annual report 2018 - armatury group a.s. · report on relations / 40. supervisory board´s report /...
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ANNUAL REPORT 2018
Annual report 2018
ARMATURY Group a.s. Nádražní 12, 747 22 Dolní Benešov, Czech Republic www.armaturygroup.com
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CONTENT
Introductory word / 5
Report of the Board of Directors on the company´s business activities and on the state of its assets / 6
Central Europe Sales Hub / 6
Foreign trade / 7
Manufacturing of valves / 8
Service and repair of valves / 9
Research and development / 10
Quality / 12
Human resources management / 13
Financial part / 14
Balance sheet / 14
Income statement / 18
Cash-flow statement / 20
Statement of changes in equity / 21
Notes to the Financial Statements / 22
Report on relations / 40
Supervisory Board´s Report / 45
Organization chart of company / 46
EMS and OHSAS Policy / 47
Independent Auditor´s Report / 48
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Introductory word
The year 2018 can be regarded as successful. We achieved good economic results, succeeded in major projects, conquered new markets, and optimized corporate processes.
In terms of revenues, 2018 fared better than the previous year. We exceeded the expected targets given the deviations in our internal structure from the planned original. Revenues from own production were at the higher end of the estimate, while sales of goods and material exceeded expectation. Looking at the sectors supplied with our products, the largest share can be ascribed to the power industry (more than 40 %), followed by gas and petrochemicals industries. We recorded increased demand in the sphere of metallurgy, which had a positive effect on the number of metallurgical and special fittings contracts.
Our expansion to foreign markets was associated with the establishment of a new branch in the United Arab Emirates. The opening of our office in Dubai brought forth promising prospects of gaining new customers and increase in sales not only in the Emirates but also across the entire Middle East region. Concurrently, we were approved as a supplier of the oil company ADNOC. The marketing activities in this region were also supported through active participation in the globally recognized exhibition ADIPEC in Abu Dhabi, where we presented novelties regarding ball valves.
Our major strength is the development of new and customized products. Last year, we completed several development tasks, such as the manufacture of new types of cryogenic ball valves and metal x A-tight metal valves. These positive results provide impetus for continuing with research and development of new products and to relentlessly work toward improving our existing product line to meet the demands of the future.
The planned target for 2019 is CZK 1.445 billion and we remain confident in achieving it in terms of the figures and the planned structure. Our primary goal remains fulfilment of customer requirements and the building of long-term successful cooperation.
Petr Holeček Chairman of Board of Directors
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Report of the Board of Directors on Company’s Business Activity and its Assets and Liabilities
Central Europe Sales Hub We exceeded the sales plan by 41 %
Given the domestic sale of fittings, the year 2018 was much more successful than 2017. It significantly surpassed the 2018 plan and sales scaled up to CZK 635 million, thanks to which our performance reached 141 % of the planned value.
The Piping & Accessories Sales department was also very successful. Sales reached CZK 160 million, which meant achieving 168 % of the planned target. Other sales for the domestic market came from the department of services, amounting to CZK 68 million; meaning 109 % of the planned volume. Total sales of the department to customers corresponded to CZK 865 million, constituting approximately 50 % of all of ARMATURY Group’s sales. A considerable percentage of our supplies ended up abroad as components of technological units (end products) exported by domestic firms.
Stable supplies to chemical industry
The most significant chemical project was the construction of a refinery in Pancevo, Serbia. Supplies related to piping, fittings and accessories, including pre-fabrication. We have been steadily supplying Unipetrol, Česká rafinerská, and other chemical companies for 10 years.
As for the power industry, a significant project was EKOFLEX in MONDI, Štětí, for which we supplied almost 700 fittings. The most interesting was the supply of high-pressure sluice valves (gate valves) S43 DN 600 PN 160 with an electric drive and manual transmission.
We are a significant supplier of fittings and piping components for turbine exporters.
Supply of fittings to nuclear power plants
We continue in our successful cooperation with nuclear power plants. In 2018, we supplied sluice valves DN 600 for the nuclear power plant Temelín, with successful operation.
Our supplies also go to hydroelectric power stations where closing valves and ball valves with a compound lever proved very successful. In the gas industry, we implemented the significant project GAZELA in the Czech Republic, for which we manufactured DN 10- up to DN 1400-dimension fittings. The supplies went directly to the investor NET4GAS and to the installation firms. The metallurgical industry is also a strong pillar of ARMATURY Group. We regularly supply our fittings not only to domestic steelworks but also to metallurgical processing plants abroad.
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Foreign Commerce Centres In 2018, we managed to strengthen our position in industrial sectors, such as the power industry, oil and gas industries, and the metallurgical industry. Among the significant included supplies to hydroelectric power stations, in particular, in Norway, Austria and Latin America. Here, the important aspects were, in particular, our individual approach to customers and cooperation in the resolution of their specific demands. Increased support and popularity of the so-called green energy make the upcoming periods promising.
New branch in Dubai
After many rigmaroles and administrative processes, we succeeded last year in registering and opening the ARMATURY Group DMCC branch in Dubai and passing the supplier approval process for the state owned Abu Dhabi National Oil Company (ADNOC). It was another strategic step towards our entry to the markets in the Middle East and North Africa.
Key supplies to the gas industry
We implemented several important ball valve projects. One of them were supplies of ball valves for the Polish gas pipeline Korytarz Pólnoc – Poludnie - to which 119 AG ball valves of the DN 200 up to DN 1000 series and many other types of fittings were supplied. Significant supplies were carried out for Czech NET4GAS for the Nord Stream gas pipeline and for the Romanian TRANSGAZ for the ISSACEA project. In the Baltics, our underground natural gas ball valves were built as part of the BALTIC CONNECTOR project connecting the existing networks of Finland and Poland.
Conversely, our failure consisted in the annulment of our victory in a tender for the supply of ball valves to Romania where we were first evaluated as the winners, but, after the Romanian supplier had been recanted and upon the decision of the court, the public contract was awarded to the company which had ended up in 2nd place. This fact had a major influence on our failure to meet the 2018 plan since we counted on the project as a sure thing.
Green metallurgy and energy
The positive development in the steel industry was also reflected in increased demand for fittings for metallurgical operation. We managed to convert this trend into several significant contracts for metallurgical and special fittings and promised to carry out further supplies in the upcoming period. What was highly promising was the cooperation with a Russian company that designs and supplies equipment for blast furnaces. Recent supplies to Russian steelworks have proven successful and we intend to continue with such in the years to come.
The power industry did not fall behind either. We supplied large welded sluice valves and other fittings to Russia for a major project. The auspicious cooperation with Russian turbine manufacturers continues, and our valves enjoy great reputation there. An all-time high number of valves were manufactured for the Chinese market. Supplies to SIEMENS and Doosan Skoda Power, our significant partners, continue. Therefore, we can confidently state that our valves continue to be successful at keeping pace with strong foreign and domestic competitors.
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Manufacturing of valves In 2018, annual sales of own products reached CZK 777 million with predominance of ball valves, flaps and metallurgical fittings. It is to be noted that 2018 was a year of metallurgical fittings requiring extensive documentation in the pre-manufacture phase, a factor that kept us fully occupied in terms of capacities. They concerned goggle valves, two-lever valves, and hot-air valves.
Optimization and effectiveness
As part of our aim to optimize manufacturing in terms of increasing effectiveness, we carried out an analysis of the system used for monitoring machines and subsequent evaluations revealed the need for modernizing the applications. Thanks to the new system for monitoring machinery, idle times went down significantly and the quality of data collection improved leading to ensuring increased efficiency of employees and machines in the future. Therefore, we achieved the given goal and reduced the amount of hard copy documentation.
System maintenance
For recording, planning and information flow purposes in relation to maintenance of the machines, a Maintenance module is going to be implemented in our ERP system in the following period. The module should secure interconnection of information between the manufacture and maintenance centres and should have a positive impact on reducing idle times, planning of repairs, and recording of results of repair and maintenance activities. Last but not the least, this is going to result in allocation of company property costs, which is important for decision-making on machines, equipment and buildings.
Welding technology
In 2018, our new welding technology was certified. It concerned flux welding by means of a tube wire for an automatic machine – technology 125. This technology is applied to the welding of ball valves. During the implementation of particular welding contracts, we were able to decrease the normative time by at least 20 %, bringing savings on the flux quantity. While technology 121 counted on coefficient 1.5 towards the wire, the new technology can count on coefficient 1.
ARMATURY Group successfully presented itself at the annual welding technologist conference held by the Czech Welding Institute and through a professional article in the KONSTRUKCE magazine on the “Welding of Industrial Fittings as Pressure Equipment”.
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Service and repair of valves The basic workload of the Service Centre is to secure warranty and post-warranty services for the entire assortment of industrial AG fittings. We carry out standard and comprehensive general repairs. The service and repairs, including installation operations, are carried out in our production halls or onsite at user. The quality of our service is based on the professional and complete knowledge of our products and on the extensive experience of our highly skilled service team.
Nonstop emergency service is a matter of course
The workload of the nonstop Emergency Service Centre consists in the provision of consultancy services regarding industrial fittings, servo drives, hydro drives, and pneumatic drives. We also manufacture distributors for controlling goggle valves and take part even in small investment units of small hydroelectric power stations, such as BIOCHEMIE and MG-Odra Gaz. A nonstop emergency service secured by means of three fully equipped service vehicles is a matter of course. The quality and customer-oriented approach is based on our workers’ high professionalism.
The Centre’s plan, put together at the beginning of 2018, was successfully achieved and even exceeded. Numerous major contracts for CZK 0.5m up to 7m, including numerous small projects, were implemented. We worked on these contracts together with our permanent partners:
• Metallurgical operations: ArcelorMittal Ostrava, Třinecké železárny, U.S. Steel Košice, and VÍTKOVICE SLOVAKIA a.s.
• Energy services: ČEZ (Dukovany, Temelín), ČEZ ENERGOSERVIS, ŠKODA JS, AJV-ENERGO, Sev.en EC, and Elektrárny Opatovice
• Heat distribution processing: Teplárna Přerov, Tepláreň Košice and Považská Bystrica
• Gas distribution: Innogy Gas Storage
• Oil distribution: MERO CR, Synthesia, Bilfinger Industrial Services Czech, Metrostav
• Water management: Povodí Vltavy, Povodí Ohře, Povodí Odry, Povodí Labe, LABSKÁ strojní a stavební společnost, Provyko, PS PROFI, and other representatives of waste water treatment plants
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Research & Development In 2018, we continued with the success of the previous year and developed many additional new fittings for the needs of our customers. Concurrently, we made progress even in the fulfilment of our long-terms development tasks. Our design team has been stable now for several years and succeeded in meeting the great demands imposed on them in 2018.
New ball valves, flaps and sluice valves
When it comes to ball valves, we were successful in designing, manufacturing and supplying a wide range of all-welded ball valves the sealing areas of which were made of metal x metal. Specifically, the internal diameter was NPS 6ˮ-40ˮ for pressure class 300 up to 600. We managed to complete the second phase of the project for developing metal x metal ball valves of A-level tightness pursuant to API Spec 6D. The project is supported by the Ministry of Industry and Trade within the OPPIK – Application. This phase was rounded off by the execution of internal pressure tests with satisfactory results.
In the sphere of closing valves, we manufactured several tens of fittings intended for hydroelectric power stations and controlled by means of a special control always tailored to customers’ specific parameters. In all-welded sluice valves S33.4, we upgraded the internal diameter up to DN 2000. We supplied sluice valves of this dimension to the Labská dam. We also designed and manufactured two types of dimensions for regulation sluice valves DN 1000 and 1200.
All-time high number of metallurgical and special fittings
We recorded an all-time high quantity of metallurgical and special fittings. They also included two-lever valves of 141 DN 2000 type and special goggle valves DN 800 and 1800 with hydraulic control.
We succeeded in completing the TRIO-FV10717 project subsidized by the Ministry of Industry and Trade and relating to cryogenic ball valves. We were awarded certificates based on three prototypes pursuant to BS6364 for cryogenic ball valves K9.1 and K92.C functioning at a temperature of up to minus 196°C.
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Others The accounting unit holds shares also in foreign subsidiaries and is commercially represented abroad – a list is stated on the last page of this Annual Report. The accounting unit has no other branches or plant units abroad.
The accounting unit did not acquire any equity stock or shares.
Subsequent events
As a consequence of a cross-border merger by consolidation of DEMURE HOLDINGS LIMITED, as the terminated company, and Armatury Servis Kravaře a.s., as the successor company, according to the cross-border merger project of 19 November 2018 with effect from 01 January 2019, the cancelled company DEMURE HOLDINGS LIMITED was terminated without liquidation and its assets and liabilities passed to the successor company Armatury Servis Kravaře a.s. This event was entered in the Companies Register on 15 May 2019.
On the balance sheet date, the Company’s management is not aware of any other significant subsequent events affecting the balance sheet as at 31 December 2018.
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Quality ARMATURY Group focuses on the maximum quality of its products, related services, repairs and customer satisfaction. It takes measures to increase effectiveness, reduce costs and idle times, and maintain high standard and quality of its products.
Audit tests proved quality in ARMATURY Group
In relation to quality management, the environment and OSH systems in the Company, system, re-certification, control and customer audits were carried out in the Company in 2018. The re-certification audit focused on the welding quality management system pursuant to EN ISO 3834-2 and on the manufacture system pursuant to technical regulations AD 2000 Merkblatt HP 0/HP 100R. To export AG ball valves to locations where the American API regulations apply, there were audits of system standard API Q1 and manufacture standard API 6D. As far as the nuclear power industry is concerned, there was a control audit of the Material Organization allowing manufacturing and supply of material pursuant to the ASME BPV CODE standards.
Moreover, ARMATURY Group underwent a control audit confirming Declaration of Conformity for the NDT laboratory at AG’s premises, designed for executing non-destructive tests RT, UT, MT, PT and VT pursuant to CSN EN ISO/IEC 17025 and verifying compliance of the testing activity with the management system introduced in the Company pursuant to EN ISO 9001. Last but not the least, there was a control audit of the quality management system pursuant to EN ISO 9001:2015, the environment management system pursuant to EN ISO 14001:2015, and the OSH system pursuant to BS OHSAS 18001:2007.
There were customer audits during the year, aimed at assessing, integrating and confirming ARMATURY Group in the register of suppliers.
Focusing on the environment
The Company kept improving its environment management processes and environment profile in compliance with the latest technical and scientific knowledge, customer demands, and public expectations. It constantly monitored and limited the Company’s effect on the environment and tried to minimize and prevent the occurrence of accidents.
The Company’s employees were systematically and permanently educated, trained and motivated to carry out their activities responsibly so as not to damage the environment and to take part in the OSH as an integral part of their work duties.
All activities of the Company were managed with regard to social and environmental impact on the surroundings.
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Human resources management Low unemployment and long-term contradiction between the offer and the demand on the labour market in Moravian Silesian Region (in particular, lack of craft workers and technical professionals) affected the Company in 2018. Despite this, we managed to hire qualified blue-collar workers, such as electrical mechanics, metal machinists, metal welders, and locksmiths.
We cooperate with schools
Since we realize that it is more and more difficult to find quality and qualified personnel to operate individual workshops, we kept developing cooperation with professional engineering schools and their students. We focus more on cooperation with the nearby technical schools: Secondary Technical School in Opava, Secondary Technical School of Mechanical Engineering in Ostrava, and Vítkovice Secondary Technical School of Mechanical Engineering in Ostrava Hrabůvka. We participated in school-organized events, such as “Mechanists to Themselves”, “Open Door Day”, where we offered students internships in our Company, and summer jobs. We held several excursions for tech-oriented secondary schools and repeatedly participated in the professional practice of 8 students from Slovakia – Erasmus internship. We hired four secondary technical school graduates.
Support of technical education through grant programmes
Every year, ARMATURY Group a.s. invests considerable funds in the education of its employees. We keep using education grant programmes and implementing numerous important projects and education grant applications within the project “Support of Technical Education of Employees II (POVEZ II) – welding courses, NDT methods training, IT training and CNC training”. We succeeded in arranging training for 30 employees. Moreover, our application for a grant to support the employment of three employees within the “Guarantees for Young People in Moravian Silesian Region” was satisfied. Within the SMEs Association, we arranged language courses (English and Russian) for 57 employees. We supported three students of VSB – Technical University of Ostrava within a programme supporting internships of pupils and students in firms.
We also made use of the ‘Go On! 50+’ project in Moravian Silesian Region, focused on the support of job applicants registered with the Labour Office and falling into the ‘Difficult to Employ’ category due to their high age (50+).
0
20
40
60
80
100
120
140
Men Women
70
77
9
97
22
134
36
140
33
131
Employees Age Structure as at 31 December 2018
Under 18years of age18-20
21-30
31-40
41-50
51-60
Over 60 yearsof age
0
200
400
600
Men Women Total
468
101
569
Employee Status as at 31 December 2018
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Financial part
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Notes to Financial Statements as per 31. 12. 2018 (in thousands CZK)
Organization and contextual definitial of explanatory and supplementary information according to
§ 39 of the Public Notice No. 500/2002 Coll. implementing certain provisions of the Act No. 563/1991 Coll., on Accounting, as amended by later regulations, for accounting units,
entrepreneurs accounting in the system of double-entry bookkeeping.
§ 39 Clause 1) Item a)
Description of Company
Name of Accounting Unit: ARMATURY Group a.s.
Registered office: Nádražní 129, 747 22 Dolní Benešov
Company ID-No.: 255 72 881
Date of Registration: 23. 8. 1999
Registered: Companies Register kept by the Regional Court in Ostrava, file number B 2572
Logal Form: Joint stock company
Scope of Business: - Joinery, floor making, locksmithery, toolmaking, machining
- Production, installation and repair of electric machines and appliances, electronic and telecommunication equipment
- Assembly, repair and testing of gas equipment and filling of containers with gas
- Assembly, repair and testing of electric equipment
- Bookkeeping, tax records keeping
- Production, trade and services not stated in Appendices 1 to 3 of the Trade Licensing Act
Entities with substantial or decisive influence (share is higher than 20 % of registered capital)
Entity Name Contribution in %
DEMURE HOLDINGS LIMITED, with its registered office at Arch. Makariou III. , 199 Neocleous house, Limassol, P.C. 3030, Cyprus
100 %
Changes in the Companies Register and organizational structure: NO
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§ 39 Clause 1) Item b) to i)
Basic Inputs for Processing Financial Statements
Attached individual financial statements were prepared in accordance with the Act No. 563/1991 Coll., on Accounting, as amended by later regulations and Public Notice No. 500/2002 Coll. implementing certain provisions of the Act No. 563/1991 Coll., on Accounting, as amended by later regulations, for accounting units who are entrepreneurs accounting in the system of double-entry accounting, as amended by later regulations. Amounts in the financial statements are in thousands of Czech crowns „CZK“.
General Accounting Principles, Accounting Methods and their Changes and Deviations
The following valuation methods were applied when processing financial statements for 2018:
A) Tangible Fixed Assets
In accordance with § 25, Clause 1) Item a) Act No. 563/1991 Coll., the accounting unit valuated tangible fixed assets at acquisition prices including price for acquisition, transportation cost, customs duties and other expenses relating to acquisition
The accounting unit valuates freely acquired tangible fixed assets at reproduction acquisition prices in accordance with § 25, Clause 1) Item l.) Act No. 563/1991 Coll.
Valuation of tangible fixed assets was reduced by subsidies from the national budget.
In accordance with § 25, Clause 1) Item b) Act No. 563/1991 Coll., the accounting unit valuated tangible fixed assets created by their own activity at their own cost including: Direct material and wage expenses
B) Intangible Fixed Assets
In accordance with § 25, Clause 1) Item h) Act No. 563/1991 Coll., the accounting unit valuated intangible fixed assets at acquisition prices including price for acquisition and other expenses relating to acquisition. The accounting unit created intangible fixed assets by their own activity: NO
Schedule for Depreciating Tangible and Intangible Fixed Assets
Method of drawing schedule for depreciating tangible fixed assets and intangible fixed assets and applied methods for depreciating when determining accounting depreciation for tangible fixed assets and intangible fixed assets:
The accounting unit issued their depreciation schedule for accounting depreciation for tangible fixed assets by issue of their internal regulation resulting from expected wear and tear of the assets complying with common conditions of their use. Accounting and tax depreciations of the accounting unit are not identical
Depreciation schedule for accounting depreciation for intangible fixed assets was based on method of depreciation according to tax depreciations. Accounting and tax depreciations of the intangible fixed assets are identical.
Depreciation schedules for fixed assets are put together in accordance with an internal regulation. In the monitored fiscal period, all fixed assets were depreciated evenly by months over a number of years
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according to individual groups pursuant to the Income Tax Act or based on supposed lifetime of assets determined by competent technician, which in the opinion of the company displays wear and tear of the assets truly. The useful live of fixed assets in all categories is regularly revised. Tax depreciations were determined in accordance with the Income Tax Act. Tax depreciations of original owner continues within included assets. Time depreciation is applied in accordance with internal regulation in respect of moulds, templates, software, preparatives and light and temporary structures. Included low-value fixed assets are depreciated at value of 50 % on entry and 50 % on exclusion. Newly acquired low-value fixed assets are depreciated with monthly time depreciation over 24 months, unless it is a new equipment of operation that would disrupt the time and factual relationships between costs and revenues significantly.
Pursuant to decision of the financial director, produced preparatives have been activated in assets since 1. 1. 2016.
Applied depreciation system for low-value fixed assets: 24 months
C) Financial Assets
The accounting unit owned financial assets in current year
In accordance with § 25, Clause 1) Item f) Act No. 563/1991 Coll., shares, securities and derivatives were valuated at acquisition prices including price for acquisition and direct expenses related to their acquisition.
D) Cash In accordance with § 25, Clause 1) Item e) Act No. 563/1991 Coll., the accounting unit valuated cash and tokens at their nominal values.
E) Inventory When accounting inventories, the accounting unit proceeded in accordance with Article 4 of the Czech Accounting Standard for Entrepreneurs No. 015, method A
The accounting unit purchased inventory.
In accordance with § 25, Clause 1) Item c) Act No. 563/1991 Coll., inventory is valuated at acquisition prices including price for acquisition and costs related to the acquisition. Pursuant to ČÚS No. 015 and according to § 49 Public Notice No. 500/2002 Coll: The cost related to acquisition of inventory was divided in analytical records into price for acquisition, cost related to acquisition and deviation from real price for acquisition. Costs related to acquisition and deviation from real price for acquisition are dissolved into the price of sold or consumed inventories according to method determined bindingly in internal regulation of the accounting unit. Purchased inventory is valuated at acquisition prices applying the following method (according to § 25 Act No. 563/1991 Coll. and according to ČÚS No. 015): At weighted arithmetic mean and differences in valuation
The accounting unit created inventory with their own activity. In accordance with § 25, Clause 1) Item d) Act No. 563/1991 Coll., inventory created by own activity is valuated at own costs: According to actual amount of cost comprising of: Direct expenses and A part of indirect expenses related to this activity
F) Valuation of New Animals and Newly Born Animals
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The accounting unit valuated new animals and newly born animals: NO
G) Receivables
When arising, receivables are valuated with their nominal value, when acquired for a price or a contribution, with acquisition price in accordance with § 25, Clause 1) Item g) Act No. 563/1991 Coll. Receivables as well as estimated receivables are divided into short-term (due date within 12 months incl.) and long-term liabilities (due date above 12 months). Short-term liabilities are due within one year from the balance sheet date. Total amount of gross receivables due on 31 December 2018
1) Total amount of gross receivables in due as at 31 December 2018 (line 28 + 34 of the balance sheet): 350 789 Total amount of overdue receivables as at 31. 12. 2018 (line 28 + 34 of the balance sheet): 147 480
Total amount of overdue receivables as at 31. 12. 2017: 205 110
2) The company register some receivables overdue more than five years as of 31 December 2018:
15 537 The company register some receivables overdue more than five years as of 31 December 2017: 86 511
3) Receivables Secured with Material Guarantees: NO
4) Receivables Encumbered with Right of Lien:
Description of Receivables Value Character, Form and Value of Encumbrance
Czech Receivables 29 659 Česká spořitelna 122 583 Komerční banka
40 192 ČSOB Foreign Receivables 112 127 Česká spořitelna
40 801 Komerční banka 47 437 ČSOB
5) Receivables towards Related parties:
2018 Related Entity Value Description of Receivables ARMATURY Group. CO 309 Trade receivables AG Slovakia 2 704 Trade receivables Total 3 013
2017 Related Entity Value Description of Receivables ARMATURY Group. CO 472 Trade receivables Total 472
6) Receivables written off In 2018, the company wrote off irrecoverable trade receivables totaling CZK 77 million (2017: CZK 8 million).
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H) Liabilities
When arising, liabilities were valuated by the accounting unit with their nominal value in accordance with § 25, Clause 1) Item G) Act No. 563/1991 Coll.
Liabilities as well as estimated liabilities are divided into short-term (due date within 12 months incl.) and long-term liabilities (due date above 12 months). Short-term liabilities are due within one year from the balance sheet date.
1) Total amount of liabilities as at 31 December 2018 (line 70 of the balance sheet): 160 391 Total amount of overdue liabilities as at 31. 12. 2018: 75 119 Total amount of overdue liabilities as at 31. 12. 2017: 45 826
2) Liabilities not Stated in Bookkeeping, Pension Liabilities, Conditional Liabilities Company registers non-payment bank guarantees over guarantee period, order and for good contract implementation towards their business partners amounting to CZK 97 624 thousands. Company does not register other liabilities not stated in bookkeeping.
3) Liabilities towards Related parties (line. 71 of the balance sheet)
2018 Related entity Value Description of liability ARMATURY GROUP Co., Ltd - CN 6 670 Trade payables ARMATURY GROUP Trading (subsidiary
company AGCN) 1 604 Trade payables
ARMATÚRY GROUP, s.r.o. SK 485 Trade payables ARMATÚRY GROUP, s.r.o. SK 14 863 Loans Shareholders of parent company 41 850 Loans + accessories Total 65 472
2017 Related entity Value Description of liability ARMATURY GROUP Co., Ltd - CN 2 479 Trade payables ARMATÚRY GROUP, s.r.o. SK 2 879 Trade payables Shareholders of parent company 20 293 Loans + accessories Total 25 651
I) Rectifying Items
In the course of the year, the accounting unit created adjustment to assets:
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Type of Rectifying Item
Metod of Determining Rectifying Item Source of Information for Determining Amount of Rectifying Item
For inventory Unsalable and otherwise unusable inventories Stocktaking 18.-21. 10. 2018
For receivables According to Act No. 593/1992 Coll., on Reserves, Act No. 563/1991 on Accounting and Czech Accounting Standard No. 005, accounting rectifying items for invoices being overdue for more than 1 year + by own analysis
Stocktaking of receivables as at 31. 12. 2018
For advance payments for fixed assets
According to Act No. 563/1991 Coll., o Accounting and Czech Accounting Standard No. 005
Stocktaking of advance payments
J) Conversion of Amounts in Foreign Currencies to Czech Currency
The accounting unit accounted assets and liabilities in a foreign currency.
When converting amounts in foreign currencies to Czech Crowns, the accounting unit applied method in accordance with § 24, Clause 2) Act No. 563/1991 Coll. The accounting unit accounts pursuant to monthly exchange rate. Exchange rate declared by the Czech National Bank (ČNB) on the last working day in a month is applied.
Amounts in foreign currencies were converted with exchange rates as at 31. 12. of given year.
K) Determination of Real Value of Assets and Liabilities In accordance with legal regaulations, the accounting unit determined real value of assets and liabilities: NO
L) Application of the equity method
The accounting unit valuated its share in controlled entity or in entity with substantial influence by the equity method.
M) Information on Deviations from Methods according to § 7 Clause 5) Act No. 563/1991 Coll., on Accounting
The following methods were not changed within course of the year: valuation and accounting procedures
N) Amounts of Advance Payments, Earnest Money, Loans, Credits, Guarantees and other
Performance for Partners, Stockholders, Members of Statutory, Supervisory and Managing Bodies (§ 39b Clause 6)
Inapplicable for the accounting unit.
O) Average Full-Time Equivalent of Employees within Fiscal period: 579
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P) Financial Invesments
§ 39b Clause 1) to 4)
The accounting unit has a substantial or decisive influence on other companies: Name and Registerd office / Year 2018
Share on Registered Capital, absolutely (in thousands CZK)
Share on Registered Capital in %
Share Capital for the Last Accounting Period (in thousands CZK
Profit/(Loss) for the Last Accounting Period (in thousands CZK)
ARMATÚRY GROUP s.r.o. Janošíkova 264, Žilina Slovakia
248 100 14 470 259
ARMATURY GROUP Poland Sp. z o.o., ul. Osala 1, 32-620 Brzeszcze
376 100 795 -1
MARTINOV Group, a.s. Bolatická 39, Kravaře 0,001 100 68 0 ARMATURY Group, Corporation Ltd., Zhangjiagang, China 27 407 100 22 549 3 519
Name and Registerd office / Year 2017
Share on Registered Capital, absolutely (in thousands CZK)
Share on Registered Capital in %
Share Capital for the Last Accounting Period (in thousands CZK
Profit/(Loss) for the Last Accounting Period (in thousands CZK)
ARMATÚRY GROUP s.r.o. Janošíkova 264, Žilina Slovakia
248
100
14 109
-920
ARMATURY GROUP Poland Sp. z o.o. ul. Osala 1, 32-620 Brzeszcze
376
100
850
-5
MARTINOV Group, a.s., Bolatická 39, Kravaře 0,001
100
68
0
ARMATURY Group, Corporation Ltd., Zhangjiagang, China 27 407
100
19 065
5 004
Investments are valuated by the equity method. The amount of share capital equals to revaluated amount by the equity method.
Financial information concerning ARMATÚRY GROUP, s.r.o., ARMATURY Group Poland Sp. Z o.o. and MARTINOV Group a.s. were obtained from unaudited final financial accounts of individual companies.
Financial information applicable to ARMATURY Group Corporation Ltd. were obtained from the audited final financial accounts.
§ 39b Clause 5)
Accounting unit is not a partner with unlimited liability.
Consolidated financial statements of the narrowest group of accounting units, to which the accounting unit as a consolidating accounting unit belongs, are prepared by the company ARMATURY Group a.s. with registered office at Dolní Benešov, Nádražní 129.
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Consolidated financial statements of the widest group of accounting units, to which the accounting unit as a consolidating accounting unit belongs, are prepared by the company Armatury Servis Kravaře a.s with registered office at Bolatická 2045/39.
§ 39b Clause 6)
Registered Capital
Type / Number of stocks
Nominal value Unpaid Portion of Contribution
Maturity Date
12 pcs registered ordinary stocks in certified form 100 0 500 pcs registered ordinary stocks in certified form 1 000 0
Stocks issued by the accounting unit within fiscal period: NO
Exchangeable Bonds
Exchangeable bonds issued by the accounting unit within fiscal period: NO
On December 17, 2012, the company ARMATURY Group a.s. issued bonds ISIN: CZ0003508137, amounting to total nominal value of 1.000 million CZK. The bonds are due on December 17, 2027 with a revenue of 8 % p.a. The company is prepared to pay for their scheduler dynamic development with these bonds. As per December 31, 2018, the company ARMATURY Group a.s. is the only owner of the bonds – there was no subscription.
Proposal for Profit/Loss Distribution of Current Fiscal Period
In the current year, based on the decision of the General Meeting of 6 June 2018, the entity transferred the profit for 2017 in the amount of CZK 104,684 thousand to the account of retained earnings of the previous years.
Fixed Assets
a) Intangible fixed assets and adjustments and accumulated depreciation - year 2018
ACQUISITION PRICE Opening Balance Additions Disposals Transfers Closing
Balance Intangible research and development results
0 0 0 0 0
Software 55 732 334 433 0 55 633 Other intellectual property rights 0 0 0 0 0 Goodwill 0 0 0 0 0 Low-value intangible fixed assets 874 62 30 0 906 Provided advance payments on intangible fixed assets 0 0 0 0 0 Intangible fixed assets under construction
0 0 0 0 0
Total 2018 56 606 396 463 0 56 539
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ADJUSTMENTS AND ACCUMULATED DEPRECIATION
Opening Balance of
Accumulated Depreciation
Depreciation Disposals
Transfers Closing Balance of
Accumulated Depreciation
Adjustments
Intangible research and development results
0 0 0 0 0 0
Software 52 972 1 838 433 0 54 377 0 Other intellectual property rights
0 0 0 0 0 0
Goodwill 0 0 0 0 0 0 Low-value intangible assets
848 25 30 0 843 0
Provided advance payments for intangible fixed assets
0 0 0 0 0 0
Intangible fixed assets under construction
0 0 0 0 0 0
Total 2018 53 820 1 863 463 0 55 220 0
Intangible fixed assets and adjustments and accumulated depreciation - year 2017
ACQUISITION PRICE Opening Balance Additions Disposals Transfers Closing
Balance Intangible research and development results
0 0 0 0 0
Software 56 192 123 583 0 55 732 Other intellectual property rights 0 0 0 0 0 Goodwill 0 0 0 0 0 Low-value intangible fixed assets 1 515 15 656 0 874 Provided advance payments on intangible fixed assets 0 0 0 0 0 Intangible fixed assets under construction
0 0 0 0 0
Total 2017 57 707 138 1 239 0 56 606
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ADJUSTMENTS AND ACCUMULATED DEPRECIATION
Opening Balance of
Accumulated Depreciation
Depreciation Disposals Transfers Closing Balance of
Accumulated Depreciation
Adjustments
Intangible research and development results
0 0 0 0 0 0
Software 51 468 2 088 584 0 52 972 0 Other intellectual property rights
0 0 0 0 0 0
Goodwill 0 0 0 0 0 0 Low-value intangible assets
1 407 97 656 0 848 0
Provided advance payments for intangible fixed assets
0 0 0 0 0 0
Intangible fixed assets under construction
0 0 0 0 0 0
Total 2017 52 875 2 185 1 240 0 53 820 0
b) Tangible Fixed Assets
Tangible fixed assets, adjustments and accumulated depreciation - year 2018
ACQUISITION PRICE Opening Balance
Additions
Disposals
Transfers Closing Balance
Lands 10 982 1 909 1 713 0 11 178 Buildings 673 672 33 045 10 307 0 696 410 Plant and equipment 503 127 4 491 3 639 0 503 979 Adjustments to acquired fixed assets 0 0 0 0 0 Cultivated areas 0 0 0 0 0 Adult livestock 0 0 0 0 0 Other tangible fixed assets 92 0 0 0 92 Provided advance payments for tangible fixed assets 618 0 0 0 618 Tangible fixed assets under construction 193 0 38 0 155 Total 2018 1 188 684 39 445 15 697 0 1 212 432
The most significant additions to the property include the acquisition of a hotel, incl. land, in the aggregate amount of CZK 34 million. The company received this non-cash consideration from one of its debtors. Based on an internal analysis done in 2019, the company's management has temporarily closed and does not operate this hotel and is currently addressing its future use.
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Tangible fixed assets, adjustments and accumulated depreciation - year 2017
ACQUISITION PRICE Opening Balance Additions Disposals Transfers Closing
Balance Lands 10 982 0 0 0 10 982 Buildings 672 130 1 542 0 0 673 672 Plant and equipment 527 359 2 385 26 617 0 503 127 Adjustments to acquired fixed assets 0 0 0 0 0 Cultivated areas 0 0 0 0 0 Adult livestock 0 0 0 0 0 Other tangible fixed assets 92 0 0 0 92 Provided advance payments for tangible fixed assets 618 0 0 0 618 Tangible fixed assets under construction
52 141 0 0 193
Total 2017 1 211 233 4 068 26 617 0 1 188 684
ADJUSTMENTS AND ACCUMULATED DEPRECIATION
Opening Balance of
Accumulated Depreciation
Depreciation
Disposals
Transfers Closing Balance of
Accumulated Depreciation
Adjustments
Lands 0 0 0 0 0 0 Buildings 178 124 22 359 1 708 0 198 775 0 Plant and equipment 364 642 44 603 3 534 0 405 711 0 Adjustments to acquired fixed assets
0 0 0 0 0 0
Cultivated areas 0 0 0 0 0 0 Adult livestock 0 0 0 0 0 0 Other tangible fixed assets
0 0 0 0 0 0
Provided advance payments for tangible fixed assets
0 0 0 0 0 618
Tangible fixed assets under construction
0 0 0 0 0 0
Total 2018 542 766 66 962 5 242 0 604 486 618
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ADJUSTMENTS AND ACCUMULATED DEPRECIATION
Opening Balance of
Accumulated Depreciation
Depreciation Disposals Transfers Closing Balance of
Accumulated Depreciation
Adjustments
Lands 0 0 0 0 0 0 Buildings 155 691 22 433 0 0 178 124 0 Plant and equipment 336 023 55 234 26 615 0 364 642 0 Adjustments to acquired fixed assets
0 0 0 0 0 0
Cultivated areas 0 0 0 0 0 0 Adult livestock 0 0 0 0 0 0 Other tangible fixed assets 0 0 0 0 0 0 Provided advance payments for tangible fixed assets
0 0 0 0 0 618
Tangible fixed assets under construction
0 0 0 0 0 0
Total 2017 491 714 77 667 26 615 0 542 766 618
c) Long-term investments Long-term investments - year 2018
Opening Balance
Additions Disposals Revaluation Closing
Balance
Equity investments 34 093 0 0 3 789 37 882 Loans – group undertakings 0 0 0 0 0 Equity investments – associated companies
0 0 0 0 0
Loans - associated companies 0 0 0 0 0 Other long-term securities and equity investments
0 0 0 0 0
Loans - other 0 0 0 0 0 Other long-term investments 0 0 0 0 0 Advance payments for long-term investments
0 0 0 0 0
Adjustments to other long-term investments
0 0 0 0 0
Total 2018 34 093 0 0 3 789 37 882
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Long-term investments - year 2017
Opening Balance Additions Disposals Revaluation Closing
Balance Equity investments 66 318 0 160 -32 065 34 093 Loans – group undertakings 0 0 0 0 0 Equity investments – associated companies
0 0 0 0 0
Loans - associated companies 0 0 0 0 0 Other long-term securities and equity investments
0 0 0 0 0
Loans - other 0 0 0 0 0 Other long-term investments 0 0 0 0 0 Advance payments for long-term investments
0 0 0 0 0
Adjustments to other long-term investments
0 0 0 0 0
Total 2017 66 318 0 160 -32 065 34 093
d) Assets Encumbered with Right of Lien, Easements of Real Estate Property
The accounting unit owns the following encumbered property:
Type and Specification of Assets Character and Function of Encumbrance Houses, halls, Buildings
Pledge of assets for the benefit of Česká spořitelna a.s., Komerční banka a.s. and ČSOB a.s., in the land registry territory D. Benešov a Kravaře
Stand-alone personal property – machining centres and machining equipment
Pledge of assets for the benefit of Česká spořitelna a.s., Komerční banka a.s. and ČSOB a.s.
Lands Pledge of assets for the benefit of Česká spořitelna a.s., Komerční banka a.s. and ČSOB a.s., in the land registry territory of D. Benešov and Kravaře
e) Assets under Operational or Financial Lease
The accounting unit has not leased property.
f) Assets with Significantly Higher Market Price than Valuation in Accounts The accounting unit doesn't owns such a property.
g) Foreign Assets Listed in the Balance Sheet, Rental of a Business or Rental of a Part of a Business
The accounting unit registers such a property.
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Deferred Tax
The accounting unit accounted deferred tax receivable.
Receivables Liabilities Difference
2018 2017 2018 2017 2018 2017
Fixed assets -- -- -695 -12 273 -695 -12 273
Receivables 9 714 -- -- -- 9 714 --
Inventory 3 871 6 060 -- -- 3 871 6 060
Provisions 1 748 1 146 -- -- 1 748 1 146
Tax losses 24 456 47 902 -- -- 24 456 47 902
Deferred tax asset / (liability) 39 789 55 108 -695 -12 273 39 094 42 835
Deferred tax results from all temporary differences between accounting and tax value of residential cost of fixed assets, accounting rectifying items for inventory, accounting reserves and also from tax loss.
When calculating deferred tax, expected tax rate valid for the period, in which tax obligation or tax receivable will be applied, is used – 19 % for 2018 as well as 2017.
Deferred tax receivable is accounted only when it is probable that it will be applied in the following accounting periods.
Operations not Included in the Balance Sheet
Character and business purpose of operations not included in the balance sheet and their financial impact on the accounting unit. Inapplicable for the accounting unit. § 39b Clause 6) Item I), § 39b Clause 7), § 39b Clause 8)
Information on transactions with related entity and transactions not concluded under normal market conditions – quantity of transactions, character of relationship with related entity and other information on transactions that is necessary to understand financial situation of the accounting unit.
Receivables towards related entities: see point G receivables 5 of the annex. Liabilities towards related entities: see point H receivables 5 of the annex .
Sale to related entities: 6 665*
Purchase from related entities: 111 245*
Other significant transactions with related entities: received loans amounting to total of CZK 41 850 thousand from stockholders of parent company* and CZK 14 863 thousand from ARMATÚRY GROUP
Transactions with related entities that were not concluded under normal market conditions: NOT APPLICABLE.
* See Report on Relations 2018
The entity did not account for the income tax provision because of a zero tax base. The balance of tax losses for use in 2019 is CZK 128 717 thousand.
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Organization and Contextual Definition of Cash Flow statement
Cash and cash equivalents include :
31. 12. 2018 31. 12. 2017 Cash in hand and valuables 721 561 Bank accounts 26 119 7 530 Debit balance of current account included in current bank loans Cash equivalents included in short-term financial assets Total cash and cash equivalents 26 840 8 091
Cash flow related to paid interests included in valuation of fixed assets were reported within investment activity in the Cash Flow Statement, were however not stated as a separate item. § 39c Clause 1)
Overview of sales on goods, products and services within current activity of the accounting unit for 2018
Type of Revenue Inland Abroad Revenues from sales of goods 170 475 156 620 Revenues from sales of own products 410 936 809 644 Revenues from sales of services 39 016 30 688 Revenues from sales of materials 55 934 20 042 Total revenues 676 361 1 016 994
Overview of sales on goods, products and services within current activity of the accounting unit for 2017
Type of Revenue Inland Abroad Revenues from sales of goods 137 204 133 030 Revenues from sales of own products 286 313 753 167 Revenues from sales of services 68 294 23 354 Revenues from sales of materials 140 324 3 980 Total revenues 632 135 913 531
§ 39c Clause 2)
Fees to the statutory auditor for 2018:
This information is included in the notes to the consolidated financial statements for the consolidated group in which the company is included.
Other information
1) Long-Term Bank Loans - Year 2018
Credit Provider Amount Of which Reclassified to Short-Term Instalments (Due Date within One Year)
With Due Date in 1 – 5 Years
Security
Komerční banka 36 425 21 909 14 516 Real estate, tangibles
Česká spořitelna 71 794 25 040 46 754 Real estate, tangibles
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Total 108 219 46 949 61 271 No liabilities are overdue for more than 5 years.
Long-Term Bank Loans - Year 2017
Credit Provider Amount Of which Reclassified to Short-Term Instalments (Due Date within One Year)
With Due Date in 1 – 5 Years
Security
Komerční banka 66 942 26 826 40 116 Real estate, tangibles
Česká spořitelna 99 374 25 040 74 334 Real estate, tangibles
Total 166 316 51 866 114 450
2) Short-Term Bank Loans - Year 2018
Credit Provider Amount Security Komerční banka 166 052 Receivables, inventory Česká spořitelna 89 053 Receivables, inventory ČSOB 82 527 Receivables, inventory Total 337 632
Part of long-term loans with due date within one year is included in the short-term bank loans
Short-Term Bank Loans - Year 2017
Credit Provider Amount Security Komerční banka 132 725 Receivables, inventory Česká spořitelna 68 611 Receivables, inventory ČSOB 143 264 Receivables, inventory Total 344 600
Part of long-term loans with due date within one year is included in the short-term bank loans
Renewal of short-term financing takes place according to standard bank requirements.
3) Received Subsidies for Investment and Operation Purposes for 2018
a) Subsidy received from the Ministry of Industry and Trade for solving project, registration No. FV10717 „Development of a New Series of Cryogenic Ball Valves, Technology of their Production and Testing“ amounting to CZK 2 014 thousand.
Received subsidies are used to pay for cost for research and development and are accounted in other operating revenues in factual and time continuity with accounting costs on determined account in accordance with conditions of the programme covering granting subsidies from the Ministry of Industry and Trade in general. The company plans to purchase also selected assets, the acquisition price of which will be reduced by a part of received subsidies for the future. They have not purchased any till now.
b) Subsidy received from the Labor Office of the Czech Republic under registration number CZ.03.1.52/0.0/0.0/15_021/0000053 - Support of Professional Education of Employees from the Operation Programme Employment amounting to CZK 483 thousand.
c) Subsidy received from the Labor Office of the Czech Republic under registration number CZ.03.1.48/0.0/0.0/15 – Guarantee for Young People in the Moravian-Silesian Region financed from the Operation Programme Employment amounting to CZK 238 thousand.
d) Subsidy received from the Ministry of Industry and Trade under registration number CZ001.1.02/0.0/0.0/15_018/0004538 – Operation Programme Enterprise and Innovation for Competitiveness – programme Application amounting to CZK 1 197 thousand.
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e) Subsidy received from the Association of Small and Medium-Sized Enterprises and Small Businesses (AMSP) under registration number CU.03.1.52/0.0/0.0/16_060/0005881 – Provision of Education for AMSP of the Czech Republic amounting to CZK 272 thousand.
f) Subsidy received from the Moravian-Silesian Region – Programme for the Support of Traineeships for Pupils and Students in Companies, Contract No. 07079/2018/RRC, amounting to CZK 75 thousand.
g) Subsidy received from the Labor Office of the Czech Republic under registration number CZ.03.1.48/0.0/0.0/15_010/0000029 Go On! 50+ amounting to CZK 36 thousand.
Subsidies received from the Labor Office are used to pay for costs and re accounted in other operating revenues in factual and time continuity with accounting costs on determined account in accordance with conditions of the programme covering granting subsidies from the Labor Office in general.
Received Subsidies for Investment and Operation Purposes for 2017
a) Subsidy received from the Ministry of Industry and Trade for solving project, registration No. FV10717 „Development of a New Series of Cryogenic Ball Valves, Technology of their Production and Testing“ amounting to CZK 2 442 thousand.
b) Subsidy received from the Labor Office of the Czech Republic under registration number CZ.03.1.52/0.0/0.0/15_021/0000053 – Support of Professional Education of Employees from the Operation Programme Employment amounting to CZK 2 172 thousand.
c) Subsidy received from the Labor Office of the Czech Republic under registration number
CZ.03.1.48/0.0/0.0/15 – Guarantee for Young People in the Moravian-Silesian Region financed from the Operation Programme Employment amounting to CZK 512 thousand.
4) Amount of Remunerations Given to Members of Managing, Controlling or Administrative Bodies for the Reason of their Function
Employees and members of managing, controlling and administrative authorities
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Average Full-Time
Equivalent Labor Costs in thousands
CZK*
2018 2017 2018 2017
Employees 579 583 217 233 209 263
Of it members of managing authorities 1 1 0 0
Of it members of controlling authorities 0 0 0 0
Of it members of administrative authorities 0 0 0 0
Total 579 583 217 233 209 263 * Labor costs on members of managing, controlling and administrative authorities are represented by remunerations given to members of these authorities for the reason of their function.
Company did not have any pension liabilities towards former members of managing, controlling and administrative bodies till December 31, 2018.
5) Additional Assessments of Due Income Tax for Past Periods: 0
6) Tax deductible and other provisions : 9 201
a) Tax deductible provisions: 0
b) Other provisions
Type and Designation of provision
Opening Balance as per 1. 1.
Creation Release Closing Balance as per 31.12
Provision for income tax 0 0 0 0 Provision for wages 4 499 11 668 9 301 6 866 Provision for social security and health insurance
1 530 3 967 3 162 2 335
Provision for risks - complaints 0 0 0 0
7) Due liabilities for social security insurance premium and state employment policy contribution: 0
8) Due liabilities for public health insurance premium: 0
9) Amount of tax arrears: 0
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10) Other operating income and expenses
Other operating expenses include mainly the write-off of receivables of CZK 77 million (2017: CZK 8 million), assigned receivables of CZK 26 million and contractual penalties of CZK 7 million (2017: CZK 4 million).
Other operating income primarily includes revenues from ceded receivables of CZK 28 million and contractual penalties of CZK 7 million (2017: CZK 4 million).
11) Subsequent Events
As a result of the cross-border merger by merging the trading company DEMURE HOLDINGS LIMITED as a dissolving company and the trading company Armatury Servis Kravaře a.s. as a successor company according to the cross-border merger project dated 19 November 2018, the companies DEMURE HOLDINGS LIMITED and Armatury Servis Kravaře a.s. merged with effect from 1 January 2019, the dissolving company DEMURE HOLDINGS LIMITED ceased to exist without liquidation, and its assets passed to the successor company Armatury Servis Kravaře a.s. This event was entered in the Commercial Register on 15 May 2019.
As of the preparation the financial statements, the company management is not aware of any other subsequent events that would have any material impact on the financial statements as at December 31, 2018.
Notes prepared by: Hana Halfarová
Date: 24 June 2019
Signature:
Petr Holeček Chairman of the Board of Directors
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Report on Relations between Controlling and Controlled Entity of the company ARMATURY Group a.s., according to provisions § 82 Act No. 90/2012 Coll., on
business corporation for accounting period of calendar year 2018 Board of directors of the company ARMATURY Group a. s., with registered office at Nádražní 129, 747 22 Dolní Benešov, company ID-No. 25572881 (hereinafter refered to as only „Company“) processed the following Report on Relationships between Controlling and Controlled Entity and on relationships between controlled entity and other entities controlled by the same entity according to provisions § 82 ZOK for accounting period of calendar year 2018. I. ENTITIES BEING MEMBERS OF THE GROUP Controlling entity: Armatury Servis Kravaře a.s., with registered office at Bolatická 2045/39, Kouty, 747 21 Kravaře, company ID-No. 258 17 060; company owns and controls 7 physical entities in accordance: • Leo Švančar, date of birth 17. 09. 1959,
residence Ludmily Hořké 44/17, Dvořisko, 747 21 Kravaře; • Ing. Jindřich Švančar, date of birth 12. 03. 1955,
residence Cihelní 3361/47, 747 21 Kravaře; • Josef Vavřínek, date of birth 01. 06. 1947,
residence Sadová 666/4, 747 23 Bolatice; • Jiří Vaněk, date of birth 25. 01. 1961,
residence Ivana Kubince 1601/23a, Dvořisko, 747 21 Kravaře; • Karel Černý, date of birth 16. 12. 1962,
residence Drobná 2363/8, Poruba, 708 00 Ostrava; death on May 24, 2018; • Petr Holeček, date of birth 07. 06. 1958,
residence Údolní 93/23, 747 17 Darkovice; • Ladislav Adámek, date of birth 15. 1. 1963,
residence 753 01 Teplice nad Bečvou, number 83. Controlled entity: DEMURE HOLDINGS LIMITED, Arch. Makariou III., 199 Neocleous house, Limassol, P.C. 3030, Cyprus; Controlled entity: ARMATURY Group a.s., Nádražní 129, 747 22 Dolní Benešov, Czech Republic, company ID-No. 255 72 881; Controlled entity: ARMATÚRY Group, s.r.o., Jánošíkova 264, Žilina, Slovenská republika, company
ID-No. 36194603; Controlled entity: ARMATURY Group Corp. Ltd., Zhangjiagang, China; Controlled entity: ARMATURY Group Poland Sp. Z o.o., Reymonta 14, Raciborz, Poland, 0000209828; Controlled entity: MARTINOV Group a.s., Martinovská 3168/48, Martinov, 723 00 Ostrava, Czech
Republic, company ID-No. 26282399;
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Graphic Representation of Structure of Relationships between Above Mentioned Entities:
II. ROLE OF THE COMPANY WITHIN THE GROUP The Company is acting towards their controlling company Armatury Servis Kravaře a.s. and their direct stockholder DEMURE HOLDINGS LIMITED independently. Entities controlled by the Company are independent business companies performing the task of specialized production and business entities or their activity is totally independent from the controlling entity (MARTINOV Group a.s.). Controlled companies use technical, economical, legal and other support from the Company and sister companies. III. METHODS AND MEANS OF CONTROLLING: Unified management is applied within the group, namely and especially with applying the following means: - General meeting and decisions adopted by it - Common meetings of the companies managements - Coordination meetings of the board of directors and supervizory boards of all the companies - Commercial contracts concluded under normal conditions and including normal prices IV. OVERVIEW OF CONTRACTS CONCLUDED BETWEEN THE COMPANY AND GROUP ENTITIES Contracts concluded between the Company and ARMATURY Group Corp. Ltd.:
• In 2018, the Company implemented purchase orders towards ARMATURY Group Co. Ltd. for goods with their total value of EUR 55 thousand.
• ARMATURY Group Co. Ltd. towards ARMATURY Group a.s. implemented orders worth EUR 3 835 thousand, and its subsidiary ARMATURY GROUP Trading towards ARMATURY Group a.s. implemented orders worth EUR 133 thousand.
Armatury Servis Kravaře a.s.
DEMURE HOLDINGS LIMITED (100 %)
ARMATURY Group a.s. (100 %)
ARMATURY Group Co. Ltd., China
(100 %)
ARMATURY GROUP Trading (Suzhou) Co.,
Ltd., China (100 %)
ARMATURY Group Poland Sp. z o.o.,
Polsko (100 %)
MARTINOV Group a.s. (100 %)
ARMATÚRY GROUP, s.r.o., Slovakia
(100 %)
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Subsidiary of ARMATURY Group
Contract concluded between the Company and ARMATÚRY Group s.r.o.
• Contract on Credit dated 21 December 2017, pursuant to which ARMATÚRY Group s.r.o. will grant a loan amounting to CZK 2 000 thousand with interests amounting to 2.8 % p. a., due on 31 January 2019, and Contract on Credit in EUR, pursuant to which ARMATÚRY Group s.r.o. will grant a loan amounting up to EUR 500 thousand with interests amounting to 2.8 % p. a., due on 31 December 2019.
• Contract on data processing from 24 February 2005, as amended by the Amendment No. 3 from 1 December 2016, pursuant to which the Company ensures data administration, software maintenance and bookkeeping for ARMATÚRY Group s.r.o. Pursuant to this contract, the Company implemented services with their value of EUR 44.1 thousand without VAT, and implemented orders with their value of EUR 161 thousand, in 2018.
• In 2018, ARMATÚRY Group s.r.o. implemented sales job orders for ARMATURY Group a.s. with their value of EUR 374 thousand.
Contracts concluded between the Company and stockholders of the company Armatury Servis Kravaře a.s.
• Contract on Credit from 14 April 2015 as amended by the Amendment No. 1 from 13 March 2018 pursuant to which Mr. Ladislav Adámek providing the Company with a loan amounting to CZK 5 500 thousand, whereas half of the loan amounting to CZK 2 750 thousand with interests amounting to 2 % p. a. is due till 14 April 2016 and half of it amounting to CZK 2 750 thousand with interests amounting to 2 % p. a. is due till 30 April 2018 – fully repaid.
• Contract on Credit from 13 April 2015, as amended by the Amendment No. 1 from 13 March 2018 pursuant to which Mr. Leo Švančar providing the Company with a loan amounting to CZK 5 500 thousand, whereas half of the loan amounting to CZK 2 750 thousand with interests amounting to 2 % p. s. is due till 14 April 2016 – repaid, and half of it amounting to CZK 2 750 thousand with interests amounting to 3 % p. s. is due till 16 April 2019. Based on the Amendment No. 3, an amount of CZK 10 000 thousand was loaned on 27 April 2018 with interests amounting to 3 % p. a., due on 16 April 2019.
• Contract on Credit from 16 April 2015, as amended by the Amendment No. 1 from 13 March 2018 pursuant to which Mr. Jindřich Švančar providing the Company with a loan amounting to CZK 5 500 thousand, whereas half of the loan amounting to CZK 2 750 thousand with interests amounting to 2 % p. s. is due till 14 April 2016 – repaid, and half of it amounting to CZK 2 750 thousand with interests amounting to 3 % p. s. is due till 16 April 2019.
• Contract on Credit from 16 April 2015, as amended by the Amendment No. 1 from 13 March 2018 pursuant to which Mr. Josef Vavřínek providing the Company with a loan amounting to CZK 5 500 thousand, whereas half of the loan amounting to CZK 2 750 thousand with interests amounting to 2 % p. s. is due till 14 April 2016 and half of it amounting to CZK 2 750 thousand with interests amounting to 2 % p. s. is due till 30 April 2018 – fully repaid.
• Contract on Credit from 16 April 2015, as amended by the Amendment No. 1 from 13 March 2018 pursuant to which Mr. Jiří Vaněk providing the Company with a loan amounting to CZK 5 500
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thousand, whereas half of the loan amounting to CZK 2 750 thousand with interests amounting to 2 % p. s. is due till 14 April 2016 – repaid, and half of it amounting to CZK 2 750 thousand with interests amounting to 3 % p. s. is due till 16 April 2019. Based on the Amendment No. 3, an amount of CZK 10 000 thousand was loaned on 27 April 2018 with interests amounting to 3 % p. a., due on 16 April 2019.
• Contract on Credit from 16 April 2015, as amended by the Amendment No. 1 from 13 March 2018 pursuant to which Mr. Karel Černý providing the Company with a loan amounting to CZK 5 500 thousand, whereas half of the loan amounting to CZK 2 750 thousand with interests amounting to 2 % p. s. is due till 14 April 2016 and half of it amounting to CZK 2 750 thousand with interests amounting to 2 % p. s. is due till 30 April 2018 – fully repaid.
• Contract on Credit from 16 April 2015, as amended by the Amendment No. 1 from 13 March 2018 pursuant to which Mr. Petr Holeček providing the Company with a loan amounting to CZK 5 500 thousand, whereas half of the loan amounting to CZK 2 750 thousand with interests amounting to 2 % p. s. is due till 14 April 2016 and half of it amounting to CZK 2 750 thousand with interests amounting to 3 % p. s. is due till 16 April 2019. Based on the Amendment No. 3, an amount of CZK 10 000 thousand was loaned on 27 April 2018 with interests amounting to 3 % p. a., due on 16 April 2019.
Other companies withing the group did not conclude a contract with the Company within decisive period. V. ASSESSMENT OF ADVANTAGES AND DISADVANTAGES RESULTING FROM RELATIONSHIPS BETWEEN INTERCONNECTED ENTITIES
Advantages consisting especially in strong economical background result from relationships with interconnected entities for the benefit of the controlled entity.Advantages prevail from relationships between interconnected entities for the controlled entity. The controlled entity did not sustained no injury, significant risk or disadvantage as a result of above mentioned reasons within period of year 2018.
VI. OVERVIEW OF MEETINGS ORGANIZED IN THE LAST ACCOUNTING PERIOD ON IMPULSE OR IN INTEREST OF THE CONTROLLING ENTITY OR ENTITIES CONTROLLED BY THEM, IF SUCH A MEETING CONCERNED PROPERTY EXCEEDING 10 % OF REGISTERED CAPITAL OF CONTROLLED ENTITY DETECTED ACCORDING TO THE LAST FINANCIAL STATEMENTS
During decisive period, the Company did not perform any meetings, legal acts or other measures on impulse of controlled entity or entities controlled by them that would concern property exceeding 10 % of registered capital of the Company detected according to the last financial statements. VII. INJURY The Company did not sustained no injury as a result of above mentioned reasons according to the business corporations act. In Dolní Benešov, on 29 March 2019 Petr Holeček Chairman of the Board of Directors ARMATURY Group a.s.
45 Valves for life
ANNUAL REPORT 2018
Supervisory Board‘s Report 2018
Concerning the review of annual financial statements of
ARMATURY Group a.s.
Dear shareholders,
In 2018, the Supervisory Board of ARMATURY Group a.s., ID: 25572881, Nádražní 129, 747 22 Dolní Benešov, carried out regular inspections and a Supervisory Board member participated in the meetings of the joint stock company‘s Board of Directors many times.
In pursuing the control activity, the Supervisory Board did not find any serious deficiencies in the company‘s business management.
The Supervisory Board carried out random checks of the company‘s accounting and handling of the company‘s property and found no breach of applicable laws during these checks on the company‘s part.
Regarding the 2017 financial statements, the Supervisory Board considers it as correct and complete and proposes the general meeting to approve them.
In Dolní Benešov on 24 June 2019
Leo Švančar Chairman of the Supervisory Board
46 Valves for life
ANNUAL REPORT 2018
Organization chart
CHAI
RMAN
OF
THE
BOAR
D
1.1. Top Management Department
Dep
artm
ent´s
pro
duct
í
1.2. Management Systems Department
Dep
artm
ent´s
pro
duct
1.3. Expert Services Department
Dep
artm
ent´s
pro
duct
1. M
anag
emen
t D
ivis
ion
7.1. Employee Education Department
Dep
artm
ent´s
pro
duct
7.2. Payroll Department
Dep
artm
ent´s
pro
duct
7. P
erso
nnel
D
ivis
ion
3.1. Sales Administration Department
Dep
artm
ent´s
pro
duct
3.2. Purchasing Department
Dep
artm
ent´s
pro
duct
3.3. Sales Department
Dep
artm
ent´s
pro
duct
3. C
omm
erci
al D
ivis
ion
3.4. Logistics and Storages Department
Dep
artm
ent´s
pro
duct
2.1. Finance Department
Dep
artm
ent´s
pro
duct
2.2. Property Administration Department
Dep
artm
ent´s
pro
duct
2.3. IT Department
Dep
artm
ent´s
pro
duct
2. F
inan
cial
Div
isio
n
4.1. Planning and Cooperation Departments
Dep
artm
ent´s
pro
duct
4.2. Production DepartmentD
epar
tmen
t´s p
rodu
ct
4. P
rodu
ctio
n D
ivis
ion 4.3. Technological Preparation of Production
Departmemt, Technology of Welding
Dep
artm
ent´s
pro
duct
5.1. Quality Inspection Department
Dep
artm
ent´s
pro
duct
5.2. Complaints Department
Dep
artm
ent´s
pro
duct
5.3. Documentation Department
Dep
artm
ent´s
pro
duct
5. Q
ualit
y C
ontro
l Div
isio
n
6.1. Design Department
Dep
artm
ent´s
pro
duct
6.2. Research and Development Department
Dep
artm
ent´s
pro
duct
6. T
echn
ical
D
ivis
ion
DIV
ISIO
N´S
PR
OD
UC
T:
Opt
imiz
ed p
roce
sses
un
der c
ontro
l
DIV
ISIO
N´S
PR
OD
UC
T:
Sale
s ob
ject
ives
ach
ieve
d.
DIV
ISIO
N´S
PR
OD
UC
T:
Acco
untin
g in
con
form
ity w
ith
legi
slat
ion.
Fin
anci
al in
dice
s un
der c
ontro
l.
DIV
ISIO
N´S
PR
OD
UC
T :
Prod
ucts
del
iver
ed o
n sc
hedu
le, i
n re
quire
d qu
ality
an
d at
the
adke
d pr
ice.
DIV
ISIO
N´S
PR
OD
UC
T:
Prov
isio
n of
requ
ired
qual
ity
of p
rodu
cts.
DIV
ISIO
N´S
PR
OD
UC
T:
Tech
nica
l doc
umen
tatio
n an
d pr
oced
ures
pre
pare
d ef
fect
ivel
y an
d on
sc
hedu
le.
ARM
ATU
RY G
roup
a.s.
ORG
ANIZ
ATIO
N CH
ART
OF
THE
COM
PANY
DIV
ISIO
N´S
PR
OD
UC
T:
Esta
blis
hed
and
effic
ient
em
ploy
ees.
CHIE
F EX
ECUT
IVE
OFF
ICER
47 Valves for life
ANNUAL REPORT 2018
EMS and OHSAS Policy
Czech Republic ARMATURY Group a.s. Production plant and Headquarters Nádražní 129, 747 22 Dolní Benešov tel.: +420/553 680 111 fax: +420/553 680 333 email: [email protected] Slovakia ARMATÚRY GROUP, s.r.o. Registered office Jánošíkova 264, 010 01 Žilina tel.: +421/41/707 77 77 fax: +421/41/707 77 70 email: [email protected] Austria Armatury Group GmbH ARMATURY Group a.s. official representative for Austria Attemsgasse 45/1/7, A-1220 Wien mob.: +43(0)/664/88 51 33 33 tel./fax: +43(0)/1/20 21 985 email: [email protected] Germany Armatury Group GmbH ARMATURY Group a.s. official representative for Germany Technology Centrer Bissendorf Gewerbepark 18, 49143 Bissendorf mob.: +43(0)/664/88 51 33 33 tel.: +49(0)/5402/70/2532 fax: +49(0)/5402/70/2531 email: [email protected] Russia AO „ARMATURY Group a.s.“ ARMATURY Group a.s. official representative for Russia 3rd street Tverskaya-Yamskaya, house 31/35, 125047 Moscow tel./fax: +7/495 956 3335 email: [email protected]
United Arab Emirates ARMATURY Group a.s. DMCC ARMATURY Group a.s. official representative Unit 509, Goldcrest Executive, Cluster "C”, Jumeira Lake Towers Dubai, United Arab Emirates mob.: +971/564 167 600 tel.: +971/043 999 167 email: [email protected] China ARMATURY GROUP Co., Ltd Subsidiary company Xinjing road 18 Zhangjiagang Economic & Technological Development Zone Jiangsu, China mob. (China): +86/137 7326 6078 mob. (CZ): +420/606 713 721 email: [email protected] Other business representatives abroad: Poland, Norway, Turkey, Estonia, Romania, Egypt, Iraq, Pakistan, India, China, Algeria and other countries.