According to the Shareholders’ General Assembly’ decision on 29th of June 2017, the financial statements of ELGEKA S.A. as at 31.12.2017 have been audited by GRANT THORNTON.

Independent Auditor’s Report

To the Shareholders of “ELGEKA S.A.”

Report on the audit of the separate and consolidated financial statements

Opinion

We have audited the accompanying separate and consolidated financial statements of the company “ELGEKA S.A.” (the Company), which comprise the separate and consolidated statement of financial position as at December 31, 2017, and the separate and consolidated statements of comprehensive income, changes in equity and cash flow for the year then ended, as well as a summary of significant accounting policies and other explanatory notes.

In our opinion, the accompanying separate and consolidated financial statements present fairly, in all material respects, the financial position of the Company and its subsidiaries (the Group) as of December 31, 2017, and of their financial performance and their cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS) as endorsed by the European Union and regulatory requirements of C.L. 2190/1920.

Basis for opinion

We conducted our audit in accordance with the International Standards on Auditing (ISAs) as they have been transposed in Greek Legislation. Our responsibilities under those standards are described in the “Auditor’s responsibilities for the audit of the separate and consolidated financial statements” section of our report. During our audit, we remained independent of the Company and the Group, in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) as transposed in Greek legislation and the ethical requirements relevant to the audit of the separate and consolidated financial statements in Greece. We have fulfilled our responsibilities in accordance with the provisions of the currently enacted law and the requirements of the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the separate and the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the separate and the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matters How our audit addressed the key audit matter
Refinancing of short term debt
As at December 31, 2017, the Group and the Company have negative working capital due to short-term loans of € 48.203K and € 31.400K respectively and long-term liabilities payable in the following year of € 23.820K and € 15.500K respectively pertaining to the bond loans of the parent company “ELGEKA S.A.” and its subsidiary “DIAKINISIS S.A.”

The management is in the process of negotiations with credit institutions for the purposes of converting the total short-term borrowings to long-term borrowings of parent Company and its subsidiary as mentioned above. Until the financial statements publication date, the refinancing process has not been finalized.

For the year ended December 31, 2017, the Company and the Group have a significant increase in Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA).

Management has prepared business plans for estimated future cash flows based on the going concern principle.

We have identified the refinancing process as a key audit matter because of the significance of the amount of loan payables and the impact of the outcome of the process on future liquidity. The abovementioned event may have an impact on the going concern principle which has been taken into account for the preparation of the Group’s and Company’s financial statements as at 31/12/2017.

Management’s disclosures regarding the amount of long term and short term borrowing and refinancing process are included in explanatory notes 37 and 45 of separate and consolidated financial statements.

 

 Our audit approach included, among others, the following procedures:

 

·       We discussed with management and assessed the refinancing plan and the process of negotiations until the date of this report.

·       We assessed the reasonableness of management’s assumptions and estimates of future cash flows included in the approved business plans of the Group.

·       We evaluated the credibility of management’s forecasts by comparing the actual performance against previous estimates.

·       We reviewed management’s correspondence with credit institutions regarding the refinancing process.

·       We assessed the adequacy of the related disclosures included in explanatory notes of separate and consolidated financial statements.

Based on the abovementioned procedures, we concluded that management’s actions, estimates and plans support the assumption of the going concern principle.
Key audit matters How our audit addressed the key audit matter
Valuation of Investments in Subsidiaries (Seperate financial statements)
As at 31/12/2017 carrying value of Investments in subsidiaries in entity’s financial statements amounted at € 29.476K. As it is mentioned into attached financial statements, the parent entity evaluates its subsidiaries at cost and the Group performs an impairment test whenever internal or external indications exist. The total of subsidiaries do not trade in active market. In order to conduct an impairment test, a determination of value in use of the subsidiaries is made. This determination of value in use requires an estimation of future cash flows of each subsidiary and the appropriate discount rate to be used based on which the present value of the future cash flows will be determined. The estimation of future cash flows depends on management’s estimates, mainly on expected operating income and expenses, capital expenditure and the discount rate.Due to the significant value of the subsidiaries and the importance of assumptions/accounting estimates this area is considered critical for our audit.

Management’s disclosures concerning accounting policy, assumption, estimates used and analysis of these issues are included in explanatory notes 3.9, 4 and 21 of separate and consolidated financial statements.

 Our audit approach included, among others, the following procedures:

·       We examined management’s procedures for identifying indications that an investment in a subsidiary may be impaired.

·       We examined management’s procedures with regard to preparation of business plans with a view to determining value in use.

·       For subsidiaries with indications of impairment we assessed: a) the reasonableness of basic assumptions of future cash flows and management’s estimates b) the application of general accepted valuation methods, c) the reasonableness of used discount rates

·       We assessed the credibility of management forecasts by comparing the actual performance against previous estimates.

·       We examined the mathematical calculation of discounted cash flow models.

·       In the above procedures and where it has been necessary, we used our company’s expert.

·       We assessed the adequacy of the related disclosures included in explanatory notes of separate and consolidated financial statements.

 
Key audit matters How our audit addressed the key audit matter
Provisions and contingent liabilities ( Consolidated financial statements)
As stated in notes 15 and 46 of separate and consolidated financial statements of 31/12/2017, Group and the parent Company are facing some pending cases concerning tax audits in Greece and Romania and environmental audits in Romania.The determination of provisions or contingent liabilities concerning the above cases are areas of audit interest as it contains significant management estimates based on judgements of legal and tax advisors. These judgements refer both to the outcome of each case and the potential economic impact for the Group and the parent Company.

Management’s disclosures regarding the abovementioned provisions and contingent liabilities are included in explanatory notes 15 and 46 of separate and consolidated financial statements.

 Our audit approach included, among others, the following procedures:

·       We assessed management’s procedures regarding collection, control and assessment of outcome of pending cases

·       We reviewed and evaluated legal advisor’s letters and discussed with management and tax advisors, where it was deemed appropriate.

·       We evaluated management’s conclusion concerning the impact of the pending cases into Group’s and Entity’s financial position and we examined the adequacy of provisions made.

·       We assessed the adequacy of the related disclosures included in explanatory notes of separate and consolidated financial statements.

 

Other Information

Management is responsible for the other information. The other information is included in the Board of Directors’ Report, as referred to the “Report on other Legal and Regulatory Requirements” section, in the Declaration of the Board of Directors Representatives and in any other information which is either required by Law or the Company optionally incorporated, in the required by Law 3556/2007, Annual Report, but does not include the financial statements and our auditor’s report thereon.

Our opinion on the separate and consolidated financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.

In connection with our audit of the separate and consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the separate and consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the procedures performed, we conclude that there is a material misstatement therein; we are required to communicate that matter. We have nothing to report in this respect.

Responsibilities of Management and Those Charged with Governance for the separate and consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the separate and consolidated financial statements in accordance with International Financial Reporting Standards, as endorsed by the European Union, and for such internal control as management determines is necessary to enable the preparation of separate and consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the separate and consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or the Group or to cease operations, or has no realistic alternative but to do so.

The Audit Committee (art. 44 of Law 4449/2017) of the Company is responsible for overseeing the Company’s and the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the separate and consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the separate and the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs, as they have been transposed in Greek Legislation, will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these separate and consolidated financial statements.

As part of an audit in accordance with ISAs as they have been transposed in Greek Legislation, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

  • Identify and assess the risks of material misstatement of the separate and consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
  • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s and the Group’s internal control.
  • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
  • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s and the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the separate and consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company and the Group to cease to continue as a going concern.
  • Evaluate the overall presentation, structure and content of the separate and consolidated financial statements, including the disclosures, and whether the separate and consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
  • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the separate and consolidated financial statements. We are responsible for the direction, supervision and performance of the audit of the Company and the Group. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

1.   Board of Directors’ Report

Taking into consideration that management is responsible for the preparation of the Board of Directors’ Report which also includes the Corporate Governance Statement, according to the provisions of paragraph 5 of article 2 (part B) of L. 4336/2015, we note the following:

  1. The Board of Directors’ Report includes the Corporate Governance Statement which provides the information required by Article 43bb of Greek Codified Law 2190/1920.
  2. In our opinion the Board of Directors’ Report has been prepared in accordance with the applicable legal requirements of articles 43a and 107A and of paragraph 1 (cases c’ and d’) of article 43bb of Greek Codified Law 2190/1920 and its content is consistent with the accompanying separate and consolidated financial statements for the year ended 31/12/2017.
  3. Based on the knowledge we obtained during our audit about the Company ELGEKA S.A. and its environment, we have not identified any material inconsistencies in the Board of Directors’ Report.

2.   Additional Report to the Audit Committee

Our audit opinion on the separate and the consolidated financial statements is consistent with the additional report to the Audit Committee referred to in article 11 of EU Regulation 537/2014.

3.   Non Audit Services

We have not provided to the Company and its subsidiaries any prohibited non-audit services referred to in article 5 of EU Regulation No 537/2014.

The allowed services provided to the Company and the Group, in addition to the statutory audit, during the year ended 31 December 2017 have been disclosed in Note 11 to the accompanying separate and consolidated financial statements.

4.   Appointment

We were appointed as statutory auditors for the first time by the General Assembly of shareholders of the Company on 25 June 2012. Our appointment has been, since then, uninterrupted renewed by the Annual General Assembly of shareholders of the Company for 6 consecutive years.

5.   Other regulatory requirements

It is noted that, as stated in Note 45 of the accompanying seperate and consolidated financial statements, the total equity of the Parent Company is lower than the half of paid up share capital and therefore the requirements for the application of Article 47 of Codified Law 2190/1920 are effective.

Athens, 27 April 2018

Pavlos Stellakis

S.O.E.L. Reg. No.:24941

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