GETBACK CAPITAL GROUP INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD OF 6 MONTHS ENDED /44

Transcription

1 GETBACK CAPITAL GROUP INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD OF 6 MONTHS ENDED /44

2 TABLE OF CONTENTS SELECTED FINANCIAL DATA... 3 INTERIM CONDENSED CONSOLIDATED PROFIT AND LOSS STATEMENT... 4 INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME... 4 INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION... 5 INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY... 6 INTERIM CONDENSED CONSOLIDATED CASH FLOW STATEMENT General information The Capital Group Organisation of GetBack Capital Group and its consolidated entities Composition of the Management Board of Parent Company Significant accounting principles Information on the principles adopted for preparation of the interim condensed consolidated financial statements Amendments to standards and interpretations applied Selected accounting principles Significant items based on the professional judgement and estimates Information on operational segments Additional notes and explanations Net revenues Other operating income and costs External services Financial income and expenses Income tax expense Tangible fixed assets, intangible assets, goodwill and investments Debt portfolios Financial assets held for trading Trade receivables and other receivables Information on provisions, deferred tax liability and assets Prepayments and accruals Cash and cash equivalents Share capital Liabilities from issue of debt securities, financial lease and loans and borrowings Trade liabilities and other liabilities Components of other comprehensive income Fair value of financial assets and liabilities Financial risk management in the Capital Group Related party transactions Contingent liabilities Additional information (notes) regarding the cash flow statement Information on dividends at GetBack Capital Group Seasonality of operations Significant events which occurred in the reporting period Subsequent events Opinion of the Management Board concerning options of implementing previously published profit/loss forecasts for relevant financial year /44

3 SELECTED FINANCIAL DATA in PLN thousand in EUR thousand Net revenues Operating profit Gross profit Net profit Net profit per shareholders of the parent company Profit (earning) per share attributable to equity holders of the parent company (in PLN/EUR per one share) Profit (earning) per share attributable to equity holders of the parent company - diluted (in PLN/EUR per one share) 1,40 3,71 0,33 0,85 1,40 3,71 0,33 0,85 Net acquisition of portfolios at contract prices ( ) ( ) ( ) (76 664) Payments from debtors Net cash flow from operating activities ( ) (27 447) (49 364) (6 266) Net cash flow from investing activities ( ) (70 993) (35 470) (16 207) Net cash flow from financing activities Total net cash flows Total assets Long-term liabilities Short-term liabilities Total equity Equity attributable to equity holders of the parent company Non-controlling interests Share capital Number of shares Book value per ordinary share (in PLN/EUR) The selected financial data presented above are supplementary to the financial statements and have been translated into EUR according to the following principles: relevant items of assets and liabilities as at balance sheet day were translated according to average exchange rate applicable at the last balance sheet day, announced by the National Bank of Poland; which as at was and as at ,; relevant items of the profit and loss statement as well as of the cash flow statement for the period between 1 January and 30 June of the relevant year were translated based on average rate, calculated as an arithmetic average of rates quoted by the National Bank of Poland on the last day of the month in the relevant period; for the period of 6 months ended , and /44

4 INTERIM CONDENSED CONSOLIDATED PROFIT AND LOSS STATEMENT Continuing operations Note Net revenues Share in profits (losses) of affiliates measured according to the equity method (12 416) (751) Other operating income Payroll costs and employee benefits (66 614) (27 467) Amortisation and depreciation (8 993) (2 664) External services 4.3 (81 720) (29 408) Other operating expenses 4.2 (29 067) (10 450) Operating profit Result on sales of financial assets - (1) Financial income Financial expenses 4.4 (71 172) (15 447) Net financial revenues (costs) (66 369) (15 196) Gross profit (loss) Income tax Net profit (loss) Net profit attributable of shareholders of parent company Net profit attributable to non-controlling interests Profit per one share: - basic earnings for the financial year (in PLN) 1,40 3,71 - diluted earnings for the financial year (in PLN) 1,40 3,71 Profit per share Net profit for the period attributable to non-preference shareholders of the parent company (in PLN thousand) Weighted average number of ordinary shares issued, applied to calculate the basic profit per share Basic profit per share (in PLN) Weighted average number of ordinary shares issued, applied to calculate the diluted profit per share Diluted profit per share (in PLN) INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Components of other comprehensive income, i.e. exchange rate differences on translating foreign entities, may be transferred to the income statement in the future. Note Profit (loss) for the period Exchange differences on translating foreign entities (379) 16 Other net comprehensive income 4.16 (379) 16 Comprehensive income for the period Attributable to shareholders of parent company Attributable to non-controlling interests /44

5 INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION ASSETS Note Non-current assets Tangible fixed assets Intangible assets Goodwill Investment property Investments Investments in affiliates Investments in securitisation funds Other long term receivables Deferred income tax assets Long-term prepayments and accruals Current assets Debt portfolios Financial assets held for trading Trade receivables Income tax receivables Short-term borrowings granted Other short-term receivables Short-term prepayments and accruals Cash and cash equivalents TOTAL ASSETS LIABILITIES AND EQUITY Equity (attributable to shareholders of the parent company) Share capital Net profit (loss) Other capitals Non-controlling interests Total equity Long-term liabilities and provisions for liabilities Financial liabilities arising from issuance of debt securities Financial lease liabilities Long-term liabilities relating to loans and borrowings and other financial liabilities Other long-term liabilities Short-term liabilities Financial liabilities arising from issuance of debt securities Trade and other liabilities Financial lease liabilities Short-term liabilities relating to loans and borrowings Corporate income tax liabilities - - Liabilities relating to employee benefits Short-term provisions TOTAL LIABILITIES TOTAL OF LIABILITIES AND EQUITY /44

6 INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the period of 6 months ended on Share capital Undistributed financial results Other equity Supplementary capital and retained earnings Exchange rate differences Net profit Equity attributable to shareholders of the parent company Non-controlling interests Total equity As at (21) Comprehensive net income for the period (379) Transfer of profit for previous year to undistributed financial results ( ) Dividends payable to non-controlling shareholders (74) (74) Transactions with shareholders ( ) - (74) (74) As at (400) for the period of 12 months ended on 31 December 2016 Share capital Undistributed financial results Other equity Supplementary capital and retained earnings Exchange rate differences Net profit Equity attributable to shareholders of the parent company Non-controlling interests Total equity As at (44) Comprehensive net income for the period Transfer of profit for previous year to undistributed financial results ( ) Dividends payable to non-controlling shareholders (196) (196) Transactions with shareholders ( ) - (196) (196) As at (21) for the period of 6 months ended on Share capital Undistributed financial results Other equity Supplementary capital and retained earnings Exchange rate differences Net profit Equity attributable to shareholders of the parent company Non-controlling interests Total equity As at (44) Comprehensive net income for the period Transfer of profit for previous year to undistributed financial results ( ) Dividends payable to non-controlling shareholders (166) (166) Transactions with shareholders ( ) - (166) (166) As at (28) /44

7 INTERIM CONDENSED CONSOLIDATED CASH FLOW STATEMENT Cash flows from operating activities Note Net profit (loss) Total adjustments: ( ) ( ) Amortisation and depreciation Share in (profit)/loss of affiliates Foreign exchange (profit)/loss (1 231) (Profit) loss on investing activities (248) (3) Interests Change in deferred income tax assets 4.21 (22 124) (326) Change in investments in debt portfolios 4.21 ( ) ( ) Movement of other investments 4.21 (1 938) - Change in receivables 4.21 ( ) Change in liabilities, except for loans and borrowings Change in liabilities relating to employee benefits 4.21 (1 193) (5 219) Change in prepayments and accruals 4.21 (11 576) (10 103) Income tax (paid) / refunded 276 (421) Current income tax (125) Valuation of fund s investment certificates Net cash flows from operating activities ( ) (27 447) Cash flows from investment activities Disposal of property, plant and equipment and intangible assets - 21 Acquisition of property, plant and equipment and intangible assets (27 836) (3 941) Acquisition of financial assets (42 754) (28 994) Acquisition of a subsidiary, net of cash acquired 4.21 (27 917) (17 815) Acquisition of shares or stock in other entities 4.21 (52 147) (20 264) Net cash flows from investing activities ( ) (70 993) Cash flows from financial activities Payment of financial lease liabilities (845) (429) Cash inflows from loans and borrowings Inflows from issue of debt securities Dividends paid (74) (166) Repayment of loans and borrowings (28 158) - Redemption of debt securities 4.21 ( ) (50 000) Interests paid 4.21 (71 585) (8 747) Net cash flows from financial activities Net increase / (decrease) in cash and cash equivalents Net foreign exchange profit/losses (19) 5 Opening balance of cash and cash equivalents Closing balance of cash and cash equivalents, including Restricted cash /44

8 1. General information GetBack Capital Group ( Capital Group, Group ) consists of the parent company GetBack S.A. ( GetBack, Company or parent entity ) and its subsidiaries. Headquarters of GetBack S.A. is based in Wrocław at Powstańców Śląskich 2-4. On GetBack S.A. was entered into the National Court Register by the District Court for Wrocław Fabryczna, 6th Commercial Division of the National Court Register under KRS number The Company s REGON (Business ID) is The main type of business of the Group is the recovery of acquired debts and management of debt portfolios in securitisation funds, including restructuring and recovery of acquired debts. The duration of the Company and of member companies of the Capital Group is unlimited. Prior to the direct parent company for GetBack Capital Group and the owner of 100% of the Company s shares was a subsidiary Getin International S.a r.l. located in Luxemburg, which on received 100% of GetBack S.A. shares in kind contribution from its subsidiary Idea Expert S. A. The parent company of the whole Group was LC Corp B.V., owned by PhD Leszek Czarnecki. Starting from the direct parent company for GetBack Group and the owner of 100% of the Company s shares was DNLD sp. z o.o. (former: Emest Investments sp. z o.o.). On , resulting from cross-border business merger, DNLD sp. z o.o. was acquired by DNLD Holdings B.V. which took control of all rights and obligations and all the assets of DNLD sp. z o.o. (including all Company s shares), while simultaneously DNLD sp. z o.o. ceased to exist. No member of the Management Board nor Supervisory Board holds directly or indirectly at least 5% of shares of GetBack S.A. 8/44

9 2. The Capital Group 2.1. Organisation of GetBack Capital Group and its consolidated entities include both GetBack and the following companies of GetBack Capital Group: Subsidiaries fully consolidated: Name and registered office Kancelaria Prawna GetBack Mariusz Brysik sp.k. with its registered office in Wrocław Activity type Effective share in capital legal services 90.91% 90.91% easydebt NSFIZ with its registered office in Warsaw statutory activity of funds % % GetBack Recovery Srl with its registered office in Bucharest (Romania) debt collection services % % Lawyer Consulting Associate Srl with its registered office in Bucharest (Romania) legal services 98.00% 98.00% Neum Pretium Sp. z o.o. (former Bakura IT Sp. z o.o.) % % other financial services with its registered office in Wrocław Open Finance FIZAN with its registered office in Warsaw statutory activity of funds % % Bakura sp. z o.o. with its registered office in Warsaw other financial services % % Bakura sp. z o.o. S.K.A. with its registered office in Warsaw other financial services % % Universe 3 NSFIZ with its registered office in Warsaw statutory activity of funds % % Bakura Sp. z o.o. Kolima Sp. k. with its registered office in Wrocław GetPro NSFIZ (former EGB Wierzytelności 1 NSFIZ) with its registered office in Warsaw other financial services statutory activity of funds % % % % Debito NSFIZ with its registered office in Warsaw statutory activity of funds % % Open Finance Wierzytelności NSFIZ with its registered office in % % statutory activity of funds Warsaw Neum Pretium S.A. with its registered office in Warsaw other financial services 100,00% % Crown Stability S.à r.l. based in Luxembourg other financial services % n/a GetBack Finance AB based in Stockholm (Sweden) other financial services % n/a GetBack Baytree Advisors LLP Limited based in London (United Kingdom) other financial services % n/a The subsidiaries are the entities controlled by GetBack, including investment funds, in which the GetBack Group has its investment certificates and in relation to whose it exercises active control. Detailed consolidation principles were disclosed in the note 3.3. Affiliated entities disclosed (consolidated) using the equity method: Name and registered office Activity type Effective share in capital OMEGA Wierzytelności NSFIZ with its registered office in Warsaw statutory activity of funds 20.00% 20.00% Trigon Profit XIV NSFIZ with its registered office in Warsaw statutory activity of funds 27.00% 20.00% Trigon Profit XV NSFIZ with its registered office in Warsaw statutory activity of funds 27.00% 20.00% Trigon Profit XVI NSFIZ with its registered office in Warsaw statutory activity of funds 27.00% 20.00% Trigon Profit XVIII NSFIZ with its registered office in Warsaw statutory activity of funds 28.00% 20.00% Trigon Profit XXI NSFIZ with its registered office in Warsaw statutory activity of funds 20.00% 20.00% Trigon Profit XX NSFIZ with its registered office in Warsaw statutory activity of funds 20.00% n/a Trigon Profit XXII NSFIZ with its registered office in Warsaw statutory activity of funds 20.00% n/a Trigon Profit XXIII NSFIZ with its registered office in Warsaw statutory activity of funds 20.00% n/a Trigon Profit XXIV NSFIZ with its registered office in Warsaw statutory activity of funds 20.00% n/a CENTAURIS Windykacji NSFIZ with its registered office in Warsaw statutory activity of funds 31.25% 26.66% Affiliated entities are all entities, in relation to whose the Group has significant influence. Detailed consolidation principles were disclosed in the note 3.3. As at , the Group s share in the total number of votes in its subsidiaries and affiliated entities is equal to its share in the share capital of those entities. 9/44

10 Graphic presentation of GetBack Capital Group structure as at : 1 GetBack Recovery Srl GetBack S.A. holds 99.95% of shares, while Bakura sp. z o.o. SKA holds 0.05 % of shares 2 Lawyer Consulting Associate Srl GetBack S.A. and GetBack Recovery Srl both hold 49% of the share in profit 3 Kancelaria Prawna GetBack Mariusz Brysik sp.k. GetBack S.A. is the limited partner with 90.91% share., whereas Bakura sp. z o.o. S.K.A. is a limited partner 4 Open Finance FIZAN GetBack S.A. holds 20% of investment certificates, and Bakura sp. z o.o. S.K.A holds 80% of investment certificates of the Fund 5 Centauris Windykacji NSFIZ GetBack S.A. holds 12.50% of investment certificates while Open Finance FINZA holds 18.75% of investment certificates of this Fund 10/44

11 In the period between and the following changes occurred in the structure of the Capital Group: On GetBack S.A. was allocated with 5,050 investment certificates of Open Finance FIZAN fund. The final price of the transaction amounted to PLN 200 thousand; On Open Finance FIZAN fund, a subsidiary of GETBACK S.A. was allocated with 1 investment certificate of series B3 of Centauris Windykacji NSFIZ fund. On GetBack S.A. was allocated with 35 investment certificates of Trigon Profit XXI NSFIZ fund. The price of the transaction amounted to PLN 6,955 thousand. On GetBack S.A. was allocated with 49 investment certificates of Trigon Profit XX NSFIZ fund, thus acquiring 20% of investment certificates issued by this fund. The price of the transaction amounted to PLN 10,241 thousand; On GetBack S.A. was allocated with 73 investment certificates of Trigon Profit XXII NSFIZ fund, thus acquiring 20% of investment certificates issued by this fund. The price of the transaction amounted to PLN 15,257 thousand. On Bakura Sp. z o.o. SKA, a subsidiary company, acquired 1 share in subsidiary, GetBack Recovery Srl, worth PLN 4 thousand. As a result of this transaction, GetBack S.A. holds % of shares while Bakura sp. z o.o. SKA holds % of shares in the subsidiary GetBack Recovery Srl. On GetBack Baytree Advisors LLP Limited located in London, United Kingdom, was registered. Until the date of approval of the present financial statement no articles of incorporation of the company were drafted and no shares were contributed. The value of contributed cash amounted to PLN 1,383 thousand. On GetBack S.A. was allocated with 35,662 investment certificates of series 12, issued by Open Finance Wierzytelności NSFIZ fund. The price of the transaction amounted to PLN 3,941 thousand. On GetBack S.A. was allocated with 38 investment certificates of series B of Trigon Profit XXIV NSFIZ fund, thus acquiring 20% of investment certificates issued by this fund. The price of the transaction amounted to PLN 7,933 thousand. On GetBack S.A. was allocated with 57 investment certificates of series B of Trigon Profit XXIII NSFIZ, thus acquiring 20% of investment certificates issued by this fund. The price of the transaction amounted to PLN 11,761 thousand. On Getback S.A. established a subsidiary, Crown Stability S.à r.l. located in Luxembourg; Getback S.A. is the sole shareholder of Crown Stability S.à r.l. The value of contributed shares amounted to PLN 51 thousand. On Getback S.A. acquired 100% shares of GetBack Finance AB located in Stockholm (Sweden) (former: Goldcup AB); these shares were divested by Bolagsrätt Sundsvall AB. The price of the transaction amounted to PLN 252 thousand (EUR 60 thousand). On GetBack S.A. was allocated with 31 investment certificates of series 25, issued by easydebt NSFIZ fund. The price of the acquisition transaction amounted to PLN 6,421 thousand. GetBack S.A. was allocated with the following investment certificates issued by Universe 3 NSFIZ fund: o on investment certificates of series I, o on investment certificates of series K, o on investment certificates of series L, o on investment certificates of series M, o on investment certificates of series N, The final price of the transaction amounted to PLN 55,153 thousand; GetBack S.A. was allocated with the following investment certificates issued by Debito NS FIZ fund: o on million investment certificates of series L, o on million investment certificates of series M, o on million investment certificates of series N, o on million investment certificates of series P, 11/44

12 o on ,285,715 investment certificates of series R, o on ,909,091 investment certificates of series S, o on million investment certificates of series V. The final price of the transaction amounted to PLN 83,840 thousand. GetBack S.A. was allocated with the following investment certificates issued by GetPro NSFIZ fund: o on investment certificates of series E, o on ,486 investment certificates of series F. The final price of the transaction amounted to PLN 21,203 thousand Composition of the Management Board of Parent Company Composition of the Management Board of GetBack S.A. as at as well as at the date of approval of the condensed interim consolidated financial statements was as follows: Konrad Kąkolewski President of the Management Board, Paweł Trybuchowski Vice-President of the Management Board, Anna Paczuska Vice-President of the Management Board, Mariusz Brysik Member of the Management Board, Marek Patuła Member of the Management Board, Bożena Solska Member of the Management Board. Between and as well as until the date of approval of these interim condensed consolidated financial statements, no personal changes occurred in the composition of the Management Board. 3. Significant accounting principles 3.1. Information on the principles adopted for preparation of the interim condensed consolidated financial statements Interim condensed consolidated financial statements of the Group cover a and include: period of 6 months ended comparative data for the period of 6 months ended for the interim condensed consolidated profit and loss statement, interim condensed consolidated statement of comprehensive income as well as interim condensed consolidated cash flow statement, comparative data for the period of 6 months ended as well as comparative data for the period of 12 months ended for interim condensed consolidated statement of changes in equity, and interim condensed consolidated statement of financial position as at and The data as at were subject to an audit by statutory auditor. The data as at were not subject to an audit or review by statutory auditor. The present interim condensed consolidated financial statements were approved for publication by the Company s Management Board on These interim condensed consolidated financial statements were prepared in compliance with the International Financial Reporting Standards approved by the European Union ( IFRS-EU ) and, in particular, in accordance with International Accounting Standard ( IAS ) 34 Interim Financial Reporting. IFRS-EU include the standards and interpretations approved by the International Accounting Standards Board ("IASB") and the International Financial Reporting Interpretations Committee ("IFRIC"). In the period from to the date of approval of the present interim condensed consolidated financial statements, there were no changes in the accounting policies and no corrections of errors in previous years. These interim condensed consolidated financial statements are presented in the Polish currency ( PLN ) and all values are presented in PLN thousand, unless specified otherwise. These interim condensed consolidated financial statements were prepared with the assumption of continuation of business activity by the companies of the Group in the future possible to predict. As at the date of approving these interim condensed consolidated financial statements there are no circumstances which would indicate any threat to the going concern of the Group companies. 12/44

13 Interim condensed consolidated financial statements do not cover all information and disclosures that are required in case of annual financial statements and hence, it must be read in conjunction with the annual consolidated financial statements of the Capital Group for the year ended Amendments to standards and interpretations applied Amendments to the published standards and interpretations which became effective after have no effect on these interim condensed consolidated financial statements. These interim condensed consolidated financial statements do not consider amendments to standards and interpretations pending approval by the European Union or which were approved by the European Union but entered or will enter into force after The list of standards, amendments to standards and interpretations which have not yet been published and have not been applied to these interim condensed consolidated financial statements is identical as the list included in Group s consolidated financial statements for the year ended The Group estimates that standards which did not become effective as at would have had no material effect on the Group s interim condensed consolidated financial statements with the exception of these standards in respect of which a summary of the effect of their possible application was included in the Group s consolidated financial statements for the year ended Since the date of publication of the Group s consolidated financial statements for the year ended , no circumstances have occurred neither no new information has come to the Group s attention that could change the results of evaluation of new standards application. GetBack Capital Group performed the preliminary impact analysis of implementing a new IFRS 9 standard as regards classification and valuation of financial instruments and impairment of financial instruments and trade receivables. The Group does not apply hedge accounting, so the impact of the standard in this regard has not been valuated. Classification of the acquired debt portfolios, measured previously at fair value, will depend on the business model according to the requirements of a new standard. If the business model test is positive, these assets will be classified as measured at the amortized cost. The Group does not expect that the implementation of a new standard will significantly affect the classification and the measurement of other assets and financial liabilities. Considering the fact that that the Group acquires materially impaired debt portfolios, the impact of the impairment is already included in the acquisition price. Debt portfolios, which are currently measured according to the fair value model, contain the adjustment due to expected future credit losses. Similarly, for the debt portfolios to be measured at amortized cost according to the new standard, the impact of assets impairment should be already included in the acquisition price of this portfolio. Therefore, the Group does not expect a significant impact of a new standard in terms of presenting the expected credit losses, on the measurement of financial assets. As a result of further analysis and obtaining new information by the Group, the estimated impact can change Selected accounting principles Accounting principles applied while preparing the interim condensed consolidated financial statements of the Group are consistent with the principles applied while preparing the consolidated financial statements of the Group for the year ended The Group s accounting principles were presented in the consolidated financial statements of the Group for the year ended , which were approved by the Management Board on Consolidation principles Interim condensed consolidated financial statements of GetBack Capital Group include interim condensed financial statements of GetBack S.A. as well as interim condensed financial statements of its subsidiaries, prepared for the relevant reporting periods. Consolidation packages of the subsidiaries, which are the basis for preparing the interim condensed consolidated financial statements, are prepared for the same reporting period as the financial statements of the parent company, using consistent accounting principles, on the basis of uniform accounting principles applied for transactions and economic events of similar nature. In order to eliminate any discrepancies in the applied accounting principles, adjustments are introduced. 13/44

14 All significant balances and transactions between the units of the Group including unrealised gains resulting from transactions within the Group were completely eliminated. Unrealised losses are eliminated, unless they prove the occurrence of impairment. Subsidiaries The Company, regardless of the participation nature in a given entity, defines its status as a parent company by assessing whether it controls the entity, where the investment was made. The Company excises control over an entity where investment was made when due to its commitment in this entity it is subject to exposure to variable financial results or when it is entitled to variable financial results and has possibility to influence the amount of those financial results through the governance over such subsidiary. The Company exercises control over the entity, where the investment was made if and only if at the same time: a) has power over the investee, b) it is exposed to variable financial results or has the right to variable returns from its involvement with the investee, and c) it has the ability to use its power over the investee, to affects the amount of investor s return. Consolidation of the entity, where the investment was made, begins on the date when the Company gains control over the entity, and terminates when it loses this control. The Company assigns a profit or loss and each component of other total incomes to the owners of the parent company and to the non-controlling interests. The Company presents non-controlling interests in the consolidated balance sheet in equity, separately to the equity of the parent company s owners. Changes in the ownership of the parent company in the affiliated entity, which do not result in the loss of control over the affiliated company by the parent company, constitute capital transactions. If part of the equity possessed by non-controlling interests is changed, GetBack makes a balance sheet value adjustment of controlling and noncontrolling interests in order to reflect changes of the relative interests in the subsidiary. All differences between the amount of adjustment of non-controlling interests and the fair value of the paid or received amount are recognised in the equity and assigned to the owners of the parent company. When the Company loses the control over the subsidiary: a) it excludes assets (including goodwill) and liabilities of the former subsidiary from the consolidated balance sheet, b) it recognises all investments maintained in the former subsidiary at their fair value at the date of losing control, and subsequently they are recognised, along with all amounts of mutual liabilities of the former subsidiary and parent company according to the appropriate IFRS, c) it recognises profits or losses related to the loss of control attributed to former parent company. Affiliated entities Affiliated entities are all entities, on whose the investor has significant influence. Significant influence means the power allowing for participation in decision making on the financial and operational policy of the entity, in which the investment was made, however, it does not involve taking control or joint control over this entity s policy. If the Group has, directly or indirectly (for example, through the subsidiaries), 20% or more votes in the entity, in which the investment was made, it is assumed that the Group has a significant influence on this entity, unless it can be evidenced otherwise in the obvious way. On the other hand, if the Group has, directly or indirectly (for example, through the subsidiaries), less than 20% of votes in the entity, in which the investment was made, it is assumed that the Group exerts no significant influence on this entity, unless it can be evidenced otherwise in the obvious way. The Group loses a significant influence on the entity, where the investment was made, when it loses power allowing for participation in decision making on the financial and operational policy of the entity, where the investment was made. As regards recognising the investments in the affiliates, the Group uses the equity method, where the investment is initially recognised by the cost, and then after the date of acquisition, its value is adjusted by the investor s share change in the net assets of the entity, in which the investment was made. 14/44

15 Investor s profit or loss covers its share in the profit or loss of the entity, in which the investment was made, while the other comprehensive incomes of the investor contain its share in other comprehensive incomes of the entity, in which the investment was made. If the entity s share in the losses of the affiliate is equal or higher than its share in the affiliate, the entity ceases to recognise its share in further losses, unless it contracted the liabilities or made payments on behalf of particular entity. If the entity, being a part of the Group, sets up the transaction with the affiliate or joint venture of the Group, profits and losses arising from these transactions are recognised in the consolidated financial statements of the Group only to the extent to which the shares of this affiliate or joint venture are not related to the Group. Each time at the end of reporting period, the Group evaluates whether there are triggers indicating the necessity for preparing the write down due to the impairment as regards its net investment in the affiliate. In case of existence of such trigger, the Group estimates the recoverable value, i.e. the useful value of fair value reduced by the sales costs, depending on which of these two is higher. If a balance sheet value of a component of assets is higher than its recoverable value, the Group recognises an impairment loss in the profit and loss statement Significant items based on the professional judgement and estimates Preparation of a financial statement according to the IFRS-UE requires the Group to execute some estimates and make assumptions which affect the amounts presented in the financial statements. Estimates and assumptions, which are subject to permanent evaluation by the Group s management, are based on the past experience and other factors, including the expectations for future events, which seem justified in a given situation. Although these estimates are based on the best knowledge of current conditions and actions taken by the Group, the actual results may differ from these estimates. Estimates performed at the end of each reporting period reflect the conditions existing at these dates (e.g. exchange rate, interest rate, market prices). Changes of accounting estimates are presented in the prospective beginning from the period, in which the estimate was made. In the period of 6 months ended the areas, for which the Group prepared estimates, have not changed compared to those presented in the consolidated financial statements of the Group for the year ended Professional judgement Lease contracts classification The Group classifies the leasing as operational or financial one by assessing the extent to which the risk and gain resulted from the leased asset, for the lessee and the lessor. The assessment is based on the economic content of each transaction. Financial asset impairment loss The Group assesses whether there occur reasonable triggers indicating the impairment of the component/group of financial assets. Impairment triggers are understood as events or group of events, which occurred after the date of initial presentation of the component/group of assets, indicating the decreased expected future cash flows from asset component or from the group of assets. At the moment of recognition of impairment triggers, the estimation of impairment losses is performed. Impairment of other fixed assets As at every balance sheet date, the Group evaluates whether there is reasonable evidence of the impairment of a component of other fixed assets. If the Group recognises the evidence indicating the impairment, it is settled whether the current book value of a particular asset is higher than the value which can be achieved by further using or selling this asset, so the recovery value of this item is estimated. If the recovery value is lower than the current balance value of given asset, the impairment is recognised and the write-off is recognised in the financial statements. Impairment of goodwill After the initial recognition, goodwill is disclosed at cost of acquisition less all accumulated impairment losses. For each reporting date it is assessed whether there occur the triggers of the impairment of goodwill. The test for goodwill impairment is performed annually by comparing the balance value of the units generating cash, 15/44

16 along with the goodwill and their recoverable value. The recoverable value is estimated based on the value in use of the units generating cash which is an estimated value of the future cash flows including residual value of units generating cash. The identified impairment loss is recognized in the financial result. Deferred tax asset The Group recognises a component of deferred tax assets basing on the assumption that a tax profit will be achieved in the future and that it will be possible to use it. Deterioration of tax results in the future could make this assumption unjustified. Uncertainty of estimates Preparation of a financial statement according to the IFRS-UE requires the Group to execute some estimates and make assumptions which affect the values presented in the financial statement. Estimates and assumptions, which are subject to permanent evaluation of the Group s management, are based on the past experience and other factors, including the expectations for future events, which seem justified in a given situation. Although these estimates are based on the best knowledge of current conditions and actions taken by the Group, the actual results may differ from these estimations. Estimates performed at the end of each reporting period reflect the conditions existing at these dates (e.g. exchange rate, interest rate, market prices). Changes of accounting estimates are presented in the prospective beginning from the period, in which the estimate was made. Main fields, in which the estimates were performed include: Fair value of financial instruments Fair value of financial assets not quoted on active markets, which include the acquired debt portfolios, are measured at reliably justified value calculated with the use of estimation model based on estimates of the discounted expected cash flows. Fair value is recognised as the sum of discounted expected cash flows, in the amount of the difference between future income from debt recovery and costs of asserting claims out of court, before the court and by means of enforcement. The most significant estimates performed by the Management Board include: Assumptions in terms of the amount of a discounted rate, Recovery amount and a period of estimated expected cash flows, Value of the Company s securities and assumption for the period of their implementation, Assumption regarding similar characteristics of debts included in particular portfolios. All models used for valuation of the acquired debt portfolios are approved before being applied, and calibrated in order to ensure that the received results reflect the actual data and comparative market prices. As far as possible, the models use observable data solely, stemming from the active market. However, in some cases, they are based on professional judgement. Future actual cash flows from the acquired portfolios may differ from the estimates and assumptions, which may result in balance value adjustments of these assets. Additional information about the adopted valuation methods, executed estimates and assumptions, as well as balance value of the acquired debt portfolios as of balance sheet date are presented in Note 4.1 and 4.7. Deferred tax relating to investments in subsidiaries In 2017, the GetBack Capital Group did not create any provision for the deferred income tax due to investment certificates of funds, which are subsidiaries of the Group. In 2016, the GetBack Group did not create the provision for deferred tax related to the investment certificates of funds, which are subsidiaries; the provisions created in the previous years were released. In , the Group created the provision for the deferred income tax based on all taxable temporary differences related to potential redemption of easydebt investment certificates, and currently concentrates on reinvesting the recovered cash without intending to generate profits from the acquisition of investment certificates in the near future. The parent company controls dates and amounts of reversed temporary differences in connection with the fact that it holds 100% of investment certificates, including 100% of votes on the meeting of investors. The Group is not required to create the provision for deferred tax, which refers to entities which meet jointly the below conditions under IAS 40: the parent company is capable of controlling the dates of temporary differences reversal; and: it is likely that temporary differences will not reverse in the foreseeable future. Recognition of revenue Income of the Company stems partly from the valuation of the financial assets. While evaluating the estimates related to the valuation, the Management Board verifies also the estimate of recognised income. 16/44

17 Useful life of tangible fixed assets and intangible assets. The Group verifies annually the adopted useful life of fixed assets and intangible assets on the basis of current estimations. The estimation of the duration of expected economic useful life of particular types of tangible fixed assets and intangible assets includes: previous average expected economic useful life, which reflects the time of physical wear, intensity of use, etc., loss of the functional properties due to technological grounds, period of executing control over the asset component, as well as legal and other limits of useful life, relation of useful life of asset component to useful lives of other assets, other circumstances affecting the expected average economic useful life of this type of asset. If the useful life of the asset component results from contractual rights, the expected average economic useful life reflects the period related to the contractual rights, or, in the situation when the estimated period is shorter, the estimated economic useful life is estimated Information on operational segments Reporting as divided into segments of the Capital Group s activity was prepared on the basis of units connected due to similar economic features and similarities in terms of the offered products and services, service provision process, type or category of a client, applied distribution methods and the nature of regulatory environment. The Management Board monitors separate operational results of segments in order to take decisions related to the allocation of resources, evaluation of the effects of this allocation and the results of activity. In the period from to the date of approval of the present interim condensed consolidated financial statements, there were no changes in reporting of operational segments. The operational activity of the Capital Group has been divided into two segments: Own funds segment covering: activity consisting in obtaining financing and allocating funds in debt portfolios including their servicing with the use of easydebt NSFIZ securitisation fund, Open Finance FIZAN fund, Universe 3 NSFIZ, GetPro NSFIZ, Open Finance Wierzytelności NSFIZ, Debito NSFIZ, and the following companies: Bakura sp. z o.o., Bakura sp. z o.o. S.K.A., Lawyer Consulting Associate Srl, Neum Pretium Sp. z o.o., Bakura sp. z o.o. Kolima sp. k., Neum Pretium SA, GetBack Baytree Advisors LLP, activity consisting in obtaining financing and allocating funds in debt portfolios including their servicing/management by GetBack Recovery Srl., Crown Stability S.à r.l., GetBack Finance AB. Internal funds segment covering: activity consisting in servicing the investment funds from outside of the GetBack Group, as well as debt collection services commissioned on behalf of other entities from outside of the GetBack Group by GetBack S.A., provision of services to external entities in terms of representation in judicial and enforcement proceedings, legal advice and representation in civil and economic proceedings by Kancelaria Prawna GetBack Mariusz Brysik sp. k. Revenues and costs of the segment are revenues and costs achieved as a result of sales to external clients. General administration expenses, depreciation and other operational costs are assigned to particular segments according to the average volume of serviced debts in a relevant year. Segment results were presented after adjustments between the segments and consolidation adjustments. Assets of the segment are operational assets used by the segment in its operational activity, which can be assigned directly to a particular segment or can be assigned to a particular segment on the basis of rational triggers. In particular, the assets of the segment do not include assets associated with income tax. The activity of the companies of the Group in the territory of Poland does not indicate regional differentiation in terms of risk and level of return from incurred investment expenditures. Interim condensed consolidated income statements for the period of 6 months ended divided into segments : 17/44

18 Continuing operations Own funds segment Third party funds segment Total Income from acquired debt portfolios Income from debt management and debt recovery under commission Share in profits (losses) of affiliated entities valuated using equity method (12 416) (12 416) Income from other services Other operating income General administration costs ( ) (32 103) ( ) Amortisation and depreciation (7 012) (1 981) (8 993) Other operating expenses - other (4 224) (23) (4 247) Financial income Financial expenses (70 924) (248) (71 172) Gross profit Income tax Net profit EBIT EBIT margin 49.7% 14.7% 45.6% EBITDA EBITDA margin 52.0% 19.6% 48.2% Cash EBITDA Cash EBITDA margin 67.2% 19.6% 61.7% (1) The Company calculates EBIT of a particular segment as a profit from operational activity of a particular segment. (2) The Company calculates EBIT margin of a particular segment as a ratio between the operational activity profit to the total operational revenue. (3) The Company calculates EBITDA of a particular segment as a profit from operational activity after eliminating depreciation of a particular segment to the total of operating revenues. (4) The Company calculates EBITDA of a particular segment as a ratio between the profit from operational activity after elimination of depreciation to the total operational revenue. (5) The Company calculates Cash EBITDA of a particular segment as a profit from operational activity of a particular segment after elimination of depreciation, purchase price depreciation and updated value of portfolios of a particular segment. (6) The Company calculated Cash EBITDA margin of a particular segment as a ratio of the profit from operational activity of a particular segment after elimination of depreciation, acquisition price depreciation and updated value of portfolios of a particular segment and the total operational revenues Interim condensed consolidated profit or loss statement for the period of 6 months ended divided into segments : Continuing operations Own funds segment Third party funds segment Total Income from the acquired debt portfolios Income from debt management and debt recovery under commission Share in profits (losses) of affiliated entities valuated using the equity method (751) (751) Income on other services Other operating revenue General administration costs (40 506) (26 328) (66 834) Amortisation and depreciation (1 751) (913) (2 664) Other operating expenses - other (352) (139) (491) Result on sales of financial assets (1) - (1) Financial income Financial expenses (15 254) (193) (15 447) Gross profit /44