REG - IG Seismic Services - FY2014 Financial Report <Origin Href="QuoteRef">IGSSq.L</Origin> - Part 3
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profit/(loss) 2,677,458 (122,997) (115,512) (755,403) − 1,683,546
8. Segment information (continued)
Calculation of the adjusted EBIT and adjusted EBITDA from operating
profit/(loss):
For year ended 31 December 2014 Seismicsegment DPIsegment Others Corporateblock Adjustments and eliminations Totalsegments
Profit/(loss) from operating activities 2,067,176 (314,782) (67,960) (619,221) − 1,065,213
Restructuring and redundancy costs 262,314 − 22,424 62,451 − 347,189
Prior year taxes and related provisions 232,264 − − − − 232,264
Distribution of Corporate overheads (535,734) (9,679) − 545,413 − −
Adjusted EBIT 2,026,020 (324,461) (45,536) (11,357) − 1,644,666
Depreciation of property, plant and equipment 2,406,586 68,545 20,340 6,400 − 2,501,871
Amortization of intangible assets 18,945 46,560 10 4,836 − 70,351
Loss/(gain) on disposal of non-current assets 224,089 2,251 6,188 (418) − 232,110
Adjusted EBITDA 4,675,640 (207,105) (18,998) (539) − 4,448,998
For year ended 31 December 2013 Seismicsegment DPIsegment Others Corporateblock Adjustments and eliminations Totalsegments
Profit/(loss) from operating activities 2,677,458 (122,997) (115,512) (755,403) − 1,683,546
Restructuring and redundancy costs 109,111 14,777 25,797 − − 149,685
Transaction related expenses − − − 56,214 − 56,214
Loss from the contract in Yemen 8,695 − − − − 8,695
Distribution of Corporate overheads (648,711) (23,759) − 672,470 − −
Adjusted EBIT 2,146,553 (131,979) (89,715) (26,719) − 1,898,140
Depreciation of property, plant and equipment 2,041,106 43,473 48,759 4,299 − 2,137,637
Amortization of intangible assets 19,937 71,531 − 2,739 − 94,207
Loss/(gain) on disposal of non-current assets 93,760 (2,166) (32) 7,261 − 98,823
Adjusted EBITDA 4,301,356 (19,141) (40,988) (12,420) − 4,228,807
Restructuring and redundancy costs incurred during the year ended 2014
primarily relates to the reduction of staff in connection with the
optimization of the Company's corporate structure and business units
management structure and certain restructuring of several operating
subsidiaries of the Group.
In the second half of 2014 the Group has decided to liquidate three small
non-core subsidiaries to eliminate unfeasible maintenance costs. Two
subsidiaries Seysmos LLC and Khantymansiyskgeofizika-service LLC are
incorporated in Russian Federation and one, Ishimgeofizika, is domiciled in
Kazakhstan. The liquidation is expected to be finalized by the mid 2015. A
loss before tax was incurred by these subsidiaries which is included within
restructuring and redundancy costs of other subsidiaries for the year ended 31
December 2014.
8. Segment information (continued)
During the years ended 31 December 2014 and 2013, the Group earned its
external sale by its geographical areas as follows:
2014 2013
Russia 18,411,893 18,493,758
Kazakhstan 1,177,354 845,819
Total external sales 19,589,247 19,339,577
As of 31 December 2014 and 31 December 2013, the Group had its goodwill and
intangible assets, property, plant and equipment and investments in associates
by their geographical areas as follows:
31 December
2014 2013
Russia 18,646,043 19,379,614
Kazakhstan 1,092,091 913,438
Total goodwill and intangible assets, property, plant and equipment and investments in associates 19,738,134 20,293,052
In 2014, the Group earned transaction revenues from operations each exceeding
10 percent of the Group's consolidated revenues with three major customers in
the amounts of 3,213,713, 3,110,614 and 2,067,331, reported within revenues
from field seismic operations (2013: four customers in the amounts of
4,036,493, 2,167,553, 1,873,928 and 1,867,418).
9. Goodwill
For impairment testing purposes, goodwill acquired as a result of the business
combination was attributable to one separate cash-generating unit - Seismic
works.
As at 31 December 2014 and 2013, the carrying amount of goodwill was
3,760,082.
Recoverable amount of the cash generating unit has been determined by
calculating value-in-use using cash-flow projections up to 2020 and terminal
value of working capital and non-current assets as of the projection period
end. A pre-tax discount rate of 18.9% (2013: 16.3%) derived from the weighted
average cost of capital has been applied to the projected cash-flows. These
calculations are based on 5-year projections and all the assumptions in
relation to production volumes and pricing growth rates are determined by
reference to management's past experience and industry forecasts. The cash
flow forecasts beyond the five-year period were extrapolated using perpetuity
formula and zero terminal growth rate (2013: 2.0%).
In calculating the value-in-use of the assets, the following assumptions have
been regarded as most significant: marginal income, discount rates and the
growth rate used to extrapolate cash flows beyond the planned period.
Risks inherent in the oil service industry are directly related to economic
conditions in the oil sector shaped by global oil prices. The key factors of
risk include slumping oil prices, which cause oil companies to sharply cut
their exploration costs and minor investors to quit the industry.
In addition, these trends are exacerbated by deteriorating customer solvency
leading to growth in receivables and a slower turnover or shortage of working
capital and ultimately triggering growth in payables.
9. Goodwill (continued)
As at 31 December 2014, the Group determined that the recoverable amount of
seismic CGU exceeds the carrying amount of the unit and, therefore, no
impairment on this unit was recognized.
With regard to the assessment of value in use cash-generating units,
management believes that no reasonably possible change in any of the above key
assumptions would cause the carrying value of the unit to materially exceed
its recoverable amount.
Level of WACC when impairment occurs is 24.4%. Level of terminal growth rate
when impairment occurs is - 7.7%.
10. Material partly-owned subsidiaries
Financial information of subsidiaries that have material non-controlling
interests is provided below:
Proportion of equity interest held by non-controlling interests:
Name Country of incorporation and operation 2014 2013
OJSC Yeniseigeofizika Russian Federation 52.77% 58.24%
JSC Azimuth Energy Services Kazakhstan 4.79% 15.82%
Accumulated balances of material non-controlling interest
OJSC Yeniseigeofizika 239,467 341,937
JSC Azimuth Energy Services 122,569 340,059
(Loss)/profit allocated to material non-controlling interest
OJSC Yeniseigeofizika (70,334) 45,887
JSC Azimuth Energy Services (16,509) (288)
The summarised financial information of these subsidiaries is provided below.
This information is based on amounts before inter-company eliminations.
Summarised statement of profit or loss for 2014 OJSC Yeniseigeofizika JSC Azimuth Energy Services
Revenue 207,853 1,264,996
Cost of sales (323,630) (1,250,459)
Administrative expenses (31,771) (120,826)
Other operating expense, net (3,783) (35,345)
Finance income / (expense), net (6,738) 80,478
Net foreign exchange loss (1) (286,318)
Loss before tax (158,070) (347,474)
Income tax 24,786 2,816
Loss for the year (133,284) (344,658)
Total comprehensive loss (133,284) (344,658)
Attributable to non-controlling interests (70,334) (16,509)
10. Material party-owned subsidiaries (continued)
Summarised statement of profit or loss for 2013 OJSC Yeniseigeofizika JSC Azimuth Energy Services
Revenue 1,014,181 1,009,429
Cost of sales (905,827) (896,629)
Administrative expenses (38,478) (120,376)
Other operating expense, net (23,831) (20,891)
Finance(expense)/income, net (10,157) 84,496
Net foreign exchange loss (43) (60,711)
Profit/(loss) before tax 35,845 (4,682)
Income tax 42,944 2,863
Profit/(loss) for the year 78,789 (1,819)
Total comprehensive income 78,789 (1,819)
Attributable to non-controlling interests 45,887 (288)
Summarised statement of financial position as at 31 December 2014 OJSC Yeniseigeofizika JSC Azimuth Energy Services
Property, plant and equipment, intangible assets and other non-current assets 447,963 2,041,783
Inventories, receivables, cash and cash equivalents and other current assets 263,659 967,432
Loans and borrowings, promissory notes and finance lease liabilities (87,285) −
Deferred tax liabilities, net (12,457) (72,986)
Accounts payable and other current liabilities (158,086) (377,368)
Total equity 453,794 2,558,861
Attributable to shareholders of the IG Seismic Services plc 214,327 2,436,292
Non-controlling interest 239,467 122,569
Summarised statement of financial position as at 31 December 2013 OJSC Yeniseigeofizika JSC Azimuth Energy Services
Property, plant and equipment, intangible assets and other non-current assets 488,030 1,672,353
Inventories, receivables, cash and cash equivalents and other current assets 661,333 706,604
Loans and borrowings, promissory notes and finance lease liabilities (192,483) −
Deferred tax liabilities, net (38,230) (62,868)
Accounts payable and other current liabilities (331,533) (166,538)
Total equity 587,117 2,149,551
Attributable to shareholders of the IG Seismic Services plc 245,180 1,809,492
Non-controlling interest 341,937 340,059
10. Material party-owned subsidiaries (continued)
Summarised cash flow information for year ending 31 December 2014 OJSC Yeniseigeofizika JSC Azimuth Energy Services
Operating (60,985) 138,905
Investing 96,303 (181,481)
Financing (108,580) −
Net decrease in cash and cash equivalents (73,262) (42,576)
Summarised cash flow information for year ending 31 December 2013 OJSC Yeniseigeofizika JSC Azimuth Energy Services
Operating 54,686 29,296
Investing (2,977) (271,951)
Financing − 214,848
Net increase/(decrease) in cash and cash equivalents 51,709 (27,807)
11. Intangible assets other than goodwill
As of 31 December
2014 2013
Development costs 90,276 85,547
Software 558,039 357,305
Patents and licenses 27,732 27,932
Other 7,703 5,862
Total cost 683,750 476,646
Less: accumulated amortization (253,967) (166,497)
Total net book value 429,783 310,149
During the year ended 31 December 2014 the Group has acquired new software
from Geoquest System which cost USD 5.8 million (197,851) and is used for data
processing and interpretation contracts.
12. Property, plant and equipment
Property, plant and equipment as at 31 December 2014 comprised the following:
Buildings and structures Machinery and equipment Vehicles Other Construction in progress Total
Gross book value
Balance as at 31 December 2013 4,076,382 13,901,371 3,509,750 269,992 7,162 21,764,657
Additions 177,928 1,647,241 412,167 88,750 4,597 2,330,683
Transfers 3,210 6,632 − − (9,842) −
Disposals (53,783) (878,045) (228,432) (25,117) (106) (1,185,483)
Translation difference 123,704 358,079 101,907 13,875 − 597,565
Balance as at 31 December 2014 4,327,441 15,035,278 3,795,392 347,500 1,811 23,507,422
Accumulated depreciation
and impairment
Balance as at 31 December 2013 (920,846) (4,097,018) (1,399,114) (134,847) − (6,551,825)
Depreciation charge (299,163) (1,807,453) (378,803) (42,516) − (2,527,935)
Disposals 14,797 354,017 109,835 16,415 − 495,064
Translation difference (38,408) (190,341) (42,382) (4,398) − (275,529)
Balance as at 31 December 2014 (1,243,620) (5,740,795) (1,710,464) (165,346) − (8,860,225)
Net book value
Balance as at 31 December 2013 3,155,536 9,804,353 2,110,636 135,145 7,162 15,212,832
Balance as at 31 December 2014 3,083,821 9,294,483 2,084,928 182,154 1,811 14,647,197
Property, plant and equipment as at 31 December 2013 comprised the following:
Buildings Machinery and equipment Vehicles Other Construction in progress Total
and structures
Gross book value
Balance as at 31 December 2012 3,849,502 11,756,148 3,014,888 273,824 137,453 19,031,815
Additions 229,337 2,398,313 548,773 25,255 5,414 3,207,092
Transfers 16,561 109,812 3,344 6,147 (135,864) −
Disposals (57,358) (303,671) 15,828 3,949 − (341,252)
Translation difference 38,340 (59,231) (73,083) (39,183) 159 (132,998)
Balance as at 31 December 2013 4,076,382 13,901,371 3,509,750 269,992 7,162 21,764,657
Accumulated depreciation
and impairment
Balance as at 31 December 2012 (664,587) (2,818,483) (1,113,314) (109,680) − (4,706,064)
Depreciation charge (265,867) (1,443,160) (367,494) (37,485) − (2,114,006)
Disposals 11,847 161,724 11,465 892 − 185,928
Translation difference (2,239) 2,901 70,229 11,426 − 82,317
Balance as at 31 December 2013 (920,846) (4,097,018) (1,399,114) (134,847) − (6,551,825)
Net book value
Balance as at 31 December 2012 3,184,915 8,937,665 1,901,574 164,144 137,453 14,325,751
Balance as at 31 December 2013 3,155,536 9,804,353 2,110,636 135,145 7,162 15,212,832
12. Property, plant and equipment (continued)
The above amounts include several vehicles under finance lease agreements. Net
book value of these vehicles comprised 13,913 as of 31 December 2014 (31
December 2013: 11,778):
As of 31 December
2014 2013
Vehicles 15,907 14,158
Total cost 15,907 14,158
Less: accumulated depreciation (1,994) (2,380)
Total net book value of leased property 13,913 11,778
Collateral
Properties with a carrying amount of 1,865,065 are subject to a registered
debenture to secure bank loans (31 December 2013: 556,986) (Note 33).
13. Investments in associates
The Group's equity associates were as follows:
As at 31 December
2014 2013
OJSC Sibneftegeofizika 39.5% 39.5%
OJSC Stavropolneftegeofizika 25.4% 25.4%
The principal activity of the associates is seismic data acquisition to the
petroleum industry in the Russian Federation. Details on transactions and
balances with associates which are only related parties to the Group are
disclosed in Note 34.
Movements in the carrying value of the Group's investments in associate are
summarized in the table below:
2014 2013
Carrying amount at the beginning of the year 1,009,989 882,965
Share in (loss)/profit, net of income tax (108,917) 127,024
Carrying amount at the end of the year 901,072 1,009,989
Summarised statement of financial position of OJSC Sibneftegeofizika:
As at 31 December
2014 2013
Non-current assets 1,607,137 1,731,833
Current assets 2,469,878 2,127,889
Total assets 4,077,015 3,859,722
Non-current liabilities (716,198) (694,186)
Current liabilities (2,283,992) (1,823,704)
Total liabilities (3,000,190) (2,517,890)
13. Investments in associates (continued)
Summarised statement of comprehensive income of OJSC Sibneftegeofizika:
For the year ended 31 December
2014 2013
Revenues 2,437,617 2,685,295
(Loss)/profit for the period (264,981) 389,979
Summarised cash flow information of OJSC Sibneftegeofizika:
For the year ended 31 December
2014 2013
Operating (979) 355,869
Investing (184,436) (95,512)
Financing 325,338 (356,506)
Net increase/(decrease) in cash and cash equivalents 139,923 (96,149)
Summarised statement of financial position of OJSC Stavropolneftegeofisika:
As at 31 December
2014 2013
Non-current assets 189,586 219,482
Current assets 324,874 156,740
Total assets 514,460 376,222
Non-current liabilities (78,526) (29,522)
Current liabilities (336,851) (230,839)
Total liabilities (415,377) (260,361)
Summarised statement of comprehensive income of OJSC Stavropolneftegeofisika:
For the year ended 31 December
2014 2013
Total revenues 455,292 319,181
Loss for the period (16,733) (122,233)
14. Income tax
Income tax expense for the years ended 31 December comprised the following:
2014 2013
Current income tax expense (3,833) (1,802)
Provisions in respect of current income tax for previous periods (98,374) 37,352
Deferred income tax benefit/(expense) 18,274 (560,174)
Total income tax expense (83,933) (524,624)
14. Income tax (continued)
Reconciliation of effective tax rate is presented below:
2014 2013
(Loss)/profit before tax (2,326,039) 123,953
Income tax at the Company's tax rate 465,208 (24,791)
(20% from Russian operations)
Deferred tax assets on tax loss not recognized (276,729) (36,280)
Adjustments in respect to current income tax of previous years (98,374) 37,352
Deferred tax expense related to Group restructuring − (434,391)
Deferred tax effect on share of (loss) / profit of an associate not recognized (Note 13) (21,783) 25,405
Deferred tax effect on provision for taxes other than income tax not recognized (Note 23) (31,490) (7,978)
Recognised deferred tax asset on tax loss for the prior periods 16,296 −
Other non-deductible income and expenses (137,061) (83,941)
Income tax expense (83,933) (524,624)
In the context of the Group's current structure, tax losses and current tax
assets of the different subsidiaries may not be set off against current tax
liabilities and taxable profits of other subsidiaries and, accordingly, taxes
may accrue even where there is a net consolidated tax loss. Therefore,
deferred tax asset of one subsidiary of the Group is not offset against
deferred tax liability of another subsidiary.
In Cyprus losses in respect of the years up to 2009, which were not set off
against profits up to the years 2014, may not be carried forward to the year
2015 according to Cyprus tax legislation. As far as the Russian subsidiaries
are concerned, tax loss carry forwards available for utilization expire in
2015-2024.
Certain deductible temporary differences, unused tax losses or credits for
which no deferred tax asset is recognised as of 31 December 2014 amounts to
1,519,445 and expires in 2023-2024 (31 December 2013: 385,940).
At 31 December 2014, there was no recognised deferred tax liability (2013:
Nil) for taxes that would be payable on the unremitted earnings of the Group's
subsidiaries. The Group has determined that undistributed profits of its
subsidiaries will not be distributed in the foreseeable future to the full
extent. As of 31 December 2014 temporary differences associated with
investments in associates, for which no deferred tax asset is recognised
amount to 215,364 (31 December 2013: 106,447).
14. Income tax (continued)
Deferred tax relates to the following:
Consolidated statement of financial position
As at 31 December
2014 2013
Deferred tax assets and liabilities
Trade and other receivables 32,938 43,365
Inventories 31,887 33,351
Trade and other payables 77,096 6,055
Provisions − 13,255
Tax loss 1,322,135 1,146,111
Other items 1,962 8,771
Property, plant and equipment (1,277,817) (1,419,007)
Trade and other receivables (1,399,789) (1,053,095)
Other items (33,745) (25,365)
Net deferred tax liabilities (1,245,333) (1,246,559)
Reflected in the statement of financial position as follows
Deferred tax assets 309,511 235,649
Deferred tax liabilities (1,554,844) (1,482,208)
Consolidated income statement
2014 2013
Deferred tax assets
Property, plant and equipment (154) −
Trade and other receivables (10,429) (51,562)
Inventories (1,728) (754,192)
Investments (782) −
Loans and borrowings 215
Trade and other payables 6,509 (28,950)
Provisions (13,243) (6,051)
Tax loss 240,549 601,449
Other items (6,209) (207,967)
Deferred tax liabilities
Property, plant and equipment 157,868 171,820
Trade and other receivables (346,331) (264,912)
Inventories (6,184) −
Loans and borrowings (1,326) −
Trade and other payables 3,623 −
Provisions (316) −
Other items (3,788) (19,809)
Deferred income tax benefit/(expense) 18,274 (560,174)
The table below presents movement in the deferred tax positions:
2014 2013
Net deferred tax liability as at the beginning of the period (1,246,559) (686,393)
Deferred income tax benefit for the period 18,274 (517,628)
Translation difference (recognized in Other comprehensive income) (17,048) (42,538)
Net deferred tax liability as at end of the period (1,245,333) (1,246,559)
15. Other non-current assets
Other non-current assets at 31 December comprised the following:
As at 31 December
2014 2013
Long-term borrowings issued (Note 7) 274,443 −
Advances issued for CAPEX 47,106 43,432
Other 4,312 4,412
Total cost 325,861 47,844
16. Inventories
Inventories at 31 December comprised the following:
2014 2013
Raw materials, fuel and spare parts (net of provision for obsolete and slow-moving items) 2,209,506 2,089,901
Work-in-progress 241,108 53,208
Finished goods and goods for resale 99,847 86,961
Total 2,550,461 2,230,070
The amount of inventories recognized in cost of sales in 2014 and 2013 was
3,190,589 and 3,154,766 respectively. The amount of provision for inventory
obsolescence was 35,982 as at 31 December 2014 (31 December 2013: 44,657).
17. Accounts receivable and prepayments
Trade and other receivables as at 31 December comprised the following:
2014 2013
Financial receivables
Trade receivables (net of bad debt provision) 2,599,043 1,463,477
Other receivables 358,509 145,707
Non-financial receivables
Amounts due from customers for construction works 6,726,845 5,313,303
Advances issued 516,852 641,778
Total 10,201,249 7,564,265
Trade receivables are non-interest bearing and are normally settled within 12
months from the origination date. Receivables and advances issued are
presented net of provision for impairment of 140,101 and 248,783 as at 31
December 2014 and 31 December 2013, respectively.
See below the movements in the provision for impairment of receivables:
At 31 December 2012 154,324
Charge for the period 170,546
Written off for the period (71,244)
Translation difference (4,843)
At 31 December 2013 248,783
Charge for the period 60,955
Written off for the period (169,034)
Translation difference (603)
At 31 December 2014 140,101
18. Other financial assets
Other financial assets comprised the following:
2014 2013
Loans issued 239,848 168,967
Interest receivable on loans issued 81,325 59,022
Total 321,173 227,989
Loans issued to third parties are unsecured and mature within one year and
bear interest rate between 12% and 14%.
19. Cash and cash equivalents
Cash and cash equivalents as at 31 December comprised the following:
2014 2013
Cash in hand 1,934 2,328
Cash in bank denominated in RUR 420,418 423,164
Cash in bank denominated in USD 199 11,590
Cash in bank denominated in EUR 1,798 1,740
Cash in bank denominated in other currencies 11,494 33,223
Short-term deposits 770,848 239,351
Total 1,206,691 711,396
Cash represents current bank accounts that carry no interest and demand
deposits maturing in less than 3 months at 18.5%-25% in RUR and at 3.5% in USD
in the amounts of 506,000 and 264,848, respectively (2013: 5%, only
RUR-denominated deposits).
20. Share capital
The following table summarises the change in share capital for the years ended
31 December 2014 and 2013 as follows:
Numberof shares Share Share
capital premium
Balance at 31 December 2013 20,833,400 6,513 13,837,978
Balance at 31 December 2014 20,833,400 6,513 13,837,978
GDRs
On 11 December 2012 the Company's GDRs were admitted to the Official List
maintained by the UK Listing Authority and started trading on the London Stock
Exchange's main market at 8.00 a.m. London Time on 12 December 2012.
The authorised share capital of the Company consists of 20,833,400 shares with
a nominal value of US$0.01 per share. All authorised shares are issued and
fully paid.
Global Depositary Receipts (GDRs) of the Company representing two ordinary
shares each are listed and traded on the Main Market of the London Stock
Exchange under the ticker IGSS (Bloomberg: IGSS LI, Reuters: IGSSq.L).
There were no changes in share capital through year ended 2014. Share premium
reserve is not available for distribution by way of dividends.
20. Share capital (continued)
Reverse acquisition reserve
As of 31 December 2010, 2009 and 1 January 2009 reverse acquisition reserve
comprises the difference between the issued share capital of IGSS and issued
share capital of GEOTECH Holding JSC. As of 31 December 2011 reverse
acquisition reserve represents the aggregate of fair value of consideration
transferred in a business combination and issued share capital of GEOTECH
Holding JSC immediately before the business combination less issued share
capital of IGSS as of 31 December 2011.
Other non-distributable reserves
In March 2008 the parent Company of GEOTECH Holding JSC, Geotech Oil Services
Holding contributed cash to its wholly owned subsidiary in the amount of
2,233,488 (USD 95 million) which was recorded in Equity as other
non-distributable reserves as of 1 January 2009.
21. Loans and borrowings
Long-term and short-term borrowings as at 31 December comprised the
following:
Security Effective, % 2014 2013
Current liabilities
Short-term bank loans Secured 9.5%-14.4% 4,386,155 1,539,501
Current portion of long-term bank loans Secured 2.5%-15.05% 3,096,819 537,610
Total short-term loans and borrowings 7,482,974 2,077,111
Non-current liabilities
Long-term bank loans Secured 2.5%-16.85% 4,958,489 7,366,469
Bonds 10.50% 2,971,379 2,963,841
Long-term borrowings 10.0-11.0% 9,775 −
Total long-term loans and borrowings 7,939,643 10,330,310
Total loans and borrowings 15,422,617 12,407,421
At the beginning of 2013 the Group entered into non-revolving credit line
agreement with Sberbank denominated in euro at interest rate calculated as
EURIBOR plus 2.15%. Amount of raised financing amounts to 14,900,000 euro
(599,522) and matures in December 2017. The liability over this credit line in
the amount of 407,087 and 203,544 is reported within Long-term bank loans and
Current portion of long-term bank loans, respectively as of 31 December2014.
All other loans and borrowings presented in the table above are at fixed rates
and are denominated in Russian rubles.
Long-term loans and borrowings are payable in the following periods:
As at 31 December
2014 2013
1 to 2 years 1,897,392 2,576,737
3 to 5 years 6,042,251 7,753,573
Total 7,939,643 10,330,310
Pledge obligations and description of security are disclosed in Note 33.
22. Accounts payable and promissory notes payable
Trade and other payables as at 31 December comprised the following:
2014 2013
Trade payables 4,281,596 3,145,162
Payables to employees 991,684 843,843
Advances received 293,516 395,653
Interest payable 195,857 114,041
Amounts due to customers under construction contracts 151,768 114,161
Other payables 98,344 73,899
Total 6,012,765 4,686,759
Trade payables are non-interest bearing and are normally settled on 60-day
terms. Other payables are non-interest bearing and have an average term of six
months.
Notes issued comprised the following:
Interest rate As at 31 December
2014 2013
Long-term promissory notes payable:
Notes issued to third parties for equipment (Sercel) 7% − 163,665
Notes issued to third parties for equipment (UniQ) 4% − 435,853
Short-term promissory notes payable:
Notes issued to third parties for equipment (Sercel) 7% 287,656 169,080
Notes issued to third parties for equipment (UniQ) 4% 674,208 290,700
Total 961,864 1,059,298
Effective interest rate for promissory notes issued by the Group in 2013 was
7% while contractual interest rate comprised 4%.
Effective interest rate accrual in the amount of 40,063 was recognized within
finance expense for the year ended 31 December 2014 (2013: 12,994).
In August 2014 the Group entered into supply agreement with Sercel for
acquisition of new seismic equipment in the amount of 11,465,720 euro
(596,089). The purchase was made on deferred payments terms through ten equal
installments by September 2019 at EURIBOR 6m + 2.8% p.a.
As of 31 December 2014 current portion of this liability in the amount of
156,720 is recorded within trade payables and amounts of 626,878 due beyond
2015 are presented within Other long-term liabilities.
23. Other taxes payable and provisions
As at 31 December other taxes and charges payable comprised the following:
2014 2013
Value-added tax payable 1,470,947 1,029,670
Social taxes payable 403,613 168,353
Personal income tax payable 135,231 187,659
Property tax payable 23,186 29,934
Other taxes and charges 38,462 28,429
Total 2,071,439 1,444,045
As of 31 December 2014 provisions amounted to 157,448 (31 December 2013:
39,891) and related to probable tax exposures in respect to value-added tax
payable which were revealed based on on-site tax audits for several previous
years.
24. Construction type contracts
The Group sales include revenues from seismic contracts of 18,987,943 and
18,249,424 for 2014 and 2013, respectively.
The status of construction type contracts in progress as at 31 December 2014
and 2013 is presented below:
As at 31 December
2014 2013
Accumulated costs under contracts in progress from inception 13,114,865 9,454,023
at the reporting date
Accumulated recognized profits less recognized loss under 4,382,804 2,503,394
contracts in progress from inception at the reporting date
Balance of advances received 538,324 385,115
The recognition of the revenue from construction type contracts uncompleted as
of 31 December 2014 and 31 December 2013 is primarily based on an assumption
of profit margins expected to be earned from inception to completion of each
contract.
If such expected profit margin reduced by one percent, the revenue from such
contracts would reduce by 194,427 (31 December 2013: 156,907).
25. Revenue
Revenue for the years ended 31 December comprised the following:
2014 2013
Field seismic operations 18,987,943 18,249,424
Data processing and interpretation 442,986 741,784
Other revenue 158,318 348,369
Total 19,589,247 19,339,577
26. Cost of sales
Cost of sales for the years ended 31 December comprised the following:
2014 2013
Labor and wages, including mandatory social contribution 6,203,070 5,786,843
Materials and supplies 3,190,589 3,154,766
Depreciation of property, plant and equipment and amortization of intangible assets 2,498,584 2,151,172
Oilfield services 1,621,323 2,023,717
Transportation services 845,613 925,088
Other third parties services 708,952 601,895
Operating lease payments 487,363 419,215
Loss from the contract in Yemen − 8,695
Other 173,842 122,575
Total 15,729,336 15,193,966
27. General and administrative expenses
General and administrative expenses for the years ended 31 December comprised
the following:
2014 2013
Labor and wages, including mandatory social contribution 1,409,485 1,197,930
Third party services 278,342 298,192
Taxes, other than income tax 115,755 150,896
Operating lease 95,361 91,149
Depreciation of property, plant and equipment and amortization of intangible assets 87,642 80,672
Bank charges 25,733 47,167
Bad receivables write-offs and provisions 31,231 162,998
Auditors' audit fees 33,120 33,313
Auditors' other fees − 12,421
Other 103,629 105,202
Total 2,180,298 2,179,940
Transaction costs in relation to LSE listing and related continuing
obligations compliance of 56,214 have been included within third party
services for year ended 31 December 2013.
28. Other operating income and expenses
Other operating income for the years ended 31 December comprised the
following:
2014 2013
Write-off of accounts payable 74,927 77,692
Restoration of provision for probable claims from tax authorities 7,092 57,023
Penalties and fines received 6,364 1,486
Other income 53,385 100,290
Total 141,768 236,491
28. Other operating income and expenses (continued)
Other operating expenses for the years ended 31 December comprised the
following:
2014 2013
Loss on disposals of property, plant and equipment and other assets 232,110 156,862
Penalties and fines paid 202,496 123,123
Provision for probable claims from tax authorities 107,108 7,092
VAT not recoverable 73,009 33,044
Net loss from service plants and facilities 32,811 24,646
Welfare assistance 17,301 23,507
Free-of-charge transfer of assets and charity 11,073 22,933
Administrative charges and state duties 6,143 24,665
Other expenses 74,117 102,744
Total 756,168 518,616
Penalties and fines relate to additional charges for breach in contractual
obligations with counterparties in a normal course of business and additional
non-income tax charges.
29. Finance income and expenses
Finance income and expenses for the years ended 31 December comprised the
following:
2014 2013
Interest received 31,017 18,429
Discounting of promissory notes to fair value (Note 22) 45,679 −
Total finance income 76,696 18,429
Interest expense on loans and borrowings 1,707,963 1,390,784
Bank charges on loans and loan accounts 65,859 31,674
Interest expense on finance lease 1,064 14,407
Other finance expenses 69,740 19,704
Total finance expenses 1,844,626 1,456,569
Net finance income and expenses 1,767,930 1,438,140
30. Foreign exchange
Transactions in foreign currencies are translated to the respective functional
currency, which is Russian Ruble for the subsidiary companies located in the
Russian Federation and Kazakh Tenge for subsidiary companies located in the
Kazakhstan at exchange rates ruling at the dates of the transactions. Monetary
assets and liabilities denominated in foreign currencies at the reporting date
are translated to the functional currency at the exchange rate at that date.
Foreign currency differences arising in translation are recognized in the
statement of comprehensive income. Net foreign exchange loss for year ended 31
December 2014 recognized in profit or loss comprised 1,514,405 (year ended 31
December 2013: 248,477).
31. Earnings per share
The information on the earnings and number of shares used for determining
basic and dilutive earnings per share is presented below:
2014 2013
Net loss attributable to ordinary equity holders of the parent (2,272,450) (530,173)
Effect of dilution − −
Net loss attributable to ordinary equity holders of the parent adjusted to the effect of dilution (2,272,450) (530,173)
2014 2013
Weighted average number of ordinary shares for basic earnings per share 20,833,400 20,833,400
Effect of dilution − −
Weighted average number of ordinary shares adjusted to the effect of dilution 20,833,400 20,833,400
2014 2013
Loss per share (in rubles) (109.08) (25.45)
No other transactions with ordinary shares or potential ordinary shares were
performed between the reporting date and the date of these financial
statements.
32. Financial instruments
The Group's financial instruments comprise accounts receivable and payable,
loans receivable, loans payable, and cash, which arise directly from its
operations. During the reporting year, the Group did not undertake trading in
financial instruments.
Credit risk
Financial assets, which potentially subject Group entities to credit risk,
consist principally of trade receivables (Note 17).
The Group has policies in place to ensure that sales of services are made to
customers with an appropriate credit history. The carrying amount of accounts
receivable, net of provision for impairment of receivables, represents the
maximum amount exposed to credit risk. The Group has no significant
concentrations of credit risk. Although collection of receivables could be
influenced by economic factors, management believes that there is no
significant risk of loss to the Group beyond the allowance already recorded.
The aging of accounts receivable at the reporting date was:
31 December 2014 31 December 2013
Gross Impairment Gross Impairment
Current 2,957,552 − 1,609,184 −
Past due 72,492 72,492 160,181 160,181
Interest rate risk
At the beginning of 2013 the Group entered into non-revocable credit line
agreement with Sberbank denominated in euro at interest rate calculated as
EURIBOR plus 2.15%. The following demonstrates the sensitivity of the Group's
profit before tax to a reasonably possible change in EURIBOR rate, with all
other variables held constant.
32. Financial instruments (continued)
Interest rate risk (continued)
Change of EURIBOR rate, % Effect on income/(loss) before tax
2014 2013
'+0.1% (611) (478)
'-0.1% 611 478
In August 2014 the Group entered into supply agreement with Sercel for
acquisition of new seismic equipment in the amount of 11,465,720 euro (783,598
as of 31 December 2014). The purchase was made on deferred payments terms
through ten equal installments by September 2019 at EURIBOR 6m + 2.8% p.a. The
following demonstrates the sensitivity of the Group's profit before tax to a
reasonably possible change in EURIBOR rate, with all other variables held
constant.
Change of EURIBOR rate, % Effect on income/(loss) before tax
2014 2013
'+0.1% (784) −
'-0.1% 784 −
The interest rates on other financial instruments of the Group are fixed and
therefore do not result in susceptibility of upward interest rate risk through
market value fluctuations of interest-bearing loans payable. As at 31 December
2014 the Group did not hedge its interest rate risk.
Market risk
Market risk is the risk that the value of a financial instrument will
fluctuate as a result of changes in market prices. The Group manages market
risk through periodic estimation of
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