Annual Report 2011 - Big Bangmedia.bigbang.si/slovenija/letna_porocila/bigbang... · management of Big Bang. Exceptional success of the trademark BEKO Thanks to Big Bang, Beko’s

Annual ReportBig Bang, d.o.o., Ljubljana2011

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[Index]

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REPORT OF THE MANAGING DIRECTORCOMPANY MANAGEMENT PROFILEKEY PERFORMANCE INDICATORSREVIEW OF MAJOR EVENTS

STRATEGIC FOCUS IN YEAR 2012Mission Vision Key development goalsSALES PROGRAMME AND SERVICESProduct groupsStoresSales marketsECONOMIC CONDITIONS IN 2011BUSINESS ANALYSIS IN 2011SalesOperating expensesFinancial income and expensesProfit or lossAssetsEquity and liabilitiesPLANS FOR THE FUTUREEMPLOYEESTrend of the Number of EmployeesThe structure of employees at31 December 2011Human Resources StrategyEducation of EmployeesHealth Care and Well-Beingof Our EmployeesRemuneration of EmployeesBig Bang and Young PeopleResearch and Looking into the Future

262628282931

3434353536373738

3838395156

67

7274

7576

78

RISK MANAGEMENTFinancial Risk ManagementInsolvency Risk Purchasing RisksOther RisksSTATEMENT IN ACCORDANCE WITH ARTICLE 545 OF THE COMPANIES ACT (ZGD-1)

AUDITED FINANCIAL STATEMENTSBalance sheetIncome StatementStatement of comprehensive incomeCash flow statementStatement of changes in equityProposal for the appropriation of profitNOTES TO THE AUDITED FINANCIAL STATEMENTS1. The Reporting Company 2. Basis for Compilation3. Significant Accounting Policies4. Financial Risk Management5. Notes and Disclosures to the Balance Sheet6. Notes and Disclosures to the Income Statement7. Other Notes8. Significant Business Events after the Balance Sheet DateSTATEMENT BY THE MANAGEMENTINDEPENDENT AUDITOR’S REPORT

PRESENTATION OF THE COMPANY WITH ITS SUBSIDIARY

Introduction

Business Report

Financial Report

Financial ReportGo to

IntroductionGo to

Business ReportGo to

4 5

Introduction

6 7

[Introduction] [Introduction]

REPORT OF THE MANAGING DIRECTOR

The negative economic situation continued in 2011; in fact, it grew harsher and presented difficult challenges to the majority of Slovenian companies. Big Bang was no exception and although it operates locally, it

is also exposed to global factors. There were two natural disasters – the earthquake in Japan and the floods in Thailand – that hampered the uninterrupted supply of products, whereas the acquisition prices of products were marked by conditions in the financial markets and the decline of the euro. The diminishing economic situation in Slovenia has also undoubtedly caused changes in consumer habits and a substantial decrease of all markets in which Big Bang operates. In the first half of the year, we were also faced with problems securing insurance and collecting open claims due to the difficult situation in Merkur, as the banks and insurance companies closely followed the development of the financial structural adjustment up until the adopted compulsory settlement.

How are we to implement our vision and mission in such a demanding environment and with so many changes taking place? Big Bang has remained the only specialist retailer for consumer electronics in the Slovenian market and has a responsibility and a promise to its loyal customers to continue to bring innovations and satisfaction when using various products and

services. We offer our customers products and services at competitive prices, with high quality advice and a good shopping experience.

In addition to ensuring client satisfaction, another important part is our internal environment and process management, where we are constantly striving for improvements. In 2011, we founded the Sales Academy with which we ensure the regular and frequent training of our sales personnel. We have continued with the implementation of category management, with which we plan to improve our profitability. The entire Company is working together and thinking of ways to achieve our goals and by directing ourselves towards the goal we are closing the gaps between the current state and the desired goal.

The year 2011 placed new challenges in front of us. We achieved a lot and can feel good about it. Especially significant is the growth of quantity in most categories. Unfortunately, we have not achieved the desired results in sales value: this is the mission we plan to achieve this year. We believe we can do it, as Big Bang has a great deal of knowledge, experience and ideas, with which we can fulfil our promise to our customers to always offer something new. In the past, Big Bang faced many stressful situations and crises, both internal and external, but because of us, the employees, who have found the energy, determination and persistence, Big Bang always came out as a winner.

Certainly, we are aware of the fact that another difficult year is ahead for Big Bang, but we have many projects planned, which will ensure our on-going existence and future Company growth.

Big Bang is always ready for something new.

Aleš Ponikvar

COMPANY MANAGEMENT PROFILEManagement of Big Bang, d. o. o.

Big Bang, d. o. o. Beograd

Breda Terglav,Managing Director & CEO,Head of Division (until 31.10.2011)

Sonja Mesar,Logistics Manager

Katja Katarina Zakrajšek,HR Manager

Zoran Memon,Retail Manager

Andrej Vidmar,Organisation and IT Manager

Jure Vidmar,Wholesale Manager

Matija Savnik,Purchasing Manager

Mateja Štimec,Financial Manager(until 31.10.2011)

Matija Torlak,Product Manager(from 15.11.2011 onwards)

Grgor Drozg,Director(until 31.5.2011)

Aleksandra Memon,Director(from 1.8.2011 onwards)

Rudolf Hornek,Product Manager(until 31.10.2011)

Patrick Vesel,Marketing Manager

Samo Turk,CFO(from 1.11.2011 onwards)

8 9

[Introduction] [Introduction]

0

20.000

40.000

60.000

80.000

100.000

120.000

140.000

160.000

20082009

20102011

Načrt2012

v ti

soč

EUR

Prihodki iz prodaje in prihodki iz prodaje na zaposlenega

2008 2009 2010 2011 Načrt 2012

KEY PERFORMANCE INDICATORSPostavka 2008 2009 2010 2011 Budget 2012

Net sales 146,663 130,686 121,825 114,892 128,512

Gross earnings 28,350 24,653 27,657 25,352 27,733

EBIT 2,020 2,064 4,432 2,254 2,602

EBITDA 3,773 4,056 6,420 4,288 4,799

Net earnings 1,787 1,695 -6,009 1,062 1,252

Balance sheet total at 31 December 48,116 46,033 42,031 40,609 42,108

Equity at 31 December 15,831 17,525 7,517 8,579 9,785

ROE (in %) 13.9 13.9 11.35 8.48 15.55

Net return on sales (in %) 1.2 1.2 1.3 0.92 0.97

Investments in fixed and intangible assets 4,684 821 1,783 1,066 1,083

Employees at 31 December 564 565 434 449 447

In spite of initially fairly optimistic expectations and forecasts of economic recovery, the year 2011 was marked by extremely difficult economic circumstances. Low economic activity, numerous bankruptcies of companies, uncertain circumstances in the labour market, unstable political conditions, etc. affected the shopping behaviour of consumers, who (according to business trend data) remain pessimistic with

regard to larger purchases in the future. The result of the abovementioned is a smaller scope of sales: the income from sales compared to the previous year was lower by 6%, while gross profit declined by 8%. In spite of difficult conditions on the market and problems of the parent company, which also affected our operations and results, we managed to achieve both operating profit and net profit in 2011.

In thousands of euros

30,000

Gross earnings

EBITDA

Earnings before interest, depreciationand amortisation (EBITDA)

In th

ousa

nds

of e

uros

25,000

20,000

15,000

10,000

5,000

0

5.000

10.000

15.000

20.000

25.000

30.000

20082009

20102011

Načrt 2012

v ti

soč

EUR

Kosmati poslovni izid in poslovni izid iz poslovanja z amortizacijo (EBITDA)

Kosmati poslovni izid EBITDA

2008 2009 2010 2011 Budget 2012

160,000

In th

ousa

nds

of e

uros 140,000

120,000

100,000

80,000

60,000

40,000

20,000

2008 2009 2010 2011 Budget 2012

Sales revenue and sales revenue per employee

REVIEW OF MAJOR EVENTSIn 2011, Big Bang also saw many interesting events, some of which were particularly significant.

New storeIn April, we opened a new store in the Qlandia shopping mall in Krško.

Moving of storesIn March, the store in Novo Mesto was relocated to the new Qlandia shopping mall. The store in the Ušće shopping mall in Belgrade was moved to a more attractive location in the mall, and its layout was optimized.

Sales academyIn spring, in cooperation with an outside consultant, we designed the Sales Academy, which included all of our sales personnel. The Academy is intended to improve the understanding and knowledge of consumers and the shopping process with concrete examples and sales suggestions, with the aim of helping sales personnel in establishing contact with a buyer and offering the buyer professional advice when shopping.

Midnight opening

We delighted the fans of the game Call of Duty: Modern Warfare 3 on its official release date at the beginning of November with a midnight opening of one of our stores in BTC Ljubljana, where they could be among the first to obtain a copy of the game. The possibility of this early purchase attracted an extremely large number of players.

Siddharta

The group Siddharta issued their new album late November and recorded a video in 3D. In Big Bang we gave the visitors special 3D glasses to see the premiere of the video on RTV SLO. All the fans of Siddharta had the chance to meet the band members, as they were signing albums in seven of our stores.

The BEKO and SONY showrooms

In our store in BTC Ljubljana we designed special showrooms – in the household appliances department, we presented Beko’s Smart Solutions, Green Line and New Technology lines, while in the audio-video department, the Sony living room presents the visitors solutions on how to combine various audio-video devices and what is a must-have in a modern living room.

Change of managementIn the beginning of November, Aleš Ponikvar, the former Commerce Director , took over the management of the Company, replacing the incumbent Managing Director, Breda Terglav, and Samo Turk, the new CFO , joined the management of Big Bang.

Exceptional success of the trademark BEKO

Thanks to Big Bang, Beko’s exclusive distributer in Slovenia, their entire product range is growing in presence on the market. In the previous three years, sales of Beko products have increased, so that today Beko is an established trademark, one which the consumers trust, as proven by its significant market shares of four categories – refrigerators, freezers, washing machines and driers.

10 11

BusinessReport

12 13

[Business Report] [Business Report]

STRATEGIC FOCUS IN YEAR 2012Fierce economic circumstances, which we began to encounter in 2010, were felt even more intensely in the previous year. Consumers expanded their savings measures and postponed purchases to a greater extent, which was reflected in the sales of most products of consumer electronics and household appliances. It is certain that in 2012 consumers will consider only the most necessary expenses.

Therefore, we will have to adapt our extensive development plans to market conditions and focus on in-house process optimization and on increasing cost efficiency. Profit-yielding operations and positive cash flow will remain our key goals in 2012.

In 2012, a good understanding of consumers and their desires will be of key importance in defining appropriate promotions and ensuring the satisfaction of our customers. In this way, we will place special attention to the understanding of the shopping process and helping customers find the products that they desire and need, and that bring them satisfaction when used. In cooperation with our quality trademark products manufacturers, we wish to offer the Slovenian market products that will help consumers enrich their lifestyle. We want to present our consumers with the trend of increasing interoperability of products, where the limits of unilateral applicability are blurred, and to inform them of the advantages that using such consumer products bring to their daily lives.

Mission

Creating long-term satisfaction of the consumer, inspiring and enriching new lifestyles appearing on the market, and in this way becoming a strong partner to the leading trademarks and manufacturers.

Vision

In the area of business of consumer electronics, we will become the first choice in the market by offering the consumer a quality shopping experience and all kinds of services.

Key development goalsBeing a provider of quality technological products in the areas of home, work and entertainment, we pursue the next goals:•Bethebuyers’firstchoice.•Reachsustainableprofityieldandpositive

cash flow.•Beanexemplaryandrespectedemployer

who takes care of its employees’ development.

•StrengthenourpositioninSloveniaandtheregion (SE Europe, frontier markets).

•Expandandstrengthenthedevelopmentand regional partnerships (be the partners’ first choice).

•Implement,targetandcarefullyselectinvestments for a satisfied customer, primarily in accordance with the achieved cash flow.

The products that are available in the sixteen Big Bang stores and the bigbang.si online centre help consumers increase the quality of their work, make their leisure time more entertaining and their chores faster and more efficient. Even though such products are not subsistence goods, the development of new technologies ensures increasing functionality and increasingly better experiences.

Being a specialist for consumer electronics, IT, and large and small household appliances, we provide the latest technology of famous trademarks to our customers. Care for quality and rich selection, and the provision of a high level of after-sales services have helped us

create the well-known Big Bang trademark. Our state-of-the-art and well-equipped stores enable buyers to consult with sales staff who are regularly informed on any relevant information or developments. Furthermore, buyers can also test most products, helping them to make the right decision.

Besides our basic activity (sales in our shop locations), an important part of our operations is also sales through the bigbang.si online centre, which has been facing quite active competition on the web. Furthermore, Big Bang is also engaged in wholesale trading and sales on foreign markets.

SALES PROGRAMME AND SERVICES

Product groups

Music instruments

TVs and TV equipment

Game consolesand games

Mobileelectronics

Telecommunications

Computers and computer equipment

Large household appliances

Cameras andphoto equipment

Small household appliances

Recorded media

14 15


Stores

Sales marketsBig Bang’s most important market is Slovenia, representing 90.3% of the Company’s total sales. This is followed by EU markets representing 9.2% of its total sales, and other markets (0.5%).

Ostali tuji trgi Države EU Slovenija

Slovenia

EU countries

Other foreign markets

A list of stores in Slovenia and Serbia: Naslov

BIG BANG CITYPARK ŠMARTINSKA CESTA 152g, 1000 LJUBLJANA

BIG BANG BTC ŠMARTINSKA CESTA 152, 1000 LJUBLJANA

BIG BANG RUDNIK JURČKOVA CESTA 228, 1000 LJUBLJANA

BIG BANG MARIBOR - TRŽAŠKA TRŽAŠKA CESTA 7, 2000 MARIBOR

BIG BANG MARIBOR - EUROPARK POBREŠKA CESTA 18, 2000 MARIBOR

BIG BANG MARIBOR - TABOR CESTA PROLETARSKIH BRIGAD 100, 2000 MARIBOR

BIG BANG CELJE MARIBORSKA CESTA 100, 3000 CELJE

BIG BANG KOPER ANKARANSKA CESTA 3a, 6000 KOPER

BIG BANG KRANJ CESTA STANETA ŽAGARJA 71, 4000 KRANJ

BIG BANG NOVO MESTO OTOŠKA 5, 8000 NOVO MESTO

BIG BANG MURSKA SOBOTA BTC – NEMČAVCI 1d, 9000 MURSKA SOBOTA

BIG BANG JESENICE FUŽINSKA CESTA 8, 4270 JESENICE

BIG BANG PTUJ ORMOŠKA CESTA 15, 2250 PTUJ

BIG BANG SLOVENSKA BISTRICA ŽOLGARJEVA ULICA 14, 2310 SLOVENSKA BISTRICA

BIG BANG NOVA GORICA CESTA 25. JUNIJA 1a, 5000 NOVA GORICA

BIG BANG KRŠKO CESTA KRŠKIH ŽRTEV 141, 8270 KRŠKO

ONLINE CENTRE:

BIGBANG.SI ŠMARTINSKA CESTA 152, 1000 LJUBLJANA

STORE IN SEBIJA:

UŠĆE PARTIZANSKE AVIJACIJE 4, 11070 BEOGRAD

Below one percent growth of gross domestic product, a higher level of unemployment at the end of the year in comparison to the previous year (increase by 2.5% to 112,754), the lowest level of year-end bonuses paid in the last six years (IMAD) and a drop in real income in retail stores (except for fuels) at the end of the year by 5.5% compared to the year before (SORS) are merely some of the more important macroeconomic indicators, which show 2011 to be as demanding and severe as the previous year. This was seen throughout the year in subjective consumer mood indicators, measured by the DMS marketing monitor, which have mainly continued and in certain cases even experienced lower values than in the year before. Therefore, the spring recession surveys in 2011 from the viewpoint of consumers were higher by 5% compared to the autumn survey from 2010, thus reaching 73%. Similarly, the level of the fall survey in 2011 was achieved, which amounted to 72%. At the same time in 2011, there was a strengthening of the level of negative expectations; increasing numbers of people experienced the problem of reduced purchasing power as a consequence of the recession, so that the purchases of consumers became even more planned and careful than the year before. The fall survey in 2011 showed the highest level of planned and deliberate shopping so far, 70% of the surveyed, which is 3% more than compared to the year before and 10% more than in the first year of the survey, i.e. in the spring of 2009. The prudent and reserved shopping style – also as a consequence of a lack of visible technological progress and extreme external events – is consequently also mirrored in the market of consumer and household

ECONOMIC CONDITIONS IN 2011electronics. Specifically, compared to the previous year in most sales categories, the trend of reduction continued both in the quantity of sales as in average sales value (GFK panel of technical stores). Encouraging levels of growth were only achieved in the category of tablet computers. Nevertheless, it is still encouraging that the value of the consumer trust indicator (SORS) in December 2011 improved both in comparison to the previous month (by 6%), as well as compared to the year before (by 7%), which was greatly supported by more optimistic forecasts of consumers regarding the possibility for savings in the future.

16 17


BUSINESS ANALYSIS IN 2011In 2011, the activity of Big Bang was also marked by harsh economic conditions and problems of the parent company. Nevertheless, with great financial discipline, by following our

In 2010, we had witnessed a drop in sales income; similarly in 2011, it dropped by 6%. The income from retail sales was lower, in comparison to the previous year by 12%, while we achieved 24% growth in wholesale.

Sales

key goals and key development goals, striving towards our vision and following our mission, we successfully concluded the business year.

The average sales growth rate per employee amounted to 5% in the last five years. The absolute sales value per employee dropped by 8.5% compared to the previous year. The drop is above all a reflection of the smaller scope of sales and in part also of the increase of the number of employees, which was greater by 3%.

160,000

Sales revenue

In th

ousa

nds

of e

uros140,000

120,000

100,000

80,000

60,000

40,000

20,000

0

20.000

40.000

60.000

80.000

100.000

120.000

140.000

160.000

20072008

20092010

2011

v ti

soč

EUR

PRIHODKI OD PRODAJE

200820072009

20102011

120,361

146,663

130,640121,825

114,892

350

In th

ousa

nds

of e

uros 300

250

200

150

100

500

50

100

150

200

250

300

350

20072008

20092010

2011

v ti

soč

EUR

PRODAJA NA ZAPOSLENEGA

20082007

2009 2010 2011

216260

301280

256

Sales per employee

Operating expenses

In 2011, operating expenses amounted to €112.8 million and were by 4.2% lower than the year before. The share of operating expenses in sales totalled 98.2% in 2011, representing a 1.5% decrease compared to the previous year. Within the last five years, the share of operating expenses in sales was been between 96% and 98%.

In the operating expenses structure, the biggest percentage is taken by the costs of sales, which has been around 79% of sales on the average within the last five years. In 2011, it was by 5% lower than in 2010, while the product sales revenue was by 6% lower in the same period.

The selling expenses are the next among the operating expenses considering the volume. Within the last five years, they amounted to 16.4% of sales on the average. Compared to 2010, the selling expenses decreased by 2.8% in 2011. The same holds for the general management costs, which on the average represent 2% of sales within the last five years. Other operating costs were by 156% higher compared to 2010. This is a result of major write-offs of property, plant and equipment as well as operating receivables, most of which refer to write-offs of receivables due from the parent company in accordance with the confirmed compulsory settlement.

0

10

20

30

40

50

60

70

80

90

100

20072008

20092010

2011

dele

ž v

prod

aji v

%

Deleži poslovnih odhodkov v prodaji

Nabavna vrednost prodanega blaga Stroški prodajanjaStroški splošnih dejavnosti Drugi poslovni odhodki

100

90

80

70

60

50

40

30

20

10

Cost of sales

General administration costs

Selling expenses

Other operating expenses

Shares of operating expenses

shar

e in

sal

es in

%

20072008

20092010

2011

78.8 80.7 81.177.3

77.9

18 19


Financial income and expenses

Compared to the year before, financial income decreased by 53% and is composed of as follows: interest income totalling €74 thousand, other financial income at €197 thousand and net income from currency differences in the amount of €5 thousand.

Financial expenses were also lower compared to 2010 (by 73%). The reason lies in last year’s

Profit or lossIn 2011, Big Bang’s operating profit or loss of €2,254 thousand was lower than in 2010, resulting from a minor volume of sales in the


Item 2007 2008 2009 2010 2011

Financial income 270 340 271 591 276

Financial expenses 83 65 148 3,242 888

Net financial result 187 276 123 -2,651 -612

high impairments of long-term loans given, which was an outstanding business event. A majority part of financial expenses (€882 thousand) refers to interest expenses, which have increased due to the payments of surety liabilities for the loans to the parent company.

retail channel. The Company generated €1,353 thousand of net earnings before tax. The effective tax rate was 21%.

-8.000

-6.000

-4.000

-2.000

0

2.000

4.000

6.000

v ti

soč

EUR

Poslovni izid iz poslovanja Čisti poslovni izid

6,000

4,000

2,000

0

-2,000

-4,000

-6,000

-8,000

2007

2,473 2,4362,020 1,787 2,064

1,695

4,432

2,254

1,062

-6,009

2008 2009 20102011

Operating profit or loss

Net profit or loss

Earnings before tax structure

Item 2007 2008 2009 2010 2011

Operating profit or loss 2,473 2,020 2,064 4,432 2,254

Net financial result 187 276 123 -2,651 -612

Other expenses - - - -8,500 -289

Earnings before tax 2,660 2,296 2,187 -6,718 1,353

AssetsAs at 31 December 2011, the balance sheet total was €40,609 thousand, which is 3% less than at the end of 2010. Long-term assets decreased due to decreased intangible assets and property, plant and equipment, and also due to lower deferred tax, while long-term

operating receivables increased. Short-term assets decreased, since the inventory and receivables for the assessed tax decreased more than the loans, operating receivables and cash increased.


010.000

20.00030.000

40.00050.000

2007

2008

2009

2010

2011

Sredstva v tisoč EUR

Dolgoročna sredstva Kratkoročna sredstva

2011

2010

10,00020,000

30,00040,000

50,000

2009

2008

2007

0

12,44726,163

13,72028,311

12,68033,364

11,81636,300

10,10431,365

Assets In thousands of euros

Long-term assets

Short-term assets

In th

ousa

nds

of e

uros

20 21


term liabilities were slightly higher than in 2010. Operating and other liabilities decreased, but liabilities from loans increased, where the short-term part of long-term loans is disclosed, as aforementioned.

Compared to 2010, the equity financing rate increased by 23%, amounting to 26.8%. This means that 26.8% of Company’s liabilities were financed with equity sources.

Equity and liabilitiesCompared to 2010, Big Bang’s equity increased by €1,062 thousand. The increase is entirely due to higher realised net earnings in 2011.

Long-term liabilities decreased due to the reduction of provisions for sureties given for loans of the parent company, which were entirely drawn. The Company took long-term loans to pay the sureties, and repaid a part of the loans during the year. The part of loans with maturity in the following year is disclosed among short-term liabilities. In 2011, short-

010.000

20.00030.000

40.00050.000

2007

2008

2009

2010

2011

Obveznosti do virov sredstev v tisoč EUR

Kapital Kratkoročne obveznosti Dolgoročne obveznosti

2011

2010

2009

2008

2007

10,00020,000

30,00040,000

50,000

0

Liabilities in thousands of euros

Equity

Long-term liabilities

Short-term liabilities

8,57925,598 6,433

7,51725,571

8,943

17,52528,022

497

15,83131,737

548

14,04426,840

585

The optimization of processes within the Company will help us increase our work efficiency; at the same time, we will need to increase cost efficiency to achieve our key goals, which is profitable operations and positive cash flow.

We will renovate the personnel strategy of financial reward system with the purpose of positive motivation of employees at all workplaces and to ensure the greatest engagement of employees possible. We will continue with appropriate forms of education, which give the employees the knowledge they need, so that they can do their work with confidence and quality.

PLANS FOR THE FUTUREWe will continue to optimize logistic processes and costs, and implement IT support in different processes in the Company, from sales to business and end users, after sales services, communication with partners and buyers, etc. We will focus our communication activities to consumer support in finding the right solutions for themselves and education on new technologies and important information, which are required when making shopping decisions. We will organize our stores in such a way that the visitors will feel comfortable in them, acquaint them with innovations and find the right products they need in the wide selection available.

22 23


EMPLOYEESThe trend of increasing number of employees stopped already during in 2009; in fact, the number even decreased due to the closing of unproductive stores. For the first time since 2008, a slightly increased number of employees was recorded in 2011.

the 4th level of education or lower decreased, while the number of those with the 5th level or higher increased.

•Setupandexecutionofthe Big Bang Sales Academy,•Executionofthemanagementschoolfor two groups of managers (36 participants),•Employeesatisfactionpollviathe SIOK research,•Introductionofaninternale-newsletter.

All activities of the HR sector are focused on strengthening the trademark of Big Bang as a popular employer and on the greater satisfaction of the employees.

In 2011, the number of Big Bang employees increased slightly. Their number in support services dropped, while retail units received new co-workers due to the opening of a new branch (Big Bang Krško) and an increased number of employees at points of sale in order to boost sales effectiveness in the last quarter of 2011.

The structure of employees at31 December 2011

More than a half of employees have the 5th level of education. In comparison with the previous year, the number of Big Bang employees with

Human Resources StrategyThe HR sector of Big Bang conducted the human resources strategic conference in the first quarter of 2011 in cooperation with an external advisory company. The purpose of which was to set up a human resources strategy and priorities for the HR sector for the year to come.In 2011, we began the following HR projects:•SetupoftheCompetenceSystemin cooperation with the external advisor,•Executionoftheannualdevelopmenttalks,•Setupofthefirstindividualsuccessindicators and completion of the reward system in

accordance with it,

31.12.2011 31.12.2010

Management 22 26

Retail 363 345

Marketing 12 4

Wholesale 6 8

Product management 22 24

Purchasing department 3 4

Logistics 21 24

Big Bang d.o.o. 449 435

0

100

200

300

400

500

600

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

600

500

400

300

200

100

0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

1st level 0.45%

2nd level 4.01%

3rd level 0.89%

4th level 30.96%

5th level 50.56%

6th level 4.90%

7th level 7.50%

8th level 0.45%

9th level 0.22%

I. st

II. st.

III. st.

IV. st.

V. st.

VI. st.

VII. st.

VIII. st.

IX. st.

24 25


Education of EmployeesIn 2011, we nearly doubled our investments into education, compared to the previous year. Apart from the topics we focused on in the previous years (merchandise knowledge, safety at work, team work) in 2011 we focused on two larger projects in the area of education:•Internally, we developed a program and

carried out two modules of the Big Bang Sales Academy for all retail personnel. The program was developed internally by selected trainers in cooperation with an external consultant. The execution of the academy itself was entirely internally organized. The first module of the Sales Academy was also carried out in the subsidiary in Serbia and the second module will take place there in 2012;

•Incooperationwithanexternalconsultant,we began the Management School intended for all managers of the Company Big Bang. Training took place in five modules.

Higher management staff also regularly meets at educational meetings, which last over a period of several days, with key emphasis on team work and communication. We offer promising individuals the possibility of financing their studies at higher levels of education. Technical assistants regularly attend professional meetings to become acquainted with the trends and changes in their line of work.

Health Care and Well-Beingof Our Employees

At Big Bang, we provide for safety at work and healthcare together with the help of a professionally trained external provider, Vago, d.o.o.

In 2011, the periodic training for safety at work and fire safety was organized for all employees from the business management (73 employees). At the same time, we carried out periodic training for safety at work at the retail stores of the Company. Apart from trainings, the external provider carried out a periodic inspection of branches and made sure that the employees work in safe and healthy conditions. A revision of the fire safety order took place in four branches.

In 2011, we also prepared for those workers who operate fork-lifts, training for driving and operating with forklifts.

We have regularly sent employees to periodic health inspections in accordance with the health risk assessment and new employees to preliminary health inspections prior to taking up their posts.

In 2011, a revision of the risk assessment statement was planned, but was not done, because the legislation regarding safety at work and fire safety changed; therefore, the revision will take place in 2012.

In 2011, the Company employed five disabled workers. Procedures also began for the attainment of rights from the disability insurance for two other employees.

In 2011, only one injury at work took place.

Remuneration of EmployeesIn 2011, we enhanced the basic reward system with a system of individual success indicators, with which we enabled the employees with good results far greater rewards. As in previous years, in 2011 we acknowledged the top five retail salespersons and five top managers and, for the first time, we rewarded the top worker of our subsidiary Big Bang Belgrade.

Big Bang and Young PeopleIn 2011, we again actively cooperated with schools in all regions by enabling student placement in our stores. We also still offer company scholarships to some perspective students.

Research and Looking into the FutureIn 2011, we carried out the SIOK (Slovenian Organisational Climate) research in cooperation with the company AT Adria. The results revealed key advantages and sources of possible dissatisfaction of employees. In accordance with the findings, we reorganized the work of the HR sector, focusing it on raising employee satisfaction in the future; therefore, the year 2012 will be oriented to renewing the remuneration system, determining roles and processes, and renewing the career development system.

26 27


RISK MANAGEMENTFinancial Risk Management

In terms of business risk management, we monitor the current conditions on all global markets. Obtaining and managing the finances needed for undisturbed operations and investments remains difficult, so we pay special attention to financial risks due to our global presence. The economic crisis has brought about new reporting methods; the focus is not in numbers anymore but in different scenarios and analyses, whereas risks are becoming a fact and their management needs to be introduced to all spheres of our operations.

Regarding financial risk management, we follow the adopted financial policy, which includes the fundamental elements for efficient and systematic financial risk management. The following are the goals of an active risk management process: •Reaching stability of operations and

decreasing exposure to individual risks to an acceptable level,

•Increasing the market value, itscompetitiveness and credit rating,

•Higher predictability of cash flows andprofits,

•Lowertaxliabilities,and•Decreasedeffectsofextremelossevents.

Financial risks are evaluated within the framework of the following groups: •Credit risk,whichcomprisesall riskswhere

the business partners’ (buyers’) failure to fulfil their contractual liabilities decreases the Company’s economic benefits,

•Marketrisk,whichincludestheinterestrate

risk, foreign currency risk, inflation risk, and liquidity risk,

•Insolvencyrisk,whichcoverstheshort-termand long-term insolvency risks.

Credit Risk Credit risk exposure depends on individual buyers and the economic conditions in the buyers’ countries of origin.

At Big Bang, we have formed an active credit risk management policy, which includes continuous monitoring of outstanding receivables, a system of limits to restrict the exposure to an individual buyer, default interest, receivables insurance and a receivables recovery policy. This system covers all buyers. We are aware that an overly strict credit risk management policy could decrease the Company’s competitiveness, resulting in a loss of a certain amount of customers and consequently income.

In order to limit the exposure to the aforementioned risk, we use a well-conceived and formalized credit rating system that comprises the following: •Insurance of possible future receivables

upon signing the contract, and verifying the new and existing buyers’ credit rating,

•Determiningtherangeandmaximumlimitfor loyal and known buyers considering the assessed credit rating, extent of turnover and previous payment discipline, depending on the amount and quality of insurance,

•Determining the limit for new buyersconsidering the assessed credit rating and insurance,

•Detailedtradereceivablerecoveryprocedure

(including the court recovery of debts).

Big Bang generates a majority of sales revenue in the retail segment. Besides cash payments, other payment instruments (cards, consumer loans) enable us to receive practically the entire revenue from this segment of sales immediately or in a few days after products have been sold. In the wholesale segment, we consistently implement the indicated measures for risk hedging; therefore, the Management believes the credit risk exposure to be moderate.

Market Risk Market risk is a risk that changes in market prices, such as exchange rates, interest rates and equity instruments, may affect the revenue or the value of financial instruments. The aim of market risk management is to manage and control the exposure to market risks within reasonable limits and simultaneous profit optimization.

Interest rate risk

Interest rate risk is a risk that the value of a financial instrument may change due to market interest rates fluctuation. In 2011, Big Bang raised two long-term loans, both tied to the EURIBOR variable interest rate risk, thus its operation is exposed to interest rate risk.

As in 2010, levels in interest rates were low in 2011. In the first half of the year, we witnessed the growth of EURIBOR, which however slightly dropped in the second half. Due to intensified situation on financial markets, interest rates are not expected to increase. In contrast, the exposure to interest rate risk has been decreasing on account of regular monthly repayments of the existing loans. Management thus assesses the interest rate risk exposure in 2011 as moderate.

0,000,200,400,600,801,001,201,401,601,802,00

6M EURIBOR 3M EURIBOR

6M EURIBOR 3M EURIBOR

2.00

1.80

1.60

1.40

1.20

1.00

0.80

0.60

0.40

0.20

0 January

FebruaryM

arch

April

May June

July Avgust

September

October

November

December

28 29


Insolvency Risk Insolvency risk is the risk that the Company will encounter problems in obtaining the finances needed to fulfil its financial liabilities. The Company has managed the indicated risk with active liquidity management in order to prevent the events of non-reconciled cash inflows and outflows. This comprises the following: •The system of limits determining the

minimum finances and high-liquid assets a company must always have available,

•Thecreditriskmanagementpolicyensuringpayment of receivables as planned,

•Continuous cash flow planning andmonitoring, and

•Credit linewith banks enabling borrowingwithdrawal with regard to the current needs.

Easier management and balancing of the current liquidity also enables constant inflow from retail buyers.

The management assesses that the insolvency risk exposure is constant and low with regard to the indicated protection measures and the current situation.

sale prices, as well as write-offs, thus affecting the Company’s operating result.

We manage this type of risk by constantly monitoring such stock, using defined criteria and by taking prompt measures, whereby we include our suppliers in the solutions as regards the bad inventory. The instrument for managing such risk is also the purchase contract.

Bad inventory can have a major effect on the Company’s operations, yet it does not represent a high risk to us, as the percentage of bad inventory is very low and we have an impairment formed for it.

Delivery risk This is a risk that a supplier may fail to deliver goods within the agreed period, which in particular represents a risk for merchandise in offer. A consequence of untimely delivery is failure to reach the planned effect of the offer and a loss of the Company’s goodwill. Untimely issues of merchandise are also an opportunity cost, as they may result in low stock of goods, thus a loss of sales opportunities.

An instrument for managing this type of risk is the purchase contract, in which damages are determined, primarily for the case of untimely issue of goods in offer, and damages for untimely deliveries of goods not in offer.

Untimely deliveries represent a moderate risk, which slightly decreases with stock optimization.

Goods or accompanying documentation risk Big Bang trades in a wide range of products, which must comply with numerous legal

Purchasing Risks Price risks Changes in purchase prices represent a strategic, business and financial risk. On the one side, there is a risk that the prices of certain goods, which we have in stock, may decrease on the market. The adaptation to the changed market conditions incurs stock revaluation costs. Furthermore, if a supplier increases a certain price, it may lead to a problem of non-competitiveness and consequently a drop in sales.

The reduction instrument for risks related to the movement of prices is the purchase contract, which determines certain limitations. Another important instrument for the management of this risk is stock regulation in respect to the level of risk for individual type or group of goods.

The movement of purchase prices represents high risk to a trading company. Exposure to this risk at Big Bang, however, is moderate.

Inventory risk Bad inventory (dead or slow-moving stock, goods with expired shelf life, etc.) causes longer time deposits and requires sales at discounted

requirements. There is a risk that a certain product may not entirely comply with the requirements, thus resulting in consequences, such as prohibition of sale by supervisory bodies, costs of procedures and high penalties, which have a direct negative impact on the operating result. To limit this type of risk, we follow the current legislation and keep our employees at the sales department informed of it.

The impact on operations is moderate, and the probability of occurrence is low.

Other Risks Logistics risk At Big Bang, the logistics activity represents certain risks for the Company’s operations, which is particularly reflected in resource management (human, spatial, time, technological, information, data resources, etc.) and cost management.

We decrease the possibility of risks by: •Being organized – cooperation and co-

deciding of the logistics department with other fields of the Company on all levels (strategic, tactical, operative),

•Managing standards – development anduse of own standards and their transfer to external partners,

•Being technologically equipped – use ofnew technologies,

•Having information support – introductionof a better information system,

•Managing costs – reduction and control inall processes and sources,

•Planning – easier and better resourcemanagement.

Currency risk Currency risk is a risk that the Company’s economic benefits may change as a result of changed rate of an individual currency. The Company assesses that the currency risk is not present, as the share of foreign currency transactions compared to the overall operations is negligible.

Inflation risk Since the Merkur Group uses the policy of transferring increased purchase prices to the selling prices, and since the non-EU states, where our subsidiary is located, are making strong and successful attempts to limit and decrease inflation, the Management of the Company assesses that the inflation exposure risk is constant and low.

30 31


Aleš PonikvarManaging Director

The Managing Director of the Company BIG BANG d.o.o. Ljubljana hereby declares that in 2011 there was no action taken or abandoned on the initiative of the managing company or its related companies that would represent a deprivation for the Company BIG BANG d.o.o. Ljubljana.

STATEMENT IN ACCORDANCE WITH ARTICLE 545 OF THE COMPANIES ACT (ZGD-1)

In terms of logistics, we carry out these activities internally, i.e. through our own development and changes of processes, by introducing new operating standards and renewed operations, and externally, i.e. through activities and cooperation on all levels of operations in the Company and the sales logistics with external partners. For these purposes we are: •Preparinglogisticprocessesrenewal,•Introducing processes of purchasing, sales,

after-sales, reverse and distribution logistics, •Preparing a new purchase contract with a

logistics annex, •Preparingnewdataandpackingstandards,•Preparing a manual for suppliers with

corresponding damages for disrespecting delivery dates,

•Cooperatingandmanagingqualitysystems.

We have been actively changing the role of the logistics from a support function into that of an important supporting player and development partner as a very important link of the supply chain. Logistics as a function has a significant impact on the excellence of the supply chain and on the Company’s competitiveness. It will continue affecting the buyers’ satisfaction, operating excellence, and it will also allow us manage our working capital more economically as well as use our operating assets more efficiently.

Considering all the indicated measures and activities, we assess the logistics risks to be low.

Insurance The insurance policy is used to provide appropriate security of property in case of different unpredictable loss events. We have concluded contracts for the following insurance types: •fireinsurance,•earthquakeinsurance,•generalliabilityinsurance,•cargoinsuranceforinternationaltransport,•burglaryinsurance,•autoinsurance,•accidentinsurance,•receivablesinsurance.

32 33

Financialreport

34 35

[Financial report] [Financial report]

Balance sheet

Item Note 31.12.2011 31.12.2010

TOTAL ASSETS 40,609 42,031

Long-term assets 12,447 13,720

Intangible assets 5.1 356 541

Property, plant and equipment 5.2 6,239 7,291

Long-term financial investments in subsidiaries 5.3 4,989 4,989

Long-term loans 5.4 4 8

Long-term operating receivables 5.5 258 -

Deferred tax assets 5.6 600 891

Short-term assets 28,163 28,311

Inventories 5.7 17,028 17,835

Short-term loans 5.4 96 5

Assessed tax receivables - 380

Short-term operating receivables 5.8 8,737 8,644

Cash 5.9 2,303 1,447

TOTAL LIABILITIES 40,609 42,031

Equity 5.10 8,579 7,517

Share capital 4,204 4,204

Capital surplus 2,892 4,620

Profit reserves 420 420

Retained net profit or loss - 4,280

Net profit or loss for the period 1,062 -6,009

Liabilities 32,030 34,514

Provisions and long-term accrued expensesand deferred revenues

349 8,855

Provisions 5.12 349 8,855

Long-term liabilities 6,084 88

Long-term financial liabilities 5.11 6,084 88

Short-term liabilities 25,597 25,571

Short-term financial liabilities 5.11 1,917 108

Short-term operating liabilities 5.13 23,677 25,463

Assessed tax liabilities 3 -

The accompanying notes are an integral part of these financial statements and should be readin conjunction with them.


Income Statement

Statement of comprehensive income

The accompanying notes are an integral part of these financial statements and should be readin conjunction with them.

Item Note 2011 2010

Net sales 6.1 114,892 121,825

Cost of sales -89,540 -94,168

Gross profit from sales 25,352 27,657

Selling expenses 6.2 -20,208 -20,794

General administration costs 6.2 -2,498 -2,570

Revaluation operating costs 6.3 -507 -199

Other operating costs 6.3 -17 -8

Other operating revenue 6.4 131 347

Operating profit or loss 2,254 4,432

Financial income 6.5 276 591

Financial expenses 6.5 -888 -3,242

Net financial income/expenses -612 -2,651

OTHER EXPENSES 6.6 -289 -8,500

Net pre-tax earnings 1,353 -6,718

Income tax 6.7 -291 710


Item 2011 2010


Other comprehensive income for the period - -

Total comprehensive income for the period 1,062 -6,009



AUDITED FINANCIAL STATEMENTS

36 37


Cash flow statement

Item 2011 2010

Cash flow from operating activities

Net pre-tax profit or loss 1,353 -6,718

Adjustments for: 3,234 13,236

Depreciation and amortisation 2,034 1,988

Revaluation operating income -85 -314

Revaluation operating expenses 463 219

Expenditure for the provisions of given sureties, guarantees and lawsuits

7 8,500

Investment income -73 -101

Investment expenses 0 2,703

Financing expenses 888 241

Changes in net operating short-term assets and provisions 61 2,053

Changes in operating and other receivables -111 8,471

Changes in inventories 807 -3,851

Changes in operating and other receivables -622 -2,549

Changes in accruals and provisions -13 -18

Net operating cash flow 4,648 8,571

Paid/returned corporate income tax -1,276 -369

Cash flow from investing activities

Proceeds from investing activities 303 1,781

Interest received 74 101

Proceeds from sale of property, plant and equipment 18 18

Proceeds from returned loans 211 1,662

Expenses for investing activities -1,258 -5,001

Expenses for acquisition of property, plant and equipment -740 -1,551

Expenses for acquisition of intangible assets -219 -158

Expenses for acquisition of investments in subsidiaries - -580

Expenses for loans -298 -2,712

Net cash flow from investing activities -955 -3,220

Cash flow from financing activities

Proceeds from investing activities - 73

Proceeds from increase in short-term financial investments - 73

Expenses for investing activities -1,561 -4,328

Expenses for interest pair -783 -241

Expenses for payment of long-term financial liabilities -778 -87

Expenses for return of equity - -4,000

Net cash flow from investing activities -1,561 -4,255

Cash for the period 855 727

Opening balance of cash and cash equivalents 1,447 720

Closing balance of cash and cash equivalents 2,302 1,447

In thousands of eurosStatement of changes in equity

Proposal for the appropriation of profit

Item Share capital

Capital surplus

Legal reserves

Net profit for the year

Retained net profit

TOTAL EQUITY

Balance at 1 January 2010 4,204 8,620 420 1,695 2,586 17,525

Profit or loss for the period - - - -6,009 - -6,009

Comprehensive income for the period - - - -6,009 - -6,009

Transactions with owners recorded in equity -

Return of paid surplus - -4,000 - - - -4,000

Transfer of the net profit from previous year to retained profit

- - - -1,695 1,695 0

Offsetting the net loss for the year following the Management resolution

- -1,728 - 6,009 -4,280 0

Total transactions with owners recorded in equity - -5,728 - 4,314 -2,586 -4,000

Balance at 31 December 2010 4,204 2,892 420 0 0 7,517

Balance at 1 January 2011 4,204 2,892 420 - - 7,517

Profit or loss for the period - - - 1,062 - 1,062

Comprehensive income for the period - - - 1,062 - 1,062

Balance at 31 December 2011 4,204 2,892 420 1,062 - 8,579

The profit for appropriation for 2011 consists of the following:

The Management proposes that the profit for appropriation for 2011 be left entirely undistributed.

Net profit or loss for 2011 1,062

Net profit from previous periods -

PROFIT FOR APPROPRIATION FOR THE FINANCIAL YEAR 1,062



38 39


1. The Reporting Company

Big Bang, d.o.o., (hereinafter “Company”) has its registered address at Šmartinska cesta 152, 1000 Ljubljana, Slovenia. The Company compiles consolidated financial statements and its Annual Report in accordance with the International Financial Reporting Standards (hereinafter “IFRS”) as adopted by the European Union and in accordance with the Companies Act. The business year equals the calendar year.

The Company and the registered office of the managing companyThe Company is an affiliate of the company Merkur, trgovina in storitve, d.d., with its registered office at Cesta na Okroglo 7, 4202 Naklo, Slovenia. Merkur, d.d., is the sole owner of the Company’s equity. The managing company compiles consolidated financial statements and prepares the consolidated Annual Report for the companies of the Merkur Group.

The Company does not compile its consolidated financial statements in accordance with Article 56 of the Companies Act.

2. Basis for Compilation

2.1 Statement of ComplianceThe financial statements have been prepared in accordance with the IFRS promulgated by the International Accounting Standards Board (hereinafter “IASB”), as adopted by the European Union.

The management of the Company confirmed the financial statements on 5 March 2012.

2.2 Basis for PreparationThe financial statements have been prepared on a historical cost basis and the going concern.

2.3 Functional and Presentation CurrencyThe financial statements of the Company are presented in euros (€), which is the Company’s functional currency. All accounting data presented in euros is rounded to one thousand units. The rounding may result in slight differences in summation.

2.4 Use of Estimates and JudgmentsThe preparation of the financial statements in accordance with IFRS requires management to make certain estimates, judgments and assumptions which impact the use of the accounting policies and the disclosure of the values of assets, liabilities, revenue and expenses. The actual results may deviate from these estimates.

The estimates and assumptions must be continuously verified. Adjustments of accounting estimates are recognised for the period in which an estimate is adjusted, and for all the future years affected by the adjustment.

The data about relevant estimates of uncertainty and critical judgments, which were prepared by the Management Board during the accounting policies implementation process, and which most affect the amounts in the financial statements, are indicated in the notes under:•Property,plantandequipment,•Financialassetsandliabilities,•Inventory,and•Provisions.

NOTES TO THE AUDITED FINANCIAL STATEMENTS 3. Significant Accounting Policies

The Company has consistently applied the accounting policies set out below for all periods presented in the enclosed financial statements.

3.1 Foreign CurrencyForeign currency transactionsTransactions expressed in a foreign currency are translated into the functional currency of the Company at the prevailing exchange rate on the date of the transaction. Monetary assets and liabilities in foreign currency are translated at the exchange rate of the functional currency prevailing on the balance sheet date. Positive or negative currency differences are differences between the amortised cost in the functional currency at the beginning of the period, adjusted for the amount of effective interest and payments in the period, and the amortised cost in a foreign currency translated at the exchange rate at the end of the period. Currency differences are recognised in the income statement.

3.2 Financial Instruments3.2.1 Non-Derivative Financial InstrumentsNon-derivative financial instruments of the Company include investments in equity, operating and other receivables, cash and cash equivalents, loans, as well as operating and other liabilities.

Initially, the Company recognises loans, receivables and deposits on the day of their occurrence. The other financial assets are initially recognised on the date of exchange or when the Company becomes a subject of contractual provisions regarding the instrument.

The Company derecognises a financial asset when the contractual rights for cash flows from this asset terminate or when the Company transfers the rights for contractual cash flows from the financial asset based on a transaction in which all risks and benefits attaching to the ownership of the financial asset are transferred. Any share in a transferred financial asset created or transferred by the Company is recognised as an individual asset or liability.

Financial assets and liabilities are offset, and the net amount is presented in the balance sheet if and only if the Company has a legal right to either settle the net sum or cash in an asset and at the same time settle its liability.

Investments in subsidiariesInvestments in subsidiaries are accounted for at the cost in the financial statements of the Company. Upon obtaining them, the investments are not revalued due to currency differences (in the case of investments in companies abroad) or due to an increased value of a corresponding part of the Company’s capital in which the Company has such an investment. In justified cases, their value must be impaired, provided that reasons for it exist (see the accounting policy “Impairment of Assets”).

LoansLoans are financial assets with determined or determinable payments and are initially recognised at the fair value at the effective interest method. Following their initial recognition, they are stated at the amortised cost, where any possible differences between the original and amortised cost are stated in

40 41


the income statement in the loan repayment period. The effective interest rate method is used.

Operating receivables On initial recognition, operating receivables are stated in amounts from corresponding documents, with the assumption that they will be repaid. Receivables are usually measured at their amortised cost at the effective interest method. Short-term receivables are not discounted at the balance sheet date.

Cash and cash equivalentsCash comprises cash in bank and in hand. Cash equivalents are short-term, quickly realisable deposits immediately transferrable into amounts of cash and with insignificant currency risk.

Automatic debt on the current account is not cash but a short-term financial liability.

EquityThe total equity of the Company is its liability to the owners, which falls due if the Company goes out of business. It is determined with the amounts invested by the owners, and with amounts that appeared during operations and that belong to the owners. It is decreased by the operating loss, treasury shares and withdrawals (payments). The total equity comprises the share capital, capital surplus (meaning subsequent payments of capital), profit reserves and retained earnings (from previous years and the current year).

Financial liabilitiesOn initial recognition, financial liabilities are stated at the fair value without any decrease

by the relevant costs of transaction. After initial recognition, borrowings are stated at the amortised cost, where any possible differences between the original and the amortised cost are stated in the income statement in the borrowing repayment period. The effective interest method is used.

Operating liabilitiesLiabilities are generally measured at the amortised cost at the effective interest method. Short-term operating liabilities are not discounted at the balance sheet date.

On initial recognition, operating liabilities are valued with amounts from corresponding documents on their occurrence, which prove a receipt of a product or service or a performed work or accounted cost, expense or share in the profit or loss for operating liabilities. 3.2.2 Derivative Financial InstrumentsThe Company does not use any derivative financial instruments.

3.3 Property, Plant and Equipment

Measurement upon recognitionProperty, plant and equipment are stated at their cost less the depreciation adjustment and accumulated impairment loss (see the accounting policy “Impairment of Assets”).

On initial recognition, property, plant and equipment are measured at the cost that comprises the purchase price, including import duties and non-refundable purchase taxes, and any directly attributable costs of bringing the asset to working condition for its intended

use. The cost also comprises the borrowing costs (interest) related to the construction of immovable property until it is in working condition.

Additional or agreed-upon investments in assets and in improvements of assets, which the Company has in finance or operating lease, are stated among property, plant and equipment or their parts.

Subsequent expenditureExpenditure incurred to replace a component of an item of property, plant and equipment is recognised in the carrying amount of such asset, if it is likely that it will increase the future economic benefit embodied in the item of property, plant and equipment and that the fair value can be reliably assessed. Based on the originally assessed level of asset efficiency and useful life, repairs or maintenance of property, plant and equipment for renewing or keeping the future economic benefit are stated in the income statement as maintenance expenditure when incurred.

Beginning of depreciation, depreciation method and useful livesProperty, plant and equipment start being depreciated on the first day of the month following the month when it is made available for use. Depreciation is recognised in the income statement with the straight-line depreciation method, considering the useful life of each individual item of property, plant and equipment. The estimated useful lives of assets for the current and comparable period are as follows:•Buildings–33.33years,•Investmentsinleasedpremises–10years,

•Plantandequipment–2to10years,•Furniture–5years,•Computerequipment–2years,and•Meansoftransport–5years.

Land, advances for property, plant and equipment, plant and equipment in construction or in the process of obtaining and works of art are not depreciated.

Depreciation methods, useful lives and the residual values are reassessed on the reporting date and adjusted if necessary. In 2011, they did not change. Leased assets are depreciated considering the duration of lease and their useful life.

DerecognitionProperty, plant and equipment are derecognised upon their disposal or when no future economic benefit is expected from their use or disposal. Profit or losses arising from the derecognition of property, plant and equipment are established as the difference between the possible net returns upon disposals and their carrying amount. They are stated in the income statement upon their derecognition.

3.4 Intangible AssetsIntangible assets are non-monetary assets without physical existence, such as purchases of a trademark and software as well as long-term patents and licenses.

In-house costs of research and development, colophons, lists of consumers and items similar in content are not recognised as an intangible asset but are immediately treated as costs or operating expenses in the period when incurred.

42 43


Intangible assets are recognised at their cost less the accumulated amortisation and accumulated impairment losses (see the accounting policy “Impairment of Assets”).

AmortisationAmortisation is recognised in the income statement under the straight-line amortisation method considering the useful lives of intangible assets unless the useful lives are not determined. Amortisation of intangible assets begins when an asset is ready for its use. This method most accurately reflects the expected pattern of the use of future economic benefits embodied in the asset. The estimated useful life for the current and comparable period for software, licenses and other rights is two years.

The amortisation methods, useful lives and the residual values are reassessed by at least the end of each business year and adjusted if necessary. In 2011, they did not change.

DerecognitionIntangible assets are derecognised upon their disposal or when no future economic benefit is expected from their use or disposal. Profit or losses arising from the derecognition of an intangible asset are established as the difference between the possible net returns upon disposals and the carrying amount of the asset. They are stated in the income statement upon derecognition of the asset.

3.5 Impairment of AssetsFinancial assets On the reporting date, any financial asset that is not recognised at the fair value through the profit or loss is assessed as to whether there exists objective evidence that demonstrates

the impairment of the asset. A financial asset is considered impaired if there is objective evidence demonstrating that upon initial recognition of such asset one or more events, which can be reliably measured, has brought to a decrease in the expected future cash flows relating to this asset.

Objective evidence on the impairment of financial assets can be the following: non-fulfilment or violation by the debtor; restructuring of an amount owed by others to the Company if the Company agrees to it; signs that the debtor will go bankrupt; and decreased solvency of lessees. When assessing the total impairment, the Company uses the past development of the probability of non-fulfilment, the time of recovery and the amount of the loss incurred, which is adjusted for the assessment of the Management Board regarding whether the actual losses due to the current economic and loan conditions can be higher or lower than the losses as envisaged by the past development.

The impairment loss related to a financial asset carried at the amortised cost is calculated as the difference between the carrying amount of an asset and the expected future cash flows discounted at the original effective interest rate. Losses are recognised in the income statement and stated in the allowance account. In this way, a part of the impaired asset is still recognised in the settlement of discount. When the amount of the impairment loss decreases due to subsequent events, the decrease of the impairment loss is derecognised through the income statement.

Impairment of operating receivablesWhen objective evidence of the impairment of receivables exists, the loss is measured as the difference between the carrying amount of the receivable and the expected recoverable value, and it is recognised in the income statement.

Receivables that are believed to be partially or entirely uncollectible should be recorded as doubtful receivables, or as disputable if a dispute has developed in connection with them.

In case of large receivables, receivables in connection with which a collection proceeding has been initiated at court, and receivables in the process of compulsory settlement or in liquidation procedure, recovery is assessed individually considering the current operations and credit rating or suitable insurance supporting the expectations that the receivables are realistically existing and collectible.

Individual adjustment is also formed for large receivables (above €10,000), which are not in court proceedings, yet doubt of their collection exists.

The Company promptly carries out the used methodology and consequently the adequacy of the risk assessment and calculations of possible losses in cases when a buyer fails to settle a payment, while it makes a calculation of possible losses twice a year.

For final write-offs of receivables, suitable documents are needed as evidence: rejection of receivable state confirmation, court rulings, compulsory settlement orders, bankruptcy

procedure orders and other appropriate documents.

Non-financial assetsAt each reporting date, the Company checks the residual carrying amount of its non-financial assets, excluding the deferred tax assets, in order to establish whether there are signs of impairment. If such signs exist, the recoverable amount of the asset is assessed. Inventories are not subject to impairment according to IAS 36.

The recoverable amount of an asset or cash generating unit is its value of use or fair value less selling costs, whichever is higher. When determining the asset’s value of use, the expected future cash flows are discounted to their current value using the pre-tax discounting rate, which reflects the current market estimate of the time value of money and the risk applicable to this asset. To test the impairment, the assets that cannot be tested individually are classified into the smallest possible group of assets, which generate cash flows from further use, and which are primarily independent of the receipts of the residual assets or groups of assets (cash generating unit).

Impairment of an asset or cash generating unit is recognised when its carrying amount exceeds its recoverable amount. A cash generating unit is the smallest group of assets that generate financial inflows that are to a large degree independent of financial inflows from other assets or groups of assets. The impairment is recognised in the income statement. The impairment loss recognised is reclassified proportionate to the carrying amount of each asset in the unit.

44 45


3.6 InventoriesInventory valuationInventory is valued at the historical cost or net realisable value, whichever is lower. The net realisable value is the estimated selling price reached during the regular operation less the estimated costs of completion and the estimated selling costs.

The Company uses the FIFO method (costing method) for inventory valuation.

The cost of inventories comprises the purchase price, customs duty and other charges (excluding those that will be later refunded to the Company by tax authorities), transportation costs, handling costs, and other costs attributable directly to obtained merchandise or material. Commercial discounts, other discounts and similar items are subtracted during the establishment of the cost.

When inventory is sold, its carrying amount is recognised as an expense of the period in which the corresponding income was accounted for.

Net realisable value of inventoriesThe value of inventories is not replaceable if inventories are damaged, entirely or partially obsolete, or if their selling prices decrease. The value of inventories is also not replaceable if the estimated costs of completion or the estimated sales related costs increase. Partial inventory write-off below its historical cost or expenses to the net realisable value is in accordance with the standpoint that assets cannot be carried in higher amounts than the expected value during their sale or use. The amount of every partial write-down of inventories with the net realisable value and all losses of inventories is

recognised as an expense in the period when a partial write-down or loss incurs.

Write-downs and partial write-downs of damaged, dead or useless inventory are carried out on a regular basis throughout the year or during the inventory by individual items. At year end, the net realisable value of inventories is inspected by similar types of goods. Flat-rate inventory write-downs are made ranging between 10% and 50% of the carrying amount of inventories. The criteria for write-down are the age of inventory and inventory turnover.

3.7 ProvisionsProvisions are recognised if the Company has a current legal or indirect obligation as result of a past event, and if there is a probability that the offset for this obligation will require an outflow of factors, which enable economic benefits. Since the effect of the time value of money is substantial, the amount of provision equals the current value of expenses, which are expected to be needed to offset the obligation. Provisions for termination and jubilee benefitsIn accordance with legal regulations and the collective agreement, the Company is obliged to pay jubilee benefits to employees and termination benefits on their old-age retirement, for which it has formed long-term provisions. No other pension obligations exist.

Provisions are formed in the value of the estimated future payments for old-age retirement termination and jubilee benefits. They are discounted on the balance sheet date using the book reserve method based on the actuarial calculation or estimate.

3.8 Income TaxIncome tax for the year comprises current and deferred tax. Income tax is recognised in the income statement as an expense, except in the part where it refers to the items recognised directly in equity, and it is therefore recognised in equity.

Current tax is tax that will be paid from the taxable profit for the year using tax rates established on the balance sheet date and the possible adjustment of tax liabilities related to the previous business years.

To record deferred tax, the method of liabilities on the balance sheet is used based on temporary differences between the carrying and tax amounts of individual assets and liabilities. The deferred tax amount is based on the expected recovery method or settlement of the carrying amount of assets effective on the balance sheet date, or tax rates in the period in which the write-down of receivable or deferred tax liability is expected.

Deferred tax asset is recognised only to the extent that it is probable that future taxable profit will be available against which the deferred asset can be utilized in the future. Deferred tax assets are recorded by the amount for which it is no longer likely that the tax relief connected with the asset will be claimable.

3.9 RevenueRevenue from the sale of goods and productsRevenue from the sale of goods and products is recognised at the fair value of the received repayment or related receivable, less the returns, rebates for further sale and quantity discounts. Revenue is recorded when a buyer assumes all relevant types of risk and benefits connected with the ownership of an asset, when there is certainty regarding the repayment of an allowance and related costs or the possibility of returning goods and products, and when the amount of revenue can be reliably assessed.

Revenue from services renderedRevenue from services rendered is recognised in the income statement when the service has been rendered.

Other operating revenueOther operating revenue includes revenue from the disposal of property, plant and equipment in the form of the surplus of their selling value over their carrying amount. It also represents revenue from realised receivables, including the reversal of impairment of receivables and revenue from write-offs of liabilities.

Finance incomeFinancial income comprises interest income from investments and operating receivables, exchange rate gains, and income from the disposal of available-for-sale financial assets.

Interest income is recognised in the income statement when incurred using the effective interest rate method.

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3.10 ExpensesOperating expensesOperating expenses are classified as the cost of sold quantities, selling cost, general cost (administrative and purchasing) and other operating expenses that are not a cost.

Cost of sold quantitiesThe use of merchandise inventories for sold quantities is derecognised using the FIFO method. The cost of sold quantities of merchandise is directly decreased by the received rebates and super rebates by suppliers. Rebates are partially accrued in the cost of inventories.

Selling cost (with amortisation)Selling costs (with amortisation) include all costs incurred connected with the sale of operating effects. Since these costs are not in inventories, they are entirely recognised among the operating expenses in the same accounting period when incurred.

General cost (with amortisation)General costs (with amortisation) comprise all costs incurred in connection with the purchase function and administration with auxiliary activities. These costs are also entirely recognised among operating expenses in the same accounting period when incurred.

Costs by primary typesCosts of material and services are costs indicated in supplier invoices and other documents less discounts during the sale or later.

Depreciation/amortisation is recognised individually by stages considering the shortest

time of use of an individual tangible or intangible asset.

Labour costs are the gross amounts of salaries charged under the collective agreement and individual employment contracts, contributions and charges directly debited to the employer, voluntary pension insurance and other labour costs (holiday allowance, commuting allowance, meal allowance, etc.).

Other operating expensesOther operating expenses appears in connection with the impairment or write-off of assets and with the disposal of property, plant and equipment as result of sales loss.

Finance expensesFinance expenses comprise interest costs on borrowing, impairment losses on financial assets and write-downs of financial assets recognised through the income statement. Borrowing costs are recognised in the income statement using the effective interest rate method. Exchange rate profit and loss are recognised in the net amount. Financial expenses are recognised regardless of the payments related with them.

Other expensesOther expenses refer to the items, which are a result of outstanding, i.e. unique events, and are not related with the regular operation of the Company.

3.11 Lease Types of leaseA lease, for which the Company assumes all relevant types of risk and benefits related to the ownership of an asset, is treated as a financial lease. Others are treated as operating leases. Finance leaseAt the inception of a lease, a finance lease is recognised in the balance sheet as an asset and liability in the amounts equal to the lower of the fair value of the leased asset or the present value of the minimum lease payments, whereby both values are determined upon the inception of the lease. Subsequent to initial recognition, an asset is accounted for in accordance with the accounting policies applicable for such assets. Operating lease With an operating lease, a lease is recognised as an expense under the straight-line method throughout the duration of the lease.

3.12 New standards and interpretations that have not yet become effective

Many new standards, amendments to standards and interpretations for the period ended on 31 December 2011, had not yet become effective and were not applied during the preparation of the financial statements. The adoption of the following standards will not significantly affect the Company’s financial statements.

IFRS 9 “Financial Instruments”, issued by the IASB on 12 November, 2009. On September 28, 2010, the IASB issued a revised IFRS 9, which includes new requirements as regards accounting for financial liabilities, and

transferred requirements for derecognition of financial assets and liabilities from IAS 39. The standard uses a unified approach for determining whether a financial asset is stated at the amortised cost or fair value, and therefore subrogates a number of different rules from IAS 39. The IFRS 9 approach is based on the method used by an entity to manage financial instruments (its business model) and features of contractual cash flows of financial assets. Furthermore, the new standard requires the use of a unified impairment method, and therefore subrogates numerous impairment methods in IAS 39. The new requirements about the accounting for financial liabilities eliminate the problem of inconsistency in the income statement, which are a result of the issuer’s decisions to measure his/her debts at the fair value. The IASB has decided to keep the existing measurement of the amortised cost for most liabilities, and to limit the amendments to those necessary for the elimination of the own loan problem. In accordance with the new requirements, an entity that decides to measure liabilities at the fair value will present the part of the fair value, which is a consequence of changes in entity’s own credit risk, in the other comprehensive profit in the income statement and not in the profit or loss.

IFRS 10 “Consolidated Financial Statements”, issued by the IASB on 12 May 2011. IFRS 10 replaces the consolidation requirements in SIC-12 Consolidation—Special Purpose Entities and IAS 27 Consolidated and Separate Financial Statements and combines them into a single consolidation model, based on the principle of control irrespective of the nature of an investee (i.e. whether such entity is controlled with voting rights of investors or with other agreements, as

48 49


it is common for special purpose entities). IFRS 10 defines control based on whether an investor has 1) power over an investee; 2) exposure or rights to variable returns; and 3) ability to use power over an investee to affect its amount of variable returns. IFRS 11 “Joint Arrangements”, issued by the IASB on 12 May 2011. IFRS 11 establishes principles for the financial reporting by parties to a joint arrangement. IFRS 11 supersedes IAS 31 Interests in Joint Ventures. The proportionate consolidation method of accounting for jointly controlled entities has been eliminated. The mere distinction as to whether a joint arrangement is a joint operation or a joint venture is no longer the key factor. Joint operation is a joint arrangement whereby the parties that have joint control have the rights to the assets and obligations for the liabilities. Joint venture is a joint arrangement whereby the parties that have joint control of the arrangements have rights to the net assets of the arrangement.

IFRS 12 “Disclosure of Interests in Other Entities”, issued by the IASB on 12 May 2011. IFRS 12 requires extensive disclosures of consolidated as well as unconsolidated entities in an entity’s interest. IFRS 12 requires extensive disclosures to help users understand the basis of control, any kind of limitations to consolidated assets and liabilities, risks associated with entity’s interest in unconsolidated structured entities, and the involvement of non-controlling owners of equity in the activity of consolidated entities.

IFRS 13 “Fair Value Measurement”, issued by the IASB on 12 May 2011. IFRS 13 defines fair

value, establishes a framework for measuring fair value and sets out related disclosure requirements. MSRP 13 does not amend the requirements as to which items should be measured or disclosed at fair value.

Amendments to IFRS 1 “First-time Adoption of International Financial Reporting Standards” – Limited exclusion of comparable disclosures under IFRS 7 for first-time adopters of IFRSs, published by the IASB on 28 January 2010. This amendment exempts the first-time adopters of IFRSs of additional disclosures introduced in March 2009 with the document “Enhancing financial instruments disclosures” (Amendments to IFRS 7).

Amendments to IFRS 1 “First-time Adoption of International Financial Reporting Standards” – Severe Hyperinflation and Removal of Fixed Dates for First-Time Adopters, issued by the IASB on 20 December 2010. The first amendment replaces references to a fixed date of “1 January 2004” with “the date of transition for IFRSs”, thus eliminating the need for companies adopting IFRSs for the first time to restate derecognition transactions that occurred before the date of transition to IFRSs. The second amendment provides guidance on how an entity should resume presenting financial statements in accordance with IFRSs after a period when the entity was unable to comply with IFRSs because its functional currency was subject to severe hyperinflation.

Amendments to IFRS 7 “Financial Instruments: Disclosures” – Transfers of financial assets issued by the IASB on 7 October 2010. The aim of these amendments is to improve the quality of information about

financial assets that were “transferred”, yet are still recognised by an entity at least partially, as they do not meet the criteria for derecognition; and about financial assets no longer recognised by an entity, as they meet the criteria for derecognition, yet are still somehow connected with them.

Amendments to IFRS 7 “Financial Instruments: Disclosures” – Offsetting Financial Assets and Financial Liabilities, issued by the IASB on 16 December 2011. The amendments require disclosure of information about all recognised financial instruments that are set off in accordance with paragraph 42 of IAS 32. These amendments also require disclosure of information about recognised financial instruments that are subject to an enforceable master netting arrangement or “similar arrangement”, irrespective of whether they are set-off in accordance with IAS 32. Amendments to IFRS 9 “Financial Instruments” and IFRS 7 “Financial Instruments: Disclosures” – The mandatory effective date and transition disclosures, issued by the IASB on 16 December 2011. The amendments move the mandatory effective date from 1 January 2013 to 1 January 2015. The restatement of comparative period financial statements upon initial application of the classification and measurement requirements of IFRS 9 is no longer required. This was originally a domain of entities who decided to use IFRS 9 prior to 2012. Instead, additional disclosures of transitions will be required to help investors understand the effect of the initial application of IASB 9 on the classification and measurement of financial instruments.

Amendments to IAS 1 “Presentation of Financial Statements” – Presentation of Items of Other Comprehensive Income, issued by the IASB on 16 June 2011. The amendments require the entities that prepare financial statements in accordance with IFRS to group items contained in other comprehensive income, which can be reclassified to profit or loss, in the income statement. The amendments also retain the option to present profit or loss and other comprehensive income in either a single continuous statement or in two separate but consecutive statements.

Amendments to IAS 12 “Income Taxes” – Deferred Tax: Recovery of Underlying Assets, issued by the IASB on 20 December 2010. IAS 12 requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. It can be difficult and subjective to assess whether recovery will be through use or through sale when the asset is measured using the fair value model in IAS 40 Investment Property. The amendment provides a practical solution to the problem by introducing a presumption that recovery of the carrying amount will, normally, be through sale.

Amendments to IAS 19 “Employee Benefits” – Improvements to the accounting for post-employment benefits, issued by the IASB on 16 June 2011. The amendments make important improvements by: (1) eliminating an option to defer the recognition of gains and losses, known as the ‘corridor method’, improving comparability and faithfulness of presentation; (2) streamlining the presentation of changes in assets and liabilities arising from defined benefit

50 51


plans, including requiring remeasurements to be presented in other comprehensive income (OCI), thereby separating those changes from changes that many perceive to be the result of an entity’s day-to-day operations; (3) enhancing the disclosure requirements for defined benefit plans, providing better information about the characteristics of defined benefit plans and the risks that entities are exposed to through participation in those plans.

Amendments to IAS 24 “Related Party Disclosures” – Simplified disclosure requirements for government-related entities and clarification of the definition of a related party, issued by the IASB on 4 November 2009. Amendments enable partial exemption for government-related entities. Prior to the introduction of these amendments, if a government controlled or significantly influenced an entity, the entity was required to disclose information about all transactions with other entities controlled, or significantly influenced by the same government. The revised standard still requires disclosures that are important to users of financial statements but eliminates requirements to disclose information that is costly to gather and of less value to users. The IASB has also simplified the definition and removed inconsistencies. IAS 27 “Separate Financial Statements” (amended in 2011), issued by the IASB on 12 May 2011. Requirements regarding separate financial statements have remained unchanged and are included in the amendment to IAS 27. Other parts of IAS 27 have been replaced by IFRS 10.

IAS 28 “Investments in Associates and Joint Ventures” (amended in 2011), issued by the IASB on 12 May 2011. IAS 28 has been amended accordingly, based on the issue of IFRS 10, IFRS 11 and IFRS 12. Amendments to IAS 32 “Financial Instruments: Presentation” – Classification of rights issues, issued by the IASB on October 8, 2009. This amendment concerns the classification of rights issues (rights, options or warrants) denominated in a foreign currency, which differs from the issuer’s functional currency. Such rights issued were previously classified as derivative liabilities. The amendment states that if certain conditions are fulfilled, such rights should be classified as equity regardless of the currency in which the exercise price is denominated.

Amendments to IAS 32 “Financial Instruments: Presentation” – Offsetting Financial Assets and Financial Liabilities, issued by the IASB on 16 December 2011. The amendments clarify the use of rules for offsetting and are focused on four main areas: (a) the meaning of “currently has a legally enforceable right of set-off”; (b) application of simultaneous realisation and settlement; (c) offsetting sums of collateral; and (d) the unit of account to which the offsetting criteria should be applied.

Amendments to various standards and interpretations “Improvements to IFRSs (2010)”, issued by the IASB on 6 May 2010 under the process of annual improvements to IFRSs (IFRS 1, IFRS 3, IFRS 7, IAS 1, IAS 27, IAS 34 and IFRIC 13), The amendments provide clarifications for requirements of the accounting

recognition in cases in which free interpretation was previously allowed. The most significant amendments include new or amended requirements regarding: (i) accounting policy changes in the year of adoption of IFRSs; (ii) revaluation basis as deemed cost; (iii) use of deemed cost for operations subject to rate regulation; (iv) transitional requirements for contingent consideration from a business combination that occurred before the effective date of the revised IFRS 3; (v) measurement of non-controlling interests; (vi) un-replaced and voluntary replaced share-based payment awards; (vii) clarification of disclosures required by IFRS 7; (viii) classification of statement of changes in equity; (ix) transitional requirements for consequential amendments as a result of IAS 27; (x) events and transactions significant for IAS 34; (xi) fair value of award credit.

Amendments to IFRIC 14 “IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction” – Prepayments of a minimum funding requirement, issued by the IASB on 26 November 2009. Without the amendments, in some circumstances entities were not permitted to recognise some voluntary prepayments for minimum funding contributions as assets. The amendments correct this problem.

IFRIC 19 “Extinguishing Financial Liabilities with Equity Instruments”, issued by the IASB on 26 November 2009. This interpretation explains IFRS requirements in cases in which an entity reaches a new arrangement on the provisions and conditions of financial liability with a creditor, and the creditor agrees to accept shares or some other entity’s equity instruments to extinguish all or part of the financial liability.

IFRIC 20 “Stripping Costs in the Production Phase of a Surface Mine”, issued by the IASB on 19 October 2011. This interpretation requires the costs of “stripping activity” to be accounted for as an addition to an existing asset or its improvement, and that this component must be depreciated or amortised over the expected useful life of the identified core body that becomes more accessible as a result of the stripping activity (using the units of production method unless another method is more appropriate).

4. Financial Risk ManagementIn terms of financial risk management, the Group follows the adopted financial policy that includes the fundamental elements for efficient and systematic financial risk management.

A more detailed overview and activities for assessment and management of each type of risk is indicated in the Business Report in the section “Risk Management”.

Accounting policies related to risk management are formed in order to determine and analyse the risk we face, based on which suitable restrictions and controls are determined and risks are monitored. Risk management policies and systems are regularly inspected, and information from the environment has a dynamic and proactive effect on the current decisions regarding the Company operations under the changed circumstances.

4.1. Credit Risk Credit risk is a risk that a party to a contract on financial instrument may not fulfil its liabilities, thus incurring financial loss to the Company.

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Credit risk is directly linked to the commercial risk and represents a threat that trade receivables and receivables due from other business partners will be repaid with a delay or will not be repaid at all.

In order to limit the credit risk exposure, we use the GVIN formalized business information system. To better know our partners, we use the soft part of information, which includes the current operations as well as the history of their operations with us and the activities of the founders, owners and representatives of

these entities in relation to their involvement in critical processes.

We manage credit risk exposure through the buyers’ credit rating and the active collection of receivables.

The Company management assesses that due to the indicated measures for risk hedging and the fact that the Company generates most revenues in the retail sector, where cash payment prevails, the exposure to credit risk is moderate.

Maximum credit risk exposure

Credit risk exposure for the items, which are not past due or impaired

Credit risk exposure for the items, which are past due and are not impaired

Item 31.12.2011 31.12.2010

Investments in affiliates 4,989 4,989

Loans 100 13

Trade receivables 7,524 7,360

Other receivables 1,470 1,284

Cash and cash equivalents 2,303 1,447

Total 16,386 15,093

Item 31.12.2011 31.12.2010

Investments in affiliates 4,989 4,989

Loans 100 13

Trade receivables 6,544 4,414

Other receivables 1,470 1,284


Total 15,406 12,146

Item 31.12.2011 31.12.2010

Trade receivables 980 2,947

Total 980 2,947




Exposure of trade receivables to the credit risk, by geographic region

Aging of trade receivables

Changes in value adjustments as result of impairment of trade receivables

Age structure of matured trade receivables, which were not impaired

All the items are impaired individually in the Company.

Item 31.12.2011 31.12.2010

Domestic 6,726 6,864

Euro zone 618 411

Former Yugoslavia 84 40

Other countries 96 45

Total 7,524 7,360

ItemGross amount

31. 12. 2011Impairment31. 12. 2011

Gross amount31. 12. 2010

Impairment31. 12. 2010

Non past due 6,287 - 4,414 -

Past due 0–30 days 710 0 2,114 -

Past due 31–180 days 123 4 718 9

Past due 181–365 days 106 4 190 151

More than one year 959 911 934 850

Total 8,185 919 8,370 1,009

Item 31.12.2011 31.12.2010

Balance at 1 January 1,009 1,484

Final write-off -219 -351

Allowances in year 189 169

Reversal of impairment -60 -293

Balance at 31 December 919 1,009

Item 31.12.2011 31.12.2010

Past due 0–30 days 710 2,114

Past due 31–180 days 119 710

Past due 181–365 days 102 39

More than one year 48 84

Total 980 2,947

At 31 December 2011, total allowances for receivables amounted to €919 thousand (2010: €1,009 thousand). In 2011, the Company made an allowance for receivables due from the parent company in accordance with the compulsory settlement of €176 thousand, which were finally

written off after the compulsory settlement was confirmed. In total, €219 thousand of receivables were finally written off, allowances of €189 thousand were made for receivables, and €60 thousand of impairments were reversed.





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Securities for trade receivables (in gross amounts, excluding adjustments of receivables)

Fair value

Item 31.12.2011 31.12.2010

Secured receivables 1,312 1,108

Unsecured receivables 6,874 7,262

Total 8,185 8,370

Trade receivables are secured with Slovenian and foreign insurance companies. Other credit exposure items are not secured.

4.2. Market Risk

Interest rate risk In 2011, Big Bang raised two long-term loans, both of which are tied to the EURIBOR variable interest rate; therefore, the operations are exposed to interest risk.

As in 2010, levels in interest rates were low in 2011. In the first half of the year, we witnessed the growth of EURIBOR, which however slightly dropped in the second half. Due to intensified situation on financial markets, interest rates are not expected to increase. In contrast, the exposure to interest rate risk has been decreasing on account of regular monthly repayments of the existing loans. Management thus assesses the interest rate risk exposure in 2011 as moderate.

Fair value sensitivity analysis for instruments with fixed interest rateThe Company does not account for financial assets with fixed interest rates at fair value through the income statement; therefore, the change of interest rates at the reporting date would not affect the net profit or loss.

Cash flow sensitivity analysis for instruments with variable interest rateOn the reporting date, a change of interest rates by 100 basis points would increase (decrease) the equity and profit or loss by €20 thousand. The analysis presumes all other variables to remain unchanged. The analysis was not carried out for 2010, since the Company did not dispose of any financial instruments with variable interest rates.

Item 31.12.2011Carrying amount

31.12.2011Fair value

31.12.2010Carrying amount

31.12.2010Fair value

Investments in subsidiaries 4,989 4,989 4,989 4,989

Loans 100 100 13 13

Operating receivables and other assets 8,994 8,994 8,644 8,644

Cash and cash equivalents 2,303 2,303 1,447 1,447

Bank loans with variable interest rate -7,839 -7,839 - -

Finance lease liabilities -162 -162 -196 -196

Trade payables and other liabilities -23,677 -23,677 -25,463 -25,463

Total -15,292 -15,292 -10,565 -10,565



Contractual maturities of non-derivative financial liabilities in 2011

The fair value of financial assets and liabilities does not deviate significantly from the carrying amount. The only exception is investment in affiliate, where the fair value cannot be determined, since the Company is not listed on the stock exchange.Investment in affiliate is valued at the cost model. The Company has no other investments; therefore it does not disclose valuation levels.

4.3. Currency Risk

Sensitivity analysisThe Company generally uses the euro for its transactions, and therefore a change in the U.S. dollar would not have an important influence on the Company’s equity or profit or loss.

4.4. Inflation RiskSince the Merkur Group uses the policy of transferring increased purchase prices to the selling prices, and since the non-EU states, including the state in which our subsidiary is located, are making strong and successful

attempts to limit and decrease inflation, the management of the Company assesses that the inflation exposure risk is low.

4.5. Insolvency RiskInsolvency risk is the risk that the Company will encounter problems in obtaining the finances needed to fulfil its financial liabilities.

The Company has managed the indicated risk with active liquidity management in order to prevent the events of non-reconciled cash inflows and outflows. Easier management and balancing of the current liquidity also enables constant inflow from retail buyers.

The management assesses that the insolvency risk exposure is low with regard to the indicated protection measures and the current situation.

The following tables present the contractual maturities of financial liabilities, including the estimated payments of interest and without the influence of arrangements regarding offset.

Item Carrying amount

Contractual cash flows

6 months or less

6–12 months 1–2 years 2–5 years

Non-derivative financial assets

Loans 100 108 103 0 1 4

Trade receivables 7,541 7,541 7,283 64 64 129

Receivables due from others 1,453 1,453 1,453 - - -

Cash and cash equivalents 2,303 2,303 2,303 - - -

Total non-derivative financial assets 11,397 11,405 11,142 65 65 132

Non-derivative financial liabilities

Collateralized loans -7,839 -8,670 -908 -1,290 -2,489 -3,982

Finance lease liabilities -162 -171 -66 -40 -57 -8

Trade payables -19,811 -19,811 -27 - - -

Liabilities to others -3,866 -3,866 - - - -

Total non-derivative financial liabilities -31,678 -32,517 -1,001 -1,330 -2,546 -3,990

Net as at 31 December 2011 -20,281 -21,112 10,142 -1,266 -2,481 -3,858


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Item Carrying amount

Contractual cash flows

6 months or less

6–12 months 1–2 years 2–5 years

Non-derivative financial assets

Loans 13 13 3 2 2 6

Trade receivables 7,370 7,370 7,370 - - -

Receivables due from others 1,274 1,274 1,274 - - -

Cash and cash equivalents 1,447 1,447 1,447 - - -

Total non-derivative financial assets 10,104 10,104 10,094 2 2 6

Non-derivative financial liabilities

Finance lease liabilities 196 205 57 57 73 17

Trade payables -21,449 -21,449 -21,449 - - -

Liabilities to others -4,014 -4,014 -4,014 - - -

Total non-derivative financial liabilities -25,267 -25,258 -25,405 57 73 17

Net as at 31 December 2011 -15,163 -15,153 -15,312 60 75 23

Contractual maturities of non-derivative financial liabilities in 2010

Intangible assets by types

5. Notes and Disclosures to the Balance Sheet

For better transparency, the balance sheet is published in a short format. Detailed

classification of individual items, and data and information that are disclosed, are presented in hereunder.

Item 31.12.2011 31.12.2010

Intangible assets 356 541

Property rights (trademarks, rights and licenses) 325 541

Intangible assets being acquired 31 -



5.1 Intangible Assets

Changes in intangible assets

In 2011, our BOF trademark was entirely amortised; therefore, the entire value of intangible assets covers only the rights for the use of software.

In 2011, intangible assets reduced by 40%, entirely as result of amortisation (the trademark is also amortised due to its time determination of use).

Item Property rights and software Intangible assets being acquired

Total

Balance at 1 January 2010

Cost 3,085 - 3,085

Accumulated amortisation -2,318 - -2,318

Carrying amount 767 - 767

Year 2010

Initial carrying amount 767 - 767

Additions 158 - 158

Amortisation -384 - -384

Final carrying amount 541 - 541

Balance at 31 December 2010

Cost 3,243 - 3,243

Accumulated amortisation -2,702 - -2,702

Carrying amount 541 - 541

Year 2011

Initial carrying amount 541 - 541

Additions 188 31 219

Amortisation -404 - -404

Final carrying amount 325 31 356

Item 31.12.2011 31.12.2010

Property, plant and equipment 6,239 7,291

Land and buildings 4,519 5,405

Plant, machinery and equipment 1,720 1,886


In thousands of euros5.2 Property, Plant and Equipment

58 59


Changes in property, plant and equipment

Carrying amounts of property, plant and equipment obtained through finance lease

Item Property and buildings

Plant, machines and equipment

Fixed assets in acquisition Total


Cost 9,639 5,595 3 15,236

Accumulated depreciation -4,340 -3,575 - -7,915

Carrying amount 5,298 2,020 3 7,321

Year 2010

Initial carrying amount 5,298 2,020 3 7,321

Additions 1,043 584 -3 1,624

Depreciation -937 -667 - -1,604

Disposals and write-offs 0 -51 - -51

Final carrying amount 5,405 1,885 0 7,291


Cost 10,682 5,386 - 16,068

Accumulated depreciation -5,277 -3,500 - -8,777

Carrying amount 5,405 1,885 - 7,291

Year 2011

Initial carrying amount 5,405 1,885 - 7,291

Additions 335 512 - 847

Depreciation -978 -652 - -1,630

Disposals and write-offs -243 -25 - -268

Final carrying amount 4,519 1,720 - 6,239


In 2011, the Company purchased property, plant and equipment in the amount of €847 thousand. The accounted depreciation included in operating costs was €1,630 thousand in 2011 (2010: €1,604 thousand).

In 2011, the Company obtained new equipment through finance lease in the amount of €84 thousand.

The Company has no mortgages/pledges on own property.

The acquisition refers to the purchase of Company vehicles.

Item 31.12.2011 31.12.2010

Property 277 286

Equipment 175 166

Total 453 452



Long-term financial investments entirely refer to the investment in the subsidiary Big Bang, d. o. o.,

Loans to others include loans to employees. Such loans bear interest at the annual interest rate equalling the recognised interest rate effective during the contract conclusion, which was between 2% and 3% in 2011. The maximum loan repayment period is four years. Short-term loans to others comprise the short-term part of long-term loans to employees.

5.3 Long-Term Financial Investments in Subsidiaries

5.4 Long-Term and Short-Term Loans

Belgrade, and did not change in 2011.

Short-term loans to companies comprise the short-term part of the long-term loan to the subsidiary Big Bang d.o.o., Belgrade.

Long-term loans to companies include the loans to Jezapo Holdings Ltd. (€1,400 thousand), HTC DVA, d.o.o. (€573 thousand) and Merfin, d.o.o. (€730 thousand). We have made complete value adjustments for all these loans.

Item 31.12.2011 31.12.2010

Long-term financial investments in subsidiaries 4,989 4,989

Long-term financial investments in subsidiaries 4,989 4,989

Item 31.12.2011 31.12.2010

Long-term loans 4 8

Long-term loans to companies 2,703 2,703

Value adjustment of long-term loans to companies -2,703 -2,703

Long-term loans to others 4 8

Short-term loans 96 5

Short-term loans to companies 95 3

Value adjustment of short-term loans to companies - -3

Short-term loans to others 1 5



60 61


Changes in loans

Item Short-term loans Long-term loans


Gross amount 1,665 3

Adjustment -3 -

Carrying amount 1,662 3

Year 2010

Opening carrying amount 1,662 3

Loans - 5,367

Attributed interest - 41

Short-term maturity of long-term loans 5 -5

Repayments -1,662 -2,695

Final write-off 58 -

Value adjustments for the period -58 -2,703

Closing carrying amount 5 8


Gross value 8 2,711

Value adjustment -3 -2,703

Carrying amount 5 8

Year 2011

Opening carrying amount 5 8

Loans - 298

Short-term maturity of long-term loans 96 -96

Repayments -5 -206

Final write-off 3 -

Closing carrying amount 96 4

In 2011, short-term loans decreased by €5 thousand, entirely as result of repayments. The increase is a matter of reclassifying the short-term maturity of long-term loans. In 2011, a value adjustment of €3 thousand was made for the loan to Slovensko nacionalno društvo frankofonskega poslovnega foruma, which represents the final write-off of this loan.

In 2011, long-term loans increased by €298 thousand as result of new loans (€295 thousand of which is a loan to our subsidiary in Belgrade). The decrease in the amount of €206 thousand is a result of early repayment of long-term loans, €200 thousand of which refers to the repayment of the loan to our subsidiary, and the remaining €96 thousand to the short-term maturity of long-term loan.

In thousands of euros Security of loans

5.5 Long-Term Operating Receivables

Item 31.12.2011 31.12.2010

Long-term loans 4 8

No security 4 8

Short-term loans 96 5

No security 96 5

Long-term operating receivables refer to receivables due from the parent company Merkur d.d. after the compulsory settlement.

5.6 Deferred Tax Assets

Long-term deferred tax assets are calculated based on temporary differences in the method of liabilities from the balance sheet using a 20% tax rate.

In the tax report for 2011, the Company utilized deferred tax assets associated with the provisions in the amount of €9 thousand, impairment of receivables of €9 thousand, and with the tax loss from the previous period totalling €274 thousand. Moreover,

Item 31.12.2011 31.12.2010

Long-term operating receivables 258 -

Long-term operating receivables due from related companies 258 -



Changes in temporary differences between the accounting gains and tax profit in 2011

Item Opening balance for the period

Recognised in income statement

Year-end closing balance

Receivables -17 9 -8

Inventory -32 - -32

Provisions -75 8 -67

Tax loss -767 274 -493

Total -891 291 -600


the Company newly recognised temporary differences for deferred tax from provisions in the amount of €1 thousand. At 31 December 2011, the balance of deferred tax assets was €600 thousand. The Company therefore recognised €291 thousand of temporary differences in the income statement.

At 31 December 2011, the tax loss carryforward was €2,645 thousand, and refers to the established (and carried forward) tax loss from 2010.

62 63


5.7 Inventory

Item 31.12.2011 31.12.2010

Inventory 17,028 17,835

Material 3 -

Products and merchandise 17,181 17,990

- merchandise in warehouses 4,764 3,245

- merchandise in stores 12,416 14,569

- merchandise in transit - 176

Adjustments -156 -156

Inventory includes merchandise in stores and their respective warehouses, and merchandise in stock in wholesale and customs warehouses. At 31 December 2011, the balance of inventory of merchandise was by 4.5% lower as compared

At 31 December 2011, the Company disclosed operating receivables of €8,737 thousand, exceeding those from 2010 by 1%.

The balance of cash at the end of 2011 was by 1.59 times higher as compared to the end of 2010.

A total of 21% trade receivables is secured.

to the end of 2010.

The surplus and deficits in inventory established during the year are recognised to the debit of the cost of goods.

Item 31.12.2011 31.12.2010

Short-term operating receivables and other assets 8,737 8,644

Advances for inventory 17 10

Short-term trade receivables 6,214 6,611

Short-term operating receivables due from subsidiaries 1,052 750

Short-term operating receivables due from others and deferred expenses and accrued revenues

1,453 1,274

Item 31.12.2011 31.12.2010


Cash on hand 412 204

Redeemable deposit 1,700 1,130

Cash on accounts 191 113




5.8 Short-Term Operating Receivables

5.9 Cash and Cash Equivalents

Financial liabilities comprise long-term liabilities to banks for loans and to lessors for finance lease of business premises and equipment (vehicles). The average maturity of finance lease liabilities for vehicles is three years, and five years for bank loans. Short-term financial liabilities comprise the short-term part of financial lease for vehicles and business premises, and of bank loans, which fall due next year.

5.10 EquityShare capitalThe Company’s share capital is entered at the Ljubljana Local Court in the amount of €4,204 thousand, and did not change in 31 December 2011; the sole owner of the equity was Merkur, d.d., Naklo.

ReservesCompany reserves are capital surplus (subsequent payments of equity) and legal reserves.

The interest rate for finance lease is tied to a 12-month EURIBOR, except for one, where it is tied to a 3-month EURIBOR. The interest rate for long-term loans is tied to a 3-month and 6-month EURIBOR and was between 5.29% and 5.49% at 31 December 2011.

At 31 December 2011, capital surplus amounted to €2,892 thousand. In 2011, their value did not change. The total value of capital surplus represents subsequent payments of equity based on the Memorandum of Association.

Legal reserves, which amounted to €420 thousand on 31 December 2011, did not change during the year. Retained earningsAt 31 December 2011, retained earnings totalled €1,062 thousand, and entirely represent the profit of the year.

Bank loans fall due in 31.12.2011 31.12.2010

Not more than one year 1,818 -

More than a year and not more than five years 6,021 -

Total 7,839 -

Item 31.12.2011 31.12.2010

Financial liabilities 8,001 196

Long-term financial liabilities 6,084 88

Bank loans 6,021 -

Finance lease 63 88

Short-term financial liabilities 1,917 108

Short-term part of bank loans 1,819 -

Short-term part of finance lease 98 108

Maturity of financial liabilities In thousands of euros

In thousands of euros5.11 Financial Liabilities

64 65


Liabilities for assets in finance lease fall due in 31.12.2011 31.12.2010

Not more than one year 98 108

More than a year and not more than five years 63 88

Total 161 196

Item 31.12.2011 31.12.2010

Long-term provisions 349 8,855

Provisions for termination bonuses 349 355

Provisions for sureties given - 8,500

5.12 Provisions

Changes in provisionsItem Provisions for termination

bonusesProvisions for sureties given Total

Balance at 1 January 2010 374 - 374

Provisions formed during the year - 8,500 8,500

Provisions utilized during the year -19 - -19

Balance at 31 December 2010 355 8,500 8,855

0

Balance at 1 January 2011 355 8,500 8,855

Provisions formed during the year 7 - 7

Provisions utilized during the year -13 -8,500 -8,513

Balance at 31 December 2011 349 0 349

Provisions for termination and jubilee bonuses are formed for the estimated liabilities of termination bonus payments for old-age retirement, and jubilee bonuses on the balance sheet date, discounted to the current value. The liability was formed for the expected payments and is based on actuarial estimate, which included the following assumptions:•Discountrateof4.2%,•Currently effective amounts of termination

and jubilee bonuses, determined in the Company’s internal acts, or as laid down by regulations,

•Actualturnoverofemployeesbyagegroups,•MortalitytablesoftheSlovenianpopulation

between 2005-2007, and•Growth of salaries as result of inflation

adjustment in 2.5% and due to career promotion in the amount of 2%.

In 2011, the Company entirely utilized the provision for sureties given to the managing company in the amount of €8,500 thousand.




Item 31.12.2011 31.12.2010

Contingent liabilities 13,353 14,620

Guarantees, of which to: 13,353 14,620

- Group companies 13,253 14,470

- Other companies 100 150

Item 31.12.2011 31.12.2010

Short-term operating liabilities 23,677 25,463

Short-term operating liabilities based on advances 331 373

Short-term trade payables 19,784 21,374

Short-term operating liabilities to related companies 27 75

Short-term operating liabilities to others 3,535 3,641

- liabilities for unpaid salaries 715 609

- liabilities for interest 105 -

- liabilities to state institutions 1,894 2,146

- other liabilities 821 886

5.13 Short-Term Operating Liabilities

5.14 Contingent Liabilities and Assets

Contingent liabilities

At 31 December 2011, short-term operating liabilities were by 7% lower than in the year before. Trade payables represent 84%, while liabilities to related companies account for only 0.1% of the total short-term operating liabilities.

Short-term liabilities to others include liabilities for unpaid salaries, interest, liabilities to state institutions, and other liabilities, among which

Contingent liabilities of the Company refer to sureties given to banks for the loans taken by the parent company in the amount of €13,253 thousand and customs guarantee of €100 thousand.

is also short-term deferred revenue (€358 thousand) and accrued costs and expenses (€417 thousand). Short-term operating liabilities to state institutions also comprise VAT liabilities, which amounted to €1,746 thousand (2010: €2,039 thousand).



66 67


Sureties given to banks for loans raised by the parent company

Contingent assets

Recipient of surety Principal 31.12.2010

Repayments in 2011

Other securities Attribution of interest

Maximum contingent liability

NLB* 9,670 3,468 3,000 29 6,231

NKBM 35,000 27,978 - - 7,022

Total 44,670 31,446 3,000 29 13,253

On 9 February 2011, an Agreement about the settlement method of two past due loans of the parent company, for which the Company is the surety, was signed with Nova Ljubljanska Banka, d. d. (hereinafter “NLB”). In accordance with the Agreement, the parent company will return 60% of the principal within the financial plan of restructuring (the first instalment was settled on 31 December 2011), and 40% of the principal was approved by NLB to the Company on 30 September 2011 as a long-term loan in the amount of €2,784 thousand, which was used to repay the principal and interest. Moreover, the Company settled the principal and interest of €400 thousand by 30 September 2011.

*A loan of €3,000 thousand is, besides our surety, also pledged with an immovable property. The related company Mersteel, d.o.o., which is also in the process of compulsory composition, guarantees for all loans as a joint and several surety.

Contingent assets refer to recourse to related companies Merkur d.d. and Mersteel d.o.o. for payments of surety liabilities. Recourse to the Company Merkur d.d. is expressed in the amount that corresponds to the plan of

On 31 March 2011, an Agreement about the method of partial fulfilment of the surety liability, which the Company as the surety has for a loan to Merkur, d.d., totalling €35,000 thousand was signed with Nova KBM, d.d. On 31 March 2011, the receivable of Nova KBM, d.d., under the mentioned loan contract amounts to only €13,300 thousand of the principal. In accordance with the Agreement, the Company repaid a part of its surety liability (40% of the principal), i.e. the principal and interest in the amount of €5,642 thousand with the approved loan of Nova KBM, d. d. Within the plan of financial restructuring, the other 60% of the principal will be repaid by Mersteel, d.o.o. and the parent company, which already settled the first instalment on 31 December 2011.

financial restructuring. We called the company Mersteel d.o.o. as a joint and several surety to compensate the pro rata part of our payments in accordance with the Code of Obligations.

Item 31.12.2011 31.12.2010

Contingent assets 6,163 -

Recourse 6,163 -


In thousands of euros Costs of material used by types

In 2011, costs decreased by 3% compared to the year before as result of decreased costs of services. All other types of costs increased in the same period.

Item 2011 2010

Costs by primary types 22,706 23,364

Costs of material used 955 911

Costs of services 10,836 11,410

Labour costs 8,035 8,364

Amortisation/depreciation costs 2,034 1,987

Long-term provisions 7 -

Other operating costs 840 692

Item 2011 2010

Costs of material used 955 911

Electricity costs 482 449

Fuel costs 175 159

Costs of office material 57 59

Other costs of material 241 244

6. Notes and Disclosures to the Income Statement

6.1. Net Sales

6.2. Costs by Primary Types

Item Slovenia2011

Slovenia2010

Foreign market

2011

Foreign market

2010

Total Company2011

Total Company2010

Net sales 103,720 116,803 11,172 5,022 114,892 121,825

Revenue from the sales of merchandise 101,585 114,570 10,016 3,939 111,601 118,509

Revenue from the sales of services 2,135 2,233 1,156 1,083 3,290 3,316




68 69


Costs of services by types

Labour costs by types

Amortisation/depreciation costs by types

Other operating costs

Item 2011 2010

Costs of services 10,836 11,410

Costs of transportation to buyers and other costs of transportation 312 302

Advertisement, propaganda, and participation at fairs 2,547 2,913

Lease for assets 4,309 4,339

Maintenance costs 1,270 1,232

Costs of telecommunication and postal services 282 316

Costs of public utility services, water rates and sewage costs 83 125

Reimbursement of labour related costs to employees 108 124

Costs of credit card sales, payment transactions, bank services, and customs duties 676 826

Insurance premiums 135 95

Hospitality 16 30

Costs of education 33 18

Costs of other services 1,064 1,091

Item 2011 2010

Labour costs 8,035 8,364

Payroll 5,818 6,005

Pension insurance costs 590 603

Cost of other insurances 424 438

Holiday allowance 317 318

Commuting allowance 414 410

Meal allowance 444 451

Other costs 27 139

Item 2011 2010

Amortisation/depreciation costs 2,034 1,992

Depreciation of property, plant and equipment 1,630 1,607

- depreciation of investments in property – buildings 978 869

- depreciation of equipment and small tools 652 738

Amortisation of intangible assets 404 384

Item 2011 2010


Contribution for building land use 190 196

WEEE fee 576 350






Item 2011 2010

Revaluation operating expenses 507 199

Write-downs in property, plant and equipment to the recoverable amount 256 45

Write-downs and adjustments of inventory to the realisable value 49 -

Impairments and write-downs in operating receivables 202 154

Item 2011 2010

Other operating expenses 17 8

Other operating expenses 17 8

Item 2011 2010

Other operating income 131 347

Profit from the sale of property, plant and equipment 7 12

Income from recognised receivables 95 290

Other operating income 30 45

6.3. Revaluation and Other Operating Expenses

6.4. Other Operating Income

Revaluation operating expenses in 2011 increased by 154% compared to 2010, primarily due to write-downs of property, plant and equipment as result of the removal of branch office and return of leased business premises.

Write-downs to the realisable value refer to the adjustments of inventories associated with damaged, deteriorated or destroyed goods.

Other operating income decreased by 62% compared to the same period of 2010. 72% of all the Company’s operating income represents income from realised receivables. Other

Impairment or loss related to operating receivables in the total amount of €202 thousand is the result of an impairment of receivables on account of a doubt about their realisation. Impairments of €190 thousand refer to receivables due from the parent company, which were impaired and written off in accordance with the confirmed compulsory settlement.

operating income of the Company includes received damages, refunds of overpaid fees and charges, and cent rounding, etc.




70 71


6.5. Financial Revenue and Expenses

Financial Revenue

Financial Expenses

Item 2011 2010

Financial revenue 277 595

Interest revenue 74 224

Net exchange rate gains 6 8

Other financial revenue 197 363

Item 2011 2010

Financial expenses 889 3,246

Interest expenses 888 481

Net expenses from exchange rates 1 5

Impairment loss – loans - 2,760

In 2011, the Company’s financial revenue was €318 thousand below the result in the previous year, of which the largest amount was

In 2011, financial expenses significantly decreased, primarily as a result of their abnormally high amount in 2010 due to impairments of loans to companies that were in financial problems.Financial expenses for interest in the amount of €888 thousand refer to paid interest recognised under the concluded loan contracts (including finance lease), and interest for overdraft utilization. Compared to 2010, these increased as result of taking long-term borrowings to repay a part of the surety liabilities for the parent company’s loans. The interest rate for

represented by allowances for sureties given to related companies.

finance lease is tied to a 12-month EURIBOR, except for one, where it is tied to a 3-month EURIBOR. Interest rates in concluded loan contracts and overdrafts were between 5.9% and 6.8%. The interest rate for long-term loans is tied to a 3-month and 6-month EURIBOR and was between 5.29% and 5.49% at 31 December 2011.

Net expenses from exchange rates totalling €1 thousand refer especially to negative exchange rates in respect of the USD.



At 31 December, the tax loss that was not carried forward amounts to €2,645 thousand, and refers to the established (and not carried forward) tax loss from 2010.

Corporate income tax

Effective tax rate

Item 2011 2010

Deferred tax expense/revenue -291 710

Total tax expense in income statement -291 710

Item 2011 2010

Earnings before tax 1.353 -6.718

Tax rate 20% 20%

Expected income tax at 20% tax rate 271 -1.344

Expenses not recognised for tax purposes 122 2.879

Tax base I 1.475 -3.839

Change of tax base 46 5

Tax base II 1.522 -3.834

Tax relief -153 -

Tax loss offsetting -1.369 -

Tax base III - -

Tax loss - -3.834

Income tax - -



6.6. Other Expenses

Other expenses of €289 thousand refer to under-recognised provisions for sureties given to the managing company, which were formed in 2010 in the amount of €8,500 thousand (see also Note 5.13. Contingent Liabilities).

6.7. Corporate Income Tax

Liability for corporate income tax is established based on the Corporate Income Tax Act (ZDDPO-2), effective as of 1 January 2007.

72 73


Other receipts comprise holiday allowance, benefits in respect of managerial insurance, company car allowance, and meal and commuting allowance.

Shares of the company Merkur, d.d., owned by related natural persons at 31 December 2011At 31 December 2011, no related natural persons owned any of the shares of Merkur, d.d.

Company’s transactions with related entities in 2011

Company’s transactions with related entities in 2010

Item Sale of merchandise Purchase of merchandise Purchase of property and other assets Service rendering Used services Charged interest Received interest Receivables Liabilities Loans Sureties given

Merkur, d. d. 7,204 72 - 4 161 0 198 1,226 27 - 13,253

Parent company 7,204 72 - 4 161 0 198 1,226 27 - 13,253

Big Bang, d. o. o., Belgrade 117 - - 23 - - - 84 - 95 -

Total subsidiaries 117 - - 23 - - - 84 - 95 -

Total 7,321 72 - 27 161 0 198 1,310 27 95 13,253

Item Sale of merchandise Purchase of merchandise Purchase of property and other assets Service rendering Used services Charged interest Received interest Receivables Liabilities Loans Sureties given

Merkur, d. d. 8,100 3,194 259 114 467 0 436 715 75 - 44,670

Parent company 8,100 3,194 259 114 467 0 436 715 75 - 44,670

Big Bang, d. o. o., Beograd 30 - - 21 - - 2 35 - - -

Total subsidiaries 30 - - 21 - - 2 35 - - -

Merfin, d. o. o. - - - - - - 29 - - 700 -

Total other related companies - - - - - - 29 - - 700 -

Total 8,130 3,194 259 135 467 0 467 750 75 700 44,670



Gross receipts of the Management and employees under individual contracts

Recipient Number of members

Fixed part of receipts

Variable part of receipts

Other receipts Total gross receipts

Total net receipts

1 2 3 5 6=2 do 5 7

Breda Terglav 1 80 - 53 134 66

Aleš Ponikvar 1 88 - 2 90 45

Gross structure 75% 0% 25% 100%

Employees under individual contracts

9 285 - 31 315 144


7. Other Notes

7.1 Transactions with Related Entities

The Company has three groups of related entities: the management staff and the parent and subsidiary company.

The management staff comprises the Managing Director and the Procurator.

74 75


The subsidiary in Belgrade finished the year 2011 with a loss of €532 thousand, which is 22% lower than the year before. The main reason is a relatively high fixed operating cost (rent and related costs), not particularly high market demand due to the economic situation, and negative currency differences. By reducing the surface area of the store at the end of the year and consequently lowering costs, we plan to generate a positive operating result. We have already received the first positive results after the reduced surface area of the store.

Big Bang, d. o. o., Beograd

7.2 Subsidiary

Item Country Ownership share from year

Ownership share in %

Investment value at the year-end

Profit or loss of the Company

2010 Serbia 2005 100% 4,989 -679

2011 Serbia 2005 100% 4,989 -532

In thousands of euros The Company’s management hereby confirms the financial statements of the company Big Bang, d.o.o., for the year ended 31 December 2011.

The management confirms consistent use of appropriate accounting policies and that accounting estimates were made following the principles of prudence and good management and that the Annual Report presents a true and fair view of the Company’s financial position and the results of its operations for the year 2011. The management is also responsible for appropriate accounting, adoption of suitable measures to secure the property and other assets, and it confirms that the financial statements together with the notes are in accordance with the relevant legislation and the IFRS as endorsed by the EU.

The Company’s management is familiar with the content of the parts of the Annual Report of Big Bang, d.o.o., for the year 2011 and therefore also with the entire Annual Report of Big Bang, d.o.o., for 2011. The Company management agrees with them and confirms them with signature.

Ljubljana, 5 March 2012 Aleš Ponikvar Head of Division

STATEMENT BY THE MANAGEMENT

7.3 Audit Fees

Pursuant to Article 57 of the Companies Act (ZGD-1), the Company must be audited. For 2010, the Company concluded a contract for auditing financial statements and annual report for the 2011 business year with the company Deloitte revizija, d.o.o., in the amount of €16 thousand. The Annual Report was confirmed on 23 March 2012.

On 16 February 2012, the Management of the Company welcomed a new member, Tadej Jurkovič, to the position of Sales Director. His task will be to take over the sales sector, managing sales in all channels.

In the first quarter of 2012, we moved our central warehouse from Ljubljana to Celje. This was the first step of our logistics strategy, which includes our own logistics centre to ensure supply to customers and our own retain units via our own logistics system. The new warehouse is entirely equipped in terms of infrastructure and started operating on 20 February 2012.

There were no other events that would significantly affect the financial statements or require additional disclosures to the annual report.

8. Significant Business Events after the Balance Sheet Date

7776

[Financial report]

INDEPENDENT AUDITOR’S REPORT

78 79

Name of company: Big Bang, d. o. o., BelgradeRegistered office: Partizanske avijacije 4, 11070 Belgrade

Phone number: +381 (0)1 122 00 640Fax number: +381 (0)1 122 00 641

E-mail: [email protected] number: 103974613

Registration number: 20065630Principal activity: 51430 Retail trade in electrical household appliances,

TV and RadioEntry in the register of companies: Input number BD 84785/2005

Share capital: €4,988,754 Owner: 100% owner of company’s capital is Big Bang, d. o. o.,

Šmartinska cesta 152, 1000 LjubljanaDirector: Aleksandra Memon

Identity card of subsidiary

Name of company: Big Bang, trgovina in storitve, d. o. o.

Short name: Big Bang, d. o. o.Registered office: Šmartinska cesta 152, 1000 Ljubljana, Slovenia

Web address: www.bigbang.siPhone number: (01) 309 3700

Fax number: (01) 309 3760E-mail: [email protected]

Identification number: SI18224326Registration number: 5464943

Principal activity: G/47.430: Retail trade in electrical household appliances, TV and Radio

Entry in the register of companies: District Court in Ljubljana, input number 1/11417/00Share capital: €4,204,400

Transaction accounts: NLB, d. d.: 02923-0254441325SKB, d. d.: 03171-1007727196

Business premises in m2: Own: 402 m2

Rented: 37,821 m2

Owner: 100% owner of Company’s capital is Merkur, d. d., Cesta na Okroglo 7, 4202 Naklo

Managing director: Aleš Ponikvar

Identity card

PRESENTATION OF THE COMPANY WITH ITS SUBSIDIARY

Big Bang, d.o.o., Šmartinska 152, SI - 1000 Ljubljana, Slovenia,Tel.: + 386 (0)1 309 37 01, www.bigbang.si

Documents

Annual Report 2011 - Big Bangmedia.bigbang.si/slovenija/letna_porocila/bigbang... · management of Big Bang. Exceptional success of the trademark BEKO Thanks to Big Bang, Beko’s