Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

Note 1.

Reporting entity

Purcari Wineries Public Company Limited (“the Company”) is a company domiciled in Cyprus. It was incorporated on 14 June 2007 as a private liability company under the provisions of the Cyprus Companies Law, Cap. 113. The registered office of the Company is 1 Lampousas Street, 1095 Nicosia, Cyprus, Tax Identification Number 12201949I. In December 2017 the Company changed its name from Bostavan Wineries Ltd. to Purcari Wineries Ltd., and at the beginning of 2018 became a public limited company and changed its name to Purcari Wineries Public Company Limited.

 

On 15 February 2018 the Company made a secondary IPO and its shares were admitted for trading at Bucharest Stock Exchange.

 

The Company has an issued share capital of 401,175 EUR as at 31 December 2022, which consists of 40,117,500 ordinary shares with the nominal value of 0.01 EUR each (2021: 40,117,500 ordinary shares with the nominal value of 0.01 EUR each).

 

These financial statements are the consolidated financial statements of Purcari Wineries Public Company Limited (the “Company”) and its subsidiaries (together referred to as “the Group”).

 

The Group is primarily involved in the production and sale of wine and brandy.

 

Subsidiaries

The Group’s subsidiaries and information related to the Company’s ownership interest are presented below:

				Country of incorporation		Ownership interest
						31 December 2022	31 December 2021
Vinorum Holdings Ltd				Gibraltar		100%	100%
West Circle Ltd				British Virgin Islands		100%	100%
Crama Ceptura SRL				Romania		100%	100%
Ecosmart Union SA				Romania		65.75%	65.75%
Vinoteca Gherasim Constantinescu SRL				Romania		100%	100%
Purcari Wineries Ukraine LLC				Ukraine		100%	100%
Angel’s Estate SA				Bulgaria		76%	-
Vinaria Bostavan SRL				Republic of Moldova		100%	100%
Vinaria Purcari SRL				Republic of Moldova		100%	100%
Vinaria Bardar SA				Republic of Moldova		56.05%	56.05%
Casa Purcari SRL				Republic of Moldova		80%	80%
Domeniile Cuza SRL				Republic of Moldova		100%	100%
Fundatia Purcari AO				Republic of Moldova		100%	100%

 

The structure of the Group as at 31 December 2022 is as follows:

-	Purcari Wineries Public Company Limited is a holding company and is domiciled in Cyprus;
-	Vinorum Holdings Ltd is a holding company and is domiciled in Gibraltar;
-	West Circle Ltd is a holding company and is domiciled in British Virgin Islands;
-	Crama Ceptura SRL is domiciled in Romania. Its major activity is the production, bottling and sale of wines;
-	Ecosmart Union SA is domiciled in Romania. Its major activity is providing waste recycling management services;
-	Vinoteca Gherasim Constantinescu SRL is domiciled in Romania. Its major activity is cultivation of grapes.
-	Purcari Wineries Ukraine LLC is domiciled in Ukraine. Its major activity is trade marketing services for Group’s product portfolio;
-	Angel’s Estate SA is domiciled in Bulgaria. Its major activity is the production, bottling and sale of wines;
-	Vinaria Bostavan SRL, Vinaria Purcari SRL and Domeniile Cuza SRL are domiciled in Republic of Moldova. Their major activity is the production, bottling and sale of wines;
-	Casa Purcari SRL is domiciled in Republic of Moldova and its activity relates to hospitality industry (bar&restaurant);
-	Fundatia Purcari AO is domiciled in Republic of Moldova. This is a non-profit charity foundation.

 

54

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

-

Vinaria Bardar SA is domiciled in Republic of Moldova. Its major activity is the production, bottling and sale of brandy and divin. The nominal ownership interest of the Group in Vinaria Bardar SA is 53.91% as at 31 December 2022 (31 December 2021: 53.91%). However, because 3.83% of shares of Vinaria Bardar SA are treasury shares, the effective ownership interest of the Group in the subsidiary is equal to 56.05% as at 31 December 2022 (31 December 2021: 56.05%).

 

Rights over land

 

Moldovan Legislation does not allow non-residents to own freehold land in the Republic of Moldova. In order to be able to exercise control over the land on which the Group’s grape vines grow, the entire area of land was acquired by Victoriavin SRL, a related party of the Group. The Group’s management considers that the related party should not be consolidated because this party is not controlled by the Company. The land is leased to Vinaria Bostavan SRL and Vinaria Purcari SRL, and on it, the grape vines of these subsidiaries are planted.

 

Victoriavin SRL is directly and fully owned by Victor Bostan (who is also shareholder of the Company through Amboselt Universal Inc.), and not the Company, because of the prohibition in Moldovan Law for companies with any element of foreign capital (such as subsidiaries) to own agricultural land in the Republic of Moldova. If Moldovan Law would change and this restriction on ownership of agricultural land would be removed, the Company has the option of requiring Victor Bostan to sell to the Company or any of its subsidiaries the relevant agricultural land (free and clear of any liens) for a gross purchase price of up to USD 1,500 per hectare.

 

The Group’s subsidiaries Vinaria Bostavan SRL and Vinaria Purcari SRL rent land for their plantations of grape vines from the related party Victoriavin SRL based on lease agreements. On 1 January 2018 the Group signed new lease agreements with Victoriavin SRL for these plots of land, where the lease period is changed to 29 years from 1 January 2018 (to 31 December 2047). The lease payment is made annually until 30 November in MDL.

Note 2.

Basis of preparation

These consolidated financial statements as at and for the year ended 31 December 2022 (hereinafter “consolidated financial statements” or “financial statements”) have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“IFRS-EU”) and the requirements of the Cyprus Companies Law Cap.113.

Details of the Group’s accounting policies are included in Note 6 to the consolidated financial statements. The Group has consistently applied the accounting policies to all periods presented in these consolidated financial statements.

Note 3.

Functional and presentation currency

The consolidated financial statements are presented in Romanian Leu (“RON”) as the Group was listed on the Bucharest Stock Exchange (BVB) on 15 February 2018. All amounts have been rounded to the nearest unit, unless otherwise indicated.

Each entity of the Group determines its own functional currency, and items included in its financial statements are measured using the functional currency and is the currency of their primary economic environment.

The currencies of the primary economic environment in which the companies of the Group operate were as follows:

-	Purcari Wineries Plc, Vinorum Holdings Ltd, West Circle Ltd - US Dollar (USD),
-	Crama Ceptura SRL, Ecosmart Union SA, Vinoteca Gherasim Constantinescu - Romanian Leu (RON),
-	Vinaria Bardar SA, Vinaria Bostavan SRL, Vinaria Purcari SRL, Domeniile Cuza SRL, Casa Purcari SRL - Moldovan Leu (MDL),
-	Purcari Wineries Ukraine LLC - Ukrainian Hryvnia (UAH),
-	Angel’s Estate SA – Bulgarian Lev (BGN).

When converting functional currency to RON as presentation currency, IAS 21 requires that assets and liabilities are converted using the closing exchange rate prevailing at each reporting period. Revenue and expenses are converted using the exchange rates prevailing at the transaction date. Equity elements, other than Profit or loss for the year and Translation reserve, are translated using the historical exchange rate at the transaction date.

All foreign exchange rate differences resulting from the translation from functional currency to presentation currency are recognized as a separate component of equity (“Translation reserve”) in the Consolidated Statement of Financial Position and in other comprehensive income in the Consolidated Statement of Comprehensive Income.

 

 

 

 

 

 

 

 

 

 

55

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

Note 4.

Use of estimates and judgments

In preparing these consolidated financial statements, management has made judgements, estimates and assumptions that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

 

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.

a)

Judgments

 

Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the consolidated financial statements was included in the following notes:

 

•	Note 9 – put option over non-controlling interests;
•	Note 25 a) – acquisition of subsidiary that is not a business combination;
•	Note 25 b) – classification of joint arrangements;
•	Note 28 – management incentive program;
•	Note 32 – contingent liabilities from litigations and claims.

 

b)	Assumptions and estimation uncertainties

 

Information about assumptions and estimation uncertainties that may result in a material adjustment in the subsequent twelve-month period was included in the following notes:

 

•	Note 7 (c) – estimates relating to the useful lives of property, plant and equipment;
•	Note 9 – valuation of the put option over non-controlling interests;
•	Note 10 – assumptions and estimates used in the valuation of equity instruments at fair value through profit or loss;
•	Note 25 – assumptions and estimates used in the valuation of harvest of grapes;
•	Note 29 – financial instruments (credit risk), measurement of expected credit loss (“ECL”) allowance for trade receivables.

 

Measurement of fair values

 

A number of the Group's accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities.

 

The management regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the management assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRS, including the level in the fair value hierarchy in which such valuations should be classified.

 

When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

•	Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
•	Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
•	Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 

If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

 

The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

 

Further information about the assumptions made in measuring fair values was included below and in the following notes:

 

•	Note 9 – valuation of the put option over non-controlling interests;
•	Note 10 – valuation of equity instruments measured at fair value through profit or loss (“FVTPL”);
•	Note 25 – valuation of biological assets (grapes on vines);
•	Note 29 – financial instruments (fair values).

 

Note 5.

Basis of measurement

Management has prepared these consolidated financial statements under the going concern basis, which assumes the realisation of assets and settlement of liabilities in the course of ordinary economic activity. These consolidated financial statements have been prepared on the historical cost basis, except for:

•	biological assets (grapes on vines) which are measured at fair value less costs to sell at point of harvest;
•	equity securities measured at FVTP;
•	put option over non-controlling interests measured at fair value.

 

56

 

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

Note 6.

Restatements

During 2021 the Group, through its subsidiary Crama Ceptura SRL, increased its initial investment of 27% in share capital of Ecosmart Union SA to 65.75% of share capital and voting interests.

The initial accounting for this business combination was incomplete as of 31 December 2021, as the Group recognized a goodwill of RON 6,984,076 from this acquisition, based on book value of identifiable net assets acquired.

After performing a purchase price allocation of the identifiable assets acquired and the liabilities assumed at their acquisition-date fair values, there were identified and recognized an intangible asset “Customer Relationships” and updated values for some equipment and vehicles, and related deferred tax impact. As consequence, no goodwill resulted from acquisition of Ecosmart Union SA.

The following tables summarize the impacts on the Group’s consolidated financial statements, as part of the business combination.

Restatement of consolidated statement of financial position as at 31 December 2021:

				As previously reported		Adjustments		As restated
Assets
Property, plant and equipment				167,171,497		116,473		167,287,970
Intangible assets and goodwill				9,050,782		5,147,462		14,198,244
Non-current receivables				2,552,630		-		2,552,630
Loan receivables				849,489		-		849,489
Inventories				74,895,843		-		74,895,843
Equity instruments at fair value through profit or loss				4,341,709		-		4,341,709
Other non-current assets				118,061		-		118,061
Non-current assets				258,980,011		5,263,935		264,243,946
Inventories				100,119,797		-		100,119,797
Trade and other receivables				63,320,703		-		63,320,703
Income tax assets				131,257		-		131,257
Prepayments				6,346,251		-		6,346,251
Other current assets				555,554				555,554
Cash and cash equivalents				32,100,114		-		32,100,114
Current assets				202,573,676		-		202,573,676
Total assets				461,553,687		5,263,935		466,817,622
Equity
Share capital				1,763,121		-		1,763,121
Share premium				83,184,367		-		83,184,367
Treasury shares reserve				(5,532,543)		-		(5,532,543)
Other reserves				5,079,807		-		5,079,807
Translation reserve				16,194,236		(270,402)		15,923,833
Retained earnings				142,714,713		(145,360)		142,569,353
Equity attributable to owners of the Company				243,403,701		(415,762)		242,987,939
Non-controlling interests				16,543,032		3,672,211		20,215,243
Total equity				259,946,733		3,256,449		263,203,182
Liabilities
Borrowings and lease liabilities				24,851,576		-		24,851,576
Deferred income				7,215,629		-		7,215,629
Deferred tax liability				7,407,095		2,007,486		9,414,581
Non-current liabilities				39,474,300		2,007,486		41,481,786
Borrowings and lease liabilities				73,133,087		-		73,133,087
Deferred income				1,967,532		-		1,967,532
Income tax liabilities				1,053,529		-		1,053,529
Employee benefits				4,671,899		-		4,671,899
Trade and other payables				75,346,297		-		75,346,297
Provisions				5,960,310		-		5,960,310
Current liabilities				162,132,654		-		162,132,654
Total liabilities				201,606,954		2,007,486		203,614,440
Total equity and liabilities				461,553,687		5,263,935		466,817,622

 

57

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

Restatement of consolidated statement of profit or loss and other comprehensive income for the year ended 31 December 2021:

	As previously reported		Adjustments		As restated
Revenue	248,133,715		-		248,133,715
Cost of sales	(132,291,220)		-		(132,291,220)
Gross profit	115,842,495		-		115,842,495
Other operating income	2,147,737		-		2,147,737
Marketing and sales expenses	(30,914,475)		-		(30,914,475)
General and administrative expenses	(27,242,431)		(263,187)		(27,505,618)
Impairment loss on trade and loan receivables, net	(2,550,417)		-		(2,550,417)
Other operating expenses	5,017,193		-		5,017,193
Profit from operating activities	62,300,102		(263,187)		62,036,915
Finance income	7,047,317		-		7,047,317
Finance costs	(6,959,687)		-		(6,959,687)
Net finance income	87,630		-		87,630
Share of loss of equity-accounted investees, net of tax	(558,114)		-		(558,114)
Profit before tax	61,829,618		(263,187)		61,566,431
Income tax expense	(10,457,692)		42,109		(10,415,583)
Profit for the year	51,371,926		(221,078)		51,150,848
Other comprehensive income
Items that are or may be reclassified to profit or loss
Foreign currency translation differences	14,287,944		(333,665)		13,954,279
Other comprehensive income for the year	14,287,944		(333,665)		13,954,279
Total comprehensive income for the year	65,659,870		(554,743)		65,105,127
Profit attributable to:
Owners of the Company	47,159,528		(145,359)		47,014,169
Non-controlling interests	4,212,398		(75,719)		4,136,679
	51,371,926		(221,078)		51,150,848
Total comprehensive income attributable to:
Owners of the Company	59,919,511		(415,761)		59,503,750
Non-controlling interests	5,740,359		(138,982)		5,601,377
	65,659,870		(554,743)		65,105,127

 

Earnings per share, RON
Basic and diluted earnings per share	1.19		(0.01)		1.18

 

 

 

 

 

 

 

 

 

 

58

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

Restatement of consolidated statement of cash flows for the year ended 31 December 2021:

	As previously reported			Adjustments			As restated
Cash flow from operating activities
Profit for the year	51,371,926		(221,078)					51,150,848
Adjustments for:
Depreciation and amortization	13,499,149		263,187					13,762,336
Equity-settled share-based payment transactions	6,391,462		-					6,391,462
Gain on disposal of property, plant & equipment & intangible assets	(710,713)		-					(710,713)
Impairment of property, plant and equipment, net	(80,142)		-					(80,142)
Impairment of trade receivables, net	2,550,417		-					2,550,417
Release of deferred income	(1,500,311)		-					(1,500,311)
Gains on write-off of trade and other payables	(183,736)		-					(183,736)
Share of loss of equity-accounted investee, net of tax	558,114		-					558,114
Adjustment to fair value of biological assets	(4,543,697)		-					(4,543,697)
Income tax expense	10,457,692		(42,109)					10,415,583
Net finance income	(87,630)		-					(87,630)
Operating profit before working capital changes	77,722,531		-					77,722,531
Changes in working capital:
Inventories	(38,633,602)		-					(38,633,602)
Trade and other receivables	(8,264,309)		-					(8,264,309)
Prepayments	(2,951,582)		-					(2,951,582)
Other assets	(480,805)							(480,805)
Employee benefits	1,313,473							1,313,473
Trade and other payables	22,523,930							22,523,930
Provisions	(1,266,843)		-					(1,266,843)
Cash generated from operating activities	49,962,793		-					49,962,793
Income tax paid	(11,880,476)							(11,880,476)
Interest paid	(3,881,020)		-					(3,881,020)
Net cash generated from operating activities	34,201,297		-					34,201,297
Cash flows from investing activities
Payments for acquisition of intangible assets	(696,800)		-					(696,800)
Payments for acquisition of property, plant and equipment	(25,125,524)		-					(25,125,524)
Acquisition of equity instruments	(3,414,780)		-					(3,414,780)
Loans granted	(849,488)		-					(849,488)
Receipt of government grants	4,684,381		-					4,684,381
Acquisition of subsidiary, net of cash acquired	(3,226,114)		-					(3,226,114)
Proceeds from sale of equity instruments	4,344,778		-					4,344,778
Proceeds from sale of property, plant and equipment	3,004,675		-					3,004,675
Net cash from/ (used in) investing activities	(21,278,872)		-					(21,278,872)
Cash flows from financing activities
Acquisition of non-controlling interests	(5,061)		-					(5,061)
Proceeds from exercise of share options	1,175,000		-					1,175,000
Receipt of borrowings	65,756,512		-					65,756,512
Repayment of borrowings and lease liabilities	(67,448,002)		-					(67,448,002)
Acquisition of treasury shares	(4,939,636)		-					(4,939,636)
Dividends paid	(27,577,478)		-					(27,577,478)
Net cash used in financing activities	(33,038,665)		-					(33,038,665)
Net increase/ (decrease) in cash and cash equivalents	(20,116,240)		-					(20,116,240)
Cash and cash equivalents at 1 January	50,788,605		-					50,788,605
Effect of movements in exchange rates on cash held	1,427,749		-					1,427,749
Cash and cash equivalents at 31 December	32,100,114		-					32,100,114

 

59

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

Note 7.

Significant accounting policies

 

The significant accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements. The accounting policies of subsidiaries have been changed where necessary to adhere to the consistent application of the accounting policies applied by the Group.

 

a)	Basis of consolidation

 

These consolidated financial statements comprise the financial statements of the parent company Purcari Wineries Public Company Limited and the financial statements of the companies controlled by the Company as at 31 December 2022.

 

(i)	Business combinations

 

The Group accounts for business combinations using the acquisition method when the acquired set of activities and assets meets the definition of a business and control is transferred to the Group. In determining whether a particular set of activities and assets is a business, the Group assesses whether the set of assets and activities acquired includes, at a minimum, an input and substantive process and whether the acquired set has the ability to produce outputs.

 

The Group has an option to apply “concentration test” that permits simplified assessment of whether an acquired set of activities and assets is not a business. The optional concentration test is met if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets.

 

The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.

 

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.

 

(ii)	Subsidiaries

 

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.

 

 

(iii)

Loss of control

 

When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related non-controlling interests and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost. Subsequently that retained interest is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained.

 

 

(iv)	Non-controlling interests

 

The Group measures any non-controlling interests in the subsidiary at their proportionate share of the subsidiary’s identifiable net assets.

 

Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary.

 

(v)	Interests in equity-accounted investees

 

The Group’s interests in equity-accounted investees comprise interests in associates. Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies.

 

Interests in associates are accounted for using the equity method. They are initially recognised at cost, which includes transaction costs. Subsequent to initial recognition, the equity-accounted investees include the Group’s share of the profit or loss and other comprehensive income of associates, until the date on which significant influence ceases.

 

(vi)	Transactions eliminated on consolidation

 

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated. Unrealised gains or losses arising from transactions with associates are eliminated against the investment to the extent of the Group’s interest in the investee.

 

 

60

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

(vii)

Put option over non-controlling interests

 

Put option over non-controlling interests in a business combination are accounted within equity in “Other reserves” using the present-access method, considering that the non-controlling interests still have present access to the returns associated with the underlying ownership interests, since this option is based on a variable price. Then subsequent to initial recognition the changes in the carrying amount of the put liability are recognised within equity in “Other reserves”.

 

(viii)

Call option over non-controlling interests

 

Call option over non-controlling interests in a business combination is recognized at fair value at the date of the acquisition.

Considering the variable exercise price and that no payment is made as premium to initiate the call option, initial recognition of the call option results in a corresponding adjustment for decrease of the purchase price for the acquired controlling interest. Call option is subsequently measured at fair value through profit or loss.

 

b)	Foreign currency

 

Foreign currency transactions

 

Transactions in foreign currencies are translated to the functional currency of each company within Group at exchange rates at the dates of the transactions.

 

Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated to the functional currency at the exchange rate when the fair value was determined. Foreign currency differences are generally recognised in profit or loss. Non-monetary items that are measured based on historical cost in a foreign currency are not translated.

 

Foreign operations

 

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into RON at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into RON at the exchange rates at the dates of the transactions. Components of equity are not retranslated but recorded in RON from the initial translation into the presentation currency.

 

Foreign currency differences are recognised in other comprehensive income and accumulated in the translation reserve, except to the extent that the translation difference is allocated to non-controlling interests.

 

When a foreign operation is disposed of in its entirety or partially such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If the Group disposes of part of its interest in a subsidiary but retains control, then the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group disposes of only part of an associate while retaining significant influence, the relevant proportion of the cumulative amount is reclassified to profit or loss.

 

c)	Property, plant and equipment

 

(i)	Recognition and measurement

 

Items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses.

 

If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment.

 

Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss.

Grape vines

The Group has adopted the amendments to accounting standards IAS 16 Property Plant and equipment and IAS 41 Agriculture (effective for annual periods beginning on or after 1 January 2016). These amendments result in bearer plants being in the scope of IAS 16 Property, Plant and Equipment, instead of IAS 41 Agriculture, to reflect the fact that their operation is similar to that of manufacturing.

 

Following this amendment, the Group used the fair value of bearer plants (grape vines) as at 1 January 2014 as deemed cost at that date.

 

 

 

61

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

(ii)	Subsequent costs

 

Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with the expenditure will flow to the Group.

 

(iii)

Depreciation

 

Depreciation is calculated to write off the cost of items of property, plant and equipment less their estimated residual values using the straight-line method over their estimated useful lives and is generally recognised in profit or loss. Land and construction in progress are not depreciated.

 

The estimated useful lives of property, plant and equipment for current and comparative periods were as follows:

 

•	buildings and constructions	15-40 years
•	equipment	3-25 years
•	vehicles	5-12 years
•	other fixed assets	2-30 years
•	grape vines	30 years

 

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

 

d)	Intangible assets and goodwill

 

(i)	Recognition and measurement

 

Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated impairment losses.

 

Intangible assets comprise customer relationships, software, instruction recipes, trademarks and licenses that are acquired by the Group and have finite useful lives. Intangible assets are measured at cost less accumulated amortisation and any accumulated impairment losses.

 

(ii)	Subsequent expenditure

 

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.

 

(iii)

Amortization

 

Amortisation is calculated to write off the cost of intangible assets less their estimated residual values using the straight-line method over their estimated useful lives and is generally recognised in profit or loss.

 

 

The estimated useful lives for the current and comparative years were as follows:

 

•	customer relationships					15 years
•	software				3-10 years
•	instruction recipes			5 years
•	trademarks		5.5-10 years
•	licenses	period of licence validity

 

Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

 

e)	Biological assets

 

Biological assets comprise grapes on the vine, which are measured at fair value less costs to sell, with any change therein recognized in profit or loss in other operating expenses.

 

f)	Inventories

Inventories are measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The cost of inventories is based on the weighted average principle. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. The cost of work in progress includes also storage costs, which are necessary in the production process before a further production stage.

The harvested product (grapes) is measured at fair value less cost to sell at the point of harvest. After harvest, it is treated as inventory in accordance with IAS 2.

 

62

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

g)	Financial instruments

 

(i)	Recognition and initial measurement

 

Trade receivables are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the Group becomes a party to the contractual provisions of the instrument.

 

 

A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

 

(ii)	Classification and subsequent measurement

 

On initial recognition, a financial asset is classified as measured at: amortized cost or FVTPL.

 

Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

 

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:

•	it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
•	its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

All financial assets not classified as measured at amortized cost as described above are measured at FVTPL.

 

Financial assets at FVTPL

 

These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss.

 

 

Financial assets at amortized cost

 

These assets are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss.

 

Cash and cash equivalents

 

Cash and cash equivalents comprise cash balances, call deposits and deposits with maturities of three months or less from the set-up date that are subject to an insignificant risk of changes in their fair value, and are used by the Group in the management of its short-term commitments.

 

Other financial liabilities

 

The Group classifies non-derivative financial liabilities into the other financial liabilities’ category.

 

Non-derivative financial liabilities are initially recognised at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortised cost using the effective interest method.

 

Other financial liabilities include bank borrowings and trade payables.

 

(iii)

Derecognition

 

Financial assets

 

The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

 

The Group enters into transactions whereby it transfers assets recognised in its statement of financial position but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognised.

 

63

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

Financial liabilities

 

The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire. The Group also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value.

 

On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss.

 

(iv)	Offsetting

 

Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.

 

h)	Impairment

 

(i)	Non-derivative financial assets

 

Financial instruments

 

The Group recognises loss allowances for ECLs on financial assets measured at amortised cost. Loss allowances for trade receivables are always measured at an amount equal to lifetime ECLs.

 

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment and including forward-looking information.

 

The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 180 days past due.

 

The Group considers a financial asset to be in default when:

 

•	the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as realising security (if any is held); or
•	the financial asset is more than 360 days past due.

 

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument. The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk.

 

Measurement of ECLs

 

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive). ECLs are discounted at the effective interest rate of the financial asset.

 

Presentation of allowance for ECL in the statement of financial position

 

Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.

 

Write-off

 

The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. The Group expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s procedures for recovery of amounts due.

 

(ii)	Non-financial assets

 

At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than inventories and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

 

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash generating units (“CGUs”).

 

64

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

 

An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount. Impairment losses are recognised in profit or loss.

 

An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. A reversal of an impairment loss is recognised in profit or loss.

 

i)	Employee benefits

 

(i)	Defined contribution plans

The Group, in the normal course of business makes payments to the National Social Insurance Authority and to the National Medical Insurance Authority on behalf of its employees for pension, health care and unemployment benefit. All employees of the Group are members and are also legally required to make defined contributions (included in the social security contributions) to the State pension plan (a State defined contribution plan).

Compulsory contributions to defined contribution plans are expensed as the related service is provided. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.

(ii)	Short term service benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

(iii)

Share-based payments arrangements

The grant-date fair value of equity-settled share-based payment arrangements granted to employees is generally recognised as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

Since the grant-date fair value of the share options cannot be measured reliably by the Group, an intrinsic value method is applied. The intrinsic value is remeasured at each reporting date and changes are recognised in profit or loss until the instrument is settled.

j)	Provisions

A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

k)

Revenue

Revenue is measured based on the consideration specified in a contract with a customer. The Group recognises revenue when it transfers control over a good or service to a customer.

		Nature and timing of satisfaction of performance obligations, including significant payment terms		Revenue recognition policies
Sale of goods		Customers obtain control of goods when the significant risks and rewards of ownership have been transferred to them. Revenue is recognised at that point in time, although invoices are generated when the goods are dispatched from the Group’s warehouse. Invoices are usually payable within 30-90 days from the date of delivery and acceptance of goods by the customers. No discounts or loyalty points are offered for sale of goods, except for standard contractual discounts included in the invoices issued by the subsidiary Crama Ceptura SRL. Some contracts permit the customer to return an item due to quality claims, and the period for these claims is		Revenue is recognised when the significant risks and rewards of ownership have been transferred to the customer. The timing of the transfer of risks and rewards varies depending on the individual terms of the sales agreement and incoterms. For contracts that permit the customer to return an item, revenue is recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur.

 

65

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

		usually no longer than 15 days from the date of delivery and acceptance of goods by the customers.
Hotel and restaurant services		Invoices for hotel and restaurant services are issued on the moment the services are consumed (i.e. at check-out) and usually are paid at check-out.		The revenue is recognised over time as the customer simultaneously receives and consumes the benefits provided by the entity's performance as the entity performs.
Waste recycling management services		The Group through its subsidiary Ecosmart Union SA takes over the environmental responsibility from its customers in Romania, and has the obligation to find recyclers/ collectors of waste and enter into contracts with them in order to process the quantities agreed with its customers.   Invoices for waste recycling management services are are usually payable within 30 days.		The revenue is recognised over time as the services are provided. The stage of completion for determining the amount of revenue to recognize is assessed based on surveys of work performed.

 

l)	Governments grants

The Group recognises an unconditional government grant in profit or loss as other operating income when the grant becomes receivable. Other government grants are initially recognised as deferred income at fair value if there is reasonable assurance that they will be received and the Group will comply with the conditions associated with the grant; they are then recognised in profit or loss as other income on a systematic basis over the useful life of the asset.

Grants that compensate the Group for expenses incurred are recognised in profit or loss on a systematic basis in the periods in which the expenses are recognised.

 

m)	Subsequent events

 

Events occurring after the reporting date, which provide additional information about conditions prevailing at those reporting dates (adjusting events) are reflected in the consolidated financial statements. Events occurring after the reporting date that provide information on events that occurred after the reporting dates (non-adjusting events), when material, are disclosed in the notes to the financial statements.

 

n)

Leases

 

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

(i)	As a lessee

 

At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices. However, for the leases of property the Group has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.

 

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

 

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

 

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.

 

The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.

 

66

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

Lease payments included in the measurement of the lease liability comprise the following:

–	fixed payments, including in-substance fixed payments;
–	variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
–	amounts expected to be payable under a residual value guarantee; and
–	the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.

 

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment.

 

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

 

The Group presents right-of-use assets in “Property, plant and equipment” and lease liabilities in “Borrowings and lease liabilities” in the statement of financial position.

 

Short-term leases and leases of low-value assets

 

The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term leases. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

 

o)	Finance income and finance costs

 

The Group’s finance income and finance costs include:

•	interest income;
•	interest expense;
•	the foreign currency gain or loss on financial assets and financial liabilities;
•	the net gain or loss on financial assets at FVTPL.

 

Interest income or expense is recognised using the effective interest method.

 

The “effective interest rate” is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to:

	•	the gross carrying amount of the financial asset; or
	•	the amortised cost of the financial liability.

In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset (when the asset is not credit-impaired) or to the amortised cost of the liability. However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortised cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis.

 

p)	Income tax

 

Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.

 

(i)	Current tax

 

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends.

 

(ii)	Deferred tax

 

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:

 

67

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

-	temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;
-	temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
-	taxable temporary differences arising on the initial recognition of goodwill.

 

Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Future taxable profits are determined based on business plans for individual subsidiaries in the Group. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improves.

 

Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.

 

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.

The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

 

Deferred tax assets and liabilities are offset only if certain criteria are met.

 

q)	Share capital

 

Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares, net of any tax effects, are recognised as a deduction from equity.

 

Treasury shares

 

When shares recognised as equity are repurchased, the amount of the consideration paid, which includes directly attributable costs, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented in the treasury share reserve. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity and the resulting surplus or deficit on the transaction is presented within share premium.

 

r)	Standards issued but not yet effective

 

The following Standards, Amendments to Standards and Interpretations have been issued but are not yet effective for annual period beginning on 1 January 2022. The Group has not early adopted the new or amended standards in preparing these consolidated financial statements.

 

The management expects that the adoption of the below financial reporting standards in future periods will not have a significant effect on the consolidated financial statements of the Group:

(i)	Standards issued but not yet effective

 

The following new and amended standards are effective for annual periods beginning after 1 January 2022 and earlier application is permitted. The Company has not early adopted any of these new and amended standards and does not expect that they will have a significant impact on the Company’s financial statements when become effective.

•	Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting policies);
•	Definition of Accounting Estimates (Amendments to IAS 8);
•	Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12);
•	Lease Liability in a Sale and Leaseback (Amendments to IFRS 16);
•	IFRS 17 Insurance contracts and amendments to IFRS 17 Insurance contracts;
•	IFRS 17 Insurance contracts: Initial Application of IFRS 17 and IFRS 9 – Comparative Information.

 

(ii)	IFRSs, Amendments to IFRSs and Interpretations not adopted by the EU

 

•	Classification of Liabilities as Current or Non-Current with Covenants (Amendments to IAS 1);
•	Lease Liability in a Sale and Leaseback (Amendments to IFRS 16);
•	Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28).

 

68

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

Note 8.

Property, plant and equipment

 

The movements of property, plant and equipment from 1 January 2021 to 31 December 2022 were as follows:

 

		Assets under construction		Land		Buildings and constructions		Equipment		Vehicles		Other		Grape vines		Total
Cost
Balance at 1 January 2022		5,367,748		9,546,439		128,590,439		120,634,965		11,493,542		6,911,457		37,406,488		319,951,078
Additions		30,036,791		194,226		95,439		53,289		492,700		80,230		2,245,674		33,198,349
Acquisitions through business combinations		-		4,180,220		30,979,883		17,580,159		465,502		126,979		9,494,752		62,827,495
Transfers		(27,157,213)		40,898		11,632,520		13,050,909		1,656,785		776,101		-		-
Disposals		-		-		(523,058)		(1,556,019)		(451,170)		(34,329)		(195,735)		(2,760,311)
Effect of movement in exchange rates		(133,643)		239,614		298,031		(481,525)		(79,890)		(414,026)		394,984		(176,455)
Balance at 31 December 2022		8,113,683		14,201,397		171,073,254		149,281,778		13,577,469		7,446,412		49,346,163		413,040,156
Accumulated depreciation and impairment losses
Balance at 1 January 2022		-		574,236		72,952,848		58,448,991		5,485,032		5,283,521		9,918,480		152,663,108
Depreciation for the year		-		167,211		4,724,822		4,862,176		5,233,332		1,863,843		1,062,925		17,914,309
Increase through business combinations		-		-		8,914,611		11,376,209		196,786		92,059		2,033,792		22,613,457
Impairment loss, net		-		-		(80,141)		-		-		-		-		(80,141)
Disposals		-		-		(406,657)		(819,901)		(295,816)		(26,345)		(45,342)		(1,594,061)
Effect of movement in exchange rates		-		(4,240)		(481,994)		76,471		(515,961)		(228,736)		14,109		(1,140,351)
Balance at 31 December 2022		-		737,207		85,623,489		73,943,946		10,103,373		6,984,342		12,983,964		190,376,321
Carrying amounts
At 1 January 2022		5,367,748		8,972,203		55,637,591		62,185,974		6,008,510		1,627,936		27,488,008		167,287,970
At 31 December 2022		8,113,683		13,464,190		85,449,765		75,337,832		3,474,096		462,070		36,362,199		222,663,835

 

 

 

 

 

 

 

 

 

 

69

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

 

		Assets under construction		Land		Buildings and constructions		Equipment		Vehicles		Other		Grape vines		Total
Cost
Balance at 1 January 2021		5,553,185		7,266,688		115,797,404		103,760,194		9,242,775		5,729,686		28,724,442		276,074,374
Additions		22,158,715		594,421		1,187,878		607,972		115,996		49,958		1,156,800		25,871,740
Acquisitions through business combinations		-		1,172,367		108,532		1,572,910		933,664		50,611		5,359,222		9,197,306
Transfers		(22,638,055)		-		7,427,150		13,651,362		860,870		698,673		-		-
Disposals		-		-		(2,948,077)		(4,887,863)		(421,310)		(34,877)		-		(8,292,127)
Effect of movement in exchange rates		293,903		512,963		7,017,552		5,930,390		761,547		417,406		2,166,024		17,099,785
Balance at 31 December 2021		5,367,748		9,546,439		128,590,439		120,634,965		11,493,542		6,911,457		37,406,488		319,951,078
Accumulated depreciation and impairment losses
Balance at 1 January 2021		-		415,351		66,498,725		52,469,986		3,877,758		4,496,603		6,500,438		134,258,861
Depreciation for the year		-		136,694		3,320,116		7,246,244		1,254,619		499,647		884,197		13,341,517
Increase through business combinations		-		-		108,532		485,494		350,688		16,716		1,990,689		2,952,119
Impairment loss, net		-		-		(80,142)		-		-		-		-		(80,142)
Disposals		-		-		(1,176,611)		(4,766,200)		(139,640)		(31,773)		-		(6,114,224)
Effect of movement in exchange rates		-		22,191		4,282,228		3,013,467		141,607		302,328		543,156		8,304,977
Balance at 31 December 2021		-		574,236		72,952,848		58,448,991		5,485,032		5,283,521		9,918,480		152,663,108
Carrying amounts
At 1 January 2021		5,553,185		6,851,337		49,298,679		51,290,208		5,365,017		1,233,083		22,224,004		141,815,513
At 31 December 2021		5,367,748		8,972,203		55,637,591		62,185,974		6,008,510		1,627,936		27,488,008		167,287,970

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

70

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

As at 31 December 2022 property, plant and equipment includes right-of-use assets of RON 5,750,128 (2021: RON 7,095,218) related to leased land, buildings and vehicles (Note 17).

The property, plant and equipment of the Group are located in the following countries:

		31 December 2022		31 December 2021
Republic of Moldova		148,275,624		135,693,788
Romania		32,096,811		31,594,182
Bulgaria		42,291,400		-
Total		222,663,835		167,287,970

 

Depreciation charge

 

Depreciation charge is included in the following financial statement captions:

 

		2022		2021
Cost of sales (Note 21)		8,106,116		5,640,554
General and administrative expenses (Note 23)		5,039,430		2,665,714
Inventories		4,537,380		4,854,388
Unallocated overheads		231,383		180,861
Total		17,914,309		13,341,517

 

Security

 

The carrying amount of property, plant and equipment that is subject to a registered debenture to secure bank loans is disclosed in Note 17 to the consolidated financial statements. The Group is not involved in any legal disputes that may restrict its ability to use or dispose of its properties.

 

 

Note 9.

Acquisition of subsidiary

 

Acquisition of Angel’s Estate SA

 

On 10 October 2022, the Company acquired a 76% stake in the share capital of Angel’s Estate SA, a winery domiciled in Bulgaria. The main activity of the acquired company is the production, bottling and sale of wines.

 

For the period 10 October to 31 December 2022 Angel’s Estate SA contributed to the Group’s revenue an amount equivalent to RON 3,052,558 and to the Group’s net income for the year with a loss in amount of RON 1,315,335. If the acquisition had occurred on 1 January 2022, management estimates that the consolidated revenue would have been RON 313,415,424 and consolidated profit for the year would have been RON 66,216,015.

 

Consideration transferred

 

The amount payable by the Company for the acquisition of 76% of shares of Angel’s Estate SA amounted to EUR 1,750,000, of which EUR 1,000,000 were paid after the completion of transaction and the deferred amount of EUR 750,000 is payable within 12 months after transaction date. Therefore the consideration transferred at the acquisition date amounted to the equivalent of RON 8,491,584.

 

The acquired company was making losses for many years in a row and its technology and equipment are out-of-date. As result, the Company will need to make significant investments in technological developments in order to turn around Angels Estate SA, making it profitable as its other Group subsidiaries. This is why the acquisition was made at a low purchase price compared to its assets value.

 

According to sale-purchase agreement, the Company is committed to provide a EUR 6,000,000 loan during the years 2023-2024 for modernization of production facilities.

 

Also, a put option was written over the non-controlling interests, that allows the minority shareholders to sell their shares between years 2028 and 2032. Due to significant investments mentioned above and under the management of the leading Group in CEE, Angel’s Estate SA could generate important revenue and profits by that time. By having a present access to the returns of the Angel’s Estate SA, the minority shareholders could sell their shares at a much higher price in the future.

 

71

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

Put option over non-controlling interests was recognized at the acquisition date at fair value in "Other reserves” within equity in “Other reserves” using the present-access method, considering that the non-controlling interests still have present access to the returns associated with the underlying ownership interests, since this option is based on a variable price. The subsequent measurement was recognized within equity in “Other reserves”. As at 31 December 2022 this put liability was estimated at RON 11,729,130.

 

The Company has as well a call option over the non-controlling interests of Angel’s Estate SA, that allows it to buy from minority shareholders of their shares between years 2028 and 2032. Call option over non-controlling interests in a business combination is recognized at fair value at the date of the acquisition. Considering the variable exercise price and that no payment is made as premium to initiate the call option, initial recognition of the call option results in a corresponding adjustment for decrease of the purchase price for the acquired controlling interest. Call option is subsequently measured at fair value through profit or loss. The call option was not recognized neither at acquisition date nor at 31 December 2022 due to being non-significant.

 

As of 31 December 2022, the fair value measurement for put option over non-controlling interests of Angel’s Estate SA has been categorized as a Level 3 fair value based on the inputs to the valuation technique used (see Note 4b). The following table shows the value estimate of the put option based on the valuation techniques used in measuring fair value as of 31 December 2022, as well as the significant unobservable inputs used.

There were no transfers between levels. Any fair value changes are included in other reserves in equity. The fair value estimate valuation of the put option was performed by a certified ANEVAR valuator, at Company’s request. The ANEVAR standards are in line with the International Valuation Standards (IVS).

 

Valuation technique	The Present Value: The valuation model considers the present value of equity, calculated based on agreed formulae and using estimated revenue to be generated by the entity in the year preceding the year of exercise of put option, discounted using a risk-adjusted discount rate (WACC).
Significant	•	Expected year of exercise (2028);
Unobservable	•	Revenue in the year preceding year of exercise (EUR 8,387,224);
inputs	•	Additional loan threshold (EUR 2,000,000);
	•	State subsidies received (EUR 687,500);
	•	Risk-adjusted discount rate (10.10%).
Inter-relationship between key	The estimated fair value would increase (decrease) by:
Unobservable inputs and fair	•	RON 117,291 / (RON 117,291) if the cash flows to be paid were higher (lower) by 1%; or
value measurement	•	RON 603,678 / (RON 569,065) if the risk-adjusted discount rate was lower (higher) by 1pp.

 

 

 

Identifiable assets acquired and liabilities assumed

 

The identifiable assets acquired, and liabilities assumed are presented below at their acquisition-date fair values, based on a Purchase Price Allocation (PPA) report. The PPA report was performed by a certified ANEVAR valuator, at Company’s request. The ANEVAR standards are in line with the International Valuation Standards (IVS).

 

		Book value		Fair Value Adjustments		Fair value
Property, plant and equipment		29,541,127		14,108,914		43,650,041
Intangible assets		161,677		3,752,500		3,914,177
Trade and other receivables		1,520,651		-		1,520,651
Inventories		9,644,266		-		9,644,266
Cash and cash equivalents		544,252		-		544,252
Deferred income		(6,674,096)		-		(6,674,096)
Trade and other payables		(3,551,286)		-		(3,551,286)
Deferred tax liabilities		1,105,298		(1,786,142)		(680,844)
Other liabilities		(1,271)		-		(1,271)
Total identifiable net assets acquired		32,290,618		16,075,272		48,365,890

 

 

72

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

Gain from Bargain Purchase

 

As a result of acquisition resulted a gain from bargain purchase, which was recognized in the face of the consolidated statement of profit and loss as a Gain from a bargain purchase. Its calculation is presented below.

 

				Amount
Consideration transferred				8,491,584
Non-controlling interests, based on their proportionate interest in the recognized amounts of the asset and liabilities of Angel’s Estate SA				11,614,909
Fair value of identifiable net assets acquired				(48,365,890)
Gain from Bargain Purchase				(28,259,397)

 

 

Acquisition of Ecosmart Union SA

 

In March 2017 the Group, through its subsidiary Crama Ceptura SRL, contributed to the foundation of Ecosmart Union SA, contributing RON 108,000 for a 27% share. The main activity of Ecosmart Union SA is providing waste recycling management services, under specific law and authorisation given by State Environment Agency.

 

At 15 September 2021, the Group, through its subsidiary Crama Ceptura SRL, increased its investment to 55.00% of share capital and voting interests and Ecosmart Union SA became a subsidiary from that date.

 

On 14 October 2021, the Group increased its investment in Ecosmart Union SA to 65.75% of shares and voting interests.

 

Ecosmart Union SA as an equity-accounted investee

 

The movement in the investment in Ecosmart Union SA from 1 January 2021 to 15 September 2021 was as follows:

 

 

		2021
Balance at 1 January		558,109
Share of loss		(558,109)
Balance at 31 December		-

 

The share of loss of equity-accounted investees, net of tax, for the year ended 31 December 2021, was recognized in the profit or loss, up to the carrying amount of investment in Ecosmart Union SA at the date the Group obtained control over it.

The following table summarises the financial information of Ecosmart Union SA as included in its own financial statements. The table reconciles the summarised financial information to the carrying amount of the Group’s interest in Ecosmart Union SA for the period from 1 January to 15 September 2021, because Ecosmart Union SA became a subsidiary on 15 September 2021.

 

		15 September 2021
Percentage ownership interest		27%
Non-current assets		1,602,471
Current assets		4,890,566
Non-current liabilities		-
Current liabilities		(16,410,891)
Net assets (100%)		(9,917,854)
Group’s share of net assets (27%)		-
Carrying amount of investment in associate		-
Revenue		42,077,423
Loss (100%)		11,984,924
Share of loss (27%)		558,109
Group’s share of loss		558,109

 

Ecosmart Union SA as a subsidiary

 

During the whole year of 2022 Ecosmart Union SA was a subsidiary of the Group and it was fully consolidated in these financial statements.

 

73

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

For the period 15 September to 31 December 2021 Ecosmart Union SA contributed to the Group’s revenue with an amount of RON 10,822,974 and to the Group’s results for the year with a loss in amount of RON 300,447. If the acquisition had occurred on 1 January 2021, management estimates that the consolidated revenue for 2021 would have been RON 290,211,138 and consolidated profit for the year 2021 would have been RON 49,779,787.

 

Consideration transferred

 

The amount paid by the Group for the increase in shareholding from 27% to 65.75% amounted to RON 340,000 (RON 328,655 adjusted net of cash acquired from the subsidiary).

 

Identifiable assets acquired and liabilities assumed

 

The identifiable assets acquired, and liabilities assumed are presented below at their acquisition-date fair values, based on a Purchase Price Allocation (PPA) report. The PPA report was performed by a certified ANEVAR valuator, at Company’s request. The ANEVAR standards are in line with the International Valuation Standards (IVS).

 

 

		Book value		Fair Value Adjustments		Fair value
Property, plant and equipment		1,597,301		139,228		1,736,529
Intangible assets		5,170		12,711,006		12,716,176
Trade and other receivables		4,863,607		-		4,863,607
Cash and cash equivalents		11,345		-		11,345
Other current assets		15,613		-		15,613
Deferred income		(9,609)		-		(9,609)
Deferred tax liabilities		-		(2,054,961)		(2,054,961)
Trade and other payables		(16,401,285)		-		(16,401,285)
Total identifiable net assets acquired		(9,917,854)		10,795,273		877,415

 

Goodwill

 

The goodwill resulted from the acquisition was calculated as follows.

 

			Amount
Consideration transferred			340,000
Fair value of pre-existing interest in Ecosmart Union SA			236,903
Non-controlling interests, based on their proportionate interest in the recognized amounts of the asset and liabilities of Ecosmart Union SA			300,512
Fair value of identifiable net assets acquired			(877,415)
Goodwill			-

 

The fair value of pre-existing interest in Ecosmart Union SA in amount of RON 236,903 was recognized within profit or loss in other finance income.

 

Note 10.

Equity instruments at fair value through profit or loss

 

The movement in equity instruments at fair value through profit or loss for the years ended 31 December 2022 and 31 December 2021 is as follows:

 

			2022		2021
Balance at 1 January			4,341,709		-
Purchase of equity instruments			-		3,414,780
Change in fair value (Note 26)			17,629		882,329
Effect of movements in exchange rates			261,947		44,600
Balance at 31 December			4,621,285		4,341,709

 

8Wines Czech Republic s.r.o.

 

On 13 May 2021, the Company purchased 10.00% ownership interest in 8Wines Czech Republic s.r.o. (8Wines), a Czech-based fast growing online retail platform. The Group neither has any significant influence nor is involved in the management of 8Wines. Therefore, the ownership interest in 8Wines is accounted as equity instruments at fair value through profit or loss and represents as at 31 December 2022 RON 4,621,285 (2021: RON 4,341,709).

 

74

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

As of 31 December 2022, the fair value measurement for equity investment in 8Wines Czech Republic s.r.o. has been categorized as a Level 3 fair value based on the inputs to the valuation technique used (see Note 4 b). The following table shows the valuation techniques used in measuring fair value as of 31 December 2022, as well as the significant unobservable inputs used. There were no transfers between levels. Any fair value changes are included in finance income/cost. The valuation of the investment was performed by the Group’s management.

 

 

Valuation technique	Discounted cash flows: The valuation model considers the present value of the net cash flows expected to be generated by the entity, discounted using a risk-adjusted discount rate.
Significant unobservable inputs	• Expected free cash flows for 2023-2027 (RON 11,079,201); • Risk-adjusted discount rate (10.30%); • Terminal growth rate (3.0%).
Inter-relationship between key unobservable inputs and fair value measurement	The estimated fair value would increase (decrease) by: • RON 69,441 / RON (34,179) if the expected cash flows were higher (lower) by 1%; or • RON 995,322 / (RON 720,491) if the risk-adjusted discount rate was lower (higher) by 1pp; or • RON 775,459 / (RON 557,589) if the terminal growth rate was higher (lower) by 1pp.

 

IM Glass Container Company SA group

 

On 9 December 2020, Vinaria Purcari SRL has exited IM Glass Container Company SA, a manufacturer of glass bottles, by selling its 31.415% ownership interest for a consideration of EUR 7,819,163 to Vetropack Group, a leading Swiss corporate group in the European glass packaging industry.

 

Under the Sales Agreement, the former selling shareholders, including Vinaria Purcari SRL, have provided Representations, Warranties, and Indemnities to Vetropack Group, thus, in case of adverse effects it might be liable for paying certain compensations.

 

Therefore, the amount of EUR 595,070 has been deducted and retained from the initial purchase price as indemnity holdback, which will be reimbursed on the date falling three years after completion of the transactions. The management estimates that no claims for indemnification will appear during this period and that full amount of indemnity holdback will be received. This discounted receivable amounts to RON 2,741,667 as at 31 December 2022 (31 December 2021: RON 2,552,630) and has been included in trade and other receivables, while in the comparative period the amount was presented as non-current receivable in the consolidated statement of financial position.

 

As at 30 July 2021, Vinaria Purcari SRL collected an additional amount of EUR 978,232 as adjustment to purchase price, which is significantly higher than initial amount estimated by the Group’ management. Vinaria Purcari SRL became entitled to this additional contribution mainly due to collection by IM Glass Container Company SA group of some overdue receivables considered impaired at the date of Sale framework agreement. Collection of the overdue receivables was conditioned by amelioration of COVID-19 pandemic restrictions and, accordingly, reduction of its effect on business. Since the events which led to collection of receivables occurred during 2021, the Group considered appropriate to account this gain in the 2021 statement of profit or loss (Note 26), rather than an adjustment to prior year results.

 

Furthermore, Vinaria Purcari SRL, along with all other former shareholders of Glass Container Group may or may not be entitled in 2021-2022 to additional variable performance payments. Due to impact of COVID-19 pandemic and significant increase of natural gas prices (key resource for the production of glass bottles by IM Glass Container Company SA group) on local, regional and global economies, as well as growing uncertainty of future economic recovery, the management considers that the Group could not be entitled to any additional earnout from the sale of GCC. As result, no variable consideration was recognized in these consolidated financial statements.

 

Note 11.

Loan receivables

 

As at 31 December 2022 and 31 December 2021 loan receivables are as follows:

 

	Currency		Interest rate		Year of maturity		31 December 2022			31 December 2021
							Non- current portion	Current portion			Non- current portion	Current portion
8Wines s.r.o.	EUR		3.0%		2025		364,378	-			350,438	-
8Wines s.r.o.	EUR		6.0%		2024		2,042,671	458,623			499,051	-
Total loan receivables							2,407,049	458,623			849,489	-

 

75

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

The loans provided to 8Wines s.r.o. are secured up to the amount of EUR 1,239,669 by the constitution of the right of pledge over the whole goods inventory – wine bottles, in the stock of 8Wines s.r.o.

Note 12.

Intangible assets

 

The movements in intangible assets from 1 January 2021 to 31 December 2022 are the following:

 

		2022		2021
Cost
Balance at 1 January		15,184,375		1,762,638
Additions
Purchase		589,635		696,800
Business combination		3,633,456		12,417,227
Disposals		-		(143,417)
Effect of movement in exchange rates		251,141		451,127
Balance at 31 December		19,658,607		15,184,375
Amortization
Balance at 1 January		986,131		575,625
Amortization for the year		1,216,530		420,820
Increase due to business combinations		27,395		-
Disposals		-		(27,359)
Effect of movement in exchange rates		(35,811)		17,045
Balance at 31 December		2,194,245		986,131
Carrying amounts
At 1 January		14,198,244		1,187,013
At 31 December		17,464,362		14,198,244

 

Intangible assets are represented by customer relationships, trademarks, technological instructions, licenses, software and other. No intangible assets are subject to a registered debenture to secure bank loans.

 

The amortization was allocated to General and administrative expenses, Cost of sales, Inventories and Unallocated overheads.

 

Note 13.

Trade and other receivables

 

As at 31 December 2022 and 31 December 2021, trade and other receivables were as follows:

 

		31 December 2022		31 December 2021
Financial receivables
Gross trade receivables		75,212,697		61,540,000
Trade receivables due from related parties (Note 31)		9,068		-
Allowance for impairment of trade receivables (Note 29)		(3,985,808)		(4,349,115)
Total financial receivables		71,235,957		57,190,885
Non-financial receivables
Other receivables		2,242,198		1,154,357
VAT receivable		4,524,171		4,635,735
Other taxes receivable		122,622		6,045
Excise receivable		37,517		333,681
Total non-financial receivables		6,926,508		6,129,818
Total trade and other receivables		78,162,465		63,320,703

The carrying amount of trade and other receivables that is subject to a registered debenture to secure bank loans is disclosed in Note 17 to the consolidated financial statements.

The market risk, credit risk, aging of trade receivables at the reporting date and the movement in the allowance for impairment in respect of them during the year are disclosed in Note 29 to the consolidated financial statements.

 

 

76

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

Note 14.

Inventories

 

As at 31 December 2022 and 31 December 2021 inventories were as follows:

	31 December 2022		31 December 2021
Raw materials
Distilled alcohol	40,411,951		36,508,269
Wine materials	10,429,500		6,378,783
Other raw materials	371,996		600,311
Total raw materials	51,213,447		43,487,363
Other materials
Packaging materials	22,231,333		14,242,424
Other materials	6,470,068		5,075,436
Chemicals	2,548,469		2,687,849
Total other materials	31,249,870		22,005,709
Semi-finished production
Wine in barrels	95,922,608		82,678,184
Divin in barrels	6,220,347		4,023,269
Brandy in barrels	173,983		276,333
Total semi-finished production	102,316,938		86,977,786
Bottled finished goods
Wine	26,771,604		21,945,866
Divin	865,651		541,198
Other finished goods	317,421		53,461
Brandy	37,183		4,257
Total bottled finished goods	27,991,859		22,544,782
Total inventories	212,772,114		175,015,640

The carrying amount of inventories that is subject to a registered debenture to secure bank loans is disclosed in Note 17 to the consolidated financial statements.

The inventories that are expected to be recovered in more than 12 months after the end of the reporting date have been classified to non-current assets and amount to RON 118,970,653 as at 31 December 2022 (2021: RON 74,895,843). These relate to wine in barrels RON 84,642,729 (2021: RON 46,644,827) and distilled alcohol and divin in barrels RON 34,327,924 (2021: RON 28,251,016).

 

Note 15.

Cash and cash equivalents

 

As at 31 December 2022 and 31 December 2021 cash and cash equivalents were as follows:

 

	31 December 2022		31 December 2021
Bank accounts	19,772,784		31,935,828
Petty cash	150,375		164,286
Short-term interest bearing deposits	3,531,973		-
Total cash and cash equivalents	23,455,132		32,100,114

 

Cash and cash equivalents consist of cash in hand, current accounts and short-term deposits with banks, which are at the free disposal of the Group.

 

The carrying amount of cash and cash equivalents that is subject to a registered debenture to secure bank loans is disclosed in Note 17 to the consolidated financial statements. The market risk and credit risk are disclosed in Note 29 to the consolidated financial statements.

 

 

 

77

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

Note 16.

Equity attributable to owners of the Company

 

	2022		2021
(in shares)
On issue at 1 January	40,117,500		20,000,000
Bonus shares issued	-		20,000,000
Share option exercised	-		117,500
On issue at 31 December	40,117,500		40,117,500
Authorized – par value	EUR 0.01		EUR 0.01

 

Share capital and share premium

 

On 28 April 2022, the shareholders unanimously approved the increase of the authorised share capital of the Company from EUR 410,000.00 divided into 41,000,000 shares of nominal value EUR 0.01 each to EUR 430,000.00 divided into 43,000,000 shares of nominal value EUR 0.01 each. During 2022 no shares were issued.

 

In 2021 the shareholders unanimously voted in favour of approval of the increase of the issued share capital of the Company from EUR 200,000.00 divided into 20,000,000 shares of nominal value EUR 0.01 each to EUR 400,000.00 divided into 40,000,000 shares of nominal value EUR 0.01 each, through issuance of 20,000,000 bonus shares to all shareholders, at nominal value and paid out of the share premium reserve of the Company. The right to receive bonus shares by entitled shareholders could not be opted out.

 

Also, in 2021, seven employees and managers submitted their exercise letters for purchase of 117,500 shares at an exercise price of RON 10 per share, according to the Management Incentive Programme in place. As result, the Company allotted additional 117,500 shares of nominal value EUR 0.01 each, issued at a premium of EUR 2.01118 for a total subscription amount of RON 1,175,000 (equivalent of EUR 237,488.65).

The details of Management Incentive Programme are disclosed in Note 28 to the consolidated financial statements.

 

At the reporting date, the issued share capital of the Company is comprised of 40,117,500 ordinary shares with nominal value EUR 0.01 each. All issued shares are fully paid.

All shares rank equally with regard to the Company's residual assets. The holders of ordinary shares are entitled to receive dividends as declared and are entitled to one vote per share at meetings of the Company.

 

As of 31 December 2022, the share premium amounts to RON 83,184,367 (31 December 2021: RON 83,184,367).

 

Shareholders structure

 

As of 31 December 2022, the share capital structure and the ownership of registered shares was as follows:

 

			Number of shares		% of ownership
Amboselt Universal Inc.			8,012,344		19.9722%
Dealbeta Investments			3,172,754		7.9087%
Fiera Capital			3,064,972		7.6400%
Conseq			2,431,920		6.0620%
Trigon Capital			2,037,329		5.0784%
Paval Holding			2,005,875		5.0000%
Others			19,392,306		48.3387%
Total			40,117,500		100%

 

As of 31 December 2021, the share capital structure and the ownership of registered shares was as follows:

 

			Number of shares		% of ownership
Amboselt Universal Inc.			8,012,344		19.9722%
Dealbeta Investments			3,172,754		7.9087%
Fiera Capital			3,169,069		7.8995%
Conseq			2,127,822		5.3040%
East Capital			2,057,027		5.1275%
Others			21,578,484		53.7881%
Total			40,117,500		100%

 

78

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

Translation reserve

 

The translation reserve comprises all foreign currency differences arising from the translation to the presentation currency.

 

Treasury share reserve

 

The Company acquired no shares in 2022 (2021: 329,156 shares in amount of RON 4,939,636).

The treasury shares acquired in 2021 and held in 2022 were enough to implement the Company’s Management Incentive Program, which provides for equity-settled share-based payments to management (see Note 28).

During 2022 the Company allocated 251,036 shares to its management and employees with a total value of RON 3,815,747 (2021: 174,982 shares with a total value of RON 3,831,179).

 

Other reserves

 

In 2022 the Company accounted for equity-settled share-based payments in amount of (RON 340,435) (2021: RON 6,391,462) in connection with the Management Incentive Program (see Note 28) and offset the amount of RON 3,815,747 (2021: RON 3,831,179) with treasury share reserve for shares allocated to employees. In 2022 the Company as well accounted for put option over non-controlling interests in amount of (RON 11,729,129).

Dividends

 

During 2022 the Company declared and paid dividends in amount of RON 0.51 per share (2021: RON 0.65).

 

Earnings per share

 

The calculation of earnings per share has been based on the following profit attributable to ordinary shareholders and weighted-average number of ordinary shares outstanding:

	2022		2021 (restated)
Profit for the year, attributable to owners of the Company	65,478,130		47,014,169
Issued ordinary shares at 1 January	40,117,500		20,000,000
Effect of bonus shares issued	-		20,000,000
Effect of treasury shares held	(225,622)		(288,669)
Effect of share option exercised	-		5,795
Weighted-average number of ordinary shares outstanding at 31 December	39,891,878		39,717,126
Earnings per share – basic and diluted	1.64		1.18

 

The Group has not issued any potentially dilutive instruments.

 

 

 

 

 

 

 

 

 

 

 

 

79

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

Note 17.

Borrowings and lease liabilities

 

This note provides information about the contractual terms of the Group's interest-bearing borrowings and lease liabilities, which are measured at amortized cost. For more information about the Group's exposure to interest rate, foreign currency and liquidity risk, see Note 29 to the consolidated financial statements.

 

As at 31 December 2022 and 31 December 2021, borrowings and lease liabilities were as follows:

 

 

	31 December 2022		31 December 2021
Non-current liabilities
Secured bank loans	39,530,884		19,081,919
Lease liabilities	4,714,516		5,769,657
Total non-current portion	44,245,400		24,851,576
Current liabilities
Current portion of secured bank loans	86,937,305		70,319,375
Current portion of unsecured loan	-		1,316,195
Current portion of lease liabilities	1,494,910		1,497,517
Total current portion	88,432,215		73,133,087
Total borrowings and lease liabilities	132,677,615		97,984,663

 

The movements of borrowings and lease liabilities for the years ended 31 December 2022 and 31 December 2021 were as follows:

		2022		2021
Balance at 1 January		97,984,663		96,582,372
Increase due to business combinations		-		1,287,548
Proceeds from borrowings		118,052,150		65,756,512
Repayment of borrowings and lease liabilities		(83,340,957)		(67,448,002)
Interest expense (Note 26)		4,551,807		3,932,834
Interest paid		(3,943,170)		(3,881,020)
New leases		81,375		746,216
Effect of movement in exchange rates		(708,253)		1,008,203
Balance at 31 December		132,677,615		97,984,663

 

Security

 

As at 31 December 2022 and 31 December 2021 the carrying amounts of assets that are subject to a registered debenture to secure bank loans were as follows:

	31 December 2022		31 December 2021
Property, plant and equipment	91,796,026		56,767,291
Trade and other receivables	41,758,872		33,736,362
Inventories	76,156,113		57,038,907
Cash and cash equivalents	2,734,232		1,658,047
Total	212,445,243		149,200,607

 

 

 

 

 

 

 

 

 

 

 

80

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

Terms and debt repayment schedule

										31 December 2022			31 December 2021
Type of loan		Lender		Currency		Nominal interest rate		Year of maturity		Non-current	Current		Non- current	Current
Secured bank loan		BC MAIB SA (1)		EUR		4.00%		2024		-	5,423,057		-	-
Secured bank loan		BC MAIB SA (2)		MDL		15.98%		2024		-	1,209,579		-	-
Secured bank loan		BC MAIB SA (3)		EUR		3.40%		2024		-	17,355,101		-	4,553,234
Secured bank loan		BC MAIB SA (4)		EUR		3.40%		2027		-	11,092,617		-	738,910
Secured bank loan		BC MAIB SA (5)		EUR		3.40%		2025		-	17,294,622		-	12,867,836
Secured bank loan		BC MAIB SA (6)		MDL		8.00%		2025		-	-		-	7,389,097
Secured bank loan		BC MAIB SA (7)		MDL		8.00%		2023		-	967,663		-	2,709,335
Secured bank loan		BC MAIB SA (8)		EUR		3.40%		2022		-	-		-	1,489,699
Secured bank loan		BC MAIB SA (9)		MDL		10.00%		2024		-	-		-	1,609,345
Secured bank loan		BC MAIB SA (10)		EUR		3.40%		2025		-	8,952,481		-	10,739,694
Secured bank loan		BC MAIB SA (11)		MDL		10.00%		2023		-	-		-	270,934
Secured bank loan		BC MAIB SA (12)		EUR		3.40%		2022		-	-		-	2,482,503
Secured bank loan		BC MAIB SA (13)		EUR		3.40%		2023		-	-		-	10,952,508
Secured bank loan		BC MAIB SA (14)		EUR		3.40%		2027		8,542,774	1,317,330		-	-
Secured bank loan		BC MAIB SA (15)		EUR		3.40%		2023		-	1,023,923		-	-
Secured bank loan		BC Victoriabank SA (1)		EUR		3.40%		2024		25,578,134	-		14,847,503	-
Secured bank loan		OTP Bank SA (1)		EUR		4.46%		2025		1,640,025	1,598,414		-	-
Secured bank loan		OTP Bank SA (2)		EUR		4.46%		2025		1,313,503	1,113,262		-	-
Secured bank loan		OTP Bank SA (3)		EUR		4.17%		2024		1,053,754	1,580,204		2,126,990	1,588,578
Secured bank loan		OTP Bank SA (4)		USD		3.95%		2022		-	-		-	1,029,253
Secured bank loan		OTP Bank SA (5)		USD		4.25%		2025		371,630	245,839		661,637	155,437
Secured bank loan		OTP Bank SA (6)		USD		3.95%		2026		1,027,303	435,737		1,445,789	359,382
Secured bank loan		UNICREDIT BANK SA (1)		USD		EURIBOR 1M+1.50%		2023		-	17,285,773		-	11,383,630
Unsecured loan		Chateau Vartely SRL		EUR		-		2022		-	-		-	1,316,195
Lease liabilities				RON/MDL/EUR		3.90%-11.25%		2022-2047		4,718,277	1,536,613		5,769,657	1,497,517
Total borrowings and lease liabilities										44,245,400	88,432,215		24,851,576	73,133,087

 

 

 

 

 

 

 

 

 

 

 

 

 

81

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

Loan covenants

 

On 31 December 2022 and 31 December 2021, the Group complied with the loan covenants stipulated in loan contracts, except for Debt Service ratio in 2022 and Debt to Equity ratio in 2021, both calculated for its subsidiary Vinaria Bostavan SRL for the loans contracted from BC MAIB SA. If covenants are breached, the credit institutions may require the acceleration of repayment of the outstanding loans. Therefore, the Group classified the related long-term liabilities of RON 42,916,849 as current liabilities as at 31 December 2022 in these financial statements (2021: RON 32,391,472).

 

In March 2023, BC MAIB SA notified the borrower that this breach of covenant will not be considered a default, therefore the Group is not required to make an earlier repayment of the loans.

 

Lease liabilities

 

The Group leases assets like land, buildings and vehicles.

 

The Group’s subsidiaries Vinaria Bostavan SRL and Vinaria Purcari SRL rent land for their plantations of grape vines from the related party Victoriavin SRL based on lease agreements. On 1 January 2018 the Group signed new lease agreements with Victoriavin SRL for these plots of land, where the lease period is changed to 29 years from 1 January 2018 (to 31 December 2047). The lease payment is made annually until 30 November. The lease term approximates the remaining useful life of plantations of grape vines of Vinaria Bostavan SRL and Vinaria Purcari SRL. Before 1 January 2019, these leases were classified as operating leases under IAS 17.

 

The lease of buildings relates to offices and warehouses, and the period of lease is around 5 years (taking into account the extension options exercisable by the Group). Before 1 January 2019, these leases were classified as operating leases under IAS 17.

 

The Group leases vehicles under a number of leases, which were classified as finance leases under IAS 17 before 1 January 2019.

 

Information about leases for which the Group is a lessee is presented below.

 

Right of use assets

 

	Land		Buildings and constructions		Vehicles		Total
Balance at 1 January 2022	3,366,498		2,844,023		884,697		7,095,218
Additions to right-of-use assets	99,644		449,835		-		549,479
Depreciation charge for the year	(130,415)		(919,183)		(315,665)		(1,365,263)
Derecognition of right-of-use assets	-		(176,117)		-		(176,117)
Effect of movements in exchange rates	(69,350)		(283,839)		-		(353,189)
Balance at 31 December 2022	3,266,377		1,914,719		569,032		5,750,128
Balance at 1 January 2021	3,194,622		2,864,706		858,195		6,917,523
Additions to right-of-use assets	80,064		666,152		-		746,216
Depreciation charge for the year	(129,231)		(836,227)		(315,665)		(1,281,123)
Derecognition of right-of-use assets	-		-		-		-
Effect of movements in exchange rates	221,043		149,392		342,167		712,602
Balance at 31 December 2021	3,366,498		2,844,023		884,697		7,095,218

 

Derecognition of the right-of-use assets during 2022 is as a result of termination of office rent agreement.

 

 

The movements of lease liabilities for the years ended 31 December 2022 and 31 December 2021 were as follows:

		2022		2021
Balance at 1 January		7,267,174		7,287,633
New leases		81,375		746,216
Repayment of lease liabilities		(987,742)		(871,159)
Interest expense (Note 26)		518,068		542,739
Interest paid		(518,068)		(542,739)
Effect of movement in exchange rates		(105,917)		104,484
Balance at 31 December		6,254,890		7,267,174

 

82

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

Note 18.

Deferred income

The movement in deferred income for 31 December 2022 and 31 December 2021 was as follows:

	2022		2021
Balance at 1 January	9,183,161		4,537,583
Grants received	692,706		4,684,381
Increase due to business combinations	5,731,950		825,161
Release of deferred income (Note 24)	(1,917,100)		(1,500,311)
Effect of movements in exchange rates	785,048		636,347
Balance at 31 December	14,475,765		9,183,161

 

The Group’s deferred income mainly represents government grants received for investments in property, plant and equipment. The Group is restricted to sell the assets for which a grant has been received for a period of five years.

 

Note 19.

Trade and other payables

 

As at 31 December 2022 and 31 December 2021 trade and other payables were as follows:

 

	31 December 2022		31 December 2021
Financial payables
Trade accounts payable	70,649,710		67,246,874
Trade payables due to related parties (Note 31)	2,636,599		2,203,759
Total financial payables	73,286,309		69,450,633
Non-financial payables
Other tax liabilities	3,695,384		3,822,723
Advances received	410,477		509,007
Dividends payable	2,179,808		1,563,934
Total non-financial payables	6,285,669		5,895,664
Total trade and other payables	79,571,978		75,346,297

 

For more information about the Group's exposure to foreign currency and liquidity risk, see Note 29 to the consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

83

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

Note 20.

Revenue

 

Revenues for the years ended 31 December 2022 and 31 December 2021 were as follows:

 

	2022		2021
Sales of finished goods
Wine	239,922,880		204,001,782
Divin	32,025,615		26,459,553
Brandy	739,287		538,114
Total sales of finished goods	272,687,782		230,999,449
Sales of other goods
Merchandise	3,473,630		3,002,802
Other	904,205		535,469
Wine materials	439,233		517,400
Total sales of other goods	4,817,068		4,055,671
Services
Hotel and restaurant services	3,456,118		2,152,266
Agricultural services	115,267		103,356
Waste recycling management services	21,410,425		10,822,973
Total services	24,981,810		13,078,595
Total revenue	302,486,660		248,133,715

 

 

Contract liabilities represent advances received from customers (which are recognized in revenue in the following year) in amount of RON 410,477 at 31 December 2022 (2021: RON 509,007) (Note 19).

 

 

Segment analysis

 

By 2020 the management monitored the performance of the Group as a single segment (production, bottling and sales of wines, divin and brandy), and through the acquisition of the subsidiary Ecosmart Union SA in 2021 a second segment related to waste recycling management services appeared, which for the years ended 31 December 2022 and 31 December 2021 has not been yet a significant one.

A reportable segment is a component of a business entity that produces goods or provides services to individuals (or groups of related products or services) in a particular economic environment that is subject to risks and generate revenues other that risks and income of those components that are peculiar to other business segments.

Reportable segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. All operating segments results are reviewed regularly by the Group’s CEO to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available.

The operating business are organized and managed separately according to the nature of products and services provided, with each segment representing a strategic business unit that offers different products and serve different markets.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

84

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

Sales of finished goods by brand and geographic region for the year ended 31 December 2022 were as follows:

 

	Bostavan wine		Purcari wine		Domeniile Cuza wine		Crama Ceptura wine		Angel’s Estate Wine		Bardar divin and brandy		Total
Romania	2,184,051		100,039,115		661,390		36,020,787		-		4,709,490		143,614,833
Republic of Moldova	7,309,116		26,499,543		-		-		-		23,193,569		57,002,228
Bulgaria	-		-		-		-		3,039,782		-		3,039,782
Poland	18,634,539		668,973		-		22,254		-		465,449		19,791,215
Czech & Slovakia	7,839,629		360,804		-		732		-		-		8,201,165
Asia	2,603,067		4,976,788		-		628,630		-		733,740		8,942,225
Belarus	-		-		-		-		-		1,440,145		1,440,145
Baltic countries	6,282,891		226,752		58,752		155,337		-		333,447		7,057,179
Ukraine	1,754,304		3,367,818		-		27,493		-		-		5,149,615
Turkey	3,119,218		975,234		-		-		-		-		4,094,452
Other	4,840,946		6,641,274		59,780		911,104		12,777		1,889,062		14,354,943
Total	54,567,761		143,756,301		779,922		37,766,337		3,052,559		32,764,902		272,687,782

 

 

Sales of finished goods by brand and geographic region for the year ended 31 December 2021 were as follows:

 

	Bostavan wine		Purcari wine		Domeniile Cuza wine		Crama Ceptura wine		Angel’s Estate wine		Bardar divin and brandy		Total
Romania	2,788,545		80,878,882		90,790		33,069,333		-		2,840,847		119,668,397
Republic of Moldova	5,595,128		20,573,339		-		-		-		18,592,884		44,761,351
Bulgaria	-		-		-		-		-		-		-
Poland	19,590,347		544,137		-		49,813		-		37,958		20,222,255
Czech & Slovakia	7,990,016		189,401		-		532,919		-		-		8,712,336
Asia	2,612,348		2,531,199		-		547,069		-		604,522		6,295,138
Belarus	84,944		70,976		-		-		-		3,588,859		3,744,779
Baltic countries	7,034,474		490,793		-		87,716		-		212,840		7,825,823
Ukraine	4,079,840		4,716,572		-		-		-		-		8,796,412
Turkey	-		-		-		-		-		-		-
Other	2,876,446		5,233,278		4,937		1,738,540		-		1,119,757		10,972,958
Total	52,652,088		115,228,577		95,727		36,025,390		-		26,997,667		230,999,449

 

The waste recycling management services are provided by the Group’s subsidiary Ecosmart Union SA and the entire revenue is realised in Romania.

 

 

 

 

 

85

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

Note 21.

Cost of sales

 

Cost of sales for the years ended 31 December 2022 and 31 December 2021 was as follows:

 

	2022		2021
Sales of finished goods
Wine	133,951,214		106,295,807
Divin	12,409,105		10,127,820
Brandy	657,018		326,346
Total sales of finished goods	147,017,337		116,749,973
Sales of other goods
Merchandise	2,962,885		2,552,382
Other	292,322		485,080
Wine materials	234,338		455,312
Total sales of other goods	3,489,545		3,492,774
Services
Hotel and restaurant services	3,407,087		2,044,653
Agricultural services	104,893		94,055
Waste recycling management services	16,201,366		9,909,765
Total services	19,713,346		12,048,473
Total cost of sales	170,220,228		132,291,220

 

The nature of the expenses that are part of the Group’s cost of sales for the years ended 31 December 2022 and 31 December 2021 was as follows:

 

	2022		2021
Consumption of inventories	130,867,105		107,824,205
Waste recycling services	18,081,547		9,909,765
Employee benefits (Note 28)	11,608,463		7,780,680
Depreciation of property, plant and equipment (Note 8)	8,106,116		5,640,554
Other	1,590,736		1,136,016
Total cost of sales	170,220,228		132,291,220

 

Other expenses presented above include amortization of intangible assets and services rendered by third parties.

 

Note 22.

Marketing and sales expenses

 

Marketing and sales expenses for the years ended 31 December 2022 and 31 December 2021 were as follows:

 

	2022		2021
Marketing and sales	22,877,043		15,014,010
Transportation expenses	4,807,738		4,217,194
Employee benefits (Note 28)	9,563,246		10,630,242
Certification of production	721,645		618,090
Other expenses	643,087		434,939
Total marketing and sales expenses	38,612,759		30,914,475

 

 

 

 

86

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

Note 23.

General and administrative expenses

 

General and administrative expenses for the years ended 31 December 2022 and 31 December 2021 were as follows:

 

	2022		2021 (restated)
Employee benefits (Note 28)	15,741,039		15,706,737
Taxes and fees	1,958,293		1,715,803
Depreciation (Note 8)	5,039,430		2,665,714
Repairs and maintenance	479,723		414,388
Operating lease	302,816		356,546
Travel	658,805		154,130
Professional fees	4,887,658		3,905,093
Bank charges	390,484		323,654
Communication	297,584		278,493
Insurance	296,876		226,763
Fuel	329,076		207,254
Materials	138,292		273,347
Penalties	433,752		188,945
Other	646,802		1,088,751
Total general and administrative expenses	31,600,630		27,505,618

 

In professional fees have been included fees for independent auditors’ remuneration for statutory audit of the annual financial statements of the Company and its subsidiaries in amount of RON 816,691 (2021: RON 647,205).

 

Note 24.

Other operating income

 

Other operating income for the years ended 31 December 2022 and 31 December 2021 was as follows:

 

	2022		2021
Release of deferred income (Note 18)	1,917,100		1,500,311
Gains on write-off of trade and other payables	34,184		183,736
Net gain from sale of other materials	7,422		88,612
Other	796,027		375,078
Total other operating income	2,754,733		2,147,737

 

Note 25.

Other operating expenses

 

Other operating expenses for the years ended 31 December 2022 and 31 December 2021 were as follows:

	2022		2021
Reverse in impairment of property, plant and equipment, net (Note 8)	(80,141)		(80,142)
Change in provisions, net	-		-
Unallocated overheads	321,608		317,359
Provision for impairment loss of prepayments made	1,911,914		-
Adjustment to fair value of harvest of grapes from own grape vines (a)	(1,732,687)		(5,185,767)
Adjustment to fair value of harvest of grapes from joint operation / operating leasing (b)	817,124		642,070
Net loss/(gain) from disposal of property, plant and equipment and intangible assets	309,080		(710,713)
Total other operating expenses	1,546,898		(5,017,193)

 

 

Provisions

 

The Group has set-up provisions for tax and other risks for which management has assessed as probable an outflow of resources. These provisions relate to the uncertainty of tax treatment of marketing and selling transactions of the Group, performed during 2014-2017.

 

 

87

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

 

The movement in provisions for the years ended 31 December 2022 and 31 December 2021 is as follows:

 

	2022		2021
Balance at 1 January	5,960,310		7,515,280
Provisions made during the year	-		-
Reverse in provisions netted against gain from disposal of equity instruments	-		(1,266,843)
Provisions used during the year	-		(1,055,004)
Effect of movements in exchange rates	359,880		766,877
Balance at 31 December	6,320,190		5,960,310

 

Adjustment to fair value of harvest of grapes

 

The movement of biological assets (grapes on vines) for the years ended 31 December 2022 and 31 December 2021 was as follows:

 

		2022		2021
Balance at 1 January		-		-
Costs for cultivation of grapes		26,304,289		19,331,474
Fair value adjustment of harvest of grapes		915,563		4,543,697
Harvested grapes transferred to inventories		(27,219,852)		(23,875,171)
Balance at 31 December		-		-

 

Costs for cultivation of grapes comprise the following types of costs:

 

		2022		2021
Services		11,157,769		9,198,367
Consumption of inventories		7,790,303		6,101,877
Employee benefits		3,124,683		1,278,438
Depreciation of property, plant and equipment		3,249,866		2,358,980
Operating lease		363,401		164,798
Other		618,267		229,014
		26,304,291		19,331,474

 

Measurement of fair values

The fair value measurement of harvest of grapes has been categorized as a Level 3 fair value based on the inputs to the valuation technique used (see Note 4 b). There were no transfers between levels. The valuation of the harvest of grapes was performed by the Group’s management.

The following table shows the valuation techniques used in measuring fair value, as well as the significant unobservable inputs used.

 

Valuation technique	Harvested grapes are transferred to inventories at their fair value, equal to the market price at the date of harvest, less costs to sell at the date of harvest. Market prices are determined by making reference to the weighted average of the grape prices for each region for the current vintage, and vary with the grade quality of grapes produced. Costs to sell refer to costs that are necessary for a sale to occur but that would not otherwise arise, such as commissions to brokers and dealers, levies by regulatory agencies and commodity exchanges, and transfer taxes and duties. In the regions where the grapes are cultivated, a sale of grapes would take place without the above mentioned costs being incurred, therefore for the estimation of fair value of grapes the costs to sell are considered nil.
Significant unobservable inputs	• Average market price of harvested grapes: RON 1,899 per tonne (2021: RON 2,185 per tonne); • Actual quantity of harvested grapes: 14,337 tonnes (2021: 10,925 tonnes).
Inter-relationship between key unobservable inputs and fair value measurement	The estimated fair value would increase (decrease) by: • RON 272,199 (2021: RON 238,752) if the average market price of harvested grapes was higher    (lower) by 1%.

 

 

88

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

Risk management strategy related to agricultural activities

 

The Group is exposed to the following risks relating to its vineyards. These risks and management’s strategies to mitigate them are described below.

i.     Regulatory and environmental risks

The Group is subject to environmental and other laws and regulations in various countries in which it operates. The Group has established environmental policies and procedures aimed at compliance with these laws.

ii.     Supply risk

The Group is exposed to the risks arising from fluctuations in the price and sales volume of grapes. To mitigate these risks, the Group has located several primary production units (grape processing). Management performs regular trend analysis for projected harvest volumes and pricing. Based on the results, management increases or reduces the range of suppliers and volume of advances to third-party grape growers.

iii.     Climate-related risks

The Group’s vineyards and expected harvest are exposed to the risk of damage from extreme weather events such as late frosts, lack of sunshine during the flowering period, lack of rain and hailstorms. Changes in the global climate conditions could intensify one or more of these events. In addition to their effect on grape yields, extreme weather events may also increase the cost of cultivation.

Although the Group uses mitigating factors such as acquiring grapes from third party producers, geographically spreading its vine area to cover against localized climatic impacts and construction of irrigation systems, there are difficulties in reducing the impact of the hailstorms, due to their unpredictable nature. The last significant hailstorm happened in 2015 and the management estimated its negative impact from the loss of harvest by ~RON 1 million.

The Group has incorporated considerations for climate changes into its replantation practices, such as the use of varieties and clones resistant to drought.

Physical risk of losing the harvest arising from hailstorm and drought are not subject and aren’t covered by Group’s property and business interruptions insurance programs. However, should the frequency and severity of these events increase because of climate change, management could review its approach and the cost of insurance may increase.

 

a)	Harvest of grapes from own grape vines

 

The areas of plantations of own grape vines (hectares of plantations) and quantities of harvested grapes were as follows:

 

		2022		2021
Area of plantations of mature vines, hectares		1,312		1,206
Area of plantations of immature vines, hectares		34		34
Total area of plantations of vines, hectares		1,346		1,240
Quantity of harvested grapes, tonnes		13,733		9,973

 

The Group is subject to laws and regulations in the country where the vines are cultivated. The Group has established environmental policies and procedures aimed at compliance with local environmental and other laws.

 

The Group’s vine plantations are exposed to the risk of damage from climatic changes, diseases and other natural forces. The Group has extensive processes in place aimed at monitoring and mitigating those risks, including regular inspections of the health of vines and industry pest and disease surveys.

 

The subsidiaries of the Group, Vinaria Bostavan SRL and Vinaria Purcari SRL have their own grape vines, which are located in the Republic of Moldova, while Vinoteca Gherasim Constantinescu SRL and Angel’s Estate SA have their own vineyards located in Romania and respectively in Bulgaria.

In October 2022 the Group acquired 76% shareholding in a Bulgarian subsidiary, Angel’s Estate SA, which major activity is bottling and sale of wine. The subsidiary owns its grape vines, with an area of plantation of 102 hectares, which are located in Bulgaria. For details, please see Note 9.

In December 2021 the Group acquired for a cash consideration of RON 2,915,550 (EUR 589,000) 100% shareholding in a subsidiary, Vinoteca Gherasim Constantinescu SRL (RON 2,897,459 adjusted net of cash acquired from the subsidiary), which major activity is cultivation of grapes on its own grape vines, with an area of plantations of 55 hectares, which are located in Romania.

89

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

The Group has performed the “concentration test” and concluded that the acquired set of activities and assets is not a business, since substantially all of the fair value of the gross assets acquired is concentrated in a group of similar identifiable assets, as grape vines and related land.

The identifiable assets acquired, and liabilities assumed are presented below:

				Amount
Property, plant and equipment				4,695,946
Intangible assets				6,663
Trade and other receivables				621,498
Inventories				48,073
Cash and cash equivalents				18,091
Borrowings				(1,287,548)
Deferred income				(1,018,534)
Trade and other payables				(168,639)
				2,915,550

 

For December 2021 Vinoteca Gherasim Constantinescu SRL had no contribution to the Group’s revenue and contributed to the Group’s results for the year with a loss in amount of RON 54,911. If the acquisition had occurred on 1 January 2021, management estimates that the consolidated revenue would have been RON 248,916,213 and consolidated profit for the year would have been RON 50,953,935.

 

b)	Joint operations and operating lease of grape vines

 

The areas of plantations of vines under joint operations and operating lease (hectares of plantations) and quantities of harvested grapes were as follows:

		2022		2021
Area of plantations of vines under joint operation arrangement, hectares		59		59
Area of plantations of vines under operating lease, hectares		35		37
Total area, hectares		94		96
Quantity of harvested grapes under joint operation arrangement, tonnes		381		511
Quantity of harvested grapes under operating lease, tonnes		223		441
Total quantity, tonnes		604		952

 

Joint operations

 

Starting 2013, Crama Ceptura SRL entered into a joint arrangement with Vie Vin Podgoria Valea Calugareasca SRL (“Vie Vin”). The purpose of the arrangement is to produce and/or to trade grapes and wine. In addition, the partners are jointly involved in viticulture and provide each other with management, legal, marketing and trade support. The joint operation takes place in Romania.

 

Crama Ceptura SRL and Vie Vin contractually agreed that the operation is administrated by a governing council, formed by two members. Each party appointed one representative to this council. The activities of the operation require the unanimous consent of the parties that control the arrangement collectively. As joint control exists explicitly, because no decisions can be made about the relevant activities of the arrangement without both Crama Ceptura SRL and Vie Vin agreeing, the arrangement is a joint arrangement. The Group has concluded that the arrangement is a joint operation. In doing so, the Group considered the terms and conditions of the partnership agreement and the purpose and design of the joint arrangement. The arrangement was not structured as a separate vehicle from the parties.

 

Under the contractual arrangement between Crama Ceptura SRL and Vie Vin, each retain the rights and legal title to their respective assets and the obligation to settle their respective liabilities. However, they agree to jointly cultivate the vines, which are rented by Vie Vin from individuals under operating lease, and therefore Crama Ceptura SRL and Vie Vin recognize 87% and 13% (2021: 87% and 13%) respectively of all revenues and expenses relating to the partnership.

 

 

The contractual obligation of Vie Vin is to contribute to the joint arrangement with the following:

•	right of use for vines it rents from individuals under operating lease;
•	right of use for equipment it owns at the date of agreement; and
•	labour force.

 

 

 

90

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

 

The contractual obligation of Crama Ceptura SRL is to contribute to the joint arrangement with:

•	working capital; and
•	know-how, technical management and joint arrangement management.

 

The outputs from joint operations are distributed in kind (grapes, wine) or in cash. Crama Ceptura SRL is entitled only to distributions in kind. The joint operators allocate the outputs annually, at the end of the harvest period, using the proportion from the harvest of 87% for Crama Ceptura SRL and 13% for Vie Vin (2021: 87% and 13%).

 

On 02 November 2022 the joint agreement between Crama Ceptura SRL and Vie Vin was prolonged till 31 October 2023, on similar conditions, but the area of plantations under joint operation was reduced from 59 hectares to 17 hectares.

 

Operating lease of grape vines

 

The subsidiary Crama Ceptura SRL entered into several operational lease agreements for the lease of grape vines located in Romania. According to the agreements, Crama Ceptura SRL is required to maintain the grape vines and it is entitled to harvest. The Group carried out an analysis and concluded that these leases of grape vines should be accounted as operating lease.

 

The lease payments are made to the lessors in nature (grapes, wine), in proportion from 14% to 18% (depending on the agreement) from the harvest on leased grape vines.

 

Note 26.

Net finance (costs) / income

 

Net finance costs for the years ended 31 December 2022 and 31 December 2021 were as follows:

 

	2022		2021
Net gain from disposal of equity instruments	-		5,611,621
Net gain on equity instruments at FVTPL (Note 10)	17,629		882,329
Interest income	424,531		192,964
Other	790		360,403
Finance income	442,950		7,047,317
Interest expense on borrowings	(4,033,739)		(3,390,095)
Interest expense on lease liabilities	(518,068)		(542,739)
Net foreign exchange loss	(6,078,061)		(3,026,853)
Finance costs	(10,629,868)		(6,959,687)
Net finance (costs) / income	(10,186,918)		87,630

 

 

Note 27.

Income tax

 

The corporate income tax rate in Cyprus was 12.5% for the years 2022 and 2021, 12% in the Republic of Moldova, 16% in Romania and 10% in Bulgaria. Deferred tax has been determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

Tax recognized in profit or loss for the years ended 31 December 2022 and 31 December 2021 was as follows:

 

	2022		2021 (restated)
Current tax expense
Current tax	9,750,781		10,000,006
Total current tax expense	9,750,781		10,000,006
Deferred tax expense
Origination and reversal of temporary differences	2,298,904		415,577
Total deferred tax expense	2,298,904		415,577
Income tax expense	12,049,685		10,415,583

 

 

 

 

91

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

The reconciliation of effective tax rate for the years ended 31 December 2022 and 31 December 2021 was as follows:

		2022				2021 (restated)
Profit before tax				81,452,584				61,566,431
Tax using the Company's domestic tax rate		12.50%		10,181,573		12.50%		7,695,804
Effect of different tax rates in foreign jurisdictions		1.76%		1,433,354		1.14%		699,971
Tax exempt income		(0.13%)		(104,964)		(0.15%)		(92,461)
Non-deductible expenses		0.62%		504,746		1.98%		1,220,268
Investment incentives		(0.87%)		(706,787)		(0.80%)		(494,694)
Current year losses for which no deferred tax assets were recognized		0.91%		741,763		2.25%		1,386,695
Income tax expense		14.79%		12,049,685		16.92%		10,415,583

 

Deferred tax assets and liabilities as at 31 December 2022 were generated by the temporary differences in the following financial statement captions:

 

			Deferred tax assets		Deferred tax liabilities		Net
Property, plant and equipment			5,486,971		(15,524,831)		(10,037,860)
Intangible assets			171,520		(2,482,006)		(2,310,486)
Inventories			1,624,398		(235,310)		1,389,088
Other current assets			4,136		5,365		9,501
Trade and other receivables			463,745		(54,845)		408,900
Borrowings and lease liabilities			718,929		(61,539)		657,390
Deferred income			-		(318,914)		(318,914)
Trade and other payables			(6,092)		41,474		35,382
Tax loss carry-forward			902,114		-		902,114
Retained earnings			-		(2,933,699)		(2,933,699)
Deferred tax assets (liabilities) before set-off			9,365,721		(21,564,305)		(12,198,584)
Set-off of tax			(9,365,721)		9,365,721		-
Deferred tax liabilities			-		(12,198,584)		(12,198,584)

 

Deferred tax assets and liabilities as at 31 December 2021 were generated by the temporary differences in the following financial statement captions:

 

			Deferred tax assets (restated)		Deferred tax liabilities (restated)		Net (restated)
Property, plant and equipment			346,227		(6,973,027)		(6,626,800)
Intangible assets			39,545		(2,101,819)		(2,062,274)
Inventories			1,185,778		(129,494)		1,056,284
Other current assets			6,593		-		6,593
Trade and other receivables			496,562		5,365		501,927
Borrowings and lease liabilities			893,508		(83)		893,425
Deferred income			-		(350,286)		(350,286)
Retained earnings			-		(2,833,450)		(2,833,450)
Deferred tax assets (liabilities) before set-off			2,968,213		(12,382,794)		(9,414,581)
Set-off of tax			(2,968,213)		2,968,213		-
Deferred tax liabilities			-		(9,414,581)		(9,414,581)

 

 

92

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

The movement in deferred tax balances during the year ended 31 December 2022 was as follows:

 

		31 December 2021		Recognized in profit or loss		Increase due to business combination		Effect of movements in exchange rates		31 December 2022
Property, plant and equipment		(6,626,800)		(2,219,107)		(1,281,710)		89,757		(10,037,860)
Intangible assets		(2,062,274)		96,039		(335,253)		(8,998)		(2,310,486)
Inventories		1,056,284		60,558		3,664		268,582		1,389,088
Other current assets		6,593		(2,399)		-		5,307		9,501
Trade and other receivables		501,927		(60,908)		(20,175)		(11,944)		408,900
Borrowings and lease liabilities		893,425		(198,852)		89		(37,272)		657,390
Deferred income		(350,286)		25,765		-		5,607		(318,914)
Trade and other payables		-		-		34,941		441		35,382
Tax loss carry-forwards		-		-		877,987		24,127		902,114
Retained earnings		(2,833,450)		-		-		(100,249)		(2,933,699)
Total		(9,414,581)		(2,298,904)		(720,457)		235,358		(12,198,584)

 

The movement in deferred tax balances during the year ended 31 December 2021 was as follows:

 

		31 December 2020		Recognized in profit or loss		Increase due to business combination		Effect of movements in exchange rates		31 December 2021
Property, plant and equipment		(5,887,937)		(320,159)		(21,200)		(397,504)		(6,626,800)
Intangible assets		(64,567)		55,380		(2,033,761)		(19,326)		(2,062,274)
Inventories		1,198,480		(199,880)		-		57,684		1,056,284
Other current assets		7,793		(1,661)		-		461		6,593
Trade and other receivables		198,730		281,210		-		21,987		501,927
Equity-accounted investees		(72,976)		72,017		-		959		-
Borrowings and lease liabilities		829,265		19,034		-		45,126		893,425
Deferred income		(351,583)		24,444		-		(23,147)		(350,286)
Trade and other payables		341,134		(345,962)		-		4,828
Retained earnings		(2,679,722)		-		-		(153,728)		(2,833,450)
Total		(6,481,383)		(415,577)		(2,054,961)		(462,660)		(9,414,581)

 

 

Unrecognized deferred tax assets

Deferred tax assets as at 31 December 2022 and 31 December 2021 have not been recognized in respect of:

 

		31 December 2022		31 December 2021
Tax losses		5,743,802		4,210,710

 

The tax losses as at 31 December 2022 and 31 December 2021 will expire as follows:

 

		31 December 2022		31 December 2021
Up to 1 year		1,013,768		-
1 to 2 years		1,020,702		81,369
2 to 3 years		1,131,239		695,230
3 to 4 years		1,822,840		910,495
4 to 5 years		755,253		1,066,827
More than 5 years		-		1,456,789
		5,743,802		4,210,710

 

Deferred tax assets have not been recognized in respect of tax losses because it is not probable that future taxable profit will be available against which the Group can utilize the benefits therefrom.

 

93

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

Management has determined that the recoverability of cumulative tax losses of the Parent (Purcari Wineries Public Company Limited) amounting RON 5,412,011 is uncertain due to specific activity as a holding company, which lacks taxable income and accounts for significant deductible expenses.

Tax losses of Angel’s Estate SA, the Bulgarian subsidiary, amounting RON 331,791 will expire within the next two years, until the subsidiary will be able to generate sufficient taxable income.

 

Note 28.

Employee benefits

 

As at 31 December 2022 and 31 December 2021, employee benefit payables were as follows:

 

	31 December 2022		31 December 2021
Payables to employees	3,618,371		2,635,620
Accruals for unused vacation	1,991,221		2,036,279
Total employee benefit payables	5,609,592		4,671,899

 

During the year ended 31 December 2022 the average number of staff was 814 persons (2021: 707). Employee benefit expenses include base salaries, mandatory medical contribution, mandatory social contribution, bonuses for performance and equity-settled share-based payments.

 

The employee benefit expenses are included in the following captions:

	2022		2021
General and administrative expenses (Note 23)	15,741,039		15,706,737
Cost of sales (Note 21)	11,608,463		7,780,680
Inventory	9,122,025		7,494,624
Marketing and sales expenses (Note 22)	9,563,246		10,630,242
Total employee benefit expenses	46,034,773		41,612,283

 

The employee benefit expenses comprise the following categories:

	2022		2021
Base salaries and bonuses for performance	40,507,597		29,945,217
Equity-settled share-based payments	(340,435)		6,391,462
Mandatory social and medical contributions	5,867,611		5,275,604
Total employee benefit expenses	46,034,773		41,612,283

 

On December 31, 2022, the share price fell to 8.49 lei (2021: 14.90 lei), which is significantly below the exercise price of the share options of 10 lei. This involved a reversal of share-settled share-based payments, as the value of the share options became nil. If the share price had remained unchanged at the end of the year, the impact of equity-settled share-based payments would have increased expenses by 430,378 lei.

The below table provides details on recognition of employee benefit expenses related to Management incentive program:

	2022		2021
Share awards	3,014,437		3,194,672
Stock options	(3,354,873)		3,196,790
Total equity-settled share-based payments	(340,436)		6,391,462

 

Increase of the share price over the exercise (strike) price will increase the employee benefits expenses. Further is described the impact on expenses from change of market price of the share:

- each increase with RON 1 over the market price of RON 10 will increase the expenses with RON 772,500 for stock options with RON 10 strike price;

 

94

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

- each increase with RON 1 over the market price of RON 15 will increase the expenses with RON 1,090,800 for stock options with RON 15 strike price;

- each increase with RON 1 over the market price of RON 20 will increase the expenses with RON 1,291,600 for stock options with RON 20 strike price.

 

Management incentive program

 

On 29 April 2020, the Company’s shareholders approved the revised Special Resolution, dated initially on 14 June 2018 and revised later on 25 April 2019, stating the provision of a Management Stock Option Plan, as part of a Management Incentive Program.

 

The Program mainly targets members of the Group's senior management team (except the CEO) and is intended to further align the interests of such Beneficiaries with those of the Company's shareholders.

 

The Program initially was comprising the following:

 

a)	award of up to 500,000 shares in the Company to the Beneficiaries, free of charge, subject to relevant performance indicators to be determined by the Board of Directors; and

 

b)	award of stock options to the Beneficiaries (the Options or PSOs), subject to relevant performance indicators to be determined by the Board of Directors, in the following amounts:
	•	up to 500,000 Options at an Exercise Price of 20 RON (i.e. that is, under 20 RON the value of options is nil);
	•	up to 625,000 Options at an Exercise Price of 30 RON; and
	•	up to 750,000 Options at an Exercise Price of 40 RON.

 

On 29.03.2021 the shareholders unanimously voted in favor of approval of increase in the issued share capital of the Company from EUR 200,000.00 to EUR 400,000.00 through issuance of 20,000,000 bonus shares to all shareholders of the Company registered in the shareholders’ registry on the record date. The free allocation of shares under the share capital increase had an impact in that the number of shares outstanding following such corporate event has doubled, while the market price of the shares was adjusted downward to account for the effects of the event.

 

As result, at the same shareholders meeting of 29.03.2021, the Board of Directors was authorized to adjust the details of the employee/management incentive plans implemented by the Company and currently active, as well as the contractual arrangements with the beneficiaries of the plans, to account for the effects of the share capital increase proposed as described above.

 

Share award

On 14 May 2020 the Company’s Board of Directors approved the Long-Term Share Incentive Plan (LTSIP 1) with a total of 409,000 shares to be vested to employees during 2020-2022. On 1^st June 2020 a total of 398,004 shares were offered to eligible participants.

On 22 December 2020 the Company’s Board of Directors approved the second Long-Term Share Incentive Plan (LTSIP 2) with a total of 101,996 shares to be vested to employees during 2021-2024. As at 31 December 2020 no shares were offered to participants under LTSIP 2. Nevertheless, the Company recognized equity-settled share-based payments expenses under this plan as all details were known and reliable measurement of such expenses could be done. On 30 March 2021 all the shares under LTSIP 2 were offered to participants.

On 20.09.2021, the Directors of the Company, based on the authorization given by shareholders at AGM held on 29.03.2021, resolved to adjust the Long-Term Share Incentive Plans by increasing the maximum number of shares awarded, as follows:

 

(a) the maximum number of shares under the LTSIP no. 1 was increased from 409,000 shares to 502,998 shares. The increased number refers to the shares that have not vested prior to 20 July 2021 only;

 

(b) the maximum number of shares under the LTSIP no. 2 was increased from 101,996 shares to 193,668 shares. The increased number refers to the shares that have not vested prior to 20 July 2021 only.

 

The share-based payments are recognized at the market value of the shares at the grant date.

In 2022 the Company made no redemption of own shares (2021: 329,156 shares). The treasury shares acquired in 2021 were enough to implement the Company’s Management Incentive Program, which provides for equity-settled share-based payments to management. These shares were recorded under “Treasury Shares Reserves”.

 

95

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

At 15 June 2022 the Company allocated 251,036 shares to its employees with a total value of RON 3,815,747 (2021: 174,982 shares with a total value of RON 3,831,179) by offset of “Treasury Shares Reserves” with “Other reserves”.

 

Stock options

 

Based on the authorization received from shareholders in the Annual Shareholders Meetings of 14.06.2018, 25.04.2019 and 29.04.2020, the Board of Directors approved on 25.03.2021 the Long-Term Stock Option Plan (LTSOP) for period 2021-2030, by which the Company may grant to the Participants a maximum number of:

 

(a) 500,000 PSOs at an Exercise Price of RON 20 per Purcari Share;

(b) 625,000 PSOs at an Exercise Price of RON 30 per Purcari Share; and

(c) 750,000 PSOs at an Exercise Price of RON 40 per Purcari Share, in any combination.

 

On 20.09.2021, the Directors of the Company, based on the authorization given by shareholders at AGM held on 29.03.2021, resolved to adjust the stock option plan by increasing the maximum number of stock options on each level, while the corresponding Exercise Prices to be decreased, as follows:

 

(a) from 500,000 stock options at an Exercise Price of RON 20 per share to 1,000,000 stock options at an Exercise Price of RON 10 per share;

(b) from 625,000 stock options at an Exercise Price of RON 30 per share to 1,250,000 stock options at an Exercise Price of RON 15 per share; and

(c) from 750,000 stock options at an Exercise Price of RON 40 per share to 1,500,000 stock options at an Exercise Price of RON 20 per share.

The exercised period for all stock options expires on 30 March 2030.

During 2022 the participants didn’t exercise any rights to purchase shares at Exercise Price (2021: 117.500 shares at the Exercise Price of RON 10 per shares).

 

In 2022 the Company had granted no stock options. As result, the Company is still authorized to grant additional stock option, to new and existing participants, up to:

 

(a) 110,000 stock options at an Exercise Price of RON 10 per share;

(b) 159,200 stock options at an Exercise Price of RON 15 per share; and

(c) 208,400 stock options at an Exercise Price of RON 20 per share.

The table below summarizes the movements in stock options between 1 January 2021 and 31 December 2022, and weighted average exercise price:

		Stock options with exercise price @RON 10		Stock options with exercise price @RON 15		Stock options with exercise price @RON 20		Weighted average exercise price
Outstanding Stock Options @ 01.01.2022		772,500		1,090,800		1,291,600		-
Stock options granted during the year		-		-		-		-
Stock options exercised		-		-		-		-
Outstanding Stock Options @ 31.12.2022		772,500		1,090,800		1,291,600		-
Outstanding Stock Options @ 01.01.2021		-		-		-		-
Stock options granted during the year		445,000		545,400		645,800		15.61
Adjusted stock options to count the effect of issue of bonus shares		445,000		545,400		645,800		15.61
Total stock options granted during the year		890,000		1,090,800		1,291,600		15.61
Stock options exercised		117,500		-		-		-
Outstanding Stock Options @ 31.12.2021		772,500		1,090,800		1,291,600		15.82

 

96

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

Note 29.

Financial instruments

 

Financial instruments by category

	31 December 2022		31 December 2021
Financial assets measured at amortised cost
Non-current receivables (Note 10)	-		2,552,630
Loan receivables (Note 11)	2,865,672		849,489
Cash and cash equivalents (Note 15)	23,455,132		32,100,114
Trade receivables (Note 13)	71,235,957		57,190,885
	97,556,761		92,693,118
Financial assets measured at FVTPL
Equity instruments at fair value through profit or loss (Note 10)	4,621,285		4,341,709
Total financial assets	102,178,046		97,034,827
Financial liabilities measured at amortised cost
Trade and other payables (Note 19)	73,286,309		69,450,633
Borrowings and lease liabilities (Note 17)	132,677,615		97,984,663
	205,963,924		167,435,296
Financial liabilities measured at fair value
Put option over non-controlling interests (Note 9)	11,729,130		-
Total financial liabilities	217,693,054		167,435,296

 

Financial risk management

 

Overview

 

The Group has exposure to the following risks from its use of financial instruments:

 

•	credit risk
•	liquidity risk
•	market risk

 

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital.

 

Risk management framework

 

The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

 

Credit risk

 

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Group’s receivables from customers.

Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

	Carrying amount
	31 December 2022		31 December 2021
Non-current receivables	-		2,552,630
Loan receivables	2,865,672		849,489
Cash and cash equivalents	23,455,132		32,100,114
Trade receivables	71,235,957		57,190,885
Total	97,556,761		92,693,118

 

97

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

Trade receivables and other receivables

The Group's exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the Group's customer base, including the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk.

The Group has established a credit policy under which each new customer is analysed individually for creditworthiness before the Group's standard payment and delivery terms and conditions are offered. The Group limits its exposure to credit risk from trade receivables based on this assessment and establishes a maximum payment period in its agreements with customers. The creditworthiness assessment is updated each time by the Group when there is a significant delay in the payment period compared to the maximum payment period agreed contractually or when the Group extends or amends the agreements with its customers.

In monitoring customer credit risk, customers are grouped according to their credit characteristics, including customer geographic location, aging profile, maturity and existence of previous financial difficulties. The Group’s most significant 10 customers account for RON 27,247,010 or 39% of the trade receivables’ carrying amount as at 31 December 2022 (2021: RON 30,096,739 or 53% of the trade receivables’ carrying amount).

Revenues from transactions with a single external customer of 10% or more of the Group’s revenues were as follows:

	2022		2021
Revenues from transactions with a customer from Republic of Moldova	35,823,504		27,835,448
Revenues from transactions with a customer from Romania	42,359,196		27,326,482
Total	78,182,700		55,161,930

 

The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was as follows:

	31 December 2022		31 December 2021
Republic of Moldova	9,381,450		10,228,574
Romania	52,789,832		39,534,813
Other European Union countries	6,850,884		4,260,471
Belarus	-		586,216
Ukraine	-		2,003,311
Other	2,213,791		577,500
Total	71,235,957		57,190,885

 

The exposure to credit risk includes a trade receivable from Austria in amount of RON 2,812,913 which is due on 9 December 2023 (please see Note 10). Previously, this receivable was included in non-current receivables (2021: RON 2,552,630).

The exposure to credit risk of loan receivables in amount of RON 2,865,671 (2021: 849,489) at the reporting date     by geographic region was from Czech Republic (please see Note 11).

The management decided to continue business with partners in Ukraine and Belarus, but under the condition not to increase the exposure recoded at the end of the year 2021 and changing the terms conditions to advance payments where possible. For a prudent presentation, the management decided to provision the full amount of account receivables from these countries.

 

Impairment losses

 

The Group uses an allowance matrix to measure the ECLs of trade receivables. Loss rates are calculated using a “delinquency” method.

 

The following table provides information about the exposure to credit risk and ECLs for trade receivables as at 31 December 2022:

 

		Weighted- average loss rate		Gross		Impairment		Net
Not due		2.72%		57,109,205		1,551,544		55,557,661
Overdue less than 1 month		5.49%		9,521,753		523,219		8,998,534
Overdue 1 to 3 months		8.77%		2,931,417		257,067		2,674,350
Overdue 3 to 6 months		19.88%		3,212,784		638,778		2,574,006
Overdue 6 months to 1 year		43.89%		1,765,991		775,020		990,971
Overdue more than 1 year		35.29%		680,614		240,179		440,435
Total		5.30%		75,221,764		3,985,807		71,235,957

 

98

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

 

Loss rates are based on actual credit loss experience over the past four years.

 

The following table provides information about the exposure to credit risk and ECLs for trade receivables as at 31 December 2021:

 

		Weighted- average loss rate		Gross		Impairment		Net
Not due		3.26%		47,859,045		1,562,470		46,296,575
Overdue less than 1 month		4.77%		6,789,716		324,166		6,465,550
Overdue 1 to 3 months		7.01%		2,429,366		170,382		2,258,984
Overdue 3 to 6 months		13.02%		1,818,535		236,774		1,581,761
Overdue 6 months to 1 year		43.81%		683,053		299,242		383,811
Overdue more than 1 year		89.58%		1,960,285		1,756,082		204,203
Total		7.07%		61,540,000		4,349,115		57,190,885

 

Loss rates are based on actual credit loss experience over the past four years.

 

The movement in the allowance for impairment with respect to trade receivables and loan receivables during the year was as follows:

 

		Trade receivables
Balance 31 December 2020		1,839,795
Increase through business combinations		426,337
Impairment loss		2,550,417
Write off		(283,620)
Interest income		(184,406)
Effect of movement in exchange rates		592
Balance 31 December 2021		4,349,115
Increase through business combinations		187,914
(Reversal of) impairment loss		(119,227)
Write off		-
Interest income		(185,968)
Effect of movement in exchange rates		(246,027)
Balance 31 December 2022		3,985,807

The impairment allowance of receivables are used to record impairment losses, unless the Group believes that no recovery of the amount is possible, in which case the allowances for amounts considered irrecoverable are written off against the financial asset.

 

Cash and cash equivalents

Cash and cash equivalents are placed with a limited number of local financial institutions. Despite the fact that these banks do not have international credit ratings (except Unicredit Bank SA Romania), they are considered as reliable counterparts, as these have stable positions in the financial markets in which they operate.

The Group held cash and cash equivalents of RON 23,304,757 at 31 December 2022 (2021: RON 31,935,828), which represent its maximum credit exposure on these assets. 60% of cash and cash equivalents as at 31 December 2022 (2021: 87%) are held with banks, from which the Group has secured loans. 51% of cash and cash equivalents as at 31 December 2022 are held with Unicredit Bank SA Romania with Fitch credit rating BBB (2021: 14% and credit rating BBB).

 

 

 

 

 

 

 

99

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

 

Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulties in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation.

 

The Group monitors the level of expected cash inflows on trade receivables together with expected cash outflows on borrowings and lease liabilities and trade and other payables. The shortages in working capital and cash outflows for investment activities are financed through new credit facilities made available by the banks.

 

The Group holds no financial assets that are readily saleable to generate cash inflows to meet cash outflows on financial liabilities.

 

The following were the estimated cash outflows for trade and other payables and contractual maturities of borrowings and lease liabilities, including estimated interest payments and excluding the impact of netting agreements:

 

Monetary liabilities		Carrying Amount		Total Contractual Cash Flow		Less than 1 month		Between 1 – 12 months		Between 1-2 years		More than 2 years
31 December 2022
Trade and other payables		73,286,309		73,286,309		29,252,367		44,033,942		-		-
Borrowings		126,422,725		130,208,257		610,655		88,940,903		40,084,725		571,974
Lease liabilities		6,254,890		12,475,055		114,859		1,263,448		1,097,459		9,999,289
Put option over non-controlling interests (Note 9)		11,729,130		19,917,574		-		-		-		19,917,574
Total		217,693,054		235,887,195		29,977,881		134,238,293		41,182,184		30,488,837
31 December 2021
Trade and other payables		69,450,633		69,450,633		28,533,783		40,916,850		-		-
Borrowings		90,717,489		94,564,451		1,606,493		73,020,080		2,662,891		17,274,987
Lease liabilities		7,267,174		14,494,003		133,448		1,467,923		1,275,070		11,617,562
Total		167,435,296		178,509,087		30,273,724		115,404,853		3,937,961		28,892,549

 

As at 31 December 2022, the Group had not complied with the Debt Service ratio covenant for secured bank loans from BC MAIB SA (see Note 17). Therefore, the Group classified the long-term liabilities as current liabilities of RON 43,063,432 as at 31 December 2022 in these consolidated financial statements.

In 2021, the Group had also not complied with the Debt-to-Equity ratio covenant for secured bank loans from BC MAIB SA and classified the long-term liabilities as current liabilities of RON 32,391,472 as at 31 December 2021.

In March 2022, BC MAIB SA notified the borrower that this breach of covenant will not be considered a default, therefore the Group is not required to make an earlier repayment of the loans.

 

Market risk

 

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Group's income or the value of its holdings of financial instruments. The Group does not use derivatives (interest rate or foreign exchange swaps) as hedging instruments under a fair value hedge accounting model. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

 

 

 

 

 

 

100

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

Currency risk

The following significant exchange rates applied during the year:

 

	31 December 2022		Average 2022		31 December 2021		Average 2021
MDL1	0.0522		0.2353		0.2463		0.2353
EUR 1	4.9474		4.9315		4.9481		4.9204
USD 1	4.6346		4.6885		4.3707		4.1604
BGN	0.5453		0.5237		-		-

 

The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of Group entities. The currencies in which these transactions are primarily denominated are EUR, USD, MDL, BGN and RON. The Group does not use any financial instruments for mitigating currency risk.

The summary of quantitative data about the Group's monetary assets and monetary liabilities in original currency provided to management of the Group based on its risk management policy was as follows:

	EUR		USD		MDL		RON		BGN		Total
31 December 2022
Monetary assets
Loan receivables	2,865,672		-		-		-		-		2,865,672
Cash and cash equivalents	10,655,358		1,739,181		2,302,013		8,180,848		577,732		23,455,132
Trade receivables	14,666,402		6,108,227		6,745,993		42,015,731		1,699,604		71,235,957
Total monetary assets	28,187,432		7,847,408		9,048,006		50,196,579		2,277,336		97,556,761
Monetary liabilities
Borrowings and lease liabilities	124,538,552		2,092,337		5,398,662		646,757		1,307		132,677,615
Trade and other payables	15,303,863		348,753		28,324,278		27,230,647		2,078,768		73,286,309
Put option over non-controlling interests (Note 9)	11,729,130										11,729,130
Total monetary liabilities	151,571,545		2,441,090		33,722,940		27,877,404		2,080,075		217,693,054
Net statement of financial position exposure	(123,384,113)		5,406,318		(24,674,934)		22,319,175		197,261		(120,136,293)
31 December 2021
Monetary assets
Non-current receivables	2,552,630		-		-		-		-		2,552,630
Loan receivables	849,489		-		-		-		-		849,489
Cash and cash equivalents	21,301,212		3,103,079		2,469,397		5,226,426		-		32,100,114
Trade receivables	6,580,181		4,907,203		10,201,887		35,501,614		-		57,190,885
Total monetary assets	31,283,512		8,010,282		12,671,284		40,728,040		-		92,693,118
Monetary liabilities
Borrowings and lease liabilities	71,208,737		7,507,822		18,219,792		1,048,312		-		97,984,663
Trade and other payables	5,563,757		5,176,133		24,265,267		34,445,476		-		69,450,633
Total monetary liabilities	76,772,494		12,683,955		42,485,059		35,493,788		-		167,435,296
Net statement of financial position exposure	(45,488,982)		(4,673,673)		(29,813,775)		5,234,252		-		(74,742,178)

 

 

 

 

 

 

 

101

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

Exposure to currency risk

 

For monetary assets and liabilities, the Group is exposed to currency risk only for balances denominated in EUR and USD.

 

Sensitivity analysis

 

A 10% strengthening of the EUR against RON, MDL and BGN would have decreased the profit before tax by RON 12,338,411 for the year 2022 and decreased the equity with the same amount (2021: RON 4,633,847). A 10% strengthening of the USD against RON, MDL and BGN would have increased the profit before tax by RON 540,632 for the year 2022 and increased the equity with the same amount (2021: decreased the profit before tax by RON 467,367 and decreased the equity with the same amount). This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the reporting date. The analysis assumes that all other variables, in particular interest rates, remain constant. The analysis has been carried out on the same basis for the years 2022 and 2021, although the reasonably possible foreign exchange rate variances were different. There were no changes in methods and assumptions from prior year.

 

Interest rate risk

 

Profile

At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was as follows:

	31 December 2022		31 December 2021
Fixed rate instruments
Financial assets	2,865,672		2,552,630
Financial liabilities	(5,492,113)		(7,346,384)
Total fixed rate instruments	(2,626,441)		(4,793,754)
Variable rate instruments
Financial assets	-		-
Financial liabilities	(138,914,632)		(90,638,279)
Total variable rate instruments	(138,914,632)		(90,638,279)

Fair value sensitivity analysis for fixed rate instruments

The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and the Group does not use derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting model. Therefore, a change in interest rates at the reporting date would not affect profit or loss.

Cash flow sensitivity analysis for variable rate instruments

An increase/decrease of 100 basis points in interest rates at the reporting date would have decreased/increased the profit before tax by RON 1,389,146 for the year 2022 and would decrease/increase the equity with the same amount (2021: RON 906,383). The analysis assumes that all other variables, in particular foreign exchange rates, remain constant. There were no changes in methods and assumptions from prior year.

Capital management

 

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for the shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

 

The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings and lease liabilities less cash and cash equivalents. Total capital is calculated as total equity plus net debt.

 

The gearing ratios as at 31 December 2022 and 31 December 2021 were as follows:

		31 December 2022		31 December 2021 (restated)
Borrowings and lease liabilities (Note 17)		132,677,615		97,984,663
Less: Cash and cash equivalents (Note 15)		(23,455,132)		(32,100,114)
Net debt		109,222,483		65,884,549
Total equity		307,154,837		263,203,182
Total capital		416,377,320		329,087,731
Gearing ratio		26.23%		20.02%

 

102

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

The Group has borrowing agreements concluded with banks, which require that covenants have to be met in accordance with provisions of those agreements. The Group’s management assesses on a yearly basis whether these covenants have been met and that ratios stated by the banks are within the required threshold.

 

According to laws and regulations in Romania, the net assets of the Group’s subsidiaries domiciled in this country (Crama Ceptura SRL, Vinoteca Gherasim Constantinescu SRL, Ecosmart Union SA), determined as the difference between total assets and total liabilities based on statutory financial statements, should not decrease to less than half of the subscribed share capital. All subsidiaries domiciled in Romania complied with this capital requirement based on the unaudited statutory financial statements, except for Vinoteca Gherasim Constantinescu SRL, therefore an extraordinary general meeting of shareholders should be organized to decide on the measures to be implemented as required by the legislation in force.

 

According to laws and regulations in the Republic of Moldova, the net assets of the Group’s subsidiaries domiciled in this country (Vinaria Bostavan SRL, Vinaria Purcari SRL, Vinaria Bardar SA, Domeniile Cuza SRL, Casa Purcari SRL), determined as the difference between total assets and total liabilities based on statutory financial statements, should not decrease to less than the subscribed share capital. The Group’s subsidiaries domiciled in Republic of Moldova complied with this capital requirement based on the audited statutory financial statements.

 

According to laws and regulations in the Bulgaria, the net assets of the Group’s subsidiary domiciled in this country (Angel’s Estate SA), determined as the difference between total assets and total liabilities based on statutory financial statements, should not decrease to less than the subscribed share capital. Angel’s Estate SA complied with this capital requirement based on the unaudited statutory financial statements.

 

 

Fair values

 

Fair values versus carrying amounts

The fair values of financial assets and liabilities, together with the carrying amounts shown in the statement of financial position are presented in the below table. The table does not include the financial assets and liabilities which are not measured at fair value, if the carrying amount approximates the fair value.

		Carrying amount				Fair value
		31 December 2022		31 December 2021		31 December 2022		31 December 2021
Financial liabilities
Borrowings and lease liabilities		132,677,615		97,984,663		134,330,590		99,995,021

Financial assets measured at fair value are disclosed in Note 10 to the consolidated financial statements. Financial liabilities measured at fair value are disclosed in Note 9.

 

Interest bearing borrowings and lease liabilities

 

Fair value is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. For lease liabilities the market rate of interest is determined by reference to similar lease agreements.

 

The fair value measurement of the above assets and liabilities for disclosure purposes has been categorized as a Level 3 fair value (see Note 4 b)).

 

Interest rates used to determine fair value

The interest rates used to discount estimated cash flows, when applicable, are based on market interest rates at the reporting date, and were as follows:

		31 December 2022		31 December 2021
Borrowings and lease liabilities denominated in MDL		8.00-16.46%		8.04%-9.08%
Borrowings and lease liabilities denominated in RON		1.65%-2.33%		1.65%-2.33%
Borrowings and lease liabilities denominated in EUR and USD		3.40%-4.86%		4.00%-4.86%

 

 

103

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

Note 30.

Non-controlling interests

 

The following tables summarized the information relating to each of the Group’s subsidiaries that has non-controlling interests, before any intra-group eliminations.

 

 

31 December 2022	Angel’s Estate		Ecosmart Union		Vinaria Bardar		Intragroup eliminations		Total
NCI percentage	24.00%		34.25%		43.95%
Non-current assets	43,502,683		12,512,848		12,685,134
Current assets	9,893,023		7,988,746		58,333,963
Non-current liabilities	(6,304,014)		(1,958,001)		(5,978,899)
Current liabilities	(2,642,488)		(19,001,466)		(17,405,652)
Net assets	44,449,204		(457,873)		47,634,546
Carrying amount of NCI	10,667,809		(156,822)		20,934,213		1,584,929		33,030,129
Revenue	3,003,403		21,549,203		26,392,928
Profit /(loss)	(1,133,267)		(669,893)		9,301,328
OCI	4,363,733		8,225		(620,041)
Total comprehensive income	3,230,466		(661,668)		8,681,287
Profit /(loss) allocated to NCI	(271,984)		(229,438)		4,087,728		338,463		3,924,769
OCI allocated to NCI	1,047,296		2,817		(276,494)		(1,039,762)		(266,143)

 

 

 

 

 

31 December 2021			Ecosmart Union		Vinaria Bardar		Intragroup eliminations		Total
NCI percentage			34.25%		43.95%
Non-current assets			14,321,066		12,122,318
Current assets			11,021,519		54,952,827
Non-current liabilities			(2,172,308)		(5,162,189)
Current liabilities			(22,900,872)		(15,699,079)
Net assets			269,405		46,213,877
Carrying amount of NCI			92,271		20,309,979		(187,007)		20,215,243
Revenue			10,822,974		25,808,288
Profit /(loss)			(521,524)		9,829,307
OCI			49,769		2,873,325
Total comprehensive income			(471,755)		12,702,632
Profit /(loss) allocated to NCI			(178,622)		4,319,763		(4,462)		4,136,679
OCI allocated to NCI			17,046		1,262,763		184,889		1,464,698

 

 

During the year ended 31 December 2022 the Group’s subsidiary Vinaria Bardar SA declared dividends, from which the share of non-controlling interests amounted to RON 2,458,651 (2021: RON 1,511,348).

 

During the year ended 31 December 2021 the Group increased its shareholding in the subsidiary Vinaria Bostavan SRL from 99.54% to 100% by acquiring shares from non-controlling interests of the subsidiary.

 

The following table summarizes the effect of changes in the non-controlling interests acquired:

 

	2022		2021
Carrying amount of non-controlling interests acquired	-		437,583
Less consideration paid to non-controlling interests	-		(5,061)
Increase in equity attributable to owners of the Company	-		432,522

 

104

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

Note 31.

Related parties

 

The Group’s related parties for the years 2022 and 2021 were the following:

 

Name of the entity		Relationship with the Company
Key management personnel		Members of board of directors of the Company, CEOs, COO, CFO and Sales Director of Group entities
Victor Bostan		CEO, Member of the Board of Directors, significant shareholder through Amboselt Universal Inc.
Agro Sud Invest SRL		Entity controlled by a key member of management through a significant shareholding
BSC Agro SRL		Entity controlled by a key member of management through a significant shareholding
Victoriavin SRL		Entity controlled by Victor Bostan through a significant shareholding
Ecosmart Union SA		An associate company till 15 September 2021
Media Alternativa AO		Common member in the board of directors
BC Moldova Agroindbank SA		Common member in the board of directors of the Company and of the Bank

 

Key management personnel and other related party transactions:

		Transaction value for the year ended 31 December				Outstanding balance – receivable/(payable) as at 31 December
		2022		2021		2022		2021
Victor Bostan
- Fixed salary		(1,075,536)		(1,060,041)		(1,798,819)		(1,102,570)
Ecosmart Union SA (the cost is based on tariff per ton and the payment is made within 10 days from receipt of invoices)
- Other expenses				(1,896,678)		-		-
- Trade payables		-		-		-		-
Victoriavin SRL (for terms and conditions please refer to Note 1)
- Lease liabilities		-		-		(3,659,807)		(3,894,567)
- Interest expense		(415,492)		(415,972)		-		-
- Trade payables		-		-		(5,422)		(5,545)
- Operating leases		(47,616)		(45,178)		-		-
- Acquisition of inventories		(3,997)		-		-		-
BC Moldova Agroindbank SA (for terms and conditions please refer to Note 17)
- Sales of merchandise		77,399		6,745		-		-
- Interest expense		(2,812,067)		(2,880,011)		-		-
- Bank charges		(243,091)		(234,317)		-		-
- Secured bank loans		-		-		(73,741,878)		(55,803,095)
- Cash and cash equivalents		-		-		6,891,127		21,065,011
Agro Sud Invest SRL (the cost is based on tariff per work, invoicing and payments are made on a monthly basis)
- Agricultural services		(5,473,242)		(4,253,693)		-		-
- Trade payables		-		-		(1,182,472)		(1,070,597)
BSC Agro SRL (the cost is based on tariff per work, invoicing and payments are made on a monthly basis)
- Agricultural services		(7,251,766)		(5,834,900)		-		-
- Trade payables		-		-		(1,448,705)		(1,127,617)
Media Alternativa AO (non-recurring promo services based on tariff per work)
- Sales of merchandise		38,572		-		-		-
- Trade receivables		-		-		9,068		-
- Marketing services		(26,701)		-		-		-
Key management personnel
- Salaries and bonuses for performance		(5,595,201)		(5,236,152)		(2,939,163)		(2,491,011)
- Equity-settled share-based payment		464,726		(4,190,014)		(480,650)		(3,262,251)

 

105

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

Note 32.

Commitments and contingencies

 

(i)	Capital commitments

 

As at 31 December 2022 the Group has a commitment for purchase of property, plant and equipment amounting EUR 6,000,000 deriving from the arrangements related to acquisition of subsidiary Angel’s Estate SA in Bulgaria (2021: nil). The amount of EUR 1,325,000 is committed for next 12 months.

 

(ii)	Litigations and claims

 

The Group is involved in several litigation or disputes. The Group does not present information and did not set-up provisions for these items, as the management assessed as remote the probability of outflow of economic benefits, because it considers unlikely unfavourable outcome of the litigations.

 

The Group‘s subsidiary Ecosmart Union SA contested the results of the control performed by the Environment Fund Administration (“AFM”) from Romania. As a result of AFM control for financial year 2018, a penalty of RON 22,206,627 was calculated alleging that Ecosmart Union SA failed to ensure traceability for the quantity of waste assumed to be further recycled. Ecosmart Union SA contested the initial decision of the AFM and it was cancelled by AFM due to procedural issues and a second review was requested. However, second review was performed without requesting any additional information and communication with Ecosmart Union SA’s management, and a decision identical with the first one was issued. Ecosmart Union SA contested also the second decision and requested a delay in repayment till finalization of the trial - which was approved.

 

On 22 March 2023 the Appeal Court decided to cancel the AFM decision. Although the decision is subject to appeal, the management and its legal advisors believe that final instance will keep the Appeal Court’s decision in force, due to both: procedural issues related to control performed and the fact that Ecosmart Union SA holds all supporting documents confirming traceability for the quantity of waste assumed to be further recycled.

 

(iii)

Fiscal environment

 

The tax laws and regulations in Romania, Moldova, Bulgaria and Cyprus may be subject to change, and there may be changes in interpretation and enforcement of tax law. The tax systems in these countries can be characterized by numerous taxes and frequently changing legislation, open to interpretation and in some cases are conflicting.  These changes in tax law and/or interpretation and enforcement of the tax law may be difficult for the Group to predict, and the Group may therefore be unprepared for these changes. As a result, the Group may face increases in taxes payable if tax laws or regulations are modified by the competent authorities in an adverse manner or are interpreted in a way that is different from Group’s interpretation, which could have a material adverse effect on the Group’s financial statements, as influenced by additional tax liabilities, including fines, penalties and charged interest.

 

Tax audits consists of detailed verifications of the accounting records of taxpayers. These audits sometimes take place months, or even years, after the date liabilities are established. Tax returns may be subject to revision and corrections by tax authorities, generally for a five-year period after they are completed in Romania and Bulgaria, a four-year period in Republic of Moldova and six years in Cyprus. Consequently, companies may be found liable for significant taxes and fines.

 

The Group regularly makes assessment of tax risks and establishes tax provisions, which represent management’s best estimate, also based on consultations with relevant tax advisors. Management believes that it has adequately provided for tax risks and liabilities. However, the interpretations of the relevant authorities could differ and the effect on these consolidated financial statements, if the authorities were successful in enforcing their interpretations, could be significant.

 

(iv)	Operating environment

On 24 February 2022, Russia announced the start of a full-scale land, sea and air invasion of Ukraine, targeting Ukrainian military assets and civilian infrastructure throughout the country.

One year on, the war is still raging in the vicinity of Moldova and Romania, where our production facilities are located and which represent the core markets for the Group.

This event was a catalyst factor for the activation of Moldova's EU accession process, the country being formally awarded EU candidate status. Maia Sandu, Moldova’s President, has set as goal for her administration to finalize the accession process and join the EU before 2030. The country has benefited from very significant financial support from EU and other development partners, estimated at over $1 billion, including large grants components in addition to loans.

 

106

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

The escalation of the war in Ukraine has created many uncertainties, as well as many consequences, especially in the fields of energy and finance. As a result, a state of emergency was established in the Republic of Moldova, from the beginning of the war until now.

Moldova was mostly affected by the price of natural gas and dependence on supplies from Russia, but the government took prompt steps to interconnect the country with the EU market, ensuring supplies for industry and households, and implemented a compensation scheme for the vulnerable population, to reduce the tariff burden.

The wider economic impact was accentuated on the cost side, mainly:

-	increased cost of transportation.
-	increased cost of packaging.
-	increased salaries.
-	increased cost of financing due to inflationary pressure and Central Banks’ tightening policies.
-	increased cost of fertilizers.

The direct impact on the Group is considered to be low, as:

-	the sales to the countries involved in the conflict (Ukraine, Russia, Belarus) are not significant, being 3% of total revenue in previous year, which will not have a significant impact even the Group refuse to these markets.
-	the gross amount of trade receivables for clients located in these countries counts for 2.9% of total trade receivables of the Group as at 31 December 2022, which will not represent a significant impact on the financial position of the Group in case of full provisioning.
-	the Company does not own any assets in the region. Its fully owned subsidiary located in Ukraine, is a trading with no significant assets.
-	the Company is not linked in any way to organizations or individuals identified for sanctions or other politically exposed people in the region.

In relation to Covid-19, the governments in all the countries of our economic presence and activity, took a more relaxed approach, almost excluding any limitations for individuals and businesses. As of now, the management of the Group does not consider Covid-19 outbreak as a threat to future development.

On the basis of the above, the Board of Directors of the Company reiterates the view that the Company is well positioned to resist the adverse impact of this external shock and will have sufficient resources to continue operating as going concern for a period of at least 12 months from the reporting date of these financial statements.

 

 

Note 33.

EBITDA

 

Earnings before Interest, Tax, Depreciation and Amortisation (“EBITDA”) is calculated as profit for the year (as presented in the consolidated statement of profit or loss and other comprehensive income), and adding back the income tax, net finance result and total amortization of intangible assets and total depreciation of property plant and equipment (as presented in Notes 8 and 12).

 

The management of the Group has presented EBITDA as they monitor this performance measure at a consolidated level, and they believe this measure is relevant to an understanding of the Group’s financial performance.

 

EBITDA is not an IFRS measure and should not be treated as an alternative to IFRS measures. Moreover, EBITDA is not uniformly defined. The method used to calculate EBITDA by other companies may differ significantly from that used by the Group. Consequently, the EBITDA presented in this note cannot, as such, be relied upon for the purpose of comparison to EBITDA of other companies.

 

 

 

 

 

 

107

Purcari Wineries Public Company Limited

Notes to the Consolidated Financial Statements for the year ended 31 December 2022

all amounts are in RON, unless stated otherwise

 

 

EBITDA for the years ended 31 December 2022 and 31 December 2021 was as follows:

 

	Indicator		Note		2022		2021 (restated)
Adjusted EBITDA	Adjusted EBITDA				82,510,944		75,241,138
Less Gain from Bargain Purchase of Angel's Estate SA					28,259,397		-
EBITDA	EBITDA				110,770,341		75,241,138
Less: depreciation for the year			8		(17,914,309)		(13,341,517)
Less: amortization for the year			12		(1,216,530)		(420,820)
Result from operating activities	EBIT				91,639,502		61,478,801
Less: net finance (loss) / income			26		(10,186,918)		87,630
Earnings Before Income Taxes	EBT				81,452,584		61,566,431
Less: tax expense			27		(12,049,685)		(10,415,583)
Profit for the year					69,402,899		51,150,848

 

Note 34.     Events after the reporting period

 

There were no further material events after the reporting period.

 

These consolidated financial statements for the year ended 31 December 2022 were approved and authorised for issue by the Board of Directors on 27 April 2023.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

108