JOINT-STOCK COMPANY
STORENT INVESTMENTS
(REGISTRATION NUMBER 40103834303)
CONSOLIDATED ANNUAL REPORT 2022
PREPARED IN ACCORDANCE WITH THE
INTERNATIONAL FINANCIAL REPORTING STANDARDS
AS ADOPTED BY THE EUROPEAN UNION
AND INDEPENDENT AUDITORS’ REPORT
Riga, 2023
* This version of consolidated financial statements is a translation from the original, which was prepared in the Latvian language. All
possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of
interpretation of information, the original language version of consolidated financial statements takes precedence over this translation.
STORENT INVESTMENTS AS Сonsolidated Annual Report
Registered address: 15A Matrozu Street, Riga, LV-1048
Registration number: 40103834303
2
CONTENTS
General information 3
Management report 4
Statement of management’s responsibility 7
Consolidated financial statements
Consolidated statement of comprehensive income 8
Consolidated statement of financial position 9
Consolidated statement of cash flows 11
Consolidated statement of changes in equity 12
Notes to the consolidated financial statements 13
Independent auditors’ report 58
STORENT INVESTMENTS AS Сonsolidated Annual Report
Registered address: 15A Matrozu Street, Riga, LV-1048
Registration number: 40103834303
3
General information
Name of the Group’s Parent company
Storent Investments
Legal status of the Group’s Parent company
Joint-stock company
The Group Parent company’s registration
number, place and date
40103834303
Riga, 7 October 2014
Registered address of the Group’s Parent
company
15a Matrozu Street, Riga, LV-1048,
Latvia
Shareholders of the Group’s Parent company
Storent Holdings LTD (Latvia) 100% from 28.12.2022
Levina Investments S.A.R.L. (Luxembourg) 73% till 28.12.2022
Bomaria LTD (Latvia) 13.5%, Andris Bisnieks till 28.12.2022
Supremo LTD (Latvia) 13.5%, Andris Pavlovs till 28.12.2022
Members of the Board
Andris Pavlovs, Member of the Board
Andris Bisnieks, Member of the Board till 28.12.2022
Members of the Council
Eri Esta, Chairperson of the Council from 28.12.2022
Baiba Onkele, Member of the Council till 28.12.2022; Deputy
Chairperson of the Council from 28.12.2022
Andzejs Strazdins, Member of the Council from 28.12.2022
Nicholas Kabcenell, Chairperson of the Council till 28.12.2022
Dalgin Burak, Member of the Council till 28.12.2022
Group’s type of operations
Renting and leasing of construction machinery and equipment
Group’s NACE code
77.32 (2.0 rev) Rental and leasing of construction and civil engineering
machinery and equipment
Independent auditor and sworn auditor name
and address
KPMG Baltics SIA
Roberta Hirša street 1, Riga
Latvia, LV – 1045
License No. 55
Armine Movsisjana
Latvian Sworn Auditor
Certificate No. 178
STORENT INVESTMENTS AS Сonsolidated Annual Report
Registered address: 15A Matrozu Street, Riga, LV-1048
Registration number: 40103834303
4
Management report
The Group’s type of operations
Storent Investments AS (hereinafter – the Group’s Parent company or Storent Investments AS) and its subsidiary companies (hereinafter
– the Group) was established on 07 October 2014. The first company of the Group - Storent SIA - was established in 2008 by Andris
Bisnieks and Andris Pavlovs with an objective to become one of the leading equipment rental companies in the Baltics and nearest
European countries. At the end of 2008, a subsidiary Storent UAB was established in Lithuania and one year later a subsidiary Storent
OU was launched in Estonia. At the end of year 2012, a subsidiary Storent Oy was established in Finland. In February 2013 a subsidiary
Storent AB was founded in Sweden, and in June 2013 a subsidiary Storent AS was established in Norway. In December 2016 Storent Oy
completed the acquisition of Leinolift Oy (now company name changed to Storent Oy), a Finnish lifting equipment rental company. On 01
August 2017, Storent finalized the second acquisition, by purchasing Cramo operations in Latvia and Kaliningrad. In summer 2017, Storent
started rental operations in Sweden. The Norwegian entity never started operational activities and currently is under liquidation process.
In end of 2022 the Group’s management have decided to sell the subsidiary in Russia (Kaliningrad) and currently it is in the process of
legal formalities. The Group’s objective is to provide customers with rental equipment solutions utilizing modern digital tools, team expertise
and providing excellent service. Online sales channel with advanced IT solutions ensures fast, convenient and contactless rental process
with competitive pricing.
Development of the Group and results of financial operations in the reporting year
Despite the unstable geopolitical situation in 2022, the Group managed to slightly improve its performance indicators. Net revenue
increased by 3% and total revenue by 8%, as well as it was possible to reduce the losses by almost one million euros. Construction
markets increased in all countries where Storent operates. Although rental market still faces strong price competition and rental equipment
overcapacity, rental prices started to rise slowly mainly due to the high inflation level.
Thousands euro
2022
2021
Difference %
Net revenue
43 578
42 267
3.1%
Total revenue
47 196
43 552
8.4%
EBITDA
5 170
5 405
-4.4%
EBITDA %
11%
12%
Net result
-2 480
-3 426
-27.6%
Net result %
-5%
-8%
On December 28, 2022, changes were made in the composition of Storent Investments AS shareholders, and Storent Holdings SIA
became its sole shareholder. Consequently, Storent Investments and its subsidiary companies become part of the newly established
holding, which, in addition to the Storent group, also includes SEL Investments SIA group, which holds investments in construction
equipment rental companies SELECTIA SIA and SELECTIA PLUS SIA (hereinafter – Storent Holdings group). The structure of the newly
created group of companies is as follows:
Storent Investments AS and its subsidiaries in addition to a modern rental fleet and a large rental depo network have a wide customer
base with a very well-developed trademark, experienced team and digital know-how. SEL Investments SIA and its two subsidiaries own
around 50% of the construction equipment fleet that Storent group operates. The merger of both groups will allow to increase expertise
and improve financial ratios to continue the development of the Storent Holdings group with a significantly higher speed and profitability.
Consolidated unaudited income statement of the newly established Storent Holdings group would show EUR 2.6 million net profits from
operating activities in 2022 assuming if the Storent Holdings group had been established as of 1 January 2022. By increasing net revenues
of Storent Holdings group by on average 10% in 2023, the management plans to reach up to EUR 5 million net profit in 2023.
STORENT INVESTMENTS AS Сonsolidated Annual Report
Registered address: 15A Matrozu Street, Riga, LV-1048
Registration number: 40103834303
5
Baltic region rental operations increased by 3.5% with two digits number increase rate in Latvia, smaller increase in Estonia and minor
decrease in Lithuania. The Baltic region accounts for approximately 70% of the Group’s net revenue. In 2022, the growth of construction
market in Estonia was almost 17%. The market growth is expected to be modest in 2023, while various construction projects will continue
during the year, such as Rail Baltica and its adjacent infrastructure. In 2022, the Latvian construction market increased by 7%. In 2023,
several large and medium-scale projects are planned, some of which will be implemented within the framework of EU programs and also
Rail Baltica project has significant impact on construction market activity. In 2022, the Lithuanian construction market continued to grow,
reaching 24% increase. There was an increase in all segments of construction. In 2023, the Rail Baltica project will continue, which will
provide additional demand for rental equipment throughout the Baltics, and gives the management additional confidence for 2023.
Construction market volume historical data and forecast doesn’t always reflect the construction rental market potential. It depends on the
construction project types and stages at the exact year. The Group’s entities growth possibilities are higher in the markets, where Storent
has smaller share of the market. It’s expected that the lack of construction workforce and higher personal costs will increase prices and
demand of rental construction equipment, as construction companies will look for ways how to replace manual work with increased use of
tools and equipment.
Nordic operations increased by 2% in 2022 compared to 2021 with similar grow rate in both countries. Constructions market showed also
a small increase, that allowed also to increase rental prices. In spring 2022 Finnish entity sold its transportation department and now is
using it as an outsourced service. That allows to focus on rental operations’ profitability. Swedish operations were stable and more
customers started to come from outside Stockholm area. Forecast for 2023 for construction market in Nordic countries is with small
decrease, Storent market share is very small in these countries so it should not affect sales results.
Operations of subsidiary Storent OOO in Kaliningrad have seen a significant revenue increase, reaching 48% increase compared to
2021. At the end of 2022, the Group’s management decided to sell the subsidiary in Russia (Kaliningrad) and, currently, is in the process
of legal formalities. The Group monitors and follows sanction restrictions, and so far, they don’t affect subsidiary’s activities.
In 2022, the Group continued cooperation with split-rent and re-rent platform PreferRent. It allowed to increase the Group’s efficiency since
PreferRent took over a part of the fleet management function and provided increased rental fleet capacity without the Group incurring
additional financial liabilities. In early 2022, Storent entities in the Baltics joined online logistics platform Cargopoint that allows to organize
transportation in a more efficient manner and gives opportunity to serve a wider range of customers with a more competitive price. Storent
Group continued to develop and invest in IT technologies. In December 2022, implementation of new IT system was started, and it is
expected that IRMS (Intelligent Rental Management System) will be implemented in all Storent group companies by the end of 2023. It
will allow to improve efficiency and ensure convenient and up-to-date rental process. A flexible approach to rental fleet rotation among
Storent Group companies ensured a quicker response to construction market changes and, overall, a more efficient rental fleet usage. In
2022, the Company continued to develop online rental service. Online ordering is a stable sales channel and it makes up to 50% of the
total income of Storent in the Baltic states for the year 2022. Historically, the highest numbers have been reached for digital authorisations
and electronically signed documents of 90% of all rental deliveries.
Storent Group’s consolidated balance sheet has a stable structure consisting of 26% shareholders equity, 27% long term liabilities and
47% short term liabilities. Non-current assets constitute 80% of the total assets. The Group’s business peculiarity historically was always
having a working capital deficit due to large amount of liabilities to finance investments in rental equipment; however, this has not prevented
the Group from meeting its obligations in accordance with their terms.
Thousands euro
2022
2021
Shareholder equity
9 634
12 114
Total assets
36 769
45 501
Shareholder equity to Assets
26.2%
26.6%
Half million euros Group’s total bank account balance at the end of the reporting period is sufficient to ensure the Group’s operational
activities. The Group concluded the financial year 2022 with a loss of 2.5 million euros, which was result of changes in the fleet structure.
The Group management worked on efficiency increase by reducing headcount during 2022 by 18 people, as well as realized savings on
other expenses positions during the financial year.
The future development of the Group
The Group management plans further development of subsidiaries in five countries as a part of Storent Holdings group.
In 2023, Storent group will continue to focus on an improvement of sales process efficiency, additions to and renewal of rental fleet, as
well as develop online sales and digitalization. The management of the Group expects that the rental revenues will increase by 10%, which
will be facilitated by new investments in rental equipment, increase of rental prices and online sales. In the summer of 2023, it is planned
to introduce a new website that will be more convenient for the end user. The goal of Storent group is to keep the volume of online orders
close to 60% of the total rental income and 90% digitally signed transactions. The Group will continue to transform its IT strategy to comply
with the scalability needs and it is planned to complete the implementation of the new cloud-based ERP system by the end of 2023.
Please see Note 35 for the management consideration of the Group’s ability to continue as a going concern.
STORENT INVESTMENTS AS Сonsolidated Annual Report
Registered address: 15A Matrozu Street, Riga, LV-1048
Registration number: 40103834303
6
Financial risk management
The Company’s key principles of financial risk management are laid out in Note 33.
Conditions and events after the end of the reporting year
In April 2023, Storent Holdings SIA, the sole shareholder of Storent Investments AS, announced new bond issue of up to EUR 15 million,
which will, for the first time, be open to both retail and institutional investors. The Group will use the proceeds for new investments, further
mergers and acquisition and to refinance its liabilities.
After the year end, the Storent Holdings group has started the legal reorganization process, which was approved in the end of 2022, in
order to complete the merger of SEL Investments SIA with Storent Investments AS and Selectia SIA, Selectia Plus with Storent SIA by
the end of 2023, which will save administrative costs, excluding mutual transactions and the costs associated with their accounting and
simplifying internal processes in the subsidiary entities. Since January 2023, all equipment owned by Selectia SIA and Selectia Plus SIA
is leased to subsidiary companies of Storent Investments AS without the intermediary of the PreferRent platform, which creates savings
for the group entities.
Until the end of April 2023, SELECTIA SIA and SELECTIA PLUS SIA have granted subordinated loans to the Group in the amount of
2.9 million euros to ensure the Group liquidity.
As of the last day of the reporting year until the date of signing these consolidated financial statements, there have been no other events
requiring adjustment of or disclosure in the consolidated financial statements or notes thereto.
On behalf of the Group, the management report was signed on 10 May 2023 by:
Andris Pavlovs
Member of the Board
Consolidated annual report is approved in shareholders meeting on 10 May 2023
STORENT INVESTMENTS AS Сonsolidated Annual Report
Registered address: 15A Matrozu Street, Riga, LV-1048
Registration number: 40103834303
7
Statement of management’s responsibility
The Group’s management confirms that the consolidated financial statements have been prepared in accordance with the applicable
legislation requirements and present a true and fair view of the Group’s financial position as at 31 December 2022 and as at 31 December
2021 and its financial performance and cash flows for the years 2022 and 2021 then ended. The management report contains a clear
summary of the Group’s business development and financial performance. The consolidated financial statements have been prepared
according to the International Financial Reporting Standards as adopted by the European Union. During the preparation of the Group’s
consolidated financial statements the management:
used and consequently applied appropriate accounting policies;
provided reasonable and prudent judgments and estimates;
applied a going concern principle unless the application of the principle wouldn’t be justifiable.
The Group’s management is responsible for maintaining appropriate accounting records that would provide a true and fair presentation of
the Group’s financial position at a particular date and financial performance and cash flows and enable the management to prepare the
consolidated financial statements according to the International Financial Reporting Standards as adopted by the European Union.
On behalf of the Group, this statement of management’s responsibility was signed on 10 May 2023 by:
Andris Pavlovs
Member of the Board
STORENT INVESTMENTS AS Сonsolidated Annual Report
Registered address: 15A Matrozu Street, Riga, LV-1048
Registration number: 40103834303
8
Consolidated statement of comprehensive income
Notes 2022 2021
Re-presented*
EUR EUR
Net revenue 3 43 578 307 42 267 488
Other operating income 4 3 617 951 1 284 360
Cost of materials and services 5 (26 587 864 ) (23 652 731 )
Personnel costs 11 (8 338 616 ) (8 673 428 )
Other operating expenses 6 (6 642 048 ) (5 879 621 )
Depreciation and amotrization
7 (5 187 395 ) (6 603 269 )
Impairement gain / (loss) on trade receivables and contract asset
(458 046 ) 59 436
Impairement loss on goodwill
(329 585 ) -
Finance income 8 24 284 23 386
Finance expenses 9 (2 137 530 ) (2 439 986 )
Profit / (loss) before income tax (2 460 542 ) (3 614 365 )
Income tax income / (expenses) 10 (3 426 ) (1 008 )
Profit/(loss) from continuing operations (2 463 968 ) (3 615 373 )
Profit/(loss) from discontinuing operation, net of tax (31 987 ) 212 523
Profit / (loss) for the year (2 495 955 ) (3 402 850 )
Items that may be reclasified subsequently to profit or loss
Exchange differences on foreign currency operations 16 335 (23 033 )
Other comprehensive income/(loss) for the year 16 335 (23 033 )
Total comprehensive income/(loss) for the year (2 479 620 ) (3 425 883 )
*Comparative information has been re‑presented due to a discontinued operation. Please see Note 16.
The notes on pages 13 to 57 are an integral part of these consolidated financial statements.
On behalf of the Group these consolidated financial statements were signed on 10 May 2023 by:
Andris Pavlovs
Member of the Board
Baiba Onkele
Chief financial officer
STORENT INVESTMENTS AS Сonsolidated Annual Report
Registered address: 15A Matrozu Street, Riga, LV-1048
Registration number: 40103834303
9
Consolidated statement of financial position
ASSETS
Note 31.12.2022 31.12.2021
NON-CURRENT ASSETS EUR EUR
Intangible assets
Licences and similar rights 57 708 20 816
Computer software 2 018 611 1 030 135
Intangible assets in process - 985 288
Goodwill 10 987 122 11 316 707
TOTAL Intangible assets 12 13 063 441 13 352 946
Property, plat and equipment
Lands and buildings 189 014 204 070
Machinery and equipment 5 786 531 9 382 163
Other fixed assets 352 258 369 586
TOTAL Property, plat and equipment 13 6 327 803 9 955 819
Right of use assets
Right of use assets 14 9 891 205 13 428 294
Other non-current assets
Deferred income tax assets 10 - 1 286
TOTAL Other non-current assets - 1 286
TOTAL NON-CURRENT ASSETS 29 282 449 36 738 345
CURRENT ASSETS
Inventories 15 1 155 604 1 150 870
Non-current assets and disposals groups held for sale 16 217 933 406 596
Receivables
Trade receivables 17 5 105 534 5 928 929
Contract assets 18 2 667 4 192
Other receivables 19 280 232 232 513
Prepaid expenses 20 222 863 119 628
TOTAL Receivables 5 611 296 6 285 262
Cash and cash equivalents 21 501 562 920 267
TOTAL CURRENT ASSETS 7 486 395 8 762 995
TOTAL ASSETS 36 768 844 45 501 340
The notes on pages 13 to 57 are an integral part of these consolidated financial statements.
On behalf of the Group these consolidated financial statements were signed on 10 May 2023 by:
Andris Pavlovs
Member of the Board
Baiba Onkele
Chief financial officer
STORENT INVESTMENTS AS Сonsolidated Annual Report
Registered address: 15A Matrozu Street, Riga, LV-1048
Registration number: 40103834303
10
Consolidated statement of financial position
EQUITY AND LIABILITIES
Note 31.12.2022 31.12.2021
EQUITY EUR EUR
Share capitals 22 33 316 278 33 316 278
Reserves:
Foreign currency translation reserve (31 801 ) (48 136 )
Other reserves 26 774 26 774
Accumulated losses:
Retained earings/ (loses) (23 677 022 ) (21 181 067 )
TOTAL EQUITY 9 634 229 12 113 849
CREDITORS
Long-term liabilities
Borrowings from related parties 31(c) 650 000 -
Lease liabilities 25 3 473 358 6 789 551
Other borrowing 26 5 631 094 1 504 527
Deferred income tax liabilities - 1 286
TOTAL Long-term liabilities 9 754 452 8 295 364
Short-term liabilities
Issued bonds 24 4 898 735 4 838 565
Borrowings from related parties 31(c) - 6 123 340
Lease liabilities 25 3 509 425 5 133 199
Liabilities directly associated with the assets held for sale 16 117 933 23 039
Other borrowing 26 1 372 568 1 766 203
Contract liabilities 18 337 402 404 345
Trade payables 4 916 700 3 945 995
Corporate income tax 531 17 472
Taxes and mandatory state social insurance contributions 27 508 766 923 160
Deferred income 28 49 540 79 443
Other provisions 23 128 956 138 903
Other liabilities 29 354 934 389 481
Accured liabilities 30 1 184 673 1 308 982
TOTAL Short-term liabilities 17 380 163 25 092 127
TOTAL LIABILITIES 27 134 615 33 387 491
TOTAL EQUITY ND LIABILITIES 36 768 844 45 501 340
The notes on pages 13 to 57 are an integral part of these consolidated financial statements.
On behalf of the Group these consolidated financial statements were signed on 10 May 2023 by:
Andris Pavlovs
Member of the Board
Baiba Onkele
Chief financial officer
STORENT INVESTMENTS AS Сonsolidated Annual Report
Registered address: 15A Matrozu Street, Riga, LV-1048
Registration number: 40103834303
11
Consolidated statement of cash flows
Notes 2022 2021
EUR EUR
Cash flows from operating activities
Loss for the year
(2 495 955 )
(3 402 850 )
Adjustments:
Income tax expenses
Amortisation of intagible assets and depreciation of fixed
assets, plant and equipment
12,13,14 5 187 395 6 687 324
Net result on diposal of property, plant and equipment
(887 589 )
Interest expenses 9
Provision decrease
(9 948 )
Impairment losses on intangible asets and goodwill
Receivables (increase)/ decrease
Inventories decrease / (increase)
Payables (decrease) / increase
Gross cash flows from operating activities
Interest paid
(1 519 240 ) (1 754 859 )
Corporate income tax paid
(16 940 ) (37 505 )
Net cash flows from operating activities
Cash flows from investing activities
Purchase of intangible assets and property, plant and equipment
(2 824 088 ) (2 225 314 )
Proceeds from sale of property, plant and equipment
Net cash flows from investing activities
Cash flows from financing activities
Proceeds from borrowings from related parties
Repayment of bonds
Repayment of other borrowings
(2 795 101 ) (3 933 999 )
Repayment of lease liabilities
(4 963 004 ) (7 015 968 )
Net cash flows from financing activities
(7 108 105 ) (13 575 767 )
Foreign currency exchange
Net cash flows for the years
(418 705 ) (2 799 873 )
Cash and cash equivalents at the beginning of the reporting year 920 267 3 720 140
Cash at the end of the reporting year
21
Cash flows from operating activities before changes in
working capital
The notes on pages 13 to 57 are an integral part of these consolidated financial statements.
On behalf of the Group these consolidated financial statements were signed on 10 May 2023 by:
Andris Pavlovs
Member of the Board
Baiba Onkele
Chief financial officer
STORENT INVESTMENTS AS Сonsolidated Annual Report
Registered address: 15A Matrozu Street, Riga, LV-1048
Registration number: 40103834303
12
Consolidated statement of changes in equity
Share capital
Foreign
currency
translation
reserve
Other
reserves*
Retained
earnings/
(losses)
Total
EUR EUR EUR EUR EUR
Balance at 31 December 2020 33 316 278 (25 103 ) 26 774 (17 778 217 ) 15 539 732
Loss for the year - - - (3 402 850 ) (3 402 850 )
Other comprehensive expenses - (23 033 ) - - (23 033 )
Balance at 31 December 2021 33 316 278 (48 136 ) 26 774 (21 181 067 ) 12 113 849
Loss for the year - - - (2 495 955 ) (2 495 955 )
Other comprehensive expenses - 16 335 - - 16 335
Balance at 31 December 2022 33 316 278 (31 801 ) 26 774 (23 677 022 ) 9 634 229
The notes on pages 13 to 57 are an integral part of these consolidated financial statements.
On behalf of the Group these consolidated financial statements were signed on 10 May 2023 by:
Andris Pavlovs
Member of the Board
Baiba Onkele
Chief financial officer
On behalf of the Group these consolidated financial statements were signed on 10 May 2023 by:
Andris Pavlovs
Member of the Board
Baiba Onkele
Chief financial officer
* * *
KPMG Baltics SIA
Roberta Hirsa iela 1
Riga, LV-1045
Latvia
T: + 371 67038000
kpmg.com/lv
kpmg@kpmg.lv
KPMG Baltics SIA, a Latvian limited liability company and a
member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a
private English company limited by guarantee.
Independent Auditors’ Report
To the shareholder of Storent Investments AS
Report on the Audit of the Consolidated Financial Statements
Our Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated financial statements of Storent Investments
AS (“the Company”) and its subsidiaries (“the Group”) set out on pages 8 to 57 of the
accompanying Consolidated Annual Report, which comprise:
the consolidated statement of comprehensive income for the year ended 31 December
2022,
the consolidated statement of financial position as at 31 December 2022,
the consolidated statement of changes in equity for the year then ended,
the consolidated statement of cash flows for the year then ended, and
the notes to the consolidated financial statements, which include a summary of significant
accounting policies and other explanatory notes.
In our opinion, the accompanying consolidated financial statements give a true and fair view
of the consolidated financial position of Storent Investments AS and its subsidiaries as at
31 December 2022, and of its consolidated financial performance and consolidated cash
flows for the year then ended in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Basis for Opinion
In accordance with the ’Law on Audit Services’ of the Republic of Latvia we conducted our
audit in accordance with International Standards on Auditing adopted in the Republic of Latvia
(ISAs). Our responsibilities under those standards are further described in the Auditors’
Responsibility for the Audit of the Consolidated Financial Statements section of our report.
We are independent of the Group in accordance with the International Ethics Standards
Board for Accountants’ International Code of Ethics for Professional Accountants (including
International Independence Standards) (IESBA Code) and independence requirements
included in the ’Law on Audit Services’ of the Republic of Latvia that are relevant to our audit
of the consolidated financial statements in the Republic of Latvia. We have also fulfilled our
other professional ethics responsibilities and objectivity requirements in accordance with the
IESBA Code and the ’Law on Audit Services’ of the Republic of Latvia.
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 consolidated financial statements of the current period. These
matters were addressed in the context of our audit of the consolidated financial statements
as a whole, and in forming our opinion thereon, and we do not provide a consolidated opinion
on these matters.
We have determined the matters described below to be the key audit matters to be
communicated in our report.
Impairment of goodwill and other non-current non-financial assets
The Group’s goodwill and other non-current non-financial assets as at 31 December 2022
amounted to EUR 29 282 449 (31 December 2021: EUR 36 737 059). Impairment charge
of goodwill and other non-current non-financial assets for the year ended
31 December 2022 amounted to EUR 329 585 (year ended 31 December 2021: EUR 0).
Reference to the consolidated financial statements: Note 2 (e) “Use of judgements,
estimates and assumptions”, Note 2 (m) “Intangible assets”, Note 2 (n) “Property, plant and
equipment” and Note 2 (o) “Impairment of tangible and intangible assets other than goodwill”
(accounting policy); Note 12 “Intangible assets”, Note 13 “Property, plant and equipment”
and Note 14 “Rights of use assets” (Notes to the consolidated financial statements).
Key audit matter Our response
Due to the fact that impairment
indicators were identified as at 31
December 2022, as discussed in
Note 12, the Group estimated the
recoverable amount of its cash
generating units, to which goodwill
and other non-current non-
financial assets are allocated, and
recognized an impairment loss at
the above date.
The assessment of the
recoverable amount and
impairment of the Group’s
goodwill and other non-current
non-financial assets incorporated
significant management
judgement in respect of
assumptions such as the newly
established Storent Holdings
group’s net turnover growth,
EBITDA margin (as a result of
internal cost optimization and
internal transfer pricing
adjustments), timing and
magnitude of EBITDA growth, as
well as discount rate used. Small
changes in the above
assumptions can result in
materially different outcomes.
This, therefore, gives rise to
inherent estimation uncertainty
Our audit procedures included, among others:
•
evaluating against the requirements of the
relevant financial reporting standards the Group's
accounting policy for identification of impairment,
and measurement and recognition of any
impairment losses in respect of goodwill and other
non-current non-financial assets;
•
understanding the Group’s business planning
process, including the preparation and validation
of financial and cash flow forecasts and testing the
design and implementation of selected key
internal controls over the Group’s business
planning process;
•
assisted by our own valuation specialists,
challenging the reasonableness of the key
assumptions used in the determination of the
prospective financial information, such as the
forecast amounts of sales and timing of cash
collections, forecast amounts of expenses capital
expenditure and timing of cash disbursements,
discount rate and terminal growth rate based on
our understanding of the Group’s activities and by
reference to publicly available industry/market
reports;
•
considered the reasonableness of the Group’s
sensitivity analysis showing the impact of a
reasonable change in the impairment testing
assumptions, to determine whether an impairment
charge was required;
related to the carrying amount of
these assets recorded in the
consolidated financial statements.
Due to the above factors, we
considered impairment of goodwill
and other non-current non-
financial assets to be a key audit
matter.
•
performing independent sensitivity analysis,
including assessing the effect of a reasonably
possible change in the key assumptions;
considering whether the Group’s disclosures
regarding the sensitivity of the outcome of the
impairment testing to changes in key assumptions
complete and accurately reflected the estimation
uncertainty in the valuation in line with the
applicable requirements of the relevant financial
reporting standards.
Going concern
Reference to the consolidated financial statements: Note 2 (e) “Use of estimates and
judgements” and Note 35 “Going concern of the Group” (Notes to the consolidated financial
statements).
Key audit matter Our response
The Group’s consolidated financial
statements are prepared on a going concern
basis.
The Group’s financial performance in the
reporting year was a loss of EUR 2 495 955
(2021: loss of EUR 3 402 850), which is a
result of a changed fleet structure. At the
end of the year, the Group’s current
liabilities exceeded its current assets by
EUR 9 893 768 (31.12.2021: current
liabilities exceeded current assets by EUR
16 329 132), as a result of significant
borrowings approaching maturity. Both of
these conditions may cast significant doubts
on the Group’s ability to continue as a going
concern.
The Group’s going concern assessment
was based on cash flows forecast, which, in
the Management Board’s view, supports the
assertion that the Company and its
subsidiaries will have sufficient resources to
continue for a period of at least 12 months
from the reporting date. The preparation of
these forecasts incorporated a number of
assumptions and significant judgment,
including those related to the Company’s
and its subsidiaries’ future revenue growth
and cost optimization forecasts. As part of
the assessment, the Group also considered
a number of actions aimed at alleviating the
potential disruption to its business and
liquidity position, such as liquid funds
Our audit procedures included, among
others:
understanding the Group’s business
planning process, including the
assessment of its ability to continue as a
going concern, and the preparation and
validation of cash flow forecasts used in
the assessment, and also testing the
design and implementation of the
Group’s risk assessment and monitoring
controls;
inspecting the Management Board’s
going concern assessment, including
their evaluation of the
business/operating and liquidity risks,
and plans for further actions in response
to the risks identified. As part of the
procedure, we also made corroborating
inquiries of the Company’s Management
Board and CFO;
independently, with the assistance of
our valuation specialists, where
applicable, evaluating the
reasonableness and feasibility of the
plans for future actions, by reference to
the preceding procedure as well as by
performing the following:
challenging the key assumptions used in
the determination of the prospective
financial information. This primarily
included challen
g
in
g
the forecast
received from the group, which incorporates
the Company and its subsidiaries, as a
result of the sale of its fixed assets and/or
attraction of additional external financing, as
well as further cost reduction measures as a
result of the reorganization initiated by the
group.
The Management Board concluded that the
range of possible outcomes considered at
arriving at this judgment does not give rise
to material uncertainties related to events or
conditions that may cast significant doubt on
the Group’s ability to continue as a going
concern. Note 35 further explains how the
judgment was formed.
The Group’s use of the going concern basis
of accounting is a key audit matter due to the
associated extent of uncertainty, and
consequently, high level of judgment
required in evaluating the Management
Board’s plans for future actions and their
financial impact.
amounts of sales and cash inflows,
forecast amounts of expenses and cash
outflows, capital expenditure and the
timing of settlements of the Group’s
liabilities, based on our understanding of
the Group’s activities and by reference
to publicly available industry/market
reports;
performing an analysis of the going
concern conclusion’s sensitivity to
changes in the aforementioned key
assumptions adopted in the going
concern assessment, and considering
whether there were any indicators of
management bias in the assessment;
assessing the availability and terms and
conditions of existing financing facilities
and arrangements, by inspecting
underlying documentation, such as
agreements, and assessing the impact
of any covenants and other restrictive
terms therein;
assessing the availability of additional
financing facilities, by inspecting
underlying documentation, such as
support letters provided by Storent
Holdings SIA group entities, and
assessing the practical abilities of these
parties to provide such financing.
considering whether any additional
relevant facts or information have
become available since the date on
which the Group made its assessment;
evaluating the appropriateness of
Group’s disclosures in respect of the
going concern assessment, subsequent
events and any related uncertainties in
the consolidated financial statements in
line with the applicable requirements of
the relevant financial reporting
standards.
Reporting on Other Information
The Group’s management is responsible for the other information. The other information
comprises:
General Information, as set out on page 3 of the accompanying Consolidated Annual
Report,
the Management Report, as set out on pages 4 to 6 of the accompanying Consolidated
Annual Report,
the Statement on Management Responsibility, as set out on page 7 of the accompanying
Consolidated Annual Report,
the Statement of Corporate Governance for 2022, as set out in a statement provided by
Storent Investments AS management and available on the Nasdaq Baltic exchange
website https://nasdaqbaltic.com, Storent Investments AS, section Reports.
Our opinion on the consolidated financial statements does not cover the other information
included in the Consolidated Annual Report, and we do not express any form of assurance
conclusion thereon, except as described in the Other Reporting Responsibilities in
Accordance with the Legislation of the Republic of Latvia Related to Other Information section
of our report.
In connection with our audit of the consolidated financial statements, our responsibility is to
read the other information and, in doing so, consider whether the other information is
materially inconsistent with the consolidated financial statements or our knowledge obtained
in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed and in light of the knowledge and understanding of
the Group and its environment obtained in the course of our audit, we conclude that there is
a material misstatement of this other information, we are required to report that fact. We have
nothing to report in this regard.
Other Reporting Responsibilities in Accordance with the Legislation of the Republic of Latvia
Related to Other Information
In addition, in accordance with the ‘Law on Audit Services‘ of the Republic of Latvia with
respect to the Management Report, our responsibility is to consider whether the Management
Report is prepared in accordance with the requirements of the ‘Law on the Annual Reports
Annual Reports’ of the Republic of Latvia.
Based solely on the work required to be undertaken in the course of our audit, in our opinion,
in all material respects:
the information given in the Management Report for the financial year for which the
consolidated financial statements are prepared is consistent with the consolidated
financial statements; and
the Management Report has been prepared in accordance with the requirements of
the ‘Law on the Annual Reports Annual Reports’ of the Republic of Latvia.
In accordance with the ‘Law on Audit Services‘ of the Republic of Latvia with respect to the
Statement of Corporate Governance, our responsibility is to consider whether the Statement
of Corporate Governance includes the information required in section 56.1, first paragraph,
clause 3, 4, 6, 8 and 9, as well as section 56.2, second paragraph, clause 5, and third
paragraph of the ‘Financial Instruments Market Law‘ of the Republic of Latvia and if it includes
the information stipulated in section 56.2 second paragraph, clause 1, 2, 3, 4, 7 and 8 of the
‘Financial Instruments Market Law‘ of the Republic of Latvia.
In our opinion, the Statement of Corporate Governance includes the information required in
section 56.1, first paragraph, clause 3, 4, 6, 8 and 9, as well as section 56.2, second
paragraph, clause 5, and third paragraph of the ‘Financial Instruments Market Law‘ of the
Republic of Latvia and it includes the information stipulated in section 56.2 second paragraph,
clause 1, 2, 3, 4, 7 and 8 of the ‘Financial Instruments Market Law‘ of the Republic of Latvia.
Responsibilities of Management and Those Charged with Governance for the Consolidated
Financial Statements
Management is responsible for the preparation of the consolidated financial statements that
give a true and fair view in accordance with IFRSs as adopted by the European Union and
for such internal control as management determines is necessary to enable the preparation
of consolidated financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the 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 Group or to cease operations, or has no realistic alternative but to do
so.
Those charged with governance are responsible for overseeing the Group’s financial
reporting process.
Auditors’ Responsibility for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error,
and to issue an auditors’ 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
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
consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain
professional scepticism throughout the audit. We also:
—
Identify and assess the risks of material misstatement of the 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 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 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 auditors’ report to the
related disclosures in the 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 auditors’ report. However, future events or
conditions may cause the Group to cease to continue as a going concern.
—
Evaluate the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial
statements represent the underlying transactions and events in a manner that
achieves a 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
consolidated financial statements. We are responsible for the direction, supervision
and performance of the group audit. 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 communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence,
and where applicable, actions taken to eliminate threats or safeguards applied.
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
auditors’ 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
Other Reporting Responsibilities and Confirmations Required by the Legislation of the
Republic of Latvia and the European Union when Providing Audit Services to Public Interest
Entities
We were appointed by the Company’s shareholders meeting on 19 October 2022 to audit the
consolidated financial statements of Storent Investments AS and its subsidiaries for the year
ended 31 December 2022. Our total uninterrupted period of engagement is 3 years, covering
the periods ending 31 December 2020 to 31 December 2022.
We confirm that:
•
our audit opinion is consistent with the additional report presented to the Audit Committee
of the Group;
•
as referred to in the paragraph 37.6 of the ’Law on Audit Services’ of the Republic of
Latvia we have not provided to the Group the prohibited non-audit services (NASs)
referred to of EU Regulation (EU) No 537/2014. We also remained independent of the
audited group in conducting the audit.
For the period to which our statutory audit relates, we have not provided any services to the
Group in addition to the audit, which have not been disclosed in the Management Report or
in the consolidated financial statements of the Group.
Report on the Auditors’ Examination of the European Single Electronic Format
(ESEF) Report
In addition to our audit of the accompanying consolidated financial statements, as included
in the consolidated Annual Report, we have also been engaged by the management of the
Group to express an opinion on compliance of the consolidated financial statements prepared
in a format that enables uniform electronic reporting (“the ESEF Report”) with the
requirements of the Commission Delegated Regulation (EU) 2019/815 of 17 December 2018
supplementing Directive 2004/109/EC of the European Parliament and of the Council with
regard to regulatory technical standards on the specification of a single electronic reporting
format (the “RTS on ESEF”).
Responsibilities of Management and Those Charged with Governance for the ESEF Report
Management is responsible for the preparation of the consolidated financial statements in a
format that enables uniform electronic reporting that complies with the RTS on ESEF. This
responsibility includes:
— the preparation of the consolidated financial statements in the applicable xHTML
format;
— the selection and application of appropriate iXBRL tags, using judgment where
necessary;
— ensuring consistency between digitised information and the consolidated financial
statements presented in human-readable format; and
— the design, implementation and maintenance of internal control relevant to the
application of the RTS on ESEF.
Those charged with governance are responsible for overseeing the financial reporting
process.
Auditors’ Responsibility for the Examination of the ESEF Report
Our responsibility is to express an opinion on whether the ESEF report complies, in all
material respects, with the RTS on ESEF, based on the evidence we have obtained. We
conducted our reasonable assurance engagement in accordance with International Standard
on Assurance Engagements 3000 (Revised), Assurance Engagements Other than Audits or
Reviews of Historical Financial Information (ISAE 3000) issued by the International Auditing
and Assurance Standards Board.
A reasonable assurance engagement in accordance with ISAE 3000 involves performing
procedures to obtain evidence about compliance with the RTS on ESEF. The nature, timing
and extent of procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material departures from the requirements of set out in the RTS
on ESEF, whether due to fraud or error. Our procedures included, among other things:
— obtaining an understanding of the tagging process;
— tracing the tagged data to the consolidated financial statements of the Group presented
in human-readable format;
— evaluating the completeness of the Group’s tagging of the consolidated financial
statements;
— evaluating the appropriateness of the Group’s use of iXBRL elements selected from
the ESEF taxonomy and creation of extension elements where no suitable element in the
ESEF taxonomy has been identified;
— evaluating the use of anchoring in relation to the extension elements; and
— evaluating the appropriateness of the format of the consolidated financial statements.
We believe that the evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Opinion
In our opinion, the ESEF Report of the Group as at and for the year ended 31 December
2022 has been prepared, in all material respects, in accordance with the requirements of the
RTS on ESEF.
KPMG Baltics SIA
Licence No. 55
Armine Movsisjana
Chairperson of the Board
Latvian Sworn Auditor
Certificate No. 178
Riga, Latvia
10 May 2023
THIS DOCUMENT HAS BEEN SIGNED WITH A SECURE ELECTRONIC SIGNATURE AND
IT HAS A TIME-STAMP