239 |
| Other gains and losses | (443) | (1,725) | (406) | 160 | 630 | 144 |
| Profit before taxation | 1,284 | 5,001 | 1,177 | 707 | 2,781 | 635 |
| Taxation | (272) | (1,061) | (250) | (86) | (337) | (77) |
| Profit after taxation | 1,011 | 3,940 | 928 | 621 | 2,444 | 558 |
| Attributable to: | ||||||
| Non-controlling interest | (11) | (42) | (10) | 7 | 28 | 6 |
| Equity holders of the parent | 1,022 | 3,981 | 937 | 614 | 2,416 | 552 |
| USD | PLN | EUR | USD | PLN | EUR | |
| Basic and diluted earnings per share | (cents) | (grosz) | (cents) | (cents) | (grosz) | (cents) |
| from continuing operations | 1.84 | 7.17 | 1.69 | 1.11 | 4.35 | 0.99 |
| USD | PLN | EUR | USD | PLN | EUR | |
| Net cash outflows from operating activities | (18,865) | (73,505) | (17,306) | (33,204) | (130,690) | (29,835) |
| Net cash outflows from investing activities | (820) | (3,197) | (753) | (734) | (2,888) | (659) |
| Net cash inflows/(outflows) from financing | ||||||
| activities Net decrease in cash and cash |
5,789 | 22,556 | 5,311 | (891) | (3,509) | (801) |
| equivalents | (13,896) | (54,146) | (12,748) | (34,829) | (137,087) | (31,295) |
| Cash at the beginning of the period | 6,537 | 25,470 | 5,997 | 4,290 | 16,885 | 3,855 |
| Cash at the end of the period | (7,360) | (28,675) | (6,751) | (30,539) | (120,202) | (27,440) |
| As at 30 June 2017 | As at 31 December 2016 | |||||
|---|---|---|---|---|---|---|
| USD | PLN | EUR | USD | PLN | EUR | |
| Current assets | 319,467 | 1,184,009 | 280,139 | 387,011 | 1,617,435 | 365,605 |
| Non-current assets | 28,854 | 106,939 | 25,302 | 28,475 | 119,004 | 26,900 |
| Total assets | 348,321 | 1,290,949 | 305,442 | 415,486 | 1,736,439 | 392,504 |
| Liabilities | 261,180 | 967,985 | 229,028 | 329,591 | 1,377,459 | 311,360 |
| Equity | 87,142 | 322,964 | 76,414 | 85,895 | 358,980 | 81,144 |
| Period from | Period from | |||||
|---|---|---|---|---|---|---|
| 1 April to 30 June 2017 | 1 April to 30 June 2016 | |||||
| USD | PLN | EUR | USD | PLN | EUR | |
| Revenue | 280,130 | 1,056,202 | 251,136 | 248,320 | 975,971 | 221,555 |
| Cost of sales | (265,028) | (999,262) | (237,597) | (234,251) | (920,675) | (209,002) |
| Gross profit | 15,102 | 56,940 | 13,539 | 14,069 | 55,296 | 12,553 |
| Selling expenses | (7,247) | (27,323) | (4,497) | (6,535) | (25,685) | (5,831) |
| Administrative expenses | (3,942) | (14,862) | (3,534) | (3,984) | (15,657) | (3,554) |
| Profit from operations | 3,914 | 14,755 | 3,508 | 3,551 | 13,955 | 3,168 |
| Financial expenses | (3,086) | (11,636) | (2,767) | (3,572) | (14,038) | (3,187) |
| Financial income | 296 | 1,114 | 265 | 168 | 662 | 150 |
| Other gains and losses | (511) | (1,927) | (458) | 99 | 391 | 89 |
| Profit before taxation | 612 | 2,307 | 549 | 247 | 969 | 220 |
| Taxation | (151) | (570) | (136) | (26) | (104) | (24) |
| Profit after taxation | 461 | 1,736 | 413 | 220 | 865 | 196 |
| Attributable to: | ||||||
| Non-controlling interests | (13) | (51) | (12) | 4 | 17 | 4 |
| Equity holders of the parent | 474 | 1,787 | 425 | 216 | 849 | 193 |
| USD (cents) |
PLN (grosz) |
EUR (cents) |
USD (cents) |
PLN (grosz) | EUR (cents) |
|
| Basic and diluted earnings per share | ||||||
| from continuing operations | 0.85 | 3.22 | 0.77 | 0.39 | 1.53 | 0.35 |
| USD | PLN | EUR | USD | PLN | EUR | |
| Net cash inflows/(outflows) from operating activities |
10,814 | 40,775 | 9,695 | (14,350) | (56,399) | (12,803) |
| Net cash outflows from investing activities | (446) | (1,680) | (400) | (333) | (1,309) | (297) |
| Net cash inflows/(outflows) from financing activities |
6,220 | 23,453 | 5,577 | (296) | (1,164) | (264) |
4. Organization of ASBIS Group
The following table presents our corporate structure as at 30 June 2017:
| Company | Consolidation Method |
|---|---|
| ASBISC Enterprises PLC | Mother company |
| Asbis Ukraine Limited (Kiev, Ukraine ) | Full (100% subsidiary) |
| Asbis PL Sp.z.o.o (Warsaw, Poland) | Full (100% subsidiary) |
| Asbis Poland Sp. z o.o. (Warsaw, Poland) | Full (100% subsidiary) |
| ASBIS Estonia AS (formerly AS Asbis Baltic) (Tallinn, Estonia) | Full (100% subsidiary) |
| Asbis Romania S.R.L (Bucharest, Romania) | Full (100% subsidiary) |
| Asbis Cr d.o.o (Zagreb, Croatia) | Full (100% subsidiary) |
| Asbis d.o.o Beograd (Belgrade, Serbia) | Full (100% subsidiary) |
| Asbis Hungary Commercial Limited (Budapest, Hungary) | Full (100% subsidiary) |
| Asbis Bulgaria Limited (Sofia, Bulgaria) | Full (100% subsidiary) |
|---|---|
| Asbis CZ,spoI.s.r.o (Prague, Czech Republic) | Full (100% subsidiary) |
| UAB Asbis Vilnius (Vilnius, Lithuania) | Full (100% subsidiary) |
| Asbis Slovenia d.o.o (Trzin, Slovenia) | Full (100% subsidiary) |
| Asbis Middle East FZE (Dubai, U.A.E) | Full (100% subsidiary) |
| Asbis SK sp.l sr.o (Bratislava, Slovakia) | Full (100% subsidiary) |
| Asbis Limited (Charlestown, Ireland) | Full (100% subsidiary) |
| FPUE Automatic Systems of Business Control (Minsk, Belarus) | Full (100% subsidiary) |
| E.M. Euro-Mall Ltd (former ISA Hardware Limited–Group) (Limassol, Cyprus) | Full (100% subsidiary) |
| OOO ' Asbis'-Moscow (Moscow, Russia) | Full (100% subsidiary) |
| Asbis Morocco Limited (Casablanca, Morocco) | Full (100% subsidiary) |
| EUROMALL CZ s.r.o. (formerly ISA Hardware s.r.o.) (Prague, Czech Republic) | Full (100% subsidiary) |
| S.C. EUROMALL 2008 S.R.L (formerly ISA Hardware International S.R.L) (Bucharest, Romania) | Full (100% subsidiary) |
| ISA Hardware s.r.o Slovakia (Bratislava, Slovakia) | Full (100% subsidiary) |
| Euro-Mall SRB d.o.o. (former ISA Hardware d.o.o Beograd) (Belgrade, Serbia) | Full (100% subsidiary) |
| Prestigio Plaza Sp. z o.o in liquidation (Warsaw, Poland) | Full (100% subsidiary) |
| Prestigio Plaza Ltd (formerly Prestigio Technologies) (Limassol, Cyprus) | Full (100% subsidiary) |
| Prestigio Europe s.r.o (Prague, Czech Republic) | Full (100% subsidiary) |
| Prestigio Plaza NL.B.V. (Amsterdam, Netherlands) | Full (100% subsidiary) |
| Asbis Kypros Ltd (Limassol, Cyprus) | Full (100% subsidiary) |
| Asbis TR Bilgisayar Limited Sirketi (Istanbul, Turkey) | Full (100% subsidiary) |
| SIA "ASBIS LV" (Riga, Latvia) | Full (100% subsidiary) |
| Asbis d.o.o. (former Megatrend d.o.o.) (Sarajevo, Bosnia Herzegovina) | Full (90% ownership) |
| ASBIS Close Joint-Stock Company (former CZAO ASBIS) (Minsk, Belarus) | Full (100% subsidiary) |
| ASBIS Kazakhstan LLP (Almaty, Kazakhstan) | Full (100% subsidiary) |
| Euro-Mall SRO (Bratislava, Slovakia) | Full (100% subsidiary) |
| Prestigio China Corp. (former AOSBIS TECHNOLOGY (SHENZHEN) CORP.) (Shenzhen,China) | Full (100% subsidiary) |
| ASBIS DE GMBH, (Munchen, Germany) | Full (100% subsidiary) |
| EUROMALL BULGARIA EOOD (Sofia, Bulgaria) | Full (100% subsidiary) |
| Advanced Systems Company LLC (Riyadh, Kingdom of Saudi Arabia) | Full (100% subsidiary) |
| SHARK Computers a.s. (merged with SHARK ONLINE a.s.) (Bratislava, Slovakia) | Full (100% subsidiary) |
| E-vision Production Unitary Enterprise (Minsk, Belarus) | Full (100% subsidiary) |
| ASBIS UK LTD (Hounslow, England) | Full (100% subsidiary) |
| I ON LTD (Kiev, Ukraine) | Full (100% subsidiary) |
| ASBC LLC (Baku, Azerbaijan) | Full (51% ownership) |
5. Changes in the structure of the Company
During the six months ended June 30th, 2017 there were the following changes in the structure of the Company and the Group:
- on April 4th, 2017 a company named "I ON" LTD with share capital of 5.404.364UAH (equal to USD 200 thousand) has been registered in Ukraine. This entity is 100% owned by the Issuer's subsidiary E.M. EURO-MALL LIMITED. It was incorporated in order to support growing business of the Group in Ukraine.
- on May 8th, 2017 a company named ASBC Məhdud Məsuliyyətli Cəmiyyət (ASBC Limited liability Company) with share capital of USD 400.000 has been created in Azerbaijan. The issuer holds 51% in this subsidiary, being equal to share capital of USD 204.0000. The other 49% is held by the incorporated subsidiary's managing director, Mr. Khalilov Eldar Shahveled oglu. This entity was incorporated to support growing business of the Group in Azerbaijan.
6. Discussion of the difference of the Company's results and published forecasts
We have not published any forecasts for the six-month period ended June 30th, 2017. However, on March 29th, 2017 the Company announced its official financial forecast for 2017. Having seen H1 2017 results, we fully sustain our forecasts that assumes revenues between USD 1,20 billion and 1,30 billion and net profit after tax between USD 5 and USD 6 million.
7. Information on dividend payment
In the six month period ended 30 June 2016 no dividend has been paid. However, following the Board of Directors' recommendation and the Annual General Meeting of Shareholders decision, a dividend of U.S.\$ 0.03 per share has been paid out on July 14th. The Dividend record date was June 21st, 2017.
8. Shareholders possessing more than 5% of the Company's shares as of the date of the publication of the interim report
The following table presents shareholders possessing more than 5% of the Company's shares as of the date of publication of this report, according to our best knowledge. The information included in the table is based on the information received from the shareholders pursuant to Art. 69, sec. 1, point 2 of the Act on Public Offering, conditions governing the introduction of financial instruments to organized trading and public companies.
| Name | Number of shares |
% of share capital |
Number of votes |
% of votes |
|---|---|---|---|---|
| KS Holdings Ltd | 20,401,361 | 36.76% | 20,401,361 | 36.76% |
| Quercus Towarzystwo Funduszy Inwestycyjnych S.A. Quercus Parasolowy SFIO and Quercus Absolutnego Zwrotu FIZ)* |
3,274,931 | 5.90% | 3,274,931 | 5.90% |
| Noble Funds TFI S.A. managing Noble Funds Fundusz Inwestycyjny Otwarty, Noble Funds Specjalistyczny Fundusz Inwestyjny Otwarty and Noble Fund Opportunity Fundusz Inwestycyjny Zamknięty |
2,934,690 | 5.29% | 2,934,690 | 5.29% |
| Noble Funds Fundusz Inwestycyjny Otwarty** | 2,866,781 | 5.17% | 2,866,781 | 5.17% |
| NN OFE | 2,872,954 | 5.18% | 2,872,954 | 5.18% |
* Including 2,775,045 shares corresponding to 5.00% votes at the AGM held by Quercus Parasolowy SFIO - according to notification from December 9th, 2011 amended by the notification from July 14th, 2015.
** Following notification from October 6th, 2016
__________
In the six-month period ended on June 30th, 2017 the Company has not received any information about changes in its shareholders structure.
9. Changes in the number of shares owned by the members of the Board of Directors
During the six-month period ended on 30 June 2017 as well as for the period between May 9th, 2017 (the date of the publication of the Interim Report for Q1 2017) and August 8th, 2017 (date of this report) there were no changes in the number of shares possessed by the members of the Board of Directors.
The table below presents the number of shares held by the members of the Board of Directors as of the date of this report. The information included in the table below is based on information received from members of our Management Board pursuant to Art. 160 sec. 1 of the Act on Public Trading:
| Name | Number of Shares | % of the share capital |
|---|---|---|
| Siarhei Kostevitch (directly and indirectly) | 20,443,127 | 36.83% |
| Constantinos Tziamalis | 555,000 | 1.00% |
| Marios Christou | 463,061 | 0.83% |
| Yuri Ulasovich | 210,000 | 0,38% |
| Demos Demou | 0 | 0% |
| Chris Pavlou | 0 | 0% |
Siarhei Kostevitch holds shares as the shareholder of KS Holdings Ltd.
10. Changes in the members of managing bodies
The Company's Annual General Meeting of Shareholders held on June 14th, 2017 has re-elected Constantinos Tziamalis and Demos Demou to the Board of Directors. There were no other changes in the members of the Company's Board of Directors during H1 2017.
11. Significant administrative and court proceedings against the Company
As of June 30th, 2017, no court, arbitration or administrative proceedings whose single or aggregate value exceeds 10% of our equity were pending against us or any of the members of our Group.
12. Related party transactions
During the six months ended June 30th, 2017 we have not had any material related party transaction exceeding the Polish Zloty equivalent of Euro 500 thousand other than typical or routine transactions.
13. Information on guarantees granted to third parties
The Company has increased corporate guarantees to support its subsidiaries' local financing from U.S.\$ 147,628 at December 31st, 2016 and U.S.\$ 144,590 at March 31st, 2017 to U.S.\$ 154,633 at June 30th 2017, representing more than 10% of the Company's equity. The total bank guarantees and letters of credit raised by the Group (mainly to Group suppliers) as at June 30th, 2017 was U.S. \$ 12,730 – as per note number 16 to the financial statements – which is less than 10% of the Company's equity.
14. Information on changes in conditional commitments or conditional assets, occurred since the end of last fiscal year
No changes in conditional commitments or conditional assets, occurred since the end of the last fiscal year.
15. Other information important for the assessment of our personnel, economic and financial position, as well as our financial results
In the three and six month period ended June 30th, 2017, the Company's results of operations have been affected and are expected to continue to be affected by a number of factors. These factors were: the in-country crisis seriously affecting major markets, currency fluctuations, competition and price pressures, low gross profit margins, potential inventory obsolescence and price erosions, the worldwide unstable financial environment, seasonality, development of own brand business, warranty claims and high cost of debt. Our revenues in Q2 and H1 2017 have grown significantly as compared to Q2 and H1 2016, gross profit margins remained under control, while expenses grew only as a function of growth in revenues and gross profit. Despite all that we can not be certain for the future and the factors below may affect the Group:
The in-country crisis affecting our major markets, gross profit and gross profit margin
Throughout the years of operation, the Company has suffered from specific in-country crises (i.e. Russia and Ukraine in 2014 and 2015), because risk of in-country crises is quite high. We need to monitor any developments, react fast and weather any risks driven by external unforeseen factors in order to secure our results.
As previously mentioned, we have adapted to the situation in Russia and Ukraine, and our results in these countries have started to improve. In Russia, we have decided to focus on profits. For this reason, the Group is selective on the deals to undertake and the customers to engage with. However, we need to keep in mind, that different in-country problems might arise at any time and affect our operations, as the recent examples of Romania and Poland. Fortunately, our procedures that have significantly improved after 2014, allow us to react fast enough and mitigate risks and possible losses.
Currency fluctuations
The Company's reporting currency is the U.S. dollar. About 40% of the Company's revenues are denominated in U.S. dollars, while the balance is denominated in Euro, Ruble and other currencies, some of which are pegged to the Euro. Since most of the Company's trade payable balances are denominated in U.S. dollars (about 80%), the Company is exposed to foreign exchange risk that remains a crucial risk factor that might affect the Group's results in the future. Although the problem still persists and will persist as the Euro and other Eastern European currencies fluctuate in a steep manner against the U.S. Dollar, the Group has adopted hedging strategies to tackle this problem and this has been successful despite large volatility of some currencies. The management believe that hedging is very important in our industry and we shall continue enhancing it going forward, by adopting to new realities and finding solutions to hedge all exotic currencies in the region.
Competition and price pressure
The IT distribution industry is a highly competitive market, particularly with regards to products selection and quality, inventory, price, customer services and credit availability and hence is open to margin pressure from competitors and new entrants. The Company competes at the international level with a wide variety of distributors of varying sizes, covering different product categories and geographic markets. In particular, in each of the markets in which the Company operates it faces competition from:
- a) international distributors such as Avnet Inc., Tech Data Corp., Ingram Micro Inc. and Arrow Electronics Inc., which are much larger than the Company, but do not always cover the same geographic regions with local presence as the Company does,
- b) regional or local distributors, such as Elko, mainly in the Baltic States, Russia, Ukraine, Merlion in the Former Soviet Union, AB, ABC Data in Poland and ATC and ED System-BGS Levi in the Czech Republic and Slovakia.
Competition and price pressures from market competitors and new market entrants may lead to significant reductions in the Company's sales prices. Such pressures may also lead to a loss of market share in certain of the Group's markets. Price pressures can have a material adverse effect on the Company's profit margins and its overall profitability, especially in view of the fact that its gross profit margins, like those of most of its competitors, are low and sensitive to sales price fluctuations.
This was also visible in the tablet and smartphone segments where we have experienced the entrance of a number of strong competitors. This had a negative result on our profitability since we had to lower prices to get rid of our stocks.
In the same time, we see opportunities arising from specifics of particular markets, like in case of Ukraine, where we have managed to win market share from weaker competitors.
Low gross profit margins
The Company's business is both traditional distribution of third party products and own brand sales. This allows the Company to deliver healthier gross profit margins when conditions are favourable. However, the own brand business, has been significantly affected by new entrants and the margins have been lowered.
In the traditional distribution business, the Company's gross profit margins, like those of other distributors of IT products, are low and the Company expects that in the distribution arm of its business they will remain low in the foreseeable future. Increased competition arising from industry consolidation and low demand for certain IT products may hinder the Company's ability to maintain or improve its gross margins. A portion of the Company's operating expenses is relatively fixed, and planned expenditures are based in part on anticipated orders that are forecasted with limited visibility of future demand. As a result, the Company may not be able to reduce its operating expenses as a percentage of revenue in order to mitigate any reductions in gross margins in the future.
In an effort to increase gross margins, the Company has developed the own brand business, that allows for higher gross profit margins. Since this business already accounts for a significant part of total sales, it positively affects the overall gross profit margins and profitability of the Company. However,
this business is also connected with risks, including the risk of technology change, the risk of changes in demand and customer preferences. Therefore, it is extremely important for the Company to foresee market demand changes and offer new products right in time to satisfy consumer needs and be able to sell the previous technology as well.
Inventory obsolescence and price erosion
The Company is often required to buy components and finished products according to forecasted requirements and orders of its customers and in anticipation of market demand. The market for IT finished products and components is characterized by rapid changes in technology and short product shelf life, and, consequently, inventory may rapidly become obsolete. Due to the fast pace of technological changes, the industry may sometimes face a shortage or, at other times, an oversupply of IT products. As the Company increases the scope of its business and, in particular, of inventory management for its customers, there is an increasing need to hold inventory to serve as a buffer in anticipation of the actual needs of the Company's customers. This increases the risk of inventory becoming devalued or obsolete and could affect the Company's profits either because prices for obsolete products tend to decline quickly, or as a result of the need to make provisions for write-offs. In an oversupply situation, other distributors may elect to proceed with price reductions in order to dispose of their existing inventories, forcing the Company to lower its prices to stay competitive. The Company's ability to manage its inventory and protect its business against price erosion is critical to its success.
A number of the Company's most significant contracts with its major suppliers contain advantageous contract terms that protect the Company against exposure to price fluctuations, defective products and stock obsolescence.
For the own brand business division, the Company needs to balance between satisfying consumer demand and risk of inventory obsolence or price erosion, by having a proper level of inventory. Following an upgrade in our procedures done in 2015, we have not had any problems related to this issue since then.
Credit risk
The Company buys components and finished products from its suppliers on its own account and resells them to its customers. The Company extends credit to some of its customers at terms ranging from 21 to 90 days or, in a few cases, to 120 days. The Company's payment obligations towards its suppliers under such agreements are separate and distinct from its customers' obligations to pay for their purchases, except in limited cases where the Company's arrangements with its suppliers require the Company to resell to certain resellers or distributors. Thus, the Company is liable to pay its suppliers regardless of whether its customers pay for their respective purchases. As the Company's profit margin is relatively low compared to the total price of the products sold, in the event where the Company is not able to recover payments from its customers, it is exposed to a financial liquidity risk. The Company has in place credit insurance which covers such an eventuality for approximately 60% of its revenue.
Due to the recent market developments following the changes in credit rating of certain countries and regions where the Group operates in, credit risk has become one of the most important risk factors that might affect the Group's results in the future. Credit insurance companies are being more strict and risk averse to certain regions they have suffered from significant default cases. A major change happened in the GCC area where the credit insurers smashed the credit limit granted due to an extensive number of run-away cases. The Group, despite the fact that it has not been directly affected by these events, has decided to enhance its risk management proceedures. These do not guarantee that all issues will be avoided, however it grants the Company confidence that is in a position to weather any possible major credit issue that may arise.
Worldwide financial environment
The world's financial crisis has eased throughout the last years. This included recovery signals from some of our markets and stabilization in some of others. Following partial recovery, the Company has undertaken certain efforts to benefit from these signals both in revenues and profitablity. The revised
strategy and adaptation to the new environment, i.e., by rebuilding our product portfolio, has paid off in terms of increased market share and sales.
However, there are many uncertainties about the world economy following the developments in Russia and turmoil in the ME region coupled with volatility of currencies and fragility of demand in many markets. Additionally, from time to time, unpredictable situations may happen in selected markets. However, with the experience we have gained (lately in Russia and Ukraine), the management strongly believes today the Company is much more flexible and better prepared to weather any obstacles that may arise due to worldwide financial environment.
Seasonality
Traditionally the IT distribution industry in which the Company operates experiences high demand during the months prior to and leading up to the Christmas and New Year holiday period. In particular, IT distributors' demand tends to increase in the period starting from September till the end of the year.
Development of own brand business
The Company's strategy is to focus more on profitability than on revenues, thus we continue to develop the own brand business that allows for higher gross profit margins. This includes the development of tablets, smartphones, GPS and other product lines that are sold under Prestigio and Canyon brands in all regions of the Company's operations.
In order to keep quality under control and get the maximum possible gross profit margins, the Company decided go under a back-to-back scheme. Thus overall revenues from own brands sales are limited to the extent we decide is the best from the point of view of overall profitability. As a result we enjoy improvements in our total results, while any quality related risks are weathered.
The Company is undertaking a number of quality control measures to mitigate this risk, but given the volumes and the large amount of factories used to produce these products, these controls might not be sufficient. Moreover, competition has already been intensified and the Company may not be able to sustain its profitability levels.
Despite the Company's efforts, there can be no assurance of a similar development pace in own brand business in future periods. This is because there may be a significant change in market trends, customer preferences or technology changes that may affect the development of own brand business and therefore its results.
Warranty claims from own brand products
The own brand business requires us to put extra efforts to avoid any problems with quality of devices. Despite all our efforts, we have noticed significant returns on specific models produced in the recent past.
This risk has negatively affected our results in the past when certain ODMs have not honored their contractual obligations on products with epidemic failure. The Group is undertaking all possible steps towards ensuring proper compensation of past expenses. In the same time, in an effort to avoid such problems in the future, a much more scrutinized selection of suppliers is currently in place, which however, does not guarantee 100% elimination of the risk of warranty losses.
High cost of debt
Distribution business entails a higher need for cash available to support growth. The Group has managed to raise cash from various financial institutions, however in certain cases the cost of this financing is expensive. The Company has already negotiated better terms with some of its supplychain financiers and is currently undertaking certain extra steps to further lower cost of financing. However, the sanctions imposed to Russia and tensions related to the Ukrainian crisis have resulted in significantly increased cost of financing facilities in these countries and this may limit our efforts to further decrease our average cost of debt.
We have already successfully decreased the cost of credit lines, however the cost of factoring (especially in F.S.U. countries) remains at high levels increasing average cost of debt. Fortunately, factoring expense is a function of revenues. Thus it only grows when revenues and profits grow.
Results of Operations
Three and six month periods ended 30 June ended 30 June 2016 2017 compared to the three and six month periods
Revenues: Our revenues in H1 201 expect this upward trend to continue in H2 2017 In Q2 2017 revenues increased by In H1 2017 revenues increased by 2017 increased significantly as compared to upward trend 2017. creased 12.81% to U.S.\$ 280,130 from U.S.\$ 248,320 creased by 14.66% to U.S.\$ 570,331 from U.S.\$ 497,414 in H1 2016. H1 2016 and we in Q2 2016.
Gross profit: Gross profit has the corresponding periods of 201 increased significantly both in Q2 2017 and H he corresponding of 2016. H1 2017 compared to
In Q2 2017 gross profit increased by creased by 7.34% to U.S.\$ 15,102 from U.S.\$ 14,069 in Q2 2016.
In H1 2017 gross profit increased by creased 10.48% to U.S.\$ 30,241 from U.S.\$ 27,371 in H1 2016.
Gross profit margin has stabilized at levels above 5%, as targeted levels targeted.
In Q2 2017 gross profit margin ross decreased slightly to 5.39% from 5.67% in Q2 2016.
In H1 2017 gross profit margin ross amounted to 5.30% as compared to 5.50% in H1 2016 2016.
Selling expenses largely comprise of salaries and benefits paid to sales employees (sales, marketing and logistics departments), marketing and advertising fees, commissions, and traveling expenses. Selling expenses usually grow together (but not in importantly, gross profit. argely comprise of salaries employees logistics (but in-line) with growing sales and, most
In Q2 2017 selling expenses in increased by 10.89% to U.S.\$ 7,247 from U.S.\$ 6,535 in Q2 2016. In H1 2016 selling expenses in increased by 11.36% to U.S.\$ 14,119 from U.S.\$ 12,680 in H1 2016.
Administrative expenses largely comprise of salaries and wages rent expense. comprise and of administration personnel and
In Q2 2017 administrative expenses 2016 dministrative expenses decreased by 1.05% to U.S.\$ 3,942 from U.S.\$ 3,984 in Q2
In H1 2017 administrative expenses 2016. dministrative increased by 4.43% to U.S.\$ 8,222 from U.S.\$ 7,872 in H1
- Operating profit: The Company improved its In Q2 2017 the Company had operating profit of U.S. \$ 3,551 profit that was 15.85% higher y U.S. \$ 6,819 in H1 2016. improved its operating profit significantly both in Q2 and H1 201 had an operating profit of U.S.\$ 3,914 (+10.22% y-3,551, in Q2 2016. In H1 2017 the Company has generated was y-o-y and amounted to U.S. \$ 7,900 compared to operating 2017. -o-y) as compared to an operating profit of
- EBITDA in Q2 2017 EBITDA amounted to U.S n Q2 2017 EBITDA amounted U.S.\$ 4,469 as compared to U.S.\$ 4,069 in Q2 2016.
However, in H1 2017 EBITDA amounted to U. U.S.\$ 8,985 as compared to U.S.\$ 7,871 in H1 2016.
Net profit: As a result of growth in Company closed both Q2 201 revenues, increased gross profit and stable 2017 and H1 2017 with strong growth in a net profit. expenses, the
In Q2 2017 net profit after tax amounted to Q2 2016. U.S.\$ 461, a 109,19% growth compared to U.S.\$ 220 in
In H1 2017 net profit after tax to U.S.\$ 621 in H1 2016. grew by 62,83% while it has amounted to U.S.\$ 1,011 as compared
Sales by regions and countries countries
The F.S.U. and the CEE regions traditionally contribute the majority of revenues. This has not changed in Q2 and H1 2017. However, focus on performance and show an impressive respectively. Following that, the F.S.U. share in our total revenues grew to 4 33.75% in H1 2016. the the F.S.U. region has allowed it to continue 37.25% and 60.05% growth in Q2 2017 and H1 2017 Following in 47.11 its very good % 11% in H1 2017 from
We have also significantly improved our sales in Western Europe, remained stable year of year. Sales in CEE region decreased by 10.56% in Q2 2017 and 9.37% in H1 2017 as a result of lack of large EU funded projects in Slovakia in H1 2017. Apart from that, sales in other CEE countries have grown. while our sales in MEA region ales and funded projects in that, reveals a better understanding of the above mentioned trends. Growth in
Country-by-country analysis reveals F.S.U. has arisen from a continuous improvement in Russia 2017), Ukraine (+4.67% in Q2 2017 and + (+15.05% in Q2 2017 and +26.29% in H1 +36.79% in H1 2017), Kazakhstan (+223.72% in Q2 Q2 2017 and
+191,52% in H1 2017) and Belarus (+45.51% in Q2 2017 and +40.78% in H1 2017). At the same time, the decrease in Slovakia (-33.35% in Q2 2017 and -30.13% in H1 2017) has been partially compensated by an increase in the Czech Republic (+6.65% in Q2 2017 and +13.24% in H1 2017), Romania (+11.23% in Q2 2017 and +14.00% in H1 2017) and Bulgaria (+12.83% in Q2 2017). The MEA result is mainly determined by our revenues in UAE (+26.82% in Q2 2017 and +0.70% in H1 2017).
The tables below provide a geographical breakdown of sales for the three and six month periods ended June 30th, 2017 and 2016.
| Q2 2017 | Q2 2016 | |||
|---|---|---|---|---|
| U.S. \$ thousand |
% of total revenues |
U.S. \$ thousand |
% of total revenues |
|
| Former Soviet Union | 128,954 | 46.03% | 93,953 | 37.84% |
| Central and Eastern Europe | 91,340 | 32.61% | 102,124 | 41.13% |
| Middle East and Africa | 37,225 | 13.29% | 36,570 | 14.73% |
| Western Europe | 20,489 | 7.31% | 6,864 | 2.76% |
| Other | 2,122 | 0.76% | 8,810 | 3.55% |
| Total | 280,130 | 100% | 248,320 | 100% |
| H1 2017 | H1 2016 | |||
|---|---|---|---|---|
| U.S. \$ thousand |
% of total revenues |
U.S. \$ thousand |
% of total revenues |
|
| Former Soviet Union | 268,691 | 47.11% | 167,878 | 33.75% |
| Central and Eastern Europe | 182,653 | 32.03% | 201,537 | 40.52% |
| Middle East and Africa | 73,622 | 12.91% | 80,440 | 16.17% |
| Western Europe | 41,624 | 7.30% | 29,631 | 5.96% |
| Other | 3,742 | 0.66% | 17,928 | 3.60% |
| Total | 570,331 | 100% | 497,414 | 100% |
Revenue breakdown – Top 10 countries in Q2 2017 and Q2 2016 (in U.S. Dollar thousand)
| Q2 2017 | Q2 2016 | ||||
|---|---|---|---|---|---|
| Country | Sales | Country | Sales | ||
| 1. | Russia | 53,433 | Russia | 46,442 | |
| 2. | Slovakia | 30,820 | Slovakia | 46,245 | |
| 3. | Kazakhstan | 29,067 | Ukraine | 26,304 | |
| 4. | Ukraine | 27,532 | United Arab Emirates | 19,606 | |
| 5. | United Arab Emirates | 24,864 | Czech Republic | 14,815 | |
| 6. | Czech Republic | 15,800 | Romania | 9,874 | |
| 7. | Belarus | 13,705 | Belarus | 9,419 | |
| 8. | Romania | 10,983 | Kazakhstan | 8,979 | |
| 9. | The Netherlands | 10,893 | Hungary | 6,752 | |
| 10. | Bulgaria | 6,310 | Bulgaria | 5,593 |
| 11. | Other | 56,723 | Other | 54,292 |
|---|---|---|---|---|
| TOTAL | 280,130 | TOTAL | 248,320 |
| H1 20 H1 2017 |
H1 2016 | ||||
|---|---|---|---|---|---|
| Country | Sales | Country | Sales | ||
| 1. | Russia | 113,106 | Slovakia | 89,560 | |
| 2. | Slovakia | 62,580 | Russia | 78,310 | |
| 3. | Ukraine | 59,611 | United Arab Emirates | 49,636 | |
| 4. | Kazakhstan | 56,615 | Ukraine | 43,577 | |
| 5. | United Arab Emirates United |
49,981 | Czech Republic | 27,722 | |
| 6. | Czech Republic | 31,392 | Romania | 21,338 | |
| 7. | Belarus | 27,838 | Belarus | 19,774 | |
| 8. | Romania | 24,324 | Kazakhstan | 19,421 | |
| 9. | The Netherlands | 21,640 | Hungary | 13,262 | |
| 10. | Bulgaria | 12,902 | The Netherlands | 12,636 | |
| 11. | Other | 110,343 | Other | 122,179 | |
| TOTAL | 570,331 | TOTAL | 497,414 |
Revenue breakdown – Top 10 countries in 10 H1 2017 and H1 2016 (in U.S. Dollar thousand)
Sales by product lines
ASBIS remains the distributor of first choice for many worldwide suppliers. This includes cooperation with Apple, that allows us to increase our revenues in Ukraine, Belarus and Kazakhstan where we have also distributed iPhones. All changes in our product portfolio have to comply with our main focus, which is the increase of margins and profitability the This with revenues in Belarus . product have comply main increase of profitability.
The chart below indicates the trends in sales per product line:
Growth in H1 2017 sales was driven by sales of smartphones, lap product lines, while sales of typical components were relatively stable year-on-year. tops, year. The
Revenues from CPUs increased by 2.33% in Q2 2017 and decrease in revenues from HDDs ( increase in sales of SSDs (+142.34% in Q2 2017 and +163.60% in H1 2017). Finaly, smartphones which is the key driver of sales growth, increased by 68.80% in Q2 2017 and by 55. and decreased by 2.36% in H1 2017. in revenues (-3.13% in Q2 2017 and -5.91% in H1 2017) was offset by increase in of Q2 +163.60% in H1 55. 5.91% an 55.99% in H1 2017.
From other product lines, the Company has noticed a positive trend for Q2 and H1 2017 in mainboards and VGA cards (+106.90% and +67.60%), peripherals (+13.22% and +35.29%), memory modules (+67.39% and +84.98%) and accessories and multimedia (+20.05% and +44.78%).
The table below sets a breakdown of revenues, by product lines, for Q2 2017 and Q2 2016:
| Q2 2017 | Q2 2016 | |||
|---|---|---|---|---|
| U.S. \$ % of total |
U.S. \$ | % of total | ||
| thousand | revenues | thousand | revenues | |
| Smartphones | 68,297 | 24.38% | 40,460 | 16.29% |
| Central processing units (CPUs) | 45,792 | 16.35% | 44,747 | 18.02% |
| Hard disk drives (HDDs) | 29,767 | 10.63% | 30,728 | 12.37% |
| PC-mobile (laptops) | 20,425 | 7.29% | 19,305 | 7.77% |
| SSD | 15,033 | 5.37% | 6,203 | 2.50% |
| Tablets | 9,725 | 3.47% | 12,272 | 4.94% |
| Software | 8,597 | 3.07% | 15,898 | 6.40% |
| Other | 82,495 | 29.45% | 84,910 | 34.19% |
| Total revenue | 280,130 | 100% | 248,320 | 100% |
| H1 2017 | H1 2016 | ||||
|---|---|---|---|---|---|
| U.S. \$ | % of total | U.S. \$ | % of total | ||
| thousand | revenues | thousand | revenues | ||
| Smartphones | 136,521 | 23.94% | 87,520 | 17.59% | |
| Central processing units (CPUs) | 95,392 | 16.73% | 97,699 | 19.64% | |
| Hard disk drives (HDDs) | 55,835 | 9.79% | 59,342 | 11.93% | |
| PC-mobile (laptops) | 43,595 | 7.64% | 39,338 | 7.91% | |
| SSD | 32,240 | 5.65% | 12,230 | 2.46% | |
| Software | 17,710 | 3.11% | 28,201 | 5.67% | |
| Tablets | 19,790 | 3.47% | 19,870 | 3.99% | |
| Other | 169,247 | 29.68% | 153,214 | 30.80% | |
| Total revenue | 570,331 | 100% | 497,414 | 100% |
Liquidity and Capital Resources
The Company has in the past funded its liquidity requirements, including ongoing operating expenses and capital expenditures and investments, for the most part, through operating cash flows, debt financing and equity financing. Cash flow in Q2 and H1 2017 has been negatively impacted by the revenue growth, increased working capital utilization and dividend payout. Neverthless, cash from operations in H1 2017 was improved by almost U.S.\$ 15 million and for Q2 2017 standalone was positive. We do expect to generate a positive cash flow from operations for the full year.
The following table presents a summary of cash flows for the six months ended June 30th, 2017 and 2016:
| Six months ended June 30th | |||
|---|---|---|---|
| 2017 | 2016 | ||
| U.S. \$ | |||
| Net cash outflows from operating activities | (18,865) | (33,204) | |
| Net cash outflows from investing activities | (820) | (734) | |
| Net cash inflows/(outflows) from financing activities | 5,789 | (891) | |
| Net decrease in cash and cash equivalents | (13,896) | (34,829) |
Net cash outflows from operations
Net cash outflows from operations amounted to U.S. \$ 18,865 for the six months ended June 30th , 2017, compared to outflows of U.S. \$ 33,204 in the corresponding period of 2016. This is attributed mainly to improved profitability and working capital utilization. The Company expects cash from operations to turn positive for 2017. Cash from operations was positive in Q2 2017 standalone and amounted to U.S.\$ 10,814 as compared to negative cash from operations of U.S.\$ 14,350 in Q2 2016.
Net cash outflows from investing activities
Net cash outflows from investing activities was U.S. \$ 820 for the six months ended June 30th, 2017, compared to outflows of U.S. \$ 734 in the corresponding period of 2016. These outflows mainly relate to on-going investments for fixed assets (such as computers, furniture etc.).
Net cash outflows from financing activities
Net cash inflows from financing activities was U.S. \$ 5,789 for the six months ended June 30th, 2017, compared to outflows of U.S.\$ 891 for the corresponding period of 2016. This primarily relates to increased utilization of certain financing lines to support sales growth.
Net decrease in cash and cash equivalents
As a result of improved net cash outflow from operating activities, cash and cash equivalents have decreased by U.S. \$ 13,896, compared to a decrease of U.S. \$ 34,829 in the corresponding period of 2016, a U.S.\$ 21 million improvement.
16. Factors which may affect our results in the future
Political and economic stability in Europe and our regions
The markets the Group operates into, have traditionally shown a vulnerability in political and economic environment, like the turbulence noted in Ukraine and Russia back in 2014 that has negatively affected our results in the past. The weak economies in the F.S.U. region and certain politically driven events in all markets, are considered by the management as a crucial external factor, which might adversely affect our results, in the short term.
Having seen the recent improvement in our F.S.U. markets and our other major regions, we do believe to be able to further benefit from the work done during the tough times. What is more, we develop more markets of this region with new product lines and our revenues and profitability benefit from that. We will continue this strategy and focus more on our core regions and strengths, to maximize profits and take advantage of any further market revival.
The Group's ability to increase revenues and market share while focusing on profits
The diversified geographic coverage of the Group's revenues ensures that we do mitigate the risk of lower sales in a particular country with the possibility of higher sales in a number of other countries. Russia, Kazakhstan, Slovakia and Ukraine are currently the markets that lead in terms of revenue. We need to ensure that we adopt to any possible changes in these markets and reinforce our strategy to fully diversify our sales.
Following the recent improvement in the F.S.U. region, it regained the leading position in our revenue breakdown by geographies. This was a result of the focus of the Group to its strong competencies and to the extended product portfolio to this market place. As a result, our revenues in Q2 and H1 2017 continued to grow significantly. We do expect this positive trend to continue, as reflected in our financial forecast for 2017.
Despite all measures taken by the Company, the possibility of a decrease in demand and sales in a particular country cannot be excluded in the future. Such a situation may limit overall growth. It is of extreme importance for the Company to prepare its structure to offset such a situation with higher sales in other markets. This means both a constant upgrade of the product portfolio and close relations with customers to win more market share from weaker competitors.
The Group's ability to increase gross profit margins
The Group's gross profit margin has decreased slightly in Q2 and H1 2017 as compared to the corresponding periods of 2016. This is a result of changes in our product portfolio and some large deals with big wholesale customers. Apart from that we continue to keep our margins at levels reached last year. We still focus on margins rather than sales. The pace of growth in gross profit margins is hard to estimate, as the margins may remain under pressure due to enhanced competition together with lower demand in a number of markets and due to some very large deals that occur from time to time. It is of extreme importance for the Group to manage its stock level and refine its product portfolio in order to achieve optimum gross profit margins. The directors believe that the Group has reached satisfactory gross profit margin levels and shall work hard to retain them.
Currency volatilities
The multi-currency environment that the Group operates in exposes its financial results to steep currency fluctuations. Although volatility of a number of currencies in Q2 and H1 2017 was strong, we have been successfully shielded by our hedging policy. Therefore, the hedging strategy should be followed and further improved without any exception for 2017.
Ability of the Group to control expenses
Selling expenses in Q2 and H1 2017 increased as compared to Q2 and H1 2016 as a result of increased revenues and gross profit and our investments in human capital for the F.S.U. region. This is expected to allow us to benefit in the next quarters of 2017 from our stronger position in this market. Administrative expenses remained stable. Despite Q2 and H1 2017 investments, we continue a strict control over expenses.
Ability to further develop the Group's product portfolio, both third party and own brands
Because of its size, geographical coverage and good relationship with vendors, the Company has managed to build an extensive product portfolio. It is crucial for the Company to continue refining its product mix constantly by adding new product lines with higher gross (and net) profit margins to boost its profitability. A recent example is smartphones that the Company has timely invested in and resulted in improved profitability.
Ability to cover warranty claims from customers
The own brand business requires us to be very careful with quality as it may affect both the consumer satissfaction and our expenses. Since we do not manufacture the devices ourselves, we have built increased warranty provisions and signed separate agreements with our suppliers to cover us against warranty losses of such products. We have much improved our procedures from H2 2015 and this has covered us since then. Therefore, we have not faced any specific problems in this area in Q2 and H1 2017 and we do not expect warranty losses to hit us hard in the foreseable future.
17. Information about important events that occurred after the period ended on June 30th, 2017 and before this report release
According to our best knowledge, in the period between June 30th, 2017 and August 8th, 2017 no events have occurred that could affect the Company's operations or its financial stability.
Part II Financial Information
The financial information of ASBISc Enterprises Plc presented as a part of this report is as follows:
Report and Condensed Consolidated Interim Financial Statements for the period ended 30 June 2017
| Contents | Page |
|---|---|
| Board of Directors representations | 1 |
| Declaration by the members of the Board of Directors and the Company officials responsible for the drafting of the condensed consolidated interim financial statements |
2 |
| Independent Auditors' review report | 3 |
| Condensed consolidated interim statement of profit and loss | 4 |
| Condensed consolidated interim statement of comprehensive income | 5 |
| Condensed consolidated interim statement of financial position | 6 |
| Condensed consolidated interim statement of changes in equity | 7 |
| Condensed consolidated interim statement of cash flows | 8 |
| Notes to the condensed consolidated interim financial statements | 9-21 |
ASBISC ENTERPRISES PLC
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30 JUNE 2017
| CONTENTS | PAGE |
|---|---|
| Board of Directors representations | 1 |
| Declaration by the members of the Board of Directors and the Company officials responsible for the drafting of the condensed consolidated interim financial statements |
2 |
| Independent Auditors' review report | 3 |
| Condensed consolidated interim statement of profit or loss | 4 |
| Condensed consolidated interim statement of comprehensive income | 5 |
| Condensed consolidated interim statement of financial position | 6 |
| Condensed consolidated interim statement of changes in equity | 7 |
| Condensed consolidated interim statement of cash flows | 8 |
| Notes to the condensed consolidated interim financial statements | 9 - 21 |
ASBISC ENTERPRISES PLC
BOARD OF DIRECTORS REPRESENTATIONS
In accordance with the requirements of the Ordinance of the Minister of Finance dated February 19th, 2009 on current and periodical information published by issuers of securities and on the conditions of recognizing as equivalent the information required by the laws of non-EU Member States, the Board of Directors of ASBISC ENTERPRISES PLC hereby represents that:
-
to its best knowledge, the semi-annual condensed consolidated financial statements and the comparative data have been prepared in accordance with the applicable accounting policies and that they give a true, fair and clear reflection of the group's financial position and its financial result, and that the semi-annual Director's Report on operations gives a true view of the group's development, achievements, and position, including description of basic risks and threats;
-
the registered audit company which reviewed the semi-annual condensed consolidated financial statements was appointed in accordance with the legal regulations and the said company and the registered auditors who performed the review fulfilled the conditions for issuing an unbiased and independent review report, in accordance with the principles of compulsory regulations and professional standards.
Limassol, August 7th, 2017
DECLARATION BY THE MEMBERS OF THE BOARD OF DIRECTORS AND THE COMPANY OFFICIALS RESPONSIBLE FOR THE DRAFTING OF THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(In accordance with the provisions of Law 190(I)/2007 on Transparency Requirements)
In accordance with Article 9, sections (3c) and (7), of the Transparency Requirements (Traded Securities in Regulated Markets) Law 190 (1) / 2007 we, the members of the Board of Directors and the company officials responsible for the drafting of the condensed consolidated interim financial statements of Asbisc Enterprises Plc (the "company") and its subsidiaries (the "group") for the period ended 30 June 2017, confirm to the best of our knowledge that:
a) the condensed consolidated interim financial statements for the period ended 30 June 2017 which are presented on pages 4 to 21:
(i) have been prepared in accordance with the International Financial Reporting Standards and requirements of the section (4), and
(ii) give a true and fair view of the assets and liabilities, the financial position and the profit or loss of the company and the undertakings included in the consolidation, taken as a whole, and
b) the Board of Directors' report provides a fair review of the developments and the performance of the business and the position of the company's and the undertakings included in the consolidation, taken as a whole, together with a description of the principal risks and uncertainties that they face.
Members of the Board of Directors:
| Siarhei Kostevitch (Cypriot) Chairman and Chief Executive Officer |
……………………………………………………… |
|---|---|
| Marios Christou (Cypriot) Executive Director |
……………………………………………………… |
| Constantinos Tziamalis (Cypriot) Executive Director |
……………………………………………………… |
| Yuri Ulasovich (Cypriot) Executive Director |
……………………………………………………… |
| Demos Demou (Cypriot) Non-Executive Director |
……………………………………………………… |
| Christakis Pavlou (Cypriot) Non-Executive Director |
……………………………………………………… |
Financial Controller responsible for the drafting of the financial statements
| Loizos Papavassiliou (Cypriot) | |
|---|---|
| Financial Controller ……………………………………………………… |
|---|
| ----------------------------------------------- |
Limassol, 7 August 2017
INDEPENDENT AUDITORS' REPORT ON THE REVIEW OF THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
TO THE BOARD OF DIRECTORS OF ASBISC ENTERPRISES PLC
Introduction
We have reviewed the accompanying condensed consolidated interim financial statements of Asbisc Enterprises PLC and its subsidiaries (the "group") on pages 4 to 21 which comprise the condensed consolidated interim statement of financial position of the group as at 30 June 2017, and the condensed consolidated interim statements of profit or loss, comprehensive income, changes in equity and cash flows of the group for the six month period then ended and notes to the interim financial information (the "Condensed Consolidated Interim Financial Information"). Management is responsible for the preparation and fair presentation of this Condensed Consolidated Interim Financial Information in accordance with the International Accounting Standard 34 "Interim Financial Reporting". Our responsibility is to express a conclusion on this Condensed Consolidated Interim Financial Information based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying Condensed Consolidated Interim Financial Information as at 30 June 2017 is not prepared, in all material respects, in accordance with IAS 34 "Interim Financial Reporting".
Certified Public Accountants and Registered Auditors KPMG Center, No.11, 16th June 1943 Street, 3022 Limassol, Cyprus.
Limassol, 7 August 2017
CONDENSED CONSOLIDATED INTERIM STATEMENT OF PROFIT OR LOSS FOR THE PERIOD ENDED 30 JUNE 2017
| For the six months ended 30 June 2017 |
For the six months ended 30 June 2016 |
||
|---|---|---|---|
| Note | US\$ | US\$ | |
| Revenue Cost of sales |
4,23 | 570,331,364 (540,090,151) |
497,414,329 (470,042,955) |
| Gross profit Selling expenses Administrative expenses |
30,241,213 (14,119,701) (8,221,470) |
27,371,374 (12,679,570) (7,872,389) |
|
| Profit from operations | 7,900,042 | 6,819,415 | |
| Financial income Financial expenses Other gains and losses Profit before tax |
7 7 5 6 |
482,539 (6,656,410) (442,698) 1,283,473 |
265,489 (6,538,318) 160,058 706,644 |
| Taxation | 8 | (272,381) | (85,709) |
| Profit for the period | 1,011,092 | 620,935 | |
| Attributable to: Equity holders of the parent |
1,021,732 | 613,895 | |
| Non-controlling interests | (10,640) | 7,040 | |
| 1,011,092 | 620,935 | ||
| Earnings per share | US\$ cents | US\$ cents | |
| Basic and diluted from continuing operations | 1.84 | 1.11 |
ASBISC ENTERPRISES PLC
CONDENSED CONSOLIDATED INTERIM STATEMENT OF OTHER COMPREHENSIVE INCOME FOR THE PERIOD ENDED 30 JUNE 2017
For the six months ended 30 June 2017 For the six months ended 30 June 2016 US\$ US\$ Profit for the period 1,011,092 620,935 Other comprehensive income Exchange difference on translating foreign operations 1,697,343 756,569 Reclassification adjustments relating to foreign operations liquidated in the period 7,193 - Other comprehensive income for the period 1,704,536 756,569 Total comprehensive income for the period 2,715,628 1,377,504 Total comprehensive income attributable to: Equity holders of the parent 2,706,548 1,368,148 Non-controlling interests 9,0780 9,356 2,715,628 1,377,504
CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2017
| Notes | As at 30 June 2017 US\$ |
As at 31 December 2016 US\$ |
|
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Property, plant and equipment | 9 | 23,933,253 | 23,209,538 |
| Intangible assets | 10 | 3,028,280 | 2,991,585 |
| Available-for-sale financial assets | 11 | 11,794 | 11,794 |
| Goodwill | 27 | 798,620 | 1,255,204 |
| Deferred tax assets | 20 | 1,082,178 | 1,006,592 |
| Total non-current assets | 28,854,125 | 28,474,713 | |
| Current assets | |||
| Inventories | 12 | 102,160,977 | 113,857,748 |
| Trade receivables | 13 | 168,104,882 | 221,068,033 |
| Other current assets | 14 | 17,968,921 | 16,990,435 |
| Derivative financial assets | 25 | 485,640 | 1,079,208 |
| Current taxation | 8 | 346,419 | 663,773 |
| Cash at bank and in hand | 26 | 30,400,362 | 33,351,703 |
| Total current assets | 319,467,201 | 387,010,900 | |
| Total assets | 348,321,326 | 415,485,613 | |
| EQUITY AND LIABILITIES | |||
| Equity | |||
| Share capital | 15 | 11,100,000 | 11,100,000 |
| Share premium | 23,518,243 | 23,518,243 | |
| Retained earnings and other components of equity | 52,150,813 | 51,109,265 | |
| Equity attributable to owners of the parent | 86,769,056 | 85,727,508 | |
| Non-controlling interests | 372,441 | 167,361 | |
| Total equity | 87,141,497 | 85,894,869 | |
| Non-current liabilities | |||
| Long term borrowings | 17 | 963,661 | 1,184,107 |
| Other long term liabilities | 18 | 340,107 | 313,475 |
| Deferred tax liabilities | 20 | 155,247 | 149,683 |
| Total non-current liabilities | 1,459,015 | 1,647,265 | |
| Current liabilities | |||
| Trade payables | 132,843,814 | 202,038,292 | |
| Other current liabilities | 21 | 23,416,750 | 26,945,360 |
| Short term borrowings | 16 | 102,957,056 | 98,623,302 |
| Derivative financial liabilities | 24 | 325,051 | 1,383 |
| Current taxation | 8 | 178,143 | 335,142 |
| Total current liabilities | 259,720,814 | 327,943,479 | |
| Total liabilities | 261,179,829 | 329,590,744 | |
| Total equity and liabilities | 348,321,326 | 415,485,613 |
The financial statements were approved by the Board of Directors on 7 August 2017.
.................................... .................................... Constantinos Tziamalis Marios Christou Director Director
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD ENDED 30 JUNE 2017
Attributable to equity holders of the parent
| Share capital US\$ |
Share premium US\$ |
Treasury stock US\$ |
Translation of foreign operations US\$ |
Retained earnings US\$ |
Total US\$ |
Non-control ling interests US\$ |
Total US\$ |
|
|---|---|---|---|---|---|---|---|---|
| Balance at 1 January 2016 | 11,100,000 | 23,518,243 | (14,234) (13,126,734) | 59,847,099 | 81,324,374 | 155,261 | 81,479,635 | |
| Profit for the period 1 January 2016 to 30 June 2016 Other comprehensive income for the year |
- - |
- - |
- - |
- 754,253 |
613,895 - |
613,895 754,253 |
7,040 2,316 |
620,935 756,569 |
| Balance at 30 June 2016 | 11,100,000 | 23,518,243 | (14,234) (12,372,481) | 60,460,994 | 82,692,522 | 164,617 | 82,857,139 | |
| (Loss)/profit for the period 1 July 2016 to 31 December 2016 Other comprehensive profit/(loss) for the period 1 July 2016 to 31 December 2016 Balance at 31 December 2016 |
- - 11,100,000 |
- - 23,518,243 |
- - |
- (968,362) (14,234) (13,340,843) |
4,003,348 - 64,464,342 |
4,003,348 (968,362) 85,727,508 |
(8,588) 11,332 167,361 |
3,994,760 (957,030) 85,894,869 |
| Profit/(loss) for the period 1 January 2017 to 30 June 2017 Other comprehensive profit for the period 1 January 2017 to 30 June 2017 Payment of final dividend Minority interest on establishment of new subsidiary |
- - - - |
- - - - |
- - - - |
- 1,684,816 - - |
1,021,732 - (1,665,000) - |
1,021,732 1,684,816 (1,665,000) - |
(10,640) 19,720 - 196,000 |
1,011,092 1,704,536 (1,665,000) 196,000 |
| Balance at 30 June 2017 | 11,100,000 | 23,518,243 | (14,234) (11,656,027) | 63,821,074 | 86,769,056 | 372,441 | 87,141,497 |
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS FOR THE PERIOD ENDED 30 JUNE 2017
| Note | For the six months ended 30 June 2017 US\$ |
For the six months ended 30 June 2016 US\$ |
|
|---|---|---|---|
| Profit for the period before tax and minority interest Adjustments for: |
1,283,473 | 706,644 | |
| Exchange difference arising on consolidation | 786,740 | 540,843 | |
| Depreciation of property, plant and equipment | 9 | 727,713 | 764,094 |
| Amortization of intangible assets | 10 | 357,494 | 287,073 |
| Impairment losses on intangible assets and goodwill | 5,27 | 560,420 | - |
| Profit from the sale of property, plant and equipment and intangible assets | 5 | (28,591) | (22,094) |
| Provision for bad debts and receivables written off | 1,462,848 | 797,174 | |
| Bad debts recovered | 5 | (7,950) | (1,227) |
| Provision for slow moving and obsolete stock | 642,638 | (208,276) | |
| Interest received | 7 | (15,624) | (69,343) |
| Interest paid | 7 | 1,960,779 | 2,196,844 |
| Operating profit before working capital changes | 7,729,940 | 4,991,732 | |
| Decrease/(increase) in inventories | 11,054,133 | (7,988,397) | |
| Decrease in trade receivables | 51,508,253 | 34,660,134 | |
| Increase in other current assets | (384,918) | (2,494,387) | |
| Decrease in trade payables | (69,194,478) | (51,534,500) | |
| (Decrease)/increase in other current liabilities | (4,869,942) | 2,475,272 | |
| Increase/(decrease) in other non-current liabilities | 26,632 | (62,865) | |
| Decrease in factoring creditors | (12,620,576) | (10,763,874) | |
| Cash outflows from operations | (16,750,956) | (30,716,885) | |
| Interest paid | 7 | (1,960,779) | (2,196,844) |
| Taxation paid, net | 8 | (153,114) | (290,117) |
| Net cash outflows from operating activities | (18,864,849) | (33,203,846) | |
| Cash flows from investing activities | |||
| Purchase of intangible assets | 10 | (427,750) | (332,159) |
| Purchase of property, plant and equipment | 9 | (566,762) | (493,004) |
| Proceeds from sale of property, plant and equipment and intangible assets | 158,513 | 22,094 | |
| Interest received | 7 | 15,624 | 69,343 |
| Net cash outflows from investing activities | (820,375) | (733,726) | |
| Cash flows from financing activities Repayments of long term loans and long term obligations under finance |
|||
| lease | (220,446) | (451,515) | |
| Proceeds/(repayments) of short term borrowings and short term obligations | |||
| under finance lease | 6,009,358 | (439,874) | |
| Net cash inflows/(outflows) from financing activities | 5,788,912 | (891,389) | |
| Net decrease in cash and cash equivalents | (13,896,312) | (34,828,961) | |
| Cash and cash equivalents at beginning of the period | 6,536,849 | 4,289,856 | |
| Cash and cash equivalents at end of the period | 26 | (7,359,463) | (30,539,105) |
ASBISC ENTERPRISES PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30 JUNE 2017
1. Incorporation and principal activities
Asbisc Enterprises Plc was incorporated in Cyprus on 9 November 1995 with limited liability. These condensed consolidated interim financial statements ("interim financial statements") as at and for the six months ended 30 June 2017 comprise the interim financial statements of the company and its subsidiaries (together referred to as the "group"). The group's and the company's principal activity is the trading and distribution of computer hardware and software. The main shareholder of the company is K.S. Holdings Limited, a company incorporated in Cyprus.
The Company is listed on the Warsaw Stock Exchange since 30 October 2007.
2. Basis of preparation
(a) Statement of compliance
These interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. They do not include all the information required for a complete set of IFRS financial statements and they should be read in conjunction with the audited financial statements for the year ended 31 December 2016. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the group since the last annual consolidated financial statements as at and for the year ended 31 December 2016.
These interim financial statements were authorized for issue by the company's Board of Directors on 7 August 2017.
(b) Use of judgments and estimates
Preparing the interim financial statements requires Management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. The significant judgments made by Management in applying the group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2016.
3. Significant accounting policies
The accounting policies adopted for the preparation of the condensed consolidated interim financial statements for the six months ended 30 June 2017 are consistent with those followed for the preparation of the annual financial statements for the year 2016 except for the adoption by the group of all the new and revised standards and interpretations issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to its operations and effective for annual periods beginning on 1 January 2017. The adoption of new and revised standards and interpretations did not have any material effect on the group's condensed consolidated financial statements.
4. Effects of seasonality
The group's revenue and consequently its profitability are significantly lower during the first half of the year. The seasonality is driven by increased household expenditure during the Christmas period as well as the commencement of the academic period during the second half of the year resulting in a positive effect on demand for the group's products.
5. Other gains and losses
| For the six months ended 30 June 2017 US\$ |
For the six months ended 30 June 2016 US\$ |
|
|---|---|---|
| Profit on disposal of property, plant and equipment | 28,591 | 22,094 |
| Other income | 42,426 | 103,617 |
| Bad debts recovered | 7,950 | 1,227 |
| Rental income | 38,755 | 33,120 |
| Impairment loss on goodwill | (560,420) | - |
| (442,698) | 160,058 |
6. Profit before tax
| For the six months ended 30 June 2017 US\$ |
For the six months ended 30 June 2016 US\$ |
|
|---|---|---|
| Profit before tax is stated after charging : | ||
| (a) Amortization of intangible assets (Note 10) | 357,494 | 287,073 |
| (b) Depreciation (Note 9) | 727,713 | 764,094 |
| (c) Auditors' remuneration | 179,485 | 173,307 |
| (e) Directors' remuneration – executive (Note 28) | 175,019 | 223,995 |
| (e) Directors' remuneration – non-executive (Note 28) | 1,094 | 1,118 |
7. Financial expense, net
| For the six months ended 30 June 2017 US\$ |
For the six months ended 30 June 2016 US\$ |
|
|---|---|---|
| Financial income | ||
| Interest income | 15,624 | 69,343 |
| Other financial income | 359,133 | 196,146 |
| Net exchange gain | 107,782 | - |
| 482,539 | 265,489 | |
| Financial expense | ||
| Bank interest | 1,960,779 | 2,196,844 |
| Bank charges | 621,515 | 659,813 |
| Derivative charges | 462,912 | 314,616 |
| Factoring interest | 2,769,108 | 1,976,270 |
| Factoring charges | 151,787 | 157,154 |
| Other financial expenses | 87,440 | 20,061 |
| Other interest | 602,869 | 579,575 |
| Net exchange loss | - | 633,985 |
| 6,656,410 | 6,538,318 | |
| Net | (6,173,871) | (6,272,829) |
8. Tax
| For the six months ended 30 June 2017 US\$ |
For the year ended 31 December 2016 US\$ |
|
|---|---|---|
| Receivable balance 1 January Provision for the period/year (Over)/under provision of prior year periods Exchange difference on retranslation Amounts paid, net |
(328,631) 329,290 (2,831) (12,990) (153,114) |
(235,073) 802,924 5,886 (4,768) (897,600) |
| Net receivable balance 30 June/31 December | (168,276) | (328,631) |
| As at 30 June 2017 US\$ |
As at 31 December 2016 US\$ |
|
| Tax receivable Tax payable |
(346,419) 178,143 |
(663,773) 335,142 |
Net (168,276) (328,631)
The consolidated taxation charge for the period/year consists of the following:
| For the six months ended 30 June 2017 US\$ |
For the six months ended 30 June 2016 US\$ |
|
|---|---|---|
| Provision for the period | 329,290 | 218,425 |
| (Over)/under provision of prior years | (2,831) | 3,809 |
| Deferred tax charge (Note 20) | (54,078) | (136,525) |
| Charge/(credit) for the period | 272,381 | 85,709 |
The taxation charge of the group comprises corporation tax charge in Cyprus on the taxable profits of the company and those of its subsidiaries which are subject to tax in Cyprus and corporation tax in other jurisdictions on the results of the foreign subsidiary companies.
ASBISC ENTERPRISES PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30 JUNE 2017
9. Property, plant and equipment
| Land and buildings US\$ |
Computer hardware US\$ |
Warehouse machinery US\$ |
Motor vehicles US\$ |
Furniture and fittings US\$ |
Office equipment US\$ |
Total US\$ |
|
|---|---|---|---|---|---|---|---|
| Cost | |||||||
| At 1 January 2016 | 23,355,177 | 6,436,831 | 368,967 | 2,253,762 | 2,384,129 | 2,867,739 | 37,666,605 |
| Additions | 732,135 | 473,166 | 6,005 | 218,803 | 69,371 | 70,531 | 1,570,011 |
| Disposals / write-offs |
- | (798,777) | - | (419,387) | (79,859) | (188,327) | (1,486,350) |
| Foreign exchange difference on retranslation | (301,465) | (75,483) | (111) | (32,009) | (41,245) | (38,306) | (488,619) |
| At 31 December 2016 | 23,785,847 | 6,035,737 | 374,861 | 2,021,169 | 2,332,396 | 2,711,637 | 37,261,647 |
| Additions | 16,121 | 253,501 | - | 240,452 | 37,570 | 19,118 | 566,762 |
| Disposals / write-offs | (292,329) | (49,529) | - | (196,625) | (27,307) | (45,340) | (611,130) |
| Foreign exchange difference on retranslation | 997,979 | 225,746 | 252 | 76,049 | 114,746 | 105,274 | 1,520,046 |
| At 30 June 2017 | 24,507,618 | 6,465,455 | 375,113 | 2,141,045 | 2,457,405 | 2,790,689 | 38,737,325 |
| Accumulated depreciation | |||||||
| At 1 January 2016 | 3,510,711 | 5,091,969 | 116,512 | 1,660,582 | 1,784,874 | 1,997,052 | 14,161,700 |
| Charge for the year | 256,585 | 601,269 | 38,930 | 234,095 | 173,769 | 239,794 | 1,544,442 |
| Disposals / write-offs | - | (798,777) | - | (419,387) | (79,859) | (188,327) | (1,486,350) |
| Foreign exchange difference on retranslation | (2,839) | (66,319) | (111) | (30,139) | (35,807) | (32,468) | (167,683) |
| At 31 December 2016 | 3,764,457 | 4,828,142 | 155,331 | 1,445,151 | 1,842,977 | 2,016,051 | 14,052,109 |
| Charge for the period | 144,936 | 285,816 | 19,485 | 113,329 | 67,929 | 96,218 | 727,713 |
| Disposals / write-offs | (210,054) | (49,529) | - | (196,625) | (27,307) | (43,340) | (526,855) |
| Foreign exchange difference on retranslation | 164,104 | 166,535 | 255 | 53,134 | 88,922 | 78,155 | 551,105 |
| At 30 June 2017 | 3,863,441 | 5,230,964 | 175,071 | 1,414,989 | 1,972,521 | 2,147,084 | 14,804,072 |
| Net book value | |||||||
| At 30 June 2017 | 20,644,175 | 1,234,491 | 200,042 | 726,056 | 484,884 | 643,605 | 23,933,253 |
| At 31 December 2016 | 20,021,390 | 1,207,595 | 219,530 | 576,018 | 489,419 | 695,586 | 23,209,538 |
ASBISC ENTERPRISES PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30 JUNE 2017
10. Intangible assets
| Computer software US\$ |
Patents and licenses US\$ |
Total US\$ |
|
|---|---|---|---|
| Cost | |||
| At 1 January 2016 | 7,851,215 | 2,232,094 | 10,083,309 |
| Additions | 587,097 | 266,558 | 853,655 |
| Disposals/ write-offs | (218,742) | - | (218,742) |
| Foreign exchange difference on retranslation | (18,853) | 2,474 | (16,379) |
| At 31 December 2016 | 8,200,717 | 2,501,126 | 10,701,843 |
| Additions | 404,716 | 23,034 | 427,750 |
| Disposals/ write-offs | (110,238) | (99,069) | (209,307) |
| Foreign exchange difference on retranslation | 43,475 | 25,071 | 68,546 |
| At 30 June 2017 | 8,538,670 | 2,450,162 | 10,988,832 |
| Accumulated amortization | |||
| At 1 January 2016 | 6,092,120 | 1,238,887 | 7,331,007 |
| Charge for the year | 342,861 | 257,096 | 599,957 |
| Disposals/ write-offs | (206,728) | - | (206,728) |
| Foreign exchange difference on retranslation | (19,197) | 5,219 | (13,978) |
| At 31 December 2016 | 6,209,056 | 1,501,202 | 7,710,258 |
| Charge for the period | 209,665 | 147,829 | 357,494 |
| Disposals/ write-offs | (110,238) | (53,421) | (163,659) |
| Foreign exchange difference on retranslation | 41,039 | 15,420 | 56,459 |
| At 30 June 2017 | 6,349,522 | 1,611,030 | 7,960,552 |
| Net book value | |||
| At 30 June 2017 | 2,189,148 | 839,132 | 3,028,280 |
| At 31 December 2016 | 1,991,661 | 999,924 | 2,991,585 |
11. Available-for-sale financial assets
The details of the investments are as follows:
| Name | Country of incorporation |
Participation % |
Cost US\$ |
Impairment US\$ |
As at 30 June 2017 US\$ |
As at 31 December 2016 US\$ |
|---|---|---|---|---|---|---|
| Investments held in related companies | ||||||
| E-Vision Ltd | Cyprus | 18% | 90,000 | (90,000) | - | - |
| Other investments | ||||||
| Asekol s.r.o. | Czech Republic | 9.09% | 9,580 | - | 9,580 | 9,580 |
| Regnon S.A. | Poland | 0.01% | 2,214 | - | 2,214 | 2,214 |
| 101,794 | (90,000) | 11,794 | 11,794 |
12. Inventories
| As at 30 June 2017 US\$ |
As at 31 December 2016 US\$ |
|
|---|---|---|
| Goods in transit | 12,400,303 | 17,467,719 |
| Goods held for resale | 96,307,406 | 103,518,766 |
| Provision for slow moving and obsolete stock | (6,546,732) | (7,128,737) |
| 102,160,977 | 113,857,748 | |
| Movement in provision for slow moving and obsolete stock | ||
| As at 30 June 2017 US\$ |
As at 31 December 2016 US\$ |
|
| On 1 January | 7,128,737 | 4,288,149 |
| Net movement for the period/year | (642,638) | 2,870,240 |
| Exchange difference | 60,633 | (29,652) |
| On 30 June/31 December | 6,546,732 | 7,128,737 |
13. Trade receivables
| As at 30 June 2017 US\$ |
As at 31 December 2016 US\$ |
|
|---|---|---|
| Trade receivables | 176,957,522 | 228,782,976 |
| Allowance for doubtful debts | (8,852,640) | (7,714,943) |
| 168,104,882 | 221,068,033 |
14. Other current assets
| As at 30 June 2017 US\$ |
As at 31 December 2016 US\$ |
|
|---|---|---|
| Deposits and advances to service providers | 490,518 | 526,314 |
| Employee floats | 151,872 | 39,321 |
| VAT and other taxes refundable | 8,318,435 | 8,583,148 |
| Other debtors and prepayments | 9,008,096 | 7,841,652 |
| 17,968,921 | 16,990,435 |
15. Share capital
| As at 30 June 2017 US\$ |
As at 31 December 2016 US\$ |
|
|---|---|---|
| Authorized 63,000,000 (2016: 63,000,000) shares of US\$ 0.20 each |
12,600,000 | 12,600,000 |
| Issued and fully paid 55,500,000 (2016: 55,500,000) ordinary shares of US\$ 0.20 each |
11,100,000 | 11,100,000 |
16. Short term borrowings
| As at 30 June 2017 US\$ |
As at 31 December 2016 US\$ |
|
|---|---|---|
| Bank overdrafts (Note 26) Current portion of long term loans Bank short term loans Short term obligations under finance leases (Note 19) |
37,759,825 663,595 26,329,889 73,725 |
26,814,854 714,258 20,289,260 54,332 |
| Total short term debt | 64,827,034 | 47,872,704 |
| Factoring creditors | 38,130,022 102,957,056 |
50,750,598 98,623,302 |
Summary of borrowings and overdraft arrangements
As at 30 June 2017 the group enjoyed factoring facilities of US\$ 109,004,000 (31 December 2016 US\$ 100,596,000). In addition, the group as at 30 June 2017 had the following financing facilities with banks in the countries that the company and its subsidiaries are operating:
- overdraft lines of US\$ 59,911,000 (31 December 2016: US\$ 55,570,000)
- short term loans/revolving facilities of US\$ 32,115,000 (31 December 2016: US\$ 26,427,000)
- bank guarantee and letters of credit lines of US\$ 12,730,000 (31 December 2016: US\$ 13,446,000)
The Group had for the period ending 30 June 2017 cash lines (overdrafts, loans and revolving facilities) and factoring lines.
The Weighted Average Cost of Debt (cash lines and factoring lines) for the period was 8.3% (for 2016: 9.2%).
The factoring, overdraft and revolving facilities as well as the loans granted to the company and its subsidiaries by their bankers are secured by:
- Floating charges over all assets of the company
- Mortgage on land and buildings that the group owns in Cyprus, Czech Republic, Belarus, Middle East, Bulgaria, Slovakia and Ukraine
- Charge over receivables and inventories
- Corporate guarantees to the extent of facilities granted to subsidiary companies
- Assignment of insurance policies
- Pledged deposits of US\$ 10,447,000 (31 December 2016: US\$ 9,967,000)
17. Long term borrowings
| As at 30 June 2017 US\$ |
As at 31 December 2016 US\$ |
|
|---|---|---|
| Bank loans Long term obligations under finance leases (Note 19) |
946,487 17,174 |
1,157,262 26,845 |
| 963,661 | 1,184,107 | |
| 18. Other long term liabilities | As at 30 June 2017 US\$ |
As at 31 December 2016 US\$ |
| Pension provision | 340,107 | 313,475 |
| 19. Finance leases | ||
| As at 30 June 2017 US\$ |
As at 31 December 2016 US\$ |
|
| Obligation under finance lease Less: Amount payable within one year |
90,899 (73,725) |
81,177 (54,332) |
| Amounts payable within 2-5 years inclusive | 17,174 | 26,845 |
| 20. Deferred tax | As at 30 June 2017 US\$ |
As at 31 December 2016 US\$ |
| Debit balance on 1 January Deferred tax charge/(credit) for the period/ year (Note 8) Exchange difference on retranslation Debit balance on 30 June/31 December |
(856,909) (54,078) (15,944) (926,931) |
(1,436,016) 569,392 9,715 (856,909) |
| As at 30 June 2017 US\$ |
As at 31 December 2016 US\$ |
|
| Deferred tax assets Deferred tax liabilities |
(1,082,178) 155,247 |
(1,006,592) 149,683 |
| Net deferred tax assets | (926,931) | (856,909) |
21. Other current liabilities
| As at 30 June 2017 US\$ |
As at 31 December 2016 US\$ |
|
|---|---|---|
| Salaries payable and related costs | 1,021,866 | 1,019,145 |
| VAT payable | 4,171,427 | 6,159,670 |
| Accruals and deferred income | 14,568,063 | 15,277,075 |
| Non-trade accounts payable | 1,590,333 | 2,548,287 |
| Provision of warranties | 2,065,061 | 1,941,183 |
| 23,416,750 | 26,945,360 |
22. Commitments and contingencies
As at 30 June 2017 the group was committed in respect of purchases of inventories of a total cost value of US\$ 2,206,000 (31 December 2016: US\$ 3,100,000) which were in transit at 30 June 2017 and delivered in July 2017. Such inventories and the corresponding liability towards the suppliers have not been included in these financial statements since, according to the terms of purchase title of the goods has not passed to the group at period end.
As at 30 June 2017 the group was contingently liable in respect of bank guarantees and letters of credit lines of US\$ 12,730,000 (31 December 2016: US\$ 13,446,000) which the group has extended mainly to its suppliers.
As at 30 June 2017 the group had no other capital or legal commitments and contingencies.
23. Operating segments
1.1 Reportable segments
The group mainly operates in a single industry segment as a distributor of IT products. The group's operating segments are based on geographic location, and the measure of segment profit is profit from operations. The group operates in four principal geographical areas – Former Soviet Union, Central Eastern Europe, Western Europe and Middle East & Africa.
1.2 Segment revenues
| For the six months ended 30 June 2017 US\$ |
For the six months ended 30 June 2016 US\$ |
|
|---|---|---|
| Former Soviet Union | 268,690,675 | 167,878,093 |
| Central Eastern Europe | 182,652,797 | 201,536,681 |
| Western Europe | 41,623,681 | 29,631,274 |
| Middle East & Africa | 73,622,383 | 80,440,433 |
| Other | 3,741,828 | 17,927,848 |
| 570,331,364 | 497,414,329 |
1.3 Segment results
| For the six months ended 30 June 2017 US\$ |
For the six months ended 30 June 2016 US\$ |
|
|---|---|---|
| Former Soviet Union | 3,986,779 | 3,444,930 |
| Central Eastern Europe | 3,134,745 | 2,733,353 |
| Middle East & Africa | 510,700 | 471,620 |
| Western Europe | 221,399 | 111,490 |
| Other | 46,419 | 58,022 |
| Profit from operations | 7,900,042 | 6,819,415 |
| Net financial expenses | (6,173,871) | (6,272,829) |
| Other gains and losses | (442,698) | 160,058 |
| Profit before taxation | 1,283,473 | 706,644 |
1.4 Segment capital expenditure (CAPEX)
| As at 30 June 2017 US\$ |
As at 31 December 2016 US\$ |
|
|---|---|---|
| Former Soviet Union | 4,034,036 | 4,100,423 |
| Central Eastern Europe | 12,459,674 | 12,080,453 |
| Middle East & Africa | 3,110,430 | 3,206,783 |
| Unallocated | 8,156,013 | 8,068,668 |
| 27,760,153 | 27,456,327 |
1.5 Segment depreciation and amortization
| For the six months ended 30 June 2017 US\$ |
For the six months ended 30 June 2016 US\$ |
|
|---|---|---|
| Former Soviet Union | 178,543 | 129,202 |
| Central Eastern Europe | 344,699 | 373,325 |
| Western Europe | - | 18,297 |
| Middle East & Africa | 99,456 | 108,993 |
| Unallocated | 462,509 | 421,350 |
| 1,085,207 | 1,051,167 |
1.6 Segment assets
| As at 30 June 2017 US\$ |
As at 31 December 2016 US\$ |
|
|---|---|---|
| Former Soviet Union | 142,298,692 | 154,300,176 |
| Central Eastern Europe | 120,115,971 | 142,566,106 |
| Western Europe | 22,211,669 | 28,285,670 |
| Middle East & Africa | 33,672,063 | 51,058,290 |
| Total | 318,298,395 | 376,210,242 |
| Assets allocated in capital expenditure (1.4) | 27,760,153 | 27,456,327 |
| Other unallocated assets | 2,262,777 | 11,819,044 |
| Consolidated assets | 348,321,326 | 415,485,613 |
| 24. Derivative financial liabilities | As at 30 June |
As at 31 December |
| 2017 | 2016 | |
| US\$ | US\$ | |
| Derivative financial liabilities carried at fair value through profit or loss | ||
| Foreign currency derivative contracts | 325,051 | 1,383 |
| 25. Derivative financial assets | ||
| As at | As at | |
| 30 June | 31 December | |
| 2017 US\$ |
2016 US\$ |
|
| Derivative financial assets carried at fair value through profit or loss | ||
| Foreign currency derivative contracts | 485,640 | 1,079,208 |
26. Cash and cash equivalents
| As at 30 June 2017 US\$ |
As at 31 December 2016 US\$ |
|
|---|---|---|
| Cash at bank and in hand Bank overdrafts (Note 16) |
30,400,362 (37,759,825) |
33,351,703 (26,814,854) |
| (7,359,463) | 6,536,849 |
The cash at bank and in hand balance includes an amount of US\$ 10,447,000 (31 December 2016: US\$ 9,967,000) which represents pledged deposits against secured borrowings.
27. Goodwill
| As at 30 June 2017 US\$ |
As at 31 December 2016 US\$ |
|
|---|---|---|
| At 1 January | 1,255,204 | 1,555,972 |
| Goodwill written off (note ii) | (560,420) | (250,000) |
| Foreign exchange difference on retranslation | 103,836 | (50,768) |
| At 30 June/31 December (note i) | 798,620 | 1,255,204 |
(i) The capitalized goodwill arose from the business combinations of the following subsidiaries:
| As at 30 June 2017 US\$ |
As at 31 December 2016 US\$ |
|
|---|---|---|
| ASBIS d.o.o. (BA) (formerly Megatrend D.O.O. Sarajevo) | 398,346 | 367,911 |
| SHARK Computers a.s. | 400,274 | 887,293 |
| 798,620 | 1,255,204 |
(ii) The impairment loss of goodwill relates to the following subsidiary:
| As at 30 June 2017 US\$ |
As at 31 December 2016 US\$ |
|
|---|---|---|
| SHARK Computers a.s. | (560,420) (560,420) |
(250,000) (250,000) |
28. Transactions and balances of key management
| For the six months ended 30 June 2017 US\$ |
For the six months ended 30 June 2016 US\$ |
|
|---|---|---|
| Directors' remuneration – executive (Note 6) | 175,019 | 223,995 |
| Directors' remuneration - non-executive (Note 6) | 1,094 | 1,118 |
| 176,113 | 225,113 |
ASBISC ENTERPRISES PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30 JUNE 2017
29. Business combinations
1. Acquisitions
1.1.a. Acquisitions of subsidiaries to 30 June 2017
During the year, the Group has acquired the 100% of the share capital of I ON LTD and 51% of ASBC MMM.
| Name of entity | Type of operations | Date acquired | % acquired | % owned |
|---|---|---|---|---|
| I ON LTD | Information Technology | 04 April 2017 | 100% | 100% |
| ASBC LLC | Information Technology | 08 May 2017 | 51% | 51% |
2. Disposals of subsidiaries to 30 June 2017
During the period the following group's subsidiary went into liquidation. Loss of US\$ 12,461 arose on the event.
| Name of disposed entity | Type of operations | Date liquidated | % liquidated |
|---|---|---|---|
| Shark Online a.s. | Information Technology | 01 January 2017 | 100% |
Disposals of subsidiaries to 31 December 2016
During the year the following group's subsidiaries went into liquidation. No gain or loss arose on the event.
| Name of disposed entity | Type of operations | Date liquidated | % liquidated |
|---|---|---|---|
| EuroMall SRB d.o.o | Information Technology | 03 August 2016 | 100% |
| EuroMall Croatia | Information Technology | 13 October 2016 | 100% |
| IT-MAX | Information Technology | 04 November 2016 | 100% |
30. Fair values
Financial instruments comprise financial assets and financial liabilities. Financial assets mainly consist of bank balances, receivables and investments. Financial liabilities mainly consist of trade payables, factoring balances, bank overdrafts and loans. The Directors consider that the carrying amount of the company's/group's financial instruments approximate their fair value at the reporting date. Financial assets and financial liabilities carried at fair value through profit or loss represent foreign currency derivative contracts categorized as a Level 2 (inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).