AutoWallis Nyrt. (registered seat: 1055 Budapest, Honvéd utca 20.; hereinafter: Company) based on its publishing obligation according to 55-56 §§ of Act CXX of 2001 on the Capital Market and the PM Decree No. 28/2008. (VIII. 15.) hereby informs market actors of the below details.
In line with the expansion plans of the Group and to support this, the annual general meeting elected PricewaterhouseCoopers Ltd as the new statutory auditor.
The AutoWallis Group executed the following restatements, representations, and reclassifications in the consolidated financial statements for the period ending on 30 June 2021. These restatements, representations, and reclassifications were discussed with the new auditor.
I. Restatement due to share-based payments
The AutoWallis ESOP program (hereinafter: ESOP) – was launched in 2019. In this program, the majority shareholder of the Group, WALLIS ASSET MANAGEMENT Zrt., transferred ordinary shares to the program (hereinafter: MRP1). The Group decided to change the accounting treatment of a part of the shares transferred since the effect of the program was not recognized as an expense for the years 2019, 2020, and 2021 first half-year since this share-based payment will never result in cash outflow nor decrease in the net assets. The expense currently retrospectively restated will not change the EBITDA, and the net profit will only be altered for technical reasons; the owners’ equity will remain unchanged due to this restatement (see table below). The restatement was prepared retrospectively to the date of the original transfer. This restatement will assure comparability with the new ESOP program (MRP2), where the shares to be transferred to the employees will be provided by the Group. In the Financial Statements the following adjustments were made for MRP1 for the shares that will be distributed to employees (all amounts in kHUF):
II. Restatement due to the acquisition of INICIÁL AUTÓHÁZ Kft. and ICL Kft.
When acquiring the majority shareholding in INICIÁL AUTOHÁZ Kft. and ICL Kft., the Entity transferred AutoWallis shares to the seller as part of the consideration transferred. The parties agreed upon providing options to each other in connection with the shares transferred. Due to this option, it may be required that the Entity has to buy back its' own shares or will have the option to do so. The option will be effective from 31 May 2022 and will expire on 31 May 2026.
This obligation was disclosed in the financial statements for the year ending on 31 December 2020, but no liability was recognized. In the financial statements for the year ending on 30 June 2021, the options were recognized as a synthetic forward and were measured at the maximum value of the theoretical cash outflow without considering the probability of this outflow. Therefore a portion of the consideration paid to the seller (the part that these options relate to) was not recognized as a capital contribution but as a liability. This adjustment was made retrospectively. The adjustment has the following effect on the consolidated financial statements (all amounts in kHUF):
The Entity still believes that the probability that these options will be exercised is remote. When the options expire and not be executed, the liability will be derecognized and reclassified to equity.
III. Representation of reverse factoring deals, reclassifications
The AutoWallis Group has a financing solution where the payable from the inventory acquisition will be settled not by the AutoWallis Group but by a financing institution, usually right after this acquisition. Based on the agreements, the legal obligation to pay for the acquisition ceases, and this payment will be the responsibility of the financing institution. The AutoWallis Group pays its’ obligation toward the financing institution later, usually when the acquired inventory is sold.
The accounting treatment of these reverse factoring transactions was changed. Since the AutoWallis Group regularly enters this type of transaction and the amount of these transactions is material, the liabilities from these transactions will be disclosed separately as Liabilities from reverse factoring. Earlier, these balances were included in accounts payable and short-term loans. The separate presentation will also be prepared for the comparative period's year-end and year-beginning (all amounts in kHUF).
Out of the above balance, 1 176 006 kHUF did not yet bear contractual interest since the financing remained within the interest-free period (comparative period: 2 215 551 kHUF).
At the same time, the Entity represents the expenses related to these liabilities and will present those as interest expenses. This adjustment to interest expense will also adjust (increases) the EBITDA (in kHUF):
The Entity will represent these items in the statement of cash flows in line with its accounting policy. Therefore, only those cash flows will be presented from this financing as operating cash flows where the conditions attached to the liabilities are substantially the same as the conditions of regular accounts payable (tenor, security, fees, etc.). If this condition is not met, then the acquisition of inventory is treated as a non-cash item in the cash flow, and the cash outflow will be presented as financing cash flow. This representation will also be done for the comparative period (amounts in kHUF):
VI. Changes in the grouping and the presentation of the liabilities
Due to the material changes in the size and the financing structure of the Group from 2021, the Entity changes the presentation of its' liabilities since it believes that this will substantially improve the quality and the understandability of the financial statements. The new grouping will clearly distinguish between liabilities bearing interest and those not bearing interest, which enables the users of the financial statements to see if there are further expenses related to the liability. At the same time, accruals and prepayments will be separately disclosed in the balance sheet both on the asset and liability side. Furthermore, the Entity includes additional subtotals to identify the total amount of liabilities bearing interest and not bearing interest since the Entity thinks this is essential information.
The new presentation is done retrospectively (for the last and first day of the comparative period) to enable comparability.
At the same time, some of the classifications used in the financial statements for the year 2020 will be changed since those classifications did not match the true nature of those liabilities. However, these modifications will not change the total amounts of short and long-term liabilities.
The following modifications are done:
1. In the case of Wallis British Motors Kft. certain related-party payables were disclosed as short-term debt on 31 December 2020. During consolidation, the balance was eliminated as accounts payable. This correction will increase the balance of the accounts payable by 563 million forints, and at the same time, short-term debt will decrease by this amount. The correction will not change the total of short-term liabilities.
2. In the balance sheet of Wallis Autókölcsönző Kft. a liability of 924 million HUF was recognized as lease liability towards AW Csoportszolgáltató Kft. This liability was eliminated on the consolidation from the other short-term liabilities. This elimination was adjusted together with the representation of the liabilities. Due to this, the interest-bearing lease liability decreased by 924 million HUF, and at the same time, the other short-term liabilities increased by the same amount. The reclassification did not change the total of short-term liabilities.
3. At the end of the previous year, the contingent liability due to the acquisition of the Opel operation was not disclosed on the correct liability position (3 223 146 tHUF in total) since the nature of this balance is not a loan. Therefore the Entity decided to reclassify this amount as other not an interest-bearing liability.
The representation and the correction will have the following effects (in kHUF):
The overall net effect of the modifications on the last day of 2020 is 446 837 kHUF increase in the liabilities, which all comes from the recognized put and call options.
These reclassifications had only effect on the short term liabilities for the first day of the comparative period (1 January 2020):
The overall net effect of the modifications on the first day of 2020 is 0.