ANNUAL REPORT PROFI CREDIT Bulgaria EOOD

Transcription

1 ANNUAL REPORT 2013

2 BASIC ECONOMICS FACTS OF PROFI CREDIT BULGARIA EOOD Брой предоствени заеми Number of loans provided Номинална стойност на предоставените заеми (в Nominal value of loans хил. лв.)* provided (in TBGN)* Общо платени заеми (в хил. лв.) Disbursed in total (in TBGN) Заем за служители - дял в Credit for employees - share общата продукция 100% 100% 100% in total production Бизнес кредити - дял в общата Loans for businessmen - продукция 0% 0% 0% share in total production Човешки ресурси Human Resources Общ брой кредитни експерти Number of external credit 631 advisors Общ брой инкасатори Number of external collectors Общ брой служители Number of employees Финансови показатели (в хил. лв.) Financial Indicators (in TBGN) Общо активи Total assets Вземания по предоставени заеми на клиенти Receivables from provided loans to clients Общо приходи Total revenues Общо разходи Total costs Печалба/загуба преди данъци Profit/Loss before taxation Отсрочен данък 3 5 Deferred tax Нетна печалба/загуба Profit/Loss after taxation * nominal value of provided loans consists of disbursed amount and future interest revenue

3 CONTENTS 1. THE PROFIREAL GROUP 4 2. LETTER FROM THE CHIEF EXECUTIVE OFFICER 7 3. CHARACTERISTICS OF PROFI CREDIT BULGARIA COMPANY BODIES COMPANY PROFILE PRODUCT OFFER BUSINESS RESULTS BUSINESS NETWORK EMPLOYEES REPORT OF THE BOARD OF DIRECTORS GENERAL INFORMATION REVIEW OF THE ACTIVITY SIGNIFICANT EVENTS OCCURED AFTER THE DATA OF THE FINANCIAL STATEMENTS FUTURE DEVELOPMENT OF THE COMPANY DEVELOPMENT AND RESEARCH ACTIVITIES DESCRIPTION OF THE SIGNIFICANT RISKS TO THE COMPANY TOTAL REMUNERATIONS RECEIVED BY MANAGEMENT DURING THE YEAR PARTICIPATION OF MANAGING DIRECTORS IN OTHER COMPANIES INDEPENDENT AUDITOR S REPORT FINANCIAL STATEMENTS STATEMENT OF COMPREHENSIVE INCOME STATEMENT OF FINANCIAL POSITION CASH FLOW STATEMENT STATEMENT OF CHANGES IN EQUITY NOTES TO THE FINANCIAL STATEMENTS CONTACTS 72 3

4 1. THE PROFIREAL GROUP The PROFIREAL Group is a transnational financial group which operates on the financial markets of Central and Eastern Europe. The group is one of the most prominent providers of loans and credits in the Czech Republic, Slovakia, Poland, Bulgaria and newly in Russia. The PROFIREAL Group consists of two divisions. The companies belonging in the PROFI CREDIT division operate in the area of financial loans and credits, while the companies falling under the PROFI INVESTMENT division deal with development of new investment projects. Until the January 2014 the group also consisted of division PROFIDEBT that operated in purchase and collection of receivables. PROFIREAL Group SE with registered office in the Netherlands is the parent company of the group. The group has been providing financial loans and credits since the year 2000, when it started this project in the Czech Republic and Slovakia. Throughout it s time in business PROFI CREDIT has succeeded in providing more than loans and credits. The strongest position belongs to the division in the Czech Republic, which also achieves the highest profitability. The share of the Czech Republic of the total volume of provided loans and credits is 44 %. The amount of provided loans and credits by division PROFI CREDIT achieved in 2013 year to year growth 40%. This result was mainly supported by growth in PROFI CREDIT Poland about 50%, PROFI CREDIT Czech about 22% and the division company in Slovakia reaching 19% and Bulgaria achieved growth almost 23%. Nominal value of provided loans and credits by division PROFI CREDIT almost reached amount 285 million. One of the main priorities for all companies of PROFIREAL Group is also the quality of the client s portfolio. The group operationally reacts to economic states in particular countries and adapts its business, mainly risk management to actual situation. 4

5 PROFIREAL Group focuses on countries of Central and Eastern Europe. The mission of the recently created PROFI INVESTMENT division is to support business operations of the PROFIREAL Group. PROFI INVESTMENT's main tasks include seeking investment opportunities and high-potential projects on both international and local scale. The firm not only acquires stakes in projects that are already under way, are established, and need a partner with a strong capital backing, but also offers startup capital for new ventures. The portfolio of the division PROFI INVESTMENT includes the company PROFIDEBT Slovakia, s.r.o. The goal of PROFIREAL Group is develop the current activities and permanently adjust them to the economic situation in the individual countries. The main emphasis will be placed on quality risk management, on the optimization of all processes inside the individual group companies, cost savings, and maintaining the shares in the market segment. 5

6 PROFIREAL Group Structure 6

7 2. LETTER FROM THE CHIEF EXECUTIVE OFFICER Dear Ladies and Gentlemen, Dear Partners, The flashback of the past 2013 shows that we have succeeded to keep the leading position on the market of non-bank financial institutions, despite the challenging economic situation. Moreover, we have expanded our sales network, we have found new offices and new job opportunities, we have expanded our product and client portfolio. In short we are continuing our development, and I will assure you that this trend will continue in the future. It has been seven years till now, which we have dedicated to the care of our customers. We are focused on their needs and we continue observing the principle of responsible lending and granting loans taking into consideration our customers abilities to repay them, we have good customer service quality and we have the flexibility of our product, accuracy and precision of the lending process and clear, transparent lending conditions. Behind the good results of the company it stands the hard work of the entire team of PROFI CREDIT Bulgaria. I believe that the success of the company is mainly due to the efforts of the all employees and collaborators, due to their dedicated time and attention to our clients and business. Thank you all for your dedication to the mission to be of service to our clients and I believe together we will continue to manage successfully our business in the future. I want to thank also to our customers and partners, and to assure them that in the face of PROFI CREDIT Bulgaria they shall have a loyal and safe partner. 7

8 Zdravko Raychev Chief Executive Officer 8

9 3. CHARACTERISTICS OF PROFI CREDIT BULGARIA 3.1. Company Bodies Immediately after his graduation Petr Vrba joined PROFIREAL Group taking a manager s position. He subsequently rose to a member of the Board of Directors and since April 2006 he has been an Executive Director (CEO) of Development Section of PROFI CREDIT Czech a.s. In this job he is in charge of all the subsidiary companies specialized in loan and credit providing. Petr Vrba is a member of the Board of Directors of PROFI CREDIT Bulgaria. Petr Vrba graduated from the University of Pardubice with a specialization in the area of Management, Marketing and Logistics. Petr Vrba Statutory Executive Svetoslav Nikolov started his career with PROFI CREDIT Bulgaria since its beginning in year 2006 occupying the position of a Director of Finance Department. In November 2012 he was appointed as Managing Director of PROFI CREDIT Bulgaria. Svetoslav Nikolov Statutory Executive Svetoslav Nikolov holds a Master s degree in Public Finance as a graduate of the University of National and World Economy, and a Bachelor s degree in Accounting and Control as a graduate of D. A. Tsenov Academy of Economics. He had taken expert positions in finance and accounting in a series of companies, among which Napredak Holding AD, Huvepharma AD and Ogneuporni Glini (Refractory Clay) AD. 9

10 From the establishment of PROFI CREDIT Bulgaria in year 2006 to the beginning of year 2013, Nikolay Kolev held the office of an Executive Director (CEO) of the company. Due to the successful development of the company on the Bulgarian market at the beginning of year 2013 Nikolay Kolev was promoted to develop the business as a part of PROFI CREDIT division on new markets. Nikolay Kolev retains also his Managing director s position in PROFI CREDIT Bulgaria on which he was appointed in year Nikolay Kolev Statutory Executive He had worked as a Sales representative and later on as a Sales Director of Promobile Bulgaria where he had been in charge of the automobile make of Volvo concern. He had held the offices of a Sales Director and Business Development & New Markets Director of Actavis Group. His experience as a director had been further consolidated in Alen Mak AD. Since the beginning of year 2013 Zdravko Raychev has been holding the office of an Executive Director (CEO) of the company for Bulgaria. He has been a member of the management team of PROFI CREDIT Bulgaria since its establishment in year 2006 taking the positions of Director of Sales Development Department, Director of Sales Department, and from year 2010 Director of Collection Department. From the end of the said year Zdravko Raychev has also been a Managing Director of PROFI CREDIT Bulgaria. Zdravko Raychev Statutory Executive Zdravko Raychev holds a university degree in Marketing and Management, and a Master s degree in Business Economics. He has experience in manager s positions in the management and development of service business and work in financial services projects under USAID programs. 10

11 3.2. Company Profile was registered on 19th of April 2006 as a private limited company under Trade Law regulations by the name PROFIREAL Bulgaria EOOD. Main activity is to provide loans to individuals, who are Bulgarian citizens with permanent income. PROFI CREDIT Bulgaria started its trade activities in the second half of 2006 simultaneously in Varna and Pleven regions, as a result the first loan was granted on 1 st November In year 2007 the expansion continued, in February the company started activities in Blagoevgrad region, later also in Bourgas and Plovdiv regions. The opening of the Sofia branch completed the company strategy that is based on the full coverage of the country. In 2007, in connection with the changes in EU legislation and the implementation of the obligatory legal organizational form of the companies with international activities, PROFIREAL Group was transformed into a European company holding structure. PROFIREAL Group SE, located in the Netherlands, became the mother company of the financial group. Following the new company identity, PROFIREAL Bulgaria EOOD changed its name to on 15th of February This change in the name is applicable for all daughter companies in the holding structure. The trade activity of is currently divided into four regions EAST, WEST, NORTH and SOUTH. The company headquarters is located in Sofia. Apart from its regional offices, operates on the territory of the country also with its district offices in most of the major cities Sofia, Varna, Pleven, Blagoevgrad, Plovdiv, Bourgas, Shumen, Dobrich, Silistra, Rousse, Veliko Turnovo, Gabrovo, Troyan, Vratsa, Kyustendil, Pernik, Petrich, Stara Zagora, Sliven, Yambol, Haskovo, Pazardzhik and others. Currently the company has teams in more than 40 cities all over the country. As a part of the PROFIREAL Group, PROFI CREDIT Bulgaria is a dynamically growing company. It has been establishing its professional network of credit experts with success all 11

12 over the country. The company s motto is Tailor-Made Money and a great emphasis is put on an individual approach to the customer. Based on face-to-face meetings in a place and time convenient for the client, the specific conditions of every single credit are defined Product Offer PROFI CREDIT Bulgaria offers to its customers non-purpose consumer loans to individuals as well as business loans to small and medium-sized enterprises. The Company provides six different product groups PROFI CREDIT Prestige, PROFI CREDIT Favorit, PROFI Made, PROFI CREDIT Energy, PROFI CREDIT Business Energy and PROFI CREDIT Business, directed to various groups of customers. PROFI CREDIT Prestige product group provides non-purpose consumer loans to individuals with proven permanent incomes above the country s average. Loan amounts available vary between 500 and 8000 BGN, loan tenors between 12 and 36 months. PROFI CREDIT Favorit product group offers non-purpose consumer loans for individuals with proven permanent income, incl. pensioners. Product group includes two products PROFI CREDIT Favorit and PROFI CREDIT Favorit VIP. The PROFI CREDIT Favorit VIP product provides the customer the opportunity to get higher loan amount and price discount upon providing a joint debtor as a collateral security. PROFI CREDIT Favorit product group offers loan amount between 500 and 8000 BGN with tenors available between 12 and 48 months. The PROFI Made product group provides non-purpose consumer loans to individuals with unproven (unofficial) but permanent income. Product group includes two products PROFI Made and PROFI Made VIP. The PROFI Made VIP product provides the customer the opportunity to get higher loan amount and price discount upon providing a joint debtor as a collateral security. PROFI Made product group offers loan amount between 500 and 5000 BGN with tenors available between 12 and 48 months. 12

13 The product group of PROFI CREDIT Energy provides small and quick consumer loans to individuals with proven permanent income. Product group is targeted to people, who have income below the average level for the country. This product group includes two products PROFI CREDIT Energy and PROFI CREDIT Energy MAX. The amount of the product PROFI CREDIT Energy is within the range BGN 100 to BGN 350, and the product PROFI CREDIT Energy MAX provides loans to the amount of up to BGN 500. The terms for which these two types of products are offered are 6, 8, 10 and 12 months. PROFI CREDIT Business Energy is easy, quick and non-secured loan intended to finance micro and small enterprises as well as self-employed people, including freelancers and craftsmen. PROFI CREDIT Business Energy does not require any collateral (pledge, mortgage, co-debtor, etc.). Loan amounts offered vary between BGN 500 and 1000, and the repayment term is 12 months. PROFI CREDIT Business product is intended to provide financing to micro and small businesses, freelancers and agricultural producers. Product is targeted to businesses, who are looking for easy, fast and convenient financing in order increasing the working capital or making business invesments. Loan amounts available vary between 1000 and BGN and term from 12 to 48 months. Depending on the risk profile of customers and the amount of the loan PROFI CREDIT Business is available with or without collateral. PROFI CREDIT Business product provides various benefits for returning customers like price discount, availability of higher loan amount, etc. Especially for its best and fair customers meeting particular criteria PROFI CREDIT Bulgaria has developed the Loyal option. This option grants the customer a discount of up to 30% of the price of the regular products. The company transfers customers loans to a personal bank account specified by the customer. The loan repayment is performed on monthly basis and the company customers have the right to choose a loan repayment due day based on their personal preferences. The customer him/herself choses the manner of repayment of his/her loan to PROFI CREDIT 13

14 Bulgaria among the following legally permissible ways cash payment, cash transfer, credit transfer, periodic payment or direct debit. The major product groups of the company - PROFI CREDIT Favorit, PROFI Made and PROFI CREDIT Prestige give the customers the opportunity of one-time deferment of up to 3 consecutive monthly installments. This way the company customers are insured against unforeseen events like lasting disease or loss of employment. PROFI CREDIT Favorit and PROFI Made product groups feature also the option of Revolving, i.e. providing fresh money to client through automatic renewal of loan contract with no subsequent application process. Every customer of PROFI CREDIT Bulgaria, who has good payment morale could benefit from the Revolving option. For example, if loan is borrowed for the period of 18 months, after the 12 th repayed installment customer can use the sum he/she has repaid up to that moment under the same terms and conditions and without any change of the due date or the installment size. An extra option Refinancing is provided for the major product groups of the company PROFI CREDIT Favorit, PROFI Made and PROFI CREDIT Prestige. The refinancing option provides the customers the opportunity to borrow a new loan, before finally repay the initially one or to repay a debt of theirs to some other lender. This option was perceived positively by the customers. PROFI CREDIT Bulgaria abides by the principle of responsible lending providing loans taking into account the customers capability to repay them. If some customer s application cannot be approved for the whole amount of the loan applied for, such an application is not refused, but the loan amount is reduced. By this way the company maintains its slogan Pari po myarka (i.e. Loans within the customers means). Led by the desire to ensure the comfort and convenience of its customers the Company has developed a one-step procedure for loan applying, and this feature distinguishes it from the other financial institutions, and is highly appreciated by the customers. With this procedure upon filling in the application documents the customer signs also the contract and thus if 14

15 his/her application is approved, he/she shall receive the money without the need to visit an office of the company again and to fill in and sign additional documents Business Results In 2013 PROFI CREDIT Bulgaria disbursed loans amounting to BGN and 344 revolvings to the amount of BGN VOLUME OF LOANS DISBURSED IN (in BGN) In 2013 the total nominal value of all loans increased with 22.6% compared with the year For the period between 2007 and 2013 the total nominal value of all loans that have been disbursed reached BGN. 15

16 THE VOLUME OF LOANS DISBURSED IN BOTH THE FIRST AND SECOND HALF OF 2013 (in BGN) The distribution of production in 2013 shows that 52% of the nominal value is disbursed in the second half of the year. NUMBER OF LOANS DISBURSED IN The WEST and EAST region had the largest volume of sales in year WEST granted 34% of nominal value whereas EAST granted 32%. These two regions were followed by SOUTH (18%) and NORTH (16%). 16

17 VOLUME OF LOANS DISBURSED IN 2013 BY REGIONS (in BGN) North East South West 3.5. Business Network PROFI CREDIT Bulgaria offers its products and serves its customers through direct sales network. The sales networt consists of 4 regions NORTH, EAST, SOUTH and WEST. Each region has a regional director. All regions are divided into smaller units called areas and subareas. An area is managed by area manager whereas a subarea is managed by team manager. The main position in the sales network is credit advisor. Credit advisors operate on the basis of a collaboration agreement and the amount of their commissions depends on the volume of loans disbursed and the type of the product. At first Credit advisors are looking for potential clients. Next step is to choose a type of product which fits to the individual need of a client. The role of the credit advisor is to take care of the client after a loan has been disbursed. 17

18 PROFI CREDIT Bulgaria aims to motivate all employees and credit advisors through different kind of initiatives. Initiatives include different competitions. To win a bonus each participant should fulfill a plan or achieve a particular goal. NUMBER OF CREDIT ADVISORS BY MONTHS IN By May 2013 the number of credit advisors had a negative trend. In the next few months the parameter has been stable and since August it started to grow up and reached its highest values for 2013 in the last 3 months of the year Employees In PROFI CREDIT Bulgaria we believe that our employees are our main power. It is not easy to establish a successful company and keep it successful. Such companies are created by individuals who make the right decisions at the right time and under the right circumstances. The Human Resources policy of PROFI CREDIT Bulgaria is directed towards development of employees for the purpose of full use of the talent/skills of our team. The quality of our products and services has been driven by the employees professionalism and accuracy. 18

19 Guided by the principle of selection of the best employees, the company adopts a balanced approach of evaluation by searching for compliance between personal characteristics and position requirements, as well as between the individual and the company culture. In order to use the talent, power and creativity of our employees to a maximum degree, we have established working environment stimulating productivity, cooperation and solidarity. At the end of 2013, the company had 132 employees, 91 of them are based at the Headquarters of the company and 41 in the Sales and Collection networks. NUMBER OF EMPLOYEES IN For the purpose of executing its progressive plans, the company relies on people with suitable education, proven skills and experience. The requirements towards the higher and medium management staff in the company are set very high. The management consists of trained specialists with considerable knowledge and education in Business, Finance, Marketing, Management, Economics, Psychology, Public and Linguistic Sciences, as well as knowledge of foreign languages (English, German, Russian, Spanish and Czech). Our team is experienced in managing projects from different business areas, which ensures a broader view and creative thinking when adopting strategic decisions pertaining to the company development. 19

20 From a strategic business perspective, the goal of recruiting is not to simply hire people into the organization, but to reliably and efficiently place and retain the right people in the right roles to effectively support a company s business strategies. The recruitment procedure of the company includes a review of the applications, a specialized interview, work and analysis on case studies, monitoring of the professional and individual characteristics of the applicants, including communication skills, motivation, degree of independence and reliability, team work and adaptation, management potential as well as provision of references. PROFI CREDIT Bulgaria is a company with broad perspectives both inside and outside the company. For the purpose of their implementation, we provide our employees with the opportunity for in-house career development. PROFI CREDIT Bulgaria implemented for its employees DEVELOPMENT MANAGEMENT PROGRAM. The main goal of the Program is to identify the talents and to develop employees in long-term who possess management potential with prospect of their professional growth and retention at the company. Training system is specially designed according to the specific company needs. DEVELOPMENT MANAGEMENT PROGRAM is accompanied by continuous training and applying what has been learned in the workplace, thereby ensuring success of acquiring the specific skills. Through the Junior Trainee Program PROFI CREDIT Bulgaria provides young and ambitious people with the opportunity to start their career as part of the company team and gain professional experience in a corporate environment. Trainees participate in the development of real projects as part of a team or work on specific tasks individually. In order to be able to function, a company needs two types of capital: financial and human. In order to be successful and competitive in today s dynamic market, people count on something more they can create or destruct the best business strategy; they can be the leading or destructive force of the adoption of new technologies. The people are the raw resource which preconditions the successful business. Due to that reason it is a priority for PROFI CREDIT Bulgaria to invest in its employees. 20

21 4. REPORT OF THE BOARD OF DIRECTORS 4.1. General Information ("the Company") is a sole-owned limited liability company established on April 19, 2006, registered under Company File No / 2006 at the Sofia City Court, with a seat and management address: Sofia, 49 Bulgaria Blvd., bl. 53Е, entr. B, 1404 Sofia, Identification Code The Company is specialized in providing consumer loans to individuals and small business. The principle legislation under which the Company operates is the Commercial Act, Credit Institution Act and the Ordinance No 26 dated of the Bulgarian National Bank for financial institutions. With an order of the Bulgarian National Bank deputy director dated PROFI CREDIT Bulgaria EOOD is registered in the financial institution register pursuant to Art. 3, Para 2 of the Credit Institution Act. The registered capital of the Company is BGN Review of the Activity GENERAL OVERVIEW The Company provides loans to clients through its sales network for direct selling. The business of the Company is split in four main regions: EAST, WEST, NORTH and SOUTH. Direct sales and client s servicing is performed by external collaborators credit advisors. In 2013 the number of provided loans to customers was (2012: loans). The net amount of loans paid to clients in 2013 is BGN thousand (2012: BGN

22 thousand) or 28.07% year growth. The nominal value (paid out principle to client plus contractual remuneration for the entire loan term) of disbursed loans in 2013 amounted to BGN thousand (2012: BGN thousand) or 22.64% year growth. As of December 31, 2013 the Sales network consists: 4 Regional offices, 27 Area offices with 28 Area managers, 41 Team managers and 703 Credit advisors. The expanding of the Sales network continued in 2013 by appointing new Team managers and Credit advisors in the smaller cities. The Team managers are external collaborators for the Company who manage the Credit advisors teams in the smaller cities, where the Company doesn t have its own offices and employees. Collection network represents a basic unit in the process of receivables collection in judicial phase. As of December 31, 2013 the number of External collectors is 60. The head office of the Company is located in Sofia. The staff in the head office performs strategic planning and performance management, risk evaluation and analysis, approval of credit applications, collection processes management, staff and external collaborators training, human resources management, marketing, development and maintenance of information technologies, etc. The Company receives financial and technical support by the Parent company PROFIREAL Group SE, The Netherlands. As of December 2013 the average number of employees is 132 (2012: 108). REVIEW OF FINANCIAL RESULTS PROFI CREDIT Bulgaria realises net profit at amount of BGN thousand for the year 2013 (2012: 436 thousand). The Company generates positive financial results for second consecutive year since its foundation. The reduction of interest costs is a result of capital increase through debt to equity transformation realized in the end of

23 Net interest income Net interest income increased by BGN 7,371 thousand or 58.74% - from BGN 12,548 thousand in 2012 to BGN 19,919 thousand in Net interest income mainly depends on the amount of the interest bearing assets, as receivables from loans to clients and also from the volume of the interest bearing liabilities, as loans from banks, other received loans as well as the difference between the interest rates of the interest bearing assets and liabilities. Interest expenses for the reporting year amounted to BGN 5,767 thousand (2012: BGN 8,633 thousand). The significant decrease of interest expenses is due to realized in 2012 capital increase through a transformation of interest bearing debt into equity. This reduction is the main driver to decrease the interest expenses. For the reporting year interest revenues amounted to 25,686 thousand (2012: 21,181 thousand). The growth in revenues is explained by the growth in loan portfolio. Impairment losses Impairment losses amount to BGN 7,176 thousand (2012: BGN 5,826 thousand) or increase of 23.17% compared to As of December 31, 2013 the credit quality remained relatively stable, as loans overdue more than 60 days amounted to BGN 35,469 thousand or 47.34% of the gross loan portfolio before impairment, in comparison to BGN 25,137 thousand or 44.21% of the gross loan portfolio at the end of the previous reporting period. Although the positive indications for recovery of the leading global economics as well as the Bulgarian economy, the recovery is still fragile and many economic sectors still meet difficulties. Despite being less likely, it is possible that quality of the loan portfolio to keep deteriorating, which would result in further growth in impairment losses on loans. The Company s portfolio entirely comprises of unsecured consumer loans. 23

24 Notes 5 and 12 to the annual financial statements present more detailed information about the impairment losses and the quality of the loan portfolio. Net fees and commissions costs The net fees and commissions costs in 2013 represent loss at the amount of BGN 2,054 thousand (2012: loss at the amount of BGN 1,527 thousand) or an increase of loss by 34.51%. The main reasons for such loss increase are: Court charges, arbitrary fees and bailiff charges amounting to BGN 705 thousand and decrease by BGN 10 thousand (2012: BGN 715 thousand). The increase is due to the higher volume of receivables submitted to the private court executors; Sales commissions costs that are not included into effective interest rate calculation at amount of BGN 944 thousand for 2013 (2012: BGN 680 thousand). The reason for such increase is the growth of new loans granted in the current year; Commissions costs paid to external collectors, which in 2013 amounted to BGN 630 thousand (2012: 469 thousand). The collectors are external collaborators of the Company that are collecting receivables from overdue loans mainly receivables from legally prosecuted loans. The increase of commissions is due to higher amount of loans from customers, served by external collectors; Cost for sales commissions paid out to credit advisors, which are not completely amortized in the interest income, in case of early repayment of the loans. In 2013 this cost amounted to BGN 1,132 thousand compared to BGN 524 thousand in High growth of this cost is due to increased volume of loans granted in 2013 compared to previous reporting period; Revenues from credit advisor commissions write-offs, which in 2013 amounted to BGN thousand compared to BGN thousand for the previous year. Mostly these are non-monetary revenues from undue sales commissions, that were initially included into effective interest rate calculation, but later on part of them were not really paid out to credit advisors due to the following reasons: if the loan contract is legally prosecuted; upon early repayment of the loan; if the credit advisor haven t met the criteria for getting of commission for payment of loan instalment; when the instalment have been collected from external collector; etc. 24

25 Note 6 to the annual financial statements comprise detailed information about the components of net fees and commissions costs. General and administrative expenses The general and administrative expenses have significant impact on realized profit as the amount of increase is BGN 1,575 thousand or 30.22% - from BGN 5,211 thousand in 2012 to BGN 6,786 thousand in The general and administrative expenses include personnel expenses, other administrative expenses and depreciation and amortization of fixed assets. Personnel expenses Personnel expenses have the major share in the general and administrative expenses which increased by BGN 947 thousand or 32.8% - from BGN 2,887 in 2012 to BGN 3,834 in The increase of personnel expenses is due to increase in the average number of employees in The average number of employees in 2013 is 126 (2012: 106). Other administrative expenses Other administrative expenses increase by BGN 623 thousand or 28.09% - from BGN 2,218 thousand in 2012 to BGN 2,841 thousand in Other administrative expenses includes office rental and overhead costs, marketing and advertising costs, postage and telecommunication expenses, national and foreign business trip expenses, consulting services, etc. The main reason for increase in other administrative expenses is due to increase of marketing, business trips and energy expenses. Depreciation/amortization of fixed assets The depreciation/amortization charges of fixed assets increased by BGN 5 thousand - from BGN 106 thousand in 2012 to BGN 111 thousand in Note 7 to the annual financial statements comprise detailed information about the structure of general and administrative expenses. 25

26 Net insurance income During the reporting period the net insurance income increases by BGN 132 thousand or 17.51% - from BGN 754 thousand in 2012 to BGN 886 thousand in Note 8 to the annual financial statements comprise detailed information about the net insurance income. Other operating income, net During the reporting period other net operating expenses amounted to BGN 734 thousand compared to the expense at the amount of BGN 305 thousand in Key components of net operating expenses are: Credit management fee of BGN 508 thousand (2012: BGN 142 thousand) Realized foreign currency gains amounting to BGN 14 thousand in 2013 comparing to realized foreign currency gains amounting to BGN 229 thousand in 2012; Hired services from related parties amounting to BGN 442 thousand in 2013 (2012: BGN 394 thousand). Revenues for provided services to related parties amounting to BGN 192 thousand in 2013 (2012: BGN 0 thousand). Notes 9, 18 and 23B to the annual financial statements comprise detailed information about the components of other operating expenses. ASSETS As of December 31, 2013 the assets amounted to BGN 52,580 thousand, the increase over the previous year is 28.27% (2012: BGN 40,993 thousand). The statement of financial position structure is not changed significantly compared to prior year. At the end of 2013, the biggest share of assets belonged to loans to customers 95.58% of total assets (2012: 96.0%), followed by other receivables 2.11 % (2012: 2.44%), etc. 26

27 LIABILITIES As of December 31, 2013 liabilities amounted to BGN thousand, a 20.60% decrease compared to the previous year (2012: BGN 36,507 thousand). At the end of 2013 other received loans amounted to BGN 35,608 thousand (2012: BGN 29,748 thousand), represented 80.88% of total liabilities compared to 81.49% at the end of The amount represents principle and interest payable for December 2013 for loan received from foreign company with maximum credit limit up to EUR 24,200 thousand matured on December 31, The loan is secured by total receivables from loans to customers as well as a blank promissory note is issued to the creditor and with registered pledge of company shares. Other liabilities at the amount of BGN 7,914 thousand (2012: BGN 6,276 thousand) consist mainly of deferred insurance income amounted to BGN 3,695 thousand (2012: 3,030 thousand), liabilities to credit experts no fallen due of BGN 2,451 thousand (2012: BGN 2,192 thousand), and others. EQUITY As of December 31, 2013 the Company reported positive equity amounting to BGN 8,552 thousand (2012: BGN 4,486 thousand). In 2013 the share capital of PROFI CREDIT is BGN 3,250, Significant Events Occured After the Data of the Financial Statements There are no significant events occurred after the date of the financial statements of the Company Future Development of the Company 27

28 The Company set the following main objectives for 2014: To keep the growth of disbursed new loans to clients in comparison to the previous year; Product portfolio diversification and launch of new products; To continue the territorial expansion by extending the distribution network; To improve the quality of loan portfolio; Improvement of the processes and results of legal collection unit; Strict control and increased costs efficiency; Diversification of the sources of financing; 4.5. Development and Research Activities The Company did not perform any research and development activities during the year Description of the Significant Risks to the Company Risk management, being a key indication in lending activities, is among the strategic goals of the Company s management. PROFI CREDIT Bulgaria pays particular attention and allocates resources for preventive management of risk factors, and implements on a timely basis leading practices in the area. Significant investments for development of the information technologies of the Company have been made. For more detailed information about the Company's exposure to significant risks, see note 23 to the annual financial statements. Credit risk Credit risk is reflected in the probability of a counterparty to a financial instrument not being able to fulfil its payment obligation as it falls due and thus to cause financial losses to the Company. The main financial assets of the Company as of December 31, 2013 comprise cash and cash equivalents amounting to BGN 389 thousand (2012: BGN 397 thousand) and loans granted to customers amounting to BGN 50,255 thousand (2012: BGN 39,351 thousand). 28

29 The Company is exposed to credit risk related to the risk some of the clients not being able to fulfil their liabilities. In order reducing the credit risk the Company uses its own network of employees (collection of receivables coordinators), as well as a developed network of external assistants - credit agents and collectors of the Company s receivables. The credit risk is diversified among a significant number of clients around the country. Some of the loans are additionally secured by third parties guarantors. In 2010, after change in Ordinance 22 of the Bulgarian National Bank, PROFI CREDIT Bulgaria EOOD obtained an access to the Central Credit Register of BNB. Access to the information in the register contributes on additional mitigation of the credit risk. Liquidity risk Liquidity risk is the risk the Company not being able to meet its payment obligations or provide loans to customers, which may originate from a gap between the Company s cash flows. With respect to the liquidity risk management, the Company s objective is to perform timely its payment obligations as well as ensuring sufficient resources for achieving high growth in assets. Price risk PROFI CREDIT Bulgaria operates in a very well developed and competitive market of financial services, and therefore, it is exposed to price risk. Some of the Company s competitors are banks and financial institutions having access to cheaper financial resources, which puts them in a better position in pricing competitive products. Foreign currency risk Foreign currency risk is the risk of change of the financial instruments value due to significant changes in foreign currency markets. The difference between the levels of financial instruments, and respectively, of assets and liabilities denominated in foreign currencies, 29

30 reflects the extent to which a particular financial instrument is exposed to a foreign currency risk. The Company performs its monetary operation mainly in EUR, CZK and BGN. The loans granted to clients are in BGN only. The exchange rate of EUR/BGN is fixed according to an Agreement between the Republic of Bulgaria and the International Monetary Fund and in compliance with the Bulgarian National Bank Law. Interest rate risk Interest rate risk relates to the possible adverse effect to the Company which fluctuations in interest rates might have on the net interest income. Company uses long-term financing with a fixed interest rate. Loans to customers bear fixed interest rate largely exceeding the interest rates at which the Company obtains its financing. Therefore, management believes that the activity of PROFI CREDIT Bulgaria is not very sensitive to interest rate fluctuations Total Remunerations Received by Management During the Year Number of members 4 4 Remunerations accrued Others (social security and health insurance, etc) 14 4 Total (in BGN thousand)

31 4.8. Participation of Managing Directors in other Companies Name Petr Vrba Company in the management and control bodies of which the persons participate PROFIREAL GROUP SE, The Netherlands PROFI CREDIT Poland, Sp. d о.о. PROFI CREDIT Czech Republic, а.s. PROFI CREDIT Slovakia, s.р.о. PROFIREAL OOO, Russia Nikolay Kolev PROFIDEBT Bulgaria EOOD PROFIREAL OOO, Russia Zdravko Raychev PROFIDEBT Bulgaria EOOD Elada Properties EOOD Svetoslav Nikolov He is not a member of other management or controlling bodies. Zdravko Raychev Managing Director Svetoslav Nikolov Managing Director 31

32 5. INDEPENDENT AUDITOR S REPORT 32

33 33

34 34

35 6. FINANCIAL STATEMENTS 6.1. STATEMENT OF COMPREHENSIVE INCOME 35

36 6.2. STATEMENT OF FINANCIAL POSITION 36

37 6.3. CASH FLOW STATEMENT 37

38 6.4. STATEMENT OF CHANGES IN EQUITY 38

39 6.5. NOTES TO THE FINANCIAL STATEMENTS 1. Description of the main activity ("the Company") was registered on April 19, 2006 under company case 4083/2006 as a sole owner limited liability company according to the requirements of the Bulgarian Commercial Act. On February 11, 2008 the name of the Company was changed from PROFIREAL Bulgaria EOOD to. The Company is specialized in providing loans to individuals and small business enterprises. The share capital is BGN Structure of property The owner of the Company as of December 31, 2013 is: Profireal Group S.E., Netherlands 100% Headquarters and address of management 49, Bulgaria Blvd., bl. 53 Е, entrance V Sofia, Sredets Municipality, Bulgaria Identification number VAT number BG

40 Managing Directors of the Company as of December 31, 2013 are: Nikolay Binev Kolev Zdravko Stamenov Raychev Petr Vrba Svetoslav Nikolaev Nikolov Changes in the Commercial register The following changes have been made till the date of the preparation of the statement of financial position: On February 9, 2007 Vratislav Ionash Kubinek was removed as a managing director and Nikolay Binev Kolev was registered as a new managing director; On September 3, 2007 PROFIREAL AD was removed as a sole owner and PROFIREAL HOLDING AD, the Czech Republic, was added as a new sole owner; On February 11, 2008 the name of PROFIREAL Bulgaria EOOD was changed to ; PROFIREAL HOLDING AD was removed as a sole owner on February 11, 2008 and PROFIREAL Group S.E., the Netherlands was added as a sole owner. In July 2009 the share capital was increased to BGN On February 25, 2011 Tomas Rosenberger was removed as a managing director and Zdravko Stamenov Raychev was registered as a new managing director; On June 28, 2011 Alexandar Jotev was removed as a managing director and David Chour was registered as a new managing director; On November 27, 2012 David Chour was removed as a managing director and Svetoslav Nikolaev Nikolov was elected as a new managing director. The share capital was increased to BGN Organizational structure The activities of the Company are organized in four geographical regions: EAST, WEST, NORTH and SOUTH. The head office is in Sofia. The staff in the head office performs strategic planning and management, services in the field of corporate finance, marketing and information technologies. 40

41 2. Basis for preparation of the financial statements and accounting principle These financial statements are prepared in accordance with International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB) and the interpretations, issued by the International Financial Reporting Interpretations Committee (IFRIC), as approved by the European Union (the EU ) and applicable in the Republic of Bulgaria. (a) Changes in IFRS Standards and Interpretations effective in the current period The following standards, amendments to the existing standards and interpretations issued by the International Accounting Standards Board (IASB) and adopted by the EU are effective for the current period: IFRS 13 Fair Value Measurement, adopted by the EU on December 11, 2012 (effective for annual periods beginning on or after January 1, 2013); Amendments to IFRS 1 First-time Adoption of IFRS - Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters, adopted by the EU on December 11, 2012 (effective for annual periods beginning on or after January 1, 2013); Amendments to IFRS 1 First-time Adoption of IFRS Government Loans, adopted by the EU on March 4, 2013 (effective for annual periods beginning on or after January 1, 2013); Amendments to IFRS 7 Financial Instruments: Disclosures - Offsetting Financial Assets and Financial Liabilities, adopted by the EU on December 13, 2012 (effective for annual periods beginning on or after January 1, 2013); Amendments to IAS 1 Presentation of financial statements - Presentation of Items of Other Comprehensive Income, adopted by the EU on June 5, 2012 (effective for annual periods beginning on or after July 1, 2012); 41

42 Amendments to IAS 12 Income Taxes - Deferred Tax: Recovery of Underlying Assets, adopted by the EU on December 11, 2012 (effective for annual periods beginning on or after January 1, 2013); Amendments to IAS 19 Employee Benefits - Improvements to the Accounting for Post-employment Benefits, adopted by the EU on June 5, 2012 (effective for annual periods beginning on or after January 1, 2013); Amendments to various standards Improvements to the IFRSs (cycle ) resulting from annual improvement project of IFRS (IFRS 1, IAS 1, IAS 16, IAS 32, IAS 34) primarly with a view to removing inconsistencies and clarifying wording, adopted by the EU on 27 March 2013 (amendments are to be applied for annual periods beginning on or after January 1, 2013); IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine, adopted by the EU on December 11, 2012 (effective for annual periods beginning on or after January 1, 2013). The adoption of these amendments to the existing standards has not led to any changes in the Entity s accounting policies. Standards and Interpretations issued by IASB and adopted by the EU but not yet effective At the date of authorisation of these financial statements the following standards, revisions and interpretations adopted by the EU were in issue but not yet effective: IFRS 10 Consolidated Financial Statements, adopted by the EU on December 11, 2012 (effective for annual periods beginning on or after January 1, 2014); IFRS 11 Joint Arrangements, adopted by the EU on December 11, 2012 (effective for annual periods beginning on or after January 1, 2014); IFRS 12 Disclosures of Interests in Other Entities, adopted by the EU on December 11, 2012 (effective for annual periods beginning on or after January 1, 2014); 42

43 IAS 27 (revised in 2011) Separate Financial Statements, adopted by the EU on December 11, 2012 (effective for annual periods beginning on or after January 1, 2014); IAS 28 (revised in 2011) Investments in Associates and Joint Ventures, adopted by the EU on December 11, 2012 (effective for annual periods beginning on or after January 1, 2014); Amendments to IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosures of Interests in Other Entities - Transition Guidance, adopted in the EU on April 4, 2013 (effective for annual periods beginning on or after January 1, 2014); Amendments to IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosures of Interests in Other Entities and IAS 27 Separate Financial Statements - Investment Entities, adopted in the EU on November 20, 2013 (effective for annual periods beginning on or after January 1, 2014); Amendments to IAS 32 Financial instruments: presentation - Offsetting Financial Assets and Financial Liabilities, adopted by the EU on December 13, 2012 (effective for annual periods beginning on or after January 1, 2014); Amendments to IAS 36 Impairment of assets Recovable amount of Disclosuers for Non-Financial Assets, adopted by the EU on December 19, 2013 (effective for annual periods beginning on or after January 1, 2014); Amendments to IAS 39 Financial instruments: Recognition and Measurement Novation of Derivatives and Continuation of Hedge Accounting, adopted by the EU on December 19, 2013 (effective for annual periods beginning on or after January 1, 2014); 43

44 Standards and Interpretations issued by IASB but not yet adopted by the EU At present, IFRS as adopted by the EU do not significantly differ from regulations adopted by the International Accounting Standards Board (IASB) except from the following standards, amendments to the existing standards and interpretations, which were not endorsed for use as at the date of publication of financial statements: IFRS 9 Financial Instruments and subsecuent amendments (effective for annual periods beginning on or after January 1, 2015); Amendments to IAS 19 Employee Benefits Defined Benefit Plans: Employee contributions (effective for annual periods beginning on or after January 1, 2014); Amendments to IFRS 1 First-time Adoption of IFRS - Government Loans (effective for annual periods beginning on or after January 1, 2013); Amendments to various standards Improvements to IFRSs (cycle ) resulting from the annual improvement project of IFRS (IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 24 and IAS 38) primarily with a view to removing inconsistencies and clarifying wording (amendments are to be applied for annual periods beginning on or after January 1, 2014). (b) Functional and presentation currency The Company keeps its accounting records in the national currency of the Republic of Bulgaria the Bulgarian Lev. These financial statements have been prepared in thousand BGN, which is the functional currency used in the Company, except when otherwise stated. The exchange rate of the EUR to the BGN is fixed by law and is EUR 1 to BGN (c) Recognition of income and expenses Income and expenses for interest are recognized in the statement of comprehensive income for all interest-bearing assets and liabilities using the effective interest method and on accrual basis. 44