097900BGGW0000048796 2023-01-01 2023-12-31 iso4217:BGN 097900BGGW0000048796 2022-01-01 2022-12-31 iso4217:BGN xbrli:shares 097900BGGW0000048796 2023-12-31 097900BGGW0000048796 2022-12-31 097900BGGW0000048796 2021-12-31 097900BGGW0000048796 2021-12-31 ifrs-full:IssuedCapitalMember 097900BGGW0000048796 2021-12-31 ifrs-full:TreasurySharesMember 097900BGGW0000048796 2021-12-31 ifrs-full:StatutoryReserveMember 097900BGGW0000048796 2021-12-31 ifrs-full:RevaluationSurplusMember 097900BGGW0000048796 2021-12-31 ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMember 097900BGGW0000048796 2021-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 097900BGGW0000048796 2021-12-31 ifrs-full:WarrantReserveMember 097900BGGW0000048796 2021-12-31 ifrs-full:RetainedEarningsMember 097900BGGW0000048796 2021-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 097900BGGW0000048796 2021-12-31 ifrs-full:NoncontrollingInterestsMember 097900BGGW0000048796 2022-01-01 2022-12-31 ifrs-full:TreasurySharesMember 097900BGGW0000048796 2022-01-01 2022-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 097900BGGW0000048796 2022-01-01 2022-12-31 ifrs-full:RetainedEarningsMember 097900BGGW0000048796 2022-01-01 2022-12-31 ifrs-full:WarrantReserveMember 097900BGGW0000048796 2022-01-01 2022-12-31 ifrs-full:StatutoryReserveMember 097900BGGW0000048796 2022-01-01 2022-12-31 ifrs-full:NoncontrollingInterestsMember 097900BGGW0000048796 2022-01-01 2022-12-31 ifrs-full:RevaluationSurplusMember 097900BGGW0000048796 2022-01-01 2022-12-31 ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMember 097900BGGW0000048796 2022-01-01 2022-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 097900BGGW0000048796 2022-12-31 ifrs-full:IssuedCapitalMember 097900BGGW0000048796 2022-12-31 ifrs-full:TreasurySharesMember 097900BGGW0000048796 2022-12-31 ifrs-full:StatutoryReserveMember 097900BGGW0000048796 2022-12-31 ifrs-full:RevaluationSurplusMember 097900BGGW0000048796 2022-12-31 ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMember 097900BGGW0000048796 2022-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 097900BGGW0000048796 2022-12-31 ifrs-full:WarrantReserveMember 097900BGGW0000048796 2022-12-31 ifrs-full:RetainedEarningsMember 097900BGGW0000048796 2022-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 097900BGGW0000048796 2022-12-31 ifrs-full:NoncontrollingInterestsMember 097900BGGW0000048796 2023-01-01 2023-12-31 ifrs-full:IssuedCapitalMember 097900BGGW0000048796 2023-01-01 2023-12-31 ifrs-full:StatutoryReserveMember 097900BGGW0000048796 2023-01-01 2023-12-31 ifrs-full:WarrantReserveMember 097900BGGW0000048796 2023-01-01 2023-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 097900BGGW0000048796 2023-01-01 2023-12-31 ifrs-full:TreasurySharesMember 097900BGGW0000048796 2023-01-01 2023-12-31 ifrs-full:RevaluationSurplusMember 097900BGGW0000048796 2023-01-01 2023-12-31 ifrs-full:RetainedEarningsMember 097900BGGW0000048796 2023-01-01 2023-12-31 ifrs-full:NoncontrollingInterestsMember 097900BGGW0000048796 2023-01-01 2023-12-31 ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMember 097900BGGW0000048796 2023-01-01 2023-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 097900BGGW0000048796 2022-01-01 2023-12-31 ifrs-full:RetainedEarningsMember 097900BGGW0000048796 2022-01-01 2023-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 097900BGGW0000048796 2022-01-01 2023-12-31 ifrs-full:NoncontrollingInterestsMember 097900BGGW0000048796 2023-12-31 ifrs-full:IssuedCapitalMember 097900BGGW0000048796 2023-12-31 ifrs-full:TreasurySharesMember 097900BGGW0000048796 2023-12-31 ifrs-full:StatutoryReserveMember 097900BGGW0000048796 2023-12-31 ifrs-full:RevaluationSurplusMember 097900BGGW0000048796 2023-12-31 ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMember 097900BGGW0000048796 2023-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 097900BGGW0000048796 2023-12-31 ifrs-full:WarrantReserveMember 097900BGGW0000048796 2023-12-31 ifrs-full:RetainedEarningsMember 097900BGGW0000048796 2023-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 097900BGGW0000048796 2023-12-31 ifrs-full:NoncontrollingInterestsMember
Annual consolidated financial statements of “Sopharma” AD
as of 31 December 2023
Contents:
Consolidated annual financial statements according to IFRS
Notes to the consolidated financial report according to IFRS
Management report
Corporate governance declaration
Non-financial declaraction
Declaration by responsible persons
Auditors’ report
Audtors’ declaration
Sopharma AD | 16 Iliensko Shose Str. | 1220 Sofia, Bulgaria | tel: +35928134200 | fax: +35929360286 | mail@sopharma.bg
sopharmagroup.com
SOPHARMA GROUP
Board of Directors: Ognian Donev, PhD
Vessela Stoeva
Alexander Chaushev
Bisera Lazarova
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
Stefan Vachev
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 2023
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. MATERIAL ACCOUNTING POLICIES OF THE GROUP 24
3. REVENUE FROM CONTRACTS WITH CUSTOMERS 81
4. OTHER OPERATING INCOME AND LOSSES 82
5. MATERIALS AND CONSUMABLES USED 83
6. HIRED SERVICES EXPENSE 84
7. EMPLOYEE BENEFITS EXPENSE 84
8. OTHER OPERATING EXPENSES 85
9. IMPAIRMENT OF ASSETS 85
10. IMPAIRMENT OF NON-CURRENT ASSETS OUTSIDE THE SCOPE OF IFRS 9 86
11. FINANCE INCOME 86
12. FINANCE COSTS 86
13. GAINS/LOSSES FROM ASSOCIATES AND JOINT VENTURES 87
14. INCOME TAX EXPENSE 87
15. OTHER COMPREHENSIVE INCOME 89
16. PROPERTY, PLANT AND EQUIPMENT 90
17. INTANGIBLE ASSETS 93
18. INVESTMENT PROPERTY 95
19. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES 97
20. OTHER LONG-TERM EQUITY INVESTMENTS 104
21. LONG-TERM RECEIVABLES FROM RELATED PARTIES 106
22. OTHER LONG-TERM RECEIVABLES 107
23. INVENTORIES 108
24. TRADE RECEIVABLES 110
25. RECEIVABLES FROM RELATED PARTIES 113
26. OTHER SHORT-TERM RECEIVABLES AND ASSETS 115
27. CASH AND CASH EQUIVALENTS 117
28. EQUITY 117
29. LONG-TERM BANK LOANS 120
30. DEFERRED TAX ASSETS AND LIABILITIES 124
31. NON-CURRENT PAYABLES TO RELATED PARTIES 126
32. LONG-TERM EMPLOYEE BENEFIT OBLIGATIONS 126
33. LEASE LIABILITIES 130
34. GOVERNMENT GRANTS 131
35. OTHER NON-CURRENT LIABILITIES 132
36. SHORT-TERM BANK LOANS 132
37. TRADE PAYABLES 133
38. PAYABLES TO RELATED PARTIES 134
39. PAYABLES UNDER FACTORING AGREEMENT 135
40. PAYABLES TO PERSONNEL AND FOR SOCIAL SECURITY 135
41. TAX PAYABLES 135
42. OTHER CURRENT LIABILITIES 138
43. CONTINGENT LIABILITIES AND COMMITMENTS 138
44. SEGMENT REPORTING 140
45. FINANCIAL RISK MANAGEMENT 142
46. ACQUISITIONS AND INCREASING INTERESTS IN SUBSIDIARIES 156
47. DISPOSAL OF SUBSIDIARIES AND JOINT VENTURES 157
48. RELATED PARTY TRANSACTIONS 159
49. EVENTS AFTER END OF THE REPORTING PERIOD 161
SOPHARMA GROUP
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2023

|  |  | 2023 | 2022
| Notes |  |  |
|  |  | BGN'000 | BGN'000
Revenue from contracts with customers | 3 |  | 1 875 304 | 1 663 016
Other operating income/(losses), net | 4 |  | 20 821 | 13 042
Changes in inventories of finished products and work in progress |  |  | 11 866 | 9 713
Raw materials and consumables used | 5 |  | (103 861) | (99 129)
Hired services expense | 6 |  | (88 579) | (70 126)
Employee benefits expense | 7 |  | (170 740) | (147 829)
Depreciation and amortization expense | 16, 17 |  | (55 872) | (52 099)
Carrying amount of goods sold |  |  | (1 376 508) | (1 214 333)
Other operating expenses | 8 |  | (14 321) | (14 374)
Profit from operations |  |  | 98 110 | 87 881
Impairment of non-current assets outside the scope of IFRS 9 |  |  | (1 890) | (20 783)
Finance income | 11 |  | 4 406 | 3 304
Finance costs | 12 |  | (13 901) | (9 417)
Finance income / (costs), net |  |  | (9 495) | (6 113)
Gain from associates and joint ventures, net | 13 |  | 24 473 | 22 635
Gain on acquisition and disposal of subsidiaries |  |  | - | 1 456
Profit before income tax |  |  | 111 198 | 85 076
Income tax expense | 14 |  | (11 324) | (8 743)
Net profit for the year |  |  | 99 874 | 76 333
Other comprehensive income: |  |  |  |
Items that will not be reclassified to profit or loss: |  |  |  |
Remeasurement of property, plant and equipment |  |  | 33 | (991)
Remeasurement of defined benefit pension plans |  |  | (1 472) | 1 498
Net change in the fair value of other long-term equity investments | 15 |  | 1 766 | (1 047)
Income tax relating to items of other comprehensive income that will not be reclassified |  |  | (3) | 99
|  |  | 324 | (441)
Items that may be reclassified to profit or loss: |  |  |  |
Exchange differences on translating foreign operations |  |  | (1 302) | (4 637)
Share of other comprehensive income of associates |  |  | 4 893 | (790)
| 15 |  | 3 591 | (5 427)
Other comprehensive income for the year, net of tax |  |  | 3 915 | (5 868)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR |  |  | 103 789 | 70 465
Net profit for the year attributable to: |  |  |  |
Equity holders of the parent |  |  | 95 977 | 71 121
Non-controlling interests |  |  | 3 897 | 5 212
Total comprehensive income for the year attributable to: |  |  |  |
Equity holders of the parent |  |  | 99 976 | 65 110
Non-controlling interests |  |  | 3 813 | 5 355
Basic net earnings per share | 28 | BGN | 0.73 | 0.59
Diluted net earnings per share | 28 | BGN | 0.69 | 0.57

The accompanying notes on pages 5 to 162 form an integral part of the consolidated financial statements.
Digitally signed by Ognian
Ognian Ivanov
Ivanov Donev
Executive Director:
Date: 2024.04.24 17:40:14
Donev
Ognian Donev, PhD
+03'00'
Digitally signed by Boris Anchev
Boris Anchev
Borisov
Finance Director:
Date: 2024.04.24 17:48:11
Borisov
Boris Borisov
+03'00'
LYUDMILA KRUMOVA
Digitally signed by LYUDMILA
Preparer:
KRUMOVA BONDZHOVA
Lyudmila Bondzhova
BONDZHOVA
Date: 2024.04.24 17:54:58 +03'00'
Audit company Baker Tilly Klitou and Partners EOOD № 129:
Digitally signed by
Galina Dimitrova
Galina Dimitrova
IVAYLO
Digitally signed by
Lokmadjieva-
Lokmadjieva-Nedkova
IVAYLO YANCHEV
Date: 2024.04.25
YANCHEV
YANCHEV
Nedkova
Date: 2024.04.25
11:23:29 +03'00'
YANCHEV
11:13:46 +03'00'
Ivaylo Yanchev Galina Lokmadjieva-Nedkova
Registered auditor Managing director
Baker Tilly Klitou and Partners EOOD
1
SOPHARMA GROUP
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December 2023
Notes

|  | 31 December | 31 December
|  | 2023 | 2022
|  | BGN'000 | BGN'000
ASSETS |  |  |
Non-current assets |  |  |
Property, plant and equipment | 16 | 357 624 | 376 407
Intangible assets | 17 | 57 829 | 48 151
Goodwill | 17 | 3 439 | 3 522
Investment property | 18 | 11 198 | 10 568
Investments in associates and joint ventures | 19 | 231 292 | 162 844
Other long-term equity investments | 20 | 3 942 | 4 778
Long-term receivables from related parties | 21 | 53 353 | 67 471
Other long-term receivables | 22 | 5 604 | 5 694
Deferred tax assets | 30 | 2 818 | 2 052
|  | 727 099 | 681 487
Current assets |  |  |
Inventories | 23 | 339 333 | 278 583
Trade receivables | 24 | 264 955 | 224 442
Receivables from related parties | 25 | 14 905 | 12 909
Other short-term receivables and assets | 26 | 38 991 | 36 702
Cash and cash equivalents | 27 | 128 879 | 19 855
|  | 787 063 | 572 491
TOTAL ASSETS |  | 1 514 162 | 1 253 978
EQUITY AND LIABILITIES |  |  |
Equity attributable to equity holders of the parent |  |  |
Share capital |  | 172 591 | 134 798
Reserves |  | 167 987 | 47 503
Other equity components (reserve on warrant issue) |  | 1 857 | 12 488
Retained earnings |  | 395 897 | 509 869
| 28 | 738 332 | 704 658
Non-controlling interests |  | 15 294 | 11 976
TOTAL EQUITY | 28 | 753 626 | 716 634
LIABILITIES |  |  |
Non-current liabilities |  |  |
Long-term bank loans | 29 | 56 462 | 27 759
Deferred tax liabilities | 30 | 4 415 | 6 397
Non-current liabilities to related parties | 31 | 16 914 | 24 494
Retirement benefit obligations | 32 | 8 352 | 6 541
Lease liabilities | 33 | 54 729 | 52 058
Government grants | 34 | 4 931 | 6 155
Other non-current liabilities | 35 | 5 543 | 6 594
|  | 151 346 | 129 998
Current liabilities |  |  |
Short-term bank loans | 36 | 200 478 | 158 355
Current portion of long-term bank loans | 29 | 6 132 | 9 758
Trade payables | 37 | 193 932 | 175 567
Payables to related parties | 38 | 101 063 | 4 904
Factoring agreement liabilities | 39 | - | 1 875
Current portion of lease liabilities | 33 | 13 424 | 12 874
Payables to personnel and for social security | 40 | 24 385 | 21 780
Tax payables | 41 | 8 485 | 8 436
Other current liabilities | 42 | 61 291 | 13 797
|  | 609 190 | 407 346
TOTAL LIABILITIES |  | 760 536 | 537 344
TOTAL EQUITY AND LIABILITIES |  | 1 514 162 | 1 253 978

The accompanying notes on pages 5 to 162 form an integral part of the consolidated financial statements.
The consolidated financial statements on pages 1 to 162 were approved for issue by the Board of Directors and signed on 24 April 2024 by:
Digitally signed by Ognian
Executive Director:
Ognian Ivanov Donev
Ivanov Donev
Ognian Donev, PhD
Date: 2024.04.24 17:40:47 +03'00'
Finance Director:
Digitally signed by Boris Anchev Borisov
Boris Anchev Borisov
Boris Borisov
Date: 2024.04.24 17:50:00 +03'00'
Digitally signed by LYUDMILA
LYUDMILA KRUMOVA
Preparer:
KRUMOVA BONDZHOVA
Lyudmila Bondzhova
BONDZHOVA
Date: 2024.04.24 17:55:48 +03'00'
Audit company Baker Tilly Klitou and Partners EOOD № 129:
Digitally signed by
Digitally signed by
Galina Dimitrova
IVAYLO
Galina Dimitrova
IVAYLO YANCHEV
Lokmadjieva-
Lokmadjieva-Nedkova
YANCHEV
YANCHEV
Date: 2024.04.25
Date: 2024.04.25
Ivaylo Yanchev Galina Lokmadjieva-Nedkova
Nedkova
YANCHEV
11:24:17 +03'00'
11:14:36 +03'00'
Registered auditor Managing director
Baker Tilly Klitou and Partners EOOD
2
SOPHARMA GROUP
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2023

| Notes | 2023 | 2022
|  | BGN'000 | BGN'000
Cash flows from operating activities |  |  |
Cash receipts from customers |  | 2 131 026 | 1 930 323
Cash paid to suppliers |  | (1 832 582) | (1 603 177)
Cash paid to employees and for social security |  | (165 523) | (141 810)
Taxes paid (except income taxes) |  | (65 713) | (65 217)
Taxes refunded (except income taxes) |  | 5 933 | 8 796
Income taxes paid |  | (13 416) | (9 905)
Income taxes refunded |  | - | 49
Interest and bank charges paid on working capital loans |  | (10 147) | (5 921)
Foreign currency exchange gains/(losses), net |  | (1 658) | (1 599)
Other proceeds/(payments), net |  | (2 889) | (1 457)
Net cash flows from operating activities |  | 45 031 | 110 082
Cash flows from investing activities |  |  |
Purchases of property, plant and equipment |  | (24 389) | (19 347)
Proceeds from sales of property, plant and equipment |  | 15 029 | 1 923
Purchases of intangible assets |  | (18 897) | (4 309)
Purchases of equity investments |  | (13 440) | (675)
Proceeds from sales of equity investments |  | 578 | 628
Proceeds from dividends from investments in associates |  | 1 488 | 1 215
Proceeds from dividends from other long-term capital investments |  | 26 | 33
Payments on acquisition of subsidiaries, net of cash received |  | (9 347) | (2 338)
Proceeds from disposal of subsidiaries, net of the cash provided |  | - | 399
Purchases of investments in associates and joint ventures |  | (27 933) | (16 480)
Proceeds from sale of investments in associates and joint ventures |  | 2 845 | -
Proceeds/(payments) on transactions with non-controlling interests, net |  | (905) | (10 859)
Loans granted to related parties |  | (5 689) | (13 500)
Loan repayments by related parties |  | 19 039 | 684
Loans granted to third parties |  | (4 696) | (1 962)
Loan repayments by third parties |  | - | 4
Interest received on loans and deposits |  | 3 442 | 965
Proceeds from guarantorship contracts |  | - | 13
Net cash flows used in investing activities |  | (62 849) | (63 606)
Cash flows from financing activities |  |  |
Proceeds from short-term bank loans (including increases in overdrafts) |  | 43 371 | 12
Repayment of short-term bank loans (including decreases in overdrafts) |  | (1 187) | (59 072)
Proceeds from long-term bank loans |  | 36 565 | 2 163
Repayment of long-term bank loans |  | (11 542) | (20 029)
Proceeds under factoring agreement |  | 700 | 30 950
Interest and charges paid under factoring agreement |  | (79) | (114)
Interest and charges paid under investment purpose loans |  | (379) | (354)
Proceeds from issued shares |  | 156 084 | -
Lease payments |  | (18 795) | (16 081)
Treasury shares |  | (5 252) | (1 919)
Dividends paid |  | (71 889) | (11)
Government grants |  | 36 | 34
Proceeds/(payments) related to other equity components (warrants), net |  | (791) | 79
Net cash flows from/(used in) financing activities |  | 126 842 | (64 342)
Net (decrease)/increase in cash and cash equivalents |  | 109 024 | (17 866)
Cash and cash equivalents at 1 January |  | 19 851 | 37 717
Cash and cash equivalents at 31 December | 27 | 128 875 | 19 851

The accompanying notes on pages 5 to 162 form an integral part of the consolidated financial statements.
Ognian Ivanov
Digitally signed by Ognian Ivanov
Executive Director:
Donev
Donev
Date: 2024.04.24 17:41:12 +03'00'
Ognian Donev, PhD
Finance Director:
Digitally signed by Boris Anchev Borisov
Boris Anchev Borisov
Date: 2024.04.24 17:50:34 +03'00'
Boris Borisov
LYUDMILA KRUMOVA
Digitally signed by LYUDMILA
Preparer:
KRUMOVA BONDZHOVA
Lyudmila Bondzhova
BONDZHOVA
Date: 2024.04.24 17:56:25 +03'00'
Audit company Baker Tilly Klitou and Partners EOOD № 129:
Digitally signed
IVAYLO
by IVAYLO
Galina Dimitrova
Digitally signed by Galina
YANCHEV
Dimitrova Lokmadjieva-Nedkova
YANCHEV
YANCHEV
Lokmadjieva-Nedkova
Date: 2024.04.25 11:24:52 +03'00'
Date: 2024.04.25
YANCHEV
11:15:13 +03'00'
Ivaylo Yanchev Galina Lokmadjieva-Nedkova
Registered auditor Managing director
Baker Tilly Klitou and Partners EOOD
3
SOPHARMA GROUP
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2023

|  |  |  |  |  |  | Attributable to owners of the equity of the parent |  |  |  | Non-controlling | Total
|  |  |  |  |  |  |  |  |  |  | interests | equity
| Notes | Share | Treasury | Statutory | Revaluation reserve | Reserve from | Translation of foreign | Other equity components | Retained | Total |  |
|  | capital | shares | reserves | - property, plant | financial assets at fair | operations reserve | (reserve on warrants | earnings |  |  |
|  |  |  |  | and equipment | value through other |  | issue) |  |  |  |
|  |  |  |  |  | comprehensive |  |  |  |  |  |
|  |  |  |  |  | income |  |  |  |  |  |
|  | BGN'000 | BGN'000 | BGN'000 | BGN'000 | BGN'000 | BGN'000 | BGN'000 | BGN'000 | BGN'000 | BGN'000 | BGN'000
Balance on 1 January 2022 | 28 | 134 798 | (50 284) | 66 201 | 36 788 | 1 644 | 682 | 12 512 | 444 634 | 646 975 | 11 893 | 658 868
Changes in owners' 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.: |  | - | - | - | - | - | - | (24) | - | (24) | - | (24)
* transaction costs |  | - | - | - | - | - | - | (24) | - | (24) | - | (24)
Distribution of profit for: |  | - | - | 2 427 | - | - | - | - | (2 427) | - | - | -
* statutory reserves |  | - | - | 2 427 | - | - | - | - | (2 427) | - | - | -
Effects assumed by the non-controlling interest 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, incl.: |  | - | - | - | (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
Balance at 1 January 2023 |  | 134 798 | (52 203) | 68 628 | 35 263 | 560 | (4 745) | 12 488 | 509 869 | 704 658 | 11 976 | 716 634
Changes in owners' equity for 2023 |  |  |  |  |  |  |  |  |  |  |  |
Share capital issue |  | 37 793 | - | 128 131 | - | - | - | (9 840) | - | 156 084 | - | 156 084
Effect of treasury shares acquisition |  |  | (5 252) |  |  |  |  |  |  | (5 252) |  | (5 252)
Effects from restructuring |  | - | 3 | - | (131) | - | - | - | 94 | (34) | 34 | -
Other equity components, incl.: |  | - | - | - | - | - | - | (791) | - | (791) | - | (791)
* transaction costs |  | - | - | - | - | - | - | (791) | - | (791) | - | (791)
Distribution of retained earnings from previous years for: |  |  |  |  |  |  |  |  | (138 625) | (138 625) |  | (138 625)
* divdiends from profit for 2022 |  |  |  |  |  |  |  |  | (32 604) | (32 604) |  | (32 604)
* advence six-month dividends |  |  |  |  |  |  |  |  | (106 021) | (106 021) |  | (106 021)
Distribution of profit for: |  | - | - | - | - | - | - | - | (77 308) | (77 308) | - | (77 308)
* dividends |  | - | - | - | - | - | - | - | (40 187) | (40 187) | - | (40 187)
* advance six month dividend from the profit for 2023 |  | - | - | - | - | - | - | - | (37 121) | (37 121) | - | (37 121)
Effects assumed by the non-controlling interest on: |  | - | - | - | - | - | - | - | (376) | (376) | (529) | (905)
* increase in the interest in subsidiaries |  | - | - | - | - | - | - | - | (376) | (376) | (529) | (905)
Total comprehensive income for the year, incl.: |  | - | - | - | 30 | 1 766 | 3 591 | - | 94 589 | 99 976 | 3 813 | 103 789
* net profit for the year |  | - | - | - | - | - | - | - | 95 977 | 95 977 | 3 897 | 99 874
* other comprehensive income, net of taxes |  | - | - | - | 30 | 1 766 | 3 591 | - | (1 388) | 3 999 | (84) | 3 915
Transfer to retained earnings |  | - | - | - | (5 834) | (1 820) | - | - | 7 654 | - | - | -
Balance at 31 December 2023 | 28 | 172 591 | (57 452) | 196 759 | 29 328 | 506 | (1 154) | 1 857 | 395 897 | 738 332 | 15 294 | 753 626

The accompanying notes on pages 5 to 162 form an integral part of the consolidated financial statements.
Digitally signed by Ognian Ivanov Donev
Executive Director:
Ognian Ivanov Donev
Date: 2024.04.24 17:41:46 +03'00'
Ognian Donev, PhD
Digitally signed by Boris Anchev
Finance Director:
Boris Anchev Borisov
Borisov
Boris Borisov
Date: 2024.04.24 17:51:15 +03'00'
Preparer:
LYUDMILA KRUMOVA
Digitally signed by LYUDMILA KRUMOVA
Lyudmila Bondzhova
BONDZHOVA
BONDZHOVA
Date: 2024.04.24 17:57:10 +03'00'
Audit company Baker Tilly Klitou and Partners EOOD № 129:
IVAYLO
Digitally signed by
Digitally signed by
IVAYLO YANCHEV
YANCHEV
YANCHEV
Galina Dimitrova
Galina Dimitrova
Ivaylo Yanchev Galina Lokmadjieva-Nedkova
Date: 2024.04.25
Lokmadjieva-Nedkova
YANCHEV
11:15:48 +03'00'
Lokmadjieva-
Registered auditor Managing director
Date: 2024.04.25
Baker Tilly Klitou and Partners EOOD
Nedkova
11:25:22 +03'00'
4
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
1. BACKGROUND INFORMATION ON THE GROUP
Sopharma Group (the Group) is comprised of the parent company and its seventy-seven (31
December 2022: seventy-seven) subsidiaries. In addition, the Group has investments in four associates and
one joint venture (31 December 2022: 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 2023 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.;
• 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;
• 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;
5
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
• 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;
• 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;
6
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
• 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
04.06.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St.,
Sopharma Business Towers, Building A, floor 13;
7
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
• 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
30.06.2008; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St.,
Sopharma Business Towers, Building A, floor 13;
8
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
• 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
dated 19.05.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev
St., Sopharma Business Towers, Building A, floor 13;
9
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
• 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
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;
10
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
• 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
14.01.2009; with a seat and management address: Sofia, Izgrev Region, 5 Lachezar Stanchev St.,
Sopharma Business Towers, Building A, floor 13;
11
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
• 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;
12
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
• 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.
• Sopharma Rus OOO, Russia - a trading company registered in Russia with decision No.
1237700691524 dated 13.10.2023 of the Unified State Register of Legal Entities and with its
registered office and management address - Russia, Moscow, Letnikovskaya St. no. 10.
On 23 August 2023, the merger of Biopharm Engineering into Sopharma AD was entered in the
Commercial Register at the Registration Agency. The merger of Biopharm Engineering AD (transforming
company) into the parent company Sopharma AD (acquiring company) was implemented through the legal
form of transformation regulated in the Commercial Law. As a result of the transaction, all assets of
Biopharm Engineering AD are transferred to Sopharma AD, and Biopharm Engineering AD is terminated
without liquidation.
The purpose of the transaction on the transformation of the two companies was:
• restructuring of the companies in the Sopharma group in order to eliminate duplicate activities;
• focusing efforts on production and commercial activities, respectively on optimizing administrative
costs;
• increasing efficiency and achieving a synergistic effect both for the management and execution of
production and commercial activities, as well as for cost optimization.
Accounting method of accounting the merger
For accounting purposes, 01.01.2023 was accepted as the date of the merger. Until that moment,
Biopharm Engineering AD was a subsidiary of Sopharma AD. The transaction was treated as a restructuring
of the activities of the two companies.
On 11 November 2022, the Group divests itself of its participation in the company Rap Pharma
International OOD.
Joint ventures
As at 31 December 2023, 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.
13
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
Associates
The Group’s associates as at 31 December 2023 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 Buildings REIT – a commercial company registered in the Sofia City Court with
decision No. 1/14.08.2007 and with its registered office and management address in the city of
Sofia at 1756, 5 Lachezar Stanchev Street.
• Pharmanova D.O.O., Serbia – a commercial company registered in Serbia with decision No.
20408642 on 15.04.2008 by the Business Register Agency of the city of Belgrade and with its
registered office and management address – Republic of Serbia, the city of Belgrade , "Baye
Pivlianina" St. No. 1;
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 2023 is as follows:
%
Donev Investments Holding AD
38.57
Telecomplect Invest AD
16.15
Sopharma AD (treasury shares)
8.30
Other legal entities
22.81
Individuals
14.17
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 2023 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.
14
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
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
31.12.2023
31.12.2022
Date of
Date of
Interest %
Interest %
acquisition
disposal
Companies in Bulgaria
of control
of control/
Sopharma Trading AD*
87.68
87.25
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
10.03.2006
23.08.2023
Phyto Palauzovo AD
95.00
95.00
21.09.2012
Veta Pharma AD
99.98
99.98
11.11.2016
Sopharmacy EOOD**
87.68
87.25
19.01.2015
Sopharmacy 2 EOOD**
87.68
87.25
17.06.2015
Sopharmacy 3 EOOD**
87.68
87.25
02.12.2015
Sopharmacy 4 EOOD**
87.68
87.25
29.02.2016
Sopharmacy 5 EOOD**
87.68
87.25
01.03.2016
Sopharmacy 6 EOOD**
87.68
87.25
03.12.2015
Sopharmacy 7 EOOD**
87.68
87.25
15.03.2017
Sopharmacy 8 EOOD**
87.68
87.25
27.06.2017
Sopharmacy 9 EOOD**
87.68
87.25
11.09.2017
Sopharmacy 10 EOOD**
87.68
87.25
11.09.2017
Sopharmacy 11 EOOD**
87.68
87.25
07.12.2017
Sopharmacy 12 EOOD**
87.68
87.25
07.12.2017
Sopharmacy 13 EOOD**
87.68
87.25
07.12.2017
Sopharmacy 14 EOOD**
87.68
87.25
07.12.2017
Sopharmacy 15 EOOD**
87.68
87.25
07.12.2017
15
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
Subsidiaries
31.12.2023
31.12.2023
Date of
Date of
acquisition
disposal
Companies in Bulgaria
Interest %
Interest %
of control
of control
Sopharmacy 16 EOOD**
87.68
87.25
15.05.2018
Sopharmacy 17 EOOD**
87.68
87.25
15.05.2018
Sopharmacy 19 EOOD **
87.68
87.25
01.10.2020
Sopharmacy 20 EOOD **
87.68
87.25
01.10.2020
Sopharmacy 21 EOOD **
87.68
87.25
01.10.2020
Sopharmacy 22 EOOD **
87.68
87.25
01.10.2020
Sopharmacy 23 EOOD **
87.68
87.25
01.10.2020
Sopharmacy 24 EOOD **
87.68
87.25
01.10.2020
Sopharmacy 25 EOOD **
87.68
87.25
01.10.2020
Sopharmacy 26 EOOD**
87.68
87.25
01.10.2020
Sopharmacy 27 EOOD **
87.68
87.25
01.10.2020
Sopharmacy 28 EOOD **
87.68
87.25
01.10.2020
Sopharmacy 29 EOOD**
87.68
87.25
01.10.2020
Sopharmacy 30 EOOD **
87.68
87.25
01.10.2020
Sopharmacy 31 EOOD **
87.68
87.25
01.10.2020
Sopharmacy 32 EOOD **
87.68
87.25
01.10.2020
Sopharmacy 33 EOOD **
87.68
87.25
01.10.2020
Sopharmacy 34 EOOD **
87.68
87.25
01.10.2020
Sopharmacy 35 EOOD **
87.68
87.25
01.10.2020
Sopharmacy 36 EOOD **
87.68
87.25
01.10.2020
Sopharmacy 37 EOOD **
87.68
87.25
01.10.2020
Sopharmacy 38 EOOD **
87.68
87.25
01.10.2020
Sopharmacy 39 EOOD **
87.68
87.25
01.10.2020
Sopharmacy 40 EOOD **
87.68
87.25
01.10.2020
Sopharmacy 41 EOOD**
87.68
87.25
01.10.2020
Sopharmacy 42 EOOD**
87.68
87.25
01.10.2020
Sopharmacy 43 EOOD**
87.68
87.25
01.10.2020
Sopharmacy 44 EOOD**
87.68
87.25
01.10.2020
Sopharmacy 45 EOOD**
87.68
87.25
01.10.2020
Sopharmacy 46 EOOD **
87.68
87.25
01.10.2020
Sopharmacy 47 EOOD **
87.68
87.25
01.10.2020
Sopharmacy 48 EOOD **
87.68
87.25
01.10.2020
Sopharmacy 49 EOOD **
87.68
87.25
01.10.2020
Sopharmacy 50 EOOD **
87.68
87.25
01.10.2020
Sopharmacy 51 EOOD **
87.68
87.25
01.10.2020
Sopharmacy 52 EOOD **
87.68
87.25
01.10.2020
Sopharmacy 53 EOOD**
87.68
87.25
01.10.2020
Sopharmacy 54 EOOD**
87.68
87.25
01.10.2020
Sopharmacy 55 EOOD**
87.68
87.25
01.10.2020
Sopharmacy 56 EOOD**
87.68
87.25
01.10.2020
Sopharmacy 57 EOOD**
87.68
87.25
01.10.2020
Sopharmacy 58 EOOD**
87.68
87.25
01.10.2020
Sopharmacy 59 EOOD**
87.68
87.25
01.10.2020
Sopharmacy 60 EOOD**
87.68
87.25
01.10.2020
Sopharmacy 61 EOOD**
87.68
87.25
01.10.2020
16
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
Subsidiaries
31.12.2023
31.12.2023
Date of
Date of
acquisition
disposal
Companies in Bulgaria
Interest %
Interest %
of control
of control
Sopharmacy 62 EOOD**
87.68
87.25
01.10.2020
Sopharmacy 63 EAD**
87.68
87.25
01.10.2020
Sopharmacy 64 AD**
87.68
87.25
01.10.2020
* effective percentage of interest
** indirect interest
Subsidiaries
31.12.2023
31.12.2022
Date of
Date of
Interest %
Interest%
acquisition
disposal
Companies abroad
of control
of control
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 Sopharma Ukraine
100.00
100.00
07.08.2012
ТОО Sopharma Kazakhstan
100.00
100.00
06.11.2014
Rap Pharma International OOD
-
-
14.04.2017
11.11.2022
Sopharma Trading d.o.o.**
87.68
87.25
09.08.2017
Pharmachim EOOD
100.00
100.00
14.04.2020
Sopharma Rus OOO
100.00
-
13.10.2023
* 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;
17
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
• Sopharmacy 9 EOOD is a subsidiary of Sopharmacy EOOD whereas the latter holds 100% of the
capital of Sopharmacy 9 EOOD;
• 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;
18
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
• Sopharmacy 26 EOOD is a subsidiary through Sopharmacy 40 EOOD whereas the latter holds
100% of the capital of Sopharmacy 26 EOOD;
• 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;
19
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
• Sopharmacy 43 EOOD is a subsidiary through Sopharmacy 40 EOOD whereas the latter holds
100% of the capital of Sopharmacy 43 EOOD;
• 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;
20
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
• Sopharmacy 60 EOOD is a subsidiary through Sopharmacy 63 EOOD whereas the latter holds
100% of the capital of Sopharmacy 60 EOOD;
• 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 through Sopharma Trading AD - Sopharma
Trading AD owns 100% of the capital of Sopharma Trading D.o.o.
The main subject of activity of the companies of the Group is concentrated in the pharmaceutical
sector, with the exception of individual companies whose subject of activity is in the field of investments
in securities.
The parent company holds a license to manufacture medicinal products/import No. BG / MIA -
0384 dated 28.06.2023, issued by the BDA.
The subject of activity of the companies of the Group is as follows:
• Sopharma AD - production and trade of medicinal substances (active ingredients) and medicinal
forms; scientific-research and engineering-implementation activity in the field of medicinal
products; production and trade of veterinary medical products and performance of laboratory
services related to the examination of animal blood samples;
• Sopharma Trading AD - trade in pharmaceutical products;
• Pharmalogistika AD - secondary packaging of pharmaceutical products and leasing of real estate;
• Electroncommerce EOOD. - trade, transportation and packaging of radioactive materials and
nuclear equipment for medicine, household electronics and electrical engineering;
• Fito Palauzovo AD – production, collection, purchase, extraction and sale of herbs and medicinal
plants;
• Veta Pharma AD - production of medicinal, non-medicinal and other products;
• Sopharmacy EOOD – franchising, know-how, property rental, trade and others;
• Sopharmacy 2 EOOD - Sopharmasi 62 EOOD (with the exception of Sopharmasi 6 EOOD) – retail
trade in medicinal products;
• Sopharmacy 6 EOOD – online and offline retail trade of medicinal products;
21
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
• Sopharmacy 63 EAD and Sopharmacy 64 AD - retail trade in medicinal products, franchising and
other services;
• PAO Vitamini, Ukraine - production and trade of pharmaceutical products;
• OOO Sopharma Ukraine, Ukraine - trade in pharmaceutical products and market and public
opinion research;
• Sopharma Trading D.o.o. - wholesale trade in medicinal products;
• Sopharma Poland Z.O.O., Poland, in liquidation - research of the market and public opinion;
• Sopharma Warsaw SP. Z.O.O., Poland - wholesale trade in pharmaceutical and medical goods and
market research and public opinion;
• Sopharma Kazakhstan LLP, Kazakhstan - trade in pharmaceutical products;
• Farmahim EOOD, Serbia – consulting activity.
• Sopharma Rus OOO, Russia - wholesale trade in pharmaceutical products and market and public
opinion research.
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; Sopharma Rus OOO – in Russia.
As at 31 December 2023, 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 2023, the interest of the Group in associates is as follows:
• Doverie Obedinen Holding AD – 23.46% 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 – 45.65% 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.
22
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
• Sopharma Buildings REIT – 31.47% participation of Sopharma AD. The subject of the company's
activity is the investment of funds raised through the issuance of securities in real estate (real estate
securitization) through the purchase of ownership rights and other real rights over real estate,
renting, leasing, leasing and/or selling. them
• Pharmanova D.O.O. – 25% participation of Sopharma AD. The subject of the company's activity
is the production of pharmaceutical products.
As of the date of these consolidated annual financial statements, the average number of Group's
personnel was 4,721 workers and employees (2022: 4,764 workers and employees).
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 2021 – 2023. The relevant
exchange rates are presented in the table below:
Indicator
2021
2022
2023
USD/BGN average for the year/period
1.65419
1.86030
1.79134
USD/BGN at end of the year/period
1.72685
1.83371
1.76998
PLN/BGN average for the year/period
0.42841
0.41760
0.43095
PLN/BGN at end of the year/period
0.42547
0.41784
0.45070
RSD/BGN average for the year/period
0.01663
0.01665
0.01668
RSD/BGN at end of the year/period
0.01663
0.01667
0.01669
UAH/BGN average for the year/period
0.06065
0.05795
0.04945
UAH/BGN at end of the year/period
0.06329
0.05022
0.04633
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
0.65183
-
-
1 BYN/BGN at end of the year/period
0.67921
-
-
KZT/BGN average for the year/period
0.00388
0.00404
0.00397
KZT/BGN at end of the year/period
0.00401
0.00397
0.00389
RUB/BGN at end of the year/period
-
-
0.02140
RUB/BGN at end of the year/period
-
-
0.01985
MDL/BGN average for the year/period
0.09352
0.09835
-
MDL/BGN at the end of the year/period
0.09736
0.09597
-
Source: BNB, National Banks of Ukraine, Poland, Serbia, Belarus, Kazakhstan and Moldova.
1.4. Macroeconomic situation
The parent company and a large part of the subsidiaries in the Group carry out their activities in
the conditions of increasing inflation. The management managed to maintain a good financial condition of
the companies in the Group by indexing the income and expenses within reasonable limits.
The group maintains a stable capital base and debt ratio.
23
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
The Group has investments in two subsidiaries in Ukraine. As of the date of preparation of these
consolidated financial statements, the assets of these subsidiaries are not physically affected by hostilities.
1.6. Climate 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.
As of December 31, 2023, the Group has not identified significant risks caused by climate change that
would affect the Group's assets and liabilities. The Group is monitoring changes in legislation resulting
from climate issues and at this stage has not identified a possible direct impact on the Group's future cash
flows, financial results and financial position.
2. MATERIAL 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 2023
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
introduced by § 1, p. 8 of the Additional Provisions of the Accountancy Act "International 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.
24
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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 2023 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 1 “Business Combinations” (in force for annual periods beginning
on or after 1 January 2023, endorsed by EC). The changes: a) require disclosure of material
information about accounting policies instead of significant accounting policies. b) explain
how entities can identify material information about accounting policies and give examples
of when information about accounting policies is likely to be material; c) clarify that
information about accounting policies may be material by nature even when the amounts
involved are immaterial; d) clarify that information about accounting policies is material
if it is necessary for users of the entity's financial statements to understand other material
information in the financial statements; and e) clarify that if the entity discloses immaterial
information about accounting policies, this should not lead to the concealment of material
information about accounting policies. Earlier application is allowed.
• Amendments to IFRS 8 Accounting policy, changes in accounting estimates and errors
(effective for annual periods from 01.01.2023, adopted by the EC). The changes are mainly
aimed at estimates and relate to: a) "definition of changes in estimates" has been replaced
by "definition of estimates". According to the new definition, estimates are values in the
financial statements that are subject to uncertainty regarding their valuation; b) the entity
develops estimates if the accounting policies require items in the financial statements to be
valued in a manner that involves uncertainty regarding their valuation; (c) a clarification
that a change in an estimate that results from new information or a new development does
not constitute a correction of an error; and d) a change in estimate may have an impact on
profit or loss for the current period or on profit and loss for the current and future periods.
Earlier application is allowed.
• IFRS 12 Income taxes (effective for annual periods from 01.01.2023, adopted by the EC).
Amendments to IFRS 12 Income taxes – Deferred taxes relating to assets and liabilities
arising from a single transaction. The amendments limit the scope of the exemption from
recognition of deferred tax liabilities, as a result of which it does not apply to transactions
25
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
where, upon initial recognition, equal taxable and deductible temporary differences arise.
Such transactions are the recognition of a right-of-use asset and lease obligations by lessees
on the date of commencement of the lease, as well as the accrual of obligations for
dismantling, relocation and restoration included in the cost of the relevant asset. On entry
into force of the amendments, businesses should recognize each deferred tax asset (to the
extent that it is probable that taxable profit will exist against which the deductible
temporary differences can be utilised) and deferred tax liability (for all taxable temporary
differences) in accordance with the criteria of IFRS 12 for transactions related to assets
and liabilities arising from single transactions on or after the beginning of the earliest
comparative period presented in the financial statements. Entities recognize the cumulative
effect of the initial application of the amendments as an adjustment to the opening balance
of retained earnings or another component of equity, if appropriate at that date.
• IFRS 12 Income Taxes - International Tax Reform - Model Second Pillar Rules (effective
immediately upon issue as well as for annual periods from 01.01.2023, adopted by the EC).
The amendments clarify that IAS 12 applies to income taxes arising from tax laws enacted
or substantially enacted to implement second pillar model rules issued by the Organization
for Economic Co-operation and Development (OECD), including . tax laws introducing
permissible minimum national additional taxes described in these rules, called second-
pillar legislation or second-pillar income taxes. The amendments introduce a temporary
exception to the standard's requirement to allow entities not to recognize deferred tax assets
and liabilities related to second pillar income taxes and not to disclose information related
to them. Enterprises should disclose the fact that they have applied the exception for non-
recognition of deferred tax assets and liabilities related to second pillar taxes and for non-
disclosure of related information.
As of the date of this financial statement, the following amended standards and interpretations
have been issued, but are not in force (and/or have not been adopted by the EC):
• Changes in IFRS 1 Presentation of financial statements (effective for annual periods from
01.01.2024, adopted by the EC). These changes are aimed at the criteria for classifying
liabilities as current and non-current. According to them, an entity classifies its liabilities
as current or non-current depending on the rights that exist at the end of the reporting period
and is not affected by the probability of whether it will exercise its right to defer settlement
of the liabilities. The amendments clarify that "settlement" of liabilities means the transfer
to a third party of cash, equity instruments, other assets or services. The classification does
not apply to derivatives in convertible liabilities, which are themselves equity instruments.
Changes are applied retrospectively. Earlier application is permitted, but simultaneously
with the application of the changes in IFRS 1 Presentation of financial statements regarding
the classification of liabilities as current and non-current.
• Changes in IFRS 1 Presentation of financial statements, non-current liabilities bound by
restrictive conditions (effective for annual periods from 01.01.2024, adopted by the EC).
26
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
These changes specify that only restrictive covenants that the entity is required to comply
with at or before the end of the reporting period affect the entity's right to defer settlement
of the relevant liabilities for at least twelve months after the reporting date and accordingly
only those should be taken into account in assessing the classification of liabilities as
current or non-current. These agreements affect whether the right exists at the end of the
reporting period, even if compliance with the conditions is assessed afterwards (for
example, a restrictive covenant based on the entity's financial position at the end of the
reporting period but assessed after the end of the period). Restrictive conditions that are
calculated on the basis of the financial position of the enterprise after the end of the
reporting period (for example, on the basis of the financial position of the enterprise six
months after the reporting date) should not be taken into account when determining the
classification of liabilities and the right to postpone them. However, entities should
disclose information on restrictive covenants covering an observable period within twelve
months after the end of the reporting period in order to assess the risk of whether the
obligations would become due. Changes are applied retrospectively. Earlier application is
permitted, but simultaneously with the application of the changes in IFRS 1 Presentation
of financial statements regarding the classification of liabilities as current and non-current.
• Changes in IFRS 7 Statement of cash flows and IFRS 7 Financial instruments: disclosure:
supplier financing arrangements (effective for annual periods from 01.01.2024, not
adopted by the EC). The changes are intended to increase the transparency of the reporting
of supplier financing arrangements and to help users of financial statements assess their
effect on the liabilities, cash flows and liquidity risk to which an entity is exposed by adding
additional disclosures in relation to this type of arrangements. IFRS 7 proposes changes to
add information to assess the effects of these arrangements on liabilities and cash flows as
follows: a) order and conditions of the arrangements; b) the balance sheet value and the
corresponding line from the statement of financial position of the obligations that are part
of the arrangements; c) the book value and the corresponding line from the statement of
financial position of the amounts that the supplier has already received from the financing
provider (the financial institution); (d) the time range of payment terms for financial
obligations under supplier financing arrangements and comparable terms for financial
obligations not forming part of those arrangements; e) the nature and effect of non-
monetary changes in the carrying amount of financial liabilities that are part of supplier
financing arrangements. IFRS 7 adds requirements to disclose an assessment of the entity's
exposure to liquidity risk and what effect termination of arrangements may have on the
entity. The changes are applied retrospectively, with relief on non-disclosures for periods
prior to the start date of the period in which the changes are first applied, and on certain
quantitative disclosures relating to the start date of the period of initial application. Earlier
application is allowed.
27
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
• Changes in IFRS 16 Leasing – Lease obligation upon sale and leaseback (effective for
annual periods from 01.01.2024, adopted by the EC). The changes aim to further develop
the requirements for the seller-lessee when measuring the lease liability in "sale-leaseback"
transactions. They require that, after the commencement date of the lease (the date of
delivery of the underlying asset), the seller-lessee determines "lease payments" and
"revised lease payments" in a manner that does not recognize a gain or loss that relates to
the right-of-use. held by him. The changes do not apply to the recognition of gains and
losses in connection with partial or full termination of the lease agreement. Changes are
applied retrospectively. Earlier application is allowed.
• Changes in IFRS 21 Effects of changes in exchange rates: no exchange rates (effective for
annual periods from 01.01.2025, not adopted by the EC). These changes clarify and require
businesses to apply a consistent approach in determining: a) when a currency can be
exchanged for another currency and when it cannot, as they introduce definitions for this.
One currency can be exchanged for another when the entity can acquire the other currency
within normal time limits, including normal administrative delays and a market mechanism
that allows the currency exchange transaction to give rise to enforceable rights and
obligations. If the entity can obtain only a minor part of the other currency on the valuation
date for the specified purpose, it is considered that the currency cannot be exchanged into
the other currency; b) what exchange rate to apply when one currency cannot be exchanged
for another, indicating two mechanisms: the first is the use of an observable exchange rate
- without further adjustments, an observable rate for another purpose and the first exchange
rate at which the exchange can be done; the second is through the use of another evaluation
technique; c) the information that the entity should disclose when one currency is not
convertible into another to enable users of its financial statements to understand how this
affects the entity's financial results, financial position and cash flows. Changes are applied
retrospectively. Earlier application is allowed.
• IFRS 10 (amended) – Consolidated financial statements and IAS 28 (amended) –
Investments in associates and joint ventures – on sales or contributions of assets between
an investor and its associates or joint ventures (with a deferred effective date subject to
determination by CMSS). These changes are aimed at addressing the accounting treatment
of sales or contributions of assets between an investor and its associates or joint ventures.
They confirm that the accounting treatment depends on whether or not the assets sold or
the non-monetary assets contributed constitute a substantial "business" within the meaning
of IFRS 3. If these assets as a whole do not meet the definition of a “business” the investor
recognizes a gain or loss up to the percentage corresponding to the interest of the other
unrelated investors in the associate or joint venture. In cases where assets are sold or non-
monetary assets are contributed that collectively constitute a "business", the investor fully
recognizes the profit or loss from the transaction. These changes will be applied
28
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
prospectively. The CMMS postponed the start date of application of these changes
indefinitely.
The consolidated annual financial statements have been prepared on a historical cost basis except
for:
a/ the properties, machines and equipment, which are valued at a revalued value; and
b/ investment properties and other long-term capital investments that are valued at their fair value
as of the date of the consolidated statement of financial position.
The Bulgarian subsidiaries of the Group, the associated companies: Doverie Obedinen Holding
AD, Sopharma Imoti REIT and Sopharma Buildings REIT and the joint venture Momina Krepost AD
keep their accounting records in Bulgarian Lev (BGN), which they accept as their functional and reporting
presentation currency. Overseas subsidiaries organize their accounting and reporting according to the
requirements of the relevant local legislation: OOO Sopharma Ukraine and PAO Vitamini - legislation of
Ukraine, Sopharma Trading D.o.o., Farmahim EOOD and Farmanova OOO - legislation of Serbia,
Sopharma Poland Z.O.O - in liquidation, Sopharma Warsaw SP. Z.O.O. - Polish legislation, Sopharma
Kazakhstan LLP - legislation of Kazakhstan and Sopharma Rus OOO - legislation of Russia. Companies
maintain their accounting records in the respective local currency - Ukrainian hryvnia (UAH), Serbian
dinar (RSD), Euro (EUR), Polish zloty (PLN), Kazakhstan tenge (KZT) and Russian ruble (RUB).
The data in the consolidated annual financial report and its annexes are presented in thousands of
BGN, unless something else is explicitly disclosed, and the Bulgarian BGN is accepted as the Group's
presentation currency. The individual financial statements of the foreign companies are recalculated from
local currency to Bulgarian Lev for the purposes of each consolidated financial statement according to
the Group's policy (Note No. 2.5).
Presentation in the consolidated annual financial statements in accordance with International
Financial Reporting Standards requires management to make best estimates, accruals and reasonable
assumptions that have an effect on the reported amounts of assets and liabilities, income and expenses,
and the disclosure of contingent receivables and liabilities at the date of the consolidated financial
statements.
These estimates, accruals and assumptions are based on information available at the date of the
consolidated annual financial statements, therefore future actual results could differ from them (as in
conditions of financial crisis, uncertainties are more significant).
Items that involve a higher degree of subjective judgment or complexity, or where assumptions and
accounting estimates are material to the consolidated financial statements, are disclosed in Note No. 2.32
and NotesNo. 16, 17, 18, 19, 20, 21, 22, 42.
29
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
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.
30
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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, Sopharma Properties REIT, Sopharma
buildings REIT and Pharmanova OOO. (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 has 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.
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.
31
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
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
Upon a 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 ;
32
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
• 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 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.
33
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
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,
or the subsidiary Sopharma Rus OOO – Russian ruble.
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:
34
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
(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
(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.
Valuation 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.
35
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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 customer 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).
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:
36
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
2.6.3. Performance obligations under contracts with customers
Sales of finished goods
Wholesale of medicinal substances and medicinal forms are carried out 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 on 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 performa nce obligations.
The progress is measured based on the units produced versus the total number of units ordered by the
customer.
37
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
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.
38
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
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.
39
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
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.
40
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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
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 order 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.
41
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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:
• 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.
42
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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 Group’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.
• 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 uncertai nty
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.
43
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
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 (Note 11 ).
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.
44
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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 (Note 11).
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
45
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
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)'.
46
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
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.
47
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
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.
• for biological assets (carriers) – 10-12 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.
48
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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. 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
49
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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'.
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.
50
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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. 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.
51
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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).
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 revaluation 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.
52
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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);
• 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.
53
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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).
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.
54
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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).
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).
55
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
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.
56
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
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 revaluation 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
• for equipment and transmission devices – 2-10 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.
57
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
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”.
58
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
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.
59
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
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.
60
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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 o f 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'.
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.
61
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
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 revaluation
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 'revaluation of defined benefit
62
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
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;
63
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
• 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.
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
64
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
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)
65
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
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 banks, 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 compr ehensive 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
66
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
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)).
67
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
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
68
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
The subsequent measurement of financial liabilities depends on their classification as described
below:
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 o f 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;
69
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
• the offsetting should be enforceable and legally defendable during (cumulatively):
- the usual business operations;
- in case of default/delay, and
- in case of insolvency
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 2023 is 10% (2022: 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:
Tax rate
Country
2023
2022
Ukraine
18%
18%
Serbia
15%
15%
Poland
19%
19%
Kazakhstan
20%
20%
Moldova
n/a
12%
Russia
20%
n/a
70
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
71
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
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
72
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
(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.
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
73
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
investments, investments in other companies, trade and other receivables, trade payables and loans
received, tax accounts, general-purpose production and administrative equipment.
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
74
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
prices, market comparables (analogues) and discounted cash flows, including based on capitalised rental
income.
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 fai r
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
75
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
fair value of the respective assets and liabilities at that date. Where necessary, this is explicitly consulted
with the involved external appraisers.
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).
76
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
77
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
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
78
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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, revaluation was carried out,
since at this date the five-year period for revaluation adopted in accordance with the policy expires. The
review and revaluation were performed with the professional support of independent licensed appraisers.
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.
79
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
In 2023, impairment of property, plant and equipment amounting to BGN 1,890 thousand (2022:
BGN 9,589 thousand) was charged.
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 2023 (31
December 2022: none).
80
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
3. REVENUE FROM CONTRACTS WITH CUSTOMERS
Group revenue from contracts with customers includes:
2023
2022
BGN'000
BGN'000
Revenue from sales of goods
1,555,753
1,379,123
Revenue from sales of finished products
319,551
283,893
Total
1,875,304
1,663,016
Contract balances are as follows:
2023
2022
BGN ‘000
BGN ‘000
Receivables under contracts with customers – third parties, net of
impairment (Note 24)
233,979
195,208
Receivables under contracts with customers – related parties, net
of impairment (Note 25)
2,072
250
Contract liabilities under contracts with customers – third parties
(Note 42)
3,274
2,664
Contract liabilities at 31 December 2023 include advance payments received for the delivery of medical
equipment, at the amount of BGN 3,621 thousand (31 December 2022: BGN 2,652 thousand) and for
delivery of medicinal and medical products – BGN 13 thousand (31 December 2022: BGN 12 thousand).
The change in contract liabilities for the period from 1 January to 31 December 2023 is as follows:
2023
2022
BGN'000
BGN'000
Balance at 1 January (Note 42)
2,664
978
Revenue stated, which was recognised as contract liabilities,
incl.:
(2,512)
(978)
- Advance payments received
(2,512)
(978)
Payments from clients (excluding those recognised as revenue
3,122
2,664
in the period)
Balance at 31 December
3,274
2,664
The reimbursement obligations as at 31 December 2023 amount to BGN 9,942 thousand (31 December
2022: BGN 7,877 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).
81
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
4. OTHER OPERATING INCOME AND LOSSES
Other operating income and losses, net include:
2023
2022
BGN'000
BGN'000
Services rendered
11,893
7,535
Gain on sale of property, plant and equipment
4,533
498
Government grants
1,419
841
Loss from foreign exchange differences
(1,259)
(180)
Rentals
1,044
1,312
Written-off liabilities and reversed provisions
873
426
Gain from a change in the fair value of investment properties
(Note 18)
446
1,125
Social activities and events
229
239
Gain on sale of materials
215
128
Interest on current accounts
204
149
Gain on leases
132
73
Other
1,092
896
Total
20,821
13,042
The services rendered include:
2023
2022
BGN'000
BGN'000
Subcontractor services
5,650
1,701
Fees to National Health Insurance Fund
2,119
1,933
Advertising and marketing
1,576
1,333
Pre-distribution income
776
980
Gamma irradiation
272
301
Subscription technical service
243
196
Secondary packaging
161
233
Transport services
146
146
Lab analysis services
139
377
Other
811
335
Total
11,893
7,535
82
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
5. MATERIALS AND CONSUMABLES USED
2023
2022
BGN'000
BGN'000
Basic materials
70,289
63,331
Electricity
8,730
10,682
Spare parts, laboratory and technical materials
8,719
6,863
Heating
4,732
7,078
Fuels and lubricating materials
3,772
4,418
Advertising materials
2,269
2,050
Work clothing and PPE
1,287
1,234
Stationery
1,237
999
Auxiliary materials
1,002
871
Water
541
479
Assets below materiality threshold
398
331
Impairment of materials
287
385
Samples
279
172
Other
319
236
Total
103,861
99,129
Expenses on basic materials include:
2023
2022
BGN'000
BGN'000
Substances
28,297
28,339
Liquid and solid chemicals
12,911
10,099
Packaging materials
12,903
12,143
Foil
3,490
2,835
Sanitary-hygienic and dressing materials
3,138
3,054
Herbs
2,946
1,065
Vials
2,494
2,144
Ampoules
2,277
2,347
Tubes
1,151
862
Polypropylene, polyethylene, polystyrene
290
266
Other
392
177
Total
70,289
63,331
83
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
6. HIRED SERVICES EXPENSE
Hired services expense includes:
2023
2022
BGN'000
BGN'000
Advertising
35,482
23,815
Consulting services
7,555
7,523
Crafting
6,418
4,509
Forwarding and transportation services
5,138
4,721
Buildings and equipment maintenance
4,609
3,781
Rentals and utilities
4,126
3,040
Communications
3,919
2,144
Subscription fees
3,864
4,517
Bank and regulatory charges
3,220
2,280
Security
2,233
2,010
Local taxes and charges
2,185
2,066
Insurances
1,249
1,269
Commissions
903
1,228
Vehicle repair
885
842
Other
6,793
6,381
Total
88,579
70,126
The accrued expenses for the year for the mandatory audit of the individual and consolidated annual
financial statements are in the amount of BGN 750 thousand (2022: BGN 677 thousand)
In 2023 and 2022, the statutory auditors of the parent company did not provide any other services.
7. EMPLOYEE BENEFITS EXPENSE
2023
2022
BGN'000
BGN'000
Current wages and salaries 135,181
117,776
Social security contributions 23,310
20,537
Social benefits and payments 6,968
4,918
Accruals for unused paid leaves 2,418
2,129
Tantieme 1,262
737
Accruals for long-term retirement benefits to personnel (Note 32) 1,196
1,344
Social security/health insurance contributions on leaves 405
388
Total 170,740
147,829
84
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
8. OTHER OPERATING EXPENSES
2023
2022
BGN'000
BGN'000
Depreciation of goods, production and work in progress
4,085
1,465
Representative events 2,341
1,991
Business trips 1,860
1,095
Scrap and lack of goods 1,716
1,542
Donations 859
438
Net change in the allowance for impairment of credit losses on
receivables, incl. from related parties (Note 9) 744
3,399
Unrecognised tax credit 560
620
Trainings 292
225
Scrap of finished products and work in process 225
220
Fines and penalties to suppliers 173
1,155
Payments to the budget for taxes and interest on taxes 154
155
Scrap of fixed assets 126
928
Receivables written-off 85
93
Other
1,101
1,048
Total 14,321
14,374
9. IMPAIRMENT OF ASSETS
2023
2022
BGN'000
BGN'000
Accrued impairment for credit losses from receivables,
including from related parties
4,350
6,811
Reversed impairment for credit losses from receivables,
including from related parties
(3,606)
(3,412)
Net change in allowance for impairment of credit losses on
receivables, incl. from related parties (Note 8)
744
3,399
Impairment of goods, finished products and works in process
(Note 8)
4,085
1,465
Impairment of inventories (Note 5)
287
385
Total
5,116
5,249
85
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
10. IMPAIRMENT OF NON-CURRENT ASSETS OUTSIDE THE SCOPE OF IFRS 9
2023
2022
BGN'000
BGN'000
Impairment of property, plant and equipment (Note 16)
1,890
9,589
Impairment of goodwill (Note 17)
-
9,601
Impairment of investments in joint ventures (Note 19)
-
1,593
Total
1,890
20,783
11. FINANCE INCOME
Finance income includes:
2023
2022
BGN'000
BGN'000
Interest income on loans granted
2,603
2,223
Income from interest on bank deposits
954
4
Interest income on overdue trade receivables
347
558
Interest income on assignment contracts
127
71
Income from interest on receivables under special contracts
117
149
Reimbursed provision for financial guarantees
105
-
Net gain from exchange differences on foreign currency loans and leases
77
-
Income from provided sureties and guarantees
51
52
Equity income (dividends)
25
33
Net gain from exchange differences on receivables from securities
-
214
transactions
Total
4,406
3,304
12. FINANCE COSTS
Finance costs include: 2023
2022
BGN'000
BGN'000
Interest expense on loans received
8,454
4,403
Interest expense on leases
1,759
1,141
Bank fees and charges on loans and guarantees
1,528
1,365
Net change in the allowance for impairment for credit losses on
receivables under business loans granted 1,256
1,856
Expense for other interest 687
391
Net loss from exchange differences on receivables from
securities transactions 128
-
Interest expense on factoring agreements 80
84
Expenses related to the payment of dividends 6
-
Net change in the impairment allowance for credit losses on
receivables under provided guarantees 3
-
Net loss from exchange differences on foreign currency loans and
leases -
161
Provision for financial guarantees
-
16
Total
13,901
9,417
86
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
13. GAINS/LOSSES FROM ASSOCIATES AND JOINT VENTURES
2023
2022
BGN'000
BGN'000
Gains from associates, net 24,644
22,866
(Losses)/gains from joint ventures, net
(171)
(231)
24,473
22,635
The gains from associates include:
2023
2022
BGN'000
BGN'000
Group’s share in the current profit of associates
22,386
22,866
Net gain on sale of shares
2,258
-
Total
24,644
22,866
The (losses)/gains from joint ventures, net include:
2023
2022
BGN'000
BGN'000
Group’s share in the current loss of joint venture (166)
(224)
Effect of transactions with Group companies (5)
(7)
Total (171)
(231)
14. INCOME TAX EXPENSE
Consolidated statement of comprehensive income
2023
2022
(profit or loss for the year)
BGN'000
BGN'000
Taxable profit of the Group companies for the year
121,365
99,808
Revaluation reserve included as an increase in the annual tax return
(1,512)
(1,299)
Taxable profit for the year
119,853
98,509
Current income tax expense for the year (Note 2.27)
13,811
11,399
Tax adjustment for past periods
39
143
Deferred income taxes
Origination and reversal of temporary differences
(2,526)
(2,799)
Total income tax expense carried to the consolidated statement of
comprehensive income (within profit or loss for the year)
11,324
8,743
87
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
Reconciliation of income tax expense applicable to the consolidated
accounting profit or loss
2023
2022
BGN'000
BGN'000
Accounting profit for the year
111,198
85,076
Income tax for the year (Note 2.27)
11,693
8,259
Unrecognised amounts under the tax return
Related to increases
3,740
4,266
Related to decreases
(4,854)
(5,837)
Tax loss for the current year on which no deferred tax assets are
recognised
668
2,157
Decreases related to tax losses for which no tax asset was recognised in
prior periods
77
(102)
Total income tax expense carried to the consolidated statement of
comprehensive income (within profit or loss for the year)
11,324
8,743
Second Pillar income taxes
The Second Pillar legislation, which introduces a minimum global tax rate of 15% for multinational
enterprises with consolidated revenues above EUR 750 million (additional tax), has been adopted in
Bulgaria from 1 January 2024. The current nominal corporate tax rate in Bulgaria is 10% , and the effective
tax rate under the Second Pillar is 15%.
Sopharma AD is the ultimate parent company of a multinational Group with consolidated revenues
of over 750 million euros and falls within the scope of the requirement to supplement the tax under the
Second Pillar, as well as the other companies of the Group. The Group applies the exemption for the
recognition and disclosure of information on deferred tax assets and liabilities related to income taxes under
the Second Pillar, as provided for in the amendments to IAS 12 issued in May 2023 and approved by the
EU in November 2023.
Since the legislation is not in force as of 31.12.2023, the Group has no current tax exposure at the
reporting date.
The Group is in the process of assessing the potential impact of second pillar income taxes.
If the additional tax were implemented in 2023, then the estimated effective tax rate in 2023 would
be more than 10% and the top-up tax rate would be the difference to 15%.
In addition, the share of profit before taxes and the effective tax rates in the financial year
commencing on 1 January 2024 will depend on factors such as the Group's income/expenses and the
provisions of the Bulgarian Corporate Income Tax Code .
88
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
The tax effects regarding items of other comprehensive income are as follows:
2023
2022
BGN'000
BGN'000
Tax
Tax
Pre-tax
benefit/
Amount
Pre-tax
benefit/
Amount
amount
(expense)
net of tax
amount
(expense)
net of tax
Items that will not be reclassified to profit or loss
(Loss)/gain on revaluation of
33
(3)
30
(991)
99
(892)
property, plant and equipment
Net change in the fair value of other
1,766
-
1,766
(1,047)
-
(1,047)
long-term equity investments
(1,472)
-
(1,472)
1,498
-
1,498
Revaluation of defined benefit
327
(3)
324
(540)
99
(441)
pension plans
Items that may be reclassified to profit or loss
Exchange differences on translating
(1,302)
-
(1,302)
(4,637)
-
(4,637)
foreign operations
Share of other comprehensive income
4,893
-
4,893
(790)
-
(790)
of associates
3,591
-
3,591
(5,427)
-
(5,427)
Other comprehensive income for
3,918
(3)
3,915
(5,967)
99
(5,868)
the year
15. OTHER COMPREHENSIVE INCOME
Other components of comprehensive income include:
Items of other
Items of other
Total items of other
comprehensive income
comprehensive income
comprehensive income
attributable to the Group
attributable to non-
controlling interests
2023
2022
2023
2022
2023
2022
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
33
(991)
-
-
33
(991)
Net change in the fair value of equity
investments measured at fair value
through other comprehensive income
1,766
(1,047)
-
-
1,766
(1,047)
Revaluation of defined benefit pension
plans
(1,388)
1,355
(84)
143
(1,472)
1,498
Income tax related to other
comprehensive income
(3)
99
-
-
(3)
99
Items that may be reclassified to profit
or loss
Foreign exchange differences from
restatement of foreign operations
(1,302)
(4,637)
-
-
(1,302)
(4,637)
Portion of other comprehensive income
of associates
4,893
(790)
-
-
4,893
(790)
Other comprehensive income for the
year
3,999
(6,011)
(84)
143
3,915
(5,868)
89
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
16. PROPERTY, PLANT AND EQUIPMENT
Land
Plant
Other
Assets
Total
and buildings
and equipment
in progress
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
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
333,813
305,758
279,086
269,771
53,508
51,271
5,513
4,798
671,920
631,598
Additions
17,695
54,257
5,769
3,602
9,324
5,892
13,592
17,256
46,380
81,007
Effect from revaluation
-
-
20
-
13
-
-
-
33
-
Effects from translation of foreign currency
(312)
(1,155)
(470)
(1,593)
(115)
(384)
(6)
(20)
(903)
(3,152)
Disposals
(21,215)
(18,824)
(7,861)
(2,121)
(5,864)
(3,965)
(330)
(2,230)
(35,270)
(27,140)
Written-off book value of assets upon disposal of
subsidiaries
-
(503)
-
(47)
-
(254)
-
-
-
(804)
Impairment
-
(9,589)
(34)
-
-
-
-
-
(34)
(9,589)
Transfer to property, plant and equipment
3,937
3,869
7,102
9,474
655
948
(11,694)
(14,291)
-
-
Transfer to/(from) investment properties
(354)
-
(107)
-
(86)
-
-
-
(547)
-
Balance at 31 December
333,564
333,813
283,505
279,086
57,435
53,508
7,075
5,513
681,579
671,920
Accumulated depreciation and impairment
Balance at 1 January
89,957
78,719
172,578
160,348
32,978
30,138
-
-
295,513
269,205
Depreciation charge for the year
21,871
20,602
16,710
15,041
7,150
6,723
-
-
45,731
42,366
Impairment
1,726
991
130
-
-
-
-
-
1,856
991
Effects from translation of foreign currency
(113)
(349)
(275)
(859)
(91)
(253)
-
-
(479)
(1,461)
Written-off depreciation
(5,637)
(9,552)
(7,239)
(1,918)
(5,427)
(3,437)
-
-
(18,303)
(14,907)
Depreciation written-off upon disposal of
subsidiaries
-
(454)
-
(34)
-
(193)
-
-
-
(681)
Transfer to/(from) investment properties
(204)
-
(87)
-
(72)
-
-
-
(363)
-
Balance at 31 December
107,600
89,957
181,817
172,578
34,538
32,978
-
-
323,955
295,513
Carrying amount at 31 December
225,964
243,856
101,688
106,508
22,897
20,530
7,075
5,513
357,624
376,407
Carrying amount at 1 January
243,856
227,039
106,508
109,423
20,530
21,133
5,513
4,798
376,407
362,393
90
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
As at 31 December 2023, the tangible fixed assets of the Group within “land and buildings” include:
land amounting to BGN 51,219 thousand (31 December 2022: BGN 60,252 thousand) and buildings of
carrying amount BGN 174,745 thousand (31 December 2022: BGN 183,604 thousand).
Tangible fixed assets in progress as at 31 December include:
• expenses on new buildings construction – BGN 1,116 thousand (31 December 2022: BGN 1,495
thousand);
• buildings reconstruction – BGN 1,741 thousand (31 December 2022: BGN 813 thousand);
• supply of equipment – BGN – 355 thousand (31 December 2022: BGN 488 thousand);
• advances granted – BGN 3,842 thousand (31 December 2022: BGN 2,567 thousand);
• other – BGN 21 thousand (31 December 2022: BGN 150 thousand).
The total cash outflow from leases in 2023 amounts to BGN 18,795 thousand (2022: BGN 16,081
thousand).
As at 31 December 2023, the Group has leased fixed tangible assets with carrying amount of BGN
1,172 thousand (31 December 2022: BGN 1,260 thousand).
As at 31 December 2023 Property, plant and equipment include right-of-use assets with carrying
amounts respectively: in the group of “land and buildings” – BGN 76,608 thousand (31 December 2022:
BGN 78,470 thousand), in the group of Machinery, plant and equipment - BGN 1,002 thousand (31
December 2022: BGN 97 thousand), within “others” – BGN – 9,071 thousand (31 December 2022: BGN
6,449 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 2023 in relation to received loans (Notes 29 and 36) as follows:
• Land and building with a carrying amount respectively of BGN 27,474 thousand and BGN
и 54,121 thousand (31 December 2022: respectively, BGN 27,459 thousand and BGN 58,194
thousand);
• Pledges on equipment, transportation vehicles and furniture and fixtures with carrying
amount of BGN 22,686 thousand (31 December 2022: BGN 30,045 thousand);
• Pledges on facilities – none (31 December 2022: BGN 131 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;
91
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
• ‘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 revaluation 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).
92
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
Intellectual property
17. INTANGIBLE ASSETS
Goodwill
Software
rights
Assets in progress
Total
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
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
31,011
31,308
36,983
33,265
60,793
61,638
2,757
2,847
131,544
129,058
Additions
-
-
3,790
2,624
12,402
81
3,230
1,442
19,422
4,147
Effects from translation of foreign currency
(83)
(257)
(9)
(25)
565
19
-
-
473
(263)
Transfer
-
-
1,177
1,134
495
51
(1,672)
(1,185)
-
-
Written-off book value of assets upon disposal of
subsidiaries
-
(40)
-
-
-
(643)
-
-
-
(683)
Disposals
-
-
(221)
(15)
(14)
(353)
(59)
(347)
(294)
(715)
Balance at 31 December
30,928
31,011
41,720
36,983
74,241
60,793
4,256
2,757
151,145
131,544
Accumulated amortisation and impairment
Balance at 1 January
27,489
17,888
19,052
15,707
33,330
27,622
-
-
79,871
61,217
Amortisation charge for the year
-
-
3,901
3,366
6,332
6,496
-
-
10,233
9,862
Impairment
-
9,601
-
-
-
-
-
-
-
9,601
Effects from translation of foreign currency
-
-
(11)
(17)
19
20
-
-
8
3
Asset amortisation written-off upon disposal of
subsidiaries
-
-
-
-
-
(473)
-
-
-
(473)
Amortisation written-off
-
-
(221)
(4)
(14)
(335)
-
-
(235)
(339)
Balance at 31 December
27,489
27,489
22,721
19,052
39,667
33,330
-
-
89,877
79,871
Carrying amount at 31 December
3,439
3,522
18,999
17,931
34,574
27,463
4,256
2,757
61,268
51,673
Carrying amount at 1 January
3,522
13,420
17,931
17,558
27,463
34,016
2,757
2,847
51,673
67,841
93
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
Intangible assets in progress as at 31 December include:
• expenses on acquiring licenses and permits for use of medicinal products – BGN 1,153 thousand (31
December 2022: BGN 1,117 thousand);
• expenses on acquisition of software – BGN 2,717 thousand (31 December 2022: BGN 1,356
thousand);
• advances granted – BGN 107 thousand (31 December 2022: BGN 99 thousand);
• costs for the acquisition of copyright - BGN 162 thousand. (31.12.2022: none);
• other – BGN 117 thousand (31 December 2022: BGN 185 thousand).
As at 31 December 2023 there are pledges in relations to loans obtained by the Group on software
with carrying amount BGN 2,385 thousand (31 December 2022: BGN 2,856 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.
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.
As a result of the analyzes performed by the Group's management, as of 31.12.2023 no impairment of
goodwill was recognized (31.12.2022: BGN 9,601 thousand).
94
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
18. INVESTMENT PROPERTY
31.12.2023
31.12.2022
BGN '000
BGN '000
Balance at 1 January 10,568
9,446
Transfer of property, machinery and equipment (Note No. 16) 184
-
Net gain from adjustment to fair value through profit or loss (Note 4) 446
1,125
Disposals -
(3)
Balance at 31 December 11,198
10,568
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 31.12.2023
31.12.2022
BGN '000
BGN '000
Warehouse premises 5,313
5,139
Production buildings 2,915
2,720
Offices 2,272
2,199
Social objects 513
510
Retail objects 185
-
Total 11,198
10,568
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 revaluation 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 and Level 3:
95
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
Warehouse
Production
Social
Retail
premises
Offices
buildings
premises
stores
Total
Balance at 1 January 2022
4,534
1,825
2,639
448
-
9,446
Fair value gain through profit
or loss – unrealised
608
374
81
62
-
1,125
Written-off
(3)
-
-
-
- (3)
Balance at 31 December 2022
5,139
2,199
2,720
510
-
10,568
Fair value gain through profit
or loss – unrealised
174
73
195
3
1
446
Transfer to/from property,
plant and equipment (Note 16)
-
-
-
-
184
184
Balance at 31 December 2023
5,313
2,272
2,915
513
185
11,198
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
Valuation approaches and techniques
Significant unobservable inputs
(Level 2)
Valuation Approach: Income Approach
a) comparative rental values for
Appraisal technique: Appraisal based on the
analogues
present value, corresponding to a methodology
b) rate of return
related to the fulfillment of the requirements of
c) term for realization of rental
Offices
BSO 2018, including valuation based on
transactions
Retail stores
capitalized rental income, as a scheme for
applying the method of discounted cash flows,
Social premises
using data, parameters and calculation results
resulting from the application of valuation
techniques from the approach of market
comparisons and from the approach based on the
costs of creation/ replacement.
Valuation Approach: Income Approach
a) comparative rental values for
Appraisal technique: Appraisal based on the
analogues
present value, corresponding to a methodology
b) rate of return
related to the fulfillment of the requirements of
c) term for realization of rental
BSO 2018, including valuation based on
transactions
capitalized rental income, as a scheme for
Warehouse premises
applying the method of discounted cash flows,
using data, parameters and calculation results
resulting from the application of valuation
techniques from the approach of market
comparisons and from the approach based on the
costs of creation/ replacement.
96
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
Groups of assets
Valuation approaches and techniques
Significant unobservable inputs
(Level 3)
Valuation Approach: Income Approach
Appraisal technique: Appraisal based on the
a) comparative rental values for
present value, corresponding to a methodology
analogues
Shops and
related to the fulfillment of the requirements of
b) rate of return
production - warehouse
BSO 2018, including valuation based on
c) term for realization of rental
bases
capitalized rental income, as a scheme for
transactions
(including land, buildings,
applying the method of discounted cash flows,
structures and construction
using data, parameters and calculation results
equipment)
resulting from the application of valuation
techniques from the approach of market
comparisons and from the approach based on the
costs of creation/ replacement.
Valuation Approach: Cost Approach
Appraisal technique: Appraisal based on the
a) comparative values for new
present value, corresponding to a methodology
analogues
related to the fulfillment of the requirements of
b) user modification indices
BSO 2018, including valuation on an as-needed
prices according to NSI data
Facilities, installations,
basis - the inherent costs of acquisition or
equipment and furniture
replacement (acquisition of an alternative asset of
for real estate
equal utility) of a relevant asset, as of the
valuation date, i.e. formation of replacement value
of the asset in its status as new, using data,
parameters and calculative results arising from
valuation techniques related to the approach of
market comparisons
19. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
31.12.2023
31.12.2022
BGN '000
BGN '000
Investments in associates 231,292
162,678
Investments in joint ventures -
166
Total 231,292
162,844
19.1. Investments in associates
As at 31 December 2023, the Group has significant influence in
% interest
Carrying amount
Date of shares acquisition
BGN'000
Doverie Obedinen Holding AD
23.46%
121,691
21.12.2016 г.
Sopharma Properties REIT
45.65%
76,918
8.12.2021 г.
Sopharma Buildings REIT
31.47%
28,707
8.9.2023 г.
Pharmanova D.O.O.
25.00%
3,976
10.11.2023 г.
231,292
97
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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 г.
Sopharma Properties REIT 41.05%
63,121
8.12.2021 г.
162,678
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 17 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 2023 is BGN 8,56 per share (December 2022: BGN 7,94).
The book value per share based on accounting net assets in 2023 is BGN 2,19 (2022: BGN 2,14).
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 shares of Sopharma Properties REIT are traded on the stock exchange, and the average monthly
price of transactions realised in December 2023 is BGN 8,87 per share (December 2022: BGN 9,42). The
book value per share based on accounting net assets in 2023 is BGN 4,04 (2022: BGN 3.66).
Sopharma Buildings REIT is an associate since 8 September 2023. Its principal activities include
investment of cash raised by issue of securities in real estate by means of purchasing right of ownership,
construction and improvements for the purpose of managing them, lease, rent and/or sale.
The shares of Sopharma Buildings REIT are traded on the stock exchange, and the average monthly
price of transactions realised in December 2023 is BGN 19,45 per share (December 2022: BGN 3,08). The
book value per share based on accounting net assets in 2023 is BGN 1,86 (2022: BGN 2,15).
Pharmanova DOO, Serbia is an associate since 10 November 2023 with principle activities of
pharmaceutical production.
98
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
The movement of the investments in associates is presented below:
31.12.2023
31.12.2022
BGN '000
BGN '000
Balance at 1 January 162,678
125,337
Share in the current profit for the period 22,386
22,866
Acquisition of shares 27,933
16,480
Share in other comprehensive income 4,893
(790)
Dividends (1,488)
(1,215)
Transfer from other non-current equity investments 15,463
-
Share sale (573)
-
Balance at 31 December 231,292
162,678
Group's share in the assets, liabilities, revenue and results of associates is as follows:
Share in
Share in
Share in
Share in
Share in other
assets
liabilities
revenue
current
31.12.2023
comprehensive
Interest
profit for the
income
period
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
%
Doverie Obedinen
23.46%
Holding AD*
606,909
494,037
132,090
17,795
4,893
Sopharma Properties
45.65%
REIT
44,075
3,570
7,433
5,401
-
Sopharma buildings
31.47%
REIT
2,985
699
13
(27)
-
Pharmanova D.O.O.
10,784
-
25.00%
3,785
1,030
(783)
Share in
Share in
Share in
Share in
Share in other
assets
liabilities
revenue
current
31.12.2022
comprehensive
Interest
profit for the
income
period
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
%
Doverie Obedinen
24.998
Holding AD*
509,302
413,448
124,274
18,651
(790)
Sopharma Properties
41.05
REIT
37,935
4,956
5,884
4,215
-
19.2. Investments in joint ventures
As at 31 December 2023 the Group exercises joint control over Momina Krepost AD:
Carrying
Date of acquisition
% interest
amount
of interest
BGN'000
Momina Krepost AD
37.46%
-
10.3.2021 г.
99
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
As at 31 December 2022 the Group exercises joint control over Momina Krepost AD:
Carrying
Date of acquisition
% interest
amount
of interest
BGN'000
Momina Krepost AD
37.46%
166
10.3.2021 г.
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:
31.12.2023
31.12.2022
BGN '000
BGN '000
Balance at 1 January 166
1,983
Impairment -
(1,593)
Share in current profit for the period (166)
(224)
Balance at 31 December -
166
19.3. General information about associates
The table below presents summarised financial information on Group’s associates.
Doverie
Sopharma
Sopharma
Pharmanova
Financial indicators
Obedinen
Properties
buildings
D.O.O.
Holding AD*
REIT
REIT
Summarised information
31.12.2023
31.12.2023
31.12.2023
31.12.2023
from the statement of
BGN’000
BGN’000
BGN’000
BGN’000
financial position
Current assets
2,162,096
2,533
8,545
5,030
Non-current assets
1,218,923
94,016
940
38,104
Current liabilities
(1,360,730)
(7,791)
(2,220)
(6,658)
Non-current liabilities
(1,391,493)
(30)
-
(8,481)
Net assets 628,796
88,728
7,265
27,995
including
Non-controlling interest (147,671)
-
-
-
481,125
88,728
7,265
27,995
100
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
Summarised information
2023
2023
2023
2023
from the statement of
BGN’000
BGN’000
BGN’000
BGN’000
comprehensive income
Revenue
563,044
16,283
41
4,119
69,927
11,831
(87)
Net profit for the year
(3,132)
Other comprehensive income
-
for the year, net of tax
20,857
-
-
-
Adjustment to fair value
5,925
-
-
Total comprehensive income
for the year
96,709
11,831
(87)
(3,132)
*Consolidated indicators
Doverie Obedinen
Sopharma Properties
Financial indicators
Holding AD*
REIT
31.12.2022
31.12.2022
Summarised information from the statement of
financial position
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
Summarised information from the statement of
2022
2022
comprehensive income
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
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:
101
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
Doverie
Sopharma
Sopharma
Pharmano
Obedinen
Properties
buildings
va D.O.O.
Holding
REIT
REIT
AD
31.12.2023
31.12.2023
31.12.2023
31.12.2023
BGN’000
BGN’000
BGN’000
BGN’000
Net assets 481,125 88,728
7,265
27,995
Group’s share (%) 23.46%
45.65%
31.47%
25.00%
Group’s share in net assets 112,872
40,504
2,286
6,999
Goodwill and other adjustments 8,819 36,414
26,421
(3,023)
Carrying amount of investment
121,691
76,918
28,707
3,976
Doverie
Sopharma
Obedinen
Properties REIT
Holding AD
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
19.4. General information about joint ventures
The table below presents summarised financial information on Group’s joint ventures.
Momina Krepost
Momina Krepost
Financial indicators
AD
AD
31.12.2023
31.12.2022
Summarised information from the statement of financial
BGN’000
BGN’000
position
Current assets, including 5,520
5,345
Cash and cash equivalents 22
61
Non-current assets 10,341
10,860
Current liabilities (7,664)
(6,707)
Non-current liabilities (6,697)
(6,753)
Net assets 1,500
2,745
102
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
Summarised information from the statement of
2023
2022
comprehensive income
BGN’000
BGN’000
Revenue 1,320
3,097
Amortisation expense (325)
(334)
Interest cost (223)
(183)
Income tax (expense)/saving 8
(5)
Net profit/(loss) for the year (1,230)
(598)
Other comprehensive income for the year, net of tax (15)
13
Total comprehensive income for the year (1,245)
(585)
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
Momina Krepost
AD
AD
31.12.2023
31.12.2022
BGN’000
BGN’000
Net assets
1,500
2,745
Group’s share (%)
37.46%
37.46%
Group’s share in net assets
562
1,028
Goodwill and other adjustments
(562)
(862)
Carrying amount of investment
-
166
19.5. Cash flows from acquisition of interest/shares in associates
31.12.2023
31.12.2022
Cash flows from acquisition of interest/shares:
BGN'000
BGN'000
Cash flows on acquisition of shares
(27,933)
(16,480)
Cash flows on sale of shares
2,845
-
(25,088)
(16,480)
103
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
20. OTHER LONG-TERM EQUITY INVESTMENTS
Other long-term equity investments include shares in the following companies:
Country
31.12.2023
Interest
31.12.2022
Interest
BGN '000
%
BGN '000
%
Traded securities
Lavena AD Bulgaria
3,638
13.14
3,788
13.22
MFG Invest AD Bulgaria
148
0.46
169
0.46
Achieve Life Sciences Inc. USA
13
0.01
8
0.01
Chimimport AD Bulgaria
11
0.01
367
0.19
Bulgarian Stock Exchange AD Bulgaria
-
-
202
0.34
Sopharma Buildings REIT Bulgaria
-
-
111
10.25
3,810
4,645
Non-traded securities
Balkanpharma Razgrad AD Bulgaria
70
0.33
70
0.33
Imventure 1 KDA Bulgaria
50
1.36
50
1.36
Other
12
-
13
-
132
133
Total
3,942
4,778
As at 31 December 2023, within “others” are stated long-term equity investments at the amount of
12 thousand (31 December 2022: BGN 13 thousand) in Group’s non-controlling interest in a total of four
companies (31 December 2022: four companies).
The fair value per share at 31 December 2023 and 31 December 2022 by companies is as follows:
104
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
Number of
Fair value
Number of
Fair value
31.12.2023
31.12.2022
shares
per share
shares held
per share
BGN '000
BGN '000
Equity investments
Lavena AD
1,303,390
2.79
3,638
1,311,183
2.89
3,788
MFG Invest AD
50,000
2.96
148
50,000
3.38
169
Achieve Life Sciences Inc. -USA
1,796
7.52
13
1,796
4.70
8
Chimimport AD
16,656
0.66
11
463,476
0.79
367
Bulgarian Stock Exchange AD
-
-
-
22,300
9.04
202
Sopharma Buildings REIT
-
-
-
66,627
1.67
111
Central Cooperative Bank AD
-
-
-
1
1.64
-
Total
3,810
4,645
Equity investments Fair value
(Level 1)
(Level 2)
31.12.2023
BGN'000
BGN'000
BGN'000
Lavena AD
3,638
-
3,638
MFG Invest AD
-
148
148
Chimimport AD
11
11
-
Achieve Life Sciences Inc. – USA
13
-
13
Total 3,810
172
3,638
Equity investments Fair value
(Level 1)
(Level 2)
31.12.2022
BGN'000
BGN'000
BGN'000
Lavena AD 3,788
-
3,788
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
105
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
The table below shows the movement between the opening and closing balances of the fair values at
Level 1 and Level 2:
Level 1
Level 2
Total
BGN'000
BGN'000
BGN'000
Balance at 1 January 2022
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
Purchases
38
12,782
12,820
Issue of capital
-
620
620
Sales
(557)
(21)
(578)
Transfer to investments in associates
-
(15,463)
(15,463)
Unrealised gain/(loss) included in other
comprehensive income (Note 15)
(55)
1,821
1,766
Balance at 31 December 2023
172
3,638
3,810
21. LONG-TERM RECEIVABLES FROM RELATED PARTIES
The long-term receivables from related parties as at 31 December include:
31.12.2023
31.12.2022
BGN '000
BGN '000
Long-term loans granted to related parties
49,071
63,355
Impairment for credit losses
(118)
(157)
Long-term loans granted to related parties, net
48,953
63,198
Receivable under cession agreements
3,884
3,757
Deposits placed under leases
580
580
Impairment for credit losses
(64)
(64)
Deposits placed under leases, net
516
516
Total
53,353
67,471
The long-term loans are granted to an associate and to companies controlled by an associate.
(31.12.2022: to associated company and companies controlled by an associated company).
106
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
The movement in the allowance for impairment of receivables to related parties under long-term
loans granted is as follows:
31.12.2023
31.12.2022
BGN '000
BGN '000
Balance at 1 January
157
97
(Decrease)/ Increase in the allowance for credit losses recognised
in profit or loss for the year
(39)
60
Balance at 31 December
118
157
The terms and conditions of the long-term loans granted to related parties are as follows:
Currency Contracted
Maturity
Interest %
31.12.2023
31.12.2022
amount
'000
BGN'000
BGN'000
BGN'000
BGN'000
including
including
interest
interest
BGN
83,400
31.12.2025
3.00%
40,901
484
51,147
731
BGN
14,939
31.12.2025
4.36%
8,052
152
10,040
40
BGN
2,000
31.12.2024
3.09%
-
-
2,011
11
48,953
636
63,198
782
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:
31.12.2023
31.12.2022
BGN'000
BGN'000
Receivables on transactions in securities 3,540
3,668
Impairment for credit losses
(183)
(142)
Receivables from transactions in securities, net 3,357
3,526
Loans granted 1,956
1,956
Impairment for credit losses
(436)
(459)
Loans granted, net 1,520
1,497
Deposits on long-term rental agreements 712
642
Other 15
29
Total 5,604
5,694
The receivables on transactions in securities constitute receivables on a sold investment in a
subsidiary maturing on 30 September 2025, which is related to the completion of statutory actions on
registration of medical product permits.
107
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
The movement in the allowance for impairment of loans granted is as follows:
31.12.2023
31.12.2022
BGN '000
BGN '000
Balance at 1 January 459
6
Increase in the allowance for credit losses recognised in profit or
loss for the year 436
459
Transfer of the allowance to other short-term receivables (459)
(6)
Balance at 31 December 436
459
The movement in the allowance for impairment of receivable from an transactions in securities is as follows:
31.12.2023
31.12.2022
BGN '000
BGN '000
Balance at 1 January 142
216
Decrease in the allowance for credit losses recognised in profit or
loss for the year 41
(74)
Balance at 31 December 183
142
The terms and conditions of the long-term loans granted to third parties are as follows:
Contracted
Currency
Maturity
Interest %
31.12.2023
31.12.2022
amount
'000
BGN'000
BGN'000
EUR
1,000
22.12.2024
0.10%
1,520
1,497
1,520
1,497
108
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
23. INVENTORIES
Inventories include:
31.12.2023
31.12.2022
BGN'000
BGN'000
Goods
225,034
192,795
Materials
56,983
45,168
Finished products
41,690
28,097
Work in progress
13,450
10,540
Semi-finished products
2,176
1,983
Total
339,333
278,583
Materials by type are as follows:
31.12.2023
31.12.2022
BGN'000
BGN'000
Basic materials
50,577
41,570
Materials in transit
3,846
1,257
Spare parts and consumables
1,353
1,194
Supplementary materials
424
392
Technical materials
399
344
Other
384
411
Total
56,983
45,168
Basic materials by type are as follows:
31.12.2023
31.12.2022
BGN'000
BGN'000
Substances
25,725
20,729
8,061
Chemicals
9,615
3,411
Vials, tubes and ampoules
5,579
3,294
PVC and aluminium foil
4,176
1,875
Packaging materials
2,169
2,341
Herbs
1,824
1,785
Sanitary-hygienic and dressing materials
1,423
74
Other
66
Total
50,577
41,570
As at 31 December 2023, there were established special pledges on inventories at the amount of
BGN 222,605 thousand (31 December 2022: BGN 167,446 thousand) as collateral under received by the
Group bank loans and issued bank guarantees (Notes 29, 36 and 43).
109
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
24. TRADE RECEIVABLES
Trade receivables include:
31.12.2023
31.12.2022
BGN'000
BGN'000
Receivables from customers
240,177
201,500
Impairment for credit losses
(6,198)
(6,292)
Receivables from customers, net
233,979
195,208
Advances and other receivables from suppliers
26,142
24,511
Impairment for credit losses
-
(167)
Advances granted and other receivables from suppliers, net
26,142
24,344
Receivables under assignment agreements
4,890
4,890
Allowance for credit losses
(56)
-
Receivables under assignment contracts, net
4,834
4,890
Total
264,955
224,442
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:
31.12.2023
31.12.2022
BGN'000
BGN'000
Balance at 1 January 6,459
4,681
Increase in the allowance for credit losses recognised in profit or
loss for the year, net 278
3,999
Effect of foreign currency restatements (13)
(42)
Transfer of the allowance to court and awarded receivables (20)
150
Transfer to Receivables from Related parties (158)
-
Amounts written-off as uncollectable (292)
(1,803)
Impairment written-off upon sale of subsidiary -
(526)
Balance at 31 December 6,254
6,459
110
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
The age structure of non-matured (regular) trade receivables is as follows:
31.12.2023
31.12.2022
BGN'000
BGN'000
up to 30 days 136,119
80,282
from 31 to 90 days 69,391
80,029
from 91 to 180 days 6,034
3,057
from 181 to 365 days 765
750
from 1 to 2 years 126
2,496
over 2 years 8,238
3,002
Gross amount of non-matured (regular) trade receivables
220,673
169,616
Expected credit losses
(471)
(325)
Non-matured (regular) trade receivables, net 220,202
169,291
The allowance for impairment of non-matured (regular) trade receivables is as follows:
31.12.2023
31.12.2022
BGN'000
BGN'000
up to 30 days 304
196
from 31 to 90 days 104
100
from 91 to 180 days 28
26
from 1 to 2 years -
1
over 2 years 35
2
Total 471
325
The age structure based on invoice date of past due trade receivables is as follows:
31.12.2023
31.12.2022
BGN'000
BGN'000
from 31 to 90 days 6,850
18,101
from 91 to 180 days 5,530
6,248
from 181 to 365 days 3,120
3,623
from 1 to 2 years 1,627
2,804
over 2 years 2,377
1,108
Gross amount of past due trade receivables
19,504
31,884
Impairment for credit losses
(5,727)
(5,967)
Past due trade receivables, net 13,777
25,917
111
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
The allowance for impairment of credit losses from past due trade receivables is as follows:
31.12.2023
31.12.2022
BGN'000
BGN'000
from 31 to 90 days 178
47
from 91 to 180 days 618
14
from 181 to 365 days 1,289
2,231
from 1 to 2 years 1,303
2,634
over 2 years 2,339
1,041
Total 5,727
5,967
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 2023 and 31 December 2022 has been determined as
follows:
Current
Up to 90
90-365 days
Over 365
Total
days past
past due
days past
31 December 2023
due
due
Expected % of credit losses
0.21% 4.22%
24.55% 96.25%
2.58%
Trade receivables (gross
BGN'000
220,673 7,791
8,195 3,518
240,177
carrying amount)
Expected credit loss
BGN'000
(471) (329)
(2,012) (3,386)
(6,198)
(impairment allowance)
Current
Up to 90
90-365 days
Over 365
Total
days past
past due
days past
31 December 2022
due
due
Expected % of credit losses
0.19%
0.28% 23.03%
95.34% 3.12%
Trade receivables (gross
BGN'000
169,616
18,136 9,946
3,802 201,500
carrying amount)
Expected credit loss
BGN'000
(325)
(51) (2,291) (3,625) (6,292)
(impairment allowance)
112
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
As at 31 December 2023, there are established special pledges on trade receivables at the amount of
BGN 151,913 thousand (31 December 2022: BGN 82,262 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:
31.12.2023
31.12.2022
BGN'000
BGN'000
Goods 19,405
19,214
Services 4,580
3,026
Raw materials and consumables 2,157
1,957
Other -
314
Impairment of credit losses -
(167)
Total 26,142
24,344
25. RECEIVABLES FROM RELATED PARTIES
Receivables from related parties by type are as follows:
31.12.2023
31.12.2022
BGN'000
BGN'000
Trade loans granted
14,961
13,996
Impairment for credit losses
(2,154)
(1,340)
Trade loans granted, net 12,807
12,656
Receivables under contracts with customers 2,220
307
Impairment for credit losses
(148)
(57)
Receivables under contracts with customers, net 2,072
250
Advances granted 26
-
Receivables under guarantorships and guarantees granted
4
4
Impairment for credit losses (4)
(1)
Receivables under guarantorships and guarantees granted, net -
3
Other receivables 160
-
Impairment for credit losses (160)
-
Other receivables
-
-
Total 14,905
12,909
113
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
The trade loans granted to related parties are unsecured and are as follows:
Currency
Contracted
Maturity Interest
amount
31.12.2023
31.12.2022
BGN
'000
%
BGN '000
BGN '000
BGN '000
'000
includin
including
g
interest
interest
to companies controlled by associates
BGN
10,997
31.12.2024 3.10%
8,740
692
8,512
463
BGN
4,000
31.12.2024 3.33%
4,067
67
4,144
144
Total:
12,807
759
12,656
607
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:
31.12.2023
31.12.2022
BGN'000
BGN'000
Balance at 1 January
1,398
47
Increase in the allowance for credit losses recognised in profit
or loss for the year
951
1,351
Transfer of trade receivables
158
-
Amounts written off for bad debts
(44)
-
Effect of currency and exchange rate recalculations
3
-
Balance at 31 December
2,466
1,398
The age structure of non-matured (regular) trade receivables from related parties is as follows:
31.12.2023
31.12.2022
BGN'000
BGN'000
up to 30 days
31
250
from 31 to 90 days
20
-
from 91 to 180 days
71
-
from 181 to 365 days
2,085
-
Gross value of outstanding (regular) receivables from related enterprises
2,207
250
Provision for impairment for credit losses
(135)
-
Total
2,072
250
114
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
The age structure based on invoice date of past due but not impaired trade receivables from related
parties is as follows:
31.12.2023
31.12.2022
BGN'000
BGN'000
From 1 to 2 years
13
57
Gross amount of past due trade receivables from related parties
13
57
Impairment of credit losses
(13)
(57)
Total
-
-
26. OTHER SHORT-TERM RECEIVABLES AND ASSETS
Other receivables and prepayments of the Group include:
31.12.2023
31.12.2022
BGN'000
BGN'000
Taxes refundable 15,759
13,019
Loans granted to third parties
13,242
8,320
Impairment of credit losses on loans to third parties (507)
(3)
Loans granted to third parties, net 12,735
8,317
Court and awarded receivables 7,877
13,649
Impairment of court and awarded receivables (1,313)
(1,002)
Court and awarded receivables, net 6,564
12,647
Prepayments 2,258
2,236
Funds provided for dividends 424
-
Receivables under deposits placed as guarantees 342
147
Receivables under investment transactions -
46
Other 909
290
Total 38,991
36,702
Taxes refundable include:
31.12.2023
31.12.2022
BGN'000
BGN'000
VAT
10,406
6,984
Excise tax
4,749
4,823
Income tax
591
1,188
Local taxes and charges and other taxes
13
24
Total
15,759
13,019
115
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
Prepayments include:
31.12.2023
31.12.2022
BGN'000
BGN'000
Subscriptions
868
970
Insurance
733
540
Bank fees and commissions
196
135
Licence and patent fees
89
126
Rentals
84
64
Advertisement
45
227
Vouchers
16
19
Other
227
155
Total
2,258
2,236
The loans granted to third parties, amounting to BGN 12,735 thousand (31 December 2022: BGN
8,317 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 2023 was
between 0.1% and 4.7% (2022: between 3.05% and 4.7%).
The movement in the allowance for impairment of court and awarded receivables is as follows:
31.12.2023
31.12.2022
BGN'000
BGN'000
Balance at 1 January
1,002
1,639
(Decrease)/Increase in the allowance for credit losses recognised
in profit or loss for the year
291
(488)
Transfer from trade receivables
20
-
Transfer to trade receivables
-
(150)
Effect of currency and exchange rate recalculations
-
1
Balance at 31 December
1,313
1,002
The movement of the adjustment for impairment of loans granted to third parties is as follows:
31.12.2023
31.12.2022
BGN'000
BGN'000
Balance on 1 January
3
-
Increase / (decrease) in credit loss allowance recognized in
profit or loss during the year, net
45
(3)
Transfer from other long-term receivables
459
6
Balance on 31 December
507
3
116
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
27. CASH AND CASH EQUIVALENTS
31.12.2023
31.12.2022
BGN'000
BGN'000
Short-term deposits
106,305
4,155
Cash at current bank accounts
17,393
12,318
Cash on hand
5,093
3,304
Short-term blocked funds
84
74
Cash and cash equivalents presented in the
consolidated statement of cash flows
128,875
19,851
Blocked cash under court cases and issued bank
guarantees
4
4
Cash and cash equivalents presented in the
consolidated statement of financial position
128,879
19,855
The available cash and cash equivalents of the Group are mainly denominated in BGN, UAH and
EUR (31 December 2022: BGN, RSD, UAH).
As at 31 December 2023, short-term blocked cash at the amount of BGN 84 thousand (31 December
2022: BGN 74 thousand) represent mainly blocked funds under performance guarantees.
28. EQUITY
Share capital
As at 31 December 2023, the registered share capital of Sopharma AD amounts to BGN 172,591
thousand distributed in 172,590,578 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 2022
121,742,899
84,514
Treasury shares
(424,188)
(1,919)
Balance at 31 December 2022
121,318,711
82,595
Issue of capital
37,792,679
37,793
Effects of Subsidiary Merger
852
3
Treasury shares
(850,000)
(5,252)
Balance at 31 December 2023
158,262,242
115,139
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 AD and Warsaw Stock Exchange .
117
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
On 6 October 2023, the increase in the capital of Sopharma AD was entered in the Commercial
Register through the issuance of 37,792,679 ordinary, registered, voting shares, with a nominal value of BGN
1 each and an issue value of BGN 4,13 per share.
Shares from the capital increase were subscribed by warrant holders.
he new shares from the company's capital increase were admitted to trading on the Bulgarian Stock Exchange
on 18.10.2023.
The repurchased own shares are 14,328,336 in the amount of BGN 57,452 thousand. (31.12.2022:
13,479,188 numbers in the amount of BGN 52,203 thousand). In the current year, 850,000 shares were
purchased (2022: 424,188 shares were purchased).
Legal reserves in the amount of BGN 196,759 thousand. (31.12.2022: BGN 68,628 thousand) were
formed from the distribution of the profit of the parent company for the "Reserve" fund and from the premium
reserve, which arose as a positive difference between the issue and nominal value of the issued shares during
the merger of subsidiaries in Sopharma AD, as well as from the subscribed and paid shares and exercised
rights under warrants by warrant holders, in the amount of BGN 136,916 thousand. (31.12.2022: BGN 8,785
thousand).
The revaluation reserve - for property, machinery and equipment in the amount of BGN 29,328
thousand. (31.12.2022: BGN 35,263 thousand) is formed by the positive difference between the balance sheet
value of the properties, machines, equipment of the Group companies and their fair values as of the dates of
the respective regular revaluations. The effect of deferred taxes on the revaluation reserve is reported directly
through other components of comprehensive income for the year.
The reserve for financial assets at fair value through other comprehensive income in the amount
of BGN 506 thousand. - a positive amount (31.12.2022: BGN 560 thousand) is formed by the effects of
valuation at fair value of other long-term capital investments (including the consolidated share of the change
in this reserve in associated companies when valuing them using the equity method ). When these investments
are written off, the reserve formed is not recycled through the statement of comprehensive income (through
profit or loss for the period).
The reserve from recalculation in the currency of presentation of foreign activities in the amount
of BGN 1,154 thousand. - negative amount (31.12.2022: BGN 4,745 thousand - negative amount) is formed
by the exchange rate differences that arose as a result of the recalculation of the currency of the financial
statements of the foreign companies in the presentation currency of the Group.
Other capital components (warrants issue)
Pursuant to Art. 25 of the Articles of Association of Sopharma AD on 21.05.2021, the Board of
Directors determines the parameters and makes a decision to issue warrants during the primary public
offering. With Decision No. 804 – E of 04 November 2021.
The Financial Supervision Commission approves the Prospectus for the issue of 44,932,633 non-
cash, freely transferable and registered warrants, with an issue value of BGN 0.28, issued by "Sopharma"
118
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
AD pursuant to Art. 112 b, para. 11 of LPOS. The underlying asset of the issued warrants are future ordinary,
registered, non-deductible, freely transferable shares, giving the right to one vote in the General Meeting of
Shareholders, which will be issued by the company under a condition, solely for the benefit of the owners of
the warrants. Each subscribed warrant entitles its holder to subscribe for one share of a future issue. Warrant
holders can exercise their right to subscribe for the corresponding number of shares from a future increase in
the company's capital within a 3-year period at a fixed price of BGN 4.13 per share. The right to exercise
arises from the date on which the issue of warrants was registered in "Central Depository" AD - 16 November
2021.
The warrants are admitted to trading on the BSE main market of the Bulgarian Stock Exchange-Sofia
AD, as of 17 November 2021.
The funds raised from the issue of warrants, which are not excercised amounting to BGN 1,857
thousand. (31.12.2022: BGN 12,488 thousand) are presented as other capital components in the statement of
financial position, net of issue costs.
The "Retained earnings" reserve includes the "other reserves" component, which contains
distributed amounts of realized profits from past years of Group companies and the "accumulated profits and
losses" component.
As of 31 December, retained earnings amounted to BGN 395,897 thousand. (31.12.2022: BGN
509,869 thousand), includes the recognized accumulated actuarial loss in the amount of BGN 2,637 thousand.
(31.12.2022: BGN 1,249 thousand), reported in subsequent assessments of plans with defined pensio n
benefits in connection with the change in IAS 19 Pension and other benefits of employed persons.
Basic net earnings per share
2023
2022
Weighted average number of shares
130,696,402
121,495,503
Net profit for the year, attributable to the equity holders of the parent
(BGN’000)
95,977
71,121
Net earnings per share (BGN)
0.73
0.59
119
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
Diluted net earnings per share
31.12.2023
31.12.2022
Average weighted number of shares in circulation
130,696,402
121,495,503
Cumulative effect of warrants
7,501,448
3,417,186
Shares in circulation with warrants
138,197,850
124,912,689
Net profit for the year, attributable to the equity holders of the parent
(BGN’000)
95,977
71,121
Dilluted earinings per share
0.69
0.57
29. LONG-TERM BANK LOANS
Contracted loan
31.12.2023
31.12.2022
Currency
amount
Maturity
Non-current
Current
Non-current
portion
portion
portion
Current portion
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
Credit lines and working capital loans
EUR
15,000
31.08.2025
27,021
-
27,021
-
-
-
Serbian
dinar/EUR
8,100
31.08.2025
15,800
-
15,800
15,797
-
15,797
EUR
5,210
31.03.2026
2,543
1,690
4,233
4,233
1,693
5,926
EUR
1,100
31.10.2025
2,152
-
2,152
2,151
-
2,151
EUR
2,062
30.04.2025
269
804
1,073
1,075
797
1,872
BGN
4,330
10.07.2028
-
-
-
1,860
416
2,276
EUR
12,000
25.06.2024
-
1,777
1,777
1,779
3,755
5,534
BGN
16,000
30.04.2024
-
1,007
1,007
801
2,667
3,468
Investment-purpose loans
BGN
9,544
25.12.2029
8,677
854
9,531
-
-
-
EUR
583
27.02.2023
-
-
-
63
378
441
BGN
4,250
16.04.2023
-
-
-
-
52
52
Total
56,462
6,132
62,594
27,759
9,758
37,517
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 received bank loans in euro are mainly agreed at an interest rate determined on the basis of
EURIBOR plus a surcharge of up to 2.6%, for leva loans - up to 1.91% fixed, for Serbian dinar - an interest
rate determined on the basis of BELIBOR plus a surcharge of up to 2.75% ( 2022: for euros - EURIBOR
plus a surcharge of up to 2.1%, for leva loans - up to 2.8% fixed). Loans are for working capital.
Investment-purpose loans are intended for purchase of tangible fixed assets and expanding of
activities.
120
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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).
121
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
01/01/2023 Changes in
cash flows
Newly arising
Offsetting with
Recognised
Other
31/12/2023
from
liabilities in the year
receivables under
income from
changes
financing
factoring
government
activities(*)
agreements
grants
BGN‘000
BGN‘000
BGN‘000
BGN‘000
BGN‘000
BGN‘000
BGN‘000
Bank loans (Notes 29 and 36)
195,872
66,828
-
-
-
372
263,072
Factoring agreements (Note 39)
1,875
621
-
(2,496)
-
-
-
Lease liabilities (Note 33)
85,548
(18,795)
23,987
-
-
(2,961)
87,779
Dividends
456
(71,889)
215,933
-
-
(1,882)
142,618
Government grants
6,902
36
-
- (1,419)
9
5,528
Total
290,653
(23,199)
239,920
(2,496)
(1,419)
(4,462)
498,997
Proceeds from issue of capital
-
156,084
-
-
-
(146,244)
9,840
Treasury shares (Note 28)
(52,203)
(5,252)
-
-
-
3
(57,452)
Reserve on warrant issue
12,488 (791)
-
-
-
(9,840)
1,857
Net cash flows from financing activities
250,938
126,842
239,920
(2,496)
(1,419)
(160,543)
453,242
122
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
Changes in cash
Non-cash changes
Other
flows
Disposal of
Newly arising
Offsetting
Recognized
changes
from financing
subsidiaries (Note
liabilities in the
with
revenue
01/01/2022
activities(*)
47)
year
receivables
from
31/12/2022
under
government
factoring
grants
agreements
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
123
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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:
2023
2022
BGN'000
BGN'000
Balance at 1 January
(4,345)
(7,422)
including: Deferred tax assets
2,052
1,050
including: Deferred tax liabilities
(6,397)
(8,472)
Recognised in profit or loss for the year
2,526
2,799
Recognised in other comprehensive income
(3)
99
Derecognised on disposal of a subsidiary
-
(41)
Recognised in the statement of changes in equity and the
current tax return
151
130
Reserve from restatement into the presentation currency
74
90
Balance at 31 December
(1,597)
(4,345)
including: Deferred tax assets
2,818
2,052
including: Deferred tax liabilities
(4,415)
(6,397)
As of 31 December 2023, the Group has not recognized deferred tax assets in the amount of BGN
829 thousand. (31.12.2022 for BGN 2,327 thousand) for temporary differences with accumulation, incl. tax
losses to be carried forward for BGN 7,517 thousand (31.12.2022 for BGN 15,115 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).
124
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
The change in the balance of deferred tax assets/(liabilities) for 2023 by items of temporary differences is as follows:
Deferred tax assets (by temporary
Balance at 1 January
Recognised in
Recognised in
Recognised in the
Reserve from
Balance at 31
differences)
2023
profit or loss for
other
statement of changes
restatement
December 2023
the year
comprehensive
in equity and the
into
income
current tax return
presentation
currency
Assets/(Liabilities)
Assets/(Liabilities)
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
Intangible assets
111
(27)
-
-
(5)
79
Inventories
1,761
(181)
-
-
30
1,610
Trade receivables
1,210
823
-
-
(3)
2,030
Retirement benefits obligation
1,464
176
-
-
(5)
1,635
Other current liabilities
1,484
188
-
-
-
1,672
Property, plant and equipment
(6,552)
1,140
(12)
151
55
(5,218)
Intangible assets acquired in business
combinations
(2,820)
608
-
-
1
(2,211)
Leases
112
32
-
-
1
145
Investment property
(1,115)
(233)
9
-
-
(1,339)
(4,345)
2,526
(3)
151
74
(1,597)
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
Balance at 1 January 2022
Recognised in profit
Recognised in other
Derecognised on
Recognised in the
Reserve from
Balance at 31
differences)
or loss for the year
comprehensive
disposal of a
statement of changes
restatement
December 2022
income
subsidiary
in equity and the
into
current tax return
presentation
currency
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
Retirement benefits obligation
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)
125
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
31. NON-CURRENT PAYABLES TO RELATED PARTIES
Non-current payables to related parties at 31 December include:
31.12.2023
31.12.2022
BGN'000
BGN'000
Lease liabilities 16,914
17,906
Payables related to share purchase -
6,588
Total 16,914
24,494
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 LIABILITIES
The long-term employee benefits as at 31 December include:
31.12.2023
31.12.2022
BGN '000
BGN '000
Long-term retirement benefit liabilities
8,097
6,306
Long-term benefit liabilities for tantieme
255
235
Total
8,352
6,541
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 12 and BGN 25)
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.
• Russia - under Russian legislation, the employer has no legal obligation to the personnel upon
retirement.
126
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
The movements in the present value of retirement benefit obligations to personnel are as follows:
2023
2022
BGN'000
BGN'000
Present value of the obligation at 1 January
6,306
7,300
Current service cost for the year
735
1,367
Interest cost for the year
420
85
Net actuarial (gain) recognised for the period
28
(108)
Expenses from past service in relation to staff cuts
13
-
Effect of recalculation
(25)
(101)
Payments made in the year
(852)
(739)
Revaluation gains or losses for the year, including:
1,472
(1,498)
Actuarial (gains) arising from changes in financial assumptions
934
(1,705)
Actuarial (gains) arising from changes in demographic assumptions
(53)
(61)
Actuarial losses arising from experience adjustments
591
268
Present value of the obligation at 31 December
8,097
6,306
The amounts of long-term retirement benefits of personnel accrued in the consolidated statement of
comprehensive income are as follows:
2023
2022
BGN'000
BGN '000
Current service cost
735
1,367
Interest cost
420
85
Net actuarial (gain) recognised for the period
28
(108)
Expenses from past service in relation to staff cuts
13
-
Components of defined benefit plan costs recognised in
profit or loss (Note 8)
1,196
1,344
Revaluation gains or losses on the retirement benefit
obligations, including:
Actuarial (gains) arising from changes in financial
assumptions
934
(1,705)
Actuarial (gains) arising from changes in demographic
assumptions
(53)
(61)
Actuarial losses arising from experience adjustments
591
268
Components of defined benefit plans cost recognised in
other comprehensive income (Note 15)
1,472
(1,498)
Total
2,668
(154)
The following actuarial assumptions were used for calculating the present value of the liabilities for
the companies in Bulgaria as at 31 December 2023:
127
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
• The discount factor is calculated by using 4,5% 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 6% annual growth compared to the
prior reporting period (2022: 0% and 5,5%);
• 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 2020 – 2022 (2022: 2019 – 2021);
• Staff turnover rate – from 0% to 20% for the five age groups formed (2022: between 0,03%
and 20%).
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 2023 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 2023:
Increase
Decrease
BGN '000
BGN '000
110
(93)
Change in salary growth
(28)
31
Change in discount rate
(57)
65
Change in staff turnover rate
128
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
Effects of changes in the basic assumptions on the amount of the stated liability as at 31 December
2023:
Increase
Decrease
BGN '000
BGN '000
Change in salary growth
563
(498)
Change in discount rate
(500)
572
Change in staff turnover rate
(334)
374
The weighted average duration of the defined benefit obligation to personnel is from 1.9 to 25.8 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
Poor health
Total
length of service
retirement
retirement
BGN '000
BGN '000
BGN '000
Payments in 2024
1,524
27
1,551
Payments in 2025
647
25
672
Payments in 2026
583
26
609
Payments in 2027
655
25
680
Payments in 2028
573
24
597
3,982
127
4,109
Long-term benefit obligations for tantieme
As at 31 December 2023, the long-term benefit obligations to personnel include also the amount of
BGN 255 thousand (31 December 2022: BGN 235 thousand), representing a payable to personnel related to
tantieme payment for a period of more than 12 months – until 2026 (2022: until 2025).
129
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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:
31.12.2023
31.12.2022
Lease
Lease
Lease
liabilities to
Lease
liabilities to
Total
Total
liabilities
related parties
liabilities
related parties
(Note 31)
(Note 31)
Term
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
13,424
2,712
16,136
12,874
2,710
15,584
Up to one year
Over one year
54,729
16,914
71,643
52,058
17,906
69,964
68,153
19,626
87,779
64,932
20,616
85,548
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:
31.12.2023
31.12.2022
Third
Related
Third
Related
Total
Total
parties
parties
parties
parties
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
Term
Up to one year
14,879
2,944
17,823
14,036
2,779
16,815
Over one year
58,279
17,722
76,001
55,057
18,179
73,236
73,158
20,666
93,824
69,093
20,958
90,051
Future finance cost
on leases
(5,005)
(1,040)
(6,045)
(4,161)
(342)
(4,503)
Present value of the
lease liabilities to
third and related
parties
68,153
19,626
87,779
64,932
20,616
85,548
130
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
Right-of-use assets are included in the statement of financial position within property, plant and equipment,
as follows:
Land and buildings
Machines and equipment
Others
Total
2023
2022
2023
2022
2023
2022
2023
2022
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
Book value
Balance at 1 January
102,508
69,379
259
166
12,707
11,409
115,474
80,954
Increases/additions 16,911
52,839
1,130
97
5,946
3,082
23,987
56,018
Decreases/written-off (6,909)
(19,710)
(179)
(4)
(4,483)
(1,784)
(11,571)
(21,498)
Balance at 31 December
112,510
102,508
1,210
259
14,170
12,707
127,890
115,474
Accumulated
depreciation
Balance at 1 January 24,038
21,253
162
76
6,258
5,202
30,458
26,531
Depreciation charge for
the period 14,174
12,927
186
86
3,148
2,739
17,508
15,752
Depreciation written-off
(2,310)
(10,142)
(140)
-
(4,307)
(1,683)
(6,757)
(11,825)
Balance at 31 December 35,902
24,038
208
162
5,099
6,258
41,209
30,458
Carrying amount at 31
December 76,608
78,470
1,002
97
9,071
6,449
86,681
85,016
Carrying amount at 01
January 78,470
48,126
97
90
6,449
6,207
85,016
54,423
34. GOVERNMENT GRANTS
The government grants to Group companies as at 31 December include:
31.12.2023
31.12.2022
BGN'000
BGN'000
Government grants, non-current portion
4,931
6,155
Government grants, current part (Note 42)
597
747
Total
5,528
6,902
The government grants received as at 31 December are to the following Group companies:
31.12.2023
31.12.2022
BGN'000
BGN'000
Sopharma AD 5,368
4,007
Biopharm Engineering AD 160
179
Veta Pharma AD -
2,716
Total 5,528
6,902
131
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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 597 thousand (31 December 2022: BGN: 747 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:
31.12.2023
31.12.2022
BGN'000
BGN'000
Payables related to share purchase
5,543
6,594
5,543
6,594
36. SHORT-TERM BANK LOANS
The short-term bank loans of the Group as at 31 December are as follows:
Currency
Contracted
Maturity
amount
31.12.2023
31.12.2022
Bank loans (overdrafts)
'000
BGN'000
BGN'000
BGN
41,500
31.07.2024
37,773
32,704
BGN
35,000
24.09.2024
34,921
-
BGN 20,000
05.09.2024
19,759
-
BGN 19,558
05.09.2024
19,574
-
BGN 20,000
05.09.2024
15,536
5
05.4.2024-
RSD/EUR 7,600
27.12.2024
14,865
7,158
EUR
34,200
01.04.2024
14,033
63,030
EUR
5,000
25.07.2024
9,757
9,757
BGN 9,779
05.09.2024
9,678
-
EUR 3,000
25.07.2024
5,858
5,859
EUR
2,488
27.03.2024
4,693
2,934
EUR
1,000
01.03.2024
1,956
1,956
EUR
10,000
01.04.2024
44
-
BGN
20,000
31.07.2024
6
-
Ukrainian hryvnia 128,000
20.01.2023
-
1,212
188,453
124,615
132
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
Currency Contracted
Maturity
amount
31.12.2023
31.12.2022
BGN'000
BGN'000
BGN'000
Credit lines
EUR
7,500
25.07.2024
12,025
12,025
BGN
20,000
31.03.2024
-
11,729
BGN
10,000
31.07.2023
-
9,986
12,025
33,740
Total
200,478
158,355
The received bank loans in euro are mainly agreed at an interest rate determined on the basis of
EURIBOR plus a surcharge of up to 2.9%; for BGN loans – the bank's reference interest rate plus a
surcharge of up to 2.75% and fixed up to 2.65%; for Ukrainian hryvnias 22% fixed; for dinar interest rate
determined on the basis of BELIBOR 1.95% (2022: EURIBOR plus surcharge up to 2.55% or fixed up to
3%; for left loans – reference interest rate of the bank's condition plus surcharge up to 1.35% and fixed up
to 1.45% ; for dinars – interest rate determined on the basis of BELIBOR 1.95% for Ukrainian hryvnias
22% fixed). 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 2023, 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
62,085 thousand (31 December 2022: BGN 48,531 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:
31.12.2023
31.12.2022
BGN'000
BGN'000
Payables to suppliers
193,391
152,483
Advances from clients
541
23,084
Total
193,932
175,567
133
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
The payables to suppliers refer to:
31.12.2023
31.12.2022
BGN'000
BGN'000
Suppliers outside Bulgaria
136,307
105,634
Suppliers from Bulgaria
57,084
46,849
Total
193,391
152,483
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:
31.12.2023
31.12.2022
BGN'000
BGN'000
Payables to shareholding companies with significant influence
84,982
1,098
Payables to key management personnel
12,991
-
Payables to joint ventures and associates
2,742
2,697
Payables to companies related through key management personnel
209
901
Payables to companies controlled by an associate
133
202
Other related parties
6
6
Total
101,063
4,904
The payables to related parties by type are as follows:
31.12.2023
31.12.2022
BGN'000
BGN'000
Dividend obligations
97,898
-
Short-term obligations under leasing contracts
2,712
2,710
Obligations for supplies of goods and materials
348
964
Delivery of services
99
68
Obligations related to the purchase of shares
-
1,031
Obligations for advances
-
125
Other
6
6
Total
101,063
4,904
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.
134
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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 2023 is BGN 15,000 thousand (2022: 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.
As at 31 December 2023 the company has no factoring liabilities (31.12.2022: BGN 1,875 thousand).
The financing granted for 2023 amounts to BGN 700 thousand (31 December 2022: BGN 30,950
thousand) (Note 2.17).
40. PAYABLES TO PERSONNEL AND FOR SOCIAL SECURITY
Payables to personnel and for social security include:
31.12.2023
31.12.2022
BGN'000
BGN'000
Payables to personnel, including: 20,160
17,949
current wages and salaries
12,291
10,137
accruals on unused compensated leaves
4,401
4,221
tantieme
3,468
3,591
Payables for social security/health insurance, including: 4,225
3,831
current payables for social security contributions
3,523
3,174
accruals on unused compensated leaves
702
657
Total 24,385
21,780
41. TAX PAYABLES
Tax payables include:
31.12.2023
31.12.2022
BGN'000
BGN'000
VAT 4,858
6,327
Taxes on dividend 1,240
-
Income taxes 1,048
996
Individual income taxes 880
730
Taxes on expenses 434
365
Local taxes and fees 25
16
Taxes at source -
2
Total 8,485
8,436
By the date of issue of these annual consolidated financial statements the following inspections and
audits of Group companies have been performed:
135
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
Company
Full-scope
VAT inspection
Inspection
tax audit
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
none
31.12.2005
31.12.2007
Electroncommerce EOOD
none
31.12.2005
30.04.2006
Veta Pharma AD
none
30.11.2023
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
30.05.2023
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
30.06.2023
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
31.08.2023
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
30.09.2023
30.04.2020
Sopharmacy 26 EOOD none
31.08.2017
none
Sopharmacy 27 EOOD none
31.12.2013
none
Sopharmacy 28 EOOD none
30.04.2023
none
Sopharmacy 29 EOOD none
31.07.2023
none
Sopharmacy 30 EOOD none
31.07.2023
30.04.2020
136
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
Company
Full-scope
VAT inspection
Inspection
tax audit
under the
social
security
legislation
Sopharmacy 31 EOOD none
31.07.2023
30.04.2020
Sopharmacy 32 EOOD 31.12.2010
31.12.2019
30.04.2020
Sopharmacy 33 EOOD none
30.04.2020
30.11.2023
Sopharmacy 34 EOOD none
30.04.2020
none
Sopharmacy 35 EOOD none
30.04.2020
31.12.2013
Sopharmacy 36 EOOD none
31.01.2015
31.05.2021
Sopharmacy 37 EOOD none
31.08.2023
30.04.2020
Sopharmacy 38 EOOD none
30.04.2020
29.02.2024
Sopharmacy 40 EOOD none
None
30.04.2020
Sopharmacy 41 EOOD none
31.08.2023
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
31.12.2023
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
31.08.2023
31.03.2020
Sopharmacy 51 EOOD none
30.09.2023
30.04.2020
Sopharmacy 52 EOOD none
none
31.12.2015
Sopharmacy 53 EOOD none
30.09.2023
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
31.07.2023
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.
137
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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:
31.12.2023
31.12.2022
Dividend payables
44,720
456
Payables for recovery under contracts with customers
9,942
7,877
Contract liabilities
3,274
2,664
Payables related to share purchase
1,051
1,032
Government grants (Note 34)
597
747
Deductions from wages
164
50
Payables under deposits placed as guarantees
136
144
Provision for financial guarantees
50
158
Amounts awarded in court cases
17
16
Others
1,340
653
Total
61,291
13,797
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
31.12.2023
31.12.2022
BGN '000
BGN '000
Buildings
7,483
7,867
Land
6,624
6,624
Total
14,107
14,491
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
31.12.2023
BGN'000
BGN'000
Doverie Obedinen Holding AD
2027
BGN
30,000
30,000
16,250
Energoinvestment AD 2024
BGN
2,000
2,000
1,600
Total
17,850
138
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
Bank guarantees
Sopharma Trading AD
Bank guarantees issued for the company as of 31.12.2023 amount to BGN 16,748 thousand.
(31.12.2022: BGN 14,716 thousand) and are for guaranteeing payment to suppliers of goods, for good
performance - guaranteeing future supplies of medicinal and medical products to hospitals under concluded
supply contracts, customs guarantee, participation in tenders and collateral under rental contracts for
commercial establishments (pharmacies).
Bank guarantees issued by:
31.12.2023
31.12.2022
BGN '000
BGN '000
7,400
7,508
DSK AD
5,062
4,870
KBC Bank Bulgaria EAD
ING Bank N.V.
4,286
2,338
16,748
14,716
As of 31 December 2023, Sopharma Trading AD has provided bank guarantees in the amount of
BGN 1,785 thousand (31.12.2022: BGN 2,152 thousand) as collateral under lease contracts for commercial
establishments (pharmacies) to which its subsidiaries are parties.
Sopharma Trading d.o.o.
As of 31.12.2023, bank guarantees issued for the company amount to BGN 15,360 thousand.
(31.12.2022: BGN 12,247 thousand) and are for guaranteeing payment to suppliers of goods, for good
performance - guaranteeing future supplies of medicinal and medical products to hospitals under concluded
supply contracts, customs guarantee and participation in tenders.
The bank guarantees have been issued by:
31.12.2023
31.12.2022
BGN '000
BGN '000
Raiffeisen AD Belgrade
13,407
8,315
OTP Bank Serbia AD Belgrade (SG Expressbank AD Belgrade)
1,002
1,350
Eurobank AD Belgrade
951
357
Banca Intesa AD Belgrade
-
2,225
15,360
12,247
Insurance of performance guarantees
Sopharma Trading AD
As at 31 December 2023, 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 10,653 thousand (31 December 2022: BGN 4,813 thousand) .
139
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
Assets held under safe custody
Sopharma Trading AD
According to concluded pre-distribution contracts, the company accepted for safekeeping as of
12.31.2023 goods in the amount of BGN 6,327 thousand. (31.12.2022: at BGN 4,318 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.
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.
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 :
140
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
Manufacturing of
Distribution of
Other
Elimination
Consolidated
pharmaceutical products
pharmaceutical products
(goods)
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
External sales
266,219
245,449
1,586,946
1,401,687
22,139
15,880
-
-
1,875,304
1,663,016
Intersegment sales
125,905
128,901
1,925
81
6,464
625
(134,294)
(129,607)
-
-
Total revenue
392,124
374,350
1,588,871
1,401,768
28,603
16,505
(134,294)
(129,607)
1,875,304
1,663,016
Segment result
(margin)
120,319
119,322
227,632
198,378
8,525
3,374
(687)
(688)
355,789
320,386
Non-allocated operating income
20,821
13,042
Non-allocated operating expenses
(278,500)
(245,547)
Profit from operations
98,110
87,881
Finance (costs)/income, net
(9,495)
(6,113)
Impairment of non-current assets
(1,890)
(20,783)
Gain on disposal of subsidiaries
-
1,456
Profit from associates, net
24,473
22,635
Profit before income tax
111,198
85,076
Income tax expense
(11,324)
(8,743)
Net profit for the year
99,874
76,333
Attributable to owners of the parent
95,977
71,121
Non-controlling interests
3,897
5,212
The assets and liabilities of the business segments include:
Assets by business segment
Manufacturing of
Distribution of
Other
Total
pharmaceutical products
pharmaceutical products
(goods)
2023
2022
2023
2022
2023
2022
2023
2022
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
Property, plant and equipment
117,056
122,397
137,892
135,586
8,407
18,813
263,355
276,796
Inventories
105,808
85,270
226,746
191,419
6,779
1,894
339,333
278,583
Receivables from related parties
14,783
12,659
51
250
71
-
14,905
12,909
Trade receivables
24,565
20,178
229,353
195,554
8,289
8,710
262,207
224,442
Cash and cash equivalents
107,558
6,521
20,069
12,270
1,252
1,064
128,879
19,855
Segment assets
369,770
247,025
614,111
535,079
24,798
30,481
1,008,679
812,585
Non-allocated assets
505,483
441,393
Total assets
1,514,162
1,253,978
Manufacturing of
Distribution of
Other
Total
Liabilities by business segment
pharmaceutical products
pharmaceutical products
(goods)
2023
2022
2023
2022
2023
2022
2023
2022
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
Payables to personnel and for social
security
2,726
2,424
13,402
11,609
204
497
16,332
14,530
Trade payables
22,076
40,615
165,729
134,712
6,127
240
193,932
175,567
Payables to related parties
96,545
1,412
4,651
3,547
(133)
(55)
101,063
4,904
Bank loans
81,390
15,087
181,682
180,785
-
-
263,072
195,872
Segment liabilities
202,737
59,538
365,464
330,653
6,198
682
574,399
390,873
Non-allocated liabilities
186,137
146,471
Total liabilities
760,536
537,344
141
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
The capital expenditures, depreciation/amortisation and non-monetary expenses other than
depreciation/amortisation by business segment include:
Manufacturing of
Distribution of
Other
Total
pharmaceutical
pharmaceutical
products
products (goods)
2023
2022
2023
2022
2023
2022
2023
2022
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
Capital expenditures
4,640
10,519
48,980
50,157
480
671
54,100
61,347
Depreciation and amortisation
10,928
10,957
33,207
31,132
944
1,477
45,079
43,566
Non-monetary expenses, other than
depreciation and amortisation
4,330
1,715
976
17,579
437
267
5,743
19,561
The distribution of Group revenue by type and by geographic area is as follows:
Bulgaria
Europe
Other countries
Total
2023
2022
2023
2022
2023
2022
2023
2022
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
BGN'000
Sales of finished products
119,458
104,175
165,016
151,366
35,077
28,352
319,551
283,893
Sales of goods
1,167,343
1,097,601
387,716
280,760
694
762
1,555,753
1,379,123
1,286,801
1,201,776
552,732
432,126
35,771
29,114
1,875,304
1,663,016
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
2023
2022
2023
2022
2023
2022
2023
2022
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
Property, plant and equipment
339,188
356,941
17,389
18,551
1,047
915
357,624
376,407
Intangible assets
40,191
41,199
17,626
6,943
12
9
57,829
48,151
Goodwill
2,159
2,159
1,280
1,363
-
-
3,439
3,522
Investment property
11,198
10,568
-
-
-
-
11,198
10,568
392,736
410,867
36,295
26,857
1,059
924
430,090
438,648
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.
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
142
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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 2023 is as follows:
Categories of financial instruments:
31.12.2023
31.12.2022
BGN '000
BGN '000
Financial assets
Financial assets at amortised cost, including: 461,554
326,563
Receivables and loans granted (Notes 21, 22, 24, 25 and 26)
332,679
306,712
Cash and cash equivalents (Note 27)
128,875
19,851
Financial assets at fair value through other comprehensive income,
3,942
4,778
including:
Equity investments (Note 20)
3,942
4,778
Total financial assets
465,496
331,341
Financial liabilities
Financial assets at amortised cost, including: 699,289
456,168
Short-term and long-term bank loans (Notes 29 and 36)
263,072
195,872
Other loans and payables (Notes 35, 37, 38 and 42)
348,438
174,748
Finance lease liabilities (Note 33)
87,779
85,548
Total financial liabilities
699,289
456,168
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:
31.12.2023
31.12.2022
BGN '000
BGN '000
Trade and other receivables, including from related parties
1,256
1,856
Loans at amortised cost
456
3,887
Court and awarded receivables
291
(488)
Total
2,003
5,255
Credit risk
143
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
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 identified 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
144
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
(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:
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 debtor’s operating results;
• A significant change in the collateral quality, which is expected to increase the risk of default;
145
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
• 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.
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 from
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.
146
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
• 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:
Note
Internal credit risk
Gross
Impairment
Carrying
Expected
categorisation
carrying
loss
amount
31.12.2023
credit losses
amount
(allowance)
(IFRS 9)
BGN '000
BGN '000
BGN '000
Lifetime
Initially negotiated
Long-term loans to
21
(credit-
loans – Stage 1
related parties
impaired)
49,071
(118)
48,953
Receivables under
assignment contracts
Lifetime
21
Regular – Stage 1
from related
(credit-
enterprises
impaired)
3,884
-
3,884
Short-term loans to
Lifetime
Initially negotiated
related parties
25
(credit-
loans – Stage 1
impaired)
4,067
-
4,067
Short-term loans to
Lifetime
related parties
25
Renegotiated Stage
(credit-
impaired)
10,894
(2,154)
8,740
Long-term loans to
Lifetime
Initially negotiated
third parties
22
(credit-
loans – Stage 12
impaired)
1,956
(436)
1,520
Lifetime
Short-term loans to
26
Renegotiated Stage
(credit-
third parties
impaired)
4,726
(503)
4,223
Short-term loans to
N/A
Lifetime
third parties
26
(credit-
impaired)
8,516
(4)
8,512
Trade and other
For a 12-
receivables from
21, 25
N/A
month period
related parties
2,964
(376)
2,588
Trade and other
For a 12-
receivables from third
22, 24, 26
N/A
month period
parties
257,942
(7,750)
250,192
(incl. court
26
receivables)
7,877
(1,313)
6,564
Financial assets
344,020
(11,341)
332,679
147
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
Note
Internal credit risk
Gross
Impairment
Carrying
Expected
categorisation
carrying
loss
amount
31.12.2022
credit losses
amount
(allowance)
(IFRS 9)
BGN '000
BGN '000
BGN '000
Lifetime
Initially negotiated
Long-term loans to
21
(credit-
loans – Stage 1
related parties
impaired)
63,355
(157)
63,198
Lifetime
Short-term loans to
Initially negotiated
25
(credit-
related parties
loans – Stage 1
impaired)
4,144
-
4,144
Lifetime
Long-term loans to
Renegotiated Stage
22
(credit-
third parties
2
impaired)
9,852
(1,340)
8,512
Lifetime
Short-term loans to
Initially negotiated
26
(credit-
third parties
loans – Stage 1
impaired)
1,956
(459)
1,497
Lifetime
Short-term loans to
Renegotiated Stage
26
(credit-
third parties
2
impaired)
8,320
(3)
8,317
Trade and other
N/A
For a 12-
receivables from
21, 25
month period
related parties
4,648
(122)
4,526
Trade and other
N/A
For a 12-
receivables from third
22, 24, 26
month period
parties
223,954
(7,436)
216,518
(incl. court
26
receivables)
13,649
(1,002)
12,647
Financial assets
316,229
(9,517)
306,712
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 2023:
Category
Correlation to an external
Average
Gross
Impairment
credit rating
percentage
carrying
loss
of expected
amount
(allowance)
credit loss
BGN '000
BGN '000
Initially negotiated loans – Stage 1
B3
2.22%
47,701
(1,057)
Initially negotiated loans – Stage 1
Ba3
0.00%
12,119
-
Renegotiated Stage 2
Caa1
19.35%
11,129
(2,154)
Renegotiated Stage 2
B3
0.05%
8,281
(4)
Regular – Stage 1
Caa1
0.00%
3,884
-
Trade and other receivables including related
parties (Stage 1)
N/A
2.69%
253,029
(6,813)
Underperforming trade receivables (court and
awarded receivables)
N/A
16.67%
7,877
(1,313)
Total
344,020
(11,341)
148
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
The Group has concentration of receivables from related parties (trade receivables and loans), as
follows:
31.12.2023
31.12.2022
BGN'000
BGN'000
Client 1
59.92%
63.63%
Client 2
12.80%
12.49%
Client 3
11.80%
10.59%
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:
31.12.2023
% credit exposure
31.12.2022
% credit exposure
versus the total
versus the total
amount of trade
amount of trade
receivables
receivables
BGN'000
%
BGN'000
%
Client 1
15,980
7%
17,124
9%
Client 2
9,827
4%
7,704
4%
Client 3
4,688
2%
5,303
3%
Client 4
4,484
2%
4,499
2%
Client 5
4,096
2%
4,126
2%
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).
149
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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 forei gn
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:
in BGN
in EUR
in RSD
in USD
in UAH
in other
Total
31 December 2023
currency
BGN
BGN
BGN
BGN
BGN
BGN
BGN
'000
'000
'000
'000
'000
'000
'000
Equity investments
3,929
-
-
13
-
-
3,942
Financial assets at
amortised cost, including
230,784
130,199
75,604
9,099
9,160
6,708
461,554
Loans and receivables,
219,839
25,995
71,041
8,119
3,313
4,372
332,679
Cash and cash
equivalents
10,945
104,204
4,563
980
5,847
2,336
128,875
Total financial assets
234,713
130,199
75,604
9,112
9,160
6,708
465,496
in BGN
in EUR
in RSD
in USD
in UAH
in other
Total
31 December 2023
currency
BGN
BGN
BGN
BGN
BGN
BGN
BGN
'000
'000
'000
'000
'000
'000
'000
Short-term and long-term
bank loans
180,976
81,118
978
-
-
-
263,072
Other loans and liabilities
207,449
77,818
54,999
5,593
541
2,038
348,438
Lease liabilities
65,921
21,157
-
297
44
360
87,779
Total financial
liabilities
454,346
180,093
55,977
5,890
585
2,398
699,289
in BGN
in EUR
in RSD
in USD
in UAH
in other
Total
31 December 2022
currency
BGN
BGN
BGN
BGN
BGN
BGN
BGN
'000
'000
'000
'000
'000
'000
'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
150
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
in BGN
in EUR
in RSD
in USD
in UAH
in other
Total
currency
31 December 2022
BGN
BGN
BGN
BGN
BGN
BGN
BGN
'000
'000
'000
'000
'000
'000
'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
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 2023 of a 10% increase/decrease in the exchange rates of RSD, UAH, USD against
BGN on the Group’s profit (following taxation) is:
31.12.2023
31.12.2022
RSD
USD
UAH
RSD
USD
UAH
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
BGN '000
Financial result
(1,668)
(290)
(703)
(934)
(332)
(449)
Retained earnings (1,668)
(290)
(703)
(934)
(332)
(449)
Mainly included in other currency: BGN 3,727 thousand. in Polish zlotys and BGN 2,141 thousand
net financial assets in Kazakhstan tenge (as of 31.12.2022: BGN 3,284 thousand in Polish zlotys and BGN
1,845 thousand in Kazakhstan tenge net financial assets).
With a 10% increase/decrease, respectively, in the exchange rate of the Polish zloty and the Kazakh
tenge against the Bulgarian lev, the final effect on the Group's profit (after tax) is:
31.12.2023
31.12.2022
PLN
MDL
PLN
MDL
BGN '000
BGN '000
BGN '000
BGN '000
Financial result
302
171
266
184
Retained earnings
302
171
266
184
151
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
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.
152
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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
up to 1
1 to 3
3 to 6
6 to 12
1 to 2
2 to 5
over 5
month
months
months
months
years
years
years
31 December 2023
Total
BGN
BGN
BGN
BGN
BGN
BGN
BGN
BGN
'000
'000
'000
'000
'000
’000
’000
'000
Short-term and long-term bank
loans
5,902
18,939
131,673
58,197
50,304
5,433
1,607
272,055
Other loans and liabilities
256,267
78,562
6,038
2,068
1,067
3,352
1,170
348,524
Lease liabilities
1,445
3,064
4,464
8,850
16,331
35,702
23,968
93,824
Total liabilities
263,614
100,565
142,175
69,115
67,702
44,487
26,745
714,403
Maturity analysis as at
31 December 2022
up to 1
1 to 3
3 to 6
6 to 12
1 to 2
2 to 5
over 5
month
months
months
months
years
years
years
Total
BGN
BGN
BGN
BGN
BGN
BGN
BGN
BGN
'000
'000
'000
'000
'000
’000
’000
'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
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.
153
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
with floating
with fixed
Interest analysis
interest-free
interest %
interest %
Total
31 December 2023
BGN '000
BGN '000
BGN '000
BGN '000
Equity investments
3,942
-
-
3,942
Financial assets at amortised cost, including:
254,612
5,282
201,660
461,554
Receivables and loans
236,965
15
95,699
332,679
Cash and cash equivalents
17,647
5,267
105,961
128,875
Total financial assets
258,554
5,282
201,660
465,496
with floating
with fixed
Interest analysis
interest-free
interest %
interest %
Total
31 December 2023
BGN '000
BGN '000
BGN '000
BGN '000
Short-term and long-term bank loans
80
261,985
1,007
263,072
Other loans and liabilities
348,436
-
2
348,438
Lease liabilities
-
62
87,717
87,779
Total financial liabilities
348,516
262,047
88,726
699,289
with floating
with fixed
Interest analysis
interest-free
interest %
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
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
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.
154
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
Impact on post-tax financial result and
Increase / decrease in interest rate
equity profit/(loss)
31.12.2023
31.12.2022
BGN’000
BGN’000
Increase
(1,179)
(888)
Decrease
1,179
888
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.
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 23-
30% at a Group level.
The table below shows the gearing ratios based on capital structure:
31.12.2023
31.12.2022
BGN'000
BGN'000
Total borrowings, including: 350,851
283,295
Bank loans
263,072
195,872
Lease liabilities and factoring
87,779
87,423
Less: Cash and cash equivalents (128,875)
(19,851)
Net debt 221,976
263,444
Total equity of the Group 753,626
716,634
Total capital of the Group 975,602
980,078
Gearing ratio
0.23
0.27
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.
155
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
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.
46. ACQUISITIONS AND INCREASING INTERESTS IN SUBSIDIARIES
46.1 Acquisition of subsidiaries
In 2023, the Group did not acquire any new subsidiaries.
In 2023, the Group established the following companies:
date of
effective
amount of
incorporation
interest %
capital
contribution
BGN'000
Sopharma Rus OOO
13.10.2023
100.00%
In 2022, the Group did not acquire and establish new subsidiaries.
The subject of activity of the acquired subsidiaries is disclosed in Note No. 1.2.
In 2023 cash amounting to BGN 9,347 thousand was paid. BGN (31.12.2022: BGN 2,338
thousand) for subsidiaries acquired in 2020.
46.2 Increases in holdings (purchases of non-controlling interests)
The group has completed transactions for the purchase of additional shares of the non-controlling
interest.
In 2023, the Group acquired the following shares:
Increases in interests
transaction
% change
acquired net assets
date
in interest
(purchases of non-controlling interest)
BGN '000
Sopharma Trading AD
29.12.2023
0.43%
529
529
156
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
In 2022 the Group acquired the following shares:
Increases in interests
transaction
% change
acquired net assets
date
in
(purchases of non-controlling interest)
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
The acquisition price of the additional shares purchased in 2023, the effects and cash outflows are as
follows:
Increases in interests
Total
(purchases of non-controlling interests)
BGN'000
Direct acquisition
905
Total acquisition price
905
Fair value of the acquired net assets
(529)
Effects undertaken by the Group at the expense of the group reserve –
“accumulated profit”
376
Cash outflow on increase in interest (purchasing of non-controlling interest)
905
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
Indirect acquisition through a subsidiary
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
47. DISPOSAL OF SUBSIDIARIES
47.1 Total disposal of subsidiaries and joint ventures
In 2023, the Group has not disposed subsidiaries and joint ventures.
In 2022, the Group reported the release of its participation in the following subsidiary:
157
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
Effective
Date of
Company
interest %
disposal
disposed of
Rap Pharma International
OOD
11.11.2022
100.00%
The net assets of the exempted companies in 2022 are presented as follows:
Disposal with loss of control
11.11.2022
BGN'000
Property, plant and equipment (Note No. 16) 123
Intangible assets (Note No. 17) 170
Inventories 462
Trade receivables 80
Other current receivables and assets 173
Cash and cash equivalents 116
Deferred tax liabilities 41
Trade obligations (2,500)
Current lease obligations (48)
Other payables (67)
Net Assets/(Liabilities)
(1,450)
The financial result of the release 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
158
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
48. RELATED PARTY TRANSACTIONS
Related parties
Relation type
Relationship period
Shareholding company with significant
Donev Investments Holding AD
2023
2022
influence
Shareholding company with significant
2023 2022
Telecomplect Invest AD
influence
Momina Krepost AD
Joint venture
2023 2022
Sopharma Properties REIT
Associate
2023 2022
Doverie Ovedinen Holding AD
Associate
2023 2022
from
Sopharma buildings REIT
Associate
-
08.09.2023
from
Pharmanova D.O.O.
Associate
-
10.11.2023
DOH Group companies
Companies controlled by an associate
2023 2022
Sofprint Group AD
Company related through a main shareholder
2023 2022
Company related through key management
2023 2022
Sofconsult Group AD
personnel
Company related through key management
2023 2022
VES Eectroinvest Systems EOOD
personnel
Company related through key management
2023 2022
Eco Solar Invest OOD
personnel
Company related through key management
2023 2022
Alpha In EOOD
personnel
Company related through key management
2023 2022
Consumpharm OOD
personnel
Civil societies for the implementation of joint
2023
DZZD "Veterinar na Diagnostica"
activity (direct participation)
Supplies from related parties:
2023 2022
BGN ‘000
BGN ‘000
Supply of inventories from:
Companies related through key management personnel
10,332 10,577
Associates
637 128
Joint ventures
322
298
Companies controlled by an associate
64
43
11,355
11,046
Supply of services from:
Companies controlled by an associate
1,177
1,106
Shareholding companies with significant influence
581
425
Associates
472 514
Companies under a common indirect control through key management
personnel
213 266
Joint ventures
5
3
2,448 2,314
Supply of property, plant and equipment from:
Companies controlled by an associate
3,369
1,558
3,369 1,558
Other supplies from:
Companies controlled by an associate
281
261
281
261
159
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
2023
2022
BGN ‘000
BGN ‘000
Interest expenses:
Shareholding companies with significant influence
467
9
Associates
-
33
467
42
Accrued dividends on:
Companies shareholders with significant influence
130,136
-
Key management personnel
17,971
-
148,107
-
Total supplies
166,027
15,221
Sales to related parties
Sales of inventories to:
Companies related through key management personnel
1,219
1,109
Companies controlled by an associate
952
1,389
2,171
2,498
Sales of services to:
Companies related through key management personnel
226
219
Companies controlled by an associate
125
281
Associates
11
7
362
507
Fees on guarantorships and warranties to:
Joint ventures
-
7
-
7
Interest on loans granted:
Companies controlled by associates
2,170
1,934
Joint ventures
62
46
Associates
31
11
2,263
1,991
Cessions
Joint ventures
127
71
127
71
4,923
5,074
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:
31.12.2023
31.12.2022
BGN ‘000
BGN ‘000
Recognised lease liabilities at 1 January
20,616
4,314
Increases
1,851
19,305
Lease payments in the period
(2,841)
(2,462)
Lease payments written-off
-
(541)
Lease liabilities at 31 December
19,626
20,616
160
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
Right-of-use assets as at 31 December in relation to leases with related parties are as follows:
31.12.2023
31.12.2022
BGN ‘000
BGN ‘000
Right-of-use assets at 1 January
20,524
4,315
Increases 1,877
19,263
Depreciation accrued (2,996)
(2,482)
Derecognised carrying amount of right-of-use assets (82)
(572)
Right-of-use assets at 31 December 19,323
20,524
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.
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 3,448
thousand (2022: BGN 3,325 thousand) and include:
• current wages and salaries – BGN 2,963 thousand (2022: BGN 3,001 thousand);
• tantieme – BGN 485 thousand (2022: BGN 324 thousand);
Salaries and other short-term benefits of key management personnel of the parent company amount
to BGN 1,857 thousand (2022: BGN 1,927 thousand) and include:
• current wages and salaries – BGN 1,463 thousand (2022: BGN 1,684 thousand);
• tantieme – BGN 394 thousand (2022: BGN 243 thousand).
49. EVENTS AFTER END OF THE REPORTING PERIOD
On 10 January 2024, the liquidation procedure of the subsidiary Fito Palauzovo AD was entered in
the Commercial Register, and the invitation to creditors was entered on 16.01.2024.
From 22 January 2024, the payment of the accrued advance dividend from the parent company's
profit for 2023, which is BGN 141,896 thousand, began.
On 23 January 2024, the parent company submitted documents for consideration to the Financial
Supervision Commission in connection with the merger of the subsidiary Veta Pharma AD.
On 20 February 2024, the Financial Supervision Commission notified the company by letter No. RG
– 05 – 684 – 2 on the basis of Art. 125 in connection with Art. 89 r, para. 2 of the Civil Procedure Code, that
it should submit additional information within one month , data and documents regarding the requested
merger.
161
SOPHARMA GROUP
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR YEAR 2023
On 20 February 2024, the Financial Supervision Commission by letter No. RG – 05 – 684 – 2 on the
basis of Art. 125 in connection with Art. 89 r, para. 2 of the Civil Procedure Code notified the parent company
that within one month it should submit additional information, data and documents regarding the requested
infusion.
On 26 January 2024, a General Meeting of the holders of warrants from the issue with ISIN
BG9200001212 of the parent company was held, at which a decision was made to exercise the rights under
them, by subscribing shares from a future increase in the capital of the parent company, by issuing of up to
7,133,264 number of ordinary, registered, dematerialized shares, with voting rights, with a nominal value of
BGN 1 each and an issue value of BGN 4.13 per share, provided that the shares from the increase are
subscribed by the warrant holders. The warrant holders made a request to the Board of Directors to make a
decision on a capital increase under the condition that it be carried out on the basis of the Articles of
Association of Sopharma AD, art. 195 of the Criminal Code and, accordingly, Art. 113, para. 2, item 2 of the
Civil Code, in which warrant holders can exercise their rights under item 2 of the agenda, and under the terms
and conditions according to the Prospectus for public offering of warrants, confirmed by the Decision of the
Financial Supervision Commission No. 804 – E/04.11.2021. The capital increase was launched with the
publication of an announcement under Art. 89t of the Civil Procedure Code on January 26, 2024.
After the end of the period for exercising the warrants, 6,509,485 shares of the capital of the parent
company were subscribed. Their issue value is BGN 26,884,173.05. The entry of the capital increase of the
parent company in the Commercial Register takes place on 05 March 2024.
On 7 March 2024, the parent company acquired 1,090,512 shares of the capital of Achieve Life
Sciences, Inc., USA (3.18%) worth 4,864 thousand USD and 1,090,512 warrants worth 136 thousand. US
dollars.
On 20 March 2024, the parent company paid 84,132 bonds issued by Doverie United Holding AD
with a total issue value of BGN 9,413,200. The bonds were issued pursuant to a decision of the Board of
Directors of Doverie Obedinen Holding AD in accordance with the terms and conditions described in the
Prospectus for the public offering of 200,000 registered, bearer, interest-bearing, unsecured, freely
transferable, convertible bonds, with a nominal and issue value of one bond BGN 100, with a floating interest
rate equal to the sum of 6-month EURIBOR, increased by a premium to 2.00% per annum and no more than
6.00% per annum, payable in a six-month period, with a maturity of five years, starting from the date of issue
the issue.
With decision No. 1253/30 November 2023, the Commission for the Protection of Competition of
the Republic of Bulgaria authorized the acquisition of nine sites from the Royal Pharmacies chain in Sofia,
Pernik, Dupnitsa and Radomir, with the intention of joining them to the Sopharmacy pharmacy chain, in
Sopharma Trading AD. The acquisition deal was completed in February 2024. The owner of the new
pharmacies, positioned in three new companies (Sopharmasi 66 EOOD, Sopharmasi 67 EOOD and
Sopharmasi 68 EOOD) is the subsidiary Sopharmasi EOOD. Additionally, on 13 March 2024, the subsidiary
company Sopharmasi EOOD acquired the company Sopharmasi 65 EOOD with two pharmacies in the city
of Sofia.
No other significant events occurred after 31 December 2023 that require additional adjustments
and/or disclosures in the consolidated financial statements as at 31 December 2023.
162
CONSOLIDATED MANAGEMENT REPORT
2023
SOPHARMA GROUP
24 April 2024
This document is a translation form Bulgarian. In case of divergence, the Bulgarian text is prevailing.
CONTENT
I. General information about Sopharma Group ................................................................................... 5
1. Main activities ................................................................................................................................... 5
2. Registration and activity of the Company ......................................................................................... 5
3. Controlled companies ....................................................................................................................... 5
4. Board of directors ............................................................................................................................. 7
5. Shareholder structure as at 31 December 2023 ............................................................................... 7
II. Recent developments ................................................................................................................. 8
1. Production activity ............................................................................................................................ 8
2. Products ............................................................................................................................................ 8
3. Distribution ....................................................................................................................................... 8
III. Information under Article 39 of the Accountancy Act ................................................................. 9
IV. An overview of the company's performance and the main risks it faces (art. 39, para 1 of the
Accountancy Act) ................................................................................................................................. 9
1. Analysis of financial and non-financial key performance indicators of the Group /Article 39, item 2
of the Accountancy Act/ ..................................................................................................................... 11
2. Significant events occurring after the date of preparation of the annual financial statements
/Article 39, paragraph 3 of the Accountancy Act/ .............................................................................. 14
3. 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
4. Research and development (article 39, item 5 of the Accountancy Act) .................................. 15
5. Information on the acquisition of own shares required by Article 187d of the Commerce Act/ Article
39, Item 6 of the Accountancy Act/ .................................................................................................... 19
6. Existence of branches of the Company /Article 39, item 7 of the Accountancy Act/ ............... 20
7. Use of financial instruments /Article 39, item 8 of the Accountancy Act/ ............................... 20
V. 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 parties
conclude contracts with the company outside its usual activity or su bstantially deviate from market
conditions ............................................................................................................................................ 24
VI. Information on Annex 2 to art. 10, item 1 of Regulation 2 of LPOS ............................................ 24
1
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, pro vide information for each
person for his share in sales or purchases and links with the issuer .................................................. 24
3. Information on significant 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 .................................................................... 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 25
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 . 25
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 commitmets ............................................. 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 fr payment and the purpose for which they
were granted ....................................................................................................................................... 26
10. Information on the use of funds from the issuance of new issue of securities during the
reporting period .................................................................................................................................. 27
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 ............................................. 27
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 ....................................................................................................................................... 27
2
13. Assessment of the feasibility of investment intentions, indicating the amount of available
funds and possible changes in the financing structure of this activity ............................................... 27
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 ..................................................... 27
15. Information about the main characteristics applied by the issuer in the process of preparing
the financial statements, internal control system and risk management .......................................... 28
16. Information about changes in management and supervisory boards during the accounting
year 28
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 expnses of the issuer, or arising
from profit distribution, including: ..................................................................................................... 28
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 isuer 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. ............................................................. 28
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 ....... 29
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 centof its equity, provide information about each case
separately ............................................................................................................................................ 29
21. Information about the Investor Relations Director, including telephone number and
correspondence address: .................................................................................................................... 29
VII. Information Annex 3 to Article 10, paragraph 2, item 4 of Ordinance 2 of LPOS ........................ 29
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
29
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 ........................................................................................ 30
3. Information about shareholders with special control rights .................................................... 30
The Articles of Association of “Sopharma” AD do not provide special control rights. ........................ 30
4. Agreements between Shareholders which are known to the Company and which may lead to
restrictions on the transfer of shares or voting right .......................................................................... 30
3
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 ..................................................................................................................................... 30
4
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 November
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.
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 four associated companies
(“Doverie - obedinen holding” AD - 23.46% stake, “Sopharma Imoti” REIT - 45.65% % stake, “Sopharma
buildings” REIT - 31.47% stake and in “Pharmanova” D.O.O. - 25% stake) and in one joint venture (“Momina
krepost” AD - 37.46% stake).
Company
Interest as of
31.12.2023 %
“Sopharma Trading” AD
87.68
“Pharmalogistica” AD
89.39
“Elektroncommerce” EOOD
100.00
“Phyto Palauzovo” AD
95.00
“Veta Pharma” AD
99.98
“Sopharmacy” EOOD **
87.68
“Sopharmacy 2” EOOD **
87.68
“Sopharmacy 3” EOOD **
87.68
“Sopharmacy 4” EOOD **
87.68
“Sopharmacy 5” EOOD **
87.68
“Sopharmacy 6” EOOD **
87.68
“Sopharmacy 7” EOOD **
87.68
5
“Sopharmacy 8” EOOD **
87.68
“Sopharmacy 9” EOOD **
87.68
“Sopharmacy 10” EOOD **
87.68
“Sopharmacy 11” EOOD **
87.68
“Sopharmacy 12” EOOD **
87.68
“Sopharmacy 13” EOOD **
87.68
“Sopharmacy 14” EOOD**
87.68
“Sopharmacy 15” EOOD**
87.68
“Sopharmacy 16” EOOD**
87.68
“Sopharmacy 17” EOOD**
87.68
“Sopharmacy 18” EOOD**
87.68
“Sopharmacy 19” EOOD **
87.68
“Sopharmacy 20” EOOD **
87.68
“Sopharmacy 21” EOOD **
87.68
“Sopharmacy 22” EOOD **
87.68
“Sopharmacy 23” EOOD **
87.68
“Sopharmacy 24” EOOD **
87.68
“Sopharmacy 25” EOOD **
87.68
“Sopharmacy 26” EOOD **
87.68
“Sopharmacy 27” EOOD **
87.68
“Sopharmacy 28” EOOD **
87.68
“Sopharmacy 29” EOOD **
87.68
“Sopharmacy 30” EOOD **
87.68
“Sopharmacy 31” EOOD **
87.68
“Sopharmacy 32” EOOD **
87.68
“Sopharmacy 33” EOOD **
87.68
“Sopharmacy 34” EOOD **
87.68
“Sopharmacy 35” EOOD **
87.68
“Sopharmacy 36” EOOD **
87.68
“Sopharmacy 37” EOOD **
87.68
“Sopharmacy 38” EOOD **
87.68
“Sopharmacy 39” EOOD **
87.68
“Sopharmacy 40” EOOD **
87.68
“Sopharmacy 41” EOOD **
87.68
“Sopharmacy 42” EOOD **
87.68
“Sopharmacy 43” EOOD **
87.68
“Sopharmacy 44” EOOD **
87.68
“Sopharmacy 45” EOOD **
87.68
“Sopharmacy 46” EOOD **
87.68
“Sopharmacy 47” EOOD **
87.68
“Sopharmacy 48” EOOD **
87.68
“Sopharmacy 49” EOOD **
87.68
“Sopharmacy 50” EOOD **
87.68
“Sopharmacy 51” EOOD **
87.68
“Sopharmacy 52” EOOD **
87.68
“Sopharmacy 53” EOOD **
87.68
“Sopharmacy 54” EOOD **
87.68
6
“Sopharmacy 55” EOOD **
87.68
“Sopharmacy 56” EOOD **
87.68
“Sopharmacy 57” EOOD **
87.68
“Sopharmacy 58” EOOD **
87.68
“Sopharmacy 59” EOOD **
87.68
“Sopharmacy 60” EOOD **
87.68
“Sopharmacy 61” EOOD **
87.68
“Sopharmacy 62” EOOD **
87.68
“Sopharmacy 63” EOOD **
87.68
“Sopharmacy 64” EOOD **
87.68
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.**
87.68
“Pharmachim” EOOD
100.00
“Sopharma Rus” OOD
100.00
*effective interest in percent
**indirect interest
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 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 2023
"Donev Investments Holding"
AD
5.80%
"Telecomplect" AD
22.81%
38.57%
Ognian Donev
"Sopharma" AD (treasury
8.30%
shares)
Other legal persons
8.37%
16.15%
Other physical persons
7
II. Recent developments
1. Production 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.:
o Hard tablets, coated tablets, film-coated tablets, capsules;
o Galenic - suppositories, drops, syrups, ointments;
o Parenteral - injection solutions, lyophilic powder for injections.
• Medical and cosmetic products, incl.:
o Plasters;
o Bandages;
o Sanitary-hygiene products;
o Herbal cosmetics;
o Concentrates for hemodialysis;
o Infusion solutions.
2. Products
“Sopharma” AD
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 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, orthopedics and
traumatology.
The most significant pharmaceutical products in terms of their contribution to the amount of
revenues are:
• Carsil – traditional plant-based product used to treat gastro-enterology diseases (liver diseases);
• Tempalgin – traditional analgesic (painkiller);
• Tabex – traditional plant-based smoking cessation drug;
• Tribestan – traditional plant-based product that stimulates the functions of the sexual system;
• Broncholitin – traditional plant-based product used to suppress cough;
• Analgin – generic analgesic (pain reliever);
• Nivalin – traditional plant-based product used for diseases of the peripheral nervous system;
• Methylprednisolon – generic medicine for cases of severe allergies and certain life-threatening
conditions;
• Vitamin C – widely used nutritional supplement;
• Valeriana – generic non-prescription herbal medicine used to reduce stress;
• 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 21.42% (according to IQVIA). “Sopharma
Trading” AD is the exclusive distributor on the Bulgarian market of particular pharmaceutical products of
8
several leading international pharmaceutical and other companies in the field of healthcare.
In accordance with its market positioning, the company offers its customers:
• A variety of over 15,000 pharmaceutical items, including medicinal products, medical
consumables, sanitary and hygiene materials, vitamins, nutritional supplements, cosmetics, medical
equipment and equipment, a portfolio of internationally established exclusive brands.
• Complete solutions for the hospital market - in addition to a distribution service for the delivery
of all products, part of the company's portfolio also includes turnkey solutions for the construction of
medical and hospital facilities.
• 100% national coverage of the territory of Bulgaria and access to any point of the country within
4 hours, thanks to its modern warehouse bases in 2 key cities - Sofia and Varna.
• Quality distribution service through our own fleet of over 100 vehicles and the ability for products
to reach over 3,500 customers quickly and easily.
• Comprehensive logistics solutions for import, storage and distribution of goods to end customers.
• Marketing and advertising services for the imposition of products on the Bulgarian market,
production of local and international companies.
• “Sopharma Trading” imposes and markets its portfolio of exclusive brands on the Bulgarian
market.
III. Information under Article 39 of the Accountancy Act
IV. An overview of the company's performance and the main risks it faces (art. 39, para 1 of the
Accountancy Act)
Key financial indicators
1-12/2023
1-12/2022
Change
Indicators
BGN '000
BGN '000
%
1 875 304
1 663 016
12.8%
Revenues
EBITDA
153 982
139 980
10.0%
Operating profit
98 110
87 881
11.6%
Net profit
99 874
76 333
30.8%
CAPEX*
65 802
85 154
-22.7%
Non-current assets
727 099
681 487
6.7%
Current assets
787 063
572 491
37.5%
Owners’ equity
753 626
716 634
5.2%
Non-current liabilities
151 346
129 998
16.4%
Current liabilities 609 190
407 346
49.6%
* acquired tangible and intangible long-term assets
9
1-12/2023
1-12/2022
Indicators
EBITDA/ Revenues
8.2%
8.4%
Operating profit/Sales Revenue
5.2%
5.3%
Net profit/ Sales Revenue
5.3%
4.6%
31.12.2023
31.12.2022
Debt/ Equity
1,01
0,75
Net debt*/ EBITDA on annual basis
1,4x
1,9x
* 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;
• 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.
10
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.
1. 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 212,3 million or 12.8%, reaching BGN 1 875,3
million in 2023 compared to BGN 1 663 million in 2022. Sales of goods increased by BGN 176,6 million or
12.8%, reaching BGN 1 555,8 million in 2023 compared to BGN 1 379,1 million in 2022. Sales of finished
products increased by BGN 35,7 million or 12.6%, reaching BGN 319,6 million in 2023 compared to BGN
283,9 million in 2022.
On a consolidated basis, the growth in sales of finished products in Bulgaria for 2023 was 11.3%
compared to the previous period. According to IQVIA data "Sopharma" AD by the end of 2023 occupies
2.06% (seventeenth position) of the total volume of the Bulgarian pharmaceutical market in terms of value
and 7.22% (second position) of sales in volume. The positions of the main competitors of the Company in
the country are as follows: Roche - 5,29% (0,19% in units), Merck Sharp & Dohme – 4.69% (0.14% in units),
Nоvartis – 4.27% (1.20% in units), AstraZeneca – 4.03% (0.46% in units), Pfizer – 3.85% (0.68% in units),
Abbvie – 3.56% (0.07% in units), Swixx Biopharma – 3.40% (1.12% in units), Teva – 3.33% (8.90% in units),
Phoenix – 2.80% (4.03% in units). The products with the largest share of sales in the country are Analgin,
Vicetin, Famotidine, Vitamin C, Paracetamol, Methylprednisolone.
On a consolidated basis for 2023, sales revenue in Russia increases by 17.4%. Growth was also
registered in other traditional markets, with sales revenue increasing in Georgia by 24%, in Azerbaijan by
69.7%, in Uzbekistan by 6.1%, in Vietnam by 111.9%, in Moldova by 72.8% and in Poland by 22.1%.
A decrease in sales revenue was registered in Ukraine by 4.1%, in Belarus by 19% and in
Kazakhstan by 8.4%.
Other operating revenues increased by BGN 7,8 million to BGN 20,8 million in 2023 compared to
BGN 13 million in 2022 as a result of sales of fixed assets and an increase in income from services provided.
Operating expenses
For the current period the expenses of materials increased by BGN 4,8 million to BGN 103,9 million,
as the most significant change was registered in the expenses of substances, which increased by BGN 7
million, as well as in the expenses for electricity and heat, decreasing by BGN 2 million and BGN 2,4 million,
11
respectively. The external service expenses increased by BGN 18,5 million to BGN 88,5 million, with the
most significant change in advertising costs, which increased by BGN 11,7 million, and in production costs
which increase by BGN 1,9 million. Personnel expenses increased by BGN 22,9 million to BGN 170,7 million
as a result of updating the current remuneration of the average list staff in the Group.
Financial income and expenses
Financial income and expenses in 2023 net registered a loss of BGN 9,5 million, which is an increase
with BGN 3,4 million compared to the same period of the last year. Financial income increased by BGN 1,1
million. Financial expenses increased with BGN 4,5 million while interest expenses on loans received for
the current period increased by BGN 4,7 million.
Financial result from the activity
200,000
153,982
139,980
150,000
98,110 99,874
100,000
1-12/2022
87 881
76 333
1-12/2023
50,000
0
EBITDA Operating profit Net profit
Earnings before interest, taxes and depreciation (EBITDA) increased by BGN 14 million or by 10%,
while in 2023 it amounted to BGN 154 million compared to BGN 140 million in 2022. The main factors for
this adjusted growth are the increase in sales in both main business segments.
Profit from operating activities increased by BGN 10,2 million or by 11.6%, to BGN 98,1 million in
2023 compared to BGN 87,9 million in 2022.
Net profit increased by BGN 23,6 million or 30.8% to BGN 99,9 million in 2023 compared to BGN
76,3 million in 2022. In addition to the effect of the operational activity, the positive impact has an increase
in the current period of profits from associated companies by BGN 1,8 million.
Assets
Non-current assets at the end of 2023 increased by BGN 45,6 million compared to the end of last
year. Investments in associated and joint companies increased by BGN 68,5 million as a result of the
reported share in the current profit in the associated company “Doverie Obedinen Holding” AD, as well as
from the increased participation in “Sopharma Imoti” REIT and in “Sopharma buildings” REIT. Long-term
receivables from related enterprises decrease by BGN 14,1 million as a result of loans granted by “Doverie
Invest” EAD and “Industrial Holding Doverie” AD.
Current assets at the end of 2023 increased by BGN 214,6 million compared to the end of previous
year, while the most significant being the impact of the increase in cash and cash equivalents by BGN 109
million as a result of an increase in the Company’s capital. An increase was recorded in inventories by BGN
60,7 million and in trade receivables by BGN 40,6 million.
12
Owners’ equity and liabilities
The equity of Sopharma Group increased by BGN 37 million compared to 31 December 2022 as a
result of an increase in equity and reserves.
The liabilities at the end of 2023 increased by BGN 223,2 million compared to 2022 as a result of the
increase in liabilities under bank loans by BGN 67,2 million, as well as a result of accrued liabilities to
related and third parties to receive dividends in the amount of BGN 142,6 million. Trade payables
increased by BGN 18,3 million compared to the end of last year.
Cash flows
31.12.2023
31.12.2022
BGN '000
BGN '000
Net cash flows from operating activities
45 031
110 082
Proceeds of amounts by factoring after interest and fees
621
30 836
Purchases of property, plant and equipment, intangible assets, net
(28 257)
(21 733)
Payments under lease agreements
(18 795)
(16 081)
Free cash flow (normalized)
(1 400) 103 218
The free cash flow (normalized with the revenues from factoring and payments under leasing
contracts), generated for 2023, amounts to BGN 1,4 million outflow compared to BGN 103,2 million
outflow in 2022. The recorded outflow from operating activities during the current period is affected by
advance payments received from costumers in 2022, related to the realized sales of production in 2023.
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;
• 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”.
• “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 2023 is 337,255 tons. In 2023 the separately collected waste
increased with 7.14% compared to the previous year while recyclables increased by 10.7% and non-
recyclables decreased by 4.37%. 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.
13
Personnel
As at 31 December 2023, the average number of employees of Sopharma Group is 4 721 (compared
to 4 764 in 2021). The average number of employees of “Sopharma” AD as at 31 December 2023 is 1 720
(at 1 760 in 2022) and of “Sopharma Trading” AD is 760 (compared to 776 in 2022).
2. Significant events occurring after the date of preparation of the annual financial statements
/Article 39, paragraph 3 of the Accountancy Act/
• On 10 January 2024, a liquidation procedure of "Fito Palauzovo" AD was entered in the
Commercial Register.
• From 22 January 2024, the payment of the accrued advance dividend from the profit for 2023,
which is in the amount of BGN 141,9 million, began.
• On 23 January 2024, the Company submitted documents for consideration to the Financial
Supervision Commission in connection with the merger of "Veta Pharma" AD, which is a subsidiary of
"Sopharma" AD.
• On 26 January 2024, a General Meeting of the holders of warrants from the issue with ISIN
BG9200001212 was held, at which a decision was made to exercise the rights under them by subscribing
shares from a future increase in the capital of "Sopharma" AD, by issuing up to 7,133,264 number of
ordinary, registered, dematerialized shares, with voting rights, with a nominal value of BGN 1 each and an
issue value of BGN 4,13 per share, provided that the shares from the increase are subscribed by the
warrant holder s. The holders of warrants made a request to the Board of Directors to decide on a capital
increase under condition that it will be carried out on the basis of the Company's Articles of Association,
Art. 195 of the Commercial Act and, accordingly, Art. 113, para. 2, item 2 of LPOS, in which the warrant
holders can exercise their rights under item 2 of the agenda, and under the terms and conditions according
to the Prospectus for the public offering of warrants, confirmed by the Decision of the Financial
Supervisory Commission No. 804 – E/04 November 2021. The capital increase was launched with the
publication of an announcement under Art. 89t of LPOS on 26 January 2024.
• On 5 March 2024, as a result of the capital increase under the condition through the exercise of
warrants, an increase in the capital of "Sopharma" AD was entered in the Commercial Register with
number 20240305153305. The new capital of the company amounts to BGN 179,100,063 distributed in
179,100,063 shares.
• On 3 July 2024, the company acquired 1,090,512 shares of the capital of Achieve Life Sciences,
Inc., USA (3.18%) worth USD 4,864 thousand and 1,090,512 warrants worth USD 136 thousand.
• On 20 March 2024, “Sopharma” AD paid 84,132 bonds issued by “Doverie Obedinen Holding” AD
with a total issue value of BGN 9,413,200. The bonds were issued pursuant to a decision of the Board of
Directors of "Doverie Obedinen Holding" AD in accordance with the terms and conditions described in the
Prospectus for the public offering of 200,000 registered, bearer, interest-bearing, unsecured, freely
transferable, convertible bonds, with nominal and issue value on one bond BGN 100, with a floating
interest rate equal to the sum of 6-month EURIBOR, increased by a premium to 2.00% per annum and no
more than 6.00% per annum, payable in a six-month period, with a maturity of five years, starting from
the date of issuance of the issue.
• With decision No. 1253/30 November 2023, the Commission for the Protection of Competition of
the Republic of Bulgaria authorized the acquisition of nine sites from the Royal Pharmacies chain in Sofia,
Pernik, Dupnitsa and Radomir, with the intention of joining them to the Sopharmacy pharmacy chain, in
“Sopharma Trading” AD. The acquisition deal was completed in February 2024. The owner of the new
pharmacies, positioned in three new companies ("Sopharmacy 66" EOOD, "Sopharmacy 67" EOOD and
"Sopharmacy 68" EOOD) is the subsidiary company "Sopharmacy" EOOD. Additionally, on 13 March 2024,
14
the subsidiary company "Sopharmasi" EOOD acquired the company "Sopharmasi 65" EOOD with two
pharmacies in the city of Sofia.
3. 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)
Key moments of the strategy that the Group foresees:
• 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 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.
4. 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.
15
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.
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 2023 in the Division "Development and Regulatory
Compliance" the following activities were performed:
• New medicines
During the reporting period, a marketing authorization was obtained for 3 new medicinal products:
o Glycerax Pico oral drops solution (Bulgaria);
o Suxamethonium Sopharma 10 mg/mL solution for injection (Bulgaria);
o Suxamethonium Sopharma 20 mg/mL solution for injection (Bulgaria).
• New registrations and re-registrations / changes
New registrations of medicinal products
Documentation for registration of 27 medicinal products has been submitted:
o Paracetamol 500 mg tb. (Belarus);
o Paracetamol Sopharma 500 mg tb. (Moldova)
o Tempalgin (paracetamol) 500 mg tb.;
o Carsil 90 mg caps. – (Belarus);
o Molsidomin 8 mg SR tb. (Russia);
o Aminophylline sfi (Lithuania);
o Digoxin Sveikuva sfi (Lithuania);
o Felogel 2.32% gel (Lithuania);
o Carsil 22.5 mg film-coated tb. (Azerbaijan);
o Carsil 22.5 mg film-coated tb. (Tadzhikistan);
o Carsil 22.5 mg film-coated tb. (Georgia) MRP;
o Carsil 22.5 mg film-coated tb. – (Moldova);
o Tribestan 250 mg film-coated tb.;
o Digoxin Sveikuva 0.25 mg/ml sfi (Lithuania);
o Pethidine hydrochloride Sveikuva 50 mg/ml sfi (Lithuania);
o Amrex 30 mg/5 ml syrup (Lithuania) MRP
o Ambrolytin 30 mg tb. (Lithuania) MRP
o Ambrolytin 30 mg tb. (Kirgizstan);
16
o Sodium picosulfate oral drops solution (Ukraine);
o Carsil 22,5 mg film-coated tb. (Turkmenistan);
o Videral 0,5 mg/ml oral drops, solution (Czech Republic);
o Deavit Neo 0.5 mg/ml oral drop, solution (Kirgizstan);
o Felogel 5 % gel (Kirgizstan);
o Felogel 2.32 % gel (Kirgizstan);
o Tempalgin 500 mg/20 mg film-coated tb. (Armenia) New manufacturing site;
• Licensing
o Sophamet XR 500 mg; 750 mg; 1000 mg SR tb. (Bulgaria);
o Trachihelp 5 mg/1,5 mg lozenges (Ukraine);
• New medical products have been registered for 43 new directions
o Verapamil sfi (DCP – Denmark; Sweden; Norway; Finland)
o Carsil 110 mg caps. (Georgia);
o Isocor 2,5 mg/ml sfi (Malaysia);
o Cinnarizine 25 mg tb. (Vietnam);
o Carsil 22.5 mg film-coated tb. (Ukraine)
o Carsil Forte 90 mg caps. (Kirgizstan);
o Pethidine Macure sfi (DCP – Finland; Norway; Sweden; Denmark);
o Carsil Max 110 mg caps. (Peru);
o Syafen 100 mg/5 mL oral susp. (Georgia) MRP;
o Furosemide Sopharma 40 mg tb. (Georgia) MRP;
o Zondaron 2 mg/mL sfi (Georgia) MRP;
o Digoxin Sopharma 0.25 mg/mL sfi (Georgia) MRP;
o Valeriana 30 mg tb. (Georgia) MRP;
o Ambrolytin 30 mg tb., (Georgia);
o Valeriana Max 200 mg fct, (Georgia);
o Valeriana 30 mg film-coated tb. (Georgia);
o Feloran Forte 5 % gel (Georgia);
o Alergosan (Desloratadin) oral solution (Peru);
o Carsil 22.5 mg film-coated tb. (Ukraine);
o Tempofen DUO film-coated tb. (Ukraine);
o Tempaforte 500 mg effervescent powder;
o Tempaforte 1000 mg effervescent powder (Azerbaijan);
o Тamoxifen Sopharma 10 mg tb. (Georgia) MRP;
o Carsil 35 mg coated tablets (Russia) EAEU;
o Carsil Max 110 mg caps. (Russia) EAEU;
o Dexketoprofen Sopharma 50 mg/ 2 ml solution for inj/inf (Ukraine);
o Carsil 22.5 mg film-coated tb. (Tajikistan);
o Persen tb. (Georgia);
o Persen tb. (Belarus);
o Troxerutin 300 mg caps. (Vietnam);
o Talert 1mg/ml syrup (Vietnam);
o Diclofenac diethylamine Sopharma 23,2 mg/g gel (Lithuania);
o Carsil 22,5 mg film-coated tb. (Moldova);
17
• Licensing
o Analgin Max 1000 mg effervescent powder (Georgia);
o Sitagliptin/Metformin APC 50 mg/500 mg modified release tablets (Bulgaria);
o Sitagliptin/Metformin APC 50 mg/1000 mg modified release tablets (Bulgaria);
o Sitagliptin/Metformin APC 100 mg/1000 mg modified release tablets (Bulgaria);
• Re-registrations / changes
o Renewed Marketing Authorizations for 50 medicinal products.
o Submission of documentation for the renewal of the Marketing Authorizations for 71
medicinal products.
o 329 changes for medicinal products approved by agencies.
o 279 changes for medicinal products submitted to agencies.
• Food additives
o 14 food supplements have been notified - 1 for Belarus; 3 for Poland; 5 for Bulgaria; 1 for
Ukraine; 2 for Georgia; 1 for Azerbaijan and 1 for Kazakhstan;
o 22 food additives have been submitted for notification - 3 for Belarus; 2 for Ukraine; 3 for
Poland; 4 for Azerbaijan; 3 for Kazakhstan; 7 for Bulgaria;
• Medical supplies
o 7 Medical devices for uploaded into the BDA system;
• Developments
Pharmaceutical development of 12 new medicinal products / projects:
o Cytisine 3.0 mg tablets – Project with company Achieve;
o Dexketoprofen 25 mg tb.;
o Xylmetazoline/Dexpanthenol nasal spray;
o Paracetamol 500 mg tab.;
o Molsidomin 4 mg tab.;
o Ketorolac 10 mg tab.;
o Glauvent 40 mg film-coated tablet;
o Vitamin C 200 mg/mL solution for injection;
o Butamirate Citrate oral drops;
o Simethicone oral drops;
o Ibuprofen 200; 400 and 600 mg tb.;
o Ibuprofen 100 and 200 mg/5 ml oral suspension;
• API – 4
o Valeriana extract/ Maltodextrin;
o Glaucine hydrobromide;
o Dry extract of milk thistle fruits;
o Dry extract of Granny's teeth;
• Development of 11 nutritional supplements is underway:
o Valeriana/Melatonin oral spray;
o Melatonin oral spray;
o Propolis nasal spray for children;
18
o Propolis nasal spray for adults;
o Propolis throat spray for children;
o Propolis throat spray for adults;
o Syrup (with bee products and extracts) for children;
o Syrup (with bee products and extracts) for adults;
o Valeriana Son 50/1 mg tb.;
o Valeriana Son 150/3 mg tb.;
o Vitamin C 100 mg tab.;
• Transfer and validation of technological processes
o 4 new medicinal products were transferred - Glycerax Pico oral drops; Felloran 2.32% gel;
Duzofarm 200 mg tab.; Dexketoprofen 25 mg tab.;
o 42 production processes/technologies have been validated/optimized.
• Prepared documentation for qualification / production
o Documentation for qualification of raw materials for production - 145;
o Production regulations - 163;
o Documentation for qualification of finished forms - 267.
5. 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 850 000 treasury shares were purchased and no shares sold. The treasury shares
purchased during the year amount to
0,49% of the Company's share capital and the average acquisition
price is BGN 6,15 per share.
Equity, net of
Shares
treasury shares
Number
BGN '000
Balance at 1 January 2022
121 742 899
84 514
Treasury shares
(424 188)
(1 909)
Expense on treasury shares
-
(10)
Balance at 31 December 2022
121 318 711
82 595
Issue of capital
37 792 679
37 793
Effects of Subsidiary Merger
852
3
Treasury shares
(850 000)
(5 252)
Balance at 31 December 2023
158 262 242
115 139
The Board of Directors is authorized to buy treasury shares under certain conditions, according to
the decisions of the General Meeting of Shareholders held on 23 June 2010, the General Meeting of
Shareholders of 30 November 2011, the General Meeting of Shareholders of 1 November 2012, the
General Meeting of Shareholders of 28 February 2013, the IOSA from 23 February 2018 and the IOSA from
4 August 2023.
Number and nominal value of the own shares held and the proportion of the capital they represent
“Sopharma” AD holds 14,328,336 treasury shares, representing 8.3% of the company's capital.
19
6. Existence of branches of the Company /Article 39, item 7 of the Accountancy Act/
“Sopharma” AD has no branches.
7. 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.
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:
•
Optimizing sources of credit resources to achieve a relatively lower cost of borrowed funds;
• 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 affordable
rate for the companies in the Group. The fixed component has a relatively low absolute value and a large
20
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.
V. 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
3 448 thousand
(2022: BGN 3 325 thousand), including:
• current – BGN 2 963 thousand (2022: BGN 3 001 thousand);
• tantieme – BGN 485 thousand (2022: BGN 324 thousand).
The remuneration and other short-term income of the Key Management personnel of the Company
for 2023 amounting to 1 857 thousand BGN (2022: BGN 1 927 thousand) are as follows:
• current – BGN 1 463 thousand (2022: BGN 1 684 thousand);
• tantieme – BGN 394 thousand (2022: BGN 243 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 2023 are as follows:
21
31.12.2023
31.12.2022
Members of the
Relative
Relative
Acquired
Transferred
Board of
share of
Shares
Shares
share of the
shares in
shares in
Change
directors
the capital
capital %
2023
2023
%
Ognian Donev
14 441 613
8.37%
6 608 350
4.90%
8 507 024
673 761
7 833 263
Vessela Stoeva
150
0.00%
150
0.00%
-
-
-
Alexander
390 442
0.23%
262 442
0.19%
128 000
-
128 000
Tchaushev
Bissera Lazarova
-
-
-
-
-
-
-
Ivan Badinski
2 030
0.00%
2 030
0.00%
Simeon Donev
195 450 0.11%
195 450 0.14%
- -
The Company has not issued any bonds.
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 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: Sofia, 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 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
22
• “VLS” AD, UIC 175082980, with headquarters in Sofia, 9 P. R. Slaveikov Square.
Alexandar 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 Badinski does not hold a direct / indirect significant share (over 25%) of the capital of
companies.
Bissera 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:
Ognian 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 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 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 Badinski participates in the management/supervisory body of the following companies:
23
• “Sopharma” AD, UIC 831902088, with seat and headquarters: 16 Iliensko Shose Str. – Member
of the Board of Directors and Procurator.
Bissera 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).
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 2023 there are no contracts outside the ordinary business of the company or significantly deviate
from market conditions.
VI. 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 o r 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 2023, 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.
24
In 2023 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.
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 2 June 2023, the following transactions were voted
between the Company and related parties:
Contract for services between "Sopharma" AD as the Contracting Authority and "Telekomplekt" AD
as the Contractor under the following basic conditions of the proposed transaction:
• Subject of the transaction: engineering and project management; construction-installation and
repair works in the properties of the Contracting Authority or in those in which the same has the
relevant rights, reconstructions, innovations and others, specified by types, volume, prices and terms of
execution in requests-specifications, mutually agreed and signed by the parties to this contract. The
services under this provision are intended to be performed with the materials of the Contractor, unless
otherwise specified in the specification and supplies and services for objects owned by or used by the
Contracting Authority;
• Lease term: 5 /five/ years;
• Value of the transaction: up to BGN 10,000,000 /ten million/ per year or in total for the planned
5-year period the value of the transaction amounts to BGN 50,000,000 /fifty million/;
• Other conditions: The performance of each service will be carried out at the request of the
contracting authority and with materials of the Contractor, unless otherwise agreed;
“Sopharma” AD has not concluded 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 2023 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 2023 are stated in the annual
financial statements in the note "Contingent Liabilities and Commitments".
25
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."
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 December 2025; balance as of 31 December 2023 – BGN 40, 901 thousand;
• Recipient - "Industrial Holding Doverie" AD; Contract amount – EUR 14 939 thousand; interest
rate – 4.36%; maturity – 31 December 2025; balance as of 31 December 2023 – BGN 8, 052 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.
The commercial loans provided by “Sopharma” AD to related parties are as follows:
• Beneficiary – “Doverie Capital” AD; Contract amount - BGN 4,000 thousand; interest rate –
3.33%; maturity – 31 December 2024; balance as of 31 December 2023 – BGN 4,067 thousand;
• Recipient - Doverie Grizha EAD; Contract amount - BGN 10,997 thousand; interest rate – 3.10%;
maturity – 31 December 2024; balance as of 31 December 2023 – BGN 8,740 thousand.
The short-term loans granted to related parties are for supporting the financing of activities of these
companies for common strategic goals. They are secured by pledges of company shares and securities
(shares), pledges of receivables and promissory notes.
Information about the loan agreements concluded by subsidiaries of Sopharma AD will be indicated
in the consolidated financial statement 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%;
maturity – 31 December 2024; balance as at 31 December 2023 – BGN 187 thousand;
• Recipient – "Pharmaplant" AD; Contractual amount BGN 949 thousand; interest rate – 4.70%;
maturity – 31 December 2024; balance as at 31 December 2023 – BGN 48 thousand;
26
• Recipient – Sopharmacy MC; Contract amount - 695 thousand euros; interest rate – 3.05%;
maturity – 31 December 2024; balance as of 31 December 2023 – BGN 1,610 thousand;
• Recipient – Sopharmacy MC; Contract amount – EUR 3,000; interest rate – 3.05%; maturity – 31
December 2024; balance as of 31 December 2023 – BGN 6,667 thousand;
• Recepient - "Alliance Energy Companies" AD; Contract amount – BGN 2,740 thousand; interest
rate – 4.37%; maturity – 31 December 2024; balance as of 31 December 2023 – BGN 2,691 thousand;
The loans granted to third parties are for 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
On 6 October 2023, an increase in the company's capital was entered in the Commercial Register
by issuing 37,792,679 ordinary, registered, dematerialized, voting shares, with a nominal value of BGN 1
each and an issue value of BGN 4,13 per share. Shares from the capital increase were subscribed by
warrant holders. The funds received from the new issue are in the amount of BGN 156,1 million and at
the end of the reporting period BGN 100,2 million were invested as a short-term deposit abroad, and the
remaining funds were used to reduce the Company's bank liabilities.
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 2024 includes investments of BGN 22,5 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.
27
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 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.
Information about the shares held by the members of the Board of directors 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
31.12.2023
31.12.2022
Rel. share
Number
Rel. share
Number
Rel. share
of capital
of shares
of capital %
of shares
of capital
%
%
Tzvetanka Zlateva
-
-
-
-
-
Vasil Naidenov
386
0.00%
386
0.00%
-
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 favo r 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.
28
Member of the Board of Directors
31.12.2023
Number of
Rel. share of total number of
warrants
subscribed warrants %
Ognian Donev
1 667 000
23.37%
Vessela Stoeva
-
-
Alexander Tchaushev
-
-
Bissera Lazarova
-
-
Ivan Badinski
-
-
Simeon Donev
-
-
As of 31 December 2023, 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 o f 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.
VII. 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 shares of “Sopharma” AD as at 31 December 2023 is 172,590,578 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
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 2023:
Physical persons:
6 348
24 430 701 shares
14.17%;
Legal persons:
141
148 129 877 shares
85.83%;
29
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:
• Claims against them;
• Taking action or refusal to act, related to the fulfillment of obligations to the Company;
• 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 2023 are as
follows:
Shareholders
Shares
%
„Donev Investments Holding“ AD, UIC: 831915121, Sofia
66 570 976
38.57%
„Pozitano“ Str. №12
“Telekomplekt Invest“ AD, UIC: 201653294, Sofia, „P.R.
27 881 287
16.15%
Slaveikov“ sq. №9
Ognian Donev
14 441 613
8.37%
„Sofarma“ AD, UIC 831902088, Sofia „Iliensko shose“ Str.
14 328 336
8.30%
№16
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
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.
Digitally signed by
Ognian
Ognian Ivanov Donev
Date: 2024.04.24
Ivanov Donev
17:42:59 +03'00'
Date: 24 April 2024 Ognian Donev, PhD
Executive Director
30
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 is a member and participated in the establishment of the National Corporate
Governance Commission.
This document is a translation form Bulgarian. In case of divergence, the Bulgarian text is prevailing.
1
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
members. The main functions of the members of the Board of Directors and the number of independent
This document is a translation form Bulgarian. In case of divergence, the Bulgarian text is prevailing.
2
members are 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
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
This document is a translation form Bulgarian. In case of divergence, the Bulgarian text is prevailing.
3
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 advance
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.
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.
This document is a translation form Bulgarian. In case of divergence, the Bulgarian text is prevailing.
4
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 companyy 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.
• 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
This document is a translation form Bulgarian. In case of divergence, the Bulgarian text is prevailing.
5
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 assist 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 2023 the public companies of Sopharma Group held General Meetings of Shareholders as
follows: “Sopharma” AD held three GMS and one General Meeting of warrant holders, “Sopharma
Trading” AD held one GMS, “Momina Krepost” AD held three GMS, “Sopharma Imoti” REIT held one GMS,
“Sopharma Buildings” REIT held two GMS and “Doverie Obedinen Holding” AD held two 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
acquisition.
This document is a translation form Bulgarian. In case of divergence, the Bulgarian text is prevailing.
6
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 a Report on the
implementation of the remuneration policy of the members of the Board of Directors in 2023. 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 companies 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
activities that qualify as environmentally sustainable.
This document is a translation form Bulgarian. In case of divergence, the Bulgarian text is prevailing.
7
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 instruments;
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 2023 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 range 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. In response to the requirements set by Regulation (EU) 2020/852of
the European Parliament and of the Council of June 18, 2020 to create a framework to facilitate
sustainable investments, the managements of the companies in the Sopharma Group are gradually
launching activities related to analysis, data collection and reporting on key material sustainability issues.
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
This document is a translation form Bulgarian. In case of divergence, the Bulgarian text is prevailing.
8
of the Group identify the stakeholders in relation to its activities based on their degree and areas of
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 listing 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
management and of further development and improvement.
Most of the parameters that will be provided in this document are from the practice of the
This document is a translation form Bulgarian. In case of divergence, the Bulgarian text is prevailing.
9
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.
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
This document is a translation form Bulgarian. In case of divergence, the Bulgarian text is prevailing.
10
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 the 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
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;
This document is a translation form Bulgarian. In case of divergence, the Bulgarian text is prevailing.
11
• 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 professional 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
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
This document is a translation form Bulgarian. In case of divergence, the Bulgarian text is prevailing.
12
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.
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
This document is a translation form Bulgarian. In case of divergence, the Bulgarian text is prevailing.
13
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 through
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.
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
This document is a translation form Bulgarian. In case of divergence, the Bulgarian text is prevailing.
14
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 controls 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 figures, 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
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.
This document is a translation form Bulgarian. In case of divergence, the Bulgarian text is prevailing.
15
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 with 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;
On February 21, 2023, the shareholder "Donev Investments Holding" AD notified the parent
company "Sopharma" AD that it crossed the threshold of 1/3 of the capital, reaching a percentage
participation of 35.24%.
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
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
This document is a translation form Bulgarian. In case of divergence, the Bulgarian text is prevailing.
16
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 General Meeting
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 №
20240305153305.
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 August 4, 2023.
V. Composition and functioning of the administrative, management and supervisory bodies and
their committees
1. Composition of the members of the Board of Directors:
This document is a translation form Bulgarian. In case of divergence, the Bulgarian text is prevailing.
17
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
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.
This document is a translation form Bulgarian. In case of divergence, the Bulgarian text is prevailing.
18
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” 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 Company 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: Vasil Naidenov, Tsvetanka Zlateva and
Kristina Atanasova with a 3-year term , who was re-elected 4 consecutive times. With a decision of the
GMS from June 2, 2023.
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,
This document is a translation form Bulgarian. In case of divergence, the Bulgarian text is prevailing.
19
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 adapt ation 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.
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.
This document is a translation form Bulgarian. In case of divergence, the Bulgarian text is prevailing.
20
In Section V of the Rules of Procedure of “Sopharma” AD regulates the rights and protection 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.
Ognian
Digitally signed by
Ognian Ivanov Donev
Ivanov
Date: 2024.04.24
17:43:49 +03'00'
Donev
24.04.2024 Ognian Donev, PhD
Sofia Executive Director
This document is a translation form Bulgarian. In case of divergence, the Bulgarian text is prevailing.
21
Consolidated non-financial declaration
to the annual consolidated financial
statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy
Act - 2023
SOPHARMA GROUP
24 April 2024
This document is a translation form Bulgarian. In case of divergence, the Bulgarian text is prevailing.
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2023
Contents
I.About the Declaration .......................................................................................................................... 2
II.Scope of the Declaration .............................................................................................................. 3
1. Vision, strategy and corporate governance .................................................................................. 3
2. Imprint of the company`s activity ................................................................................................ 8
3. Organizational structure ............................................................................................................ 11
III.Strategy for corporate social responsibility ................................................................................ 14
1. Definition .................................................................................................................................. 14
2. CSR management ...................................................................................................................... 17
3. Membership .............................................................................................................................. 17
1
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2023
1. About the Declaration
The Consolidated non-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 Taxonomy, 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
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.
2
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2023
To the extent that for the reporting period 2023 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
Share of taxonomically
Share of
(BGN’000)
eligible economic
taxonomically-
activities (in %)
inadmissible economic
activities (in %)
Turnover 1 875 304
0%
100%
Capital costs (CAPEX)65 802
0%
100%
Operating costs (OPEX)9 620
0%
100%
I. 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 01.01.2023 - 31.12.2023. The
declaration contains quantitative data used as impact indicators in the main areas.
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.
3
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2023
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.
Values
Sopharma Group launched the OneFamily project, which unifies the approach at all levels and in all
companies in the Group through common values.
Care: We put customer satisfaction at the heart of our decisions and actions
Responsibility: We bear personal responsibility and deliver results
Continuous improvement: "Better than yesterday"
Teamwork: We are all one team! "The whole is greater than the sum of its parts!"
Integrity: We follow the highest standards of ethical behavior
Corporate citizenship policies
The parent company, as a leading pharmaceutical manufacturer, follows best practices in the field of
corporate citizenship. The values that logically determine life in the company and the interaction with the
interested parties are related to the care of people's health.
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:
Corporate governance systems
Description
Adoption
Last
date
update
Good Manufacturing
A system of principles and rules that ensure
2003
2023
practice/GMP
the proper course of each stage of the
production process, providing a quality
final product.
Good distribution practices
The good distribution practices is a system
2003
2023
/GDP
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.
4
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2023
ICH “Q8 Pharmaceutical
Principles, governing the establishment of
2004 2023
Development”
pharmaceutical products.
AXAPTA/SAP
Integrated information system for the
2013
2023
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.
ISO 9001: 2015 Quality Management System
2008 2023
ISO 13485: 2003
Quality management systems for medical
2003
2023
devices
СЕ BRAND
Conformity of Medical Device Directive
2003
2023
93/42 / EEC
Directive
Concentration Directive for hemodialysis
2003 2023
93/42/ЕЕС
BDS
Standard for laboratory tests of foods of
2006 2023
INISI/
different origins; water and beverages;
IEC 17025
feed; control of technological surfaces and
carcasses; diagnosis of diseases in all
species of domestic and wild animals; bees
and a beehive
ISO 14001:2015 Environmental management systems 2015
2023
ISO 27001:2013
Information security management systems 2013 2023
OHSAS 18001:2007
Occupational health and safety
2007 2023
management systems
WHO Good dissemination
WHO Technical statements Series, № 937,
2006 2023
practices
2006.
5
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2023
Detailed description of the corporate governance systems:
• 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.
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.
6
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2023
• 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.
• BDS 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.
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.
7
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2023
2. Imprint of the company`s activity
Economical impact
We create added value for our stakeholders
Economic and Financial data
2023
2022
%
Stakeholders
change
Decision for payment of dividends by
0.60
-
N/A
Shareholders
the General Meeting in the amount
of BGN per 1 share
Taxes paid in thousand BGN
79 129
75 122
5.33
State and local
Incl:
authorities
Taxes paid (other) in thousand BGN
65 713
65 217
0.76
Corporate tax paid in thousand BGN
13 416
9 905
35.45
Payments to suppliers in thousand
1 832 582
1 603 177
14.31
Suppliers /including
BGN
hired services/
Payments for wages and social
165 523 141 810
16.72 Employees
insurance in thousand BGN
The economical 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.
8
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2023
Social impact
Economic and financial data /expenses
2023
2022 Stakeholders
thousand BGN/
Number of employees
4 721
4 764
Work places - employees
Training courses
292 225
Employees
/expenses BGN ‘000/
Economic and financial data
Stakeholders
Social benefits and payments
6 968 4 918
Employees
/expenses BGN ‘000/
Medical services
721 722
Employees
/expenses BGN ‘000/
Donations
859 438
Local communities
/expenses BGN ‘000/
Social activities and events
229 239 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.
• 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.
9
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2023
Ecological impact
Indicators
2023
2022
%
Cost of materials and energy
17 775
22 657
-21.55
(electricity, headenergy, fuels, water;
without main materials and impairment)
/expenses BGN ‘000/
Costs for transport services 5 138
4 721 8.83
Waste submitted for recylcing
337 t.
314 t. 7.3
Exhaust emissions into the atmosphere
0*0*0
Emissions to wastewater
Waste water is treated in WWTP **
Employees trainings and inclusion in
Instruction of employees;
environmental protection activities
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.
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);
•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;
•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.
10
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2023
As of 31 December 2023, the average number of employees of Sopharma Group is 4 721 (compared to
4 764 in 2022). The average number of employees of “Sopharma” AD as of 31 December 2023 is 1 720 (1 760
in 2022) and of “Sopharma Trading” AD is 760 (compared to 776 in 2022).
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 2022: seventy-eight) subsidiaries. In addition, the Group
has investments in two associate and one joint venture (31 December 2022: 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 pharmaceutical sector in
Bulgaria.
!
Bulgarian)based)mother)
company,)pharmaceutical)
producer)
API$production$
Pharmaceuticals$
Wholesale$and$
Non-pharma$activities$
production$$
distribution$
$
$
"Sopharma" AD, Bulgaria
"Sopharma" AD, Bulgaria
Group “Sopharma Trading”
“Biopharm Engineering” AD,
AD, Bulgaria and Serbia
Sliven, Bulgaria
Extraction of active ingredients
Traditional products from herbal
origin, Generic products
Pre-wholesaling, wholesaling,
Veterinary products, sterile
retail
production
“Biopharm Engineering” AD,
Subsidiaries in Ukraine,
Bulgaria/PAO “Vitamini”,
Kazakhstan, Poland and etc.
Ukraine
Generic products
Wholesaling, retail
11
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2023
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.
At the production site in the city of Sliven, the Group has modern production units and is constantly
expanding and modernizing its production facilities, which gives the technological advantages of the products
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.
12
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2023
PAO “Vitamins”, Ukraine
PAO “Vitamins” manufactures and sells medicines, tablets, powders, oil solutions, syrups and tinctures.
Production of medicines by PAO “VitaminS” is highly effective, with excellent quality, affordable prices and is
sold successfully not only in Ukraine, but also in other CIS countries. Currently, production is carried out in
the following production areas:
• liquid medicinal 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.
In the general pharmaceutical market, Sopharma Trading AD achieves a market share of 21.42%
according to IQVIA data for 2023. Within the two market segments, the company's share in value is 18.61%
for the pharmacy market and 28.55% for the hospital market.
Services provided:
In accordance with its market positioning, the company offers its customers:
• A variety of over 15,000 pharmaceutical items, including medicinal products, medical consumables,
sanitary and hygiene materials, vitamins, nutritional supplements, cosmetics, medical equipment and
equipment, a portfolio of internationally established exclusive brands.
• Complete solutions for the hospital market - in addition to a distribution service for the delivery of
all products, part of the company's portfolio also includes turnkey solutions for the construction of medical
and hospital facilities.
• 100% national coverage of the territory of Bulgaria and access to any point of the country within 4
hours, thanks to its modern warehouse bases in 2 key cities - Sofia and Varna.
• Quality distribution service through our own car fleet of over 100 vehicles and the ability for products
to reach over 3,500 customers quickly and easily.
• Comprehensive logistics solutions for import, storage and distribution of goods to end customers.
• Marketing and advertising services for the imposition of products on the Bulgarian market,
production of local and international companies.
• “Sopharma Trading” AD imposes and markets its portfolio of exclusive brands on the Bulgarian
market.
In its activity, “Sopharma Trading” AD follows the highest standards for Good Distribution Practice.
Since its establishment, “Sopharma Trading” has continuously invested in the development of its logistics
potential. In 2023, “Sopharma Trading” AD has 100% national logistics coverage in Bulgaria. Owned and
leased warehouse areas in Bulgaria include 18,276 sq.m., have 14,761 pallet spaces and 10 cold storage rooms
with an area of 536 sq.m.
In 2015, the company introduced its own SOpharmacy pharmacy retail concept to the Bulgarian
market, introducing the best global practices to the local market and providing an innovative approach in
serving the health needs of Bulgarian patients.
13
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2023
SOpharmacy's mission is to become a trusted partner in health care for life.
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 revenue increased by BGN 212.3 million or 12.8%, reaching BGN 1,875.3 million in
2023 compared to BGN 1,663 million in 2022. Sales of goods increased by 176 .6 million BGN or 12.8%,
reaching BGN 1,555.8 million in 2023 compared to BGN 1,379.1 million in 2022. Sales of finished products
increased by BGN 35.7 million or 12.6%, reaching BGN 319.6 million in 2023 compared to BGN 283.9 million
in 2022.
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.
14
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2023
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;
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 training 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 applicable
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
15
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2023
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.
Corporate responsibility and strategic management
Market
Employees
Environment
Society
Corporate
Citizenship
Transparent
Zero discrimination
Environmental
Contribution to
Anticorruption
corporate
regarding the right
management
economic
governance
to work, sex
systems
development
Guaranteed
Guaranteeing the
Reducing the
Development of the
Work on SDG 2015
quality and
right of association
environmental
healthcare system
safety of
imprint
products and
services
Resistance
Employee
Responsible use of
Disease prevention
Participation in the
development:
resources
and maintaining good
development and
hierarchically and
health
implementation of
as a qualification
international
and education
standards related to
pharmacy
Ethical
Decent pay for
Reduction of direct
Providing affordable
Working with
competition
work
impact
and quality treatment
partner
organizations
Responsible
Ensuring health and
Reducing indirect
Investments in
Joint projects of
Marketing
safety at work
impacts
education
organizations where
16
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2023
members of the
Group are members
Responsible
Social benefits for
Participation in
Investments in public
Development of the
supply
employees
environmental
communications
generics industry in
projects
the country
Development of
Internal
Training of
the field of
communication
employees
pharmacy
Responsible choice 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
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 Manufacturing 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 the Bulgarian National Code
17
Non-financial declaration to the annual consolidated financial statements of Sopharma Group on the
requirements of Art. 48-52 of the Accountancy Act - 2023
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 Medicines Wholesalers (“Sopharma Trading” AD)
– The mission of the
Association is to ensure fair and transparent medicines 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 Medicines Wholesalers - The mission of the association is to ensure fair
and transparent medicines delivery and service provision in the pharmaceutical sector. It protects the branch
interests and rights of its members before state authorities, institutions and producers.
• 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.
Digitally signed
Ognian
by Ognian
Ivanov
Ivanov Donev
Date: 2024.04.24
Donev
17:45:30 +03'00'
24 April 2024 Ognian Donev, PhD
Executive Director
18
DECLARATION
under art. 100о, par. 4, item. 3 of the Public Offering of Securities Act
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 2023, 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 2023 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.
24 April 2024 DECLARANTS:
Digitally signed
Ognian
Sofia
by Ognian Ivanov
Ivanov
Donev
Date: 2024.04.24
Donev
17:44:41 +03'00'
.........................................
/Ognian Donev/
Digitally signed by
Boris Anchev
Boris Anchev Borisov
Date: 2024.04.24
Borisov
17:53:12 +03'00'
.........................................
/Boris Borisov/
Digitally signed by
LYUDMILA
LYUDMILA KRUMOVA
KRUMOVA
BONDZHOVA
Date: 2024.04.24
BONDZHOVA
17:58:16 +03'00'
.........................................
/Lyudmila Bondzhova/
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
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, 2023, 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 material 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, 2023, 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.
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.
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
Valuation of trade receivables, receivables
In this area our audit procedures performed
from related parties and loans granted to third
are:
parties
As disclosed in Notes № 21, 22, 24, 25 and 26 to
• We have obtained understanding of the
the consolidated financial statements, as of
process for the application of IFRS 9,
31.12.2023 the Group has gross trade receivables,
with focus on implemented methodology
receivables from related parties and loans granted
in Group`s model for determination of
to third parties amounting to BGN 344,020
impairment allowance for credit losses,
thousand and impairment loss allowances
including the use of key assumptions and
amounting to BGN 11,341 thousand.
estimates.
The Group has applied IFRS 9 “Financial
• Inquiries, walkthroughs and obtaining of
instruments”, according to which credit losses are
understanding of the process, related to
determined based on expected credit losses.
determination of credit losses for trade
receivables, receivables from related
The application of the model for determination of
parties, and loans granted to third parties.
the allowance for credit losses for trade
receivables, receivables from related parties and
• Assessment and test of design and
loans granted to third parties, result in significant
operating effectiveness of key controls in
complexity and the necessity of key estimates and
the process of monitoring and
judgements for the Management`s final
determination of the amount of
calculations related to identification of doubtful
impairment allowance for credit losses.
exposures as well as determination of the amount
of credit losses.
• Review and assessment of the adequacy
To determine the amount of impairment loss
of the methodology used by the Group
allowance for credit losses, the Group applies
for the purposes of identification of credit
model based on significant estimates and
losses and calculation of impairment loss
judgements in:
allowance in accordance with the concept
and the requirements of IFRS 9.
• Interpretation of the requirements for
determination of impairment loss
• Analysis and assessment of the
allowance in accordance with IFRS 9,
justification and appropriateness of
which is based on the Group`s model for
calculations for the indicators of
determination and calculation of the
“probability of default” and “loss given
expected credit losses;
default” through inspection of the
Key audit matter
How our audit addressed the key audit matter
• Calculation and interpretation of key
assumptions used and the output data, as
indicators as “probability of default”, “loss
well as the approach for inclusion of
given default” and “exposure at default”;
prospective information in the models.
• Assumptions and estimates in a number of
scenarios for estimated future cash flows,
• Assessment of the completeness,
based on past events, current conditions
appropriateness and adequacy of the
and future economic forecasts;
disclosures in the Group’s consolidated
• Assumptions, used by Management in the
financial statements with regard to credit
review of individually significant
risk and impairment allowance for credit
exposures, related to recent losses, number
losses for trade receivables, receivables
of probable scenarios for future cash flows
from related parties and loan granted to
and the results of these scenarios and
third parties.
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.
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, 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 significant 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 section “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 2023, 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 2023, in the attached electronic file “097900BGGW0000048796-20231231-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 2023 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 2023, contained in the attached electronic file
“097900BGGW0000048796-20231231-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, 2023 by the general meeting
of shareholders held on June 2, 2023 for a period of one year.
• The audit of the consolidated financial statements of the Group for the year ended December
31, 2023 represents seventh 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 2023.
Audit company №129 Baker Tilly Klitou and Partners EOOD
Digitally signed
Digitally signed by
IVAYLO
by IVAYLO
Galina
Galina Dimitrova
YANCHEV
YANCHEV
Dimitrova
Lokmadjieva-
YANCHEV
Nedkova
Date: 2024.04.25
Lokmadjieva-
YANCHEV
11:54:50 +03'00'
Date: 2024.04.25
Nedkova
11:58:10 +03'00'
Ivaylo Yanchev
Galina Lokmadjieva - Nedkova
Registered auditor, responsible for the audit
Managing Director
April 25, 2024
Baker Tilly Klitou and Partners EOOD
5, Stara Planina Str., 5th floor
1000 Sofia, Bulgaria
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 2023, 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 25,
2024.
We hereby certify that as reported in our audit report on the annual consolidated financial
statement of Sopharma AD for 2023 issued on April 25, 2024:
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
2023 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 2023 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 2023, 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.
1
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 2023, dated 25 April 2024. 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 25 April 2024 regarding the issues covered by Art. 100m, para. 4, item 3 of
POSA.
Baker Tilly Klitou and Partners EOOD:
Digitally signed by
IVAYLO
IVAYLO YANCHEV
YANCHEV
YANCHEV
Date: 2024.04.25
YANCHEV
12:02:45 +03'00'
____________________________
Ivaylo Yanchev
Registered auditor
25 April 2024
Sofia
2