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Sopharma AD | 16 Iliensko Shose Str. | 1220 Sofia, Bulgaria | tel: +35928134200 | fax: +35929360286 | mail@sopharma.bg
sopharmagroup.com
Annual consolidated financial statements according to IFRS
Notes to the annual consolidated financial report
Annual consolidated management report
Consolidated Corporate governance declaration
Consolidated Non-financial declaraction
Declaration by responsible persons
Audit report
Audit statement
Annual consolidated financial
statements of “Sopharma” AD
as of 31.12.2022
SOPHARMA GROUP
Board of Directors: Ognian Donev, PhD
Vessela Stoeva
Alexander Chaushev
Ognian Palaveev
Ivan Badinski
Executive Director: Ognian Donev, PhD
Procurator: Simeon Donev
Finance Director: Boris Borisov
Preparer: Lyudmila Bondzhova
Head of Legal Department Alexander Yotov
Registered Address: Sofia
16, Iliensko Shousse Str.
Lawyer: Ventsislav Stoev
Servicing Banks:
KBC Bank Bulgaria AD
DSK Bank EAD
Eurobank Bulgaria AD
ING Bank N.V. - Sofia Branch
UniCredit Bulbank AD
Citibank Europe AD, Bulgaria Branch
Municipal Bank AD
Auditors: Baker Tilly Klitou and Partners EOOD
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
CONSOLIDATED ANNUAL STATEMENT OF COMPREHENSIVE INCOME 1
CONSOLIDATED ANNUAL STATEMENT OF FINANCIAL POSITION 2
CONSOLIDATED ANNUAL STATEMENT OF CASH FLOWS 3
CONSOLIDATED ANNUAL STATEMENT OF CHANGES IN EQUITY 4
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
1. BACKGROUND INFORMATION ON THE GROUP 5!
2. SUMMARY OF THE SIGNIFICANT ACCOUNTING POLICIES OF THE GROUP 24!
3. REVENUE FROM CONTRACTS WITH CUSTOMERS 83!
4. OTHER OPERATING INCOME AND LOSSES 84!
5. MATERIALS AND CONSUMABLES USED 85!
6. HIRED SERVICES EXPENSE 86!
7. EMPLOYEE BENEFITS EXPENSE 87!
8. OTHER OPERATING EXPENSES 87!
9. IMPAIRMENT OF ASSETS 88!
10. IMPAIRMENT OF NON-CURRENT ASSETS OUTSIDE THE SCOPE OF IFRS 9 88!
11. FINANCE INCOME 89!
12. FINANCE COSTS 89!
13. GAINS/LOSSES FROM ASSOCIATES AND JOINT VENTURES 90!
14. INCOME TAX EXPENSE 90!
15. OTHER COMPREHENSIVE INCOME 92!
16. PROPERTY, PLANT AND EQUIPMENT 93!
17. INTANGIBLE ASSETS 96!
18. INVESTMENT PROPERTY 98!
19. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES 100!
20. OTHER LONG-TERM EQUITY INVESTMENTS 106!
21. LONG-TERM RECEIVABLES FROM RELATED PARTIES 108!
22. OTHER LONG-TERM RECEIVABLES 109!
23. INVENTORIES 111!
24. TRADE RECEIVABLES 112!
25. RECEIVABLES FROM RELATED PARTIES 115!
26. OTHER SHORT-TERM RECEIVABLES AND ASSETS 117!
27. CASH AND CASH EQUIVALENTS 119!
28. EQUITY 119!
29. LONG-TERM BANK LOANS 122!
30. DEFERRED TAX ASSETS AND LIABILITIES 125!
31. NON-CURRENT PAYABLES TO RELATED PARTIES 127!
32. LONG-TERM EMPLOYEE BENEFIT OBLIGATIONS 127!
33. LEASE LIABILITIES 131!
34. GOVERNMENT GRANTS 132!
35. OTHER NON-CURRENT LIABILITIES 133!
36. SHORT-TERM BANK LOANS 133!
37. TRADE PAYABLES 134!
38. PAYABLES TO RELATED PARTIES 135!
39. PAYABLES UNDER FACTORING AGREEMENT 136!
40. PAYABLES TO PERSONNEL AND FOR SOCIAL SECURITY 136!
41. TAX PAYABLES 136!
42. OTHER CURRENT LIABILITIES 139!
43. CONTINGENT LIABILITIES AND COMMITMENTS 139!
44. SEGMENT REPORTING 142!
45. FINANCIAL RISK MANAGEMENT 144!
46. ACQUISITIONS AND INCREASING INTERESTS IN SUBSIDIARIES 159!
47. DISPOSAL OF SUBSIDIARIES AND JOINT VENTURES 160!
48. RELATED PARTY TRANSACTIONS 163!
49. EVENTS AFTER END OF THE REPORTING PERIOD 166
for the year ended 31 December 2022
2022 2021
BGN'000 BGN'000
Revenue from contracts with customers
3
1 663 016 1 603 310
Other operating income/(losses), net
4
13 042 13 830
Changes in inventories of finished products and work in progress
9 713 (8 721)
Raw materials and consumables used
5
(99 129) (83 122)
Hired services expense
6
(70 126) (75 927)
Employee benefits expense
7
(147 829) (150 061)
Depreciation and amortization expense
16, 17
(52 099) (53 187)
Carrying amount of goods sold
(1 214 333) (1 166 508)
Other operating expenses
8
(14 374) (16 095)
Profit from operations
87 881 63 519
Impairment of non-current assets outside the scope of IFRS 9
10
(20 783) (10 476)
Finance income
11
3 304 6 632
Finance costs
12
(9 417) (11 797)
Finance income / (costs), net
(6 113) (5 165)
Gain from associates and joint ventures, net
13
22 635 12 092
Gain on acquisition and disposal of subsidiaries
1 456 37 604
Profit before income tax
85 076 97 574
Income tax expense
14
(8 743) (5 871)
Net profit for the year
76 333 91 703
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Remeasurement of property, plant and equipment
15
(991) 10 616
Remeasurement of defined benefit pension plans
15,32
1 498 (25)
Net change in the fair value of other long-term equity investments
15
(1 047) (355)
Income tax relating to items of other comprehensive income that will not be reclassified
15
99 (1 150)
(441) 9 086
Items that may be reclassified to profit or loss:
Exchange differences on translating foreign operations
15
(4 637) (799)
Share of other comprehensive income of associates
15,19
(790) 3 708
(5 427) 2 909
Other comprehensive income for the year, net of tax
15
(5 868) 11 995
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
70 465 103 698
Net profit for the year attributable to:
Equity holders of the parent
71 121 89 496
Non-controlling interests
5 212 2 207
Total comprehensive income for the year attributable to:
Equity holders of the parent
65 110 101 970
Non-controlling interests
5 355 1 728
Basic net earnings per share
28
BGN
0.59 0.71
Diluted net earnings per share
28
BGN
0.57 0.71
Executive Director:
Ognian Donev, PhD
Finance Director:
Boris Borisov
Preparer:
Lyudmila Bondzhova
Audit company Baker Tilly Klitou and Partners EOOD № 129:
Ivaylo Yanchev Galina Lokmadjieva-Nedkova
Registered auditor Managing director
Baker Tilly Klitou and Partners EOOD
Notes
The accompanying notes on pages 5 to 166 form an integral part of the consolidated financial statements.
SOPHARMA GROUP
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
1
OGNIAN IVANOV DONEV
Digitally signed by OGNIAN
IVANOV DONEV
Date: 2023.04.26 19:22:44
+03'00'
BORIS ANCHEV
BORISOV
Digitally signed by
BORIS ANCHEV BORISOV
Date: 2023.04.26
19:29:00 +03'00'
LYUDMILA KRUMOVA
BONDZHOVA
Digitally signed by LYUDMILA
KRUMOVA BONDZHOVA
Date: 2023.04.26 19:32:31
+03'00'
IVAYLO
YANCHEV
YANCHEV
Digitally signed by
IVAYLO YANCHEV
YANCHEV
Date: 2023.04.28
11:10:35 +03'00'
Galina
Dimitrova
Lokmadjiev
a-Nedkova
Digitally signed by
Galina Dimitrova
Lokmadjieva-
Nedkova
Date: 2023.04.28
11:16:06 +03'00'
SOPHARMA GROUP
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December 2022
Notes
31 December
2022
BGN'000
31 December
2021
BGN'000
ASSETS
Non-current assets
Property, plant and equipment
16
376 407 362 393
Intangible assets
17
48 151 54 421
Goodwill
17
3 522 13 420
Investment property
18
10 568 9 446
Investments in associates and joint ventures
19
162 844 127 320
Other long-term equity investments
20
4 778 5 778
Long-term receivables from related parties
21
67 471 49 696
Other long-term receivables
22
5 694 10 222
Deferred tax assets
30
2 052 1 050
681 487 633 746
Current assets
Inventories
23
278 583 255 949
Trade receivables
24
224 442 227 832
Receivables from related parties
25
12 909 14 479
Other short-term receivables and assets
26
36 702 35 250
Cash and cash equivalents
27
19 855 37 722
572 491 571 232
TOTAL ASSETS 1 253 978 1 204 978
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Share capital
134 798 134 798
Reserves
47 503 55 031
Other equity components (reserve on warrant issue)
12 488 12 512
Retained earnings
509 869 444 634
28
704 658 646 975
Non-controlling interests 11 976 11 893
TOTAL EQUITY
28
716 634 658 868
LIABILITIES
Non-current liabilities
Long-term bank loans
29
27 759 42 907
Deferred tax liabilities
30
6 397 8 472
Non-current liabilities to related parties
31
24 494 10 210
Retirement benefit obligations
32
6 541 7 622
Lease liabilities
33
52 058 38 589
Government grants
34
6 155 6 783
Other non-current liabilities
35
6 594 7 635
129 998 122 218
Current liabilities
Short-term bank loans
36
158 355 217 392
Current portion of long-term bank loans
29
9 758 9 467
Trade payables
37
175 567 143 480
Payables to related parties
38
4 904 3 700
Factoring agreement liabilities
39
1 875 6 370
Current portion of lease liabilities
33
12 874 11 583
Payables to personnel and for social security
40
21 780 17 888
Tax payables
41
8 436 7 039
Other current liabilities
42
13 797 6 973
407 346 423 892
TOTAL LIABILITIES 537 344 546 110
TOTAL EQUITY AND LIABILITIES 1 253 978 1 204 978
The accompanying notes on pages 5 to 166 form an integral part of the consolidated financial statements.
The consolidated financial statements on pages 1 to 166 were approved for issue by the Board of Directors and signed on 26 April 2023 by:
Digitally signed by OGNIAN
OGNIAN IVANOV
DONEV
IVANOV DONEV
Executive Director:
Date: 2023.04.26 19:23:27 +03'00'
Ognian Donev, PhD
Finance Director:
Digitally signed by BORIS ANCHEV
BORISOV
Date: 2023.04.26 19:29:38 +03'00'
Boris Borisov
BORIS ANCHEV BORISOV
Preparer:
Lyudmila Bondzhova
Digitally signed by LYUDMILA
LYUDMILA KRUMOVA
BONDZHOVA
KRUMOVA BONDZHOVA
Audit company Baker Tilly Klitou and Partners EOOD № 129:
Date: 2023.04.26 19:33:03 +03'00'
Digitally signed
Galina
Dimitrova
Lokmadjieva-
Nedkova
Digitally signed by
IVAYLO
YANCHEV
YANCHEV
by IVAYLO
Galina Dimitrova
Ivaylo Yanchev Galina Lokmadjieva-Nedkova
Lokmadjieva-Nedkova
Registered auditor Managing director
YANCHEV
Date: 2023.04.28
YANCHEV
Baker Tilly Klitou and Partners EOOD
11:16:59 +03'00'
Date: 2023.04.28
11:11:24 +03'00'
2
SOPHARMA GROUP
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2022
Notes
2022 2021
BGN'000 BGN'000
Cash flows from operating activities
Cash receipts from customers
1 930 323 1 656 161
Cash paid to suppliers
(1 603 177) (1 504 805)
Cash paid to employees and for social security
(141 810) (146 239)
Taxes paid (except income taxes)
(65 217) (74 454)
Taxes refunded (except income taxes)
8 796 9 434
Income taxes paid
(9 905) (7 937)
Income taxes refunded
49 43
Interest and bank charges paid on working capital loans
(5 921) (6 600)
Foreign currency exchange gains/(losses), net
(1 599) (548)
Other proceeds/(payments), net
(1 457) (1 018)
Net cash flows used in operating activities
110 082 (75 963)
Cash flows from investing activities
Purchases of property, plant and equipment
(19 347) (20 349)
Proceeds from sales of property, plant and equipment
1 923 1 055
Proceeds from sales of investment property
- 1 952
Purchases of intangible assets
(4 309) (6 761)
Purchases of equity investments
20 (675) (22 338)
Proceeds from sales of equity investments
628 2 040
Proceeds from dividends on equity investments
33 451
Payments on acquisition of subsidiaries, net of cash received
46 (2 338) (2 338)
Proceeds from disposal of subsidiaries, net of the cash provided
47 399 (1 152)
Purchases of investments in associates and joint ventures
19 (16 480) (20 800)
Proceeds from sale of investments in associates and joint ventures
- 213
Proceeds from dividends on investments in associates and joint ventures
1 215 -
Proceeds/(payments) on transactions with non-controlling interests, net
(10 859) (8 421)
Loans granted to related parties
(13 500) (8 010)
Loan repayments by related parties
684 10 795
Loans granted to third parties
(1 962) (1 367)
Loan repayments by third parties
4 4 129
Interest received on loans and deposits
965 2 806
Proceeds from guarantorship contracts
13 30
Net cash flows used in/from investing activities
(63 606) (68 065)
Cash flows from financing activities
Proceeds from short-term bank loans (including increases in overdrafts)
12 19 554
Repayment of short-term bank loans (including decreases in overdrafts)
(59 072) (27 145)
Proceeds from long-term bank loans
2 163 16 834
Repayment of long-term bank loans
(20 029) (19 405)
Proceeds under factoring agreement
30 950 193 905
Interest and charges paid under factoring agreement
(114) (56 8)
Interest and charges paid under investment purpose loans
(354) (1 994)
Lease payments
(16 081) (20 477)
Treasury shares
(1 919) (16 628)
Dividends paid (11) (63)
Government grants
34 81
Proceeds/(payments) related to other equity components (warrants), net 79 12 512
Net cash flows from financing activities
(64 342) 156 606
Net (decrease)/increase in cash and cash equivalents (17 866) 12 578
Cash and cash equivalents at 1 January 37 717 25 139
Cash and cash equivalents at 31 December 27 19 851 37 717
Executive Director:
Ognian Donev, PhD
Finance Director:
Boris Borisov
Preparer:
Lyudmila Bondzhova
Audit company Baker Tilly Klitou and Partners EOOD № 129:
Ivaylo Yanchev Galina Lokmadjieva-Nedkova
Registered auditor Managing director
Baker Tilly Klitou and Partners EOOD
The accompanying notes on pages 5 to 166 form an integral part of the consolidated financial statements.
3
OGNIAN IVANOV
DONEV
Digitally signed by OGNIAN
IVANOV DONEV
Date: 2023.04.26 19:24:03 +03'00'
BORIS ANCHEV
BORISOV
Digitally signed by BORIS
ANCHEV BORISOV
Date: 2023.04.26 19:30:06 +03'00'
LYUDMILA KRUMOVA
BONDZHOVA
Digitally signed by LYUDMILA
KRUMOVA BONDZHOVA
Date: 2023.04.26 19:33:38 +03'00'
IVAYLO
YANCHEV
YANCHEV
Digitally signed
by IVAYLO
YANCHEV
YANCHEV
Date: 2023.04.28
11:11:54 +03'00'
Galina
Dimitrova
Lokmadjieva-
Nedkova
Digitally signed by
Galina Dimitrova
Lokmadjieva-
Nedkova
Date: 2023.04.28
11:17:25 +03'00'
SOPHARMA GROUP
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2022
Non-controlling
Total
Attributable to owners of the equity of the parent
interests
equity
Notes
Share
Treasury
Statutory
Revaluation
reserve - property,
plant and
equipment
Reserve from
financial assets at fair
value through other
comprehensive
income
Translation of foreign
operations reserve
Other equity components
Retained
earnings
Total
capital
shares
reserves
(reserve on warrants
issue)
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
Balance at 1 January 2021
28 134 798 (33 656)
63 335 28 425 2 282 (2 685) - 360 770 553 269 13 326 566 595
Changes in equity for 2021
Effect of treasury shares acquisition
- (16 628)
- - - - - - (16 628) -
(16 628)
Other equity components, incl.:
12 512
12 512
12 512
*issue value
12 579
12 579
12 579
* transaction costs
(67)
(67)
(67)
Distribution of profit for:
- -
2 866 - - - - (2 866)
-
-
-
* statutory reserves
- -
2 866 - - - (2 866) - - -
Effects assumed by non-controlling interests on:
- -
- - - - - (4 148) (4 148) (3 161) (7 309)
* acquisition/(disposal) of subsidiaries:
- -
- - - - - - - 1 196 1 196
* increase in the interest in subsidiaries
- -
- - - - - (4 148) (4 148) (4 357) (8 505)
Total comprehensive income for the year, including:
- -
- 9 485 (355) 3 367 - 89 473 101 970 1 728 103 698
* net profit for the year
- -
- - - - 89 496 89 496 2 207
91 703
* other comprehensive income, net of taxes
- - - 9 485 (355) 3 367 - (23) 12 474 (479)
11 995
-
Transfer to retained earnings - - - (1 122) (283) - - 1 405 - -
-
Balance at 31 December 2021
28 134 798 (50 284)
66 201 36 788 1 644 682 12 512 444 634 646 975 11 893 658 868
Balance at 1 January 2022
134 798 (50 284)
66 201 36 788 1 644 682 12 512 444 634 646 975 11 893 658 868
Changes in equity for 2022
Effect of treasury shares acquisition
- (1 919) - - - - - - (1 919) -
(1 919)
Effects of rights sold under warrant issue
- - - - - - - 103 103 -
103
Other equity components, incl.:
- - - - - - (2 4) - (24) -
(24)
* transaction costs
- - - - - - (2 4) - (24) -
(24)
Distribution of profit for:
- -
2 427 - - - - (2 427) - - -
* statutory reserves
- -
2 427 - - - - (2 427) - -
-
Effects assumed by non-controlling interests on:
- -
- - - - - (5 587) (5 587)
(5 272) (10 859)
* increase in the interest in subsidiaries
- -
- - - - - (5 587) (5 587) (5 272)
(10 859)
Total comprehensive income for the year, including:
- -
- (892) (1 047) (5 427) - 72 476 65 110 5 355 70 465
* net profit for the year
- -
- - - - - 71 121 71 121 5 212
76 333
* other comprehensive income, net of taxes
- -
- (892) (1 047) (5 427) - 1 355 (6 011) 143
(5 868)
-
Transfer to retained earnings
- -
- (633) (37) - - 670 -
-
-
-
-
Balance at 31 December 2022
28 134 798 (52 203)
68 628 35 263 560 (4 745) 12 488 509 869 704 658 11 976 716 634
The accompanying notes on pages 5 to 166 form an integral part of the consolidated financial statements.
OGNIAN IVANOV
DONEV
Digitally signed by OGNIAN
Executive Director:
IVANOV DONEV
Ognian Donev, PhD
Date: 2023.04.26 19:24:39 +03'00'
Finance Director:
Digitally signed by BORIS ANCHEV BORISOV
Date: 2023.04.26 19:31:39 +03'00'
Boris Borisov
BORIS ANCHEV BORISOV
Preparer:
Digitally signed by LYUDMILA KRUMOVA
BONDZHOVA
Date: 2023.04.26 19:34:13 +03'00'
LYUDMILA KRUMOVA
BONDZHOVA
Lyudmila Bondzhova
Audit company Baker Tilly Klitou and Partners EOOD № 129:
Digitally signed by
IVAYLO
YANCHEV
YANCHEV
IVAYLO YANCHEV
Galina Dimitrova
Lokmadjieva-
Nedkova
Digitally signed by Galina
YANCHEV
Ivaylo Yanchev Galina Lokmadjieva-Nedkova
Date: 2023.04.28
Registered auditor Managing director
Dimitrova Lokmadjieva-Nedkova
11:12:22 +03'00'
Baker Tilly Klitou and Partners EOOD
Date: 2023.04.28 11:17:52 +03'00'
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SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
5
1. BACKGROUND INFORMATION ON THE GROUP
Sopharma Group (the Group) is comprised of the parent company and its seventy-seven (31 December 2021:
seventy-eight) subsidiaries. In addition, the Group has investments in two associates and one joint venture (31
December 2021: in two associates and one joint venture).
Parent company
Sopharma AD (the parent company) is a business entity registered in Bulgaria with a seat and registered
management address: Sofia, 16, Iliensko Shousse St.
The Company was registered with court on 15 November 1991 by Decision No 1/1991 of Sofia City Court.
Explanation regarding the change in the name of the reporting entity after the end of the previous
reporting period:
During the year there was no change in the name of the reporting parent company.
Subsidiaries
The Group subsidiaries as at 31 December 2022 are as follows:
· Sopharma Trading AD – a business entity registered in Bulgaria by Decision No. 3594/16.10.1998
of Varna District Court, with a seat and management address: Sofia, Izgrev Region, 5 Lachezar
Stanchev St., Sopharma Business Towers, Building A, floor 12;
· Pharmalogistica AD – a business entity registered in Bulgaria by Decision of Sofia City Court
dated 12 August 2002, with a seat and management address: Sofia, 16, Rozhen Blvd.;
· Electroncommerce EOOD – a business entity registered in Bulgaria by Decision of Sofia City Court
under Company File No. 24456 of 1991, with a seat and management address: Sofia, 1,
Samokovsko Shousse St.;
· Biopharm Engineering AD – a business entity registered in Bulgaria by Decision No. 524/1997 of
Sliven District Court, with a seat and management address: Sliven, 75, Trakiya Blvd.;
· Phyto Palauzovo AD – a business entity registered in Bulgaria by Decision No.
20120924105551/24.09.2012 of the Registry Agency, with a seat and management address:
Kazanluk, 110, 23rd Pehoten Shipchenski Polk Blvd.;
· Sopharmacy EOOD – a business entity registered in Bulgaria by Decision No.
201501191300026/19.01.2015 of the Registry Agency, with a seat and management address: Sofia,
Izgrev Region, 5 Lachezar Stanchev St., Sopharma Business Towers, Building A, floor 12;
· Sopharmacy 2 EOOD – a business entity registered in Bulgaria by Decision No.
20150617110324/17.06.2015 of the Registry Agency, with a seat and management address: Sofia,
Izgrev Region, 5 Lachezar Stanchev St., Sopharma Business Towers, Building A, floor 12;
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
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· Sopharmacy 3 EOOD – a business entity registered in Bulgaria by Decision No.
20151202165822/02.12.2015 of the Registry Agency, with a seat and management address: Sofia,
Izgrev Region, 5 Lachezar Stanchev St., Sopharma Business Towers, Building A, floor 12;
· Sopharmacy 4 EOOD – a business entity registered in Bulgaria by Decision No.
20160229093338/29.02.2016 of the Registry Agency, with a seat and management address: Sofia,
Izgrev Region, 5 Lachezar Stanchev St., Sopharma Business Towers, Building A, floor 12;
· Sopharmacy 5 EOOD – a business entity registered in Bulgaria by Decision No.
20160301155620/01.03.2016 of the Registry Agency, with a seat and management address: Sofia,
Izgrev Region, 5 Lachezar Stanchev St., Sopharma Business Towers, Building A, floor 12;
· Sopharmacy 6 EOOD – a business entity registered in Bulgaria by Decision No.
20140127170842/27.01.2014 of the Registry Agency, with a seat and management address: Sofia,
Izgrev Region, 5 Lachezar Stanchev St., Sopharma Business Towers, Building A, floor 12;
· Sopharmacy 7 EOOD – a business entity registered in Bulgaria by Decision No
20170315161212/15.03.2017 of the Registry Agency, with a seat and management address: Sofia,
Izgrev Region, 5 Lachezar Stanchev St., Sopharma Business Towers, Building A, floor 12;
· Sopharmacy 8 EOOD – a business entity registered in Bulgaria by Decision No
20170627142803/27.06.2017 of the Registry Agency, with a seat and management address: Sofia,
Izgrev Region, 5 Lachezar Stanchev St., Sopharma Business Towers, Building A, floor 12’;
· Sopharmacy 9 EOOD – a business entity registered in Bulgaria by Decision No
20170911100706/11.09.2017 of the Registry Agency, with a seat and management address: Sofia,
Izgrev Region, 5 Lachezar Stanchev St., Sopharma Business Towers, Building A, floor 12;
· Sopharmacy 10 EOOD – a business entity registered in Bulgaria by Decision No
20170911101412/11.09.2017 of the Registry Agency, with a seat and management address: Sofia,
Izgrev Region, 5 Lachezar Stanchev St., Sopharma Business Towers, Building A, floor 12;
· Sopharmacy 11 EOOD – a business entity registered in Bulgaria by Decision No 20170302125338
/02.03.2017 of the Registry Agency, with a seat and management address: Sofia, Izgrev Region, 5
Lachezar Stanchev St., Sopharma Business Towers, Building A, floor 12;
· Sopharmacy 12 EOOD – a business entity registered in Bulgaria by Decision No
20170306085236/06.03.2017 of the Registry Agency, with a seat and management address: Sofia,
Izgrev Region, 5 Lachezar Stanchev St., Sopharma Business Towers, Building A, floor 12;
· Sopharmacy 13 EOOD – a business entity registered in Bulgaria by Decision No
20170306080850/06.03.2017 of the Registry Agency, with a seat and management address: Sofia,
Izgrev Region, 5 Lachezar Stanchev St., Sopharma Business Towers, Building A, floor 12;
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
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· Sopharmacy 14 EOOD – a business entity registered in Bulgaria by Decision No
20170306081205/06.03.2017 of the Registry Agency, with a seat and management address: Sofia,
Izgrev Region, 5 Lachezar Stanchev St., Sopharma Business Towers, Building A, floor 12;
· Sopharmacy 15 EOOD – a business entity registered in Bulgaria by Decision No
20170302134305/02.03.2017 of the Registry Agency, with a seat and management address: Sofia,
Izgrev Region, 5 Lachezar Stanchev St., Sopharma Business Towers, Building A, floor 12;
· Sopharmacy 16 EOOD – a business entity registered in Bulgaria by Decision No
20180515105543/15.05.2018 of the Registry Agency, with a seat and management address: Sofia,
Izgrev Region, 5 Lachezar Stanchev St., Sopharma Business Towers, Building A, floor 12;
· Sopharmacy 17 EOOD – a business entity registered in Bulgaria by Decision No
20180515105543/15.05.2018 of the Registry Agency, with a seat and management address: Sofia,
Izgrev Region, 5 Lachezar Stanchev St., Sopharma Business Towers, Building A, floor 12;
· Sopharmacy 18 EOOD – a business entity registered in Bulgaria by Decision No
20190228133836/28.02.2019 of the Registry Agency, with a seat and management address: Sofia,
Izgrev Region, 5 Lachezar Stanchev St., Sopharma Business Towers, Building A, floor 12;
· Veta Pharma AD - a business entity registered in Bulgaria under company file No. 581 dated
05.04.1999 of the Veliko Tarnovo District Court and with its seat and management address - the
city of Veliko Tarnovo, 32 "Dulga Laka" Street;
· Sopharmacy 19 EOOD (until 27 January 2021 it was called Valentina Vasileva – Lyulin EOOD) a
business entity registered in Bulgaria by Decision of the Registry Agency, No 20090226110235
dated 26.02.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev
St., Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 20 EOOD (until 16 February 2021 it was called Vasilka Lilovska EOOD), a business
entity registered in Bulgaria by Decision of the Registry Agency, No 20090518182226 dated
18.05.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St.,
Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 21 EOOD (until 4 February 2021 it was called Venera Mutashka EOOD), a business
entity registered in Bulgaria by Decision of the Registry Agency, No 20090519084124 dated
19.05.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St.,
Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 22 EOOD (until 17 February 2021 it was called Veselka Vassileva EOOD), a business
entity registered in Bulgaria by Decision of the Registry Agency, No 20090320091825 dated
20.03.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St.,
Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 23 EOOD (until 17 February 2021 it was called Victoria Angelova EOOD), a business
entity registered in Bulgaria by Decision of the Registry Agency, No 20090604184353 dated
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
8
04.06.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St.,
Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 24 EOOD (until 4 February 2021 it was called Desislava Yordanova EOOD), a
business entity registered in Bulgaria by Decision of the Registry Agency, No 20090604170149
dated 04.06.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev
St., Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 25 EOOD (until 4 February it was called Dimka Vladeva EOOD), a business entity
registered in Bulgaria by Decision of the Registry Agency, No 20090519080611 dated 19.05.2009;
with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St., Sopharma
Business Towers, Building A, floor 13;
· Sopharmacy 26 EOOD (until 4 February 2021 it was called Donka Chivganova EOOD), a business
entity registered in Bulgaria by Decision of the Registry Agency, No 20090226120647 dated
26.02.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St.,
Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 27 EOOD (until 18 February 2021 it was called Ekaterina Mihaylova Shumen 1
EOOD), a business entity registered in Bulgaria by Decision of the Registry Agency, No
20090604181926 dated 04.06.2009; with a seat and management address: Sofia, Izgrev Region, 5
Lachezar Stanchev St., Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 28 EOOD (until 27 January 2021 it was called Elka Neykova EOOD), a business
entity registered in Bulgaria by Decision of the Registry Agency, No 20090227145039 dated
27.02.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St.,
Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 29 EOOD (until 17 February 2021 it was called Emilia Angelova EOOD), a business
entity registered in Bulgaria by Decision of the Registry Agency, No 20090605085738 dated
05.06.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St.,
Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 30 EOOD (until 27 January 2021 it was called Zhuliana Kotova EOOD), a business
entity registered in Bulgaria by Decision of the Registry Agency, No 20090227160338 dated
27.02.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St.,
Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 31 EOOD (until 27 January 2021 it was called Ivan Ivanov 1 EOOD), a business entity
registered in Bulgaria by Decision of the Registry Agency, No 20080630143914 dated 30.06.2008;
with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St., Sopharma
Business Towers, Building A, floor 13;
· Sopharmacy 32 EOOD (until 2 February 2021 it was called Iliana Kalushkova EOOD), a business
entity registered in Bulgaria by Decision of the Registry Agency, No 20080630143914 dated
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
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30.06.2008; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St.,
Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 33 EOOD (until 4 February 2021 it was called Irina Toncheva EOOD), a business
entity registered in Bulgaria by Decision of the Registry Agency, No 20090226112827 dated
26.02.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St.,
Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 34 EOOD (until 17 February 2021 it was called Kapka Nikolova – Voenna Bolnitsa
EOOD), a business entity registered in Bulgaria by Decision of the Registry Agency, No
20090226165512 dated 26.02.2009; with a seat and management address: Sofia, Izgrev Region, 5
Lachezar Stanchev St., Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 35 EOOD (until 16 February it was called Kostadin Gorchev EOOD), a business entity
registered in Bulgaria by Decision of the Registry Agency, No 20090513180047 dated 13.05.2009;
with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St., Sopharma
Business Towers, Building A, floor 13;
· Sopharmacy 36 EOOD (until 4 February it was called Krasimira Shunina EOOD), a business entity
registered in Bulgaria by Decision of the Registry Agency, No 20090519083827 dated19.05.2009;
with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St., Sopharma
Business Towers, Building A, floor 13;
· Sopharmacy 37 EOOD (until 4 February 2021 it was called Lora Doncheva EOOD), a business
entity registered in Bulgaria by Decision of the Registry Agency, No 20090226102708 dated
26.02.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St.,
Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 38 EOOD (until 4 February 2021 it was called Lyudmila Zlatkova EOOD), a business
entity registered in Bulgaria by Decision of the Registry Agency, No 20090519090345 dated
19.05.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St.,
Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 39 EOOD (until 16 February 2021 it was called Lyudmila Kovacheva EOOD), a
business entity registered in Bulgaria by Decision of the Registry Agency, No 20090227150054
dated 27.02.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev
St., Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 40 EOOD (until 2 February 2021 it was called Manik Burgazyan EOOD), a business
entity registered in Bulgaria by Decision of the Registry Agency, No 20081220153409 dated
20.12.2008; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St.,
Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 41 EOOD (until 27 January 2021 it was called Mariyks Zhaygarova EOOD), a
business entity registered in Bulgaria by Decision of the Registry Agency, No 20090519080839
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
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dated 19.05.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev
St., Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 42 EOOD (until 17 February 2021 it was called Maria Agova EOOD), a business
entity registered in Bulgaria by Decision of the Registry Agency, No 20090518183127 dated
18.05.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St.,
Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 43 EOOD (until 4 February 2021 it was called Maria Gancheva EOOD); a business
entity registered in Bulgaria by Decision of the Registry Agency, No 20090226105948 dated
26.02.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St.,
Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 44 EOOD (until 4 February 2021 it was called Maria Kenova EOOD), a business
entity registered in Bulgaria by Decision of the Registry Agency, No 20090605134931 dated
05.06.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St.,
Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 45 EOOD (until 4 February 2021 it was called Maria Hristova – Motopista EOOD),
a business entity registered in Bulgaria by Decision of the Registry Agency, No 20090519091916
dated 19.05.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev
St., Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 46 EOOD (until 17 February 2021 it was called Mariyana Markova EOOD), a
business entity registered in Bulgaria by Decision of the Registry Agency, No 20090519083054
dated 19.05.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev
St., Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 47 EOOD (until 17 February it was called Mary Ivanova EOOD), a business entity
registered in Bulgaria by Decision of the Registry Agency, No 20090227154137 dated 27.02.2009;
with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St., Sopharma
Business Towers, Building A, floor 13;
· Sopharmacy 48 EOOD (until 2 February it was called Nelly Stavreva EOOD), a business entity
registered in Bulgaria by Decision of the Registry Agency, No 20090227155742 dated 27.02.2009;
with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St., Sopharma
Business Towers, Building A, floor 13;
· Sopharmacy 49 EOOD (until 4 February 2021 it was called Preslava Becheva EOOD), a business
entity registered in Bulgaria by Decision of the Registry Agency, No 20090518162442 dated
18.05.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St.,
Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 50 EOOD (until 27 January 2021 it was called Rayna Madzharova – St. Geori Sofiyski
EOOD), a business entity registered in Bulgaria by Decision of the Registry Agency, No
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
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20090227152516 dated 27.02.2009; with a seat and management address: Sofia, Izgrev Region, 5
Lachezar Stanchev St., Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 51 EOOD (until 27 January 2021 it was called Rumyana Ignatova - Gancheva EOOD),
a business entity registered in Bulgaria by Decision of the Registry Agency, No 20090227153607
dated 27.02.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev
St., Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 52 EOOD (until 17 February 2021 it was called Sashka Todorova EOOD), a business
entity registered in Bulgaria by Decision of the Registry Agency, No 20090518174837 dated
18.05.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St.,
Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 53 EOOD (until 7 February 2021 it was called Svetla Harizanova EOOD), a business
entity registered in Bulgaria by Decision of the Registry Agency, No 20090226101122 dated
26.02.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St.,
Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 54 EOOD (until 17 February 2021 it was called Svetlana Pirpirova EOOD), a business
entity registered in Bulgaria by Decision of the Registry Agency, No 20090519085825 dated
19.05.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St.,
Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 55 EOOD (until 27 January 2021 it was called Ceiba Blagoevgrad 1 EOOD), a
business entity registered in Bulgaria by Decision of the Registry Agency, No 20090414165833
dated 14.04.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev
St., Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 56 EOOD (until 17 February 2021 it was called Silvia Veneva EOOD), a business
entity registered in Bulgaria by Decision of the Registry Agency, No 20090519071228 dated
19.05.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St.,
Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 57 EOOD (until 18 February 2021 it was called Siyana Milanova EOOD), a business
entity registered in Bulgaria by Decision of the Registry Agency, No 20090604164039 dated
04.06.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St.,
Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 58 EOOD (until 27 January 2021 it was called Stoyanka Radenkova EOOD), a
business entity registered in Bulgaria by Decision of the Registry Agency, No 20090227160132
dated 27.02.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev
St., Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 59 EOOD (until 8 February 2021 it was called Ana Advzhieva EOOD), a business
entity registered in Bulgaria by Decision of the Registry Agency, No 20090114162615 dated
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
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14.01.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St.,
Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 60 EOOD (until 2 February 2021 it was called Radina Bekova EOOD), a business
entity registered in Bulgaria by Decision of the Registry Agency, No 20080422121447 dated
22.04.2008; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St.,
Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 61 EOOD (until 2 February 2021 it was called Rumen Raynov EOOD), a business
entity registered in Bulgaria by Decision of the Registry Agency, No 20090114170550 dated
14.01.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St.,
Sopharma Business Towers, Building A, floor 13;
· Sopharmacy 62 EOOD (until 2 February 2021 it was called Hani Modhi EOOD), a business entity
registered in Bulgaria by Decision of the Registry Agency, No 20080512090050 dated 12.05.2008;
with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St., Sopharma
Business Towers, Building A, floor 13;
· Sopharmacy 63 EOOD (until 2 February 2021 it was called CSC Franchise EAD), a business entity
registered in Bulgaria by Decision of the Registry Agency, No2008041018022 dated 10.04.2008;
with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St., Sopharma
Business Towers, Building A, floor 13;
· Sopharmacy 64 EOOD (until 6 July 2021 it was called Sanita Franchising AD), a business entity
registered in Bulgaria by Decision of the Registry Agency, No 20080411103252 dated 11.04.2008;
with a seat and management address: Sofia, 1220, Nadezhda Residential Area, 16, Rozhen Blvd;
· Sopharma Poland Z.O.O., Poland, in liquidation – a business entity registered in Poland by
Decision No. KRS 0000178554/04.11.2003 of XX Economic Division of Warsaw Regional Court
Register, with a seat and management address: Poland, Warsaw, 58, Shashkova St.;
· Sopharma Warsaw SP. Z.O.O., Poland – a business entity registered in Poland by Decision No.
DSR 0000372245 of 17 December 2010 by XII Economic Division of the State Court Register of
Warsaw, with a seat and management address: Poland, Warsaw, 8, Halubinskiego St.;
· OOO Sopharma Ukraine, Ukraine – a business entity registered in Ukraine by Decision No.
10691020000029051/07.08.2012 in the Unified State Register of Legal Entities and Physical
Entities-Entrepreneurs, with a seat and management address: Ukraine, Kiev, Oblonski Region,
prospect Moskovskii No. 9, unit 4, floor 2, office 4-203;
· PAO Vitamini, Ukraine – a business entity registered in Ukraine by Decision No. 133/15.04.1994
of Uman City Court, with a seat and management address: Ukraine, Cherkasy Province, Uman, 31,
Leninski Iskri St.;
· Sopharma Trading, Serbia – a business entity registered in Serbia by Decision No 07829531/
05.02.1992 of the Business Registers Agency – Serbia, Belgrade, 48b Zorana Djindjica Boulevard;
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
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· TOO Sopharma Kazakhstan, Kazakhstan – a business entity registered in Kazakhstan by Decision
No 5286-1910-04-ТОО/06.11.2014 of the Ministry of Justice, Auezov District, with seat and
management address: Kazakhstan, Almaty, Auezov District, Mamir-4, home 190;
· Pharmachim EOOD, Serbia – business entity registered in Serbia with BD 27219.2020 dated
14.04.2020 by the Business Registry Agency of Belgrade, with seat and management address:
Republic of Serbia, Belgrade, 6, Vladimira Popovicha St.
On 11 November 2022 the Group disposed of its interest in the company Rap Pharma International OOD.
As from 10 March 2021 the company Momina Krepost AD obtained the status of a joint venture for the
Group.
As from 8 June 2021 the investment in Sopharma Buildings REIT was classified as other long-term equity
investment for the Group, due to the sale of a significant portion thereof.
On 1 October 2021 the Group disposed of its interest in UAB Recessus.
On 2 November 2021 SIA BAH was incorporated – a subsidiary of SIA Briz, which the Group disposed of
as at 30 November 2021.
On 30 November 2021 the Group disposed of its interest in the companies SOOO Brititrade, OOO Tabina,
OOO Pharmacevt Plus, OOO Galenapharm, DOO Medjel, DOO Alenpharm-plus, DOO Salusline, ZAO
Interpharm, OOO Zdorovey, BOOO SpetzAfarmacia, OOO Bellerofon, OOO Zdorovey Plus and SIA
BAH.
On 30 December 2021 the Group disposed of its interest in the companies SIA Briz and SIA Briz Trading.
Joint ventures
As at 31 December 2022, the Group’s joint venture is:
· Momina Krepost AD – a business entity registered in Bulgaria by Decision No. 3426/1991 of
Veliko Tarnovo District Court, with a seat and management address: Veliko Tarnovo, 23,
Magistralna St..
Associates
The Group’s associate s as at 31 December 2022 are as follows:
· Doverie Obedinen Holding AD – a business entity registered in Bulgaria by Sofia City Court under
Company File No. 13056 of 1996, with a seat and management address: 1594 Sofia, 82, Knyaz
Dondukov Blvd;
· Sopharma Properties REIT – a business entity registered in Bulgaria by Decision No. 1/24.03.2006
of Sofia City Court, with a seat and management address: Sofia, Izgrev Region, 5 Lachezar
Stanchev St.
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
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1.1. Ownership and management of the parent company
Sopharma AD is a public company under the Bulgarian Public Offering of Securities Act. Starting from
November 2011, the shares of the company are traded in the Warsaw Stock Exchange.
The shareholding structure of the parent company as at 31 December 2022 is as follows:
%
Donev Investments Holding AD
27.89
Telecomplect Invest AD
20.68
Sopharma AD (treasury shares)
10.00
MUPF Allianz Bulgaria
5.23
Telso AD
5.14
Other legal entities
20.86
Individuals
10.20
100.00
Sopharma AD has a one-tier management system with a five-member Board of Directors. Company's
management in the form of Board of Directors is composed as at 31 December 2022 as follows:
Ognian Donev, PhD
Chairperson
Vessela Stoeva
Deputy Chairperson
Bisera Lazarova
Member
Alexander Chaushev
Member
Ivan Badinski
Member
The parent company is represented and managed by its Executive Director Ognian Donev, PhD. Pursuant
to a business management contract dated 9 June 2020, the Company’s Procurator is Simeon Donev.
The Audit Committee supports the work of the Board of Directors and plays the role of those charged with
governance that exercise monitoring and control over the internal control system, risk management and
Company's system of financial reporting.
The composition of the Audit Committee is as follows:
Vasil Naidenov
Chairman
Tsvetanka Zlateva
Member
Kristina Atanasova – Elliot
Member
Name of the Group’s parent:
No parent or other controlling entity have been identified other than the parent company exercising control
over Sopharma AD.
Name of the Group’s ultimate parent:
No ultimate parent or other controlling entity have been identified other than the parent company exercising
control over Sopharma AD.
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
15
1.2. Structure of the Group and principal activities
The structure of the Group includes Sopharma AD as a parent company and the subsidiaries stated below:
Subsidiaries
Companies in Bulgaria
31.12.2022
Interest
%
31.12.2021
Interest %
Date of
acquisition
of control
Date of
disposal
of control/
Sopharma Trading AD*
87.25
81.34
08.06.2006
Pharmalogistica AD
89.39
89.39
15.08.2002
Electroncommerce EOOD
100.00
100.00
09.08.2005
Biopharm Engineering AD
97.15
97.15
10.03.2006
Sopharma Buildings REIT
-
-
04.08.2008
07.06.2021
Momina Krepost AD
-
-
01.01.2008
10.03.2021
Phyto Palauzovo AD
95.00
95.00
21.09.2012
Veta Pharma AD
99.98
99.98
11.11.2016
Sopharmacy EOOD**
87.25
81.34
19.01.2015
Sopharmacy 2 EOOD**
87.25
81.34
17.06.2015
Sopharmacy 3 EOOD**
87.25
81.34
02.12.2015
Sopharmacy 4 EOOD**
87.25
81.34
29.02.2016
Sopharmacy 5 EOOD**
87.25
81.34
01.03.2016
Sopharmacy 6 EOOD**
87.25
81.34
03.12.2015
Sopharmacy 7 EOOD**
87.25
81.34
15.03.2017
Sopharmacy 8 EOOD**
87.25
81.34
27.06.2017
Sopharmacy 9 EOOD**
87.25
81.34
11.09.2017
Sopharmacy 10 EOOD**
87.25
81.34
11.09.2017
Sopharmacy 11 EOOD**
87.25
81.34
07.12.2017
Sopharmacy 12 EOOD**
87.25
81.34
07.12.2017
Sopharmacy 13 EOOD**
87.25
81.34
07.12.2017
Sopharmacy 14 EOOD**
87.25
81.34
07.12.2017
Sopharmacy 15 EOOD**
87.25
81.34
07.12.2017
Sopharmacy 16 EOOD**
87.25
81.34
15.05.2018
Sopharmacy 17 EOOD**
87.25
81.34
15.05.2018
Sopharmacy 18 EOOD**
87.25
81.34
28.02.2019
Sopharmacy 19 EOOD **
87.25
81.34
01.10.2020
Sopharmacy 20 EOOD **
87.25
81.34
01.10.2020
Sopharmacy 21 EOOD **
87.25
81.34
01.10.2020
Sopharmacy 22 EOOD **
87.25
81.34
01.10.2020
Sopharmacy 23 EOOD **
87.25
81.34
01.10.2020
Sopharmacy 24 EOOD **
87.25
81.34
01.10.2020
Sopharmacy 25 EOOD **
87.25
81.34
01.10.2020
Sopharmacy 26 EOOD**
87.25
81.34
01.10.2020
Sopharmacy 27 EOOD **
87.25
81.34
01.10.2020
Sopharmacy 28 EOOD **
87.25
81.34
01.10.2020
Sopharmacy 29 EOOD**
87.25
81.34
01.10.2020
Sopharmacy 30 EOOD **
87.25
81.34
01.10.2020
Sopharmacy 31 EOOD **
87.25
81.34
01.10.2020
Sopharmacy 32 EOOD **
87.25
81.34
01.10.2020
Sopharmacy 33 EOOD **
87.25
81.34
01.10.2020
Sopharmacy 34 EOOD **
87.25
81.34
01.10.2020
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
16
Subsidiaries
Companies in Bulgaria
31.12.2022
Interest %
31.12.2021
Interest %
Date of
acquisition
of control
Date of
disposal
of control
Sopharmacy 35 EOOD **
87.25
81.34
01.10.2020
Sopharmacy 36 EOOD **
87.25
81.34
01.10.2020
Sopharmacy 37 EOOD **
87.25
81.34
01.10.2020
Sopharmacy 38 EOOD **
87.25
81.34
01.10.2020
Sopharmacy 39 EOOD **
87.25
81.34
01.10.2020
Sopharmacy 40 EOOD **
87.25
81.34
01.10.2020
Sopharmacy 41 EOOD**
87.25
81.34
01.10.2020
Sopharmacy 42 EOOD**
87.25
81.34
01.10.2020
Sopharmacy 43 EOOD**
87.25
81.34
01.10.2020
Sopharmacy 44 EOOD**
87.25
81.34
01.10.2020
Sopharmacy 45 EOOD**
87.25
81.34
01.10.2020
Sopharmacy 46 EOOD **
87.25
81.34
01.10.2020
Sopharmacy 47 EOOD **
87.25
81.34
01.10.2020
Sopharmacy 48 EOOD **
87.25
81.34
01.10.2020
Sopharmacy 49 EOOD **
87.25
81.34
01.10.2020
Sopharmacy 50 EOOD **
87.25
81.34
01.10.2020
Sopharmacy 51 EOOD **
87.25
81.34
01.10.2020
Sopharmacy 52 EOOD **
87.25
81.34
01.10.2020
Sopharmacy 53 EOOD**
87.25
81.34
01.10.2020
Sopharmacy 54 EOOD**
87.25
81.34
01.10.2020
Sopharmacy 55 EOOD**
87.25
81.34
01.10.2020
Sopharmacy 56 EOOD**
87.25
81.34
01.10.2020
Sopharmacy 57 EOOD**
87.25
81.34
01.10.2020
Sopharmacy 58 EOOD**
87.25
81.34
01.10.2020
Sopharmacy 59 EOOD**
87.25
81.34
01.10.2020
Sopharmacy 60 EOOD**
87.25
81.34
01.10.2020
Sopharmacy 61 EOOD**
87.25
81.34
01.10.2020
Sopharmacy 62 EOOD**
87.25
81.34
01.10.2020
Sopharmacy 63 EAD**
87.25
81.34
01.10.2020
Sopharmacy 64 AD**
87.25
81.34
01.10.2020
* effective percentage of interest
** indirect interest
Subsidiaries
Companies abroad
31.12.2022
Interest %
31.12.2021
Interest
%
Date of
acquisition
of control
Date of
disposal
of control
SIA Briz
-
-
10.11.2009
30.12.2021
SOOO Brititrade **
-
-
10.11.2009
30.11.2021
PAO Vitamini
100.00
100.00
18.01.2008
Sopharma Warsaw SP. Z.O.O.
100.00
100.00
23.11.2010
Sopharma Poland Z.O.O., Poland, in liquidation
60.00
60.00
16.10.2003
ООО Tabina**
-
-
08.04.2011
30.11.2021
ООО Sopharma Ukraine
100.00
100.00
07.08.2012
OOO Pharmacevt Plus **
-
-
31.05.2013
30.11.2021
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
17
Subsidiaries
Companies abroad
31.12.2022
Interest %
31.12.2021
Interest%
Date of
acquisition
of control
Date of
disposal
of control
ТОО Sopharma Kazakhstan
100.00
100.00
06.11.2014
OOO Galenapharm **
-
-
28.02.2015
30.11.2021
DOO Medjel **
-
-
28.02.2015
30.11.2021
DOO Alenpharm-plus **
-
-
30.06.2015
30.11.2021
DOO Salusline **
-
-
18.11.2016
30.11.2021
Rap Pharma International OOD
-
80.00
14.04.2017
11.11.2022
ZAO Interpharm**
-
-
26.04.2017
30.11.2021
Sopharma Trading d.o.o.**
87.25
81.34
09.08.2017
OOO Zdorovey **
-
-
16.08.2017
30.11.2021
BOOO SpetzAfarmacia **
-
-
16.08.2018
30.11.2021
OOO Bellerofon **
-
-
07.03.2019
30.11.2021
UAB Recessus**
-
-
26.09.2019
01.10.2021
OOО Zdorovey Pharm**
-
-
02.03.2020
30.11.2021
Pharmachim EOOD
100.00
100.00
14.04.2020
SIA Briz Trading **
-
-
15.02.2021
30.12.2021
SIA BAH **
-
-
02.11.2021
30.11.2021
* effective percentage of interest
** indirect interest
· Sopharmacy EOOD is a subsidiary of Sopharma Trading AD whereas the latter holds 100% of the
capital of Sopharmacy EOOD;
· Sopharmacy 2 EOOD is a subsidiary of Sopharmacy EOOD whereas the latter holds 100% of the
capital of Sopharmacy 2 EOOD;
· Sopharmacy 3 EOOD is a subsidiary of Sopharmacy EOOD whereas the latter holds 100% of the
capital of Sopharmacy 3 EOOD;
· Sopharmacy 4 EOOD is a subsidiary of Sopharmacy EOOD whereas the latter holds 100% of the
capital of Sopharmacy 4 EOOD;
· Sopharmacy 5 EOOD is a subsidiary of Sopharmacy EOOD whereas the latter holds 100% of the
capital of Sopharmacy 5 EOOD;
· Sopharmacy 6 EOOD is a subsidiary of Sopharmacy EOOD whereas the latter holds 100% of the
capital of Sopharmacy 6 EOOD;
· Sopharmacy 7 EOOD is a subsidiary of Sopharmacy EOOD whereas the latter holds 100% of the
capital of Sopharmacy 7 EOOD;
· Sopharmacy 8 EOOD is a subsidiary of Sopharmacy EOOD whereas the latter holds 100% of the
capital of Sopharmacy 8 EOOD;
· Sopharmacy 9 EOOD is a subsidiary of Sopharmacy EOOD whereas the latter holds 100% of the
capital of Sopharmacy 9 EOOD;
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
18
· Sopharmacy 10 EOOD is a subsidiary of Sopharmacy EOOD whereas the latter holds 100% of the
capital of Sopharmacy 10 EOOD;
· Sopharmacy 11 EOOD is a subsidiary through Sopharma Trading AD whereas the latter holds
100% of the capital of Sopharmacy 11 EOOD;
· Sopharmacy 12 EOOD is a subsidiary through Sopharma Trading AD whereas the latter holds
100% of the capital of Sopharmacy 12 EOOD;
· Sopharmacy 13 EOOD is a subsidiary through Sopharma Trading AD whereas the latter holds
100% of the capital of Sopharmacy 13 EOOD;
· Sopharmacy 14 EOOD is a subsidiary through Sopharma Trading AD whereas the latter holds
100% of the capital of Sopharmacy 14 EOOD;
· Sopharmacy 15 EOOD is a subsidiary through Sopharma Trading AD whereas the latter holds
100% of the capital of Sopharmacy 15 EOOD;
· Sopharmacy 16 EOOD is a subsidiary through Sopharmacy EOOD whereas the latter holds 100%
of the capital of Sopharmacy 16 EOOD;
· Sopharmacy 17 EOOD is a subsidiary thro of Sopharmacy EOOD whereas the latter holds 100%
of the capital of Sopharmacy 17 EOOD;
· Sopharmacy 18 EOOD is a subsidiary through Sopharmacy EOOD whereas the latter holds 100%
of the capital of Sopharmacy 18 EOOD;
· Sopharmacy 19 EOOD is a subsidiary through Sopharmacy 61 EOOD whereas the latter holds
100% of the capital of Sopharmacy 19 EOOD;
· Sopharmacy 20 EOOD is a subsidiary through Sopharmacy 59 EOOD whereas the latter holds
100% of the capital of Sopharmacy 20 EOOD;
· Sopharmacy 21 EOOD is a subsidiary through Sopharmacy 40 EOOD whereas the latter holds
100% of the capital of Sopharmacy 21 EOOD;
· Sopharmacy 22 EOOD is a subsidiary through Sopharmacy 59 EOOD whereas the latter holds
100% of the capital of Sopharmacy 22 EOOD;
· Sopharmacy 23 EOOD is a subsidiary through Sopharmacy 59 EOOD whereas the latter holds
100% of the capital of Sopharmacy 23 EOOD;
· Sopharmacy 24 EOOD is a subsidiary through Sopharmacy 40 EOOD whereas the latter holds
100% of the capital of Sopharmacy 24 EOOD;
· Sopharmacy 25 EOOD is a subsidiary through Sopharmacy 40 EOOD whereas the latter holds
100% of the capital of Sopharmacy 25 EOOD;
· Sopharmacy 26 EOOD is a subsidiary through Sopharmacy 40 EOOD whereas the latter holds
100% of the capital of Sopharmacy 26 EOOD;
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
19
· Sopharmacy 27 EOOD is a subsidiary through Sopharmacy 59 EOOD whereas the latter holds
100% of the capital of Sopharmacy 27 EOOD;
· Sopharmacy 28 EOOD is a subsidiary through Sopharmacy 60 EOOD whereas the latter holds
100% of the capital of Sopharmacy 28 EOOD;
· Sopharmacy 29 EOOD is a subsidiary through Sopharmacy 59 EOOD whereas the latter holds
100% of the capital of Sopharmacy 29 EOOD;
· Sopharmacy 30 EOOD is a subsidiary through Sopharmacy 61 EOOD whereas the latter holds
100% of the capital of Sopharmacy 30 EOOD;
· Sopharmacy 31 EOOD is a subsidiary through Sopharmacy 60 EOOD whereas the latter holds
100% of the capital of Sopharmacy 31 EOOD;
· Sopharmacy 32 EOOD is a subsidiary through Sopharmacy 63 EOOD whereas the latter holds
100% of the capital of Sopharmacy 32 EOOD;
· Sopharmacy 33 EOOD is a subsidiary through Sopharmacy 61 EOOD whereas the latter holds
100% of the capital of Sopharmacy 33 EOOD;
· Sopharmacy 34 EOOD is a subsidiary through Sopharmacy 59 EOOD whereas the latter holds
100% of the capital of Sopharmacy 34 EOOD;
· Sopharmacy 35 EOOD is a subsidiary through Sopharmacy 59 EOOD whereas the latter holds
100% of the capital of Sopharmacy 35 EOOD;
· Sopharmacy 36 EOOD is a subsidiary through Sopharmacy 40 EOOD whereas the latter holds
100% of the capital of Sopharmacy 36 EOOD;
· Sopharmacy 37 EOOD is a subsidiary through Sopharmacy 40 EOOD whereas the latter holds
100% of the capital of Sopharmacy 37 EOOD;
· Sopharmacy 38 EOOD is a subsidiary through Sopharmacy 40 EOOD whereas the latter holds
100% of the capital of Sopharmacy 38 EOOD;
· Sopharmacy 39 EOOD is a subsidiary through Sopharmacy 59 EOOD whereas the latter holds
100% of the capital of Sopharmacy 39 EOOD;
· Sopharmacy 40 EOOD is a subsidiary through Sopharmacy 63 EOOD whereas the latter holds
100% of the capital of Sopharmacy 40 EOOD;
· Sopharmacy 41 EOOD is a subsidiary through Sopharmacy 60 EOOD whereas the latter holds
100% of the capital of Sopharmacy 41 EOOD;
· Sopharmacy 42 EOOD is a subsidiary through Sopharmacy 59 EOOD whereas the latter holds
100% of the capital of Sopharmacy 42 EOOD;
· Sopharmacy 43 EOOD is a subsidiary through Sopharmacy 40 EOOD whereas the latter holds
100% of the capital of Sopharmacy 43 EOOD;
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
20
· Sopharmacy 44 EOOD is a subsidiary through Sopharmacy 40 EOOD whereas the latter holds
100% of the capital of Sopharmacy 44 EOOD;
· Sopharmacy 45 EOOD is a subsidiary through Sopharmacy 40 EOOD whereas the latter holds
100% of the capital of Sopharmacy 45 EOOD;
· Sopharmacy 46 EOOD is a subsidiary through Sopharmacy 59 EOOD whereas the latter holds
100% of the capital of Sopharmacy 46 EOOD;
· Sopharmacy 47 EOOD is a subsidiary through Sopharmacy 59 EOOD whereas the latter holds
100% of the capital of Sopharmacy 47 EOOD;
· Sopharmacy 48 EOOD is a subsidiary through Sopharmacy 61 EOOD whereas the latter holds
100% of the capital of Sopharmacy 48 EOOD;
· Sopharmacy 49 EOOD is a subsidiary through Sopharmacy 40 EOOD whereas the latter holds
100% of the capital of Sopharmacy 49 EOOD;
· Sopharmacy 50 EOOD is a subsidiary through Sopharmacy 60 EOOD whereas the latter holds
100% of the capital of Sopharmacy 50 EOOD;
· Sopharmacy 51 EOOD is a subsidiary through Sopharmacy 60 EOOD whereas the latter holds
100% of the capital of Sopharmacy 51 EOOD
· Sopharmacy 52 EOOD is a subsidiary through Sopharmacy 59 EOOD whereas the latter holds
100% of the capital of Sopharmacy 52 EOOD;
· Sopharmacy 53 EOOD is a subsidiary through Sopharmacy 40 EOOD whereas the latter holds
100% of the capital of Sopharmacy 53 EOOD;
· Sopharmacy 54 EOOD is a subsidiary through Sopharmacy 59 EOOD whereas the latter holds
100% of the capital of Sopharmacy 54 EOOD;
· Sopharmacy 55 EOOD is a subsidiary through Sopharmacy 60 EOOD whereas the latter holds
100% of the capital of Sopharmacy 55 EOOD;
· Sopharmacy 56 EOOD is a subsidiary through Sopharmacy 59 EOOD whereas the latter holds
100% of the capital of Sopharmacy 56 EOOD;
· Sopharmacy 57 EOOD is a subsidiary through Sopharmacy 59 EOOD whereas the latter holds
100% of the capital of Sopharmacy 57 EOOD;
· Sopharmacy 58 EOOD is a subsidiary through Sopharmacy 60 EOOD whereas the latter holds
100% of the capital of Sopharmacy 58 EOOD;
· Sopharmacy 59 EOOD is a subsidiary through Sopharmacy 63 EOOD whereas the latter holds
100% of the capital of Sopharmacy 59 EOOD;
· Sopharmacy 60 EOOD is a subsidiary through Sopharmacy 63 EOOD whereas the latter holds
100% of the capital of Sopharmacy 60 EOOD;
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
21
· Sopharmacy 61 EOOD is a subsidiary through Sopharmacy 63 EOOD whereas the latter holds
100% of the capital of Sopharmacy 61 EOOD;
· Sopharmacy 62 EOOD is a subsidiary through Sopharmacy 63 EOOD whereas the latter holds
100% of the capital of Sopharmacy 62 EOOD;
· Sopharmacy 63 EAD is a subsidiary through Sopharma Trading AD whereas the latter holds 100%
of the capital of Sopharmacy 63 EAD;
· Sopharmacy 64 AD is a subsidiary through Sopharma Trading AD whereas the latter holds 100%
of the capital of Sopharmacy 64 AD;
· Sopharma Trading d.o.o., Serbia is a subsidiary of Sopharma Trading AD whereas the latter holds
100% of the capital of Sopharma Trading d.o.o.;
The core business activities of the Group companies are focused on the pharmaceutical sector except for
separate companies having business activities also in the field of investment in securities.
The parent company holds a permit for production/import of pharmaceuticals No BG / MIA-0328 /
06.10.2022, issued by the Bulgarian Drug Agency (BDA).
The core business activities of the companies within the Group are as follows:
· Sopharma AD – production and trade in medicinal substances (active ingredients) and finished
drug forms; research and development activities in the field of medicinal products;
· Sopharma Trading AD – trade in pharmaceutical products;
· Biopharm Engineering AD – production and trade in infusion solutions;
· Pharmalogistica AD – secondary packaging of pharmaceutical products and real estate leases;
· Electroncommerce EOOD – trade, transportation and packaging of radioactive materials and
nuclear equipment for medicinal use, household electronics and electrical equipment;
· Phyto Palauzovo AD – production, harvesting, purchase, growing and trade in herbs and medicinal
plants;
· Veta Pharma AD – production of medicinal, non-medicinal and other products;
· Sopharmacy EOOD – franchising, know-how, renting of property, trade and other;
· Sopharmacy 2 EOOD – Sopharmacy 62 EOOD (with the exception of Sopharmacy 6 EOOD) –
retail trade in medicinal products;
· Sopharmacy 6 EOOD – online and off-line retail trade in medicinal products;
· Sopharmacy 63 EAD and Sopharmacy 64 EOOD – retail trade in medicinal products, franchising
and other services;
· PAO Vitamini, Ukraine – production and trade in pharmaceuticals;
· OOO Sopharma Ukraine, Ukraine – trade in pharmaceuticals and market and public opinion
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
22
research;
· Sopharma Trading d.o.o. – wholesale trade in medicinal products;
· Sopharma Poland Z.O.O., Poland, in liquidation – market and public opinion research;
· Sopharma Warsaw SP. Z.O.O., Poland – wholesale trade in pharmaceutical and medicinal products
and market and public opinion research;
· TOO Sopharma Kazakhstan, Kazakhstan – trade in pharmaceuticals;
· Rap Pharma International OOD, Moldova (until 11 November 2022) – trade in pharmaceuticals;
· Pharmachim EOOD, Serbia – consultancy.
The parent company and the subsidiaries Sopharma Trading AD, Pharmalogistica AD, Electroncommerce
EOOD, Biopharm Engineering AD, Phyto Palauzovo AD, Sopharmacy EOOD, Sopharmacy EOOD,
Sopharmacy 62 EOOD, Sopharmacy 63 EAD and Sopharmacy 64 AD perform their activities in Bulgaria.
Sopharma Poland Z.O.O. (in liquidation) and Sopharma Warsaw SP. Z.O.O. operate in Poland; PAO
Vitamini, OOO Sopharma Ukraine – in Ukraine; Sopharma Trading d.o.o. and Pharmachim EOOD – in
Serbia; TOO Sopharma Kazakhstan – in Kazakhstan; Rap Pharma International OOD (until 11 November
2022) – in Moldova.
As at 31 December 2022, the interest of the Group in joint ventures is as follows:
• Momina Krepost AD – 37.46% interest of Sopharma AD. The principal activities of the joint
venture include development, implementation and production of human and veterinary medical
products. It has been a Joint venture for the Group since 10 March 2021.
As at 31 December 2022, the interest of the Group in associates is as follows:
· Doverie Obedinen Holding AD – 24.998% interest of Sopharma AD. The principal activities of the
company include acquisition, management, assessment and sale of shares in Bulgarian and foreign
companies – legal entities.
· Sopharma Properties REIT – 41.05% interest of Sopharma AD. The principal activities of the
company include investing cash raised by issues of securities in real estate through purchase pf
right of ownership and other rights in rem over real estate, construction and enhancements in order
to provide the real estate for management, lease and/or sale.
As of the date of these consolidated annual financial statements, the average number of Group's personnel
was 4,764 workers and employees (2021: 5,507 workers and employees).
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
23
1.3. Main indicators of the economic environment
Currency exchange rates are among the main economic indicators of the business environment that have
affected the activities of the Group companies throughout the period 2020 – 2022. The relevant exchange
rates are presented in the table below:
Indicator
2020
2021
2022
USD/BGN average for the year/period
1.71619
1.65419
1.86030
USD/BGN at end of the year/period
1.59386
1.72685
1.83371
PLN/BGN average for the year/period
0.44034
0.42841
0.41760
PLN/BGN at end of the year/period
0.42894
0.
42547
0.
41784
RSD/BGN average for the year/period
0.01663
0.01663
0.01665
RSD/BGN at end of the year/period
0.01663
0.01663
0.01667
UAH/BGN average for the year/period
0.06393
0.06065
0.05795
UAH/BGN at end of the year/period
0.05632
0.06329
0.05022
EUR/BGN average for the year/period
1.95583
1.95583
1.95583
EUR/BGN at end of the year/period
1.95583
1.95583
1.95583
1 BYN/BGN average for the year/period
0.70788
0.65183
-
1 BYN/BGN at end of the year/period
0.61820
0.67921
-
KZT/BGN average for the year/period
0.0041
0.00388
0.00404
KZT/BGN at end of the year/period
0.00379
0.00401
0.00397
MDL/BGN average for the year/period
0.09912
0.09352
0.09835
MDL/BGN at the end of the year/period
0.09257
0.09736
0.09597
Source: BNB, National Banks of Ukraine, Poland, Serbia, Belarus, Kazakhstan and Moldova.
1.4. Macroeconomic situation
The parent and many Group subsidiaries operate in the conditions of rising inflation. The management
manages to retain the good financial position of the Group companies by indexing revenue and expenses,
within reasonable limits. The direct effect of the changed macroeconomic environment is the increase in:
- cost of basic manufacturing materials – due to the increase in the prices of materials and
substances;
- cost of heating and electricity – due to the significant price rises in the period;
- the discount rate applied by the Group upon impairment tests of investments in other non-current
assets.
The Group maintains a stable capital base and debt ratio. In the reporting period there was no increase in
interest costs on loans obtained.
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
24
1.5. War in Ukraine – impact and effects
On 24 February 2022, a military conflict began between Russia and Ukraine. As a result, many countries
imposed sanctions on certain natural persons and legal entities in Russia, as well as on the state itself. The
Russia-Ukraine conflict and the related economic sanctions and other measures taken by governments
around the world have had a significant effect both on the local economies of the counties, and on the global
economy. Usually, in such conflicts, pharmaceuticals are not subject to sanctions or other restrictions, in
order to avoid a humanitarian crisis. Therefore, the sales of the Group on the territory of the two countries
could be restricted mainly due to reasons such as difficulties with logistics and restrictions on the free
movement of cash. In 2022 sales of the Group in Ukraine and Russia represent 7.4% from the consolidated
revenues for 2022 (2021: 6.3%). At the date of approval of the consolidated financial statements the Group
has no business counterparties included in the sanctioning lists published by the European Union.
The Group has investments in two subsidiaries in Ukraine. These consolidated financial statements
include the following assets owned by theses subsidiaries: property, plant and equipment amounting to
BGN 6,144 thousand, inventory amounting to BGN 8,343 thousand, trade and other receivables amounting
to BGN 8,212 thousand and cash and cash equivalents amounting to BGN 3,990 thousand. As of the date
of the approval of these consolidated financial statements the assets of these subsidiaries are not physically
affected by the military actions and there are no legal constraints for realization of the assets, which do not
have tangible nature, however in the future it may be necessary to review the carrying amount of these
assets, depending on the war’s development and its impact on the operations of these two subsidiaries.
1.6. Environmental matters
The Group considers environmental protection and the slowing down of climate change to be part of its
corporate social policy and develops its activities in accordance with environmental protection
requirements. The Groups applies measures for: separate waste collection, minimizing, utilization and
recycling of manufacturing and general waste; providing appropriate training to staff on matters related to
environmental protection and pollution prevention. The Group actively invests in renewable energy sources
for own use.
2. SUMMARY OF THE SIGNIFICANT ACCOUNTING POLICIES OF THE GROUP
2.1. Basis for preparation of the consolidated financial statements
The consolidated financial statements of Sopharma Group for the year ended 31 December 2022 have been
prepared in accordance with all International Financial Reporting Standards (IFRS), which comprise
Financial Reporting Standards and the International Financial Reporting Interpretations Committee
(IFRIC) interpretations, approved by the International Accounting Standards Board (IASB), as well as the
International Accounting Standards (IAS) and the Standing Interpretations Committee (SIC)
interpretations, approved by the International Accounting Standards Committee (IASC) and have been
accepted by the Commission of the European Union. IFRSs as adopted by the EU is the commonly accepted
name of the general-purpose framework – the basis of accounting equivalent to the framework definition
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
25
introduced by § 1, p. 8 of the Additional Provisions of the Accountancy Act "In ternational Accounting
Standards" (IASs).
The Group’s consolidated financial statements have been prepared on a going-concern basis, which
assumes that the Group will continue its existence for the foreseeable future.
For the current financial year, the Group has adopted all new and/or revised standards and interpretations,
issued by the International Accounting Standards Board (IASB) and respectively, by the International
Financial Reporting Interpretations Committee (IFRIC), which have been relevant to its activities.
The adoption of these standards and/or interpretations, applicable to entities in Bulgaria for annual reporting
periods beginning on 1 January 2022 at the earliest, has not caused changes in Group’s accounting policies
with the exception of some new and the expansion of already introduced disclosures, without leading to
other changes in the classification or measurement of individual reporting items and transactions.
The new and/or amended standards and interpretations include:
· Amendments to IFRS 3 “Business Combinations” (in force for annual periods beginning
on or after 1 January 2022, endorsed by EC). These amendments update IFRS 3 by
replacing the reference to the old version of the Conceptual Framework for Financial
Reporting with its latest updated 2018 version. They also add an exception from the
principle for recognition of liabilities and contingent liabilities within the scope of IAS 37
“Provisions, Contingent Liabilities and Contingent Assets” and IFRIC 21 “Levies”,
explicitly specifying that contingent liabilities are not recognized at the date of acquisition.
The amendments are applied prospectively. The management is in the process of research,
analysis and assessment of the effects of the changes that might impact the accounting
policy and the classification and presentation of the Group’s assets and liabilities,
transactions and results.
· Amendments to IAS 16 “Property, Plant and Equipment” (in force for annual periods
beginning on or after 1 January 2022, endorsed by EC). These amendments prohibit
deducting from the cost for “testing whether the asset is functioning properly”, which is
part of the direct costs attributable to bringing the asset to the location and condition
necessary for it to be capable of operating in the manner intended by management, the net
proceeds received from selling items produced while the entity is preparing the asset for
its intended location and condition. Instead, the entity shall recognize the revenue from
sales of such items and the respective costs related thereto within profit or loss for the
period, in accordance with the other applicable standards. The amendments specify that
testing whether the asset is functioning properly is in fact an assessment of whether the
technical and physical performance and capacity of the asset correspond to its intended use
in production, supply of goods or services, lease, or for administrative purposes.
Additionally, the amendment requires entities to separately disclose the amounts of
proceeds and costs relating to items produced that are not an output of the entity’s ordinary
activities. The amendments are applied retrospectively, but only for property, plant and
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
26
equipment brought to the location and condition necessary for their intended use on or after
the start of the earliest period presented in the financial statements for which the entity first
applies the amendments. The management is in the process of research, analysis and
assessment of the effects of the changes that might impact the accounting policy and the
classification and presentation of the Group’s assets and liabilities, transactions and results.
· Amendments to IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” (in
force for annual periods beginning on or after 1 January 2022, endorsed by EC). The
amendments specify that the ‘cost of fulfilling’ an onerous contract comprises the ‘costs
that relate directly to the contract’, including: а) direct labour costs and direct cost of
materials; and b) additional costs which related directly to fulfilling the contract – for
instance, the allocation of the depreciation charge for an item of property, plant and
equipment used in fulfilling the contract. Administrative and other general costs are
excluded, unless specifically billable to the counterpart. The amendments also make a
small adjustment to the clarifications for recognition of impairment losses before a separate
onerous contract provision is created, by highlighting that these are assets used in fulfilling
the contract rather than assets intended thereto, which was the requirement prior to the
amendments’ enforcement. An entity shall apply those amendments to contracts for which
it has not yet fulfilled all its obligations at the beginning of the annual reporting period in
which it first applies the amendments. The management is in the process of research,
analysis and assessment of the effects of the changes that might impact the accounting
policy and the classification and presentation of the Group’s assets and liabilities,
transactions and results.
· Annual Improvements to IFRSs 2018-2020 Cycle, to IFRS 1 “First-time Adoption of
International Financial Reporting Standards”, IFRS 9 “Financial Instruments”,
Illustrative Example 13 to IFRS 16 “Leases” and IAS 41 “Agriculture” (in fo rce for
annual periods beginning on or after 1 January 2022, endorsed by EC). These
improvements introduce partial amendments to the following standards: а) the amendment
to IFRS 1 grants a relief for a subsidiary in first-time adoption of IFRS at a date later than
the parent. It measures in its separate financial statements the assets and liabilities at the
carrying amounts that would be included in the parent’s consolidated financial statements
based on which the parent acquired the subsidiary. The subsidiary may, in its financial
statements, measure the cumulative translation differences using the carrying amount
stated in the parent’s consolidated financial statements based on the date of the parent’s
date of transition to IFRS, unless adjustments have been made for the purpose of
consolidation procedures or to account for the business combination’s effects. These
amendments will also be applied for associates and joint ventures which have elected the
same relief under IFRS 1. Entities shall apply these amendments for annual reporting
periods beginning on or after 1 January 2022. Earlier application is permitted; b) the
amendment to IFRS 9 clarifies which fees an entity includes when it applies the ‘10 per
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
27
cent’ test in assessing whether in case of a modification of a financial liability the
conditions of the new or amended financial liability significantly differ from the conditions
of the initially recognized one. According to the amendment, the entity includes only fees
paid or received between the entity (the borrower) and the lender, including fees paid or
received by either the entity or the lender on the other’s behalf. The entity applies the
amendments to financial liabilities modified at or after the beginning of the annual
reporting period in which it first applies these amendments; c) the amendment to
Illustrative Example 13 to IFRS 16 removes from the example the illustration of the
reimbursement of leasehold improvements by the lessor in order to resolve any potential
confusion regarding the treatment of lease incentives. Since the amendment refers to an
illustrative example accompanying the standard and is not a part thereof, no enforcement
date is specified; d) the amendment to IAS 41 removes the requirement for entities to
exclude taxation cash flows when measuring the fair value of a biological asset using a
present value technique.
At the date of these financial statements, the following amended standards and interpretations have also
been issued, but are not adopted (and/or not endorsed by EU):
· Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement
2 Making Materiality Judgements (in force for annual periods beginning on or after 1
January 2023, endorsed by EC). These amendments provide guidelines and examples
regarding the application of the materiality concept upon judgements and decisions
makings related to disclosures of the accounting policy, such as a) they replace the
requirement for disclosing material accounting policies information instead of significant
accounting policies; b) they provide clarifications on how the entities can identify material
accounting policy information and to give examples of when accounting policy
information is likely to be material; c) clarify that accounting policy information may be
material because of its nature, even if the related amounts are immaterial; d) clarify that
accounting policy information is material if users of the entity’s financial statements would
need it to understand certain material information in the financial statements; and d) clarify
that the entity needn’t disclose immaterial accounting policy information, this shall not
result in omitting or obscuring obscure material accounting information. Earlier
application is permitted. The management is in the process of research, analysis and
assessment of the effects of the changes that might impact the accounting policy and the
classification and presentation of the Group’s assets and liabilities, transactions and results.
· Amendments to IAS 1 “Presentation of Financial Statements” (in force for annual periods
beginning on or after 1 January 2024, not endorsed by EC). These amendments address
the criteria for classification of liabilities as current or non-current. According to them, an
entity classifies its liabilities as current or non-current depending on the rights thereof that
are in existence at the end of the reporting period, and the classification is unaffected by
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
28
expectations about whether it will exercise its right to defer settlement of the liabilities.
The classification shall not be impacted by the entity’s expectations for or events after the
reporting period. The amendments made clear that “settlement” refers to the transfer to a
counterparty of cash, equity instruments, other assets or services. The classification does
not address derivatives of convertible liabilities, which constitute equity instruments. The
amendments are applied retrospectively. The management is in the process of research,
analysis and assessment of the effects of the changes that might impact the accounting
policy and the classification and presentation of the Group’s liabilities.
· Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
(in force for annual periods beginning on or after 1 January 2023, endorsed by EC). These
amendments are related to clarifications aimed at a more accurate distinction between
changes to the accounting policy, error adjustments and changes to accounting estimates,
such as: a) “the definition of a change in accounting estimates” is replaced with a
“definition of accounting estimates” – under the new definition, accounting estimates are
“monetary amounts in financial statements that are subject to measurement uncertainty”;
b) the entity develops and applies accounting estimates if the accounting policies require
items in the financial statements to be measured in a way that involves measurement
uncertainty; с) a clarification is made that a change in accounting estimate ma y result from
a change in input or valuation technique, as well as from new information or new
developments, unless it is the correction of a prior-year error; d) a change in an accounting
estimate may affect only the current’s period profit or loss, or th e profit or loss of both the
current period and future periods. Earlier application is permitted. The management is in
the process of research, analysis and assessment of the effects of the changes that might
impact the accounting policy and the classification and presentation of the Group’s assets
and liabilities, transactions and results.
· IAS 12 Income Taxes (in force for annual periods beginning on or after 1 January 2023,
endorsed by EC). Amendments to IAS 12 – Income Taxes – Deferred Tax related to Assets
and Liabilities arising from a Single Transaction. The amendments restrict the scope of
exemption from recognition of deferred tax liabilities, as a result of which it is not applied
for transactions in which equal taxable and deductible temporary differences may arise
upon initial recognition. Such transactions are the recognition of a right-of-use asset and
lease liability by the lessee at the commencement date of a lease, as well as in the accrual
of liabilities for dismantling, removing or restoring included as part of the cost of an asset.
Upon the amendments coming into force, the entities should recognize each deferred tax
asset (to the extent that it is probable that taxable profit will be available against which the
deductible temporary difference can be utilized) and a deferred tax liability (for all
deductible temporary differences) in accordance with the IAS 12 criteria for transactions
related to assets and liabilities arising from a single transaction on or after the beginning
of the earliest comparative period presented in the financial statements. The entities
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
29
recognize the cumulative effect of initially applying the amendments as an adjustment to
the opening balance of retained earnings or other component of equity, as appropriate, at
that date. These amendments are effective for annual reporting periods beginning on or
after January 1, 2023, and earlier application is permitted. The management is in the
process of research, analysis and assessment of the effects of the changes that might impact
the accounting policy and the classification and presentation of the Group’s assets and
liabilities, transactions and results.
· IFRS 10 (amended) “Consolidated Financial Statements” and IAS 28 (amended)
“Investments in Associates and Joint Ventures” – regarding the sale or contribution of
assets between an investor and its associates or joint ventures (postponed effective date,
to be determined by the IASB). These amendments address the accounting treatment of the
sale or contribution of assets between an investor and its associates or joint ventures. They
confirm that the accounting treatment depends on whether the assets sold or contributed
constitute in substance a business as defined in IFRS 3. If these assets as an aggregate do
not meet the definition of a business, then the investor shall recognise gain or loss only to
the extent of other unrelated investor's interests in the associate or joint venture. In cases
of sale or contribution of assets, which as an aggregate constitute a business, the investor
shall recognise the full gain or loss on the transaction. The amendments will be applied on
a prospective basis. IABS postponed the initial date of application of these amendments
for an indefinite period. The management is in the process of research, analysis and
assessment of the effects of the changes that might impact the accounting policy and the
classification and presentation of the Group’s assets and liabilities, transactions and results.
· Amendments to IFRS 16 “Leases” – Lease Liability in a Sale and Leaseback (in force
for annual periods beginning on or after 1 January 2024, not endorsed by EC). The
amendment aims to clarify requirements to the seller-lessee upon measuring a lease
liability in sale and leaseback transactions. It requires a seller-lessee to subsequently (after
the date of providing the underlying asset) determine lease payments and revised leased
payments in a way that it does not recognize any amount of the gain or loss that relates to
the right of use it retains. The amendments do not apply to the recognition of gains or
losses in relation to partial or full termination of a lease. The amendments are applied
retrospectively. Earlier application is permitted. The management has conducted research
and has determined that these changes would not have a material impact on the Group’s
assets and liabilities, transactions and results.
· Amendments to IAS 1 “Presentation of Financial Statements, Non-Current Liabilities
with Covenants” (in force for annual periods beginning on or after 1 January 2024, not
endorsed by EC). These amendments specify that only covenants with which an entity is
required to comply on or before the reporting date affect the entity’s right to defer the
respective liabilities for at least twelve months after the reporting date and respectively,
only these are to be considered upon assessing the classification of liabilities as current or
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
30
non-current. These amendments have an impact on whether the right exists at the
reporting date, even if compliance with the conditions is determined thereafter (for
instance, a covenant based on the entity’s financial position at the reporting date, but
assessed thereafter). Covenants calculated based on the entity’s financial position after
the reporting date (for instance, based on the entity’s financial position six months after
the reporting date) shall not be considered upon determining the classification od
liabilities and the right of deferral thereof. Nevertheless, entities shall disclose information
about the covenants comprising an observable period within 12 months from the end of
the reporting period, in order to assess the risk of whether the liabilities would become
due. The amendments are applied retrospectively. Earlier application is permitted, but
simultaneously with the application of amendments to IAS 1 Presentation of Financial
Statements regarding the classification of liabilities as current and non-current. The
management has conducted research and has determined that these changes would not
have a material impact on the Group’s assets and liabilities, transactions and results.
Additionally, with regard to the stated below new standards, amended/revised standards and new
interpretations that have been issued but not yet in force for annual periods beginning on 1 January 2022,
the management has judged that they are unlikely to have a potential impact resulting in changes in the
accounting policies and the consolidated financial statements of the Group:
· Improvements to IFRS 17 Insurance Contracts (in force for annual periods beginning on
or after 1 January 2023, endorsed by EC). The amendments are related to the Initial
Application of IFRS 17 and IFRS 9 – Comparative Information. They provide a transitional
provision regarding the comparative information on financial assets upon initial
application of IFRS 17 in order to reduce accounting mismatches between financial assets
and liabilities under insurance contracts in the comparative information upon initial
application of IFRS 17 and IFRS 9. The application of the changes is optional and only
applies to the presentation of comparative information upon initial application of IFRS 17.
· IFRS 17 “Insurance Contracts” (in force for annual periods beginning on or after 1
January 2023, endorsed by EC). This is an entirely new accounting standard on all types
of insurance contracts, including some guarantees and financial instruments, and includes
rules and principles on recognition and measurement, presentation and disclosure. The
standard will supersede the effective standard up to date related to insurance contracts –
IFRS 4. It establishes an entirely new overall model for insurance contracts’ accounting,
covering all relevant accounting and reporting aspects.
The consolidated annual financial statements of the Group have been prepared on a historical cost basis
except for: а/ property, plant and equipment, measured at revalued amount; b/ investment property and
other long-term equity investments, measured at fair value at the date of the consolidated statement of
financial position.
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
31
The Bulgarian subsidiaries of the Group and the associates Doverie Obedinen Holding AD and Sopharma
Properties REIT, and the joint venture Momina Krepost AD maintain their accounting books in Bulgarian
Lev (BGN), which is accepted as being their functional and presentation currency. The subsidiaries,
associates and joint ventures abroad organise their accounting and reporting in accordance with the
requirements of the respective local legislation: OOO Sopharma Ukraine and PAO Vitamini – the
Ukrainian legislation; Sopharma Trading d.o.o. and Pharmachim EOOD – the Serbian legislation;
Sopharma Poland Z.O.O. (in liquidation), Sopharma Warsaw SP. Z.O.O. – the Polish legislation; TOO
Sopharma Kazakhstan – the legislation of Kazakhstan, and Rap Pharma International OOD (subsidiary
until 11 November 2022) – the Moldovan legislation. The companies keep their accounting ledgers in the
respective local currency – Belarusian Ruble (BYN), Ukraine Hryvnia (UAH), Serbian Dinar (RSD), Euro
(EUR), Polish Zloty (PLN), Kazakhstan Tenge (KZT), and Moldovan Leu (MDL).
The data in the consolidated annual financial statements and the notes thereto are presented in BGN ‘000
unless explicitly stated otherwise, and the Bulgarian Lev has been adopted as the Group’s presentation
currency. The separate financial statements of foreign companies are restated from local currencies into BGN
for the purposes of the consolidated financial statements as per the Group’s policy (Note 2.5).
The presentation of the consolidated annual financial statements in accordance with International Financial
Reporting Standards requires the management to make best estimates, accruals and reasonable assumptions
that affect the reported values of assets and liabilities, the amounts of income and expenses and the
disclosure of contingent receivables and payables as at the date of the consolidated financial statements.
These estimates, accruals and assumptions are based on the information, which is available as of the date
of the consolidated financial statements, and therefore, the future actual results might be different from
them (whereas in the conditions of financial crisis the uncertainties are more significant). The items
presuming a higher level of subjective assessment or complexity or where the assumptions and accounting
estimates are material for the consolidated financial statements, are disclosed in Note 2.32 and Notes 16,
17, 18, 19, 20, 21, 22 and 42.
2.2. Definitions
Parent company
This is a company that has control over one or more other companies, in which it has invested. Having
control means that the investor is exposed, or has rights, to variable returns from its involvement with the
investee, and has the ability to affect those returns through its power over the investee.
The parent company is Sopharma AD, Bulgaria (Note 1).
Subsidiary
A subsidiary is a company, or another entity, that is controlled directly or indirectly by the parent company.
The subsidiary companies are consolidated as from the date on which the effective control over them has
been acquired by the Group and are de-consolidated as from the date when the control over them ceases
and is transferred outside the Group. The full consolidation method is applied for their consolidation.
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
32
The subsidiaries are presented in Note 1.2.
Joint venture
A joint venture is a company or another entity established by virtue of a contractual arrangement between
the parent company as an investor and one or more other parties (companies) that start a common business
undertaking, and on which the joint venturers (including the parent, which also has such a status) have a
joint control. Joint control exists when it is contractually agreed that the strategic financial and operating
decisions, relating to the joint venture, shall require mandatory unanimous consent of the joint venturers.
The latter have rights to the net assets of the joint venture.
The joint venture is included in the consolidated financial statements of the Group by applying the equity
method – as from the date on which the joint control has been acquired by the venturer (the parent company)
and its consolidation under this method is ceased when the joint venture is transformed into a subsidiary or
when the joint control is transferred from the venturer to third parties.
The joint venture is Momina Krepost AD (Note 1.2).
Associate
An associate is a company in which the investor (the parent company) exercises significant influence but
is neither a subsidiary nor a joint venture with the investor.
Significant influence is the right of participation in decision-taking with regard to financial and operating
policies of the investee but is not control or joint control over these policies. Usually it exists in case of: (a)
possession by the investor, directly or indirectly, of 20% to 50% of the shares in the capital of the investee
company (including by virtue of an agreement between shareholders), and (b) in addition, the investor is
represented in the managing body of the investee and/or participates in the decision-taking process with
regard to the policy and strategy of the investee, and/or significant transactions exist between the investor
and the investee.
The associate is included in the consolidated financial statements of the Group by applying the equity
method – from the date on which the investor (the parent company) acquires significant influence and its
consolidation under this method is ceased when associate is transformed into a subsidiary or when it is
accepted that the significant influence is transferred from the investor to third parties.
The associates are Doverie Obedinen Holding AD and Sopharma Properties REIT (Note 1.2).
2.3. Consolidation principles
The consolidated financial statements include the financial statements of the parent company and the
subsidiaries, the joint ventures and the associates, prepared as at 31 December, which is the reporting date
of the Group’s financial year. The 'economic entity' assumption h as been applied in the consolidation
whereas for the measurement of non-controlling interest in business combinations and other forms of
acquisition of subsidiaries for which the 'proportionate share of net assets' method has been chosen.
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
33
For the purposes of consolidation, the financial statements of the subsidiaries, the joint ventures and the
associates have been prepared for the same reporting period as the parent company using uniform
accounting policies.
2.3.1. Consolidation of subsidiaries
In the consolidated financial statements, the financial statements of the included subsidiaries are
consolidated under the 'full consolidation' method, line-by-line, by applying accounting policies that are
uniform with regard to the significant reporting items. The investments of the parent company are
eliminated against its share in the equity of the subsidiaries at the date of acquisition. Intra-group
transactions and balances, including unrealised intra-group gains and losses, are eliminated in full. The
effect of deferred taxes has been taken into account in these eliminating consolidation entries.
The shares of shareholders – third parties in the subsidiaries other than these of the shareholders of the
parent company are presented separately in the consolidated statement of financial position, the
consolidated statement of comprehensive income and the statement of changes in equity as 'non-controlling
interest'. The non-controlling interest includes: (a) the combined share of the shareholders – third parties at
the date of initial consolidation in the fair value (deemed cost) of all identifiable assets acquired, liabilities
and contingent (crystallised) liabilities of the respective subsidiaries assumed, determined (based on the
share) through the proportionate method, and (b) the change in the share of these third parties in the equity
of each respective subsidiary from their initial consolidation to the end of the reporting period.
2.3.2. Acquisition of subsidiaries
The acquisition (purchase) method of accounting is used on the acquisition of a subsidiary (entity) by the
Group in business combinations. The consideration transferred includes the fair value at the date of
exchange of the assets transferred, the incurred or assumed liabilities and the equity instruments issued by
the acquirer in exchange of the control over the acquiree. It includes the fair value of any asset or liability
resulting from a contingent consideration arrangement. Acquisition-related direct costs are recognised as
current expenses when incurred except for the issue costs of debt or equity instruments, which are
recognised as equity components.
All identifiable assets acquired, liabilities and contingent (crystallised) liabilities assumed in the business
combination are measured initially at their fair values at the date of exchange. Any excess of the aggregate
consideration transferred (measured at fair value), the amount of non-controlling interest in the acquiree
and, in a business combination achieved in stages, the acquisition-date fair value of the acquiree's
previously held equity, over the acquired identifiable assets and assumed liabilities of the acquirer, is treated
and recognised as goodwill. If acquirer's share in the fair value of acquired net identifiable assets exceeds
the cost of acquisition of the business combination, this excess is recognised immediately in the
consolidated statement of comprehensive income of the Group in the item 'gains/(losses) on
acquisition/(disposal) of subsidiaries'. Any non-controlling interest in a business combination is measured
based on the method of the 'proportionate share of the net assets' of the acquiree.
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
34
When a business combination for the acquisition of a subsidiary is achieved in stages, all previous
investments held by the acquirer at the acquisition date are revalued to fair value and the effects of this
revaluation are recognised in the current profit or loss of the Group, respectively in 'finance income' and
'finance costs' or 'gains/(losses) from associates and joint ventures', and all previously recorded effects in
other comprehensive income are recycled.
The Group applies provisionary accounting for the items resulting from business combinations
(acquisitions) when the initial reporting is not complete at the end of the reporting period when the business
combinations was performed. This provisionary accounting is adjusted in the period of measurement, or
additional assets and liabilities are recognised to reflect the new information on facts and circumstances
which were already present at the date of acquisition. Adjustments made in the measurement period are
stated retrospectively, and the comparatives are adjusted as at the acquisition date.
2.3.3. Disposal of subsidiaries
On sale or other form of loss (transfer) of control over a subsidiary:
· The carrying amounts of the assets and liabilities (including any attributable goodwill) of the
subsidiary are derecognised at the date when control is lost;
· The non-controlling interest in the subsidiary is derecognised at carrying amount in the
consolidated statement of financial position at the loss of control date, including all components of
other comprehensive income related thereto;
· The fair value of the consideration received from the transaction, event or operation that resulted
in the loss of control is recognised;
· All components of equity, representing unrealised gains or losses in accordance with the respective
IFRS under the provisions of which these components fall, are reclassified to 'profit or loss for the
year' or are transferred directly to retained earnings;
· Any resulting difference as a 'gain or loss from a disposal (sale) of a subsidiary' attributable to the
parent is recognised in the consolidated statement of comprehensive income.
· The remaining shares held that form investments in associates, joint ventures or other long-term
equity investments are initially measured at fair value at the date of sale and subsequently –
following the accounting policy adopted by the Group (Note 2.13 and Note 2.14).
The acquisition (purchase-and-sale) method is applied also in transactions of uniting and/or restructuring
of entities under a common control with companies of the Group, provided that they represent direct
acquisitions from the perspective of the parent company.
2.3.4. Transactions with non-controlling interests
The Group treats transactions with non-controlling interests as transactions with holders of the common
equity of the Group. The effects from sales of parent company’s shares, without loss of control, to holders
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
35
of non-controlling interests are not treated as components of the current profit or loss of the Group but as
movements directly in its equity components, usually to the ‘retained earnings’ reserve. And vice versa,
when the parent company purchases additional shares from holders of non-controlling interest, without
acquisition of control, the difference between the consideration paid and the relevant share acquired of the
carrying amount of net assets of the subsidiary is also directly recognised in the consolidated statement of
changes in equity, usually to the ‘retained earnings’ reserve.
When the Group ceases to have control, joint control and significant influence, any retained minority
investment as interest in the capital of the respective entity, is remeasured to its fair value, with the change
in carrying amount recognised in profit or loss. Respectively, any amounts previously recognised in other
comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of
all components related to the initial investment (in a subsidiary, joint venture or associate).
2.3.5. Consolidation of associates and joint ventures
Associates and joint ventures are included in the consolidated financial statements by applying the equity
method whereby the investment of the parent company is initially stated at cost and is subsequently
recalculated to reflect the changes in investor’s (the parent company) share in the post-acquisition net assets
of the associate or joint venture. Group's investment in an associate or joint venture includes also the
goodwill identified on their acquisition net of any recognised impairment.
The post-acquisition gains or losses for the Group (through the parent company) from associates and joint
ventures for the respective reporting period represent its share in the net (post-tax) financial results of their
business activities for the period, which share is recognised and presented on a separate line in the
consolidated statement of comprehensive income. Analogously, the Group's share in post-acquisition
changes in other components of comprehensive income of associates and joint ventures is also recognised
and presented as movement in the other components of comprehensive income in the consolidated
statement of comprehensive income, and respectively the consolidated reserves of the Group - in the
statement of changes in equity. The Group recognises its share in the losses of associates and joint ventures
up to the amount of its investment, including the granted internal loans, unless it has assumed certain
obligations or payments on behalf of the associate or joint venture.
The internal accounts and balances between the Group and associates and joint ventures are not eliminated.
The unrealised gains or losses from transactions between them are eliminated to the percentage of Group's
interest in the associates and joint ventures by also making tests for impairment in case of loss. The effect
of deferred taxes on these consolidation procedures has also been taken into account.
2.4. Comparatives
In these consolidated financial statements, the Group presents comparative information for one prior year.
Where necessary, comparative data is reclassified (and restated) in order to achieve comparability in view
of the current year presentation changes.
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
36
2.5. Functional currency and recognition of exchange differences
The functional currency of the Group companies in Bulgaria being also presentation currency for the Group
is the Bulgarian Lev. The Bulgarian Lev is fixed to the Euro, under the BNB Act, at the ratio BGN
1.95583:EUR 1.
Upon its initial recognition, a foreign currency transaction is recorded in the functional currency whereas
the exchange rate to BGN at the date of the transaction or operation is applied to the foreign currency
amount. Cash, receivables and payables, as monetary reporting items, denominated in a foreign currency,
are recorded in the functional currency by applying the exchange rate as quoted by the Bulgarian National
Bank (BNB) for the last working day of the respective month. At 31 December, these amounts are presented
in BGN at the closing exchange rate of BNB.
The non-monetary items in the consolidated statement of financial position, which are initially denominated
in a foreign currency, are accounted for in the functional currency by applying the historical exchange rate
at the date of the transaction and are not subsequently re-valued at the closing exchange rate.
Foreign exchange gains or losses arising on the settlement or recording of foreign currency commercial
transactions at rates different from those at which they were converted on initial recognition, are recognised
in the consolidated statement of comprehensive income in the period in which they arise and are presented
net under 'other operating income/(losses)'.
The functional currency of the companies in Poland (Sopharma Poland Z.O.O. (in liquidation) and
Sopharma Warsaw SP. Z.O.O. is the Polish Zloty, of the subsidiary TOO Sopharma Kazakhstan – the
Kazakhstan Tenge, of the subsidiaries in Ukraine (PAO Vitamini, OOO Sopharma Ukraine) – the Ukrainian
Hryvnia, of the subsidiaries in Serbia (Sopharma Trading d.o.o., Pharmachim EOOD) – the Serbian Dinar,
of the subsidiary (until 11 November 2022) in Moldova (Rap Pharma International OOD) – the Moldovan
Leu.
For the purposes of the consolidated financial statements, the financial statements of the subsidiaries abroad
are restated from the functional currency of the respective subsidiary to the presentation currency (BGN)
adopted for the consolidated financial statements, whereas:
(a) all assets and liabilities are restated to the currency of the Group by applying the closing
exchange rate of the local currency thereto at 31 December or at the date of disposal of the
company;
(b) all income and expenses are restated to the currency of the Group at average rate of the local
currency thereto for the reporting period (Note 2.6 and Note 2.7);
(c) all exchange differences resulting from the restatements are recognised and presented as a
separate component of equity in the consolidated statement of financial position – 'translation
of foreign operations reserve', and
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
37
(d) the exchange differences resulting from the restatement of the net investment in the
companies abroad together with the loans and other currency instruments, accepted as hedge
of these investments, are presented directly in equity.
On disposal (sale) of a foreign operation (company), the cumulative amount of exchange differences that
have been directly stated as a separate component of equity, are recognised as part of the profit or loss in
the consolidated statement of comprehensive income on the line 'gains/(losses) on acquisition and disposal
of subsidiaries, net', obtained on disposal (sale).
Goodwill and adjustments to fair value arising on acquisition of a company abroad are treated analogously
to the assets and liabilities of this company and are restated to the presentation currency at closing exchange
rate.
2.6. Revenue
2.6.1. Recognition of revenue under contracts with customers
The Group’s usual revenue is from the activities disclosed in Note 1.2.
The Group’s revenue is recognised when control of the goods or services promised in the contract with the
customer are transferred to the customer. Control is transferred to the customer upon satisfaction of the
contractual performance obligations through transfer of the promised goods and/or provision of the
promised services.
Measurement of contracts with customers
The Group accounts for a contract with a customer only if upon its enforcement: а/ it has commercial
substance and rationale; b/ the parties to the contract have approved the contract (in writing, orally or in
accordance with other customary business practices) and are committed to perform it; c/ each party’s rights
can be identified; d/ the payment terms can be identified; and e/ it is probable that the Group will collect
the consideration to which it is entitled upon performing its performance obligations.
In assessing whether collectability of an amount of consideration is probable, the Group considers all
relevant facts and circumstances of the transaction, including past experience, customary business
practices, published rules and declarations made by the Group, collaterals and possibilities for satisfaction.
A contract for which any of the above criteria has not yet been met is subject to new assessment in each
reporting period. The consideration received under such contracts shall be recognised as a liability (contract
liability) in the statement of financial position, until: а/ all criteria for recognizing a contract with a c ustomer
are met; b/ the Group meets its performance obligations and has received all or substantially all of the
consideration (which is non-refundable); and/or c/ when the contract is terminated and the consideration
received is non-refundable.
Upon the initial assessment of its contracts with customers, the Group makes additional analysis and
judgement whether two or more contracts should be combined and accounted for as a single contract,
respectively whether the goods and/or services promised in each separate and/or combined contract should
be accounted for as a single and/or multiple performance obligation(s).
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
38
Each promise to transfer goods and/or services which are distinct (in nature and in the context of the
contract), is accounted for as a separate performance obligation.
The Group recognises revenue for each separate performance obligation on an individual contracts basis
with customers, by analysing the type, term and conditions of each specific contract. For contracts with
similar features, revenue is recognised on a portfolio basis, only if their grouping into a portfolio would not
have a materially different impact on the financial statements.
When another party is involved in providing goods or services to a customer, the Group shall determine
whether the nature of its promise is a performance obligation to provide the specified goods or services
itself (i.e. the Group is a principal) or to arrange for those goods or services to be provided by the other
party (i.e. the Group is an agent). The Group is a principal and recognises as revenue the gross amount of
consideration if it controls the specified goods and/or services prior to their transfer to the customers. If,
however, the Group does not obtain control over the specified goods and/or services and its obligation is
only to arrange for a third party to provide these specified goods and/or services, the Group is an agent and
recognises as revenue the net amount it retains for the goods or services to be provided in its capacity as
agent.
2.6.2. Measurement of revenue under contracts with customers
Revenue is measured based on the transaction price determined for each contract.
The transaction price is the amount of consideration to which the Group expects to be entitled, excluding
amounts collected on behalf of third parties. Upon determining the transaction price, the Group takes into
consideration the contractual conditions and its customary business practices, including the impact of
variable consideration, the existence of a significant financing component in the contract, non-cash
consideration, consideration payable to the customer (if any). In contracts with more than one performance
obligations, the transaction price is allocated between each performance obligation based on the standalone
selling prices of each good and/or service determined based on one of the methods permitted under IFRS
15, priority being given to the method of “observable selling prices”.
The change in the scope or price (or both) of the contract is accounted for as a separate contract and/or as
part of the existing contract, depending on whether the change is related to the addition of goods and/or
services which are distinct, and on the price determined for them. Based on that: а) the Group accounts for
a contract modification as a separate contract if the scope of the contract increases because of the addition
of promised goods or services that are distinct, and the price of the contract increases by an amount of
consideration that reflects the entity's stand-alone selling prices of the additional promised goods or
services; b) the Group accounts for the contract modification as if it were a termination of the existing
contract and the creation of a new contract (future application), if the remaining goods and/or services are
distinct from the goods and/or services transferred before the contract modification, but the change in the
contract price does not reflect the standalone selling price of the goods and/or services added; c) the Group
accounts for the contract modification as if it were a part of the existing contract (cumulative catch-up
adjustment) if the remaining goods or services are not distinct and, therefore, form part of a single
performance obligation that is partially satisfied.
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
39
2.6.3. Performance obligations under contracts with customers
Sales of finished goods
Wholesales of medicinal substances and medicinal forms are made in the country and abroad, both based
on the Group’s specification (technology) and based on the customer’s specification (technology).
Sales of finished goods based on the Group’s specifications
Upon sales of finished goods based on the Group’s specifications, control is transferred to the customer at
a point in time.
Upon domestic sales, this is usually upon handover of the products and the physical possession of the
customer thereof, when the customer has the ability to direct the use of, and by obtaining substantially all
of the remaining benefits from, the finished goods.
Upon export sales, the judgement at the point in which the customer obtains control over the finished goods
sold is made based on the INCOTERMS applicable for the contract.
Sales of products based on the customer’s specifications
Regarding the finished goods based o n the customer’s specifications, the Group has a legal and contractual
restriction to direct for other use (sales to another party) and it has no alternative use. In these cases, the
method of transfer is determined specifically for each contract with customers (at individual contract basis).
For this purpose, it is determined if the Group is entitled to payment for the work performed to date, which
should at least compensate for the cost incurred plus a reasonable margin should the contract be terminated
for reasons other than the Group’s default (legally enforceable right to payment).
If in the specific contract the Group has a legally enforceable right to payment, revenue is recognised over
time, and the output method is used to measure the progress (stage of completion) of the contract. This
method has been determined to the most appropriate to measure the progress, as the results achieved best
depicts the Group’s activity towards complete satisfaction of the performance obligations. The progress is
measured based on the units produced versus the total number of units ordered by the customer. The
assessments of revenue, costs and/or stage of progress towards complete satisfaction of the performance
obligations are reviewed at the end of each reporting period, incl. in case of change in the
circumstance/occurrence of new circumstances. Each subsequent increase or decrease of expected revenue
and/or costs is stated within profit or loss for the period in which the circumstances resulted in the review
became known to the management.
If in the specific contract the Group does not have a legally enforceable right to payment, revenue is
recognised at a point in time, when control of the finished goods sold is transferred to the customer: when
the finished goods are provided to the customer and it has physical possession thereon (for domestic sales)
and in accordance with the contract’s applicable INCOTERMS (for export sales).
Sales of pharmaceuticals and medical goods
Sales of pharmaceuticals and medical goods by the Group’s distributor companies are to customers which
are pharmacies, hospitals and wholesalers (wholesale) in the country and abroad.
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
40
Wholesale
Upon wholesale, the control of the goods sold is assessed to be transferred to the customer at a point in
time. This is usually upon handover of the goods and the physical possession of the customer thereon, when
the customer has the ability to direct the use of, and by obtaining substantially all of the remaining benefits
from, the goods.
Retail sales
Upon retail sales, control of the goods sold is transferred to the customer upon their handover thereto.
Customer loyalty programmes
The Group maintains a loyalty programme whereby customers holding a club card may accumulate points
for each purchase. The points accumulated may be exchanged for products participating in the programme
without payment by the customer within a period set in the programme conditions. The Group management
has determined that the loyalty points grant customers with a material right they cannot obtain without
concluding a contract for the initial purchase. Therefore, the promise for future discounts through giving
points is a separate performance obligation. The transaction price is allocated between the goods
and/services already sold and the points which the Group expects to be claimed and compensated, based
on the respective standalone selling prices. The standalone selling price of a point reflects the discount that
the customer would get, adjusted for the probability of the points being claimed and compensated,
determined based on information about the points used (past experience). The stand-alone selling price of
the goods and/or services sold is determined based on the price list effective at the sale date. Payables under
the loyalty programme are stated as a contract liability in the consolidated statement of financial position.
The Group recognises revenue when the loyalty points are claimed or when their validity expires. The
Group reviews its estimate of the points to be claimed and compensated at the end of each reporting period,
and if necessary, adjusts the payable (contract liability) recognised, respectively the recognised revenue,
through cumulative catch-up adjustment.
Medical equipment (appliances) sales
The sales of medical equipment usually include delivery, installation, commissioning, operation training
and warranty service, and the selling price is total for the respective contract and/or equipment. Revenue
from the sales of medical equipment is recognised on an individual contracts basis, and for each contract
it is assessed whether the promised goods and/or services are separate performance obligations. This
assessment is made based on the timing of transfer of control over the medical equipment and the
interrelated components of the contract.
Usually, control over the medical equipment (appliances) is transferred to the customer at a point in time,
when the equipment is delivered at the agreed location and the physical possession is handed over to the
customer. At this point, the Group transfers all risks and rewards related to the medical equipment, subject
of the contract with the customer, and the customer has the ability to direct the use of the asset.
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
41
The distinct installation, commissioning and training services which are sold together with the equipment
are usually rendered following its delivery and are relatively independent. These services are accounted for
as separate performance obligations, since a/ they may be performed by another supplier; b/ in most cases
the services are short-term and not specific in nature; c/ they do not modify the equipment delivered and
are not interrelated and integrated therewith. Therefore, it has been determined that in this case, control
over the installation, commissioning and training services is transferred over the period of their rendering,
since they are performed on an asset controlled by the customer, and the customer simultaneously receives
and consumes the benefits provided by the Group’s performance as the Group performs the services. The
revenue from the services performed is recognised over time, and to measure contract progress (stage of
completion), the output method is used. This method has been determined to be the most appropriate to
measure progress, as it is most relevant in depicting the scheme of transfer of control and satisfying
performance obligations, respectively most accurately reflects the level of all outstanding activities.
Warranty service
The warranty service usually includes a standard warranty clause that guarantees that the medical
equipment sold meets the contractual specifications and quality standards for the usual warranty period
(usually 12 months) and is covered by the producer.
Transportation of the finished goods and goods sold
Usually, upon export sales, the Group is responsible for transporting the goods to the location agreed, and
the transportation is organised by the Group, and the cost of transport is included (calculated) as part of the
selling price. Depending on the transportation conditions agreed with the customer, it may be carried out
also after control over the products sold has been transferred to the customer. Until the transfer of control
over the products, the sales of products and the transportation service are accounted for as a single
performance obligation, since they constitute parts of an integrated service.
The transportation service following transfer of control over the finished goods sold is accounted for as a
separate performance obligation, since the transportation can be provided by another supplier (i.e. the
customer may use the finished goods sold with readily available resources), and the transportation service
does not modify or amend the finished goods sold in any way. In this case, the consideration the Group
expects to be entitled to (the transaction price) is allocated between the separate performance obligations
based on their stand-alone selling prices. The stand-alone selling price of the finished goods sold is
determined based on the price list effective at the transaction’s date, and the stand-alone selling price of the
transportation service is determined as an approximation by using the cost plus margin approach.
To render the transportation service, the Group uses transportation companies – subcontractors. The Group
has determined it controls the services prior to their provision to the customer and therefore it acts in its
capacity as principal, since a/ it is primarily responsible for rendering the services and for the acceptability
of the services to the customer (i.e. the Group is responsible for fulfilling the promise in the contract
irrespective of whether it performs the services itself or hires a third-party service supplier to perform
them); and b/ it has the discretion in establishing the price for the services independently, without
interference by the customer.
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
42
Revenue from the sales of transportation services are recognised over time, since it is not necessary for the
work performed to date to be repeated if another party has to perform the remaining work, therefore, the
customer simultaneously receives and consumes the benefits provided by the Group’s performance as the
Group performs the services. In order to measure the contract progress (stage of completion), the input
method is used. This method has been determined as the most appropriate to measure the progress since it
best depicts the Group’s activity regarding the transfer of control and satisfaction of obligations;
respectively, it most accurately reflects the level of performance of obligations, in as far as the Group’s
efforts (costs incurred) are directly related to the transfer of the service to the customer. The progress is
measured based on the costs incurred to the total costs planned for contract performance.
Bill-and-hold arrangements
In certain cases, upon wholesale, the goods sold are physically possessed by the Group. The Group has
analysed these arrangements and has determined that although the customer does not have physical
possession over the goods, usually they have control thereon, since: a/ the hold is done at the customer’s
request; b/ the goods can be identified separately as belonging to the customer; c/ the goods are available
for immediate shipment at the customer’s request; d/ the Group does not have the ability to direct the use
of the goods or direct them to another customer and e/ a separate consideration is agreed for the storage
service. In these cases, the delivery of goods and the storage service rendering are accounted for as separate
performance obligations. Respectively: a/ control over the goods sold is transferred to the customer at a
point in time, when the goods can be identified separately as belonging to the customer, and the customer
has legal title thereon; b/ the obligation to perform the storage services is satisfied over time, while this
service is being provided.
Sales of services
The services provided by the Group include: storage services (pre-distribution) for customer goods,
subscription extra-warranty servicing of medical equipment, medical representation etc. Service revenue is
presented as other income in the statement of comprehensive income, in as far as it does not constitute a
portion of the Group’s primary business activities.
Extra-warranty (maintenance) service
A Group’s company provides extra-warranty services under subscription. The extra-warranty service
contracts are usually concluded for a period of 2 years. The consideration is fixed and is determined on an
annual basis and/or for the entire term of the contract, allocated on a monthly basis. The services performed
are usually invoiced on a monthly basis, and the payment period is 30 to 60 days from the date of issuing
an invoice to the assignor.
The extra-warranty service comprises various tasks/activities of continuous and/or repetitive nature, which
are distinct and form part of an integrated service. They constitute a series of distinct services and are
therefore a single performance obligation, since: a) the integrated maintenance service covers numerous
distinct time periods (usually one month); b) the services are substantially the same, since the customer
obtains continuous benefit therefrom for each separate time period (each month) even of the tasks
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
43
performed differ in their nature and quantity; c) control is transferred over time, since the customer
simultaneously receives and consumes the benefits provided by the Group as the Group performs the
service and there is no need for another company to substantially repeat the work done by the Group
company at a given date if this other company has to perform the remaining portion of the performance
obligation.
Revenue is recognised over time, and the progress (stage of completion) is measured based on the time
passed (on a linear basis – monthly). This method has been determined as the most appropriate one to
measure the progress, since services are rendered on a monthly basis and form part of a series, therefore, it
best depicts the Group’s activity regarding transfer of control and satisfaction of performance obligations.
Other services
For the other services performed by the Group, control is transferred to the customer over the period of
their rendering, since the customer simultaneously receives and consumes the benefits provided by the
Group. The revenue from other sales is recognised over time by measuring the degree of performance of
the Group’s obligations (stage of completion). In or der to measure the progress (stage of completion), the
Group applies the output method based on the quantity of services provided.
2.6.4. Refund obligations under contracts with customers
The refund obligation includes the Group’s obligation to reimburse a portion or all of the consideration
received (or subject to receipt) from the customer under contracts with a right of return and/or for the
expected retrospective discounts, rebates and discount volumes. The obligation is initially measured at the
amount which the Group does not expect to be entitled to and which it expects to reimburse to the customer.
At the end of each reporting period, the Group reassess the measurement of the refund obligations,
respectively of the transaction price and of the recognised revenue.
Refund obligations under contracts with customers are stated within “Other current liabilities” in the
statement of financial position.
2.6.5. Transaction price and payment terms
Finished goods, pharmaceutical and medical produces
The selling prices of the products (finished goods and goods) sold by the Group are usually fixed, based on
a common and/or customer-specific price list, and are individually determined for each product. Upon
determining the transaction price, the Group also takes into account the various forms of variable
consideration and other amounts (consideration) owed to the customer.
Variable consideration
The variable consideration is included in the transaction price only to the extent that it is highly probable
that a significant reversal in the amount of cumulative revenue recognised will not occur. The forms of
variable consideration applicable for the Group include:
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
44
· Volume discounts: Retrospective trade discounts provided to the customer upon reaching
monthly, quarterly and/or annual turnover determined in advance, set as a uniform threshold
and/or progressive bonus scheme. Upon measuring the variable consideration, the Group
determines the customer’s estimated turnover by using the most probable outcome method. The
discounts granted are offset against the amounts due by the customer.
· Price discounts from the common price list: under the pricing policy adopted, upon wholesale,
the selling price from the common price list is reduced by the discount usually applicable for the
respective product. The discount applicable for each customer is determined based on the turnover
agreed for a certain period as compared to the total potential turnover with the customer. These
price discounts are granted to the customer upon each sale and/or at the end of each month. If the
customer fails to meet the turnover targets and does not compensate the difference over the next
period, the Group is entitled to claiming default compensation set as a percentage of the turnover
default.
· Price protection: With regards to domestic sales, the Group is obliged, upon price reduction
imposed by a state regulatory body, to compensate the buyer and/or its customers for finished
goods purchased at a higher price and not yet sold to end clients. The payment of this
consideration depends on the state policy on medicinal products price regulation and is beyond
the Group’s control.
· Compensation for hidden flaws: the customer may claim returns due to hidden flaws (quality
claims) throughout the validity period of the finished goods sold, which may vary from one to
five years. Quality claims are settled by the provision of new replacement goods or by refund of
the amount paid by the customer. Upon determining the compensations for hidden flaws due at
the end of the reporting period, the Group takes into consideration the quality assurance system
implemented thereby and the accumulated experience.
· Compensations due to the customer: in case of inaccurate performance of contractual obligations
by the Group, usually in relation of failure to meet the negotiated delivery deadline. These are
included within a decrease of the transaction price only if the payment is very likely. The Gr oup’s
experience shows that historically, contract terms are complied with, and the Group has not
recorded liabilities for payment of compensations.
· Right of return: Some sales contracts allow the customer to return the goods within a given period.
The Group accounts for the right of return as a form of variable consideration and recognises
revenue from sales only at the amount of consideration it is reasonably assured it is entitled to
(considering the goods expected to be returned). Upon determining what proportion of the goods
sold is expected to be returned, the Group uses historical data about goods returned by customers
over the past year.
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
45
· Compensations owed by the customer: variable consideration in the form of compensations for
delayed payment by the customer. Receiving such consideration depends on the customer’s
actions and is beyond the Group’s control. They are included within the transaction price only
when the uncertainty regarding their receipt has been resolved.
Including compensations (owed by and due to the customer) as part of the transaction price is determined
for each individual contract and is subject to reassessment at the end of each reporting period.
The variable consideration expected in the form of various discounts, defaults and compensations is
determined and measured based on the accumulated experience and is recognised as adjustment of the
transaction price only and respectively the revenue (as an increase or a decrease) only to the extent that it
is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur,
including due to assessment restrictions. Any subsequent changes to amount of the variable consideration
are recognised as adjustment of revenue (as an increase or a decrease) at the date of change and/or resolving
the uncertainty. At the end of each reporting period, the Group updates the transaction prices, including
whether the estimated price contains restrictions, so as to accurately present circumstances existing and
occurring during the reporting period. Upon assessing the variable consideration, the Group uses the most
likely outcome approach.
Discounts accrued but not settled at the end of the reporting period, to which the customer still does not
have unconditional right, are presented as refund liabilities in the statement of financial position.
Consideration due to the customer
The consideration due to the customer includes amounts that the Group companies pay and/or have
promised to pay to the customer. It is included as a component of the transaction price, unless the payment
to the customer is in return to distinct goods and/or services which the customer transfers and/or grants to
the Group companies and the fair value of these distinct goods and/or services does not exceed the amount
of consideration paid by the Group. If the latter is higher than the fair value of the goods and/or service
received by the customer, only the excess is included within the transaction price. The consideration paid
to the customer is recognised as contract assets and are included within the transaction price, respectively
in a decrease of revenue from contracts with customers, upon transfer of control over the goods sold or
when the Group promises to pay, whichever occurs later.
Significant financing component
Upon wholesales the usual credit period is 30 to 270 days following the delivery of goods. In certain sales
transactions, the payments can be partially in advance and the amounts paid in advance are refunded if the
contract is terminated. The advance payments collected from customers are presented in the statement of
financial position as contract liabilities.
As a result of the financial condition and credit risk of some of the customers which are hospitals, the
customer pays for the goods delivered with a significant delay compared to the payment period agreed, and
in some cases, the period between the date of transfer of control over the goods and the date of payment by
the customer may reach and exceed 2 years.
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
46
The Group has determined that contracts with such customers do not contain a financing component, since:
a) the payment term agreed with the customer does not differ from the usual payment term for such
transactions, and upon concluding the sales contract, no explicit deferred payment scheme has been agreed;
b) the selling prices do not include a financing component (interest). They are legislatively regulated and
do not significantly deviate from the selling price of the same goods and/or services upon sales to other
customers and/or upon sale to the same customer by another distributor of medicinal products and medical
consumables. The differences (if any) result from variable consideration granted in the form of discounts,
rather than from the agreed and/or expected payment period; c) the delay in payments results from the
financial condition and credit risk of some of the customers which are hospitals; d) upon delay by the
customers, the Group charges an interest (penalty) at the amount of the statutory interest, as from the date
of delay; e) the financing element arises on the date of delay starting from which the Group charges a delay
interest; f) the customer (hospital) pays the interest charged (penalties) and they reflect the time value of
money.
The interest income recognised due to not paying within the agreed payment period by customers, which
are hospitals, are presented as finance income in the statement of comprehensive income (Notes 11 and
42).
Upon retail sales, payment is due at the time of sale. Exceptions are retail sales in Bulgaria for which NHIF
reimburses a portion of the price. This portion of the selling price is paid by NHIF within 60 days.
Medical equipment (Appliances)
The agreed selling price related to contracts for sale of medical equipment (appliances) is usually
aggregated for the specific contract and/or equipment is aggregate. As a result, the consideration which the
Group expects to be entitled is allocated to each separate performance obligation on the basis of stand-
alone selling prices determined approximately by using the cost plus a margin approach.
Significant financing component
Upon the sale of medical equipment, the payment terms for the transaction price are determined
individually for each contract. The customer usually makes an advance payment of up to 20% of the
contracted consideration, and the remaining part is paid after performance of the contractual obligations, at
a later date or in accordance to a payment schedule. Deferred payment is usually made after 30 days to 2
years.
For contracts with deferred payment of over 1 year, the Group has determined that a financing component
exists which is significant for revenue. In these cases the transaction price is adjusted so as to reflect the
impact of the time value of money by using a discount rate reflecting the credit characteristics of the
counterparty receiving the financing (the customer). The payments collected in advance from the customer
are presented in the statement of financial position as contract liabilities, and the interest charged – as
finance income in the statement of comprehensive income (Notes 11 and 42).
SOPHARMA GROUP
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47
For contracts where the period for transferring the control of the promised goods and services to the
customer and the payment is up to 12 months, the Group does not adjust the transaction price to reflect the
effect of the financing component.
Sales of services
The selling prices of services are usually fixed. The consideration upon extra-warranty (maintenance)
service is fixed and determined on an annually and/or for the entire duration of the contract, and it is
allocated equally on a monthly basis.
The services performed are most often invoiced monthly, and the payment period is within 30 to 60 days
from the date of the invoice issuance to the customer.
2.6.6. Contract costs
The Group states as contract costs the following:
· the incremental and directly related expenses it incurs upon concluding a contract with a
customer, which it expects to recover over a period longer than twelve months (costs to obtain
a contract with a customer) and
· the expenses it incurs to fulfil a contract with a customer and which are directly related to the
specific contract, enhance the generation of resources to be used in the contract fulfilment and
the Group expects to recover them over a period longer than twelve months (costs of fulfilling
contracts with customers).
The Group in its primary business activity does not incur direct or specific costs to obtain contracts with
customers and costs of fulfilling such contracts, which would have not been incurred if the contracts had
not been obtained.
2.6.7. Contract balances
Trade receivables and contract assets
A contract asset is the Group's right to receive consideration in exchange for goods or services that it has
transferred to a customer but is not unconditional (receivable accrual). If by transferring the goods and/or
providing the services the Group performs its obligation before the customer to pay the respective
consideration and/or before the payment is due, a contract asset is recognised for the consideration earned
(which is conditional). Recognised contract assets are reclassified as trade receivables when the right to
consideration becomes unconditional. A right to consideration is unconditional if only the passage of time
is required before payment of that consideration is due.
Contract liabilities
The Group presents as a contract liability the consideration received from the customer and/or the
unconditional right to receive consideration before it has performed its contractual obligations. Contract
liabilities are recognised as revenue when (or as) the performance obligations are satisfied.
SOPHARMA GROUP
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48
Contract assets and contract liabilities are presented in other receivables and payables in the statement of
financial position. They are included in current assets when their maturity is within 12 months or within
the Group’s usual operating cycle, and the others are stated as non-current. Assets and liabilities from a
single contract are presented on a net basis in the statement of financial position, even if they result from
difference performance obligations in the contract.
Following their initial recognition, trade receivables and contract assets are subject to review for
impairment in accordance with the requirements of IFRS 9 Financial Instruments.
Right of return assets from contracts with customers
The right of return is the Group’s right to receive sold goods which are expected to be returned by the
customers (Note 23). This right is initially measured at the carrying amount of the goods which are expected
to be returned, less any expected costs to recover the goods, including any potential decreases in the value
of products returned, including due to passage of their expiry date. At the end of each reporting period the
Group reassess the measurement of right of return assets recognised related to changes in expectations
about the volume of goods returned and other decreases in their value.
Right of return assets are presented in inventories in the statement of financial position and are separately
disclosed in the notes to the annual financial statements.
2.7. Expenses
Expenses are recognised in the Group when they are incurred based on the accrual and matching concepts
(to the extent that this would not lead to recognition of an asset or liability not satisfying the definitions for
assets and liabilities in the Framework and IFRS themselves).
Deferred expenses are put off and recognised as current expenses in the period when the contracts, whereto
they refer, are performed.
Losses from revaluation of investment property to fair value are presented in the consolidated statement of
comprehensive income (within profit or loss for the year) on the line 'other operating income/(losses)'.
2.8. Finance income and costs
2.8.1. Finance income
Finance income is included in the statement of comprehensive income (within profit or loss for the year)
when earned and comprises: interest income on granted loans and term deposits, interest income on
receivables under special contracts, interest income on past due receivables, income/gains from deals with
investments in available-for-sale securities at fair value through profit or loss, or through other
comprehensive income, including dividends, net gains on exchange differences under loans in foreign
currency, income from debt settlement transactions, gain on fair value measurement of available-for-sale
investments in securities at fair value through profit or loss, or through other comprehensive income, gains
from fair value measurement of investments in the acquisition of a subsidiary performed in stages.
SOPHARMA GROUP
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49
Interest income is calculated by applying the effective interest rate on the gross carrying amount of financial
assets, with the exception of financial assets, which are credit-impaired (Stage 3), for which interest income
is calculated by applying the effective interest rate on their amortised cost (i.e. the gross carrying amount
after deducting the impairment allowance)
2.8.2. Finance costs
Finance costs are included in the consolidated statement of comprehensive income (within profit or loss for
the year) when incurred separately from finance costs and comprise: interest expenses under loans received,
bank fees and charges under loans and guarantees, foreign exchange net loss from loans in foreign
currencies, leases, and impairment losses on granted loans.
2.9. Property, plant and equipment
Property, plant and equipment, including permanent plants (fixed tangible assets) are presented in the
consolidated financial statements at revalued amount less the accumulated depreciation and impairment
losses in value.
Initial acquisition
Upon their initial acquisition, property, plant and equipment are valued at acquisition cost (cost), which
comprises the purchase price, including customs duties and any directly attributable costs of bringing the
asset to working condition for its intended use. The directly attributable costs include the cost of site
preparation, initial delivery and handling costs, installation costs, and professional fees for people involved
in the project, non-refundable taxes, expenses on capitalised interest for qualifying assets, etc.
Property, plant and equipment of acquired subsidiaries are measured at fair value at the transaction
(business combination) date which is accepted as acquisition price for consolidation purposes.
Upon acquisition of property, plant and equipment under deferred settlement terms, the purchase price is
equivalent to the present value of the liability discounted on the basis of the interest level of the attracted
by the Group credit resources with analogous maturity and purpose.
The Group has set a value threshold of BGN 500, below which the acquired assets, regardless of having
the features of fixed assets, are treated as current expense at the time of their acquisition.
Subsequent measurement
The chosen by the Group approach for subsequent measurement of property, plant and equipment, is the
revaluation model under IAS 16, i.e. measurement at revalued amount less any subsequent accumulated
depreciation and subsequent accumulated impairment losses.
The revaluation of property, plant and equipment is accepted to be performed by certified appraisers
normally in a period of five years. Where the fair value changes materially in shorter periods, revaluation
may be performed more frequently.
SOPHARMA GROUP
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Subsequent costs
Repair and maintenance costs are recognised as current expenses as incurred. Subsequent costs incurred in
relation to property, plant and equipment having the nature of replacement of certain components,
significant parts and aggregates or improvements and restructuring, are capitalised in the carrying amount
of the respective asset whereas the residual useful life is reviewed at the capitalisation date. At the same
time, the non-depreciated part of the replaced components is derecognised from the carrying amount of the
assets and is recognised in the current expenses for the period of restructure.
Depreciation methods
The Group applies the straight-line depreciation method for property, plant and equipment. Depreciation
of an asset begins when it is available for use. Land is not depreciated. The useful life of the groups of
assets is dependent on their physical wear and tear, the characteristic features of the equipment, the future
intentions for use and the expected obsolescence.
The useful life per group of assets is as follows:
· buildings – 20-70 years;
· installations – 5-30 years;
· machinery and equipment – 6-35 years;
· computers and mobile devices – 2-5 years;
· motor vehicles – 5-17 years;
· servers and systems – 4-18 years;
· furniture and fixtures – 3-13 years;
· other tangible assets – 3-12 years.
The useful life set for any tangible fixed asset is reviewed by the management of each company within the
Group and respectively, by the parent company, at the end of each reporting period and in case of any
material deviation from the future expectations of their period of use, the latter is adjusted prospectively.
Impairment of assets
The carrying amounts of property, plant and equipment are reviewed for impairment when events or
changes in circumstances indicate that the carrying amount might permanently differ from their recoverable
amount. If any indications exist that the estimated recoverable amount of an asset is lower than its carrying
amount, the latter is adjusted to the recoverable amount of the asset. The recoverable amount of property,
plant and equipment is the higher of fair value less costs to sell or the value in use. In assessing value in
use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market conditions and assessments of the time value of money and the risks, specific to the
particular asset. Impairment losses are recognised in the consolidated statement of comprehensive income
(within profit or loss for the year) unless a revaluation reserve has been set aside for the respective asset.
SOPHARMA GROUP
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51
Then the impairment is treated as a decrease in this reserve (through other comprehensive income) unless
it exceeds its amount and the excess is included as expense in the consolidated statement of comprehensive
income (within profit or loss for the year).
Gains and losses on disposal (sale)
Tangible fixed assets are derecognised from the consolidated statement of financial position when they are
permanently disposed of and no future economic benefits are expected therefrom or on sale. The gains or
losses arising from the sale of an item of 'property, plant and equipment' group are determined as the
difference between the consideration that the Group expects to be entitled to (sales revenue) and the
carrying amount of the asset on the date when the recipient obtains control thereon. They are stated net
under 'other operating income/(losses), net' on the face of the consolidated statement of comprehensive
income (within profit or loss for the year). The part of 'revaluation reserve' component attributable to the
asset sold is directly transferred to 'retained earnings' component in the consolidated statement of changes
in equity.
2.10. Biological assets
Biological assets are measured at fair value less the estimated costs to sell.
The fair value of biological assets is determined on the basis of their present location and condition based
on a price quoted in an active market or other alternative sources of current prices. Gain or loss on initial
recognition of a biological asset at fair value less estimated costs to sell and changes in fair value less
estimated costs to sell is recognised in the consolidated statement of comprehensive income (within profit
or loss for the year) in the period in which it arises and is presented in 'other operating income/(losses), net'.
When the fair value of a biological asset cannot be reliably measured, it is measured at cost less accumulated
depreciation or impairment losses. Subsequently, when the fair value of this biological asset becomes
reliably measurable, the Group changes its approach and switches to measuring the asset at fair value less
the estimated costs to sell.
2.11. Intangible assets
Goodwill
Goodwill represents the excess of the cost of an acquisition (the consideration given) over the fair value of
Group's share in the net identifiable assets of the acquired company at the date of acquisition (the business
combination). Goodwill is initially measured in the consolidated financial statements at acquisition cost
(cost) and subsequently – at cost less accumulated impairment losses. Goodwill is not amortised.
Goodwill arising on the acquisition of a subsidiary is presented in the consolidated statement of financial
position in the group of 'intangible assets' while goodwill arising on the acquisition of a joint venture or an
associate (entities) is incorporated in the total amount of the investment and is stated in the group of
'investments in joint ventures' or respectively 'investments in associates'.
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
52
The goodwill on the acquisition of joint ventures and associates (entities) is tested as part of the total balance
(amount) of the investment. The individually recognised goodwill on the acquisition of subsidiaries
(entities) is mandatory tested for impairment at least once in a year. Impairment losses on goodwill are not
subsequently reversed. Gains or losses on the sale (disposal) of a particular subsidiary (entity) of the Group
include the carrying amount of the goodwill relating to the entity sold (disposed of).
On the realisation of a particular business combination, each recognised goodwill is allocated to a particular
cash generating unit and this unit is used for impairment testing. The allocation is made to those cash
generating units that are expected to benefit from the business combination in which the goodwill arose.
Impairment losses on goodwill are presented in the consolidated statement of comprehensive income
(within profit or loss for the year) in the item 'impairment of non-current assets'.
Other intangible assets
Intangible assets are stated in the consolidated financial statements at acquisition cost less accumulated
amortisation and any impairment losses in value. The intangible assets include mainly intellectual property
rights, software and complex intangible assets (licences and pharmacy chain locations).
The Group applies the straight-line amortisation method for the intangible assets with determined useful
life from 3 to 18 years.
The carrying amount of the intangible assets is subject to review for impairment when events or changes
in the circumstances indicate that the carrying amount might exceed their recoverable amount. Then
impairment is recognised as an amortisation expense in the consolidated statement of comprehensive
income (within profit or loss for the year).
Intangible assets are derecognised from the consolidated statement of financial position when they are
permanently disposed of and no future economic benefits are expected therefrom or on sale at the date of
transfer of control to the asset recipient. The gains or losses arising from the sale of an item of intangible
assets are determined as the difference between the consideration that the Group expects to be entitled to
(sales revenue) and the carrying amount of the asset on the date when the recipient obtains control thereon.
They are stated net within “other operating income/(losses) on the face of the sta tement of comprehensive
income (within profit or loss for the year).
2.12. Investment property
Investment property is property lastingly held by the Group to earn rentals and/or for capital appreciation.
They are presented in the consolidated statement of financial position at fair value (Note 18). Gains or
losses arising from a change in the fair value of investment property are recognised in the consolidated
statement of comprehensive income (within profit or loss for the year) as 'other operating income/(losses),
net' for the period in which they arise. The income gained on investment property is presented in the same
item of the consolidated statement of comprehensive income.
Investment properties are derecognised from the consolidated statement of financial position when they are
permanently withdrawn from use and no future economic benefits are expected therefrom or on disposal.
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
53
Gains or losses arising from the disposal of investment property are determined as the difference between
the consideration that the Group expects to be entitled to (sales revenue) and the carrying amount of the
asset on the date when the recipient obtains control thereon. They are presented under 'other operating
income/(losses), net' in the consolidated statement of comprehensive income (within profit or loss for the
year).
Transfers to, or from, the group of 'investment property' is made only when there is a change in the
functional designation and the use of a particular property. In case of a transfer from 'investment property'
to 'owner-occupied property', the asset is recognised in the new group at deemed cost, which is its fair value
at the date of transfer.
To the opposite, in case of a transfer from 'owner-occupied property' to 'investment property' the asset is
measured at fair value at the date of transfer while the difference to its carrying amount is presented as a
component of the consolidated statement of comprehensive income (within other comprehensive income)
and within 'revaluation reserve – property, plant and equipment' in the statement of changes in equity.
2.13. Investments in associates and joint ventures
Long-term investments, representing shares in associates and joint ventures, are presented in the
consolidated financial statements under the equity method – value that includes the acquisition cost being
the fair value of the consideration paid, including the direct costs on investment acquisition adjusted by
investor's share of profits or losses and respectively the other reserves of the joint ventures and associates
after the dates of their acquisition.
The share of profits and losses after the date of acquisition of an associate and a joint venture is presented
on a separate line in the consolidated statement of comprehensive income (within profit or loss for the year)
while the share of other components of comprehensive income – on the respective line of the consolidated
statement of comprehensive income (within other comprehensive income) and as a separate movement of
the individual components of reserves in the consolidated statement of changes in equity.
The investments in associates and joint ventures held by the Group together with the included goodwill are
subject to review for impairment at the date of the financial statements. Where conditions for impairment
are identified and its amount is determined, the impairment is included in the consolidated statement of
comprehensive income (within profit or loss for the year) in the item 'gain/(loss) from associates and joint
ventures'.
In purchases and sales of investments in associates and joint ventures the date of trading (conclusion of the
deal) is applied.
Investments in associates and joint ventures are derecognised when the rights related thereto are transferred
to third parties as a result of occurrence of legal rights for that and thus the significant influence over or
joint control of the economic benefits from the investments is being lost. The income from their sale is
presented in 'gain/(loss) from associates and joint ventures' of the consolidated statement of comprehensive
income (within profit or loss for the year).
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
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2.14. Other long-term equity investments
The other long-term equity investments are non-derivative financial assets in the form of shares in the
capital of other companies (minority interest), held for a long term.
Initial measurement
Equity investments are initially recognised at cost, being the fair value of the consideration given including
the direct expenses associated with the investment (financial asset) acquisition (Note 2.25).
All purchases and sales of equity instruments are recognised at the transaction’s “trade date”, i.e. the date
on which the Group undertakes to purchase or sell the asset.
Subsequent measurement
The equity investments held by the Group are subsequently measured at fair value (Note 2.31) determined
with support by an independent licensed valuator.
The effects from subsequent remeasurement to fair value are carried within a separate component of the
statement of comprehensive income (in other comprehensive income), respectively in the reserve for
financial assets at fair value through other comprehensive income.
These effects are transferred to retained earnings upon disposal of the respective investment.
Dividend income
Dividend income related to long-term investments constituting shares in other entities (non-controlling
interest) is recognised as current income and stated in the statement of financial position (within profit or
loss for the year) in the “finance income” item.
Upon derecognising shares at disposal or sale, the weighted-average price method is used, applying the
price determined at the end of the month when the derecognition is performed.
2.15. Inventories
Inventories are valued in the consolidated financial statements as follows:
· raw materials, consumables and goods – at the lower of acquisition cost and net realisable value;
· finished products, semi-finished products and work in progress – at the lower of production cost
and net realisable value.
Expenses incurred in bringing a certain product within inventories to its present condition and location, are
included in the acquisition cost (cost) as follows:
· raw materials, materials and goods – all delivery costs, including the purchase price, import
customs duties and charges, transportation expenses, non-refundable taxes and other expenses,
incurred for rendering the materials and goods ready for usage (sale);
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
55
· finished products, semi-finished products and work in progress – all necessary expenses on
production that constitute the production cost, which includes the cost of direct materials and labour
and the attributable proportion of production overheads (both variable and fixed), but excluding
administrative expenses, exchange rate gains and losses and borrowing costs.
The inclusion of fixed production overheads in the production cost of finished products, semi-finished
products and work in progress is based on normal production capacity.
They are allocated to finished products on the following bases chosen by the Group:
· for production of medicinal products – the standard rate of man-hours of directly engaged staff in
the production of the particular unit;
· for production of infusion solutions – quantity of manufactured finished products;
· for production of plastic medical disposable products – planned cost of manufactured finished
products.
The parent company applies 'standard production cost' for current valuation of finished products, semi-
finished products and work in progress, and respectively, 'standard purchase cost' for basic raw materials
and other production materials. At the end of each reporting period the management performs analysis of
factors leading to variances on: (a) the supply of raw materials and other production materials – by
comparing the actual and standard acquisition costs, and (b) the production of finished products, semi-
finished products and work in progress – by comparing the actual and standard production costs.
Where necessary, the value of inventories, included in the financial statements, is adjusted. On the basis of
research on the good reporting practices in the pharmaceutical industry, the Company has adopted
materiality thresholds regarding: (a) variance on supply of raw materials and other production materials –
up to 2%, and (b) variance on production – up to 1%, within which the current value of the existing closing
stocks of raw and other materials, finished products and work in progress are not adjusted for the purposes
of the consolidated financial statements.
Upon use (putting into production or sale) of inventories, they are currently expensed by applying the
weighted average cost (cost) method.
The net realisable value represents the estimated selling price of an asset in the ordinary course of business
less the estimated cost of completion and the estimated costs necessary to make the sale.
2.16. Trade receivables
Trade receivables constitute the Group’s unconditional entitlement to consideration under contracts with
customers and other counterparties (i.e. it is only dependent on the passage of time before payment of the
consideration).
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
56
Initial measurement
Trade receivables are initially recognised and carried at fair value based on the transaction price, which is
usually equal to the invoice amount, unless they contain a significant financial component, which is not
additionally charged. In this case they are recognised at their present value determined by applying a
discount rate which is equal to the interest rate specific to the customer-debtor.
Subsequent measurement
The Group holds trade receivables only for the purpose of collecting contractual cash flows and
subsequently measures them at amortised cost less the amount of impairment accumulated for expected
credit losses. (Note 2.25 Financial instruments).
Impairment
The Group applies the expected credit losses model for the entire term of all trade receivables, using the
simplified approach under IFRS 9, and based on the matrix model for loss percentage (Note 24).
2.17. Interest-bearing loans and other financial resources granted
All loans and other financial resources granted are initially recognised at acquisition cost (nominal amount),
which is accepted to be the fair value of the consideration received on the transaction, net of the direct costs
related to these loans and granted resources. After the initial recognition, the interest-bearing loans and
other granted resources are subsequently measured and presented in the consolidated financial statements
at amortised cost by applying the effective interest rate method. They are classified in that category as the
business model of the Group is solely to collect contractual cash flows of principal and interest. Amortised
cost is calculated by taking into account all types of charges, commissions, and other costs, associated with
these loans. Gains and losses are recognised in the consolidated statement of comprehensive income (within
profit or loss for the year) as 'finance income' (interest) or 'finance costs' throughout the amortisation period,
or when the receivables are settled, derecognised or reduced.
Interest income is recognised in accordance with the stage in which the respective loan or other receivables
has been classified based on the effective interest method.
Interest-bearing loans and other financial resources granted are classified as current ones unless (and for
the relevant portion thereof) the Group has unconditionally the right to settle its obligation within a term of
more than 12 months after the end of the reporting period (Note 2.25).
2.18. Cash and cash equivalents
Cash includes cash on hand and cash at current accounts, and cash equivalents – bank deposits with original
maturity up to three months, and funds in deposits with longer maturity which are readily available to the
Group under its agreements with the banks over the deposits’ terms (Note 2.25).
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
57
Subsequent measurement
Cash and cash equivalents at banks are subsequently measured at amortised cost, less the impairment
accumulated for expected credit losses.
For the purposes of the statement of cash flows:
· cash proceeds from customers and cash paid to suppliers are presented at gross amount, including
value added tax (20%);
· interest on investment purpose loans received is reported as payments for financial activities while
the interest on loans for current activities (for working capital) is included in the operating
activities;
· interest received on overdue trade receivables is reported as receipts from customer in cash flows
from operating activities;
· interest received from bank deposits is included within cash flows from investing activities;
· VAT paid on fixed assets purchased from foreign suppliers is presented on the line 'taxes paid'
while that paid on assets purchased from local suppliers is presented as 'cash paid to suppliers' in
the cash flows from operating activities as far as it represents a part of the operating flows of the
Group companies and is recovered therewith in the respective period (month).
· overdraft proceeds and payments are stated net by the Company.
· permanently blocked funds for a period of more than 3 months are not treated as cash and cash
equivalents.
· proceeds under factoring agreements are stated within cash flows from financing activities.
2.19. Trade and other payables
Trade and other current amounts payable are carried to the consolidated financial statements at original
invoice amount (acquisition cost), which is the fair value of the consideration to be paid in the future for
goods and services received. In case of payments deferred over a period exceeding the common credit
terms, where no additional interest payment has been envisaged or the interest considerably differs from
the common market interest rates, the payables are initially valued at their fair value based on their present
value at a discount rate applicable for the Group, and subsequently – at amortised cost (Note 2.25).
2.20. Interest-bearing loans and other borrowings
All loans and other borrowings are initially recognised in the consolidated financial statements at cost
(nominal amount), which is accepted to be the fair value of the consideration received on the transaction,
netted of the direct costs related to these loans and borrowings. After the initial recognition, the interest-
bearing loans and other borrowings are subsequently measured and presented in the consolidated financial
statements at amortised cost by applying the effective interest rate method.
SOPHARMA GROUP
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58
Amortised cost is calculated by taking into account all types of charges, commissions and other costs,
including any discount or premium on settlement, associated with these loans. Gains and losses are
recognised in the consolidated statement of comprehensive income (within profit or loss for the year) as
finance income or costs (interest) throughout the amortisation period, or when the liabilities are
derecognised or reduced (Note 2.25).
Interest costs are recognised for the term of the financial instrument based on the effective interest method.
Interest-bearing loans and other borrowings are classified as current ones unless (and for the relevant
portion thereof) the Group has unconditionally the right to settle its obligation within a term of more than
12 months after the end of the reporting period.
2.21. Capitalisation of borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying
asset of the Group are capitalised as part of the cost of that asset. A qualifying asset is an asset that
necessarily takes a period of at least 12 months to get ready for its intended use or sale.
The amount of borrowing costs eligible for capitalisation to the value of a qualifying asset is determined
by applying a capitalisation rate. The capitalisation rate is the weighted average of the borrowing costs
applicable to the borrowings that are outstanding during the period, other than borrowings made specifically
for the purpose of obtaining a qualifying asset.
The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when the following
conditions are met: expenditures for the asset are being incurred, borrowing costs are being incurred and
activities that are necessary to prepare the asset for its intended use or sale are in progress.
Borrowing costs are also reduced by any investment income earned on the temporary investment of those
borrowed funds.
2.22. Leases
At the lease inception, which is the earlier of the date of a lease agreement and the date of commitment by
the parties to the principal terms and conditions of the lease, the Group performs analysis and assesses
whether the contract is, or contains, a lease. A contract is, or contains, a lease, if the contract conveys the
right to control the use of an identified asset for a period of time in exchange for consideration.
Lessee
The Group applies a uniform model for recognition and measurement of all leases, except for short-term
leases (leases with a lease term of 12 months or less and which do not contain a purchase option) and leases
of low value assets (such as tablets, personal computers, telephones, office equipment, etc.).
The Group has not elected to apply the practical expedient of IFRS 16, which allows a lessee, by class of
underlying asset, not to separate non-lease components from lease components, and instead account for
each lease component and any associated non-lease components as a single lease component.
SOPHARMA GROUP
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59
For contracts that contain a lease component and one or more additional lease or non-lease components,
the Group allocates the consideration in the contract to each lease component on the basis of the relative
stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components.
а) right-of-use assets
The Group recognises right-of-use assets in the statement of financial position at the commencement date
of the lease, i.e. the date on which a lessor makes an underlying asset available for use by the lessee.
Right-of-use assets are presented in the statement of financial position at acquisition cost, less the
accumulated depreciation, impairment losses and adjustments resulting from remeasurement and
adjustments to the lease liability. The acquisition cost includes:
· the amount of the initial measurement of the lease liability;
· any lease payments made at or before the commencement date, less any lease incentives received;
· any initial direct costs incurred by the Group in its capacity as lessee;
· costs for dismantling and removing the underlying asset, restoring the site on which the asset is
located or restoring the underlying asset to the condition required by the terms and conditions of
the lease.
The Group depreciates the right-of-use asset to the earlier of the end of the useful life of the right-of-use
asset or the end of the lease term. If ownership of the asset is transferred under the lease by the end of the
lease term, the Group shall depreciate it to the end of the useful life. Depreciation shall be charged from
the commencement date.
The depreciation terms by types of underlying assets are as follows:
· land – 3 to 15 years
· buildings – 1 to 10 years
· motor vehicles – 1 to 5 years
· furniture and fixtures – 2 to 4 years
The Group has elected to apply the acquisition cost model for all of its right-of-use assets.
Right-of-use assets are tested for impairment in accordance with IAS 36 Impairment of Assets, by applying
an impairment determination and reporting policy analogous to the one for property, plant, and equipment.
The recoverable amount of right-of-use assets is the higher of the fair value less disposal costs, or value in
use. To determine assets’ value in use, future cash flows are discounted to their present amount, by applying
a pre-tax discount rate reflecting the market conditions and time value of money and the risks inherent to
the respective asset. Impairment losses are determined as the difference between the recoverable and
carrying amount (when the recoverable amount is lower than the carrying amount) and are carried to the
statement of comprehensive income as impairment of non-current assets.
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Right-of-use assets are presented within property, plant and equipment in the consolidated statement of
financial position, and depreciation thereof – within depreciation and amortization expenses in the
consolidated statement of comprehensive income.
b) lease liabilities
The Group companies recognise lease liabilities at the commencement date, measured at the present value
of the lease payments that are not paid at this date. They include:
· fixed lease payments (including in-substance fixed payments), less any lease inceptives receivable;
· variable lease payments that depend on an index or rate, initially measured using the index or rate
at the commencement date;
· the exercise price of the purchase options, if the lessee is reasonably certain to exercise this option;
· payments of penalties for terminating the lease, of the lease term reflects the exercise of an option
to terminate the lease;
· the amount expected to be payable by the Group to lessor under residual value guarantees.
Variable lease payments that do not depend on an index or a rate, but are dependent on performance or use
of the underlying asset, are not included in the measurement of the lease liability and the right-of-use asset.
They are recognised as current expenses in the period when the event or circumstance resulting in these
payments arises.
Lease payments are discounted using the interest rate implicit in the lease, of that rate can be readily
determined, or the Company’s incremental borrowing rate, which it would have to pay to borrow over a
similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the
right-of-use asset in a similar economic environment.
Lease payments (instalments) contain a certain ratio of the finance cost (interest) and the respective portion
of the lease liability (principal). Interest costs for the lease are presented in the statement of comprehensive
income (within profit or loss for the year) for the lease period on a periodic basis, so as to achieve constant
periodic rate of interest on the remaining balance of the lease liability, and are presented as “finance costs”.
Lease liabilities are stated on separate lines in the consolidated statement of financial position: Lease
liabilities – non-current portion of liabilities, current portion of lease liabilities – for the current portion of
liabilities, non-current payables to related parties – non-current portion, and payables to related parties –
current portion.
The Group subsequently measures the lease liability by:
· increasing the carrying amount to reflect the interest on the lease liability;
· reducing the carrying amount to reflect the lease payments made;
· remeasuring the carrying amount to reflect any reassessment or lease modifications of the lease;
· residual value guarantees are reviewed and if necessary, adjusted, at the end of each reporting
period.
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The Group remeasures the lease liabilities (and makes corresponding adjustments to the related right-of-
use assets) whenever:
· the lease term has changes or there is a significant event or change in circumstances resulting in a
change in the assessment of exercise of a purchase option, in which case the lease liability is
remeasured by discounting the revised lease payments using a revised discount rate;
· the lease payments change due to changes in an index or rate or a change in expected payment
under a residual value guarantee, in which cases the lease liability is remeasured by discounting
the revised lease payments using an unchanged (original) discount rate (unless the lease payments
change is due to a change in a floating interest rate, in which case a revised discount rate is used);
· a lease contract is modified and the lease modification is not accounted for as a separate lease, in
which case the lease liability is remeasured based on the lease term of the modified lease by
discounting the revised lease payments using a revised discount rate at the effective date of
modification.
c) Short-term leases and leases of low-value assets
The Group has elected the exemption from recognition of right-of-use assets and lease liabilities under
IFRS 16 for short-term leases of buildings and motor vehicles and for low-value assets constituting printers
and other equipment which the Group considers to be at a low value when new and are independently used
at the Group without dependence or close relation to other assets.
Payments related to short-term leases and leases of low-value assets are recognised directly as current
expenses in the statement of comprehensive income (within profit or loss for the year) on a straight-line
basis over the lease term.
Lessor
Leases for which the Group is a lessor are classified as finance or operating leases. Whenever the terms of
the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified
as a finance lease; all other leases are classified as operating leases.
Operating lease
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant
lease. Initial direct costs incurred in obtaining an operating lease are added to the carrying amount of the
leased asset and recognised on a straight-line basis over the lease term.
The underlying asset which is subject to the lease shall remain and be stated within the Group’s consolidated
statement of financial position.
Finance lease
The Group recognises and presents the assets held under finance leases in its statement of financial
position as lease receivables whose amount is equal to the net investment in the lease.
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The Group recognises finance income (lease interest) over the lease term based on a pattern reflecting a
constant periodic rate of return on the lessor's net investment in the lease. Interest income is included in the
statement of comprehensive income (within profit and loss for the year) as finance income based on the
Effective Interest Method.
When the contract contains both lease and non-lease components, the Company applies IFRS 15 to allocate
the total consideration between the separate components.
2.23. Pensions and other payables to personnel under the social security and labour legislation
The employment and social security relations with workers and employees of the Group are based on the
Labour Code and the provisions of the effective social security legislation for the companies operating in
Bulgaria, the Polish Code – for the companies in Poland, the employment legislation and the Collective
Labour Agreement – for the companies in Ukraine, the employment legislation, the General Collective
Labour Agreement and the effective Employment Rules and Regulations – for the companies in Serbia,
and the Social Security Law of the Republic of Kazakhstan – for the company in Kazakhstan.
Short-term benefits
Short-term benefits to hired personnel in the form of remuneration, bonuses and social payments and
benefits (due for payment within 12 months after the end of the period when the employees have rendered
the service or have satisfied the required terms) are recognised as an expense in the statement of
comprehensive income (within profit or loss for the year) for the period when the service thereon has been
rendered and/or the requirements for their receipt have been met, unless a particular IFRS requires
capitalisation thereof to the cost of an asset, and as a current liability (less any amounts already paid and
deductions due) at their undiscounted amount.
At each date of consolidated balance sheet, the companies of the Group measure the estimated costs on the
accumulating compensated absences, which amount is expected to be paid as a result of the unused
entitlement. The measurement includes the estimated amounts of employee's remuneration and the statutory
social security and health insurance contributions due by the employer thereon.
Tantieme
In accordance with the Group companies’ Articles of Association and upon a decision of the General
Meeting of Shareholders, the Executive Director and/or other management are entitled to one-off
remuneration (tantieme), usually determined as a percentage of the Company’s net profit. These
remuneration expenses are recognised in the statement of comprehensive income (within profit or loss)
within “employment benefit expenses”. When a certain portion is required to be deferred for a period of
more than 12 months, this portion is measured at present value at the reporting date and is stated within
non-current liabilities in the statement of financial position in the item 'payables to personnel'.
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Bonus schemes
The amounts payable to staff, including key management members, under different bonus schemes applied
in the Group, are usually accrued for the reporting year to which the achieved results refer. These
remuneration expenses are recognised in the statement of comprehensive income (within profit or loss)
within “employment benefit expenses” and in the statement of financial position as “payables to personnel”
and are usually short-term.
Long-term retirement benefits
Defined contribution plans
For Bulgaria
The major duty of the companies - employers in Bulgaria is to make the mandatory social security
contributions for the hired employees to the Pensions Fund, the Supplementary Mandatory Pension Security
(SMPS) Fund, to the General Diseases and Maternity (GDM) Fund, the Unemployment Fund, the Labour
Accident and Professional Diseases (LAPD) Fund, and for health insurance.
The rates of the social security and health insurance contributions are regulated in the Social Security Code
(SSC), as well as in the Law on the Budget of State Social Security and the Law on the Budget of National
Health Insurance Fund for the respective year. The contributions are split between the employer and
employee in line with rules of the SSC.
These pension plans, applied by the Group in its capacity as an employer, are defined contribution plans.
Under these plans, the employer pays defined monthly contributions to the government funds as follows:
Pensions Fund, GDM Fund, Unemployment Fund, LAPD Fund as well as to universal and professional
pension funds – on the basis of rates fixed by law, and has no legal or constructive obligation to pay further
contributions if the funds do not hold sufficient means to pay the respective individuals the benefits they
have worked-out over the period of their service. The obligations referring to health insurance are
analogous.
For companies abroad
The rates of the social security contributions in Poland are approved by the Law on the National Social
Security System, in Ukraine – Law on Pension Provision, in Serbia – the Law on Labour in the Republic
of Serbia, and in Kazakhstan – Law of the Republic of Kazakhstan on Social Security Obligations. The
social security contributions are being apportioned between an employer and employees at ratios regulated
by the relevant local laws.
There is no established and functioning private voluntary social security scheme at the Group. The
contributions, payable by the companies of the Group under defined contribution plans for social security
and health insurance, are recognised as a current expense in the statement of comprehensive income (within
profit or loss for the year) unless a particular IFRS requires this amount to be capitalised to the cost of an
asset, and as a current liability at their undiscounted amount along with the accrual of the respective
employee benefits to which the contributions refer and in the period of rendering the underlying service.
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Defined benefit plans
In accordance with the Labour Code, the Group in its capacity as an employer in Bulgaria is obliged to pay
an indemnity at the amount of the respective employee’s gross remuneration for two months upon
termination of employment relations due to retirement. If the employee has acquired within the company
of the same Group ten years’ service over the last twenty years, the indemnity amounts to the gross
remuneration for six months. In their nature these are unfunded defined benefit schemes.
In accordance with the Labour Law in Serbia, the employer of the Serbian company is obliged to pay to its
personnel on coming of age for retirement an indemnity at the amount of at least three average salaries
calculated at the time of payment. In accordance with the employment legislation in Ukraine and the
Collective labour Agreement of the Ukrainian company, the employer is obliged to pay to its personnel on
coming of age for retirement an indemnity, which depending on the length of service with the entity may
vary between UAH 250 and UAH 500 (between BGN 14 and BGN 29). Also, the company in Ukraine
accrues social indemnities, which are paid prior to retirement of employees due to specific labour
conditions. According to the employment legislation in Poland, the employer is obliged to pay upon
retirement one gross monthly salary.
In their nature these are unfunded defined benefit schemes.
The calculation of the amount of these liabilities necessitates the participation of qualified actuaries in order
to determine their present value at the date of the financial statements, at which they are presented in the
consolidated statement of financial position, and respectively, the change in their value – in the consolidated
statement of comprehensive income as follows: (a) current and past service costs, interest costs and the
gains/losses on a curtailment and settlements are recognised immediately when incurred and are presented
in current profit or loss under 'employee benefits expense'; and (b) effects from remeasurement of
obligations that in substance represent actuarial gains and losses are recognised immediately when occurred
and are presented to other comprehensive income in the item 'remeasurement of defined benefit pension
plans'. Actuarial gains and losses arise from changes in the actuarial assumptions and experience
adjustments.
At the date of issue of the consolidated financial statements, the companies of the Group assign certified
actuaries who provide their report with calculations regarding the long-term retirement benefit obligations
upon termination of employment relations due to retirement. For this purpose, they apply the Projected
Unit Credit Method. The present value of the defined benefit obligation is determined by discounting the
estimated future cash flows, which are expected to be paid within the maturity of this obligation, and using
the interest rates of long-term government bonds of similar term, quoted in the respective country where
the company itself operates.
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Share based payments
Share based payments to employees and others providing similar services are measured at fair value of the
equity instruments as of the grant date. Form remunerations related to share based payments with conditions
which have not vested rights the fair value as of the grant date is measured in a way to reflect these
conditions and not to account for differences between expected and actual results.
Termination benefits
In accordance with the local provisions of the employment and social security regulations of the Group
companies, the employer is obliged, upon termination of the employment contracts of employees prior to
retirement, to pay certain types of indemnities.
The Group recognises employee benefit obligations on employment termination before the normal
retirement date when it is demonstrably committed, including based on an announced plan (for instance,
for restructuring), to terminating the employment contract with the respective individuals without
possibility of withdrawal or in case of formal issuance of documents in the case of voluntary redundancy.
Termination benefits due more than 12 months are discounted and presented in the consolidated statement
of financial position at their present value.
2.24. Share capital and reserves
Sopharma AD (the parent company) is a joint-stock company and is obliged to register with the Commercial
Register a specified share capital, which should serve as a security for the creditors for execution of their
receivables. Shareholders are liable for the obligations of the Group up to the amount of the capital share
held by each of them and may claim returning of this share only in liquidation or bankruptcy proceedings.
The parent company reports its share capital at the nominal value of the shares registered in the court.
According to the requirements of the Commercial Act and the Articles of Association, the parent company
is obliged to set aside a Reserve Fund (statutory reserve) by using the following sources:
· at least one tenth of the profit, which should be allocated to the Fund until its amount reaches one
tenth of the share capital or any larger amount as may be decided by the General Meeting of
Shareholders;
· any premium received in excess of the nominal value of shares upon their issue (share premium
reserve);
· other sources as provided for by a decision of the General Meeting.
The amounts in the Fund can only be used to cover annual loss or losses from previous years. When the
amount of the Fund reaches the minimum value specified in the Articles of Association, the excess may be
used for share capital increase.
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The treasury shares are presented in the consolidated statement of financial position at acquisition cost
(cost) and Group's equity is decreased by their gross purchase price. Gains or losses on sales of treasury
shares are at the expense of retained earnings and are carried directly to Group's equity in the 'retained
earnings' component.
Revaluation reserve – property, plant and equipment is set aside from:
· the revaluation surplus between the carrying amount of property, plant and equipment and their fair
values at the date of each revaluation;
· the revaluation surplus between the carrying amount of property stated as owner-occupied property
and their fair values at the date when they are transferred to investment property.
Deferred tax effect on the revaluation reserve is directly carried at the account of this reserve.
Revaluation reserve is transferred to accumulated profits when the assets are derecognised from the
consolidated statement of financial position of the Group or are fully depreciated.
The revaluation reserve covers the impairment of the assets to which it relates. It may be used in the
implementation of Group's dividend and capital policies only after it is transferred to the 'retained earnings'
component.
The reserve for financial assets at fair value through other comprehensive income is formed by the
effects of fair-value measurement of other long-term equity investments. Upon derecognition of these
investments, the reserve form is not recycled through the statement of comprehensive income (through
profit or loss for the year).
The translation of foreign operations reserve includes the effects of restating the financial statements of
the companies abroad from local currency to the presentation currency of the Group. This reserve is
recognised as a separate component of equity in the consolidated statement of financial position and as part
of the profit or loss in the consolidated statement of comprehensive income on the line 'gains/(losses) on
acquisition and disposal of subsidiaries, net' on disposal (sale) of a foreign operation (company).
The other equity components constitute a reserve on warrants issued, which is formed by the difference
between the issue value of the registered warrants and the transaction costs related to the issue. The warrants
are issued and registered at a fixed price, denominated in BGN, and grant future rights to conversion into a
fixed number of ordinary, dematerialised, registered, freely transferrable parent company shares, and are
therefore classified as an equity instrument.
2.25. Financial instruments
A financial instrument is any contract that simultaneously gives rise to a financial asset at one entity and a
financial liability or equity instrument at another entity.
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Financial assets
Initial recognition, classification and measurement
At initial recognition, financial assets are classified in three groups, as subsequently measured: at amortised
cost; at fair value through other comprehensive income, and at fair value through profit or loss.
The Group initially measures financial assets at fair value, and in the case of financial assets which are not
stated at fair value through profit and loss, the direct transaction costs are added. An exception to this rule
are trade receivables that do not contain a significant financing component – they are measured based on
the transaction price determined under IFRS 15 Revenue from contracts with customers (Note 2.6.2).
Purchases or sales of financial assets that require delivery of assets within a time frame established by
regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the
date that the Group commits to purchase or sell the asset.
The classification of financial assets at their initial recognition depends on the characteristics of the
contractual cash flows of the respective financial asset and on the Group’s business model for management
thereof. In order for a financial asset to be classified and measured at amortised cost or fair value through
OCI, it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the
principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an
instrument level.
The Group’s business model for managing financial assets refers to how it manages its financial assets in
order to generate cash flows. The business model determines whether cash flows will result solely from
collecting contractual cash flows, selling the financial assets, or both.
Subsequent measurement
For the purpose of subsequent measurement, financial assets are classified in the following categories:
- Financial assets at amortised cost (debt instruments)
- Financial assets at fair value through other comprehensive income without “recycling” of
cumulative gains or losses (equity instruments)
Classification groups
Financial assets at amortised cost (debt instruments)
The Group measures a financial asset at amortised cost if both of the following conditions are met:
- the financial asset is held within a business model whose objective is to hold financial assets
in order to collect contractual cash flows and
- the contractual terms of the financial asset give rise on specified dates to cash flows that are
solely payments of principal and interest on the principal amount outstanding.
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Financial assets at amortised cost are subsequently measured using the effective interest method. They are
subject to impairment. Gains and losses are recognised in the statement of comprehensive income (within
profit or loss for the year) upon asset disposal, modification or impairment.
The Group’s financial assets at amortised cost include: cash and cash equivalents at bank s, trade
receivables, including from related parties, loans to related and third parties (Note 21, Note 22, Note 24,
Note 25, Note 26 and Note 27).
Financial instruments at fair value through other comprehensive income (equity instruments)
At initial recognition, the Group companies may make an irrevocable election to classify certain equity
instruments as financial instruments at fair value through other comprehensive income, but only if they
meet the equity definition under IAS 32 Financial Instruments: Presentation and are not held for trading.
The classification is determined at an individual level, on an instrument by instrument basis.
At derecognition of these assets, gains and losses from measurement to fair value, recognised in other
comprehensive income, are not transferred to (recycled through) profit or loss. Dividends are recognised
as “financial income” in the statement of comprehensive income (within profit or loss for the year) when
the right of payment has been established, except when the Group benefits from such proceeds as a recovery
of part of the cost of the financial asset, in which case, such gains are recorded in other comprehensive
income. Equity instruments designated as financial instruments at fair value through other comprehensive
income are not subject to impairment test.
The Group has made an irrevocable election to classify into this category minority equity investments which
it holds in the long term and in relation to its business interests in these entities. Significant part of these
instruments are listed. They are presented in the consolidated statement of financial position within the
„Other long-term equity investments” item.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial
assets) is primarily derecognised (i.e., removed from the Group’s consolidated statement of financial
position) when:
- the rights to receive cash flows from the asset have expired, or
- the Group has transferred its rights to receive cash flows from the asset or has assumed an
obligation to pay the received cash flows in full without material delay to a third party under
a ‘pass-through’ arrangement; and either (a) the Group has transferred substantially all the
risks and rewards of the asset, or (b) the Group has neither transferred nor retained
substantially all the risks and rewards of the asset, but has transferred control of the asset
When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-
through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership.
SOPHARMA GROUP
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When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor
transferred control of the asset, the Group continues to recognise the transferred asset to the extent of its
continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset
and the associated liability are measured on a basis that reflects the rights and obligations that the Group
has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the
lower of the original carrying amount of the asset and the maximum amount of consideration that the Group
could be required to repay.
Impairment of financial assets
The Group recognises an allowance (impairment provision) for expected credit losses for all debt
instruments which are not held at fair value through profit or loss. Expected credit losses are based on the
difference between the contractual cash flows due in accordance with the contract and all the cash flows
that the Group expects to receive, discounted at an approximation of the original effective interest rate.
The expected cash flows will include cash flows from the sale of collateral held or other credit
enhancements that are integral to the contractual terms
To calculate the expected credit losses for loans to related and third parties, incl. cash and cash equivalents
at banks, the Group applies the general impairment approach defined by IFRS 9. Under this approach, the
Group applies a 3-stage impairment model based on changes at the initial recognition of the credit quality
of the financial instrument (asset).
Expected credit losses are recognised at two stages:
а. A financial asset which is not credit impaired at its initial recognition/acquisition is classified in
Stage 1. These are loans granted to debtors with low risk of default, classified as performing and not
overdue.
Since its initial recognition, its credit risk and characteristics are subject to continuous monitoring and
analyses. The expected credit losses for the financial assets classified in Stage 1 are determined based on
credit losses resulting from probable events or default that are possible in the next 12 months of the
respective asset’s lifetime (12-month expected credit losses for the instrument).
b. When there has been a significant increase in credit risk since the initial recognition of a financial
asset, and as a result its characteristics deteriorate, it is classified in Stage 2. Expected credit losses for
financial assets classified in Stage 2 are determined for the remaining lifetime of the respective asset,
irrespective of the point of default (lifetime expected credit loss (ECL)).
The Group’s management has developed a policy and a set of criteria to analyse, ascertain and assess the
occurrence of a condition of “significant increase in credit risk”. The main points of the policy and set of
criteria are disclosed in Note 45.
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In the cases when the credit risk of a financial instrument increases to a level that indicates default, the
financial asset is considered to be impaired, and is classified in Stage 3. At this stage, the losses incurred
for the lifetime of the respective asset are identified and calculated.
The Group’s management has performed the respective analyses, based on which it has determined a set of
criteria for default events. One of them is delay in contract payments by over 90 days, unless circumstances
exist for a certain instrument that make such claim refutable. Along with that, there are other events, based
on internal and external information, which indicate that the debtor is not able to repay all contracted
amounts due, including in consideration of all loan collaterals and credit enhancements held by the Group.
The main points of the policy and set of criteria are disclosed in Note 45.
The Group adjusts expected credit losses determined based on historical data, with forecasted
macroeconomic indicators for which it has been established that correlation exists and which are expected
to impact the amount of expected credit losses.
In order to calculate expected credit losses for trade receivables and contract assets the Group has elected
and applies a simplified approach based on an expected credit losses calculation matrix and does not
monitor subsequent changes in their credit risk. In this approach, it recognises an allowance (impairment
provision) based on lifetime expected credit losses at each reporting date. The Group has developed and
applies a provisioning matrix based on its historical experience with credit losses, adjusted with forecast
factors specific for debtors and the economic environment, for which a correlation has been established
with the percentage of credit losses (Note 45).
Derecognition
Impaired financial assets are derecognised when there is no reasonable expectation of recovering the
contractual cash flows.
Financial liabilities
Initial recognition, classification and measurement
The Group’s financial liabilities include trade and other payables, loans and other borrowings, including
bank overdrafts.
All financial assets are initially recognised at fair value, and in the case of loans and borrowings and trade
and other payables, net of direct transaction costs.
The Group’s financial liabilities include trade and other payables, loans and borrowings, including bank
overdrafts, derivative financial instruments.
Subsequent measurement
The subsequent measurement of financial liabilities depends on their classification as described below:
SOPHARMA GROUP
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Classification groups
Loans and borrowing
After initial recognition, the Group measures interest-bearing loans and borrowings at amortised cost,
applying the effective interest method. Gains and losses are recognised in the statement of comprehensive
income (within profit or loss for the year) when the respective financial liability is derecognised, as well as
through amortisation based on the effective interest rate.
The amortised cost is calculated by taking into consideration any discounts or premiums at acquisition, as
well as fees or costs that constitute an integral part of the effective interest rate. Amortisation is included
as a “finance expense” in the statement of comprehensive income (within profit or loss for the year).
Derecognition
Financial liabilities are derecognised when the obligation under the liability is discharged or cancelled or
expires. When an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as the derecognition of the original liability and the recognition of a new liability.
The difference in the respective carrying amounts is recognised in the statement of profit or loss.
Offsetting (netting) of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated
statement of financial position if there is a currently enforceable legal right to offset the recognised amounts
and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
This requirement results from the concept of the economic substance of the Group’s relations with a given
counterparty stating that in the simultaneous presence of these two requirements the expected actual future
cash flow and rewards for the Group is the net flow, i.e. the net amount reflects the Group’s actual right
and obligation resulting from these financial instruments – in all cases to only receive or pay the net amount.
If the two conditions are not simultaneously met, it is assumed that the Group’s rights and obligations with
respect to these offsetting financial instruments are not exhausted in all situations by only the payment or
receipt of the net amount.
The offsetting policy is also related to the measurement, presentation and management of actual credit risk
and the liquidity risk pursuant from these offsetting instruments.
The criteria applied to establish the “current and legally enforceable entitlement to offsetting” are:
· lack of dependence on a future event, i.e. it should not only be applicable upon the occurrence of a
future event;
· the offsetting should be enforceable and legally defendable during (cumulatively):
- the usual business operations;
- in case of default/delay, and
- in case of insolvency
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The applicability of criteria is measured against the requirements of the Bulgarian legislation and the
contractual relations between the parties. The condition of “presence of current and legally enforceable
right to offsetting” is always and mandatorily assessed together with the second condition – for “mandatory
settling of these instruments on a net basis”.
2.26. Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse
the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance
with the original or modified terms of a debt instrument
Financial guarantee contracts are initially recognised as a financial liability at fair value determined based
on the present value of the difference in cash flows between contract payments required under the debt
instrument, and payments that would be required without a guarantee payable to a third party upon
commitment.
The subsequent measurement of financial guarantee liabilities is the higher of the following:
· the amount determined in accordance with the expected credit losses model, and
· the initially recognised amount, less, when applicable, the cumulative amount of the revenue
recognised under the principles of IFRS 15 Revenue from Contracts with Customers.
The provision for expected credit losses on financial guarantee contracts is included in the consolidated
statement of financial position as ‘other current liabilities”.
2.27. Income taxes
Current income taxes of the Bulgarian companies of the Group are determined in accordance with the
requirements of the Bulgarian tax legislation – the Corporate Income Taxation Act (CITA). The nominal
income tax rate in Bulgaria for 2022 is 10% (2021: 10%).
The subsidiaries and joint ventures abroad are charged in accordance with the requirements of the respective
local tax regulations by applying the following tax rates:
Country
Tax rate
2022
2021
Ukraine
18%
18%
Serbia
15%
15%
Latvia
n/a
0-25%
Belarus
n/a
18%
Lithuania
n/a
15%
Poland
19%
19%
Kazakhstan
20%
20%
Moldova
12%
12%
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
73
Deferred income taxes are determined using the liability method on all temporary differences of each
consolidated company existing at the consolidated financial statements date, between the carrying amounts
of the assets and liabilities and their tax bases, including for those arising from consolidation adjustments.
Deferred tax liabilities are recognised for all taxable temporary differences, with the exception of those
originating from recognition of an asset or liability, which has not affected the accounting and the taxable
profit/(loss) at the transaction date.
Deferred tax assets are recognised for all deductible temporary differences and the carry-forward of unused
tax losses, to the extent that it is probable they will reverse and a taxable profit will be available or taxable
temporary differences might occur, against which these deductible temporary differences can be utilised,
with the exception of the differences arising from the recognition of an asset or liability, which has affected
neither the accounting nor taxable profit /(loss) at the transaction date.
The carrying amount of all deferred tax assets is reviewed at each reporting date and reduced to the extent
that it is probable that they will reverse and sufficient taxable profit will be generated or taxable temporary
differences will occur in the same period, whereby they could be deducted or compensated.
Deferred taxes, related to items directly credited or charged as other components of comprehensive income
or as an equity item in the consolidated statement of financial position, are also reported directly in the
respective component of the comprehensive income or the equity item in the statement of financial position.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period and
type of operations when the asset is realised or the liability – settled (repaid) on the basis of the tax laws
that have been enacted or substantively enacted, and at tax rates of the country under the jurisdiction of
which the respective deferred asset or liability is expected to be recovered or settled.
Deferred tax assets of a Group company are presented net against the deferred tax liabilities of this company
when it is the tax payer in the respective jurisdiction, and this is only in cases where the company is legally
entitled to perform or receive net payments of current tax liabilities or income tax receivables.
2.28. Government grants
Government grants represent various forms of providing gratuitous resources by a government (local and
central authorities and institutions) and/or intergovernmental agreements and organisations.
Government grants (from municipal, government and international institutions, including under the
procedure of using the European funds and programmes) are initially recognised as deferred income
(financing) when there is reasonable assurance that they will be received by the Group and that the latter
has complied and complies with the associated thereto requirements.
A government grant that compensates the Group for expenses incurred is recognised in current profit or
loss on a systematic basis in the same period in which the expenses are recognised.
A government grant that compensates investment expenses incurred to acquire an asset is recognised in
current profit or loss on a systematic basis over the useful life of the asset usually proportionately to the
amount of the recognised depreciation charge.
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
74
2.29. Net earnings or losses per share
Basic net earnings or losses per share are calculated by dividing net profit or loss attributable to ordinary
equity holders of the parent company by the weighted average number of ordinary shares outstanding
during the period.
The weighted average number of ordinary shares outstanding during the period is the number of ordinary
shares outstanding during at the beginning of the period, adjusted by the number of ordinary shares bought
back or issued during the period multiplied by a time-weighting factor.
This factor represents the number of days that the shares are outstanding as a proportion of the total number
of days in the period.
In case of a capitalisation, bonus issue or splitting, the number of the outstanding ordinary shares as at the
date of such event, is adjusted as to reflect the proportional change in the number of outstanding ordinary
shares as if the event has occurred in the beginning of the earliest presented period.
Diluted net earnings or losses per share are calculated dilutive potential ordinary shares (warrants) have
been issued by the parent.
Upon the calculation of diluted net earnings or loss per share for the period attributable to the parent,
adjustment is made to the net profit or loss for the period which is subject to distribution to shareholders –
holders of ordinary shares of the parent, and the average weighted number of shares in circulation, with the
effect of all dilutive potential ordinary shares, comprising warrants.
The potential ordinary shares are aimed to offset the decrease in the net earnings per share when the
conversion thereof would increase the net earnings per share or would decrease loss per share from
continuing operations.
The profit or loss for the period which is subject to distribution to shareholders – holders of ordinary shares
in the parent is increased by adding the amount of dividends and post-tax interest recognized in the period
in relation to the dilutive potential ordinary shares, and is adjusted for any other changes to profit or loss
that might arise as a result of the conversion of dilutive potential ordinary shares.
The options and warrants have a decreasing value only when the average market price of ordinary shares
for the period exceeds the price upon exercising the options or warrants (i.e. they generate profit). Earnings
per share reported in prior periods are not adjusted retrospectively to account for changes in the prices of
ordinary shares.
Diluted net earnings or losses per share is calculated based on the calculated base net earnings or loss per
share, adjusted as follows:
(a) the profit or loss for the period attributable to holders of ordinary shares of the parent, is increased by
the amount of post-tax dividend and interest recognised in the period in relation to the dilutive potential
ordinary shares, and is adjusted for all other changes in profit and loss that might arise as a result of the
conversion of dilutive potential ordinary shares; and
(b) The average weighted number of ordinary shares in circulation in the period is increased by adding the
average weighted number of the additional ordinary shares that would be in circulation upon conversion of
all dilutive potential ordinary shares.
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
75
2.30. Segment reporting
The Group identifies its reporting segments and discloses segment information in accordance with the
organisational and reporting structure used by the management of the parent company for current general
monitoring and management of the Group and its components. Operating segments are business
components, which are regularly measured by members of the management who take operating decisions
by using financial and operating information prepared specifically on the segment for the purposes of
current monitoring and assessment of results and allocating Group's resources.
Group's operating segments are currently monitored and directed separately as each of them represents a
separate business area that offers various products and bears various business risks and rewards. The
operating segments that the Group’s management monitors, measures and controls risks and return
therefrom are defined based on the main business operations performed on pharmaceutical products,
namely: production and trade.
Information by operating segments
The Group uses one basic measuring unit – gross margin (profit) for measuring the results in the operating
segments and allocation of resources between them. It is defined as the difference between segment revenue
and segment expenses directly attributable to the respective segment.
Segment assets, liabilities, respective revenue, expenses and results include those that are and can be
directly attributable to the respective segment as well as such that can be allocated on a reasonable basis.
Usually they include: (a) for revenue - sales of finished products; (b) for expenses - raw materials and
consumables used, depreciation and amortisation and production staff remuneration, cost of goods sold; (c)
for assets - property, plant and equipment and inventories, receivables from related parties, trade receivables
and cash and cash equivalents; (d) for liabilities - payables to personnel and for social security, payables to
related parties, trade payables and bank loans for direct financing (long-term and short-term).
Capital expenditures (investments) by business segments are differentiated expenses incurred in the period
of acquisition or construction of segment non-current assets, which are expected to be used for more than
one period.
The Group manages its investments in securities, trade accounts and financial resources granted/received
as well as taxes at Group and entity level and they are not allocated at segment level.
The results of the operations regarded as accidental ones compared to the main types of operations
(activities) of the Group as well as revenue, expenses, liabilities and assets that are not subject to allocation
are stated separately in the item 'total at Group level'. In general, these amounts include: other operating
income unless originating from the operation of a particular segment, administrative expenses, interest
income and expenses, realised and unrealised gains and losses from foreign currency transactions and
investments, investments in other companies, trade and other receivables, trade payables and loans
received, tax accounts, general-purpose production and administrative equipment.
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
76
Inter-segment transfers: segment revenue, expenses and results, include internal transfers between business
segments. These transfers are accounted for at competitive market prices charged to third party customers
of similar goods, and are eliminated at consolidated financial statements level.
Investments in joint ventures and associates, accounted for by using the equity method, are excluded from
segment assets and segment revenue. They are stated within non-allocated assets, and revenue therefrom is
presented within the item “gains/(losses) from joint ventures and associates, net”.
The applied accounting policy for segment reporting is based on that used by the Group for the preparation
of its statutory financial statements for public purposes.
Additionally, the Group discloses information about important customers when the amount of revenue
realised from the respective client exceeds 10% of the total amount of Group’s consolidated operating
revenue.
2.31. Fair value measurement
Some of Group's assets and liabilities are measured and presented and/or just disclosed at fair value for
financial reporting purposes. These include: (a) on a recurring (annual) basis – other long-term equity
investments, investment property, bank loans granted and received and loans to/from third parties, certain
trade and other receivables and payables, receivables and payables under finance leases, etc. (b) on a non-
recurring (periodical) basis – non-financial assets such as property, plant and equipment.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between independent market participants at the measurement date. Fair value is an exit price
and is based on the assumption that the sale transaction will take place either in the principal market for
this asset or liability or in the absence of a principal market – in the most advantageous market for the asset
or liability. Both the designated as a principal market and the most advantageous market are markets to
which the Group companies must have an access.
Fair value is measured from the perspective of using the assumptions and judgments that potential market
participants would use when pricing the respective asset or liability assuming that market participants act
in their economic best interest.
In measuring the fair value of non-financial assets the starting point is always the assumption what would
be the highest and best use of the particular asset for the market participants.
The Group applies various valuation techniques that would be relevant to the specific features of the
respective conditions and for which it has sufficient available inputs while trying to use at a maximum the
publicly observable information, and respectively, to minimize the use of unobservable information. It uses
the three acceptable approaches – the market approach, the income approach and the cost approach –
whereas the most frequently applied valuation techniques include direct and/or adjusted quoted market
prices, market comparables (analogues) and discounted cash flows, including based on capitalised rental
income.
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
77
All assets and liabilities that are measured and/or disclosed in the consolidated financial statements at fair
value, are categorised within the following fair value hierarchy, namely:
· Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or
liabilities;
· Level 2 — Valuation techniques that use inputs other than directly quoted prices but are
observable, either directly or indirectly, including where the quoted prices are subject to
certain adjustments; and
· Level 3 — Valuation techniques for which the lowest level input that is significant to the
fair value measurement is unobservable.
For assets and liabilities that are recognised at fair value in the consolidated financial statements on a
recurring basis, the Group determines at the date of the consolidated financial statement whether transfers
between levels in the fair value hierarchy are deemed to be made for a particular asset or liability depending
on the inputs available and used at that date.
Internal rules and procedures for measuring the fair value of various types of assets and liabilities have
been developed centrally in the parent company. For the purpose, a specifically designated individual,
subordinated to the Finance Director of the Group, organised the performance of the overall valuation
process and also coordinates and observes the work of the external appraisers.
The Group uses the expertise of external certified appraisers to determine the fair value of the following
assets and liabilities: other long-term equity investments Level 2 and Level 3, investment properties – Level
1, property, plant and equipment – Level 2. The choice of such appraisers is made on an annual basis using
the following criteria: applied professional standards, professional experience and knowledge, reputation
and market status. The need for rotation of external appraisers is periodically assessed – every three to five
years. The applied valuation approaches and techniques as well as the used inputs for each case of fair value
measurement are subject to mandatory discussion and coordination between the external experts –
appraisers and the specifically designated individual, engaged with measurements, and so is the acceptance
of the issued appraiser's reports – especially with regard to the significant assumptions and the final
conclusions and proposals for the fair value amount. The final fair value measurements are subject to
approval by the Finance Director and/or Chief Accountant, Executive Director and the Board of Directors
of the respective company and the Finance Director of the Group.
In accordance with Group accounting policy, at the end of each reporting period the specifically designated
individual, engaged with measurements, performs a general analysis of collected in advance information
about the movement in the values of assets and liabilities of the Group companies that are subject to
valuation or to a disclosure at fair value, the type of available data and the possible factors for the observed
changes, and proposes for approval to the Finance Director, the approach for measuring the fair value of
the respective assets and liabilities at that date. Where necessary, this is explicitly consulted with the
involved external appraisers.
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
78
The results of the assessment of the fair value measurement procedure are presented to the audit committee
and to the independent auditors of the respective companies as well as to the Finance Director and the
independent auditors of the Group.
For the purposes of fair value disclosures, the Group has classified the respective assets and liabilities on
the basis of their nature, basic characteristics and risks as well as of the fair value hierarchical level.
2.32. Critical accounting judgments on applying the Group's accounting policies. Key estimates and
assumptions of high uncertainty.
Revenue from contracts with customers
Upon revenue recognition and preparation of the consolidated annual financial statements, the management
performs various judgements, estimates and assumptions that impact the revenue, costs, assets and
liabilities accounted for and the respective disclosures thereto. As a result of the uncertainty regarding these
assumptions and estimates, significant adjustments may occur in the carrying amount of the assets and
liabilities concerned in the future, respectively the costs and revenue recorded.
The key judgements and assumptions that materially impact the amount and term for recognition of revenue
from contracts with customers, including the timing, transfer of the control of the promised finished goods,
goods and/or services, the estimation of variable consideration for returned assets and volume rebates, are
disclosed in Note 2.6.1.
Fair value measurement of equity investments
When the fair value of equity investments carried in the statement of financial positions cannot be obtained
based on quoted prices on active markets, their fair value is determined by using other valuation models
and techniques, including the discounted cash flows model. The input used in these models is obtained
from observable markets, where possible, but when this cannot be done, significant judgement is applied
to determine fair values. Such judgement involves the review, analysis and assessment of input, for instance
regarding liquidity risk, credit risk, and volatility. The changes in assumptions for these factors may impact
the amount of the fair value of financial instruments stated.
Calculation of expected credit losses for loans and guarantees granted, trade receivables, including
from related parties, and cash and cash equivalents
The measurement of expected credit losses for financial assets stated at amortised cost (loans granted, trade
receivables and contract assets, cash and cash equivalents), as well as for financial guarantees granted is an
area that requires the use of complex models and material assumptions for future economic conditions and
the credit behaviour of customers and debtors (for instance, the probability of counterparties not meeting
their obligations and the pursuant losses).
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
79
In order to apply these requirements, the Group’s management makes a number of material judgements,
such as:
(a) determining criteria to identify and measure significant credit risk increases;
(b) selection of suitable models and assumptions to measure expected credit losses;
(c) establishing groups of similar financial assets (portfolios) for the purpose of measuring expected
credit losses,
(d) establishing and assessing the correlation between historical default rates and the behaviour of
certain macro indicators to reflect the effects of forecasts for these macro indicators in the
calculation of expected credit losses. (Note 45).
Regarding trade receivables, including from related parties
The Group uses provisioning matrixes calculate expected credit losses from trade receivables and contract
assets. The provision rates are based on days past due for groups from different customer segments
(portfolios) sharing similar loss models (type of client sector).
Each provisioning matrix is initially based on detailed historical observation of default rates in the Group
companies’ receivables and the movement of receivables by delay groups. Usually, historical data is used
for at least three years as per the financial statement’s date. Moreover, the Company calibrates the matrix
so as to adjust historically ascertained dependence for credit losses with forecast information by also using
probability scenarios. If certain forecast economic conditions, measured by means of certain macro
indicators, are expected to aggravate or improve in the next year, which might result in established
correlational increase in payment delays for a certain sector (type of client), the historic default rates are
adjusted. At each reporting date, the observable historical default rates are updated and the effects of
changes in the estimates are accounted for.
The assessment of the relation between observable historical default rates, the forecast economic conditions
and expected credit losses is a significant accounting judgement. The amount of expected credit losses is
sensitive to changes in circumstances and forecast conditions. The Group’s historical credit closes and the
forecast economic conditions may deviate from actual collection rates in the future.
Regarding loans and guarantees granted:
The Group has adopted the general approach for calculating impairment based expected credit losses of the
loans granted, pursuant to IFRS 9. For this purpose, the Group applies a model of its choice. Its application
goes through several stages. First, the debtor’s credit rating is determined by means of several rating
agencies’ methodologies for the respective economic sectors and ratios, quantitative and qualitative
parameters and indicators of the entity. Second, by using statistical models including historical default
probability data (PD), transfer between ratings, macro-economic data and forecast, the relevant marginal
PD are calculated by year for each rating.
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
80
Third, based on this analysis and the determined rating, and based on a set of indicators for the instrument’s
characteristics at the date of each financial statements, the following parameters are determined: instrument
stage (Stage 1, Stage 2 or Stage 3), PD needed for the instrument’s lifetime, as well as loss given default
(LGD). The main formula used to calculate expected credit losses is: ЕCL=EADxPDxLGD, where:
ECL is the expected credit losses indicator;
ЕAD is the exposure at default indicator;
PD is the probability of default indicator;
LGD is the loss given default indicator.
Upon determining losses, all guarantees and/or collaterals and/or insurances are taken into consideration.
Thus, in the final step, by using all these parameters and following discount, the expected credit loss for
the respective period of the respective financial assets is calculated.
Stage 1 includes loans granted which are classified as “regular” according to the internal risk classification
scheme developed. These are loans granted to debtors with low default rates, regular servicing, without
considerable aggravation of key indicators (financial and non-financial), and without amounts past due.
The expected impairment loss for such loans is calculated based on default probability for the next 12
months and the Group’s expectation for loss amount upon exposure default over the next 12 months.
Stage 2 includes granted loans classified as “renegotiated”. These are loans with respect to which (based
on a set of indicators) a significant aggravation of the credit risk related to the debtor has been established
as compared to the exposure’s initial recognition. The expected impairment loss for these loans is calculated
based on the default probability for the lifetime of the loan which is considered to be credit-unimpaired,
and the Group’s expectations for loss amount upon exposure default over the lifetime.
Stage 3 includes granted loans which are classified as “underperforming”. These are loans for which
evidence exists that the asset is credit-impaired, i.e. a credit event has occurred (according to the policy on
default event eligibility). Therefore, an analysis is performed of a system of indicators used to identify the
occurrence of credit losses. Impairment losses for such loans are calculated based on probability-weighted
scenarios for the Group’s expectations for the loss amount of the non-performing credit-impaired exposure
throughout its lifetime.
A granted loan is credit-impaired when one or more events have occurred which have an adverse effect on
expected future cash flows from this loan, accordingly financial assets.
The Group applies the same model with respect to expected credit losses from guarantees granted and
certain individual receivables.
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
81
Cash
To calculate expected credit losses for cash and cash equivalents at banks, the Group applies the general
“three-stage” impairment model under IFRS 9. For this purpose, it applies a model based on the bank’s
public ratings as determined by internationally recognised rating firms like Moody’s, Fitch, S&P, BCRA
and Bloomberg. Based on this, on the one hand, PD (probability of default) indicators are set by using
public data about PD referring to the rating of the respective bank, and on the other hand, through the
change in the rating of the respective bank from one period to the next, the Company assesses the presence
of increased credit risk. Loss given default is measured by using the above formula. Upon determining
LGD, the presence of secured and/or insured amounts in the respective bank accounts is taken into
consideration.
Recognition of tax assets
Upon recognition of deferred tax assets, the Group’s management assesses the probability of future reversal
of individual temporary differences and the abilities of each Group’s company to generate sufficient profit
to compensate such reversal. With respect to subsidiaries which have continued to state losses over the last
few years, the Group’s management has identified as at the date of issuance of the consolidated financial
statement significant uncertainty about whether and to what extent these companies would be able to
generate sufficient taxable profit within the period designated under the respective local tax legislation on
tax losses carry forward. .
Inventories
Normal capacity
Group's normal production capacity is determined on the basis of management assessments (made after
relevant analyses) for optimum load of the production facilities and return on the investments made therein,
with structure of the manufactured finished products accepted as being common for the Group.
Impairment
At the end of each financial year, the Group companies review the state, useful life and usability of the
existing inventories. In case of identified inventories bearing a potential of not being realised at their current
carrying amount in the following reporting periods, the Group companies impair these inventories to net
realisable value.
Revaluation of property, plant and equipment
As at 31 December 2021, a thorough review was performed of the changes which have occurred in the fair
value of the Group companies’ non-current tangible assets, as well as of the physical and technical condition
thereof, operation means and residual useful lives. Respectively, remeasurement was carried out, since at
this date the five-year period for remeasurement adopted in accordance with the policy expires. The review
and remeasurement were performed with the professional support of independent licensed appraisers.
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
82
The management has performed detailed analysis of the licensed appraisers’ reports, incl. the sensitivity
tests. As a result, it has stated revaluation, and has recognized new revaluation reserve at the amount of
BGN 9,466 thousand, net of impairment and deferred tax (Note 15) and deferred tax and has stated current
impairment expense at the amount of BGN 9,779 thousand. In addition, a current expense for impairment
was stated at the amount of BGN 697 thousand of PPE in process.
The Group has decided to not revalue the following groups of assets: a/fully depreciated assets acquired
before 31 December 2006, as far as the potential additional depreciation costs thereon are already offset by
the increased maintenance costs; b/ assets acquired in 2021 – as far as these asset’s acquisition cost was
close to their fair value; c/ right-of-use assets for which under agreements for consideration the right of
control over the use of assets for a certain period of time is obtained, which as at 31 December 2021 is
between 2 and 4 years; and d/ assets from all groups (with the exception of properties) for which the market
analyses show that the changes in the value of these assets are not affected by price or market changes over
the period, but result from differences in assumptions regarding useful life.
The outcomes of the fair value measurement process are presented to the Group auditors.
Actuarial calculations
Calculations of certified actuaries have been used every year when determining present value of long-term
payables to personnel upon retirement on the basis of assumptions for mortality rate, staff turnover rate,
future salaries level and discount factor.
Cash pool
In 2021 a cash pool scheme was introduced at Sopharma Trading Group for the purpose of more effective
short-term management of the group’s cash flows by gathering the bank balances of domestic subsidiaries
within a single bank account. Participants’ balances are transferred on a daily basis to a main bank account
managed by the cash pool leader – the subsidiary Sopharma Trading AD.
Litigation provisions
With regard to the pending litigations against companies of the Group, the management of respective
companies have judged, jointly with their lawyers, that at this stage the probability and risks of a negative
outcome therefrom is still below 50% and therefore, no provisions for payables under litigations have been
included in the consolidated annual statement of financial position as at 31 December 2022 (31 December
2021: none).
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
83
3. REVENUE FROM CONTRACTS WITH CUSTOMERS
Group revenue from contracts with customers includes:
2022
2021
BGN'000
BGN'000
Revenue from sales of goods
1,379,123
1,328,372
Revenue from sales of finished products
283,893
274,938
Total
1,663,016
1,603,310
Contract balances are as follows:
2022
2021
BGN ‘000
BGN ‘000
Receivables under contracts with customers – third parties, net of
impairment (Note 24)
195,208
199,988
Receivables under contracts with customers – related parties, net
of impairment (Note 25)
250
660
Contract liabilities under contracts with customers – third parties
(Note 42)
2,664
978
Contract liabilities at 31 December 2022 include advance payments received for the delivery of medical
equipment, at the amount of BGN 2,652 thousand (31 December 2021: BGN 969 thousand) and for delivery
of medicinal and medical products – BGN 12 thousand (31 December 2021: BGN 9 thousand).
The change in contract liabilities for the period from 1 January to 31 December 2022 is as follows:
2022
2021
BGN'000
BGN'000
Balance at 1 January (Note 42)
978
154
Revenue stated, which was recognised as contract liabilities,
incl.:
(978)
(154)
- Advance payments received
(978)
(154)
Payments from clients (excluding those recognised as revenue
in the period)
2,664
978
Balance at 31 December
2,664
978
The reimbursement obligations as at 31 December 2022 amount to BGN 7,877 thousand (31 December
2021: BGN 2,631 thousand) and include liabilities under retrospective trade volume discounts payable
under contracts with customers which have been or will be reimbursed over the next reporting period. (Note
42).
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
84
4. OTHER OPERATING INCOME AND LOSSES
Other operating income and losses, net include:
2022
2021
BGN'000
BGN'000
Services rendered
7,535
6,474
Rentals
1,312
1,260
Gain on change in the fair value of investment property (Note
18)
1,125
134
Government grants
841
1,482
Gain on sale of property, plant and equipment
498
406
Written-off liabilities and reversed provisions
426
751
Social activities and events
239
214
Gains/(losses) on exchange differences under trade receivables
and payables and current accounts
(180)
538
Interest on current accounts
149
213
Gain on sale of materials
128
84
Gain on leases
73
230
Other
896
2,044
Total
13,042
13,830
The services rendered include:
2022
2021
BGN'000
BGN'000
Fees to National Health Insurance Institute
1,933
1,052
Development services
1,701
1,442
Advertising and marketing
1,333
2,235
Pre-distribution income
980
870
Lab analyses
377
360
Gamma irradiation
301
228
Secondary packaging
233
142
Transport services
146
53
Other
531
92
Total
7,535
6,474
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
85
5. MATERIALS AND CONSUMABLES USED
2022
2021
BGN'000
BGN'000
Basic materials
63,331
53,096
Electric energy
10,682
9,281
Heating
7,078
4,052
Spare parts, laboratory and technical materials
6,863
5,455
Fuels and lubricating materials
4,418
3,040
Advertising materials
2,050
1,863
Work clothing and PPE
1,234
1,426
Stationery
999
948
Auxiliary materials
871
616
Water
479
700
Impairment of materials
385
996
Low-value and short-term objects
331
686
Other
408
963
Total
99,129
83,122
Expenses on basic materials include:
2022
2021
BGN'000
BGN'000
Substances
28,339
23,263
Packaging materials
12,143
10,328
Liquid and solid chemicals
10,099
8,583
Sanitary-hygienic and dressing materials
3,054
2,398
Foil
2,835
1,817
Ampoules
2,347
2,194
Vials
2,144
942
Herbs
1,065
2,073
Tubes
862
613
Polypropylene, polyethylene, polystyrene
266
435
Other
177
450
Total
63,331
53,096
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
86
6. HIRED SERVICES EXPENSE
Hired services expense includes:
2022
2021
BGN'000
BGN'000
Advertising
20,007
27,410
Consulting services
11,331
10,607
Forwarding and transportation services
4,721
4,324
Subscription fees
4,517
4,256
Manufacturing
4,509
5,044
Buildings and equipment maintenance
3,781
3,164
Rentals and utilities
3,040
2,680
Bank and regulatory charges
2,280
2,592
Communications
2,144
2,078
Local taxes and charges
2,066
2,014
Security
2,010
2,022
Insurance
1,269
1,433
Commissions
1,228
1,388
Vehicle repair
842
838
Other
6,381
6,077
Total
70,126
75,927
The expenses accrued for the year for statutory audit of the separate and consolidated financial statements
amount to BGN 677 thousand (2021: BGN 627 thousand).
During the year, the statutory auditors of the financial statements of the parent company did not render
other services (2021: services related to agreed-upon procedures engagement for checking the historical
financial information included in a public offering of warrants prospectus. The consideration under this
contract is BGN 7 thousand).
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
87
7. EMPLOYEE BENEFITS EXPENSE
2022
2021
BGN'000
BGN'000
Current wages and salaries
117,776
119,856
Social security contributions
20,537
21,686
Social benefits and payments
4,918
4,192
Accruals for unused paid leaves
2,129
1,764
Accruals for long-term retirement benefits to personnel (Note 32)
1,344
946
Tantieme
737
1,308
Social security/health insurance contributions on leaves
388
309
Total
147,829
150,061
8. OTHER OPERATING EXPENSES
2022
2021
BGN'000
BGN'000
Net change in the allowance for impairment of credit losses on
receivables, incl. from related parties (Note 9)
3,399
1,891
Entertainment allowances
1,991
2,266
Scrappage and shortage of goods
1,542
2,466
Fines and penalties to suppliers Impairment of goods, finished
products and work in progress
1,465
2,037
Business trips
1,155
450
Scrappage of non-current assets
1,095
711
Unrecognised tax credit
928
420
Donations
620
800
Trainings
438
365
Scrappage of non-current assets
225
247
Scrappage of finished products and work in process
220
599
Receivables written-off
93
3,007
Other
1,203
836
Total
14,374
16,095
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
88
9. IMPAIRMENT OF ASSETS
2022
2021
BGN'000
BGN'000
Impairment of credit losses from receivables, including from
related parties
6,811
5,238
Reversed impairment of credit losses from receivables,
including from related parties
(3,412)
(3,347)
Net change in allowance for impairment of credit losses on
receivables, incl. from related parties (Note 8)
3,399
1,891
Impairment of goods, finished products and works in process
(Note 8)
1,465
2,037
Impairment of inventories (Note 5)
385
996
Total
5,249
4,924
10. IMPAIRMENT OF NON-CURRENT ASSETS OUTSIDE THE SCOPE OF IFRS 9
2022
2021
BGN'000
BGN'000
Impairment of goodwill (Note 17)
9,601
-
Impairment of property, plant and equipment (Note 16)
9,589
10,476
Impairment of investments in joint ventures (Note 19)
1,593
-
Total
20,783
10,476
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
89
11. FINANCE INCOME
Finance income includes:
2022
2021
BGN'000
BGN'000
Interest income on loans granted
2,223
2,248
Interest income on past due trade receivables
558
1,916
Net gain from exchange differences from receivable on transactions in
securities
214
266
Interest income on special agreements
149
190
Interest income on cession agreements
71
-
Income from guarantorships and guarantees
52
19
Shareholding income (dividends)
33
271
Interest income on bank deposits
4
35
Net gains from exchange differences from loans denominated in foreign
currencies and leases
-
1,489
Net gain on transactions with investments in securities
-
152
Net change in the allowance for impairment of credit losses on receivables
under business loans granted
-
46
Total
3,304
6,632
12. FINANCE COSTS
Finance costs include:
2022
2021
BGN'000
BGN'000
Interest expense on loans received
4,403
7,944
Net change in the allowance for impairment of credit losses on
receivables under business loans granted
1,856
-
Bank fees and charges on loans and guarantees
1,365
960
Interest expense on leases
1,141
1,751
Expense for other interest
391
382
Net loss on exchange differences from loans denominated in
foreign currencies and leases
161
-
Interest expense on factoring agreements
84
714
Provision for financial guarantees
16
45
Impairment of credit losses on guarantorship fees
-
1
Total
9,417
11,797
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
90
13. GAINS/LOSSES FROM ASSOCIATES AND JOINT VENTURES
2022
2021
BGN'000
BGN'000
Gains from associates, net
22,866
12,088
(Losses)/gains from joint ventures, net
(231)
4
22,635
12,092
The gains from associates include:
2022
2021
BGN'000
BGN'000
Group’s share in the current profit of associates
22,866
12,088
Total
22,866
12,088
The (losses)/gains from joint ventures, net include:
2022
2021
BGN'000
BGN'000
Group’s share in the current profit/(loss) of joint venture
(224)
4
Effect of transactions with Group companies
(7)
-
Total
(231)
4
14. INCOME TAX EXPENSE
Consolidated statement of comprehensive income
2022
2021
(profit or loss for the year)
BGN'000
BGN'000
Taxable profit of the Group companies for the year
99,808
(13,958)
Revaluation reserve included as an increase in the annual tax return
(1,299)
(439)
Taxable profit for the year
98,509
(14,397)
Current income tax expense for the year (Note 2.27)
11,399
5,732
Tax adjustment for past periods
143
106
Deferred income taxes
Origination and reversal of temporary differences
(2,799)
33
8,743
5,871
Total income tax expense carried to the consolidated statement of
comprehensive income (within profit or loss for the year)
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
91
Reconciliation of income tax expense applicable to the consolidated
accounting profit or loss
2022
2021
BGN'000
BGN'000
Accounting profit for the year
85,076
97,574
Income tax for the year (Note 2.27)
8,259
5,187
Unrecognised amounts under the tax return
Related to increases
4,266
14,247
Related to decreases
(5,837)
(16,758)
Tax loss for the current year on which no deferred tax assets are
recognised
2,157
3,391
Decreases related to tax losses for which no tax asset was recognised in
prior periods
-
(236)
Recognised deferred taxes on temporary differences from prior periods
(102)
40
Total income tax expense carried to the consolidated statement of
comprehensive income (within profit or loss for the year)
8,743
5,871
The tax effects regarding items of other comprehensive income are as follows:
2022
2021
BGN'000
BGN'000
Pre
-tax
amount
Tax
benefit/
(expense)
Amount
net of tax
Pre
-tax
amount
Tax
benefit/
(expense)
Amount
net of tax
Items that will not be reclassified to profit or loss
(Loss)/gain on revaluation of
property, plant and equipment
Net change in the fair value of other
long-term equity investments
(991)
99
(892)
10,616
(1,151)
9,465
(
1,047)
-
(
1,047)
(
355)
-
(
355)
Remeasurement of defined benefit
pension plans
1,498
-
1,498
(25)
1
(24)
(540)
99
(441)
10,236
(1,150)
9,086
Items that may be reclassified to profit or loss
Exchange differences on translating
foreign operations
(4,637)
-
(4,637)
(799)
-
(799)
Share of other comprehensive income
of associates
(790)
-
(790)
3,708
-
3,708
(5,427)
-
(5,427)
2,909
-
2,909
Other comprehensive income for
the year
(5,967)
99
(5,868)
13,145
(1,150)
11,995
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
92
15. OTHER COMPREHENSIVE INCOME
Other components of comprehensive income include:
Items of other comprehensive
income attributable to the Group
Items of other comprehensive
income attributable to non-
controlling interests
Total items of other
comprehensive income
2022
2021
2022
2021
2022
2021
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
Items that will not be
reclassified to profit or
loss
Revaluation of property,
plant and equipment
(991)
10,636
-
(20)
(991)
10,616
Net change in the fair
value of
equity
investments measured at
fair value through other
comprehensive income
(1,047)
(355)
-
-
(1,047)
(355)
Remeasurement of
defined benefit pension
plans
1,355
(23)
143
(2)
1,498
(25)
Income tax related to
other comprehensive
income
99
(1,151)
-
1
99
(1,150)
Items that may be
reclassified to profit or
loss
-
Foreign exchange
differences from
restatement of foreign
operations
(4,637)
(341)
-
(458)
(4,637)
(799)
Portion of other
comprehensive income
of associates
(790)
3,708
-
-
(790)
3,708
Other comprehensive
income for the year
(6,011)
12,474
143
(479)
(5,868)
11,995
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
93
16. PROPERTY, PLANT AND EQUIPMENT
Land
and buildings
Plant
and equipment
Other
Assets
in progress
Total
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
Book value
Balance at 1 January
305,758
334,672
269,771
265,882
51,271
54,541
4,798
10,209
631,598
665,304
Additions
54,257
14,601
3,602
2,587
5,892
6,491
17,256
12,896
81,007
36,575
Effect from revaluation
-
5,568
-
3,325
-
763
-
-
-
9,656
Effects from translation of foreign currency
(1,155)
1,626
(1,593)
809
(384)
332
(20)
26
(3,152)
2,793
Disposals
(18,824)
(18,267)
(2,121)
(6,026)
(3,965)
(7,602)
(2,230)
(107)
(27,140)
(32,002)
Written-off book value of assets upon disposal of
subsidiaries
(503)
(24,913)
(47)
(9,157)
(254)
(2,612)
-
(1,076)
(804)
(37,758)
Impairment
(9,589)
(8,330)
-
(732)
-
-
-
(697)
(9,589)
(9,759)
Transfer to property, plant and equipment
3,869
2,662
9,474
13,083
948
708
(14,291)
(16,453)
-
-
Transfer to/(from) assets held for sale
-
(1,861)
-
-
-
(1,350)
-
-
-
(3,211)
Balance at 31 December
333,813
305,758
279,086
269,771
53,508
51,271
5,513
4,798
671,920
631,598
Balance at 1 January
305,758
334,672
269,771
265,882
51,271
54,541
4,798
10,209
631,598
665,304
Accumulated depreciation and impairment
Balance at 1 January
78,719
83,149
160,348
153,283
30,138
33,000
-
-
269,205
269,432
Depreciation charge for the year
20,602
22,907
15,041
14,571
6,723
6,566
-
-
42,366
44,044
Effect from revaluation
-
(126)
-
(783)
-
(38)
-
-
-
(947)
Impairment
991
(1,283)
-
2,000
-
-
-
-
991
717
Effects from translation of foreign currency
(349)
646
(859)
457
(253)
170
-
-
(1,461)
1,273
Written-off depreciation
(9,552)
(15,036)
(1,918)
(5,730)
(3,437)
(6,763)
-
-
(14,907)
(27,529)
Depreciation written-off upon disposal of
subsidiaries
(454)
(11,017)
(34)
(3,450)
(193)
(1,517)
-
-
(681)
(15,984)
Transfer to/(from) assets held for sale
-
(521)
-
-
-
(1,280)
-
-
-
(1,801)
Balance at 31 December
89,957
78,719
172,578
160,348
32,978
30,138
-
-
295,513
269,205
Carrying amount at 31 December
243,856
227,039
106,508
109,423
20,530
21,133
5,513
4,798
376,407
362,393
Carrying amount at 1 January
227,039
251,523
109,423
112,599
21,133
21,541
4,798
10,209
362,393
395,872
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
94
As at 31 December 2022, the tangible fixed assets of the Group within “land and buildings” include: land
amounting to BGN 60,252 thousand (31 December 2021: BGN 60,904 thousand) and buildings of carrying
amount BGN 183,604 thousand (31 December 2021: BGN 166,135 thousand).
Tangible fixed assets in progress as at 31 December include:
· expenses on new buildings construction – BGN 1,495 thousand (31 December 2021: BGN 909
thousand);
· buildings reconstruction – BGN 813 thousand (31 December 2021: BGN 1,278 thousand);
· supply of equipment – BGN – 488 thousand (31 December 2021: BGN 41 thousand);
· expenses for acquisition of biological assets – none (31 December 2021: BGN 138 thousand);
· advances granted – BGN 2,567 thousand (31 December 2021: BGN 2,258 thousand);
· other – BGN 150 thousand (31 December 2021: BGN 174 thousand).
The total cash outflow from leases in 2022 amounts to BGN 16,081 thousand (2021: BGN 20,477 thousand).
As at 31 December 2022, the Group has leased fixed tangible assets with carrying amount of BGN 1,260
thousand (31 December 2021: BGN 1,294 thousand).
As at 31 December 2022 Property, plant and equipment include right-of-use assets with carrying amounts
respectively: in the group of “land and buildings” – BGN 78,470 thousand (31 December 2021: BGN 48,126
thousand), within “others” – BGN 6,546 thousand (31 December 2021: BGN 6,297 thousand). Right-of-use
assets are disclosed in detail in Note 33.
Other data
The following encumbrances have been constituted on tangible fixed assets of the Group as at
31 December 2022 in relation to received loans (Notes 29 and 36) as follows:
· Land and building with a carrying amount respectively of BGN 27,459 thousand and BGN
и 58,194 thousand (31 December 2021: respectively, BGN 26,644 thousand and BGN 72,468
thousand);
· Pledges on facilities with carrying amount of BGN 131 thousand (31 December 2021: BGN
141 thousand);
· Pledges on equipment, transportation vehicles and furniture and fixtures – BGN 30,045
thousand (31 December 2020: BGN 35,383 thousand).
Periodical revaluation to fair value
Revaluation of property, plant and equipment was performed as at 31 December 2021 with the assistance of
an independent certified appraiser for the purpose of determining the fair value of the assets in accordance
with the requirements of IFRS 13 and IAS 16.
During this revaluation, the following main approaches and valuation methods were applied to measure the
fair value of the different types of tangible assets:
· ‘market approach’ and ‘market comparables’ approach – for regulated land plots and agricultural
land for which an actual market exists, there are market comparables and transactions therewith and there is
basis for comparison – the fair value adopted is the market value determined using the comparative method;
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
95
· ‘cost approach’ through ‘amortised recoverable amount’ method and ‘method based on the cost
to create or replace the asset’ – for specialized buildings, machinery, equipment, facilities and other assets
for which there is no actual market and comparable sales of comparable assets – the fair value adopted is the
amortised recoverable amount based on the indexed historical value of the asset and based on current costs
to create or replace the asset.
· ‘income approach’ through ‘capitalized income on use/production of biological assets’ – for
permanent yellow acacia crops in fruit-bearing stage.
The effects of remeasurement as at 31 December 2021 are as follows:
· Measurement to fair value as at 31 December 2021, carried to the statement of
comprehensive income (within profit or loss for the year) at the amount of BGN 10,476
thousand, incl. 697 thousand for property, plant and equipment in process (Note 10);
· Measurement to fair value carried to the statement of comprehensive income (within other
comprehensive income) at the amount of BGN 10,616 thousand, incl. effect of measurement
to fair value in a joint venture (Note 15).
SOPHARMA GROUP
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
96
17. INTANGIBLE ASSETS
Goodwill
Software
Intellectual property
rights
Assets in progress
Total
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
Book value
Balance at 1 January
31,308
31,157
33,265
27,696
61,638
88,183
2,847
2,458
129,058
149,494
Additions
-
-
2,624
4,928
81
35
1,442
1,998
4,147
6,961
Effects from translation of foreign currency
(257)
151
(25)
249
19
40
-
3
(263)
443
Transfer
-
-
1,134
857
51
374
(1,185)
(1,231)
-
-
Written-off book value of assets upon disposal of
subsidiaries
(40)
-
-
(345)
(643)
(22,858)
-
(41)
(683)
(23,244)
Disposals
-
-
(15)
(120)
(353)
(4,136)
(347)
(340)
(715)
(4,596)
Balance at 31 December
31,011
31,308
36,983
33,265
60,793
61,638
2,757
2,847
131,544
129,058
Accumulated amortisation and impairment
Balance at 1 January
17,888
17,888
15,707
13,225
27,622
46,840
-
-
61,217
77,953
Amortisation charge for the year
-
-
3,366
2,673
6,496
6,575
-
-
9,862
9,248
Impairment
9,601
-
-
-
-
-
-
-
9,601
-
Effects from translation of foreign currency
-
-
(17)
241
20
19
-
-
3
260
Asset amortisation written-off upon disposal of
subsidiaries
-
-
-
(318)
(473)
(22,609)
-
-
(473)
(22,927)
Amortisation written-off
-
-
(4)
(114)
(335)
(3,203)
-
-
(339)
(3,317)
Balance at 31 December
27,489
17,888
19,052
15,707
33,330
27,622
-
-
79,871
61,217
Carrying amount at 31 December
3,522
13,420
17,931
17,558
27,463
34,016
2,757
2,847
51,673
67,841
Carrying amount at 1 January
13,420
13,269
17,558
14,471
34,016
41,343
2,847
2,458
67,841
71,541
SOPHARMA GROUP
CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR 2022
97
Intangible assets in progress as at 31 December include:
· expenses on acquiring licenses and permits for use of medicinal products – BGN 1,117 thousand (31
December 2021: BGN 1,438 thousand);
· expenses on acquisition of software – BGN 1,356 thousand (31 December 2021: BGN 734
thousand);
· advances granted – BGN 99 thousand (31 December 2021: BGN 409 thousand);
· other – BGN 185 thousand (31 December 2021: BGN 266 thousand).
As at 31 December 2022 there are pledges in relations to loans obtained by the Group on software with
carrying amount BGN 2,856 thousand (31 December 2021: BGN 2,578 thousand) (Notes 29 and 36).
The rights on intellectual property include products of development activities related to medicinal substances
(active ingredients) and dosage forms, acquired patents and trademarks and complex intangible assets
(licences and pharmacy chain locations).
Within the total intellectual property owned by the Group the largest share belongs to internally created
trademarks, which have not been capitalised in the consolidated statement of financial position.
These trademarks grant exceptional rights on the names of pharmaceuticals while those with biggest relative
share in the sales of the Group are: Carsil, Tempalgin, Broncholitin, Tabex, Analgin, Tribestan, Vicetin,
Sydnopharm, Antistenocardin, Spasmalgon, Softensif, Chlofadon, Chlofasolin, Sofafailin, Sopral, Vasopren,
Buscolisin, Nivalin, Maraslavin, Dimex, Allergosan, Aminalon.
The Group holds a patent for production of dosage forms containing Ranitidin.
The intangible assets acquired through business combinations mainly in Serbia, include the exclusive
contracts with counterparts, licences and a distribution network.
Goodwill impairment
The management of the Group performed the necessary procedures for the mandatory test for impairment of
the goodwill, recognised in the consolidated statement of financial position, on the acquisition of a subsidiary.
For the purpose, each individual company was accepted as a 'cash-generating unit'.
The (pre-tax) projected cash flows were based on the financial budgets, developed by the management of the
respective companies and of the Group as a whole, that covered 3 to 5-year period as well as other medium-
term and long-term plans and intents for the development and restructuring of the activities within the Group.
The recoverable amount of each cash generating unit was determined on the basis of the 'value in use'.
The key assumptions used in the calculations had been determined specifically for each goodwill bearing
company, treated as a separate cash-generating unit, and in line with the characteristic features of its
operations, the business environment and risks.
The tests and judgments of Group's management for impairment of recognised goodwill were made through
the prism of its projections and intents as to the future economic benefits, expected by the Group from its
subsidiaries including through the use of their internally created trademarks, commercial and industrial
experience and the generated thereby and expected for the future volumes of revenue, ensuring position in
the Bulgarian and international markets (development and retaining), the expectations for future sales and
restructuring of the activities, etc.
SOPHARMA GROUP
CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR 2022
98
As a result of the analyses performed the Group management, the impairment of goodwill recognised as at
31 December 2022 amounts to BGN 9,601 thousand (31 December 2021: none).
18. INVESTMENT PROPERTY
31.12.2022
31.12.2021
BGN '000
BGN '000
Balance at 1 January
9,446
11,691
Net gain from adjustment to fair value through profit or loss (Note 4)
1,125
134
Disposals
(3)
(2,379)
Balance at 31 December
10,568
9,446
Investment property represents buildings and the land they stand on, differentiated parts of buildings for
independent use, intended for long-term lease. By group they are as follows:
Group of assets
31.12.2022
31.12.2021
BGN '000
BGN '000
Warehouse premises
5,139
4,534
Production buildings
2,720
2,639
Offices
2,199
1,825
Social objects
510
448
Total
10,568
9,446
Fair value measurement
Fair value hierarchy
The fair values of the groups of investment properties are categorised as Level 2 fair values based on the
inputs to the valuation technique used. The investment property remeasurement to fair value is recurring and
is due to the application of the fair value model under IAS 40. It is performed regularly at the end of each
reporting period. Fair value is determined with the assistance of independent certified appraisers.
The table below shows reconciliation between the opening and closing balances of the fair values of
investment properties measured at Level 2:
SOPHARMA GROUP
CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR 2022
99
Warehouse
premises
Offices
Production
buildings
Social
objects
Total
Balance at 1 January 2021
4,631
4,048
2,578
434
11,691
Additions
(143)
(2,236)
-
-
(2,379)
Remeasurement to fair value through
profit or loss – unrealised
46
13
61
14
134
Balance at 31 December 2021
4,534
1,825
2,639
448
9,446
Remeasurement to fair value through
profit or loss – unrealised
608
374
81
62
1,125
Disposals
(3)
-
(3)
Balance at 31 December 2022
5,139
2,199
2,720
510
10,568
Valuation techniques and significant unobservable inputs
The table below shows a description of the valuation techniques, used in measuring the fair value of all
groups of Level 2 investment properties as well as the used significant unobservable inputs:
Groups of assets
(Level 2)
Valuation approaches and techniques
Significant unobservable inputs
Warehouse premises
Production buildings
a. Income approach
a. Weighted rate of return
Valuation technique:
Method of capitalised rental income as application
of
discounted cash flows (main valuation
technique)
b. Term to entrance into rental deals
b. Cost approach
Adjusted prices for construction of
identical properties and purchase
prices of machinery and equipment,
similar to those attached
Valuation technique:
Method of replacement costs – depreciated
recoverable amount (ancillary supportive valuation
technique)
Offices
Social objects
a. Income approach
a. Weighted rate of return
b. Term to entrance into rental deals
Valuation technique:
Method of capitalised rental income as application
of discounted cash flows
(main valuation
technique)
b. Market approach
Valuation technique:
Comparability adjustments
Market multiples method (supportive valuation
technique)
SOPHARMA GROUP
CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR 2022
100
19. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
31.12.2022
31.12.2021
BGN '000
BGN '000
Investments in associates
162,678
125,337
Investments in joint ventures
166
1,983
Total
162,844
127,320
19.1. Investments in associates
As at 31 December 2022, the Group has significant influence in
% interest
Carrying amount
Date of shares acquisition
BGN'000
Doverie Obedinen Holding AD
24.998%
99,557
21.12.2016
Sopharma Properties REIT
41.05%
63,121
8.12.2021
162,678
As at 31 December 2021, the Group has significant influence in:
% interest
Carrying amount
Date of shares acquisition
BGN'000
Doverie Obedinen Holding AD
24.998%
81,696
21.12.2016
Sopharma Properties REIT
32.77%
43,641
8.12.2021
125,337
The principal activities of Doverie Obedinen Holding AD include acquisition, management, valuation and
disposal of shares/interest in Bulgarian and foreign companies. Doverie Obedinen Holding Group includes
18 subsidiaries. They perform operations mainly in the following sectors and areas: trade in DIY goods,
insurance medical services, and textile industry.
The shares of Doverie Obedinen Holding AD are traded on the stock exchange, and the average monthly
price of transactions realised in December 2022 is BGN 7,94 per share (December 2021: BGN 10,36).
The book value per share based on accounting net assets in 2022 is BGN 2.14 (2021: BGN 2.27).
Sopharma Properties REIT is an associate whose principal activities include investment of cash raised by
issue of securities in real estate by means of purchasing right of ownership and other rights in rem over real
estate, lease and/or sale. The company has had an associate status since 8 December 2021.
SOPHARMA GROUP
CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR 2022
101
The shares of Sopharma Properties REIT are traded on the stock exchange, and the average monthly price of
transactions realised in December 2022 is BGN 9.42 per share (December 2021: BGN 6.20). The book value
per share based on accounting net assets in 2022 is BGN 3.66 (2021: BGN 3.35).
The movement of the investments in associates is presented below:
31.12.2022
31.12.2021
BGN '000
BGN '000
Balance at 1 January
125,337
62,811
Share in the current profit for the period
22,866
12,088
Acquisition of shares
16,480
17,920
Share in other comprehensive income
(790)
3,709
Dividends
(1,215)
-
Transfer from other non-current equity investments
-
25,989
Share issue
-
2,880
Share sale
-
(60)
Balance at 31 December
162,678
125,337
Group's share in the assets, liabilities, revenue and results of associates is as follows:
31.12.2022
Share in
assets
Share in
liabilities
Share in
revenue
Share in
current
profit for the
period
Share in other
comprehensive
income
Interest
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
%
Doverie Obedinen
Holding AD*
509,302
413,448
124,274
18,651
(790)
24.998
Sopharma Properties
REIT
37,935
4,956
5,884
4,215
-
41.05
31.12.
2021
Share in
assets
Share in
liabilities
Share in
revenue
Share in
current
profit for the
period
Share in other
comprehensive
income
Interest
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
%
Doverie Obedinen
Holding AD*
485,274
407,162
82,310
11,995
3,709
24.998
Sopharma Properties
REIT
29,067
4,973
219
93
-
32.77
19.2. Investments in joint ventures
As at 31 December 2022 the Group exercises joint control over Momina Krepost AD:
SOPHARMA GROUP
CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR 2022
102
% interest
Carrying
amount
Date of
acquisition of
interest
BGN'000
Momina Krepost AD
37.46
166
10.3.2021
As at 31 December 2021 the Group exercises joint control over Momina Krepost AD:
%
interest
Carrying
amount
Date of
acquisition of
interest
BGN'000
Momina Krepost AD
37.46
1,983
10.3.2021
Momina Krepost AD is a joint venture whose principal activities include development, implementation and
production of medicinal products for human and veterinary medicine. As from 10 March 2021 the company
has been a joint venture.
The movement of investments in joint ventures is presented below:
31.12.2022
31.12.2021
BGN '000
BGN '000
Balance at 1 January
1,983
-
Impairment
(1,593)
-
Share in current profit for the period
(224)
4
Transfer of investments in subsidiaries
-
1,694
Effect of remeasurement of previously held shares at fair value
-
272
Share in other comprehensive income
-
13
Balance at 31 December
166
1,983
19.3. General information about associates
The table below presents summarised financial information on Group’s associates.
Financial indicators
Doverie Obedinen
Holding AD*
Sopharma Properties
REIT
Summarised information from the statement of
financial position
31.12.2022
31.12.2022
BGN’000
BGN’000
Current assets
1,689,098
2,502
Non-current assets
1,028,694
89,910
Current liabilities
(1,117,533)
(10,436)
Non-current liabilities
(1,082,352)
(1,637)
Net assets
517,907
80,339
including
Non-controlling interest
(128,533)
-
Adjustment to fair value
(5,925)
-
383,449
80,339
SOPHARMA GROUP
CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR 2022
103
Summarised information from the statement of
comprehensive income
2022
2022
BGN’000
BGN’000
Revenue
497,137
14,334
Net profit for the year
71,775
10,267
Other comprehensive income for the year, net of tax
(3,159)
-
Adjustment to fair value
2,835
-
Total comprehensive income for the year
71,451
10,267
*Consolidated indicators
Financial indicators
Doverie Obedinen
Holding AD*
Sopharma Properties
REIT
Summarised information from the statement of
financial position
31.12.2021
31.12.2021
BGN’000
BGN’000
Current assets
1,575,921
1,998
Non-current assets
1,026,280
86,701
Current liabilities
(1,002,963)
(10,487)
Non-current liabilities
(1,170,564)
(4,687)
Net assets
428,674
73,525
including
Non-controlling interest
(107,464)
-
Adjustment to fair value
(8,760)
-
312,450
73,525
Summarised information from the statement of
comprehensive income
2021
2021
BGN’000
BGN’000
Revenue
329,238
669
Net profit for the year
44,792
285
Other comprehensive income for the year, net of tax
14,834
-
Adjustment to fair value
3,190
-
Total comprehensive income for the year
62,816
285
*Consolidated indicators
The table below presents the reconciliation between the summarised financial information on the material
interests in associates and their carrying amount at 31 December, included in these consolidated financial
statements:
SOPHARMA GROUP
CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR 2022
104
Doverie
Obedinen
Holding AD
S
opharma
Properties REIT
31.12.2022
31.12.2022
BGN’000
BGN’000
Net assets
383,449
80,339
Group’s share (%)
24.998%
41.05%
Group’s share in net assets
95,855
32,979
Goodwill and other adjustments
3,702
30,142
Carrying amount of investment
99,557
63,121
Doverie
Obedinen
Holding AD
Sopharma
Properties REIT
31.12.2021
31.12.2021
BGN’000
BGN’000
Net assets
312,450
73,525
Group’s share (%)
24.998%
32.77%
Group’s share in net assets
78,113
24,094
Goodwill and other adjustments
3,583
19,547
Carrying amount of investment
81,696
43,641
19.4. General information about joint ventures
The table below presents summarised financial information on Group’s joint ventures.
Financial indicators
Momina Krepost
AD
Momina Krepost
AD
31.12.2022
31.12.2021
Summarised information from the statement of financial
position
BGN’000
BGN’000
Current assets, including
5,345
5,881
Cash and cash equivalents
61
28
Non-current assets
10,860
11,065
Current liabilities, including
(6,707)
(8,030)
Current financial liabilities
-
(1,644)
Non-current liabilities, including
(6,753)
(5,586)
Non-current financial liabilities
-
(2,500)
Net assets
2,745
3,330
SOPHARMA GROUP
CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR 2022
105
Summarised information from the statement of
comprehensive income
2022
2021
BGN’000
BGN’000
Revenue
3,097
3,326
Depreciation and amortisation expense
(334)
(249)
Interest cost
(183)
(85)
Income tax (expense)/saving
(5)
4
Net profit/(loss) for the year
(598)
10
Other comprehensive income for the year, net of tax
13
23
Total comprehensive income for the year
(585)
33
The table below presents the reconciliation between the summarised financial information on the material
interests in joint ventures and their carrying amount at 31 December, included in these consolidated financial
statements:
Momina Krepost
AD
Momina Krepost
AD
31.12.2022
31.12.2021
BGN’000
BGN’000
Net assets
2,745
3,330
Group’s share (%)
37.46%
37.46%
Group’s share in net assets
1,028
1,247
Goodwill and other adjustments
(862)
736
Carrying amount of investment
166
1,983
19.5. Cash flows from acquisition of interest/shares in associates
31.12.2022
31.12.2021
Cash flows from acquisition of interest/shares:
BGN'000
BGN'000
Cash flows on acquisition of shares
(16,480)
(20,800)
Cash flows on sale of shares
-
213
(16,480)
(20,587)
SOPHARMA GROUP
CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR 2022
106
20. OTHER LONG-TERM EQUITY INVESTMENTS
Other long-term equity investments include shares in the following companies:
Country
31.12.2022
Interest
31.12.2021
Interest
BGN '000
%
BGN '000
%
Traded securities
Lavena AD
Bulgaria
3,788
13.22
4,919
13.23
Chimimport AD
Bulgaria
367
0.19
548
0.27
Bulgarian Stock Exchange AD
Bulgaria
202
0.34
-
-
MFG Invest AD
Bulgaria
169
0.46
-
-
Sopharma Buildings REIT
Bulgaria
111
10.25
85
10.25
Achieve Life Sciences Inc. – USA
USA
8
0.01
23
0.02
Central Cooperative Bank AD
Bulgaria
-
-
70
0.06
4,645
5,645
Non-traded securities
Balkanpharma Razgrad AD
Bulgaria
70
-
70
-
Imventure 1 KDA
Bulgaria
50
1.36
50
1.36
Total
13
-
13
-
133
133
4,778
5,778
As at 31 December 2022, within “others” are stated long-term equity investments at the amount of 13
thousand (31 December 2021: BGN 13 thousand) in Group’s non-controlling interest in a total of four
companies (31 December 2021: four companies).
The fair value per share at 31 December 2022 and 31 December 2021 by companies is as follows:
SOPHARMA GROUP
CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR 2022
107
Number of
shares
Fair value
per share
31.12.2022
Number of
shares held
Fair value
per share
31.12.2021
BGN '000
BGN '000
Equity investments
Lavena AD
1,311,183
2.89
3,788
1,312,102
3.75
4,919
Chimimport AD
463,476
0.79
367
651,045
0.84
548
Bulgarian Stock Exchange AD
22,300
9.04
202
-
-
-
MFG Invest AD
50,000
3.38
169
-
-
-
Sopharma Buildings REIT
66,627
1.67
111
66,627
1.28
85
Achieve Life Sciences Inc. – USA
1,796
4.70
8
1,796
12.64
23
Central Cooperative Bank AD
1
1.64
-
69,934
1.01
70
Total
4,645
5,645
Equity investments
Fair value
(Level 1)
(Level 2)
31.12.2022
BGN'000
BGN'000
BGN'000
Lavena AD
3,788
-
3,788
Chimimport AD
367
367
-
Bulgarian Stock Exchange AD
202
202
-
MFG Invest AD
169
169
-
Sopharma Buildings REIT
111
-
111
Achieve Life Sciences Inc. – USA
8
8
-
Total
4,645
746
3,899
Equity investments
Fair value
(Level 1)
(Level 2)
31.12.2021
BGN'000
BGN'000
BGN'000
Lavena AD
4,919
-
4,919
Chimimport AD
548
548
-
Sopharma Buildings REIT
85
-
85
Central Cooperative bank AD
70
70
-
Achieve Life Sciences Inc. - USA
23
23
-
Total
5,645
641
5,004
The table below shows the movement between the opening and closing balances of the fair values at Level
1 and Level 2:
SOPHARMA GROUP
CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR 2022
108
Level 1
Level 2
Total
BGN'000
BGN'000
BGN'000
Balance at 1 January 2021
6,518
5,028
11,546
Purchases
22,189
149
22,338
Sales
(2,004)
(35)
(2,039)
Transfer to investments in associates
(25,989)
-
(25,989)
Transfer from investment in subsidiaries
-
144
144
Unrealised gain/(loss) included in other
comprehensive income (
Note 15)
(73)
(282)
(355)
Balance at 31 December 2021
641
5,004
5,645
Purchases
674
1
675
Sales
(624)
(4)
(628)
Unrealised gain/(loss) included in other
comprehensive income (
Note 15)
55
(1,102)
(1,047)
Balance at 31 December 2022
746
3,899
4,645
21. LONG-TERM RECEIVABLES FROM RELATED PARTIES
The long-term receivables from related parties as at 31 December include:
31.12.2022
31.12.2021
BGN '000
BGN '000
Long-term loans granted to related parties
63,355
49,792
Impairment of credit losses
(157)
(97)
Long-term loans granted to related parties, net
63,198
49,695
Receivable under cession agreements
3,757
-
Deposits placed under leases
580
1
Impairment of credit losses
(64)
-
Deposits placed under leases, net
516
1
Total
67,471
49,696
The long-term loans are granted to an associate and to companies controlled by an associate.
The movement in the allowance for impairment of receivables to related parties under long-term loans
granted is as follows:
SOPHARMA GROUP
CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR 2022
109
31.12.2022
31.12.2021
BGN '000
BGN '000
Balance at 1 January
97
118
Increase in the allowance for credit losses recognised in profit or
loss for the year
60
-
Decrease in the allowance for credit losses recognised in profit or
loss for the year
-
(21)
Balance at 31 December
157
97
The terms and conditions of the long-term loans granted to related parties are as follows:
Currency
Contracted
amount
Maturity
Interest %
31.12.2022
31.12.2021
'000
BGN'000
BGN'000
BGN'000
BGN'000
including
interest
including
interest
BGN
83,400
31.12.2025
3.00%
51,147
731
49,695
95
BGN
10,000
31.12.2024
4.36%
10,040
40
-
-
BGN
2,000
31.12.2024
3.09%
2,011
11
-
-
63,198
782
49,695
95
The long-term loans granted to related parties are intended to support the financing of these companies'
activities under common strategic objectives. They are secured by pledges on securities (shares) and
promissory notes.
22. OTHER LONG-TERM RECEIVABLES
The other non-current receivables of the Group include:
31.12.2022
31.12.2021
BGN'000
BGN'000
Receivables on transactions in securities
3,668
3,454
Impairment of credit losses
(142)
(216)
Receivables from transactions in securities, net
3,526
3,238
Loans granted
1,956
6,314
Impairment of credit losses
(459)
(6)
Loans granted, net
1,497
6,308
Deposits on long-term rental agreements
642
623
Other
29
53
Total
5,694
10,222
The receivables on transactions in securities constitute receivables on a sold investment in a subsidiary
maturing on 30 September 2024, which is related to the completion of statutory actions on registration of
medical product permits.
SOPHARMA GROUP
CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR 2022
110
The movement in the allowance for impairment of loans granted is as follows:
31.12.2022
31.12.2021
BGN '000
BGN '000
Balance at 1 January
6
12
Increase in the allowance for credit losses recognised in profit or
loss for the year
459
6
Transfer of the allowance to other short-term receivables
(6)
(12)
Balance at 31 December
459
6
The movement in the allowance for impairment of receivable from an transactions in securities is as follows:
31.12.2022
31.12.2021
BGN '000
BGN '000
Balance at 1 January
216
297
Decrease in the allowance for credit losses recognised in profit or
loss for the year
(74)
(81)
Balance at 31 December
142
216
The terms and conditions of the long-term loans granted to third parties are as follows:
Currency
Contracted
amount
Maturity
Interest
%
31.12.2022
31.12.2021
'000
BGN'000
BGN'000
BGN'000
BGN'000
incl.
interest
incl.
interest
EUR
1,000
22.12.2024
0.10%
1,497
-
-
-
EUR
3,000
29.6.2023
3.05%
-
-
6,308
440
1,497
-
6,308
440
SOPHARMA GROUP
CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR 2022
111
23. INVENTORIES
Inventories include:
31.12.2022
31.12.2021
BGN'000
BGN'000
Goods
192,795
188,186
Materials
45,168
35,710
Finished products
28,097
17,608
Work in progress
10,540
8,421
Semi-finished products
1,983
6,024
Total
278,583
255,949
Materials by type are as follows:
31.12.2022
31.12.2021
BGN'000
BGN'000
Basic materials
41,570
30,118
Materials in transit
1,257
3,041
Spare parts and consumables
1,194
1,313
Supplementary materials
392
484
Technical materials
344
527
Other
411
227
Total
45,168
35,710
Basic materials by type are as follows:
31.12.2022
31.12.2021
BGN'000
BGN'000
Substances
20,729
18,431
Chemicals
8,061
4,204
Vials, tubes and ampoules
3,411
2,817
PVC and aluminium foil
3,294
1,154
Packaging materials
2,341
1,803
Herbs
1,875
401
Sanitary-hygienic and dressing materials
1,785
1,202
Other
74
106
Total
41,570
30,118
As at 31 December 2022, there were established special pledges on inventories at the amount of BGN
167,446 thousand (31 December 2021: BGN 119,303 thousand) as collateral under received by the Group
bank loans and issued bank guarantees (Notes 29, 36 and 43).
SOPHARMA GROUP
CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR 2022
112
24. TRADE RECEIVABLES
Trade receivables include:
31.12.2022
31.12.2021
BGN'000
BGN'000
Receivables from customers
201,500
204,669
Impairment of credit losses
(6,292)
(4,681)
Receivables from customers, net
195,208
199,988
Advances and other receivables from suppliers
24,511
22,954
Impairment of credit losses
(167)
-
Advances granted and other receivables from suppliers, net
24,344
22,954
Receivables under cession agreements
4,890
4,890
Total
224,442
227,832
The receivables from customers are interest-free and are mainly denominated in BGN, RSD and EUR.
Usually the Group companies negotiate with their clients payment terms within the range of 30 to 180 days
for receivables under sales unless there are determined specific conditions for maturity for particular clients
or in the cases where new markets and products are developed and new trade counterparts are attracted. The
Group has set a common credit period of 180 days for which no interest is charged to clients, with the
exception of cases of restructured receivables under a special agreement, setting a longer period and interest
rates. In case of sale of medical equipment to hospitals, the credit period could exceed 2 years, due to the
specific financial characteristics of counterparts.
The movement in the allowance for impairment of trade receivables from third parties is as follows:
31.12.2022
31.12.2021
BGN'000
BGN'000
Balance at 1 January
4,681
5,546
Increase in the allowance for credit losses recognised in profit or
loss for the year, net
3,999
1,099
Transfer from court and awarded receivables
150
-
Transfer of the allowance to court and awarded receivables
-
(484)
Effect of foreign currency restatements
(42)
318
Amounts written-off as uncollectable
(1,803)
(155)
Impairment written-off upon sale of subsidiary
(526)
(1,643)
Balance at 31 December
6,459
4,681
SOPHARMA GROUP
CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR 2022
113
The age structure of non-matured (regular) trade receivables is as follows:
31.12.2022
31.12.2021
BGN'000
BGN'000
up to 30 days
80,282
73,649
from 31 to 90 days
80,029
86,325
from 91 to 180 days
3,057
4,481
from 181 to 365 days
750
2,765
from 1 to 2 years
2,496
4,640
over 2 years
3,002
23
Gross amount of non-matured (regular) trade receivables
169,616
171,883
Expected credit losses
(325)
(1,179)
Non-matured (regular) trade receivables, net
169,291
170,704
The allowance for impairment of non-matured (regular) trade receivables is as follows:
31.12.2022
31.12.2021
BGN'000
BGN'000
up to 30 days
196
446
from 31 to 90 days
100
194
from 91 to 180 days
26
49
from 181 to 365 days
-
489
from 1 to 2 years
1
1
over 2 years
2
-
Total
325
1,179
The age structure based on invoice date of past due trade receivables is as follows:
31.12.2022
31.12.2021
BGN'000
BGN'000
from 31 to 90 days
18,101
10,761
from 91 to 180 days
6,248
9,304
from 181 to 365 days
3,623
5,612
from 1 to 2 years
2,804
6,835
over 2 years
1,108
274
Gross amount of past due trade receivables
31,884
32,786
Impairment of credit losses
(5,967)
(3,502)
Past due trade receivables, net
25,917
29,284
SOPHARMA GROUP
CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR 2022
114
The allowance for impairment of credit losses from past due trade receivables is as follows:
31.12.2022
31.12.2021
BGN'000
BGN'000
from 31 to 90 days
47
902
from 91 to 180 days
14
359
from 181 to 365 days
2,231
521
over 365 days
3,675
1,720
Total
5,967
3,502
Most past due receivables are from state hospitals. It is the Group’s policy, with respect to all past due
receivables, to accrue, invoice and collect default interest, by means of which it fully compensates for the
payment delayed and the expense/losses incurred, both for special agreements with the respective debtor –
hospital, and for litigation.
The Group applies the simplified approach under IFRS 9 to measure expected credit losses from trade
receivables, by recognising expected credit losses for the life term of all trade receivables (Note 2.16). Based
on this, the loss allowance at 31 December 2022 and 31 December 2021 has been determined as follows:
31 December 2022
Current
Up to 90
days past
due
90-365 days
past due
Over 365
days past
due
Total
Expected % of credit losses
0.19%
0.28%
23.03%
95.34%
3.12%
Trade receivables (gross
carrying amount)
BGN'000
169,616
18,136
9,946
3,802
201,500
Expected credit loss
(impairment allowance)
BGN'000
(325)
(51)
(2,291)
(3,625)
(6,292)
31 December 2021
Current
Up to 90
days past due
90-365 days
past due
Over 365
days past due
Total
Expected % of credit
losses
0.69%
8.12%
5.84%
26.01%
2.29%
Trade receivables
(gross carrying
amount)
BGN'000
171,883
11,114
15,060
6,612
204,669
Expected credit loss
(impairment
allowance)
BGN'000
(1,179)
(902)
(880)
(1,720)
(4,681)
SOPHARMA GROUP
CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR 2022
115
As at 31 December 2022, there are established special pledges on trade receivables at the amount of BGN
82,262 thousand (31 December 2021: BGN 157,029 thousand). They are established as collateral under
received by the Group bank loans and issued bank guarantees (Notes 29, 36 and 43).
The advances granted to suppliers are regular and are mainly denominated in BGN and EUR and are for the
purchase of:
31.12.2022
31.12.2021
BGN'000
BGN'000
Goods
19,214
20,584
Services
3,026
715
Raw materials and consumables
1,957
1,655
Other
314
-
Impairment of credit losses
(167)
-
Total
24,344
22,954
25. RECEIVABLES FROM RELATED PARTIES
Receivables from related parties by type are as follows:
31.12.2022
31.12.2021
BGN'000
BGN'000
Trade loans granted
13,996
13,621
Impairment of credit losses
(1,340)
-
Trade loans granted, net
12,656
13,621
Receivables under contracts with customers
307
706
Impairment of credit losses
(57)
(46)
Receivables under contracts with customers, net
250
660
Receivables under guarantorships and guarantees granted
4
9
Impairment of credit losses
(1)
(1)
Receivables under guarantorships and guarantees granted, net
3
8
Receivables under deposits granted
-
189
Advances granted
-
1
Total
12,909
14,479
SOPHARMA GROUP
CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR 2022
116
The trade loans granted to related parties are unsecured and are as follows:
Currency
Contracted
amount
Maturity
Interest
31.12.2022
31.12.2021
'000
%
BGN '000
BGN '000
BGN '000
BGN
'000
including
interest
includin
g
interest
to companies controlled by associates
BGN
10,997
31.12.2023
3.10%
8,512
463
8,263
215
BGN
4,000
31.12.2023
3.33%
4,144
144
4,011
11
to joint ventures
BGN
3,500
31.12.2022
3.50%
-
-
1,347
27
Total:
12,656
607
13,621
253
The receivables from contracts with customers are interest-free and denominated in BGN.
The Group companies usually negotiate payment terms between 90 and 180 days for receivables on sales of
finished products and up to 30 days for receivables on sales of materials (including substances – active
ingredients).
The Group applies the simplified approach under IFRS 9 to measure expected credit losses from trade
receivables, by recognising expected losses for the life term of all trade receivables (Note 2.16). The
movement in the loss allowance for impairment of receivables from related parties is as follows:
31.12.2022
31.12.2021
BGN'000
BGN'000
Balance at 1 January
47
76
Increase in the allowance for credit losses recognised in profit
or loss for the year
1,398
-
Decrease in the allowance for credit losses recognised in
profit or loss for the year
(47)
(29)
Balance at 31 December
1,398
47
The age structure of non-matured (regular) trade receivables from related parties is as follows:
31.12.2022
31.12.2021
BGN'000
BGN'000
up to 30 days
250
108
from 31 to 90 days
-
59
Total
250
167
SOPHARMA GROUP
CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR 2022
117
The age structure based on invoice date of past due but not impaired trade receivables from related parties
is as follows:
31.12.2022
31.12.2021
BGN'000
BGN'000
from 31 to 90 days
-
236
from 91 to 180 days
-
247
from 1 to 2 years
57
56
Gross amount of past due trade receivables from related parties
57
539
Impairment of credit losses
(57)
(46)
Total
-
493
26. OTHER SHORT-TERM RECEIVABLES AND ASSETS
Other receivables and prepayments of the Group include:
31.12.2022
31.12.2021
BGN'000
BGN'000
Taxes refundable
13,019
15,845
Court and awarded receivables
13,649
15,609
Impairment of court and awarded receivables
(1,002)
(1,639)
Court and awarded receivables, net
12,647
13,970
Loans granted to third parties
8,320
1,804
Impairment of credit losses on loans to third parties
(3)
-
Loans granted to third parties, net
8,317
1,804
Prepayments
2,236
2,003
Receivables under deposits placed as guarantees
147
318
Funds granted to investment intermediaries
46
200
Receivables under investment transactions
-
417
Other
290
693
Total
36,702
35,250
Taxes refundable include:
31.12.2022
31.12.2021
BGN'000
BGN'000
VAT
6,984
8,202
Excise tax
4,823
5,841
Income tax
1,188
1,797
Local taxes and charges and other taxes
24
5
Total
13,019
15,845
SOPHARMA GROUP
CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR 2022
118
Prepayments include:
31.12.2022
31.12.2021
BGN'000
BGN'000
Subscriptions
970
920
Insurance
540
627
Advertisement
227
-
Licence and patent fees
126
125
Rentals
64
53
Vouchers
19
88
Other
290
190
Total
2,236
2,003
The loans granted to third parties, amounting to BGN 8,317 thousand (31 December 2021: BGN 1,804
thousand), are granted to two entities – counterparts, with the purpose of supporting the financing of these
entities for common strategic objectives. The annual interest agreed for these loans for 2022 was between
3.05% and 4.7% (2021: between 3.05% and 4.7%).
The movement in the allowance for impairment of court and awarded receivables is as follows:
31.12.2022
31.12.2021
BGN'000
BGN'000
Balance at 1 January
1,639
454
(Decrease)/Increase in the allowance for credit losses recognised
in profit or loss for the year
(488)
884
Transfer from impairment of trade receivables
(150)
484
Effect of foreign exchange restatement
1
-
Impairment written-off
-
(172)
Written-off impairment of receivables of subsidiaries upon
disposal thereof
-
(11)
Balance at 31 December
1,002
1,639
SOPHARMA GROUP
CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR 2022
119
27. CASH AND CASH EQUIVALENTS
31.12.2022
31.12.2021
BGN'000
BGN'000
Cash at current bank accounts
12,318
30,385
Short-term deposits
4,155
5,143
Cash in hand
3,304
2,149
Short-term blocked funds
74
40
Cash and cash equivalents presented in the
consolidated statement of cash flows
19,851
37,717
Blocked cash under court cases and issued bank
guarantees
4
5
Cash and cash equivalents presented in the
consolidated statement of financial position
19,855
37,722
The available cash and cash equivalents of the Group are mainly denominated in BGN, UAH and EUR (31
December 2021: BGN, RSD, UAH).
As at 31 December 2022, short-term blocked cash at the amount of BGN 74 thousand (31 December 2021:
BGN 40 thousand) represent mainly blocked funds under performance guarantees.
28. EQUITY
Share capital
As at 31 December 2022, the registered share capital of Sopharma AD amounts to BGN 134,798 thousand
distributed in 134,797,899 shares of nominal value BGN 1 each.
Ordinary shares issued and fully paid
Shares
Share capital net of
treasury shares
nos.
BGN '000
Balance at 1 January 2021
125,786,432
101,142
Treasury shares
(4,043,533)
(16,628)
Balance at 31 December 2021
121,742,899
84,514
Treasury shares
(424,188)
(1,919)
Balance at 31 December 2022
121,318,711
82,595
The shares of Sopharma AD are ordinary, non-cash, with right of dividend and liquidation share and are
registered for trade in the Bulgarian Stock Exchange – Sofia AD and Warsaw Stock Exchange.
The treasury shares are 13,479,188 at the amount of BGN 52,203 thousand (2021: 13,055,000 at the amount
of BGN 50,284 thousand).
SOPHARMA GROUP
CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR 2022
120
Statutory reserves at the amount of BGN 68,628 thousand (31 December 2021: BGN 66,201 thousand) have
been set aside from allocation of profit of the parent company and included all amounts for the Reserve Fund.
The revaluation reserve – for property, plant and equipment, amounting to BGN 35,263 thousand
(31 December 2021: BGN 36,788 thousand), has been set aside from excess of the carrying amount of
property, plant and equipment of the Group companies over their fair values at the dates of the respective
regular revaluation. The effect of deferred taxes on the revaluation reserve is stated directly through other
components of comprehensive income for the year.
The reserve of financial assets at fair value through other comprehensive income at the amount of BGN
560 thousand – a positive figure) (31 December 2021: BGN 1,644 thousand) has been formed by the impact
of measurement at fair value of other long-term equity investments (including the consolidated share of the
change in this reserve in associates on their valuation under the equity method). Upon derecognition of these
investments, the reserve formed is not recycled through the statement of comprehensive income (through
profit or loss for the period).
The translation of foreign operations reserve, amounting to BGN 4,745 thousand – a negative value (31
December 2021: BGN 682 thousand – a positive value)
has been set aside from exchange differences arising as a result of translation of the currency in the financial
statements of foreign companies to the presentation currency of the Group.
Other equity components (warrant issue)
Pursuant to Art. 25 of the Statute of Sopharma AD dated 21 May 2021, the Board of Directors approved
parameters and made a decision for issuing initial public offering of warrants. By means of Decision No 804
– Е dated 4 November 2011, the Financial Supervision Commission approved Prospectus for issue of 44 932
633 dematerialised, freely transferrable and registered warrants, with issue value BGN 0.28, issued by
Sopharma AD pursuant to Art. 112b, Para 1 of POSA. The underlying asset of the issued warrants are future
ordinary, registered, freely transferrable voting right shares, each holding one vote in the General Meeting of
Shareholders, which will be issued by the Company conditionally, only in favour of warrant holders. Each
registered warrant entitles the holder thereof to register one share from the future issue. The warrants’ holders
may exercise their right to register the respective number of shares in future increase of the Company’s capital
within a 3-month period, at a fixed price of BGN 4.13 per share. The right to exercise arises from the date on
which the issue of 44 925 943 warrants was registered with the "Central Depository" AD – 11 January 2022.
The warrants were admitted to trade on the main BSE market of Bulgarian Stock Exchange – Sofia AD, as
from 25 January 2022.
The funds raised from the warrant issue, at the amount of BGN 12,488 thousand (31 December 2021: BGN
12,512 thousand), is carried within other equity component in the statement of financial position, net of issue
costs.
SOPHARMA GROUP
CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR 2022
121
The retained earnings reserve includes the component 'other reserves', which contains the amounts
distributed from profits of the Group companies generated in prior years, as well as the component
'accumulated profits and losses'.
Retained earnings, amounting to BGN 509,869 thousand at 31 December 2022 (31 December 2021:
BGN 444,634 thousand), include also the recognised accumulated actuarial loss at the amount of BGN 3,959
thousand (31 December 2021: BGN 2,604 thousand), stated upon remeasurement of defined benefit pension
plans in relation with the amendment to IAS 19 Employee Benefits.
Basic net earnings per share
2022
2021
Weighted average number of shares
121,495,503
125,368,350
Net profit for the year, attributable to the equity holders of the parent
(BGN’000)
71,121
89,496
Net earnings per share (BGN)
0.59
0.71
Diluted net earnings per share
31.12.2022
31.12.2021
Average weighted number of shares in circulation
Cumulative effect of warrants
121,495,503
125,368,350
Shares in circulation with warrants
3,417,186
-
Diluted net earnings per share
124,912,689
125,368,350
Net profit for the year, attributable to the equity holders of the parent
(BGN’000)
71,121
89,496
0.57
0.71
As at 31 December 2021, the effect of warrants is counter-dilutive.
SOPHARMA GROUP
CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR 2022
122
29. LONG-TERM BANK LOANS
Currency
Contracted loan
amount
Maturity
31.12.2022
31.12.2021
Non-current
portion
Current
portion
Non-current
portion
Current portion
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
Credit lines and working capital loans
RSD/EUR
8,100
31.08.2024
15,797
-
15,797
14,627
-
14,627
EUR
1,100
31.10.2024
2,151
-
2,151
2,151
-
2,151
EUR
2,300
11.03.2023
-
-
-
804
-
2,679
EUR
10,000
31.08.2023
-
-
-
6,750
-
6,750
Investment-purpose loans
EUR
5,210
31.03.2026
4,233
1,693
5,926
5,924
1,270
7,194
BGN
4,330
10.07.2028
1,860
416
2,276
2,275
414
2,689
EUR
12,000
25.06.2024
1,779
3,755
5,534
5,540
3,743
9,283
EUR
2,062
30.04.2025
1,075
797
1,872
1,881
796
2,677
BGN
16,000
30.06.2024
801
2,667
3,468
3,263
2,655
5,918
EUR
583
27.02.2024
63
378
441
444
380
824
BGN
4,250
16.04.2023
-
52
52
52
209
261
Total
27,759
9,758
37,517
42,907
9,467
52,374
The Group has gradually established a policy for annual re-negotiation of the terms and conditions of initially
agreed long-term credit lines, including maturity terms. Starting from the date of re-negotiation, the extended
credit lines are presented as short-term bank loans (Note 36).
The bank loans obtained in Euro are contracted mainly at interest rate determined on the basis of EURIBOR
plus a mark-up of up to 2.1%, for BGN-denominated loans – up to 2.8% fixed (2020: for EUR – EURIBOR
plus a mark-up of up to 2.1%, for BGN-denominated loans – up to 2.8% fixed. The loans are intended for
providing working capital.
Investment-purpose loans are intended for purchase of tangible fixed assets and expanding of activities.
The following collateral has been established in favour of the creditor banks:
· Real estate mortgages (Note 16);
· Special pledges on:
- machinery and equipment (Note 16);
- inventories (Note 23);
- trade receivables (Note 24).
SOPHARMA GROUP
CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR 2022
123
Reconciliation of liabilities arising from financial activities
The table below details changes in liabilities arising from financial activities, including both cash and non-cash changes. Liabilities arising from financing
activities are those for which cash flows were, or future cash flows will be, classified in the statement of cash flows as cash flows from financing activities.
01/01/2022
Changes in
cash flows
from
financing
activities(*)
Non-cash changes
Other
changes
31/12/2022
Disposal of
subsidiaries (Note
47)
Newly arising
liabilities in the
year
Offsetting
with
receivables
under
factoring
agreements
Recognized
revenue
from
government
grants
BGN‘000
BGN‘000
BGN‘000
BGN‘000
BGN‘000
BGN‘000
BGN‘000
BGN‘000
Bank loans (Notes 29 and 36)
269,766
(77,280)
-
3,686
-
-
(300)
195,872
Factoring agreements (Note 39)
6,370
30,836
-
-
(35,331)
-
-
1,875
Lease liabilities (Note 33)
54,486
(16,081)
(48)
56,018
-
-
(8,827)
85,548
Dividends
608
(11)
-
-
-
-
(141)
456
Government grants
7,596
34
-
-
-
(841)
113
6,902
Total
338,826
(62,502)
(48)
59,704
(35,331)
(841)
(9,155)
290,653
Treasury shares (Note 28)
(50,284)
(1,919)
-
-
-
-
-
(52,203)
Warrant rights sold
-
103
-
-
-
-
(103)
-
Reserve on warrant issue
12,512
(24)
-
-
-
-
-
12,488
Net cash flows from financing activities
301,054
(64,342)
(48)
59,704
(35,331)
(841)
(9,258)
250,938
SOPHARMA GROUP
CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR 2022
124
01/01/2021
Changes in cash
flows
from financing
activities(*)
Non-cash changes
Other
changes
31/12/2021
Disposal of
subsidiaries (Note
47)
Newly arising
liabilities in the
year
Offsetting
with
receivables
under
factoring
agreements
Recognized
revenue
from
government
grants
BGN‘000
BGN‘000
BGN‘000
BGN‘000
BGN‘000
BGN‘000
BGN‘000
BGN‘000
Bank loans (Notes 29 and 36)
321,020
(12,156)
(43,513)
-
-
-
4,415
269,766
Factoring agreements (Note 39)
36,591
193,337
-
-
(223,558)
-
-
6,370
Lease liabilities (Note 33)
67,718
(20,477)
(5,539)
13,947
-
-
(1,163)
54,486
Dividends
909
(63)
(158)
-
-
-
(80)
608
Government grants
11,354
81
(2,362)
-
-
(1,482)
5
7,596
Total
437,592
160,722
(51,572)
13,947
(223,558)
(1,482)
3,177
338,826
Treasury shares (Note 28)
(33,656)
(16,628)
-
-
-
-
-
(50,284)
Reserve on warrant issue
-
12,512
-
-
-
-
-
12,512
Net cash flows from financing activities
403,936
156,606
(51,572)
13,947
(223,558)
(1,482)
3,177
301,054
SOPHARMA GROUP
CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR 2022
125
30. DEFERRED TAX ASSETS AND LIABILITIES
The total change in deferred tax assets and liabilities of the Group for the respective financial year is as
follows:
2022
2021
BGN'000
BGN'000
Balance at 1 January
(7,422)
(5,888)
including: Deferred tax assets
1,050
2,049
including: Deferred tax liabilities
(8,472)
(7,937)
Recognised in profit or loss for the year
2,799
(33)
Recognised in other comprehensive income
99
(1,150)
Derecognised on disposal of a subsidiary
(41)
(391)
Recognised in the statement of changes in equity and the
current tax return
130
44
Reserve from restatement into the presentation currency
90
(4)
Balance at 31 December
(4,345)
(7,422)
including: Deferred tax assets
2,052
1,050
including: Deferred tax liabilities
(6,397)
(8,472)
As at 31 December 2022 the Group did not recognise deferred tax assets at the amount of BGN 2,327
thousand (31 December 2021: BGN 2,948 thousand) for aggregate temporary differences, included tax losses
to carry forward at the amount of BGN 15,115 thousand (31 December 2021: BGN 20,191 thousand).
On recognising deferred tax assets, the probability of a reversal of the individual differences and the abilities
of the Group companies to generate sufficient taxable profit in the future, have been taken into account (Note
2.27).
SOPHARMA GROUP
CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR 2022
126
The change in the balance of deferred tax assets/(liabilities) for 2022 by items of temporary differences is as follows:
Deferred tax assets (by temporary
differences)
Balance at 1 January 2022
Recognised in profit
or loss for the year
Recognised in other
comprehensive
income
Derecognised on
disposal of a
subsidiary
Recognised in the
statement of changes
in equity and the
current tax return
Reserve from
restatement
into
presentation
currency
Balance at 31
December 2022
Assets/(Liabilities)
Assets/(Liabilities)
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
Intangible assets
89
46
-
-
-
(24)
111
Inventories
1,953
(185)
-
-
-
(7)
1,761
Trade receivables
729
548
-
(65)
-
(2)
1,210
Employee benefit expenses
1,407
75
-
-
-
(18)
1,464
Other current liabilities
764
725
-
-
-
(5)
1,484
Property, plant and equipment
(8,152)
1,213
99
4
130
154
(6,552)
Intangible assets acquired in business
combinations
(3,483)
646
-
20
-
(3)
(2,820)
Leases
87
30
-
-
-
(5)
112
Investment property
(816)
(299)
-
-
-
-
(1,115)
(7,422)
2,799
99
(41)
130
90
(4,345)
The change in the balance of deferred tax assets/(liabilities) for 2021 by items of temporary differences is as follows:
Deferred tax assets (by temporary
differences)
Balance at 1 January 2021
Recognised in profit
or loss for the year
Recognised in other
comprehensive
income
Derecognised on
disposal of a
subsidiary
Recognised in the
statement of changes
in equity and the
current tax return
Reserve from
restatement
into
presentation
currency
Balance at 31
December 2021
Assets/(Liabilities)
Assets/(Liabilities)
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
Intangible assets
66
9
-
-
-
14
89
Inventories
3,058
(888)
-
(219)
-
2
1,953
Trade receivables
1,664
(673)
-
(294)
-
32
729
Employee benefit expenses
1,404
7
1
(16)
-
11
1,407
Other current liabilities
615
179
-
(25)
1
(6)
764
Property, plant and equipment
(7,942)
702
(1,151)
260
43
(64)
(8,152)
Intangible assets acquired in business
combinations
(4,124)
643
-
-
-
(2)
(3,483)
Leases
68
107
-
(97)
-
9
87
Investment property
(697)
(119)
-
-
-
-
(816)
(5,888)
(33)
(1,150)
(391)
44
(4)
(7,422)
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2022
127
31. NON-CURRENT PAYABLES TO RELATED PARTIES
Non-current payables to related parties at 31 December include:
31.12.2022
31.12.2021
BGN'000
BGN'000
Lease liabilities
17,906
2,591
Payables related to share purchase
6,588
7,619
Total
24,494
10,210
The lease payments due within 12 months are presented in the annual consolidated statement of financial position
within current payables, within “payables to related parties” (Note 38).
32. LONG-TERM EMPLOYEE BENEFIT OBLIGATIONS
The long-term employee benefits as at 31 December include:
31.12.2022
31.12.2021
BGN '000
BGN '000
Long-term retirement benefit obligations
6,306
7,300
Long-term benefit obligations for tantieme
235
322
Total
6,541
7,622
Long-term retirement benefit obligations
The long-term payables to personnel include the present value of the obligation of the Group companies,
operating mainly in Bulgaria and Ukraine, to pay indemnities to the hired personnel at the date of the
statement of financial position on coming of age for retirement. In accordance with the Labour Code in
Bulgaria each employee is entitled to indemnity on retirement at the amount of two gross monthly salaries,
and if he or she has worked for at least the last 10 years of the service period for the same employer – six
gross monthly salaries at the time of retirement (Note 2.23).
Employer's obligations to personnel on retirement for the companies abroad are as follows:
· Ukraine – the employer is obliged to pay between UAH 250 and 500 (BGN 14 and BGN 29)
depending on the length of service as well as a social pension, which the company accrues after
employees' retirement due to specific work conditions;
· Kazakhstan – according to the Kazakhstani legislation, the employer does not have a legal obligation
to personnel upon retirement;
· Serbia – the employer is obliged to pay 3 average salaries.
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
128
The movements in the present value of retirement benefit obligations to personnel are as follows:
2022
2021
BGN'000
BGN'000
Present value of the obligation at 1 January
7,300
7,007
Effect of disposal of subsidiaries
-
(82)
Current service cost for the year
1,367
856
Interest cost for the year
85
91
Net actuarial (gain) recognised for the period
(108)
(21)
Expenses from past service in relation to staff cuts
-
20
Effect of restatement
(101)
62
Payments made in the year
(739)
(658)
Remeasurement gains or losses for the year, including:
(1,498)
25
Actuarial (gains) arising from changes in financial assumptions
(1,705)
(40)
Actuarial (gains) arising from changes in demographic assumptions
(61)
(8)
Actuarial losses arising from experience adjustments
268
73
Present value of the obligation at 31 December
6,306
7,300
The amounts of long-term retirement benefits of personnel accrued in the consolidated statement of
comprehensive income are as follows:
2022
2021
BGN'000
BGN '000
Current service cost
1,367
856
Interest cost
85
91
Net actuarial (gain) recognised for the period
(108)
(21)
Expenses from past service in relation to staff cuts
-
20
Components of defined benefit plan costs recognised in
profit or loss
(Note 8)
1,344
946
Remeasurement gains or losses on the retirement benefit
obligations, including:
Actuarial (gains) arising from changes in financial
assumptions
(1,705)
(40)
Actuarial (gains) arising from changes in demographic
assumptions
(61)
(8)
Actuarial losses arising from experience adjustments
268
73
Components of defined benefit plans cost recognised in
other comprehensive income (
Note 15)
(1,498)
25
Total
(154)
971
The following actuarial assumptions were used for calculating the present value of the liabilities for the
companies in Bulgaria as at 31 December 2022:
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
129
· The discount factor is calculated by using 6% annual interest rate as basis. (2021: 0.6%).
The assumption is based on yield data for long-term government securities with 10-year maturity;
· The assumption for the future level of the salaries is based on the information provided by
the Company's management and amounts to between 0% and 5.5% annual growth compared to the
prior reporting period (2021: 0% and 5%);
· Mortality rate – in accordance with the table on the total mortality rate of the population in
Bulgaria, issued by the National Statistics Institute for the period 2019 – 2021 (2021: 2018 – 2020);
· Staff turnover rate – from 0.03% to 20% for the five age groups formed (2021: between 1%
and 16%).
This defined benefit plan exposes the Group companies to the following risks: investment risk, interest risk,
longevity risk and salary growth related risk: The management of the parent defines them as follows:
· investment risk – as far as this is unfunded plan, the Group companies should monitor and
balance currently the forthcoming payments under it with the ensuring of sufficient cash resources.
The historical experience and the liability structure show that the annual resource required is not
material compared to the commonly maintained liquid funds;
· interest risk – any increase in the yield of government securities with similar term will
increase the plan liability;
· longevity risk – the present value of the retirement benefit liability is calculated by reference
to the best estimate and updated information about the mortality of plan participants. An increase in
life expectancy would result in a possible increase in the liability. A relative stability of this indicator
has been observed in the recent years; and
· salary growth related risk – the present value of the retirement benefit liability is calculated
by reference to the best estimate of the future increase in plan participants' salaries. Such an increase
would increase the plan liability.
The sensitivity analysis of the main actuarial assumptions is based on the reasonably possible changes of
these assumptions at the end of the reporting period, assuming that all other assumptions are held constant.
The effects of the change (increase or decrease) by 1% of salary growth, discount rate and staff turnover rate
on the amount of the stated current service cost and interest cost for 2022 and respectively, on the present
value of the obligation for payment of defined retirement benefits, are assessed as follows:
Effects of changes in the basic assumptions on the amount of stated expenses for 2022:
Increase
Decrease
BGN '000
BGN '000
Change in salary growth
89
(77)
Change in discount rate
(26)
29
Change in staff turnover rate
(49)
55
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
130
Effects of changes in the basic assumptions on the amount of the stated liability as at 31 December 2022:
Increase
Decrease
BGN '000
BGN '000
Change in salary growth
430
(383)
Change in discount rate
(382)
433
Change in staff turnover rate
(273)
304
The weighted average duration of the defined benefit obligation to personnel is from 2.3 to 21.26 years.
The expected indemnity payments upon retirement under the defined benefit plan for the following five years are
as follows:
Forecast payments
Old age and
length of service
retirement
Poor health
retirement
Total
BGN '000
BGN '000
BGN '000
Payments in 2023
970
26
996
Payments in 2024
503
25
528
Payments in 2025
589
24
613
Payments in 2026
516
25
541
Payments in 2027
591
24
615
3,169
124
3,293
Long-term benefit obligations for tantieme
As at 31 December 2022, the long-term benefit obligations to personnel include also the amount of BGN 235
thousand (31 December 2021: BGN 322 thousand), representing a payable to personnel related to tantieme
payment for a period of more than 12 months – until 2025 (2021: until 2024).
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
131
33. LEASE LIABILITIES
The lease liabilities to third and related parties included in the consolidated statement of financial position
are stated net of the future interest due and are as follows:
31.12.2022
31.12.2021
Lease
liabilities
Lease
liabilities to
related parties
(Note
31)
Total
Lease
liabilities
Lease
liabilities to
related parties
(Note
31)
Total
Term
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
Up to one year
12,874
2,710
15,584
11,583
1,723
13,306
Over one year
52,058
17,906
69,964
38,589
2,591
41,180
64,932
20,616
85,548
50,172
4,314
54,486
Lease liabilities to related parties are stated within Non-current payables to related parties (Note 31) and
Payables to related parties (Note 38).
Minimum lease payments to third and related parties are due, as follows:
31.12.2022
31.12.2021
Third
parties
Related
parties
Total
Third
parties
Related
parties
Total
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
Term
Up to one year
14,036
2,779
16,815
12,492
1,813
14,305
Over one year
55,057
18,179
73,236
40,480
2,699
43,179
69,093
20,958
90,051
52,972
4,512
57,484
Future finance cost
on leases
(4,161)
(342)
(4,503)
(2,800)
(198)
(2,998)
Present value of the
lease liabilities to
third and related
parties
64,932
20,616
85,548
50,172
4,314
54,486
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
132
Right-of-use assets are included in the statement of financial position within property, plant and equipment,
as follows:
34. GOVERNMENT GRANTS
The government grants to Group companies as at 31 December include:
31.12.2022
31.12.2021
BGN'000
BGN'000
Government grants, non-current portion
6,155
6,783
Government grants, current portion (Note 42)
747
813
Total
6,902
7,596
The government grants received as at 31 December are to the following Group companies:
31.12.2022
31.12.2021
BGN'000
BGN'000
Sopharma AD
4,007
4,427
Biopharm Engineering AD
2,716
2,969
Veta Pharma AD
179
200
Total
6,902
7,596
Land
Buildings
Vehicles
Furniture and fixtures
Total
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
Book value
Balance at 1
January
9
38
69,370
77,836
11,293
13,672
282
260
80,954
91,806
Increases/additions
-
-
52,839
12,448
2,982
2,554
197
42
56,018
15,044
Decreases/disposals
(2)
(29)
(19,708)
(20,914)
(1,668)
(4,933)
(120)
(20)
(21,498)
(25,896)
Balance at 31
December
7
9
102,501
69,370
12,607
11,293
359
282
115,474
80,954
Accumulated
depreciation
1 January
Depreciation charge
for the period
3
8
21,250
18,734
5,105
6,288
173
82
26,531
25,112
Depreciation
written-off
2
5
12,925
15,203
2,695
2,938
128
102
15,750
18,248
31 December
(1)
(10)
(10,141)
(12,687)
(1,567)
(4,121)
(114)
(11)
(11,823)
(16,829)
Carrying amount at
31 December
3
6
78,467
48,120
6,374
6,188
172
109
85,016
54,423
Carrying amount at
1 January
6
30
48,120
59,102
6,188
7,384
109
178
54,423
66,694
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
133
The government grants are received by the Group companies under European Operational Programmes
mainly in relation to the acquisition of machinery and equipment (Note 16). The current portion of the grants,
amounting to BGN 747 thousand (31 December 2021: BGN 813 thousand), will be recognised as current
income over the following 12 months from the date of the annual consolidated statement of financial position
and is presented as 'other current liabilities' (Note 42).
35. OTHER NON-CURRENT LIABILITIES
Other non-current liabilities as at 31 December include:
31.12.2022
31.12.2021
BGN'000
BGN'000
Payables related to share purchase
6,594
7,626
Other
-
9
6,594
7,635
36. SHORT-TERM BANK LOANS
The short-term bank loans of the Group as at 31 December are as follows:
Currency
Contracted
amount
Maturity
31.12.2022
31.12.2021
Bank loans (overdrafts)
'000
BGN'000
BGN'000
EUR
34,200
28.02.2023
63,030
42,712
BGN
41,500
31.07.2023
32,704
38,601
EUR
5,000
25.07.2023
9,757
9,757
RSD/EUR
8,000
10.08.2023 -
29.12.2023
7,158
6,754
EUR
3,000
25.07.2023
5,859
5,858
EUR
1,500
02.09.2023
2,934
2,934
EUR
1,000
03.06.2023
1,956
1,956
UAH
128,000
20.01.2023
1,212
6,106
BGN
20,000
05.09.2023
5
19,967
BGN
9,779
05.09.2023
-
9,759
EUR
4,500
31.10.2022
-
8,760
BGN
10,000
31.07.2023
-
5,476
EUR
3,000
31.10.2022
-
7,559
124,615
166,199
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
134
Currency
Contracted
amount
Maturity
31.12.2022
31.12.2021
BGN'000
BGN'000
BGN'000
Credit lines
EUR
7,500
25.07.2023
12,025
12,025
BGN
20,000
28.02.2023
11,729
11,461
BGN
10,000
31.07.2023
9,986
10,000
BGN
24,625
31.07.2023
-
17,707
33,740
51,193
Total
158,355
217,392
The bank loans obtained in Euro are contracted mainly at interest rate determined on the basis of
EURIBOR plus a mark-up of 2.55% or fixed to 3%; for BGN-denominated loans – benchmark rate of the
respective bank plus a mark-up of up to 1.35% and fixed to 1.45%; for UAH – 22% fixed; for RSD – an
interest rate based on BELIBOR – 1.95% (2021: EURIBOR plus a mark-up of 2.75% or fixed to 2%; for
BGN-denominated loans – benchmark rate of the respective bank plus a mark-up of up to 1.5% and fixed
to 1.45%; for UAH – 10.8% fixed; for RSD – an interest rate based on BELIBOR – 1.2%). The loans are
for working capital.
The following special pledges have been established as collateral for the above loans in favour of the
creditor banks:
- machinery and equipment (Note 16);
- raw materials, consumables and finished products (Note 23);
- trade receivables (Note 24).
As at 31 December 2022, there are special pledges on receivables from related parties, subject to
consolidation and eliminated for the purpose of the consolidated financial statements, at the amount of BGN
48,531 thousand (31 December 2021: BGN 60,871 thousand), established as collateral under received by the
Group bank loans and issued bank guarantees (Notes 29, 36 and 43).
37. TRADE PAYABLES
Trade payables include:
31.12.2022
31.12.2021
BGN'000
BGN'000
Payables to suppliers
152,483
142,681
Advances from clients
23,084
799
Total
175,567
143,480
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
135
The payables to suppliers refer to:
31.12.2022
31.12.2021
BGN'000
BGN'000
Suppliers outside Bulgaria
105,634
98,554
Suppliers from Bulgaria
46,849
44,127
Total
152,483
142,681
The payables to suppliers are regular, interest-free and refer to supplies of materials, goods and services. The
average credit period, for which usually no interest is charged on trade payables, is up to 180 days.
38. PAYABLES TO RELATED PARTIES
The payables to related parties refer to:
31.12.2022
31.12.2021
BGN'000
BGN'000
Payables to joint ventures and associates
2,697
1,721
Payables to shareholding companies with significant influence
1,098
1,118
Payables to companies related through key management personnel
901
831
Payables to companies controlled by an associate
202
24
Other related parties
6
6
Total
4,904
3,700
The payables to related parties by type are as follows:
31.12.2022
31.12.2021
BGN'000
BGN'000
Short-term lease liabilities
2,710
1,723
Payables related to share purchase
1,031
1,013
Payables on supply of goods and materials
964
848
Advance payables
125
4
Supply of services
68
106
Other
6
6
Total
4,904
3,700
The payables to related parties are regular, denominated in BGN, interest-free and are not additionally
secured through a special pledge or guarantee by the Group.
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
136
39. PAYABLES UNDER FACTORING AGREEMENT
Companies of the Group have entered into factoring agreements with a financial institution (Factor), dated
19 January 2016, for transfer of existing unsalable receivables from debtors.
The Factor is entitled to recourse for all amounts paid in advance regardless of whether they are included not
in the approved credit limit. The approved credit limit as at 31 December 2022 is BGN 15,000 thousand
(2021: BGN 15,000 thousand). The transferred invoices are paid in advance up to 90% (ninety per cent) of
their amount with VAT included.
The interest for the amounts paid in advance is 1M RIR + 1.55% on an annual basis and is deducted on a
monthly basis in the end of each calendar month.
The payable under the factoring agreement amounts to BGN 1,875 thousand as at 31 December 2022 (31
December 2021: BGN 6,370 thousand).
The financing granted for 2022 amounts to BGN 30,950 thousand (31 December 2021: 193,905 thousand)
(Note 2.18).
40. PAYABLES TO PERSONNEL AND FOR SOCIAL SECURITY
Payables to personnel and for social security include:
31.12.2022
31.12.2021
BGN'000
BGN'000
Payables to personnel, including:
17,949
14,682
current wages and salaries
10,137
7,692
accruals on unused compensated leaves
4,221
3,518
tantieme
3,591
3,472
Payables for social security/health insurance, including:
3,831
3,206
current payables for social security contributions
3,174
2,634
accruals on unused compensated leaves
657
572
Total
21,780
17,888
41. TAX PAYABLES
Tax payables include:
31.12.2022
31.12.2021
BGN'000
BGN'000
VAT
6,327
6,039
Income taxes
996
36
Individual income taxes
730
540
Taxes on expenses
365
409
Withholding taxes
2
-
Other
16
15
Total
8,436
7,039
By the date of issue of these annual consolidated financial statements the following inspections and audits of
Group companies have been performed:
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
137
Company
Full-scope
tax audit
VAT inspection
Inspection
under the
social
security
legislation
Sopharma AD
31.12.2011
31.12.2011
30.09.2013
Sopharma Trading AD
31.12.2011
31.12.2017
30.04.2018
Biopharm Engineering AD
31.12.2014
31.10.2022
30.04.2009
Pharmalogistica AD
31.12.2005
31.12.2007
none
Electroncommerce EOOD
31.12.2005
30.04.2006
none
Veta Pharma AD
none
30.11.2022
30.06.2016
Sopharmacy EOOD
none
31.07.2020
none
Sopharmacy 2 EOOD
none
30.06.2019
none
Sopharmacy 3 EOOD
none
30.11.2017
none
Sopharmacy 4 EOOD
none
30.06.2022
none
Sopharmacy 5 EOOD
none
31.08.2020
none
Sopharmacy 6 EOOD
none
31.07.2019
none
Sopharmacy 7 EOOD
none
31.05.2019
none
Sopharmacy 8 EOOD
none
31.08.2020
none
Sopharmacy 9 EOOD
none
31.12.2020
none
Sopharmacy 10 EOOD
none
30.11.2022
none
Sopharmacy 11 EOOD
none
31.07.2022
none
Sopharmacy 12 EOOD
none
31.07.2022
none
Sopharmacy 13 EOOD
none
31.07.2022
none
Sopharmacy 14 EOOD
none
31.12.2018
none
Sopharmacy 15 EOOD
none
30.06.2022
none
Sopharmacy 16 EOOD
none
31.12.2019
none
Sopharmacy 17 EOOD
none
31.12.2020
none
Sopharmacy 18 EOOD
none
30.10.2021
none
Sopharmacy 19 EOOD
none
31.12.2017
none
Sopharmacy 20 EOOD
none
31.12.2013
none
Sopharmacy 21 EOOD
none
none
31.08.2017
Sopharmacy 22 EOOD
none
31.12.2012
30.04.2020
Sopharmacy 23 EOOD
none
31.05.2014
30.04.2020
Sopharmacy 24 EOOD
none
none
30.04.2020
Sopharmacy 25 EOOD
none
31.05.2019
30.04.2020
Sopharmacy 26 EOOD
none
31.08.2017
none
Sopharmacy 27 EOOD
none
31.12.2013
none
Sopharmacy 29 EOOD
none
31.05.2019
none
Sopharmacy 30 EOOD
none
31.12.2013
30.04.2020
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
138
Company
Full-scope
tax audit
VAT inspection
Inspection
under the
social
security
legislation
Sopharmacy 31 EOOD
none
31.07.2022
30.04.2020
Sopharmacy 32 EOOD
31.12.2010
31.12.2019
30.04.2020
Sopharmacy 33 EOOD
none
none
30.04.2020
Sopharmacy 34 EOOD
none
none
30.04.2020
Sopharmacy 35 EOOD
none
31.12.2013
30.04.2020
Sopharmacy 36 EOOD
none
31.01.2015
31.05.2021
Sopharmacy 37 EOOD
none
31.10.2022
30.04.2020
Sopharmacy 38 EOOD
none
31.07.2017
30.04.2020
Sopharmacy 40 EOOD
none
none
30.04.2020
Sopharmacy 41 EOOD
none
30.11.2018
31.05.2019
Sopharmacy 42 EOOD
none
none
30.11.2020
Sopharmacy 43 EOOD
31.12.2016
none
31.05.2019
Sopharmacy 44 EOOD
none
31.12.2013
30.04.2020
Sopharmacy 45 EOOD
none
none
30.04.2020
Sopharmacy 46 EOOD
none
31.05.2017
none
Sopharmacy 47 EOOD
none
31.11.2016
31.03.2020
Sopharmacy 48 EOOD
none
30.06.2021
31.08.2017
Sopharmacy 49 EOOD
31.12.2015
31.12.2014
31.05.2020
Sopharmacy 50 EOOD
none
31.12.2018
31.03.2020
Sopharmacy 51 EOOD
none
30.09.2018
30.04.2020
Sopharmacy 52 EOOD
none
none
31.12.2015
Sopharmacy 53 EOOD
none
30.06.2021
31.08.2017
Sopharmacy 54 EOOD
none
31.08.2015
31.03.2020
Sopharmacy 55 EOOD
none
31.12.2014
31.03.2020
Sopharmacy 56 EOOD
none
31.12.2015
30.04.2020
Sopharmacy 57 EOOD
none
none
31.05.2020
Sopharmacy 58 EOOD
none
31.07.2018
none
Sopharmacy 63 EAD
31.12.2012
none
31.12.2019
Sopharmacy 64 AD
31.12.2016
none
none
PAO Vitamini
31.12.2013
31.12.2013
01.04.2014
ООО Sopharma Ukraine
31.12.2014
31.12.2014
30.06.2016
Sopharma Warsaw SP. Z.O.O.
none
none
06.07.2017
Sopharma Trading d.o.o., Serbia
31.03.2017
30.06.2017
15.04.2017
Tax audit of the companies in Bulgaria is performed within a 5-year period after the end of the year when
the tax return for the respective liability has been submitted. The tax audit confirms ultimately the tax liability
of the respective company — tax liable person except in the cases explicitly stated by law. For the companies
outside Bulgaria a tax audit is performed as follows: in Ukraine – within a term of three years, in Poland and
Kazakhstan – within a term of five years, and in Serbia – within a term of ten years.
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
139
The companies Phyto Palauzovo AD, TOO Sopharma Kazakhstan, Pharmachim EOOD, Sopharmacy 59
EOOD, Sopharmacy 60 EOOD, Sopharmacy 61 EOOD, Sopharmacy 62 EOOD and Sopharmacy 39 EOOD
have not been subject to full-scope tax audits, VAT audits and inspections under the social security
regulations.
42. OTHER CURRENT LIABILITIES
Other current liabilities include:
31.12.2022
31.12.2021
Payables for recovery under contracts with customers
7,877
2,631
Contract liabilities
2,664
978
Payables related to share purchase
1,032
1,014
Government grants (Note 34)
747
813
Dividend payables
456
608
Provisions under financial guarantees
158
139
Payables under deposits placed as guarantees
144
299
Deductions from work salaries
50
93
Awarded amounts under litigations
16
34
Other
653
364
Total
13,797
6,973
43. CONTINGENT LIABILITIES AND COMMITMENTS
Issued and granted guarantees
Sopharma AD
The company provided the following collaterals in favour of banks under loans to associates:
In favour of Doverie Obedinen Holding AD
31.12.2022
31.12.2021
BGN '000
BGN '000
Buildings
7,867
8,252
Land
6,624
6,624
Total
14,491
14,876
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
140
The company is a co-debtor under received bank loans, bank guarantees issued and leases, and is a guarantor
to banks and suppliers, of the following companies:
Maturity
Currency
Contracted amount
Guaranteed amount
Original
currency
31.12.2022
BGN'000
BGN'000
Doverie Obedinen Holding AD
2027
BGN
30,000
30,000
21,500
Energoinvestment AD
2023
BGN
2000
2000
1,600
Pharmaplant AD
2023
BGN
235
460
23
Total
23,123
Sopharma Trading AD
The company concluded a contract for guarantorship under a loan of MBAL Doverie AD. As at 31 December
2021 the loan payable was repaid (31 December 2021: BGN 260 thousand).
Bank guarantees
Sopharma Trading AD
The bank guarantees issued in favour of the company amount to BGN 14,716 thousand (31 December 2021:
BGN 17,978 thousand) are to secure payments to suppliers of goods, for good performance – ensuring future
deliveries of pharmaceutical and medicinal products to hospitals under concluded contracts, customs office
guarantees and tender participation and collateral under rental of retail sites (pharmacies).
The bank guarantees have been issued by:
31.12.2022
31.12.2021
BGN '000
BGN '000
DSK AD
7,508
6,658
KBC Bank Bulgaria EAD
4,870
5,229
ING Bank N.V.
2,338
6,091
14,716
17,978
The collateral for issued bank guarantees is as follows:
- Special pledge on goods in circulation at the amount of BGN 2,934 thousand (31 December 2021:
BGN 2,934 thousand) (Note 23).
- Special pledge on receivables from clients with a carrying amount of BGN 2,347 thousand
(31 December 2021: BGN 2,347 thousand) (Note 24).
As at 31 December 2022 Sopharma Trading AD granted bank guarantees at the amount of BGN 2,152
thousand (31 December 2021: BGN 1,308 thousand) as collateral under rental agreements for retail sites
(pharmacies) parties to which are its subsidiaries.
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
141
Sopharma Trading d.o.o.
The bank guarantees issued in favour of the company amount to BGN 12,247 thousand as at 31 December
2022 (31 December 2021: BGN 26,256 thousand) and are to secure payments to suppliers of goods, for good
performance – ensuring future deliveries of pharmaceutical and medicinal products to hospitals under
concluded contracts, customs office guarantees and tender participation.
The bank guarantees have been issued by:
31.12.2022
31.12.2021
BGN '000
BGN '000
Raiffeisen AD Belgrade
8,315
21,991
OTP Bank Serbia AD Belgrade (SG Expressbank AD Belgrade)
2,225
2,221
Eurobank AD Belgrade
1,350
1,649
Banca Intesa AD Belgrade
357
395
12,247
26,256
Insurance of performance guarantees
Sopharma Trading AD
As at 31 December 2022, the company has concluded contracts for instance of performance securities for
participation in tenders for supply of medicinal products and consumables for hospitals and the Ministry of
Health, at the amount of BGN 4,813 thousand (31 December 2021: BGN 9,743 thousand).
Assets held under safe custody
Sopharma Trading AD
According to concluded pre-distribution contracts, the Company has received goods for safe custody
amounting to BGN 4,318 thousand as at 31 December 2022 (31 December 2021: BGN 2,024 thousand).
Significant irrevocable agreements and commitments
Sopharma AD
The Company received three government grants under Operational Programme "Development of the
Competitiveness of the Bulgarian Economy" 2007 – 2013 and Operational Programme “Energy Efficiency”
(Note 34 and Note 42), related to the acquisition of non-current assets, reconstruction of buildings and
technological renovation and modernisation of tablet production facilities and implementation of innovative
products in the ampoule production section and implementation of “artificial tears” innovative eye drops
(Note 16).
The Company undertook a commitment that for a period of 5 years after the completion of the respective
projects they shall not be subject to significant modifications affecting the essence and the terms and
conditions for their execution or giving rise to unjustified benefits to the company, neither modifications
resulting from a change in the nature of ownership over the assets acquired in relation to the grants.
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
142
On non-compliance with these requirements, the financing shall be returned. At the date of preparation of
the financial statements, all contractual requirements were being fulfilled.
Biopharm Engineering AD
The company has assumed a commitment under a grant contract with a term of five years after completion
of the project for acquisition of
(a) line for production of amino acid solution for parenteral nutrition, which includes components for
inflation, filling and hermitization in aseptic environment, and
(b) clean rooms construction (omega profile ceilings, separation walls, doors, blocking devices, lighting,
air conditioning, etc.). The term commenced on 27 April 2015 (the date on which the project was
ultimately approved by the financing institution) and according to the contract the project should not
suffer significant changes referring to its nature, the conditions of its performance or leading to
unjustifiable benefits for the company as well as changes resultant from modification in the nature
of ownership of infrastructural component or discontinuance of production activities. On non-
compliance with these requirements, the financing shall be returned. At the date of approval for issue
of the financial statements, all contractual requirements were fulfilled.
Veta Pharma AD
The company received three government grants under Operational Programme "Development of the
Competitiveness of the Bulgarian Economy" 2007 – 2013 (Notes 34 and 42) related to enhancing the
efficiency of companies and developing a favourable business environment (Note 16). The company has
undertaken a commitment within 3 years after completion of the respective projects to not undergo significant
changes concerning the essence and conditions of performance or resulting in undue benefits for the
company, as well as changes resulting from a change in the ownership of the assets acquired in relation to
the funding. Upon failure to meet these requirements, the funding is subject to recovery. As at the date of
preparation of the statements, all contractual conditions have been met.
44. SEGMENT REPORTING
The segment reporting in the Group is organised on the basis of two basic business segments – 'production
of pharmaceutical products' and 'distribution of pharmaceutical products (goods)'. The group 'other' includes
mainly production and distribution of non-pharmaceutical products.
The items of income, expenses and result of business segments determined in the Group include:
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
143
Manufacturing of
pharmaceutical products
Distribution of
pharmaceutical products
(goods)
Other
Elimination
Consolidated
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
External sales
245,449
216,386
1,401,687
1,365,059
15,880
21,865
-
-
1,663,016
1,603,310
Intersegment sales
128,901
115,112
81
175
625
377
(129,607)
(115,664)
-
-
Total revenue
374,350
331,498
1,401,768
1,365,234
16,505
22,242
(129,607)
(115,664)
1,663,016
1,603,310
Segment result
(margin)
119,322
82,532
198,378
212,172
3,374
5,775
(688)
14,386
320,386
314,865
Non-allocated operating income
13,042
13,830
Non-allocated operating expenses
(245,547)
(265,176)
Profit from operations
87,881
63,519
Finance (costs)/income, net
(6,113)
(5,165)
Impairment of non-current assets
(20,783)
(10,476)
Gain (loss) on disposal of subsidiaries
1,456
37,604
Losses from associates, net
22,635
12,092
Profit before income tax
85,076
97,574
Income tax expense
(8,743)
(5,871)
Net profit for the year
76,333
91,703
Attributable to owners of the parent
71,121
89,496
Non-controlling interests
5,212
2,207
The assets and liabilities of the business segments include:
Assets by business segment
Manufacturing of
pharmaceutical products
Distribution of
pharmaceutical products
(goods)
Other
Total
2022
2021
2022
2021
2022
2021
2022
2021
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
Property, plant and equipment
122,397
130,440
135,586
131,138
18,813
18,305
276,796
279,883
Inventories
85,270
67,189
191,419
188,195
1,894
565
278,583
255,949
Receivables from related parties
12,659
13,827
250
652
-
-
12,909
14,479
Trade receivables
20,178
27,983
195,554
187,853
8,710
11,996
224,442
227,832
Cash and cash equivalents
6,521
18,633
12,270
18,437
1,064
652
19,855
37,722
Segment assets
247,025
258,072
535,079
526,275
30,481
31,518
812,585
815,865
Non-allocated assets
441,393
389,113
Total assets
1,253,978
1,204,978
Liabilities by business segment
Manufacturing of
pharmaceutical products
Distribution of
pharmaceutical products
(goods)
Other
Total
2022
2021
2022
2021
2022
2021
2022
2021
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
Payables to personnel and for social
security
2,424
1,799
11,609
9,159
497
407
14,530
11,365
Trade payables
40,615
13,418
134,712
129,929
240
133
175,567
143,480
Payables to related parties
1,412
1,540
3,547
2,160
(55)
-
4,904
3,700
Bank loans
15,087
61,581
180,785
208,185
-
-
195,872
269,766
Segment liabilities
59,538
78,338
330,653
349,433
682
540
390,873
428,311
Non-allocated liabilities
146,471
117,799
Total liabilities
537,344
546,110
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
144
The capital expenditures, depreciation/amortisation and non-monetary expenses other than
depreciation/amortisation by business segment include:
Manufacturing of
pharmaceutical
products
Distribution of
pharmaceutical
products (goods)
Other
Total
2022
2021
2022
2021
2022
2021
2022
2021
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
Capital expenditures
10,519
5,758
50,157
33,947
671
294
61,347
39,998
Depreciation and amortisation
10,957
11,552
31,132
32,898
1,477
1,330
43,566
45,780
Non-monetary expenses, other than
depreciation and amortisation
1,715
8,122
17,579
6,791
267
985
19,561
15,898
The distribution of Group revenue by type and by geographic area is as follows:
Bulgaria
Europe
Other countries
Total
2022
2021
2022
2021
2022
2021
2022
2021
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
Sales of finished products
104,175
106,499
151,366
146,510
28,352
21,929
283,893
274,938
Sales of goods
1,097,601
978,018
280,760
350,345
762
9
1,379,123
1,328,372
1,201,776
1,084,517
432,126
496,855
29,114
21,938
1,663,016
1,603,310
The carrying amount as at 31 December of Group's non-current assets other than financial instruments,
distributed by geographic area, is as follows:
Bulgaria
Europe
Other countries
Total
2022
2021
2022
2021
2022
2021
2022
2021
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
Property, plant and equipment
356,941
330,507
18,551
31,270
915
616
376,407
362,393
Intangible assets
41,199
45,572
6,943
8,815
9
34
48,151
54,421
Goodwill
5,876
2,159
(2,354)
11,261
-
-
3,522
13,420
Investment property
10,568
9,446
-
-
-
-
10,568
9,446
414,584
387,684
23,140
51,346
924
650
438,648
439,680
45. FINANCIAL RISK MANAGEMENT
In the ordinary course of business, the Group can be exposed to a variety of financial risks the most important
of which are market risk (including currency risk, risk of a change in the fair value and price risk), credit risk,
liquidity risk and risk of interest-bearing cash flows.
The general risk management is focused on the difficulty to forecast the financial markets and to achieve
minimizing the potential negative effects that might affect the financial results and position of the Group.
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
145
The financial risks are currently identified, measured and monitored through various control mechanisms in
order to establish adequate prices for the finished products and services of the Group companies and the
borrowed thereby capital, as well as to assess adequately the market circumstance of its investments and the
forms for maintenance of free liquid funds through preventing undue risk concentrations.
Risk management is currently performed by the management of the parent company and respectively, the
managing bodies of the subsidiaries, in line with the policy defined by the Board of Directors of the parent.
The Board of Directors has approved the basic principles of general financial risk management, on the basis
of which specific procedures have been established for management of the separate specific types of risk
such as currency, price, interest, credit and liquidity risk and the risk of use of non-derivative instruments.
The structure of financial assets and liabilities at 31 December 2022 is as follows:
Categories of financial instruments:
31.12.2022
31.12.2021
BGN '000
BGN '000
Financial assets
Financial assets at amortised cost, including:
326,563
333,111
Receivables and loans granted (Notes 21, 22, 24, 25 and 26)
306,712
295,394
Cash and cash equivalents (Note 27)
19,851
37,717
Financial assets at fair value through other comprehensive income,
including:
4,778
5,778
Equity investments (Note 20)
4,778
5,778
Total financial assets
331,341
338,889
Financial liabilities
Financial assets at amortised cost, including:
456,168
494,716
Short-term and long-term bank loans (Notes 29 and 36)
195,872
269,766
Other loans and payables (Notes 35, 37, 38 and 42)
174,748
170,464
Finance lease liabilities (Note 33)
85,548
54,486
Total financial liabilities
456,168
494,716
The net effect of accrued (reversed) impairment related to financial assets and financial guarantees
recognised in the statement of comprehensive income (within profit or loss) is as follows:
Impairment losses, net of reversals, related to financial assets and financial guarantees recognised in the
statement of comprehensive income, are as follows:
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
146
31.12.2022
31.12.2021
BGN '000
BGN '000
Trade and other receivables, including from related parties
3,887
1,008
Loans at amortised cost
1,856
(46)
Court and awarded receivables
(488)
884
Total
5,255
1,846
Credit risk
Credit risk is the risk that any of the Group's clients will fail to discharge in full and within the normally
envisaged terms the amounts due under trade receivables.
The Group’s credit risks arises both from its business operations, through trade receivables, and from its
financing activities, including the granting of loans to related and third parties, commitments undertaken
under loans and guarantees and bank deposits. The Group has developed policies, procedures and rules for
control and monitoring of credit risk behaviour.
Trade receivables
In its business practice, the Group has applied various schemes of distribution until arriving at its current
effective approach, which considers the market environment, various forms of payments, as well as the
inclusion of trade rebates. The Group works with counterparts with whom it has a history on its main markets,
and partners with over 70 Bulgarian and foreign licensed distributors of medicinal products.
Work with the NHSSO and with distributors working with state hospitals also require the adoption of a
deferred payment policy in Bulgaria. In this sense, even though credit risk concentration exists, this risk is
controlled by means of selection, ongoing monitoring of the liquidity and financial stability of sales partners,
as well as direct communication therewith and seeking quick measures upon indications for problems.
The Group’s credit policy envisages assessing each new customer’s creditworthiness before proposing standard
delivery and payment conditions.
The Group uses provisioning matrixes to calculate expected credit losses from trade receivables and contract
assets. The latter are grouped into groups (portfolios) from various client segments sharing similar
characteristics, incl. for credit risk.
The percentages applied in the provisioning matrix are based on days past due for each portfolio.
Each matrix percentage is initially determined based on historical data observed by the Group companies for
a period of three years. The method is based on analysis of the history and assessing behaviour for each
invoice within a group issued over at least the last three years, including pays past due, going period by period
among the different past due ranges, payments and outstanding receivables, etc. Based on that, the loss
percentage is determined as bad debt for the given group of factors versus past due invoices by days. The
period of occurrence on an economic loss from uncollectability is determined by customer portfolios:
wholesalers, pharmacy market, hospital market, and by geographic regions. This period is examined and
historically assessed. The Group does not have a practice to request collateral of trade receivables, and does
not insure them.
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
147
Second, the Group makes the impairment provisioning matrixes for each portfolio precise by adjusting
certain percentages based on historical data for the behaviour of payments under the invoices issued and
historical losses from bad debt, by including scenarios and forecast information about certain macro factors.
Historical percentages are adjusted to reflect the effect of the future behaviour of macroeconomic factors for
which a statistical dependence has been id entified and which are considered to impact the customers’ ability
to service and settle their payables.
Court and awarded receivables
Upon determining the collectability of court and awarded receivables, the management analyses on an
individual basis the overall exposure from each counterpart (counterpart type) in order to determine the actual
likelihood of their collection. Upon establishing it is highly unlikely to collect a given receivable (group of
receivables), it is assessed what portion thereof is secured (pledge, mortgage, guarantors, and bank security)
to thus guarantee collectability (through potential future realisation of the collateral or payment by the
guarantor). The receivables or portion thereof for which the management determines are highly unlikely to
be collected, are 100% impaired.
Loans and financial guarantees granted
The assessment of each credit exposure for the management’s purposes is a process that requires the use of
models to reflect impact on exposure by changes in market conditions and the debtor’s operation, estimated
cash flows and time left to maturity. The assessment of the credit risk of loans granted leads to further
judgement on the possibility of default, on the loss coefficients related to this judgement and to correlation
between counterparts. The Company measures credit risk by using probability of default (PD), exposure at
default (EAD) and loss given default (LGD).
To determine the credit risk of loans and financial guarantees granted, and of certain individual trade
receivables, the Group’s management has developed a methodology that includes two main components:
determining the debtor’s credit rating, and statistical models for calculating marginal PD by year for each
rating. With respect to the rating, it uses internal credit ratings of its counterparts based on the global
methodologies of world’s leading rating agencies. The rating reflects financial indebtedness, liquidity,
profitability ratios, etc. quantitative (for instance, sales volumes) and qualitative (for instance, financial
policy, diversifications, etc.) criteria depending on the respective methodology and industry.
By means of statistical models based on historical global data about probability of default (PD) and transitions
between different ratings, as well as forecasts for key macroeconomic indicators (GDP growth, inflation,
etc.), the necessary marginal PD are determined by year for each rating.
Based on the specific rating established and the analysis of the debtor’s characteristics and the loan/guarantee,
incl. changes which have occurred therein compared to the prior period, the instrument’s stage is determined
(Stage 1, Stage 2, and Stage 3). The Group considers that a certain financial instrument has undergone a
significant increase in credit risk when one or more of the following quantitative or qualitative criteria are
met:
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
148
Quantitative criteria:
· An increase in the probability of default (PD) for the financial instrument’s lifetime at the reporting
date versus the possibility of default for the instrument’s lifetime at the date on which the asset was
initially recognised
· Payment is past due for over 30 days, but less than 90 days, past due
· An actual or expected significant adverse change in the debtor’s operating result, above the
permissible change range, measured based on the debtor’s main financial and operating indicators
· A significant change in the value of the collateral, which is expected to increase the loss and risk of
default.
Qualitative criteria:
· Significant adverse changes in the business, financial and/or economic conditions of the debtor;
· Actual or expected adverse changes in the debt or’s operating results;
· A significant change in the collateral quality, which is expected to increase the risk of default;
· Early signs of cash flow/liquidity issues, such as delays in servicing trade creditors/bank loans.
The criteria used to identify a substantial increase in credit risk are monitored, and their viability is reviewed
on a periodic basis by the Group’s Finance Director.
The Company designates a financial instrument as non-performing and the credit loss as incurred, when it
meets one or more of the following criteria:
Quantitative criteria
· The debtor’s contract payments are over 90 days past due
· Significant adverse changes have occurred or are expected in the debtor’s business, financial
conditions and economic environment, manifest in a serious decrease in the debtor’s main financial
and operational indicators;
· The debtor states a number of losses and negative net assets;
· Significant adverse changes have occurred or are expected in value of the loan’s key collateral,
incl. loss of collateral.
Qualitative criteria
The debtor is unable to pay due to significant financial difficulties. This includes cases when:
· The debtor is in default of the financial contract, for instance with respect to interest payments,
collaterals and/or another significant contract, including for financing;
· Adverse changes in the debtor’s business, market, environment, and regulations;
· Concessions and reliefs have been made in relation to the debtor’s financial difficulties;
· There is probability that the debtor declares insolvency.
The default definition is subsequently applied to modelling the probability of default (PD), the exposure at
default (EAD), and the loss given default (LGD) determined through calculation of the Group’s expected
credit losses.
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
149
Expected credit losses have been determined by discounting the product of: the probability of default (PD),
exposure at default (EAD), and the loss given default (LGD), determined as follows:
· PD is the probability of the debtor not meeting their financial obligations, either over the next 12
months, or over the financial asset’s lifetime (lifetime PD) determined based on public PD data f rom
generally accepted sources and statistical models of the impact of forecast macroeconomic factors.
Moreover, the Company’s management has conducted historical analysis and has identified the main
economic variables impacting credit risk and expected credit losses per loan (portfolio) type.
· EAD is the amount payable to the Company by the debtor at default, over the next 12 months or over
the remaining period of the loan, determined in accordance with the specific instrument’s
characteristics (amount due, repayment plans, interest, term, etc.).
· LGD is the Company’s expectation for the amount of loss from a non-performing exposure. LGD
varies depending on the type of counterpart, the type and superiority of the claim and the presence
of collateral or other credit support. LGD is measured as a loss percentage for an open exposure at
default.
· The discount rate used to calculate expected credit losses (ECL) is the instrument’s initial effective
interest or in the case of financial guarantees and other instruments without an applicable interest
rate – the risk-free rate for the respective period, currency, etc.
The Group applies a number of policies and practices to lower the credit risk from loans granted. Most
frequently, it accepts collateral. The Company assigns valuation to external experts – independent valuators,
of the collateral received, as part of the process of granting loans. This valuation is reviewed on a periodic
basis, but at least once per year.
The table below presents the quality of the Group’s financial assets, contract assets and financial guarantee
contracts, as well as the maximum exposure to credit risk according to the credit rating adopted:
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
150
31.12.
2022
Note
Internal credit risk
categorisation
Expected
credit losses
(IFRS 9)
Gross
carrying
amount
Impairment
loss
(allowance)
Carrying
amount
BGN '000
BGN '000
BGN '000
Long
-
term loans to
related parties
21
Initially negotiated
loans –
Stage 1
Lifetime
(credit-
impaired)
63,355
(157)
63,198
Short
-
term loans to
related parties
25
Initially negotiated
loans –
Stage 1
Lifetime
(credit-
impaired)
4,144
-
4,144
Short-term loans to
related parties
25
Renegotiated Stage
2
Lifetime
(credit-
impaired)
9,852
(1,340)
8,512
Long
-
term loans to
third parties
22
Initially negotiated
loans –
Stage 1
Lifetime
(credit-
impaired)
1,956
(459)
1,497
Short-term loans to
third parties
26
Renegotiated Stage
2
Lifetime
(credit-
impaired)
8,320
(3)
8,317
Trade and other
receivables from
related parties
21, 25
N/A
For a 12-
month period
4,648
(122)
4,526
Trade and other
receivables from third
parties
24, 26
N/A
For a 12-
month period
223,954
(7,436)
216,518
(incl. court
receivables)
26
13,649
(1,002)
12,647
Financial assets
316,229
(9,517)
306,712
31.12.
2021
Note
Internal credit risk
categorisation
Expected
credit losses
(IFRS 9)
Gross
carrying
amount
Impairment
loss
(allowance)
Carrying
amount
BGN '000
BGN '000
BGN '000
Long
-
term loans to
related parties
21
Initially negotiated
loans –
Stage 1
Lifetime
(credit-
impaired)
49,792
(97)
49,695
Short
-
term loans to
related parties
25
Renegotiated Stage
2
Lifetime
(credit-
impaired)
13,621
-
13,621
Long
-
term loans to
third parties
22
Renegotiated Stage
2
Lifetime
(credit-
impaired)
6,314
(6)
6,308
Short
-
term loans to
third parties
26
Renegotiated Stage
2
Lifetime
(credit-
impaired)
1,714
-
1,714
Short
-
term loans to
third parties
26
Underperforming
Stage 3
Lifetime
(credit-
impaired)
90
-
90
Trade and other
receivables from
related parties
21, 25
N/A
For a 12-
month period
905
(47)
858
Trade and other
receivables from third
parties
24, 26
N/A
For a 12-
month period
229,644
(6,536)
223,108
(incl. court
receivables)
26
15,609
(1,639)
13,970
Financial assets
302,080
(6,686)
295,394
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
151
The table below provides information about the Group’s exposure to credit risk and the impairment of credit
losses for loans granted, trade receivables and other receivables as at 31 December 2022:
Category
Correlation to an external
credit rating
Average
percentage
of expected
impairment
loss
Gross
carrying
amount
Impairment
loss
(allowance)
BGN '000
BGN '000
Initially negotiated loans (Stage 1)
B3
1.20%
51,304
(616)
Initially negotiated loans (Stage 1)
Ba3
0.00%
10,040
-
Renegotiated loans (Stage 2)
Caa1
0.00%
8,771
-
Renegotiated loans (Stage 2)
B3
0.04%
8,061
(3)
Initially negotiated loans (Stage 1)
Bа1
0.00%
4,144
-
Initially negotiated loans (Stage 1)
B1
0.00%
3,967
-
Renegotiated loans (Stage 2)
B1
100.00%
1,340
(1,340)
Trade and other receivables (Stage 1)
N/A
3.05%
214,953
(6,556)
Underperforming trade receivables (court and
awarded receivables)
N/A
7.34%
13,649
(1,002)
316,229
(9,517)
The Group has concentration of receivables from related parties (trade receivables and loans), as follows:
31.12.2022
31.12.2021
BGN'000
BGN'000
Client 1
63.63%
77.44%
Client 2
12.49%
12.89%
Client 3
10.59%
6.25%
The Group manages concentration of receivables from related parties on a current basis by applying credit limits
and additional collaterals in the form of pledge on securities and other assets and applying promissory notes.
The concentration of the first five clients in the Group’s trade receivables is as follows:
31.12.2022
% credit exposure
versus the total
amount of trade
receivables
31.12.2021
% credit exposure
versus the total
amount of trade
receivables
BGN'000
%
BGN'000
%
Client 1
17,124
9%
12,809
6%
Client 2
7,704
4%
11,624
6%
Client 3
5,303
3%
6,659
3%
Client 4
4,499
2%
5,881
3%
Client 5
4,126
2%
4,063
2%
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
152
Cash
The Group’s cash and payment operations are concentrated in different first-class banks. To calculate expected
credit losses for cash and cash equivalents, it applies a model based on the bank’s public ratings as determined
by internationally recognised rating firms like Moody’s, Fitch, S&P, BCRA and Bloomberg and the reference
public data about PD referring to the rating of the respective bank. The management monitors changes in a
bank’s rating on an ongoing basis in order to assess the presence of increased credit risk, ensure the current
management of incoming and outgoing cash flows and the allocation of cash in the bank accounts and banks.
Foreign currency risk
The Group companies perform their operations with active exchange with foreign suppliers and clients and
therefore, they are exposed to currency risk.
The Group through the companies in Belarus, Ukraine and Serbia carries out business in these countries and,
therefore, has significant exposure in BYN, UAH and RSD. The currency risk is related with the adverse
floating of the exchange rate of these currencies against BGN in future business transactions as to the
recognised assets and liabilities denominated in foreign currency and as to the net investments in foreign
companies. The rest of the companies abroad perform sales mainly to the local markets, which leads to
currency risk to their currencies as well – Polish Zloty (PLN), US Dollar (USD), British Pound (GBP) and
Kazakhstani Tenge (KZT).
Most operations of the Group companies are usually denominated in BGN and the fact that the BGN is fixed
to the EUR reduces the potential currency volatility for the companies of the Group.
To control foreign currency risk, there is an implemented system in the whole Group for planning import
supplies, sales in foreign currency as well as procedures for daily monitoring of US dollar exchange rates
and control on pending payments. The exposures of almost all subsidiaries in Bulgaria to foreign currency
risk are insignificant because almost all sales are performed to the local market in Bulgarian Levs (BGN).
The import of goods is performed mainly in Euro (EUR). The loans denominated in a foreign currency have
been granted mainly in EUR.
The assets and liabilities of the Group denominated in BGN and presented by a foreign currency are as
follows:
31 December 2022
in BGN
in EUR
in RSD
in USD
in UAH
in other
currency
Total
BGN
'000
BGN
'000
BGN
'000
BGN
'000
BGN
'000
BGN
'000
BGN
'000
Equity investments
4,770
-
-
8
-
-
4,778
Financial assets at
amortised cost, including
222,660
23,821
60,126
6,790
7,258
5,908
326,563
Loans and receivables,
212,483
21,084
59,343
6,695
3,252
3,855
306,712
Cash and cash
equivalents
10,177
2,737
783
95
4,006
2,053
19,851
Total financial assets
227,430
23,821
60,126
6,798
7,258
5,908
331,341
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
153
31 December
2022
in BGN
in EUR
in RSD
in USD
in UAH
in other
currency
Total
BGN
'000
BGN
'000
BGN
'000
BGN
'000
BGN
'000
BGN
'000
BGN
'000
Short-term and
long
-
term bank
loans
123,272
67,555
3,833
-
1,212
-
195,872
Other loans and
liabilities
65,480
60,357
45,299
2,697
435
480
174,748
Lease liabilities
65,695
18,997
-
417
141
298
85,548
Total financial
liabilities
254,447
146,909
49,132
3,114
1,788
778
456,168
31 December 2021
in BGN
in EUR
in RSD
in USD
in UAH
in other
currency
Total
BGN
'000
BGN
'000
BGN
'000
BGN
'000
BGN
'000
BGN
'000
BGN
'000
Equity investments
5,755
-
-
23
-
-
5,778
Financial assets at amortised cost,
including
221,866
31,236
57,173
7,445
10,372
5,019
333,111
Loans and receivables,
202,525
29,651
48,550
7,103
3,372
4,193
295,394
Cash and cash equivalents
19,341
1,585
8,623
342
7,000
826
37,717
Total financial assets
227,621
31,236
57,173
7,468
10,372
5,019
338,889
31 December 2021
in BGN
in EUR
in RSD
in USD
in UAH
in other
currency
Total
BGN
'000
BGN
'000
BGN
'000
BGN
'000
BGN
'000
BGN
'000
BGN
'000
Short-term and long-term bank
loans
125,949
132,073
5,638
-
6,106
-
269,766
Other loans and liabilities
70,321
57,365
37,012
3,600
1,476
690
170,464
Lease liabilities
49,532
3,641
-
1,091
-
222
54,486
Total financial liabilities
245,802
193,079
42,650
4,691
7,582
912
494,716
Foreign currency sensitivity analysis
The foreign currency sensitivity of the Group exposures is mainly related with the Ukrainian Hryvnia (UAH),
and the Serbian Dinar (RSD). With regard to the other currencies in which the Group operates or in which
other companies of the Group operate (Polish Zloty, US Dollar and Kazakhstani Tenge) the foreign currency
risk of the Group is limited, because their exposures in these currencies are relatively small and are more
easily regulated by the managing bodies of the respective subsidiaries.
The effect of foreign currency sensitivity to 10% increase/decrease in current exchange rates of BGN to the
Serbian Dinar (RSD), Belarusian Ruble (BYN), Ukrainian Hryvnia (UAH), US Dollar (USD) and in general
to the other foreign currency exposures, based on the structure of foreign currency assets and liabilities at 31
December and on the assumption that the influence of all other variables is ignored, has been measured and
presented as impact on the post-tax consolidated financial result and on the equity of the Group.
The impact in 2022 of a 10% increase/decrease in the exchange rates of RSD, UAH, USD against BGN on
the Group’s profit (following taxation) is:
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
154
31.12.2022
31.12.2021
RSD
USD
UAH
RSD
USD
UAH
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
Financial result
934
332
449
1,234
250
229
Retained earnings
934
332
449
1,234
250
229
Other currencies include mainly: BGN 3,284 thousand in PLN (31 December 2021: BGN 2,046 thousand in
PLN and BGN 1,099 thousand in MDL net financial assets).
In case of 10% increase/decrease in the exchange rates of PLN (for 2021: MDL and RUB) against BGN the
final effect on the Group’s profit (following taxation) is:
31.12.2022
31.12.2021
PLN
MDL
PLN
MDL
BGN '000
BGN '000
BGN '000
BGN '000
Financial result
266
-
166
97
Retained earnings
266
-
166
97
The effect on equity is of the same amount and in a direction of a decrease and reflects in the component
'retained earnings'.
The Group analyses currency exposure and takes timely measures to mitigate effects thereof on the Group’s
results.
Price risk
The Group companies are exposed to price risk of inventories based on three main factors:
(a) a possible increase of purchase prices of raw materials and consumables, since a significant portion of
the raw materials used are imported and they represent a significant share of production costs;
(b) a possible increase in supplier prices of goods; and
(c) the growing competition on the Bulgarian pharmaceutical market, affecting the prices of
pharmaceuticals.
For the purpose of mitigating this influence, the management of the Group applies a strategy aimed at
optimisation of production costs, validation of alternative suppliers that offer beneficial commercial
conditions, expanding product range by means of new generic products development and last but not least,
adoption of a flexible marketing and price policy. Price policy is a function of three main factors – structure
of expenses, prices of competitors and purchasing capacity of customers.
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
155
The Group is exposed to a significant price risk also with regard to the shares held thereby, classified as other
long-term equity investments, mostly through the parent company. For this purpose, the management
monitors and analyses all changes in security markets and also uses consulting services of one of the most
authoritative in the country investments intermediaries. In addition, at this stage, the management has taken
a decision for a reduction in its operations on stock markets, retaining of the purchased shares for longer
periods with current monitoring of the reported by the respective issuer financial and business indicators as
well as the development of the operations in the environment of crisis.
Liquidity risk
The liquidity risk is the adverse situation when the Group encounters difficulty in meeting unconditionally
its obligations within their maturity.
The Group generates and maintains a significant volume of liquid funds. An internal source of liquid funds
for the Group is its main economic activity of its companies generating sufficient operational flows. Banks
and other permanent counterparts represent external sources of funding. To isolate any possible general
liquidity risk, the group implements a system of alternative mechanisms of acts and prognoses, the final aim
being to maintain good liquidity and, respectively, ability to finance its economic activities. This is
supplemented by current monitoring of the maturities of assets and liabilities, control over cash outflows and
ensuring their current balancing with inflows, including renegotiation of maturities and optimisation of debt
structure, increase and internal restructuring of self-generated funds and their investment.
Maturity analysis
The table below presents the financial non-derivative liabilities of the Group, classified by remaining term
to maturity, determined against the contractual maturity at the consolidated financial statements date. The
table is prepared on the basis of undiscounted cash flows and the earliest date on which a payable becomes
due for payment. The amounts include principal and interest.
Maturity analysis as at
31 December 2022
up to 1
month
1 to 3
months
3 to 6
months
6 to 12
months
1 to 2
years
2 to 5
years
over 5
years
Total
BGN
'000
BGN
'000
BGN
'000
BGN
'000
BGN
'000
BGN
’000
BGN
’000
BGN
'000
Short-term and long-term bank
loans
1,804
80,271
5,270
84,122
24,925
3,437
202
200,031
Other loans and liabilities
98,687
51,821
8,543
2,645
2,475
4,675
7,013
175,859
Lease liabilities
1,405
2,923
4,217
8,270
15,182
32,552
25,502
90,051
Total liabilities
101,896
135,015
18,030
95,037
42,582
40,664
32,717
465,941
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
156
Maturity analysis as at
31 December 2021
up to 1
month
1 to 3
months
3 to 6
months
6 to 12
months
1 to 2
years
2 to 5
years
over 5
years
Total
BGN
'000
BGN
'000
BGN
'000
BGN
'000
BGN
'000
BGN
’000
BGN
’000
BGN
'000
Short-term and long-term bank
loans
63,024
2,261
34,630
132,920
33,160
6,781
994
273,770
Other loans and liabilities
93,031
59,721
1,287
1,447
2,545
6,137
9,350
173,518
Lease liabilities
1,219
2,489
3,614
6,670
12,119
21,915
9,458
57,484
Total liabilities
157,274
64,471
39,531
141,037
47,824
34,833
19,802
504,772
Risk of interest-bearing cash flows
Interest-bearing assets in the structure of the Group are: cash, bank deposits and loans granted at fixed interest
rate. On the other hand, the borrowings of the Group in the form of long-term and short-term loans are usually
with a floating interest rate. This circumstance makes the cash flows of the Group partially dependent on interest
risk. This risk is covered in two ways:
(a) optimisation of resources and structure of credit resources for achieving relatively lower price of attracted
funds; and
(b) combined structure of interest rates on loans comprising two components – a permanent one and a
variable one; the correlation between them, as well as their absolute value, are maintained in a proportion
favourable for the Group companies. The fixed component has a relatively low absolute value and
sufficiently high relative share in the total interest rate. This circumstance eliminates the probability of a
significant change in interest rate levels in case of variable component updating. Thus the probability for
an unfavourable change of cash flows is reduced to a minimum.
The managing bodies of the Group companies together with the management of the parent currently monitor and
analyse the exposure of the respective company to the changes in interest levels. Simulations are carried out for
various scenarios of refinancing, renewal of existing positions, and alternative financing. The impact of a defined
interest rate shift, expressed in points or percentage, on the financial result and equity is calculated based on these
scenarios. For each simulation, the same assumption for interest rate shift is used for all major currencies. The
calculations are made for major interest-bearing positions.
Interest analysis
interest-free
with floating
interest %
with fixed
interest %
Total
31 December 2022
BGN '000
BGN '000
BGN '000
BGN '000
Equity investments
4,778
-
-
4,778
Financial assets at amortised cost, including:
224,175
5,133
97,255
326,563
Receivables and loans
213,234
15
93,463
306,712
Cash and cash equivalents
10,941
5,118
3,792
19,851
Total financial assets
228,953
5,133
97,255
331,341
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
157
Interest analysis
interest-free
with floating
interest %
with fixed
interest %
Total
31 December 2022
BGN '000
BGN '000
BGN '000
BGN '000
Short-term and long-term bank loans
9
191,183
4,680
195,872
Other loans and liabilities
172,851
1,895
2
174,748
Lease liabilities
-
4,289
81,259
85,548
Total financial liabilities
172,860
197,367
85,941
456,168
Interest analysis
interest-free
with floating
interest %
with fixed
interest %
Total
31 December 2021
BGN '000
BGN '000
BGN '000
BGN '000
Equity investments
5,778
-
-
5,778
Financial assets at amortised cost, including:
228,668
22,040
82,403
333,111
Receivables and loans
213,710
15
81,669
295,394
Cash and cash equivalents
14,958
22,025
734
37,717
Total financial assets
234,446
22,040
82,403
338,889
Short-term and long-term bank loans
31
255,755
13,980
269,766
Other loans and liabilities
164,311
6,151
2
170,464
Lease liabilities
-
3,711
50,775
54,486
Total financial liabilities
164,342
265,617
64,757
494,716
The table below demonstrates Group's sensitivity to possible changes in interest rates by 0.50% based on the
structure of assets and liabilities as at 31 December and with the assumption that the influence of all other variables
is ignored. The effect is measured and presented as impact on the financial result after taxes and on equity.
Increase / decrease in interest rate
Impact on post-tax financial result and
equity profit/(loss)
31.12.2022
31.12.2021
BGN’000
BGN’000
Increase
(888)
(1,195)
Decrease
888
1,195
Capital risk management
The capital management objectives of the Group are to build and maintain capabilities to continue its operation as
a going concern and to provide return on the investments of shareholders and economic benefits to other
stakeholders and participants in its business as well as to maintain an optimal capital structure to reduce the cost
of capital. Analogous approach is applied also at the level of a separate Group company with regard to its capital
structure and financing.
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
158
The Group currently monitors capital availability and structure on the basis of the gearing ratio. This ratio is
calculated as net debt divided by the total amount of employed capital. Net debt is calculated as total borrowings
(current and non-current ones) as presented in the consolidated statement of financial position less cash and cash
equivalents. Total employed capital is equal the sum of equity (including non-controlling interest) and net debt. It
is a characteristic feature for both presented periods that the Group finances its operations both through its own
generated profit and by maintaining a certain level of trade and other current payables and loans (bank, commercial
ones). The strategy of the parent company's management was to maintain the ratio within 25-35% at a Group
level.
The table below shows the gearing ratios based on capital structure:
31.12.2022
31.12.2021
BGN'000
BGN'000
Total borrowings, including:
283,295
330,622
Bank loans
195,872
269,766
Lease liabilities and factoring
87,423
60,856
Less: Cash and cash equivalents
(19,851)
(37,717)
Net debt
263,444
292,905
Total equity of the Group
716,634
658,868
Total capital of the Group
980,078
951,773
Gearing ratio
0.27
0.31
The liabilities shown in the table are disclosed in Notes 29, 31, 33, 36 and 39..
Fair value measurement
The fair value concept presumes realisation of the financial instruments through sales, based on the position,
assumptions and judgements of independent market participants on the main or more profitable market for
given assets or liabilities. However, in most cases especially in regard of trade receivables and payables as
well as loans and deposits with banks, the Group expects to realise these financial assets also through their
total refund or respectively, settlement over time. Therefore, they are presented at amortised cost.
In addition, a large part of the financial assets and liabilities are either short-term in their nature (trade
receivables and payables, short-term loans) or are presented in the consolidated statement of financial
position based on market value (deposits placed with banks, investments in securities, loans with floating
interest rate) and therefore, their fair value is almost equal to their carrying amount.
For receivables and loans with a fixed interest rate, the methodology applied in determining it uses as starting
point for calculations Group’s observations of market interest rates.
As far as no sufficient market experience, stability and liquidity exist in regards of purchases and sales of
certain financial assets and liabilities, still no adequate and reliable quotes of market prices are available
thereof, due to which alternative assessment methods and techniques are used.
The management of the parent company is of the opinion that the estimates of the financial assets and
liabilities presented in the statement of financial position are as reliable, adequate and trustworthy as possible
for financial reporting purposes under the existing circumstances.
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
159
46. ACQUISITIONS AND INCREASING INTERESTS IN SUBSIDIARIES
46.1 Acquisition of subsidiaries
In 2022, the Group did not acquire or incorporate new subsidiaries.
In 2021, the Group did not acquire new subsidiaries.
In 2021, the Group incorporated the following companies:
date of
incorporation
effective
interest %
amount of
capital
contribution
BGN'000
Through SIA BRIZ
SIA BACH
2.11.2021
100.00%
11,884
As at 30 November 2021 the Group disposed of its interest in SIA BACH (Note 47).
In 2022, cash was paid at the amount of BGN 2,338 thousand for subsidiaries acquired in 2020 (2021:
BGN 2,338 thousand).
46.2 Increasing interest (purchases of non-controlling interests)
The Group performed the transactions for purchase of additional shares of non-controlling interests.
In 2022 the Group acquired the following shares:
Increases in interests
transaction
date
% change
in interest
acquired net assets
(purchases of non-controlling interest)
BGN '000
Sopharma Trading AD
30.12.2022
5.91%
5,564
Rap Pharma International OOD
17.8.2022
20.00%
(292)
5,272
In 2021 the Group acquired the following shares:
Increases in interests
transaction
date
% change
in interest
acquired net assets
(purchases of non-controlling interest)
BGN '000
Sopharma Trading AD
31.12.2021
5.17%
4,384
ООО Zdorovey
21.1.2021
3.25%
4
ООО Zdorovey Pharm
21.1.2021
2.11%
2
OOO Pharmacevt Plus
21.1.2021
4.01%
(33)
4,357
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
160
The acquisition price of the additional shares purchased in 2022, the effects and cash outflows are as follows:
Increases in interests
Total
(purchases of non-controlling interests)
BGN'000
Direct acquisition
10,859
Total acquisition price
10,859
Fair value of the acquired net assets
(5,272)
Effects undertaken by the Group at the expense of the group reserve –
“accumulated profit”
5,587
Cash outflow on increase in interest (purchasing of non-controlling interest)
10,859
The acquisition price of the additional shares purchased in 2021, the effects and cash outflows are as follows:
Increases in interests
Total
(purchases of non-controlling interests)
BGN'000
Direct acquisition
8,421
Indirect acquisition through a subsidiary
84
Total acquisition price
8,505
Fair value of the acquired net assets
(4,357)
Effects undertaken by the Group at the expense of the group reserve –
“accumulated profit”
4,148
Cash outflow on increase in interest (purchasing of non-controlling interest)
8,421
47. DISPOSAL OF SUBSIDIARIES AND JOINT VENTURES
47.1 Total disposal of subsidiaries and joint ventures
In 2022 the Group disposed of its interest in the following subsidiary:
Company
Date of
disposal
Effective
interest %
disposed of
Rap Pharma International
OOD
11.11.2022
100.00%
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
161
In 2021 the Group disposed of its interest in the following subsidiaries:
Company
Date of
disposal
Effective
interest %
disposed of
Momina Krepost AD
10.3.2021
60.93%
Sopharma Buildings REIT
8.6.2021
40.38%
UAB Recessus
1.10.2021
50.98%
SOOO Brititrade
30.11.2021
80.00%
ООО Tabina
30.11.2021
80.22%
ООО Farmacevt Plus
30.11.2021
63.09%
ООО Galenapharm
30.11.2021
90.60%
ODO Medjel
30.11.2021
82.00%
ODO Alenpharm-plus
30.11.2021
91.98%
ODO SalusLine
30.11.2021
77.00%
ZAO Interpharm
30.11.2021
90.00%
ООО Zdorovei
30.11.2021
70.10%
BOOO Spetzfarmacia
30.11.2021
70.00%
ООО Bellerofon
30.11.2021
85.80%
OOО Zdorovei Pharm
30.11.2021
45.57%
SIA BACH
30.11.2021
100.00%
SIA Briz
30.12.2021
100.00%
SIA Briz Trading
30.12.2021
100.00%
The net assets of the companies disposed of in 2022 are presented, as follows:
Disposal with loss of control
11.11.2022
BGN'000
PPE (Note 16)
123
Intangible assets (Note 17)
170
Inventories
462
Trade receivables
80
Other current receivables and assets
173
Cash and cash equivalents
116
Deferred tax assets
41
Trade payables
(2,500)
Current lease liabilities
(48)
Other payables
(67)
Net assets/(liabilities)
(1,450)
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
162
The financial result from disposal of subsidiaries is as follows:
2022
BGN'000
Income from disposal of Group subsidiary
98
Adjusted with:
Negative net assets written-off
1,450
Goodwill
(40)
Reserve on restatement of foreign operations into the presentation currency
(52)
Gain on disposal of subsidiaries
1,456
Net cash flows from disposal pf subsidiaries
Cash received for subsidiaries sold in 2022
98
Cash received for subsidiaries sold in prior years
417
Less:
Cash of the companies disposed of
(116)
Net cash flows from disposal of subsidiaries
399
The net assets of the companies disposed of in 2021 are presented, as follows:
Disposal with loss of control
31.12.2021
BGN'000
PPE (Note 16)
21,774
Intangible assets (Note 17)
317
Investment property (Note 18)
634
Other long-term equity investments (Note 20)
2,832
Inventories
29,792
Trade receivables
12,599
Other current receivables and assets
5,956
Cash and cash equivalents
2,624
Long-term bank loans
(15,718)
Non-current lease liabilities
(2,894)
Deferred tax liabilities
391
Long-term benefit obligations
(82)
Non-current government grants
(2,262)
Other non-current liabilities
(3,771)
Trade payables
(42,767)
Short-term bank loans
(25,100)
Current portion of long-term bank loans
(2,695)
Current lease liabilities
(2,645)
Current government grants
(100)
Other payables
(14,045)
Net assets/(liabilities)
(35,160)
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
163
The financial result from disposal of subsidiaries is as follows:
2021
BGN'000
Income from disposal of Group subsidiary
1,504
Fair value of the retained interest
2,110
Adjusted with:
Negative net assets written-off
35,160
Non-controlling interest
(1,196)
Reserve on restatement of foreign operations into the presentation currency
26
Gain on disposal of subsidiaries
37,604
Net cash flows from disposal pf subsidiaries
Cash received for subsidiaries sold in 2021
1,472
Less:
Cash of the companies disposed of
(2,624)
Net cash flows from disposal of subsidiaries
(1,152)
48. RELATED PARTY TRANSACTIONS
Related parties
Relation type
Relationship period
Telecomplect Invest AD
Shareholding company with significant
influence
2022
2021
Donev Investments Holding AD
Shareholding company with significant
influence
2022
2021
Momina Krepost AD
Joint venture
2022
as from 10
March 2021
Sopharma
Properties REIT
Company related through shareholding
company with significant influence
2022
as from
08.12.2021
Doverie Ovedinen Holding AD
Associate
2022
2021
DOH Group companies
Companies controlled by an associate
2022
2021
Sofprint Group AD
Company related through a main shareholder
2022
2021
Sofconsult Group AD
Company related through key management
personnel
2022
2021
VES Eectroinvest Systems EOOD
Company related through key management
personnel
2022
2021
Eco Solar Invest OOD
Company related through key management
personnel
2022
2021
Sirius OOD
Company related through key management
personnel
-
until
14.06.2021
Melnitsa Stefanovo village EOOD
Company related through key management
personnel
-
until
14.06.2021
OKP
Investments OOD
Company related through key management
personnel
-
until
14.06.2021
Alpha In EOOD
Company related through key management
personnel
2022
2021
Consumpharm OOD
Company related through key management
personnel
2022
as from
14.06.2021 г.
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
164
Supplies from related parties:
2022
2021
BGN ‘000
BGN ‘000
Supply of inventories from:
Companies related through key management personnel
10,577
8,936
Joint ventures
298
-
Associates
128
22
Companies controlled by an associate
43
81
11,046
9,039
Supply of services from:
Companies controlled by an associate
1,106
969
Shareholding companies with significant influence
425
383
Associates
514
126
Companies under a common indirect control through key management personnel
266
269
Joint ventures
3
-
2,314
1,747
Supply of property, plant and equipment from:
Companies controlled by an associate
1,558
463
Shareholding companies with significant influence
-
17
1,558
480
Other supplies from:
Companies controlled by an associate
261
235
261
235
Interest expenses:
Associates
33
-
Shareholding companies with significant influence
9
170
42
170
Total supplies
15,221
11,671
Sales to related parties
Sales of inventories to:
Companies controlled by an associate
1,389
943
Companies related through key management personnel
1,109
700
2,498
1,643
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
165
Sales of services to:
2022
2021
BGN ‘000
BGN ‘000
Companies controlled by an associate
281
285
Companies related through key management personnel
219
229
Associates
7
7
507
521
Fees on guarantorships and warranties to:
Joint ventures
7
14
Companies controlled by an associate
-
6
7
20
Interest on loans granted:
Companies controlled by associates
1,934
1,918
Joint ventures
46
26
Associates
11
2
1,991
1,946
Cessions
Joint ventures
71
-
71
-
5,074
4,130
Leases
In the reporting period the Group recognised assets, liabilities and payments in relation to leases with related
parties:
Lease liabilities as at 31 December in relation to leases with related parties are as follows:
31.12.2022
31.12.2021
BGN ‘000
BGN ‘000
Recognised lease liabilities at 1 January
4,314
174
Increases
19,305
4,373
Lease payments in the period
(2,462)
(233)
Lease payments written-off
(541)
-
Lease liabilities at 31 December
20,616
4,314
Right-of-use assets as at 31 December in relation to leases with related parties are as follows:
31.12.2022
31.12.2021
BGN ‘000
BGN ‘000
Right-of-use assets at 1 January
4,315
172
Increases
19,263
4,427
Depreciation accrued
(2,482)
(284)
Derecognised carrying amount of right-of-use assets
(572)
-
Right-of-use assets at 31 December
20,524
4,315
The newly arisen right-of-use assets and lease liabilities are under a lease concluded with an associate and
with a company controlled by an associate.
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2022
166
The accounts and balances with related parties are presented in Notes 21, 25, 31 and 38.
The composition of key management personnel of the Group includes the disclosed in Note 1.1 Executive
Director and the members of the Board of Directors of the parent company.
Salaries and other short-term benefits of key management personnel and Executive Directors, members of
the Board of Directors and General Managers of the Group’s subsidiaries amount to BGN 3,325 thousand
(2021: BGN 5, 6,614 thousand) and include:
· current wages and salaries – BGN 3,001 thousand (2021: BGN 6,095 thousand);
· tantieme – BGN 324 thousand (2021: BGN 519 thousand);
Salaries and other short-term benefits of key management personnel of the parent company amount to BGN
1,214 thousand (2021: BGN 1,256 thousand) and include:
· current wages and salaries – BGN 971 thousand (2021: BGN 969 thousand);
· tantieme – BGN 243 thousand (2021: BGN 287 thousand).
49. EVENTS AFTER END OF THE REPORTING PERIOD
On 23 January 2023 the parent company concluded a transformation agreement through the merger of
Biopharm Engineering AD in accordance with Art. 262 of the Commercial Act, as a result of which the entire
property of the transforming company (Biopharm Engineering AD) will be transferred to the receiving
company (Sopharma AD), which will become its legal successor. The transforming company (Biopharm
Engineering AD) will be terminated without liquidation. The contract was submitted for approval to the
Financial Supervision Commission on 27 January 2023.
By means of Letter No РГ – 05 – 684 – 1 dated 24.02.2023 Financial Supervision Commission requested
additional information and data, as well as adjusted documents in relation to the merger application. These
were deposited to the Financial Supervision Commission on 24 March 2023.
No other significant events occurred after 31 December 2022 that require additional adjustments and/or
disclosures in the consolidated financial statements as at 31 December 2022.
Consolidated management report – Sopharma Group 2021
SOPHARMA GROUP
26 April 2023
CONSOLIDATED MANAGEMENT REPORT
2022
1
CONTENT
I. General information about Sopharma Group ................................................................................ 5
1. Main activities .................................................................................................................................. 5
2. Registration and activity of the Company ........................................................................................ 5
3. Controlled companies ...................................................................................................................... 6
4. Board of directors ............................................................................................................................. 8
5. Shareholder structure as at 31 December 2022 .............................................................................. 8
II. Recent developments ................................................................................................................... 8
1. Industrial activity .............................................................................................................................. 8
2. Products ........................................................................................................................................... 8
3. Distribution ....................................................................................................................................... 9
III. Information under Article 39 of the Accountancy Act ............................................................. 10
1. An overview of the company's performance and the main risks it faces (Art. 39, para 1 of the
Accountancy Act / ............................................................................................................................... 10
2. Analysis of financial and non-financial key performance indicators of the Group /Article 39, item 2
of the Accountancy Act/ ..................................................................................................................... 12
3. Significant events occurring after the date of preparation of the annual financial statements
/Article 39, paragraph 3 of the Accountancy Act/ .............................................................................. 15
4. Future development of Sopharma Group (article 39, item 4 of the Accountancy Act) and planned
economic policy in the following year (Article 247 (3) of the Commerce Act) ................................... 15
5. Research and development (article 39, item 5 of the Accountancy Act) ....................................... 16
6. Information on the acquisition of own shares required by Article 187d of the Commerce Act/
Article 39, Item 6 of the Accountancy Act/ ........................................................................................ 19
7. Existence of branches of the Company /Article 39, item 7 of the Accountancy Act/ ..................... 19
8. Use of financial instruments /Article 39, item 8 of the Accountancy Act/ ..................................... 19
IV. Information under Article 247 and Art. 240b of the Commerce Act ........................................ 21
1. Information under Art. 247 of the Commerce Act ......................................................................... 21
2. Information under art. 240b of the Commercial Law on the obligation of Board members to notify
in writing the Board of Directors or the Management Board when they or their related par ties
conclude contracts with the company outside its usual activity or substantially deviate from market
conditions ........................................................................................................................................... 24
V. Information on Annex 2 to art. 10, item 1 of Regulation 2 of LPOS .............................................. 24
2
1. Information given in value or quantitative terms about the main categories of goods, products
and / or services provided, including their share in sales revenue of the Group in general and
changes in the reporting year ............................................................................................................. 24
2. Information about the revenues allocated by separate categories of activities, domestic and
foreign markets and information on sources for supply of materials needed for production of goods
or the provision of services with the degree of dependence on any individual seller or buyer / user,
in case their share exceeds 10 per cent of the expenses or sales revenue, provide information for
each person for his share in sales or purchases and links with the issuer ......................................... 24
3. Information on significant transactions ......................................................................................... 24
4. Information regarding transactions between the issuer and related parties during the reporting
period, proposals for concluding such transactions, as well as transactions that are outside its usual
activity or substantially deviate from market conditions when, the issuer or its subsidiary is party,
indicating the value of the transactions, the nature of relatedness and any information necessary to
assess the impact on the financial position of the issuer ................................................................... 25
5. Information about events and indicators unusual for the issuer that have a significant impact on
its activity and realized income and expenses; assessment of their impact on the current year
results ................................................................................................................................................. 26
6. Information on off-balance sheet transactions - nature and business purpose, the financial impact
of transactions on the activity, if the risks and benefits of these transactions are material to the
issuer and the disclosure of this information is essential for assessing the financial position of the
issuer .................................................................................................................................................. 26
7. Information on shares of the issuer, its major investments in the country and abroad (in
securities, financial instruments, intangible assets and real estate), as well as investments in equity
securities outside its group of companies under Accountancy Act and the sources /methods of
financing ............................................................................................................................................. 26
8. Information about the concluded by the issuer, its subsidiary or parent company in their capacity
as borrowers, loan contracts specifying the terms and conditions, including the deadlines for
repayment as well as information about guarantees and commitments .......................................... 26
9. Information about the concluded by the issuer, its subsidiary or parent company in their capacity
of lenders, loan agreements, including the provision of guarantees of any kind, including related
parties, and the specific terms, including the deadlines for payment and the purpose for which they
were granted ...................................................................................................................................... 27
10. Information on the use of funds from the issuance of new issue of securities during the
reporting period ................................................................................................................................. 28
11. Analysis of the relationship between the financial results reflected in the financial statements
for the financial year and earlier published forecasts for these results ............................................. 28
3
12. Analysis and evaluation of the policy on the management of financial resources, including the
ability to meet its obligations, possible threats and measures that the issuer has taken or will take to
resolve them ....................................................................................................................................... 28
13. Assessment of the feasibility of investment intentions, indicating the amount of available
funds and possible changes in the financing structure of this activity ............................................... 28
14. Information about changes in the reporting period in the basic principles of management of
the issuer and its group of companies under the Accounting Law ..................................................... 28
15. Information about the main characteristics applied by the issuer in the process of preparing
the financial statements, internal control system and risk management .......................................... 29
16. Information about changes in management and supervisory boards during the accounting
year 29
17. Information on the amount of remuneration, rewards and / or benefits of each of the
members of the management and supervisory bodies for the financial year, paid by the issuer and
its subsidiaries, regardless of whether they have been included in the expenses of the issuer, or
arising from profit distribution, including: ......................................................................................... 29
18. Information on held by members of management and supervisory bodies, the procurators
and the senior management of the issuer shares, including the shares held by each of them
individually and as a percentage of shares of each class and provided by the issuer options on its
securities - type and amount of securities on which options have been set, exercise price of the
options, purchase price, if any, and the term of the options. ............................................................ 29
19. Arrangements (including after the end of the financial year) as a result of which future
changes may occur in the holding of shares or bonds by current shareholders or bondholders There
are no such arrangements. ................................................................................................................. 30
20. Information about pending legal, administrative or arbitration proceedings relating to
liabilities or receivables o f the issuer of at least 10 percent of its equity; if total liabilities or
receivables of the issuer in all proceedings exceeds 10 per cent of its equity, provide information
about each case separately ................................................................................................................ 30
21. Information about the Investor Relations Director, including telephone number and
correspondence address: ................................................................................................................... 30
VI. Information Annex 3 to Article 10, paragraph 2, item 4 of Ordinance 2 of LPOS ............................. 30
1. Structure of the capital of the Company, including securities not admitted to trading on a
regulated market in Bulgaria or another Member State, indication of the different classes of shares,
the rights and obligations of each class of shares and the portion of the total capital represented by
each class ............................................................................................................................................ 30
2. Information regarding the direct and indirect ownership of 5 percent or more of the voting rights
at the General Meeting of the Company, including details of the Shareholders, the size of their
shareholding and the type of shareholding ........................................................................................ 31
4
3. Information about shareholders with special control rights .......................................................... 31
4. Agreements between Shareholders which are known to the Company and which may lead to
restrictions on the transfer of shares or voting right. ........................................................................ 31
5. Significant contracts of the Company that take effect, are amended or terminated due to a
change in control of the company in a mandatory tender offer and the effects thereof, except
where disclosure of this information may cause serious damage to the company; exemption under
the preceding sentence shall not apply in cases where the company is obliged to disclose
information under the Law ................................................................................................................. 32
5
I. General information about Sopharma Group
1. Main activities
Sopharma Group (the Group) is a leading Bulgarian producer, exporter and local distributor of
pharmaceutical products with a strong presence in Eastern and South-eastern Europe, offering a wide
range of prescription medicines and OTC products, food supplements, cosmetics and medical devices.
The Group operates in the following areas:
• production of pharmaceutical products including medicines, primarily generics, herbal-based
substances and food supplements, which is mainly done by “Sopharma” AD (the Company);
• production of medicinal products and medicinal cosmetics, as plasters, bandages and sanitary-
hygiene products focused at the production site in Sandanski city;
• distribution of pharmaceuticals, medical supplies, sanitary materials, vitamins, food supplements
and cosmetics, which is mainly performed by “Sopharma Trading” in Bulgaria and in Serbia.
2. Registration and activity of the Company
“Sopharma” AD is a company registered in Bulgaria under the Provisions of the Commercial Act,
with its registered office in Sofia, 16 Iliensko shose Str.
“Sopharma” AD was established in 1933. The court registration of the Group is from 15.11.1991,
decision №1/1991 of Sofia City Court. “Sopharma” AD is a public company under the Law on Public
Offering of Securities.
The Company conducts the production and marketing of medicinal substances and dosage forms;
research, engineering and implementation activities in the field of phytochemistry, chemistry and
pharmacy, production of medical products and cosmetics, incl. - plasters, bandages, sanitary-hygiene
products, herbal cosmetics, concentrates for hemodialysis. “Sopharma” AD provides services related to
production, as well as to ancillary and supporting activities.
6
3. Controlled companies
Sopharma Group consists of “Sopharma” AD and the following subsidiaries, directly or indirectly
controlled by the Company. Additionally, the Group has investments in two associated companies
(“Doverie - obedinen holding” AD, 24.998% stake and “Sopharma Imoti” REIT, 35.65% stake) and in one
joint venture (“Momina krepost” AD, 37.46% stake).
Company
Interest as at
31.12.2022 in %
“Sopharma Trading” AD
87.25
“Pharmalogistica” AD
89.39
“Elektroncommerce” EOOD
100.00
“Biopharm Engineering” AD
97.15
“Phyto Palauzovo” AD
95.00
“Veta Pharma” AD
99.98
“Sopharmacy” EOOD **
87.25
“Sopharmacy 2” EOOD **
87.25
“Sopharmacy 3” EOOD **
87.25
“Sopharmacy 4” EOOD **
87.25
“Sopharmacy 5” EOOD **
87.25
“Sopharmacy 6” EOOD **
87.25
“Sopharmacy 7” EOOD **
87.25
“Sopharmacy 8” EOOD **
87.25
“Sopharmacy 9” EOOD **
87.25
“Sopharmacy 10” EOOD **
87.25
“Sopharmacy 11” EOOD **
87.25
“Sopharmacy 12” EOOD **
87.25
“Sopharmacy 13” EOOD **
87.25
“Sopharmacy 14” EOOD**
87.25
“Sopharmacy 15” EOOD**
87.25
“Sopharmacy 16” EOOD**
87.25
“Sopharmacy 17” EOOD**
87.25
“Sopharmacy 18” EOOD**
87.25
“Sopharmacy 19” EOOD **
87.25
“Sopharmacy 20” EOOD **
87.25
“Sopharmacy 21” EOOD **
87.25
“Sopharmacy 22” EOOD **
87.25
“Sopharmacy 23” EOOD **
87.25
“Sopharmacy 24” EOOD **
87.25
“Sopharmacy 25” EOOD **
87.25
“Sopharmacy 26” EOOD **
87.25
“Sopharmacy 27” EOOD **
87.25
“Sopharmacy 28” EOOD **
87.25
“Sopharmacy 29” EOOD **
87.25
“Sopharmacy 30” EOOD **
87.25
7
“Sopharmacy 31” EOOD **
87.25
“Sopharmacy 32” EOOD **
87.25
“Sopharmacy 33” EOOD **
87.25
“Sopharmacy 34” EOOD **
87.25
“Sopharmacy 35” EOOD **
87.25
“Sopharmacy 36” EOOD **
87.25
“Sopharmacy 37” EOOD **
87.25
“Sopharmacy 38” EOOD **
87.25
“Sopharmacy 39” EOOD **
87.25
“Sopharmacy 40” EOOD **
87.25
“Sopharmacy 41” EOOD **
87.25
“Sopharmacy 42” EOOD **
87.25
“Sopharmacy 43” EOOD **
87.25
“Sopharmacy 44” EOOD **
87.25
“Sopharmacy 45” EOOD **
87.25
“Sopharmacy 46” EOOD **
87.25
“Sopharmacy 47” EOOD **
87.25
“Sopharmacy 48” EOOD **
87.25
“Sopharmacy 49” EOOD **
87.25
“Sopharmacy 50” EOOD **
87.25
“Sopharmacy 51” EOOD **
87.25
“Sopharmacy 52” EOOD **
87.25
“Sopharmacy 53” EOOD **
87.25
“Sopharmacy 54” EOOD **
87.25
“Sopharmacy 55” EOOD **
87.25
“Sopharmacy 56” EOOD **
87.25
“Sopharmacy 57” EOOD **
87.25
“Sopharmacy 58” EOOD **
87.25
“Sopharmacy 59” EOOD **
87.25
“Sopharmacy 60” EOOD **
87.25
“Sopharmacy 61” EOOD **
87.25
“Sopharmacy 62” EOOD **
87.25
“Sopharmacy 63” EOOD **
87.25
“Sopharmacy 64” EOOD **
87.25
PAO “Vitamini”
100.00
“Sopharma” Warsaw Sp. z. o. o
100.00
“Sopharma” Poland Sp. z. o. o - in liquidation
60.00
OOO “Sopharma” Ukraine
100.00
TOO “Sopharma” Kazakhstan
100.00
“Sopharma Trading” D.o.o.**
87.25
“Pharmachim” EOOD
100.00
*effective interest in percent
**indirect interest
8
4. Board of directors
“Sopharma” AD has a one tier management system with a Board of Directors of five members as
follows: Ognian Donev, PhD – Chairman, Vessela Stoeva – Deputy Chairman and members – Alexander
Tchaoushev, Bissera Lazarova and Ivan Badinski. The company has two procurators - Simeon Donev and
Ivan Badinski. The company is represented and managed by the Executive Director Ognian Donev, PhD.
Members of the key management personnel of the Group include the disclosed in Note №1
Executive Director and members of the Board of Directors of the Company. Additionally, it includes the
executive directors, the board of directors and the managers of subsidiaries of the Group.
5. Shareholder structure as at 31 December 2022
II. Recent developments
1. Industrial activity
The production activities of the Company are realized and developed in the following areas:
• Substances and preparations based on plant raw materials (phytochemical production);
• Ready-to-use formulations, incl.:
ü Hard tablets, coated tablets, film-coated tablets, capsules;
ü Galenic - suppositories, drops, syrups, ointments;
ü Parenteral - injection solutions, lyophilic powder for injections.
• Medical and cosmetic products, incl.:
ü Plasters;
ü Bandages;
ü Sanitary-hygiene products;
ü Herbal cosmetics;
ü Concentrates for hemodialysis;
ü Infusion solutions.
2. Products
“Sopharma” AD
The Company has more than 200 products in its portfolio: incl. nearly 190 medicinal products and
27.89%
20.68%
10.00%
5.23%
5.14%
20.86%
10.20%
"Donev Investments Holding" AD
"Telecomplect invest" AD
"Sopharma" AD (treasury shares)
CUPF "Alianz Bulgaria"
"Telso" AD
Other legal persons
Other physical persons
9
11 groups of medical devices. Medicinal products mainly include generics and 15 traditional products, 12
of the products are plant-based. The Company's traditional products (in particular Tabex, Carsil and
Tempalgin) make a major share to its export market income, while the company's generic products are of
major importance for domestic sales, Analgin being the leader among these products.
The product portfolio of “Sopharma” AD focuses on the following therapeutic areas: cardiology,
gastroenterology, pain management, cough and cold, immunology and dermatology, respiratory tract and
asthma, neurology and psychiatry, urology and gynecology, nephrology, surgery, or thopedics and
traumatology.
The most significant pharmaceutical products in terms of their contribution to the amount of
revenues are:
Ø Carsil – traditional plant-based product used to treat gastro-enterology diseases (liver
diseases);
Ø Tempalgin – traditional analgesic (painkiller);
Ø Tabex – traditional plant-based smoking cessation drug;
Ø Tribestan – traditional plant-based product that stimulates the functions of the sexual
system;
Ø Broncholitin – traditional plant-based product used to suppress cough;
Ø Analgin – generic analgesic (pain reliever);
Ø Nivalin – traditional plant-based product used for diseases of the peripheral nervous system;
Ø Methylprednisolon – generic medicine for cases of severe allergies and certain life-
threatening conditions;
Ø Vitamin C – widely used nutritional supplement;
Ø Valeriana – generic non-prescription herbal medicine used to reduce stress;
Ø Medical devices – gauzes, compresses and dressings.
3. Distribution
“Sopharma Trading” AD
The company is a leading distributor of pharmaceutical products and cosmetics in Bulgaria, with a
market share in the pharmaceutical products segment of 21.79% (according to IQVIA). “Sopharma
Trading” AD is the exclusive distributor on the Bulgarian market of particular pharmaceutical products of
several leading international pharmaceutical and other companies in the field of healthcare such as
Amgen, Astra Zeneca, GE Healthcare, Johnson and Johnson, Abbot Diagnostics, Hartmann, Novartis and
Novo Nordisk.
The Company has more than 15 000 products (particularly pharmaceutical products, medical
equipment and devices, accessories, cosmetics, vitamins and food supplements) in its portfolio, including
the brands of “Sopharma” AD, and holds exclusive rights for Bulgaria over brands of strategic partners
such as “Aboca”, “Colief”, “Jamieson”, “Planter's”, “Premax”, “Skincode”, “SVR” Laboratories, “US
Pharmacia” and “Wyeth”, specialized services (such as software solutions for pharmacies and advice and
consulting services) and national logistics services. “Sopharma Trading” AD cooperates with more than
400 partners and over 3 500 clients.
10
III. Information under Article 39 of the Accountancy Act
1. An overview of the company's performance and the main risks it faces (Art. 39, para 1 of the
Accountancy Act /
Key financial indicators
Indicators
1-12/2022
1-12/2021
Change
BGN '000
BGN '000
%
Revenues
1 663 016
1 603 310
3.7%
EBITDA
139 980
116 706
19.9%
Operating profit
87 881
63 519
38.4%
Net profit
76 333
91 703
-16.8%
CAPEX*
85 154
43 536
95.6%
31.12.2022
31.12.2021
BGN '000
BGN '000
Non-current assets
681 487
633 746
7.5%
Current assets
572 491
571 232
0.2%
Owners’ equity
716 634
658 868
8.8%
Non-current liabilities
129 998
122 218
6.4%
Current liabilities
407 346
423 892
-3.9%
* acquired tangible and intangible long-term assets
Indicators
1-12/2022
1-12/2021
EBITDA/ Revenues
8.4%
7,3%
Operating profit/Sales Revenue
5.3%
4,0%
Net profit/ Sales Revenue
4.6%
5,7%
31.12.2022
31.12.2021
Debt/ Equity
0,75
0,83
Net debt*/ EBITDA on annual basis
1,9x
2,5x
* net debt includes bank loans and leasing and factoring liabilities less cash, taking into account the effects of the adoption of IFRS
16 Leasing, effective from 1 January 2019.
Risks related to the Group’s business and the industry the Group operates in
• The Group faces significant competition;
• Part of Sopharma Trading's revenues in Bulgaria is generated from sales to state hospitals, which
predetermines a high degree of business risk;
• The Group is dependent on regulatory approvals;
• Government regulations affecting the Group's business may change, thus possibly increasing
compliance costs or otherwise affecting its operations;
• Part of the Group’s revenues, in particular in Bulgaria, depends on the inclusion of the Group’s
medicines in reimbursement lists;
11
• The Group’s production facilities and processes are subject to strict requirements and regulatory
approvals that may delay or disrupt the Group’s operations;
• The Company’s ability to pay dividends depends on a number of factors and there can be no
guarantee that the Company will be able to pay dividends in accordance with its dividend policy
or at all in any given year;
• The Group is subject to operational risk, which is inherent to its business activities;
• The Group is subject to numerous environmental and health and safety laws and regulations and
is exposed to potential environmental liabilities;
• Litigations or other out-of-court proceedings or actions may adversely affect the Group’s business,
financial position and results of operations.
Risks, related to Bulgaria and other markets in which the Group operates
• The macroeconomic environment, particularly in Bulgaria, Russia and Ukraine, has a significant
effect on the Group’s operations and position;
• The political environment in Bulgaria and in the export markets, especially Russia, Belarus and
Ukraine, has a significant effect on the Group operations and financial position;
• Risks related to the Bulgarian legal system;
• Developing legal frameworks in some countries in which the Group sells its products, in particular
Russia, Belarus and the Ukraine, may negatively impact the Group’s operations in these countries;
• Risks relating to exchange rates and the Currency Board in Bulgaria;
• Interpretations of tax regulations may be unclear and tax laws and regulations applicable to the
Group may change.
Currency risk
The Group companies perform their activities in active exchange with foreign suppliers and
customers and are therefore exposed to currency risk.
Through the companies in Ukraine and Kazakhstan, the group carries out business operations in
these countries and, accordingly, has substantial exposures in Ukrainian hryvnia and Kazakh tenge. The
currency risk is related to the negative movement of the exchange rates of these currencies against the
Bulgarian lev in the future business operations, the recognized assets and liabilities in foreign currency
and the net investments in foreign companies. The rest of the companies abroad sell mainly on local
markets, leading to currency risk and against their currencies - the Serbian dinar and the Polish zloty.
In order to control the currency risk, a system of planning of import deliveries, for foreign currency
sales, as well as procedures for daily monitoring of movements in the dollar exchange rate and control of
forthcoming payments, is introduced. The exposure of subsidiaries in Bulgaria in foreign currency is
insignificant, as almost all sales are made on the local market in Bulgarian leva. Imports of goods are fully
realized in euro. Borrowings denominated in foreign currency are mainly denominated in euro.
12
2. Analysis of financial and non-financial key performance indicators of the Group /Article 39, item
2 of the Accountancy Act/
Operating revenues
Sales revenues of the Group increased with BGN 59,7 million or 3.7%, reaching BGN 1 663 million
in 2022 compared to BGN 1 603,3 million in 2021. Adjusted for the deconsolidation of the companies sold
at the end of last year in Latvia and Belarus, sales growth was 1 0%. Sales of goods increased with BGN
50,7 million or 3.8%, reaching BGN 1 379,1 million in 2022 compared to BGN 1 328,4 million in 2021. After
adjustment for the deconsolidation of distribution companies and pharmacy chains in Latvia and Belarus,
the growth of sales of goods for the nine months of 2022 was 11%. Sales of finished products increased
by BGN 9 million, or 3.3%, to BGN 283,9 million in 2022 compared to BGN 274,9 million in 2021.
On a consolidated basis, the growth in sales of finished products in Bulgaria for 2022 was 3.3%
compared to the previous period. "Sopharma" AD retains its market share and according to IQVIA data,
by the end of 2022 it occupies 2.48% (tenth position) of the total volume of the Bulgarian pharmaceutical
market in terms of value and 9.46% (first position) of sales in kind terms. The positions of the main
competitors of the Company in the country are as follows: Novartis –6.86% (4.03% in kind), Roche – 5.35%
(0.14% in kind), Merck Sharp & Doh me– 4.37% (0.15% in kind), Pfizer – 3.72% (0.65% in kind), Teva – 3.55%
(9.19 % in kind), Astrazeneca – 3.11% (0.36% in kind), Abbvie – 3.05% (0.06 in kind), Swixx Biopharma –
2.95% (0.92 in kind), Bayer – 2.61% (1.82% in kind). The products with the largest share of sales in the
country are Analgin, Sophazolon, Vicetin, Fomotidine, Vitamin C, Paracetamol, Bromhexine,
Methylprednisolone.
On a consolidated basis for 2022, sales revenue in Russia increases by 11%, in Moldova by 61%, in
Serbia by 73%, in Latvia by 13%, in Belarus by 9%, in Mongolia by 113%. Growth was also registered in the
countries of the Caucasus region (Georgia with 61%, Azerbaijan with 26% and Armenia with 10%) and
Central Asia (Uzbekistan with 7% and Kazakhstan with 50%). In Vietnam, sales revenue fell by 13%, in
Ukraine by 7%, in Poland by 5%.
Contract and contract manufacturing sales also registered a 31% growth, reaching BGN 6 million.
Other operating revenues decreased by BGN 0,8 million to BGN 13 million in 2022 compared to
BGN 13,8 million in 2021.
Operating expenses
For the current period the expenses of materials increased by BGN 16 million to BGN 99,1 million,
as the most significant change was registered in the expenses of substances, which increased by BGN 5
million, as well as in the expenses for electricity and heat, increasing by BGN 1,4 million and BGN 3 million,
respectively. Personnel expenses decreased by BGN 2,2 million to BGN 147,8 million as a result of the
decrease in the average number of personnel in the Group (4,764 workers and employees compared to
5,507 for 2021), mainly as a result of the sale of the companies in Latvia and Belarus at the end of 2021.
The external service expenses decreased by BGN 5,8 million to BGN 70,1 million with the most significant
change in construction costs, which decreased by BGN 7,4 million, which increase by BGN 0,7 million and
in the production costs, which decrease by BGN 0,5 million.
13
Financial income and expenses
Financial income and expenses in 2022 net registered a loss of BGN 6,1 million, which is a increased
of the loss by BGN 0,9 million compared to the same period of the last year. Financial income decreased
by BGN 3,3 million, interest income from overdue receivables decreased by BGN 1,3 million and net
foreign exchange gains on foreign currency loans and leases decreased by BGN 1,5 million. Financial
expenses decreased by a total of BGN 2,4 million, while interest expenses on loans received for the current
period decreased by BGN 3,5 million as a result of a decrease in the Group's bank exposure due to the sale
of shares in the Baltic States and Belarusian companies at the end of last y ear, as well as the ongoing trend
in the current year of reducing bank debt through the generated positive free cash flow in the Group. An
increase of BGN 1,9 million was recorded in the costs for the impairment of receivables from granted
commercial loans.
Financial result from the activity
Earnings before interest, taxes and depreciation (EBITDA) increased by BGN 23,3 million or by 20%,
while in 202 2 it amounted to BGN 140 million compared to BGN 116,7 million in 2021. After adjustment
due to the deconsolidation of the companies sold at the end of 2021 in Latvia and Belarus, the growth
amounted to 25%. The main factors for this adjusted growth are the increase in sales in both main business
segments by a total of 10% with insignificant changes in the gross profit margin, as well as the good
management of operating expenses (sales, marketing, logistics and administrative expenses), whose
increase is below 3% despite severe inflationary pressure.
Profit from operating activities increased by BGN 24,4 million or by 38%, to BGN 87,9 million in
2022 compared to BGN 63,5 million in 2021.
Net profit decreased by BGN 15,4 million or 17% to BGN 76,3 million in 2022 compared to BGN
91,7 million in 2021. The most significant contribution to its reduction is the profit registered in the
previous reporting period from the acquisition and disposal of subsidiaries in the amount of BGN 36,1
million, as well as the impairment charges of non-current assets in the amount of BGN 20,8 million in 2022.
The impairments are the result of recognition of impairment of goodwill, reported upon acquisition of
Sopharma Trading D.o.o. Serbia, in the amount of BGN 9,6 million, as well as due to the depreciation of
property, machinery and equipment in the amount of BGN 9,6 million period of profits from associated
companies in the amount of BGN 10,5 million.
116,706
63,519
91,703
139,980
87,881
76,334
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
EBITDA Operating profit Net profit
1-12/2021
1-12/2022
14
Assets
Non-current assets at the end of 2022 increased by BGN 47,7 million compared to the end of last
year. The acquired tangible and intangible fixed assets for the period amounted to BGN 85,2 million, of
which those related to leasing contracts amount to BGN 56 million. The parent company invested BGN 4,1
million in 2022 in the construction of new production facilities for the processing of technical cytisine,
which are pending inspection and certification by МЕА. Substantial technological improvements and
modernization of phytochemical production were also carried out, as a result of which an increase in
production capacity was achieved. Investments in associates and joint ventures increased by BGN 35,5
million as a result mainly of the reported share in current profit and the increased share in the associate
“Doverie-obedinen holding” AD.
Current assets at the end of 2022 increased by BGN 1,3 million compared to the end of last year,
which is mainly due to the increase in material stocks by BGN 22,6 million. Cash and cash equivalents
decreased by BGN 17,9 million.
Owners’ equity and liabilities
The equity of Sopharma Group increased by BGN 57,7 million compared to 31.12.2021 as a result
of the reported net current profit.
The liabilities decreased by BGN 8,8 million compared to the end of 2021. Total liabilities on bank
loans, leasing and factoring of the Group decreased by BGN 47,4 million, as the net debt after deduction
of cash and cash equivalents decreased with BGN 29,5 million to BGN 263,4 million. The trade liabilities
increased by BGN 32,1 million compared to the end of the last year as a result of the BGN 22,3 million
increase in advances received from customers.
Cash flows
31.12.2022
BGN '000
31.12.2021
BGN '000
Net cash flows from operating activities
110 082
(75 963)
Proceeds of amounts by factoring after interest and fees
30 836
193 337
Purchases of property, plant and equipment, intangible assets, net
(21 733)
(26 055)
Payments under lease agreements
(16 081)
(20 447)
Free cash flow (normalized)
103 104
70 842
The free cash flow (normalized with the revenues from factoring and payments under leasing
contracts), generated for 2022, amounts to BGN 103,1 million inflow compared to BGN 70,8 million inflow
in 2021.
Ecology and environmental protection
“Sopharma” AD maintains and observes its commitments in compliance with the national legislation
in the field of environmental protection. The company applies measures to:
- separate collection of waste, minimization, recovery and recycling of production and household
waste;
- provide appropriate personnel training on environmental and pollution prevention issues;
- responsibly fulfill the imperative requirements of the Packaging and Waste Ordinance and pays
its product tax in accordance with Regulation for Packaging and Wastage from Packaging;
- measure annual emissions of waste gases into the ambient air from the Solid Form Factory;
15
- once every two years, own periodic measurements (STI) of waste gases in the atmospheric air are
carried out at the Steam Power Plant Installation at
sites “A” and “B”. Emissions are measured and
reported in 2021.
- “Sofiyska Voda” AD measures on a monthly basis emission in wastewater at production sites A
and B.
- every quarter the drinking water from the production plants is given for testing (short chemical
and microbiological analysis) in an accredited laboratory;
- twice a year the groundwater and wastewater are given for testing in an accredited laboratory
according to the permits for water abstraction and for use of surface water body.
The total amount of waste delivered in 2022 is 314,17 tons. In 2022 the separately collected waste
decreased by 28.8% compared to the previous year. Production waste is disposed with licensed recyclers.
The annual emissions of waste gases into the ambient air as well as the emissions in the wastewater are
within the required standards. The requirements of the Discharge Permit are fulfilled. Once a month, a
report is made on the packaging imported and / or marketed by type of material for which a monthly
installment is paid to “EcoBulpak Bulgaria” AD, with which “Sopharma” AD has concluded a contract for
the recovery of packaging waste.
Personnel
As at 31 December 2022, the average number of employees of Sopharma Group is 4 764
(compared to 5 507 in 2021). The average number of employees of “Sopharma” AD as at 31 December
2022 is 1 715 (at 1 860 in 2021) and of “Sopharma Trading” AD is 776 (compared to 826 in 20 21).
3. Significant events occurring after the date of preparation of the annual financial statements /Article
39, paragraph 3 of the Accountancy Act/
On 23 January 2023, the Company entered into an agreement for transformation by merger of
the subsidiary company "Biopharm Engineering" AD in accordance with the provisions of Article 262 of
the Commercial Law, as a result of which all the property of the transforming company ("Biopharm
Engineering" AD) will transfer to the receiving company ("Sopharma" AD), which will become its legal
successor. The transforming company ("Biopharm Engineering" AD) will be terminated without
liquidation. The contract was submitted for approval to the Financial Supervision Commission on
27.01.2023.
4. Future development of Sopharma Group (article 39, item 4 of the Accountancy Act) and planned
economic policy in the following year (Article 247 (3) of the Commerce Act)
The Group envisages key moments of the strategy:
• to increase sales of its existing portfolio, as well as by adding new products in categories in which
the Company has a strategic interest. To this end, the company is actively exploring various
opportunities to acquire products that would complement and diversify its own portfolio;
• to achieve a phased transformation of its production processes and capacities through the
optimization of the Company's production capacity through the purchase and modernization of
new machinery and equipment and the transfer of production activities and technologies. In
addition to this, a strategy has been developed and is in the process of implementation to optimize
the processes of planning, supplies, production, distribution through active management along
16
supply chains. This would allow the development of new business segments such as potential
contract manufacturing;
• continued operation of the production in full accordance with the good manufacturing practices
approved in the EU;
• to implement new technologies to support the automation of business processes;
• to develop its personnel through training in order to increase qualifications and competencies and
to preserve and maintain the reputation of a preferred employer with opportunities for career
development, as well as to work closely with specialized higher education institutions and offer a
career start to personnel;
• to implement a diversity policy in order to create a working environment free from prejudice,
cultivating an atmosphere of respect and mutual trust, fostering a corporate culture of mutual
respect and valuing each individual. Managers and employees carry out their activities
professionally, impartially, with dignity and integrity, avoiding conflicts of interest;
• implement a green policy in order to reduce the carbon footprint by using energy from renewable
sources.
• "Sopharma" AD will strive to achieve a stable result of developing eight to ten new products per
year for its pharmaceutical business.
Apart from Bulgaria, the main markets for finished products continue to be Russia and Ukraine. The
Group's plans are to increase its presence in the Russian market through increased investments in
marketing and advertising activities and human resources. In addition, expansion of the portfolio and
relations with various counterparties is planned. In Ukraine, in view of the military conflict at this stage, the
main immediate goal is to maintain market presence through its distribution company for the local market
"Sopharma Ukraine" and the production company PAO "Vitamini". In the remaining traditional markets in
Poland, Serbia, Belarus, Kazakhstan, Moldova, the countries of the Caucasus region and the Baltic States,
the Group continues its presence and plans to strengthen its positions through additional marketing
activities and the imposition of products in therapeutic groups where there is potential for growth . The
group will continue to look for opportunities for an even more active presence in a highly developing market
such as that of Vietnam..
5. Research and development (article 39, item 5 of the Accountancy Act)
The Group focuses its research and development mainly on generic products. Research and
development projects are focused on finding and developing new formulas and composition or physical
properties (such as medicine form or tablet form) of a product in order to adapt it to current market needs.
The Parent Company mainly submits applications for new product authorizations including new
product forms in Bulgaria and / or export markets and for existing products in new markets.
Intellectual Property
Although oriented towards generic pharmaceutical products, “Sopharma” AD has been known for
years with the traditional production of several unique products based on plant extracts obtained from
own-produced technologies. These products are protected not only by trademark, but also by patent or
company know-how.
17
Regarding the generic products it produces, for their market distinctiveness, Sopharma Group
relies on brand names, all of which are registered trademarks of the Company.
In all the years of existence, Sopharma Group has generated and defended its industrial property.
As a result, the Group owns a large number of industrial property sites, the majority of which - registered
rights (trademarks, patents, designs) and fewer unregistered objects - mainly technology.
These assets are the result of the Group's special policy towards product and technological
update, and in particular innovation.
New developments and products
During the reporting period January - December 2022 in the Division "Development and
Regulatory Compliance" the following activities were performed:
ü New medicines
During the reporting period, a marketing authorization was obtained for 10 new medicinal
products:
- Diclofenac Diethylamine 23.2 mg/g gel (DCP);
- Paracedol Duo 200 mg/ 500 mg fct (Bulgaria);
- Dusopharm 100 mg tablets (Russia);
- Dusopharm 200 mg tablets (Russia);
- Furosemide Sopharma inj (MRP-Georgia);
- Haloperidol Sopharma inj (MRP-Georgia);
- Gorloin 5 mg/1.5 mg comp. lozenges (Moldova, Kazakhstan, Azerbaijan);
- Nexopral 20 mg gastro-resistant tablets (Bulgaria);
- Felogel Max 23,2mg/g gel (Poland);
- Tempaforte effervescent powder for oral solution – (Belarus).
ü New registrations and re-registrations / changes
New registrations of medicinal products
• Documentation for registration of 13 medicinal products has been submitted:
- Pethidin 50 mg/mlsolution for injection (DCP – Denmark, Switzerland, Norway, Finland);
- Aminophyllin Sveikuva 24 mg/ml solution for injection (Lithuania);
- Glicerax Pico 7,5mg/ml oral drops, solution (Bulgaria);
- Suxamethonium Sopharma 10mg/ml sol.for.inj. – (Bulgaria)
- Suxamethonium Sopharma 20mg/ml sol.for.inj. – (Bulgaria);
- Tempaforte 500 mg eff. Powder – (Azerbaijan);
- Tempaforte 1000 mg eff. Powder - (Azerbaijan).
- Dexamethasone Sopharma 4mg/ml sol.for inj. (Lithuania);
- Dexketoprofen Sopharma 50mg/2ml sol.for inj – (Ukraine);
- Ketorolac 30mg/ml sol.for inj. – (Ukraine).
- Otofix ear drops. (Ukraine);
18
- Carsil 110 mg caps. – (Georgia);
- Analgin max 1000 mg eff powder in sachet – (Georgia).
Re-registrations / changes
• Renewed Marketing Authorizations for 48 medicinal products.
•
Submission of documentation for the renewal of the Marketing Authorizations for 70 medicinal
products.
• 301 changes for medicinal products approved by agencies.
• 261 changes for medicinal products submitted to agencies.
Food additives
• 4 food supplements have been notified for Bulgaria.
Cosmetic products
• 4 Cosmetic products are registered.
ü Developments
• Pharmaceutical development of 13 new medicinal products / projects:
- Citisinicline 3,0 mg tablets – Project with the company Achieve;
- Suxamethonium 10 mg/ml solution for injection;
- Suxamethonium 20 mg/ml solution for injection;
- Keterolac 30 mg/ml solution for injection; 1 ml;
- Sodium picosulfate 7,5 mg/ml oral drops;
- Dexketoprophenum 25 mg tablets;
- Betagamma caps.;
- Buscolizin 10 mg tablets;
- Antistenocardin 25 mg tb;
- Ketorolac 10 mg/ml tb;
- Valeriana 30 mg tb.;
- Xylmetazoline/Dexpanthenol nasal spray;
- Paracetamol 500 mg tb.
ü Transfer and validation of technological processes
• 24 production processes / technologies are validated / optimized.
ü Prepared documentation for qualification / production
• Documentation for qualification of raw materials for production - 125;
• Production regulations - 103;
Documentation for qualification of finished forms - 230.
19
6. Information on the acquisition of own shares required by Article 187d of the Commerce Act/
Article 39, Item 6 of the Accountancy Act/
In the current year 424 188 treasury shares were purchased and no shares sold. The treasury shares
purchased during the year amount to 0.3% of the Company's share capital and the average acquisition
price is BGN 4,50 per share.
Shares
Equity, net of
treasury shares
Number
BGN '000
Balance at 1 January 2021
125 786 432
101 142
Treasury shares
(4 043 533)
(16 546)
Expense on treasury shares
-
(82)
Balance at 31 December 2021
121 742 899
84 514
Treasury shares
(424 188)
(1 919)
Balance at 31 December 2022
121 318 711
82 595
The Board of Directors is authorized to buy treasury shares under certain conditions, according to
the decisions of the GMS, held on 23 June 2010, of the EGMS from 30 November 2011, of the EGMS from
1 November 2012, of the EGMS from 28 February 2013 and of the EGMS from 23 February 2018.
Number and nominal value of the own shares held and the proportion of the capital they represent
“Sopharma” AD holds 13,479,188 treasury shares, representing 10% of the company's capital.
7. Existence of branches of the Company /Article 39, item 7 of the Accountancy Act/
“Sopharma” AD has no branches.
8. Use of financial instruments /Article 39, item 8 of the Accountancy Act/
Overall risk management focuses on the difficulties in predicting financial markets and minimizing
potential negative effects that may affect the financial performance and position of the Group.
Financial risks are currently identified, measured and monitored by various control mechanisms
introduced to determine adequate prices for the group's products and services and borrowed capital and
to adequately assess the market circumstances of the investments made by them and forms of
maintenance of the free liquid assets, without allowing unjustified concentration of risk.
Risk management is carried out on an ongoing basis by the management of the parent company
and respectively the management of the subsidiaries in accordance with the policy defined by the Board
of Directors. The Board of Directors has adopted basic principles for general financial risk management,
on the basis of which specific procedures have been developed for the management of individual specific
risks, such as currency, price, interest, credit and liquidity, and the risk of using non-derivative instruments.
20
Credit risk
Credit is the risk that the clients of the Group will not be able to pay fully and within the usual
time limits the amounts due from them under the trade receivables. Trade receivables are presented in
the statement of financial position in net amount after deducting the accrued impairment for doubtful
and bad debts. Such impairments are made where and when there are events identifying loss of
collectability under previous experience.
The Group has developed policies and procedures for assessing the creditworthiness of its
counterparties and setting credit rating and credit limits by group of clients.
Cash in the Group and the payment operations are concentrated in various premium banks. In the
distribution of cash flows between them, the management of the Company and the subsidiaries take into
account a number of factors, including the capital, security, liquidity, credit potential and rating of the
bank, etc.
Liquidity risk
The liquidity risk is expressed in the negative situation that the Group will not be able to meet
unconditionally all its obligations according to their maturity, including due to the presence of over-
inflation, and the indexation of trade accounts for companies operating in such an environment.
The Group generates and maintains a sufficient volume of liquidity. An internal source of liquidity
for the Group is the main business of its companies generating sufficient operating flows. External sources
of funding are banks and other permanent partners.
Risk of interest-bearing cash flows
In the structure of the Group's assets, interest-bearing assets are represented by the cash at
floating rate and the loans granted at a fixed interest rate. On the other hand, the borrowed funds of the
Group in the form of long-term and short-term loans are usually with variable interest rates. This
circumstance partly puts the cash flows of the Group in line with interest rate risk. The coverage of this
risk is achieved in two ways:
(a) optimizing sources of credit resources to achieve a relatively lower cost of borrowed funds;
(b) combined structure of interest rates on loans, which contains two components - fixed and
variable, the ratio between which and their absolute value can be achieved and maintained at a
favorable rate for the companies in the Group. The fixed component has a relatively low absolute
value and a large enough relative share in the total interest rate. This circumstance eliminates the
probability of a significant change in interest rates with a possible update of the variable
component. This also minimizes the probability of a change in the unfavorable direction of cash
flows.
The management of the companies in the Group together with the management of the Company
are currently monitoring and analyzing its exposure to changes in interest rates. Different scenarios of
refinancing, renewal of existing positions and alternative financing are simulated. Based on these
scenarios, the effect on financial result and equity is measured when changing with certain points or
percentages. For each simulation, the same assumption of interest rate change applies to all major
currencies. Calculations are made for significant interest-bearing items.
21
IV. Information under Article 247 and Art. 240b of the Commerce Act
1. Information under Art. 247 of the Commerce Act
Information concerning the course of activity and the condition of the Company and explanations
regarding the annual financial statements
Section II, item 2 describes the operations and the position of the Group and explains the annual
financial statements.
Remuneration received during the year by members of the Board of directors
The remuneration and other income of the key management and executive directors, the members
of the Board of directors and the managers of the Group's subsidiaries amount to BGN 3,325 thousand
(2021: BGN 6,614 thousand), including:
• current – BGN 3,001 thousand (2021: BGN 6,095 thousand);
• tantieme – BGN 324 thousand (2021: BGN 519 thousand).
The remuneration and other short-term income of the Board of directors of the Company for 2022
amounting to 1,214 thousand BGN (2021: BGN 1,256 thousand) are as follows:
• current – BGN 971 thousand (2021: BGN 969 thousand);
• tantieme – BGN 243 thousand (2021: BGN 287 thousand).
Acquired, held and transferred by the members of the Boards during the year shares and bonds of
the company
The Company's shares acquired, owned and transferred by the members of the Board of Directors in
2022 are as follows:
Members of the Board of
directors
31.12.2022
31.12.2021
Shares
Relative
share of
the
capital
%
Shares
Relative
share of
the
capital %
Acquired
shares in
2022
Transferred
shares in
2022
Change
Ognian Ivanov Donev
6 608
350
4.90%
6 608 350
4.90%
-
-
-
Vessela Lyubenova Stoeva
150
0.0001%
150
0.0001%
-
-
-
Ognian Kirilov Palaveev
-
-
187 520
0.14%
-
-
-
Alexander Viktorov
Tchaushev
262 442
0.19%
262 442
0.19%
-
-
-
Bissera Nikolaeva Lazarova
-
-
-
-
-
-
-
Ivan Venetskov Badinski
2 030
0.0015%
350
0.0003%
1 680
-
1 680
Simeon Ognianov Donev
195 450
0.14%
195 450
0.14%
-
-
The Company has no issued bonds.
22
Rights of members of the Board to acquire shares and bonds of the company
The Articles of Association of “Sopharma” AD do not contain any restrictions on the right of the
members of the Board of directors to acquire shares and bonds of the company.
Participation of members of the Board of directors in commercial companies as unlimited liability
partners, the holding of more than 25 percent of the capital of another company, as well as their
participation in the management of other companies or co-operatives, such as procurators, managers or
board members
Participation of the members of the Board of Directors by more than 25 per cent of the capital
of other companies:
Ognian Ivanov Donev has a direct / indirect significant share (over 25%) of the capital of the
following companies:
• “Donev Investments Holding” AD, UIC 831915121, with headquarters in Sofia, 12 Pozitano Str.
• “Telecomplect” AD, UIC 831643753, with headquarters in Sofia, 5 Lachezar Stanchev Str.
• “Sofprint Group” AD, UIC 175413277 with seat and headquarters: Sofia, 12 Pozitano Str.
• “Sofconsult Group” AD, UIC 175413245, with seat and headquarters: Sofia, 12 Pozitano Str.
• “Sopharma” AD, UIC 831902088, with seat and headquarters: 16 Iliensko Shose Str.;
• “Energoinvestment” AD, UIC 200929754, with a registered office in Sofia, 9 P. R. Slaveykov Square
• “Simba Private Kindergarten” EOOD, UIC 204683684, with seat and headquarters in Sofia, 16
Iliensko Shose Str.
• “Selso” EOOD, UIC 206522151, with headquarters in Sofia, 12 Pozitano Str.
Vessela Lyubenova Stoeva controls or owns directly/indirectly a significant share (more than 25%)
of the capital of the following companies:
• “VES elekroinvest systems” EOOD, UIC 201712700, with headquarters: Sofia, 9 P. R. Slaveykov
Square
• “Eco Solar Invest” OOD, UIC 201634905, with headquarters: Sofia, 48 Alabin Str.
• “Aquatex” OOD, UIC 203934379, with headquarters: Sofia, 9 P. R. Slaveykov Square
• “VLS” AD, UIC 175082980, with headquarters in Sofia, 9 P. R. Slaveikov Square.
Alexandar Victorov Tchaushev controls or owns directly/indirectly a significant share (more than
25%) of the capital of the following companies:
• “Alpha In” EOOD, UIC 131156322, with headquarters in Sofia, 1B Dimcho Debelianov Str.
• "Assa Asset Management" OOD, UIC: 131156297, with headquarters: Sofia, 1B DIMCHO
DEBELYANOV str.; Entrance A; Floor 3; App. 8.
Ivan Venetskov Badinski does not hold a direct / indirect significant share (over 25%) of the capital
of companies.
Bissera Nikolaeva Lazarova controls or owns directly/indirectly a significant share (more than
25%) of the capital of the following companies:
• “Consumpharm” OOD, UIC 121148366, with headquarters in Sofia, 80 Yanko Sakazov Blvd.
Participation of Board members in the management of other companies or cooperatives as
procurators, managers or board members:
23
Ognian Ivanov Donev participates in the managing/controlling body in the following companies:
• “Sopharma Trading” AD, UIC 103267194, with headquarters in Sofia, 5 Lachezar Stanchev Str. –
Chairman of the Board of Directors.
• “Donev Investments Holding” AD, UIC 831915121, with headquarters in Sofia, 12 Pozitano Str. –
Chairman of the Supervisory Board.
• “Telecomplect” AD, UIC 831643753, with address management in Sofia, 5 Lachezar Stanchev Str.,
Building A – Chairman of the Supervisory Board.
• “Doverie Capital” AD, UIC 130362127, with headquarters in Sofia, 82 Knyaz Dondukov Blvd. –
Member of the Supervisory Board.
• “Sopharma” AD, UIC 831902088, with seat and headquarters in Sofia, 16 Iliensko Shose Str. –
Мember of the Board of Directors and Executive Director.
Vessela Lyubenova Stoeva participates in the management/supervisory body for the following
companies:
• “VLS” AD, UIC 175082980, with headquarters in Sofia, 9 P. R. Slaveikov Square - Мember of the
Board of Directors.
• “VES Elekroinvest systems” EOOD, UIC 201712700, with headquarters: Sofia, 9 P. R. Slaveykov
Square – Manager.
• “Sopharma” AD, UIC 831902088, with seat and headquarters in Sofia, 16 Iliensko Shose Str. –
Deputy Chairman of the Board of Directors.
Alexandar Victorov Tchaushev participates in the management/supervisory body of the following
companies:
• “DK-Domostroene” AD, UIC 102148397, with registered office in Burgas, PO Box 8000, Pobeda
area – Мember of the Board of Directors.
• “Alpha IN” EOOD, UIC 131156322; with seat and headquarters: Sofia, 1b Dimcho Debelyanov Str.
– Manager.
• “Sopharma” AD, UIC 831902088, with seat and headquarters: Sofia, 16 Iliensko Shose Str. –
Member of the Board of Directors.
Ivan Venetskov Badinski participates in the management/supervisory body of the following
companies:
• “Sopharma” AD, UIC 831902088, with seat and headquarters: 16 Iliensko Shose Str. – Member of
the Board of Directors and Procurator.
Bissera Nikolaeva Lazarova participates in the management/supervisory body of the following
companies:
• Sopharma Imoti REIT, UIC 175059266, with seat and headquarters in Sofia, 5 Lachezar Stanchev
Str. – Member of the Board of Directors.
• “Sopharma” AD, UIC 831902088, with seat and headquarters in Sofia, 16 Iliensko Shose Str. –
Member of the Board of Directors.
Planned economic policy in the next year (Article 247, paragraph 3 of the Commerce Act)
The information is reflected in Section III, paragraph 4 of this Report - Future development of the
Company (Article 39, paragraph 4, of the Accountancy Act).
24
2. Information under art. 240b of the Commercial Law on the obligation of Board members to
notify in writing the Board of Directors or the Management Board when they or their related
parties conclude contracts with the company outside its usual activity or substantially deviate
from market conditions
In 2022 there are no contracts outside the ordinary business of the company or significantly deviate
from market conditions.
V. Information on Annex 2 to art. 10, item 1 of Regulation 2 of LPOS
1. Information given in value or quantitative terms about the main categories of goods, products and
/ or services provided, including their share in sales revenue of the Group in general and changes in
the reporting year
The information is included in Section III, item 2 of this document. The Group does not publish
quantitative information due to the specifics of the production.
2. Information about the revenues allocated by separate categories of activities, domestic and foreign
markets and information on sources for supply of materials needed for production of goods or the
provision of services with the degree of dependence on any individual seller or buyer / user, in case
their share exceeds 10 per cent of the expenses or sales revenue, provide information for each
person for his share in sales or purchases and links with the issuer
Information about the revenues allocated by separate categories of activities, domestic and
foreign markets are provided in Section III item 2 of this report.
For 2022, there are no customers whose relative share exceeds 10% of total sales revenue.
The raw materials used exceed 3,500 nomenclature numbers that have a dynamic structure and
diverse origin (synthetic, vegetable), aggregate (liquid, solid, gaseous).
The main share of raw materials is secured by imports. Sources of supply are validated
manufacturers, which is in line with regulatory requirements and aims to maintain consistency and
traceability in terms of quality.
The respective counterparty companies operate according to the requirements of GMP, GDP and
other industry standards. “Sopharma” AD is working with a number of Bulgarian and foreign suppliers as
their selection is done according to procedure developed in-house and aims to provide an alternative
security in the supply and competitive flexibility in trade relations. Non-negotiable conditions that
“Sopharma” AD implies in the negotiation process are: consistent quality, competitive prices and
attractive payment terms, rhythmic and timely deliveries which prevent the accumulation of inventories
on the one hand, while guaranteeing the regularity of the production process.
In 2022 none of the suppliers’ share exceeds 10% of the total cost of services rendered and
materials.
3. Information on significant transactions
The Group has adopted that significant transactions are those that result or may be reasonably
assumed to lead to favorable or unfavorable change in the amounts of 5 or more percent of sales revenues
or net profit. There are no such transactions.
25
4. Information regarding transactions between the issuer and related parties during the reporting
period, proposals for concluding such transactions, as well as transactions that are outside its usual
activity or substantially deviate from market conditions when, the issuer or its subsidiary is party,
indicating the value of the transactions, the nature of relatedness and any information necessary to
assess the impact on the financial position of the issuer
Information regarding the transactions between “Sopharma” AD and related parties during the
period is specified in Notes to the Annual Financial Statements “Related Party Transactions”. At the
Regular General Meeting of Shareholders, held on 3 June 2022, the following transactions were voted
between the Company and related parties:
Real estate lease agreement between "Sopharma" AD as lessee and "Sopharma Imoti" REIT as
lessor under the following basic conditions of the proposed transaction:
• Lease term: 10 /ten/ years;
• Maximum leased area: Office space in building A of the Complex, leased with a gross lettable area
of 4 637,46 sq.m., Parking spaces in the underground parking lot of the Complex (level -2) with a
lettable area of 1 051,68 sq.m. and the leased area of the warehouse in the amount of 30,49 sq.m.;
• Other conditions: The rental price is updated annually every January, starting from January 1 of
the year following the first calendar year of the rental period (ie starting from 2023), in accordance
with the Harmonized Index of Consumer Prices in the 27 countries of the EU (HICP EU-27) (and in
case of its elimination, the substitute index according to EUROSTAT) for all goods and services for
the previous year, published by EUROSTAT;
• Fee for services: to cover the costs of providing maintenance and management services for the
building at a fixed rate of 2,70 euros per sq.m. from the rental area of the office space, per month,
excluding VAT. The fee for services is indexed annually every January, starting from January 1 of
the year following the first calendar year of the rental period (ie starting from 2023), in accordance
with the Harmonized Index of Consumer Prices of the Bulgarian National Statistical Office
Institute;
• Other receivables: payment of consumables (electricity, heat and cold energy, water) needed in
the leased office space and warehouse for the benefit of utility service providers; payment of the
part of the local household waste fee for the Complex deducted from the gross rental area of the
office space, warehouse space and parking spaces for the benefit of the budget of the
Metropolitan Municipality - Izgrev region.
• The estimated value (without VAT) of the costs of the rental price and remuneration for services
under the transaction, fixed at the time of its conclusion, for the functionally separated office
spaces, for the entire maximum lease term of 10 years, for which it is proposed to conclude it, is
in the amount of BGN 17,989,299.60 (seventeen million nine hundred eighty-nine thousand two
hundred ninety-nine leva and sixty stotinki).
26
• The estimated value (without VAT) of the costs of the rental price under the transaction, fixed at
the time of its conclusion, for the functionally separated parking spaces, for the entire maximum
rental period of 10 years, for which it is proposed to conclude it, is in the amount of BGN 1 314
900. (one million three hundred fourteen thousand nine hundred leva).
• The estimated value (without VAT) of the costs of the rental price under the transaction, fixed at
the time of its conclusion, for the functionally separated parking spaces, for the entire maximum
lease term of 10 years, for which it is proposed to conclude it, is in the amount of BGN 32 142 (
thirty-two thousand one hundred forty-two leva).
“Sopharma” AD has not concluded transactions outside of its usual activities or that substantially
deviate from the market conditions.
The group has not concluded any transactions outside of its usual activities or that substantially
deviate from the market conditions.
5. Information about events and indicators unusual for the issuer that have a significant impact on its
activity and realized income and expenses; assessment of their impact on the current year results
In 2022 there were no events and indicators of unusual nature for the Group.
6. Information on off-balance sheet transactions - nature and business purpose, the financial impact
of transactions on the activity, if the risks and benefits of these transactions are material to the
issuer and the disclosure of this information is essential for assessing the financial position of the
issuer
The contingent obligations took by the Group as at 31 December 2022 are stated in the annual
financial statements in the note "Contingent Liabilities and Commitments".
7. Information on shares of the issuer, its major investments in the country and abroad (in securities,
financial instruments, intangible assets and real estate), as well as investments in equity securities
outside its group of companies under Accountancy Act and the sources /methods of financing
The information on shareholdings and major investments, domestic and foreign, of “Sopharma”
AD are listed in the Notes to the annual financial statements - "Investments in subsidiaries", "Other long-
term capital investments" and "Investments in associates". Information regarding investments in
intangible assets and real estate is presented in the Notes “Intangible assets”, “Property, plant and
equipment” and “Investment property”.
8. Information about the concluded by the issuer, its subsidiary or parent company in their capacity as
borrowers, loan contracts specifying the terms and conditions, including the deadlines for
repayment as well as information about guarantees and commitments
The information on concluded by “Sopharma” AD and its subsidiaries loan agreements are listed
in the notes to the annual consolidated financial statements "Long-term bank loans" and "Short-term bank
loans."
27
9. Information about the concluded by the issuer, its subsidiary or parent company in their capacity of
lenders, loan agreements, including the provision of guarantees of any kind, including related
parties, and the specific terms, including the deadlines for payment and the purpose for which they
were granted
Long-term loans to related parties:
• Recipient - Doverie Invest EAD; Contract amount - BGN 83,400 thousand; interest rate –
3.00%; maturity – 31.12.2025; balance as of 31.12.2022 – BGN 51,147 thousand;
• Recipient - "Industrial Holding Doverie" AD; Contract amount – BGN 10,000 thousand; interest
rate – 4.36%; maturity – 31.12.2024; balance as of 31.12.2022 – BGN 10,040 thousand;
• Recipient – “Doverie United Holding” AD; Contract amount – BGN 2,000 thousand; interest
rate – 3.09%; maturity – 31.12.2024; balance as of 31.12.2022 – BGN 2,011 thousand.
Long-term loans to related parties were granted to assist in financing the activities of these
companies for common strategic objectives. They are secured by pledges of securities (shares) and
promissory notes.
Long-term loans granted to third parties:
• Recipient – Sopharmacy MC; Contract amount – EUR 3000 thousand; interest rate – 3.05%;
maturity – 29.06.2023; balance as of 31.12.2022 – BGN 0 thousand.
The long-term loans provided to third parties are for the purpose of supporting the financing of
activities of these enterprises for common strategic goals. They are secured by pledges of securities
(shares), pledges of machinery and equipment and real estate mortgages.
Short-term loans to related parties:
To other related parties:
• Beneficiary - Doverie Capital AD; Contract amount - BGN 4,000 thousand; interest rate –
3.33%; maturity – 31.12.2023; balance as of 31.12.2022 – BGN 4,144 thousand;
• Recipient - Doverie Grizha EAD; Contract amount - BGN 10,997 thousand; interest rate –
3.10%; maturity – 31.12.2023; balance as of 31.12.2022 – BGN 8,512 thousand.
To joint ventures:
• Recipient - "Momina Krepost" AD; Contract amount - BGN 3,500 thousand; interest rate –
3.50%; maturity – 31.12.2023; balance as of 31.12.2022 – BGN 0 thousand.
Short-term loans granted to related parties are to help finance the activities of these
companies for achieving their strategic purposes. They are secured by pledges of shares, securities and
promissory notes.
Information on the loans of the subsidiaries of “Sopharma” AD will be available in the
consolidated financial statements of the Group.
The commercial loans provided by “Sopharma” AD to third parties are as follows:
• Recipient – "Pharmaplant" AD; Contractual amount BGN 4,184 thousand; interest rate – 4.30%;
28
maturity – 31.12.2023; balance as at 31.12.2022 – BGN 187 thousand;
• Recipient – "Pharmaplant" AD; Contractual amount BGN 949 thousand; interest rate – 4.70%;
maturity – 31.12.2023; balance as at 31.12.2022 – BGN 72 thousand;
• Recipient – Sopharmacy MC; Contract amount - 695 thousand euros; interest rate – 3.05%;
maturity – 31.12.2023; balance as of 31.12.2022 – BGN 1,568 thousand;
• Recipient – Sopharmacy MC; Contract amount – 3,000 thousand euros; interest rate – 3.05%;
maturity – 31.12.2023; balance as of 31.12.2022 – BGN 6,490 thousand;
The loans granted to third parties are for the purpose of supporting the financing of activities
of these enterprises for common strategic goals. They are secured by pledges of securities (shares).
10. Information on the use of funds from the issuance of new issue of securities during the reporting
period
In 2022, there was no new issue of securities.
11. Analysis of the relationship between the financial results reflected in the financial statements for
the financial year and earlier published forecasts for these results
There are no published forecasts of financial results.
12. Analysis and evaluation of the policy on the management of financial resources, including the
ability to meet its obligations, possible threats and measures that the issuer has taken or will take
to resolve them
The management of the parent company and respectively the managements of the subsidiaries
currently control the collection of receivables, the implementation of financial ratios of banking contracts
and ensure regular servicing of their obligations.
Financial risk management is fully disclosed in the "Financial Risk Management" as part of the
consolidated financial statements of the Company.
13. Assessment of the feasibility of investment intentions, indicating the amount of available funds
and possible changes in the financing structure of this activity
The planned investment program for 2023 includes investments of BGN 11 million for the
acquisition of lands, buildings, machinery, equipment and software.
Sources of funding are its own funds from regular business. The Company is not experiencing
difficulties in carrying out its investment intentions and payments for operating activity thanks to the
generated positive to cash flow and good liquidity.
14. Information about changes in the reporting period in the basic principles of management of the
issuer and its group of companies under the Accounting Law
During the reporting period there were no changes in the main management principles of
“Sopharma” AD and its economic group.
29
15. Information about the main characteristics applied by the issuer in the process of preparing the
financial statements, internal control system and risk management
The information is provided in item 3 of the Corporate Governance Declaration pursuant to Art.
100n para 8 of LPOS, which is a separate report, published together with the management report.
16. Information about changes in management and supervisory boards during the accounting year
During the reporting period, there were no changes in the management and supervisory bodies
of “Sopharma” AD.
17. Information on the amount of remuneration, rewards and / or benefits of each of the members of
the management and supervisory bodies for the financial year, paid by the issuer and its
subsidiaries, regardless of whether they have been included in the expenses of the issuer, or arising
from profit distribution, including:
“Sopharma” AD prepares a separate report on the implementation of the remuneration policy of
the members of the Board of Directors.
18. Information on held by members of management and supervisory bodies, the procurators and the
senior management of the issuer shares, including the sha res held by each of them individually and
as a percentage of shares of each class and provided by the issuer options on its securities - type
and amount of securities on which options have been set, exercise price of the options, purchase
price, if any, and the term of the options.
Information about the shares held by the members of the Board of d irectors of “Sopharma” AD is
indicated in Section IV of this report - information under Art 247 par. 2 from Commerce Act.
Members of the Audit Committee
31.12.2022
31.12.2021
Rel. share
of capital
%
Number of
shares
Rel. share
of capital %
Number of
shares
Rel. share
of capital
%
Tzvetanka Zlateva
-
-
-
-
-
Vasil Naidenov
386
0.000003%
386
0.000001%
-
Kristina Atanasova - Eliot
-
-
-
-
-
By Decision № 804 - Е of 4 November 2021, the Financial Supervision Commission approved a
Prospectus for an issue in the amount of 44,932,633 dematerialized, freely transferable and registered
warrants, with an issue value of BGN 0.28, issued by “Sopharma” AD under Art. 112 b, para. 11 of the
LPOS. The underlying asset of the issued warrants are future ordinary, registered, dematerialized, freely
transferable shares, giving the right to one vote in the General Meeting of Shareholders, which will be
issued by the company on condition only in favor of the owners of warrants. Each subscribed warrant
entitles its holder to subscribe for one share of a future issue. Holders of warrants may exercise their right
to subscribe for the respective number of shares from a future increase in the company's capital within 3
years at a fixed price of BGN 4.13 per share. The right to exercise arises from the date on which the issue
of 44 925 943 warrants was registered with the "Central Depository" AD – 11 January 2022. The warrants
are admitted to trading on the BSE main market of the Bulgarian Stock Exchange, starting from 25 January
30
2022.
Member of the Board of Directors
31.12.2022
Number of
warrants
Rel. share of total
number of subscribed
warrants %
Ognian Ivanov Donev
12 508 500
27.84%
Vessela Lyubenova Stoeva
-
-
Ognian Kirilov Palaveev
-
-
Alexander Victorov Tchaushev
-
-
Bissera Nikolaeva Lazarova
-
-
Ivan Venetskov Badinski
-
-
Simeon Ognianov Donev
-
-
As of 31 December 2022 no member of the Audit Committee has warrants.
19. Arrangements (including after the end of the financial year) as a result of which future changes may
occur in the holding of shares or bonds by current shareholders or bondholders
There are no such arrangements.
20. Information about pending legal, administrative or arbitration proceedings relating to liabilities or
receivables of the issuer of at least 10 percent of its equity; if total liabilities or receivables of the
issuer in all proceedings exceeds 10 per cent of its equity, provide information about each case
separately
There are no pending legal, administrative or arbitration proceedings relating to liabilities or
receivables.
21. Information about the Investor Relations Director, including telephone number and
correspondence address:
Director of Investor Relations of “Sopharma” AD is Pelagia Viatcheva, tel. +359 2 8134 523,
correspondence address - Sofia, 5 Lachezar Stanchev Str., Building A, fl. 11.
VI. Information Annex 3 to Article 10, paragraph 2, item 4 of Ordinance 2 of LPOS
1. Structure of the capital of the Company, including securities not admitted to trading on a
regulated market in Bulgaria or another Member State, indication of the different classes of
shares, the rights and obligations of each class of shares and the portion of the total capital
represented by each class
The total number of issuers by “Sopharma” AD as at 31 December 2022 is 134 797,899 with a
nominal value of BGN 1 per share. All issued shares are registered, dematerialized, ordinary and indivisible,
in accordance with the Articles of Association of the company. All issued shares are of one class. Each
31
share gives the right to one vote in the General Meeting of Shareholders, the right to a dividend and a
liquidation share, proportional to the nominal value of the share.
Structure of the capital of “Sopharma” AD as at 31 December 2021:
• Physical persons: 6 162 – 13 754 896 shares – 10.20%
• Legal persons: 130 – 121 043 003 shares – 89.80%
The capital of the Company may be increased by a decision of the General Meeting of Shareholders
adopted by majority as required by law. In case of capital increase, each Shareholder has the right to
acquire shares of the new emission, which correspond to their share in the capital before the increase. A
shareholder cannot participate in person or by proxy in voting related to:
ü Claims against them.
ü Taking action or refusal to act, related to the fulfillment of obligations to the Company.
ü Taking of decision under art. 114, par. 1 of LPOS, in case they are an interested party within
the meaning of LPOS.
2. Information regarding the direct and indirect ownership of 5 percent or more of the voting
rights at the General Meeting of the Company, including details of the Shareholders, the size of
their shareholding and the type of shareholding
Shareholders holding more than 5 percent of the Company’s capital as at 31 December 2022 are as
follows:
SHAREHOLDERS
Number of
shares
% of the
capital
“Donev Investment Holding” AD, UIC:
831915121, Sofia, 12 Positano Str.
37 600 000
27.89%
“Telecomplect invest” AD, UIC:
201753294, Sofia, 9 Slaveykov Square
27 881 287
20.68%
“Sopharma” AD, UIC: 831902088, Sofia,
16 Iliensko Shose Str.
13 479 188
10.00%
CUPF “Allianz Bulgaria”, UIC: 130477720,
Sofia, 42 Damian Gruev Str.
7 054 547
5.23%
"Telso" AD, UIC: 131176385, Sofia, 12
"Positano" St.
6 935 350
5.14%
3. Information about shareholders with special control rights
The Articles of Association of “Sopharma” AD do not provide special control rights.
4. Agreements between Shareholders which are known to the Company and which may lead to
restrictions on the transfer of shares or voting right.
32
There are no such agreements.
5. Significant contracts of the Company that take effect, are amended or terminated due to a
change in control of the company in a mandatory tender offer and the effects thereof, except
where disclosure of this information may cause serious damage to the company; exemption
under the preceding sentence shall not apply in cases where the company is obliged to disclose
information under the Law
There are no such contracts.
Date: 26 April 2023 Ognian Donev, PhD
Sofia city /Executive Director/
OGNIAN
IVANOV
DONEV
Digitally signed by
OGNIAN IVANOV
DONEV
Date: 2023.04.26
19:25:24 +03'00'
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1
DECLARATION
for corporate governance
according to art. 40 of the Accounting Act and art. 100n, para 8 of LPOS
of SOPHARMA GROUP
The undersigned Ognian Ivanov Donev, in his capacity as an Executive Director of “Sopharma” AD,
declare the following:
I. Information on compliance, as appropriate, with the Bulgarian Corporate Governance Code
prepared by the National Corporate Governance Commission (NCGC), approved by the Deputy
Chairman of the Financial Supervision and Corporate Governance Commission, which is applied by
Sopharma Group in addition to the Code.
The public companies in Sopharma Group adopted and continue to comply with the established
in October 2007, with subsequent amendments in 2012, 2016 and 2021, National Code of Corporate
Governance (NCCU), approved by the Deputy Chairman of the Financial Supervision Commission.
Good corporate governance is a set of balanced relationships between the Management bodies
of the Group, its shareholders and all stakeholders - employees, business partners, creditors of the
company, potential and future investors and society as a whole.
Along with the principles of recommendatory nature, public companies in Sopharma Group have
established a certain set of requirements for corporate governance, compliance with which is mandatory
for their management bodies, namely:
• Protection of shareholders' rights;
• Ensuring fair treatment of all shareholders, regardless of the number of shares held by
them;
• Recognition of the rights of the interested parties and promotion of the cooperation
between the companies and the interested parties;
• Ensuring timely and accurate disclosure of information on all matters related to the
companies, including the financial condition, results, ownership and management of the companies;
• Supporting the strategic management of the companies, control over the activities of the
management and its accountability to the company and the shareholders.
The Corporate Governance Code is applied on a "comply or explain" basis. This means that its
recommendations are complied with, and whether or not there is a deviation from them, the
managements of the public companies in the Group periodically disclose information on corporate
governance of the nature and scope provided for in the NCGC, namely:
• The actions of their managements are aimed at establishing the principles of good
corporate governance, increasing the confidence of shareholders, investors and persons interested in the
management and activities of the Group.
• The managements of the public companies in the Group complies with Program for
corporate governance, which is consistent with existing regulations, internationally recognized standards
of good corporate governance and the National Corporate Governance Code.
• The managements of these companies in the Group approves the Disclosure Policy in
accordance with the legal requirements and the Articles of Association.
“Sopharma” AD participates in the establishment of the National Corporate Governance
Commission.
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2
1. MANAGEMENT OF THE PARENT COMPANY “SOPHARMA” AD - BOARD OF DIRECTORS
1.1. Functions and responsibilities
The Board of Directors of “Sopharma” AD manages the Company independently and responsibly
in accordance with the established vision, goals and strategies of the Company and the interests of the
shareholders. The members of the Board of Directors give a guarantee for their management in the
amount of their quarterly gross remuneration.
During their term of office, the members of the Board of Directors shall be guided in their activities
by the generally accepted principles of integrity, loyalty, managerial and professional competence. The
Board of Directors complies with the Code of Ethics of the Company's employees, adopted by the Board
of Directors on March 26, 2007.
The management of “Sopharma” AD, represented by the Board of Directors, also:
• monitors the results of the activities in the Parent Company and the Group and, if
necessary, initiates changes in the management;
• treats all shareholders equally, acts in their interest and with the care of a good trader;
• strives to follow the economic, social and environmental priorities of the Company;
• encourages the implementation and monitors the compliance of the subsidiaries with the
adopted principles of sustainable development at group level, also promotes the establishment of a
culture of sustainable development;
• ensures and controls the integrated functioning of the accounting and financial reporting
systems;
• ensures and controls the construction and operation of a risk management system, incl.
for internal control and internal audit;
• is responsible for the creation and reliable functioning of the financial information system
of the Parent Company and the Group;
• gives the guidelines, approves and controls the implementation of: the business plan of
the Parent Company and the Group, essential transactions and etc.;
• reports on its activities to the General Meeting of Shareholders, preparing an annual
report and submitting it for approval to the GMS.
1.2. Election and dismissal of members of the Board of Directors
The General Meeting of Shareholders elects and dismisses the members of the Board of Directors
of “Sopharma” AD, in accordance with the law and the Articles of Association of the Company, observing
the principles of continuity and sustainability of the work of the Board of Directors. All members meet the
legal requirements for holding office.
In case of proposals for election of new members of the Board of Directors, the principles of
compliance of the competence of the candidates with the nature of the activity of the Parent Company
and the Group.
1.3. Structure and competence
The number of members and the structure of the Board of Directors are determined in the Articles
of Association of the Company. The company is managed and represented by a Board of Directors, which
consists of five individuals meeting the requirements of Article 234 of the CA and Article 116a, paragraph
2 of the Law on public offering of securities.
The composition of the Board of Directors elected by the General Meeting is structured in a way
that guarantees the professionalism, impartiality and independence of the decisions and actions of its
members in connection with the management of the Group.
The Board of Directors shall ensure a proper distribution of tasks and responsibilities among its
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3
members. The main functions of the members of the Board of Directors and the number of independent
members is enshrined in the Articles of Association of the Company. The main function of the independent
directors is to control the actions of the executive management and to participate effectively in the work
of the Company in accordance with the interests and rights of shareholders. There is one independent
member of the Board of Directors of “Sopharma” AD.
The competencies, rights and obligations of the members of the Board of Directors follow the
requirements of the law, the Articles of Association and the standards of good professional and
managerial practice.
The members of the Board of Directors of “Sopharma” AD have appropriate knowledge and
experience, which is required by their position. After their election, the new members of the Board of
Directors should be familiar
with the main legal and financial issues related to the activities of the Group.
The company stimulates the raising of the qualification of the members of the Board of Directors.
The members of the Board of Directors have the necessary time to perform their tasks and duties.
The Articles of Association of the Company do not specify the number of companies in which the members
of the Board of Directors may hold managerial positions, in order not to limit their activities.
The election of the members of the Board of Directors of the Parent Company is done through a
transparent procedure, which provides, among other things, timely and sufficient information about the
personal and professional qualities of the candidates for members. The number of consecutive terms of
office of the members of the Board of Directors ensures the effective operation of the Parent Company
and compliance with legal requirements. According to the Articles of Association of the Parent Company,
the members of the Board of Directors may be re-elected without restriction.
1.4. Remuneration of the members of the Board of Directors
The Management of all public companies of the Group have prepared and implements a
Remuneration Policy, which is adopted by the General Meeting of Shareholders. The Remuneration Policy
has been developed in accordance with Ordinance № 48 of March 20 2013 of the Financial Supervision
Commission and the Law on public offering of securities. The amount and structure of the remunerations
are determined by the General Meeting.
In accordance with the legal requirements and good practice for corporate governance, the
amount and structure of remuneration take into account:
• The obligations and the contribution of each member of management bodies in the
activity and the results of the respective company. The members of the management bodies receive a
permanent remuneration in the form of an amount determined by the General Meeting of Shareholders,
paid under the terms and conditions of the management contracts concluded between them and the
Company.
• The possibility for selection and retention of qualified and loyal members of the
management bodies.
• The need for compliance of the interests of the members of the management bodies, the
long-term interests and the sustainable development of the companies. The remunerations of the
members are formed on the basis of the results of the company's activity and is in accordance with the
business strategy, goals, values and long-term interests of the Group.
• The executive member of the Board of Directors receives a permanent remuneration in
the form of an amount determined by the General Meeting of Shareholders, paid under the terms and
conditions of the management contract concluded between him and the Company.
• The remunerations and bonuses of the members of the management bodies and of the
Executive Director of the Company must be determined by the General Meeting of Shareholders.
According to the Articles of Association of the Parent Company, in case of a positive financial result /profit/
and by decision of the General Meeting, the Executive Director is entitled to receive a one-time
remuneration of up to one percent of the net profit of the Company.
• The remunerations and bonuses of the members of the management bodies and of the
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4
Executive Director of the Company must be determined by the General Meeting of Shareholders.
• The remuneration of the independent directors is only permanent without additional
incentives and reflects their participation in meetings, as well as the implementation of their tasks to
control the actions of the executive management and to participate effectively in the work of the
company.
So far, the executive member has not been granted shares, stock options or other financial
instruments.
By qualified majority, the management bodies may decide to determine the range of employees,
among which an amount of up to 2% of the value of the Parent Company's profit for each financial year
shall be distributed as a bonus. The same is possible only in the presence of a decision of Shareholders to
determine the specific amount of the bonus on the General Meeting, which adopts the relevant audited
annual financial statements and if there is a positive financial result /profit/.
The disclosure of information about the remuneration of the members of the Board of Directors
is in accordance with the legal norms and the Articles of Association of the public companies in the Group
and the Parent Company.
Shareholders have easy access to the adopted company policy for determining the remuneration
and bonuses of the members of the Board, as well as to information on the annual remuneration and
additional incentives received by them. Information on the remuneration of the members of the Board of
Directors is presented in the annual financial report, in the Report on the implementation of the
Remuneration Policy of the Board of Directors and is published on the websites of the companies.
1.5. Conflict of interests
The members of the management bodies shall endeavor to avoid and prevent any actual or
potential conflict of interest.
The procedures for avoiding and disclosing conflicts of interest are regulated in the Articles of
Association of the companies, internal document and rules.
The members of the management bodies have an obligation to immediately disclose conflicts of
interest and to provide the shareholders with access to information on transactions between the
companies and its subsidiaries and members of management bodies or related persons.
Every potential conflict should be disclosed to management bodies.
A potential conflict of interest exists when the company intends to enter into a transaction with
a legal entity in which a member of the management body or related persons have a financial interest.
Art. 114 of the LPOS describes in detail the hypotheses under which the persons who manage and
represent a public company, including the persons - representatives of a legal entity that is a member of
the management body of the public company, without being expressly authorized by the general meeting
of the public company, cannot undertake certain transactions. Article 114 of the Law on public offering of
securities and subsequent, provide an opportunity for shareholders to review and approve in advanc e
transactions involving interested parties and related parties in order to avoid conflicts of interest and
violate the rights of shareholders.
1.6. Committees
The work of the management body is supported by committees, as the management body
determines the need for their establishment in accordance with the specifics of the company.
In accordance with the requirements of the current legislation and on the basis of the criteria
determined by it, the management body proposes to the General Meeting of Shareholders of the
company to elect an audit committee that meets the legal requirements and specific needs of the
company.
Committees are set up on the basis of a written structure, scope of tasks, functioning and
reporting procedures.
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5
The Audit Committee of “Sopharma” AD consists of three people, with a 3-year term determined
by the GMS. The members of the Audit Committee meet the requirements of the Independent Financial
Audit Act.
2. INDEPENDENT FINANCIAL AUDIT AND INTERNAL CONTROL
The Audit Committee of “Sopharma” AD and its members, in their capacity as persons in charge
of general management, provide supervision of internal audit activities and monitor the overall
relationship with the external auditor, including the nature of non-audit services provided by the Group's
auditor.
The management of “Sopharma” AD, assisted by the Audit Committee, motivates in writing before
the General Meeting its proposal for selection of an auditor, guided by the established requirements for
professionalism.
The management of the companies in the Group ensures compliance with the applicable law
regarding the independent financial audit.
A rotation principle is applied in the proposals and selection of an external auditor. The auditors
are selected by the GMS for each financial year.
The companies of Sopharma Group have a system in place for internal control, which includes
identifying the risks associated with the activities of the Company and supporting their effective
management. It also ensures the effective functioning of reporting and disclosure systems.
3 . PROTECTION OF SHAREHOLDERS 'RIGHTS
The management of the public companies in Sopharma Group guarantees equal treatment of all
shareholders, including minority and foreign shareholders and protects their rights, as well as facilitates
their exercise within the limits allowed by applicable law and in accordance with the Articles of Association
of the companies. The managements provide information to all shareholders about their rights, financial
results of the company and corporate events through an information disclosure system and the company's
website.
3.1. General meeting of the shareholders
Information on the rules according to which general meetings of shareholders are convened and
held, including voting procedures, is available to all shareholders. The corporate managements of the
public companies in Sopharma Group provide sufficient and timely information on the date and place of
the General Meeting, as well as complete information on the issues to be considered and resolved at the
meeting.
During the General Meeting, the management of the respective public company of the Group
ensures the right of all shareholders to express their opinion and ask questions.
• Shareholders with voting rights have the opportunity to exercise their voting rights at the
General Meeting of the public company in person or through representatives, as well as by
correspondence or electronically. The procedure for the participation of the shareholders in the General
Meeting is announced in the Invitation.
• The management maintains a database of contacts of its shareholders holding 5 or more
than 5% of the company's capital, which allows sending direct messages to them or to a specific person.
• The management exercises effective control by creating the necessary organization for
the voting of the authorized persons in accordance with the instructions of the shareholders or in the
ways permitted by law.
• The management organizes and conducts regular and extraordinary General Meetings of
the company's shareholders in accordance with statutory procedures that ensure equal treatment of all
shareholders, including minority and foreign, and the right of each shareholder to express its views on the
agenda of the General Meeting.
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6
• The management determine the procedures for holding the General Meeting of
Shareholders in a manner that does not complicate or increase the cost of voting unnecessarily.
• The management takes actions to encourage the participation of shareholders in the
General Meeting of Shareholders, incl. by providing the opportunity for remote presence through
technical means (including the Internet) in cases where this is possible and necessary, and does not
contradict the NCCU.
• The managements of the public companies in Sopharma Group believe that the
prerequisites for sufficient transparency in relations with investors, financial media and capital market
analysts have been created.
• The processes and procedures for holding General meetings of Shareholders guarantee
equal treatment of all shareholders, including minority and foreign shareholders, and protect their
interests.
All members of the Managements try to attend the General Meetings of the shareholders of the
Company.
3.2. Materials of the General Meeting of Shareholders
The materials related to the General Meeting of Shareholders are available to the shareholders
from the day of announcing the invitation to convene it in the Commercial Register. They are submitted
to the Financial Supervision Commission and are published on the company's website
, as well as in the
relevant media, at least 30 days before the date of the General Meeting and upon request are provided
free of charge to shareholders.
The texts in the written materials related to the agenda of the General Meeting are specific and
clear and do not mislead the shareholders. All proposals regarding major corporate events are presented
as separate items on the agenda of the General Meeting, incl. the profit distribution pro posal.
The public companies of Sopharma Group maintain on their websites a special section on the
rights of shareholders and their participation in the General Meeting of Shareholders.
The managements of these companies assists the shareholders entitled under the current
legislation to include additional issues and to propose decisions on issues already included in the agenda
of the General Meeting.
3.3. The managements of the public companies in the Group guarantee the right of the
shareholders to be informed about the decisions taken by the General Meeting of Shareholders.
The minutes of the General meetings of shareholders are published within the statutory period,
subject to the requirements for maximum publicity and transparency of information provided, its
simultaneous publication, using sufficiently accessible platforms for information disclosure, including its
own website. All materials from the held general meetings of the shareholders shall be kept accessible to
the shareholders and all interested parties for a period determined in the LPOS.
In 2022 the public companies of Sopharma Group held General Meetings of Shareholders as
follows: “Sopharma” AD held one GMS, “Sopharma Trading” AD held one GMS, “Momina Krepost” AD
held one GMS, “Sopharma Imoti” REIT held three GMS and “Doverie Obedinen Holding” AD held one GMS.
The Board of Directors considers that preconditions have been created for sufficient transparency
in the relations with investors, financial media and capital market analysts.
3.4. Equal treatment of shareholders of one class
All shareholders in one class are treated equally.
All shares within one class give equal rights to shareholders of the same class.
3.5. The management of the public companies in Sopharma Group guarantee the provision of
sufficient information to investors regarding the rights granted by all shares of each class before their
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7
acquisition.
3.6. Consultations between shareholders on fundamental shareholder rights
Within the limits allowed by the current legislation and in accordance with the provisions of the
Articles of Association of the respective companies, the managements of the public companies in
Sopharma Group do not prevent the shareholders from consulting each other on issues related to their
basic shareholder rights allows the commission of abuses.
3.7. Shareholder transactions with controlling rights and abusive transactions
The managements of the public companies in Sopharma Group do not allow the implementation
of transactions with shareholders with controlling rights, which violate the rights and/or legitimate
interests of other shareholders, including under the terms of negotiations with itself.
3.8. Remuneration policy
The management bodies of the public companies in the Group prepare an Report on the
implementation of the remuneration policy of the members of the Board of Directors in 2022. The report
reveals the way in which the Remuneration Policy is implemented, paying special attention to avoiding
the creation of incentives for excessive risk-taking, conflict of interest or other behavior leading to adverse
consequences. The amount and structure of the remunerations are determined by the General Meeting
of the company.
4 . DISCLOSURE OF INFORMATION
The managements of the public companies in the Group approve the Policy for disclosure of
information in accordance with the legal requirements and the Articles of Association.
In accordance with the adopted information disclosure policy, managements establish and
maintain a disclosure system.
The information disclosure policy guarantees equality of the addressees of the information
(shareholders, stakeholders, investment community) and does not allow misuse of inside information and
manipulation of the market of financial instruments.
The managements of the public companies in Sopharma Group also:
• ensure that the disclosure system provides complete, timely, accurate and
comprehensible information that allows for objective and informed decisions and assessments;
• promptly disclose the capital structure of the c ompanies and agreements that lead to the
exercise of control in accordance with its rules for disclosure of information;
• within the limits of the current legislation and in accordance with the provisions of the
Articles of Association of the companies ensure that the rules and procedures under which the acquisition
of corporate control and extraordinary transactions such as mergers and sale of significant assets are
clearly and timely disclosed;
• approve and control the observance of internal rules for preparation of the annual and
interim reports and the procedure for disclosure of information;
• have adopted a Disclosure Policy, which ensure the timely disclosure of any material
periodic and incidental information about the companies, their managements, their corporate
managements, their operational activities, their shareholder structure;
• disclose non-financial information on an annual basis in accordance with national law and
applicable European law. The non-financial statement is part of the annual report, which includes
information on how and to what extent the company's activities can be classified as environmentally
sustainable, such as: what part of its turnover is due to products and services related to economic
activities which qualify as environmentally sustainable; what part of its capital expenditure, where
applicable, and what part of its operating costs are related to assets or processes related to economic
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8
activities that qualify as environmentally sustainable.
As part of the disclosure system, Sopharma Group maintain a website with approved content,
scope and periodicity of the disclosed information. The Group`s website is: www.sopharmagroup.com.
The information disclosed through the Group`s website includes:
Ø basic commercial and corporate information identifying the Group;
Ø up-to-date information on the shareholder structure;
Ø the rules and the adopted policies related to the activities and functioning of the Group;
Ø information on the structure and composition of the management and control bodies of
the Parent Company, as well as basic information on their members, including information on their
committees;
Ø financial statements for the last 10 years;
Ø the materials for the forthcoming general meetings of the shareholders of “Sopharma”
AD, as well as additional ones, received by law;
Ø information on the decisions taken by the general meetings of shareholders for at least
the last three years, incl. information on the dividends distributed by the Group for this period;
Ø information for auditors;
Ø information about upcoming events;
Ø information on issued shares and other financial instrument s;
Ø important information related to the activities of the Group;
Ø information on the rights of shareholders, incl. sufficient information on the right of
shareholders to request the inclusion of issues and to propose decisions on issues already included in the
agenda of the General Meeting under Article 223a of the Commerce Act;
Ø contact information with the Investor Relations Director of “Sopharma” AD.
The Group also maintains foreign language versions of the corporate website with similar content
in the following languages: English, Russian and Polish.
The Group periodically discloses information about corporate governance. Disclosure of corporate
governance information is in accordance with the "comply or explain" principle.
The managements of the public companies in Sopharma Group ensure the disclosure of any
material periodic and incidental information about the Group, through channels that provide equal and
timely access to relevant information by users.
In 2022 the public companies in the Group disclose the publicly regulated information by
providing it to the Financial Supervision Commission and to the public. Regulated information is disclosed
to the public in a way that ensures it reaches the widest possible rang e of people at the same time, and
in a way that does not discriminate against them. This is done through the X3NEWS information system,
the Investor.bg information system, as well as on the Warsaw Stock Exchange, including through the
Polish Information Agency (PAP).
5. STAKEHOLDERS. SUSTAINABLE DEVELOPMENT.
Sustainable development is the achievement of a balance between social and environmental
principles, such as socially justified and environmentally friendly economic development. It aims to meet
the needs of the current generation without compromising the ability of future generations to meet their
own needs.
The Corporate Managements are committed to establishing specific actions and policies regarding
the sustainable development of the companies, including the disclosure of information related to climate
and social aspects of their activities.
The Managements ensure effective interaction with stakeholders. This category includes certain
groups of persons who are directly affected by the Group and who in turn can influence its activities, incl.
suppliers, customers, employees, creditors, public pressure groups and other employees. The companies
of the Group identify the stakeholders in relation to its activities based on their degree and areas of
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9
influence, role and attitude to its sustainable development.
In its Disclosure Policy, the managements comply with legal requirements and the principles of
transparency, accountability and business ethics.
The managements of the companies guarantee sufficient information to all interested parties
about their legally established rights.
In accordance with this policy, the management of the companies in the Group develop specific
rules for taking into account the interests of stakeholders, which rules ensure their involvement in
resolving certain issues requiring their position. These rules guarantee the balance between the
development of the companies in the Group and the economic, social and environmentally friendly
development of the environment in which it operates.
Corporate managements of the companies in Sopharma Group maintain effective relationships
with stakeholders. Periodically, in accordance with the legal norms and the good international practice
for disclosure of non-financial information, the Group informs about economic, social and environmental
issues concerning the interested parties, such as: fight against corruption; work with employees, suppliers
and customers; the social responsibility of the Group; environmental protection and human rights
violations.
The managements of the companies in the Sopharma Group guarantee the right for timely and
regular access to relevant, sufficient and reliable information about the Group when the interested parties
participate in the corporate governance process.
6. INSTITUTIONAL INVESTORS, FINANCIAL INSTRUMENTS MARKETS AND OTHER
INTERMEDIARIES
The corporate managements of the public companies in the Sopharma Group ensure effective
interaction of the companies with their shareholders - institutional investors, as well as with the regulated
markets of financial instruments and investment intermediaries on these markets.
Managements of the companies use the services of investment intermediaries whose
recommendations or actions are based on market information and principles. The same applies
accordingly to the operators of markets on which financial instruments issued by the Company are traded.
“Sopharma” AD encourages the involvement of investment intermediaries and institutional
investors in defining corporate governance policies and practices of the Parent Company.
The company is listed on the Bulgarian and Warsaw Stock Exchanges, as market operators disclose
and document the criteria and procedures for recognizing the requirements for lis ting on the main market.
II. Explanation of which parts of the Corporate Governance Code under item 1, letter “a” or
letter “b” of Art. 100 “n” para. 8 are not observed and what are the grounds for this, respectively when
the issuer has decided not to refer to any of the rules of the Corporate Governance Code - grounds for
this
The public companies of Sopharma Group comply with all parts of the Corporate Governance
Code under p. 1, letter “a”.
III. Description of the main characteristics of the issuer's internal control and risk management
systems in connection with the financial reporting process
The internal control system of the financial reporting and reporting in the companies of Sopharma
Group has been developed as a result of studies of good accounting and control practices in Bulgaria and
of large pharmaceutical groups, as well as in compliance with national legal requirements, incl. for
companies and groups listed on regulated markets. It is in a constant process of monitoring by the
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10
management and of further development and improvement.
Most of the parameters that will be provided in this document are from the practice of the
companies with the most developed internal control systems, namely - “Sopharma” AD and “Sopharma
Trading” AD.
The internal control system of the financial reporting and reporting of the companies in the Group
are set of behavioral and technical principles, rules, means, procedures and control actions, which are
specially developed and adapted to the specifics of the companies, its activities and reporting system. It
is aimed at:
• ensuring current monitoring and directing the reporting activities towards their goals and
expectations of its various users, and achieving their necessary efficiency and effectiveness, incl. when
using the borrowed resources; and
• ensuring adequate and timely addressing of identified business risks that have an impact
on financial, management and operational reporting.
In particular, it is designed to create leadership comfort that:
• the companies in the Group comply with the applicable legal requirements in the field of
accounting, reporting and other directly related areas and especially the requirements of the Accounting
Act and International Financial Reporting Standards;
• the Group follows the instructions and guidelines of the top management regarding the
reporting and documentation;
• there is the required efficiency and effectiveness of the financial and accounting process,
incl. consolidation and documentary justification;
• there is a high degree of security in the protection and maintenance of the assets of the
companies in the Group, incl. and prevention of fraud and error; and
• there is the provision of reliable, high-quality and timely financial and operational
information for internal and external users.
The main components of the internal control system for financial reporting and reporting include:
a) adoption and observance of the ethical principles and rules of conduct, which are
adopted by the Code of Ethics of the employees in the companies of Sopharma Group and with regard to
financial reporting and accounting and all related processes, procedures and actions of all staff of the
company;
b) development and determination of an optimal structure of units involved in the
processes related to financial reporting, with clearly defined responsibilities and delegations, powers and
obligations, incl. through developed written internal documents;
(c) developing policies for the selection, training and development of staff involved in
accounting and financial reporting;
(d) development, implementation and maintenance of control procedures and rules for
each stage of the processes related to accounting, financial reporting and reporting, with priority phased
introduction of formalized written procedures;
e) development of procedures for identification, monitoring and management of risks
related to accounting, financial reporting and accounting, incl. the development of adequate measures
and actions for their minimization; and
f) development and maintenance of adequate organization of the information system,
incl. controls for access, input, processing and retrieval of data, changes in the system, distribution of
responsibilities of its employees, as well as storage and protection of the integrity and authenticity of data
in the system.
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Control environment
Ethical principles and rules related to the processes of accounting, financial reporting and
accounting
The managements of the various levels of the companies in the Group has introduced and
constantly monitor the observance of ethical values such as integrity, independence and objectivity as the
foundations of the professional conduct of all persons involved in the processes related to accounting and
financial reporting in the Group.
They are the framework against which the control environment is built and which have influenced
the effectiveness of model design, administration and ongoing monitoring of other components of
internal control in the field of accounting and financial reporting. Integrity and ethical behavior are a
product of the established general ethical and behavioral standards of the companies in the Group. They
are clearly communicated with all financial and accounting and control staff and they are constantly
validated in practice.
The ethical principles that guide professional conduct that should be followed by all persons
directly or indirectly involved in accounting and financial reporting processes are: objectivity; impartiality;
independence; conservatism; transparency; methodological justification; consistency and use of
independent experts. These principles are applied at all stages of financial reporting when: choosing an
accounting policy; accounting closing; the preparation and application of accounting estimates and the
preparation of public and management financial statements, other public reports and documents
containing financial information.
Management bodies responsible for the individual components of the overall accounting and
financial reporting process
Management bodies that have certain responsibilities and powers regarding the process of
financial reporting and resp. other related processes are different for the Group companies. For the Group
they include: the Board of Directors, the Audit Committee, the Chief Financial Officer, the Chief
Accountant, the Head of the Reporting Department and the Head of the Internal Audit Department.
Their functions and responsibilities can be summarized as follows:
• The Board of Directors accepts and confirms: the accounting policy and the changes in it
for each reporting period, the developed accounting estimates as of the date of each reporting period,
incl. the applied methodology; financial statements and other public documents containing financial
information; the functions, organization and responsibilities of all structural units and their heads,
engaged in the processes of and related to financial reporting; the development, implementation and
ongoing monitoring of the functioning of the individual components of the internal control system, incl.
the activity of the Internal Audit Department;
• The Audit Committee independently monitors the implementation of the financial
reporting processes, the applied accounting policies and the effectiveness of th e internal control system
of the company, incl. risk management, as well as the implementation and results of the external and
internal audit;
• The CFO is responsible for the overall organization, operation and ongoing control of
accounting and financial reporting. He directly manages the whole process, makes all key decisions related
to financial statements and other public documents with financial information. It also approves at the first
level the accounting policy, the main reporting methodologies and evaluates and accepts the work of used
independent experts (appraisers, actuaries, consultants, etc.) involved in the financial reporting process.
He monitors on an ongoing basis, together with the Chief Accountant and the Head of the Reporting
Department, the effects and risks on the financial statements of the identified business risks for the
company;
• The Chief Accountant organizes and manages the accounting activities of the company -
controls and methodologically directs the current accounting, manages the preparation of financial and
management reports; is responsible for the development and implementation of accounting
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methodologies and techniques; is responsible for the process of closing the accounts and preparing all
accounting estimates, proposes and develops accounting policies and changes in them, monitors ongoing
changes in IFRS. It is the direct contact with the used internal and external experts for the purposes of
financial reporting;
• The Reporting Department and its head carry out the overall organization, methodological
support and implementation of the process related to the preparation of the consolidated financial
statements of the company, incl. the current control, instruction, monitoring and analysis of the financial
statements for the purposes of consolidation of the companies of Sopharma Group;
• The Internal Audit Department performs ex-post control over the operations and activities
related to the preparation of the company's financial statements and compliance with the established
internal controls over the individual routine and non-routine processes.
Policy and practice related to human resources in the financial and accounting departments
The companies of the Group have established policies and rules related to the management of
human resources involved in the process of financial reporting and other processes related to it. These
include imposed and implemented policies and procedures in the selection and appointment of such staff,
aimed at education and profess ional experience, computer literacy and foreign language skills of the
candidates.
Personnel management policies also include those related to the continuous additional
professional training, updating and expanding the knowledge and skills of the employed specialists. It is
obligatory to conduct trainings in case of changes in normative acts, IFRS, tax laws and others, directly
related to their work. The purpose of this policy is to increase their expertise and improve their skills to
increase efficiency in the performance of their duties.
Process of the Group for risk assessment related to financial reporting
The Board of Directors, the Audit Committee, the Chief Financial Officer and the Chief Accountant
of the Group`s public companies have a key role in the process of continuous identification, monitoring
and control of business risks, incl. to establish and control the effects of those of them that have a direct
impact on individual processes and objects of accounting, financial reporting and reporting of the
company. Together, they provide comprehensive monitoring of the risk management process.
Risk factors related to sound financial reporting include external and internal events, transactions
and circumstances that may arise and adversely affect the entity's ability to create, maintain and process
accounting and operational data in a manner that ensures reliable financial statements, reports and
reports. The following factors are defined in the Group as main:
a) external risks are defined as: change in the business environment and the market environment
of the companies and its main products; the activity of competitors; change in the legal and regulatory
framework; changes in key suppliers or customers; unscrupulous or malicious actions by outsiders; rapid
corporate growth and group growth; development of companies in which it holds significant investments
in the form of participations and/or loans.
b) the internal risks include: change of the technological base of the companies, the manner and
intensity of use of its assets and resources; new products and activities; new accounting policies and IFRS;
changes in the staff of the departments responsible for and/or financial reporting; changes in information
systems; errors in work and/or insufficient knowledge or skills of staff, rapid expansion abroad; application
of multiple estimates - in particular the application of fair values and the calculation of the recoverable
amount of certain non-current assets, with the participation of external experts.
Risk factors that are recurring and/or related to the application of accounting policies and
estimates are currently monitored by the chief accountant of the Group, who proposes management
solutions and properly reflects their effects in the financial statements. The new risk factors are identified
by the CFO of the Parent Company and are assessed and developed by him, together with the Chief
Accountant and the Head of the Reporting Department. If necessary, the help of independent consultants
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is used, incl. and the application of new IFRSs. The general monitoring of the process of managing the risks
related to financial reporting is carried out by the audit committee of the company.
Information system of the companies in the Group. Accounting Department - organization of the
accounting function in the companies in the Group and the financial reporting process
Information System
information system of “Sopharma” AD includes infrastructure (physical and hardware
components), software, people, procedures and data. In 2013, the Company implemented the Microsoft
Dynamics AX ERP system. It covers all processes of sales, warehousing, master planning, production and
accounting. The system has been adapted and implemented, taking into account the specifics of the
company itself, but good practices have been borrowed from the pharmaceutical sector and other
industries.
In addition to the main information system, the Company also uses the following systems: Hermes
- human resources management system, which covers the entire management cycle related to planning,
evaluation, remuneration and human capital development in “Sopharma” AD. The connection between
them is that Hermes data is entered into Microsoft Dynamics AX. The quality of information generated by
Microsoft Dynamics AX and other products provides significant opportunities for management to make
adequate, reasonable and timely decisions in the management and control of activities for the
preparation of various financial and management reports and other public documents with financial
information.
The information system of “Sopharma Trading” AD includes infrastructure (physical and hardware
components), software, people, procedures and data. The company started in 2014 the phased
implementation of the SAP ERP system. It covers all major transaction processes in the Company. The
system has been adapted and implemented, taking into account the specifics of the Company itself, but
good practices have been borrowed from the pharmaceutical sector and other industries.
In addition to the main information system, the Company also uses the following systems: FM +
transport planning and management, mobile application for driver management (on SAP mobile
platform), KNAPP WMS and SAP WMS - warehouse management, SAP Hybris - online management sales,
Hermes - HR management. The connection between them is made through interfaces. The quality of the
information generated by the ERP system SAP and other products provides significant opportunities for
the Management to make adequate, reasonable and timely decisions in the management and control of
the activities for the preparation of various financial and management reports and other public
documents with financial information. Given the smaller scale of the other companies in the Group, each
of them uses software appropriate to its needs. The information system relevant to the objectives and
process of financial reporting covers methods and documentation that:
• identify and reflect all valid transactions and operations;
• describe transactions and operations in a timely manner in sufficient detail to enable them
to be properly classified for financial reporting purposes;
• assess the value of transactions and operations in a way that reflects their appropriate
monetary value in the financial statements;
• determine the time period during which the transactions and operations have occurred
in order to allow their recording in the appropriate accounting period;
• present the transactions and operations and related disclosures in the financial
statements in accordance with the requirements of the reporting framework.
The "Information Technology" Department is responsible for the risk-free functioning of the
information system in the Parent company and in ”Sopharma Trading” AD – “Business and Technological
Development”. In each of the companies in the Group was established “Information technology”
department, which is responsible for the smooth functioning of the different types of software.
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Accounting Department - fulfillment of the accounting function and key role in the financial
reporting process
The Accounting Department of the Parent Company is directly subordinated to the Executive
Director. It is headed by a chief accountant. It consists of: Deputy Chief Accountant, and heads of sectors
and operational accountants. Structurally, it consists of the following sectors: fixed assets, materials, cost,
sales, foreign exchange operations, lev operations, wages. According to its functional characteristics, it
covers and fully implements the accounting function in the Company, internal accounting control and
preparation of financial statements.
His responsibilities include the correct and consistent application of the developed accounting
policies, the development and implementation of an internal chart of accounts; accounting
methodologies, current accounting; current accounting analysis and control of reporting data and
documentation; summarizing and classifying the reporting data for the purposes of the financial
statements; the preparation and/or processing of the input data for the accounting estimates together
with the engaged experts, as well as the reporting of established deviations and discrepancies to the
Financial Director; and compliance with regulatory requirements in the field of accounting, taxes and
other related areas.
The accounting department of “Sopharma Trading” AD is managed by a chief accountant, who is
directly subordinated to the Financial Director. Structurally, the accounting department consists of two
structural areas: 1) accounting of Sopharma Trading, which involves one deputy chief accountant and 8
operational accountants and 2) group accounting, which involves one senior accountant and 1 operational
accountant. The financial and accounting operations of the company in Serbia and in the Retail segment
in Bulgaria are taken care of by two separate accounting teams.
In each of the companies in the Group there are respective structures that ensure the good
functioning of both the company itself and the control of its financial and accounting activities.
The accounting policy of the Parent Company and the Group, respectively, for the purposes of
preparing the consolidated financial statements, is subject to annual approval at two levels - by the
Financial Director and the Board of Directors of the Parent Company. The most important aspects of it,
necessary for the correct understanding of the financial statements, must be disclosed.
The choice of the reporting framework is defined on the basis of the requirements of the
Accounting Act. The company applies the International Financial Reporting Standards (IFRS) adopted by
the European Union. Ongoing control over the proper application of IFRS is performed by the Chief
Accountant, the Chief Financial Officer and the Audit Committee. Additional confirmation of the
correctness of the application is received from external auditors.
The preparation of the financial statements of the Parent Company for public use is the result of
a complete process of accounting closing of the reporting period. This process is formalized thr ough
documents and rules adopted by the Management. They are related to the performance of certain actions
and procedures, and resp. the preparation of certain documents by persons from the Accounting
Department or by other officials and these actions and procedures are aimed at: carrying out inventories;
analysis of accounts; sending confirmation letters; determining best estimates such as depreciation,
revaluation, impairment and accruals based on reasonable assumptions, consolidation and classification
of accounting data; studies and analyzes of certain legal documents (contracts, lawsuits, opinions of legal
advisers); studies and evaluation of expert reports (appraisers, actuaries, internal auditors, other internal
experts and officials); preparation of reports and financial packages for consolidation; preparation,
analysis and discussion of draft financial statements.
The closing process is led directly by the Chief Accountant and Head of Reporting Department,
with the CFO monitoring and finalizing key issues related to the recognition, classification, valuation,
presentation and disclosure of certain items, transactions and events, and the overall presentation of the
financial statements – individual and consolidated financial statements of the Parent Company.
!
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Control activities
The control actions, which are envisaged in the developed and implemented internal controls by
processes, include: reviews of the implementation and the results of the activity; information processing;
physical controls and division of duties and responsibilities.
The general controls related to financial reporting can be categorized as procedures related to
current and periodic reviews and analyzes of financial indicators and the input data for them, through
which the performance and results of the company's activities are presented in the financial statements.
These, in turn, include such reviews and analyzes of actual reported performance data against
budgetary, forecast, previous periods and industry. Such financial analyzes are performed with the
QlikView platform - upgrading the ERP system Axapta 2009. They can usually contain proposals for
optimization or revision of certain budgets.
The controls assigned to the Parent Company's information systems cover both the contro ls of
the application programs and the general IT controls, which are policies and procedures that help to
ensure the continuous proper functioning of the information systems. The typical controls on the
application programs that are set are: checking the mathematical accuracy of records, maintaining and
reviewing accounts and turnover sheets, automated controls, such as input checks and checks on the
sequence of numbering and non-automatic tracking of exception reports. Common IT controls include:
program change controls, controls that restrict access to programs or data, controls on the deployment
of new releases of bundled software applications, and controls on system software that restrict access or
ongoing monitoring of the use of system utilities that could change financial data or records without
leaving a trace for follow-up.
At “Sopharma Trading” AD the general controls relevant to financial reporting can be categorized
as procedures relating to ongoing and periodic reviews and analyses of financial performance and inputs
that are used to present the performance and results of the Company's operations in the financial
statements. These, in turn, include such reviews and analyses of actual reported performance data against
budget, forecast, prior period and industry data. Such financial analyses are performed using the SAP ERP
and SAP Bl platform.
For management purposes, separate forms have been established and approved under which
monthly reports are prepared. The reports contain actual and budget fi gures, analysis of variances,
comparison of current with previous period. They may also normally contain proposals for optimization
or revision of certain budgets.
Most of the Group companies have an Information Technology department responsible for
implementing control activities.
The applied physical controls of the companies of the Group include:
a) measures for the physical security of the assets - secure facilities and premises, as well as
special conditions for access to assets and documents;
b) a special procedure for granting access to computer programs and data files;
c) periodic inventories - procedures for organizing and conducting inventories by physical
counting /weighing/ sending appropriate letters for confirmation and comparison with
the amounts reflected in the control inventories and accounting documents/registers.
Procedures have been introduced for the timely analysis of the results of the inventories,
development of solutions for their accounting and resp. approval by the Executive
Director.
The developed and implemented procedures for management, organization and implementation
of the main routine processes (supplies and sales), as well as for the processes of preparation and
acceptance of complex estimates (depreciation, impairment, revaluation, actuarial calculations and long-
term provisions) also provide internal controls. They are aimed at: authorization of the individual
operation and the issued primary documents; review and verification of the issued documents and the
assets involved in the operation; subsequent recalculation and comparison with other documents
(contracts, applications, confirmations, price lists, etc.) and persons, as well as the division of duties and
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responsibilities of the participating officials at each step of the process, to ensure mutual control between
them, as and to reduce the possibility of allowing a person to be in a position to both commit and conceal
errors or fraud in the normal course of his or her duties.
The Group is in the process of constantly expanding the formalized control procedures and
activities.
Ongoing monitoring of controls
An important priority goal of the management of the companies in Sopharma Group, in the person
of the CFO is to establish and maintain continuous and effective internal control. Ongoing monitoring of
controls by management includes an assessment of whether they are operating as intended and whether
they are being modified in an appropriate manner to reflect changes in conditions. Ongoing monitoring
of controls may include activities such as management review of whether internal management reports
are being prepared in a timely manner and whether key data in them are in line with third-party
confirmation and its projections, and internal auditors' assessment of compliance wi th policies and
procedures. on the implementation of routine processes (sales and deliveries) by the staff employed in
them, incl. the set internal controls, incl. and in comparison with the contracts with the counterparties,
as well as supervision over the observance of the ethical norms or the policy for business practice by the
legal department of the companies and the department for relations with the investors. Ongoing
monitoring is carried out to ensure that controls continue to be effective over time.
Internal auditors, as well as other staff performing supervisory, monitoring or control functions,
incl. the accounting department and the reporting department also contribute to the ongoing monitoring
of internal controls over the company's processes through their assessments of individual controls or
groups of controls. They usually provide such information periodically, in the course of their duties and
functions, and their assessments of the functioning of certain internal controls, focusing considerable
attention on assessing their effectiveness, communicating with relevant persons information on identified
strengths and weaknesses of internal controls and make recommendations for their improvement.
Ongoing monitoring activities include the use of external information that identifies problems or
identifies areas for improvement. Such countries are customers, suppliers and servicing banks. In addition,
the regulatory body, represented by the FSC, may also communicate with the company's management
issues that affect the functioning of internal control, for example, exchange of information directly
monitored by the Commission related to the implementation of certain actions or transactions of the
company or inspections from the FSC itself. Also, in the implementation of ongoing monitoring activities,
the management always takes into account the communication with the external auditors related to the
internal control and the identified weaknesses and recommendations.
IV . Information referred to in Article 10 (1) (c), (d), (e), (h) and (i) of Directive 2004/25/EC of the
European Parliament and of the Council of 21 April 2004 on proposals for ingestion
1. Significant direct or indirect shareholdings (including indirect shares through pyramid structures
and cross-shareholdings) within the meaning of Article 85 of Directive 2001/34/EC;
During the year there is no reaching, exceeding or falling below one of the following limits of 10%,
20%, 1/3, 50% and 2/3 of the share capital of the Parent Company.
2. Holders of all securities with special control rights and description of these rights;
There are no securities with special rights for the Parent Company and for the other public
companies in the Group. According to the Articles of Association of the companies in the Group, all shares
issued by them are of one class, registered, dematerialized, ordinary and indivisible. Each share gives the
right to one vote in the General Meeting of Shareholders, the right to dividend and liquidation share,
proportional to the nominal value of the share.
3. Any restrictions on voting rights, such as restrictions on the voting rights of holders of a certain
percentage or number of votes, deadlines for the exercise of voting rights or systems through which, in
cooperation with the company, the financial rights granted to the securities, are separated from the
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possession of the securities;
There are no restrictions on the voting rights in the Parent Company and for the other public
companies in the Group.
4. The rules governing the appointment or replacement of members of the board and the
amendment of the Articles of Association;
For “Sopharma” AD the Board of Directors proposes to the General Meeting amendments and/or
supplements to the Articles of Association, changes in the composition of the Board of Directors, dismissal
and election of a new Board of Directors.
Members of the Board of Directors may be natural and legal persons meeting the requirements
of Article 234 of the CA and Article 116a, paragraph 2 of the Law on public offering of securities.
When a member of the Board of Directors is a legal entity, he/she appoints a representative/s for
the performance of his/her duties in the Board. The legal entity shall be jointly and severally liable with
the other members of the Council for the obligations arising from the actions of its representative. The
natural persons, who represent the legal entities - members of the Board of Directors, must meet the
requirements of art. 234, para 2 of the CA.
Persons who have been members of the management or supervisory body of a Company
terminated due to insolvency during the last two years preceding the date of the decision to declare
insolvency may not be members of the Board of Directors if unsatisfied creditors remain.
A person who has been a manager, a member of a management or control body of a company for
which a non-fulfillment of obligations to establish and maintain the levels of stocks determined by him by
an effective penal decree has been established by an effective penal decree may not be a member of the
Council stocks of oil and petroleum products.
At least one third of the members of the Board of Directors must be independent. The
independent member of the council may not be:
• employee in the public company;
• a shareholder who holds directly or through related parties at least 25 per cent of the
votes at the general meeting or is a person related to the company;
• a person who is in a lasting commercial relationship with the public company;
• member of a management or control body, procurator or employee of a company or other
legal entity;
• a person related to another member of the management or control body of the public
company.
The members of the Board of Directors may be re-elected without restriction.
In case of changes in the legislation, at the next General Meeting of Shareholders a decision is
made to amend the Articles of Association in order to bring its provisions in line with those of the
applicable regulations. Until this decision is made, the affected texts of the Articles of Association shall be
interpreted in accordance with the Constitution and the laws of the country.
The Articles of Association are amended and supplemented by a decision of the soph of
Shareholders by a majority of 2/3 /two thirds/ of the capital presented to the General Meeting. The
current Articles of Association are entered in the Commercial Register under number №20210412150242.
5. The powers of the members of the board, and in particular the right to issue or repurchase
shares.
The powers of the Board of Directors are regulated in the Articles of Association of the Company.
The approval for the issuance of bonds is a decision that the Board of Directors may take by a qualified
majority of 2/3 of its members.
The Board of Directors is authorized to repurchase shares under certain conditions, with the
decisions taken by the EGM, held on February 23, 2018.
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V. Composition and functioning of the administrative, management and supervisory bodies and
their committees
1. Composition of the members of the Board of Directors:
The Parent Company is managed and represented by a Board of Directors, which consists of five
individuals meeting the requirements of Article 234 of the CA and Article 116a, paragraph 2 of the Law on
public offering of securities. The composition of the Board of Directors may be changed by the General
Meeting at any time.
The composition of the Board of Directors is described in item I. General information about
“Sopharma” AD in the Management Report.
According to Article 116a, paragraph 2 of the Law on public offering of securities, at least one third
of the members of the Board of Directors must be independent persons. In this case it is:
• Alexandar Viktorov Tchaoushev
The members of the Board of Directors are acquainted with the rights and obligations related to
their position.
2. Procedure for work of the Board of Directors
“Sopharma” AD has developed Rules for the work of the Board of Directors, which comply with
and are a continuation of the principles set out in the Good Corporate Governance Program. The Articles
of Association of the Company are in accordance with the requirements of the Law on public offering of
securities and the shareholders have the right to timely notification on various issues.
The Board of Directors meets at least once a month.
3. Minutes of meetings
Minutes of the decisions of the Board of Directors shall be kept and signed by all members present
at the meeting.
The minutes shall be kept by the Investor Relations Director of the company in a special register
according to the provision of art. 116d, para. 3, item 3 of the LPOS.
The protocols are a trade secret. Facts and circumstances thereof may be published, disclosed or
brought to the attention of third parties only by decision of the Board of Directors or when required by
law.
4. Responsibility
The members of the Board of Directors must provide a monetary guarantee for their management
in the amount determined by the General Meeting, but not less than their 3-month gross remuneration.
The members of the Board of Directors are jointly and severally liable for the damages they have
caused to the Company.
Each member of the Board of Directors may be released from liability if it is established that there
is no fault for the damages. The General Meeting may release from liability a member of the Board of
Directors of the Regular Annual General Meeting in the presence of certified by a registered auditor Annual
Financial Statements for the previous year and interim financial statements for the period from the
beginning of the current year to the General Meeting.
The Board of Directors reports to the General Meeting of Shareholders.
5. Role of the Board of Directors for the application of the principles of good corporate governance
The Board of Directors makes decisions on all issues related to the activities of the Parent
Company, except for those which, according to the current legislation and the Articles of Association, are
within the exclusive competence of the General Meeting. According to the structure and composition of
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19
the management bodies of each of the companies in the Group, their functions are distributed according
to the departments that exist in them. The way of functioning of the management and control bodies is
aimed at bringing the management of each company in line with the set strategic goals, both of the
company itself and those of the Group.
The Board of Directors assigns the implementation of its decisions and the implementation of the
operational management functions of the Company to one of its members /executive director/. The
Executive Director may be replaced at any time.
The members of the Board of Directors of the public companies in the Group submit a declaration
to the Financial Supervision Commission /FSC/, to “BSE-Sofia” AD and to the Company itself under Art.
114b of LPOS and under Art. 247, item 4 of the Commercial Law. The change in these circumstances shall
be declared in the respective terms after its occurrence.
In carrying out its activities, the Board of Directors complies with the accepted principles of
corporate governance of the Company.
The Board of Directors makes the best efforts to ensure easy and timely access to public
information in order to exercise the rights of shareholders in an informed manner, respectively to make
an informed investment decision by investors.
6. Due care. Avoiding conflicts of interest.
The members of the Board of Directors are obliged:
• to perform their functions with the care of a good trader, to be loyal to the Company and
to act in the best interest of its shareholders;
• to perform their duties with the skills, diligence and responsibility inherent in the
professional and in a way that they reasonably believe is in the interest of all shareholders of the Company,
using only information that they reasonably believe to be reliable, complete and timely;
• to prefer the interest of the Company and the investors in the Co mpany to their own
interest and not to use for the benefit of themselves or others at the expense of the Company and the
shareholders facts and circumstances that they learned in the performance of their official and
professional duties;
• to avoid direct or indirect conflicts between their interest and the interest of the Company,
and if such conflicts arise - to disclose them in a timely and complete manner and not to participate and
not to influence other members of the board in making decisions in these cases;
• not to disseminate information about the discussions and decisions of the meetings of the
Board of Directors, as well as other non-public information about the Company, including after they cease
to be members of the Board of Directors, until the public announcement of the relevant circumstances by
the Company;
• to provide and disclose information to shareholders and investors in accordance with the
requirements of the regulations and internal acts of the Company.
The Board of Directors is assisted by an Audit Committee, which according to the Independent
Financial Audit Act and International Standards on Auditing performs the following functions:
• monitors the financial reporting processes in the enterprise;
• monitors the effectiveness of the company's internal control systems;
• monitors the effectiveness of risk management systems in the enterprise;
• oversees the independent financial audit of the enterprise;
• reviews the independence of the registered auditor of the company in accordance with
the requirements of the law and the Code of Ethics for Professional Accountants, including monitors the
provision of additional services by the registered auditor of the audited company.
At the Extraordinary General Meeting of Shareholders of “Sopharma” AD, held on November 20,
2008, an Audit Committee was elected consisting of three people: Tsvetanka Zlateva, Vasil Piralkov and
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Vasil Naidenov with a 3-year term , who was re-elected 3 consecutive times. With a decision of the GMS
from June 2, 2017 Vasil Piralkov was replaced by Kristina Atanasova.
VI. Description of the diversity policy applied to the issuer's administrative, management and
supervisory bodies in relation to aspects such as age, gender or education and professional experience,
the objectives of this diversity policy, the manner of its implementation and the results during the
reporting period
Sopharma Group makes every effort to ensure equal opportunities in appointment and to comply
with the form and substance of the full range of laws relating to fair practices in the work environment
and prevention of discrimination.
Discrimination, whether based on race, sex, sex or gender, skin color, beliefs, religion, national
origin, nationality, age, disability, genetic information, marital status (including unmarried and civil unions,
defined and recognized by applicable law), sexual orientation, culture, pedigree, veteran status, socio-
economic status or other legally protected personal characteristics are unacceptable and completely
incompatible with the Society's tradition of providing honest, professional and a decent job. Repressive
measures against people who complain of discrimination or harassment are also prohibited.
The main goals of the Group in the implementation of diversity policies are:
• Attracting, hiring and retaining people with a wide range of professional skills. The diverse
abilities of managers and employees open new opportunities for innovative and creative solutions,
increase creativity and innovation. This, in turn, would lead to a more effective adaptation to the impact
of globalization and technological change. A more diverse workforce can increase a company's efficiency
in achieving its goals. It can lift the spirits of employees, give access to new market segments and increase
productivity.
• Promoting a working atmosphere that embraces ethnocultural diversity and in which
differences between people are valued and respected.
• Solving one of the most important problems for the employer - that of labor shortages, as
well as problems related to hiring and retaining highly qualified workers.
• Improving the Group's reputation and overall performance to external stakeholders and
society.
• Creating opportunities for disadvantaged groups and building the unity of society.
Sopharma Group strives to achieve the set goals by approving and applying in practice the types
of diversity important for the company. Adopting good practices from other companies and institutions,
the company's management wants to make diversity management a functioning part of the Group. The
Group strives to inform employees, consumers, customers and investors about the importance of diversity
for them and their work, aiming to build their trust and desire for support.
The policy of diversity provides diversity of the members of the governing bodies, which
guarantees a reliable system of management and control, and good corporate governance is a key element
of the secure and stable operation of Sopharma Group. They meet the high standards applied by the Group
in order to achieve its goals and strategies.
The composition of the management bodies of the companies in the Group and the number of
persons included in it is consistent with the size, complexity and scope of the Group's activities and ensures
a sufficient level of general expertise.
The members of management bodies of the companies in the Group have extensive professional
experience, both theoretical, acquired through education, training and qualifications, and practical,
acquired during previous positions. They are persons with good reputation and managerial abilities, with
high professional and moral qualities.
The principle of gender equality has been observed, as evidenced by the many women holding
senior management positions in the Group. The male-female ratio in most companies in the Group is in
favour of women and is dictated by the nature of the production process.
This document is a translation form Bulgarian. In case of divergence, the Bulgarian text prevailing.
21
The policy of diversity with regard to governing bodies does not allow for age restrictions.
The companies of the Group have representatives from various minority ethnic groups. The
Company also employs disadvantaged people. The aim is to provide young people with opportunities for
professional and personal development.
There are no cases of discrimination in the companies of the Group on any grounds.
In Section V of the Rules of Procedure of “Sopharma” AD regulates the rights and protectio n of
employees with regard to any discriminatory actions by the employer.
On the grounds of Ordinance for employment /SG, issue 7/1987, amended and ext. No. 111 of
28.12.2001, amended, SG No. 78 of 30.09.2005, entered into force on 01.10.2005/, Ordinance №8 on
determining the jobs suitable for employment of persons with reduced working capacity /SG, issue
52/1987, SG, issue 47/1990/ and Ordinance for amendment and supplement of Ordinance № 8 for
determination of the jobs, suitable for employment of persons with reduced working capacity /SG, issue
44/1993/ and according to art. 27 of the Law on Integration of People with Permanent Disabilities, every
year an Employment Commission is established in “Sopharma” AD. The Commission shall prepare a list of
suitable places and positions for employment of persons with reduced working capacity and with
permanent disabilities in accordance with the percentage determined for the branch by the order of art.
315 of the Labor Code and of pregnant and lactating workers. The Commission shall examine the specific
employment cases and identify suitable places according to the approved list.
26.04.2023 Ognian Donev, PhD
Sofia Executive Director
OGNIAN
IVANOV DONEV
Digitally signed by
OGNIAN IVANOV DONEV
Date: 2023.04.26 19:26:00
+03'00'
SOPHARMA GROUP
26 April 2023
Consolidated non-financial declaration
to the annual consolidated financial
statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy
Act - 2022
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2022
1
Contents
I. About the Declaration .............................................................................................................................. 2
II. Scope of the Declaration .......................................................................................................................... 3
1. Vision, strategy and corporate governance ...................................................................................... 4
2. Imprint of the company`s activity ...................................................................................................... 8
3. Organizational structure .................................................................................................................. 11
III. Strategy for corporate social responsibility ........................................................................................... 15
1. Definition .......................................................................................................................................... 15
•
Markets ............................................................................................................................................. 15
•
Stakeholders ...................................................................................................................................... 16
•
Environment ...................................................................................................................................... 17
•
Society ............................................................................................................................................... 17
2. CSR management ............................................................................................................................. 18
3. Membership ..................................................................................................................................... 19
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2022
2
I. About the Declaration
The Consolidated n on-financial declaration (“the Declaration”) describes the commitments that
Sopharma Group, as a corporate citizen, fulfills for the shareholders and investors, state and local authorities,
consumers, customers and partners, the environment and society. The Group maintains an active dialogue
with all of them in defining important decisions and in carrying out its corporate communications at all levels.
Group companies monitor and declare the economic, social and environmental footprint that results from
their activities. The measures used are in line with the main activity of the companies and are used to
minimize the negative and increase the positive impact on their stakeholders.
The declaration complies with the reporting requirements of Art. 48 of the Accounting Law and is a
description of the policies and enterprises regarding their activities in the fields of ecology, social affairs,
employees, anti-corruption, human rights.
All companies in the Group strive to introduce good practices followed by the parent company
“Sopharma” AD.
Our activities
In connection with the requirements of Art. 8 Transparency of undertakings in non-financial
statements, REGULATION (EU) 2020/852 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 18 June
2020 on the establishment of a framework to facilitate sustainable investments, and amending Regulation
(EU) 2019/2088, the Group should disclose whether its activity is eligible under the current Tax onomy, as a
qualification system for ecologically sustainable economic activities. The Taxonomy Regulation is a key
component of the European Commission's action plan to redirect capital flows towards a more sustainable
economy.
We considered our activities as a pharmaceutical company in the context of all economic activities
meeting the taxonomy criteria listed in the Climate Delegated Act. The Climate Delegated Act focuses on
those economic activities and sectors that have the greatest potential to achieve the climate change
mitigation objective – i.e. the need to avoid creating greenhouse gas (GHG) emissions, to reduce these
emissions or to increase GHG sinks and long-term carbon storage. Sectors covered include energy, selected
manufacturing activities, transport and buildings.
After a thorough review involving all relevant divisions and functions, we have concluded that our
activity as a pharmaceutical manufacturer is not covered by the Climate Delegated Act and is therefore
taxonomically ineligible.
Our assessment of taxonomy eligibility is focused on economic activities defined as the combination of
resources to produce specific goods or services. In this context, we, as a pharmaceutical manufacturer,
generate external revenue from our products through only one activity (production and sale of our
pharmaceutical products), but we are active in several sectors within the value chain of our products.
Activities within the value chain of our products that do not generate revenue but result in assets or processes
that are essential to our revenue-generating activities are not accounted as economic activities meeting the
requirements of the taxonomy. For instance, transporting our pharmaceutical products to our customers
does not count as a taxonomy-eligible activity and is not included in our turnover KPI, as we do not generate
external turnover on a stand-alone basis with this activity.
We considered our activities also based on the exceptions for the reporting period according to Art. 10
of Delegated Regulation (EU) 2021/2178. As we draw attention to, and in view of the active change and
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2022
3
updating of the understandings of the European Commission in this regard, it is possible that we re-evaluate
both our income reporting and disclosures in our next reports.
To the extent that for the reporting period 2022 our turnover is taxonomically ineligible, as our
economic activities are not covered by the Climate Delegated Act, the capital and operating expenses related
to these activities are also taxonomically ineligible, which is reflected in the following table:
Ratio of taxonomy-compliant and taxonomy-unacceptable economic activities in total turnover, capital
and operating costs
Total
(BGN’000)
Share of taxonomically
eligible economic
activities (in %)
Share of
taxonomically-
inadmissible economic
activities (in %)
Turnover
1 663 016
0%
100%
Capital costs (CAPEX)
85 154
0%
100%
Operating costs (OPEX)
8 965
0%
100%
II. Scope of the Declaration
The Declaration gives a broad overview of a various aspects of the activity of Sopharma Group as a
corporate citizen. It focuses on the activities of the Group for the period 01.01.2022 - 31.12.2022. The
declaration contains quantitative data used as impact indicators in the main areas.
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2022
4
1. Vision, strategy and corporate governance
1.1 Mission, values, goals and strategy
The mission of Sopharma Group is to play an active role in raising people's living standards by providing
constant and easy access to the most important health-related products.
To ensure the fulfillment of its mission, Sopharma Group constantly invests in production - new
technologies, research and studies; in increasing the efficiency of distribution; in maintaining an active and
effective dialogue with all participants in the healthcare system; in participation in significant projects and
programs related to the development of society and in environmental protection.
The vertically integrated model of companies operating mainly in the field of healthcare supports the
application of global and European standards and practices. Synergies within the Group lead to better
organization, centralization of core marketing and sales activities, cost optimization and better performance
in all markets.
The parent company, as a leading pharmaceutical manufacturer, follows the best practices in the field
of corporate citizenship. The values that logically determine life in the company and the interaction with the
stakeholders are related to the care of people's health not only in the physical aspect, but also in emotional
and mental terms.
The Sopharma Group's development strategy turns the companies into an attractive investment thanks
to the following long-term goals:
• Portfolio diversification, expansion of foreign markets, successful acquisition operations;
• Sustainable development and strong performance in key markets;
• Transparent and efficient management model.
The results of the Group's work are always in favor of all stakeholders, making it a preferred “partner”
in health and investment.
The Group is represented in over 45 countries with key markets in Bulgaria, Russia, Ukraine, Kazakhstan
and Poland and a strategic plan focused on further market expansion in the region.
Corporate citizenship policies
The corporate citizenship of the Group operates and develops in accordance with the constitutions,
laws and regulations of the countries in which the Group is active. I
In all their actions, the companies comply
with the regulations of the state, local government and regulatory bodies, keeping an eye on the renewal and
strict implementation of the legislation concerning their activities. The Group follows the 10 basic principles
of the UN Global compact and works towards the achievement of the Global sustainable development goals
SDG 2015 through the active participation of companies in various thematic projects.
1.2 Management systems
Corporate governance systems
Each of the companies operates following its basic internal rules, such as the regulations, and complies
with its management systems in accordance with the imposed legislative and regulatory requirements. More
specific management systems, related to pharmaceutical production and distribution are:
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2022
5
Corporate governance
systems
Description
Adopti
on
date
Last
updat
e
Prospect
The prospectus contains detailed information about the issuer of a
financial instrument and about the issue itself.
2021
2021
Articles of Association
The Articles of Association determine the basic rules according to
which significant decisions are made concerning the existence of the
Company.
2003
2021
Decisions taken at the
General Meeting of
Shareholders
The decisions of the shareholders are fundamental for the activity
of the Company.
at
least
once a
year
2022
Rules of operation of the
Board of Directors
Instructions and explanations for the duties and responsibilities of
the members of the Board of Directors.
2007
Good corporate
governance program
A system of rules protecting the rights of shareholders and other
stakeholders.
2009
2022
Good Manufacturing
practice/GMP
A system of principles and rules that ensure the proper course of
each stage of the production process, providing a quality final
product.
2003
2022
Good distribution
practices
/GDP
The good distribution practices is a system of rules and procedures
which serves to guarantee the high quality of the medicinal products
at every stage of their distribution. The quality of medicinal products
may be affected by a lack of adequate controls.
2003
2022
ICH “Q8 Pharmaceutical
Development”
Principles, governing the establishment of pharmaceutical products.
2004
2022
AXAPTA/SAP
Integrated information system for the overall business management
of production planning processes, supply chain management, sales
management and planning, financial management and control,
customer relationship management, business analysis and more.
2013
2022
ISO 9001: 2015
Quality Management System
2008
2018
ISO 13485: 2003
Quality management systems for medical devices
2003
2018
СЕ BRAND
Conformity of Medical Device Directive 93/42 / EEC
2003
2016
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2022
6
Directive
93/42/ЕЕС
Concentration Directive for hemodialysis
2003
2016
BDS
INISI/
IEC 17025
Standard for laboratory tests of foods of different origins; water and
beverages; feed; control of technological surfaces and carcasses;
diagnosis of diseases in all species of domestic and wild animals;
bees and a beehive
2006
2017
ISO 14001:2015
Environmental management systems
2015
2019
ISO 27001:2013
Information security management systems
2013
2017
OHSAS 18001:2007
Occupational health and safety management systems
2007
2017
WHO Good dissemination
practices
WHO Technical statements Series, № 937, 2006.
2006
Detailed description of the corporate governance systems:
• The program for good corporate governance
A system of rules protecting the rights of shareholders and other stakeholders concerning the timely and
accurately disclose information on all material issues related to the Company and to support its strategic
management. The program also provides control over the activities of the Board of Directors/Management
and Supervisory Board and its accountability to the company and shareholders.
The program is in accordance with current legislation, to the internationally recognized standards for
good corporate governance and the Bulgarian National Code of Corporate Governance.
• GMP
Good manufacturing practice is a system of rules and procedures which guarantee the high quality of
medicinal products at every stage of their manufacturing. Its major purpose is to protect the patient's health.
The GMP deal with both the production process and the working conditions, the qualifications of the
production personnel, the sales system in use and the method of product withdrawal from the respective
market.
• GDP
GDP include an array of tools used in the activities of wholesale distribution, including preventing
counterfelt medicinal products from entering the supply chain. Their implementation ensures control an
efficient contor of the distribution chain and the maintenance of the high quality and integrity of the
manufactured medicinal products.
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2022
7
The GDP is applicable to any and all activities including the supply, storage, delivery or export of medicinal
products, excluding the sale to the end users.
This system also includes competency of the employees, working conditions and product retention,
control at any point in time to the final delivery.
• ICH Q8 Pharmaceutical Development
The standard applies to the overall process of creating new products, from development to registration.
It also includes risk assessment and quality assurance systems as part of product design. It concerns all
components of the medicinal product, substances, excipients, active substances, development of the
formulation and process of creation, knowledge accumulated during this process, physicochemical and
biological properties, development of the manufacturing process and all information that may affect the final
result.
• ISO 9001:2015
The implementation of the Quality Management System to the requirements of ISO 9001: 2015 ensures
the company's ability to continuously provide services that meet the customer's and applicable legal and
regulatory requirements. Effective implementation of the system leads to increased customer satisfaction.
• ISO 14001:2015
Through the implementation of the standard, the company is committed to the rational use of natural
resources to ensure constant control over the identified aspects of the environment that it affects. Measures
are implemented to manage the environmental aspects, those that can be controlled and those that are
expected to have an impact on the part of the company.
• OHSAS 18001:2013
Through the implementation of the standard, the company demonstrates its commitment to the health
of its employees by providing a safe working environment, managing and minimizing the risks to the health
of the personnel as well as to the staff of the stakeholders who work at the company's premises.
• ISO 27001:2013
By applying the requirements of the standard, the company provides adequate and coherent security
mechanisms, whose purpose is to protect the information assets of the company and to ensure the
confidence of each interested party with special attention to the clients.
• ISO 13485:2016
The standard specifies the requirements for a quality management system when an organization needs
to demonstrate its ability to provide medical devices and related services that consistently meet customer
requirements and applicable regulatory requirements.
• БДС INISI / IEC 17025
Accredited laboratory according to BIS INISI / IEC 17025 by the Bulgarian Accreditation Service (BSA) and
has the right to carry out tests which are recognized by all national and European food control authorities.
The scope of accreditation includes tests of foods of different origins; water and beverages; feed; control of
technological surfaces and carcasses; Diagnosis of diseases in all species of domestic and wild animals; bees
and a beehive.
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2022
8
Since 2014, the Lab Unit has been housed in new laboratory premises including Biosafety Level 3 for
disease diagnosis as required by the OIE.
• СЕ BRAND
Conformity of Medical Device Directive 93/42 / EEC.
• АXAPTA/SAP
Integrated information system for business process management in the corporate activity of the high
class company.
It improves efficiency, helps to make more precise decisions, and improves interconnections with the
supply chain.
It supports sales management and planning, production to material planning and production capacity,
supply chain management resoursec - stocks, warehouses and links between them, quality management.
The system facilitates activities related to accounting, financial management and control, budget control
and business analysis capabilities.
• World Health Organization Good Distribution practices (WHO Technical Statement Series, No 937,
2006)
By applying the requirements of the European Commission described in Directive 2001/83 / EC, the
Management Manual of Good Practice of Distributing Practice of 5 November 2013 and the World Health
Organization, the companies engaged in distribution declare their expertise and constant control over quality
assurance, ensuring that products consistently stored, transported and handled under appropriate conditions
as required by the marketing authorization or product specification.
2. Imprint of the company`s activity
Economic impact
We create added value for our stakeholders
Economic and Financial data
2022
2021
%
change
Stakeholders
Decision for issuance, under the
conditions of initial public offering,
of warrants
-
44 925 943
number of
registered,
demateriali
zed
warrants
-
Shareholders
Decision for payment of dividends
by the General Meeting in the
amount of BGN per 1 share
-
-
N/A
Shareholders
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2022
9
Taxes paid in thousand BGN
Incl:
Taxes paid (other) in thousand BGN
Corporate tax paid in thousand
BGN
75 122
65 217
9 905
82 391
74 454
7 937
(8.82)
(12.40)
20.00
State and local
authorities
Payments to suppliers in thousand
BGN
1 603 177
1 504 805
6.13
Suppliers /including
hired services/
Payments for wages and social
insurance in thousand BGN
141 810
146 239
(3.02)
Employees
The economic impact is most clearly tracked through dividend decisions that show the relationship with
stakeholders as shareholders; paid taxes, incl. paid corporate tax, which is a contribution to state and local
authority; payments to suppliers showing relationships with companies in the supply chain; the cost of labor
that shows employee relations as an interested party.
Social impact
Economic and financial data
/expenses thousand BGN/
2022
2021
Stakeholders
Plants / Number of
employees
9/1 696
8/1 768
Work places -
employees
Training courses
/expenses BGN ‘000/
225
247
Employees
Economic and financial data
Stakeholders
Social benefits and
payments
/expenses BGN ‘000/
4 918
4 192
Employees
Medical services
/expenses BGN ‘000/
722
761
Employees
Donations
/expenses BGN ‘000/
438
365
Local communities
Social activities and events
239
214
Local communities
Projects related to promoting health culture and investing in civil society.
The companies of the Group works to increase the economic and social development of society, to
promote a healthy lifestyle and to improve the health culture.
Sopharma Group adheres to traditions that nurture fundamental values, such as health care in
harmony with nature, strengthening the community and nurturing the competitive spirit.
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2022
10
• We traditionally support initiatives related to sport and healthy lifestyles by supporting sports events
and competitions;
• Initiatives under the UN Global Compact Network: "I'm proud of my parents' work" - youth career
guidance activity;
• A digital platform was created for training and upskilling of the staff, incl. pharmacists;
• Donations to hospitals, universities, community centers, Bulgarian Red Cross, nursing homes.
Ecologic impact
Indicators
2022
2021
%
Cost of materials and energy
(electricity, headenergy, fuels, water;
without main materials and impairment)
/expenses BGN ‘000/
35 413
29 030
18.02
Costs for transport services
4 721
4 324
8.40
Separate waste collection
314 t.
442 t.
(29)
Exhaust emissions into the atmosphere
0*
0*
0
Emissions to wastewater
Waste water is treated in WWTP **
Employees trainings and inclusion in
environmental protection activities
Instruction of employees;
Instructions for recovery and separate collection of waste;
Instructions on how to deal with waste substances in the units;
* The plants of Sopharma AD are certified according to Good Manufacturing Practices (GMP), which also
controls the degree of environmental pollution. Emissions of waste gases are less than 50 tons per year, which
according to the standards tends to 0.
** For years in the production in the factories of the company no organic substances are used for filming the
tablets, which guarantees zero pollution of the wastewater.
The main part of the turnover, operating and capital costs of the Company are related to economic
activities that qualify as environmentally sustainable, with the exception of some transport activities by third
parties and domestic transport activities, which in crease by BGN 4,721 thousand in 2021 or by 8.13% of BGN
4,324 thousand in 2021.
Projects related to responsible use of resources and environmental protection
• Separate waste collection, minimization, utilization and recycling of production and municipal waste;
• Providing regular training of personnel on environmental issues and pollution prevention;
• Responsible implementation of the mandatory requirements, defined in the Waste Management Act
(WMA) and payment of a product fee, according to the Ordinance on Packaging and Packaging Waste (WAO);
• Switching from plastic to paper sticks in the production of ear sticks;
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2022
11
• Separate collection of household waste (paper, plastic, batteries) at the workplace. Containers
provided at all production sites;
• Reduction of printed advertising materials by 50% per year by 2025, by switching to digital content;
• Emissions of waste gases in the atmospheric air from the Plant for solid dosage forms are measured
annually;
• Investments in the creation of “smart” buildings, facilities for renewable energy sources. In 2022, the
Company invests in the construction of photovoltaic plants, which will lead to a reduction of CO2 emi ssions
by up to 1,400 tons per year;
• Zero pollution of wastewater and the atmosphere, through the use of water film, instead of organic
substances for filming the tablets in the production in the company's plants;
• Measurement of the annual emissions of waste gases in the atmospheric air from the Phytochemical
Plant and the Factory for Dosage Forms.
• Emissions of waste gases are less than 50 tons per year, which according to the standards tends to 0.
Employees
The companies in Sopharma Group provide equal employment opportunities regardless of gender,
age and education. All companies in the Group strictly follow basic principles such as:
• Zero tolerance for any kind of discrimination in the workplace;
• Ensuring healthy and safe working conditions;
• Ensuring opportunities for development based on equality;
• Ensuring the right of association and labor protection of employees.
As at 31 December 2022, the average number of employees of Sopharma Group is 4 764 (compared
to 5 507 in 2021). The average number of employees of “Sopharma” AD as at 31 December 2022 is 1 696 (at
1 860 in 2021) and of “Sopharma Trading” AD is 770 (compared to 826 in 2021).
3. Organizational structure
Sopharma Group (the Group) is a leading Bulgarian manufacturer, exporter and distributor of
pharmaceutical products with a strong presence in Eastern and Southeastern Europe. The group includes a
parent company and its seventy-seven (31 December 2021: seventy-eight) subsidiaries. In addition, the Group
has investments in two associate and one joint venture (31 December 202 1: in two associate and in one joint).
“Sopharma” AD, the parent company, is a commercial enterprise, registered in Bulgaria under the
Provisions of the Commercial Law, with its registered office in Sofia, 16, Iliensko shose str., established in
1933. Today “Sopharma” AD is a public company and is among the most successful Bulgarian companies after
privatization, with ten consecutive years being among the top 10 in revenues in pharmacy sector in Bulgaria.
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2022
12
!
Bulgarian)based)mother)
company,)pharmaceutical)
producer)
API$production$
$
Pharmaceuticals$
production$$
Wholesale$and$
distribution$
Non-pharma$activities$
$
"Sopharma" AD, Bulgaria
Extraction of active ingredients
"Sopharma" AD, Bulgaria
Traditional products from herbal
origin, Generic products
Group “Sopharma Trading”
AD, Bulgaria and Serbia
Pre-wholesaling, wholesaling,
retail
“Biopharm Engineering” AD,
Sliven, Bulgaria
Veterinary products, sterile
production
“Biopharm Engineering” AD,
Bulgaria/PAO “Vitamini”,
Ukraine
Generic products
Subsidiaries in Ukraine,
Kazakhstan, Poland and etc.
Wholesaling, retail
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2022
13
4. Products and services
The Group operates in the following areas:
Production of pharmaceutical products including medicines, primarily generics, herbal-based
substances (phytochemical production); food supplements;
infusion solutions; hemodialysis
concentrates.
Production of medicinal products and medicinal cosmetics, as plasters, bandages and
sanitary-hygene products focused on the production site in Sandanski city;
Distribution of pharmaceuticals, medical supplies, sanitary materials, vitamins, food
supplements and cosmetics;
Production and distribution of non-pharmaceutical products, primarily medical supplies such
as syringes and other disposables used in medicineand other complementary activities to the
production of pharmaceutical products and distribution of pharmaceutical products.
Production activity
“Sopharma” AD and its manufacturing subsidiaries has nine manufacturing plants, conforming with EU
Good Manufacturing Practices (GMP), which are located in Bulgaria, complied with EU Good Manufacturing
Practices (GMP), a factory in the Ukraine, certified by local authorities and recognized in all CIS countries.
The production activities of the Group are carried out and developed in the following areas:
• production of pharmaceutical products;
• substances and preparations based on plant raw materials (phytochemical production);
• veterinary vaccines;
• infusion solutions;
• concentrates for hemodialysis;
• medical disposable products for human and veterinary medicine;
• injection molded products for the industry, agriculture and households.
“Sopharma” АD
The Company has more than 200 products in its portfolio: incl. nearly 190 medicinal products
and 11 groups of medical devices. Medicinal products mainly include generics and 15 traditional products, 12
of which are plant-based. The traditional products of the Group (and in particular Tabex, Carsil and Tempalgin)
have a major share to its export market income, while the company's generic products are of major
importance for domestic sales, Analgin being the leader among these products. The product portfolio of
“Sopharma” AD focuses on the following therapeutic areas: cardiology, gastroenterology, pain management,
cough and cold, immunology and dermatology, respiratory tract and asthma, neurology and psychiatry,
urology and gynecology, nephrology, surgery, orthopedics and traumatology
.
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2022
14
“Biopharm Engineering” AD
“Biopharm Engineering” AD has modern production facilities and is continuously expanding and
modernizing its production capacities. The strategy of “Biopharm Engineering” AD is built upon the market
and technological advantages of the company. The company’s production facilities are GMP (Good
Manufacturing Practices) certified. It is successfully developing in the following areas:
• Manufacturing of infusion solutions;
• Manufacturing of injection solutions;
• Manufacturing of veterinary medical products and immunological preparations;
The produced infusion solutions are marketed through “Sopharma” AD on both the Bulgarian and the
international markets. Veterinary medical products are offered in Bulgaria and other European countries.
PAO “Vitamini”, Ukraine
PAO “Vitamini” manufactures and sells medicines, tablets, powders, oil solutions, syrups and tinctures.
Production of medicines by PAO “Vitamini” is highly effective, with excellent quality, affordable prices and is
sold successfully not only in the Ukraine, but also in other CIS countries.The production takes place in the
following production facilities:
• for liquid dosage forms;
• two production areas for solid dosage forms;
• production site for extraction;
• tincture production;
• production of solutions;
• production of powdered products.
Distribution
“Sopharma Trading” AD is the exclusive distributor on the Bulgarian market of particular
pharmaceutical products of several leading international pharmaceutical and other companies in the field of
healthcare such as Amgen, Astra Zeneca, GE Healthcare, Johnson and Johnson, Abbot Diagnostics, Hartmann,
Novartis and Novo Nordisk.
The company is a leading distributor of pharmaceutical products and cosmetics in Bulgaria with a
market share in the pharmaceutical products segment of 21.79% (according to IQVIA).
The Group has more than 15 000 products (particularly pharmaceutical products, medical equipment
and devices, accessories, cosmetics, vitamins and food supplements) in its portfolio, including the brands of
“Sopharma” AD, and holds exclusive rights for Bulgaria over brands of strategic partners such as “Aboca”,
“Colief”, “Jamieson”, “Planter's”, “Premax”, “Skincode”, “SVR” Laboratories, “US Pharmacia” and “Wyeth”,
specialized services (such as software solutions for pharmacies and advice and consulting services) and
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2022
15
national logistics services. “Sopharma Trading” AD cooperates with more than 400 partners and over 3 000
clients.
In 2015, the company introduced its own SOpharmacy pharmacy retail concept to the B ulgarian
market, introducing the best global practices to the local market and providing an innovative approach in
serving the health needs of Bulgarian patients.
SOpharmacy's mission is to become a trusted partner in health care for life.
In the fourth quarter of 2017, the company acquired all 19 PharmaStore pharmacies and subsequently
joined the SOpharmacy family.
The company continues to implement its strategy of expanding its market presence on a national scale
in the retail segment of the Pharmacy Market, as in March 2020 it announced its intention to acquire the
"SCS Franchise" Pharmacy Group. By Decision No. 626/23.07.2020 The Commission for the Protection of
Competition of the Republic of Bulgaria allowed the concentration in the sense of Chapter V of the Law on
the Protection of Competition through the acquisition of sole control by "Sopharma Trading" AD over "SCS
Franchise" AD and "Sanita Franchising" AD. A condition for the conclusion of the transaction was
authorization from the General Meeting of Shareholders of Sopharma Trading AD, which took place on
September 25, 2020. On October 1, 2020, the transaction was finalized, with the company acquiring over 150
pharmacies under the Ceiba brands , Sanita and SCS nationwide. The company's intentions envisage the
inclusion of the new pharmacies under the SOpharmacy brand, with the integration process starting in 2021
with the unification of central teams and customer activities. It continued throughout 2022.
III. Strategy for corporate social responsibility
1. Definition
Sopharma Group has an active and crucial role in raising living standards and human health. The policy
of Sopharma Group expresses the views and commitments for the future development and improvement of
the business by maintaining high quality products and services, protecting the environment, ensuring healthy
and safe working conditions, security of information and responsible corporate behavior of companies to
stakeholders - investors, partners and end users.
Economic and financial indicators are proof of the success of the business model, complemented by
adequate CSR policies, confirming the Group's reputation. The companies in the Group are working to achieve
the UN SDG 2015.
CSR policies and initiatives are set up in accordance with important stakeholder topics, approved by
the Key Management Personnel and reported to shareholders mainly through the Annual Reports and
General Meetings.
Sopharma Group actively communicates with all stakeholders through the appropriate channels.
Policies and specific projects are targeted in four main areas:
Markets
The group is represented in more than 45 countries, with key markets being Bulgaria, Russia, Ukraine,
Kazakhstan and Poland. The strategic plan focuses on expanding the presence in the region.
The Group's sales revenues increased by BGN 59,7 million or 3.7%, reaching BGN 1 663 million in
2022 compared to BGN 1 603,3 million in 2021
.
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2022
16
Sales of goods increased by BGN 50,7 million or 3.8%, reaching BGN 1 379,1 million in 2022
compared to BGN 1 328,4 million in 2021.
Sales of finished products increased by BGN 9 million or 3.3%, to BGN 283,9 million in 2022 compared
to BGN 274,9 million in 2021.
Stakeholders
For the Sopharma Group, a stakeholder is any group that is directly or indirectly related to the Group's
activities, has the potential to influence it and can influence the decision-making process for its business
development.
Stakeholder relationships are a indicator of the success rate of the Group, its place in the economic
and social life of the country, and the correct direction of development.
The Group maintains a continuous open dialogue with all interested parties through various
communication channels depending on the target group: the official website of the group
www.sopharmagroup.com, the corporate media of individual companies, official announcements, meetings
with investors, social networks, conferences, formu and seminars.
- Patients and end users: daily through product sites, official sites of group companies;
group site www.sopharmagroup.com; company profiles and their social networking brands;
- Shareholders: General Meetings of Shareholders; notifications; meetings; official corporate
sites; the Group's site; annual reports;
- Government and local authorities: participation in annual meetings of the business;
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2022
17
roundtables, discussion forums dedicated to the pharmaceutical sector; official sites of the state and local
authorities, control bodies; official corporate media.
- Partners in the chain: software solutions for pharmacies and consultancy services; free
edition for „Sopharma Trading“ AD customers - "Pharma Premium", intended for owners and pharmacists
of pharmacies; sites of the companies in the group.
- Employees: intranet page; social networking company profiles; corporate sites; site of the
Group. Sopharma Group companies value their employees as their most valuable asset and work towards
employer branding. The group encourages employees to continuously learn by providing them with
various opportunities for this: trainings, conferences and seminars to increase competence. In the
process of implementation are new electronic platforms for training and improving the qualifications of
employees in the companies of the Group, which can be accessed at any time from office devices.
Investments in learning foreign languages during working hours. All mandatory trai ning and refresher
courses are conducted according to the legislation for a certain type of qualification for the high-quality
and safe performance of official duties. Workers and employees are entitled to higher additional
remuneration required by applica ble law for overtime, night shifts and work on Saturdays, Sundays and
holidays. Employees who work in specific, harmful or dangerous conditions receive personal protective
equipment and allowances. Companies in the Sopharma Group implement different policies aimed at
employees, depending on the topics that are relevant to the employees of the particular company, which
differ due to the specifics of the country in which they operate, as well as the activities of the companies.
Environment
Sopharma Group upholds and complies with commitments in accordance with national and European
legislation in the field of environmental protection.
“Sopharma Trading” AD maintains a certified Environmental Management System according to the
requirements of ISO 14001: 2015.
In parallel with the statutory and certified environmental protection measures, employees from
different Group companies are involved in environmental projects.
The offices of companies are located in "smart" buildings, such as Sopharma Warsaw, which is housed
in a business center with The Leadership in Energy & Environmental Design, with energy saving systems,
rainwater use, roofing of bees and Sopharma's office at Sopharma Business Towers, Sofia, whose lifts produce
electricity, and the façade is designed to allow a maximum amount of daylight. Employees in the Towers also
enjoy the green roof, the "smart" heating/cooling control and the light in the buildings.
Society
The companies in Sopharma Group are committed to society, and in order to achieve maximum
impact, various projects are implemented together with partner organizations and other companies.
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2022
18
Core areas of corporate responsibility and strategic management
Market
Employees
Environment
Society
Corporate
Citizenship
Transparent
corporate
governance
Zero discrimination
regarding the right
to work, sex
Environmental
management
systems
Contribution to
economic
development
Anticorruption
Guaranteed
quality and
safety of
products and
services
Guaranteeing the
right of association
Reducing the
environmental
imprint
Development of the
healthcare system
Work on SDG 2015
Resistance
Employee
development:
hierarchically and
as a qualification
and education
Responsible use of
resources
Disease prevention
and maintaining good
health
Participation in the
development and
implementation of
international
standards related to
pharmacy
Responsible
Marketing
Ensuring health and
safety at work
Reducing indirect
impacts
Investments in
education
Joint projects of
organizations where
members of the
Group are members
Responsible
supply
Social benefits for
employees
Participation in
environmental
projects
Investments in public
communications
Development of the
generics industry in
the country
Development of
the field of
pharmacy
Internal
communication
Training of
employees
Responsible business and Transparency
Transparent and responsible business is the only way to build a sustainable reputation and to empower
the society.
In the business strategy of “Sopharma” AD there is zero tolerance for any kind of corruption, employees
are expected and required not only to act in a ethical manner, but also to combat corruption. We actively
interact with all levels of government in our stakeholders and therefore have a responsibility to openly
express our position of a corporate citizen.
2. CSR management
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2022
19
Corporate Responsibility is embedded in the Group's mission, vision, and strategy for development and
corporate governance documents for the companies.
Organizational CSR is the subject of the corporate responsibility, investor relations, marketing, human
resources, ecology.
3. Membership
For the adequate creation and implementation of sustainable development policies, Sopharma Group
works with partner organizations such as CEIBG, BMGD, BCAUSE Foundation, Bulgarian Public Relations
Association, European Association of Communication Directors, Association of Investor Relations Directors
and others.
The companies in Sopharma Group are members of various organizations and associations:
Confederation of Employers and Industrialists in Bulgaria (CEIB). http://krib.bg/
The German-Bulgarian Chamber of Commerce and Industry (GBITC), which connects the German
and Bulgarian economies with more than 450 German, Bulgarian and international companies.
http://bulgarien.ahk.de/bg/
The Bulgarian Generic Pharmaceutical Association (BGFARMA) whose priorities are to harmonize
the interests with regard to the common national and international mechanisms regulating the
production and use of medicines, to improve the application of the principles of Good Manufactur ing
Practice and to observe the principles of fair competition. http://www.bgpharma.bg
The Bulgarian National Committee of the International Chamber of Commerce, accepted as a full
member of the International Chamber of Commerce (ICC). ICC is the most prestigious organization in
the field of international trade and international economic relations that promotes cross-border
trade and investment. http://www.icc-bulgaria.bg
The National Commission on Corporate Governance, established for the purpose of promoting the
implementation of good corporate governance practices and the development of t he Bulgarian
National Code of Corporate Governance (the Code). The Commission is a permanent independent
body set up under the auspices of the Bulgarian Stock Exchange (BSE) and the Financial Supervision
Commission (FSC), with the support of the World Bank and the International Financial Corporation
(IFC) www.nkku.bg
The Bulgarian UN Global Compact Network http://www.unglobalcompact.bg
o As an active member of BMGD, Sopharma is working towards the achievement of the UN
sustainable development goals adopted in 2015.
Bulgarian Association of Drug Wholesalers (“Sopharma Trading” AD) – The mission of the
Association is to ensure fair and transparent drug delivery and provision of services in the
pharmaceutical sector in Bulgaria. It protects the branch interests and rights of its members before
state authorities, institutions and producers - www.batel.bg
Genezis (“Sopharma Trading” Serbia) – The Genezis Association brings together generic
manufacturers of generic medicines and holders of a marketing authorization in the Republic of
Serbia - www.genezis.rs
The Serbian Association of Drug Wholesalers - The mission of the association is to ensure fair and
transparent drug delivery and service provision in the pharmaceutical sector. It protects the branch
interests and rights of its members before state authorities, institutions and producers.
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2022
20
Member of the National Alliance for Local Economic Development NALED Serbia Independent, non-
financial and non-party organization of companies, municipalities and civil organizations working
together to create better working and living conditions in Serbia.
MediReg Pharmaceutical Consulting – supports the efficient launch of new products in the Polish
market and ensures regulatory compatibility and pharmacovigilance.
The "FARMACJA POLSKA" " Chamber of Commerce.
26 April 2023 Ognian Donev, PhD
Sofia Executive Director
OGNIAN
IVANOV DONEV
Digitally signed by
OGNIAN IVANOV DONEV
Date: 2023.04.26
19:26:25 +03'00'
DECLARATION
under art. 100о, par. 4, item. 3 of the Law on Public Offering of Securities
We, the undersigned Ognian Ivanov Donev, in the capacity of Executive Director,
Boris Anchev Borisov, in the capacity of Financial Director, and Lyudmila Krumova
Bondzhova in the capacity as Preparer of the Annual Consolidated Financial statements of
Sopharma AD, UIC 831902088, entered in the Commercial Register of Sofia City Court
under company case № 9359/1991, with seat and address of management: Sofia, Nadezhda
district, 16 Iliensko shose Str.,
DECLARE that to our knowledge:
1. The Annual Consolidated Financial statements for 2022, prepared in accordance
with the applicable accounting standards, reflect a true and fair view of the assets
and liabilities, financial position and profit of Sopharma AD and the companies,
included in the consolidation.
2. The Annual Consolidated Management report for 2022 contains a fair presentation
of the development and operating results of Sopharma AD, as well as the state of
the companies, included in the consolidation, as well as a description of the main
risks and uncertainties, which they are facing.
26 April 2023 DECLARANTS:
Sofia
.........................................
/Ognian Donev/
.........................................
/Boris Borisov/
.........................................
/ Lyudmila Bondzhova /
OGNIAN
IVANOV
DONEV
Digitally signed by
OGNIAN IVANOV
DONEV
Date: 2023.04.26
19:26:50 +03'00'
BORIS ANCHEV
BORISOV
Digitally signed by BORIS
ANCHEV BORISOV
Date: 2023.04.26
19:28:13 +03'00'
LYUDMILA KRUMOVA
BONDZHOVA
Digitally signed by LYUDMILA
KRUMOVA BONDZHOVA
Date: 2023.04.26 19:34:50
+03'00'
Baker Tilly Klitou and Partners EOOD
5, Stara planina street
5th Floor
Sofia 1000
Bulgaria
T: +359 2 9580980
F: +359 2 8592139
info@bakertilly.bg
www.bakertilly.bg
ADVISORY  ASSURANCE  TAX
Baker Tilly Klitou and Partners EOOD trading as Baker Tilly is a member of the global network of Baker Tilly International Ltd., the members of
which are separate and independent legal entities.
INDEPENDENT AUDITORS’ REPORT
To the Shareholders of Sopharma AD
REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
Opinion
We have audited the accompanying consolidated financial statements of Sopharma AD (“the Group”),
which comprise the consolidated statement of financial position as at December 31, 2022, and the
consolidated statement of comprehensive income, the consolidated statement of changes in equity and
the consolidated statement of cash flows for the year then ended, and notes to the consolidated
financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the financial position of the Group as at December 31, 2022, and its financial performance
and its cash flows for the year then ended in accordance with International Financial Reporting
Standards ("IFRS"), as adopted by the European Union (“EU”).
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 Auditors’ Responsibilities for the
Audit of the consolidated financial statements section of our report. We are independent of the Group
in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for
Professional Accountants (IESBA Code) together with the ethical requirements of the Independent
Financial Audit Act (IFAA) that are relevant to our audit of the consolidated financial statements in
Bulgaria, and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code
and the requirements of IFAA. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements of the current period. These matters were addressed in
the context of our audit of the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a consolidated opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
1) Recoverable amount of goodwill and specific
intangible assets recognized in business
combinations
As at 31 December 2022 the Group reports in the
consolidated statement of financial position
intangible assets, including goodwill, to the
amount of BGN 51,673 thousand (Note 17). The
total amount includes goodwill of BGN 3,522
thousand and specific intangible assets of BGN
23,044 thousand, related to the acquired
subsidiaries.
For these subsidiary companies some of the
following characteristics are observed: start-up
stage in business, change in business strategy or
incurred losses. These circumstances presume that
certain risk exists as to the correct valuation of
goodwill and specific intangible assets recognized
in business combinations of these subsidiaries as
at the end of the reporting period.
The review of the Group`s management tests of
impairment of the goodwill and the specific
intangible assets of these subsidiaries is a complex
process, through which are considered Group`s
forecasts regarding future estimated benefits and
profitability, expected to be received by the
Group. In its calculations the Group Management
needs to apply significant assumptions, various
judgements and estimates, and for the purpose of
measuring their recoverable amount it uses the
discounted future cash flows’ method.
Due to the circumstances that (a) the process of
estimating and testing of possible impairment
losses of goodwill and specific intangible assets of
In this area our audit procedures performed
are:
• Analyses and assessment of the relevance
of Group’s budget and projections as at
31 December 2022;
• Examination of the calculations and the
results from the test for impairment of the
respective goodwill and specific
intangible assets made by the Group’s
management with the assistance of
independent external appraisers;
• Assessment of the objectivity,
independence and competency of the
external appraisers;
• Analysis and assessment of the
appropriateness of the key judgments and
assumptions, used by the Group’s
management, including the discount rate
used in the application of the discounted
cash flows model;
• Assessment and testing the completeness,
appropriateness and adequacy of the
disclosures in the Group’s consolidated
financial statements with regard to the
valuation of goodwill and the specific
intangible assets of subsidiaries.
Key audit matter
How our audit addressed the key audit matter
these subsidiaries assumes a number of judgments,
higher degree of subjectivity and uncertainty
related to the projection assumptions, including
revenue projections, cash flow projections and
growth rate, the level of uncertainty, including the
fact that these subsidiaries are in the start-up and
development stage of their business; there was a
change in business strategy or they have incurred
losses; (b) the significance of the reporting item
itself for the consolidated financial statements, as
disclosed above, we have determined this matter
as a key audit matter.
2. Valuation of trade receivables, receivables
from related parties and loans granted to
third parties
As disclosed in Notes № 21, 22, 24, 25 and 26 to
the consolidated financial statements, as of
31.12.2022 the Group has gross trade receivables,
receivables from related parties and loans granted
to third parties amounting to BGN 316,800
thousand and impairment loss allowances
amounting to BGN 9,517 thousand.
The Group has applied IFRS 9 “Financial
instruments”, according to which credit losses are
determined based on expected credit losses.
The application of the model for determination of
the allowance for credit losses for trade
receivables, receivables from related parties and
loans granted to third parties, result in significant
complexity and the necessity of key estimates and
judgements for the Management`s final
calculations related to identification of doubtful
exposures as well as determination of the amount
of credit losses.
To determine the amount of impairment loss
allowance for credit losses, the Group applies
model based on significant estimates and
judgements in:
In this area our audit procedures performed
are:
• We have obtained understanding of the
process for the application of IFRS 9,
with focus on implemented methodology
in Group`s model for determination of
impairment allowance for credit losses,
including the use of key assumptions and
estimates.
• Inquiries, walkthroughs and obtaining of
understanding of the process, related to
determination of credit losses for trade
receivables, receivables from related
parties, and loans granted to third parties.
• Assessment and test of design and
operating effectiveness of key controls in
the process of monitoring and
determination of the amount of
impairment allowance for credit losses.
• Review and assessment of the adequacy
of the methodology used by the Group
for the purposes of identification of credit
losses and calculation of impairment loss
allowance in accordance with the concept
Key audit matter
How our audit addressed the key audit matter
• Interpretation of the requirements for
determination of impairment loss
allowance in accordance with IFRS 9,
which is based on the Group`s model for
determination and calculation of the
expected credit losses;
• Calculation and interpretation of key
indicators as “probability of default”, “loss
given default” and “exposure at default”;
• Assumptions and estimates in a number of
scenarios for estimated future cash flows,
based on past events, current conditions
and future economic forecasts;
• Assumptions, used by Management in the
review of individually significant
exposures, related to recent losses, number
of probable scenarios for future cash flows
and the results of these scenarios and
future collectability.
Because of the significance of the above stated
circumstances: a) material amount of trade
receivables, receivables from related parties and
loans granted to third parties as captions in the
consolidated financial statements of the Group
and, b) inherent level of uncertainty in the use of
multiple estimates and judgements by the
management of the Group for the specific
calculation of the amount of credit losses, related
to trade receivables, receivables from related
parties and loans granted to third parties in
accordance with the implemented model, resulting
from the application of IFRS 9, we have
determined this matter as key audit matter.
and the requirements of IFRS 9.
• Analysis and assessment of the
justification and appropriateness of
calculations for the indicators of
“probability of default” and “loss given
default” through inspection o f the
assumptions used and the output data, as
well as the approach for inclusion of
prospective information in the models.
• Assessment of the completeness,
appropriateness and adequacy of the
disclosures in the Group’s consolidated
financial statements with regard to credit
risk and impairment allowance for credit
losses for trade receivables, receivables
from related parties and loan granted to
third parties.
Information Other than the consolidated financial statements and Auditors’ Report Thereon
The Management Board of the Group (“the Management”) is responsible for the other information.
The other information comprises of the annual consolidated report on activities, incl. corporate
governance statement and the consolidated non-financial declaration, prepared by the management in
accordance with Chapter Seven of the Accountancy Act, but does not include the consolidated
financial statements and our auditors’ report thereon, which we received prior to the date of our
auditor’s report.
Our opinion on the consolidated financial statements does not cover the other information and we do
not express any form of assurance conclusion thereon, unless it is not specifically stated in our
auditors’ report and to the extent it is specifically stated.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated 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.
Responsibilities of Management and Those Charged with Governance for the consolidated
financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS as adopted by the EU, and for such internal control as
management determines is necessary to enable the preparation of consolidated financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Group’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 Group or to cease operations, or has no realistic alternative but to do so.
The Audit Committee (“Those charged with governance”) are responsible for overseeing the Group’s
financial reporting process.
Auditors’ Responsibilities for the Audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’
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 consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the consolidated 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 Group's internal control.
• 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 sig nificant doubt on the Group’s ability to continue as a
going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditors’ report to the related disclosures in the consolidated 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 auditors’ report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial statements
represent the underlying transactions and events in a manner that achieves fair presentation.
• Receive adequate and relevant audit evidence regarding the financial information of the
companies part of the Group in order to express an opinion on the consolidated financial
statements. We bear responsibility for the instruction, supervision and execution of the audit of
the consolidated financial statements. We bear the ultimate responsibility for our audit opinion.
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.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and will communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such
communication.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
Additional matters, required to be reported by the Accountancy Act and Public Offering of
Securities Act
In addition to our reporting responsibilities according to ISAs described in s ection “Information Other
than the consolidated financial statements and Auditors’ Report Thereon”, with respect to the annual
consolidated report on activities, the corporate governance statement and the consolidated non-
financial declaration, we have also performed the procedures required by the Guidelines related to new
extended audit reports and communication from the auditors of the Professional Organization of
Registered Auditors in Bulgaria - Institute of Certified Public Accountants. These procedures include
tests over the existence, form and content of the other information in order to assist us in forming an
opinion as to whether the other information includes the disclosures and reporting as required by
Chapter Seven of the Accountancy Act and the Public Offering of Securities Act (art. 100m, para 10 of
POSA in relation to art. 100m, para 8, p. 3 and 4 of POSA), applicable in Bulgaria.
Opinion under Article 37, paragraph 6 of the Accountancy Act
Based on the procedures performed, in our opinion:
• The information included in the annual consolidated report on the activities for the financial
year for which the consolidated financial statements have been prepared, is consistent with the
consolidated financial statements.
• The consolidated report on the activities has been prepared in accordance with the requirements
of Chapter Seven of the Accountancy Act and of Art. 100m, paragraph 7 of the Public Offering
of Securities Act.
• The information required by Chapter Seven of the Accountancy Act and Art. 100m, para 8 of
the Public Offering of Securities Act is presented in the corporate governance statement
covering the financial year for which the consolidated financial statements have been prepared.
• The consolidated non-financial Declaration, covering the financial year for which the
consolidated financial statements have been prepared, has been provided and prepared in
accordance with the requirements of Chapter Seven of the Accountancy Act.
Opinion under Art. 100m, para 10 in relation to art. 100m, para 8, p. 3 and 4 of the Public
Offering of Securities Act
Based on the procedures performed and as a result of the acquired knowledge and understanding of the
entity and the environment in which it operates, acquired during our audit, in our opinion, the
description of the main features of the entity’s internal control and risk management systems in
relation to the financial reporting process as part of the annual report on activities (as element of the
content of the corporate governance statement) and the information under Article 10, paragraph 1,
letter "c", "d", "f", "h" and "i" of the Directive 2004/25/EC of the European Parliament and of the EU
Council of April 21, 2004 related to takeover bids, included in the corporate governance statement do
not contain cases of material misrepresentations.
Additional Reporting on the audit of the consolidated financial statements under Art. 100m,
para 4, p.3 of the Public Offering of Securities Act
Reporting under Art. 100m, para 4, p.3 b) “b” of the Public Offering of Securities Act
The information on transactions with related parties is disclosed in Note 48 to the consolidated
financial statements. Based on the audit procedures performed on the transactions with related parties,
we have not identified any facts or other information, based on which we could conclude that the
transactions with related parties are not disclosed in the attached financial statements, in all material
aspects, in accordance with the requirements of IAS 24 Disclosure of related parties. The results of our
audit procedures regarding transactions with related parties are considered in the context of forming
our audit report on the consolidated financial statements taken as a whole, and not with the purpose of
expressing the audit opinion on transactions with related parties.
Reporting under Art. 100m, para 4, p.3 b) “c” of the Public Offering of Securities Act
Our responsibilities for the audit of the consolidated financial statements as a whole, described in the
section Auditors’ Responsibilities for the Audit of the consolidated financial statements include
assessment whether the consolidated financial statements presents true and fair view of material
transactions and events. Based on the audit procedures performed on the material transactions,
underlying the consolidated financial statements for the year ended 31 December 2022, no facts
circumstances or other information have come to our attention, based on which we can conclude that
there are cases of material misstatements and disclosures in the consolidated financial statements in
accordance with the requirements of IFRS, adopted by EU. The results of our audit procedures on the
material transactions and events related to the Group are considered in the context of forming our audit
report on the consolidated financial statements taken as a whole, and not with the purpose of
expressing the audit opinion on these material transactions.
Reporting on compliance of the electronic format of the consolidated financial statements,
included in the annual consolidated financial statements according to art. 100m, para 4 of the
Public Offering of Securities Act with the requirements of the ESEF Regulation
We have conducted engagement to express reasonable assurance regarding the compliance of the
electronic format of the consolidated financial statements of Sopharma AD for the year ended 31
December 2022, in the attached electronic file “097900BGGW0000048796-20221231-EN-CON.zip",
with the requirements of Commission Delegated Regulation (EU) 2018/815 of 17 December 2018
supplementing Directive 2004/109/EC of the European Parliament and of the Council with regard to
regulatory technical standards on the specification of a single electronic reporting format (“Regulation
ESEF”). Our conclusion is only regarding the electronic format of the consolidated financial
statements and does not cover the other information included in the annual consolidated financial
statements for the activity under Art. 100m, para. 5 of the POSA.
Description of a subject matter and applicable criteria
The management has prepared the electronic format of the consolidated financial statements of the
Group for the year ended 31 December 2022 under the ESEF Regulation in order to comply with the
requirements of the POSA. The requirements for the preparation of consolidated financial statements
in this electronic format are contained in the ESEF Regulation and, in our view, have the
characteristics of appropriate criteria for forming a reasonable assurance conclusion.
Responsibilities of the management and those charged with governance
The Group's management is responsible for applying the requirements of the ESEF Regulation when
preparing the electronic format of the consolidated financial statements in XHTML. These
responsibilities include the selection and application of appropriate iXBRL markups using the
taxonomy of the ESEF Regulation, as well as the design and implementation of such internal control
system that management determines necessary to prepare the electronic format of the Group's annual
consolidated financial statements that does not contain material non-compliance with the requirements
of the ESEF Regulation.
Those charged with governance are responsible for overseeing the process for preparation the Group's
annual consolidated financial statements, including the application of the ESEF Regulation.
Auditor's responsibilities
Our responsibility is to express a reasonable assurance conclusion as to whether the electronic format
of the consolidated financial statements is in compliance with the requirements of the ESEF
Regulation. For this purpose, we have complied with the „Guidelines related to issuing of audit
opinion in relation to the application of the European single electronic format (ESEF) for the financial
statements of entities, which shares are traded on a regulated market in the European union (EU)” of
the Professional Organization of Registered Auditors in Bulgaria - Institute of Certified Public
Accountants and we have conducted an engagement to express reasonable assurance in accordance
with ISAE 3000 (revised) “Assurance Engagements Other than Audits or Reviews of Historical
Financial Information" (ISAE 3000 (revised)).
This standard requires us to comply with ethical requirements, plan and perform appropriate
procedures to obtain reasonable assurance whether the electronic format of the Group's consolidated
financial statements has been prepared, in all material respects, in accordance with the applicable
criteria mentioned above.
The nature, timing and scope of the selected procedures depend on our professional judgment,
including the assessment of the risk of material non-compliance with the requirements of the ESEF
Regulation, whether due to fraud or error.
A reasonable assurance is a high level of assurance, but it does not guarantee that an engagement
performed in accordance with ISAE 3000 (revised) will always detect material non-compliance, when
such exist.
Quality management requirements
We apply the requirements of the International Standard on Quality Management (ISQM) 1, which
requires development, implementation and maintenance of system for quality management, including
policies or procedures regarding compliance with ethical requirements, professional standards and
applicable legal and regulatory requirements for registered auditors in Bulgaria.
We comply with the ethical and independence requirements of the International Code of Ethics for
Professional Accountants (including International Standards of Independence) of the International
Ethics Standards Board for Accountants (IESBA Code), adopted by ICPA through the IFAA.
Summary of the work performed
The purpose of the procedures planned and performed by us was to obtain a reasonable assurance that
the electronic format of the consolidated financial statements has been prepared, in all material
respects in accordance with the requirements of the ESEF Regulation. As part of our assessment of
compliance with the ESEF Regulation's electronic (XHTML) format for reporting on the Group's
consolidated accounts, we maintained professional skepticism and used professional judgment. We
also:
- obtained understanding of the internal control and the processes related to the application of the
ESEF Regulation regarding the consolidated financial statements of the Group and including the
preparation of the consolidated financial statements of the Group in XHTML format and its marking
up in machine readable language (iXBRL);
- checked if the applied XHTML format is valid;
- checked whether the human readable part of the electronic format of the consolidated financial
statements corresponds to the audited consolidated financial statements;
- assessed the completeness of the marking up in the consolidated financial statements of the Group
using the machine-readable language (iXBRL) in accordance with the requirements of the ESEF
Regulation;
- assessed the appropriateness of the iXBRL markups selected from the main taxonomy used, as well
as the creation of an extended taxonomy element in accordance with the ESEF Regulation where an
appropriate element in the main taxonomy is missing;
- assessed the appropriateness of anchoring of the elements of the extended taxonomy in accordance
with the ESEF Regulation.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our
conclusion.
Conclusion on the compliance of the electronic format of the consolidated financial statements with
the requirements of the ESEF Regulation
In our opinion, based on the procedures performed, the electronic format of the consolidated financial
statements of the Group for the year ended 31 December 2022, contained in the attached electronic file
“097900BGGW0000048796-20221231-EN-CON.zip", has been prepared in all material respects in
accordance with the requirements of the ESEF Regulation.
Reporting in accordance with Art. 10 of Regulation (EU) No 537/2014 in connection with the
requirements of Art. 59 of the Independent Financial Audit Act
In accordance with the requirements of the Independent Financial Audit Act in connection with Art. 10
of Regulation (EU) No 537/2014, we hereby additionally report the information stated below.
• Baker Tilly Klitou and Partners EOOD were appointed as statutory auditors of the consolidated
financial statements of the Group for the year ended December 31, 2022 by the general meeting
of shareholders held on June 3
rd
, 2022 for a period of one year.
• The audit of the consolidated financial statements of the Group for the year ended December
31, 2022 represents sixth statutory uninterrupted audit engagement for that entity carried out by
Baker Tilly Klitou and Partners EOOD.
• We hereby confirm that the audit opinion expressed by us is consistent with the additional
report provided to the Audit committee, in compliance with the requirements of Art. 60 of the
Independent Financial Audit Act.
• No prohibited non-audit services referred to in Art. 64 of the Independent Financial Audit Act
were provided.
• We hereby confirm that in conducting the audit we have remained independent of the Group.
• We hereby confirm that we have not provided services to the Group, other than the audit
services, for the period related to consolidated financial statements for 2022.
Audit company №129 Baker Tilly Klitou and Partners EOOD
Ivaylo Yanchev
Galina Lokmadjieva - Nedkova
Registered auditor, responsible for the audit
Managing Director
April 28, 2023
Baker Tilly Klitou and Partners EOOD
5, Stara Planina Str., 5th floor
1000 Sofia, Bulgaria
IVAYLO
YANCHEV
YANCHEV
Digitally signed by
IVAYLO YANCHEV
YANCHEV
Date: 2023.04.28
11:23:27 +03'00'
Galina
Dimitrova
Lokmadjieva-
Nedkova
Digitally signed by
Galina Dimitrova
Lokmadjieva-
Nedkova
Date: 2023.04.28
11:26:02 +03'00'
1
TO
SHAREHOLDERS OF
SOPHARMA AD
DECLARATION
Art. 100m, para 4, item 3 from
Public Offering of Securities Act
The undersigned:
Ivaylo Yanchev Yanchev, in the capacity of Registered auditor of Baker Tilly Klitou and Partners
EOOD, with UIC 131349346, with headquarters and management address: 5, Stara Planina Str.,5, floor 5,
Sofia, 1000 and address for correspondence: Sofia, 1000, 5, Stara Planina Str., 5, floor 5, declare that:
Baker Tilly Klitou and Partners EOOD was committed to carry out a mandatory financial audit of the
consolidated financial statements of Sopharma AD for the year 2022, compiled in accordance with the
International Financial Reporting Standard adopted by the EU, a generally accepted name of the
accounting base defined in paragraph 8 of the Supplementary part of the Accounting Act under the name
"International Accounting Standards". As a result of our audit, we issued an audit report on April 28,
2023.
We hereby certify that as reported in our audit report on the annual consolidated financial
statement of Sopharma AD for 2022 issued on April 28, 2023:
1. Art. 100m, para. 4, item 3, letter "a" Audit opinion: In our opinion, the accompanying consolidated
financial statements give a true and fair view of the financial position of the Group as at 31 December
2022 and of its financial performance and its cash flows for the year, ending on that date in accordance
with the International Financial Reporting Standard (IFRS) adopted by the European Union (EU).
2. Art. 100m, para. 4, item 3, letter "b" Information related to the transactions of SOPHARMA AD
with related parties. Information about related party transactions is duly disclosed in Note 48 to the
consolidated financial statements. Based on the audit procedures we performed on related party
transactions as part of our audit of the consolidated financial statements as a whole, we have not become
aware of the fact, circumstances or other information on the basis of which we may conclude that related
party transactions are not disclosed in the accompanying consolidated financial statements for the year
ended 31 December 2022 in all material respects in accordance with IAS 24 Related Party Disclosures.
The results of our audit procedures on related party transactions have been reviewed by us in the context
of forming our opinion on the consolidated financial statements as a whole, rather than in order to express
a separate opinion on related party transactions.
3. Art. 100m, para. 4, item 3, letter "c" Information relating to material transactions. Our audit
responsibilities for the financial statements as a whole described in the section of our report "Auditor's
Responsibilities for the Audit of the Consolidated Financial Statements" include assessing whether the
consolidated financial statements present the material transactions and events in a manner that delivers
credible performance. Based on the audit procedures we performed on the material transactions
underlying the consolidated financial statements for the year ended 31 December 2022, no facts,
circumstances or other information have been disclosed to us in order to conclude that there are cases of
material misrepresentation and disclosure in accordance with the applicable IFRS requirements adopted
by the European Union.
2
The results of our audit procedures on the Group's transactions and events that are material to the Group's
financial statements are reviewed by us in the context of our opinion on the consolidated financial
statements as a whole and not for the purpose of obtaining a separate opinion on these material
transactions.
The representations made by this declaration should be considered only in the context of our audit
report as a result of the independent financial audit of the consolidated annual financial statements of
SOPHARMA AD for the reporting period ending 31 December 2022, dated 28 April 2023. This
declaration is intended solely for the above-mentioned addressee and has been prepared solely and
solely in compliance with the requirements set forth in Art. 100m, para. 4 (3) of the Public Offering of
Securities Act (POSA) and should not be accepted as a substitute for our opinion expressed in the audit
report issued by us on 28 April 2023 regarding the issues covered by Art. 100m, para. 4, item 3 of
POSA.
Baker Tilly Klitou and Partners EOOD:
____________________________
Ivaylo Yanchev
Registered auditor
28 April 2023
Sofia
IVAYLO
YANCHEV
YANCHEV
Digitally signed by
IVAYLO YANCHEV
YANCHEV
Date: 2023.04.28
11:26:58 +03'00'