Annual / Quarterly Financial Statement • Nov 10, 2023
Annual / Quarterly Financial Statement
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This is a translation in pdf format without the European Single Electronic Format (ESEF) markups of the digitally signed original which was prepared in Latvian and submitted in machine-readable .xhtml format to the Nasdaq Riga Stock Exchange (link: https://nasdaqbaltic.com/)
for the year ended 30 June 2023
(Translation from Latvian)
Content
| Page | |
|---|---|
| Management report | 3 – 4 |
| Statement of the Board's responsibility | 5 |
| Consolidated and separate financial statements: | |
| Consolidated and separate statement of financial position | 6 |
| Consolidated and separate statement of profit or loss and other comprehensive income | 7 |
| Consolidated and separate statement of changes in the shareholders' equity | 8 |
| Consolidated and separate statement of cash flows | 9 |
| Notes to the consolidated and separate financial statements | 10 – 38 |
SAF Tehnika JSC and its subsidiaries (hereinafter referred to as the Group) design, manufacture, and distribute digital microwave transmission equipment. The Group's activities can be divided into three categories:
The Group's accumulated experience and knowledge has allowed to develop a range of innovative products, including launching and developing a series of the world's smallest microwave spectrum analyzers Spectrum Compact, as well as creating the Aranet brand of wireless sensor network solutions.
The Group offers comprehensive and cost-effective solutions in both public and private sectors.
In the financial year (FY) 2022/2023, the Group's net turnover amounted to EUR 37.26 million, which is EUR 3.3 million or 9.7% more than in the previous financial year 2021/2022. The net turnover of the Parent company in FY 2022/2023 was EUR 32.04 million, which is EUR 2.91 million or 10% more than in the previous FY 2021/2022.
The turnover of the American region, which accounts for sales in both North, South and Central Americas, represented 72% of the Group's annual turnover and amounted to EUR 26.75 million, which is by 43.4% more than last year. Marketing, sales, product warehousing and logistics services of the Group's products in the US and Canada were provided by the US-based subsidiary – SAF North America LLC. Sales in the European and CIS region were EUR 3.5 million lower than in the previous year. The decline is also observed in the AMEA (Asia, Middle East, Africa) region.
In the reporting year, a subsidiary in Singapore was established with the aim of increasing presence and promoting business development (especially in the IoT segment) in the Asia-Pacific region. Its mission is to provide customers in the Asia-Pacific region with custom-designed and efficient wireless data transmission and sensor solutions. Products and services are intended for both private and public enterprises that need to provide high-quality wireless data transmission both in telecommunications projects and in many industry segments where the IoT ecosystem could be applied.
During the reporting year, development of new products continued, as well as work is underway on new faster product implementations. On average, the product life cycle for microwave wireless data transmission equipment in the industry is estimated at about 5 years, when the products of the previous generation are replaced by newer and more modern devices. Transition between technologies is a gradual process and will happen over several years.
Also, the Group offered product-related services and continued to develop specific and individual customer-requested functionality for SAF Tehnika JSC products.
Despite the modernization of the Telecommunications market in the direction of fiber-optic communications, there is still demand in the market for radio systems that provide enhanced data rates. Consequently, the Group continues to actively explore the market and problematic issues in order to be able to offer the necessary product modifications and create prototypes for next generation technologies. At the same time, the Group also develops IoT segment solutions in business and consumer segments to diversify, to create higher added value for SAF Tehnika product offering, as well as to increase the Group's revenue.
The Group's sales revenue in countries outside Latvia accounted for 99.09% (98.94% for the Parent company, respectively) of the total turnover and amounted to EUR 36.92 million (EUR 31.7 million for the Parent company). In the reporting year, the Group sold its products in 85 countries around the world.
The Group's cash balance at the end of the year was EUR 3.46 million (EUR 1.54 million for the Parent company, respectively), which is EUR 683 thousand (EUR 376 thousand for the Parent company, respectively) more than at the end of the previous reporting year. To ensure liquidity, in August of the reporting year, the Parent company entered into a Credit Line Agreement with Luminor Bank AS for the total amount of EUR 4.95 million. At the end of the reporting period, the use of the credit line was EUR 1.2 million.
In the reporting year, the Group paid dividends in the amount of EUR 2.02 million.
During the reporting year, the Group invested EUR 1.76 million in the acquisition of IT infrastructure, production and research equipment, software and licenses, product certification, as well as in the renovation of premises.
The Group's operations were long affected by the global shortage of various electronic components. By regularly reviewing procurement volumes and deadlines, the company accumulated material reserves (inventories) to be able to fulfil most of the orders within normal lead times. Following the precautionary principle and the Group's policy on slowmoving stocks – the stocks that over the period of 12, 9 or 6 months, respectively, have moved by less than 30% of their amount at the beginning of the period are recognized as slow-moving inventory. Total provisions for slow-moving inventory (compared to the volume at the end of the fourth quarter of the previous financial year) increased by EUR 2.2 million.
The Group completed the financial year 2022/2023 with a profit of EUR 3.53 million (the Parent company with EUR 3.12 million, respectively). The result of the Group's activities for the previous financial year was a profit of EUR 6.09 million (EUR 5.75 million for the Parent company, respectively).
A success factor and a prerequisite for the Group's long-term existence is its ability to ensure continuous product development. During the reporting year, the development and improvement of the microwave wireless data transmission product line continued. Solutions were found to improve functionality and quality indicators, and to reduce production costs. The Group continued to design and develop the Aranet functionality within the IoT environmental monitoring solution, as well as kept working on the development of the Aranet Cloud service. Aranet is an industrial-grade wireless environmental monitoring solution that allows taking measurements of various environmental parameters over a wide area, including monitoring of temperature, humidity, and CO2. Spectrum Compact metering products are regularly supplemented with new functionalities and accessories. There are developments both for the release of new products, and for the improvement and refinement of existing ones. Technologically, SAF Tehnika products are interconnected. The development and existence of such products provides a wider range of the Group's offerings. During the reporting period, the Group's product development projects received co-financing in the amount of EUR 99 thousand from the Latvian electrical and optical equipment industry competence center "LEO Pētījumu centrs" SIA.
SAF Tehnika JSC has an extensive experience and long-standing expertise in the development and production of microwave transmission equipment. The Group is able to supply excellent, high-quality products to the general market, as well as to successfully develop niche solutions. The Group's task is to further develop the next generation of data transmission equipment, continue to produce high-quality products for the microwave data communication market, looking for innovative ideas for microwave data transmission applications. It is planned to continue to offer not only standardized solutions, but also product modifications to meet specific customer needs. The goal is to stabilize the level of turnover, which provides a positive net result in the long term.
The Group will continue its established market strategy, focusing on strategic market niches for both products and regions.
Although the direct impact on the Group's activities has been relatively limited after the outbreak of hostilities in Ukraine by Russia, the general uncertainty in the business environment remains. The Group continues to monitor forecasts of possible cost increases and assess potential risks. The company regularly reviews procurement volumes and deadlines, and continues to provide material reserves in order to be able to fulfil most of the orders within normal lead times. This applies to all SAF product families – microwave links, Spectrum Compact and Aranet.
The Group looks positively at projections for future operational periods, however, remains cautious, and the Board of the Parent company refrains from making any statements about future sales and financial results.
During the period between the last day of the reporting year and the date of signing of these financial statements, there have been no events that would significantly affect the financial situation of the Group and/or the Parent company as of June 30, 2023, and/or financial results and cash flows for the relevant reporting year.
The Board of the Parent company proposes to keep the profit for the reporting year as retained earnings.
The Corporate Governance Report for 2022/2023 has also been submitted to Nasdaq Riga AS together with this separate and consolidated Annual Financial Report 2022/2023 by SAF Tehnika JSC.
On behalf of the Board,
/digitally signed/
Normunds Bergs Chairman of the Board
The Board of SAF Tehnika A/S is responsible for preparing separate and consolidated annual reports of SAF Tehnika A/S.
The separate and consolidated annual reports set out on pages 6 to 38 and are prepared in accordance with the source documents and present fairly the financial position of SAF Tehnika A/S (Parent company) and SAF Tehnika A/S and its subsidiaries (the Group) as at 30 June 2023 and their results of financial performance and cash flows for the year ended on 30 June 2023.
The above-mentioned financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the European Union on a going concern basis. Appropriate accounting policies have been applied on a consistent basis. Prudent and reasonable judgments and estimates have been made by the Board in the preparation of the financial statements.
The Board of SAF Tehnika A/S is responsible for the maintenance of proper accounting records, the safeguarding of the Group's and the Parent company's assets and the prevention and detection of fraud and other irregularities in the Group and the Parent company. The Board is also responsible for compliance with requirements of legal acts of the countries where Group companies and the Parent company operate.
On behalf of the Board,
/digitally signed/
Normunds Bergs Chairman of the Board
| Group | Parent company | |||||
|---|---|---|---|---|---|---|
| As at 30 June | As at 30 June | |||||
| Note | 2023 | 2022 | 2023 | 2022 | ||
| ASSETS | EUR | EUR | EUR | EUR | ||
| Long-term investments | ||||||
| Property, plant and equipment | 5 | 2 870 045 | 2 006 940 | 2 844 855 | 1 976 692 | |
| Intangible assets | 5 | 514 431 | 411 679 | 514 431 | 411 678 | |
| Right-to-use assets | 5 | 1 976 768 | 2 371 668 | 1 890 175 | 2 229 318 | |
| Investments in subsidiaries | 6 | - | - | 53 905 | 32 893 | |
| Investments in other companies | 6 | 209 328 | 7 146 | 209 328 | 7 146 | |
| Deferred tax asset | 137 237 | - | - | |||
| Total long-term investments | 5 707 809 | 4 797 433 | 5 512 694 | 4 657 727 | ||
| Current assets | ||||||
| Inventories | 7 | 17 455 447 | 16 334 594 | 16 897 971 | 16 054 124 | |
| Trade receivables | 8 | 1 289 346 | 2 742 892 | 596 340 | 688 667 | |
| Due from related parties | 8, 26 | - | - | 63 805 | 264 976 | |
| Other debtors | 9 | 339 040 | 633 527 | 338 952 | 606 142 | |
| Corporate income tax | 16 160 | 192 552 | - | - | ||
| Deferred expenses | 235 603 | 151 785 | 136 503 | 118 278 | ||
| Cash and cash equivalents | 10 | 3 464 439 | 2 781 167 | 1 538 058 | 1 162 474 | |
| Total current assets | 22 800 035 | 22 836 517 | 19 571 629 | 18 894 661 | ||
| Total assets | 28 507 844 | 27 633 950 | 25 084 323 | 23 552 388 | ||
| EQUITY AND LIABILITIES | ||||||
| EQUITY | ||||||
| Share capital | 11 | 4 158 252 | 4 158 252 | 4 158 252 | 4 158 252 | |
| Share premium | 2 851 726 | 2 851 726 | 2 851 726 | 2 851 726 | ||
| Other reserves | 8 530 | 8 530 | 8 530 | 8 530 | ||
| Foreign currency translation reserve | 76 791 | 145 805 | - | - | ||
| Retained earnings | 11 748 240 | 10 233 237 | 10 305 359 | 9 207 677 | ||
| Total shareholders' equity | 18 843 539 | 17 397 550 | 17 323 867 | 16 226 185 | ||
| LIABILITIES | ||||||
| Long-term liabilities | ||||||
| Lease liabilities | 13 | 1 665 029 | 2 013 978 | 1 623 885 | 1 918 656 | |
| Contract liabilities | 14 | 712 952 | 638 925 | 11 291 | 20 410 | |
| Total long-term liabilities | 2 377 981 | 2 652 903 | 1 635 176 | 1 939 066 | ||
| Current liabilities | ||||||
| Trade and other payables | 12 | 4 601 401 | 5 163 614 | 3 778 326 | 4 041 398 | |
| Contract liabilities | 14 | 1 088 325 | 2 028 976 | 703 699 | 925 447 | |
| Short-term loans | 15 | 1 207 973 | - | 1 207 973 | - | |
| Due to related parties | 26 | - | - | 96 139 | 81 149 | |
| Lease liabilities | 13 | 388 625 | 390 907 | 339 143 | 339 143 | |
| Total current liabilities | 7 286 324 | 7 583 497 | 6 125 280 | 5 387 137 | ||
| Total liabilities | 9 664 305 | 10 236 400 | 7 760 456 | 7 326 203 | ||
| Total equity and liabilities | 28 507 844 | 27 633 950 | 25 084 323 | 23 552 388 | ||
The accompanying notes on pages 10 to 38 form an integral part of these financial statements.
On behalf of the Board,
/digitally signed/
Normunds Bergs Chairman of the Board /digitally signed/
Dace Langada Chief accountant
| Group | Parent company | ||||
|---|---|---|---|---|---|
| For the year ended | For the year ended | ||||
| 30 June | 30 June | ||||
| Note | 2023 | 2022 | 2023 | 2022 | |
| EUR | EUR | EUR | EUR | ||
| Revenue from contracts with customers | 16 | 37 263 890 | 33 968 171 | 32 040 313 | 29 135 280 |
| Cost of goods sold | 17 | (22 323 838) | (19 565 848) | (21 531 985) | (18 576 123) |
| Gross profit | 14 940 052 | 14 402 323 | 10 508 328 | 10 559 157 | |
| Sales and marketing expenses | 18 | (7 864 063) | (6 473 416) | (4 149 351) | (3 390 224) |
| Administrative expenses | 19 | (3 185 917) | (2 215 927) | (2 780 803) | (1 876 917) |
| Profit from operating activities | 3 890 072 | 5 712 980 | 3 578 174 | 5 292 016 | |
| Other income | 20 | 257 382 | 390 565 | 202 387 | 385 865 |
| Financial income | 21 | 2 503 | 214 134 | - | 170 363 |
| Financial expenses | 22 | (128 416) | (49 374) | (158 226) | (44 908) |
| Profit before tax | 4 021 541 | 6 268 305 | 3 622 335 | 5 803 336 | |
| Corporate income tax | 23 | (486 816) | (178 325) | (504 931) | (49 097) |
| Profit of the reporting year | 3 534 725 | 6 089 980 | 3 117 404 | 5 754 239 | |
| Other comprehensive income | |||||
| Other comprehensive income that will be reclassified subsequently to profit or loss: |
|||||
| Foreign operations - currency translation differences |
(69 014) | 135 481 | - | - | |
| Total comprehensive income | 3 465 711 | 6 225 461 | 3 117 404 | 5 754 239 | |
| Basic and diluted profit per share (EUR per share): |
24 | 1.190 | 2 .050 | 1.050 | 1 .937 |
The accompanying notes on pages 10 to 38 form an integral part of these financial statements.
On behalf of the Board,
/digitally signed/
Normunds Bergs Chairman of the Board /digitally signed/
Dace Langada Chief accountant
Statement of changes in the shareholders' equity - the Parent company
| Share capital |
Share premium |
Other reserves |
Retained earnings |
Total | |
|---|---|---|---|---|---|
| EUR | EUR | EUR | EUR | EUR | |
| Balance as at 30 June 2021 Transactions with |
4 158 252 | 2 851 726 | 8 530 | 5 443 459 | 12 461 967 |
| shareholders recognized in | - | - | - | ||
| the equity | (1 990 021) | (1 990 021) | |||
| Dividends | - | - | - | (1 990 021) | (1 990 021) |
| Total comprehensive income | - | - | - | 5 754 239 | 5 754 239 |
| Profit for the reporting year | - | - | - | 5 754 239 | 5 754 239 |
| Balance as at 30 June 2022 | 4 158 252 | 2 851 726 | 8 530 | 9 207 677 | 16 226 185 |
| Balance as at 1 July 2022 Transactions with |
4 158 252 | 2 851 726 | 8 530 | 9 207 677 | 16 226 185 |
| shareholders recognized in the equity |
- | - | - | (2 019 722) | (2 019 722) |
| Dividends | - | - | - | (2 019 722) | (2 019 722) |
| Total comprehensive income | - | - | - | 3 117 404 | 3 117 404 |
| Profit for the reporting year | - | - | - | 3 117 404 | 3 117 404 |
| Balance as at 30 June 2023 | 4 158 252 | 2 851 726 | 8 530 | 10 305 359 | 17 323 867 |
The accompanying notes on pages 10 to 38 form an integral part of these financial statements.
On behalf of the Board,
/digitally signed/
Normunds Bergs Chairman of the Board /digitally signed/
Dace Langada Chief accountant
| Group For the year ended 30 June |
Parent company For the year ended 30 June |
|||||
|---|---|---|---|---|---|---|
| Note | 2023 EUR |
2022 EUR |
2023 EUR |
2022 EUR |
||
| Cash flows from operating activities | ||||||
| Profit before taxes Adjustments for: |
4 021 541 | 6 268 305 | 3 622 335 | 5 803 336 | ||
| - depreciation of fixed assets | 5 | 637 952 | 377 001 | 615 955 | 365 827 | |
| - amortization of intangible assets | 5 | 153 673 | 121 093 | 153 672 | 121 028 | |
| - amortization of right-to-use assets | 5 | 390 508 | 366 311 | 339 143 | 314 547 | |
| - change in valuation allowance for inventories | 7 | (2 192 572) | (31 420) | (2 192 572) | (31 420) | |
| - change in provisions for guarantees | 12 | 10 022 | - | 10 022 | - | |
| - change in provisions for unused vacations | 12 | 140 428 | 119 218 | 82 023 | 119 217 | |
| - change in provision for expected credit losses | 8 | (3 826) | (202 592) | 4 937 | (191 733) | |
| - interest income | 21 | (413) | (432) | - | - | |
| - interest expenses on lease liabilities | 22 | 107 950 | 49 355 | 102 916 | 44 889 | |
| - cash exchange rate fluctuations | 134 666 | (378 867) | 63 310 | (207 110) | ||
| - government grants | 20 | (196 842) | (321 444) | (196 842) | (321 444) | |
| - gain on disposal of fixed assets | (158 056) | (50 720) | (158 056) | (50 720) | ||
| Operating profit before changes in working | ||||||
| capital | 3 045 031 | 6 315 808 | 2 446 843 | 5 966 417 | ||
| (Increase)/ decrease in inventories | 1 072 111 | (7 746 490) | 1 349 118 | (7 746 380) | ||
| (Increase)/ decrease in receivables | 1 973 010 | (744 599) | 702 602 | (97 746) | ||
| Increase/ (decrease) in payables Cash generated by/(used in) operating |
(1 695 447) | 1 341 906 | (574 784) | 276 347 | ||
| activities | 4 394 705 | (833 375) | 3 923 779 | (1 601 362) | ||
| Government grants | 20 | 35 556 | 276 195 | 35 556 | 276 195 | |
| Corporate income tax paid | (458 323) | (747 698) | (504 931) | (71 669) | ||
| Net cash from operating activities | 3 971 938 | (1 304 878) | 3 454 404 | (1 396 836) | ||
| Cash flows from investing activities | ||||||
| Acquisition of property, plant and equipment | 5 | (1 503 819) | (1 692 699) | (1 486 209) | (1 660 358) | |
| Proceeds from sale of property, plant and | 163 321 | 51 649 | ||||
| equipment Acquisition of intangible assets |
5 | 163 469 (259 991) |
51 788 (216 122) |
(259 991) | (216 122) | |
| Sale of investment in other companies | 6 | (202 182) | - | (202 182) | - | |
| Investments in subsidiaries | 6 | - | - | (21 012) | - | |
| Interest received | 412 | 432 | - | - | ||
| Net cash used in investing activities | (1 802 111) | (1 856 601) | (1 806 073) | (1 824 831) | ||
| Cash flows from financing activities | ||||||
| Loans received | 15 | 1 207 973 | - | 1 207 973 | - | |
| Payment of lease liabilities | 13 | (351 230) | (311 775) | (294 771) | (286 063) | |
| Interest paid on lease liabilities | 22 | (107 950) | (49 355) | (102 916) | (44 889) | |
| Dividends | (2 019 722) | (1 990 021) | (2 019 722) | (1 990 021) | ||
| Net cash used in financing activities | (1 270 929) | (2 351 151) | (1 209 436) | (2 320 973) | ||
| Net change in cash and cash equivalents | 898 898 | (5 512 630) | 438 895 | (5 542 640) | ||
| Cash and cash equivalents at the beginning of | ||||||
| the year | 2 781 167 | 7 689 748 | 1 162 474 | 6 498 004 | ||
| Effect of movements in exchange rates on cash | ||||||
| held | (215 626) | 604 049 | (63 311) | 207 110 | ||
| Cash and cash equivalents at the end of the year |
10 | 3 464 439 | 2 781 167 | 1 538 058 | 1 162 474 |
The accompanying notes on pages 10 to 38 form an integral part of these financial statements.
On behalf of the Board,
/digitally signed/
Normunds Bergs Chairman of the Board /digitally signed/
Dace Langada Chief accountant
9 This is translation of the Company's separate financial statements and Group's consolidated financial statements in pdf-format without European Single Electronic Format (ESEF) markups, from the digitally signed original, which was prepared in Latvian and submitted in machine-readable .xhtml format to the Nasdaq Riga Stock Exchange (link: https://nasdaqbaltic.com/).
A/S "SAF Tehnika" (hereinafter referred to as the Parent Company) was registered in Riga, Latvia, on 27 December 1999 with the registration number 40003474109. Registration in the Commercial Register was performed on 10 March 2004. The legal address is Ganību dambis 24a, Riga, Latvia. The Parent company is a public joint stock company, the shares of the Parent company are listed on the main list of A/S "Nasdaq Riga" Stock Exchange, Latvia.
The core business activity of the Parent company and its subsidiaries (together hereinafter referred to as the Group) is the design, production and distribution of microwave radio data transmission equipment thus offering an alternative to cable channels. The Group offers products to mobile network operators, data service providers (such as Internet service providers and telecommunications companies), as well as state institutions and private companies.
Promotion of the Parent company's products and services, marketing, market research, attraction of new clients and technical support in North America is provided by a 100% subsidiary "SAF North America" LLC. The said company is registered in the USA and operates in Aurora, Colorado, and these activities in the East Asia and Oceania region are provided by its 100% owned subsidiary company "SAF Tehnika Asia" Pte. Ltd registered in Singapore.
These separate financial statements of A/S "SAF Tehnika" and consolidated financial statements of A/S "SAF Tehnika" and its subsidiaries (together – the Group) (hereinafter – financial statements) were approved by the Parent company's Board on 30 October 2023. The financial statements will be presented for approval to the shareholders' meeting. The shareholders have the power to reject the financial statements prepared and issued by management and the right to request that new financial statements are issued. Dace Langada, the Chief Accountant of A/S "SAF Tehnika", is in charge of the bookkeeping.
The auditor of the Group is SIA "Potapoviča un Andersone", License No. 99 and the responsible certified auditor is Lolita Čapkeviča, Certificate No. 120.
These financial statements are prepared using the accounting policies and valuation principles set out below. These policies have been applied consistently to all the years presented, unless otherwise stated.
These financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS).
The financial statements have been prepared under the historical cost convention.
The financial statements are presented in euros (EUR). The financial statements cover the period from 1 July 2022 to 30 June 2023.
The Group (the Parent company) has applied the following new and amended standards and interpretations effective for annual periods beginning on or after January 1, 2022.
Proceeds before intended use, Onerous contracts – cost of fulfilling a contract, Reference to the Conceptual Framework – narrow scope amendments to IAS 16, IAS 37 and IFRS 3, and Annual Improvements to IFRSs 2018-2020 – amendments to IFRS 1, IFRS9, IFRS16 and IAS 41 (effective for annual periods beginning on or after 1 January 2022).
The amendment to IAS 37 clarifies the meaning of 'costs to fulfil a contract'. The amendment explains that the direct cost of fulfilling a contract comprises the incremental costs of fulfilling that contract; and an allocation of other costs that relate directly to fulfilling. The amendment also clarifies that, before a separate provision for an onerous contract is established, an entity recognises any impairment loss that has occurred on assets used in fulfilling the contract, rather than on assets dedicated to that contract.
The amendment to IFRS 9 addresses which fees should be included in the 10% test for derecognition of financial liabilities. Costs or fees could be paid to either third parties or the lender. Under the amendment, costs or fees paid to third parties will not be included in the 10% test.
Illustrative Example 13 that accompanies IFRS 16 was amended to remove the illustration of payments from the lessor relating to leasehold improvements. The reason for the amendment is to remove any potential confusion about the treatment of lease incentives.
Covid-19-Related Rent Concessions – Amendments to IFRS 16 (effective for annual periods beginning on or after 1 April 2021). In May 2020 an amendment to IFRS 16 was issued that provided an optional practical expedient for lessees from assessing whether a rent concession related to COVID-19, resulting in a reduction in lease payments due on or before 30 June 2021, was a lease modification. An amendment issued on 31 March 2021 extended the date of the practical expedient from 30 June 2021 to 30 June 2022.
Adopted new or revised standards and interpretations that have been introduced during the reporting year have not had or have had an insignificant impact on the Group's (the Parent company's) financial position, results, cash flows or disclosures.
The International Accounting Standards Board (IASB) and IFRS Interpretations Committee (IFRIC) have issued the following standards, amendments to standards and interpretations that apply in or after 1 January 2023. The Group (the Parent company) has not applied the following amendments in the financial statements before.
IAS 1 was amended to require companies to disclose their material accounting policy information rather than their significant accounting policies. The amendment provided the definition of material accounting policy information. The amendment also clarified that accounting policy information is expected to be material if, without it, the users of the financial statements would be unable to understand other material information in the financial statements. The amendment provided illustrative examples of accounting policy information that is likely to be considered material to the entity's financial statements. Further, the amendment to IAS 1 clarified that immaterial accounting policy information need not be disclosed. However, if it is disclosed, it should not obscure material accounting policy information. To support this amendment, IFRS Practice Statement 2, 'Making Materiality Judgements' was also amended to provide guidance on how to apply the concept of materiality to accounting policy disclosures.
Amendments to IAS 8: Definition of Accounting Estimates (effective for annual periods beginning on or after 1 January 2023). The amendment to IAS 8 clarified how companies should distinguish changes in accounting policies from changes in accounting estimates.
Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback (effective for annual periods beginning on or after 1 January 2024, not yet endorsed by the EU).
The amendments relate to the sale and leaseback transactions that satisfy the requirements in IFRS 15 to be accounted for as a sale. The amendments require the seller-lessee to subsequently measure liabilities arising from the transaction and in a way that it does not recognise any gain or loss related to the right of use that it retained. This means deferral of such a gain even if the obligation is to make variable payments that do not depend on an index or a rate.
These amendments clarify that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the reporting period. Liabilities are non-current if the entity has a substantive right, at the end of the reporting period, to defer settlement for at least twelve months. The guidance no longer requires such a right to be unconditional. The October 2022 amendment established that loan covenants to be complied with after the reporting date do not affect the classification of debt as current or non-current at the reporting date. Management's expectations whether they will subsequently exercise the right to defer settlement do not affect classification of liabilities. A liability is classified as current if a condition is breached at or before the reporting date even if a waiver of that condition is obtained from the lender after the end of the reporting period. Conversely, a loan is classified as non-current if a loan covenant is breached only after the reporting date. In addition, the amendments include clarifying the classification requirements for debt a company might settle by converting it into equity. 'Settlement' is defined as the extinguishment of a liability with cash, other resources embodying economic benefits or an entity's own equity instruments. There is an exception for convertible instruments that might be converted into equity, but only for those instruments where the conversion option is classified as an equity instrument as a separate component of a compound financial instrument.
The Group (the Parent company) is currently assessing the impact of the amendments listed above on its financial statements.
Other new or amended IFRSs or interpretations issued and not yet adopted are not expected to have a significant impact on the Group's (the Parent company's) financial position, results, cash flows or disclosures.
At the time of signing this report there are no new or revised standards or interpretations that are not yet effective that are expected to have a material impact on the Parent company or the Group.
Notes to the financial statements (continued)
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases. Subsidiaries of the Group were established by the parent company, therefore business combinations and resulting acquisition accounting does not apply to the Group.
Subsidiaries controlled by the Parent company:
| Name | Country of Share residence holding |
Equity of subsidiaries | Profit/ (loss) of subsidiaries |
|||
|---|---|---|---|---|---|---|
| 30.06.2023 EUR |
30.06.2022 EUR |
2022/2023 EUR |
2021/2022 EUR |
|||
| "SAF North America" LLC | United | |||||
| States of America |
100% | 1 552 521 | 1 204 258 | 401 349 | 364 584 | |
| SAF Tehnika Asia Pte. Ltd. (founded 03.11.2022.) |
Singapore | 100% | 21 038 | - | 674 | - |
The financial statements of the Group's subsidiaries have been prepared for the same reporting period as the parent company's financial statements, applying the same accounting policies. The accounting policies of subsidiaries are adjusted when necessary in order to ensure consistency with those of the Group.
Internal transactions, account balances and unrealized gains from transactions between the Group companies are eliminated. Unrealized loss is also eliminated unless objective evidence exists that the asset involved in the transaction has impaired.
In the separate financial statements of the Parent company investments in subsidiaries are accounted for using the cost method under IAS 27 "Separate Financial Statements". Subsequent to initial recognition, investments in subsidiaries are carried at cost less any accumulated impairment losses. At the end of each reporting year it is assessed whether there are indication that the investment may be impaired. If any such indication exists, the impairment test is performed. The parent calculates the impairment as the difference between the recoverable amount of the subsidiary and the carrying amount of the investment, recognising the loss in the statement of comprehensive income.
Dividends received from subsidiaries are recognised in the statement of comprehensive income in the period in which the right to receive the dividends arises.
(a) Functional and reporting currency
The functional currency of the Group and the Parent company and the reporting currency is the official currency of the Republic of Latvia - euro (EUR).
Transactions in foreign currencies are translated into functional currency (EUR) of the Group (Parent company) at the reference exchange rate set by the European Central Bank as at the transaction date. Foreign monetary asset and liability items are revalued to functional currency of the Group (Parent company) according to closing rate published on the official website of the European Central Bank on the reporting date. The effects of changes in foreign exchange rates are recognized in the statement of profit or loss.
| 30.06.2023 | 30.06.2022 | ||
|---|---|---|---|
| 1 USD | 1.08660 | 1.03870 | |
| 1 GBP | 0.85828 | 0.85820 | |
| 1 SGD | 1.47320 | 1.44830 |
The results of operations and the financial position of the Group companies (none of which are operating in hyperinflation economics) that operate with functional currencies other than the reporting currency are translated to the reporting currency as follows:
(i) Assets and liabilities are converted according to exchange rate as at the date of statement of financial position;
(ii) Transactions of the statement of profit and loss and other comprehensive income are revalued according to exchange rate as at the date of transaction; and
(iii) All resulting exchange differences are initially recognized in other comprehensive income and subsequently reclassified from equity to profit or loss when the Group disposes of the respective foreign operation.
Property, plant and equipment (PPE) are carried at cost less accumulated depreciation and impairment losses. Cost includes expenses directly related to acquisition of PPE. Such cost includes the cost of replacing part of such PPE item if the asset recognition criteria are met.
Leasehold improvements, including expenses of overhaul, are capitalized and disclosed as PPE. Depreciation of these assets is calculated over the shorter of the leasehold period or the estimated useful life on a straight-line basis.
PPE consisting of significant items with different useful lives are treated as different items of PPE for which depreciation is calculated separately.
The cost of replacing part of an item of PPE is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group (Parent company) and its cost can be measured reliably. The costs of the day-to-day servicing of PPE is recognised in the profit or loss as incurred.
Current maintenance costs of tangible assets are recognized in the profit or loss as incurred.
Depreciation is calculated on a straight-line basis over the entire useful lives of the respective PPE item to write down each asset to its estimated residual value over its estimated useful life using the following rates
| % per year | |
|---|---|
| Technological equipment | 25 |
| Vehicles | 20 |
| Other equipment and machinery | 20 – 50 |
The assets' residual values, useful lives and methods are reviewed, and adjusted if appropriate, at each reporting date. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount exceeds its estimated recoverable amount (see Note H).
Gains and losses on disposals are determined by comparing proceeds with the respective carrying amount and included in the statement of profit or loss.
Effective January 1, 2019, the Group (the Parent company) has applied IFRS 16, Leases, which has resulted in the recognition of a right-of-use assets as a non-current assets. The accounting policy for leases is set out in section R of the accounting policies.
Trademarks and licenses have a definite useful life and are carried at cost less accumulated amortisation and any accumulated impairment losses. Amortisation is calculated on a straight-line basis to allocate the costs of trademarks and licenses over their estimated useful life, which usually is 3 years.
The acquired software licenses are capitalised on the basis of the purchase and installation costs. These costs are amortised over their estimated useful lives, usually of 4 years.
Notes to the financial statements (continued)
Research costs are recognized in statement of profit or loss as incurred. An intangible asset arising from the development expenditure on an individual project is recognized only when the Group (Parent company) can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intentions to complete and its ability to use or sell the asset, and when the Group (Parent company) can demonstrate how the asset will generate future economic benefits, the availability of resources to complete and the ability to measure reliably the expenditure during the development. Following the initial recognition of the development expenditure, the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and impairment losses. Any expenditure capitalized is amortized over the period of the expected future sales from the related project. An assessment is made at each reporting date to determine whether there is any indication that such an asset may be impaired.
All non-financial assets of the Group and the Parent Company have a definite useful life. The Group (Parent Company) assesses at each reporting date whether there is any indication that an item of property, plant and equipment, intangible assets, right-to-use assets and other non-current assets may be impaired. If any such indication exists, the asset's recoverable amount is estimated. Intangible assets that are not put into operation are not amortized and are reviewed annually.
An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets and groups. Impairment losses are recognised in profit or loss. Impairment losses recognized in respect of cash-generating units are allocated to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset in relation to which the future cash flows have not been adjusted.
All Group's (Parent company's) assets are allocated to two cash generating units that are identified as Group's (Parent company's) operating segments (see Note 16). No impairment indicators have been noted.
In respect of non-current assets (excluding goodwill), impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
Segments reportable in financial statements are business segments or aggregations of business segments that meet certain criteria and for which separate financial information is available that is regularly evaluated by the chief operating decision maker in making decisions about the allocation of resources and performance evaluation. Segment results that are reported to the Chief Executive Officer of the Group (Parent company) include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the Group's (Parent company's) headquarters), head office expenses, and tax assets and liabilities. Information on the Group's (Parent company's) operating segments is disclosed in Note 16.
Government and international organisations grants are recognized where there is a reasonable assurance that the grant will be received and all attaching conditions will be complied with. Government grants are systematically recognized as income in the respective periods in order to balance them with compensated expenses thus recognizing receivables. Where the grant relates to non-current asset, the fair value is initially credited to a deferred income account and is released to the statement of profit or loss over the expected useful life of the relevant asset. Grants that are not intended to provide an incentive to incur specific expenses are recognized as income when the Group (Parent Company) becomes eligible for the grant.
Notes to the financial statements (continued)
In case the co-financing has been granted, however the cash is not yet received, respective receivables are recognized in Statement of Financial Position under Other receivables.
Since April 2019, the cooperation project "Competence Center of Latvian Electrical and Optical Equipment Industry" is being implemented within the framework of an agreement signed between A/S "SAF Tehnika" and "LEO Pētījumu centrs" SIA., regarding which SIA "LEO Pētījumu centrs" had signed a contract with "Centrālo finanšu un līgumu aģentūra", in order to obtain financing from the European Regional Development Fund as part of the above project. A/S "SAF Tehnika" conducts individual research activities to develop new products within the framework of the abovementioned project. For the implementation of this project activity co-financing to cover remuneration of project staff and other costs related to this project are provided. Co-financing received relates to expense items recognized in Statement of profit or loss and other comprehensive Income and thus was recognized as income in order to compensate the costs incurred.
Inventories are stated at the lower of cost or net realizable value. Cost is measured based on the first in – first out (FIFO) method. Costs of finished goods and work-in-progress include cost of materials, labour and depreciation.
Net realisable value is the estimated selling price in the ordinary course of Groups (Parent companys) business, less the estimated costs necessary to make the sale. Estimating the net sales value of inventory, the carrying amount is reduced in relation to the slow-moving inventory. Slow-moving inventory is the inventory whose movement in 12, 9 or 6-month period respectively has been less than 30% comparing with the amount at the beginning of period. Provisions for slow-moving inventory are made according to the following rates:
| The time interval where there has not been | Provision rate % |
|---|---|
| movement | |
| 6 to 8 months | 20 |
| 9 to 11 months | 50 |
| 12 months and more | 100 |
The Group (the Parent company) classifies its financial assets in the following measurement categories:
• those subsequently measured at fair value (with revaluation in either profit or loss or other comprehensive income), and
• those to be measured at amortized cost.
The classification and subsequent measurement depend on the Group's (Parent company's) business model for managing the related assets portfolio and the cash flow characteristics of the asset.
"Regular way" acquisitions and sales of financial assets are recorded at trade date, which is the date when the Group (the Parent company) commits to acquire or deliver a financial asset. Financial assets are derecognized when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group (the Parent company) has transferred substantially all the risks and rewards of ownership.
At initial recognition, the Group (the Parent company) measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVTPL are expensed in profit or loss.
Subsequent measurement of debt instruments depends on the entity's business model for managing the asset and the cash flow characteristics of the asset. All debt instruments of the Group (the Parent company) are classified in an amortised cost valuation category.
Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. Interest income from these financial assets is included financial income based on effective interest rate method. Any gain or loss arising on derecognition is recognized directly in profit or loss and presented in other gains/ (losses) together with impairment losses and foreign exchange gains and losses. On 1 July 2022 and 30 June 2023, the Group's (the Parent company's) financial assets measured at amortized cost comprise: trade receivables and cash and cash equivalents.
The Groups (the Parent company's) investments in equity instruments are insignificant.
Loans are recognized initially at the proceeds received net of transaction costs incurred. Afterwards loans are recognized at historic cost which is diminished by the amounts of principal repayment made. The difference between the cash proceeds received net of transactions costs incurred and the net amount of loan principal repayable is released to the statement of profit or loss over the term of loan repayment using the effective interest rate of the loan. This difference is recognized as part of the financial costs.
Derivative financial instruments are accounted for at fair values. All financial instruments are recognised as assets when fair value is positive and as liabilities when fair value is negative. Changes in values of derivative financial instruments are included in profit or loss statement. The Group (the Parent company) does not apply hedge accounting.
The Group (the Parent company) determines expected credit loss from its debt instruments accounted at amortised cost. Methods used for assessment of impairment depend on whether credit risk has increased significantly.
Expected credit loss is assessed based on:
• all the reasonable and supportable information about past events, current conditions and future forecasts available at the end of each reporting period without undue cost or efforts.
The Group (the Parent company) applies simplified approach to trade receivables and accrued income without significant financing component as allowed by IFRS 9, which requires accrual of lifetime expected credit losses for all trade receivables grouped on the basis of common credit characteristics and overdue payments. The rates of expected credit loss are based on the dynamics of payments (for sales) during the last 3 years, as well as historical credit losses in the respective historic period. The amount of historical loss is adjusted to reflect current and future information.
Cash and cash equivalents comprise current bank accounts balances and deposits, and short term highly liquid investments with an original maturity of three months or less.
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are charged against the share premium account.
Corporate income tax for the reporting period is included in the financial statements based on the management's calculations prepared in accordance with requirements of tax legislation of each company of the Group. With respect to the Group's parent company in Latvia, corporate income tax is calculated on distributed profit (20/80 of the net amount payable to shareholders) as well as on conditionally distributed profit (20/80 of the calculated taxable base). Corporate tax on distributed profit is recognized when the Company's shareholders approve the distribution of profit.
The Company also calculates and pays corporate income tax on conditionally distributed profit, including statutory taxable items, such as non-operating expenses, amounts of other transactions if they meet the criteria set out in the Corporate Income Tax Law, as well as other expenses in excess of statutory deduction thresholds. Such tax is not an income tax in the context of IAS 12 because it is calculated on a gross rather than a net basis and is therefore recognized in the statement of profit or loss as other operating expense.
Deferred income tax within the Group is calculated for those subsidiaries of the Group that are not located in Latvia. Deferred income tax is calculated on all significant temporary differences between the tax bases of assets and liabilities and their carrying amounts. Deferred tax assets are recognized in the Group's statement of financial position if their realization in the future is probable.
Salary liabilities, including non-monetary benefits, bonus plans, annual leave, are recognized for employee services until the end of the reporting period and measured at the amounts expected to be paid to settle the liability. The Group (Parent company) makes social insurance contributions under the State's health, retirement benefit and unemployment schemes at the statutory rates in force during the year, based on gross salary payments. The Group (Parent company) will have no legal or constructive obligations to pay further contributions if the statutory fund cannot settle their liabilities towards the employees. Social insurance and pension plan contributions are included in the expenditures in the same period as the related salary cost. Provisions for unused annual leaves are estimated by multiplying the average daily earnings of employees for the last six months of the reporting year by the number of unused vacation days accrued at the end of the reporting year. These liabilities are shown as short-term accrued liabilities.
The Group is a designer, manufacturer and distributor of digital microwave transmission equipment. The Group provides end-to-end and cost-effective wireless backhaul solutions for digital voice and data transmission to mobile and fixed network operators and data service providers both in the public and private sectors as an alternative to cable networks. The Group operates in two separate segments: (1) operations with products developed by the Group and (2) operations with products acquired from other producers, including, sales of antennae, cables, rebranded (OEM-ed) and other side products.
Revenue is income generated on the course of the Group's (the Parent company's) ordinary operations. Revenue is recognised at transaction price. Transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties. The Group (the Parent company) recognises revenue at the moment of transfer of control over the goods or services to the client.
Revenue is recognised at the moment of delivery of goods to the wholesaler (buyer) together with full freedom of choice in respect of further sale and prices of those goods and a wholesaler (buyer) does not have any claims regarding fulfilment of contract liability that could affect acceptance of goods by the wholesaler (buyer).
Delivery takes place when products are delivered to a specified location, risks of expiry and loss transferred to the wholesaler (buyer) and the Group (the Parent company) has acquired objective proof that criteria for acceptance/transfer have been fulfilled. It is considered that no financing component is present when sales are performed with 30-45-day settlement period what corresponds to usual market practice. Trade receivable is recognised when goods are delivered, since at this point consideration becomes unconditional and the settlement depends only on time. If consideration depends on performance of additional obligations, a contract asset is recognised. If the Group (the Parent company) receives an advance payment, it recognises contract liability.
The Group (the Parent company) provides to customers early product replacement guarantees, as well as warranties, specific product development and configuration services, calibration of equipment and training services. Revenues from services are recognised over the time of delivery of the service.
Sales transaction can comprise certain future services, for instance, extended warranties. In this case transaction price of the goods and services granted is allocated on a stand-alone selling price basis of such components. In order to determine stand-alone selling prices observable prices are used, but when such are not available, "cost plus" method is applied. Extended warranties are initially recognised as contract liabilities in the balance sheet and are transferred to statement of profit or loss on a linear basis over the period of extended warranty. (See Note 14.)
At inception of a contract, the Group (the Parent company) assesses whether a contract is, or contains, a lease based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Group (the Parent company) has elected to apply the practical expedient to account for each lease component and any non-lease components as a single lease component.
The Group (the Parent company) recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured based on the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The assets are depreciated to the earlier of the end of the useful life of the right-of-use asset or the lease term using the straight-line method as this most closely reflects the expected pattern of consumption of the future economic benefits. The lease term includes periods covered by an option to extend if the Company is reasonably
certain to exercise that option. Lease terms mostly range from 2 to 7 years for offices and warehouse but there may also be lease agreements concluded for a shorter term, for example 1 year.
In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's (the Parent company's) incremental borrowing rate. Generally, the Group (the Parent company) uses its incremental borrowing rate as the discount rate. The lease liability is measured at amortized cost using the effective interest method.
The Group (the Parent Company) reassess the lease liabilities (and adjusts the related right-of-use asset accordingly) whenever:
• the lease term has changed or a significant event or change in circumstances has occurred, resulting in a change in the measurement of the call option, in which case the lease liabilities are remeasured by discounting the revised lease payments using the revised discount rate;
• the lease payments change due to a change in an index or rate, or expected payments change due to a guaranteed residual value; in such cases, the lease liability is remeasured by discounting the revised lease payments at a initial discount rate (unless the lease payments change due to a change in a variable interest rate, in which case a revised discount rate is used) the lease contract is changed and the change is not accounted for as a separate lease, in which case the lease liability is remeasured based on the term of the modified lease, discounting the revised lease payments by using the revised discount rate at the effective date of the modification.
The Group (the Parent company) has elected to apply the practical expedient not to recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets. The lease payments associated with these leases is recognized as an expense on a straight-line basis over the lease term.
Dividends payable to the shareholders are recognised as a liability in the financial statements in the period in which the dividends are approved by the shareholders.
Financial income and expenses comprise interest payable on borrowings and lease liabilities calculated using the effective interest rate method, interest receivable on funds invested and foreign exchange gains and losses. Interest income is recognised in the statement of profit or loss as it accrues, using the effective interest method. The interest expenses of lease liabilities are recognized in statement of profit or loss using the effective interest rate method.
Related parties represent both legal entities and private individuals related to the Group and Parent company in accordance with the following rules.
Related party transaction - a transfer of resources, services or obligations between a reporting group entity and a related party, regardless of whether a price is charged.
The Group's activities expose it to a variety of financial risks:
The Group's overall risk management focuses on the unpredictability of financial markets and seeks to minimise its potential adverse effects on the Group's financial performance. The responsibility for risk management lies with the Finance Department. The Finance Department identifies and evaluates risks and seeks for solutions to avoid financial risks in close co-operation with other operating units of the Group. Financial risks are managed both on Parent company and consolidated level.
The Group operates in the international market and is subject to foreign currency risk arising primarily from USD fluctuations.
Foreign currency risk arises when future commercial transactions, recognised assets and liabilities are denominated in a currency different from the Group's functional currency. To manage the foreign currency risk arising from future commercial transactions and recognised assets and liabilities, the Group uses forward foreign currency contracts. The Finance Department analyses the net open position in each foreign currency. The Group might decide to enter to forward foreign currency contracts or to maintain borrowings (in form of credit line) in appropriate currency andamount. As at 30 June 2023 and 30 June 2022 the Group (including Parent company) had no open forward exchange contracts.
The following schedule summarises net open positions for currencies expressed in EUR as at 30 June 2023:
| EUR | USD | Other | Total |
|---|---|---|---|
| 439 407 297 225 |
856 676 3 151 036 |
10 889 16 178 |
1 306 972 3 464 439 |
| 4 771 411 | |||
| (1 207 973) | - | - | (1 688 586) (1 207 973) |
| (1 964 483) (1 227 851) |
(931 712) 3 076 000 |
(364) 26 703 |
(2 896 559) 1 874 852 |
| EUR | USD | Other currencies |
Total |
| 666 132 1 538 058 |
|||
| 737 444 | 1 450 224 | 16 522 | 2 204 190 |
| (756 510) | (870 046) | (362) | (1 626 918) (1 207 973) |
| (1 964 483) (1 227 039) |
(870 046) 580 178 |
(362) 16 160 |
(2 834 891) (630 701) |
| 736 632 (756 510) 478 604 258 840 (1 207 973) |
4 007 712 (931 712) 174 916 1 275 308 - |
currencies 27 067 (364) 12 612 3 910 - |
The following schedule summarises net open positions for currencies expressed in EUR as at 30 June 2022: Group EUR USD Other Total
| currencies | ||||
|---|---|---|---|---|
| Financial assets | ||||
| Trade receivables, gross | 604 663 | 2 159 217 | 463 | 2 764 343 |
| Cash and cash equivalents | 807 173 | 1 962 921 | 11 073 | 2 781 167 |
| Total | 1 411 836 | 4 122 138 | 11 536 | 5 545 510 |
| Financial liabilities | ||||
| Liabilities | ||||
| Total | (1 246 751) | (677 341) | (1 972) | (1 926 064) |
| Net open positions | (1 246 751) 165 085 |
(677 341) 3 444 797 |
(1 972) 9 564 |
(1 926 064) 3 619 446 |
19 This is translation of the Company's separate financial statements and Group's consolidated financial statements in pdf-format without European Single Electronic Format (ESEF) markups, from the digitally signed original, which was prepared in Latvian and submitted in machine-readable .xhtml format to the Nasdaq Riga Stock Exchange (link: https://nasdaqbaltic.com/).
(a) Foreign currency risk (continued)
| Parent company Financial assets |
EUR | USD | Other currencies | Total |
|---|---|---|---|---|
| Trade receivables, gross | 604 663 | 349 567 | 463 | 954 693 |
| Cash and cash equivalents | 807 173 | 344 228 | 11 073 | 1 162 474 |
| Total | 1 411 836 | 693 795 | 11 536 | 2 117 167 |
| Financial liabilities | ||||
| Liabilities | (1 246 751) | (472 473) | (1 972) | (1 721 196) |
| Total | (1 246 751) | (472 473) | (1 972) | (1 721 196) |
| Net open positions | 165 085 | 221 322 | 9 564 | 395 971 |
The Group and the Parent company have assessed the impact on profit before tax of reasonably possible changes in the exchange rate of the US dollar against the euro, assuming that other variables, mainly interest rates, remain unchanged.
| Change in the USD exchange rate | Group | Parent company | |||
|---|---|---|---|---|---|
| Effect as at 30 June | Effect as at 30 June | ||||
| 2022/2023 | 2021/2022 | 2022/2023 | 2021/2022 | ||
| EUR | EUR | EUR | EUR | ||
| -10% | 307 600 | 344 480 | 58 018 | 22 132 | |
| - 5% | 153 800 | 172 240 | 29 009 | 11 066 | |
| +5% | (153 800) | (172 240) | (29 009) | (11 066) | |
| +10% | (307 600) | (344 480) | (58 018) | (22 132) |
The Group (including Parent company) has significant exposure of credit risk with its customers. The Group's policy is to ensure that wholesale of products is carried out with customers having appropriate credit history. If the customers are residing in countries with high credit risk, then Letters of Credit issued by reputable credit institutions are used as credit risk management instruments. In situations where no Letters of Credit can be obtained from reputable credit institutions, the prepayments from the customers are requested or State Export Guarantees purchased. Customers' financial position is monitored on regular basis and assigned credit limits has been changed based on customer's credit history and customer's paying behaviour.
As at 30 June 2023, the Group's largest customer's receivable balance accounted for approximately 37% of the total carrying amount of trade receivables, and the sales revenue from this largest customer (located in the United States) accounted for approximately 14% of the Group's revenues (at 30 June 2022: 41% and for 2021/2022 – 4%, respectively), as well as another receivable balance accounted for 13% of total trade receivables. In 2022/2023 income from the above-mentioned largest clients in the US 100% applies to CFIP, Integra, Spectrum Compact, Aranet segment (2021/2022 - 100% applies to CFIP, Integra, Spectrum Compact, Aranet segment). Trade receivable balances of the Group's other customers did not reach at least 10% of the total receivables. The Parent company's balance sheet as at 30 June 2023 included three trade receivables with the balance above 10% of the total of trade receivables, including receivables from related companies (30.06.2022: three debts). In the reporting year, the Parent company generated approximately 53% of the revenues from sales to subsidiary in the United States (2021/2022 - 40%). In 2022/2023 as well as in 2021/2022 income from sales to the US subsidiary relate to the CFIP, Integra, Spectrum Compact, Aranet segment in the amount of 95% and the other segment 5%.
With respect to credit risk arising from the other financial assets of the Group, which comprise cash and cash equivalents, the Group's exposure to credit risk arises from the default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments. The Group's maximum credit risk exposure as at 30.06.2023 amounts to EUR 5 691 153 or 19.96% of total assets (30.06.2022.: EUR 6 509 071 or 23.55% of total assets), and Parent company's maximum credit risk exposure as at 30.06.2023 amounts to – EUR 2 936 892 or 11.71% of total assets (30.06.2022: EUR 2 840 536 or 12.06% of total assets. For more information on the Group's and Parent company's exposure to credit risk please also refer to Note 8.
The Group follows a prudent liquidity risk management and hence maintain a sufficient quantity of liquid funds. The Group's current liquidity ratio (ratio between the current assets and total liabilities) is 2.36 (30.06.2022: 2.23), quick liquidity ratio (ratio between the current assets less inventory and total liabilities) is: 0.55 (30.06.2022: 0.64), and Parent company's current liquidity ratio is 2.51 (30.06.2022: 2.58), quick liquidity ratio is: 0.33 (30.06.2022: 0.39).
The Group's management monitors liquidity reserves for the operational forecasting, based on estimated cash flows. Most of the Group's liabilities are short term. Management believes that the Group will have sufficient liquidity to be generated from operating activities and does not see significant exposure to liquidity risk. For more information on the Group's and Parent company's exposure to liquidity risk, refer to Note 12, Note 14 and Note 15.
The maturity structure of financial liabilities based on contractual undiscounted payments is as follows:
| Group | Up to 3 | 3 to 12 | 2-5 years | Total | Balance |
|---|---|---|---|---|---|
| 30/06/2023 | months | months | sheet value | ||
| EUR | EUR | EUR | EUR | EUR | |
| Lease liabilities | 100 400 | 301 201 | 1 874 636 | 2 276 237 | 2 053 654 |
| Loans | 1 218 597 | - | - | 1 218 597 | 1 207 973 |
| Trade payables, other | |||||
| liabilities, accruals | 3 948 608 | 652 793 | - | 4 601 401 | 4 601 401 |
| Total | 5 267 605 | 953 994 | 1 874 636 | 8 096 235 | 7 863 028 |
| 30/06/2022 | |||||
| Lease liabilities | 100 971 | 302 913 | 2 282 512 | 2 686 396 | 2 404 885 |
| Trade payables, other | |||||
| liabilities, accruals | 4 557 509 | 606 104 | - | 5 163 613 | 5 163 613 |
| Total | 4 658 480 | 909 017 | 2 282 512 | 7 850 009 | 7 568 498 |
| Parent company | Up to 3 | 3 to 12 | 2-5 years | Total | Balance |
| 30/06/2023 | months | months | sheet value | ||
| EUR | EUR | EUR | EUR | EUR | |
| Lease liabilities | 88 030 | 264 089 | 1 788 043 | 2 140 162 | 1 963 028 |
| Loans | 1 218 597 | - | - | 1 218 597 | 1 207 973 |
| Trade payables, other | |||||
| liabilities, accruals | 3 183 937 | 594 388 | - | 3 778 325 | 3 778 325 |
| Total | 4 490 564 | 858 477 | 1 788 043 | 7 137 084 | 6 949 326 |
| 30/06/2022 | |||||
| Lease liabilities | 88 030 | 264 089 | 2 140 162 | 2 492 281 | 2 257 799 |
| Trade payables, other | |||||
| liabilities, accruals | 3 435 294 | 606 104 | - | 4 041 398 | 4 041 398 |
| Total | 3 523 324 | 870 193 | 2 140 162 | 6 533 679 | 6 299 197 |
The Group's cash flows from interest bearing liabilities are dependent on current market interest rates. As the Group does not have significant interest-generating assets or interest-bearing liabilities (please see credit line amount as at the balance sheet date), thus the Group's cash flows and net results are largely independent of changes in market interest rates (Euribor). However, as the Group and Parent company mainly has short-term interest-bearing liabilities, the exposure is not significant.
Part of the Group's and the Parent company's revenue is derived from the sale of products outside the European Union, which creates exposure to geopolitical risk. The global electronics services market is primarily affected by the US-China "trade war", but it does not currently pose a threat to the Group's sales. Import duties on microwave equipment imported from the European Union remain unchanged. It is more likely that, in the event of sanctions being imposed on Chinese competitors, additional sales opportunities may appear on the US market.
Since the start of military actions by Russia in Ukraine, the overall uncertainty of the business environment has increased. Although the direct impact on the Group's operations is relatively limited, the Group carefully evaluates potential cost increase forecasts and potential risks.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal, or in its absence, the most advantageous market to which the Group has access at that date. The fair value of liabilities represents default risk.
When available, the Group measures the fair value of an instrument using quoted prices in an active market for that instrument. Fair value is classified in various levels in the fair value hierarchy according to data used in measurement methods:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices);
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability might be categorized in different levels of the fair value hierarchy, the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Group recognizes reclassification among fair value hierarchy levels in the end of the reporting period in which the reclassification was performed.
The Group and the Parent Company have no significant assets as at 30 June 2023 and 30 June 2022 that are to be measured at fair value.
The Group's and Parent company's financial assets and liabilities (trade receivables, other receivables, other financial assets, trade and other payables, lease liabilities and other financial liabilities) correspond to Level 3, except for cash and cash equivalents, which correspond to Level 2. These Group's financial assets and liabilities, except lease liabilities, generally have a maturity of up to six months, therefore the Group believes that the fair value of these financial assets and liabilities corresponds to their initial nominal value and carrying amount at any subsequent date. The majority of the lease liability in the previous year (2021/2022) were calculated at amortized cost as a result of lease modifications using a revised discount rate equal to the market interest rate for similar borrowings. Although the market interest rates have increased during the reporting year, the Group believes that the accounting value of lease liabilities is also approximately similar to their fair value on 30 June 2023, taking into account the remaining amount of lease liabilities.
The Group and the Parent company manages its capital to ensure that the Group and the Parent company will be able to continue as a going concern while maximizing the return to stakeholders through the optimization of the debt and equity balance. The Group and the Parent company control the capital using the gearing ratio. This ratio is calculated by applying the total amount of liabilities less cash and cash equivalents to total equity.
The gearing ratios at the year-end was as follows:
| Group | Parent company | ||||
|---|---|---|---|---|---|
| 30/06/2023 | 30/06/2022 | 30/06/2023 | 30/06/2022 | ||
| EUR | EUR | EUR | EUR | ||
| Liabilities | 9 664 306 | 10 236 400 | 7 760 457 | 7 326 203 | |
| Cash and cash equivalents | (3 464 439) | (2 781 167) | (1 538 058) | (1 162 474) | |
| Net debt/(assets) | 6 199 867 | 7 455 233 | 6 222 399 | 6 163 729 | |
| Shareholders' equity | 18 843 539 | 17 397 550 | 17 323 867 | 16 226 185 | |
| Debt to equity ratio | 51% | 59% | 45% | 45% | |
| Net debt/(net asset) to equity ratio | 33% | 43% | 36% | 38% |
The ratios characterizing the capital management at the Group level have improved in the reporting year, with a decrease in the total amount of liabilities and an increase in the cash balance, as well as an increase in the amount of equity due to the profit of the reporting year, while in the case of the Parent company, the coefficients have not changed significantly.
The management of the Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Management has assessed the situation at the end of the reporting period and after the end of the reporting year and has determined that military actions in Ukraine did not have a material adverse effect on the Group's and Parent company's operations and financial results, given the specifics of the products produced by the Group. The Group's operations were not significantly disrupted and management does not anticipate any significant disruptions in the future.
When the events and circumstances indicate a potential impairment, the Group performs impairment tests for items of PPE, intangible assets and right-to-use assets. Based to these tests, assets are written down to their recoverable amounts, if necessary. When carrying out impairment tests management uses various estimates for the cash flows arising from the use of the assets, sales, maintenance, and repairs of the assets, as well as in respect of the inflation and growth rates. If the situation changes in the future, either additional impairment could be recognised, or the previously recognised impairment could be partially or fully reversed. In view of the above considerations about impact of hostilities in Ukraine, management has not identified any circumstances that could indicate that the Group's and the Parent company's long-term non-financial assets could be impaired. See also Note 2H.
The Group and the Parent company have closed the reporting year with a profit and a positive cash flow from operating activities. The Group will continue pursuing its strategy to develop competitive wireless data transmission products and solutions for new export markets, and maintain the current sound financial position and control over the production process with the aim to increase sales and profitability.
Management estimates the useful lives of individual PPE items in proportion to the expected duration of use of the asset based on historical experience with similar fixed assets and future plans. See also Note 2E and Note 2F.
The Group recognizes allowances for expected credit losses from loans and receivables. In order to determine the unrecoverable amount of receivables, management applies estimates as explained in Note 2L.
The Group (Parent company) makes provisions in for slow-moving inventories. Inventories at net realizable value are reported by reducing the cost of inventories by the amount of the established provisions in accordance with the principles described in the Note 2 K.
Provisions are recognized when the Group has a present legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required from the Group to settle the obligation, and the amount of obligation can be measured reasonably. If the Group foresees that the expenses required for recognizing an allowance will be partly or fully repaid, for example, within an insurance contract, the recovery of such expenses is recognized as a separate asset only when it is certain that such expenses will be recovered. Expenses connected with any provisions are recognized in the profit or loss statement less recovered amounts.
Due to the specifics of the operations, provisions for potential warranty expenses are recognized based on the management's assessment of the risk of expected warranty repairs relating to the concluded contracts. The standard warranty period is one to five years depending on product.
Accrued liabilities for unused vacations are calculated in accordance with the number of vacation days unused as at the end of reporting year and the average remuneration during the last six months of the reporting year. These liabilities are shown as short-term accrued liabilities.
The application of IFRS 16 Leases requires significant management assumptions regarding the identification of the lease, the determination of the lease term and the discount rate applied in calculations. The estimation of the right-touse asset and respective lease liability value in respect of production, sale and administration premises is based on the assumption that the lease of premises will be used for the next 6 years (after 30.06.2023) at a fixed monthly rental rate; discount rate of 2,54% (30.06.2022: 2,54%) was applied based on available data from the Bureau of Statistics for similar loans.
| 5. Group |
Property, plant and equipment, intangible assets and right-to-use assets Software and licenses |
Leasehold Improve ments |
Technolog ical equipment |
Other PPE |
Under construc tion |
Right-to use assets (premises) |
Total |
|---|---|---|---|---|---|---|---|
| EUR | EUR | and devices EUR |
EUR | EUR | EUR | EUR | |
| Reporting year ended 30 June 2022 | |||||||
| Opening balance | 316 640 | 17 030 | 579 932 | 94 580 | - | 1 316 804 | 2 324 986 |
| Acquisitions at cost Disposals at net book |
216 122 | 254 716 | 936 330 | 271 006 | 230 647 | 1 396 722 | 3 305 543 |
| value Result of fluctuations in the foreign exchange |
- | - | (1 352) | (99) | - - |
- | (1 451) |
| rates Depreciation and |
4 | - | 257 | 12 | 20 358 | 20 631 | |
| amortisation charge for the period |
(121 087) | (18 414) | (295 554) | (62 151) | - | (362 216) | (859 422) |
| Closing balance | 411 679 | 253 332 | 1 219 613 | 303 348 | 230 647 | 2 371 668 | 4 790 287 |
| Reporting year ended 30 June 2023 | |||||||
| Opening balance | 411 679 | 253 332 | 1 219 613 | 303 348 | 230 647 | 2 371 668 | 4 790 287 |
| Acquisitions at cost | 259 991 | 810 156 | 671 329 | 153 303 | (130 969) | - | 1 763 810 |
| Disposals at net book value Result of fluctuations in |
(3 566) | - | (1 543) | (696) | - | - | (5 805) |
| the foreign exchange rates Depreciation and |
(2) | - | (258) | (264) | - | (4 392) | (4 916) |
| amortisation charge for the period |
(153 671) | (63 746) | (474 203) | (100 004) | - | (390 508) | (1 182 132) |
| Closing balance | 514 431 | 999 742 | 1 414 938 | 355 687 | 99 678 | 1 976 768 | 5 361 244 |
| As at 30 June 2022: | |||||||
| Historical cost | 1 303 549 | 1 370 668 | 4 946 475 | 984 822 | 230 647 | 3 444 375 | 12 280 536 |
| Accumulated depreciation and amortisation |
(891 870) | (1 117 336) | (3 726 862) | (681 474) | - | (1 072 707) | (7 490 249) |
| Carrying amount | 411 679 | 253 332 | 1 219 613 | 303 348 | 230 647 | 2 371 668 | 4 790 287 |
| As at 30 June 2023: | |||||||
| Historical cost | 1 324 594 | 2 180 824 | 5 137 983 | 1 047 884 | 99 678 | 3 432 661 | 13 223 624 |
| Accumulated depreciation and amortisation |
(810 163) | (1 181 082) | (3 723 045) | (692 197) | - | (1 455 893) | (7 862 380) |
| Carrying amount | 514 431 | 999 742 | 1 414 938 | 355 687 | 99 678 | 1 976 768 | 5 361 244 |
Historical cost of disposals for the reporting year ended 30 June 2023 is EUR 802 409 and disposed accumulated depreciation is EUR 796 604 (2021/2022: EUR 798 400 and EUR 796 949, respectively).
Depreciation of EUR 687 052 is included in the statement of profit or loss within Cost of sales (2021/2022: EUR 505 558); depreciation of EUR 279 319 is included within Sales and marketing costs (2021/2022: EUR 220 094); depreciation of EUR 215 761 is included within Administrative expenses (2021/2022: EUR 133 770), including depreciation of EUR 6 967 under Other administrative expenses (2021/2022: EUR 6 145).
Cost of short-term lease in the amount of EUR 36 087 is included in the statement of profit or loss within Administrative expenses (statement of profit and loss within Cost of goods sold 2021/2022: EUR 23 011).
The acquisition costs of fully depreciated fixed assets that are still in use at the reporting date amounted to EUR 4 959 433 (30.06.2022.: EUR 5 405 516).
24 This is translation of the Company's separate financial statements and Group's consolidated financial statements in pdf-format without European Single Electronic Format (ESEF) markups, from the digitally signed original, which was prepared in Latvian and submitted in machine-readable .xhtml format to the Nasdaq Riga Stock Exchange (link: https://nasdaqbaltic.com/).
| Parent company | Software and licenses |
Leasehold improvements |
Technolo gical equipment and devices |
Other fixed assets |
Under construc tion |
Right-to use assets (premises) |
Total |
|---|---|---|---|---|---|---|---|
| EUR | EUR | EUR | EUR | EUR | EUR | EUR | |
| Reporting year ended 30 June 2022 | |||||||
| Opening balance | 316 584 | 17 030 | 573 617 | 92 839 | - | 1 147 143 | 2 147 213 |
| Acquisitions at cost | 216 122 | 254 716 | 917 457 | 257 539 | 230 647 | 1 396 722 | 3 273 203 |
| Disposals at net book value Depreciation and amortisation charge for |
- | - | (1 225) | (99) | - | - | (1 324) |
| the period | (121 028) | (18 414) | (288 047) | (59 368) | - | (314 547) | (801 404) |
| Closing balance | 411 678 | 253 332 | 1 201 802 | 290 911 | 230 647 | 2 229 318 | 4 617 688 |
| Reporting year ended 30 June 2023 | |||||||
| Opening balance | 411 678 | 253 332 | 1 201 802 | 290 911 | 230 647 | 2 229 318 | 4 617 688 |
| Acquisitions at cost | 259 990 | 810 157 | 659 582 | 147 440 | (130 969) | - | 1 746 200 |
| Disposals at net book value Depreciation and |
(3 566) | - | (1 543) | (548) | - | - | (5 657) |
| amortisation charge for the period |
(153 671) | (63 747) | (459 575) | (92 634) | - | (339 143) | (1 108 770) |
| Closing balance | 514 431 | 999 742 | 1 400 266 | 345 169 | 99 678 | 1 890 175 | 5 249 461 |
| As at 30 June 2022: | |||||||
| Historical cost Accumulated depreciation and |
1 300 726 | 1 370 668 | 4 863 123 | 915 237 | 230 647 | 3 178 630 | 11 859 031 |
| amortisation | (889 048) | (1 117 336) | (3 661 321) | (624 326) | - | (949 312) | (7 241 343) |
| Carrying amount | 411 678 | 253 332 | 1 201 802 | 290 911 | 230 647 | 2 229 318 | 4 617 688 |
| As at 30 June 2023: | |||||||
| Historical cost Accumulated depreciation and |
1 321 771 | 2 180 825 | 5 048 775 | 977 097 | 99 678 | 3 178 630 | 12 806 776 |
| amortisation | (807 340) | (1 181 083) | (3 648 509) | (631 928) | - | (1 288455) | (7 557 315) |
| Carrying amount | 514 431 | 999 742 | 1 400 266 | 345 169 | 99 678 | 1 890 175 | 5 249 461 |
Historical cost of disposals for the reporting year ended 30 June 2023 is EUR 798 455 and disposed accumulated depreciation is EUR 792 798 (2021/2022: EUR 791 502 and EUR 790 178, accordingly).
Depreciation of EUR 687 052 is included in the statement of profit or loss within Cost of sales (2021/2022: EUR 505 558); depreciation of EUR 205 957 is included within Sales and marketing costs (2021/2022: EUR 162 076); depreciation of EUR 215 761 is included within Administrative expenses (2021/2022: EUR 133 770), including depreciation of EUR 6 967 under Other administrative expenses (2021/2022: EUR 6 145).
Cost of short-term lease in the amount of EUR 36 087 is included in the statement of profit or loss within Administrative expenses (statement of profit and loss within Cost of goods sold 2021/2022: EUR 23 011).
The acquisition costs of fully depreciated fixed assets that are still in use at the reporting date amounted to EUR 4 844 820 (30.06.2022.: EUR 5 286 725).
Notes to the financial statements (continued)
| Name | Investment in equity % |
Carrying value of the investment |
||
|---|---|---|---|---|
| 30/06/2023 | 30/06/2021 | 30/06/2022 | 30/06/2021 | |
| Parent company: | % | % | EUR | EUR |
| "SAF North America" LLC | 100 | 100 | 32 893 | 32 893 |
| SAF Tehnika Asia Pte. Ltd. | 100 | - | 21 012 | - |
| Investments in subsidiaries | 53 905 | 32 893 | ||
| Other investments: | ||||
| "LEITC" SIA | 17.98 | 17.98 | 6 435 | 6 435 |
| "LEO Pētījumu centrs" SIA | 15.57 | 10 | 995 | 711 |
| TRYM Inc. | < 3% | - | 201 898 | - |
| Investments in other companies | 209 328 | 7 146 | ||
| Total investments in subsidiaries and other companies | 263 233 | 40 039 |
"SAF North America" LLC is a 100% subsidiary of the Parent company that operates in Aurora, Colorado State in USA, that started active operations in the spring of 2012 and promotes the Group`s products and services, performs marketing, market research, attraction of new clients and provides technical support in North America. Since 1 October 2014 the subsidiary is engaged in the distribution of goods in the North American region. As at 30 June 2023 the equity of the subsidiary amounted to EUR 1 552 521 (30.06.2022.: EUR 1 204 258). 100% participation ensures absolute control of the subsidiary's assets and liabilities.
At the end of 2022 the Parent company's subsidiary SAF Tehnika Asia Pte.Ltd started its operations in Singapore. The purpose of its creation was to provide promotion, marketing, market research, attraction of new customers and technical support for the products and services offered by the Group in the Asia region. On 30 June 2023, the equity of the subsidiary was EUR 21 038. 100% participation ensures absolute control over the assets and liabilities of the subsidiary.
In September 2012, the Parent company acquired the shares of "LEITC" SIA (Latvijas Elektronikas iekārtu testēšanas centrs) and became the owner of 16.75% shares through an investment of EUR 477. At the end of 2017, another 1.23% of the shares were acquired becoming the owner of 17.98% with an investment of EUR 6 435. The mission of LEITC is to support research of electromagnetic compatibility (EMC) and educational projects that aim to expand the knowledge base, the range of equipment and to set up a group of specialists capable of addressing today's and future EMC issues.
"LEO Pētījumu centrs" is a limited liability company established in 2010 by the members of the Latvian Electrical Engineering and Electronic Industry Association (LETERA) and the company's objective is to attract EU funding for research and development of new products in the sphere of electronics and electrical engineering. The Company has invested EUR 711 in its share capital and has become the owner of 10% of its shares. At the end of 2022 were purchased 284 shares, investing 284 EUR in the share capital, thus the Company's share increased to 15.57%
In September 2022 the Parent company purchased shares of TRYM Inc., which is a company based in the state of Delaware, USA. TRYM INC is a software development company that develops solutions for the medical marijuana growing industry and mainly performs the integration of various systems and equipment designed to support Cannabis growers - growth optimization, regulator reports, automation of daily process management.
| Group | Parent company | |||
|---|---|---|---|---|
| 30/06/2023 | 30/06/2022 | 30/06/2023 | 30/06/2022 | |
| EUR | EUR | EUR | EUR | |
| Raw materials | 6 517 219 | 6 921 845 | 6 517 219 | 6 921 845 |
| Work in progress | 2 984 021 | 3 253 116 | 2 984 021 | 3 253 116 |
| Finished goods | 7 954 207 | 6 159 633 | 7 396 731 | 5 879 163 |
| 17 455 447 | 16 334 594 | 16 897 971 | 16 054 124 |
In order to value inventories at the lower of cost and net realizable value, the Group makes provisions for impairment of inventories. As at 30 June 2023 total amount of respective provisions (the Group and the Parent company) amounted to EUR 3 255 541 (30.06.2022: EUR 1 060 515). During the reporting year provision was increased by EUR 2 195 025 (2021/2022: increase by EUR 43 335) and respective change was included in Cost of sales.
Finished goods include equipment sent to clients for trial with an option to buy or return the equipment and the equipment sent to substitute damaged equipment. As at 30 June 2023 the value of equipment sent due to the above reasons amounted to EUR 400 384 (30.06.2022.: EUR 341 217) for Group and EUR 187 171 (30.06.2022.: EUR 101 392) for Parent company.
Work in Progress and Finished goods include production overhead costs (salary expenses and social insurance of production units' employees, depreciation and amortization, amortization of right-to-use assets, expenses of equipment, lease, service and other costs of production process) in amount of EUR 537 683 (30.06.2022.: EUR 645 646).
The Group maintains a certain level of raw materials and consumables, in order to be able to supply all the products currently included in the product portfolio of the Group within a competitive deadline. The market continues to display a tendency of increasing material production and delivery times and to continue to provide competitive and adequate production times the inventories raw materials are purchased with a reserve.
| Group | Parent company | |||
|---|---|---|---|---|
| 30/06/2023 | 30/06/2022 | 30/06/2023 | 30/06/2022 | |
| EUR | EUR | EUR | EUR | |
| Receivables from related companies | - | - | 63 805 | 264 976 |
| Trade receivables | 1 306 972 | 2 764 343 | 602 327 | 689 717 |
| Allowances for expected credit losses | (17 626) | (21 451) | (5 987) | (5 987) |
| Total trade receivables | 1 289 346 | 2 742 892 | 660 145 | 660 145 |
Trade receivables are not secured with collateral.
| 30/06/2023 | 30/06/2023 | 30/06/2022 | 30/06/2022 | |
|---|---|---|---|---|
| Group | Gross | Allowance | Gross | Allowance |
| EUR | EUR | EUR | EUR | |
| Not overdue | 1 013 839 | - | 2 420 831 | - |
| Overdue by 1 – 90 days | 282 343 | (6 836) | 322 061 | - |
| Overdue by 90 and more days | 10 790 | (10 790) | 21 451 | (21 451) |
| Total trade receivables | 1 306 972 | (17 626) | 2 764 343 | (21 451) |
| 30/06/2023 | 30/06/2023 | 30/06/2022 | 30/06/2022 | |
| Parent company | Gross | Allowance | Gross | Allowance |
| EUR | EUR | EUR | EUR | |
| Not overdue | 492 049 | - | 770 166 | - |
| Overdue by 1 – 90 days | 174 083 | (5 987) | 183 477 | - |
| Overdue by 90 and more days | - | - | 1 050 | (1 050) |
| Total trade receivables | 666 132 | (5 987) | 954 693 | (1 050) |
27 This is translation of the Company's separate financial statements and Group's consolidated financial statements in pdf-format without European Single Electronic Format (ESEF) markups, from the digitally signed original, which was prepared in Latvian and submitted in machine-readable .xhtml format to the Nasdaq Riga Stock Exchange (link: https://nasdaqbaltic.com/).
| Group | Parent company |
||
|---|---|---|---|
| EUR | EUR | ||
| As at 30 June 2021 | 224 043 | 192 783 | |
| Written-off | (4 213) | - | |
| Additional allowances for expected credit losses | 183 | - | |
| Debts recovered | (198 562) | (191 733) | |
| As at 30 June 2022 | 21 451 | 1 050 | |
| Written-off | 67 725 | 6 232 | |
| Additional allowances for expected credit losses | (71 725) | (1 295) | |
| Debts recovered | 175 | - | |
| As at 30 June 2023 | 17 626 | 5 987 |
Changes in allowances for expected credit losses are recognized in Statement of profit or loss within administration costs.
| Group | 30/06/2023 | 30/06/2023 | 30/06/2022 | 30/06/2022 |
|---|---|---|---|---|
| EUR | % | EUR | % | |
| USD | 856 676 | 65.55 | 2 159 216 | 78.11 |
| EUR | 439 407 | 33.62 | 604 663 | 21.87 |
| GBP | 394 | 0.03 | 464 | 0.02 |
| SGD | 10 495 | 0.80 | - | - |
| Total trade receivables, gross | 1 306 972 | 100% | 2 764 343 | 100% |
| Parent company | 30/06/2023 | 30/06/2023 | 30/06/2022 | 30/06/2022 |
| EUR | % | EUR | % | |
| USD | 174 916 | 26 26 | 349 566 | 36.61 |
| EUR | 478 604 | 71.85 | 604 663 | 63.33 |
| GBP | 394 | 0.06 | 464 | 0.06 |
| SGD | 12 218 | 1.83 | - | - |
| Total trade receivables, gross | 666 132 | 100% | 954 693 | 100% |
| Group | Parent company | |||
|---|---|---|---|---|
| 30/06/2023 EUR |
30/06/2022 EUR |
30/06/2023 EUR |
30/06/2022 EUR |
|
| Government grants* | 43 464 | 112 443 | 43 464 | 112 443 |
| Overpaid value added tax | 48 965 | 104 278 | 48 965 | 104 278 |
| Advance payments to suppliers | 201 372 | 127 196 | 201 372 | 109 751 |
| Other receivables | 45 239 | 289 610 | 45 151 | 279 670 |
| 339 040 | 633 527 | 338 952 | 606 142 |
* The government grants related to the employee training project, exhibition project and the development project, which are implemented with the "LEO Pētījumu centrs" SIA. Government grants in the amount of EUR 35 556 were received after the end of the financial year.
| Group | Parent company | ||||
|---|---|---|---|---|---|
| 30/06/2023 | 30/06/2022 | 30/06/2023 | 30/06/2022 | ||
| EUR | EUR | EUR | EUR | ||
| Cash in banks | 3 464 439 | 2 781 167 | 1 538 058 | 1 162 474 | |
| 3 464 439 | 2 781 167 | 1 538 058 | 1 162 474 |
Notes to the financial statements (continued)
| Breakdown of cash and cash equivalents by currency, expressed in EUR | ||||||
|---|---|---|---|---|---|---|
| 30/06/2023 | 30/06/2023 | 30/06/2022 | 30/06/2022 | |||
| Group | EUR | % | EUR | % | ||
| USD | 3 151 035 | 90.95 | 1 962 922 | 70.58 | ||
| EUR | 297 225 | 8.58 | 807 173 | 29.02 | ||
| GBP | 3 910 | 0.11 | 11 072 | 0.40 | ||
| 12 269 | 0.36 | - | - | |||
| Cash and cash equivalents | 3 464 439 | 100% | 2 781 167 | 100% | ||
| 30/06/2023 | 30/06/2023 | 30/06/2022 | 30/06/2022 | |||
| Parent company | EUR | % | EUR | % | ||
| USD | 1 275 308 | 82.92 | 344 228 | 29.61 | ||
| EUR | 258 840 | 16.83 | 807 174 | 69.44 | ||
| GBP | 3 910 | 0.25 | 11 072 | 0.95 | ||
| Cash and cash equivalents | 1 538 058 | 100% | 1 162 474 | 100% |
| Breakdown of cash and cash equivalents by bank | |||||
|---|---|---|---|---|---|
| Moody's credit rating (short-term/ long-term) |
Group | Parent company | |||
| 30/06/2023 EUR |
30/06/2022 EUR |
30/06/2023 EUR |
30/06/2022 EUR |
||
| Swedbank AS | P-1 / Aa3 | 124 500 | 124 165 | 124 500 | 124 165 |
| LUMINOR Bank AS | P-1 / Baa3 | 1 191 650 | 887 841 | 1 191 650 | 887 841 |
| SEB Banka AS | P-1 / Aa2 | 67 267 | 31 757 | 67 267 | 31 757 |
| US Bank | P-1 / A1 | 1 863 325 | 1 618 693 | - | - |
| OCBC bank | P-1 / Aa1 | 24 670 | - | - | - |
| Other banks | n/a | 193 027 | 118 711 | 154 641 | 118 711 |
| 3 464 439 | 2 781 167 | 1 538 058 | 1 162 474 |
The Group's and the Parent company's estimated credit losses on cash held with banks are immaterial and have not been recognized based on Moody's rating information that was publicly available in 2023 and up to the date of these financial statements.
As at 30 June 2023, the registered and paid-up share capital of the Parent company is EUR 4 158 252 (30.06.2022.: EUR 4 158 252) and consists of 2 970 180 ordinary bearer shares (30.06.2022.: 2 970 180 shares) with unlimited voting rights. Nominal value per share is EUR 1,4.
The structure of the Company's shareholders is as follows (incl. shareholders holding more than 5% of the voting shares):
| Shares owned, % | ||||
|---|---|---|---|---|
| Shareholder | 30/06/2023 | 30/06/2022 | ||
| Didzis Liepkalns | 17.05% | 17.05% | ||
| Koka Zirgs SIA | 11.59% | 11.59% | ||
| Andrejs Grišāns | 10.03% | 10.03% | ||
| Normunds Bergs | 9.74% | 9.74% | ||
| Juris Ziema | 8.71% | 8.71% | ||
| Other shareholders | 42.88% | 42.88% |
During the reporting year
In the reporting year, dividends in amount of EUR 2 019 722 or EUR 0.68 per 1 share were calculated and paid out (01.07.2021-30.06.2022 – respectively EUR 1 990 021 or EUR 0.67 per 1 share).
| Group | Parent company | |||
|---|---|---|---|---|
| 30/06/2023 EUR |
30/06/2022 EUR |
30/06/2023 EUR |
30/06/2022 EUR |
|
| Trade accounts payable Trade and other payables |
1 688 586 1 688 586 |
1 926 064 1 926 064 |
1 626 918 1 626 918 |
1 721 196 1 721 196 |
| Accrued liabilities for unused vacations | 835 033 | 694 605 | 776 628 | 694 605 |
| Accrued liability for premiums | 929 377 | 1 443 410 | 388 358 | 665 727 |
| Salary | 501 787 | 439 678 | 416 224 | 350 865 |
| Other taxes | 374 761 | 515 218 | 325 381 | 478 439 |
| Provisions for guarantees | 55 658 | 45 636 | 55 658 | 45 636 |
| Other liabilities | 216 199 | 99 003 | 189 159 | 84 930 |
| Other liabilities | 2 912 815 | 3 237 550 | 2 151 408 | 2 320 202 |
| Total | 4 601 401 | 5 163 614 | 3 778 326 | 4 041 398 |
During the reporting period the increase in accrued liabilities for unused vacation pay included in the statement of profit or loss amounted to 140 428 (2021/2022: increase of EUR 119 217).
| Movement in provisions: | Group | Parent company | ||
|---|---|---|---|---|
| Warranties | Total | Warranties | Total | |
| EUR | EUR | EUR | EUR | |
| Balance at 30.06.2021 | 45 636 | 45 636 | 45 636 | 45 636 |
| Provisions made | - | - | - | - |
| Balance at 30.06.2022 | 45 636 | 45 636 | 45 636 | 45 636 |
| Provisions made | 10 022 | 10 022 | 10 022 | 10 022 |
| Balance at 30.06.2023 | 55 658 | 55 658 | 55 658 | 55 658 |
| 30/06/2023 | 30/06/2023 | 30/06/2022 | 30/06/2022 | |
|---|---|---|---|---|
| Group | EUR | % | EUR | % |
| USD | 931 712 | 55.18 | 677 340 | 35.17 |
| EUR | 756 510 | 44.80 | 1 246 752 | 64.73 |
| GBP | 362 | 0.02 | 1 972 | 0.10 |
| SGD | 2 | 0.00 | - | - |
| Trade and other payables | 1 688 586 | 100% | 1 926 064 | 100% |
| 30/06/2023 | 30/06/2023 | 30/06/2022 | 30/06/2022 | |
| Parent company | EUR | % | EUR | % |
| USD | 870 046 | 53.48 | 472 473 | 27.45 |
| EUR | 756 510 | 46.50 | 1 246 751 | 72.44 |
| GBP | 362 | 0.02 | 1 972 | 0.11 |
| Trade and other payables | 1 626 918 | 100% | 1 721 196 | 100% |
| Group | Parent company | |||
|---|---|---|---|---|
| 01.07.2022- 30.06.2023 EUR |
01.07.2021- 30.06.2022 EUR |
01.07.2022- 30.06.2023 EUR |
01.07.2021- 30.06.2022 EUR |
|
| At the beginning of the year | 2 404 885 | 1 319 940 | 2 257 799 | 1 147 141 |
| incl. long term | 2 013 978 | 1 004 539 | 1 918 656 | 876 985 |
| short term | 390 907 | 315 401 | 339 143 | 270 156 |
| Interest expense on lease liabilities | 62 160 | 49 355 | 57 348 | 44 889 |
| Interest payments | (62 160) | (49 355) | (57 348) | (44 889) |
| Lease payments | (344 746) | (334 551) | (294 771) | (283 936) |
| Increase in lease liabilities | - | 1 394 594 | - | 1 394 594 |
| Fluctuations in foreign exchange rates | (6 484) | 24 902 | - | - |
| At the end of the year | 2 053 655 | 2 404 885 | 1 963 028 | 2 257 799 |
| incl. long term | 1 665 030 | 2 013 978 | 1 623 885 | 1 918 656 |
| short term | 388 625 | 390 907 | 339 143 | 339 143 |
30 This is translation of the Company's separate financial statements and Group's consolidated financial statements in pdf-format without European Single Electronic Format (ESEF) markups, from the digitally signed original, which was prepared in Latvian and submitted in machine-readable .xhtml format to the Nasdaq Riga Stock Exchange (link: https://nasdaqbaltic.com/).
The production of the Group's products is material-intensive, for the purchase of which customers often make prepayments. Advances paid by customers are settled when the products are sold, and this usually takes place within 1 year. There are also customers who, together with the goods, also purchase extended warranties, which are recognized in revenue over the warranty period (up to 5 years).
| Group | Parent company | |||
|---|---|---|---|---|
| 30/06/2023 | 30/06/2022 | 30/06/2023 | 30/06/2022 | |
| EUR | EUR | EUR | EUR | |
| Advances from customers | 667 082 | 1 677 390 | 518 995 | 888 574 |
| Advances from related companies | - | - | 134 921 | - |
| Extended warranties | 1 134 195 | 990 511 | 61 074 | 57 283 |
| Total | 1 801 277 | 2 667 901 | 714 990 | 945 857 |
| incl. long term liabilities | 712 952 | 638 925 | 11 291 | 20 410 |
| short term liabilities | 1 088 325 | 2 028 976 | 703 699 | 925 447 |
| Movement of contract liabilities: | Group | Parent company | ||
| 01.07.2022- | 01.07.2021- | 01.07.2022- | 01.07.2021- | |
| 30.06.2023 | 30.06.2022 | 30.06.2023 | 30.06.2022 | |
| EUR | EUR | EUR | EUR | |
| At the beginning of the year | 2 667 901 | 2 225 246 | 945 857 | 1 289 751 |
| Received during the year | 18 470 131 | 17 537 867 | 13 178 381 | 12 075 117 |
| Recognised in revenue | (19 412 667) | (17 539 244) | (13 409 248) | (12 419 011) |
| Foreign exchange differences | 75 912 | 444 032 | - | - |
| Group | Parent company | |||
|---|---|---|---|---|
| 30/06/2023 EUR |
30/06/2022 EUR |
30/06/2023 EUR |
30/06/2022 EUR |
|
| Loans from credit institutions | 1 207 973 | - | 1 207 973 | - |
| Total | 1 207 973 | - | 1 207 973 | - |
At the end of the year 1 801 277 2 667 901 714 990 945 857
On August 10, 2022, in order to ensure liquidity, the Parent company of the Group concluded a credit line agreement with AS Luminor Bank with a total limit of EUR 4 950 000. The annual interest rate 3-month Euribor plus the added rate is applied to the credit line. The initial repayment period was set untill 30 August 2023. After the end of the reporting year, the repayment term of the credit line was extended until 30 August 2024.
As a collateral is pledged the property of the Parent company as a community of things and its future components, as well as all existing and future claims (rights of claim) against all debtors, regardless of the basis of their origin, with all rights belonging to these claims. The maximum claim amount is EUR 6 435 000.
CFIP product line is represented by::
Lumina, Full Outdoor all-in-one radio with Gigabit Ethernet traffic interface;
Marathon, FIDU low frequency low capacity system for industrial applications, energy companies and rural telecom use.
All CFIP radios are offered in most widely used frequency bands from 1.4GHz to 38 GHz, thus enabling the use of CFIP radios all across the globe.
Integra – is a next generation radio system employing latest modem technology on the market as well as radio technology with a frequency from 6GHz to 86 GHz. Some integras models provide a data transmission speed of up to 10 Gbs.
Spectrum Compact – it is a measurement tool for field engineers for telecom, broadcasting and other industries using radio technologies. It comprises of a number of units covering several frequency bands and proving various functionality.
Aranet - the latest SAF product line for environmental monitoring, consisting of various wireless sensors, base stations and Aranet cloud solution for data collection, aggregation and analysis.
• operations related to sales of products purchased from other suppliers, like antennas, cables, SAF renamed (OEMed) products and different accessories - as the second unit.
| CFIP, Integra, Spectrum Compact, Aranet |
Other | Total | ||||
|---|---|---|---|---|---|---|
| Group | 2022/2023 | 2021/2022 | 2022/2023 | 2021/2022 | 2022/2023 | 2021/2022 |
| EUR | EUR | EUR | EUR | EUR | EUR | |
| Segment assets Unallocated assets |
21 550 175 | 20 118 730 | 1 629 292 | 1 154 249 | 23 179 467 5 328 377 |
21 272 979 6 360 971 |
| Total assets | 28 507 844 | 27 633 950 | ||||
| Segment liabilities | 3 023 755 | 4 384 691 | 75 981 | 69 754 | 3 099 736 | 4 454 445 |
| Unallocated liabilities | 6 564 569 | 5 781 955 | ||||
| Total liabilities | 9 664 305 | 10 236 400 | ||||
| Revenue | 35 459 480 | 31 963 722 | 1 804 410 | 2 004 449 | 37 263 890 | 33 968 171 |
| Segment result | 12 094 969 | 13 535 408 | 2 845 083 | 866 916 | 14 940 052 | 14 402 324 |
| Unallocated expenses | (11 049 980) | (8 689 344) | ||||
| Profit from operating activities | 3 890 072 | 5 712 980 | ||||
| Other income | 257 382 | 390 565 | ||||
| Financial income | 2 503 | 214 134 | ||||
| Financial expenses | (128 416) | (49 374) | ||||
| Profit before taxes | 4 021 541 | 6 268 305 | ||||
| Corporate income tax | (486 816) | (178 325) | ||||
| Profit after tax | 3 534 725 | 6 089 980 | ||||
| Foreign currency fluctuations Profit of the reporting |
(69 014) | 135 481 | ||||
| year | 3 465 711 | 6 225 461 |
| Other information of segment: | ||||||
|---|---|---|---|---|---|---|
| CFIP, Integra, Spectrum Compact, Aranet |
Other | Total | ||||
| Group | 2022/2023 | 2021/2022 | 2022/2023 | 2021/2022 | 2022/2023 | 2021/2022 |
| EUR | EUR | EUR | EUR | EUR | EUR | |
| Additions of fixed and | ||||||
| intangible assets | 318 884 | 577 423 | - | - | 314 884 | 577 423 |
| Unallocated additions of fixed and intangible assets incl. initial recognition of leasehold rights |
1 448 926 | 2 728 120 | ||||
| Total additions of fixed and intangible assets and leasehold rights recognized | 1 763 810 | 3 305 543 | ||||
| Depreciation and amortization | 687 052 | 625 945 | - | - | 687 052 | 625 945 |
| Unallocated depreciation and amortization | 495 080 | 233 477 | ||||
| Total depreciation and amortisation | 1 182 132 | 859 422 |
| CFIP, Integra, Spectrum Compact, Aranet |
Other | Total | ||||
|---|---|---|---|---|---|---|
| Parent company | 2022/2023 EUR |
2021/2022 EUR |
2022/2023 EUR |
2021/2022 EUR |
2022/2023 EUR |
2021/2022 EUR |
| Segment assets Unallocated assets Total assets |
20 803 627 | 18 289 884 | 1 073 812 | 879 867 | 21 877 439 3 206 884 25 084 323 |
19 169 751 4 382 637 23 552 388 |
| Segment liabilities Unallocated liabilities |
3 037 825 | 3 470 291 | 83 214 | 71 618 | 3 121 039 4 639 417 |
3 541 909 3 784 294 |
| Total liabilities Revenue |
30 775 913 | 27 778 345 | 1 264 400 | 1 356 935 | 7 760 456 32 040 313 |
7 326 203 29 135 280 |
| Segment result | 9 544 227 | 9 700 271 | 964 101 | 858 887 | 10 508 328 | 10 559 158 |
| Unallocated expenses | (6 930 154) | (5 267 142) | ||||
| Profit from operating activities | 3 578 174 | 5 292 016 | ||||
| Other income | 202 387 | 385 865 | ||||
| Financial income | - | 170 363 | ||||
| Financial expenses | (158 226) | (44 908) | ||||
| Profit before taxes | 3 622 335 | 5 803 336 | ||||
| Corporate income tax | (504 931) | (49 097) | ||||
| Profit of the reporting year |
3 117 404 | 5 754 239 |
| CFIP, Integra, Spectrum Compact, Aranet |
Other | Total | ||||
|---|---|---|---|---|---|---|
| Parent company | 2022/2023 | 2021/2022 | 2022/2023 | 2021/2022 | 2022/2023 | 2021/2022 |
| EUR | EUR | EUR | EUR | EUR | EUR | |
| Additions of fixed and intangible assets |
314 884 | 577 423 | - | - | 314 884 | 577 423 |
| Unallocated additions of fixed and intangible assets incl. initial recognition of leasehold rights |
1 431 316 | 2 695 780 | ||||
| Total additions of fixed and intangible assets and leasehold rights recognized | 1 746 200 | 3 273 203 | ||||
| Depreciation and amortization |
687 052 | 625 945 | - | - | 687 052 | 625 945 |
| Unallocated depreciation and amortization | 421 718 | 175 459 | ||||
| Total depreciation and amortisation | 1 108 770 | 801 404 |
As at 30.06.2023. PPE, intangible assets and right of use assets located in Latvia with the total balance sheet value in the amount of EUR 5 249 461 (30.06.2022. – EUR 4 617 688) make up 98% (30.06.2022. – 96%) of the Group's total assets. The rest of these assets are located in the United States.
b) This note provides information on division of the Group's and Parent company's revenue and assets by geographical segments (only trade receivables are allocated to regions based on customer residency, all other assets remain unallocated). Information about credit risk concentration to individual customers see in Note 3 (1b). All revenue is derived from the contracts with customers.
| Revenue | Assets | ||||
|---|---|---|---|---|---|
| Group | 2022/ 2023 | 2021/ 2022 | 2022/ 2023 | 2021/ 2022 | |
| EUR | EUR | EUR | EUR | ||
| Latvia | 340 675 | 478 477 | 1 287 | 20 052 | |
| Other regions: | |||||
| North and South America | 26 750 640 | 18 659 097 | 850 342 | 2 138 822 | |
| Europe (excluding Latvia), CIS | 7 713 648 | 11 224 121 | 366 590 | 379 006 | |
| Asia, Africa, Middle East | 2 458 927 | 3 606 476 | 71 127 | 205 012 | |
| 37 263 890 | 33 968 171 | 1 289 346 | 2 742 892 | ||
| Unallocated assets | - | - | 27 218 498 | 24 891 058 | |
| 37 263 890 | 33 968 171 | 28 507 844 | 27 633 950 |
| Revenue | Assets | ||||
|---|---|---|---|---|---|
| Parent company | 2022/ 2023 | 2021/ 2022 | 2022/ 2023 | 2021/ 2022 | |
| EUR | EUR | EUR | EUR | ||
| Latvia | 340 675 | 478 477 | 1 287 | 20 052 | |
| Other regions: | |||||
| North and South America | 21 527 063 | 13 826 206 | 167 831 | 349 572 | |
| Europe (excluding Latvia), CIS | 7 713 648 | 11 224 121 | 366 590 | 379 006 | |
| Asia, Africa, Middle East | 2 458 927 | 3 606 476 | 124 437 | 205 012 | |
| 32 040 313 | 29 135 280 | 660 145 | 953 642 | ||
| Unallocated assets | - | - | 24 424 178 | 22 598 746 | |
| 32 040 313 | 29 135 280 | 25 084 323 | 23 552 388 |
Income of the Group and Parent company by main geographical markets and segments:
| Group: | ||||||
|---|---|---|---|---|---|---|
| CFIP, Integra, Spectrum Compact, Aranet |
Other | Total | ||||
| 2022/2023 | 2021/ 2022 | 2022/2023 | 2021/ 2022 | 2022/2023 | 2021/ 2022 | |
| Region | EUR | EUR | EUR | EUR | EUR | EUR |
| North and South America Europe (including |
24 767 354 | 17 271 309 | 1 983 286 | 1 387 788 | 26 750 640 | 18 659 097 |
| Latvia), CIS Asia, Africa, |
7 580 370 | 11 241 805 | 473 953 | 460 793 | 8 054 323 | 11 702 598 |
| Middle East | 2 160 466 34 508 190 |
3 450 608 31 963 722 |
298 461 2 755 700 |
155 868 2 004 449 |
2 458 927 37 263 890 |
3 606 476 33 968 171 |
| Parent | ||||||
|---|---|---|---|---|---|---|
| company: | ||||||
| CFIP, Integra, Spectrum Compact, Aranet |
Other | Total | ||||
| 2022/2023 | 2021/ 2022 | 2022/2023 | 2021/ 2022 | 2022/2023 | 2021/ 2022 | |
| Region | EUR | EUR | EUR | EUR | EUR | EUR |
| North and South America Europe (including |
19 543 777 | 13 085 932 | 1 983 286 | 740 274 | 21 527 063 | 13 826 206 |
| Latvia), CIS Asia, Africa, |
7 580 370 | 11 241 805 | 473 953 | 460 793 | 8 054 323 | 11 702 598 |
| Middle East | 2 160 466 29 284 613 |
3 450 608 27 778 345 |
298 461 2 755 700 |
155 868 1 356 935 |
2 458 927 32 040 313 |
3 606 476 29 135 280 |
34 This is translation of the Company's separate financial statements and Group's consolidated financial statements in pdf-format without European Single Electronic Format (ESEF) markups, from the digitally signed original, which was prepared in Latvian and submitted in machine-readable .xhtml format to the Nasdaq Riga Stock Exchange (link: https://nasdaqbaltic.com/).
Notes to the financial statements (continued)
| Group | Parent company | |||
|---|---|---|---|---|
| 01.07.2022- | 01.07.2021- | 01.07.2022- | 01.07.2021- | |
| 30.06.2023 | 30.06.2022 | 30.06.2023 | 30.06.2022 | |
| EUR | EUR | EUR | EUR | |
| Purchases of components and | ||||
| subcontractors' services | 15 165 370 | 13 132 365 | 14 373 518 | 12 142 640 |
| Salary expenses* | 4 737 210 | 4 425 268 | 4 737 210 | 4 425 268 |
| Social insurance expenses* | 1 104 941 | 1 031 890 | 1 104 941 | 1 031 890 |
| Depreciation and amortization (See Note | ||||
| 5) | 687 052 | 505 558 | 687 052 | 505 558 |
| Public utilities | 288 577 | 187 927 | 288 577 | 187 927 |
| Transportation | 39 736 | 37 030 | 39 736 | 37 030 |
| Business trip expenses | 3 625 | 4 291 | 3 625 | 4 291 |
| Communication expenses | 15 176 | 7 333 | 15 176 | 7 333 |
| Low value articles | 6 060 | 6 977 | 6 060 | 6 977 |
| Other production costs | 276 091 | 227 209 | 276 090 | 227 209 |
| 22 323 838 | 19 565 848 | 21 531 985 | 18 576 123 |
* Including accrued liabilities for unused vacations.
Research and development related expenses of EUR 3 532 831 (2021/ 2022: EUR 3 428 971) are included in the statement of profit or loss within Purchases of components and subcontractors' services.
| Group | Parent company | |||
|---|---|---|---|---|
| 01.07.2022- 30.06.2023 |
01.07.2021- 30.06.2022 |
01.07.2022- 30.06.2023 |
01.07.2021- 30.06.2022 |
|
| EUR | EUR | EUR | EUR | |
| Salary expenses * | 4 975 764 | 4 140 046 | 2 322 571 | 1 856 996 |
| Delivery costs | 669 421 | 662 918 | 418 508 | 482 907 |
| Social insurance expenses * | 702 346 | 573 395 | 534 149 | 435 184 |
| Advertisement and marketing expenses | 572 293 | 414 360 | 338 916 | 295 619 |
| Depreciation and amortization(See Note 5) | 279 319 | 220 094 | 205 957 | 162 076 |
| Business trip expenses | 408 342 | 191 089 | 188 971 | 79 881 |
| Other selling and distribution costs | 256 578 | 271 514 | 140 279 | 77 561 |
| 7 864 063 | 6 473 416 | 4 149 351 | 3 390 224 |
* Including accrued liabilities for unused vacations.
| Group | Parent company | |||
|---|---|---|---|---|
| 01.07.2022- | 01.07.2021- | 01.07.2022- | 01.07.2021- | |
| 30.06.2023 | 30.06.2022 | 30.06.2023 | 30.06.2022 | |
| EUR | EUR | EUR | EUR | |
| Salary expenses* | 1 394 673 | 862 201 | 1 394 673 | 862 201 |
| Social insurance expenses* | 330 668 | 203 231 | 330 668 | 203 231 |
| Depreciation and amortization (See Note 5) | 208 794 | 127 625 | 208 794 | 127 625 |
| Insurance | 267 265 | 216 276 | 57 939 | 38 625 |
| Bank fees | 126 133 | 51 877 | 65 113 | 26 902 |
| Public utilities | 94 198 | 109 092 | 94 198 | 109 092 |
| Training | 73 282 | 171 540 | 62 441 | 86 459 |
| IT services | 81 019 | 71 803 | 81 019 | 71 803 |
| Rent of premises | 36 087 | - | 36 087 | - |
| Representation expenses | 33 492 | 16 267 | 11 585 | 5 379 |
| Sponsorship | 33 106 | 117 164 | 26 896 | 111 500 |
| Office maintenance | 11 622 | 13 891 | 11 622 | 13 891 |
| Business trip expenses | 1 470 | 17 566 | 1 470 | 17 566 |
| Communication expenses | 5 981 | 9 254 | 5 981 | 9 254 |
| Allowances for doubtful trade receivables |
4 771 | (201 670) | 12 934 | (187 520) |
| Other administrative expenses** | 483 356 | 429 810 | 379 383 | 380 909 |
| 3 185 917 | 2 215 927 | 2 780 803 | 1 876 917 |
* Including accrued liabilities for unused vacations.
** Other administration costs include remuneration to the certified auditor company for the audit of the annual report in the amount of EUR 12 900 (2021/2022 - EUR 10 835). The certified audit company has not provided other services to the Group and the Parent Company.
| Group | Parent company | ||||
|---|---|---|---|---|---|
| 01.07.2022- 30.06.2023 EUR |
01.07.2021- 30.06.2022 EUR |
01.07.2022- 30.06.2023 EUR |
01.07.2021- 30.06.2022 EUR |
||
| Government grants* | 196 842 | 321 444 | 196 842 | 321 444 | |
| Other income | 60 540 | 69 121 | 5 545 | 64 421 | |
| 257 382 | 390 565 | 202 387 | 385 865 |
* Government grants are received from LIAA and LETERA, and they relate to development project realized in cooperation with "LEO Pētījumu centrs" SIA. During the reporting year the Group (Parent company) has received a government grant of EUR 35 556 (2021/ 2022: EUR 276 195). Government grants that are approved by the end of the reporting year, but not yet received, are included in Other receivables (see Note 9).
| Group | Parent company | |||
|---|---|---|---|---|
| 01.07.2022- 30.06.2023 EUR |
01.07.2021- 30.06.2022 EUR |
01.07.2022- 30.06.2023 EUR |
01.07.2021- 30.06.2022 EUR |
|
| Interest income, calculated using the | ||||
| effective interest method | 2 503 | 763 | - | - |
| Net foreign exchange gain | - | 213 371 | - | 170 363 |
| 2 503 | 214 134 | - | 170 363 |
| Group | Parent company | ||||
|---|---|---|---|---|---|
| 01.07.2022- 30.06.2023 EUR |
01.07.2021- 30.06.2022 EUR |
01.07.2022- 30.06.2023 EUR |
01.07.2021- 30.06.2022 EUR |
||
| Interest expenses on credit line, calculated using the effective interest method Interest expenses on lease liabilities, calculated using the effective interest |
45 568 | - | 45 568 | - | |
| method | 62 160 | 49 374 | 57 348 | 44 908 | |
| Net foreign exchange loss | 20 688 | - | 55 310 | - | |
| 128 416 | 49 374 | 158 226 | 44 908 |
| Group 01.07.2022- 30.06.2023 EUR |
01.07.2021- 30.06.2022 EUR |
Parent company 01.07.2022- 30.06.2023 EUR |
01.07.2021- 30.06.2022 EUR |
|
|---|---|---|---|---|
| Corporate income tax for reporting period Increase in deferred tax |
624 053 | 178 325 | 504 931 | 49 097 |
| asset | (137 237) 486 816 |
- 178 325 |
- 504 931 |
- 49 097 |
Basic earnings per share are calculated by dividing profit by the weighted average number of shares outstanding during the year.
| Group | Parent company | |||
|---|---|---|---|---|
| 01.07.2022- 30.06.2023 EUR |
01.07.2021- 30.06.2022 EUR |
01.07.2022- 30.06.2023 EUR |
01.07.2021- 30.06.2022 EUR |
|
| Profit of the reporting year (a) Weighted average number of shares |
3 534 725 | 6 089 980 | 3 117 404 | 5 754 239 |
| outstanding during the year (b) Basic and diluted earnings per share |
2 970 180 | 2 970 180 | 2 970 180 | 2 970 180 |
| for the reporting year (a / b) | 1.190 | 2.050 | 1.050 | 1.937 |
The Council of the Parent company consisting of 5 members is elected in a shareholders meeting for a term of 3 years. The Council is a supervisory body of the Group, which represents shareholder interests in meetings and supervises the Board in accordance with statutes of the Group. Decisions of the Council are made by a simple majority of members present. Only a meeting of shareholders has the right to make decisions on statute amendments of the Group, issue and conversion of securities, remuneration to the members of the Council. During the reporting year and the previous reporting year, the composition of neither the Board nor the Council members has changed.
Council members of the Parent company during the reporting year were:
Juris Ziema – Chairman of the Council (own 8.71% or 258 762 shares) Andrejs Grišāns – Deputy chairman of the Council (own 10.03% or 297 888 shares) Ivars Šenbergs – Member of the Council (own 0.00% or 2 shares) Aira Loite – Member of the Council (own 0.27% or 8 000 shares) Sanda Šalma – Member of the Council (owns no shares)
The Council appoints the Board consisting of 4 members for a term of 3 years. All members of the Board have the right of representation. The members of the Board represent the Company separately. Decisions of the Board are made by a simple majority of members present.
Board members of the Parent company during the reporting year were:
Normunds Bergs – Chairman of the Board (owns 9.74% or 289 377 shares) Didzis Liepkalns – Member of the Board (owns 17.05% or 506 460 shares)
Zane Jozepa – Member of the Board (owns no shares)
Jānis Bergs – Member of the Board (owns 0.01% or 387 shares)
| Group | Parent company | |||
|---|---|---|---|---|
| 01.07.2022- | 01.07.2021- | 01.07.2022- | 01.07.2021- | |
| 30.06.2023 EUR |
30.06.2022 EUR |
30.06.2023 EUR |
30.06.2022 EUR |
|
| Remuneration of the Board members: | ||||
| · salary | 759 775 | 892 789 | 275 715 | 246 911 |
| · social insurance contributions | 80 423 | 77 337 | 65 087 | 58 247 |
| Remuneration of the Council members: | ||||
| · salary | 220 755 | 192 758 | 220 755 | 192 758 |
| · social insurance contributions | 50 371 | 43 570 | 50 371 | 43 570 |
| Total | 1 111 324 | 1 206 454 | 611 928 | 541 486 |
Notes to the financial statements (continued)
| Parent company | Transactions for the year ended 30 June |
Balance as at 30 June | |||
|---|---|---|---|---|---|
| 2023 EUR |
2022 EUR |
2023 EUR |
2022 EUR |
||
| Sale of goods and services Subsidiaries |
17 138 810 | 11 610 150 | 63 805 | 264 976 | |
| Purchase of goods and services Subsidiaries |
365 458 | 270 768 | 231 060 | 81 149 |
In the consolidated financial statements of the Group the intercompany transactions and balances between Parent company and subsidiaries have been eliminated.
| Group | Parent company | ||
|---|---|---|---|
| 01.07.2022- | 01.07.2021- | 01.07.2022- | 01.07.2021- |
| 30.06.2023 | 30.06.2022 | 30.06.2023 | 30.06.2022 |
| EUR | EUR | EUR | EUR |
| 11 107 647 | 9 427 515 | 8 454 454 | 7 144 465 |
| 2 137 955 | 1 808 516 | 1 969 757 | 1 670 305 |
| 13 245 602 | 11 236 031 | 10 424 211 | 814 770 |
| Group | Parent company | |||
|---|---|---|---|---|
| 01.07.2022- | 01.07.2021- | 01.07.2022- | 01.07.2021- | |
| 30.06.2023 | 30.06.2022 | 30.06.2023 | 30.06.2022 | |
| The average number of employees | ||||
| in the reporting year: | 265 | 241 | 248 | 226 |
As a result of regular operational activity the Group (Parent company) has not issued performance guarantees to third parties (30.06.2022: 1 669).
As at 30 June 2023 the net profit of the Parent company, which arose after 31 December 2017, is EUR 10 305 359. The potential corporate income tax liability that will arise if the entire amount of the above profit is distributed as dividends is EUR 2 576 340 (20/80 of the net amount distributed to shareholders).
No significant subsequent events have occurred in the period from the year-end to the date of these financial statements that would have a material impact on the Group's and/or Parent company`s financial position as at 30 June 2023 or their performance and cash flows for the year then ended.
On behalf of the Board,
Normunds Bergs Chairman of the Board Dace Langada Chief accountant
The Annual Report is approved in the Board meeting on 30 October 2023 and the Board has authorised the Chairman of the Board to sign it on behalf of the Board.
Electronic signature of the Chairman of the Board relates to the Annual Report as a single document on pages 1 to 38. Electronic signature of the chief accountant Dace Langada relates to the financial statements on pages 10 to 38.
We have audited accompanying separate financial statements of AS "SAF Tehnika" ("the Company") and consolidated financial statements of AS "SAF Tehnika" and its subsidiaries (together - "the Group") contained in the digital file 48510000F6NVA4T63P67-2023-06-30-lv.zip (SHA-256-checksum: C5588F8F726CEB2F284A263B83A6768F6408BC66B9769543AAE957775671A197).
Accompanying separate financial statements and consolidated financial statements (together – "Financial statements") comprise:
In our opinion, the accompanying separate and consolidated financial statements give a true and fair view of the separate financial position of the Company and consolidated financial position of the Group as at 30 June 2023, and of their separate and consolidated financial performance and their separate and consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS).
Our opinion is consistent with our additional report to the Council (body equivalent to the Audit Committee) dated 30 October 2023.
In accordance with the Law on Audit Services of the Republic of Latvia we conducted our audit in accordance with International Standards on Auditing adopted in the Republic of Latvia (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the Company and the Group in accordance with the International Ethics Standards Board for Accountants International Code of Ethics for Professional Accountants (including International Independence Standards) and independence requirements included in the Law on Audit Services of the Republic of Latvia that are relevant to our audit of the financial statements in the Republic of Latvia. We have also fulfilled our other professional ethics responsibilities and objectivity requirements in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) and Law on Audit Services of the Republic of Latvia.
To the best of our knowledge and belief, we declare that we have not provided to the Company or its subsidiaries any non-audit services prohibited in accordance with Article 37.6 of the Law on Audit Services of the Republic of Latvia.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Translation note:
This independent auditor's report (translation of the Latvian original) should only be used with the original document submitted to the Riga Stock Exchange in machine-readable .xhtml format (https://nasdaqbaltic.com).
This version of our report is a translation from the original, which was prepared in Latvian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation.
Refer to Note 2 "Summary of accounting principles used" section K "Inventories" and Note 7 "Inventories" to the financial statements
We focused on this area because inventories represent a significant part of the Company's and Group's assets. The volume of inventories during the last two years as compared to previous periods has significantly increased, as the Company and the Group are creating reserves of raw materials and finished products in order to be able to successfully fulfil the orders received from customers and ensure the continuity of production. Given these factors as well as the rapid development of the technology industry, the valuation of inventories is of significant importance, including the determination of the obsolescence and net realizable value of inventories, which includes subjective estimates and may have a material effect on the Company's and the Group's financial performance.
In accordance with our professional judgment, based on our understanding and accumulated audit experience about the Company's and the Group's inventory valuation processes and internal control procedures, we did not identify inventory valuation as area of a significant risk in our audit. However, the audit of inventory area requires a significant amount of time and resources from the auditors, given its importance and magnitude. Thus, this area is considered a key audit matter.
As disclosed in Note 7 to the Financial statements, the balance sheet value of inventories as at 30 June 2023 amount to EUR 16 897 971 (the Company) and EUR 17 455 447 (the Group). As at 30 June 2023 the estimated inventory impairment allowance constituted EUR 3 255 541 with regard to both the Company and the Group.
The process of determining the cost of inventories involves the use of certain management estimates for the allocation of overheads.
For each age category of inventories, a provision is made in accordance with the Group's provisioning policy for slow-moving inventories, by grouping the inventories according to the period during which they have not moved, and applying a percentage set by the management to determine the impairment allowance.
Key audit matter How our audit addressed the key audit matter
Our audit procedures, amidst others, included the following:
Management is responsible for the other information. The other information comprises:
Translation note:
This independent auditor's report (translation of the Latvian original) should only be used with the original document submitted to the Riga Stock Exchange in machine-readable .xhtml format (https://nasdaqbaltic.com).
This version of our report is a translation from the original, which was prepared in Latvian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation.
Our opinion on the financial statements does not cover the other information included in the Annual Report as described above, and we do not express any form of assurance conclusion thereon, except as described in the Other reporting responsibilities in accordance with the legislation of the Republic of Latvia section of our report.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed and in light of the knowledge and understanding of the entity and its environment obtained in the course of our audit, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Management is responsible for the preparation of the financial statements that give a true and fair view in accordance with IFRS as adopted by the European Union and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company's and Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's and Group's financial reporting process.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and objectivity, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
This version of our report is a translation from the original, which was prepared in Latvian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation.
This independent auditor's report (translation of the Latvian original) should only be used with the original document submitted to the Riga Stock Exchange in machine-readable .xhtml format (https://nasdaqbaltic.com).
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the separate and consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
In addition, in accordance with the Law on Audit Services of the Republic of Latvia with respect to the Management Report, our responsibility is to consider whether the Management Report is prepared in accordance with the requirements of the Law On the Annual Reports and Consolidated Annual Reports' of the Republic of Latvia.
Based solely on the work required to be undertaken in the course of our audit, in our opinion:
In accordance with the Law on Audit Services of the Republic of Latvia with respect to the Statement of Corporate Governance, our responsibility is to consider whether the Statement of Corporate Governance includes the information referred to in Article 56.1 , section 1, clauses 3, 4, 6, 8 and 9, as well as Article 56.2 , section 2, clause 5 of the Financial Instruments Market Law and whether it includes the information stipulated in Article 56.2 , section 2, clauses 1, 2, 3, 4, 7 and 8 of the Financial Instruments Market Law.
In our opinion, the Statement of Corporate Governance includes, in all material aspects, the information required in accordance with Article 56.1 , section 1, clauses 3, 4, 6, 8 and 9, as well as Article 56.2 , section 2, clause 5 of the Financial Instruments Market Law and includes the information stipulated in Article 56.2 , section 2, clauses 1, 2, 3, 4, 7 and 8 of the Financial Instruments Market Law.
In accordance with the Law on Audit Services of the Republic of Latvia, our responsibility is to consider whether the Remuneration Report includes the information referred to in Article 59.4 of the Financial Instruments Market Law.
In our opinion, the Remuneration Report includes, in all material aspects, the information referred to in Article 59.4 of the Financial Instruments Market Law.
Based on our agreement we have been engaged by the management of the Group's parent company to conduct a reasonable assurance engagement for the verification of compliance of the Consolidated financial statements for the year ended 30 June 2023 contained in the digital file 48510000F6NVA4T63P67-2023-06-30-lv.zip (SHA-256-checksum: C5588F8F726CEB2F284A263B83A6768F6408BC66B9769543AAE957775671A197) with the applicable requirements of the European Single Electronic Reporting format (thereafter – ESEF).
The Single Electronic Reporting Format of the Consolidated financial statements has been applied by the management to comply with the requirements of art. 3 and 4 of the Commission Delegated Regulation (EU) 2019/815 of 17 December 2018 supplementing Directive 2004/109/EC of the European Parliament and of the Council with regard to regulatory technical standards on the specification of a Single Electronic Reporting Format (thereafter - the ESEF Regulation). The applicable requirements regarding the Single Electronic Reporting Format of the Consolidated financial statements are contained in the ESEF Regulation.
The requirements described in the preceding paragraph determine the basis for application of the Single Electronic Reporting Format of the Consolidated financial statements and, in our view, these requirements constitute appropriate criteria to form a reasonable assurance conclusion.
Management is responsible for the application of the Single Electronic Reporting Format of the Consolidated financial statements that complies with the requirements of the ESEF Regulation. This responsibility includes the selection and application of appropriate markups in iXBRL using ESEF taxonomy and designing, implementing and maintaining internal controls relevant for the preparation of the Single Electronic Reporting Format of the Consolidated financial statements which is free from material non-compliance with the requirements of the ESEF Regulation.
Those charged with governance are responsible for overseeing the financial reporting process, which should also be understood as the preparation of Consolidated financial statements in accordance with the format resulting from the ESEF Regulation.
Translation note:
This version of our report is a translation from the original, which was prepared in Latvian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation.
This independent auditor's report (translation of the Latvian original) should only be used with the original document submitted to the Riga Stock Exchange in machine-readable .xhtml format (https://nasdaqbaltic.com).
Our objective is to obtain reasonable assurance in order to express a conclusion on whether the Consolidated financial statements prepared in the Single Electronic Reporting Format comply with the ESEF regulation.
We conducted our engagement in accordance with International Standard on Assurance Engagements 3000 (Revised) "Assurance Engagements other than Audits and Reviews of Historical Financial Information" (thereafter - the ISAE 3000 (R)). This standard requires that we comply with ethical requirements, plan and perform procedures to obtain reasonable assurance whether the Single Electronic Reporting Format of the Consolidated financial statements is prepared, in all material aspects, in accordance with the applicable requirements.
Reasonable assurance is a high level of assurance, but it does not guarantee that the service performed in accordance ISAE 3000 (R) will always detect the existing material misstatement (significant noncompliance with the requirements).
We apply the provisions of the International Standard on Quality Control 1 (IAASB) and accordingly maintain a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.
We comply with the independence and other ethical requirements of the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.
Our planned and performed procedures were aimed at obtaining reasonable assurance that the Single Electronic Reporting Format of the Consolidated financial statements was applied, in all material aspects, in accordance with the applicable requirements and such application is free from material errors or omissions.
Our procedures include in particular:
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion.
In our opinion, the Single Electronic Reporting Format of the Consolidated financial statements for the year ended 30 June 2023 complies, in all material respects, with the ESEF Regulation.
We were first appointed as auditors for the Company's and Group's financial statements for the year ended 30 June 2016. This is the eighth consecutive year of our appointment as auditors. Our appointment for the year ended 30 June 2023 was by resolution of general meeting of shareholders dated 6 December 2022.
The certified auditor-in-charge of the audit resulting in this independent auditor's report is Lolita Čapkeviča.
On behalf of SIA Potapoviča un Andersone, Ūdens street 12-45, Riga, LV-1007 Certified Auditors Company licence No. 99
/digitally signed/
Lolita Čapkeviča Certified Auditor-in-charge Certificate No. 120 Member of the Board
Translation note:
This version of our report is a translation from the original, which was prepared in Latvian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation.
This independent auditor's report (translation of the Latvian original) should only be used with the original document submitted to the Riga Stock Exchange in machine-readable .xhtml format (https://nasdaqbaltic.com).
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