CZ/SK verze

Debts wherever you look: Rail Invest still takes out CZK 750 million for a new toy that is moving towards destruction

Debts wherever you look: Rail Invest still takes out CZK 750 million for a new toy that is moving towards destruction
photo: Archives/Workshop Louny
28 / 11 / 2020

As we managed to find out, the company Traťová strojní společnost (TSS) has been permanently at a loss of approximately 400 million crowns since its establishment. Among other things, the company reports a deferred tax liability of more than 0.5 billion Czech crowns. Nevertheless, this company paid 751 million crowns this year in the insolvency procedure for the purchase of a workshop in Louny. The price at which they bought this factory reached three times the price set by the price evaluation.

The Rail Invest Group, to which TSS belongs and which is controlled by the controversial Šuška’s brothers, was established in 2007/2008 and includes an entire portfolio of companies. For example, Ostravské opravny a strojírny (OSS), TSS Cargo, TSS Maintenance and TSS itself. However, none of these companies are doing very well economically.

According to the last published financial statements for the accounting period ending on 31 March 2019, the company TSS, which is the new owner of the wagon repair workshop in Louny, which is undergoing a drastic interruption of production, reported total assets of approximately CZK 4.1 billion, with financial funds in the amount of approximately 191 million crowns and the company's revenues amounted to 390 million crowns. However, the company has always been loss-making since its establishment: in 2015 the loss was 90 million crowns, in 2016 93 million crowns, in 2017 212 million crowns and in 2018 a loss of 1.7 million crowns. The accumulated loss of previous accounting periods thus amounts to a total of 403 million crowns.

TSS, like other companies in the Rail Invest group, uses "tax doping" in the form of a reported deferred tax liability. In the period from 2015 to 2016, it always amounted to more than half a billion crowns. This accounting practice is common, but in this particular case, both the amount of the deferred liability and its continuing recognition since the inception of the company raise certain doubts that are likely to be of interest to financial authorities. Given these economic results of the company, it is striking that the company could afford to buy the Louny workshop for 751 million crowns, although the experts have evaluated that the price of it was around 238 million crowns. The Šuška’s have therefore paid three times more for Louny.

According to available public information, another company from the Rail Invest group, namely Ostravské opravny a strojírny, reported a loss in 2017 and 2018, while sales decreased by more than half a billion crowns between 2015 and 2018. The company therefore shows significantly unstable economic results. In 2017 and 2018, the company reported a loss of 29 million crowns, respectively 88.8 million crowns. Only for the accounting period ending March 31, 2019, the company reported a pre-tax profit of 120 million crowns.

In the 2012/2013 accounting period, Ostravské opravny a strojírny issued bonds in the amount of CZK 2 billion. We were unable to find further details on this issue from the Czech National Bank’s prospectus database or other open sources. However, the last published financial statements up to 31 March 2019 show that the bonds have not yet been even partially repaid. In the notes to the financial statements, the company states that it owns part of these bonds in the amount of CZK 400 million. According to the same financial statements, there was a sudden increase in the value of the item “Shares - controlled or controlling entity” from the original amount of CZK 965.5 million to CZK 2.765 billion. This increase was not justified by the Rail Invest or OOS Group (e.g. in the annual report).

During the last year, however, part of the company Ostravské opravny a strojírny was set off to its successor company Rail Invest a.s. and also transferred to TSS Maintenance and TSS, taking over all OOS’ real estates, comprising more than 100 plots and buildings and 18 hunting grounds, valued including business shares for the value of approximately 2.7 billion crowns. If the company OOS lost all real estates by this division, it would in fact have assets only in the value of the original 965.5 million crowns. Thus, by implementing the spin-off, the OOS would find itself in a situation where it would have negative equity accounting, as the sum of its assets would be lower than the sum of its liabilities. The splitting project explicitly states that the rights and obligations arising from the issue of bonds distributed by OOS do not pass to the successor Rail Invest.

And here we return to the seven-year-old issue of bonds in the amount of 2 billion crowns. As these bonds are not repaid yet, in the case of this company, for no apparent reason, it could be considered as an "artificial" accounting increase in assets of approximately CZK 1.8 billion, in order for the company to subsequently lose a substantial part of its real assets. This accounting operation may raise a number of doubts. The increase in assets in OOS took place through the accounting valuation of shares in third parties without an expert evaluation and without a real increase in business shares.

It is also strange to withdraw real business shares and all real estate from OOS and transfer to Rail Invest, while leaving the liability from bonds for 2 billion in OOS. Translated into plain language: OOS got rid of all real assets and probably remained only fictitious in its portfolio, but mainly all liabilities remained.

But other companies in the group are not economically better off economically either. In the years 2015 - 2017, TSS Cargo reported another long-term liability in the amount of CZK 1.5 billion, which is not suddenly reported in 2018. This company has also reported a permanently deferred tax liability of approximately CZK 250 million since 2012, and even CZK 312 million in 2015. TSS Maintenance in 2018 ended in a loss of 9.6 million crowns.

In short, it seems that the Šuška’s brothers have better times behind them – better time when according to the Ekonom.cz website they had ties to Christian democratic politicians. They now have other worries: they bought a new toy for 750 million crowns and have no use for it. According to the information from the editorial office, production in the Louny wagon has fallen to the level of 10 %, employees are leaving, and it is not certain how things will turn out with the former Lostr at all.

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