2020
Report of UAB Vilniaus lokomotyvų remonto depas Content
CEO’S FOREWORD 2
BASIC INFORMATION ON THE COMPANY 3
MANAGEMENT OF THE COMPANY 5
STRATEGY 14
MAJOR EVENTS IN 2020 16
EVENTS AFTER THE REPORTING PERIOD 17
OVERVIEW OF THE KEY PERFORMANCE INDICATORS 18
ANALYSIS OF FINANCIAL AND PERFORMANCE RESULTS 19
OPERATING RESULTS 19
INVESTMENTS 24
EMPLOYEES 25
RISKS AND THEIR MANAGEMENT 29
INFORMATION ON THE COMPLIANCE WITH THE GUIDELINES ON THE TRANSPARENCY 30
CORPORATE SOCIAL RESPONSIBILITY REPORT 33
FINANCIAL STATEMENTS 40
INDEPENDENT AUDIT REPORT 41
STATEMENT OF FINANCIAL POSITION 44
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 46
STATEMENT OF CHANGES IN EQUITY 47
STATEMEMT OF CASH FLOWS 48
EXPLANATORY NOTES 49
ABBREVIATIONS:
Company, VLRD – UAB Vilniaus lokomotyvų remonto depas LTG group, Group, Company group – AB Lietuvos Geležinkeliai and its subsidiaries LTG Cargo – AB LTG Cargo LTG Link – UAB LTG Link EU – European Union GTC – UAB Geležinkelio tiesimo centras GRL – The Government of the Republic of Lithuania
Annual and interim reports as well as the financial statements are available publicly on the Company’s website:http://www.vlrd.lt. CEO foreword
Dear partners, customers, mployees,
The year 2020 should be assessed in terms how companies addressed the challenges of the global pandemic, how they managed to adapt the processes in place and introduce new ones, and, certainly, to protect their employees. UAB Vilniaus lokomotyvų remonto depas, just as many other companies, started the year by planning works towards ambitious objectives, however it did not avoid the Covid-19 rollercoaster.
As early as in the first half of the year we had an opportunity to give a credit to the team for its readiness for remote work and organization of production processes in compliance with strict safety requirements, whereas the second quarantine further clarified the priorities of a new reality – safe employee, safe environment and responsible manager.
I am happy that throughout the year we have fulfilled our obligations to customers in due time, consistently created and responsibly maintained relationship with foreign customers. The awarded contracts for wagon repairs to the Lithuanian companies not only contributed to ensuring workloads in the We are already in a close cooperation with LTG Cargo, regions but also created value for business entities in our successfully carry out capital repairs of Siemens locomotives country. entrusted to us. Therefore, in preparation for challenges in the future, I see a great value in working together. Taking the green course of the entire LTG Group, in 2020 we have designed and manufactured the first modernized It is no secret that a successful company can be defined by locomotive TEM2-1000. In addition to all other innovations, a satisfied employees, thus, even during the year when the much more environmentally-friendly engine will run in it. We hunger for immediate communication has been felt so strongly, strongly believe in success of this product in our region. we have offered a new series of events “VLRD says thank you” to our colleagues. For the first time in the company’s history, The threat of the pandemic has not stopped other initiatives just as other LTG Group companies, we have conducted the either. The project “Relocation of Repair Location Closer to the survey of “Voice of Employees”, which has revealed that the Customer” is being successfully implemented: from September employees also see the breakthrough in occupational safety 2020, 2nd workshop of VLRD operates in Vaidotai. The project of as one of the key priorities. investment in optimization of production bases “Modernization of Production Activity of Repairs of Vilnius Locomotives” has We have taken immediate measures and already have a been prepared, and on 29 December 2020 it was granted the strategy for improvement of occupational safety the purpose status of regional importance. Formation of a land parcel for whereof is zero accidents in the working environment. a new depot in the railway station of Vaidotai has begun. All procurements related to production of wagons have been I do have faith that by keeping up with the direction of efficiency, initiated, staff selection procedures are in progress. innovations and growth of organizational culture we are taking the surest way towards achievement of ambitious objectives After the end of the reporting period of 2020, the parent set out in the strategy, and having joined the forces with LTG company AB Lietuvos Geležinkeliai has announced its decision Cargo we will create value for our shareholder – Lithuania. to merge two group companies – VLRD and LTG Cargo. I am of the opinion that it is the right way to create a stronger synergy between the two companies, which share the same goal in ALBERTAS BAJORINAS their horizon – to expand the activity beyond the Lithuanian Chief Executive Officer borders, lead the railway sector in the region. UAB Vilniaus lokomotyvų remonto depas
2 Basic information on the company
Company name UAB Vilniaus lokomotyvų remonto depas Legal form Private Limited Liability Company Date and place of registration 21 August 2003, the Register of Legal Entities of the Republic of Lithuania Company code 126280418 Address Švitrigailos St. 39, LT-03209 Vilnius Telephone (+370 5) 269 2035 Email [email protected] Website www.vlrd.lt Core business Production of new shunting locomotives and road machinery, performance of capital and current repairs, and maintenance of all types of railway rolling stock, production and repair of freight wagons. Company’s Chief Executive Officer Albertas Bajorinas Shareholders 100% of shares is owned by AB Lietuvos Geležinkeliai
Subsidiaries and associated companies of the company
Name OOO Rail Lab UAB Lokomotyvai ir transporto komponentai
Registered address Internacionalnaja g. 36-1, Minsk, Republic of Šeškinės St. 59A, Vilnius Lithuania
Legal form Limited liability company Private limited liability company
Date, place of registration 26/05/2020, Republic of Belarus 09/09/2014, Register of Legal Entities of the Republic of Lithuania
Company number 192827267 303388493
Phone +375 29 312 23 52 +370 616 46221
E-mail [email protected] -
Website - -
Principal activity Production of rolling stock and locomotives, Activity is not conducted repair and maintenance of vehicles, whole- sale trade of other machinery and plant Shareholding held by the Company, % 99 per cent of shares is controlled by UAB 25 per cent of shares is controlled by UAB Vilniaus lokomotyvų remonto depas Vilniaus lokomotyvų remonto depas
The company’s branches, representative offices abroad
The Company did not have branches or representative offices during the analyzed period.
3 Activity of the company
Operating model of the Company
UAB Vilniaus lokomotyvų remonto depas together with the parent company AB LietuvosGgeležinkelia” and its legal entities, controlled directly or indirectly, comprise a company group of vertical integration. The Company, operating in the LTG Group follows the strategy confirmed by the parent Company and confirmed policies for activity areas. VLRD was entered into the Register of Legal Entities on 21 August 2003. The Company started its activity on 1 October 2003.
The main activity and services rendered
• Production of new locomotives, autodraisines and infrastructure road machinery;
• Works of capital and current repairs and technical maintenance of railway rolling stock;
• Production of freight wagons and works of depot, capital and current repairs of freight wagons;
• Other repairs and activity (repairs of units, containers, wholesale).
Market
The Company provides services to companies in Lithuania, Latvia, Estonia, Poland, Ukraine, Georgia. In 2020, the major part of services (96.1 per cent) was rendered to the Lithuanian companies. The largest volumes of services in the foreign market was rendered to companies in Poland, Latvia and Estonia.
Competitive environment
The major competitor of VLRD in Lithuania, Latvia and Estonia in the field of services of locomotives and wagons is the locomotive repair factory in Daugavpils, which has enormous productive premises and large repair capacities.
In Poland, VLRD competes with such manufacturers as PESA, NEWAG and other private repair depots.
There are over 100 repair depots In Ukraine, which are owned by the Ukrainian railways, repairing their fleet. Their repair bases are not up to date, they lack investment into to the repair bases. Also, private repair depots operate in Ukraine, such as the locomotive repair factory in Mykolaiv, the locomotive repair factory in Zaporizhzhia, the locomotive repair factory of Ivano-Frankivsk and the locomotive repair factory in Poltava and other.
Major clients
The clients of the Company are railway companies (carriers). In 2020, the following major clients used the services of the Company: LTG Group companies (AB “LTG Cargo”, UAB LTG Link; in 2020, VLRD’s sales turnover for the group companies accounted for 88 per cent), also other Lithuanian and foreign companies - UAB Transachema, UAB ”Kuusamet”. 4 Management of the company
Information about shares as at 31 December 2020
Amount of Company authorised capital, Number of shares, Par value per EUR thousand pcs. share, EUR Parent company UAB Vilniaus lokomotyvų remonto depas 19,017 65,663 289,62 Subsidiary OOO Rail Lab 450 - - Associated company UAB Lokomotyvai ir transporto komponentai 72 250 289,62
The Company is part of AB Lietuvos Geležinkeliai Group the sole shareholder whereof is the parent company AB Lietuvos Geležinkeliai.
All the shares are of the same class, i. e. ordinary registered shares. The shares are intangible, they are recorded in Personal Securities Accounts in accordance with the procedures established by legislation. The Company has not issued privileged shares.
During the reporting period, the Company did not acquire its own shares or shares of other Group companies.
5 Management of the company
Management and organisational structure of the company
The sole shareholder of VLRD is the parent company AB Lietuvos Lietuvos Geležinkeliai, VLRD is responsible for implementation Geležinkeliai. The shareholder of AB Lietuvos Geležinkeliai is the of principal activities and achievement of the set goals of State which is controlling 100% of shares. The Shareholder’s operation. In order to implement the raised goals and ensure rights and obligations are implemented by the Ministry of appropriate management, in its activities VLRD is independent, Transport and Communications of the Republic of Lithuania. it makes relevant decisions and ensures reporting and responsibility for operating results. In seeking for AB Lietuvos Geležinkeliai group companies’ long-term growth in value, rational and effective utilization In its activities the Company follows the Law on Companies of funds, assets and other resources as well as fulfilment of of the Republic of Lithuania, the Company’s Articles of the shareholder’s expectations and interests, the operating Association, decisions of the bodies of the Company, and other model of the Group is oriented towards figuring out of principal legal acts of the Republic of Lithuania governing the activities activities and refocusing thereof in subsidiaries and companies of the Company including the activities of the state-owned of subsequent levels. Being a part of the company group AB enterprises.
GENERAL MEETING OF SHAREHOLDERS (AB Lietuvos geležinkeliai)
BOARD
CEO
Freight Department Department Department Traction and Department Wagon of Technologies of Sales and of Corporate Rolling Stock of Quality Depot and Development Governance Depot Innovations
6 Governing bodies of the company
The company’s articles of association which adopts the main decisions related to implementation of property rights and obligations. The Company’s Articles of Association is the principal document that the Company follows in its activities. The Company has not issued preference shares. During the reporting period, a voting right was not restricted. During the reporting period the VLRD’s Articles of Association were amended once – on 14 August 2020 a revised version of In accordance with the Company’s Articles of Association, an the Articles of Association was registered which contain a more additional competence of the General meeting of shareholders detailed regulation of interrelationship of VLRD and AB Lietuvos is to endorse the decisions of the Board of VLRD regarding Geležinkeliai, emphasize commercial nature of VLRD activity the following: and objectives, specify the competence of the management bodies regarding conclusion of transactions. • the Company’s non-current assets the carrying amount of which exceeds EUR 300 thousand: The Articles of Association of VLRD are available in the company’s website at https://vlrd.lt/lt/apie-mus/dokumentai/. • investment in the Group companies or third parties, disposal or lease of those assets; The Articles of Association of VLRD are amended under the decision of the general meeting of shareholders by a qualified • pledge or mortgage; majority of votes, which shall be at least 2/3 of votes conferred by all shares held by all the shareholders participating in the • sureties or guarantees for fulfilment of a third meeting. party’s obligations;
Governing bodies of the company • acquisition of non-current assets;
The following governing bodies of the Company are set out by • conclusion of other transactions. Articles of Association: • participation or establishment of other legal entities; • General meeting of shareholders; • establishment the Company’s branches and representative • Board of Directors; offices and approval of their Articles of Association;
• Chief Executive Officer – Director General. • commencing activities of new nature or terminating the Company’s current activities if the respective decision has General meeting of shareholders – is the supreme governing not been adopted in approving the Company’s strategy; body of the Company. The competence of the General meeting of shareholders, the procedure of its convening as well as • investment of the Company-owned property and facilities resolution-passing is established by the Law on Companies as of importance to ensuring national security, conclusion well as in the Articles of Association of the Company published of purchase or sale, or any other transfer of ownership, on the website https://vlrd.lt/lt/apie-mus/dokumentai/. pledge or mortgage transactions (if the Company’s property was included in the list of facilities and property The sole shareholder of VLRD is AB Lietuvos Geležinkeliai of importance to ensuring national security).
7 Governing bodies of the company
Key decisions of the General meeting of shareholders equals or exceeds EUR 300 thousand; in 2020: • Adoption of decisions related to investment of VLRD • the Company’s financial statements for the year 2019 have owned property and facilities of importance to ensuring been approved; national security, conclusion of purchase or sale, or any other transfer of ownership, pledge or mortgage • the Company’s retained earnings (losses) of 2019 have transactions (if the Company’s assets were included in the been distributed; List of Facilities and Property of Importance to Ensuring National Security); • the Articles of Association of VLRD have been amended. • Adoption of decisions on participation or establishment The Board – is a collegial governing body, set out in the Articles of other legal entities; of Association, consisting of 5 members. The members of the Board are elected by the General meeting of shareholders for • Adoption of decisions on commencing activities of new a term of 4 years. The Management Board elects the chairman nature or terminating the VLRD’s current activities; of the management Board from its members. The same person may be elected as a member of the Board no more than for • Approval of employment contract of the Company’s two consecutive offices. executive, conditions of remuneration and incentives;
The Board is accountable to the General meeting of • Approval of the total amount of incentives to VLRD shareholders. employees for annual performance (in accordance with the Company’s performance); The competence of the Board meets the competences of boards laid down in the Law on Companies of LoR and the • Consideration of information on the Company’s key additional competences of the Board set forth in the Articles operational risks and approval of the Company’s plan of of Association. operational risk management;
Additional competence areas of the Board: • Consideration of information and reports on the Company’s ongoing programmes; • Approval of operating strategy and long-term goals, investment and operational plans, and annual budget of • Analysis and assessment of other information on the most VLRD; significant operational issues provided by VLRD executive.
• Establishment of performance indicators of VLRD; Office term of the Board: 13/12/2017 - 13/12/2021. • Approval of the list of information which is considered a Members of the Board do not own shares of Group companies. commercial (industrial) secret and confidential information, Thirteen Board meetings took place during the reporting the conditions of use and storage of such information; period.
• Adoption of decisions regarding the Company’s non- current assets the carrying amount of which equals to or exceeds EUR 300 thousand regarding:
• Investment in the Group companies or third parties, disposal or lease of those assets;
• pledge or mortgage;
• sureties or guarantees for fulfilment of a third party’s obligations;
• acquisition of non-current assets;
• conclusion of other transactions (related to assets, works, services).
• Adoption of decisions regarding consent that the Company’s executive may conclude transactions of acquisition of goods, works and services the value of which
8 Governing bodies of the company
Composition of the company’s board
Education
• Vilnius Gediminas Technical University, Bachelor’s degree in Environmental Engineering.
Main employer, position held
• Chief Executive Officer of AB LTG Cargo Geležinkelio g. 12, Vilnius, company code 304977594.
Other positions
• Board member of AB LTG Cargo, Geležinkelio g. 12, Vilnius, company code 304977594.
EGIDIJUS LAZAUSKAS
Chairman of the Board Appointed from 29 November 2019 As a board member since 25 March 2019
9 Governing bodies of the company
Education
• Vilnius University, Bachelor’s degree in Economics.
Main employer, position held
• Director of Corporate Governance Department of AB LTG Cargo, Geležinkelio g. 12, Vilnius, company code 304977594.
Other positions
• Board member of AB LTG Cargo, Geležinkelio g. 12, Vilnius, company code 304977594.
LUKAS DANIELEVIČIUS
Board member Appointed from 25 March 2019
Education
• Concordia International University Estonia, Bachelor’s degree in International Business.
Main employer, position held
• Director of the Centre of Planning and Governance Accounting of AB Lietuvos geležinkeliai, Mindaugo g. 12, Vilnius, company code 110053842.
AGNĖ GRAMBAITĖ
Board member Appointed from 29 November 2019
10 Governing bodies of the company
Education
• University of Glasgow, Economics.
Main employer, position held
• Director of Strategy and Operational Performance Department of AB Lietuvos geležinkeliai, Mindaugo g. 12, Vilnius, company code 110053842.
Other positions • Board member of AB LTG Cargo, Geležinkelio g. 12, Vilnius, company code 304977594;
• Board member of UAB Geležinkelio tiesimo centras, Trikampio g. 10, Lentvaris, Trakai district municipality, Company code 181628163;
• Board member of UAB voestalpine Railway Systems Lietuva, Sostinės g. 18, Valčiūnai, Juodšiliai eldership, Vilnius district, ROKAS JANUTĖNAS company code 110709524;
Board member • Chairman of the Board of UAB Gelsauga, Prūsų g. 1, Vilnius, Appointed from 31 December 2017 company code 125825125. (until 31/10/2020).
Education
• Vilnius University, Bachelor’s degree in Psychology;
• Vilnius University, Master’s degree in Organizational Psychology.
Main employer, position held
• Partner of Human Resource Management of AB Lietuvos geležinkeliai, Mindaugo g. 12, Vilnius, company code 110053842.
Other positions
• Director of Small Partnership Perkūno slėnis, Bendoriai road 8A-1, Žemieji Rusokai, Vilnius district, 305569923;
GRETA KERNAGIENĖ
Board member Appointed from 29 November 2019
11 Governing bodies of the company
Changes in the composition of the board during the reporting period
Composition of the Board did not change during the reporting period.
Information on participation in the board meetings in 2020
Name, surname of a member Board meetings
Number of meetings in 2020 (including away days, early-voting in writing) 13 Egidijus Lazauskas 12 Rokas Janutėnas 13 Lukas Danielevičius 13 Agnė Grambaitė 13 Greta Kernagienė 13
Most important decisions adopted in 2020
• Approval of the Company’s annual report for the year 2019; • Approval of the financial statements of the Company for the year 2019; • Establishment of the Company’s principal performance indicators for 2019 and Chief Executive Officer’s goals; • Endorsement of the Company’s interim financial statements for a period of six months ended 30 June 2020; • Decision regarding establishment of a joint venture of the Company and UAB Geležinkelio tiesimo centras in Belarus; • Approval of the Company’s operational plan (budget) for 2021.
The board’s self-assessment on performance and results
In line with the Board‘s rules of procedure, and in line with good governance practices, in early 2020 the Board carried out a self-assessment of its performance in 2019.
The results of the self-assessment were discussed at the Board Meeting: areas for improvement were identified and an action plan for 2020 was drawn up. The area for improvement identified by the Board is making the organization of meetings more effective. The planned improvement actions are related to annual planning of the Board meetings (maintenance of relevant annual plan) and submission of information to the Board in the set format and by deadlines: relocation of arrangement of work of the board and preparation for meetings to the information system platform used by the Company.
Chief Executive Officer (Head of the Company)– is the sole executive body who is responsible for organisation of day-to- day business of the company and manages it. The competence areas of the CEO are defined by the Law on Companies of the Republic of Lithuania and the Articles of Association of the Company available on the Company’s website https://vlrd.lt/ lt/apie-mus/dokumentai/. The CEO is elected for a term of 5 years by the Board which the CEO is accountable to. The same person may be elected as a Chief Executive Officer no more than for two consecutive office terms.
12 Governing bodies of the company
Management of the company
ALBERTAS BAJORINAS Chief Executive Officer Holds the position since 5 April 2017 Director of the Company’s Sales and Held the position from 24 April 2019 until ERNESTAS ČESOKAS Development Department 22 January 2021 Director of the Company’s Technology and RUSTAM ALIJEV Holds the position since 1 September 2017 Innovation Department Chief of the Company’s Rolling Stock WLADISLAW ENZI Holds the position since 1 August 2019 Depot Chief of the Company’s Freight Wagon EVALDAS RIMSKIS Holds the position since 8 April 2019 Depot Director of the Company’s Corporate DONATAS MALAŠKEVIČIUS Holds the position since 13 January 2020 Operations Department Director of the Company’s Quality NATALJA CECHANAVIČIENĖ Holds the position since 29 April 2020 Department
Additional information about Chief Executive Officer contract amounted to EUR 6,800 as at the end of the reporting period. The Company’s Chief Executive Officer’s Chief Executive Officer of VLRD has higher education in the basic monthly salary did not change in 2020. field of transport engineering, obtained at Vilnius Gediminas Technical University (Bachelor‘s and Master‘s degree). • Annual incentives. The annual variable remuneration (annual incentive) directly related to achievement of Changes in composition of management during the annual goals and dependent on actual achievement reporting period of the established annual indicators might be paid to the Company’s Chief Executive Officer next to the basic VLRD management did not change during the reporting period. monthly salary. Each year, the Board of the Company approves the structure of annual goals of the Group, Members of the Board, the CEO, managers of the Company threshold values for their achievement and benchmarks, have submitted declarations on private interests, which can be and after the end of year the Board of the Company found on the website of the Chief Official Ethics Commission at approves the results of achievement of these objectives http://www.vtek.lt. There were no conflicts of interest between and the possibility of paying an annual incentive. the members of the Board, the CEO and managers of the Company during the reporting period. The maximum amount of the variable annual incentive is up to 30 per cent of the annual basic salary. The maximum monthly Information on remuneration of board members and the proportion (i.e. 1/12) of the annual incentive shall not exceed company‘s Chief Executive Officer EUR 2,040. In 2020, a monthly portion (1/12) of the annual incentive to the Company’s CEO for achievement of the goals Components of the Company’s Chief Executive Officer’s of the year 2019 amounted to EUR 1,673. remuneration: Board members delegated by the shareholder AB Lietuvos • Basic monthly salary. The Company’s Chief Executive Geležinkeliai do not receive remuneration for their activity Officer’s basic monthly salary set out in the employment at the Board.
13 Strategy
In response to geographical and economic changes in the market of transport services, leading to changing trade trends and passenger flows, LTG Group plans its activity not only in the short-term perspective but also in the long-term one. Seeking for a stronger focus of the strategic lines and goals of the long-term corporate strategy of LTG Group for 2018-2030 on specific activities managed by LTG Group, long-term strategies of individual business units of LTG Group have been prepared. One of them is the long-term strategy of VLRD for 2020-2030 which is reviewed and improved on a yearly basis. In 2020, the strategic lines and goals of the company for 2021 were specified, in addition the analysis of internal factors was carried out and the measures for increasing the efficiency of operation were assessed.
Mission Vision
A partner in repairs, The leader in modernization and services of repairs, production of rolling modernization and stock for a safe and production of rolling efficient business. stock in Central and Eastern Europe.
Strategic operational directions
In the long-term strategy of VLRD for 2020–2030 the strategic lines are focused on creation of benefit to the shareholder, client, employee, community:
• Increase the value of the company – to continue the development of services and geography in Central and Eastern Europe, be a financially sustainable company.
• Create value for the client – maintain long-term relationship with clients, based on mutual trust and benefit, become the first choice for clients and partners in Central and Eastern Europe.
• Ensure sustainable organizational culture – develop competences in creation and implementation of the most advanced solutions in the synergy of traditions and innovations, form the culture of ambitious results.
• Grow and raise others responsibly – create solutions of responsible growth, which are environmentally friendly and create value for the community.
Strategic projects planned until 2030:
• Optimization of VLRD production bases by removing the production units from the centre of the city.
• New business activity – production of wagons allowing to generate income from a newly conducted activity.
• Development of new products: re-motorisation of the shunting locomotive TEM2, modernization of the shunting locomotive by adopting a hybrid drive.
14 Strategy
Strategy goals for 2020
Guidelines for target Strategic performance indicators Measuring units achievement in 2020 Achieved in 2020
Sales revenue EUR million 80-86 68
ROE % >16.1% 3.8%
Net promoter score (NPS) scores > 76 88
Major projects implemented in 2020
• In May 2020 the strategic project of Construction of VLRD Production Bases was approved by the order of the Director General of AB Lietuvos Geležinkeliai. The funding of EUR 2.5 million was allocated to the first two stages of the project (acquisition of the land parcel and design works). During 2020, the eco-geological research necessary for the project was started at Vaidotai railway station, the acquisition of the land management rights was started. In order to increase the efficiency of VLRD activity and use of property and seeking for maximum financial return, a modern and up-to-date VLRD production base will be installed, adapted to the provision of new services and meeting the service standards of the renewed fleet of rolling stock of the LTG Group and other customers. The project is going to be completed in 2025.
• The Wagon Production project is being continued to increase the Company‘s income earned from new activities. During the reporting year, a subsidiary of VLRD and GTC was established in Belarus to carry out the wagon certification process, and tests of two semi-wagons were successfully completed, and a certificate of conformity was obtained. Production of the first wagons is planned to start as early as in 2021.
• Implementation of the project of a new product, i. e. re- motorisation of the Shunting locomotive TEM2, continues. In December 2020, the test start of the locomotive was successfully completed. The project is being implemented to create opportunities for the development and expansion of new products abroad.
• Initiatives of efficiency of activity were reviewed and started: search for automatization solutions, increasing efficiency through optimal use of human resources, equipment and assets, review of internal production costs, also the process of transition to a unified business management system is in progress, activity plans are prepared for expansion of the function of scientific research and development.
• 15 Major events in 2020
March
Due to the emergency situation as a result of the global virus COVID-19 and the announcement of quarantine by the Government of the Republic of Lithuania, in Q1-Q2 and Q3 of 2020 all employees of the Company were working remotely, where permitted by the nature of work and functions.
May
In order to increase the efficiency of the Company‘s operations and use of assets, and the maximum return, the project of optimization of VLRD production bases was initiated. The approval for the project was obtained and the funding was allocated for the first two stages (land take-over, design until the construction permit). It should be noted that the investment project has already been prepared and it has been granted the status of regional importance.
Together with UAB Geležinkelio tiesimo centras a subsidiary OOO Rail Lab was established, which will be engaged in certification of produced wagons.
June
The Company won a public procurement contract for repairs of freight wagons for AB LTG Cargo. Repairs of over 300 wagons are planned to be completed during the year.
August
The revised Articles of Association of VLRD were registered.
September
UAB Vilniaus lokomotyvų remonto depas was recognized as a contracting authority.
October
Implementation of the project of wagon production has gained pace: the first two semi-wagons produced have been already certified. All the equipment necessary for the production process has been produced.
Special attention is given to improvement of quality of repairs of rolling stock. The Quality Department has been formed, which constantly analyzes the rate of return of rolling stock for warranty repairs and controls incompliances.
16 Events after the reporting period
During the year 2021 the Company will merge with AB LTG Cargo and both companies will operate as one organization – LTG Cargo. The merger of the Company with LTG Cargo was approved by the LTG Board on 19 January.
After the end of the reporting period, there were no other significant events that should be recognized or disclosed in the financial statements for the year 2020.
Impact of COVID -19 on the company’s activity In view of the declared state of emergency in Lithuania due to the spread of corona virus (COVID-19), measures for ensuring the going concern and preventive measures have been reviewed and new ones are planned by the Company: additional occupational safety and preventive measures are applied to personnel working in depots, work places were computerized, technical tools have been implemented, which allows working remotely, work has been arranged in shifts, technical and assistance measures have been planned, in case the virus spreads, the plans for emergency situations are reviewed, preparations are made for an additional continuity of critical activities.
Aspects related to going concern - upon assessment of the key threats posed to performance, the Company has identified potential scenarios related to the spread of COVID-19 and expected impact on the Company’s activity and results. However, following the assessment of the management, the negative circumstances related to the virus do not cast doubts about the Company‘s ability to continue as a going concern, and they do not alter the long-term plans and goals of the Company‘s activities.
Impairment of assets – the assets were tested for impairment. Impairment has not been identified, no threats to going concern of the Company have been identified.
17 Overview of the key performance indicators
Measurement 2020/2019, Indicators unit 2018 m. 2019 m. 2020 m. % Tractive rolling stock repairs:
Large-scale repair* section 107 57 78 36.8
Small-scale repair** section 8,286 7,730 7,234 (6.4)
Wagons repairs:
Wagon capital repairs unit 960 720 467 (35.1)
Wagon depot repairs unit 4,905 6,035 4,264 (29.4)
Wagon maintenance repairs unit 11,401 10,822 11,883 9.8
* Large-scale repairs - capital repairs of locomotives **Small-scale repairs – current repairs and maintenance of locomotives
The key reasons of change in indicators:
• In 2020 volumes of wagon repairs excluding the estimate of current repairs decreased by 30 per cent compared with 2019. In the course of the year, upon the clients’ initiative the programme of wagons submitted for repairs was adjusted;
• Quantity of repairs of traction rolling stock:
• The quantity of large-scale repairs was higher by 36.8 per cent. In the end of 2019, the programme of periodic capital repairs of Siemens locomotives was started in AB LTG Cargo;
• The quantity of small-scale repairs was lower by 6.4 per cent. In the course of the year, upon the clients’ initiative the programme of wagons submitted for repairs or technical maintenance was adjusted.
18 Analysis of financial and performance results
Operating results
Sales revenue
In 2020, the main sales revenue increased by EUR 15,840 thousand or by 30.3 per cent, as compared to 2019.
The key reasons for changes in revenue:
The growth of revenue was determined by the increased Whereas revenue from repairs of wagons was lower by 19.0 per quantity of works related to repairs of locomotives mainly as a cent due to a smaller amount of orders. The revenue generated result of a wider scope of programme of periodic capital repairs from other rendered services decreased as well (repairs of of Siemens locomotives in AB LTG Cargo. In 2020, the revenue units and assemblies, repairs of containers, wholesale). The from repairs of locomotives amounted to EUR 46,499 thousand, generated revenue of this type was lower by 26.1 per cent as i. e. it was higher by 86.1 per cent as compared to 2019. compared to 2019.
Company's sales revenue, EUR thousand Structure of revenue in 2020, % 68,058 52,218 50,731 7.8% Revenue from 23.9% repairs of locomotives Revenue from repairs of wagons
Other revenue 68.3% 2018 2019 2020
Change in Company‘s sales revenue, EUR thousand
21,518 68,058
-3,808 -1,870 52,218
Sales revenue in Revenue from repairs Revenue from repairs Other revenue Sales revenue in 2019 of locomotives of wagons 2020
Other operating income
Other operating income in 2020 amounted to 167 EUR thousand, 2019 – 76 EUR thousand. 19 Analysis of financial and performance results
Costs
In 2020, costs increased by EUR 18,570 thousand or 38.9 per cent as compared to 2019.
The largest share in the structure of costs consists of costs of materials, repairs and maintenance (62.2%) and remuneration (22.1%).
The key reasons for change in costs:
Due to change in the structure of repair, costs of materials, changed slightly (as at 31 December 2020, the Company had repairs and maintenance in 2020 increased by 72.9 per cent as 935 employees, as at 31 December 2019 – 940 employees). compared to 2019. During the analyzed period more works of repairs of locomotives were completed, while a smaller number In the group of other costs, the costs related to the of wagons was repaired. management fee, impairment of doubtful debts and insurance have increased. The employees hold the Covid-19 insurance, Costs of benefits to employees increased by 4.0 per cent due providing with an additional financial support in case of serious to the increased average salary. The number of employees has illnesses. The rest of costs remained at the level of 2019.
Company's costs, EUR thousand Structure of costs in 2020, % 66,368 47,798 46,960 3.4% 12.3% Materials, repairs and technical maintenance Costs of benets 22.1% to employees Depreciation and amortization 62.2% Other costs 2018 2019 2020
Change in Company‘s costs, EUR thousand
17,399 558 660 66,368 -47 47,798
Costs in Materials, repairs and Benets to Depreciation and Other costs Costs in 2019 technical maintenance employees amortization 2020
20 Analysis of financial and performance results
Operating results
In 2020, the Company earned net profit of EUR 956 thousand, that is, less by EUR 2,719 thousand or 74.0 per cent than in 2019.
During the analyzed period the Company’s EBITDA decreased by EUR 2,686 thousand or 39.6 per cent and accounted for EUR 4,104 thousand.
Due to a changed structure of repairs carried out in 2020, the Company incurred more costs related to acquisition of materials and components used in repairs. While the volumes of services rendered decreased, the regular expenses of the Company have changed slightly.
Company's EBITDA in EUR thousand Company's net prot in EUR thousand
13.0% 6.0% .6 2.6 13.7% 10.0% 13.7% EBITDA Net prot 3.8% 6,790 3,675 4,104 EBITDA margin, % ROE, % 4,812 3,205
956
2018 2019 2020 2018 2019 2020
Balance sheet changes
In 2020, the non-current assets amounted to EUR 18,691 change was mainly influenced by the decrease under the item thousand. If to compare with 2019, non-current assets of cash and cash equivalents due to the dividends paid by the increased by EUR 4,438 thousand or by 31.1 per cent. and Company to the parent company from the distributed profit of accounted for 38.4 per cent in the common structure of assets. 2019. Also, the amount of prepayments has decreased. The major changes have resulted from: The equity amounted to EUR 21,875 thousand and decreased • Vehicles amounted to EUR 1,358 thousand. The by EUR 6,734 thousand. In 2020, the dividends of EUR 7,690 increase of EUR 1,249 thousand was reclassification thousand were paid. of vehicles held for sale to the non-current assets and putting them into operation in 2020; Financial debt increased due to the need to balance working capital - the Company used the LTG Group Cash pool account • Construction in progress and prepayments in 2020. accounted for EUR 3,853 thousand and increased by EUR 1,981 thousand due to acquisitions of non- current assets in implementation of the project of Installation of the Production Line of Freight Wagons;
• Buildings and structures amounted for EUR 6,441 thousand and increased by EUR 1,340 thousand for the introduction of a production building into operation;
• Financial assets amounted to EUR 369 thousand – it is the Company’s investment into the established subsidiary OOO Rail Lab.
In 2020, the current assets amounted to EUR 30,036 thousand and decreased by EUR 5,617 thousand or 15.8 per cent. The
21 Analysis of financial and performance results
Key financial indicators*
Measuring 2018 2019 2020 units Sales revenue EUR thous. 50,731 52,218 68,058 Other activity revenue EUR thous. 44 76 167 Total revenue EUR thous. 50,776 52,294 68,225 Expenses EUR thous. 46,960 47,797 66,368 EBITDA EUR thous. 4,812 6,790 4,104 EBITDA margin % 9.5 13.0 6.0 EBIT EUR thous. 3,815 4,496 1,857 EBIT margin % 7.5 8.6 2.7 Net profit EUR thous. 3,205 3,675 956 Net profit margin % 6.3 7.0 1.4 31/12/2018 31/12/2019 31/12/2020 Non-current assets EUR thous. 11,675 14,253 18,691 Current assets EUR thous. 22,439 35,653 30,036 Total assets EUR thous. 34,114 49,906 48,727 Equity EUR thous. 24,934 28,609 21,875 Financial debt EUR thous. 0 4,014 13,239 Net debt EUR thous. (1,150) (114) 12,757 Return on Equity capital (ROE) % 13.7 13.7 3.8 Return on Assets (ROA) % 9.5 8.7 1.9 Return on Investment (ROI) % 34.9 12.6 3.4 Financial debt / EBITDA times 0 0.6 3.2 Financial debt / Equity % 0 0.1 0.6 Net debt / EBITDA times 0 0 3.1 Equity ratio % 73.1 57.3 44.9 Asset turnover ratio times 1.5 1.0 1.4 Quick ratio times 1.7 1.3 0.5 Total liquidity ratio times 2.8 2.0 1.2
* For definitions of the indicators see page 39 of the Report.
22 Analysis of financial and performance results
Financing of the company
In 2020, the Company did not have any financial liabilities to credit institutions.
To balance the working capital, in 2020 the Company used the LTG Group cash pool. The agreement on the Group cash pool is effective until 31 December 2021. The terms of the agreement are in line with normal market conditions.
Dividend policies
The payment of dividends and the amount of profit contributions • The Company incurred a net loss during the reporting of state-owned enterprises is regulated by the Lithuanian period; Government Resolution No. 20, dated 14 January 1997, and its amendments. • The Company’s performance as monitored by institutional creditors at the end of the reporting period for which The allocation and payment of dividends by the Group dividends are proposed would not be in line with companies is regulated by the Dividend Policy of LTG Group, contractual values or the size of the indicators would prepared taking into account the provisions of the Resolution adversely affect the credit rating; of the Government of the Republic of Lithuania. • The Company carries out or participates in carrying out Allocation of dividends for the financial year or a shorter period an economic project recognized as of state importance than the financial year is planned taking into consideration the by resolutions of the Government of the Republic of level of return on equity, net profit earned, financial ability to Lithuania or the Seimas of the Republic of Lithuania, or a pay dividends, implementation of economic projects of state particularly important project that has an impact on the importance, as well as other circumstances and conditions long-term strategy implemented by the LTG Group; as set out in the Dividend Policy. The dividend pay-out ratio, calculated on retained earnings, depends on ROE at the end • The Company‘s equity after payment of dividends would of the reporting period. become less than the amount of authorized capital, compulsory reserve, revaluation reserve and reserve for Portion of distributed acquiring own shares of the LTG Group entity; ROE of the Company (%) profit allocated to divi- dends, % • The Company is insolvent or would become such after ≤1 ≥85 the payment of dividends.
>1 ir ≤3 ≥80 In 2020, UAB Vilniaus lokomotyvų ir remonto depas paid out dividends of EUR 7.7 million from appropriated profit of 2019. >3 ir ≤5 ≥75 The Company had not paid out dividends in the previous year.
>5 ir ≤10 ≥70
>10 ir ≤15 ≥65
>15 ≥60
The Board of the Company may propose a higher share of profit to be distributed for dividends taking into account the implementation of financial plans, significant financial ratios (net profit, EBITDA, financial debt to EBITDA ratio, financial debt to equity ratio) at the end of the reporting period, if the payment of such higher share of profit would not have a negative effect on the implementation of the Company‘s long-term strategy.
The Board of the Company may propose a lower profit share to be allocated for dividends or no allocation at all, if at least one of the following conditions is met:
23 Analysis of financial and performance results
Investments
In 2020, the investments of VLRD amounted to EUR 3,405 thousand. All the investments (100 per cent) have been financed by the Company’s own funds. The major part of the investments is aimed at production of freight wagons (64.1 per cent) and the project of re-motorization of TEM2 shunting locomotive (20.1 per cent). Investments to ensure the going concern (renewal of assets, acquisition of production equipment) accounted for 15.8 per cent.
2020/2019, Investments, EUR thousand 2018 2019 2020 %
Project of production of wagons 978 2,183 223.2
Project of re-motorisation of TEM2shunting locomotive 163 684 419.7
Investments to ensure going concern 230 506 538 6.3
Total 230 1,647 3,405 206.7
Major investment projects implemented in Major planned investment projects / 2020: investment directions:
• Having assessed the challenges in the market of freight out, the technical start-up test has been completed. wagons, VLRD has initiated the project of Installation Exploitation and rent of the model prototype is going to of Production Line of Freight Wagons, after the begin in 2021. implementation whereof the production of some type of wagons will take place in Lithuania, which will ensure • In 2021, the projects of Production of Freight Wagons the fulfilment of needs of group clients of AB Lietuvos (the final value of the project is EUR 6.2 million) and Re- Geležinkeliai and also generation of additional income. motorization of TEM2 (the final value of project is EUR 1.2 During the reporting period the installation works of million) are going to be completed. In 2021, the investment production bases were carried out, a subsidiary was in the project of construction of VLRD production bases is established in Belarus and the agreement of certification planned to amount to EUR 1.3 million for acquisition of the of wagons was concluded, certificates of semi-wagons have land parcel, advisory services and design works. been received, equipment for production of wagons was acquired, the procurements for acquisition of components • In implementation of the development line of new have been initiated. In 2021, production of new wagons products it is planned to start the modernization of the is planned. shunting locomotive by adapting the hybrid drive. The implementation of this project, aimed at competitiveness • Increasing the efficiency of operation and use of assets of VLRD and increasing of EBITDA, is going to be initiated in of VLRD, and seeking for maximum financial return, the the second half of 2021, and currently the stage of planning project of Optimization of Production Bases of VLRD has is in progress. been started. It is planned to install an up-to-date and modern production base of VLRD, adapted to provision of • In 2021, it is planned to prepare a study for the renewal of new services and in compliance with servicing of updated the freight wagon depot in order to implement the works fleet of rolling stock of the companies of LTG Group and of the freight wagon depot equipment, infrastructure other clients. The project has been granted the status of renewal and technology improvement. The renewed base regional importance, formation of vacant state-owned will enable faster and higher-quality repairs of wagons, land has begun. In Q1 of 2021, a market consultation is increasing capacity, thus fulfilling the directions envisaged planned for acquisition of services for technological plan in the strategy - to increase the value of the Company and and design, it is planned to announce a call for tender in create value for the customer. Q2. • Other works of renovation and repair of property are • TEM2 modernization. Through development of business being carried out. It is expected that the completion of and increasing of the competitiveness of VLRD, a new, these projects makes more efficient use of repair capacity high-tech, modern, ecological and competitive prototype and workshop areas, ensures work safety and health of of TEM2 locomotive is being developed. In 2020, the main employees. modification works of locomotive frame have been carried
24 Analysis of financial and performance results
Employees In order to succeed in implementation of its strategy, efficiently conduct daily operation, create competitive advantage and adopt to changing business needs, the Company follows the principles of personnel management based on the best practices of personnel management. Focus on the employees makes a strategic direction, and is primarily implemented through the development of the corporate culture.
The entire LTG Group strives for a high-performance culture based on the existing values of LTG:
We are We work for We respect We act We are ambitious our clients each other with integrity responsible
Initiatives and material events in 2020:
• During the pandemic special focus was given to working and both long-term and short-term initiatives are conditions of employees by providing all the necessary implemented at the organizational level and also in local safety equipment to those who can perform their functions individual structural units. The majority of improvement only in their workplace and expeditiously providing those, initiatives of this year is aimed at strengthening of mutual who are able work remotely, with conditions to work from communication and cooperation. home. All employees of LTG Group hold Covid-19 insurance providing with an additional financial support in cases of • A new event – presentation of quarterly performance and serious illnesses. In case of unavoidable downtime, the the event of expressing appreciation to employees “VLRD salary of at least 50 per cent is guaranteed to employees. says thank you”. All the employees of the company are invited to attend the event. • In fostering a change in organizational culture, in February 2020 for the first time in the history of LTG On 31 December 2020 the number of employees of the Group an extended survey of the factors influencing company was 935. Compared to 31 December 2019, the the organizational culture “Voice of Employees” took number of employees decreased by 5 employees or by 0.5 place. All the employees were able to participate in the per cent. survey and the actual participation rate of the Company’s employees was at 72 per cent. During the survey, the The average monthly salary changed from EUR 1,478 to EUR indicators of employees’ involvement, satisfaction, 1,500 as compared to the year 2019. loyalty were assessed, as well as other highly important areas influencing the organizational culture, such as: The total remuneration fund amounted to EUR 16.2 million. In cooperation, career and education, organizational values, addition, in April 2020, the annual incentives for performance activity management, client focus, leadership, diversity in the amount of EUR 0.67 million were paid to the Company’s management, empowerment, work-place and occupational employees as well as to the employees of other companies of safety. On the basis of the results of the survey, the areas the LTG Group. which need most improvement have been identified,
25 Analysis of financial and performance results
Number of employees of the company and an average salary
31/12/2018** 31/12/2019 31/12/2020
Actual Actual Actual number of number of number of Function groups employees Average employees Average employees Average as of the salary, EUR as of the salary, EUR as of the salary, EUR end of the end of the end of the period period period
CEO* 1 6,239 1 6,800 1 6,800
High-level executives* 4 3,987 3 4,933 3 5,153
Senior executives and specialists 10 3,045 8 3,340 10 3,826 in exceptional fields Middle-level managers and 38 2,163 32 2,185 34 2,381 individual experts Team leaders and experienced 205 1,550 168 1,668 174 1,700 specialists Specialists and experienced 113 1,286 138 1,353 139 1,359 operational/service staff Operational/service staff, 684 1,243 590 1,360 574 1,351 qualified workers
Total 1,055 1,364 940 1,478 935 1,500
* a fixed remuneration as of the end of the period is provided; ** for data comparability purposes, average salary figures in 2018 have been recalculated under the new tax system by multiplying a coefficient of 1.289.
In 2020, when corporate levels of functions were introduced, the number of employees and the average salary are disclosed by groups of corporate levels of functions. The data of the previous periods was recalculated according to the updated methodology.
The monthly remuneration set for the Company’s CEO of the Company as at 31 December 2020 was EUR 6,800, and the average actual salary, taking into account the annual incentive for performance, amounted to EUR 8,480 in 2020.
The average monthly salary of high level executives established in their employment contracts as at 31 December 2020 amounted to EUR 5,153, and the average actual salary of this group of employees, taking into account the annual incentive, in 2020 amounted to EUR 5,785.
The charts below show distribution of employees by age, gender, length of service and education as at 31 December 2020.
26 Analysis of financial and performance results
Distribution of employees by gender, % Distribution of employees by age groups, %
From 30 years 8.9%
12.9% From 30 to 40 years 19.7% From 40 to 50 years 25.5%
Men From 50 to 60 years 29.5%
Women Over 60 years 16.5% 87.1%
Distribution of employees by education, %
HIgher university education 16.6%
Higher non-university education 16.3%
Professional training 20.2% Average length of service, Age group years Secondary education 47.0% Up to 30 years 1.6 From 30 to 40 years 4.4 From 40 to 50 years 6.3 Distribution of employees by length of service, % From 50 to 60 years 7.4 Up to 1 year 9.9% Over 60 years 8.6 Average length of 1 - 5 years 65.7% 6.2 service 6 - 10 years 4.1%
11 - 20 years 9.5%
21 - 30 years 9.5%
Over 30 years 1.3%
Social partnership
Seeking to strengthen the Company’s social dialogue with In September 2020, the representatives of LTG company group representatives of employees and implementing the provisions together with social partners reviewed the industry collective of industry collective agreement, the LTG company group agreement of the company group of Lietuvos Geležinkeliai, organized training for chairmen of the trade unions regarding which is currently in force, and agreed on extending it for improvement of skills in company management, communication another period of 2 years, until 31 December 2022. and cooperation. In order to establish an active social partnership, there is In September 2020, a regular provision of information and regular development of communication and cooperation with consultation was performed to the employees’ representatives the representatives of the trade unions existing in the Company, during which the information regarding the Company’s periodic meetings to discuss issues of arrangement of daily work condition, structure, changes, which took place and are planned, and to resolve matters that are important to employees and was introduced. The development plans of the Company and its affect their social and economic situation. In accordance with departments, changes in remuneration and expected trends the procedure established by legal acts, relevant information thereof, the results of implementation of occupational safety is provided to trade unions and consultations are carried out and health, which help to improve the working environment in adopting decisions regarding changes in the Company. were introduced and fulfilment of the collective agreement for the year 2019 was reported.
27 Analysis of financial and performance results
Management of remuneration and improve the necessary skills and maintain a high professional operational efficiency level. In 2020, 240 employees of the company participated in internal and external mandatory professional and in-service trainings. Employees performing high-risk work, working with The general principles of the remuneration package are and maintaining potentially hazardous equipment have been developed for: trained for safe working methods. According to the internal professional learning programmes regarding traffic safety and • attraction, motivation and retention of highly qualified and occupational safety and health (prepared in accordance with competent employees; provisions of the Law on Railway Transport Traffic Safety of the Republic of Lithuania and the European regulations), 212 • encouragement for improvement of employees; employees were trained, 28 employees took courses in external education institutions. • adherence to the principle of internal justice in rewarding for work and efforts of employees; Strengthening of leadership is one of the priority axes of the LTG Group. In 2020, the Leaders’ Academy was introduced, • a continuous improvement of working conditions in order the purpose of which is to strengthen particular leadership to increase productivity; competences, responding to individual educational needs of managers in the fields of operational efficiency, team leadership, • motivation of employees by granting a package of operational infrastructure, individual efficiency, working with additional benefits; clients. The internal training programme LTG Leader’s Standard, concerning the main principles and standards of team leading, • contribution to the efficiency management of staff costs; is continued and taken by each new manager of VLRD. In organization much attention is given to the culture of feedback. In order to achieve the specified objectives, classical elements For the third year in row a 360-degree feedback survey on of remuneration management are used: methodological managerial competencies is conducted, during which managers evaluation of functions; periodic comparison of internal are provided with comprehensive and high-quality feedback remuneration data with the market and implementation of on their leadership competencies from the immediate work the review; direct connection of the possibility of change of environment – direct supervisor, colleagues and subordinates, remuneration with the efficiency of the employee‘s activity - they identify their strengths and areas for improvement and the results of achieving the annual goals. create individual self-development plans. In 2020, 29 managers of VLRD participated in the feedback programme. Despite of uncertainties due to the pandemic, in the spring of 2020 the periodic review of remuneration was implemented This year were offered vebinars to the company‘s employees, and the annual incentive was paid to employees for the results focused on remote work, what helped managers and of 2019. From the second half of 2020, the evaluation results employees to adapt to changed working principles more easily. of all functions were expressed in corporate levels, they are As well as trainings about personal efficiency at work, which published and available to all employees of the Company. In covered the topics of time planning, creativity at work and such manner, the principles of transparency, internal justice communication. We have strengthened not only professional and open culture are consistently assessed, the internal culture competencies, but also personal efficiency competencies, is encouraged. In April 2020, the package of additional benefits among which were organizational skills, emotional intelligence, to employees was quickly supplemented by the employees’ stress management, psychological resilience. The last topic was Covid-19 insurance, guaranteeing additional financial support particularly important, having many fundamental changes in in cases of serious illnesses. During the emergency (quarantine) working conditions and more stress on employees. downtown, full salary was guaranteed to employees whose salary did not exceed EUR 1,300, and the salary of 50%, however not lower than EUR 1,300, was guaranteed to employees whose salary was higher.
Trainings and competence development To encourage the employees to use their potential and career opportunities to full extent, VLRD motivates continuous professional and personal improvement of its staff. The Company priorities self-education, learning at workplace, internal trainings. Internal training and periodic certifications are organized for employees on a regular basis in order for employees to acquire or update professional knowledge,
28 Risks and their management
VLRD operates and continuously improves the unified risk 4. Development of risk management plans, 5. Implementation management system of the group of entities. It is defined of risk management plans, 6. Monitoring of risk management. in the risk management policy developed taking into account the international ISO 31000 and COSO ERM risk management The level of risks in the Company is assessed by standards and examples of best risk management practices. determining their likelihood and potential impact The policy sets out the regulations, principles and main areas (assessing financial, legal and reputational impact) and is of responsibility for carrying out these activities. The mission assigned to one of the four risk categories recorded in the of risk management activities is to ensure a consistent and risk management policy: common risk management system of the Company. Vision is an effective risk management system that helps maintain and Strategic risks are risks related to changes in the environment increase the value of the Company. and the Company‘s ability to properly use these changes in its operations or to prepare for them. Strategic risks are In practice, the risk management policy guidelines are relevant to the Company and can have a direct impact on the followed according to the 3-line defense model. According achievement of the goals set in the strategy; to it: Level 1 risk management activities are carried out by the Company, which identifies, assesses and manages risks. Operational risks are possible events or circumstances that Level 2 risk management activities are performed by the Risk may affect the operations of the Company or the objectives Management Division, which performs the risk management pursued, may endanger the safety and health of people, the coordination and control function. This department develops assets, the continuity of operations or the environment; and improves the risk management system of the Company, performs monitoring; the Level 3 risk management activities Financial risks are risks, related to changes in credit, liquidity, are performed by the Internal Audit Division of the LTG, which exchange rates, interest rates and capital; performs an independent assessment of the effectiveness of the risk management Levels 1 and 2, provides comments and Compliance risks are possible events or circumstances that recommendations on possible improvement of the overall risk. may lead to non-compliance of the Company’s activity with internal and (or) external legal requirements. Risks of the Company are managed in stages, each of which involves employees with different roles, individuals and collegial Taking into account the history, specificity and current context bodies. The risk management cycle consists of the following of activity of VLRD, the main risks are identified and presented main steps: 1. Identification of risk appetite, 2. Identification and below. assessment of risks, 3. Systematization and calibration of risks,
Description of the risk and its Name of the risk Risk level impact Main risk management measures
• As VLRD became a contracting • Implementation of innovations in authority, the company’s ability to operation; Loss of the compete has decreased (the speed of market share High provided services has decreased etc.); • Search for new markets. due to reduced competitiveness • Occurrence of risk may have an adverse effect on the financial performance of the company.
• As VLRD became a contracting • Review of processes of planning authority, the procurement processes of needs and procurement, and Delay in significantly slowed down; distribution of responsibilities. High acquisitions • Delay in acquisitions is likely to influence smoothness of processes and timely fulfilment of obligations.
• Occurrence of risk can have an adverse • Given the average age of employees, to effect on ensuring of the necessary staff attract new and competent employees; Aging production Medium turnover. staff • Develop targeted programme of employee training.
29 Information on the compliance with the guidelines on the transparency
In disclosing the required information in annual and interim reports and on its website http://www.vlrd.lt, the Company follows the requirements of the Description of the Guidelines for Ensuring Transparency of State-Owned Enterprises approved by Resolution No 1052 of 14 July 2010 of the Government of the Republic of Lithuania (the Description).
Structured information on compliance with the transparency guidelines
Description provision Point of Description Yes/No Disclosure of the Company‘s information The following data and information must be announced in the internet website of a state- 5. - owned enterprise:
5.1. Name; Yes
5.2. Code and register, where data about the company is filed and stored; Yes
5.3 headquarters (address); Yes
Legal status, if a state-owned enterprise is under reformation, reorganization (indicate the Legal status 5.4. way of reorganization), liquidation, is becoming or has become bankrupt; not registered
5.5. The name of the institution representing the State and a link to its website; Yes
5.5. Operating goals, vision and mission; Yes
5.7. Structure; Yes
5.8. Data about the head of the enterprise; Yes
Data about the chairman and members of the Board, if formed according to the Articles of 5.9. Yes Association; Data about the chairman and members of the Supervisory Council, if formed according to 5.10. Not formed the Articles of Association; Disclosed in the website 5.11. Names of committees, if formed; data about their chairmen and members; of the parent company LTG The sum of the nominal values of the state-owned shares (in euro to the nearest euro cent) 5.12. Yes and the share (in percentage) in the authorized capital of the state-owned enterprise; The performed special obligations that are determined as to recommendations approved by the Minister of Economics and Innovations of the Republic of Lithuania: the purpose of The Company the special obligations, state budget appropriations allocated their implementation in the does not fulfil 5.13. current calendar year and the legal acts entrusting the state-owned enterprise with the any special performance of the special obligation, the conditions for fulfilment of the special obligations obligations and (or) regulatory pricing; Information on social responsibility initiatives and measures, important ongoing or planned 5.14. Yes investment projects. In order to ensure publicity regarding the professionalism of the management and supervisory bodies as well as the members of the committees, formed in a state-owned enterprise, the following data of the persons referred to in sub-points 5.8 – 5.11 of the Description shall be published: name, surname, commencement date of current duties, other 6. Yes current managerial positions in other legal bodies, education, qualification, professional experience. If the person stated in sub-points 5.9 – 5.11 of the Description has been elected or appointed as an independent member, this information should be additionally disclosed under his data.
30 Information on the compliance with the guidelines on the transparency
Description provision Point of Description Yes/No Disclosure of the Company‘s information
7. The following documents shall be announced in the website of a state-owned enterprise: -
7.1. Articles of Association; Yes
Statement from an institution representing the State regarding the establishment of the 7.2. Yes goals and expectations of the State in a state-owned enterprise; The business strategy or a summary thereof in cases where the business strategy contains 7.3. Yes confidential information or information which is considered a commercial (industrial) secret; Document establishing the remuneration policy, setting out the remuneration of the head of a state-owned enterprise and the remuneration of members of collegial bodies 7.4. Yes and committees formed in a state-owned enterprise, as detailed in the Code of Corporate Governance; Annual and interim reports of a state-owned enterprise, annual and interim activity reports 7.5. Yes of a state-owned enterprise for a period of at least five years; Annual and interim financial statements and auditor‘s reports on annual financial statements 7.6. Yes for a period of at least five years; When a state-owned enterprise is a parent company, the structure of the group of companies is to be published on its website as well as the information of its subsidiaries and further 8. subsidiaries as specified in Clauses 5.1–5.3 of the Description, the website addresses, the Yes share (percentage) of the share capital owned by the parent company in their authorized capital, and consolidated annual reports. When a state-owned enterprise is a participant of legal entities other than those specified in 9. Clause 8, the details of these legal entities specified in Clauses 5.1–5.3 of the Description as Yes well as their website addresses must be posted on its website. If details specified in Clauses 5, 6, 7.1–7.4, 8 and 9 of the Description change or are found to 10. Yes be false, information and documents must also be immediately corrected on the website. A set of annual financial statements of a state-owned enterprise, an annual report of a state- owned enterprise, an auditor’s report on the annual financial statements of a state-owned 11. Yes enterprise must be posted on the website of the state-owned enterprise within 10 business days after their approval. Sets of interim financial statements of a state-owned enterprise, interim reports of a state- 12. owned enterprise must be posted on the website of the state-owned enterprise within 2 Yes months after the end of the reporting period. Documents specified in Clause 7 of the Description must be posted in the PDF format with 13. Yes the option of printing. Preparation of sets of financial statements and reports State-owned enterprises maintain their accounts in a manner that ensures the preparation 14. Yes of financial statements in accordance with international accounting standards. In addition to a set of annual financial statements, a state-owned enterprise must prepare a 15. Yes set of interim financial statements for periods of 6 months. A state-owned enterprise, considered to be a public interest company in accordance with 16. the Law on the Audit of Financial Statements of the Republic of Lithuania, apart from the Yes annual report must additionally prepare a 6-month interim report. The following additional details must be provided in an annual report of a state-owned 17. Yes enterprise or an annual activity report of a state enterprise:
31 Information on the compliance with the guidelines on the transparency
Preparation of sets of financial statements and reports
17.1. A short description of the operating model of the state-owned enterprise; Yes
Information about major events, which had occurred during a fiscal year and later (prior 17.2. to the preparation of the annual report or the annual activity report) and which were of Yes primary importance to the activities of the state-owned enterprise; The results of implementation of the targets specified in the established business strategy 17.3. Yes of the state-owned enterprise;
17.4. The profitability, liquidity, assets negotiability, and debt indicators; Yes
The Company does not fulfil 17.5. The fulfilment of the specific obligations; any special obligations
17.6. The implementation of the investment policy, planned investment projects and investments Yes
17.7. as well as those under implementation during the reporting year; Yes
17.8. The implementation of the risk management policy applicable at the state-owned enterprise; Yes
17.9. The implementation of the dividend policy at state-owned enterprises; Yes
The total annual payroll fund, the average monthly salaries according to the positions held 17.10. Yes and (or) divisions; Information on the compliance with the provisions of Chapters II and II of the Description, 17.11. including the information on how they are being implemented, what provisions have not Yes been complied with and why. State-owned enterprises, which are not imposed a duty to prepare a social responsibility report, are recommended to respectively provide information in their annual reports on the 18. Yes issues of environment protection, social and personnel-related issues, the protection of human rights, anti-corruption and anti-bribery measures. If the information specified in Clause 17 of the Description is considered a commercial (industrial) secret or confidential information of a state-owned enterprise, the state-owned 19. enterprise is entitled not to disclose such information; however, it must specify in its annual Yes report or the annual activity report that this information is not being disclosed and specify reasons for nondisclosure. Other information not specified in the Description may be provided in an annual report of a 20. Yes state-owned enterprise. A state-owned enterprise, which is a parent company, must provide the structure of the group of companies, the details of each subsidiary specified in Clauses 5.1–5.3 of the Description, the equity interest in the subsidiary (the percentage share), the financial and 21. non-financial performance results of a fiscal year in its consolidated annual report, and if Yes it is not obliged to prepare a consolidated annual report, in its annual report. If a state- owned enterprise, which is a parent company, prepares a consolidated annual report, the requirements of Clause 17 of the Description apply to it mutatis mutandis. An interim report of a state-owned enterprise or an interim activity report of a state enterprise must contain a short description of the operating model of the state-owned enterprise, the analysis of financial performance for a reporting period, information on 22. Yes major event, which had occurred during the reporting period, and also profitability, liquidity, assets negotiability, debt indicators and their changes in comparison with the respective period of the previous year.
Audit information
Audit of the Company‘s financial statements is conducted in accordance with International Standards on Auditing. The public procurement tender for the audit of the consolidated and financial statements of AB Lietuvos geležinkeliai and separate subsidiaries, prepared as to International Financial Reporting Standards, adopted in the EU, for the year 2020–2022, was won by KPMG Baltics, UAB. The candidacy of auditors was confirmed by the LTG Audit Committee, it was approved by the Board of LTG and the confirmation of the shareholder was obtained. The contract for audit services was signed on 23 June 2020.
The fee for the audit of the financial statements for the year 2020 established to the audit firm was EUR 23 thousand (without VAT). During the reporting period the auditor did not provide any additional services not related to the audit of the financial statements of the Company.
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Occupational safety and health
OHS risk management in 2020
01 02 03 Raising occupational COVID-19 prevention Updating instructions safety competences and provision of related PPE and legislation
04 05 06 OHS digitalization Occupational risk Taking care of worker‘s assessment, management health of psychosocial risks
• The main objectives in ensuring the occupational safety which establish how much time is allocated for practice and health (the OSH) in the Company is strengthening subsequent to the acquired qualification. leadership and culture of employees and improvement of processes and measures regulating the occupational • All employees are involved in Safety days which take place safety and health seeking to reduce the risk of damage to on the first day of each month (regarding competences health and occurrence of incidents. for safe work, sobriety prevention, personal protective equipment at work, recommendations during the COVID • Seeking to develop independent safety culture in the virus, safe work place, first aid for heat exhaustion, LTG Group the activity is standardized and organized by musculoskeletal disorders and their prevention and other applying the PACI elements (plan, act, check, improve), relevant topics). in addition by implementing leadership of each employee and ensuring social dialogue, distribution of duties, rights • The Company carries out the prevention of work-related and responsibilities in the field of safety. incidents, accident at work and on the way to and from work, health disorders and occupational diseases, all • Seeking to ensure competence of employees in accidents are investigated. Employees of LG Group performance of works delegated to them, the matrix of are additionally insured against accidents at the competence management (MCM) has been prepared, employer’s expense. which includes trainings necessary for the position regarding matters of occupational safety and security, • At the employer’s initiative the employees are vaccinated thus the heads of departments can quickly assess what against influenza free of charge. MCM related trainings are needed for a new employee or when the certificate of a current employee expires. In • In 2020, much attention was paid to the assessment and 2020, 7 (compulsory first aid, manual handling of loads, management of psychosocial risks of employees: work at height, occupational safety and health of heads digitized psychosocial risk assessment questionnaires of departments, employee representatives etc.) remote were developed; at the initiative of the Occupational training of occupational safety and health programmes, Safety and Health Team, about 20 employees of the LTG programme tests Moodle were developed. Group participated in the project / training to increase the mental health competencies of corporate employees • Given that new joiners or existing employees do not have implemented by the Vilnius Public Health Bureau. the necessary qualifications to perform works involving high risk, a process of practical skills in the work place • In three cities, employees have access to psychological (traineeship) and the matrix have been developed, help to deal with psychological trauma after an accident or incident.
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• Risk assessment of biological factors was performed, • In 2020, Full-scale instruction project was implemented it was introduced to employees. at the LTG Group level, by establishing the same periodicity for compulsory instruction at a work place and eliminating • The COVID-19 situation was managed: the opportunity the risk of work without instruction, providing with a to work remotely was ensured in consideration of possibility to test the employees’ knowledge in the Moodle professional risk of remote work, the occupational conduct system, instruct remotely. An intensive amendment of was regulated; leaflets, posters of safe behavior as well as related legislation took place: the process of instruction information on mano.litrail.lt were prepared; employees at a work place was updated providing with a possibility to are fully provided with personal safety equipment for confirm the fact of instruction in the DVS system through COVID-19 prevention; an additional insurance service creating relevant registers for instruction, by optimizing was acquired for those infected with the COVID-19 virus, the outdated legislation 21 instructions of occupational causing serious health disorders; the training on safe safety and health were approved. conduct was organized by the National Public Health Centre to employees who are in contact with customers; • All employees are provided with high-quality collective periodic inspections were carried out on implementation and personal protective equipment, ensuring of COVID-19 prevention; the prevention is ensured by rental services of work clothing with periodical cleaning the emergency management group formed by Lietuvos and repairing, acquisition of work footwear and other geležinkeliai. personal protective equipment. In 2020, the Company’s lists of personal protective equipment were updated, • Having assessed the risks posed by COVID-19 and performance of public procurement was ensured seeking to improve communication with personnel, ensure guaranteeing an uninterrupted provision of personal the least possible contact with a colleague the following protective equipment to employees. Employees are has been completed: involved in decision making with regard to selection and procurement of more convenient personal and other • A channel was created on TEAMS program in which protective equipment. members of the occupational safety and health committee and representatives were involved. • Regulation of contractual relationship with All relevant information is shared on the channel, contractors, customers, providers of goods and related legislation is coordinated, consultations take services was updated: safety provisions were updated, place; penalties were established in the contracts for provision of goods and services, provisions regulating occupational • A channel was created on TEAMS program where safety and health were included in the Code of Conduct incompliances in the departments are expeditiously of Suppliers, a leaflet about risk factors and compulsory presented to their heads, as well as plans for compliance with safety requirements in provision of prevention; services/goods in the territory of the LTG Group companies was prepared for contractors, suppliers of goods and • Seeking for a timely improvement of qualification of services, a questionnaire of inspection of safe activity was employees, remote training related to OSH matters; prepared for contractors.
• The initial instruction process was updated on the Seeking to provide clear and integrated information, documents basis whereof a remote initial instruction process related to the occupational safety and health to all employees, is carried out. a column of the Occupational Safety and Health was created on the internal group website of AB Lietuvos Geležinkeliai (mano. litrail.lt).
34 Corporate social responsibility report
Traffic safety
UAB Vilniaus lokomotyvų remonto depas implements technical the management of conflicts of interest. Therefore, employees, and organizational measures to ensure that the managed who are obliged, submit declarations of private interests in railway infrastructure and rolling-stock, as well as the railway accordance with the procedure established by the Law on the traffic participants, are protected from railway catastrophes, Coordination of Public and Private Interests of the Republic accidents and incidents and their consequences. of Lithuania, employees, who do not have this obligation, declare private interests in the employee self-service module The vision of UAB Vilniaus lokomotyvų remonto depas in the Manolitrail. For the purpose of objectivity and transparency field of traffic safety is simple and all-encompassing - 0(zero) in decision-making, procedures for preparation, consideration incidents, i.e. safe society and company without any railway or adoption of decisions on the removal of employees and catastrophes, accidents and incidents. It should be noted, that removal from decisions that may cause a conflict of interest in 2020 no catastrophes, accidents and incidents occurred in are addressed. the railway infrastructure managed by UAB Vilniaus lokomotyvų remonto depas. UAB Vilniaus lokomotyvų remonto depas follows the legal requirements by checking the compliance of the recruited In 2020, in order to ensure high level of the railway traffic safety, persons with the legal requirements and assessing them UAB Vilniaus lokomotyvų remonto depas: from the aspect of impeccable reputation. At the same time, the Company is strict towards its partners - the solvency and • identified relevant safety objectives focused on the reputation of business partners are analyzed and assessed, highest operational risks, developed and implemented a thus identifying potential risks arising from activities of comprehensive plan of measures to achieve them takes business partners. into account the good experience of other countries and legal regulations; To promote responsibility and activity of employees and other persons, the Company enables them to report anonymously • fosters an integrated safety culture model that raises about violations of corruptive nature through the following safety awareness among workers. reporting channels (phone (8 5) 269 3600, e-mail prevencija@ bekorupcijos.lt, report on the website www.litrail.lt/korupcijos- In addition, UAB Vilniaus lokomotyvų remonto depas manages prevencija). the risks related to railway traffic safety by implementing measures to eliminate or reduce the risks to the lowest The Company conducts a targeted survey of employees‘ acceptable level, performs targeted traffic safety inspections resistance to corruption every year - the opinion of each and periodic audits of the elements of the traffic safety employee is important, which helps to strengthen the management system, ensures continuous monitoring of the transparency of the Company‘s activities. The results of state of road safety based on safety indicators, which allows the survey performed in 2018 – 2020 show that the level to proactively prevent railway accidents, traffic accidents, of honesty and awareness of employees not to give illegal incidents and their consequences. remuneration/gifts is extremely high and employees rarely face corruption in their activities. Employee involvement in It should be noted that in the event of a railway accident, traffic the corruption prevention activities is improved by other accident or incident, their investigations are carried out in order means as well – employees are familiarized with the most to identify the direct and indirect reasons of the incidents and important documents regulating these activities, trainings are to implement systematic measures to ensure that the incidents organized in cooperation with STT and other institutions, other do not occur in the future. educational measures are implemented.
Prevention of corruption and bribery Data protection
UAB Vilniaus lokomotyvų remonto depas follows the principle VLRD takes care of the protection of personal data and cherishes of zero tolerance for corruption, which means that the Company the information, entrusted to the Company by its employees does not tolerate any form of corruption. In its activity UAB and customers. In doing so, the Company strictly follows the Vilniaus lokomotyvų remonto depas implements a set of requirements of the EU General Data Protection Regulation measures and processes aimed at forming a transparent and and other data protection legal acts for the protection of data smoothly functioning company of impeccable reputation. Fair subjects. To implement the requirements of the EU General and responsible behaviour in the company is also expected Data Protection Regulation in 2020, the Company did the from its employees; therefore, all employees of UAB Vilniaus following in the sphere of data protection: lokomotyvų remonto depas in their daily work follow the ethical principles and standards provided for in the Code of Ethics for • took care of employees awareness of personal data Employees, which was approved in 2020. protection issues; therefore, data protection trainings were provided to employees; UAB Vilniaus lokomotyvų remonto depas is committed to ensuring the declaration of public and private interests and • in order to have impeccable personal data protection
35 Corporate social responsibility report
documentation, the data protection risks have been In 2020, in the company trainings on package handling and identified and, as a result, recommendations to persons accounting, and handling and accounting of chemicals were in-charge of data protection have been made, and a plan held for employees. 9 employees of VLRD took part in these with measures to mitigate these risks has been provided; trainings whose activity is related to these areas.
• much attention was paid to the review and updating of the The Company also seeks to protect natural and energy resources Company‘s personal data documents, process standards, through the rational use of materials and raw materials, proper mandatory data processing activity records, in the process maintenance of rolling stock and thus prolonging its service of which the Company‘s employees were also involved; life. For reduction of the cost of energy resources, in 2020 the Company replaced all halogen luminaires with LED luminaires • the group enforced the most important personal data in one of the workshops, replaced the electric heating with a processing document – the Personal Data Processing much more efficient air-to-air heating system in the current Methodology, which also replaced the personal data repair unit. processing rules in the Company. During the production activities conducted in the depot large During the reporting period, the Company did not receive any amounts of a wide variety of hazardous and non-hazardous requests from data subjects on the exercise of their rights, nor waste accumulate. The generated waste is sorted to ensure did it conduct any data protection impact assessments. During high recycling possibilities. As much as 92 percent of the waste 2020, there were no accidents of breach of data safety. It is also generated during the previous year was suitable for recycling, gratifying that the need of consulting with the data protection i. e. more by 5% than in 2019. From 2019 the Company‘s officer is increasing in the Company. divisions have implemented a system of reusable industrial wipes, which allows to reduce the amount of generated Environmental protection hazardous waste. During 2020 in Vilnius branches of the depot, where the amount of used hazardous wipes were the largest The Company complies with common obligations of company and this system of reusable wipes was implemented earliest, group of AB Lietuvos Geležinkeliai to environmental protection: the amount of these hazardous waste was reduced by 12.88 efficiently uses energy and natural resources, seeks solutions to tons, i.e. y almost by 60% compared to 2019 . reduce the negative impact of its activities on the environment and climate change. The Company also participates in the project “No paper” implemented throughout the LTG group of companies, which In the Company, the performance of environmental protection moves to more efficient document management and abandons functions is centralized. In order to comply with the requirements the use of paper documents. For several years now, the of environmental legislation, internal environmental inspections Company has been involved in the campaign “We do sort in our are carried out, periodic control of pollutants released and company” of the Association of Manufacturers and Importers, discharged into the environment is performed, and reports which aims to reduce the amount of household electrical and on the impact of activities on the environment are submitted. electronic equipment and batteries and accumulators going In 2020, in UAB Vilniaus lokomotyvų remonto depas the data into mixed municipal waste, landfills. of the inventory reports of air pollution sources and emissions from three divisions was updated. In response to growing public concern about climate change and pollution, the Company remains committed to reducing Also, the Company has implemented the Environmental the environmental impact of its operations, using natural Management System LST EN ISO 1400: 2015. The system and energy resources sustainably, meeting climate change includes compliance with all legal and contractual requirements mitigation goals and providing the most environmentally for environmental protection imposed on production and the friendly rolling stock repair, maintenance and production expansion thereof; services.
• continuous improvement of efficiency of environmental Cooperation with educational institutions protection and pursuit of pollution prevention; In 2020, UAB Vilniaus lokomotyvų remonto depas was actively • rational and economical use of natural resources and seeking to attract the young talents in order to ensure sufficient energy; future resources for maintenance of safe infrastructure. Actively participating in activities of universities and colleges • reduction of the Company‘s emissions to air and water that prepare the needed professionals, VLRD promoted the or soil; sector of railway as an attractive and perspective workplace ensuring long-term career opportunities. During this year, • setting environmental objectives and allocating the in cooperation with educational institutions, 17 students necessary resources to achieve them; were recruited for internship, during which they gained good practical skills related to railway infrastructure, got familiarized • continuous education of employees in the field of with the company’s structure, principal activities and career environmental protection. 36 Corporate social responsibility report
opportunities. The internship programme Growing Leaders students were invited to join the LTG team for the summer. In took place in summer for two consecutive years, which the summer of 2020, more than 20 students remotely joined allowed students from Lithuanian and foreign universities to various Group companies or corporate functions. develop not only their professional but also leadership skills, attracted 2 students studying in universities in Lithuanian Every year, LTG joins the Open House festival. Although and abroad. In addition to performance of their functional the buildings could not be opened to visitors in 2020 due to tasks in daily activities, the youth in separate groups created the pandemic, this did not prevent the opening of the most remote studying programmes for improvement of digital interesting open-air railway facilities in Vilnius. Tours were literacy contributing value to our employees in such a way. organized in the yard of the building at Mindaugo St. 12 in, in After the summer internship, one student joined the team as the territories of Vilnius railway station and VLRD Vilnius depot a permanent employee. or return wheel. The route „By the railway“ gained enormous popularity - places for excursions were filled in just in 15 Every year VLRD participates in the biggest Career Day events. minutes from the beginning of registration. Unfortunately, these events were organised in a slightly different manner due to the pandemic - for the first time in history, Kaunas University of Technology has organised a virtual Innovations Career Day event. Over 10 thousand participants watched the event. Also, VLRD participated in the fair for high school Employees of LTG Group faced major cultural changes when students, “Studies 2020”, as a future employer. As many as most of the employees of administrative functions moved to 37,000 visitors attended this fair. Both during this fair and over work from home due to the pandemic. However, the work kept the year, social campaigns encouraging students to choose on going. Firstly, thanks to technological solutions implemented railway professions were carried out. at the Group level, especially the Microsoft Teams platform. All meetings and discussions were relocated to this platform, the implementation whereof began as early as in 2019. Openness to the society In addition to the tools of remote work the project The Group seeks to operate in an open manner, by involving #ModernTeam („#ModerniKomanda) was implemented as parties concerned and taking into consideration the needs well, which resulted in major changes in arrangement of day- of all members of society. All services provided by the to-day activities, and, at the same time, together with changes Group companies are developed in cooperation with parties a part of internal processes was also adjusted. concerned, in accordance with the national legislation and creating value for the shareholder – the State of Lithuania. Platforms of remote communication were enabled not only by supporting the internal communication of teams but also LTG also maintains an active social dialogue with residents of to a greater extent, by introducing services and projects to Vilnius station area, carries out the project Vilnius Connect in concerned parties. Both AB LTF Infra and also the group cooperation with the city municipality develops, the purpose of technology centre AB LTG Digital and VLRD organized remote which is to involve residents of this area, as in the nearest future events to clients or suppliers, and introduced the projects this area with its attractive location is going to go through major carried out and the future plans to them. transformation in the implementation whereof the residents are also involved. Cutting-edge solutions were also implemented by optimizing business processes: in the group company VLRD, All device Various companies of LTG Group actively joined this initiative: – the tool of planning of facility failures and repairs - was fully from the passenger transportation company LTG Link or the enabled: more than 300 facilities were tagged with NFC sensors, manager of infrastructure LTG Infra, to the parent company which allows managing the current facilities more efficiently and Lietuvos Geležinkeliai or Vilniaus lokotomotyvų remonto increasing productivity. depas. The latter company opened its doors to the territory of Vilnius depot not only for tours but also for cultural events. We were actively implementing remote learning platforms and An episode of the electronic music project Antidote was filmed encouraged employees of all the Group companies to use them, in the unique surroundings of the returning wheel, and a work we were encouraging employees to individually study topics by artists participating in Vilnius Connect project was born in which were of their interest in the Moodle environment. the depot hangars - a painted wagon “Back to Nature”, later exhibited at the Railway Museum. The project No Paper is continued at the Group level, the purpose whereof is to reduce consumption of paper, conserve For the second year in a row, the Group had a paid internship natural resources, and also make the work process in the program „Growing Leaders“ in place: final year university organization more efficient.
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Equal opportunities
We believe that diversity adds value, promotes development of truthfulness, openness and integrity, application of uniform and creativity, helps to better understand clients and principles, non-discrimination of any person or a society group meet their needs and extend the possibilities to adapt to regardless of their gender, race, nationality, language, origin, environmental changes. Therefore, we promote diversity social status, age, sexual preferences, disability, ethnicity, and equal opportunities to everyone, during trainings and in membership in a political party or association, religion, beliefs implementing communication instruments, we introduce and or views, and taking lawful measures to prevent the perceived enhance the understanding of diversity and engagement, we discrimination. These principles are enshrined in internal endeavor to involve employees and encourage them to share legislation setting out the internal processes of the Company; their experience. e. g. recruitment, performance assessment, remuneration review, ensuring social security, etc. The Company does not We create diversity-conducive environment in accordance tolerate any forms of direct or indirect discrimination, nor with the approved Policy of Equal Opportunities. Principles of instructions to discriminate and any form of harassment, non-discrimination and equal opportunities as well as other psychological violence, bullying or abuse of authority. The fundamental principles of equal opportunities are defined in the Company has the Trust Line in place (by phone and email) values and ethical principles of the company group of LTG which for employees to report on experience of discrimination or provide for intolerance of discrimination, pursuing of the course harassment or inform on such breaches.
38 Definitions
Revenue + Income from other activities after assessment of grants intended for Revenue compensation of losses due to passenger transportation activities, excluding income from financial activities
Sales revenue Sales revenue, excluding income from financial and other activities
Costs Costs, excluding the corporate tax and financial activities costs
Financial debt Interest-bearing financial debt, including financial / operating lease
Interest-bearing financial debt including financial lease / operating lease, less net cash Net debt and cash equivalent investments Net profit/loss for the period of the last 12 months / average equity for the reporting Return on equity (ROE) period Net profit/loss for the period of the last 12 months / average assets for the reporting Return on assets (ROA) period Net profit (loss) for the period of the last 12 months / (average of assets for the reporting Return on investments (ROI) period - the average of current liabilities for the reporting period)
EBIT Profit (loss) before the corporate tax – the result of financial investment activities
Profit (loss) before the corporate tax – the result of financial investment activity + EBITDA depreciation and amortization
EBIT margin EBIT / sales revenue
EBITDA margin EBITDA / sales revenue
Net profit margin Net profit (loss) / sales revenue
Equity ratio Equity at the end of the period / total assets at the end of the period
Asset turnover indicator Sales revenue for the period of the last 12 months / total assets at the end of the Period
Quick ratio Current assets at the end of period - inventories / current liabilities at the end of period
Total liquidity ratio Current assets at the end of the period / current liabilities at the end of the period
The number of listed active employees as of the end of the period (excluding the Number of employees employees on parental leave, military service, long-term incapacity)
Average salary Average gross salary per employee
39 Vilniaus lokomotyvų remonto depas Financial statements
Prepared in accordance with international financial reporting standards as adopted by the european union and the independent auditor’s report
For the financial year ended 31 December 2020
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KPMG Baltics, UAB Phone: +370 5 2102600 Lvovo St. 101 Fax: +370 5 2102659 LT-08104, Vilnius E-mail: [email protected] Lithuania Website: kpmg.com/lt
Independent Auditor’s Report
To the Shareholders of UAB Vilniaus lokomotyvų remonto depas
Opinion
We have audited the financial statements of UAB Vilniaus lokomotyvų remonto depas (“the Company”). The Company’s financial statements comprise: • the statement of financial position as at 31 December 2020, • the statement of profit or loss and other comprehensive income for the year then ended, • the statement of changes in equity for the year then ended, • the statement of cash flows for the year then ended, and • the notes to the financial statements, comprising significant accounting policies and other explanatory information. In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Company as at 31 December 2020, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards, as adopted by the European Union.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with the Law on Audit of Financial Statements of the Republic of Lithuania and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Other Information
The other information comprises the information included in the Company’s annual management report, but does not include the financial statements and our auditor’s report thereon. Management is responsible for the other information. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, 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.
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©2021 KPMG Baltics, UAB, a Lithuanian limited liability company and a Company code: 111494971 member firm of the KPMG global organization of independent member firms affiliated VAT code: LT114949716 with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
In addition, our responsibility is to consider whether information included in the Company’s annual management report for the financial year for which the financial statements are prepared is consistent with the financial statements and whether annual management report has been prepared in compliance with applicable legal requirements. Based on the work carried out in the course of audit of financial statements, in our opinion, in all material respects: • The information given in the Company’s annual management report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
• The Company’s annual management report has been prepared in accordance with the requirements of the Law on Financial Reporting by Undertakings of the Republic of Lithuania.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation of the financial statements that give a true and fair view in accordance with International Financial Reporting Standards, as adopted by the European Union, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company’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 to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the 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 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 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 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 internal control.
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© 2021 "KPMG Baltics", UAB, a Lithuanian 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. All rights reserved.
• 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 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 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 to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. 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.
On behalf of KPMG Baltics, UAB
Vilamantas Karalius Certified Auditor
Vilnius, the Republic of Lithuania 1 March 2021
The electronic auditor‘s signature applies only to the Independent Auditor‘s Report on pages 41-43 of this document.
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© 2021 "KPMG Baltics", UAB, a Lithuanian 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. All rights reserved. UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Statement of financial position
Notes 2020 2019 NON-CURRENT ASSETS Property, plant and equipment 8 13,968 9,265 Land - - Buildings and structures 6,441 5,102 Machinery and plant 1,768 1,742 Vehicles 1,358 109 Other equipment, fittings and tools 548 440 Construction in progress and prepayments 3,853 1,872 Right-of-use assets 9 2,676 3,943 Intangible assets 10 316 71 Software 63 1 Other intangible assets 253 70 Investment property 11 856 631 Financial assets 12 369 - Deferred tax assets 31 506 343 Total non-current assets 18,691 14,253 CURRENT ASSETS Inventories 13 16,565 11,929 Non-current assets held for sale 13 1 1,521 Contractual assets 14 2,776 1,178 Trade and other receivables 15 8,874 12,654 Prepayments 16 1,338 4,243 Cash and cash equivalents 17 482 4,128 Total current assets 30,036 35,653 Total assets 48,727 49,906 The accompanying explanatory notes are an integral part of these financial statements.
44 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Statement of financial position (continued)
Notes 2020 2019 EQUITY Share capital 18 19,017 19,017 Legal reserve 20 1,902 1,902 Retained profit (loss) 956 7,690 Total equity 21,875 28,609 Non-current liabilities Lease liabilities 21 1,217 2,562 Employee benefits 22 723 919 Grants 23 14 41 Total non-current liabilities 1,954 3,522 CURRENT LIABILITIES Current portion of borrowings 21 10,470 - Lease liabilities 21 1,552 1,453 Income tax liability 31 631 562 Employee benefits 24 2,594 2,855 Trade and other payables 25 7,245 5,482 Liabilities from contracts with customers 26 2,198 7,312 Provisions 22 208 111 Total current liabilities 24,898 17,775 Total liabilities 26,852 21,297 TOTAL EQUITY AND LIABILITIES 48,727 49,906
The accompanying explanatory notes are an integral part of these financial statements.
Chief Executive Officer Albertas Bajorinas
Acting Head of the Reporting and Control Vidas Paltarackas Division of the Accounting Services Centre of AB Lietuvos Geležinkeliai, acting in accordance with Authorization No ĮG(VLRD)-17 of 26 February 2021
45 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Statement of profit or loss and other comprehensive income
Notes 2020 2019 Revenue 27 68,058 52,218 Other income 28 167 76 Total income 68,225 52,294 Employee benefit expenses 29 (14,650) (14,092) Depreciation and amortisation 8,9,10,11 (2,247) (2,294) Fuel (354) (496) Materials (39,208) (21,356) Electricity (452) (505) Repairs and maintenance (2,071) (2,524) Decrease (increase) in impairment of inventories (62) (120) Decrease (increase) in impairment of receivables (248) (16) Decrease (increase) in provisions 22 97 2 Other expenses (7,173) (6,397) Operating profit (loss) 1,857 4,496 Finance income 30 19 37 Finance costs 30 (451) (235) Profit (loss) before income tax 1,425 4,298 Income tax 31 (469) (623) Net profit (loss) 956 3,675 Other comprehensive income (expenses) - - Total comprehensive income (expenses) 956 3,675 The accompanying explanatory notes are an integral part of these financial statements.
46 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Statement of changes in equity
Authorised Retained share Share Legal Other earnings
Notes capital premium reserve reserves (loss) Total
Balance as at 31 December 2018 19,017 - 1,861 - 4,056 24,934 Net profit (loss) - - - - 3,675 3,675 Other comprehensive income after tax ------Total comprehensive income (expenses) - - - - 3,675 3,675 Transfers between reserves - - 41 - (41) - Used reserves ------Total transactions related to owners of the company - - 41 - (41) - Balance as at 31 December 2019 19,017 - 1,902 - 7,690 28,609 Net profit (loss) - - - - 956 956 Other comprehensive income after tax ------Total comprehensive income (expenses) - - - - 956 956 Unrecognised profit (loss) for the reporting year ------Transfers between reserves ------Dividends - - - - (7,690) (7,690) Total transactions related to owners of the company - - - - (7,690) (7,690) Balance as at 31 December 2020 19,017 - 1,902 - 956 21,875 The accompanying explanatory notes are an integral part of these financial statements.
47 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Statement of cash flows
Notes 2020 2019
Cash flows from operating activities Net profit (loss) 956 3,675 Adjustment to non-cash items Depreciation and amortisation expenses 8,9,10,11 2,274 2,320 (Depreciation) of grants (27) (26) (Gain) loss from disposal/write-off of non-current assets 32 29 (Decrease) increase in impairment of inventories and 310 136 receivables Change in accrued income / expenses 279 124 Interest expenses 30 - Increase (decrease) in provisions 22 97 (73) Effect of currency exchange fluctuations 76 (60) Lease liability interest 129 173 Corporate income tax expenses (income) 31 469 623 Cash flows from operating activities after adjustment 4,625 6,921 to non-cash items Changes in working capital Decrease (increase) in inventories (4,686) (2,820) (Increase) in contractual assets (251) (213) Decrease (increase) in trade and other receivables and 7,338 (5,235) prepayments (Increase) in liabilities from contracts with customers (5,114) 7,309 (Increase) decrease in current and non-current trade (943) (137) payables and received prepayments Increase (decrease) in employment related liabilities (458) 22 Increase (decrease) in other non-current and current 51 798 payables (Paid) income tax (902) (943) Net cash flows from operating activities (340) 5,702 Cash flows from investing activities (Acquisition) disposal of non-current assets (4,381) (1,221) (Acquisition) disposal of investment (110) - Net cash flows from investing activities (4,491) (1,221) Cash flows from financing activities Loans received 10,470 - Right-of-use asset payments (1,466) (1,330) (Paid) interest on lease (129) (173) (Paid) dividends (7,690) - Net cash flows from financing activities 1,185 (1,503) Increase (decrease) in net cash flows (3,646) 2,978 Cash and cash equivalents at the beginning of the period 4,128 1,150 Cash and cash equivalents at the end of the period 482 4,128 The accompanying explanatory notes are an integral part of these financial statements.
48 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes
1. Background information stocks; manufacture and depot, overhaul and routine repair of freight wagons; as well as repair of nods and UAB Vilniaus lokomotyvų remonto depas (hereinafter aggregates. referred to as the VLRD) was registered in the Register of Legal Entities of the Republic of Lithuania on 1 Octo- As at 31 December 2020 and 2019, the sole shareholder ber 2003 after the reorganisation of a special structural of the Company was AB Lietuvos geležinkeliai. branch - Vilniaus lokomotyvų depas – by separating the activities of exploitation and repair of rolling stocks. In its As at 31 December 2020, the share capital of UAB Vil- activities the Company follows the Constitution of the Re- niaus lokomotyvų remonto depas comprised 65,663 or- public of Lithuania, Law on Companies of the Republic of dinary registered shares with par value of EUR 289.62 Lithuania, and other effective legal acts of the Republic each. Value of the share capital amounted to EUR 19,017 of Lithuania. thousand. As at 31 December 2020, the associated com- pany UAB Lokomotyvai ir transporto komponentai and The Company is a limited civil liability legal entity indepen- the subsidiary OOO Rail Lab did not own any of the Com- dently organising economic, financial, organisational and pany‘s shares. The Company has not acquired its own legal activities. The Company is a private limited compa- shares. ny, company code: 126280418, VAT code: LT262804113, legal (registration) address: Švitrigailos St. 39, LT-03209 As at 31 December 2020, the number of active emplo- Vilnius, its shareholder is AB Lietuvos geležinkeliai. The yees in the Company was 935 (as at 31 December 2019: Company is part of AB Lietuvos geležinkeliai Group. 940).
The Company‘s main activity comprises the following: As at 31 December 2020, the Company held 25% of manufacture of new locomotives, autodraisines and road shares of the associated company UAB Lokomotyvai ir machinery of infrastructure; performance of overhaul transporto komponentai and 99% of shares of the subsi- and routine repair and maintenance of railroad rolling diary OOO Rail Lab.
Owned share, Company Registered % name address Main activities 2020 2019
UAB Lokomotyvai ir Švitrigailos St. 39, Vilnius 25 25 Provision of railway trans- transporto komponentai port services (non-per- formed activity) OOO Rail Lab Internacionalnaja ul., 36, 99 - Provision of railway trans- Minskas port services
2. Significant accounting policies
Basis of preparation. The Company’s financial state- ments have been prepared in accordance with the Inter- national Accounting Standards (hereinafter referred to as the IAS) and the International Financial Reporting Stan- dards (hereinafter referred to as the IFRS) as adopted wi- thin the European Union. The main accounting policies applied when preparing the financial statements of the Company are provided below. The mentioned policies were applied to all the reporting periods presented in the financial statements unless stated otherwise.
The Company’s financial year coincides with the calendar year.
49 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
2. Significant accounting policies shareholding of between 20 and 50 per cent of the voting (continued) rights a significant influence can be made.
Changes in accounting policies. The Company has con- Foreign currency. Transactions in foreign currency are sistently applied the accounting policy set out in this measured in functional currency applying the currency Note to all reporting periods presented in these financial exchange rates applicable during transactions. Monetary statements. assets and monetary liabilities in foreign currency are re- valuated in functional currency on the date of preparation Use of estimates and judgements. The preparation of of the Statement of financial position applying reference the financial statements in conformity with the IFRS, the exchange rates set and published by the European Cen- IAS requires the use of certain significant accounting es- tral Bank. Currency exchange gains or losses are accoun- timates and assumptions, which affect application of ac- ted for as profit or losses in the Statement of profit or loss counting principles, and amounts related to assets, liabi- and other comprehensive income. Non-monetary assets lities, income and expenses. Estimates and assumptions and liabilities, denominated in foreign currency and me- related to them have been based on historical experience asured at fair value, are revaluated in functional currency and other factors, which conform to existing conditions, at exchange rates valid on the date of determination of and based on their results a conclusion is made about re- the fair value. Non-monetary assets and liabilities deno- sidual values of assets and liabilities, decisions on which minated in foreign currency and measured at cost are cannot be made based on other sources. The estimates revaluated in functional currency at exchange rates valid and related assumptions are continually revised and rely on the date of recognition of assets and liabilities in the upon historical experience and other factors, including statement of financial position. Currency exchange gains expectations on future events based on existing circums- or losses are stated as profit or loss in the Statement of tances. Judgements made by the management in the profit or loss and other comprehensive income. application of the IFRSs, the IASs that have significant effect on the financial statements and estimates of the Property, plant and equipment. Property, plant and Company with a significant risk within the next financial equipment are non-current tangible assets which: a) are year are discussed in Note 3 Significant accounting esti- kept for purposes of production of goods or provision of mates and judgements. services, or for administrative purposes; and b) are inten- ded to be used for a period longer than one reporting Going concern. These financial statements of the year period. The cost of property, plant and equipment shall ended 31 December 2020 have been prepared in accor- only be recognised as assets when and only when: a) it dance with an assumption made by the Company’s ma- is probable that the future economic benefits embodied nagement that the Company will continue its activities. in the asset will eventuate; and b) the asset possesses a cost or other value that can be measured reliably. The estimates were made on the basis of all the available information about threats posed by COVID-19. It is note- Property, plant and equipment are accounted for at cost worthy that the final impact of the COVID-19 pandemic less accumulated depreciation and impairment loss. The on the operation conducted by the Company cannot be initial value of non-current tangible assets comprises established yet, however when making estimates of the their acquisition cost, including unrecoverable taxes of likely impact of major factors of COVID-19 on the results acquisition, capitalised borrowing costs and any direct- of the Company, the management of the Company has ly attributable costs of bringing the asset to its working not identified any threats to the going concern of the condition and location for its intended use. Expenditures Company. The Company took measures to address the incurred after the tangible non-current assets have been occurring risk. put into operation are normally charged to profit or loss in the period the costs are incurred. Functional and presentation currency. The amounts in these financial statements have been presented in euro, Where separate parts of items of property, plant and unless otherwise stated. The functional currency of the equipment have different useful lives, they are accoun- Company is euro. In these financial statements all amo- ted for as separate items (components) of property, plant unts have been expressed in euro and rounded down to and equipment. Costs of replacement of the part of an the nearest thousand (EUR ‘000). Because of rounding item of property, plant and equipment are capitalised figures between tables may not match. Such inconsisten- only if it is probable that economic benefits will be deri- cies are considered as insignificant in the financial state- ved from that part, and the cost of a new constituent part ments. can be measured reliably. The residual value of the old constituent part is written off. The costs of the day-to-day Associates. Associates are entities over which the Com- servicing of property, plant and equipment are accoun- pany has significant influence (directly or indirectly) but ted for as profit or loss as incurred. not control. Generally, it is assumed that when owning a
50 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
2. Significant accounting policies (continued)
Groups of property, plant and equipment Useful life
Buildings and structures 8-50
Machinery and plant 5-20
Road vehicles 4-10
Rolling stock (including railway wagons) 8-20
Computers and hardware 4-6
Other equipment, fittings and tools 4-30
Subsequent to their recognition property, plant and the production, provision of services, or for administra- equipment shall be accounted for at cost less any accu- tion purposes or sale. Investment property is stated at mulated depreciation and any impairment loss. historical cost less accumulated depreciation and impai- rment loss, if any. Depreciation is calculated by applying Repair costs are added to the carrying amount of proper- the straight-line method during estimated useful life: 8 ty, plant and equipment, if it is probable that the Com- to 50 years. Transfers to and from investment property pany will obtain economic benefits from these costs and are made only when there is an obvious change in in- they can be measured reliably. The carrying amount of tended use of assets. When transferring the assets from the replaced part is written off. All other repair and main- investment property to property, plant and equipment tenance expenses are recognised as costs when incurred. used for own needs, apparent cost of those assets is de- emed to be the carrying amount of investment property A gain or a loss on the disposal of property, plant and on the date of transfer. If property, plant and equipment equipment is determined by the comparison of the pro- are transferred to investment property, the Company ac- ceeds from asset sale with its carrying amount and is counts for those assets according to accounting princi- recognized in the Statement of profit or loss and other ples applicable to property, plant and equipment up to comprehensive income. the date of transfer. The apparent cost of transferred in- vestment property is considered the carrying amount of Depreciation. Depreciation of land is not calcuated. that property on the date of transfer. Depreciation on other groups of property, plant and equipment is calculated using the straight-line method to allocate their cost to their residual values over their Intangible assets. The Company’s intangible assets have estimated useful lives. definite useful lives and primarily include capitalised computer software, patents, trademarks and licences. The residual value of an asset is the estimated amount that the Company would currently obtain from the dis- Acquired computer software, licences, patents and posal of the asset less the estimated costs of disposal, trademarks are capitalised on the basis of the costs if the asset was already of the age and in the condition incurred to acquire and bring them to use. expected at the end of its useful life. The assets’ residu- al values and useful lives are reviewed, and adjusted if Intangible assets are amortised applying the straight-line appropriate, at the end of each reporting period. method during estimated useful life that can make up from 3 to 15 years. Amortization period shall be reviewed at the Construction in progress. Construction in progress is end of each financial year. accounted for at the cost of acquisition. This includes the cost of construction, structures and equipment, and The residual value of intangible assets used in the Company other directly attributable expenses. Construction in pro- has to be considered as zero, except for the cases when gress is not depreciated until construction is completed the third party commits to purchase the assets at the end and assets are ready for service. of their useful life or there is an active market for those assets which can be used as a basis for determining the Investment property. Investment property, including residual value; furthermore, it is probable that this market part of buildings and structures, is held for earning ren- will also be present at the end of the useful life. tals and/or for capital appreciation rather than for use in 51 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
2. Significant accounting policies (continued)
Assets held for sale. The Company classifies non-current items. If the contract is a lease contract or includes a lease, assets as held for sale if their carrying amount will be the Company shall account for each lease component of recoverable from disposal rather than their continued the contract as a lease separately from the non-lease utilisation. Such non-current assets and groups of (service) components of the contract. transferred assets, classified as held for sale, are assessed at lower of their carrying amount or at fair value less costs The Company shall not apply the lease recognition to sell. Costs to sell are expenses directly attributed to sales, provisions to short-term leases (leases of up to one year) except for financial expenses and income tax expenses. and leases with low value property (computers, telephones, printers, furniture, etc.). In deciding whether the value Impairment of property plant andequipment, and of an asset is low, the Company shall assess each asset intangible assets. On every date of the Statements of separately. In deciding whether the value of an asset is low, financial position the Company reviews the residual value lease fees over the entire lease period are not assessed. of its property, plant and equipment, and intangible assets Assets with a value of up to EUR 4 thousand are considered to determine whether there is any indication that those low value assets. The Company shall not apply the lease assets have been impaired. If any such indication exists, recognition provisions to all intangible assets. Payments the recoverable amount of the asset is assessed in order related to short-term lease and leases of assets of low to determine the extent of impairment (if any). Where it value are directly recognized as expenses in the Statement is not possible to assess the recoverable amount of the of profit or loss and other comprehensive income. The asset, the Company estimates the recoverable amount Company shall apply the provisions of IAS 38 Intangible of the cash-generating unit to which the asset belongs. Assets to such assets. The Company shall recognize the Where a reasonable and consistent basis of allocation can right to use the asset and the lease liability in the statement be identified, the Company’s assets are also allocated to of financial position at the commencement of the lease. individual cash-generating units, or otherwise they are On the commencement date the Company shall measure allocated to the smallest group of cash-generating units the asset under management at cost. Subsequent to initial for which a reasonable and consistent allocation basis can recognition, assets under management are measured at be identified. cost less accumulated depreciation and accumulated impairment losses, and an adjustment to any revaluation The Company tests intangible assets for possible of the liability. On the commencement date the Company impairment by comparing their recoverable amount shall measure a lease liability at the present value of the against the carrying amount on an annual basis or at any lease payments outstanding at that date. Lease fees shall point when indicators of impairment of intangible assets be discounted using the interest rate provided for in the are present. In case of impairment of intangible assets, the lease contract, if that rate can be readily determined. If carrying amount of intangible assets is reduced to their that rate cannot be readily determined, the Company shall fair value. use the borrowing rate charged by the lessee.
The recoverable amount is the higher of fair value less The borrowing rate to be charged by the lessee shall be costs to sell and value in use. When assessing value in recorded by the Company at the beginning of each year use, the estimated future cash flows are discounted to and used for all new contracts signed in that year and for their present value using a pre-tax discount rate, assessed contracts the terms of which (not all but only for which under current market conditions, an existing time value of the lease liability must be reassessed) have changed during money and risks specific to the asset, which have not been that year. A reassessment of a lease liability occurs when considered in the estimates of future cash flows. the cash flows change from the original conditions of the lease, for example, when changes in the lease term or If the recoverable amount of an asset (or a cash-generating lease payments change based on an index or interest rate. unit) is estimated to be less than its carrying amount, the Changes that were not part of the original lease contract carrying amount of the asset is reduced to its (or a cash- are considered to be lease changes. generating unit) recoverable amount. An impairment loss is recognized immediately in the Statement of profit or loss Initial assessment of right-of-use assets. On the lease and other comprehensive income. commencement date, the Company shall measure the asset under the right-of-use at cost. The cost of an asset Lease. A contract is a lease contract or includes a lease managed under a right-of-use comprises of: the amount if, for consideration, it confers the right to control the use of the initial measurement of the lease liability, any lease of an asset for a certain period of time. payments at or before the inception date, less any lease incentives received; any initial direct costs incurred by the The Company as a lessee Company; and an estimate of the costs that the Company will incur in dismantling and disposing of the leased asset, The Company shall assess each contract for possible lease maintaining its location or restoring the leased asset to the 52 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
2. Significant accounting policies (continued) condition required by the lease conditions, unless those The initial direct costs incurred in obtaining the operating costs are incurred in producing the stocks. The Company lease shall be included by the Company in the carrying shall assume a liability relating to these costs on the amount of the leased assets and shall be recognised as commencement date or after using the leased assets for expenditure during the lease period on the same basis a specific period. The Company shall recognise these costs as the lease income. The Company shall account for the as part of the cost of the right-of-use assets when a liability change in the operating lease as a new lease from the date is incurred for these costs. of the change‘s entry into force and shall treat the lease fees paid or accrued in advance in relation to the original Initial assessment of right-of-use assets. By applying lease as part of the new lease. the cost method the Company shall assess the right- of-use assets at cost. By applying the cost method the Financial instruments Company shall measure the assets managed under the right-of-use at cost: less any accumulated depreciation Financial assets. The Company’s financial assets include and any accumulated impairment losses; and adjusted cash, trade receivables and other receivables. for reassessment of the lease liability. In calculating the depreciation of rights-of-use assets, the Company shall Trade receivables are recognized initially upon occurrence. apply the depreciation requirements of IFRS 16 Property, During initial recognition all other financial assets are Plant and Equipment. recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets Initial assessment of the lease liability. On the (other than trade receivables without significant funding commencement date, the Company shall assess the lease component), if not measured at fair value through profit liability at the current value of the lease outstanding on or loss, are initially measured at fair value plus transaction that date. Lease fees shall be discounted using the interest costs directly attributable to acquisition or disposal. rate provided for in the lease contract, if that rate can The trade receivables without a significant financing be readily determined. If this rate cannot be readily component are initially recognized at transaction price. determined, the Company shall use the borrowing rate published by the Bank of Lithuania. The financial assets are divided into three groups depending on the method of their measurement: Reassessment of the lease liability. After initial recognition, the lease liability shall be reassessed to take a) financial assets that are measured at amortised cost into account changes in the lease fees. The Company in subsequent periods; shall recognise the amount of the reassessment of the lease liability as an adjustment to the right-of-use assets. b) financial assets that are subsequently measured at fair However, if the carrying amount of the right-of-use asset value through other comprehensive income; is reduced to zero and the assessment of the lease liability is further reduced, the Company shall recognise any c) financial assets that are subsequently measured at remaining amount of the reassessment as profit or loss. fair value through profit or loss. The Company shall report the lease liabilities separately from other liabilities in the statement of financial position. Classification of the financial assets depends on the The interest expenditure on the lease liability is presented business model for managing the financial assets (it is separately from the depreciation of the assets under the assessed how the Company manages the financial assets right-of-use. The interest expenditure on the lease liability in order to generate cash flows) and their contractual is a component of the financial cost presented in the cash flow characteristics of the financial assets (whether Statement of comprehensive income. contractual cash flows include the principal amounts of the loan and interest payments only). The Company as a lessor The Company has no financial assets, which are Every lease of a lessor is classified either as a finance subsequently measured at fair value through other lease or an operating lease. Whether a lease is a finance comprehensive income, and financial assets, which are lease or an operating lease depends on the substance of subsequently measured at fair value through profit or loss. the transaction rather than the form. A financial asset is measured at amortized cost if both of Operating lease. The Company shall recognise the lease the following criteria are met: a) the financial asset is held fees related to operating lease, income on a linear basis. according to its business model, an objective of which is Costs (including depreciation) incurred in earning lease to hold the financial asset to collect its contractual cash related income are recognised by the Company as costs. flows; and b) due to contractual conditions of the financial
53 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
2. Significant accounting policies (continued) asset cash flows may occur on set dates, which represent When the Company transfers the rights to receive cash solely payments of principal and interest. flows from an asset and neither transfers nor retains risks and benefit related to ownership to the financial asset, Financial assets that do not include cash flows that meet but transfers control of the asset, the asset is recognised only the payment requirement of the principal loan and to the extent of the Company’s continuing involvement the interest are measured at fair value with the change in in the asset. The Company’s assets that take the form of the fair value carried in profit or loss in the Statement of a guarantee over the transferred asset are measured at profit or loss and other comprehensive income. the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company The financial asset, which is subsequently measured at could be required to repay. amortized cost, is measured by using the effective interest method. The amortized cost is reduced due to impairment The Company reduces the gross carrying amount of the loss. Interest income, foreign exchange profit and loss are financial asset if it cannot reasonably expect to recover all accounted for through profit (loss). Any derecognition or part of the financial asset. profit or loss are accounted for in the Statement of profit or loss and other comprehensive income. Writing down is an event of derecognition.
The effective interest method is the method used to Derecognition of financial liabilities. A financial liability calculate the amortized cost of a financial asset or liability is derecognised by the Company when contractual and distribute interest income or expense during the obligations have been fulfilled or cancelled or the liability respective period. The effective interest rate is the rate expires. The Company also ceases recognition of a financial that allows discounting future cash payments accurately liability when its terms are changed and the cash flows during the specified period of validity of financial liability of the amended liability are materially different. In this or during shorter period, where appropriate. case the new financial liability is recognised at fair value in accordance with the amended contractual terms. At initial recognition the financial assets, which are measured at fair value through profit or loss in the In the event of derecognition of a financial liability the Statement of profit or loss and other comprehensive difference between the carrying amount written off and income, are accounted for at fair value. Later fair value the consideration paid (including any transferred non-cash change profit and losses, including all interest and assets or liabilities assumed) is recognised as profit or loss dividends, are recognized as profit and losses in the in the Statement of profit or loss and other comprehensive Statement of profit or loss and other comprehensive income. income. Offsetting of financial assets and liabilities. Financial Derecognition of financial assets. Financial assets (or, assets and financial liabilities are offset when, and only where appropriate, part of financial assets or part of the when, the Company has a legally enforceable right to group of similar financial assets) are derecognised when: record the amounts and intend to make an offsetting, or realize the asset to offset the liability. a) he right to receive cash flows from the asset has expired; Impairment of financial assets due to credit risk. Impairment losses on financial assets measured at b) the Company retains the right to receive cash flows amortised cost are measured based on the expected credit from the asset, but has assumed an obligation to pay loss (ECL) model. Credit losses are measured as the present them in full without material delay to a third party under value of all cash losses (the difference between the cash a ‘pass through’ arrangement; flows that the Company holds under the contract and the cash flows the Company expects to receive). ECLs are c) the Company transfers its right to receive the cash discounted by applying an effective interest rate. flows and/or: At the end of each reporting period, the Company - transfers substantially all risks and rewards of the recalculates and records the provision for expected credit asset, losses in accordance with past events, current market conditions and future prospects. The Company applies a - neither transfers nor retains substantially all the risks simplified method to calculate the expected maturity credit and rewards of the asset, but has transferred control losses over the period of validity and uses a provisioning of the asset. matrix for all trade and other receivables. For calculation
54 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
2. Significant accounting policies (continued) of the expected credit losses using the provisioning Gross carrying amount of financial assets is written off matrix, trade and other receivables are categorized into when the Company does not have reasonable expectations separate groups according to credit risk characteristics. to recover all assets or a part thereof. Unrecoverable assets The amounts for each group are analysed by the number are written off according to the recognized impairment if of days past due. all necessary actions were taken to recover the assets and the amount of losses has been determined. At the end of each reporting period, the Company assesses whether the value of financial assets carried at amortised For financial assets which are written off and are also cost is impaired. Financial assets are impaired when subject to the activity of securing fulfilment, the Company one or more events have occurred that have a negative takes actions related to legal regulation so that the amounts impact on the expected future cash flows of the financial were recovered to maximum extent. assets. Other principal criteria given below are also used to determine whether there is objective evidence that The amounts previously written off and recovered impairment loss has occurred: during subsequent periods are booked under the item of depreciation losses of the statement of profit or loss and • the counterparty experiences a significant financial other comprehensive income. difficulty as evidenced by financial information it provides; Cash and cash equivalents. Cash comprise cash at bank accounts and on hand. Cash equivalents represent short- • a breach of contract, for example, failure to fulfil term highly liquid investments easily convertible to a liabilities or payments overdue; known amount of cash. The term of such investments does not exceed three months and the risk of changes in • the counterparty considers bankruptcy or intends to value is insignificant. Cash and cash equivalents reported take measures for financial reorganization; in the cash flow statement comprise cash at bank and on hand, deposits with current accounts and other short-term • there is an adverse change in the payment status highly liquid investments. of the counterparty as a result of changes in the national or local economic conditions which affect Trade and other receivables. Trade and other receivables the counterparty; are initially recognised at transaction price and subsequently at amortised cost. • the value of collateral, if any, significantly decreases as a result of deteriorating market conditions. Trade and other payables. At initial recognition trade and other payables are recognised when the Company Losses on financial assets measured at amortised cost becomes a party to the contractual terms. Trade and other are recognized as provisions having impact on the gross payables are initially measured at fair value plus directly accounting value of such assets. related transaction costs.
The gross carrying amount of a financial asset is written Borrowings. Borrowings are recognised initially at fair down when the Company has no reasonable expectations value less transaction costs and subsequently measured of recovering all or part of the asset. Uncollectible assets at amortised cost using the effective interest method. are written off based on admitted impairment loss after all the necessary procedures for recovery of the asset have Financial guarantees. Financial guarantee contract is been completed and the amount of the loss has been the contract that binds the Company to make specific determined. Subsequent recoveries of amounts previously payments to reimburse the holder of the guarantee for written off are credited to the impairment loss item in a loss it incurs because a specified debtor fails to make the Statement of profit or loss and other comprehensive payment when due in accordance with the original or income. updated terms of a debt instrument. Financial guarantees are initially recognised at their fair value, which is normally Write-off of financial assets. Impairment for financial evidenced by due amounts received. assets is formed in consideration of provisions of IFRS 9, the Company’s accounting policies and by carrying out the Income taxes. Income taxes have been provided for in the assessment of possible risks according to the possibility financial statements in accordance with legislation enacted of their occurrence, taking into consideration the likely on the closing date of the reporting period. The income tax internal and external factors which include significant charge comprises current tax and deferred income tax and financial difficulties of customers, liabilities more than is recognised in the Statement of profit or loss and other 120 days overdue and the likely case of bankruptcy of the comprehensive income, unless those taxes are recognised customer. in other comprehensive income or directly in equity as 55 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
2. Significant accounting policies (continued) they are related to transactions that are also recognised taxable profit forecasts. When it is probable that a portion in other comprehensive income or directly in equity in the of deferred tax will not be utilised, this portion of deferred same or a different period. tax is not recognised in the financial statements.
The income tax rate applicable for the companies of the Taxable losses can be carried forward for an unlimited time, Republic of Lithuania in 2020 and 2019 was 15%. except for the losses that have originated due to disposal of securities and (or) derivative financial instruments. Taxes for the reporting period are the amount expected Operating losses carry forward is disrupted if the Company to be paid to or recovered from the taxation authorities, ceases its activities which caused the losses, unless the considering a taxable profit or losses for the reporting and Company ceases activities due to reasons beyond its prior periods. The taxable profit or losses are based on control. The losses from disposition of securities and/or estimates if financial statements are approved prior to derivative financial instruments can be carried forward filing relevant tax returns. Taxes other than income tax for 5 years and only be used to reduce the taxable income are recorded in operating expenses. earned from the transactions of the same nature.
For financial reporting purposes deferred taxes are From 2014 operating tax losses carried forward can cover provided using the balance sheet liability method for tax no more than 70 percent of taxable profit of a taxable loss carry forwards and temporary differences arising period according to applicable Lithuanian laws. between the tax bases of assets and liabilities and their carrying amounts. In accordance with the initial recognition Inventories. Inventories are measured at acquisition or exemption, deferred taxes are not recorded for temporary production cost, and subsequently are accounted for at differences on initial recognition of an asset or a liability the lower of the cost or the net realisable value. The net in a transaction other than a business combination if realisable value is a sale price under normal business the transaction, when initially recorded, affects neither conditions less expenses of completion and possible costs accounting nor taxable profit. Deferred tax balances are to sell. The cost is calculated under the FIFO method. The measured at tax rates enacted at the end of the reporting cost of inventories is net of volume discounts and rebates, period, which are expected to apply to the period when received from suppliers during the reporting period, but it the temporary differences will reverse or the tax loss carry applies to the inventories still held in stock. The inventories forwards will be utilised. Deferred tax assets for deductible that may not be realised are fully written off. temporary differences are recorded only to the extent that it is probable that the temporary difference will reverse Dividends. Dividends are recognised as a liability and in the future and there is sufficient future taxable profit deducted from equity in the period in which they are available against which the deductions can be utilised. declared and approved. Dividends are accounted for in the financial statements in the period when they are Deferred tax assets and liabilities are offset only when approved by the annual General Shareholders’ Meeting. there is a legally enforceable right to offset current tax If dividends are declared subsequent to reporting period, assets against current tax liabilities and when the deferred but antecedent the approval of financial statements by the income tax assets and liabilities relate to income taxes management, they are disclosed in the explanatory notes. levied by the same taxation authority on either the same taxable entity or different taxable entities where there is Equity. Equity and equity related reserves are presented an intention to settle the balances on a net basis. Deferred in accounting books by type in accordance with legal income tax assets and deferred tax liabilities may be offset regulations and the Company‘s articles of association. separately at each company. The Company‘s equity is the assets value less value of all Deferred tax liabilities and assets are measured at the liabilities. The Company‘s equity includes: a) share capital tax rates that are expected to apply in the period in - The share capital is equity paid in by shareholders and is which the liability is settled or the asset realised, based stated at nominal value in accordance with the Company‘s on tax rates (and tax laws) that have been enacted or articles of association and the entry in the Centre of substantively enacted by the end of the reporting period. Registers; b) share premium- Share premium is created by The measurement of deferred tax liabilities and assets the surplus of the issuance value in excess of the nominal reflects the tax consequences that would follow from the value of shares decreased by issuance costs; c) legal reserve manner in which the Company expects, at the end of the - According to Lithuanian legislation an annual transfer of reporting period, to recover or settle the carrying amount 5% of net profit to the legal reserve is compulsory until of its assets and liabilities. the reserve reaches 10% of the share capital. The legal reserve cannot be distributed as dividends and is formed Deferred tax assets have been recognised in the Statement to cover future losses; d) other reserves - Other reserves of financial position to the extent the management believes are formed according to the decision of the shareholder they will be realised in the foreseeable future based on for specified purpose; e) retained profit (loss). 56 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
2. Significant accounting policies (continued)
Provisions. Provisions are accounted for only when the Provisions for warranty repairs. Liabilities related to rolling Company has a legal or irrevocable obligation resulting stock warranty repairs are recognised as provisions under from the past event, and it is probable that an outflow of the signed contracts and the essential requirements for resources embodying economic benefits will be required to the repair and upgrading of tractive rolling stocks, nods settle the obli¬gation and a reliable estimate can be made and aggregates. The Company is legally obliged to provide of the amount of the obligation. The Company re-evaluate rolling stock warranty services and to fulfil this obligation provisions at each balance sheet date and adjust them in has to utilise economic resources and will not be relieved order to present the most reasonable current estimate. of accumulated costs. Warranty costs are attributed to If the effect of the time value of money is material, the the period when warranty services were sold rather amount of provision is equal to the pre¬sent value of the than the period when warranty repair of rolling stocks is expenses which are expected to be incurred to settle the performed; therefore, these costs are recognised in the liability. Where discounting is used, the increase in the reporting period when the income is earned. The amount provision due to the passage of time is recognised as an of provisions is determined on the basis of experience in interest. similar activity, expert opinion, and after-balance-sheet events. Employee benefits. The Company does not have any adopted defined contribution and benefit plans and has Calculation of provisions for warranty repairs is based on no share-based payment schemes. Post-employment the Company’s experience in providing rolling stock repair obligations to employees retired on pension are borne services, established practise of common malfunctions by the State. Short-term payments to employees are of specific parts of rolling stocks after specific types of recognised as current costs in the period the services are repairs performed and knowledge about additional work rendered by employees. The payments include salaries, to be carried out after the sale of warranty service, and social insurance contributions, bonuses, paid leave etc. specialists’ estimates and calculations. Provisions for warranty repairs are charged to no-current liabilities, Provisions for retirement benefits. Following the legislative and provision formation costs are attributed to operating requirements of the Republic of Lithuania, each employee at expenses. the age of retirement is entitled to a one-off payment in the amount of 2-month salary. The historical cost is recognised Revenue recognition. Revenue of the Company are as expenses in the Profit and Loss Statement and other recognised in accordance with IFRS 15 Revenue from comprehensive income immediately after the assessment Contracts with Customers; i. e. the Company recognises of such liability. Any profit or losses which have appeared income at the time and to such an extent that the transfer of as a result of a change in benefit conditions are recognised committed goods or services to customers would represent immediately. The above-mentioned employment benefit an amount that corresponds to the consideration that the obligation is calculated based on actuarial assumptions, Company expects to obtain in exchange for those goods using the projected unit credit method. The obligation is or services. The Company takes into account the terms of recorded in the statements of financial position and reflects the contract and all relevant facts and circumstances. For the present value of these benefits on the preparation date that purpose the Company‘s revenue is recognised using of the statements of financial position. Present value of the 5-step model: the non-current obligation to employees is determined by discounting estimated future cash flows using the discount Step 1 - Identify the contracts with a customer. rate which reflects the interest rate of the Government bonds of the same currency as the employment benefits, Agreement between two and/or more parties (depending and the maturity whereof is similar to the estimated on the conditions of purchase or sale), which creates maturity of the benefits. Actuarial profit and losses are enforceable rights and liabilities, is recognised as a contract. recognised in other comprehensive income. Therefore, A contract subject to IFRS 15 Revenue from Contracts with provisions are formed for the possible benefits. Actuarial Customers is only recognised if the following criteria are estimates are carried out in order to assess the liability of satisfied: such retirement payments. a) the parties have approved the contract (in writing, Plans of bonuses. The Company recognises the liability orally or in accordance with other usual business and expenses of bonuses when a contractual liability is practices) and are bound by the obligations under the present or a practice which created a constructive liability contract; was applied in the past. Based on the provisions of the Collective Agreement, the liabilities are recognized for b) each party‘s rights in relation to the goods and/or possible benefits to employees reaching the jubilees of services to be transferred can be identified; 50 and 60.
57 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
2. Significant accounting policies (continued)
c) the payment terms for the goods and/or services to Step 5 - Recognise revenue when (or as) the Company be transferred can be identified; satisfies performance obligations.
d) the contract is of commercial nature; The Company recognises revenue when it satisfies a performance obligation by transferring promised goods e) it is probable to receive remuneration in exchange or services to the customer (i.e. when the customer for the goods and/or serivices which will be transferred obtains control over the mentioned goods or services). to a customer. The recognised amount of revenue is equal to the amount of the satisfied performance obligation. Performance Contracts with the customer may be aggregated or obligation may be satisfied at a point of time or over time. disaggregated into separate contracts, while retaining the criteria of the former contracts. Such aggregation or Revenue from manufacture and repair of locomotives and disaggregation is considered modification of a contract. from repair of wagons are recognised through a period of time based on the percentage-of-completion method. Step 2 - Identify the performance obligations in the Related expenses are recognised in the Statement of contract. profit and loss and other comprehensive income when incurred. Advances received are included into contractual The contract establishes a promise to deliver goods and/ liabilities. Revenue from sale of goods are recognised upon or services to the customer. When goods and/or services the moment the goods are dispatched from the Company’s can be distin-guished, the obligations are recognised warehouse. separately. Each obligation is identified in one of two ways: Revenue is recognised when the amount of revenue can a) goods and/or a service is distinct; be measured reliably and when it is probable that the economic benefits associated with the transaction will flow b) a package of distinct goods and/or services which to the Company, and when specific criteria have been met are substantially the same and are transferred to the for each type of income, as described below. The Company customer based on the same model. relies on historical results, taking into account the customer type, the transaction type and the characteristics of each Step 3 - Determine the transaction price. agreement.
In accordance with the newly applicable IFRS 15 Revenue Revenue is recognised at fair value of consideration from Contracts with Customers, the transaction price may obtained or to be obtained. Revenue is reduced by be fixed, variable or both. measured amounts of customer returns, discounts and other similar deferrals. Revenue is recognized when it is The transaction price is the amount to which the Company probable that the Company will get economic benefit and expects to be entitled in exchange for the transfer of goods transaction-related expenses incurred or to be incurred and services. Transactions concluded by the Company may be reliably measured. Sales revenue is recognised are subject to fixed prices for both ongoing services and after deducting the VAT and discounts, including accrued services performed at a given moment. The transaction probable discounts for a reporting year. price is also adjusted considering the time value of money, if the contract includes a significant financing arrangement, Revenue of the Company is earned through provision of and considering any consideration payable to the customer. different types of services. Sales revenue is classified into the following groups based on: The Company applies the following sales price calculation methods: adjusted market assessment approach, expected The type of the Company‘s income; cost plus margin approach and residual approach. Similar transactions are measured equally. • Income from manufacture of locomotives;
Step 4 - Allocate the transaction price to each • income from repair of locomotives; performance obligation. • income from repair (manufacture) of freight Normally, the Company attributes the transaction price to wagons; each performance obligation, based on relative separate sales prices of each promised good or service. If data on • other additional services. separate sales prices is not observed in the market, an entity performs its assessment. 58 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
2. Significant accounting policies (continued)
The type of the Company‘s customers: at the end of the month upon assessment of percentage-of-completion or upon provision of • Income from public enterprises; services and signing of the deed of acceptance and delivery of works. • Income from a private sector. The Company recognises revenue when goods are Revenue is distributed according to the nature of its transferred to a customer, service revenue are recognised recognition: on a monthly or quarterly basis, or when services are transferred to a customer (the deed of acceptance and • Immediately upon rendering of services; delivery of works is signed). The table below provides information on the nature and timing of the fulfilment • For an ongoing period (a calendar month) when of performance obligations provided in contracts with services are provided pursuant to service fees customers, payment terms and accounting policies for specified in contracts, and revenue is recognised revenue recognition:
Type of services Nature, timing and payment con- Revenue recognition under IFRS ditions of operating liabilities 15 Revenue from Contracts with Customers Manufacture of locomotives Invoices are issued after the service Revenue is recognised over a peri- has been rendered and the deed of od of time on a monthly or calendar Repair of locomotives acceptance and delivery of works has quarterly basis or when services are been signed. A common term for pay- transferred to the customer (the deed Manufacture of freight wagons ment of invoices is 30 days. Depen- of transfer-acceptance of the perfor- dent on a type of repair, a repairing med works is signed) based on stage Repair of freight wagons period of a locomotive usually lasts of completion method, assessing the from 1 to 25 calendar days, and re- result of fulfilment when services or pairing of a wagon usually lasts for 3 works are completed. The related calendar days. costs are recognised in profit or loss and other comprehensive income when incurred. Expected contract re- lated loss is recognised immediately in the Statement of profit or loss and other comprehensive income.
Advances received are included into contractual liabilities. If services under one agreement are rendered in diffe- rent reporting periods, then the con- sideration is allocated based on their relative independent sales prices. The separate sales price is determined ba- sed on service prices indicated in the agreement. Other additional revenue Invoices for additional services are Income is recognized at once, as the issued immediately after the service customer acquires the control over go- has been rendered. Revenue after sale ods and services once the goods have of goods are recognised after the lo- been removed from the warehouse, ading of goods from a warehouse. A and the services have been rendered. common term for payment of invoices Services are considered provided is 30 days. when the deed of acceptance-transfer of the performed works is signed. The customer acquires the control over the good and service when he recei- ves all benefit related to the good and service. 59 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
2. Significant accounting policies (continued)
Recognition of expenses. Expenses are recognized in the Offsetting. When preparing financial statements, assets financial accounting in existence of reduction in assets or and liabilities, as well as revenue and expenses are not increase in liabilities due to which the reduction in equity offset, except for the cases when a certain standard occurs, except for reductions related to allocations to the specifically permits or requires such offsetting. owners of shares. Related parties. Related parties are defined as Financial income and cost. Finance income comprises shareholders, employees, members of the management interest income. Interest income is recognised on an board, their close relatives and companies that directly, accrual basis, using the effective interest rate method. or indirectly through one or more intermediaries, control, Finance expenses comprise interest expense. Borrowing or are controlled by, or are under common control with, costs that are not directly attributable to the acquisition, the Company, provided the listed relationship empowers construction or production of a qualifying asset are one of the parties to exercise the control or significant recognised in profit or loss using the effective interest rate influence over the other party in making financial and method. Currency exchange gain or loss in profit or loss is operating decisions. presented at a net value. Significant estimates and assumptions. Information on Use of estimates in the preparation of financial significant estimates and assumptions is provided below: statements. The preparation of financial statements according to International Financial Reporting Standards Moment of revenue recognition. The Company‘s requires management to make judgements, estimates and management assesses the moment of revenue recognition, assumptions that affect the reported amounts of assets, i.e. whether revenue is recognised over time or at a point liabilities, income and costs and contingencies. Significant of time. areas of these financial statements where estimates are utilised comprise depreciation and valuation of non-current The date when assets are brought into use. An asset is tangible assets, deferred tax asset. Future events may included in operations and its impairment is begun to be cause the assumptions used in arriving at the estimates calculated when it is prepared for usage, i.e. the assets to change. The effect of such changes in the estimates will is in the right place and conditions are set for it to be be recorded in the financial statements when determined. used according to the management’s intended manner. The Company‘s management included the asset into Contingent assets and liabilities. Contingent liabilities operations after it was properly tested and all permissions are not recognized in the financial statements, except for to begin activities were obtained. contingent liabilities related to business combinations. They are disclosed in the financial statements unless the Useful lives of intangible assets and property, plant and possibility of an outflow of resources embodying economic equipment. The useful lifetime of all the property, plant benefits is remote. Contingent assets are not recognized and equipment was assessed during the independent in the financial statements but are disclosed when it is valuation performed on the transition date of 1 January probable that future economic benefits or service potential 2015. The useful lives of assets are reviewed annually and will flow to the entity. adjusted if necessary to reflect the current assessment of the remaining useful lives, taking into account Asset-related grants. Grants and subsidies (hereinafter technological changes, future economic uses of the assets “grants”) intended for the purchase, construction or other and their physical condition. If the expectations differed acquisition of non-current assets are considered as asset- from previous estimates, the change would be accounted related grants. Assets received free of charge are also for as a change in an accounting estimate in accordance allocated to this group of grants. The amount of the asset- with IAS 8. related grants is recognised in profit and loss gradually according to the depreciation rate of the assets associated Impairment losses of property, plant and equipment. with this grant. In profit or loss, a relevant expense account The fair value of all the property, plant and equipment is reduced by the amount of grant amortisation. was assessed during the independent valuation performed on the transition date of 1 January 2015. The Company Subsequent events. Subsequent events are events which reviews the carrying amounts of its property, plant and provide additional information on the Company’s standing equipment at each statement of financial position date to as at the date of the statement of financial position. determine whether there is any indication of impairment. If Adjusting events are reported in the financial statements. any such indication exists, the asset‘s recoverable amount Non-adjusting subsequent events are described in the is estimated. For the purpose of impairment testing, assets notes, if significant.
60 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
2. Significant accounting policies (continued) that generate cash inflows from continuing use that are asset. The recoverable amount of an asset that does not largely independent of the cash inflows from other assets generate cash inflows is determined by reference to the or groups of assets (cash-generating units) are grouped recoverable amount of the cash-generating unit to which at the lowest levels for which there are currently no cash the asset belongs. flows. Recoverable amount is calculated as the higher of two values: the fair value less costs to sell of the asset and Impairment losses of amounts receivable. The the value in use of the asset. management makes assumptions, on the basis of which judgements are made on the valuation of expected credit The value in use of an asset is calculated by discounting losses. Credit losses are measured as the present value the future cash flows to their present value using a pre- of all cash shortfalls (i.e. the difference between the cash tax discount rate that reflects current market assessments flows due to the Company in accordance with the contract of the time value of money and the risks specific to the and the cash flows that the Company expects to receive).
3. Significant estimates and assumptions term, management considers all the facts and circums- tances that give rise to the economic incentive to exer- Writing-down of inventories to the net realizable value. cise the option to extend the contract or not to exercise The Company reviews its inventory list at least annually the option to terminate it. The possibility of extending to determine the net realisable value of inventories. In- the contract (or the periods after the possibility of termi- ventories acquired earlier than a year ago are reviewed nating the contract) is provided for in the leases only if it to determine whether they can be realized in the future. can be reasonably expected that the lease will be exten- In the case of slow-moving spare parts and other materi- ded (or not terminated). als, impairment is recognized at the full cost of the inven- tories if the inventories have been on the inventory for Discount rate. In assessing value in use, the estimated more than 2 years and have not been used since. future cash flows are discounted to their present value using an additional borrowing rate that reflects current Provisions and contingent liabilities. The Company ma- market assessments of the time value of money and the kes significant judgments in measuring and recognizing risks specific to the asset and have not been assessed for provisions and contingent liabilities related to ongoing cash flows. disputes or other outstanding claims that will be settled through negotiation, mediation or arbitration, and other Deferred tax assets. Deferred tax is provided using the contingent liabilities. The decision must be made in the balance sheet method, providing for temporary differen- light of the likelihood that the action will be settled fa- ces between the carrying amounts of assets and liabi- vourably, or a liability will arise, and to quantify possible lities for financial reporting purposes and the amounts options for a final settlement. Due to the inherent uncer- used for taxation purposes. The amount of deferred tax tainties of this valuation process, actual losses may differ provided is based on the expected manner of realisation from the provisions initially calculated. These estimates or settlement of the liability. Deferred tax assets are re- may change as new information becomes available, pri- cognised only to the extent that it is probable that future marily with the support of in-house professionals such as taxable profits will be available against which the defer- lawyers. Changes in estimates may have a material effect red tax assets can be utilized. The values of deferred tax on the Company‘s results of operations. assets shall be reviewed at the date of each statement of financial position and reduced if the associated tax bene- Duration of the lease period. In determining the lease fit is not likely to be used.
61 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
4. Impact of COVID-19 on key accounting provisions should have been formed for the mentioned estimates, assumptions and valuation con- losses. tingencies Past events, the Company’s current activity conditions In assessing potential impact of the COVID-19 related and the expected economic situation were taken into factors on the Company’s activities and results, the Com- consideration by the Company in assessing the poten- pany’s management estimated possible disruptions of tial losses. It should be noted that additional expenses cash flows, fund raising, the risk of employees who per- expected to be incurred in the future due to the announ- form primary functions to be exposed to COVID-19, and ced quarantine do not comply with criteria for provisions; the risk of delay of the ongoing projects. In addition, the therefore, as at the end of the financial statements, the Company’s management assessed potential impact of Company does not form provisions for business recovery COVID-19 on key accounting estimates, assumptions and expenses to be possibly incurred in the future. valuation contingencies. Useful life of non-current tangible assets. The Company Management of the risk regarding employees exposu- reviewed the useful life of intangible assets and proper- re to COVID-19. It would be impossible to manage the ty, plant and equipment to evaluate whether they com- Company’s infrastructure in the event of a significant ply with the intended nature of use and purpose taking number of employees being exposed to COVID-19, which into consideration potential impact of COVID-19 on that is one of the main risks. It may cause a decrease in amo- asset. The review of useful life was based on expected unt of performed work or loss of customers and, sub- events and economic conditions which may be created sequently, a decrease in income and profit. During the by the COVID-19 pandemic in the future. The review quarantine period, the Company is in strict compliance of carried out by the management did not lead to identifi- all recommendations provided by the Government of the cation of any use discrepancies of intangible assets and Republic of Lithuania regarding management of potential property, plant and equipment both in a long-time and threat related to COVID-19. Conditions for an effective re- short-time periods. mote work are introduced in the Company, and no direct and significant discrepancies in performance of primary Impairment losses of property, plant and equipment. functions of employees are incurred. Manufacturing em- The Company has identified a budget gap between the ployees are provided with additional personal protective estimated costs and the actual costs and income earned; equipment and personal care supplies, actions to ensure therefore, the Company’s management carried out im- employee shifts are prepared and implemented, etc. As pairment tests for property, plant and equipment. The at the date of the financial statements, no major discre- management has reviewed the key assumptions which pancies due to COVID-19 related to performance of these are used for impairment testing of property, plant and functions were incurred by the Company. equipment with regard to impact of COVID-19. More in- formation is disclosed in Note 8. Discrepancies in supply chains. Supply chain discrepan- cies comprise supply of IT and telecommunication ser- Write-off of inventories to net realisable value. Taking vices which are essential to ensure proper remote work into consideration COVID-19, the management of the and functioning of IT systems as well as supply of goods Company has assessed writing off of inventories to net and services, which are essential to implement projects realisable value. More information is provided in Note 13. in a timely manner. The Company’s management cons- tantly communicates with suppliers to monitor the situ- Impairment loss of receivables. The Company’s mana- ation and assess their ability to fulfil its liabilities on time. gement has considered past events and both current and As at the date of the financial statements, there were no future economic conditions known as at the issue date indications regarding discrepancy in supply chain that of the financial statements to determine potential cre- would affect the Company’s financial statements for the dit losses due to COVID-19. The Company’s management year 2020. has determined that future economic situation as a re- sult of COVID-19 does not have significant impact on loss Compliance with contracts and potential losses. The ratios used for calculation of expected credit losses. Company has properly evaluated information on loss from compliance with lease, sale and other similar con- Provisions and contingent liabilities and duration of the tracts, especially when the loss was caused by decrease lease period. The Company’s management assessed the in business capacity as a result of the pandemic. As at impact of COVID-19 on provisions and duration of the the date of preparation of the financial statements, the lease period. As at the date of the financial statements amount of inevitable losses arising from compliance with there were no indications which would have impact on contracts effective as at the end of the financial state- the financial statements of the Company for the year ments was calculated, and it was evaluated whether any 2020.
62 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
5. New standards and interpretations not Based on the currently available information, according yet adopted to the assessment of the Company’s management, the new amendments, after initial application, will not have a The new standards, amendments to standards and inter- significant impact on the Company’s financial statements. pretations that are effective for annual periods beginning on or after 1 January 2021 and have not been applied in Property, Plant and Equipment – Proceeds before Intend- the preparation of these financial statements are set out ed Use (Amendments to IAS 16) below: In May 2020 the International Accounting Standards Onerous Contracts — Cost of Fulfilling a Contract (Amend- Board published Property, Plant and Equipment – Pro- ments to IAS 37) ceeds before Intended Use (Amendments to IAS 16) which prohibit an entity to deduct from the cost of an The amendments specify which costs an entity includes item of property, plant and equipment any proceeds in determining the cost of fulfilling a contract for the pur- from selling items produced while bringing that asset to pose of assessing whether the contract is onerous. the location and condition necessary for it to be capable of operating in the manner intended by management. The amendments are effective for annual reporting pe- Instead, an entity recognises the proceeds from selling riods beginning on or after 1 January 2022. The amend- such items, and the cost of producing those items, in ments apply for contracts which are effective as at the ini- profit or loss. tial application date of these amendments. As at the date of initial application, the overall impact of the- amend The amendments are effective for annual reporting peri- ments is recognised as an adjustment of retained earn- ods beginning on or after 1 January 2022. An entity -ap ings (losses) or other appropriate equity components at plies the amendments retrospectively only to items of the beginning of the period. Comparative information is property, plant and equipment that are brought to the not recalculated. location and condition necessary for them to be capable of operating in the manner intended by management on Based on the currently available information, according or after the beginning of the earliest period presented in to the assessment of the Company’s management, the the financial statements in which the entity first applies new amendments, after initial application, will not have a the amendments. significant impact on the Company’s financial statements. Based on the currently available information, according Interest Rate Benchmark Reform – Phase 2 (Amendments to the assessment of the Company’s management, the to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) new amendments, after initial application, will not have a significant impact on the Company’s financial statements. The amendments are effective as of 1 January 2021. Early application is permitted. The amendments address the First-time Adoption of International Financial Reporting effects of the interest rate benchmark reform on financial Standards – Subsidiary as a First-time Adopter (Amend- statements, including changes to contractual cash flows ments to IFRS 1) or hedging relationships that arise when an interest rate benchmark used to calculate interest on a financial as- When carrying out the annual improvements process to set is replaced with an alternative benchmark rate. The IFRS standards 2018–2020, the International Account- amendments offer relief from certain requirements of ing Standards Board published First-time Adoption of IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 related to: International Financial Reporting Standards – Subsidiary as a First-time Adopter (Amendments to IFRS 1). These amendments permit a subsidiary which has chosen to • change of the basis for determining the apply the provisions of IFRS 1 (16), to measure cumula- contractual cash flows of a financial asset, tive translation differences for all foreign operations at financial or lease liability; amounts included in the consolidated financial state- ments of the parent, based on the parent’s date of tran- • hedge accounting. sition to IFRS Standards. These amendments are also ap- plied to associates and joint ventures.
The amendments are effective for annual reporting peri- ods beginning on or after 1 January 2022. Early applica- tion in permitted.
63 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
5. New standards and interpretations not unearned profit from the group of contracts (the contrac- yet adopted (continued) tual service margin). The profits generated by a group of insurance contracts will be recognised by insurers during Based on the currently available information, according the period when the insurance cover is granted and at to the assessment of the Company’s management, the the time of the risk exemption. If a group of contracts is new amendments, after initial application, will not have a or becomes unprofitable, the entity recognizes the loss significant impact on the Company’s financial statements. immediately.
Financial Instruments – Fees in the ‘10 per cent’ Test for These amendments to the standard will not affect the Derecognition of Financial Liabilities (Amendments to Company‘s financial statements as it does not carry out IFRS 9) insurance activities.
When carrying out the annual improvements process to Classification of Liabilities as Current or Non-current IFRS standards 2018–2020, the International Accounting (Amendments to IAS 1) Standards Board published Amendments to IFRS 9 Finan- cial Instruments. The amendments clarify the fees an On 1 January 2020 the International Accounting -Stan entity includes when assessing whether the terms of a dards Board published amendments to Articles 69 and new or modified financial liability are substantially differ- 75 of IAS 1 Presentation of Financial Statements by spec- ent from the terms of the original financial liability. These ifying the requirements for classification of liabilities as fees include only the fees paid, or received from, the bor- current or non-current. The amendments clarify: rower and the lender, including fees paid or received by either the borrower or lender on the other’s behalf. • what is meant by a right to defer settlement; An entity applies the amendments to financial liabilities • that a right to defer must exist at the end of which are modified or adjusted at the beginning of the the reporting period; period of initial application of the financial period. • that classification is unaffected by the The amendments are effective for annual reporting peri- likelihood that an entity will exercise its ods beginning on or after 1 January 2022. Early applica- deferral right; tion in permitted. • that only if an embedded derivative in Based on the currently available information, according a convertible liability is itself an equity to the assessment of the Company’s management, the instrument would the terms of a liability new amendments, after initial application, will not have a not impact its classification. significant impact on the Company’s financial statements.
IFRS 17 Insurance Contracts The amendments are effective for annual reporting pe- Effective for annual reporting periods beginning on 1 -Jan riods beginning on or after 1 January 2023 and must be uary 2023 with regard to the principle of comparability. applied retrospectively. Early application is permitted if an entity also applied IFRS 9 and IFRS 15 as at the date of IFRS 17 application or ear- Based on the currently available information, according lier. IFRS 17 replaces IFRS 4, which has allowed entities to the assessment of the Company’s management, the to continue using current practice for accounting for- in new amendments, after initial application, will not have a surance contracts. This made it difficult for investors to significant impact on the Company’s financial statements. compare the financial performance of similar insurance There are no other new or amended standards or inter- companies. IFRS 17 is a general principles-based stan- pretations that have not yet entered into force that could dard setting accounting requirements for all types of- in have a material effect on the Company. surance contracts, including reinsurance contracts held by an insurer. The standard requires groups of insurance Other standards contracts to recognize and measure: (i) future cash flows (cash flows arising from the performance of the contract) COVID-19-Related Rent Concessions (Amendment to at risk-adjusted present value, which includes all available IFRS 16) information about the cash flows arising from the perfor- mance of the contract consistent with observable market On 28 May 2020 the International Accounting Standards data; by adding (if this value is a liability) or subtracting Board published COVID-19-Related Rent Concessions (if this value is an asset) (ii) an amount representing the (Amendment to IFRS 16). The amendments provide
64 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
5. New standards and interpretations not 7. Financial instruments and risk manage- yet adopted (continued) ment lessees with an exemption from assessing whether a The Company’s main financial instruments not carried at COVID-19-related rent concession is a lease modifica- fair value are trade and other receivables, cash, assets tion. As a practical expedient, a lessee may elect not to arising from contracts with customers, liabilities under assess whether a rent concession, occurring as a direct the contracts with clients, trade and other payables, consequence of the COVID-19 pandemic, is a lease mod- lease liabilities and short-term borrowings. According to ification. A lessee that makes this election shall account the management of the Company, the carrying amounts for any change in lease payments resulting from the of these financial instruments are close to their fair val- rent concession the same way it would account for the ues because the borrowing costs are linked to the inter- change applying this standard if the change were not a bank borrowing rate EURIBOR, while other financial as- lease modification. sets and liabilities are short-term and therefore their fair value fluctuation is not significant. The amendments are effective for annual reporting peri- ods beginning after 1 June 2020. Early application is per- The fair value of financial instruments is the value at mitted. which, at the valuation date, an asset or liability would be sold under current market conditions under a trans- The amendments have no impact on the Company’s fi- action on the underlying (or most advantageous) market, nancial statements. regardless of whether this price is directly monitored or determined by the valuation methodology. 6. Significant changes in accounting policy
The standards and amendments effective as of 1 January 2020 did not have a significant impact on the financial statements for 2020.
The Company‘s financial instruments according to their types:
Financial instruments by groups
Financial assets 2020 2019 Assets arising from contracts with customers 2,776 1,178 Trade and other receivables 8,012 12,337 Cash and cash equivalents 482 4,128 Total 11,270 17,643
Financial liabilities 2020 2019 Trade and other payables 6,158 4,333 Current portion of borrowings (Cashpool) 10,470 - Lease liabilities 2,769 4,015 Total 19,397 8,348
Fair value is defined as the price at which the asset would identical assets or liabilities; be disposed of at the date of valuation or a liability trans- ferred under current market conditions, independent on Level 2 – inputs other than quoted prices included within whether this price is directly observable or established Level 1 that are observable for the asset or liability, either using valuation techniques. directly (i.e. as prices) or indirectly (i.e. derived from pri- ces); The fair value is allocated according to the hierarchy which reflects the materiality of inputs used. The fair va- Level 3 – original inputs for the asset or liability that are lue hierarchy consists of the following levels: not based on observable market data (unobservable ori- ginal inputs). Level 1 – quoted prices (unadjusted) in active markets for 65 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
7. Financial instruments and risk management (continued)
The following is a comparison of the values of the Company’s all financial instruments as at 31 December 2020:
Financial assets Carrying Fair value amount Level 1 Level 2 Level 3 Assets arising from contracts with customers 2,776 - - 2,776 Trade and other receivables 8,012 - - 8,012 Cash and cash equivalents 482 482 - - Total 11,270 482 - 10,788
Financial liabilities Carrying Fair value amount Level 1 Level 2 Level 3 Trade and other payables 6,158 - - 6,158 Current portion of borrowings (Cashpool) 10,470 - - 10,470 Lease liabilities 2,769 - - 2,769 Total 19,397 - - 19,397
Cash and cash equivalents. Cash includes cash the value achievement of the operating objectives of the Compa- of which approximates to the fair value. ny, are determined. Possible impacts of the activity risks, including financial and legal impact as well as impact on Amounts receivable and payable. The carrying amount reputation, are assessed at the Company. of short-term trade receivables and current trade credi- tors approximates their fair value. The Company is exposed to the following financial risks: credit, liquidity, currency exchange, interest rate and Borrowings. The fair value of non-current loans and bor- capital risks as well as a customer dependency risk. This rowings of the current portion is measured on the basis note provides information on the impact of these risks on of the market price or interest rate of the same or similar the Company, objectives, policies and processes related loan effective at the time to the loans of the same matu- to the assessment and management of these risks. rity. The fair value of loans is attributed to Level 2 within the fair value hierarchy model. The fair value of loans re- Credit risk. Credit risk is a risk that he Company will incur ceived corresponds to their carrying amount. financial losses, if a buyer or other party fails to fulfil its contractual liabilities. This risk is mostly related to recei- Risk management. The Company faces uncertainty abo- vables from Company’s customers. ut external and internal factors, identifies operational- ri sks (strategic, financial, operating and compliance), anti- The Company manages the credit risk through policies cipates their impact and likelihood, and seeks to mitigate and procedures. The basis of credit risk management them at least in part. of trade receivables is the assessment of customer reli- ability. The Company constantly assesses the creditwor- According to the strategic goals of the Company, sum- thiness of both potential and existing buyers/suppliers marised risk groups, which are considered as the most of services. If the buyer of the services is assessed as ri- important and are likely to have a large impact on the sky or the customer is new and does not have a history
66 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
7. Financial instruments and risk management (continued) of cooperation with the Company, the terms of advan- The trade receivables of the Company (excluding related ce payment apply. When payments with customers are parties) from major clients were as follows: deferred, legal credit risk mitigation measures are used, such as credit insurance or pledging. Various credit risk Impairment losses of financial assets 2020 management and mitigation measures are provided for Client A 226 in bilateral agreements between the Company and ser- vice buyers/suppliers: restrictions, guarantees for the Client B 170 fulfilment of contractual obligations and other measures Client C 130 protecting the Company‘s interests. Credit risk is monito- red on an ongoing basis. Client D 88 Client E 83 The Company assesses probability of non-fulfilment of obligations during the initial recognition of financial- as Client F 76 sets and on each date of preparation of a balance sheet, Other 144 considering whether the credit risk has not grown subs- tantially since initial recognition. Total 917
The credit risk is measured as a maximum credit risk for The Company allocates each exposure to a credit risk each group of financial instruments and is equal to their grade based on data that is determined to be predicti- carrying amount. The carrying amount of each group of ve of the risk of loss (including but not limited to exter- assets forms the highest credit risk. nal ratings, audited financial statements, management accounts and cash flow projections and available press information about customers) and applying experienced credit judgement. Credit risk grades are defined using qu- alitative and quantitative factors that are indicative of the risk of default and are aligned to external credit rating de- finitions from agencies. An ECL rate is calculated for each credit risk grade based on actual credit loss experience, in addition the provision of EUR 248 thousand was calcu- lated during the year 2020.
The Company’s exposure to credit risk and ECLs for trade receivables together with related parties and other receivables as at 31 December 2020 by separate external customers:
Gross Expected Provision Net book book value credit losses value
Low risk 10,440 0.00% - 10,440 Fair risk 274 0.10% - 274 Increased risk 47 16.88% (8) 39 High risk 465 92.54% (430) 35 Total 11,226 (438) 10,788
67 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
7. Financial instruments and risk management (continued)
Low risk – none of the customer’s invoices is past due; expected credit losses, trade and other receivables, and financial securities are divided into separate groups ac- Fair risk – at least one of the customer’s invoices is past cording to the general characteristics of credit risk using due up to 30 days; a provision matrix. The amounts for each group shall be analysed according to the number of days past due. As Increased risk – at least one of the customer’s invoices is trade receivables and other receivables do not normally past due up to 120 days; include collateral or other credit security measures, the expected loss ratio is consistent with the probability of High risk – at least one of the customer’s invoices is past default. due over 120 days. The Company determines credit risk based on historical The Company uses a simplified method to calculate the data, considering past due payments. expected maturity credit losses over the period of validi- ty and use a provisioning matrix for all trade and other receivables, and financial securities. In order to calculate
The following table provides the Company’s information about the exposure to credit risk and the ECL provision for trade receivables together with related parties and other receivables as at 31 December 2020:
Expected Gross book Provision Net book credit losses, value value % Not past due 10,440 0.00% - 10,440 Past due for 1 to 30 days 274 0.10% - 274 Past due for 31 to 60 days - 0.25% - - Past due for 61 to 120 days 47 16.88% (8) 39 Past due for over 120 days 465 92.54% (430) 35 Total 11,226 (438) 10,788
Provision accounted for by the Company reflects the es- timated losses from doubtful trade receivables. The prin- cipal component of impairment is individually assessed losses from significant doubtful trade receivables. Impai- rment assessment methods are constantly reviewed to ensure that the difference between the estimated and actual losses is as low as possible.
68 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
7. Financial instruments and risk management (continued)
Provision for trade receivables, recognized as profit or loss, consisted of the following:
2020 2019 Provision for trade receivables (438) (191) Total (438) (191)
Most of receivable amounts are received from related sification principle is applied for the monetary resources parties, and they were not overdue as at 31 December held by the Company, the funds are at banks that have 2020 and 2019. international credit ratings of BBB-/Baa3 and higher.
Although economic circumstances may affect the reco- 2020 very of trade and other receivables, in the opinion of the Aa2, A+, AA- 278 management, the Company is not exposed to a signifi- BAa3, AA- 45 cant risk of incurring losses that would exceed the alrea- dy recognised provision. Baa1 159 Total 482 Given the positive macroeconomic forecasts that Lithua- nia and other countries continue or intend to implement Liquidity risk. Liquidity risk is the risk that the Compa- new economic promotion programmes, which will signi- ny will be unable to meet its financial obligations as they ficantly contribute to economic recovery, the manage- fall due. Risk management ensures that the Company will ment of the Company did not apply the additional COVID always have sufficient liquid assets and will be able to risk element in assessment of receivables up to 180 days, meet its obligations on time. Liquidity and solvency risk making an assumption as well that the situation of delay management involves the planning and control of cash in receivables should change for the better as a result of flows and the forecasting of unforeseen events that may reviewing and improving the credit control processes in adversely affect cash flows and pose a threat to solven- place. cy and liquidity. Liquidity and solvency risk is assessed by monitoring and analysing the relative liquidity and sol- Cash and cash equivalents comprise cash and cash at vency ratios, which assess the condition of both current bank; therefore, the related credit risk is minimal. Diver- and non-current liabilities and the effectiveness of cash flow management.
Maturities of the Company’s trade debts, financial debts and lease liabilities by the method of non-discounted flows as at 31 December 2020: Financial liabilities Carrying Total Within From one to five After five amount one year years years
Trade and other payables 6,158 6,158 6,158 - - Lease liabilities 2,769 2,769 1,552 1,217 - Current portion of financial debts 10,470 10,470 10,470 - - Total: 19,397 19,397 18,180 1,217 -
Maturities of the Company’s trade debts, financial debts and lease liabilities by the method of non-discounted flows as at 31 December 2019: Financial liabilities Carrying Total Within From one to five After five amount one year years years
Trade and other payables 4,333 4,333 4,333 - - Lease liabilities 4,015 4,015 1,453 2,562 - Current portion of financial debts - - - - - Total: 8,348 8,348 5,786 2,562 - 69 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
7. Financial instruments and risk management (continued)
Liquidity risk is managed by the Company using the fo- ficant interest rate, currency or consumer price indices, llowing instruments: related to bank products, risks.
• Current liquidity risk is managed through utilisation Capital management. Capital includes equity attribu- of contractual credit lines and overdrafts, borrowing table to shareholders. The objectives of the Company’s within the LTG Group through the Cash pool platform. capital management is to ensure the Company’s ability to continue as a going concern while seeking to earn profit • Non-current liquidity risk is managed through constant for the shareholders and maintain an optimal capital funding of the Company‘s activities using loans granted structure by decreasing capital cost. In order to maintain by commercial banks and other instruments. The or change the capital structure, the Company may pay lending process is performed in a centralised manner; the capital to the shareholders or issue new shares. i. e. funds are borrowed on behalf of LTG - the parent company – and, subsequently, LTG lends the funds to According to the Law on Companies of the Republic of companies of the LTG Group. Lithuania, the share capital of a private limited liability company must be at least EUR 2.5 thousand, and equity Market risk. Market risk is the risk that changes in mar- at least 50 percent of the Company‘s share capital. ket prices will impact the Company’s results or the value of financial instruments held. The Company‘s management controls compliance with the provisions of the Law on Companies of the Republic Currency risk. Exchange rate risk is the risk that changes of Lithuania stating that if the Company‘s equity beco- in market prices due to changes in foreign exchange rates mes less than 1/2 of the share capital specified in the Ar- will affect the Company‘s results or the value of available ticles of Association, the Board must convene a general financial instruments. meeting of shareholders not later than within 3 months from the day on which it became aware or should have Taking into account actual turnovers in foreign currency, become aware of the situation, which must consider the the currency risk is minimal and insignificant to the finan- issues referred to in Article 59 (10) (2) and (11) of this cial statements. As at 31 December 2020, the Company Law. The situation in the Company must be rectified no did not enter into derivative financial transactions to ma- later than within 6 months from the date on which the nage the risk of exchange rate fluctuations with servicing Board became aware or should have become aware of banks. the situation.
Interest rate risk. All the Company’s loans received and In 2020, the Company complied with the requirements other borrowings are subject to variable interest rates re- of the abovementioned provisions of the Law on Compa- lated to EURIBOR. The Company is not exposed to signi- nies of the Republic of Lithuania.
70 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
8. Property, plant and equipment
As at 31 December 2020, the Company‘s property, plant and equipment consisted of:
Other Construction Machinery equipment in progress Buildings and and Vehicles fittings and and Land structures equipment tools prepayments Total
Acquisition cost 31 December 2018 - 7,505 4,426 970 573 1,855 15,329 - acquisitions during the year - - 155 381 153 532 1,221 - assets sold, written off, disposed - - (13) (2) (15) (15) (45) - reclassification to intangible assets - - - - - (70) (70) - reclassification to investment property - (653) - - - - (653) - reclassification to current asset - - - - - (1,521) (1,521) - reclassifications - - (39) (1,157) 105 1,091 - 31 December 2019 - 6,852 4,529 192 816 1,872 14,261 - acquisitions during the year - - 417 - 204 3,507 4,128 - assets sold, written off, disposed - (34) (33) - (17) - (84) - reclassification to investment property - (386) - - - - (386) - reclassification from current assets - - 30 95 - 1,521 1,646 - reclassification to current assets - - (49) - - (4) (53) - reclassifications - 1,874 - 1,169 - (3,043) - 31 December 2020 8,306 4,894 1,456 1,003 3,853 19,512 Accumulated depreciation and impairment losses 31 December 2018 - 1,494 2,341 78 277 - 4,190 - depreciation - 278 480 5 78 - 841 - assets sold, written off, disposed - - (3) - (10) - (13) - reclassification to investment property - (22) - - - - (22) - reclassifications - - (31) - 31 - - 31 December 2019 - 1,750 2,787 83 376 - 4,996 - depreciation - 248 391 15 95 - 749 - impairment during the year ------assets sold, written off, disposed - (2) (4) - (16) - (22) - reclassification to investment property - (131) - - - - (131) - reclassification to current assets - - (48) - - - (48) 31 December 2020 - 1,865 3,126 98 455 - 5,544 Carrying amount 31 December 2018 - 6,011 2,085 892 296 1,855 11,139 31 December 2019 - 5,102 1,742 109 440 1,872 9,265 31 December 2020 - 6,441 1,768 1,358 548 3,853 13,968
71 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
8. Property, plant and equipment (continued)
As at 31 December 2020, acquisition cost of fully amortised property, plant and equipment still in use consisted of the following:
2020 2019 Buildings and structures 479 466 Machinery and plant 1,186 923 Vehicles 129 129 Other equipment, fittings and tools 152 120 Total 1,946 1,638
In 2020, in preparing the financial statements, the Com- • weighted capital costs ratio was estimated referring pany’s management calculated the recoverable amount to the WACC model and comprised 7.4%; of property, plant and equipment. Estimation was perfor- med discounting the expected future cash flows from the • cash flows are forecasted for the period of 4 years Company’s activity. The forecast of the Company’s ope- (2021–2024). An average growth rate of revenue rating results was made on the basis of the following key forecasted for the period of 4 years is equal to 5.6%. assumptions:
The performed testing of the recoverable amount disclo- • in order to calculate the recoverable amount, a long- sed that the recoverable amount exceeds the carrying term growth rate equal to 2% was used to calculate amount; thus, no impairment was accounted for. the continuing value;
Sensitivity analysis of the key assumptions:
Discount rate 6.4% 7.4% 8.4% Growth rate 1% 2% 3% Change in value 45,804 31,144 21,072
72 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
9. Right-of-use assets
Discount rate applied to lease agreements in 2020 comprises 6-month EURIBOR and the market margin, determined by market research under the current market conditions.
The Company‘s right-of-use assets consisted of:
Buildings and structures Acquisition cost 1 January 2019 5,081 - acquisitions during the year 263 31 December 2019 5,344 -acquisitions during the year 220 - assets sold, written off, disposed - - reclassifications - 31 December 2020 5,564 Accumulated amortisation and impairment losses 1 January 2019 - - depreciation 1,401 31 December 2019 1,401 - depreciation 1,487 - reclassifications - 31 December 2020 2,888 Carrying amount - 1 January 2019 5,081 31 December 2019 3,943 31 December 2020 2,676
73 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
10. Intangible assets
As at 31 December 2020, intangible assets consisted of:
Software Other intangible Total assets Acquisition cost 31 December 2018 192 386 578 - acquisitions during the year - - - - reclassification from tangible assets - 70 70 31 December 2019 192 456 648 - acquisitions during the year - 253 253 - assets sold, written off, disposed (25) - (25) - reclassification 70 (70) - 31 December 2020 237 639 876 Accumulated amortisation and impairment losses 31 December 2018 189 311 500 - amortization 2 75 77 31 December 2019 191 386 577 - amortization 3 4 7 - assets sold, written off, disposed (24) - (24) - reclassification 4 (4) - 31 December 2020 174 386 560 Carrying amount 31 December 2018 3 75 78 31 December 2019 1 70 71 31 December 2020 63 253 316
The Company does not have internally generated intangible assets. Amortisation costs of the Company’s intangible -as sets, which made up EUR 7 thousand as at 31 December 2020, are accounted for in the Statement of profit or loss and other comprehensive income, under general and administrative expenses.
The cost of fully amortised intangible assets still used by the Company consisted of:
2020 2019 Software 385 190 Other intangible assets 165 384 Total 550 574
74 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
11. Investment property
The investment property of the Company consisted of the following:
Buildings and structures Acquisition cost 31 December 2018 - - acquisitions during the year - - assets sold, written off, disposed - - reclassification from tangible assets 653 - reclassifications - 31 December 2019 653 - acquisitions during the year - - assets sold, written off, disposed - - reclassification from tangible assets 387 - reclassifications - 31 December 2020 1,040 Accumulated depreciation and impairment losses 31 December 2018 - - depreciation - - assets sold, written off, disposed - - reclassification from tangible assets 22 - reclassifications - 31 December 2019 22 - depreciation 31 - impairment during the year - - assets sold, written off, disposed - - reclassification from tangible assets 131 - reclassifications - 31 December 2020 184 Carrying amount - 31 December 2019 631 31 December 2020 856 Investment property consisted of buildings leased to third parties. he average irrevocable lease period is 1 year and may be extended.
During 2020, from investment property the Company received lease revenue amounting to EUR 348 thousand (in 2019: EUR 362 thousand).
75 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
12. Investments in associates, subsidiaries and other companies
As at 31 December 2020, movements of investments in associates, subsidiaries and other companies consisted of the following:
2020 2019 Company name Controlled Investment Booked Carrying Investment Booked Carrying share, % value provision amount value provision amount
Shares of associates UAB Lokomotyvai ir transporto a) 25 72 (72) - 72 (72) - komponentai Shares of subsidiaries b) 99 369 - 369 - - - OOO Rail Lab Total, net 441 (72) 369 72 (72) - a) In 2014, OOO Holding transportnyje komponenty and b) In 2020, UAB Geležinkelio tiesimo centras and the the Company established an associated company UAB Company established a subsidiary OOO Rail Lab in Belarus Lokomotyvai ir transporto komponentai and acquired 25% and acquired 99% shares of the established subsidiary by shares contributing EUR 72 thousand to the established making a monetary contribution of RUB 290 thousand, associated company‘s authorised capital. UAB Lokomotyvai the Company’s contribution will amount to the total of ir transporto komponentai was registered in the Register RUB 1,175 thousand. The Company’s not paid authorized of Legal Entities on 9 September 2014. As at 31 December capital amounts to RUB 885 thousand. OOO Rail Lab was 2018, the Company performed investment valuation of registered in the Register of Legal Entities of Belarus on the associated company and accounted for impairment. 26 May 2020.
Financial position of the associated company UAB Lokomotyvai ir transporto komponentai:
Non-current Current Non-current Current Ownership assets asset liabilities liabilities
2020-12-31 - 294 - 1 293 2019-12-31 - 322 - - 322
Comprehensive income of the associated company UAB Lokomotyvai ir transporto komponentai:
Revenue (Expenses) Profit (loss)
2020-12-31 12 (42) (30) 2019-12-31 - (7) (7)
Financial position of the subsidiary OOO Rail Lab:
Non-current Current Non-current Current Ownership assets asset liabilities liabilities
2020-12-31 11 314 - 1 324 2019-12-31 - - - - -
76 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
12. Investments in associates, subsidiaries and other companies (continued)
Comprehensive income of the subsidiary OOO Rail Lab:
Revenue (Expenses) Profit (loss)
2020-12-31 10 (58) (49) 2019-12-31 - - -
13. Inventories The Company‘s inventories consisted of:
2020 2019 Spare parts 1,890 9,965 Materials 1,865 1,782 Fuel 9 18 Work clothing 101 104 Inventory 134 62 Greases 279 132 Other inventories 1 - Impairment (-) (88) (134) Total raw materials, materials and component parts 4,191 11,929 Goods held-for-resale 12,483 - Impairment (-) (109) - Total goods held-for-resale 12,374 - Non-current assets held-for-sale 1 1,521 Impairment (-) - - Total non-current assets held-for-sale 1 1,521 Total 16,566 13,450
The carrying value of the Company’s inventories of EUR The change in the write-down of the Company‘s inventories 16,763 thousand was reduced by the amount of EUR 197 to net realisable value is reflected in the expense item in thousand to the net realizable value as at 31 December the Statement of Profit or Loss and other comprehensive 2020 (as at 31 December 2019: the amount of EUR 13,584 income. thousand was reduced by the amount of EUR 134 thousand to the net realizable value). During 2020, the inventories (excluding fuel) of EUR 39,208 thousand (2019 – EUR 21,356 thousand) were written off The net carrying amount of the Company‘s non-current at operating expenses. assets held-for-sale was equal to EUR 1 thousand as at 31 December 2020. Non-current assets held-for-sale consist of machine tools and stands.
77 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
14. Assets arising from contracts with customers
The Company‘s assets arising from contracts with customers consisted of:
2020 2019 Accrued income 376 109 Accrued income from related parties 2,023 475 Guarantees paid to buyers 26 19 Guarantees paid to buyers, related parties 351 575 Total 2,776 1,178
15. Trade and other receivables
The Company’s trade and other receivables consisted of:
2020 2019 External trade receivables, gross value 1,355 2,048 Provision (-) (438) (191) Total external trade receivables 917 1,857 Receivables from related parties 7,086 10,346 Provision (-) - - Total receivables from related parties 7,086 10,346 Other receivables from the budget 862 317 Other receivables 9 134 Provision (-) - - Total other receivables 871 451 Total 8,874 12,654
As at 31 December 2020, the movement of impairment of doubtful receivables was as follows:
2020 2019 Balance at the beginning of the period (191) (175) Impairment losses of receivables (247) (16) Balance at the end of the period (438) (191)
16. Prepayments
As at 31 December 2020, the Company‘s prepayments consisted of:
2020 2019 Prepayments 744 3,778 Prepayments to related parties 152 152 Guarantees paid 123 - Guarantees paid to related parties 287 280 Deferred charges 32 33 Total 1,338 4,243
78 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
17. Cash and cash equivalents
As at 31 December 2020, the Company‘s cash and cash equivalents consisted of:
2020 2019 Cash in bank 482 4,128 Total 482 4,128
As at 31 December 2020 and 31 December 2019, the Company had no term deposits. Cash was not pledged.
18. Share capital
The nominal value per share of the Company is EUR 289.62. The change in the share capital as of 31 December 2020 is presented in the following table:
Subscribed share capital 2020 Number of shares, units 1. Subscribed share capital At the beginning of the reporting period 19,017 65,663 Changes during the reporting period Increase - - Decrease - - At the end of the reporting period 19,017 65,663 2. Capital structure 2.1. By type of shares 2.1.0. Ordinary shares 19,017 65,663 2.1.1. Privileged shares - - 2.2. State-owned capital B. Uncalled shares and called-up shares but not paid yet, including therein: Shareholders (debtors) - - Total 19,017 65,663
19. Dividends
Under the decision of the sole shareholder AB Lietuvos Geležinkeliai, EUR 7,690 thousand of dividends were accounted for on 23 June 2020. The payment was made in July 2020. The amount of dividends attributed per share was EUR 117.11.
79 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
20. Reserves
Legal reserve Other reserves
A legal reserve is a compulsory reserve under Lithuanian Allocation of the Company’s profit to other reserves was legislation. This reserve must be annually renewed by at not carried out as at 31 December 2020. least 5 per cent of the net profit up to the extent equal to 10 per cent of the authorised capital.
21. Financial liabilities Lease contracts comprise premises lease contracts. reasonably expected that the lease will be extended (or Lease contracts of buildings are usually concluded for a not terminated). Possible future cash payments were not 3-years period with a possibility to extend them. When included in the lease liabilities as there is no reason to be determining the lease period, the management evaluates certain that the leases will be extended (or not terminated). all facts and circumstances, which give rise to economic Short-term leases of 12 months or less and lease payments incentives to avail themselves of the possibility to extend for low-value assets are recognized directly as expenses in or terminate the contract. The possibility of extending the the statement of profit or loss and other comprehensive contract (or the periods after the possibility of terminating income. the contract) is provided for in the leases only if it can be
Impact on the statement of financial position of the Company (increase/decrease) as at 31 December 2020:
2020 2019 Assets Right-of-use assets 2,676 3,943 Long-term liabilities Lease liabilities (1,217) (2,562) Short-term liabilities Lease liabilities (1,552) (1,453) Impact on the statement of profit or loss of the previous year (72) - Impact on the statement of profit or loss (21) (72)
Impact on the Company’s statement of profit or loss and other comprehensive income (increase / (decrease)) as at 31 December 2020:
2020 2019 Depreciation expenses (1,487) (1,402) Lease expenses 1,595 1,503 Profit (loss) from operations 108 101 Finance costs: Palūkanos (129) (173) Profit (loss) of the reporting period (21) (72)
80 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
21. Financial liabilities (continued)
Impact on the Company’s cash flow statement (increase / decrease) as at 31 December 2020:
2020 2019 Net profit (loss) (21) (72) Depreciation and amortisation expenses 1,487 1,402 Interest on lease liabilities 129 173 Cash flows from (to) investing activities 1,595 1,503 Payment of lease liabilities (1,466) (1,330) Interest on lease liabilities (129) (173) Net increase (decrease) in cash flows - - If the discount rate applicable at the Company increased or decreased by 1 percent, the amount of lease liabilities as at 31 December 2020 would accordingly make up EUR 2,748 thousand and EUR 2,791 thousand.
As at 31 December 2020, the Company’s financial debts consisted of:
2020 2019 Long-term debts - - Short-term debts (Cash-pool) 10,470 - Total 10,470 - On 21 December 2018, the group cash-pool agreement was entered into with Swedbank, AB, whereby and according to the mutual borrowing agreement of 28 January 2019, the members of LTG group agree on allowing each other to use their funds, which are transferred to the account of LTG group, and which may be individually disposed by any member of LTG group, following the procedure laid down by the agreement.
During 2020, the interest of EUR 30 thousand was paid for the loan.
22. Provisions As at 31 December 2020, provisions consisted of:
2020 2019 Provisions for warranty repair Balance at the beginning of the period 111 113 Increase (formed) 97 - Decrease (used) - (2) Balance at the end of the period 208 111 As at 31 December 2020, an additional amount of EUR 97 thousand was formed for provision for warranty repairs of the rolling stock.
23. Grants Movement of grants and subsidies during the year ended 31 December 2020 was as follows:
2020 2019 Balance at the beginning of the year 41 67 Used for decrease in depreciation expenses of non-current assets (27) (26) Balance at the end of the year 14 41
81 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
24. Employee benefits
According to the legislative requirements of the Republic years or more. Jubilee payments also comprise provisions of Lithuania, each employee of the Company at the age for pensions and similar liabilities. Under the collective of retirement is entitled to a one-off payment in the agreement effective at the Company, a payment of EUR amount of 2-month salary. In addition, under the effective 300 is paid to members of trade unions when they reach collective agreement, payment of up to 1 month average the ages of 50 and 60 years. remuneration is paid to an employee who has served for 25
Change in long-term provisions for pensions and similar obligations is presented in the table below:
Balance as at 31 December 2018 990 Used (-) (71) Balance as at 31 December 2019 919 Used (-) (196) Balance as at 31 December 2020 723
As at 31 December 2020, an annual increase in salaries and changes in a discount rate had an effect on calculation of provisions for pensions and anniversary payments.
Key assumptions applied to valuation of the Company’s long-term liabilities related to employee benefits are provided in the table below
2020 2019 Discount rate, % 0.4 0.31 Employee turnover rate, % 9.47 10.81 Salary increase rate 1.9 -
Change in benefits to employees during the year 2020 by type:
Calculated to the statement of profit or loss and other Calculated comprehensive capitalized 2019 income costs Paid 2020
Long-term liabilities Provisions for pensions and other similar 919 (182) - (14) 723 obligations Total long-term liabilities: 919 (182) - (14) 723 Short-term liabilities Accrued vacation reserve 1,741 1,854 - (2,085) 1,510 Payable remuneration 575 5,214 2,122 (7,344) 567 Payable social insurance contributions 303 3,907 38 (3,929) 319 Payable personal income tax contributions 210 3,167 - (3,212) 165 Other employment related liabilities 26 689 - (682) 33 Total short-term liabilities: 2,855 14,831 2,160 (17,252) 2,594 Total 3,774 14,649 2,160 (17,266) 3,317
82 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
25. Trade and other payables
As at 31 December 2020, trade and other payables of the Company comprised:
2020 2019 Cash guarantees received 92 288 Other taxes payable to the budget 1,087 1,149 Trade payables 3,078 2,683 Payables to related companies 839 627 Accrued costs from related companies 2,126 522 Other payables and long-term liabilities 23 213 Total 7,245 5,482
Under accrued expenses, the Company accounted for audit service expenses of EUR 23 thousand.
The management fee, based on the calculation of service fee by the shareholder AB Lietuvos Geležinkeliai, accounts for the majority of trade payables to related parties.
26. Liabilities arising from contracts with customers
As at 31 December 2020, liabilities arising from contracts with customers consisted of the following:
2020 2019 Current portion Prepayments received from non-related entities 42 32 Prepayments received from related entities 2,156 7,280 Total 2,198 7,312
27. Sales revenue
During the year ended 31 December 2020, sales revenue according to the type consisted of:
2020 2019 Revenue from repair of locomotives 46,499 24,981 Revenue from repair of wagons 16,273 20,081 Other revenue 5,286 7,156 Total 68,058 52,218
During the year ended 31 December 2020, sales revenue according to the moment of recognition consisted of:
2020 2019 Recognised over an ongoing period 64,597 47,885 Recognised immediately 3,461 4,333 Total 68,058 52,218
83 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued) 28. Other operating income During the year ended 31 December 2020, other operating income consisted of the following:
2020 2019 Debited inventories 8 9 Gain from transfer/write-off of assets - 2 Other income 159 65 Total 167 76
29. Expenses related to benefits to employees
During the year ended 31 December 2020, expenses related to benefits to employees consisted of the following:
2020 2019 Payroll (14,701) (14,230) Social insurance expenses (267) (254) Change in vacation allowances and overtime 231 347 Change in pensions and promotion 87 45 Total (14,650) (14,092)
30. Result of financial activities
During the year ended 31 December 2020:
2020 2019 Total finance income 19 37 Penalties and default interest for overdue trade receivables 4 37 Gain from currency exchange fluctuations - - Other income 15 - Total finance costs (451) (235) Penalties and default interest (217) (2) Losses from currency exchange fluctuations (75) (60) Interest (159) (173) Result of financial activities (432) (198)
31. Corporate income tax and deferred tax
The corporate income tax was calculated by applying the 15% rate.
During the year ended 31 December 2020, the Company‘s income tax (costs) benefit consisted of:
2020 2019 Corporate income tax of the reporting year 453 554 Corporate income tax of the previous year 179 - Deferred tax (cost) benefit (163) 69 Total corporate income tax (expenses) income recognized in the profit or loss 469 623
84 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued) 31. Corporate income tax and deferred tax (continued)
Corporate income tax (cost) benefit consisted of the following:
2020 2019 Profit (losses) before tax 1,425 4,298 Income tax 214 645 Income tax deductible / increasing expenses 76 54 Income tax deductible / increasing income - (76) Income tax of the previous year 179 - Total income tax (cost) benefit 469 623 Effective rate, % 32.89% 14.50%
Calculation of the deferred tax of the Company is presented below:
2020 2019 Deferred income tax assets: Difference between accounting and tax value of non-current assets 20 21 Impairment of amounts receivable 66 29 Impairment of inventories 29 20 Vacation and bonus accruals 252 118 Accrued long-term employee benefits 108 138 Provision for warranty repairs 31 17 Deferred tax assets 506 343 Deferred income tax liability - - Total deferred tax assets 506 343
Deferred income tax assets and deferred income tax liabilities are offset to the extent that the deferred tax liability will be realised at the same time as deferred tax assets. In addition, they are related to the same tax authority.
32. Related party transactions
The parties are deemed as being related when one of them • The parent company AB Lietuvos Geležinkeliai; could control another or could have significant influence on the other party when making financial and operating • The parent companies of the parent company AB decisions. Lietuvos Geležinkeliai;
As defined by IAS 24 Related Party Disclosures, the entity • Affiliated, non-consolidated and associated companies is related to a reporting entity if any of the following as well as joint ventures of AB Lietuvos Geležinkeliai; conditions applies: • The members of the management Board and their • The Lithuanian Government in its capacity as the close relatives; owner of all shares in AB Lietuvos Geležinkeliai; • Persons who are key management personnel of the • Companies or enterprises subject to the control of the reporting entity and their relatives. Lithuanian Government;
85 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
32. Related party transactions (continued)
For entities operating in an environment in which • Another entity that is a related party because the same government control is pervasive, many counterparties government has control, joint control or significant are also government-related and therefore are related influence over both the reporting entity and the other parties. IAS 24 allows a reporting entity to reduce the entity. level of disclosures about transactions and outstanding balances, including commitments, with: Due to the above-mentioned reasons, the Company does not disclose the transactions with the Lithuanian • A government that has control, joint control or Government and other entities controlled by the Lithuanian significant influence over the reporting entity; and Government.
Related-party transactions of the Company are as follows:
2020 2020 Purchases Sales Receivables Payables AB Lietuvos geležinkeliai 5,414 - 766 10,908 AB LTG Cargo 1,990 54,643 6,628 2,199 AB LTG Infra 844 461 56 31 UAB Gelsauga 184 3 - - UAB Geležinkelių tiesimo centras 198 554 - - UAB LTG Link 50 2,377 426 22 UAB Saugos paslaugos 156 - - 28 OOO Rail Lab - - - 277 UAB Voestalpine Railway Systems Lietuva, UAB - 3 - - 8,836 58,041 7,876 13,465
2019 2019 Purchases Sales Receivables Payables AB Lietuvos geležinkeliai 4,855 3,883 1,007 290 AB LTG Cargo 693 34,953 10,063 7,450 AB LTG Infra 74 1 13 111 UAB Gelsauga 150 - - 2 UAB Geležinkelių tiesimo centras 34 445 - 34 UAB LTG Link 19 445 270 5 UAB Saugos paslaugos 61 - - 15 5,886 39,727 11,353 7,907
According to the methodology of the AB Lietuvos geležinkeliai company group, all transactions with related parties are carried out under market conditions and comply with the arm’s length principle.
86 UAB VILNIAUS LOKOMOTYVŲ REMONTO DEPAS Company code 126280418, Švitrigailos St. 39, Vilnius, Lithuania (all amounts are in EUR thousand unless otherwise stated)
Explanatory notes (continued)
32. Related party transactions (continued)
Income and expenses of the Company concerning related parties are accounted for in the Statement of financial position as at 31 December 2020:
Accrued receivables Accrued payables AB LTG Cargo 2,023 2,082 AB LTG Infra - 40 UAB LTG Link - 4 2,023 2,126
Remuneration to management and other benefits
As at 31 December 2020, the number of managers was 7; i. e. Chief Executive Officer, Director of Sales and Development Department, Director of Corporate Operations Department, Chief of Rolling Stock Depot, Chief of Freight Wagon Depot, Director of Technology and Innovation Department, Director of Quality Department.
2020 2019 Remuneration to management 444 369 Incentive payments* 67 49 Accrued long-term benefits** 1 - Number of managers 7 6 Payments to the Board members - - Number of the Board members 5 5
*Incentive payments are bonuses for performance and one-off bonuses
** Accrued long-term benefits are provisions for pensions and other similar liabilities, accrued as at the end of the year of the reporting period
As at 31 December 2020, no loans, guarantees, or other disbursements or accruals or disposals of assets were made to the Company’s management, except for those disclosed above.
33. Significant events after the reporting period During the year 2021 the Company will merge with AB LTG After the transfer of the Company‘s activities to AB LTG Cargo and both companies will operate as one organization Cargo, the remaining assets of the Company may be – LTG Cargo. The merger of the Company with LTG Cargo transferred to the shareholder AB Lietuvos Geležinkeliai; was approved by the Board of AB Lietuvos Geležinkeliai the Company may be merged with another company; the on 19 January. Company may exist as a non-performing legal entity or the Company may be liquidated. At the date of issue of The Company sees this merger as merging businesses of the reports, no management decision has been made as to shared control, when the merging business entities prior which of the above options will be selected. Regardless of and subsequent to the business merger are controlled by which of the above scenarios is chosen, all the Company‘s the same party, AB Lietuvos Geležinkeliai. business, including the Company‘s processes, employees, contracts and all existing liabilities of the Company on the Applying the principles of merging companies of shared date of transfer, will be transferred to AB LTG Cargo and control, business merger or transfer thereof will be the Company will continue to operate as part of AB LTG considered as a transaction without economic substance, Cargo. therefore, transfer of assets, liabilities and all rights and obligations will be performed at carrying amounts. Also, Taking into account the above information, the Company‘s during the merger all employees and agreements of the financial statements for 2020 are prepared on a going Company will be transferred, and also all liabilities of the concern basis. Company present as at the date of transfer. After the end of the reporting period, there were no other The Company‘s management is considering various significant events that should be recognised or disclosed scenarios for the transfer of business to AB LTG Cargo. in the financial statements for the year 2020. 87