An independent auditor has completed the audit of financial report of year 2020 of AS “Rīgas kuģu būvētava”.

AS “Rīgas kuģu būvētava” (Company) closed 2020 with a negative operating result or losses of EUR 9,886,447, which have increased by approximately 1,200% compared to 2019. Factors affecting the loss for the reporting year are (a) revaluation of fixed assets, where the value of fixed assets was reduced by approximately 50% or EUR 6,896,304; (b) revaluation of inventories, which resulted in the write–off of approximately 80% of the value of inventories or EUR 676,805; and (c) the assessment of the recoverability of receivables by writing off bad debts and establishing provisions for doubtful receivables.

Net turnover from operations in 2020 was EUR 633,502, which more than doubled compared to 2019. The increase is due to the fact that in 2020 the Company agreed with several shipping companies on the performance of repairs, which were also successfully implemented. In the field of ship repairs, the main customers were Estonian, Lithuanian, Belgian and Latvian shipping companies.

Total assets of the Company at the end of 2020 reduced by EUR 10 million or approximately 47% compared to the beginning of the year due to the revaluation of fixed assets, which was carried out in accordance with an asset valuation provided by independent experts. In 2020, the Company’s total liabilities decreased insignificantly, reaching EUR 7,357,060 at the end of the year, as well as equity decreased by approximately 86% and as at December 31^st, 2020 amounted to EUR 1,531,019.

On August 16^th, 2019, the Riga City Vidzeme Suburb Court satisfied the application for the Company’s Legal Protection Proceedings, hereinafter referred to as LPP, and approved the Company’s LPP plan of measures (as amended on June 12^th, 2019), setting the Company’s LPP implementation period at two years from August 16^th, 2019. The LPP plan of measures prepared by the Company and approved in court makes it possible to maintain the current business profile – ship repairs, while also developing other types of business in order to make the most of the Company’s infrastructure.

Considering the fact that in Latvia and elsewhere in the world the prohibitions and restrictions set in connection with the restriction of the spread of Covid–19 was introduced in 2020, the Company was unable to resume its economic activity to the extent provided for in the LPP plan of measures, therefore the Company developed amendments to the LPP plan of measures. On May 15^th, 2020, the Riga City Vidzeme Suburb Court decided to approve the amendments to the plan of measures of the Company’s legal protection proceedings (as amended on April 06^th, 2020) and to set the term for the implementation of the Company’s legal protection proceedings at 4 (four) years, starting from August 16^th, 2019. On the other hand, taking into account that at the end of 2020, both in Latvia and elsewhere in the world, the bans and restrictions imposed in connection with the restriction of the spread of Covid–19, which significantly affected the Company’s ability to fulfil the LPP plan of measures and its amendments, the Company repeatedly developed amendments to the LPP plan of measures. On January 25^th, 2021, the Riga City Vidzeme Suburb Court decided to approve new amendments to the plan of measures of the legal protection proceedings of the Company (as amended on December 23^rd, 2020) and to set the term for implementation of the legal protection proceedings for the Company at 5 (five) years, counting from August 16^th, 2019.

The amount of the Company’s equity as of December 31^st, 2020 is positive in the amount of EUR 1,531,019. The Company’s operating result for 2020 was a net loss of EUR 9,886,447 and as at December 31^st, 2020, short–term liabilities exceed current assets by EUR 486,275. The most significant short–term liability items are liabilities for taxes and state social insurance contributions, as well as advances received, amounting to total liabilities of EUR 1,016,481.

In 2021 and until the approval of the annual report, the restrictions related to the spread of coronavirus are still in force in the Republic of Latvia and many other countries, which significantly slows down the economic development in the country and in the world, therefore, the economic development is still uncertain and this had a significant and unfavourable impact on the Company’s economic activity.

The above situation has had a very direct impact not only on the Company’s future operations, but also on the implementation of LPP. Since the approval of the plan of measures of legal protection proceedings until the preparation of the annual report, there have been several amendments to the plan of measures of legal protection proceedings, the last of which was approved on September 17^th, 2021, reducing the total amount of creditors’ liabilities by ten percent and setting a period of five years for the implementation of these proceedings counting from August 16^th, 2019.

The Company confirms that the amendments to the LPP plan of measures prepared by it and approved by the court will make it possible for it to maintain its current business profile and indicates that the financial obligations towards both secured creditors and unsecured creditors will be fulfilled within sixty months from the approval of the LPP plan of measures, i.e. by 2024.

In 2021 and until the preparation of the annual report, the Company has been able to fulfil its obligations in accordance with the LPP plan of measures. The future operation of the Company depends on the Company’s ability to implement the legal protection plan, as well as to settle the liabilities to its creditors within the set term, observing all conditions of the plan. The Company forecasts that in the near future, as the restrictions imposed due to Covid–19 in Latvia and in the world reduce, it will be able to improve its economic performance and financial results within approximately 12 months. The Company continues to take measures in the field of process efficiency and cost optimisation, at the same time looking for solutions to expand the Company’s operations, as a result of which the Company’s forecasts and operating financial results are planned with a profit.

Although the Company has clear prospects for resuming operations, it is already known that it will take time to optimise staffing, restore the flow of current assets, diversify production and raise investment.

This conclusion is based on the information available at the moment of signing this financial statement and the impact of further events on future operations of the Company may differ from the management’s evaluation.

On the initiative of the private shareholder, on October 26^th, 2021, the Financial and Capital Market Commission according to its Decision No.139 authorised to make a mandatory share repurchase offer. Within the framework of the mandatory share repurchase offer, one private person repurchased 42,036 shares of the Company or 0.3601% of the total number of voting shares of the Company, as a result of which one private shareholder acquired 50.2157% both as indirect (as the shareholder of AS “Remars–Rīga”) and direct ownership of the total number of voting shares of the Company. The Board of the Company considers that the share repurchase offer complied with the provisions of the Financial Instrument Market Law. Considering that the issuer of the share repurchase offer intends to continue the current activity of the Company and no change in the type of its activity is planned, the Board of the Company evaluates the share repurchase offer positively and accordingly it will continue the economic activity in the current field.

The Company has not performed any activities in the field of research and development in the reporting year.

In the reporting year the Company has neither redeemed, nor sold its shares.

The Company does not have representation offices or branches abroad.

The Board of the Company proposes to cover the losses of the reporting year from the retained earnings of next years.

Find hereby enclosed the audited Financial Report of year 2020, auditor’s report and Corporative Governance Report on 2020.

The Board of Directors of AS “Rīgas kuģu būvētava”