This document summarizes information about CERB JSC, an electrical repair company in Bulgaria, and the Bulgarian financial market. It provides background on CERB JSC, describing its history and operations. It analyzes CERB JSC's financial results, working capital, investment practices, and current funding. It also describes the Bulgarian financial market institutions and common funding practices in Bulgaria's electrical industry. Finally, it proposes plans for CERB JSC to improve its self-funding ability and access to external funding, such as optimizing its supply chain, receivables, and payables.

1. CERB JSC
financial requirement:
opportunities on the Bulgarian
financial market

2. Agenda
 CERB JSC
provides the information on the history of electrical industry in Bulgaria
presents CERB JSC and its preliminary funding assessment
 Bulgarian financial market
describes the financial institutions in Bulgaria and financial instruments
 CERB JSC financial requirements
does assessment of the present funding practice of the CERB JSC
proposes the plan of actions for the company to improve its self-funding ability
and to create better conditions to obtain external funding

3. Electrical industry
 In 2009, the total amount of electricity generated in the world was 20,100 TWh
enough for every person on Earth to keep a pot of water boiling for one - third of
each day throughout the year
 Use of electric power by industry grows exponentially; between 1999 and 2009,
world electricity production grew by 33 percent
 Electrical engineering industry has a huge capital earning potentiality, which can
strengthen the economy of a country
 Electrical industry in Bulgaria has over 100 years of history
 Bulgarian electricity
production – 34.31 billion kWh
consumption – 28.3 billion kWh
export – 7.735 billion kWh
import – 5.073 billion kWh

4. CERB JSC
CERB was established in 1948 and today is recognized as a reliable supplier of
repair services to the power facilities within the electric power sector in Bulgaria
 1948 – the electrical machines repair workshop
 1956 – the transformers repair workshop and the mechanical workshop
 1965 – the transport department
 1975 – the center for welding and control of metals and specialized sections
for vibration analysis and dynamic balancing of rotating machines and
adjustment of the regulation of steam turbines
 1994 – CERB became a joint stock company
 2001 – CERB was privatized
 2002 – Quality Management System – EN ISO 9001-2000 was introduced
 2005 – Health and Safe Labour Management System – BSI-OHSAS 18001
was introduced

5. The main financial results
(in thousands of BGN)
2011 2010 Change
1 Gross financial result (EBIT) 101 -1 063 1 164
2 Net financial result
(profit/losses) 98 -959 1 057
3 Equity 2 488 2 390 98
4 Turnover 5 745 4 388 1 357
5 Expenses 5 644 5 451 193
6 Money 44 65 -21
7 Prepaid expenses 25 29 -4
8 Payables 3 820 2 732 1 088
9 Receivables 1 070 969 101
10 Total assets 6 395 5 199 1 196

6. Net operating working capital
The working capital is strongly influenced by:
– operating conditions (sales growth, contribution margin, sales volatility)
– ability to finance operating working capital (operating cash flow, asymmetric
information and costs of external financing, capital market access, market power,
financial distress)
1-Q 2011 2-Q 2011 3-Q 2011 4-Q 2011 1-Q 2012 2-Q 2012
Sales 408 252 1 155 025 1 756 985 1 434 180 714 495 799 150
Inventory 1 457 616 1 797 528 1 842 288 2 151 200 1 816 311 1 942 371
Receivables 931 111 759 360 1 012 925 1 010 205 876 228 894 902
Payables 680 067 908 784 895 198 1 067 135 1 039 904 1 170 480
NOWC 1 708 660 1 648 104 1 960 015 2 094 270 1 652 635 1 666 794

7. NOWC strategy
In theory sales volatility, limited capital market, costly external financing during the
should force CERB JSC use more aggressive working capital strategies
In fact the company has the sufficient positive net operating working capital and
uses conservative working capital policy
The NWOC-to-sales ratio almost doubled in 2012 comparing to 2011
1-Q 2011 2-Q 2011 3-Q 2011 4-Q 2011 1-Q 2012 2-Q 2012
Sales 408 252 1 155 025 1 756 985 1 434 180 714 495 799 150
NOWC 1 708 660 1 648 104 1 960 015 2 094 270 1 652 635 1 666 794
Change in sales 746 773 601 960 -322 805 -719 685 84 655
Change in
NOWC -60 556 311 911 134 255 -441 635 14 158
NOWC / Sales
ratio 1,43 1,12 1,46 2,31 2,09

8. Change in Sales and NOWC
1-Q 2011 2-Q 2011 3-Q 2011 4-Q 2011 1-Q 2012 2-Q 2012
Change in sales 183% 52% -18% -50% 12%
Change in inventory 23% 2% 17% -16% 7%
Change in
receivables -18% 33% 0% -13% 2%
Change in payables 34% -1% 19% -3% 13%

9. Capital expenditure
(CAPEX)
Aggressive investment policy (AIP) – minimal level of investment in current
assets versus fixed assets.
Conservative investment policy (CIP) places a greater proportion of capital in
liquid assets with the opportunity cost
CERB JSC had not been doing active investment in CAPEX and company
investment policy can be defined as conservative
1-Q 2011 2-Q 2011 3-Q 2011 4-Q 2011 1-Q 2012 2-Q 2012
Change in current assets 195 379 300 354 293 863 -496 463 130 192
Change in CAPEX 102 639 71 205 50 728 6 674 -46 214
Change in total assets 298 019 371 559 344 591 -489 788 83 978

10. Bulgarian financial market
Institutions
Bulgarian financial state agencies: Financial Supervision Commission; Customs
Agency; The State Receivables Collection Agency; Public Procurement Agency;
InvestBulgaria Agency; Privatization Agency; Bank Association
Since 1997, the Bulgarian Stock Exchange (BSE) has operated under a license
from the Securities and Stock Exchange Commission (SSEC)
Money market
31 commercial banks with total assets of BGN 73.7 billion
Banking system is highly capitalized (Capital adequacy ratio – 17.5 %)
The trade is concentrated in the shortest maturities – overnight
Capital market
Total market capitalization amounted to BGN 10.8 billion
There were no initial public offerings (IPO) on the BSE-Sofia during the 2012
period. The secondary market amounted to BGN 178.5 million on the stock exchange,
a nearly 24 % decrease compared to BGN 235.2 million for the same period of 2011

11. Industry funding practice
All the companies have positive working capital and net operating working
capital, it means they use conservative working capital strategy.
Because three out of four companies use more conservative investment policy
we can conclude that it is more common practice in electrical industry in Bulgaria.
The opposite situation with financing policy, three out of four companies
practice to use more aggressive financing policy.
NOWC-to-sales ratio between 0,45 and 0,49
NOWC-to-Total assets ratio fluctuates sufficiently from 0,12 up 0,52.
Usual practice for industry to have low level of current financial liabilities into
the structure of the current liabilities, only one company exceeded the level over 4%

12. Industry funding practice
(in thousands of BGN)
CERB Hyundai ELPROM Energoremont
2011 Type 2011 Type 2011 Type 2011 Type
Sales 4 754 93 355 6 514 30 586
Current assets 3 298 72 151 4 862 60 059
Inventory 2 159 26 221 1 958 17 935
Receivables 1 012 43 353 2 068 25 032
Non-current assets 3 097 13 786 18 592 36 476
Total assets 6 395 85 937 23 454 96 535
Current liabilities 2 202 25 037 1 287 28 128
Current financial liabilities 84 631 218 113
Payables 1 954 24 406 1 069 27 772
Working capital (WC) 1 096 47 114 3 575 31 931
Net operating working capital
(NOWC) 1 217 CWCS 45 168 CWCS 2 957 CWCS 15 195 CWCS
Investment policy (IP) 0,5157 CIP 0,8396 CIP 0,2073 AIP 0,6221 CIP
Financing policy (FP) 0,3443 AFP 0,2913 AFP 0,0549 CFP 0,2914 AFP
Current financial
liabilities/Current liabilities 3,81% 2,52% 16,94% 0,40%
NOWC/ Sales 25,60% 48,38% 45,39% 49,68%
NOWC/ Total assets 19,03% 52,56% 12,61% 15,74%

13. CERB present funding
Year 2011
Non-current financial liabilities 1618
Bank credits 472
Financial leasing 27
Other non-current loans 1119
Current financial liabilities 84
Total financial liabilities 1702
Financial debt (in thousands of BGN)
Equity and net debt (in thousands of BGN)
Year 2011 2010
Equity 2488 2390
Debt 2634 2090
Cash and cash equivalents 44 65
Net debt 2590 2025
Equity/Net debt ratio 0,96 1,18

14. Future financial
development plans
Supply chain management and inventory supervision
– “just in time” concept
– sell all unnecessary stocks and raw materials accumulated in previous years
Receivables
– collecting debts in as short a time as possible
– offering discounts for prepaid orders
– sell debts
Payables
– find alternative supplier for every existing supplier
– use bank guarantee to maximize as much as possible the terms of payments to
suppliers
– avoid payments to suppliers in advance
– issue “Internal bonds for personnel” (IBP)
Cash conversion cycle = DII + DSO – DPO
– decrease to optimal level

15. Thank you!
Pisa 2012