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The disclosure of confidential information dated 16 March 2016
Report number: RB 07/2016 Report created: 2016-03-18
Acting pursuant to Art. 56 sec. 1 point 1) of the Act on Public Offering, conditions Governing the Introduction of Financial Instruments to Organised Trading, and Public Companies of 29 July 2005.
(Journal of Laws of 2013, pos. 1382) ("the Act") , Alma Market SA (the "Company") announces that today the Management Board resolved to make major write-downs and the creation of reserves in the weight of the results of 2015.
The Management Board of Alma Market S.A.:
1. after preparing the final financial projections, based on which an analysis was prepared to determine whether there is an evidence of impairment of assets, and the verification of existing lease agreements in order to assess whether or not some of them constitute an onerous contract,
2. after receiving and reviewing the valuations of the subsidiaries,
adopted a resolution on the creation of write-downs and reserves that affect the individual and consolidated results for the year of 2015 and the equity of the Company.
Ad.1 Management Board in the fiscal year 2015 has observed negative market trends in the retail industry, resulting in a decrease in the level of sales revenue and net profit. It had a significant impact deflationary factors, but also misguided locations part of the Company's stores, which permanently undercut its profitability.
In 2015 the Management Board has taken decision to close 3 stores, which generated losses. In February 2016 another shopping center was closed. It should be noted that the closure of the store before the end of the period for which it has been invested in assets, is the loss associated with the loss of unamortized portion of the assets, and any other losses related to the implementation of the closure prior to the period for which lease contracts were signed.
These are the circumstances which set, in accordance with IAS 36 "Impairment of Assets", rationale for the potential impairment of fixed assets. According to above mentioned standard it was necessary to perform an impairment test in order to determine whether there was an actual loss of assets of the Company. In addition, in accordance with IAS 37 "Provisions, Contingent Liabilities and Contingent Assets", the Management Board analyzed existing contracts in order to assess whether or not some of them constitute an onerous contract. An onerous contract is understood as a contract in which the inevitable costs of meeting the obligation outweigh the benefits, which - according to forecasts - could be received under that agreement. The inevitable costs under a contract reflect at least net costs of exiting the contract, which are corresponding to the lower cost amongst the costs of fulfilling the contract and any compensation or penalty costs arising from failure to fulfill it.
In accordance with IAS 36, the Management Board has decided to conduct a test for impairment as at the date of 31 December 2015. As a result of the test impairment of fixed assets in the total amount of 36.599 thousand PLN was identified.
Ad.2 The Management Board had received a prepared valuation of subsidiaries, which was commissioned in order to cover their value. The resulting valuation of subsidiaries reduce the position of other comprehensive income by the total amount of 37.405 thousand PLN.
The Management Board in accordance with accepted accounting principles shall valuation among other things its financial assets (including "investments in subsidiaries"). Whereas made estimates and valuation and the accounting for certain groups of financial assets subject to valuation did not have a material adverse effect on the change of their value, the valuation of the subsidiary Paradise Group
Sp. o.o. showed a significant reduction in previously grasped value of the company. It has to do mainly with a significant reduction of its activities in 2015 and the planned further reduction of activity in 2016 by its Management Board. As a result it has been recognized a decline in the value of the company Paradise Group Sp z o.o. in the amount of 78.695 thousand PLN, which will affect the Company's result under other comprehensive income. The resulting valuation of Paradise Group
Sp. o.o. also influenced the decision of the Management Board of the necessity of preparing a
write-down for impairment of the entire goodwill Paradise Group Sp z o.o. presented so far in the amount of 50.650 thousand PLN in the consolidated financial statement.
In connection with the changes in presentation and approach to the recognition at fair value of financial assets the greatest impact on the change in the value of the shares had a valuation of the subsidiary Krakowski Kredens Tradycja Galicyjska SA, whose value increased by 25.999 thousand PLN.
Write-downs and provisions which was made as well as a reserves created after deferred tax will have the following negative impact on the financial results of 2015:
• reduce net unit by the amount of 49.328 thousand PLN,
• decrease in other comprehensive income unit by the amount of 30.298 thousand PLN.
Which will reduce the unit's equity of the Company by an amount of 79.626 thousand PLN
Write-downs and provisions created after deferred tax will have the following negative impact on the consolidated financial results in 2015:
• reduce the consolidated net profit by 99.978 thousand PLN
Which will reduce the consolidated equity by 99.978 thousand PLN.
