Pan European Terminals plc (formerly Baltic Oil Terminals plc), posted a profit before tax of GBP 1.15 million in the year ended 31 December 2012, the company said today. Revenues increased by 32% to GBP 20.6 million, up from GBP 15.6 million in 2011.
Commenting on the results,
Simon Escott, CEO of Pan European Terminals, said: "We have made good progress in Europe this year, due to the solid performance from Petro Broker and the successful acquisition and refurbishment of Dan Balt, both of which gives us a strong base for the future. In Kaliningrad, Baltic Top showed significant growth, while we are hopeful of a swift resolution with the Rosbunker terminal, due to the ongoing progress there."
"We continue to carefully look at opportunities for expansion within our existing facilities and also at new acquisition targets in different geographic locations that meet our strict criteria for acquisition. This will ensure economic and environmental risk is managed going forward, whilst giving us the best opportunity to offer our growing client base, flexibility, better service and competitive rates for 2013 onwards. It is the Group's intention to publish an update on progress made in 2013 in due course."
The company's financial overview, a summary of its operations (including Rosbunker) and an outlook for 2013 have been provided below.
Source: Pan European Terminals plc
Financial Overview
Turnover has increased by 32% to £20.6m in 2012 (2011: £15.6m) primarily due to a large increase in sales volume at Baltic Top. However, the margins to date on these new sales have been low as we have had to undercut the competition to enter this market and we are now working hard to increase these to more competitive levels; we can already note this improvement in Q1 2013. Overall, 2012 was a good year for the Baltic Top facility with good progress being made on new sales areas and trading is continuing well during 2013.
Our Terminal in Holland, Petro Broker International, again performed very well in 2012 with similar levels of turnover (2012: £6.9m and 2011: £7.8m) and gross profit (2012: £2.8m and 2011: £3.0m) to last year. However, we have substantially reduced the overheads in Holland to £346,000 in 2012 compared to £654,000 in 2011, and these are expected to drop further in 2013 as the full year effect of the savings becomes apparent. The additional 120,000 cubic metre storage facility taken on in October 2012 will further increase profit generation albeit at a lower margin as these tanks are used for diesel oil.
As expected, Dan Balt in Denmark made a small loss before tax in 2012 but is forecast to make good levels of profit in 2013 as new oil transhipment contracts commenced in 2013, including a major new customer for the Group. The Group has upgraded valves, pumping equipment, and other facilities and equipment at the Terminal - most of the cost of which was covered by the fund raising in May with the remainder coming from cashflow generated by the Group.
The change in the Rosbunker accounting treatment is discussed in Note 5 and 25 in the accounts and from an accounting perspective profit is now only recognised when cash is received from that investment. The asset is included in the Group accounts as at 31 December 2012 at its estimated fair value of £22.5m.
Management successfully negotiated a refinancing of its $11m secured loan notes in November 2012 and were able to obtain a more favourable interest rate of 10% per annum on the £8.5m Loan Note. This is due for repayment in November 2015 although the Loan Note also carries an ability to convert to ordinary shares at the option of the Group and subject to shareholder approval. The full interest cost to the Group in 2012 was £1,309,000 including an amount of £323,000 for the write off of previously capitalised loan note issue costs upon re-financing, compared to £232,000 in 2011. This cost is expected to reduce to approximately £900,000 in 2013.
The majority of the overhead costs of running the Group are incurred at Group Head Office. The central overheads in 2012 were £4.96m (2011 £1.90m) which included one-off costs of £3.72m leaving £1.24m as our normal recurring overheads. Of the £3.72m of one-off costs, £2.45m related to bad debt provisions on older debts. The Directors remain confident that these monies are properly due. Please refer to note 16 for details of the work performed in respect of the debts that have been provided for. The remaining one-off costs include £333,000 in relation to legal costs in Russia, £372,000 relating to the Dan Balt acquisition costs, £250,000 on a debt settlement on trading and £181,000 in relation to the loan note restructuring costs.
Management will continue a rigorous policy to maintain efficiency in overheads across the Group. At the centre, the recurring overheads of £1.24m (2011 £1.90m) are down by 35% even though a 32% increase in sales was achieved in the 2012 year. To date this policy has resulted in a reduction of total overheads (excluding one-off costs) from 72% of total gross profit in 2011 to 56% in the 2012 year.
Including the reclassification of the Rosbunker investment at its revised fair value of £22.5m, the Group total assets are now stated at £47.6m in the Statement of Financial Position as at 31 December 2012 (2011: £44.0m). The Group had cash reserves of £1.1m at the year end (2011 £1.6m). Cash generation remains strong and is more than sufficient to fund ongoing operations. Should funding be required for any acquisitions or expansion, management believe that there are routes available as and when projects arise.
Operations
Our European operations performed better than expected during the year, with progress in 2013 expected to show similar growth. In Russia, Baltic Top showed significant revenue growth and, despite the present status at Rosbunker, we are confident of reaching a positive solution on this investment in the near future.
Profit (pre-management fee) at Petro Broker International (PBI) rose by 29%, whilst an additional 120,000 cubic metres of tank storage was added to the PBI facility in October 2012 for diesel oil. This will add further to profit generation in 2013. The new storage is being let to customers on long term agreements but at lower margins than other products, as is the case in the diesel oil market.
As expected, Dan Balt did not make a contribution to profit, due to our obligation to service inherited contracts, all of which expired by 31 December 2012. However, we are modernising the terminal in accordance with our plans and paving the way for a successful 2013. This has included replacing the loading pumps and valves, as announced with the fund raising on 22 May 2012. The project was expanded and all the fuel oil tanks have been refurbished, re-calibrated and re-inspected and the main boiler has also been re-configured in order to give greater efficiency in cold weather, such as experienced in February and March 2013. After completion of the engineering planning, work commenced in late 2012 and the full refurbishment will be completed by the end of June 2013, on schedule and on budget. Together with the Aabenraa Port Authority, we have also upgraded the discharge lines to ensure speedier discharge for our clients, which increases our overall competitiveness in the market place. Finally, as announced on 29 January 2013 a major new contract has been signed for this facility and we are actively looking to increase the use of our space. The molasses contract has been renegotiated and now runs through to the end of 2014.
Baltic Top had an excellent year with a near 50% increase in sales, although on lower margins than that of the rest of the Group and is a credit to the efforts of our Russian General Director, who has shown that our Russian operations can be profitable and enhance value for the Group. The terminal has now commenced supplying diesel oil to larger companies and traders active in the diesel and gasoline market and other large organisations in the Kaliningrad region, which we view as a positive market opportunity for us. In 2013, we plan to increase our margins now that we have captured a bigger market share.
Rosbunker
The Directors have carefully considered the status of its Rosbunker asset and the well documented events that have occurred during 2012. Given the limitation on control of the asset during the year, it has been decided that the most appropriate approach for the purpose of these accounts is to treat the asset as an investment for the whole of the 2012 year.
The reason behind re-classifying Rosbunker from associate to investment is clear: As an associate, the Group must be able to exercise significant influence over the asset in an operational and financial capacity. However, due to the ongoing court proceedings, this has not been possible and therefore the Directors believe the most appropriate accounting policy is to treat the holding as an investment thereby effectively "ring-fencing" the asset for the purposes of these accounts.
Therefore, no income from the asset has been recognised in the Group accounts for 2012 (with the exception of the fair value uplift explained in note 5 and 25), and the asset has been restated to its fair value of £22.5m as at 31 December 2012. Shareholders should note that the asset has been classified as an associate since 2010 and during this period the Group has not received any cash distributions from its Rosbunker operations and therefore, this accounting treatment is deemed to be the most appropriate in the circumstances. The change in accounting policy has no effect on the cash generated by the Group.
The Directors continue to pursue direct control of the asset and, by the end of 2012, had made encouraging headway within the Russian courts. Further, the Group's current 50% holding in Rosbunker is now deemed secure and protected under Russian law.
Concurrently, other options for the resolution of the situation are also being pursued by the Directors, and a number of attractive corporate transactions are under negotiation, one of which is with a large Russian financial institution. The Directors consider any one of these possible solutions to be strategically positive for the Group's future.
The Directors are confident that any of these options will ensure cash flow is returned to the Group by 1 April 2014 at the latest.
Outlook
The outlook for 2013 is bright, due to the continuing successes within Europe and also Russia. We are looking at new opportunities for expansion within our existing facilities and also at new acquisition targets in different geographic locations. This will ensure economic and environmental risk is managed going forward, whilst giving us the best opportunity to serve our growing client base.
