Telelink Business Services Group AD
CONSOLIDATED FINANCIAL
STATEMENTS
TELELINK BUSINESS
SERVICES GROUP AD
FOR THE YEAR
ENDED
DECEMBER 31
2021
Telelink Business Services Group AD
i
CONTENTS
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ........................ 1
CONSOLIDATED STATEMENT OF FINANCIAL POSITION ............................................................................... 2
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ................................................................................ 4
CONSOLIDATED CASH FLOW STATEMENT ................................................................................................... 5
1. Corporate information .............................................................................................................................. 7
2. Basis of preparation .................................................................................................................................. 9
3. Basis of consolidation ............................................................................................................................... 9
4. Summary of significant accounting policies ............................................................................................ 10
5. Significant accounting judgements, estimates and assumptions ............................................................ 27
6. Changes in accounting policies and disclosures ...................................................................................... 31
7. Standards issued but not yet effective and not early adopted ............................................................... 32
8. Revenue from contracts with customers ................................................................................................ 37
9. General and administrative expenses ..................................................................................................... 38
10. Sales and marketing expenses ................................................................................................................ 39
11. Expenses by nature ................................................................................................................................. 39
12. Other operating income / (expenses) ..................................................................................................... 39
13. Finance income and finance costs .......................................................................................................... 40
14. Employee benefit expenses .................................................................................................................... 41
15. Income tax .............................................................................................................................................. 42
16. Assets classified as held for sale ............................................................................................................. 43
17. Prepayments ........................................................................................................................................... 43
18. Property, plant and equipment ............................................................................................................... 44
19. Investment property ............................................................................................................................... 45
20. Intangible assets ..................................................................................................................................... 45
21. Inventories .............................................................................................................................................. 46
22. Trade and other receivables and contract assets ................................................................................... 47
23. Loans granted ......................................................................................................................................... 48
24. Cash and cash equivalents ...................................................................................................................... 49
25. Government grants ................................................................................................................................. 49
26. Interest-bearing loans and borrowings ................................................................................................... 49
27. Leases ...................................................................................................................................................... 50
28. Trade and other payables ....................................................................................................................... 52
29. Contract liabilities ................................................................................................................................... 52
30. Retirement benefit liability ..................................................................................................................... 53
31. Related party disclosure.......................................................................................................................... 53
32. Share capital and reserves ...................................................................................................................... 56
33. Dividends distributed .............................................................................................................................. 57
34. Fair value measurement ......................................................................................................................... 58
35. Commitments and contingencies ........................................................................................................... 59
36. Financial risk management objectives and policies ................................................................................ 59
37. Share-based payments ............................................................................................................................ 63
38. Events after the date of the consolidated financial statements ............................................................. 64
Telelink Business Services Group AD
ii
Supervisory Board (SB)
Hans van Houwelingen – Chair of SB;
Ivo Evgeniev Evgeniev – member of SB;
Bernard Jean Luc Moscheni – member of SB.
Management Board (MB)
Ivan Zhitiyanov – Chair of MB and Executive Director;
Teodor Dobrev – member of MB;
Orlin Rusev – member of MB;
Nikoleta Stanailova - member of MB;
Gojko Martinovic - member of MB
Head office and registered Office
Vitosha region, v.a. Malinova dolina, 6 Panorama Sofia Str.,
Business Center Richhill, Block B, 2nd floor
1766 Sofia
Servicing banks
Unicredit Bulbank AD
Legal consultants
Consult 2002 EOOD
42, Alabin St. fl. 2
Sofia
Auditors
Ernst & Young Audit OOD
Polygraphia Office Center
47A, Tsarigradsko Shose Blvd., fl. 4
1124 Sofia
Telelink Business Services Group AD
CONSOLIDATE STATEMENT OF PROFIT AND OTHER COMPREHENSIVE INCOME
For the year ended 31 December
Ivan Krasimirov Zhitiyanov Jordanka Lyubchova Klenovska, Preparer
Executive Director Deputy Financial Director
The financial statements were approved for issue by decision of the Management Board dated 27 April
2022.
The accompanying notes from 1 to 38 are an integral part of these financial statements.
1
CONSOLIDAED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Financial statements for which Ernst & Young Audit OOD with registered number 108 has issued
auditors’ report dated 28 April 2022 with Nikolay Garnev being the Registered Auditor in charge of the
audit.
2021 2020
Notes BGN'000 BGN'000
Revenue 8 165,688 135,495
Cost of sales 11 (136,216 ) (108,764 )
Gross profit 29,472 26,731
Other operating income 12 220 523
General and administrative expenses 9, 11 (6,423 ) (5,521 )
Selling and marketing expenses 10, 11 (8,492 ) (6,938 )
Other operating expenses 12 (137 ) (115 )
Operating profit 14,640 14,680
Finance income 13 126 13
Finance costs 13 (485 ) (563 )
Net impairment losses on other financial assets 23 (84 ) 93
Profit before tax 14,197 14,223
Income tax expense 15 (1,790 ) (1,623 )
Profit for the year from continuing operations 12,407 12,600
Other comprehensive income/(loss) for the year, net of tax 2 (4 )
Total comprehensive income for the year, net of tax 12,409 12,596
Owners of the company 12,409 12,596
Non-controlling interests - -
12,409 12,596
Earnings per share 0.993 1.008
YORDANKA
LYUBCHOVA
KLENOVSKA
Digitally signed by
YORDANKA
LYUBCHOVA
KLENOVSKA
Date: 2022.04.29
10:05:04 +03'00'
IVAN
KRASIMIROV
ZHITIYANOV
Digitally signed by
IVAN KRASIMIROV
ZHITIYANOV
Date: 2022.04.29
10:15:11 +03'00'
Digitally signed by
NIKOLAY Georgiev
Garnev
Telelink Business Services Group AD
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December
2
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Continued to page 3
Financial statements for which Ernst & Young Audit OOD with registered number 108 has issued
auditors’ report dated 28 April 2022 with Nikolay Garnev being the Registered Auditor in charge of the
audit.
Notes 2021 2020
ASSETS BGN'000 BGN'000
Non-current assets
Property, plant and equipment 18 6,689 7,910
Investment properties
19 409 372
Intangible assets 20 482 631
Prepayments 17 7,360 3,711
Non-current receivables 9 -
Deferred tax asset 15 629 633
Current assets
Inventories 21 5,038 7,849
Trade and other receivables 22 25,419 25,135
Contract assets 8, 22 2,468 2,863
Prepayments 17 8,142 5,143
Cash and cash equivalents 24 12,815 11,762
Income taxes receivable 167 379
Assets classified as held for sale 16 316 554
54,365 53,685
TOTAL ASSETS 69,943 66,942
Digitally signed by
NIKOLAY Georgiev
Garnev
Telelink Business Services Group AD
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December
Ivan Krasimirov Zhitiyanov Jordanka Lyubchova Klenovska, Preparer
Executive Director Deputy Financial Director
The financial statements were approved for issue by decision of the Management Board dated 27 April
2022.
The accompanying notes from 1 to 38 are an integral part of these financial statements.
3
Continued from page 2
Financial statements for which Ernst & Young Audit OOD with registered number 108 has issued
auditors’ report dated 28 April 2022 with Nikolay Garnev being the Registered Auditor in charge of the
audit.
2021 2020
EQUITY AND LIABILITIES BGN'000 BGN'000
Share capital 32 12,500 12,500
Legal reserves 32 1 083 341
Other reserves 32 (13,467 ) (13 883 )
Other components of equity 32 40 40
Retained earnings 32 5,022 3,414
Profit for the year 32 12,407 12 600
Equity
32 17,585 15,012
Foreign currency translation reserve 32 (558 ) (560 )
Total equity 17,027 14,452
Non-current liabilities
Lease liabilities 27 1,477 2 771
Employee benefits 30 19 16
Contract liabilities 8, 29 8,140 3,088
Current liabilities
Interest-bearing loans and borrowings 26 1,725 2,003
Lease liabilities 27 1,456 1 819
Trade and other payables 28 28,455 33,259
Government grants 25 143 290
Contract liabilities 8, 29 11,172 8,565
Income tax payable 329 679
Total liabilities 52,916 52,490
TOTAL EQUITY AND LIABILITIES
YORDANKA
LYUBCHOV
A
KLENOVSKA
Digitally signed
by YORDANKA
LYUBCHOVA
KLENOVSKA
Date: 2022.04.29
10:05:27 +03'00'
IVAN
KRASIMIROV
ZHITIYANOV
Digitally signed by
IVAN KRASIMIROV
ZHITIYANOV
Date: 2022.04.29
10:16:16 +03'00'
Digitally signed by
NIKOLAY Georgiev
Garnev
Telelink Business Services Group AD
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
as at 31 December
Ivan Krasimirov Zhitiyanov Jordanka Lyubchova Klenovska, Preparer
Executive Director Deputy Financial Director
The financial statements were approved for issue by decision of the Management Board dated 27 April
2022.
The accompanying notes from 1 to 38 are an integral part of these financial statements.
4
CONSOLIDATE STATEMENT OF CHANGE IN EQUITY
Financial statements for which Ernst & Young Audit OOD with registered number 108 has issued
auditors’ report dated 28 April 2022 with Nikolay Garnev being the Registered Auditor in charge of the
audit.
Share
Capital
Legal
reserves
Other
reserves
Other
components
of equity
Retained
earnings
Foreign
currency
translation
reserve
Total
equity
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
Balance at 01 January 2020 12,500 317 (14 108 ) 9,631 (556 ) 7,784
Profit for the year - - - - 12,600 - 12,600
Other comprehensive income - - - - - (4 ) (4 )
Total comprehensive income - - - - 12,600 (4 ) 12,596
Increase in capital reserves (note 32) - 22 - - (22 ) - -
Dividends distributed (note 33) - - - - (6,195 ) - (6,195 )
Transfers 2 14 - 16
Buy-back of own shares 40 - 40
Employee share-based compensation 211 - 211
Balance at 31 December 2020 12,500 341 (13 883 ) 40 16,014 (560 ) 14,452
Balance at 01 January 2021 12,500 341 (13 883 ) 40 16,014 (560 ) 14,452
Profit for the year - - - - 12,407 - 12,407
Other comprehensive income - - - - - 2 2
Total comprehensive income - - - - 12,407 2 12,409
Increase in capital reserves (note 32) - 742 - - (742 ) - -
Dividends distributed (note 33) - - - - (10,250 ) - (10,250 )
Transfers - 25 - - - 25
Employee share-based compensation - - 391 - - - 391
Balance at 31 December 2021 12,500 1,083 (13,467 ) 40 17,429 (558 ) 17,027
YORDANKA
LYUBCHOVA
KLENOVSKA
Digitally signed by
YORDANKA
LYUBCHOVA
KLENOVSKA
Date: 2022.04.29
10:05:44 +03'00'
IVAN
KRASIMIROV
ZHITIYANOV
Digitally signed by
IVAN KRASIMIROV
ZHITIYANOV
Date: 2022.04.29
10:17:24 +03'00'
Digitally signed by
NIKOLAY Georgiev
Garnev
Telelink Business Services Group AD
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December
5
CONSOLIDATED CASH FLOW STATEMENT
Continued to page 6
Financial statements for which Ernst & Young Audit OOD with registered number 108 has issued
auditors’ report dated 28 April 2022 with Nikolay Garnev being the Registered Auditor in charge of the
audit.
2021 2020
Notes
BGN'000 BGN'000
Operating activities
Profit before income tax from continuing operations 14,197 14,223
Adjustment to reconcile profit before tax to net cash flows
Non-cash transfers:
Net finance costs 483 436
Movements in retirement benefits obligations and government grants 25, 30 (144 ) (487 )
Share-based payments expense 37
(Gain) on disposal of property, plant and equipment 12 (14 ) -
Loss on disposal of assets held for sale 10 36
Depreciation & amortisation
18, 20
Working capital adjustments
Decrease/(Increase) in inventories 2,799 (2 931 )
Increase in trade and other receivables, contract assets (6,318 ) (1,455 )
Increase in trade and other payables, contract liabilities 2,423 10,189
Bank charges paid (259 ) (197 )
Income taxes paid (1,924 ) (1,307 )
Net cash flows from from operating activities 14,579 21,739
Digitally signed
by NIKOLAY
Georgiev Garnev
Telelink Business Services Group AD
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December
Ivan Krasimirov Zhitiyanov Jordanka Lyubchova Klenovska, Preparer
Executive Director Deputy Financial Director
The financial statements were approved for issue by decision of the Management Board dated 27 April
2022.
The accompanying notes from 1 to 38 are an integral part of these financial statements.
6
Continued from page 5
Financial statements for which Ernst & Young Audit OOD with registered number 108 has issued
auditors’ report dated 28 April 2022 with Nikolay Garnev being the Registered Auditor in charge of the
audit.
2021 2020
BGN'000 BGN'000
Investing activities
Purchase of property, plant and equipment 18 (1,216 ) (1,360 )
Purchase of intangible assets 20 (147 ) (341 )
Proceeds from sale of property, plant and equipment 47 22
Receipt of government grants 25 - 383
Loans granted 150 -
Proceeds from loans (150 ) -
Interest received 2 13
Net cash flows used in investing activities (1,314 ) (1,283 )
Financing activities
Proceeds form borrowings 26 9,708 9,876
Repayment of borrowings 26 (9,986 ) (11,997 )
Payments on leases 27 (1,882 ) (1,932 )
Dividends paid 33 (9,535 ) (5,924 )
Tax withheld on dividend (414 ) (271 )
Repurchase of shares 32 - (302 )
Interest paid (109 ) (109 )
Interest paid on leases 27 (118 ) (120 )
Net cash flows used in financing activities (12,336 ) (10,779 )
Net change in cash and cash equivalents 929 9,677
Net foreign exchange difference
Cash and cash equivalents at 1 January 11,762 2,199
Cash and cash equivalents at 31 December
24
YORDANKA
LYUBCHOV
A
KLENOVSKA
Digitally signed by
YORDANKA
LYUBCHOVA
KLENOVSKA
Date: 2022.04.29
10:06:02 +03'00'
IVAN
KRASIMIROV
ZHITIYANOV
Digitally signed by
IVAN KRASIMIROV
ZHITIYANOV
Date: 2022.04.29
10:18:36 +03'00'
Digitally signed by
NIKOLAY Georgiev
Garnev
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
7
1. Corporate information
Incorporation
shareholder joint stock company with an owner Telelink Holdings BV (The Netherlands), registered
with the Trade Register of the Registry Agency under UIC 205744019.
The registered office of the
Company is: Vitosha region, v.a. Malinova dolina, 6 Panorama Sofia Str., Business Center Richhill, Block
B, 2nd floor, 1766 Sofia, Bulgaria
Telelink Business Services Group EAD is a public company, registered with Financial Supervision
Commission on 28 November 2019.
Company shares are traded on the Bulgarian Stock Exchange.
Shareholders
The share capital of the Company amounts to BGN 12,500 thousand formed of 12,500,000 shares with
nominal value of 1.00 Bulgarian lev each.
In the period 2020-2021, there were three tranches of public offering of existing Company shares,
pursuant to which three of the shareholders existing as such prior to the offering sold on the Bulgarian
Stock Exchange (BSE) a total of 2,625,000 shares (of which 875,000 in 2021), representing 21% of the
Company’s registered capital (of which 7% realized in 2021).
The conducted offerings were limited strictly to existing shares and did not involve any capital increase,
nor any proceeds to the Company and the Group.
Pursuant to share buybacks for the purposes of employee incentive programs, as of December 31
2021, the Company held 356 own shares acquired in 2020. No further share buybacks were carried out
in 2021.
As of December 31 2021, the persons holding over 5% of the Company’s capital were Lubomir Minchev
with a stake of 8,371,678 shares or 66.97% and Utilico Emerging Markets Trust PLC (UK) with a stake
of 1,733,837 shares or 13.78%.
Ownership structure and Group structure as at 31 December 2021 are presented below:
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
8
1. Corporate information (continued)
Business
Telelink Business Services Group specializes in
providing services related to systems integration and
maintenance of customers’ information and communication systems in the three main market
segments: mobile telecommunications service providers, fixed telecommunications service providers,
and large and mid-sized public and private organizations within the area of the group’s territorial
presence and globally.
The consolidated financial statements present financial information of Telelink Business Services
Group AD and its subsidiaries - Telelink Business Services EAD (Bulgaria), Comutel DOO (Serbia),
Telelink Business Services DOO – Podgoritsa (Montenegro), Telelink DOO (Bosnia and Herzegovina),
Telelink DOO (Slovenia), Telelink Business Services DOOEL (North Macedonia), Telelink Albania SH.P.K.
(Albania), Telelink Business Services DOO (Croatia), Telelink Business Services LLC (USA), Telelink
Business Services SRL (Romania), all of them jointly the “Group”.
66,97% 100%
100%
4,01%
50%
4,01%
1,07% 100%
1,64% 100%
13,87% 100%
6,12% 100%
2,30% 100%
0,003% 100%
100%
100%
100%
subsidiairies
shareholders
Telelink Business
Services Group AD
Telelink Business Services EAD
Ivo Evgeniev
Telelink BS Staffing
EOOD
Lubomir Minchev
shareholders existing prior to
public offering
Spas Shopov
Green Border OOD
Ivan Zhitiyanov, CEO TBSG
AD
Comutel DOO (Serbia)
Telelink Business Services DOO
(Montenegro)
UTILICO EMERGING
MARKETS TRUST PLC
Telelink DOO (Bosnia and
Herzegovina)
Other existing prior to
public offering
new
shareholders
Other Institutional
Investors & Legal Entities
Telelink DOO (Slovenia)
Retail Investors
(Natural Persons)
Telelink Business Services DOO
(Croatia)
Own shares held by the
Company
Telelink Albania SH.P.K. (Albania)
Telelink Business Services DOOEL
(Macedonia)
Telelink Business Services SRL
(Romania)
Telelink Business Services, LLC
(USA)
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
9
2. Basis of preparation
These consolidated financial statements have been prepared on a historical cost basis except for
investment properties measured at fair value and defined benefit obligations measured at the present
value of the obligations. The financial statements are presented in Bulgarian leva (BGN), which is the
Group’s functional currency. All values are rounded off to the nearest thousand (BGN’ 000), except
when otherwise stated.
The consolidated financial statements for the year ended 31 December 2021 were authorised for issue
by decision of the Management Board dated 27 April 2022.
Statement of compliance
These consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted for use in the European Union (EU). The reporting
framework “IFRS, adopted by EU” in its essence is the national accounting basis IAS, adopted by EU,
settled in the Accountancy Act and defined in p.8 in its Additional Provisions.
3. Basis of consolidation
The consolidated financial statements comprise the financial statements of Telelink Business Services
Group AD and its subsidiaries as at 31 December 2021.
Subsidiaries are all entities over which the Group has control. The Group controls an investee when it
is exposed, or has rights, to variable returns from its involvement with the investee and has the ability
to use its power to affect its return. Consolidation of a subsidiary begins when the Group obtains
control over the subsidiary and ceases when the Group loses control of the subsidiary.
Non-controlling interests (NCI) are measured at the proportionate share of the acquiree’s identifiable
net assets at the date of the acquisition. Changes in the Group’s ownership interest in a subsidiary that
do not result in the loss of control are accounted for as an equity transaction.
If the Group loses control over a subsidiary, it derecognises the related assets and liabilities of the
subsidiary, and non-controlling interest and other components of equity, while any resultant gain or
loss is recognised in profit or loss. Any investment retained in a former subsidiary is recognised at fair
value at the time the control is lost.
All intra-group balances and transactions, unrealised income and expenses, resulting from intra-group
transactions, are eliminated. Unrealized gains on transactions between the Group and its associates
and joint ventures are eliminated to the extent of the Group’s interest in these entities. Unrealized
losses are also eliminated unless the transaction provides evidence of impairment.
Telelink Business Services Group AD is a newly incorporated entity established in 2019. After its
registration, an activity is separated from an existing entity, comprising companies which were under
common control, but did not form a legal group as of 31 December 2018.
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
10
3. Basis of consolidation (continued)
Business combinations between entities under common control are accounted for using predecessor
value method. Under this method, the newly established company, Telelink Business Services Group
AD, incorporates the assets and liabilities of the entities acquired in 2019 using the acquiree’s values
from the consolidated financial statements of the previous parent entity. The acquired entity’s results
are included in the consolidated financial statements retrospectively: the financial statements reflect
full year’s results of Telelink Business Services EAD, Comutel DOO (Serbia), Telelink Business Services
DOO – Podgorica (Montenegro), Telelink DOO (Bosnia and Herzegovina), Telelink DOO (Slovenia) for
2018, even though the business combination occurred in 2019. In addition, the corresponding amounts
for 2018 reflect the combined results of the new group structure, even though the transformation
occurred in 2019. Intragroup balances and unrealized gains and losses on transactions within the
Group are eliminated.
Telelink Business Services Group AD has prepared its first consolidated financial statements for the
year ended 31 December 2019, which include comparative data from the financial statements of
Telelink Bulgaria EAD for previous years.
The Group has not identified reporting segments and does not disclose segment information in
accordance with IFRS 8 Operating Segments.
4. Summary of significant accounting policies
Foreign currency translation
The consolidated financial statements have been prepared in Bulgarian leva, which is the Group’s
functional and reporting currency. Transactions in foreign currencies are initially recorded in the
functional currency rate ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are retranslated at the functional currency at the rate of exchange
ruling at the reporting date. Any differences are taken to the statement of profit or loss and other
comprehensive income. Non-monetary assets and liabilities that are measured in terms of historical
cost in a foreign currency are translated into the functional currency using the exchange rate as at the
date of the initial transaction (acquisition).
Business combinations
The Group accounts for business combinations using the acquisition method when control is
transferred to the Group. The consideration transferred in the acquisition is generally measured at fair
value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for
impairment. Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction
costs are expensed as incurred, except if related to the issue of debt or equity securities. Any
contingent consideration payable is measured at fair value at the acquisition date. If the contingent
consideration is classified as equity, then it is not remeasured and settlement is accounted for within
equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised
in profit or loss.
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
11
4. Summary of significant accounting policies (continued)
Business combinations under common control
Business combinations between entities under common control are accounted for as if the acquisition
had taken place at the beginning of the earliest comparative period presented or, if later, on the date
on which joint control existed, and for the purpose, the comparative information is restated. Assets
and liabilities are recognised at the carrying amounts previously reported in the consolidated financial
statements of the shareholder exercising control over the Group (‘predecessor value method’). The
acquirees’ results are included in the consolidated financial statements retrospectively, i.e. the
comparative date for previous years reflect summarised results of the new structure of the Group,
even though the transformation occurred in the current year. Intragroup balances and unrealized gains
and losses on transactions withing the Group are eliminated.
Joint Arrangements
A participation in joint arrangements is determined within contractual relations, which entitle the
parties to joint control over the agreement. Joint arrangements are either joint operations or joint
ventures. The Group analyses its participation in joint arrangements by considering its rights and
obligations, as well as the structure and legal form of each arrangement, and the contractual terms
agreed to in the arrangement. In respect of its participation in a joint venture, the Group recognises
the assets, liabilities, revenue from the sale of the products of the joint arrangement, expenses,
including those incurred jointly and accounted for in the assets, liabilities, income and expenses
associated with their participation in the joint arrangement in compliance with IFRSs applicable to the
specific assets, liabilities, income and expenses.
Assets held for sale
The Group classifies non-current assets (or disposal group) as held for sale if their carrying amounts
will be recovered principally through a sale rather than through continuing use. This condition is
regarded as met only when the asset is available for immediate sale in its present condition and its
sale is highly probable. For the sale to be highly probable, management must be committed to a plan
to sell the asset (or disposal group), and an active programme to locate a buyer and complete the plan
must have been initiated. In addition, the sale should be expected to qualify for recognition as a
completed sale within one year from the date of classification, except when events or circumstances
beyond the Group’s control may extend the period and if there is evidence that management is still
committed to its plan to sell the asset.
Assets classified as held for sale are measured at the lower of their carrying amount and fair value less
costs to sell.
Property, plant and equipment and intangible assets are not depreciated or amortised once classified
as held for sale.
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
12
4. Summary of significant accounting policies (continued)
Property, plant and equipment
Property, plant and equipment are stated at cost, net of any accumulated depreciation and
accumulated impairment losses. Such cost includes the cost of replacing part of the machinery and
equipment when that cost is incurred, if the recognition criteria are met. Likewise, when a major
inspection is performed, its cost is recognised in the carrying amount of the machinery and equipment
as a replacement if the recognition criteria are satisfied. Any other repair and maintenance costs are
recognised in the statement of profit or loss in the period in which they were incurred.
Property, plant and equipment (continued)
Depreciation is calculated on a straight-line basis over the estimated useful life of the assets, as follows:
Type of the asset
Useful life in years
Computers
2 years
Machinery and equipment
3.33 years
Motor vehicles
4 years
Managed services hardware
in accordance with the duration of the contract for
the provision of such services - usually 4/7 years
Furniture and fixtures and fittings
6.67 years
Other assets
6.67 years
An item of property, plant and equipment is derecognized upon disposal or when no future economic
benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset
(calculated as the difference between the net disposal proceeds and the carrying amount of the asset)
is included in the statement of profit or loss and other comprehensive income in the year the asset is
derecognized.
The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial
year end, and adjusted prospectively, if the expectations differ from the previous accounting
estimates.
Investment property
Investment property is property held to earn rental income or for capital appreciation or both.
Investment property is measured initially at cost, including transaction costs.
Subsequent to initial recognition, investment property is stated at fair value, which reflects market
conditions at the reporting date. Gains or losses arising from changes in the fair values of investment
property are recognized in profit or loss in the period in which they arise.
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
13
4. Summary of significant accounting policies (continued)
Investment property (continued)
Investment property is derecognised on disposal of or when the investment property is permanently
retired and no future economic benefits are expected from its disposal. Gains or losses arising from
the retirement or disposal are recognized in the statement of profit or loss and other comprehensive
income in the period of retirement or disposal.
Transfers from or to investment properties are made only in case of change of their use. For a transfer
from investment property carried at fair value to owner-occupied property or inventory, the deemed
cost for subsequent accounting under IAS 16 or IAS 2 is the fair value at the date of change in use. If
an owner-occupied property becomes an investment property, the Group applies IAS 16 up to the date
of change in use.
Borrowings costs
Borrowing costs directly attributable to the acquisition or construction of an asset that necessarily
takes a substantial period of time to get ready for its intended use are capitalized as part of the cost of
the respective assets. All other borrowing costs are expensed in the period in which they occur.
Borrowing costs consist of interest and other costs that an entity incurs in connection with the
borrowing of funds.
Government grants
Government grants are recognised initially where there is reasonable assurance that the grant will be
received and all attached conditions will be complied with by the Group. Subsequently, they are
recognized in profits and losses on a systemic basis over the asset’s useful life.
Government grants that compensate the Group for expenses incurred are recognized in profits and
losses on a systemic basis in the periods, in which the expenses were incurred.
Intangible assets
Non-current intangible assets acquired separately are measured initially at cost. The cost comprises
the purchase price, including any import duties and non-refundable purchase taxes, and any directly
attributable expenditure on bringing the asset to its intended use.
Following initial recognition, intangible assets are carried at cost less any accumulated amortization
and any accumulated impairment losses. Subsequent expenditure on an intangible asset after its
purchase or its completion is recognized as an expense when it is incurred unless it is probable that
this expenditure will enable the asset to generate future economic benefits in excess of its originally
assessed standard of performance and this expenditure can be measured and attributed to the asset
reliably. If these two conditions are met, the subsequent expenditure is added to the cost of the
intangible asset.
Internally generated intangible assets, excluding development costs, are not capitalised and
expenditure is reflected in the statement of profit or loss in the year in which the expenditure is
incurred.
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
14
4. Summary of significant accounting policies (continued)
Intangible assets (continued)
Development is the application of research findings or other knowledge to a plan or design for the
production of new or substantially improved materials, devices, products, processes, systems or
services before the start of commercial production or use. To assess whether an internally generated
intangible asset meets the criteria for recognition, the Group classifies the generation of the asset into
a research phase and a development phase.
If the Group cannot distinguish the research phase from the development phase of an internal project
to create an intangible asset, the Group treats the expenditure on that project as if it were incurred in
the research phase only. Development costs are recognised for assets if the Group has control and
expects future economic benefits from it.
The useful life of the intangible assets is assessed to be finite.
Amortisation is calculated on a straight-line basis over the estimated useful life of the asset as follows:
Type of asset
Useful life in years
Software
2 years
Managed services software
in accordance with the duration of the contract
years - usually 4/7 years
Other assets
Within the contract period
Intangible assets with finite lives are amortised over the useful economic life and assessed for
impairment whenever there is an indication that the intangible asset may be impaired. The
amortisation period and the amortisation method for an intangible asset with a finite useful life are
reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern
of consumption of future economic benefits embodied in the asset is accounted for by changing the
amortisation period or method, as appropriate, and treated as changes in accounting estimates. The
amortisation expense on intangible assets with finite lives is classified by function in the statement of
profit or loss and other comprehensive income, depending on the use of the intangible asset.
Any gain or loss arising on derecognition of an intangible asset, calculated as the difference between
the net disposal proceeds and the carrying amount of the asset, is included in the statement of profit
or loss and other comprehensive income for the year in which the asset is derecognised.
Inventories
Inventories include materials, goods for trading, and work in progress. Inventories are measured at the
lower of cost or net realisable value. The cost of inventories reflects their purchase price plus any other
costs necessary to bring them to their present location and condition and is determined using the
weighted average method. Net realisable value for goods for trading and finished products is the
estimated selling price in the ordinary course of business, less estimated costs of completion and the
estimated costs necessary to make the sale.
Work in progress includes cost of direct materials and labour but excluding borrowing costs.
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
15
4. Summary of significant accounting policies (continued)
Intangible assets (continued)
Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that an asset may be
impaired. If any such indication exists, or when annual impairment testing for an asset is required, the
Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the
higher of an asset’s or cash-generating unit’s fair value less costs of disposal and its value in use. It is
determined for an individual asset, unless the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets. Where the carrying amount of an asset
exceeds its recoverable amount, the asset is considered impaired and is written down to its
recoverable amount. 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 assessments of the time value
of money and the risks specific to the asset. In determining fair value less costs of disposal, an
appropriate valuation model is used.
Impairment losses on continuing operations are recognised in the statement of comprehensive income
in expense categories consistent with the function of the impaired asset.
For all non-financial assets excluding goodwill, the Group assesses whether there are indications that
the impairment loss on an asset other than goodwill recognized in prior periods may no longer exist or
may have decreased. If such indications exist, the Group determines the recoverable amount of the
asset or cash-generating unit. An impairment loss is reversed only when there has been a change in
the estimates used to determine the recoverable amount of the asset after recognition of the last
impairment loss. If that is the case the carrying amount of the asset is increased to its recoverable
amount. The reversal of an impairment loss is limited so that the carrying amount of the asset does
not exceed its recoverable amount nor exceed the carrying amount, after deduction of amortization,
that would have been determined had no impairment loss been recognized for asset in previous
periods. The reversal of an impairment loss is recognized in the statement of profit or loss and other
comprehensive income for the year.
Cash and cash equivalents
Cash and short term deposits comprise cash in bank accounts and on hand, and short-term deposits
with an original maturity of three months or less.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and cash
equivalents as defined above.
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
16
4. Summary of significant accounting policies (continued)
Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair
value through other comprehensive income (OCI), and fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial asset’s contractual
cash flow characteristics and the Group’s business model for managing them. With the exception of
trade receivables that do not contain a significant financing component, the Group initially measures
a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or
loss, transaction costs. Trade receivables that do not contain a significant financing component are
measured at the transaction price determined under IFRS 15.
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 from
collecting contractual cash flows, selling the financial assets, or both.
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.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
• Financial assets at amortised cost (debt instruments)
• Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt
instruments)
• Financial assets designated at fair value through OCI with no recycling of cumulative gains
and losses upon derecognition (equity instruments)
• Financial assets at fair value through profit or loss
Financial assets at amortised cost (debt instruments)
The Company measures financial assets at amortised cost if both of the following conditions are met:
• The financial asset is held within a business model with the objective 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 effective interest rate method and
are impaired. Gains and losses are recognized in profit or loss statement when the asset is
derecognised, modified or impaired.
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
17
4. Summary of significant accounting policies (continued)
Financial assets (continued)
Financial assets at amortised cost of the Group include trade receivables and loans to third parties.
Derecognition
A financial asset is derecognized when:
• The rights to receive cash flows from the asset have expired; or
• The Group has transferred its rights to receive cash flows from the asset or has assumed an
obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-
through’ arrangement; and either (a) the Group has transferred substantially all the risks and rewards
of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards
of the asset, but has transferred control of the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered into a
pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of
ownership. 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 for expected credit losses (ECLs) for all debt instruments not held
at fair value through profit or loss. ECLs 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.
ECLs are recognised in two stages. For credit exposures for which there has not been a significant
increase in credit risk since initial recognition, ECLs are provided for credit losses that result from
default events that are possible within the next 12-months (a 12-month ECL). For those credit
exposures for which there has been a significant increase in credit risk since initial recognition, a loss
allowance is required for credit losses expected over the remaining life of the exposure, irrespective
of the timing of the default (a lifetime ECL).
For trade receivables and contract assets, the Group applies a simplified approach in calculating ECLs.
Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance
based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is
based on its historical credit loss experience, adjusted for forward-looking factors specific to the
debtors and the economic environment.
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
18
4. Summary of significant accounting policies (continued)
Financial assets (continued)
The Group considers a financial asset in default when internal or external information indicates that
the Group is unlikely to receive the outstanding contractual amounts in full before taking into account
any credit enhancements held by the Group. A financial asset is written off when there is no
reasonable expectation of recovering the contractual cash flows.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit
or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an
effective hedge, as appropriate.
Financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and
payables, net of directly attributable transaction costs.
The Group’s financial liabilities include trade and other payables, loans and borrowings including bank
overdrafts, and derivative financial instruments.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at
amortised cost using the effective interest rate (EIR) method. Gains and losses are recognised in profit
or loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees
or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the
statement of profit or loss and other comprehensive income.
This category generally applies to interest-bearing loans and borrowings. For more information, refer
to note 26„Interest-bearing loans and borrowings”.
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
19
4. Summary of significant accounting policies (continued)
Financial liabilities (continued)
Derecognition
A financial liability is 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 and other comprehensive income.
Offsetting 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.
Provisions
General
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result
of a past event, it is probable that an outflow of resources embodying economic benefits will be
required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
Where the Group expects some or all of a provision to be reimbursed, for example under an insurance
contract, the reimbursement is recognised as a separate asset but only when the reimbursement is
virtually certain. The expense relating to any provision is presented in the statement of comprehensive
income net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax
rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the
increase in the provision due to the passage of time is recognised as a finance cost.
Employee benefits
Short-term employee benefits include salaries, interim and annual bonuses, social security
contributions and paid annual leave of current employees expected to be settled wholly within twelve
months after the end of the reporting period. They are recognised as an employee benefit expense in
the profit or loss or included in the cost of an asset when service is rendered to the Group. Short-term
employee benefits are measured at the undiscounted amount of the expected cost of the benefit.
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
20
4. Summary of significant accounting policies (continued)
State social security plan
All employees of the Group are members of the Bulgarian Social Security Plan. In the normal course of
business, the Group makes payments to the National Social Security Fund and National Health
Insurance Fund based on employee’s remuneration, at rates determined by the Bulgarian Social
Security Code. The share of the Group in the social security contributions is treated as payments made
under a defined contribution plan and is recognized as expense at the time when incurred. Under the
State Social Security Plan, all related risks are assumed by the employees. The Group bears no other
obligation.
Retirement benefits
The Group operates a defined benefit plan arising from the requirement of the Bulgarian labour
legislation to pay two or six gross monthly salaries to its employees upon retirement, depending on
the length of their service. If an employee has worked for the Company for 10 years, the retirement
benefit amounts to six gross monthly salaries upon retirement, otherwise, two gross monthly salaries.
These retirement benefits are unfunded. The cost of providing benefits under the retirement benefit
plan is determined by the Group using the actuarial projected unit credit method. Re-measurements,
comprising of actuarial gains and losses, are recognised immediately in the statement of financial
position with a corresponding debit or credit to retained earnings through other comprehensive
income in the period in which they occur. Re-measurements are not reclassified to profit or loss in
subsequent periods. Past service costs are recognised in profit or loss on the earlier of:
• The date of the plan amendment or curtailment, and
• The date that the Group recognises restructuring-related costs
Interest expense is calculated by applying the discount rate to the retirement benefit liability. The
changes in the defined benefit obligation are recognised by the Group in profit or loss for the period
and are presented as follows:
• Service costs comprising current service costs, past-service costs, gains and losses on
curtailments and non-routine settlements within “Emplyee benefit expense”;
• Net interest expense or income within “Finance costs”.
Revenue from contracts with customers
Revenue from contracts with customers is recognised when control of the goods or services is
transferred to the customer at an amount that reflects the consideration to which the Group expects
to be entitled in exchange for those goods or services.
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
21
4. Summary of significant accounting policies (continued)
Revenue from contracts with customers (continued)
The Group has generally concluded that it is the principal in its revenue arrangements, because it
typically controls the goods or services before transferring them to the customer.
The disclosures of significant accounting judgements, estimates and assumptions relating to revenue
from contracts with customers are provided in note 5.
Sale of goods/equipment
Revenue from sale of goods and equipment is recognised at the point in time when control of the asset
is transferred to the customer, generally on delivery of the equipment. The normal credit term is 30
to 90 days upon delivery.
The Group considers whether there are other promises in the contract that are separate performance
obligations to which a portion of the transaction price needs to be allocated (e.g., warranties). In
determining the transaction price for the sale of equipment, the Group considers the effects of
variable consideration, the existence of significant financing components, noncash consideration, and
consideration payable to the customer (if any).
Significant financing component
Generally, the Group receives short-term advances from its customers. Using the practical expedient
in IFRS 15, the Group does not adjust the promised amount of consideration for the effects of a
significant financing component if it expects, at contract inception, that the period between the
transfer of the promised good or service to the customer and when the customer pays for that good
or service will be one year or less.
In certain cases, the Group receives long-term advances from clients. The Group determines that
payments terms are structured mainly for reasons other than the provision of funding and concludes
that there is no significant funding component.
Warranty obligations
The Group provides also an extended warranty beyond fixing defects that existed at the time of sale.
These service-type warranties are sold either separately or bundled together with the sale of fire
prevention equipment. The legal warranty is not accounted by the Group as it is borne by the producer
of the equipment.
Contracts for bundled sales of equipment and a service-type warranty comprise two performance
obligations because the promises to transfer the equipment and to provide the service-type warranty
are capable of being distinct. Using the relative stand-alone selling price method, a portion of the
transaction price is allocated to the service-type warranty and recognised as a contract liability.
Revenue is recognised over the period in which the service-type warranty is provided based on the
time elapsed.
Installation services
The Group provides installation services that are either sold separately or bundled together with the
sale of equipment to a customer. The installation services can be obtained from other providers and
do not significantly customise or modify the equipment. Contracts for bundled sales of equipment and
installation services are comprised of two performance obligations because the promises to transfer
equipment and provide installation services are capable of being distinct and separately identifiable.
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
22
4. Summary of significant accounting policies (continued)
Revenue from contracts with customers (continued)
Installation services (continued)
Accordingly, the Group allocates the transaction price based on the relative stand-alone selling prices
of the equipment and installation services.
The Group recognises revenue from installation services over time by considering the stage of
completion of installation services. Usually, these services are carried out shortly after the delivery of
the equipment. The sales revenue of the equipment is recognized at a point in time, upon the delivery
of the equipment.
Provision of services related to licensing and software, developed by third parties
The Group provides services related to the transfer of software licenses under contracts with
customers, which is fulfilled by downloading and activating a license key. An integral part of the
contracts is the provision of consultancy services to the customers regarding the choice of an optimal
package of software products and offering them assistance with the implementation of the licensing
system.
As for the customer contracts that involve a combination of consultancy services and licensing,
developed by third party, revenue is recognized at the time of delivery of the software product.
Provision of managed services
These services include long-term customer contracts (typically between five and seven years) to
support and manage the customer’s IT infrastructure, which includes ongoing proactive surveillance,
remote management, and on-site support. Under the majority of the contracts, the Group provides
network and/or voice communications equipment for use as part of its contractual obligation. Revenue
under managed service contracts is recognized over the term of the contract on a monthly basis.
Contract balances
Contract assets
A contract asset is the right to consideration in exchange for goods or services transferred to the
customer. If the Group performs by transferring goods or services to a customer before the customer
pays consideration or before payment is due, a contract asset is recognised for the earned
consideration that is conditional.
Trade receivables
A receivable represents the Group’s right to an amount of consideration that is unconditional (i.e., only
the passage of time is required before payment of the consideration is due).
Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Group has
received consideration (or an amount of consideration is due) from the customer. If a customer pays
consideration before the Group transfers goods or services to the customer, a contract liability is
recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities
are recognised as revenue when the Group performs under the contract.
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
23
4. Summary of significant accounting policies (continued)
Revenue from contracts with customers (continued)
Interest
Interest income is recognised as the interest accrues (using the effective interest method that is the
rate that exactly discounts estimated future cash receipts through the expected life of the financial
instrument) to the net carrying amount of the financial asset.
Dividends
A liability to make cash or non-cash distributions to the equity owners of the parent company is
recognised when the distribution is authorised (ie authorised by the shareholders) and is no longer at
the discretion of the Company. A corresponding amount is debited directly to equity.
Lease
The determination of whether an arrangement is, or contains, a lease is made at inception date. And
namely, whether the arrangement conveys a right to use the asset for a certain period of time.
The Group as a lessee
The Group applies a single recognition and measurement approach for all leases, except for short-term
leases (i.e. leases with a lease contract term of less than 12 months) and leases of low-value assets.
The Group recognises lease liabilities to make lease payments and right-of-use assets representing the
right to use the underlying assets.
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the
underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated
depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost
of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred,
and lease payments made at or before the commencement date, an estimate of costs to be incurred
by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located
or restoring the underlying asset to the condition required by the terms and conditions of the lease,
less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the
shorter of the lease term and the estimated useful lives of the assets, as follows:
• Plant and machinery 3.33 years
• Motor vehicles and other equipment 4 years
If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects
the exercise of a purchase option, depreciation is calculated using the estimated useful life of the
asset.
The right-of-use assets are also subject to impairment. Refer to the accounting policies in section
Impairment of non-financial assets.
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
24
4. Summary of significant accounting policies (continued)
Lease (continued)
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the
present value of lease payments to be made over the lease term. The lease payments include fixed
payments (including in- substance fixed payments) less any lease incentives receivable, variable lease
payments that depend on an index or a rate, and amounts expected to be paid under residual value
guarantees. The lease payments also include the exercise price of a purchase option reasonably
certain to be exercised by the group and payments of penalties for terminating the lease, if the lease
term reflects the entity exercising the option to terminate.
Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless
they are incurred to produce inventories) in the period in which the event or condition that triggers
the payment occurs.
In calculating the present value of lease payments, the Group uses borrowing interest rate based on
interest rate statistics because the interest rate implicit in the lease is not at any time readily
determinable. After the commencement date, the amount of lease liabilities is increased to reflect the
accretion of interest and reduced for the lease payments made. In addition, the carrying amount of
lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the
lease payments (e.g., changes to future payments resulting from a change in an index or rate used to
determine such lease payments) or a change in the assessment of an option to purchase the
underlying asset.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases of machinery
and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement
date and do not contain a purchase option). It also applies the lease of low-value assets recognition
exemption to leases of office equipment that are considered to be low value. Lease payments on
short-term leases and leases of low- value assets are recognised as expense on a straight-line basis
over the lease term.
The Group as a lessor
Leases in which the Group does not transfer substantially all the risks and rewards incidental to
ownership of an asset are classified as operating leases. Rental income arising is accounted for on a
straight-line basis over the lease terms and is included in revenue in the statement of statement of
comprehensive income due to its operating nature. Initial direct costs incurred in negotiating and
arranging an operating lease are added to the carrying amount of the leased asset and recognised over
the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the
period in which they are earned.
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
25
4. Summary of significant accounting policies (continued)
Taxes
Current tax
Current income tax assets and liabilities for the current and prior periods are measured at the amount
expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to
compute the amount are those that are enacted or substantially enacted by the reporting date.
Deferred tax
Deferred income tax is provided using the liability method on temporary differences at the reporting
date between the tax bases of assets and liabilities and their carrying amounts for financial reporting
purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences, except:
• where the deferred income tax liability arises from the initial recognition of goodwill or of an
asset or liability in a transaction that is not a business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable profit or loss; and
• in respect of taxable temporary differences associated with investments in subsidiaries,
associates and interests in joint ventures, where the timing of the reversal of the temporary differences
can be controlled and it is probable that the temporary differences will not reverse in the foreseeable
future.
Deferred income tax assets are recognised for all deductible temporary differences, carry forward of
unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be
available against which the deductible temporary differences, and the carry forward of unused tax
credits and unused tax losses can be utilised except:
• where the deferred income tax asset relating to the deductible temporary difference arises
from the initial recognition of an asset or liability in a transaction that is not a business combination
and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
• in respect of deductible temporary differences associated with investments in subsidiaries,
associates and interests in joint ventures, deferred income tax assets are recognised only to the extent
that it is probable that the temporary differences will reverse in the foreseeable future and taxable
profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to
the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part
of the deferred income tax asset to be utilised.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to
the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have
been enacted or substantively enacted at the reporting date.
Deferred income tax relating to items recognised directly in equity is recognised in equity and not in
the statement of profit or loss and other comprehensive income for the year.
Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right
exists to set off current tax assets against current income tax liabilities and the deferred income taxes
relate to the same taxable entity and the same taxation authority.
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
26
4. Summary of significant accounting policies (continued)
Taxes (continued)
Value Added Tax
Revenue, expenses and assets are recognised net of the amount of sales tax except:
• where the value added tax incurred on a purchase of assets or services is not recoverable from
the taxation authority, in which case the value added tax is recognised as part of the cost of acquisition
of the asset or as part of the expense item as applicable; and
• receivables and payables that are stated with the amount of value added tax included.
The net amount of value added tax recoverable from, or payable to, the taxation authority is included
as part of receivables or payables in the balance sheet.
Share capital and reserves
Telelink Business Services Group is a shareholding company and is obliged to register with the Trade
register certain level of share capital that will act as a collateral to the creditors. Shareholders meet
obligations of the Company up to their own shareholding and can claim refund of their shareholding
only during liquidation or insolvency proceedings. The share capital is presented as the nominal value
of the issued and paid shares.
According to the Commercial act regulations the Group is obliged to set aside Legal reserves.
Shares bought back are presented in the statement of financial position at cost and are deducted from
the Group equity. The net effect of the shares bought back and their transfer to employees within the
share-based payments plans in the Group is presented directly in the Other components of equity.
Share-based payments
Employees and members of the Managing board of the Group receive remuneration in the form of
share-based payments, whereby employees render services as consideration for equity instruments
(equity-settled transactions). Equity instruments transferred are measured by their fair value at grant
date. The fair value of the share-based payment considerations under conditions, that have not vested,
is measured to reflect the conditions and to exclude any differences between expected and actual
results. The cost of equity-settled transactions is recognised, together with the corresponding increase
in the equity over the period in which the service and, where applicable, the performance conditions
are fulfilled (the vesting period). More details are provided in Note 37.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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5. Significant accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and
assumptions that affect the reported amounts of assets and liabilities, and the disclosure of the
contingent liabilities at the date of the statement of financial position, as well as on the income and
expenses reported for the period. However, uncertainty about these assumptions and estimates could
result in outcome that requires a material adjustment to the carrying amount of the asset or liability
in subsequent reporting periods.
Judgements
In the process of applying the adopted accounting policies, the Group’s management has made the
following judgements, which have the most significant effect on the amounts recognised in the
financial statements:
Joint Arrangements
The Group assesses its participation in each consortium, where joint control is present as joint
arrangements. Management analysed the rights and obligations by considering the structure and legal
form of each arrangement, the contractual terms agreed to by the parties to the arrangement and all
other relevant facts and circumstances, in order to determine the type of Joint Arrangement it is
involved in – Joint Operations or Joint Venture. The analysis performed by management has
determined that the participation in all the consortiums meets the criteria of recognition as Joint
Operations.
Revenue from contracts with customers
The reporting of revenue from contracts with customers requires significant judgments to be made by
the Group's management to determine the individual performance obligations under contracts with
customers, which significantly affect the amount of revenue recognized in the reporting period. Key
judgements include an analysis of the economic nature and commercial context of contracts with
customers to identify individual performance obligations, as well as an assessment of their progress at
the end of the reporting period, including estimates and assumptions about the volume of services,
activities and inventories that are required for satisfaction of the performance obligations; the
expected total contract costs; the remaining costs of completing the contract; the total revenue from
the contract, as well as the risks under the contracts, including technical, regulatory and legal risks.
The Group applied the following judgements that significantly affect the determination of the amount
and timing of revenue from contracts with customers:
• Identifying performance obligations in a bundled sale of equipment and installation services
The Group provides installation services that are bundled together with the sale of equipment to a
customer. The installation services are a promise to transfer services in the future and are part of the
negotiated exchange between the Group and the customer. The Group has determined that both the
equipment and installation services are capable of being distinct. The Group has also determined that
the promises to transfer the equipment and to provide installation services are distinct within the
context of more contracts. The equipment and installation are not inputs to a consolidated item in the
contract. The Group is not providing significant integration services because the presence of the
equipment and installation services together in the contract does not result in any additional or
consolidated functionality. In addition, the equipment and installation services are not highly
interdependent or highly interrelated, because the Group would be able to transfer the equipment
even if the customer declined installation services and the customer itself, would be able to ensure
installation services in relation to products offered by other distributors. Consequently, the Group
allocates a portion of the transaction price to the equipment and the installation services based on
relative stand-alone selling prices.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
28
5. Significant accounting judgements, estimates and assumptions (continued)
Judgements (continued)
Revenue from contracts with customers (continued)
• Principal versus agent considerations
The Group enters into contracts with its customers for the sale of equipment/goods and
licenses/software produced by produced by various suppliers. The Group has determined that it
controls the goods before they are transferred to customers, and it has the ability to direct the use of
the equipment or obtain benefits from the equipment. The following factors indicate that the Group
controls the goods before they are being transferred to customers. Therefore, the Group has
determined that it acts as a principal in these contracts.
- The Group is primarily responsible for fulfilling the promise to provide the specified
equipment.
- The Group bears the inventory risk before or after the specified equipment has been
transferred to the customer as it purchases equipment and holds it in a warehouse.
- The Group has discretion in establishing the price for the specified equipment.
In addition, the Group has concluded that it transfers control over its services at a point in time, upon
completed tests of functioning equipment and acceptance by the customer.
• Determining the timing of satisfaction of services
Judgment is required to determine the degree of satisfaction of the performance obligation.
The Group determined that, depending on the specifics of the contract with customers, the cost-plus-
margin method of inputs or linear recognition of revenue over time based on the period in the
contract, are the best methods in measuring progress of services provided.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the
balance sheet date, that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are discussed below.
Useful lives of property, plant and equipment, and intangible assets
Financial reporting of plant and equipment, and intangible assets involves estimates as to their
expected useful lives and residual values, based on management assessments. Further details about
the useful lives of property, plant and equipment, and intangible assets are provided in Note 4
„Summary of significant accounting policies”.
Revaluation of investment property
The Group measures its investment property at fair value with any changes in the fair value being
recognised in profit or loss. The Group engages an independent valuer to determine the fair value at
the reporting period-end or at the date of change in use. The key assumptions used to determine the
fair value of investment property and sensitivity analyses are provided in Note 19„Investment
property“.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
29
5. Significant accounting judgements, estimates and assumptions (continued)
Estimates and assumptions (continued)
Provision for expected credit losses of trade receivables and contract assets
The Group uses a provision matrix to calculate ECLs for trade receivables and contract assets. The
provision matrix is initially based on the Group’s historical observed default rates. The Group will
calibrate the matrix to adjust the historical credit loss experience with forward-looking information.
For instance, if forecast economic conditions are expected to deteriorate over the next year which can
lead to an increased number of defaults in the manufacturing sector, the historical default rates are
adjusted. At every reporting date, the historical observed default rates are updated and changes in the
forward-looking estimates are analysed.
The assessment of the correlation between historical observed default rates, forecast economic
conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to changes in
circumstances and of forecast economic conditions. The Group’s historical credit loss experience and
forecast of economic conditions may also not be representative of customer’s actual default in the
future.
Write down of inventories
In general, inventories are written down to net realisable value. Estimates of net realisable value are
based on the most reliable evidence available at the time the estimates are made, of the amount the
inventories are expected to realise. Estimates of net realisable value also take into consideration the
purpose for which the inventory is held.
Income tax
Current income tax liabilities are for the current and prior periods and are measured at the amounts
expected to be paid to the taxation authorities, using the tax rates that have been enacted by the
balance sheet date. Provision for income taxes reported in the respective income tax returns includes
an estimate of the potential additional tax assessments that may be imposed by the tax authorities
upon settlement of the open tax years. Accordingly, the final settlement of the income taxes might
differ from the income taxes that have been accounted for in the financial statements.
Fair value measurement
The Group measures non-financial assets, such as, investment property at fair value at each reporting
date. The fair values of financial instruments and investment properties are disclosed in note 34"Fair
value measurement".
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The fair value measurement is
based on the presumption that the transaction to sell the asset or transfer the liability takes place
either:
• In the principal market for the asset or liability, or
• In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible to the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants
would use when pricing the asset or liability, assuming that market participants act in their economic
best interest.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
30
5. Significant accounting judgements, estimates and assumptions (continued)
Estimates and assumptions (continued)
Fair value measurement (continued)
A fair value measurement of a non-financial asset takes into account a market participant's ability to
generate economic benefits by using the asset in its highest and best use or by selling it to another
market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient
data are available to measure fair value, maximising the use of relevant observable inputs and
minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are
categorised within the fair value hierarchy, described as follows, based on the lowest level input that
is significant to the fair value measurement as a whole:
• Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
• Level 2 — Valuation techniques for which the lowest level input that is significant to the fair
value measurement is directly or indirectly observable;
• 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 in the financial statements on a recurring basis, the Group
determines whether transfers have occurred between Levels in the hierarchy by re-assessing
categorisation (based on the lowest level input that is significant to the fair value measurement as a
whole) at the end of each reporting period.
The Group’s management determines the policies and procedures for both recurring fair value
measurement, and for non-recurring measurement, such as assets held for distribution in discontinued
operation.
At each reporting date, the management analyses the movements in the values of assets and liabilities
which are required to be re-measured or re-assessed as per the Group’s accounting policies. For this
analysis, the management verifies the major inputs applied in the latest valuation by agreeing the
information in the valuation computation to contracts and other relevant documents. The
management, in conjunction with the valuation experts, also compares each the changes in the fair
value of each asset and liability with relevant external sources to determine whether the change is
reasonable.
For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on
the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value
hierarchy as explained above.
Legal guarantees
The Group does not report legal guarantee obligations for goods sold as they are borne by the
equipment manufacturer.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
31
5. Significant accounting judgements, estimates and assumptions (continued)
Estimates and assumptions (continued)
External temporary differences in consolidated financial statement
The Group does not recognise deductible temporary differences associated with investments in
subsidiaries, associates and interests in joint ventures, as the Group considers there is no probability
that the temporary differences will reverse in the foreseeable future and taxable profit will be available
against which the temporary differences can be utilised.
Significant funding component
In some cases the Group receives long-term advances from customers. The Group accrues one time
advance amount for the services, since other payment terms would affect the nature of the risks, borne
by the Group for rendering the services, and may turn the provision of the service unprofitable.
Following the analysis, the Group determines there is no significant funding component.
6. Changes in accounting policies and disclosures
New and amended standards and interpretations
The Group applied for the first-time certain standards and amendments, which are effective for annual
periods beginning on or after 1 January 2021. The Group has early adopted the Amendments to IFRS
16 Covid-19 Related Rent Concessions beyond 30 June 2021 as specified below. The Group has not
early adopted any other standard, interpretation or amendment that has been issued but is not yet
effective.
Amendments to IFRS 16 Covid-19 Related Rent Concessions
In March 2021, the Board amended the conditions of the practical expedient in IFRS 16 that provides
relief to lessees from applying the IFRS 16 guidance on lease modifications to rent concessions arising
as a direct consequence of the covid-19 pandemic. The amendments provide relief to lessees from
applying IFRS 16 guidance on lease modification accounting for rent concessions arising as a direct
consequence of the Covid-19 pandemic. As a practical expedient, a lessee may elect not to assess
whether a Covid-19 related rent concession from a lessor is a lease modification. A lessee that makes
this election accounts for any change in lease payments resulting from the Covid-19 related rent
concession the same way it would account for the change under IFRS 16, if the change were not a lease
modification. The 2021 amendment is effective for annual reporting periods beginning on or after 1
April 2021. Earlier application is permitted. Following the 2021 amendment, the practical expedient
now applies to rent concessions for which any reduction in lease payments affects only payments
originally due on or before 30 June 2022, provided the other conditions for applying the practical
expedient are met. Lessees apply the practical expedient retrospectively, recognising the cumulative
effect of initially applying the amendment as an adjustment to the opening balance of retained
earnings (or other component of equity, as appropriate) at the beginning of the annual reporting
period in which the lessee first applies the amendment. In the reporting period in which a lessee first
applies the 2021 amendment, the lessee is not required to disclose the amount of the adjustment for
each financial statement line affected and earnings per share required by paragraph 28(f) of IAS 8.
These amendments had no impact on the financial statements of the Group.
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
32
6. Changes in accounting policies and disclosures (continued)
Interest Rate Benchmark Reform – Phase 2 – IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 (Amendments)
In August 2020, the IASB published Interest Rate Benchmark Reform – Phase 2, Amendments to IFRS
9, IAS 39, IFRS 7, IFRS 4 and IFRS 16, completing its work in response to IBOR reform. The amendments
provide temporary reliefs which address the financial reporting effects when an interbank offered rate
(IBOR) is replaced with an alternative nearly risk-free interest rate (RFR). In particular, the amendments
provide for a practical expedient when accounting for changes in the basis for determining the
contractual cash flows of financial assets and liabilities, to require the effective interest rate to be
adjusted, equivalent to a movement in a market rate of interest. Also, the amendments introduce
reliefs from discontinuing hedge relationships including a temporary relief from having to meet the
separately identifiable requirement when an RFR instrument is designated as a hedge of a risk
component. Furthermore, the amendments to IFRS 4 are designed to allow insurers who are still
applying IAS 39 to obtain the same reliefs as those provided by the amendments made to IFRS 9. There
are also amendments to IFRS 7 Financial Instruments: Disclosures to enable users of financial
statements to understand the effect of interest rate benchmark reform on an entity’s financial
instruments and risk management strategy. The amendments are effective for annual periods
beginning on or after 1 January 2021 with earlier application permitted. While application is
retrospective, an entity is not required to restate prior periods. These amendments had no impact on
the financial statements of the Group.
7. Standards issued but not yet effective and not early adopted
The new and amended standards and interpretations that are issued, but not yet effective, up to the
date of issuance of the Group’s financial statements are disclosed below. The Group intends to adopt
these new and amended standards and interpretations, if applicable, when they become effective.
Covid-19-Related Rent Concessions beyond 30 June 2021 Amendments to IFRS 16
On 28 May 2020, the IASB issued Covid-19-Related Rent Concessions - amendment to IFRS 16 Leases.
The amendments provide relief to lessees from applying IFRS 16 guidance on lease modification
accounting for rent concessions arising as a direct consequence of the Covid-19 pandemic. As a
practical expedient, a lessee may elect not to assess whether a Covid-19 related rent concession from
a lessor is a lease modification. A lessee that makes this election accounts for any change in lease
payments resulting from the Covid-19 related rent concession the same way it would account for the
change under IFRS 16, if the change were not a lease modification. The amendment was intended to
apply until 30 June 2021, but as the impact of the Covid-19 pandemic is continuing, on 31 March 2021,
the IASB extended the period of application of the practical expedient to 30 June 2022.The amendment
applies to annual reporting periods beginning on or after 1 April 2021.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
33
7. Standards issued but not yet effective and not early adopted (continued)
IFRS 17 Insurance Contracts
In May 2017, the IASB issued IFRS 17 Insurance Contracts (IFRS 17), a comprehensive new accounting
standard for insurance contracts covering recognition and measurement, presentation and disclosure.
Once effective, IFRS 17 will replace IFRS 4 Insurance Contracts (IFRS 4) that was issued in 2005. IFRS 17
applies to all types of insurance contracts (i.e., life, non-life, direct insurance and re-insurance),
regardless of the type of entities that issue them, as well as to certain guarantees and financial
instruments with discretionary participation features.
A few scope exceptions will apply. The overall objective of IFRS 17 is to provide an accounting model
for insurance contracts that is more useful and consistent for insurers. In contrast to the requirements
in IFRS 4, which are largely based on grandfathering previous local accounting policies, IFRS 17 provides
a comprehensive model for insurance contracts, covering all relevant accounting aspects. The core of
IFRS 17 is the general model, supplemented by:
• A specific adaptation for contracts with direct participation features (the variable fee
approach)
• A simplified approach (the premium allocation approach) mainly for short-duration contracts
IFRS 17 is effective for reporting periods beginning on or after 1 January 2023, with comparative figures
required. Early application is permitted, provided the entity also applies IFRS 9 on or before the date
it first applies IFRS 17. It is not expected that the standard would impact the financial position or
performance of the Group.
Amendments to IAS 1: Classification of Liabilities as Current or Non-current
In January 2020, the IASB issued amendments to paragraphs 69 to 76 of IAS 1 to specify the
requirements for classifying liabilities as current or non-current. The amendments clarify:
• What is meant by a right to defer settlement
• That a right to defer must exist at the end of the reporting period
• That classification is unaffected by the likelihood that an entity will exercise its deferral right
• That only if an embedded derivative in a convertible liability is itself an equity instrument
would the terms of a liability not impact its classification
In July 2021 the Board tentatively decided to propose several amendments to the clarifications made
in January 2020. In particular, the Board decided to propose that if a right to defer settlement for at
least twelve months is subject to an entity complying with conditions after the reporting date, those
conditions do not affect whether the right to defer settlement exists at the reporting date for the
purpose of classifying a liability as current or non-current. Additional presentation and disclosure
requirements would be applicable in such circumstances. Furthermore, the Board tentatively decided
to defer the effective date to no earlier than 1 January 2024 (from 1 January 2023).
The amendments have not yet been endorsed by the EU. The Group will analyze and assess the impact
of the new amendments on its financial position or performance.
Amendments to IFRS 3 Business combinations
In May 2020, the IASB issued Amendments to IFRS 3 Business Combinations - Reference to the
Conceptual Framework. The amendments are intended to replace a reference to the Framework for
the Preparation and Presentation of Financial Statements, issued in 1989, with a reference to the
Conceptual Framework for Financial Reporting issued in March 2018 without significantly changing its
requirements.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
34
7. Standards issued but not yet effective and not early adopted (continued)
Amendments to IFRS 3 Business combinations (continued)
The Board also added an exception to the recognition principle of IFRS 3 to avoid the issue of potential
‘day 2’ gains or losses arising for liabilities and contingent liabilities that would be within the scope of
IAS 37 or IFRIC 21 Levies, if incurred separately. At the same time, the Board decided to clarify existing
guidance in IFRS 3 for contingent assets that would not be affected by replacing the reference to the
Framework for the Preparation and Presentation of Financial Statements. The amendments are
effective for annual reporting periods beginning on or after 1 January 2022 and apply prospectively.
Earlier application is permitted if, at the same time or earlier, an entity also applies all of the
amendments contained in the Amendments to References to the Conceptual Framework in IFRS
Standards (March 2018). The Group will analyse and assess the impact of the new amendments on its
financial position or performance.
Amendments to IAS 16 Property, Plant and Equipment: Proceeds before Intended Use
In May 2020, the IASB issued Property, Plant and Equipment — Proceeds before Intended Use, which
prohibits entities deducting from the cost of an item of property, plant and equipment, any proceeds
from selling items produced while bringing that asset to the location and condition necessary for it to
be capable of operating in the manner intended by management. Instead, an entity recognises the
proceeds from selling such items, and the costs of producing those items, in profit or loss. The
amendment is effective for annual reporting periods beginning on or after 1 January 2022 and must
be applied retrospectively to items of property, plant and equipment made available for use on or after
the beginning of the earliest period presented when the entity first applies the amendment. The Group
will analyse and assess the impact of the new amendments on its financial position or performance.
Amendments to IAS 37: Onerous Contracts – Costs of Fulfilling a Contract
In May 2020, the IASB issued amendments to IAS 37 to specify which costs an entity needs to include
when assessing whether a contract is onerous or loss-making. The amendments apply a “directly
related cost approach”. The costs that relate directly to a contract to provide goods or services include
both incremental costs and an allocation of costs directly related to contract activities. General and
administrative costs do not relate directly to a contract and are excluded unless they are explicitly
chargeable to the counterparty under the contract.
The amendments are effective for annual reporting periods beginning on or after 1 January 2022 and
must be applied prospectively. The Group will analyse and assess the impact of the new amendments
on its financial position or performance.
IFRS 1 First-time Adoption of International Financial Reporting Standards – Subsidiary as a first-time
adopter
As part of its 2018-2020 annual improvements to IFRS standards process, the IASB issued an
amendment to IFRS 1 First-time Adoption of International Financial Reporting Standards. The
amendment permits a subsidiary that elects to apply paragraph D16(a) of IFRS 1 to measure cumulative
translation differences using the amounts reported by the parent, based on the parent’s date of
transition to IFRS. This amendment is also applied to an associate or joint venture that elects to apply
paragraph D16(a) of IFRS 1. The amendment is effective for annual reporting periods beginning on or
after 1 January 2022 with earlier adoption permitted. It is not expected that the amendments would
impact the financial position or performance of the Group.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
35
7. Standards issued but not yet effective and not early adopted (continued)
IFRS 9 Financial Instruments – Fees in the ’10 per cent’ test for derecognition of financial liabilities
As part of its 2018-2020 annual improvements to IFRS standards process the IASB issued amendment
to IFRS 9. The amendment clarifies the fees that an entity includes when assessing whether the terms
of a new or modified financial liability are substantially different from the terms of the original financial
liability. These fees include only those paid or received between the borrower and the lender, including
fees paid or received by either the borrower or lender on the other’s behalf. An entity applies the
amendment to financial liabilities that are modified or exchanged on or after the beginning of the
annual reporting period in which the entity first applies the amendment. The amendment is effective
for annual reporting periods beginning on or after 1 January 2022 with earlier adoption permitted. The
Group will analyse and assess the impact of the new amendments on its financial position or
performance.
IAS 41 Agriculture – Taxation in fair value measurements
As part of its 2018-2020 annual improvements to IFRS standards process the IASB issued amendment
to IAS 41 Agriculture. The amendment removes the requirement in paragraph 22 of IAS 41 that entities
exclude cash flows for taxation when measuring the fair value of assets within the scope of IAS 41. An
entity applies the amendment prospectively to fair value measurements on or after the beginning of
the first annual reporting period beginning on or after 1 January 2022 with earlier adoption permitted.
It is not expected that the amendments would impact the financial position or performance of the
Group.
Amendments to IFRS 10 and IAS 28 - Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture
In December 2015, the IASB decided to defer the effective date of the amendments until such time as
it has finalised any amendments that result from its research project on the equity method. The
amendments address the conflict between IFRS 10 Consolidated Financial Statements and IAS 28
Investments in Associates and Joint Ventures in dealing with the loss of control of a subsidiary that is
sold or contributed to an associate or joint venture. The amendments clarify that a full gain or loss is
recognised when a transfer to an associate or joint venture involves a business as defined in IFRS 3.
Any gain or loss resulting from the sale or contribution of assets that does not constitute a business,
however, is recognised only to the extent of unrelated investors’ interests in the associate or joint. The
amendments have not yet been endorsed by the EU. The Group will analyse and assess the impact of
the new amendments on its financial position or performance.
Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure
of Accounting policies
In February 2021, the Board issued amendments to IAS 1 and IFRS Practice Statement 2 Making
Materiality Judgements (the PS), in which it provides guidance and examples to help entities apply
materiality judgements to accounting policy disclosures. The amendments aim to help entities provide
accounting policy disclosures that are more useful by:
• Replacing the requirement for entities to disclose their ‘significant’ accounting policies with a
requirement to disclose their ‘material’ accounting policies and
• Adding guidance on how entities apply the concept of materiality in making decisions about
accounting policy disclosures
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
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7. Standards issued but not yet effective and not early adopted (continued)
Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure
of Accounting policies (continued)
The amendments are effective for annual reporting periods beginning on or after 1 January 2023.
Earlier application of the amendments to IAS 1 is permitted as long as this fact is disclosed. The
amendments have not yet been endorsed by the EU. The Group will analyze and assess the impact of
the new amendments on its financial position or performance.
Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of
Accounting Estimates
In February 2021, the Board issued amendments to IAS 8, in which it introduces a new definition of
‘accounting estimates’. The amendments clarify the distinction between changes in accounting
estimates and changes in accounting policies and the correction of errors. Also, they clarify how
entities use measurement techniques and inputs to develop accounting estimates.
The amended standard clarifies that the effects on an accounting estimate of a change in an input or
a change in a measurement technique are changes in accounting estimates if they do not result from
the correction of prior period errors. The aspect of the definition for the accounting estimates that
changes in accounting estimates may result from new information or new developments is retained
by the Board.
The amendments are effective for annual reporting periods beginning on or after 1 January 2023.
Earlier application is permitted. The amendments have not yet been endorsed by the EU. The Group
will analyse and assess the impact of the new amendments on its financial position or performance.
Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a
Single Transaction
In May 2021, the Board issued amendments to IAS 12, which narrow the scope of the initial recognition
exception under IAS 12, so that it no longer applies to transactions that give rise to equal taxable and
deductible temporary differences. The amendments clarify that where payments that settle a liability
are deductible for tax purposes, it is a matter of judgement whether such deductions are attributable
for tax purposes to the liability recognised in the financial statements or to the related asset
component. This judgement is important in determining whether any temporary differences exist on
initial recognition of the asset and liability.
Under the amendments, the initial recognition exception does not apply to transactions that, on initial
recognition, give rise to equal taxable and deductible temporary differences. It only applies if the
recognition of a lease asset and lease liability (or decommissioning liability and decommissioning asset
component) give rise to taxable and deductible temporary differences that are not equal.
The amendments are effective for annual reporting periods beginning on or after 1 January 2023. An
entity should apply the amendments to transactions that occur on or after the beginning of the earliest
comparative period presented. In addition, at the beginning of the earliest comparative period
presented, it should also recognise a deferred tax asset (provided that sufficient taxable profit is
available) and a deferred tax liability for all deductible and taxable temporary differences associated
with leases and decommissioning obligations. The amendments have not yet been endorsed by the
EU. The Group will analyse and assess the impact of the new amendments on its financial position or
performance.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
37
8. Revenue from contracts with customers
Set out below, is the disaggregation of the revenue from contracts with customers:
The geographical information on revenue from the sale of products and provision of services is based
on the customer’s location.
Contract balances
Trade receivables are non-interest bearing and are generally on terms of 30 to 60 days.
Contract assets are initially recognised for obligations fulfilled, which have not yet been invoiced to the
customer, as well as payments withheld by the customer as warranties. When the payment becomes
due, the amounts recognised as contract assets are reclassified to trade receivables.
Contract liabilities include advances from customers. They are recognized as revenue when the
performance obligation is satisfied.
Performance obligations
Sale of equipment /goods
The performance obligation is satisfied upon delivery of the equipment / goods and payment is
generally due within 30 to 90 days from delivery.
Extended maintenance
Contracts which provide for an extended warranty for new equipment or equipment owned by the
customer. Maintenance is accounted for as a separate performance obligation and part of the
transaction price is allocated to it. The performance obligation with regard to the extended warranty
is satisfied over the maintenance period (one, three, five years) based on based on the expired period
of time.
2021 2020
Приходи от договори с клиенти BGN' 000 BGN' 000
Geographical markets
Bulgaria 99,176 81,806
Other European countries 65,558 50,517
Counties outside Europe 954 3,171
165,688 135,494
Timing of revenue recognition
At a point 145,826 113,072
Over time 19,862 22,423
165,688 135,495
2021 2020
BGN'000 BGN'000
Trade receivables (note 22) 23,684 24,106
Contract assets (note 22) 2,468 2,863
Contract liabilities (note 29) 19,312 11,653
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
38
8. Revenue from contracts with customers (continued)
Installation services
The performance obligation is satisfied over time and payment is generally due upon completion of
installation and its acceptance by the customer.
Managed services
Long-term contracts for a period of three to five years for managing the customers’ IT infrastructure
where the performance obligation is satisfied over time.
Services related to licensing and software, developed by third parties
As for the customer contracts that involve a combination of consultancy services and licensing of third
party software, revenue is recognized at a point in time of delivery of the software product.
Revenue recognised over the current year from amounts included in contract liabilities at 1 January
2021 amounts to BGN 6,427 thousand (at 1 January 2020: BGN 4,863 thousand).
The transaction price allocated to the remaining performance obligations (unsatisfied or partially
unsatisfied) as at 31 December are, as follows:
9. General and administrative expenses
Accrued during the year services rendered by registered auditors are as follows:
- Fee for obligatory audit on the separate and consolidated financial statements at the amount
of BGN 116 thousand (2020: BGN 104 thousand)
2021 2020
BGN'000 BGN'000
Within one year 11,142 8,408
More than one year 8,141 3,085
19,283 11,493
2021 2020
BGN'000 BGN'000
Employee benefit expenses (4,579) (3,912)
Depreciation & amortisation (274) (222)
Consulting services (255) (500)
Office rent and utilities (334) (222)
Representative expenses (163) (106)
Other (818) (559)
(6,423) (5,521)
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
39
10. Sales and marketing expenses
11. Expenses by nature
Expenses by nature, included in the cost of sales, administrative expenses and sales and marketing
expenses are as follows:
12. Other operating income / (expenses)
2021 2020
BGN'000 BGN'000
Employee benefit expenses (5,394) (4,855)
Depreciation & amortisation (587) (267)
Consulting and agency services (1,331) (352)
Marketing and advertisement (754) (958)
Other (426) (506)
(8,492) (6,938)
2021 2020
BGN'000 BGN'000
Changes in inventories of finished goods and work in progress 1,094 251
Capitalised development costs and contract costs 117 236
Raw materials and consumables (511) (309)
Hired services (46,770) (34,348)
Employee benefit expenses (note 14) (15,637) (13,769)
Depreciation and amortisation (note 18, 20) (2,935) (2 631)
Other, including Cost of goods sold (86,489) (70,653)
(151,131) (121,223)
2021 2020
Other operating income BGN'000 BGN'000
Gain on disposal of property, plant and equipment 14 -
Written off payables 13 -
Government grants (note 25) 147 493
Rental income 28 15
Other 18 15
220 523
2021 2020
Other operating expenses EUR'000 EUR'000
Penalties (18) (15)
Other (109) (64)
(137) (115)
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
40
13. Finance income and finance costs
14. Employee benefit expenses
Additional information related to the share-based payments is presented in note 37.
The average full-time staff number and its breakdown by function are presented below:
2021 2020
Finance costs
BGN'000 BGN'000
Interest on financing (226) (252)
Net foreign exchange loss - (114)
Other financial costs (259) (197)
(485) (563)
2021 2020
Finance income BGN'000 BGN'000
Interest income - loans granted 2 13
Net foreign exchange gain 124 -
126 13
2021 2020
BGN'000 BGN'000
Salaries (13,390) (11,495)
Social security contributions (1,853) (1 667)
Expenses related to defined benefit plans (3) (6)
Share-based payments (391) (601)
(15,637) (13,769)
2021 2020
Number Number
Management 9 7
Operations 166 139
Sales 43 43
Administration 45 39
263 228
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
41
15. Income tax
The major components of income tax expenses are as follows:
The reconciliation between income tax expense and the product of accounting profit multiplied by the
statutory tax rate for the Group for the years 2021 and 2020 is as follows:
Deferred taxes of the Group as at 31 December 2021 and 2020 relate to the following items:
2021 2020
BGN'000 BGN'000
Current income tax
Current income tax charge (1,786) (1,740)
Relating to origination and reversal of temporary differences (4) 117
Income tax reported in the statement of comprehensive income (1,790) (1,623)
2021 2020
BGN'000 BGN'000
Accounting profit before income tax 14,197 14,223
Income tax rate 10% 10%
At parent's corporate income tax rate 10% (2020: 10%) (1,420) (1,422)
Tax effects of profits from subsidiaries taxed at different rate (245) (118)
Tax effect of non-deductible expenses (138) (93)
Tax effect of losses and other temporary differences on which no
deferred tax was calculated
13 10
(1,790) (1,623)
At the effective income tax rate of: 13% 11%
Income tax reported in the statement of comprehensive income (1,790) (1,623)
(1,790) (1,623)
2021 2020 2021 2020
Deferred income tax assets / (liabilities) BGN'000 BGN'000 BGN'000 BGN'000
Accrued expenses 202 291 (89) 106
Employee benefits 182 167 15 47
Property, plant and equipment/Intangible assets (160) (186) 26 (49)
Impairment losses on fanancial and contract assets 330 323 7 (7)
Share-based payments 57 20 37 20
Impairment losses on investment 18 18 - -
Deferred income tax asset / (liability) 629 633
Movement in deferred taxes (4) 117
Statement of financial
position
Statement of
comprehensive income
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
42
15. Income tax (continued)
The reconciliation between the movement in deferred tax assets / liabilities for 2021 and 2020 is as
follows:
The Group’s tax liabilities are based on the tax returns submitted to the tax authorities and are
determined finally after being verified by the national tax authorities or after the expiry of a five-year
term following the year of submission, as the case may be.
16. Assets classified as held for sale
In previous period, Telelink Business Services EAD acquired apartments located in town of Aheloi
against its trade receivables from a customer as a result of a public sale procedure. During 2021 one
of the apartments was sold.
In October 2018, Telelink Business Services EAD acquired apartments in Serbia as collateral on a loan.
The apartments were sold to Comutel DOO in 2019 and in 2019 and 2020 partial sale of the assets was
realised.
The apartments have been classified as held for sale as management is committed to a plan for their
sale.
At the end of 2021 and 2020, an external valuer was engaged to assess the market value of the
properties. The assessment showed no indications of impairment of these assets.
17. Prepayments
Prepayments comprise mainly prepaid extended maintenance in addition to the standard warranty
provided by the suppliers of the equipment.
2021 2020
BGN'000 BGN'000
Opening balance as of 1 January 633 516
Tax expense during the year recognised in profir or loss (4) 117
Closing balance 31 December
629 633
2021 2020
BGN'000 BGN'000
Balance on 1 January
8,854 8,630
Accrued during the year 18,478 9,841
Released to profit and loss (11,829) (9,617)
Balance on 31 December
15,502 8,854
Current 8,142 5,143
Non-current 7,360 3,711
15,502 8,854
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
43
18. Property, plant and equipment
The Group has performed impairment testing on the property, plant and equipment as at the end of
2021. There are no indicators that the balance value exceed the carrying value of the assets. Therefore
no impairment loss was recognised in the financial statements. Managed services assets represent
machinery and equipment, computers and inventory used under contracts for managed services.
Right-of-use
assets
Machinery
&
equipment
Computers
Motor
Vehicles
Furniture
and
Fittings
Managed
Services
assets
Total
Book value BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
Balance as of 1 January 2021 7,969 1,605 1,474 26 700 2,133 13,907
Additions 223 147 296 - 25 748 1,439
Disposals - (129) (108) - (104) (25) (366)
Transferred from inventory - 21 3 - - - 24
Transferred to inventory - - - - - (13) (13)
Balance as of 31 December 2021 8,192 1,644 1,665 26 621 2,843 14,991
Accumulated depreciation:
Balance as of 1 January 2021 (2,939) (973) (1,210) (17) (427) (431) (5,997)
Depreciation for the year (1,581) (282) (260) (6) (70) (440) (2,639)
Disposals (3) 129 95 - 104 8 333
Transferred to inventory - - - - - 1 1
Balance as of 31 December 2021 (4,523) (1,126) (1,375) (23) (393) (862) (8,302)
Net book value as of 1 January 2021 5,030 632 264 9 273 1,702 7,910
Net book value as of 31 December 2021
3,669 518 290 3 228 1,981 6,689
Right-of-use
assets
Machinery
&
equipment
Computers
Motor
Vehicles
Furniture
and
Fittings
Managed
Services
assets
Total
Book value BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
Balance as of 1 January 2020 7,468 1,292 1,418 26 702 1,313 12,219
Additions 501 409 267 - 77 607 1,861
Disposals - (122) (223) - (79) (1) (425)
Transferred from inventory - 26 12 - - 215 253
Transferred to inventory - - - - - (1) (1)
Balance as of 31 December 2020 7,969 1,605 1,474 26 700 2,133 13,907
Accumulated depreciation:
Balance as of 1 January 2020 (1,476) (917) (1,111) (10) (440) (99) (4,053)
Depreciation for the year (1,463) (178) (300) (7) (66) (333) (2,347)
Disposals - 122 201 - 79 1 403
Balance as of 31 December 2020 (2,939) (973) (1,210) (17) (427) (431) (5,997)
Net book value as of 1 January 2020 5,992 375 307 16 262 1,214 8,166
Net book value as of 31 December 2020
5,030 632 264 9 273 1,702 7,910
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
44
18. Property, plant and equipment (continued)
Geographical information
19. Investment property
Description of valuation techniques and key assumptions used in determining the fair value of the
investment property
as at 31 December 2021
Bulgaria
Other European
countries
Counties outside
Europe
Total
BGN '000 BGN '000 BGN '000 BGN '000
Property, plant and equipment 3,401 2,900 388 6,689
Investment properties 409 409
Intangible assets 480 2 482
Prepayments 2,184 5,021 155 7,360
6,065 8,332 543 14,940
as at 31 December 2020
Bulgaria
Other European
countries
Counties outside
Europe
Total
BGN '000 BGN '000 BGN '000 BGN '000
Property, plant and equipment 4,506 3,088 316 7,910
Investment properties 372 372
Intangible assets 628 3 631
Prepayments 777 2,757 177 3,711
5,911 6,220 493 12,624
2021 2020
BGN'000 BGN'000
Opening balance at 1 January
372 362
Net result from a fair value remeasurement
37 10
Closing balance at 31 December
409 372
2021 2020
BGN'000 BGN'000
Rental income derived from investment properties 28 15
Net profit arising from investment properties carried at fair value 28 15
Significant unobservable inputs
-Estimated rental value per sqm per month EUR 8,50 – 7,10
-Rent growth p.a. 1%
-Discount rate 9%
Range
Valuation technique (DCF method)
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
45
20. Intangible assets
The Group invests considerable resources in the development of new products - software solutions in
areas, such as, next generation communications, information and cyber security, integrated security,
Internet of Things.
The Group carried out an annual impairment testing as at the end of 2021. There were no indicators
that the carrying amount of the intangible assets exceeded their recoverable amount and, as a result,
no impairment loss was recognized in the financial statements.
Software
Development
Costs
Other Total
Book value:
BGN'000 BGN'000 BGN'000 BGN'000
Balance as of 1 January 2021
3,382 32 284 3,698
Additions
28 116 3 147
Disposals
(26) - (6) (32)
Transfers
9 (9) - -
Balance as of 31 December 2021
3,393 139 281 3,813
Accumulated amortization:
B
a
Balance as of 1 January 2021
(2,973) - (94) (3,067)
Amortisation for the year
(242) - (54) (296)
Disposals
26 - 6 32
Balance as of 31 December 2021
(3,189) - (142) (3,331)
Net book value as of 1 January 2021
409 32 190 631
Net book value as of 31 December 2021
204 139 139 482
Software
Development
Costs
Other Total
Book value:
BGN'000 BGN'000 BGN'000 BGN'000
Balance as of 1 January 2020
2,921 264 185 3,370
Additions
3 236 102 341
Disposals
(10) - (3) (13)
Transfers
468 (468) - -
Balance as of 31 December 2020
3,382 32 284 3,698
Accumulated amortization:
B
a
Balance as of 1 January 2020
(2,747) - (49) (2,796)
Amortisation for the year
(236) - (48) (284)
Disposals
10 - 3 13
Balance as of 31 December 2020
(2,973) - (94) (3,067)
Net book value as of 1 January 2020
174 264 136 574
Net book value as of 31 December 2020
409 32 190 631
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
46
21. Inventories
Write-down allowance for inventories
22. Trade and other receivables and contract assets
Trade and other receivables
Trade receivables are non-interest bearing and are generally on terms of 30 to 60 days.
The Group has established registered pledge over current and future trade receivables under individual
contracts of Telelink Business Services EAD in order to secure the funds utilised under an overdraft
facility and additional pledges of current and future receivables of Telelink Business Services EAD under
the projects financed by the revolving credit facility. The funds utilized by Telelink Business Services
EAD under the contract amounted to zero as at 31 December 2021 (as at 31 December 2020: zero
BGN).
Under the conditions of the loan agreement signed between Comutel DOO and Raiffeisen AD Beograd,
the respective loan funds are utilized against a pledge of at least equal amounts of the receivables
from a key account. As at 31 December 2021, the funds utilized amounted to BGN 1,725 thousand
2020 (as at 31 December 2020: BGN 1,817 thousand).
2021 2020
BGN'000 BGN'000
Materials 219 147
Goods 2,086 5,427
Dispatched goods 162 798
Work in progress 2,571 1 477
5,038 7,849
2021 2020
BGN'000 BGN'000
At 1 January
62 62
At 31 December
62 62
2021 2020
BGN'000 BGN'000
Trade receivables from related parties, gross (note 32) 1,130 1,916
Trade receivables from third parties, gross 23,007 22,661
Loss allowance (452) (471)
Trade receivables 23,684 24,106
Dividend and other receivables from related parties 1 60
Other receivables 1,733 969
Trade and other receivables 25,419 25,135
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
47
22. Trade and other receivables and contract assets (continued)
Contract assets
As at 31 December 2021, the Group had contract assets amounted BGN 2,468 thousand (31 December
2020: BGN 2,863 thousand). The Group does not expect credit losses on contract assets.
Set out below is the movement in the allowance for expected credit losses of trade receivables:
The ageing analysis of trade receivables and contract assets as at 31 December 2021 and 31 December
2020 is presented in the following table:
2021 2020
BGN'000 BGN'000
Loss allowance at 01 January
471 471
Amounts written off
(19) -
Loss allowance at 31 December
452 471
31 December 2021 < 30 days 31-60 days 61 - 90 days 91 - 180 days > 181 days Total
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
Receivables from related parties, gross 415 280 315 4 17 99 1,130
Receivables from third-party customers,
gross
17,928 452 1,815 314 328 2,170 23,007
Contract assets, gross 2,468 - - - - - 2,468
Loss allowance of trade receivables and
contract assets
- - - - - (452) (452)
Total trade receivables and contract
assets
20,811 732 2 130 318 345 1,817 26,153
Current
Days past due
31 December 2020 < 30 days 31-60 days 61 - 90 days 91 - 180 days > 181 days Total
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
Receivables from related parties, gross 1,213 628 22 32 17 4 1,916
Receivables from third-party customers,
gross
21,284 307 160 45 344 521 22,661
Contract assets, gross 2,863 - - - - - 2,863
Loss allowance of trade receivables and
contract assets
- - - - - (471) (471)
Total trade receivables and contract
assets
25,360 935 182 77 361 54 26,969
Current
Days past due
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
48
23. Loans granted
As at 31 December 2020, the Group have not granted loans, besides the USD loans that are fully
impaired as at 31 December 2017. The revaluation of the impaired loans for 2021 amounts to the
negative value of BGN 84 thousand.(for 2020: BGN 93 thousand)
24. Cash and cash equivalents
Cash in bank accounts bear floating interest rates based on the daily interest rates on bank deposits.
Short-term deposits are made for various periods between one week and three months depending on
the immediate cash requirements of the Group and earn interest at the respective short-term deposit
rates. The fair value of cash and short-term deposits at 31 December 2021 and 31 December 2020
equals their carrying amount.
25. Government grants
In 2017, Telelink Business Services EAD entered into a contract with the Ministry of Economic to
receive a grant under the project "Implementation of Innovative Services" as part of the Operational
Program "Innovation and Competitiveness" 2014-2020, that ends in 2020.
Under the contract, the grants were utilised for the purchase of certain items of property, plant and
equipment and intangible assets, as well as for the provision of hired services under the 2017 contract.
There are no unfulfilled conditions concerning the contracts. In 2018, the Company received the
financing under the contract from 2017 of BGN 373 thousand.
In 2019, Telelink Business Services EAD, being part of a Consortium, in which more than 30 partners
from various European countries participate, received the first tranche from financing under the
Operational Program ECHO European network of Cybersecurity centres and competence Hub for
innovation and Operations. The funds of BGN 464 thousand under the Program was provided and
utilized to cover personnel costs. In 2020 the Group received second tranche of funds under the
Program at the amount of BGN 383 thousand.
2021 2020
BGN'000 BGN'000
Third parties
2017/2020
2,540 2,456
Loss allowance (2,540) (2,456)
- -
Current
Maturity
2021 2020
BGN'000 BGN'000
Cash and cash equivalents in hand 3 11
Cash and cash equivalents in current accounts 12,359 11,627
Cash and cash equivalents in accounts subject of
special conditions 301 -
Short-term deposits 152 124
12,815 11,762
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
49
25. Government grants (continued)
The amount of government grants recognized in the financial statements corresponds to the useful
life of the acquired items of property, plant and equipment, and intangible assets, and the hired
services used:
26. Interest-bearing loans and borrowings
In May 2021, TBS EAD signed an Annex №5 for the extension of the availability period of the
Agreement for undertaking credit commitments under an overdraft credit line № 0018/730/10102019
dated 10.10.2019 with Unicredit Bulbank AD from May 31 2021 until June 02 2021. On June 02 2021
the TBSG AD also signed an Annex№6 for the annual renewal of the same agreement with an
availability period until May 31 2022.
The provisions of the latter Annex regarding the limits for the effective drawing of cash funds and the
undertaking of contingent commitments under the agreement included:
• overdraft credit limit of up to EUR 3,000 thousand, with a utilization period until May 31 2022
and repayment period until July 31 2022;
• revolving credit limit of up to EUR 4,000 thousand, with a utilization period until May 31 2022
and repayment period until May 31 2023;
• contingent bank credit of up to EUR 13,000 thousand, with a utilization period until June 30
2029;
• extension of letters of credit terms until May 15 2023.
All limits remain available for utilization in BGN, EUR or USD at respectively applicable interest rates of
BIR + 1.357%, 1m. EURIBOR + 1.5% and 1m. LIBOR + 1.5%, but no less than 1.5% (regardless of the
currency of utilization).
As of December 31 2021 and 31 December 2020, TBS EAD did not have any utilized and outstanding
overdraft, conditional bank loan and revolving credit funds.
2021 2020
BGN'000 BGN'000
Balance on 1 January 290 400
Received during the year - 383
Released to profit and loss (note 13) (147) (493)
Balance on 31 December 143 290
Current 143 290
143 290
2021 2020
Current BGN'000 BGN'000
Revolving credit facilities 1M LIBOR + 1.6% 1,725 1,817
Bank loans 0% - 186
1,725 2,003
Interest rate %
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
50
26. Interest-bearing loans and borrowings (continued)
On January 28 2021, Comutel signed an Annex for the annual renewal of its Credit facility agreement
with Raiffeisen Banka AD Beograd (Serbia) from 2015 with limit up to USD 5,000 thousand. The interest
rate applied under the agreement remained unchanged at 1m. LIBOR + 1.6%. The loan is fully secured
by a pledge of receivables from a key account. As of December 31 2021, funds utilized amounted to an
equivalent of BGN 1,725 thousand (31 December 2020: BGN 1,817 thousand).
On February 20 2020, Telelink Albania signed a Short-term financing agreement with First Investment
Bank – Albania with a limit of EUR 500 thousand for the financing of receivables as per invoices issued
to a specified telecom account of the company. As of December 31 2021, there are no funds utilized
by Telelink Albania under the agreement (31 December 2020: BGN 186 thousand).
Reconciliation of the movement of liabilities to cash flows from financing activity:
27. Leases
The Group has leases for offices, vehicles, and managed services assets used in the business. Leases
for managed services assets have lease terms between 3 and 4 years, vehicles - 4 years, and rented
offices 5 years. The Group’s obligations under its leases are secured by the lessor’s title to the leased
assets. Generally, the Group is restricted from assigning and subleasing the leased assets and some
contracts require the Group to maintain certain financial ratios.
There are no lease contracts that include extension and termination options and variable lease
payments.
The Group also has certain leases of premises or equipment with lease terms of 12 months or less and
leases of office equipment with low value. The Group applies the ‘short-term lease’ and ‘lease of low-
value assets’ recognition exemptions for these leases.
Set out below are the carrying amounts of right-of-use assets recognised and the movements during
the period:
2021 2020
BGN'000 BGN'000
Interest-bearing loans and borrowings at 01 January 2,003 4,124
Proceeds from borrowings 9,708 9,876
Repayments of borrowings (9,986) (11,997)
Interest expense 109 109
Interest paid (109) (109)
Interest-bearing loans and borrowings at 31 December 1,725 2,003
Buildings
Motor
Vehicles
Managed
Services
assets
Total
BGN '000 BGN '000 BGN '000 BGN '000
Balance at 1 January 2021 2,606 698 1,726 5,030
incl. under Lease contracts with transfer of
ownership by the end of the lease term
- 81 1,726 1,807
Additions 158 65 - 223
Depreciation (863) (260) (461) (1,584)
incl. under Lease contracts with transfer of
ownership by the end of the lease term
- (19) (461) (480)
Balance at 31 Dec 2021
1,901 503 1,265 3,669
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
51
27. Leases (continued)
Expenses for short-term lease (included in cost of sales) are BGN 29 thousand in 2021 (2020: BGN 28
thousand).
Set out below are the carrying amounts of lease liabilities and the movements during the period:
The Company had total cash outflows for leases of BGN 2,029 thousand in 2021, including BGN 29
thousand related to short-term leases (2020: BGN 2,080 thousand, including BGN 28 thousand related
to short-term leases).
Buildings
Motor
Vehicles
Managed
Services
assets
Total
BGN '000 BGN '000 BGN '000 BGN '000
Balance at 1 January 2020 3,385 419 2,188 5,992
incl. under Lease contracts with transfer of
ownership by the end of the lease term
- 1 2,188 2,189
Additions 34 467 - 501
incl. under Lease contracts with transfer of
ownership by the end of the lease term
- 93 - 93
Depreciation (813) (188) (462) (1,463)
incl. under Lease contracts with transfer of
ownership by the end of the lease term
- (12) (462) (474)
Exchange differences - - - -
Balance at 31 Dec 2020
2,606 698 1,726 5,030
2021 2020
BGN '000 BGN '000
Balance at 01 Jan 4,590 6,009
Additions 225 499
Accretion of interest 118 134
Payments (2,000) (2,052)
Balance at 31 December 2,933 4,590
Current 1,456 1,819
Non-current 1,477 2,771
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
52
27. Leases (continued)
Set out below are the lease related amounts recognised in profit and loss:
28. Trade and other payables
Trade payables are non-interest bearing and are normally settled on 30-60-day terms.
Tax liabilities are non-interest bearing and are settled within the statutory deadlines.
Other payables are non-interest bearing and have an average term of 30 days. Other liabilities are
mainly formed by short-term payables to personnel and accrued unused paid leave.
29. Contract liabilities
Following the initial application of IFRS 15, Advances received from clients and Deferred income
represent customer billed amounts in advance of performance are classified within Contract liabilities.
Advances received represent short-term upfront amount received by customers for services or goods.
Deferred income comprises of short and long term advances received for extended customer support.
2021 2020
BGN '000 BGN '000
Depreciation expense of rights-of-use assets (1,584) (1,463)
incl. under Lease contracts with transfer of ownership by the end of the lease term (480) (474)
Interest expenses on lease liabilities (118) (134)
incl. under Lease contracts with transfer of ownership by the end of the lease term (5) (30)
Expenses relating to short-term leases (29) (28)
Total amount recognised in profit or loss (1,731) (1,625)
2021 2020
BGN'000 BGN'000
Trade payables to related parties (note 31) 146 2,659
Trade payables to third parties 21,505 21,569
Accrued expenses 2,192 3,079
Trade payables 23,843 27,307
Tax and other statutory liabilities 1,752 3,718
Dividend and other payables to related parties (note 33) 302 -
Other payables 2,558 2 234
Trade and other payables 28,455 33,259
2021 2020
BGN'000 BGN'000
Contract liabilities to related parties 29 -
Advances received 2,172 3,643
Deferred income 17,111 8,010
Total contract liabilities 19,312 11,653
Current 11,172 8,565
Non-current 8,140 3,088
19,312 11,653
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
53
30. Retirement benefit liability
Major assumptions used for accounting purposes:
There have been no reasonably possible changes in key assumptions that could have a significant
impact on the retirement benefit liability as of year-end.
The average duration of the retirement benefit obligation is 27.79 years.
31. Related party disclosure
Group related parties
Name
Nature of relationship
Telelink Business Services EAD (Bulgaria)
Subsidiary of
Telelink Business Services Group AD – 100%
Comutel DOO (Serbia)
Subsidiary of
Telelink Business Services Group AD – 100%
Telelink Business Services DOO – Podgorica
(Montenegro)
Subsidiary of
Telelink Business Services Group AD – 100%
Telelink DOO (Bosna and Herzegovina)
Subsidiary of
Telelink Business Services Group AD – 100%
Telelink DOO (Slovenia)
Subsidiary of
Telelink Business Services Group AD – 100%
Telelink Albania SH.P.K. (Albania)
Subsidiary of
Telelink Business Services Group AD – 100%
Telelink Business Services DOOEL (Macedonia)
Subsidiary of
Telelink Business Services Group AD – 100%
Telelink Business Services DOO (Croatia)
Subsidiary of
Telelink Business Services Group AD – 100%
Telelink Business Services LLC (USA)
Subsidiary of
Telelink Business Services Group AD – 100%
Telelink Business Services SRL (Romania)
Subsidiary of
Telelink Business Services Group AD – 100%
Other related parties
Name
Nature of relationship
Telelink Bulgaria EAD (Bulgaria)
Under common control
Telelink Infra Services EAD (Bulgaria)
Under common control
Telelink City Services EAD (Bulgaria)
Under common control
Telelink Labs EOOD (Bulgaria)
Under common control
Secnet AD (Bulgaria)
Under common control
Telelink Services Romania SRL (Romania)
Under common control
Telelink Infra Services SH.P.K. (Romania)
Under common control
Telelink MK DOOEL (Macedonia)
Under common control
Telelink UK LTD. (United Kingdom)
Under common control
Telelink GmbH (Germany)
Under common control
Marifons Holdings Limited (Cyprus)
Under common control
V_investment Holdings B.V. (The Netherlands)
Under common control
2021 2020
BGN'000 BGN'000
Balance on 1 January 16 10
Accrued for the year 3 6
Balance on 31 December 19 16
Major assumptions
2021 2020
Discount Rate 0,40% 0,40%
Future Salary Increases 5,00% 5,00%
Personnel Retention Rate (depending on the age) 80,14% 80,14%
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
54
31. Related party disclosure (continued)
V_investment Bulgaria EOOD (Bulgaria)
Under common control
Field on Track OOD (Bulgaria)
Under common control
Develiot EOOD (Bulgaria)
Under common control
TOTAl TV B.V. (The Netherlands)
Under common control
V_Investments Cyprus Limited (Cyprus)
Under common control
Modeshift Inc, (USA)
Under common control
Field on Track LTD. (United Kingdom)
Under common control
TOTALNA TELEVIZIJA DOO (Croatia)
Under common control
Modeshift Europe EAD (Bulgaria)
Under common control
Telelink Investments SARL (Luxembourg)
Under common control
Richhill EOOD (Bulgaria)
Under common control
Participation in joint arrangements
Name
Nature of relationship
Consorcium SysTel (Bulgaria)
Participation
TeleLink Business Services EAD - 50%
Consortium ATP Services (Bulgaria)
Participation
TeleLink Business Services EAD
Consortium Telesec (Bulgaria)
Participation
TeleLink Business Services EAD - 50%
Consortium Telelink Info (Bulgaria)
Participation
TeleLink Business Services EAD - 78%
Consortium Telelink Group (Bulgaria)
Participation
TeleLink Business Services EAD - 50%
Consortium TelechnoLink (Bulgaria)
Participation
TeleLink Business Services EAD - 59,10%
Consortium Bulgarski porechiya
Participation
TeleLink Business Services EAD - 15%
Consortium TeleSystems
Participation
TeleLink Business Services EAD - 63,50%
Consortium Smart Transport (Bulgaria)
Participation
TeleLink Business Services EAD - 20%
Set out below is the total amount of the transactions concluded with related parties throughout the
respective financial year, as well as the outstanding balances as at the end of each financial year:
Amounts due by related parties are included in trade and other receivables (Note 22). Amounts due to
related parties are included in trade and other payables (Note 28).
Trade
2021 2020 2021 2020
Name BGN'000 BGN'000 BGN'000 BGN'000
Other related parties (under common control) 1,353 4,872 2,578 2,429
1,353 4,872 2,578 2,429
Interest
2021 2020 2021 2020
Name BGN'000 BGN'000 BGN'000 BGN'000
Other related parties (under common control) - 14 - -
- 14 - -
Trade
2021 2020 2021 2020
Name BGN'000 BGN'000 BGN'000 BGN'000
Other related parties (under common control) 774 1 074 146 2 659
774 1 074 146 2 659
Receivables from related
Charged to related parties
Sales to related parties
Purchases from related
Charged by related parties
Payables to related parties
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
55
31. Related party disclosure (continued)
Receivables and payables from and to related parties cannot be set-off. Outstanding balances of trade
receivables and trade payables at the year-end are unsecured, interest-free and settlement occurs in
cash.
As of December 31 2021, other payables to related parties at the amount of BGN 301 thousand
represent unclaimed dividend.
Joint arrangements
The interests of Telelink Business Services EAD in joint arrangements are regulated by consortium
agreements. Telelink Business Services EAD and the other parties agree, based on mutual cooperation,
to combine their efforts in the form of consortium to implement certain projects where no party holds
control. The partners participate with assets, liabilities, income and expenses corresponding to their
share in the consortium. The consortiums generate no profit or loss.
Set out below are the interests of Telelink Business Services EAD – income, expenses, assets and
liabilities in the consortiums:
Remuneration of key management personnel
Trade
2021 2020 2021 2020
Name BGN '000 BGN '000 BGN '000 BGN '000
Consortium ATP Services (Bulgaria) 302 329 - -
Consortium Telesec (Bulgaria) 523 4 - -
Consortium Telelink Group (Bulgaria) 478 3 612 - -
Consortium TelechnoLink (Bulgaria) 10 10 - -
Consorcium SysTel 10,637 5,489 - -
Consortium TeleSystems 13 1,513 - -
Consortium Bulgarski porechiya - 60 - -
Consortium Telelink Smart Transport - 39 - -
12,010 11,056 - -
Sales to joint operations
Purchases from joint operations
Trade
2021 2020 2021 2020
Name BGN '000 BGN '000 BGN '000 BGN '000
Consortium ATP Services (Bulgaria) 22 28 - -
Consortium Telesec (Bulgaria) 312 - - -
Consortium Telelink Group (Bulgaria) 22 227 - -
Consortium TeleSystems - 587 - -
356 842 - -
Trade receivables from
Trade payables to
2021 2020
BGN'000 BGN'000
Short-term employee benefits 1,139 1,140
Share-based payments 122 74
1,261 1,214
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
56
32. Share capital and reserves
Registered capital
2020
2020
shares
shares
Ordinary shares of BGN 1 each
12,500,000
12,500,000
12,500,000
12,500,000
Ordinary shares issued, fully paid-in
shares
shares
At 31 December, issued and fully paid-in
12,500,000
12,500,000
Telelink Business Services Group AD was established in July 2019 with a share capital of BGN 50
thousand. The share capital available as of 31 December 2020 amounting to BGN 12,500 thousand was
formed as a result of the Reorganization of Telelink Bulgaria EAD, whereby Telelink Bulgaria EAD
allocated the net assets attributable to the separated Business Services activity amounting to BGN
12,667 thousand and the latter amount was allocated to the formation of additional share capital
amounting to BGN 12,450 thousand and general reserves amounting to BGN 217 thousand.
Legal reserves
Legal reserves are formed from retained earnings in accordance with the statutory requirements and
can be used to offset future losses. Pursuant to article 246 of the Commercial Act, legal reserves should
be set aside until they reach one tenth or more of the company's registered capital. The sources of
funding these reserves may be at least one tenth of the net profit, share premiums upon share issuing,
and other sources provided for by the statutes of the Company or by resolution of the General Meeting
of Shareholders.
Legal reserves are formed from the retained earnings of Telelink Business Services Group AD (2021:
BGN 981 thousand and 2020: BGN 239 thousand), Telelink Business Services EAD (2020 and 2019: BGN
100 thousand) and Telelink Business Services Macedonia (2020: BGN 2 thousand).
The Group’s legal reserves as at 31 December 2021 were BGN 1,083 thousand (2020: BGN 341
thousand).
Other reserves
Other reserves were formed after applying the predecessor method upon the acquisition of the
companies under common control, and represent the difference between the investment in acquirees
and the share capital of these entities.
The Group’s other reserves formed following the acquisition as at 31 December 2021 and 31 December
2020 were BGN (14,123) thousand.
In 2020 and 2021 the Group establishes one-off share-based payments incentive Procedure for
employees (the Procedure), long-term share-based payment incentive Programme for management
and key personnel (the Programme) and share-based payment incentive Scheme for members of the
Managing board (the Scheme). (Note 37)
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
57
32. Share capital and reserves (continued)
The increase in Other reserves equals the expense at the amount of BGN 391 thousand in 2021 (2020:
BGN 211 thousand). (Note 37)
Other components of equity
On 21 December 2020, the Company implemented the Procedure, transferring 28,608 shares to 137
persons without limitations to further disposal. In accordance with the respective decisions of the
General Meeting of Shareholders (“GMS”) from 10 September 2020 and the MB from 27 November
2020, the program was implemented entirely on the basis of own shares bought back by the Company.
In total, 28,964 own shares were bought back in 2020 for the purposes of employee incentive plans.
After the implementation of the above-mentioned one-time share incentive program, as of 31
December 2020, the Company held 356 shares in treasury stock.
Translation reserves
Translation reserves are formed from the restatement of the subsidiaries’ operating results and
financial performance in the Group’s presentation currency.
The translation reserves as at 31 December 2021 were BGN (558) thousand (2020: BGN (560)
thousand).
33. Dividends distributed
Set out below are the dividends distributed by the Group companies to the parent company in 2021
and 2020:
At 31 December 2021 and 31 December 2020 all dividends are fully paid.
Number of
shares
Other
components of
BGN '000
At the beginning of the reporting period
Shares bought back on market (28 964) (302)
Share -based payments 28 608 343
Buy-back transaction costs - (1)
At the end of the reporting period (356) 40
2021 2020
Name BGN'000 BGN'000
Comutel DOO 391 450
Telelink DOO - Podgorica - 160
Telelink DOO (Bosnia and Herzegovina) 782 270
Telelink DOO (Slovenia) 841 606
Telelink Business Services EAD 11,442 7,002
13,456 8,488
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
58
33. Dividends distributed (continued)
The General meeting of the shareholders by resolution from 14 September 2021 approved the
distribution of dividends amounting to BGN 10,250 thousands in 2021 (2020: BGN 6,195 thousand).
34. Fair value measurement
The following table provides the fair value measurement hierarchy of the Group’s assets and liabilities.
If carrying amounts approximate fair values of financial assets and liabilities not measured at fair value,
no information on the fair values is shown.
2021 2020
BGN'000 BGN'000
At the beginning of the reporting period - -
Final dividend for the yesr (2021: 0,05 BGN per share, 2020: 0,02 BGN per share)
678 195
Interim dividend (2021: 0,77 BGN per share, 2020: 0,48 BGN per share) 9,572 6,000
Net divedend distributed (9,535) (5,924)
Tax withheld (414) (271)
At the end of the reporting period
301 -
Quoted
prices in
active
markets
Significant
observable
inputs
Significant
unobservable
inputs
Year ended at 31 December 2021 Total
(Level 1) (Level 2) (Level 3)
BGN'000 BGN'000 BGN'000 BGN'000
Assets measured at fair value:
Investment properties:
Office properties 31.12.2021 409 - - 409
Total assets measured at fair value 409 - - 409
Fair value measurement
Date of
valuation
Quoted
prices in
active
markets
Significant
observable
inputs
Significant
unobservable
inputs
Year ended at 31 December 2020 Total
(Level 1) (Level 2) (Level 3)
BGN'000 BGN'000 BGN'000 BGN'000
Assets measured at fair value:
Investment properties:
Office properties 31.12.2020 372 - - 372
Total assets measured at fair value 372 - - 372
Fair value measurement
Date of
valuation
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
59
35. Commitments and contingencies
Litigations and claims: There are no significant litigation or claims against the Group.
Guarantees: Bank guarantees under contracts with clients and participation in tenders, issued by the
Group servicing banks at 31 December 2021, amounted to BGN 7,375 thousand (at 31 December 2020:
BGN 9,750 thousand).
Capital commitments: The Group had no capital commitments as at 31 December 2021 and 2020.
Commitments to the benefit of related parties
As of December 31 2021 and during the reporting period as a whole, TBSG AD maintained its
commitments as a guarantor, respectively pledgor under the following contracts signed in 2019 as
security to the obligations of TBS EAD (UIN 130545438) under an Agreement for the undertaking of
credit commitments under an overdraft credit line with Unicredit Bulbank AD:
• a suretyship agreement with Unicredit Bulbank AD, securing all receivables of the bank from
TBS EAD stemming from the above credit agreement and the annexes thereto until their final
repayment;
• a share pledge agreement with Unicredit Bulbank AD over the Issuer’s 100% stake in the capital
of TBS EAD, securing all receivables of the bank from TBS EAD stemming from the above credit
agreement and annexes thereto until their final repayment.
On January 29 2021, TBSG AD issued a counter-guarantee securing a guarantee on behalf of TBS
Macedonia (UIN 7385986) with regard to a contract for a hardware hybrid cloud platform, in favour of
Agency of electronic communications, Skopje, North Macedonia, for the amount of EUR 105,900, valid
until May 15 2022.
On March 16 2021, TBS EAD provided a counter guarantee securing a performance guarantee on behalf
of TBS Macedonia with regard to a contract with the Ministry of economy and environment of the
republic of Kosovo for Hardware and assistance of national research networks in the amount of EUR
69,246.29, valid through October 15 2024.
On February 15 2021, the suretyship commitment of TBS EAD was extended with regard to an annex
to the credit agreement for 4,200 thousands USD between Comutel and Raiffeisen Bank AD Beograd,
Serbia, in order to secure the due fulfillment of the respective obligations of Comutel.
On December 12 2021, the Company issued a corporate guarantee securing the obligations of Telelink
Albania (UIN L91803017J) as purchaser with regard to the supply of equipment from Veracomp
Croatia, for with regard to a contract for a hardware hybrid cloud platform, for the amount of USD
145,435.43, valid until March 31 2022.
36. Financial risk management objectives and policies
The Group’s principal financial liabilities comprise interest-bearing loans and borrowings, and trade
payables. The main purpose of these financial liabilities is to finance the Group’s operations. The
Group’s principal financial assets include trade receivables, loans granted, and cash and short-term
deposits that derive directly from its operations.
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
60
36. Financial risk management objectives and policies (continued)
In 2021 and 2020, the Group neither owned nor traded in derivative financial instruments.
The Group is exposed primarily to interest rate risk, liquidity risk, currency risk, and credit risk. The
Group’s policies for managing each of these risks are summarised below.
Interest rate risk
The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s
revolving credit lines for current financing of working capital and to a lesser extent, to finance lease
contracts bearing floating (variable) interest rates.
The Group’s policy is to manage its interest expenses by employing financial instruments bearing fixed
and floating interest rates and assuming the risk relating to revolving credit lines due to the inherently
variable nature of exposures thereto; moreover, the Group keeps track of changes in periodically
updated floating and variable indices with a view to possibly fixing or hedging interest rates on financial
leases.
At the reporting date, the interest rate profile of the Group’s interest-bearing financial instruments
was:
A change of 100 basis points in interest rates at the date of the financial statements would have
increased (decreased) profit or loss by the amounts shown below. This analysis assumes that all other
variables, in particular foreign exchange rates, remain constant.
2021 2020
BGN' 000 BGN' 000
Fixed rate instruments
Financial assets
12,812 11,751
Cash and cash Equivalents
12,812 11,751
Financial liabilities
- (186)
Interest-bearing loans and borrowings (principal)
- (186)
12,812 11,565
2021 2020
BGN' 000 BGN' 000
Variable rate instruments
Financial liabilities (2,236) (2,909)
Interest-bearing loans and borrowings (principal) (1,725) (1,817)
Finance leases
(511) (1,092)
(2,236) (2,909)
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
61
36. Financial risk management objectives and policies (continued)
Interest rate risk (continued)
Due to the negotiation of minimal interest rates equal to either interest margin or total interest rate
at the date of signature of the contract for certain instruments, the effects of an increase and decrease
by the same change in interest rate are asymmetrical.
Currency risk
The Group trades in different markets and in local currencies that are different from its functional
currency, as well as in third-party currencies, including mostly purchases in US dollars. Consequently,
it faces transaction and translation exchange rate risks. The Group’s exposure to changes in exchange
rates of local currencies is substantially limited owing to the fixed EUR/BGN and EUR / BAM exchange
rate maintained under the currency board systems operating in Bulgaria and Bosnia and Herzegovina,
as well as by the adoption of the Euro as a National currency of Montenegro. Therefore, the total sales
and profits generated in jurisdictions using or pegged to the Euro or BGN have the largest share in the
consolidated results. The Group is exposed to translation currency risk in Serbia, Croatia, Albania and
North Macedonia relative to the floating exchange rates of the local currencies.
A significant part of revenue and cost of sales, including locally sourced goods and services, employee
benefits and other fixed costs, are denominated in the local currencies of the operational subsidiaries.
Third-party currency risk relative to other trading is limited by existing contractual arrangements for
the exchange rate indexation of receivables in Serbia, Albania and North Macedonia.
Outstanding risks from foreign currency trading are mitigated by Group companies by matching the
timing and currencies of its trade receivables and payables, to the extent possible, as well as by
occasional forward purchases of US Dollars for the payment of uncovered payables.
The tables below demonstrate the sensitivity to a possible changes on the following exchange rates:
1,00% -1,00%
increase decrease
(21) 17
(21) 17
(25) 18
(25) 18
Profit or loss
Effect in thousands of BGN
31 December 2021
Variable rate instruments
Cash flow sensitivity (net)
31 December 2020
Variable rate instruments
Cash flow sensitivity (net)
USD MKD RSD ALL HRK
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
Interest-bearing loans and
borrowings (principal)
(1,724) - - - -
Trade and other payables (5,843) (654) (8,133) (687) (308)
Contract liabilities - - - - (194)
Trade and other receivables 13,167 847 3,046 1,067 -
Contract assets 2 1 - 0 -
5,601 194 (5,087) 380 (502)
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
62
36. Financial risk management objectives and policies (continued)
Currency risk (continued)
Credit risk
The Group trades generally with recognised, creditworthy third parties, such as, leading telecoms,
public institutions and multinational companies, and long-lasting partners with proven credit history.
The receivable balances and maturities are monitored on an ongoing basis. Therefore, the Group’s
credit risk exposure is very limited.
The credit risk that arises from other financial assets of the Group, such as cash and other financial
assets, is related to the Group’s credit exposure to default risks on the part of its counterparties.
The maximum credit exposure of the Group related to the recognised financial assets equals their
carrying amount as stated in the balance sheet as of 31 December 2021 and as of 31 December 2020.
Liquidity risk
Liquidity risk is managed through the planning of cash flows and ensuring sufficient cash, as also by
agreeing credit limits and financial support with renown local banks and strategically engaged
partners.
The following table summarises the maturity profile of the Group’s financial liabilities at 31 December
based on contractual discounted payments.
Effect on profit before tax
+5% -5%
BGN' 000 BGN' 000
Change in USD rate 280 (280)
Change in MKD rate 10 (10)
Change in RSD rate (254) 254
Change in ALL rate 19 (19)
Change in HRK rate (25) 25
29 (29)
1 - 5 > 5
years years
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
Interest-bearing loans and borrowings
- - 1,725 - - 1,725
Lease liabilities
- 302 1,152 1,479 - 2,933
Trade and other payables
565 23,079 2,765 24 - 26,433
31 December 2021
On
demand
< 3 months
3-12 months
Total
1 - 5 > 5
years years
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
Interest-bearing loans and borrowings
- - 2,003 - - 2,003
Lease liabilities
- 424 1,389 2,777 - 4,590
Trade and other payables
772 21,670 9,032 - - 31,474
31 December 2020
On
demand
< 3 months
3-12 months
Total
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
63
36. Financial risk management objectives and policies (continued)
Capital management
The main objective of capital management of the Group is to ensure that it maintains a strong credit
rating and healthy capital ratios in order to support its business and maximise shareholder value..
The Group manages its capital structure and adjusts it, where necessary, depending on the changes in
the economic environment. To maintain or adjust the capital structure, the Group may adjust the
dividend payment to shareholders, return capital to shareholders or issue new shares. No changes
were made in the objectives, policies or processes during the years ended 31 December 2021 and
2020.
The Group monitors capital using a gearing ratio, which is net debt divided by total capital plus net
debt. The Group includes within net debt, interest bearing loans and borrowings, trade and other
payables, less cash and cash equivalents, excluding discontinued operations.
37. Share-based payments
In 2020 the Group established one-off share-based payment incentive Procedure for employees (the
Procedure). Under the Procedure employees with at least 24 months length of service in the Group
and its preceding companies are eligible to receive one-off supplementary remuneration (bonus) in
the form of shares without restrictions for subsequent disposal. The implementation of the Procedure
took place on 21 December 2020. Telelink Business Services Group AD has transferred to employees
of the Group 28 608 shares with nominal value of BGN 1 each and price at the day of the transfer of
BGN 12 per share. The Group has measured the fair value of the services received by reference to the
fair value of the shares transferred which is equal to the closing price of the Bulgarian Stock Exchange
on the date of the grant. The Group accounts for the Procedure as an equity-settled share-based
payments plan. The Procedure is implemented entirely at the expense of the shares bought back by
the Company. The total expense of the shares transferred under the Procedure is at the amount of
BGN 343 thousand.
2021 2020
BGN'000
BGN'000
Interest bearing loans and borrowings 1,725 2,003
Lease liabilities 2,933 4,590
Trade and other payables 28,455 33,259
Contract liabilities 19,312 11,653
Less cash and short term deposits (12,815) (11,762)
Net debt 39,610 39,743
Equity 17,585 15,012
Less other reserves 13,467 13,883
Adjusted Equity 31,052 28,895
Capital and net debt 70,662 68,638
Gearing ratio 56% 58%
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
64
37. Share-based payments (continued)
In 2020 the Group established long-term share-based payment incentive Programme for management
and key personnel (the Programme). Under the Programme eligible employee is any employee who
works at managerial position or is a key employee, nominated by resolution of the Managing Board,
who has at least 365 days length of service at the Group. The supplementary remuneration under the
Programme is conditional on the Group’s performance for a period of three years 2020-2022 and
personal performance of each employee with regard to financial and non-financial results. The final
number of shares to be transferred is measured by reference to the Group`s performance for a period
of three years.
In 2020 the Group establishes share-based payment incentive Scheme for members of the Managing
board (the Scheme). Granting conditions and final number of shares to be transferred are subject to
the continuing employment of the members of the Managing board and the Group`s performance for
the three-year period 2020-2022.
According to the Programme and the Scheme shares will be transferred to employees in the year
following the three-year period 2020-2022. The Group has estimated the fair value of the services
received by reference to the fair value of the shares granted, but not yet vested, using the closing price
of the Bulgarian Stock Exchange at 31 December 2020 adjusted with the present value of future
dividend. The Group accounts for the Programme and the Scheme as an equity-settled share-based
payments plans. The expense accrued according to the Programme and the Scheme in 2021 is BGN
219 thousand (2020: BGN 211 thousand).
In 2021 the Group establishes new identical share-based payment incentive Programme for
management and key personnel and Scheme for members of the Managing board related to
continuing employment and Group performance for new three-year period 2021-2023. Shares are
transferred to the participants in the year following the three-year period 2021-2023. The Group has
estimated the fair value of the services received by reference to the fair value of the shares granted,
but not yet vested, using the closing price of the Bulgarian Stock Exchange at 24 September 2021
adjusted with the present value of future dividend. The expense accrued according to the Programme
and the Scheme related to the new three-year period in 2021 is BGN 171 thousand.
The Group accounts for all plans as equity-settled share-based payments.
38. Events after the date of the consolidated financial statements
On a meeting held on January 18 2022, the Company’s MB adopted a preliminary resolution on
extending the term of the suretyship agreement whereby TBS EAD has provided security in favour of
Raiffeisen Bank AD Beograd, Serbia, for the due fulfillment of the obligations of Comutel.
On January 21 2022, the suretyship commitment of TBS EAD was extended with regard to an annex to
the credit agreement between Comutel and Raiffeisen Bank AD Beograd, Serbia, in order to secure the
due fulfillment of the respective obligations of Comutel.
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
65
38. Events after the date of the consolidated financial statements (continued)
On January 24 2022, subsidiary Telelink Business Services GmbH was entered in the Trade register of
the Federal Republic of Germany as represented by Silviya Marinova. The company’s capital in the
amount of EUR 25,000 has been fully paid in.
On February 10 2022, the Company’s MB resolved upon entering into an Overdraft Agreement with
Raiffeisenbank (Bulgaria) EAD, signed on February 15 2022, with the following limits:
• Overdraft credit up to EUR 2,000,000, with a repayment term until February 28 2026;
• Contingent bank credit up to EUR 2,000,000, with a utilization term until January 28 2026.
On February 11 2022, the TBSG AD’s MB resolved upon the extension of a corporate guarantee by the
Company for securing the obligations of TBS Croatia under operating lease agreements with Unicredit
Leasing Croatia d.o.o. On February 15 2022, the Company issued a corporate guarantee for EUR
56,554.95.
On February 14 2022, the TBSG AD published a statement by CEO Ivan Zhytiyanov on the successful
completion of due diligence and the subsequent termination of the consultations with Slovenia
Broadband S.a.r.l. with regard to the potential acquisition of the Company due to diverging strategic
views on key areas of business development and growth. Without prejudice to the above, Mr.
Zhitiyanov also stated his maintained solidarity with the selling shareholders’ intention to offer a
majority stake in case of further interest from strategic investors matching the Company’s goals.
On February 15 2022, the TBSG AD’s MB signed an Overdraft Agreement with Raiffeisenbank (Bulgaria)
EAD, with the following limits:
• Overdraft credit up to EUR 2,000,000, with a repayment term until February 28 2026;
• Contingent bank credit up to EUR 2,000,000, with a utilization term until January 28 2026.
All limits are available for utilization in BGN, EUR or USD, at respectively applicable interest rates of
RIR + 1.5%, 1m. EURIBOR + 1.5% and 1m. LIBOR + 1.5%, but not less than 1.5% (regardless of the
currency of utilization).
Provided security to the agreement includes:
• pledge on receivables from accounts with the bank;
• pledge of current and future receivables from commercial agreements between TBSG AD and
its subsidiaries;
• suretyship by TBS EAD.
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
66
38. Events after the date of the consolidated financial statements (continued)
As of February 24 2022, the structure of subsidiary TBS Croatia has been changed by the removal of its
supervisory board as a governing body.
In accordance with a preliminary resolution of the Company’s MB from February 23 2022, on February
25 2022, TBS Group AD signed contracts for the provision of corporate and business development
services with subsidiaries TBS EAD, Comutel, TBS Montenegro, Telelink Bosnia, Telelink Slovenia, TBS
Macedonia, Telelink Albania and TBS Croatia.
In February 2022, following the military conflict between Russia and Ukraine, certain countries
announced new packages of sanctions against the public debt of the Russian Federation and a number
of Russian banks, as well as personal sanctions against a number of individuals.
Due to the growing geopolitical tensions, since February 2022, there has been a significant increase in
volatility on the securities and currency markets, fluctuations in energy and petrol prices, significant
depreciation of the ruble against the US dollar and the euro.
It is expected that these events may affect the activities of Russian, Ukrainian and Belarusian
enterprises in various sectors of the economy. The Company does not have direct exposures to related
parties and/or key customers or suppliers or banks from those countries. The impact of the above
events may affect the macro-economic conditions in the country and Europe, and in longer-term, the
trading volumes, cash flows, profitability.
The Group regards these events as non-adjusting events after the reporting period, the quantitative
effect of which cannot be estimated at the date of the approval for issue of the present consolidated
financial statements with a sufficient degree of confidence.
Currently, the Company's management is analyzing the possible impact of changing macroeconomic
conditions on the Company's financial position and results of operations.
On a meeting held on March 04 2022, the MB resolved to convene a general meeting of shareholders
on April 11 2022.
On a meeting held on March 11 2022, the SB approved the Group’s annual budget for 2022 and a policy
for the motivation of stakeholders.
On March 16 2022, TBSG AD provided a corporate guarantee securing the obligations of Telelink
Slovenia under Framework Credit Agreement №. 5074/2022 with Unicredit Banka Slovenia d.d. for the
amount of EUR 1,500,000, as approved by the Company’s MB on March 15 2022.
As of March 18 2022, the structure of subsidiary Comutel has been changed by the removal of its
supervisory board as a governing body.
On March 22 2022, Telelink Slovenia signed a framework agreement for financing and guarantees with
UniCredit AD Slovenia with a limit of up to EUR 1 500 thousand, annual interest rate of 1.5% +1м.
EURIBOR and a maximum term until January 19 2023.
Telelink Business Services Group AD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2021
67
38. Events after the date of the consolidated financial statements (continued)
On March 23 2022, a Cash Loan Areement was signed between TBS EAD (lender) and TBSG AD
(borrower) with a limit of up to BGN 1,000 thousand subject to revolving utilization and repayment for
a term of 12 months, at an interest rate of 2.25%. As of the date of this Report, the utilized amount is
BGN 250 thousand. The agreement was approved in preliminary by resolution of the GMS held on
September 14 2021.
On a meeting held on March 28, the MB approved the individual annual financial statements of TBSG
AD.
On March 29 2022, an annex was signed to the loan agreement between TBSG AD (lender) and TBS
Croatia (borrower), whereby the limit was extended to EUR 500 thousand and the term – until
December 21 2022.
On April 11 2022, the general meeting of shareholders adopted the following resolutions:
• Authorizing the Company’s MB to engage in dealings subject to art. 114, par. 1, item 3 of the
POSA, i.e. agreements whereby the Company will provide corporate and business development and
management services to its subsidiaries;
• Authorizing the Company’s MB to engage in dealings subject to art. 114, par. 1, item 2 of the
POSA, i.e. providing the possibility for the Company to make transactions entailing obligations of the
Company towards third parties with regard to issuing guarantees for the performance of commitments
by its subsidiaries.
On April 12 2022, a contract was signed between TBS EAD and Consortium Digital Backpack DZZD,
whereby the subsidiary will carry out works amounting to a total of BGN 11,045,266.85 without VAT
with regard to a project for the Delivery and implementation of a single electronic platform for
educational services and content (SEPESC) and modules thereto” of the Ministry of Education and
Science. The dealing was pre-approved by the MB of TBSG Group AD on April 12 2022 on basis of a
request filed by the subsidiary for signing the deal.
Except as described above, the Group’s management declares that from the end of the reporting
period to the date of approval of these financial statements no significant and / or materials events
have occurred that have an impact on the results or affect the Group’s operations, the non-disclosure
of which would have an effect on the true and fair presentation of the financial statements.
CONSOLIDATED
ANNUAL REPORT
TELELINK BUSINESS
SERVICES GROUP AD
THIS ANNUAL REPORT HAS BEEN PREPARED IN ACCORDANCE WITH THE PROVISIONS OF ART. 44-47 OF THE ACCOUNTANCY
ACT, ART. 100N, PAR. 5 OF THE PUBLIC OFFERING OF SECURITIES ACT (“POSA”) AND APPENDIX NO 2 TO ART. 11, PAR. 1 OF
ORDINANCE NO 2 FROM NOVEMBER 09 2021 REGARDING THE INITIAL AND SUBSEQUENT DISCLUSRE OF INFORMATION UPON
THE PUBLIC OFFERING OF SECURITIES AND THE ADMISSION OF SECURITIES TO TRADING ON A REGULATED MARKET
FOR THE YEAR ENDED
DECEMBER 31 2021
Letter from the CEO
DEAR SHAREHOLDERS, CO-WORKERS AND PARTNERS,
It was yet another year of ongoing and new challenges and opportunities for all
of us, and for TBS.
A year when we continued to fend off the negative impact of COVID-19 and do our
best to turn them around into catalysts of our evolution.
A year that put us between the growing demand from our clients and the
struggling supply from our vendors.
A year of hard and protracted change of government in the country, where we
started it all and remains our flagship market to date.
Looking at what we achieved, I see less than we wanted and expected, but also many promises kept and much
more than we had at onset of 2021, as well as much more than many others managed to keep at its end.
I see a second consecutive year of growth in all of our main operating regions, record sales in data center and office
productivity solutions and a new record level of revenues as a whole. Maybe not exactly the growth we expected
in terms of its structure and added value inside, but also yet another proof of the diversification and capability of
TBS to counterbalance between its various competences and specializations.
A year, in which we managed to maintain the record levels of profits achieved before it, as well as to keep our
promise to start investing in the strategic development and future growth of the Group.
A second consecutive year, in which we improved our financial position in all key regards, even though we shared
even more of our profit and cash flow in the form of dividends and bonuses to our shareholders and employees.
A year, when we stayed true to our values and everything that makes us who we are.
We also stay true to our vision for the future of TBS.
More than ever, I look forward with a reaffirmed conviction in our strategic priorities and goals. I stay behind our
intent to increase investments in the establishment of local presence in new Balkan and developed markets,
complement our proven competences in IT infrastructure with new specializations in the fields of digital
transformation, information security and Internet of Things, as well as in the elevation of our sales and marketing
process and team to anew level, form which to address market opportunities and the needs of our clients in the
best possible way.
I believe that the short-term impact of these investments on current results will bring multiple returns in the form
of accelerated growth in both revenues and profitability and the payback of your investments in TBS in the medium
term.
Stay healthy and safe!
________________________________
Ivan Zhitiyanov, Chief Executive Officer
April 27 2022
2021 in Figures
Revenue
Gross Profit
EBITDA
Net Profit
BGN 165.7 M
BGN 29.5 M
BGN 17.4 M
BGN 12.4 M
+22%
+10%
+2%
-2%
Y/Y
Y/Y
Y/Y
Y/Y
Revenue by Client Region
Bulgaria
Mid-Western
Balkans
South-Western
Balkans
Cross-border
Markets
BGN 98.8 M
BGN 39.5 M
BGN 11.8 M
BGN 15.5 M
+21%
-4%
+120%
+116%
Y/Y
Y/Y
Y/Y
Y/Y
Revenue by Technology Group
Service
Provider
Solutions
Enterprise
Connectivity
Hybrid
Cloud
Modern
Workplace
Information
Security
Application
Services
Other
BGN 35.6 M
BGN 24.4 M
BGN 40.0 M
BGN 54.7 M
BGN 3.7 M
BGN 3.8 M
BGN 3.4 M
-16%
-30%
+35%
+147%
-26%
+11.6x
+268%
Y/Y
Y/Y
Y/Y
Y/Y
Y/Y
Y/Y
Y/Y
2020 in Figures
Balance Sheet
Total Assets
Equity
Financial Debt
Cash & CE
Net Debt
BGN 69.9 M
BGN 17.0 M
BGN 2.3 M
BGN 12.8 M
-BGN 10.5 M
+BGN 3.0 M
+BGN 2.6 M
-BGN 1.1 M
+BGN 1.1 M
- BGN 2.1 M
change from Dec 31 2020
Cash Flow
Operating
Investing
Financing
Net
+
BGN 14.6 M
-BGN 1.3 M
-BGN 12.3 M
+BGN 1.1 M
+BGN 13.3 M
Free Cash Flow
Share Price
Market Cap
Jan 04
Jun 08
Dec 30
Dec 30
BGN 12.10
BGN 13.50
BGN 15.50
BGN 193.7 M
+12%
+28%
Public Offering Tranche 3
Cash Returns
Dividend per Share
Dividends
BGN 0.82
BGN 10.3 M
+BGN 0.32
+65%
Y/Y
Letter from the Managing Board
DEAR SHAREHOLDERS,
We, the members of the Management Board of Telelink Business Services Group AD (“the Company”), guided
by our commitment to manage the Company in the best interest of its shareholders and in accordance with
the provisions of Article 45 of the Accountancy Act, Article 100n, Paragraph 5 of the POSA and Appendix No 2
to Article 1, par. 1 of Ordinance No. 2 from November 09 2021 regarding the initial and subsequent disclosure
of information upon the public offering of securities and the admission of securities to trading on a regulated
market, prepared the present Consolidated Management Report (the Report). The Report presents
commentary and analysis of key financial and non-financial indicators and an objective overview, providing a
true and fair representation of the development and operating results of the Company and its subsidiaries
(the Group), as well as of its condition, together with a description of the main risks thereto.
Appended to this Report id the Company’s Corporate management declaration prepared in compliance with
the provisions of Article 100n, Paragraph 8 of the POSA and Article 40 of the Accountancy Act.
Consolidated Annual Report 2021
vi
I GENERAL INFORMATION ON THE COMPANY AND THE GROUP
I.1 Business Profile
Telelink Business Services Group AD (TBS Group, the Company, the Issuer) was established on July 12 2019
with the purpose of consolidation, foundation and management of investments in subsidiaries operating in
the field of information and communication technologies (ICT), together with which it constitutes the
economic “Group TBS” (the Group).
The main activity of the Company comprises the provision of administrative and financial services and services
relative to the management and support of the business development, marketing and sales of Group
subsidiaries. The Company itself does not carry out direct commercial activities in the field of ICT or other
areas addressing end customers outside the Group.
The main activity of the Group consists of the operating activities of the subsidiaries making part thereof and
comprises the sale of products and services and the implementation of complex solutions in the field of ICT,
including, but not limited to:
• delivery, warranty and post-warranty support of equipment and software produced by third-party
technology suppliers, and applications and services developed at the client’s request;
• system integration covering system design, configuration, installation, setup and commissioning of
the supplied equipment, software or integrated ICT systems, combining functionally two or more
product types;
• consultancy services comprising the analysis of the situation, requirements, transformation and future
development of the client’s ICT systems, processes and infrastructures;
• managed services whereby the client transfers the management and responsibility for a certain ICT
function or group of functions to the Group, and the latter undertakes to maintain them on a certain
level.
A part of delivered managed services include the provision of equipment and software as a service presenting
the client with a flexible alternative to their own investments in such assets.
As of December 31 2021, the products and services offered by the Group cover a broad range of technologies
organized in 6 technology groups – Service Provider Solutions, Enterprise Connectivity, Hybrid Cloud,
Application Services, Modern Workplace and Information Security.
To assure comparability to the classification used in preparing the Prospectus for the admission to trading on
a regulated market in 2020, the Group also continues to provide a parallel grouping of the above technological
units in 4 main categories – Data Networks, Data Center, Office Productivity and Information Security.
Consolidated Annual Report 2021
vii
Product categories
Technology groups
Types of technology
Data Networks
Service Provider Solutions
Transmission networks, access networks, optical networks, cable
networks, network functions virtualization (NFV), audio & video
headеnd, customer-premises equipment (CPE), etc.
Enterprise Connectivity
Corporate networks, network security, firewall, data center
networking, virtualization, collaboration systems, contact center,
etc.
Data Center
Hybrid Cloud
Computing equipment, disk systems, backup and business
continuity solutions, virtualization, orchestration, application
monitoring and performance, Public Cloud Infrastructure (IaaS) and
more.
Application Services
Software development, program interface integration (API),
program interface gateways (API Proxy), data processing and
presentation, container infrastructure, infrastructure optimized for
application development automation (DevOps), infrastructure
based on cloud platforms (PaaS), etc.
Office Productivity
Modern Workplace
Microsoft (Windows, Office 365, Enterprise Mobility, etc.), multi-
factor authentication, management of end-user devices,
computers, peripherals, etc.
Information Security
Information Security
Data encryption systems, data leakage prevention, vulnerability
analysis, database protection, security analysis and monitoring as a
service (Advanced Security Operation Center), etc.
I.2 Investment Portfolio
As of December 31 2021, the Company held shares in ten subsidiaries, including:
• Telelink Business Services EAD (Bulgaria) (TBS EAD), Comutel DOO (Serbia) (Comutel), Telelink DOO –
Podgoritsa (Telelink Montenegro), Telelink DOO (Bosnia and Herzegovina) (Telelink Bosnia), Telelink
DOO (Slovenia) (Telelink Slovenia) and Telelink Albania Sh.p.k. („Telelink Albania“), transferred into
Company pursuant to a reorganization by means of spinoff of the Business Services activities of
Telelink Bulgaria AD in August 2019;
• Telelink Business Services DOOEL (Macedonia) (TBS Macedonia), established by the Company in
September 2019;
• Telelink Business Services DOO (Croatia) (“TBS Croatia), established by the Company in November
2020;
• Telelink Business Services, LLC (USA) (TBS USA), established by the Company in January 2021;
• Telelink Business Services SRL (Romania) (TBS Romania), established by the Company in November
2021.
As of December 31 2021, the Company was a sole owner of all of the above subsidiaries and held indirect
interests in two more companies controlled by TBS EAD. All directly and indirectly owned subsidiaries are
governed in their respective countries of incorporation.
Consolidated Annual Report 2021
viii
As of December 31 2021, all direct subsidiaries except for the recently established TBS USA and TBS Romania
carried out active commercial operations.
As of December 31 2021, the indirectly owned Telelink BS Staffing EOOD, established with a view to potential
cooperation with a leading financial advisory firm, was yet to deploy material business activities, while joint
venture Green Border EOOD has exhausted its purpose with the completion of the project it was established
for and is not expected to have a material impact on the Group’s future results and financial position.
I.3 Share Capital and Ownership Structure
The Company has a registered capital in the amount of BGN 12,500 thousand divided in 12,500,000 common
shares with a nominal value of BGN 1.00 each.
In the period 2020-2021, there were three tranches of public offering of existing Company shares, pursuant
to which three of the shareholders existing as such prior to the offering sold on the Bulgarian Stock Exchange
(BSE) a total of 2,625,000 shares (of which 875,000 in 2021), representing 21% of the Company’s registered
capital (of which 7% realized in 2021).
Pursuant to share buybacks for the purposes of employee incentive programs, as of December 31 2021, the
Company held 356 own shares acquired in 2020. No further share buybacks were carried out in 2021.
As of December 31 2021, the persons holding over 5% of the Company’s capital were Lubomir Minchev with
a stake of 8,371,678 shares or 66.97% and Utilico Emerging Markets Trust PLC (UK) with a stake of 1,733,837
shares or 13.78%.
Subsidiary
Country of incorporation
and management
Capital share held by
TBS Group
(direct)
Telelink Business Services EAD Bulgaria 100%
Comutel DOO Serbia 100%
Telelink Business Services Montenegro DOO Montenegro 100%
Telelink DOO Bosnia and Herzegovina 100%
Telelink DOO Slovenia 100%
Telelink Business Services DOO Croatia 100%
Telelink Business Services DOOEL Macedonia 100%
Telelink Albania SH.P.K. Albania 100%
Telelink Business Services SRL Romania 100%
Telelink Business Services, LLC USA 100%
(indirect) (through TBS EAD)
Telelink BS Staffing EOOD Bulgaria 100%
Green Border OOD Bulgaria 50%
Consolidated Annual Report 2021
ix
I.4 Combined Ownership Structure of the Company and the Group as of
December 31 2021
I.5 Governance
The Company has a two-tier board system.
As of December 31 2021, the Company’s Managing Board (the MB) features five members, including:
• Ivan Zhitianov – Executive Director and Chairman of the MB;
• Teodor Dobrev – member of the MB;
• Orlin Rusev – member of the MB;
• Nikoleta Stanailova – member of the MB;
• Gojko Martinovic – member of the MB.
66.97% 100%
100%
4.01%
50%
4.01%
1.07% 100%
1.64% 100%
13.87% 100%
6.12% 100%
2.30% 100%
0.003% 100%
100%
100%
100%
subsidiairies
shareholders
Telelink Business
Services Group AD
Telelink Business Services EAD
Ivo Evgeniev
Telelink BS Staffing
EOOD
Lubomir Minchev
shareholders existing prior to
public offering
Spas Shopov
Green Border OOD
Ivan Zhitiyanov, CEO
TBSG AD
Comutel DOO (Serbia)
Telelink Business Services DOO
(Montenegro)
UTILICO EMERGING
MARKETS TRUST PLC
Telelink DOO (Bosnia and
Herzegovina)
Other existing prior to
public offering
new
shareholders
Other Institutional
Investors & Legal Entities
Telelink DOO (Slovenia)
Retail Investors
(Natural Persons)
Telelink Business Services DOO
(Croatia)
Own shares held by the
Company
Telelink Albania SH.P.K. (Albania)
Telelink Business Services DOOEL
(Macedonia)
Telelink Business Services SRL
(Romania)
Telelink Business Services, LLC
(USA)
Consolidated Annual Report 2021
x
The Company’s Supervisory Borad (the SB) features three members, including:
• Hans van Houvelingen – Chairman of the Supervisory Board;
• Ivo Evgeniev – member of the SB;
• Bernard Jean-Luc Moscheni – member of the SB.
I.6 Public Information
In accordance with the requirements of art. 27 and the subsequent provisions of Ordinance 2 of the FSC, with
regard to art. 100t, par. 3 of the POSA, the Company discloses regulated information to the public through a
selected media service. All of the information provided to that media, is available in full and unedited form on
http://www.x3news.com/. The required information is presented to the FSC through the unified e-Register
system for the electronic presentation of information, developed and maintained by the FSC.
The above information is also available on the Company’s investor web page https://www.tbs.tech/investors/.
TBS Group AD has fulfilled its obligation as per art. 79b, par. 1 of the POSA, pursuant to which it has obtained
a legal entity identification (LEI) code 894500RSIIEY6BQP9U56.
The Company’s issued shares have been registered with an ISIN code: BG1100017190 and, as of the date of
this Report, are being traded on the Standard Equities Segment of the BSE under the ticker of TBS.
The Company’s Investor Relations Director is Ivan Daskalov, available at telephone number +359 2 9882413
and e-mail address IR-TBS@tbs.tech.
Consolidated Annual Report 2021
xi
II REVIEW OF THE GROUP’S ACTIVITIES AND FINANCIAL POSITION
II.1 Key financial indicators
Financials (BGN thousand) 2021 2020 change
Net sales revenue 165,688 135,495 22%
Cost of Sales -136,216 -108,764 25%
Gross Profit 29,472 26,731 10%
Sales and Marketing Expenses -8,492 -6,938 22%
General and Administrative Expenses -6,423 -5,521 16%
Other Operating Income/(Expenses) (net) 83 408 -80%
Operating Profit 14,640 14,680 0%
Financial Income/(Expenses) (net) -443 -457 -3%
Income Tax Expense -1,790 -1,623 10%
Net Profit 12,407 12,600 -2%
Depreciation & Amortization Expenses -2,935 -2,631 12%
Interest Income/(Expenses) (net) -224 -239 -6%
Earnings before Interest, Tax, Depreciation & Amortization (EBITDA) 17,356 17,093 2%
One-off and Extraordinary Income/(Expenses) (net) -84 -297 -72%
Normalized EBITDA 17,440 17,390 0%
Total Assets 69,943 66,942 4%
Non-current Assets 15,578 13,257 18%
Current Assets and Assets Held for Sale 54,365 53,685 1%
Equity 17,027 14,452 18%
incl. Retained Earnings and Profit for the Year 17,429 16,014 9%
Total Liabilities 52,916 52,490 1%
Non-current Liabilities 9,636 5,875 64%
Current Liabilities 43,280 46,615 -7%
Cash & Cash Equivalents 12,815 11,762 9%
Total Financial Debt* 2,290 3,363 -32%
Net Financial Debt** -10,525 -8,399 -2,126
Net Cash Flow from Operating Activities 14,579 21,739 -33%
Net Cash Flow from Investment Activities -1,314 -1,283 2%
Net Cash Flow from Financing Activities -12,336 -10,779 14%
incl. Dividends Paid -9,535 -5,924 61%
incl. Withholding Tax on Distributed Dividends -414 -271 53%
Number of Employees as of Period End 271 241 12%
* Incl. loans and finance lease contracts
** Total Financial Debt - Cash & Cash Equivalents
*** Net, after withholding taxes; not incl. unreceived due to shareholder ommissions.
Ratios 2021 2020 change
Gross Margin 17.8% 19.7% -1.9%
Operating Margin 8.8% 10.8% -2.0%
Net Margin 7.5% 9.3% -1.8%
EBITDA margin 10.5% 12.6% -2.1%
Current Ratio* 1.26 1.15 0.10
Equity / Total Assets 24% 22% 3%
Financial Debt / Total Assets 3% 5% -2%
Average Return on Assets (ROA) 18.1% - -
Average Return on Equity (ROE) 78.8% - -
* Current Assets and Assets Held for Sale / Current Liabilities
Consolidated Annual Report 2021
xii
As of December 31 2021, the Group carried out active commercial operations through all directly owned
Company subsidiaries except for the newly established TBS Romania and TBS USA and had a positive net worth
of BGN 17,027 thousand.
The Group’s financial position and the factors behind the formation of its assets, liabilities and equity are
presented in the Statement of Financial Position included in the Consolidated Financial Statements and
analysed below.
II.2 Revenue
In total, consolidated net sales revenue for 2021 increased by 22% over the same period of 2020, reaching
BGN 165,688 thousand.
The main driver behind registered growth was the 20%
1
increase achieved in Bulgaria, where TBS EAD
continued to record growing sales both on the local market and to cross-border clients (with the predominant
contribution of globally serviced multinational companies). With a share of 64%, the Company continued to
play a leading part in the formation of Group revenues, maintaining a similar contribution as compared to 66%
in 2020.
With more than twofold combined growth of 114%
1
, combined sales from the South-Western Balkans region,
encompassing subsidiaries in Macedonia and Albania, stood out as the Group’s fastest evolving territorial
division mostly on the strength of TBS’s expanding project portfolio in Macedonian public sector. While the
two companies still had a comparatively limited relative weight of 7% of consolidated revenues, this
represented a nonetheless significant increase over the 4% contribution recorded in 2020.
A positive trend was also observed in combined sales from Serbia, Montenegro, Bosnia i Herzegovina, Slovenia
and Croatia (region Mid-Western Balkans), where the Group recorded 15%
1
of annual growth after launching
deliveries to new clients from the Balkan telecom sector and resuming its participation in public infrastructure
projects in Serbia. Altogether, the region continued to play a significant part in the formation of consolidated
revenues with a share of 29%, close to the 30% recorded in 2020.
II.3 Expenses and profitability
II.3.1 Gross profit
Accounting for a substantial decrease in the consolidated gross margin from 19.7% in 2020 to 17.8% in 2021,
consolidated gross profit grew at positive but slower (as compared to revenues) rate of 10%, reaching BGN
29,472 thousand.
The observed decrease in relative profitability stemmed from both Bulgaria-based operations, wherein TBS
EAD reported a gross margin of 21% as compared to 23% in 2020 as a result of the substantially increased
share of computer equipment and software license resale bearing typically lower added value, and sales in
the Mid-Western Balkans (showing a combined margin of 11% against 12% in 2020) and the South-Western
Balkans region (with a combined margin of 13% against 13% in 2020), where the achieved expansion in new
clients and public projects also involved significant resales and a relatively lower average margins.
In spite of the above trends, all operating regions had positive contributions to gross profit growth in absolute
figures in 2021.
1
Growth in revenues from clients other than Group companies.
Consolidated Annual Report 2021
xiii
II.3.2 Sales and marketing expenses
Showing a 22% increase over 2020 identical to the growth ratio in realized sales, the consolidated sales and
marketing expenses of BGN 8,492 thousand recorded in 2021 maintained an unchanged ratio of 5.1% of
consolidated revenues.
The main factor behind the observed increase were the additional activities and human resources allocated
by TBS EAD towards current and targeted sales, internal and external marketing processes and functions and
the strategic market and business development in Bulgaria and the Group as a whole. While also growing
moderately, local expenditures in Macedonia increased much less as compared to the intensely expanding
sales for the period.
II.3.3 General & administrative expenses
While also exhibiting a substantial annual increase by 16%, the consolidated general and administrative
expenses of BGN 6,423 thousand recorded in 2021 grew substantially slower than sales realized during the
period and accounted for a decreasing ratio of 3.9% of consolidated revenues, as compared to 4.1% in 2020.
For the most part, the observed increase was also attributable to expanding personnel and supporting
activities in Bulgaria with regard to building up the capacity to manage and service current and planned future
growth in TBS EAD and the Group as a whole, as well as expenditures related to the public status of TBSG AD.
Other factors included the appointment of new professional management in Albania and the launch of
business in Croatia.
II.3.4 Operating profit and earnings before interest, taxes, depreciation, and
amortization (EBITDA)
In spite of the lagging growth rate in gross profit, its increase in absolute figures compensated almost entirely
the increase in operating expenses and the decrease in net other income, as a result of which consolidated
operating profit (BGN 14,640 thousand) remained substantially unchanged from 2020. Relative to the growing
amount of revenues, this result was reflected in the decrease of the Group’s operating margin from 10.8% in
2020 to 8.8% in 2021.
A similar trend was observed in the reported consolidated profit before interest, tax depreciation and
amortization (EBITDA) (BGN 17,356 thousand), which exhibited a slight year-on-year increase by 2% while the
corresponding margin decreased from 12.6% in to 10.5% in 2021. Adjusted for the extraordinary non-interest
financial expenses from the currency revaluation of a previously impaired loan granted by TBS EAD, the
Group’s normalized EBITDA reached BGN 17,440 thousand, remaining substantially unchanged from 2020.
II.3.5 Financial income and expenses
Showing a slight 3% decrease from 2020, net finance costs for the period (BGN 443 thousand) remained of a
typically low impact on the formation of the Group’s financial results, maintaining ratios of just 0.3% of
consolidated revenues and 3% of consolidated operating profit.
Within their usual scope (excluding the above-mentioned extraordinary expenses and the positive effect of
the same nature reported in 2020), finance costs for the period featured decreasing interest expenses
reflecting the lower average level of financial debt and а net gain from foreign currency operations (against
the net loss of the same nature in 2020), balanced in part by growth in charges for other bank services,
including bank guarantees, in line with increasing sales volumes.
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II.3.6 Net profit
Taking into account the moderate growth in net finance costs and the increase of the consolidated effective
tax rate from 11.4% to 12.6% in the context of substantially unchanged operating profit, the consolidated net
profit of BGN 12,407 thousand recorded in 2021 exhibited an annual drop of 2%, while net margin decreased
from 9.3% in 2020 to 7.5% in 2021.
II.4 Assets, liabilities and equity
II.4.1 Assets
Amounting at BGN 69,943 thousand, consolidated assets reported as of December 31 2021 exhibited an
overall increase by BGN 3,001 thousand or 4% from the end of 2020.
Reaching a total value of BGN 15,578 thousand or 22% of total Group assets as of period end, consolidated
non-current assets increased by BGN 2,321 thousand or 18% from December 31 2020 as a result of growing
long-term prepaid expenses, which continued to stem predominantly from equipment support commitments
over 1 year in Bulgaria and the Mid-Western Balkans region. In spite of decreasing due to the prevalence of
depreciation and amortization over new capital expenditures made during the period, long-term assets
making part of Property, plant and equipment remained significant and continued to include mostly
equipment provided by TBS EAD as a service to clients under long-term managed service contracts and rights
of use under long-term rental and operating lease contracts on buildings and vehicles recognized as assets of
the respective categories in accordance with the IFRS 16 in force since January 01 2019. A similar decrease
occurred in non-tangible non-current assets, wherein costs capitalized during the year from development
activities in the field of information security remained inferior to the amortization of similar and other assets
acquired in previous periods.
Balanced between the decrease in inventories and growth in short-term prepayments stemming from
equipment support commitments up to 1 year and cash and cash equivalents, consolidated current assets and
assets held for sale exhibited only a slight decrease by BGN 680 thousand or 1%, reaching BGN 54,365
thousand and continued to account for a predominant part of 78% of total Group assets.
II.4.2 Liabilities
Assuring 14% of growth in assets for the period, the consolidated liabilities of BGN 52,916 thousand reported
as of December 30 2021 exhibited a substantially lower increase by BGN 426 thousand or 1% from the end of
2020.
The observed increase was entirely attributable to the Group’s non-current liabilities, which grew by BGN
3,761 thousand or 64% along the lines of long-term deferred income arising from equipment support contracts
with a term of more than 1 year, in parallel with the corresponding prepayments included in consolidated
assets. In total, non-current liabilities as of December 31 2021 reached BGN 9,636 thousand or 18% of total
liabilities and 14% of the Group’s total assets and continued to also include decreasing but nonetheless
substantial long-term lease liabilities arising from both finance lease agreements for equipment provided as a
service and long-term rental and operating lease contracts. As of period end, the total balance sheet value of
the non-current part of finance lease contract obligations amounted to BGN 216 thousand, and that of rental
and operating lease contract obligations – to BGN 1,261 thousand, the latter of which do not represent
financial debt.
Accounting for the significant decrease in trade and other payables, which was compensated only in part by
the increase in current deferred income, consolidated current liabilities were reduced by 7% of BGN 3,355
thousand from the end of 2020, ending 2021 with a balance of BGN 43,280 thousand or 82% of total liabilities
Consolidated Annual Report 2021
xv
and 62% of total assets. Short-term components of the Group’s financial debt reported as of the same date
included outstanding loans and borrowings received in the amount of BGN 1,725 thousand, formed entirely
of the current balance of drawn credit line funds in Serbia, and current obligations on finance lease contracts
of BGN 349 thousand. In parallel, the Group also continued to report, pursuant to the application of IFRS 16,
substantial current liabilities from rental and operating lease contracts in the amount of BGN 1,107 thousand,
which do not represent financial debt.
II.4.3 Financial debt
Summing the above loan obligations in the amount of BGN 1,725 thousand and finance leases in the total
amount of BGN 565 thousand, the consolidated financial debt of BGN 2,290 thousand measured as of
December 31 2021 exhibited a reduction by 32% or BGN 1,073 thousand from previous year end, declining to
3% of total assets and 4% of total liabilities as compared to the corresponding ratios of 5% and 6% as of
December 31 2020.
Adding to the above decrease, the increase in cash and cash equivalents by BGN 1,053 thousand or 9% up to
BGN 12,815 thousand contributed to a total reduction of consolidated net financial debt (the difference
between financial debt and cash and cash equivalents) by BGN 2,126 thousand from the end of 2020. As a
result of the above changes, as of December 31 2021, the Group registered negative financial debt (a surplus
of cash and cash equivalents over financial debt) of BGN (-) 10,525 thousand, comparing to BGN (-) 8,399
thousand at the end of 2020.
The lease obligations accounted under the IFRS 16 in force since January 01 2019 with regard to right-of-use
assets arising from long-term rental and operating lease contracts do not represent actual credit relationships
and should not be considered as a part of financial debt.
II.4.4 Liquidity
As of period end, the Group recorded an increasingly substantial surplus of current assets and assets held for
sale over current liabilities in the amount of BGN 11,085 thousand, as compared to BGN 7,070 thousand as of
the end of 2020.
Reflecting the substantial decrease in current liabilities on the background of relatively stable current assets
and moderate growth in cash and cash equivalents, the Group registered improvements on all key levels of
liquidity, with current, quick and cash ratios showing respective increases from 1.15, 0.85 and 0.25 at the end
of 2020 to 1.26, 0.94 and 0.30 as of December 31 2021.
II.4.5 Equity
Taking into account the effected distribution of dividends for 2020 and the first half of 2021 in the total amount
of BGN 10,250 thousand equivalent to 83% of the total net profit realized in 2021, the consolidated net assets
(equity) of BGN 17,027 thousand recorded as of December 31 2021 exhibited only a relatively moderate
increase by BGN 2,575 thousand or 18% from the end of 2020, nevertheless covering the predominant part
(86%) of growth in total assets over the period.
By GMS resolution from June 21 2021, the Company’s legal reserves were increased by the allocation of 10%
of its net profit for 2020 or BGN 742 thousand towards the fulfilment of its Reserve Fund as per art. 246 of the
Commercial Code. Taking out the above allocation and distributed dividends, accumulated earnings from the
current and previous periods exhibited a net increase by BGN 1,297 thousand, ending the year at BGN 17,311
thousand.
Consolidated Annual Report 2021
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As a result of the aforementioned increase under the Commercial Code and the formation of additional other
reserves of BGN 416 thousand (mainly pursuant to the approval of new share-based incentive plans for the
period 2021-2023), consolidated capital reserves exhibited an overall increase by BGN 1,159 thousand form
the end of 2020. Besides the attained legal reserves of BGN 1,083 thousand, the BGN (-) 12,903 thousand of
total reserves and other components of equity reported as of December 31 2021 continued to include the
effects of currency translation (BGN (-) 559 thousand) and one-off stock awards (BGN 40 thousand) and other
reserves in the amount of BGN (-) 13,467 thousand reflecting the negative effect of BGN (-) 14,127 thousand
accounted according to the rules of reporting business combinations under common control upon the TBSG
AD’s reorganization from August 14 2019 and the positive cumulative effect of long-term share incentive plans
enacted by the end of 2021.
As of period end, the Company maintained an unchanged registered share capital of BGN 12,500 thousand.
The nominal value of own shares bought back in previous periods and held by the Company as of December
31 2021 amounted to BGN 356.
Reflecting the faster growth in equity as compared to total assets, the Group registered an improving level of
balance sheet capitalization (ratio of equity to total assets) of 24%, comparing to a corresponding ratio of 22%
as of the end of 2020.
II.5 Cash flows
II.5.1 Cash flow from operating activities
Exceeding substantially the moderate increase in net non-cash working capital, which occurred as a result of
maintaining relatively stable trade and other receivables against the significant decrease in trade and other
payables and advances received, stable operating profit before depreciation favored the achievement of a
strongly positive net cash flow from operating activities in the amount of BGN 14,579 thousand.
In comparison, the latter marked a significant decrease from the same result for the previous year (BGN 21,739
thousand) mostly on the background of the significant reduction of net non-cash working capital registered in
2020.
In relative terms, the above amount was equivalent to 84% of EBITDA for the period, comparing to 127% in
2020.
II.5.2 Cash flow from investing activities
During the reporting period, the Group continued to invest in tangible and intangible non-current assets
mainly along the lines of equipment provided to clients under long-term managed service contracts and, to a
lesser extent, in computers, other equipment and development activities. Derived mostly from payments for
the above investments and proceeds from the disposal of fixed assets, the consolidated net cash flow from
investing activities for 2021 amounted to BGN (-) 1,314 thousand.
In spite of lower expenditures on the acquisition and formation of tangible and intangible non-current assets,
the above result represented a moderate decrease from the same indicator for 2020 (BGN (-) 1,283 thousand)
accounting for the proceeds from government grants received in that period.
II.5.3 Cash flow from financing activities
Besides the significant reduction in credit line utilization, the regular service of obligations from finance lease
contracts and interest expenses, the negative net cash flow from financing activities of BGN (-) 12,336
thousand reported in 2021 was formed mainly of the BGN 9,949 thousand of payments for dividends
distributed during the year.
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xvii
Growing 61% year-on-year, the latter were also the factor behind the substantial overall increase in the net
payments on financing activities as compared to the corresponding amount of BGN (-) 10,779 thousand
recorded in 2020.
II.5.4 Net cash flow
Overall, the preservation of stable operating profit and the contained increase in net working capital during
the period continued to favour the generation of strongly positive cash flow to the firm (net cash flow from
operating and investing activities), allowing for the realization of growing dividend returns by the shareholders
of TBSG AD and an additional reduction in financial debt, as well as for a net increase in cash and cash
equivalents by BGN 1,053 thousand.
While substantially lower than the net cash flow of BGN 9,563 thousand recorded in 2020, the above increase
continued to also promote improvements in the Group’s liquidity and net cash position described in section
II.4 of this Report.
Consolidated Annual Report 2021
xviii
III MAIN RISKS RELEVANT TO THE GROUP
The risks associated with the Company and the Group’s activities can be generally divided into systemic
(common) and non-systemic (related specifically to their activities and the sector, in which they operate).
III.1 Systemic risks
Common (systemic) risks are those that relate to all economic entities in the country and are the result of
factors, which are external to the Group and cannot be influenced by the companies included in its
composition. The main methods for limiting the impact of these risks are the reporting and analysis of current
information and the forecasting of future developments by specific and common indicators and their impact
on the activities and financial results of the Group.
III.1.1 Political risk
Political risk is the possibility of a sudden change in the country’s policy pursuant to a change of the
government, the occurrence of internal political instability and unfavourable changes in European and/or
national legislation, as a result of which the economic and investment climate and the overall environment in
which local business entities operate may change adversely and investors may suffer losses.
The international political risks for Bulgaria and the Western Balkans include the challenges related to
undertaken commitments to implement major structural reforms, improve social stability and the reduce
inefficient expenses, in their capacity of candidate members or members of the EU, as well as to the threats
of terrorist attacks in Europe, the acute destabilization of countries in the Middle East, military interventions
and conflicts in the region of the former Soviet Union, the refugee waves driven by these factors and the
potential instability of other key countries near the Balkans.
Other factors relevant to this risk include potential legislative changes, and particularly those affecting the
economic and investment climate in the region.
III.1.2 General macroeconomic risk
The general macroeconomic risk is the probability of various economic factors and trends, including, but not
limited to recession, trade barriers, currency changes, inflation, deflation and other factors, affecting
negatively demand and purchasing power in the countries where Group companies carry out their activities,
as well as in the countries where cross-border counterparties thereof operate.
Presently, the expectations of many independent market analysts and institutions continue to point out risks
of slowdown in growth and even contraction of the economies of developed Western European countries, as
well as in Bulgaria and Western Balkan countries, which may lead to limitations in private sector spending and
remain insufficiently compensated with countercyclical measures by national and supranational authorities.
III.1.3 Currency risk
The systemic currency risk is the probability of changes in the currency regimes or exchange rates of foreign
to the local currencies in the countries where Group companies operate affecting adversely the costs,
profitability, international competitiveness and general stability of economic agents and the local and regional
economy as a whole.
Presently, Bulgaria maintains a currency board system, based on a fixed Euro / Lev exchange rate. The Euro
has also been adopted as a fixing base or local currency in Bosnia and Herzegovina, Montenegro and Slovenia.
The above factors limit substantially the systemic currency risk relevant to the Group. However, the countries
Consolidated Annual Report 2021
xix
in which it operates, as well as European economies as a whole remain exposed to the effects of the exchange
rate dynamics of other leading global currencies, including mostly the US dollar.
III.1.4 Interest rate risk
The Systemic interest risk relates to possible changes in the interest rate levels, established by the financial
institutions in the countries where Group companies operate, as well as by international institutions and
markets, affecting adversely the accessibility of financing, funding costs, investment returns and economic
growth.
At this point, major financial institutions in Bulgaria, most leading global economies and the EU as a whole
maintain policies of low or negative base interest rates, targeted at catalyzing financing and investing activities
in the economy.
III.1.5 Credit risk
Systemic credit risk is the probability lowering the credit ratings of the countries in which Group companies or
key counterparties thereof operate, or other countries important to their economies, affecting adversely the
accessibility and cost of debt financing, the stability and attractiveness of their economies. This risk is
determined and measured by specialized international credit agencies.
III.1.6 Risk of adverse changes in tax legislation and practices
Changes in tax legislation towards increasing tax rates, the adoption of new taxes or adverse changes in double
tax treaties may lead to increased or unforeseen costs of the economic agents.
The tax system in Bulgaria is still evolving, which may lead to controversial tax practices. Similar risks also apply
to other countries, in which Group companies operate.
III.1.7 Risks related to imperfections of the legal system
Although since 2007 Bulgaria has introduced a number of significant legal and constitutional reforms and most
of its legislation has been harmonized with EU law, the country’s legal system is still in the process of
reformation. The above concern is all the more relevant to the countries of the Western Balkans, which are
yet to join the EU.
Judiciary and administrative practices remain problematic and local courts are often inefficient in resolving
property disputes, violations of laws and contracts, etc. Consequently, identified risks of legal infrastructure
deficiencies may result in uncertainties arising from corporate conduct, supervision thereof and other matters.
III.2 Risks specific to the Group and the sector in which it operates
III.2.1 Risks specific to the business strategy and growth
III.2.1.1 Inappropriate business strategy
The choice of an inappropriate business strategy, as well as а failure to adapt it in a timely manner to the
changing conditions of the environment can lead to losses and missed benefits for the Group. The
management of strategic risk through the constant supervision and periodic tracking of fluctuations in the
market environment and key performance indicators and the interaction among all levels in the organization
in order to identify potential problems and implement the appropriate measures in a timely manner are of
essential importance. Although this process has been recognized as of high priority and importance, it is
possible that the Group’s management and employees prove limited in the implementation of the above
practices due to a lack of experience, timely information or insufficiency of human resources.
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III.2.1.2 Insufficient management capacity and increased growth management costs
Notwithstanding the availability of managerial staff with significant experience and competence sufficient to
manage the Group in its current business size and scale, targeted expansion on new markets and in new
segments of existing markets will require additional management. It is part of the Group's policy to cultivate
such staff by promoting employees with sufficient experience and highly esteemed aptitude to grow in
hierarchy. However, the number of suitable employees is limited and some of them may not meet the
expectations on a managerial level. In turn, recruiting management staff with proven track record externally,
especially on developed markets, can be difficult and may entail high costs with a potentially negative impact
on profitability.
III.2.1.3 Insufficient capacity and increased costs for the operational assurance of growth
The Group’s expansion on both existing and new markets is highly dependent on the recruitment and
successful integration of additional staff, including centralized and local teams of marketing and sales
specialists and resource hubs for project management, engineering and technical personnel.
Identifying and recruiting appropriate marketing and sales professionals with the aim to attract new customers
can be difficult, slow, or involve additional costs, which may slow growth or reduce sales profitability.
Considering the overall growth trend and increased demand for engineering, technical and project staff in the
ICT sector on the Group’s markets and globally, the expansion of existing and the development of new
resource centres may also be slowed down or may require higher costs. The lack of experience at group
companies on new markets and segments, the shortage and increased price competition for the recruitment
of personnel, can also result in high staff turnover due to recruitment of unsuitable specialists or solicitation
by competitors that offer levels of remuneration, which the Group cannot afford to profitability match.
All of the above factors can lead to both missed benefits due to the impossibility to win and secure the
implementation of new projects, services and customers, and the erosion or loss of the Group's competitive
advantages based on the quality of service, number and cost of human resources.
III.2.1.4 Insufficient access and increased cost of external resources and subcontractors
As far as external experts and subcontractors are also subject to increased demand on the ICT market, the
risks outlined above also apply to the recruitment of such on a temporary basis to complement the Group's
internal capacity.
III.2.2 Risks relative to human resources and managerial staff
Besides their importance to the Group’s growth, management staff and human resources are also essential to
the assurance of its ongoing operations, and the Group is therefore exposed to various risks relative to the
retention, increased turnover and costs of such personnel.
III.2.2.1 Loss, deficit and increased costs of management staff and key personnel
The Group's operational management and business development depend to a large extent on the contribution
of a limited number of individuals managing key subsidiaries and the Group as a whole, playing key roles in
the administration, sales and operations and/or possessing key certifications, experience and other knowledge
essential to these functions that could be difficult to replace with similarly qualified personnel. A possible
withdrawal of those persons from the relevant structures or their inability to fulfil their obligations over a long
period of time could have adverse effects on the operating performance depending on the time of their
absence or the time needed for their substitution and the training of their substitutes, their adequate
familiarization with the organization and the specifics of the business and their full functional deployment.
Consolidated Annual Report 2021
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Possible retention measures could result in the increase of respective costs relative to their motivation
through raises in base salaries, bonuses, fringe and other benefits, at the expense of the Group.
III.2.2.2 Loss, deficit and increased costs of implementation staff
Considering the dynamic development and high demand for human resources in the ICT sector, the Group is
exposed to the risk of high turnover and costs of retaining or replacing engineering and technical staff,
marketing and sales specialists, and other personnel specialized in this field. A possible withdrawal of those
persons from the relevant structures or their inability to fulfil their obligations over a long period of time could
have adverse effects on the operating performance contingent on the time of their absence or the time
needed for their substitution and the training of their substitutes, their adequate familiarization with the
organization and the specifics of the business and their full functional deployment. Any possible retention
measures could result in the increase of costs relative to their motivation through raises in base salaries,
bonuses, fringe and other benefits, at the expense of the Group.
III.2.3 Risks relative to the market environment and competition
III.2.3.1 Slowdown or unfavourable trends in demand
Notwithstanding the observed positive development and positive growth forecasts by key expert
organizations in the industry for key Group markets and the ICT market as a whole, there is no guarantee that
future market developments will reaffirm these expectations and will continue to be positive or that the
corresponding growth in demand will not slow down significantly compared to the expected growth rates for
certain periods. The demand for ICT is also dependent on trends and circumstances specific to the various
business sectors and customers that determine their willingness and ability to purchase the Group’s products
and services, which may differ in one direction or another from the overall market trend. This may include the
possibility that the Group's target customers in one or more markets may not demonstrate interest in the
products and services being offered as they were expected to, or their adoption might take much longer than
expected. The aforementioned factors can lead to both a slowdown in sales growth and a deterioration in
operating performance due to lower prices and gross profitability, as well as delayed return on operating and
investment expenditures on business development.
III.2.3.2 Regulatory changes unfavourable to market demand
The Group generates a substantial part of its revenue from regulated or government policy-influenced sectors
and market niches such as telecommunications, banking, distribution companies, national security,
healthcare, etc. In that sense, demand for the Group's products and services, respectively its revenue and
operating results, can be significantly influenced by possible adverse changes in local and supranational
regulations and policies, including possible reduction or redirection to other areas of the EU and other
structural funds which its current and target customers are eligible to utilize.
III.2.3.3 Intense competition
The Group operates in a sector characterized by intense competition from both local and international
companies. Local competitors have an established market presence in key segments, which limits the
possibilities to enter or expand the Group’s operations in these segments and may serve as a basis for an
expansion of the position of those competitors at the expense of the Group. Large international companies
have widely recognized trademarks, a leading role in the implementation of innovative solutions and widely
diversified customer base and market presence, as well as large-scale organizational and financial capacity
that provides them with greater possibilities to exercise and withstand competitive pressures. A possible
increase in competitive pressure on the part of existing or newly emerging market players in the current
segments and markets, as well as any possible adverse reaction against the entry of the Group into new
Consolidated Annual Report 2021
xxii
segments and markets, could result in decline in the performance and delays or failure of the planned
expansion of operations.
III.2.3.4 Unfair competition
As a part of competitive pressure from other market players, the Group may be exposed to various forms of
unfair competition that may impair the Group's performance and limit its expansion opportunities. Such
actions may include soliciting key personnel with the aim to reduce its technical and organizational capacity,
implying a negative image before certain customers or on the market as a whole, covert lobbying by and for
the benefit of competitors, biased use of legal and contractual mechanisms with the aim to impede or delay
the execution of public procurement and other activities, making competitive bids based on unprofitable
prices or a hidden decrease in the utility offered, which may result in choices on the part of the Group’s
counterparties that deviate from the actual cost-benefit ratio between the offerings of the Group and its
competitors.
III.2.4 Risks relative to public procurement
III.2.4.1 Delayed tendering and implementation
The implementation of projects in the public sector depends on their timely definition, the approval of budget
or program financing, announcement and tendering, contracting and acceptance of performed works by the
relevant governmental entities or local and central government. The failed or late implementation of any of
these steps may result in discarded or delayed revenues and a corresponding deterioration in the Group’s
current performance or slowdown in its growth.
Factors that can lead to a delay at the aforementioned key stages include current and future changes in
managerial and expert staff in the context of local and/or central elections, the appointment of temporary
authorities and other factors, which can lead to delays in decision making and executive action at the
contracting organizations. Delays may also arise as a result of appeals filed by competitors against tendering
procedures announced or the results thereof. Regardless of their merits, considering the applicable statutory
hearing terms, appeals result in more or less significant delays in tenders and the award of contracts for their
implementation.
III.2.4.2 Competition for public procurement
Due to the large volume and attractiveness of the public ICT market, public procurement is subject to relatively
more intensive and unfair competition compared to sales to the private sector. Commonly employed
instruments of unfair competition include the unscrupulous use of legal means to appeal tendering procedures
or the results thereof, with competitors aiming to procure more time for their own preparation or to affect
negatively the Group’s financial results by delaying the project’s implementation and the realization of
respective revenues and profits.
III.2.5 Concentration risks
III.2.5.1 Adverse changes in key client relationships
By virtue of its specialization in high-grade technological solutions and professional services targeted mostly
at large and medium organizations and projects, the Group is inherently exposed to a concentration risk with
regard to key clients and client groups. Such counterparties with substantial portions of the Group’s revenues
for the past three financial years and/or with potential significance to future development include
telecommunication operators, public organizations, banks, multinational clients and other private enterprises.
In spite of the Group’s progress towards growing revenue diversification, the potential loss, a drastic decrease
in sales or a deterioration in the terms of cooperation with such clients could have an adverse effect on the
Consolidated Annual Report 2021
xxiii
volume and results from operations in the short term, as well as a potentially negative reputational effect on
the Group in perspective.
III.2.5.2 Adverse changes in relationships with key technological partners
Accounting for the significant importance of innovative and large-scale technologies offered by leading global
vendors to the offered products and services, the Group is exposed to a concentration risk with regard to its
key technological partners. Such counterparties accounting for substantial portions of the Group’s purchases
for the past three financial years include several leading vendors in the fields of networking, data center and
office productivity solutions. Although the Group’s vendor policy is flexible and open to various technological
partners, a potential termination or a deterioration in key terms of such partnerships, such as requirements
for the maintenance of technological specializations, levels of discounts, terms of payment, etc., could have
an adverse effect on the cost and volume of operations.
III.2.6 Risks relative to changes in technology and technological choices
III.2.6.1 Time and cost of adpating to new technologies
The ICT sector is characterized by a fast pace of technological innovation, reducing the life cycle of products
and requiring a constant update of the Group's technological specializations in accordance with trends in
market demand and opportunities for generating revenue from the introduction of new solutions and services.
Despite the Group's consistent practices in this respect and its open approach to establishing new and
extending the scope of existing technological partnerships, in some cases they may require additional time or
costs for researching and establishing relationships with relevant suppliers.
III.2.6.2 Loss of clients due to their transition to alternative technologies
Notwithstanding the wide range of technologies and technological partners offered by the Group and its open
approach and extensive experience in establishing new partnerships with equipment and software vendors,
customers may still opt to change current technologies and vendors with others with whom the Group does
not have and cannot establish partnerships providing the respective competences and attractive delivery
terms. Due to the presence of competitors with better positioning in respect of a technological partner and
better delivery terms for their products, it is possible for the Group to not be preferred as a supplier by the
client in spite of having an established partnership with the same vendor. Such circumstances could also lead
to substantial decreases in revenues and operating results.
III.2.6.3 Delayed adoption of new technologies by the clients
The main geographical markets, in which the Group operates, are lagging behind in the adoption of many
innovative ICT products and services. In spite of the market segmentation applied by the Group in accordance
with the clients’ technological maturity, it is possible for the target client groups to also react more
conservatively than expected, delaying significantly the implementation of the Group’s strategy and growth
targets.
III.2.6.4 Delayed or unsuccessful positioning of propriatary products and services
To tap identified market opportunities in given market segments, the Group may continue to invest in the
development of proprietary complex solutions and services adapted to the needs and specifics of the
respective markets and client groups. Despite this adaptation, there is a risk that the new products and
services will not meet the actual requirements or that they will not be adopted fast enough or at all by the
Group’s current and targeted clients, which could lead to a delayed, limited or negative return on the
undertaken investments.
Consolidated Annual Report 2021
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III.2.7 Risks relative to long-term contracts
III.2.7.1 Cost of commitments for regular service and support
Many contracts signed by the Group include commitments for warranty and post-warranty servicing and
maintenance of hardware, software and complex systems and infrastructures, or the provision of managed
and other services against fixed one-off or subscription fees. The costs of fulfilling these commitments may
exceed the amount of revenue without the Group being able to compensate additional costs at the expense
of the customer or the respective primary suppliers and technological partners, having an accordingly negative
impact on results from operations.
III.2.7.2 Early termination
Medium and long-term contracts for multiple deliveries or regular service in the form of maintenance,
managed and other services can be terminated unilaterally and early at the client’s initiative. While some of
these contracts include provisions limiting the above risk and respective losses for the Group, such as
penalties, buyout commitments etc., they can prove insufficient to cover missed benefits or the incurred
additional costs. The earlier termination of such contracts could lead to a decrease in the Group’s recurring
revenues, which may not be compensated with new sources of revenue and may lead to an overall decrease
in sales and results from operations.
III.2.7.3 Specific risks relative to the provision of equipment as a service
Depending on changes in the IT policies of respective clients or other factors, the long-term contracts signed
by the Group for managed services including the provision of equipment-as-a-service can be terminated
unilaterally and prior to their expiry. Despite the provisions enforcing preliminary notifications and
compensations for expenses incurred up to that point, a potential termination could be a factor for a decrease
in the Group’s recurring revenues and overall sales.
Under certain circumstances of termination, some contracts provide a possibility for respectively leased
equipment to remain the property of the Group instead of being bought out by the client. This could lead to
additional costs for dismantling, transportation, etc., as well as delayed or non-materializing resale of the
equipment to other clients.
Some contracts provide the option to expand their scope at the client’s initiative through the delivery and
integration of additional equipment provided as a service based on prices or conditions identical to or subject
to limited indexation compared to the initial ones. If, in the meantime, the market price of the equipment has
increased, and/or there has been a significant rise in the expenses for the provision of respective services, this
could lead to an uncompensated increase in the Group’s expenses and an overall decrease in the profitability
of similar operations.
III.2.8 Financial risks
III.2.8.1 Currency risk
The Group operates on different markets and in currencies different from its functional currency and is
accordingly exposed to transaction and translation currency risks. The main source of transaction-driven
currency risk is the purchase of equipment from global technological partners denominated in US dollars and
financed with credit limits in the same currency. Despite the presence of mechanisms of currency indexation
in some contracts and the practice of voluntary forward hedging of larger purchases at the discretion of
respective Group companies, such transactions continue to generate net results (including losses) from foreign
currency operations Group subsidiaries. Accounting for the fixed exchange rates of the Bulgarian Lev and the
Bosnia and Herzegovina Convertible Mark to the Euro and the adoption of the latter as the national currency
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in Slovenia and Montenegro, the Group is exposed to a translation risk relative mainly to the floating Serbian
Dinar, as well as to the Macedonian Denar, the Albanian Lek and the Croatian Kuna.
III.2.8.2 Liquidity risk
The Group’s cash flows can undergo significant momentary fluctuations as a result of various factors such as
peaks in net working capital, increased investment activity, payment of dividends, etc., which may result in a
given Group company’s cash and cash equivalents being insufficient to meet its due liabilities. In spite of the
signed financing contracts providing significant limits for funding working capital and the financing of a
significant portion of investments with finance lease contracts, there is a risk that these limits may be
insufficient in certain moments or periods. Such deficits may result in one or more Group companies’
temporary inability to service its obligations to third parties in a timely manner with various adverse effects
on its reputation and financial position.
III.2.8.3 Insufficient financial capacity for the implementation of big projects
Besides their impact on the current liquidity of respective Group companies, possible instances of uncovered
cash deficits may also lead to the impossibility of committing the working capital need to start new projects
or implement ongoing ones, resulting in delayed revenues, penalties for delayed implementation and
respective damage to the Group’s reputation. In the event that it is not possible to prove sufficient financial
resources in front of potential clients or in accordance with the requirements of public and private tenders for
large projects, the respective company may not be able to negotiate sufficient additional financing in due time
and miss the opportunities to win the respective projects and the benefits of their implementation.
III.2.8.4 Credit risk
Although the Group's key accounts are well-established and solvent companies and institutions with proven
payment track records, the Group remains generally exposed to the risk of significant delays or non-payment
of receivables due to a variety of factors relative to internal processes, financial condition and current trends
in the cash flows of those and other customers. Significant past-due receivables may affect the cash flows and
immediate liquidity of one or more Group companies and its ability to service its obligations to third parties in
due course with a various adverse effects on its reputation and financial condition.
III.2.8.5 Asset impairment risk
Under certain circumstances (such as impairment and write-off of receivables, intangible assets, investment
property, inventories, held-for-sale assets, etc.), it is possible for the Group to record substantial expenses and
reductions in the book value of its assets.
III.2.8.6 Interest rate risk
The Group is exposed to the risk of increase in market interest rates in connection with the use of overdraft
limits, revolving credit lines in Bulgaria and Serbia based on the base interest rate (BIR) of the Bulgarian
National Bank, EURIBOR, USD LIBOR and BELIBOR indexes, and finance leases in Bulgaria and Macedonia based
on the periodically updated average deposit index (ADI) of the financing bank and floating EURIBOR indexes.
Pursuant to the subsequent signing of an overdraft agreement between the Company and Raiffeisenbank
(Bulgaria) EAD referred to in section VI, the Group has also become potentially exposed to changes in the
reference interest rate of the latter bank based on the variable yields on retail deposits in Bulgaria.
Due to the dynamic nature of overdraft and credit line exposures, the predominantly low or negative levels of
such indexes observed in recent years and the low effective variability of BIR and EURIBOR determined by the
application of fixed minimum total interest rates by financing banks, the Group considers interest rate risk as
Consolidated Annual Report 2021
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relatively insignificant and has no current hedging practices. Consequently, a potential sharp rise in market
indexes could have a negative impact on its results.
III.2.9 Operational risks
III.2.9.1 Deviations in processes and quality of service
Group companies are exposed to the risk of losses or unforeseen costs that may arise due to incorrect or
inoperative internal processes, human errors, external circumstances, administrative or accounting errors,
business interruptions, fraud, unauthorized transactions and asset damages. Any failure of the risk
management system to establish or correct an operational risk may have a substantial adverse effect on the
Group’s reputation and operating results.
III.2.9.2 Inaptitude or malfunction of specific IT equipment and systems
In carrying out their principal activities, Group companies use specific IT equipment and systems, any potential
malfunction, misuse or inaptitude of which would have a substantial impact on their ability to fulfil undertaken
commitments to counterparties or which may result in unforeseen technical, legal and other costs affecting
negatively the Group’s reputation and operating results.
III.2.9.3 Assuring compliance with standards and norms
Certain Group require their suppliers to ascertain the compliance of their competence and rules for the
organization of processes and activities with various international quality management standards, procedures
for the handling of confidential information, etc. Notwithstanding the certification of TBS EAD under a number
of such standards and norms, the imposition of similar requirements on other Group companies not having
the corresponding certifications, or a change in the current requirements and the inability of the Group to
respond thereto on a short notice could have a negative impact on the Group’s revenue and operating results.
III.2.9.4 Leakage of personal and sensitive information of clients and employees
In the process of carrying out its activities, the Group stores and processes personal and sensitive data of its
employees, customers and third parties. Any loss or unauthorized external and internal access and misuse of
such data could have various negative consequences to the competitiveness, reputation and performance of
the Group, including judicial or out-of-court proceedings and proceedings against respective subsidiaries and
substantial pecuniary sanctions by the relevant authorities.
III.2.10 Other risks
III.2.10.1 Litigation risk
Group companies are generally exposed to the risk of litigation, including collective claims filed against them
by clients, employees, shareholders, etc. by the initiation of civil actions, actions by competent authorities,
administrative, enforcement and other types of judicial and extrajudicial proceedings. Some of these
proceedings may be accompanied by restrictive and enforcement measures against the Group’s assets and
activities that could limit its ability to carry out a part or all of its activities for an indefinite period of time.
Plaintiffs in similar cases against the Group may seek refund of large or undetermined amounts or other
damages that could significantly deteriorate the Group’s financial position. The defense costs in future court
cases can be significant. Public information on such events or their negative business impact may impair the
reputation of respective subsidiaries and the Group as a whole, regardless of whether or not the underlying
claims and negative rulings are justified. The potential financial and other consequences of such proceedings
may remain unknown for an extensive period of time.
Consolidated Annual Report 2021
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III.2.10.2 Risks relative transactions with related parties
In the course of their business, Group companies carry out transactions and make commitments to each other
as well as to related parties outside its membership. In spite of its endeavor to follow good practices in the
implementation of such deals and the commitment to comply with the applicable provisions of the POSA and
other applicable regulations, it is possible because of ignorance, employee negligence, etc. that one or more
such transactions may be concluded under conditions deviating substantially from market terms, which could
have an adverse effect on the results of the Group’s operations and its financial position.
III.2.10.3 Cyber attacks
In addition to unauthorized access to data of the Group data and its counterparties, possible attacks against
the Group and its counterparties could be targeted at or result in a malfunction or inability to use information
and communication systems, including specialized IT systems for the provision of services. Although the Group
specializes in information security and has advanced competences in preventing, limiting, monitoring and
recovering systems and data in the aftermath of such attacks, the latter may take some time, during which
the effects of these attacks may affect adversely operating results and compromise the Group’s reputation.
III.2.10.4 Force majeure
Like all economic agents, the Group is exposed to the general risk of natural disasters, hostilities, terrorism,
political, public and other acts and events beyond its control and not subject to insurance, which could have a
substantial adverse effect on the results of its activities and prospects in one or more territorial and other
business domains.
III.3 COVID-19 coronavirus epidemic
In spite of the gradual subsiding of the latest propagation wave of COVID-19 and the tendency towards the
relaxation and discontinuation of the ant-epidemic measures, the Group remains exposed to the ongoing
repercussions of the epidemic, such as accelerated inflation, the extension of the production and delivery cycle
of electronic components and equipment and the slowdown in the investments of some private sector
industries in certain types of information and communication technologies.
At the same time, the are also ongoing significant factors counter-balancing the risks, including the
acceleration of public spending on technological development and modernization and economic support of
the economy as a whole, as well as a tendency of significant acceleration of private sector investments in
digitalization and digital transformation.
The potential impact of the above factors on the Group’s sales and financial results has been counted among
the current and future factors of the economic environment in the Group’s current budgets and mid-term
development plans. In that sense, as of the date of this Report, the latter are not deemed exposed to
significant risks arising from a continuing development of the epidemic and/or its repercussions. Nevertheless,
the Company’s management will continue to monitor the situation’s development on a day-to-day basis, with
a view to the timely identification of actual and potential adverse effects and the undertaking of all possible
measures towards the limitation of their impact in due course.
Consolidated Annual Report 2021
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IV INFORMATION ON ENVIRONMENTAL ISSUES
Overall, the Group’s core operations are not related to activities with a significant direct impact on the
envireonment.
Physical activities carried out in relation to system integration, delivery and maintenance are limited to the
transportation, installation and setup, replacement or repair of on-site ICT equipment and materials, and do
not include construction activities on the deployment or reorganization of infrastructures, premises and
complex facilities. By their nature and scope, the transport, installation and repairment activities performed
do not entail significant environmental risks.
To the extent legal norms apply to the recycling and disposal of retired ICT equipment and materials, the
respective liabilities and risks for the Group arise only to the extent such equipment is owned by Group
companies or they have made contractual commitments for the performance of respective operations on
behalf of and at the expense of the client.
In the case of services limited to the delivery, system integration on a project basis and support, the property,
risks and obligations associated with the operation, disposal and recycling of the delivered equipment are
transferred to the client at the time of fulfilment of the delivery or integration activities under the project.
In the case of providing Managed Services including the provision of Equipment as a Service, the equipment
remains the property of the Group. To this extent, the Group companies providing such services undertake
contractual and legal obligations for the safe operation, removal and disposal or recycling of respective ICT
equipment and materials.
Insofar as the nature and scope of the use of ICT equipment does not entail significant environmental risks,
the probability of occurrence of environmental problems that may affect the use of ICT equipment owned by
the Group for the provision of services or for internal purposes is insignificant.
Consolidated Annual Report 2021
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V INFORMATION ON EMPLOYEE-RELATED MATTERS
V.1 Trends in the number and evolution of personnel
As of December 31 2021, total staff hired under employment and management contracts in Group companies
reached 271, growing by 19 people or 12% from the end of 2020. Similar growth by 32 employees or 14% was
also reported in the average count of consolidated personnel.
The main factor behind registered growth was the overall increase in personnel in Bulgaria, stemming from
the expansion of operating and administrative capacity at TBS EAD with a view to the assurance of resources
for the current and planned growth on the Bulgarian market and in the Group as a whole. A certain part also
stemmed by the launch of activities in Croatia, with regard to which a local team was formed in the fourth
quarter with the mission of developing opportunities for the deployment of the Group’s product portfolio on
the local market.
As of period end, 86% of the Group’s total staff continued to consist of personnel employed on the territory
of Bulgaria, which retained a predominant share in realized services and continued to concentrate the main
strategic functions relative to the Group’s business development as a whole.
V.2 Organizational policy and human resources management
Recognizing the need to assure resources and premises for the efficient implementation of its strategic
development plans, the Group has continued the deployment of a matrix organizational structure started in
2019 with the goal of integrating the available human resources of Group companies into a seamless
international service delivery organization. The implemented structure is based on establishing interactions
among all functional levels, including technical staff, project management, marketing and sales, relationships
with suppliers, human resources, finance and general administration, with each of the Group’s product lines.
Inherently, the operations of Group companies involve a relatively limited scope of field activities presenting
substantial risks to the health and safety of employees. Notwithstanding, Group Companies apply a consistent
policy of occupational health and safety, including the assurance of appropriate working conditions and the
training of employees according to the profile of their work.
The management of TBS Group acknowledges the foremost importance of human capital as a key factor of
the Group’s competitive advantage and capacity to materialize market opportunities, both in terms of
innovation and quality of the offered solutions and services and as regards the administrative and managerial
assurance of its development strategy. In consideration of the above factors, the Group intends to maintain
its general policy of human capital development based on systematic qualification improvement and update,
the promotion of career development and the motivation, retention and loyalty of key personnel.
V.3 Financial motivation and share-based incentives
Furthering the practices established after TBSG AD’s listing in 2020, in 2021, the Group’s policy of encouraging
employee interest in achieved results continued to include both traditional annual cash bonuses based on
individual performance and the financial standing of Group companies and a new edition of a long-term share-
based incentive plan for the managers and key employees, based on continuing employment and Group
performance in the period 2021-2023, encompassing 49 employees (as compared to 42 included in the similar
program adopted in 2020 for the period 2020-2022).
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VI SIGNIFICANT EVENTS AFTER THE DATE OF COMPILATION OF THE
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
On a meeting held on January 18 2022, the Company’s MB adopted a preliminary resolution on extending the
term of the suretyship agreement whereby TBS EAD has provided security in favour of Raiffeisen Bank AD
Beograd, Serbia, for the due fulfillment of the obligations of Comutel.
On January 21 2022, the suretyship commitment of TBS EAD was extended with regard to an annex to the
credit agreement between Comutel and Raiffeisen Bank AD Beograd, Serbia, in order to secure the due
fulfillment of the respective obligations of Comutel.
On January 21 2022, Comutel and Raiffeisen Bank AD Beograd, Serbia signed an annex to Credit agreement №
265-0000001624611-36, whereby the agreement’s term was extended until January 31 2023.
On January 24 2022, subsidiary Telelink Business Services GmbH was entered in the Trade register of the
Federal Republic of Germany as represented by Silviya Marinova. The company’s capital in the amount of EUR
25,000 has been fully paid in.
On February 10 2022, the Company’s MB resolved upon entering into an Overdraft Agreement with
Raiffeisenbank (Bulgaria) EAD, signed on February 15 2022, with the following limits:
• Overdraft credit up to EUR 2,000,000, with a repayment term until February 28 2026;
• Contingent bank credit up to EUR 2,000,000, with a utilization term until January 28 2026.
All limits are available for utilization in BGN, EUR or USD, at respecitively applicable interest rates of RIR +
1.5%, 1m. EURIBOR + 1.5% and 1m. LIBOR + 1.5%, but not less than 1.5% (regardless of the currency of
utilization).
Provided security to the agreement includes:
• pledge on receivables from accounts with the bank;
• pledge of current and future receivables from commercial agreements between TBSG AD and its
subsidiairies;
• suretyship by TBS EAD.
The agreement was signed on February 15 2022.
On February 11 2022, the Company’s MB resolved upon the extension of a corporate guarantee by the
Company for securing the obligations of TBS Croatia under operating lease agreements with Unicredit Leasing
Croatia d.o.o. On February 15 2022, the Company issued a corporate guarantee for EUR 56,554.95.
On February 14 2022, the Company published a statement by CEO Ivan Zhytiyanov on the successful
completion of due diligence and the subsequent termination of the consultations with Slovenia Broadband
S.a.r.l. with regard to the potential acquisition of the Company due to diverging strategic views on key areas
of business development and growth. Without prejudice to the above, Mr. Zhitiyanov also stated his
maintained solidarity with the selling shareholders’ intention to offer a majority stake in case of further
interest from strategic investors matching the Company’s goals.
As of February 24 2022, the structure of subsidiary TBS Croatia has been changed by the removal of its
supervisory board as a governing body.
In accordance with a preliminary resolution of the Company’s MB from February 23 2022, on February 25
2022, TBS Group AD signed contracts for the provision of corporate and business development services with
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xxxi
subsidiaries TBS EAD, Comutel, TBS Montenegro, Telelink Bosnia, Telelink Slovenia, TBS Macedonia, Telelink
Albania and TBS Croatia.
On a meeting held on March 04 2022, the MB resolved to convene a general meeting of shareholders on April
11 2022.
On a meeting held on March 11 2022, the SB approved the Group’s annual budget for 2022 and a policy for
the motivation of stakeholders.
On March 16 2022, TBSG AD provided a corporate guarantee securing the obligations of Telelink Slovenia
under Framework Credit Agreement №. 5074/2022 with Unicredit Banka Slovenia d.d. for the amount of EUR
1,500,000, as approved by the Company’s MB on March 15 2022.
As of March 18 2022, the structure of subsidiary Comutel has been changed by the removal of its supervisory
board as a governing body.
On March 22 2022, Telelink Slovenia signed a framework agreement for financing and guarantees with
UniCredit Banka Slovenija d.d. with a limit of up to EUR 1,500 thousand, annual interest rate of 1.5% +1m.
EURIBOR and a maximum term until January 19 2023.
On March 23 2022, a Cash Loan Areement was signed between TBS EAD (lender) and TBSG AD (borrower) with
a limit of up to BGN 1,000 thousand subject to revolving utilization and repayment for a term of 12 months,
at an interest rate of 2.25%. As of the date of this Report, the utilized amount is BGN 250 thousand. The
agreement was approved in preliminary by resolution of the GMS held on September 14 2021.
On a meeting held on March 28, the MB approved the individual annual financial statements of TBSG AD.
On March 29 2022, an annex was signed to the loan agreement between TBSG AD (lender) and TBS Croatia
(borrower), whereby the limit was extended to EUR 500 thousand and the term – until December 21 2022.
On April 11 2022, the general meeting of shareholders adopted the following resolutions:
• Authorizing the Company’s MB to engage in dealings subject to art. 114, par. 1, item 3 of the POSA,
i.e. agreements whereby the Company will provide corporate and business development and
management services to its subsidiaries;
• Authorizing the Company’s MB to engage in dealings subject to art. 114, par. 1, item 2 of the POSA,
i.e. providing the possibility for the Company to make transactions entailing obligations of the
Company towards third parties with regard to issuing guarantees for the performance of
commitments by its subsidiaries.
On April 12 2022, a contract was signed between TBS EAD and Consortium Digital Backpack DZZD, whereby
the subsidiary will carry out works amounting to a total of BGN 11,045,266.85 without VAT with regard to a
project for the Delivery and implementation of a single electronic platform for educational services and
content (SEPESC) and modules thereto” of the Ministry of Education and Science. The dealing was pre-
approved by the MB of TBSG Group AD on April 12 2022 on basis of a request filed by the subsidiary for signing
the deal.
Consolidated Annual Report 2021
xxxii
VII RESEARCH AND DEVELOPMENT ACTIVITIES
During the year, TBS EAD allocated internal resources and external services towards the development of
specialized information security systems. Overall, expenditures on the formation of intangible non-current
assets from development activities for the year amounted to BGN 116 thousand, representing a substantial
decrease from the BGN 236 thousand allocated to the development of IoT systems in 2020.
Except for the above, there were no other Group companies carrying out research and development activities
in the period in 2020-2021.
Consolidated Annual Report 2021
xxxiii
VIII POTENTIAL FUTURE DEVELOPMENT OF THE GROUP
VIII.1 Group Development Strategy
VIII.1.1 Geographical development
In line with identified market trends, competitive strengths and opportunities, the Group’s strategy continues
to target:
• stability in established operations in Serbia, Montenegro and Bosnia and Herzegovina;
• continuing expansion of operations and revenues in Bulgaria and Macedonia;
• expansion of the existing activity scope in Slovenia and repositioning of TBS Albania;
• deployment of operations in the recently launched TBS Croatia;
• the establishment of local market presence in Romania, Germany and the USA.
VIII.1.2 Products and services
VIII.1.2.1 IT Infrastructure
The Group intends to maintain and continue to update and expand in line with future technological evolution
its established competences in the fields, of Service Provider Solutions, Enterprise Connectivity, Hyprid Cloud
Solutions and Modern Workplace.
Expectations for future growth and sustainability of sales in those business lines in the medium term are based
on:
• the revolving and expansion of European pre-accession and cohesion funds and the launch of new
recovery and resilience funds;
• the recovery of enterprise investments in IT infrastructure from the withholding impact of COVID-19;
• the growing interest of foreign and multinational companies from developed markets in the
outsourcing and transformation of investments in IT infrastructure, including in the form of managed
services and equipment as a service.
VIII.1.2.2 Digital Transformation
Combining its proven competence in custom software development from the Application Services product line
with the low code / no code platforms and business process automation from the field of Hyperautomation
which it started to develop in 2021, the Group intends to address the growing interest in the digital
transformation of public and private organizations with a comprehensive portfolio of software-based products
and services.
Major drivers of mid-term growth in this domain include:
• the growing awareness and interest in digital transformation of the private sector in the aftermath of
COVID-19 and in the context of general technological evolution;
• the strong emphasis of European structural programs and funds on digitalization as a top priority of
development and sustainability for the years to come.
VIII.1.2.3 Information Security
The Group intends to continue the development of its successfully established specialization in the field of
cybersecurity with a growing emphasis on attractively priced solutions and the offering inf information
security as a service with the goal of stimulating growth on the still underdeveloped regional market.
Consolidated Annual Report 2021
xxxiv
The main premises for mid-term growth expected in this business line include:
• the increasing importance of information security in the context of the growing adoption of remote
access technologies, cloud-based services and digitalization as a whole;
• the high potential implied by the low present level of penetration of information security in the Balkan
region;
• the distinguished positioning of the Group as one of the few regional players with an established
professional team and a broad range of partnerships with leading a niche vendors of specialized
hardware and software.
VIII.1.2.4 IoT
At the beginning of 2022, TBS EAD proceeded towards the integration of an already established team of
specialists and the undertaking of corresponding activities for the development and sales of specialized
systems and device in the field of IoT, focused on the monitoring and management of water resource, air
quality and other parameters of the environment and utility services.
The strategy for the future development of IoT within the Group is based on:
• a growing emphasis on the development of software-based platforms and solutions for the
comprehensive integration of IoT with IT infrastructure, digital transformation and cybersecurity;
• the strong alignment of IoT with the digitalization objectives and the ecologically oriented priorities
for sustainable development addressed broadly in the policies and structural financing programs of
the EU.
VIII.2 Expected trends in financial results
Taking into account the above objectives and initiatives, the main expected near and medium term trends in
the Group’s future business development and financial results upon successful implementation of its strategy
include:
• increasing product, territorial and sector diversification and significant mid-term growth in revenues
with the main contribution of intensified public spending under EU programs over the next three years
and the full deployment of the potential of newly established local operations in Croatia, Romania,
Germany and the USA in a five-year perspective;
• gradual improvement of gross profitability from 2023 (considering the expected withholding impact
of rising equipment purchase prices in 2022), favoured by the growing share of products and services
bearing typically higher added value in the fields of Digital Transformation, IoT and Information
Security, the achievement of sustainable positioning on new local markets in the Balkan region and
the growing share of local revenues from Germany and the USA, where the Group expects t realize
predominantly managed services of high added value;
• a temporary drop in operating and net profit as a result of planned accelerated growth in sales and
marketing expenses and general and administrative costs as compared to gross profit in 2022 with
regard to business development, new market entries, internal productivity improvements and the
assurance with human resources of planned mid-term growth, followed by the resumption of faster
growth in operating profit as compared to gross profit from 2023, a normalization of growth rates in
sales and marketing and general and administrative expenses from 2024 and the achievement of
significant economies of scale in a five-year perspective;
Consolidated Annual Report 2021
xxxv
• faster growth in EBITDA as compared to operating profit due to the growing share of depreciation and
amortization in the Group’s operating expenses as a result of the growing investments in equipment
provided as service under managed service contracts corresponding to planned expansion in Germany
and the USA.
VIII.3 Possible deviations and risks for the future development of the
Group
The actual development of the Group may deviate in one or more aspects from the above expectations, goals,
initiatives and effects of their implementation depending on various factors within or beyond the Group’s
control.
The risks related to the Group’s strategy, the operations of its subsidiaries and the overall economic and
political environment in which they operate are described in section III above.
VIII.4 Potential acquisitions
As of the date of this Report, the Company and Group subsidiaries have not extended or signed any binding
offers and agreements for the acquisition of equity interests in other companies. However, the management
remains open to considering possible future capital investments and acquisitions bearing the potential for
positive synergies, which could support or accelerate the implementation of its strategy for local and
international development and growth.
Consolidated Annual Report 2021
xxxvi
IX INFORMATION REGARDING OWN SHARES REQUIRED UNDER
ARTICLE 187e OF THE COMMERCE ACT
IX.1.1 Number and nominal value of own shares acquired and transferred during the
reporting period, the part of capital they represent and price of acquisition or
transfers made
Neither the Company, nor its subsidiaries acquired or transferred any own shares during the reporting period..
IX.1.2 Number of own shares held and the part of the capital they represent
As of December 31 2021, the Company held 356 own shares with a nominal value of BGN 1 each, representing
0.003% of its registered capital, acquired in 2020.
As of the same date, no Group subsidiaries have acquired or held any own shares.
Consolidated Annual Report 2021
xxxvii
X ESTABLISHED BRANCHES OF THE COMPANY AND GROUP
COMPANIES
As of December 31 2021 and the date of this Report, the Company has no registered branches in the country
or abroad.
As of the same dates, TBS EAD has a registered branch in Romania which has not conducted active commercial
operations.
Except for the above, there are no other Group subsidiaries with registered branches in their countries of
incorporation or in other countries.
Consolidated Annual Report 2021
xxxviii
XI USE OF FINANCIAL INSTRUMENTS
XI.1 Financial risk management objectives and policies, including hedges
Due to the formation of its revenues and expenses mainly or entirely from its subsidiaries and in local currency
(leva) or Euro under the regime of a currency board and the exclusive use of intra-group financing bearing an
interest rate with limited indexation possibilities throughout the reporting, the Company was not exposed
directly to significant currency and interest rate risk and did not use any financial instruments.
In their activities and with regard to their funding, Group subsidiaries are exposed to the currency and interest
rate risks described in sections III.2.8.1 and III.2.8.6 of this Report.
XI.1.1 Currency risk management
In the first place, Group companies aim to minimize transaction-based currency risks from the purchase of
equipment in US Dollars and its resale in local currency or Euro by negotiating mechanisms of currency
indexation of sale prices and/or synchronization of the maturities and currencies of receivables and payables,
to the possible extent. Significant exposures not covered in the above ways are hedged by forward purchases
of US Dollars at the discretion of the respective companies.
XI.1.2 Interest rate risk management
In view of the floating nature of exposures under overdraft and revolving credit limits depending on the
current dynamics of net working capital, the applicable minimum interest rate clauses in case of negative
levels of interest rate indices and the systematic observation of such levels of EURIBOR, zero or minimally
positive BIR and deposit indices of the financing banks and low to moderate levels of USD LIBOR and BELIBOR
during the reporting and previous periods, Group companies do not hedge interest rate risk arising from credit
line agreements. The current changes and forecasts for the development of regularly updated and floating
indices remain subject to continuous monitoring in view of the timely renegotiation of interest rates on credit
lines and the possible fixing or hedging of interest rates on long-term finance lease contracts in cases of
significant actual or expected unfavourable changes in market interest rates.
XI.2 Exposure to price, credit and liquidity risks and cash flow risks
XI.2.1 Risk of changes in the prices of signed contracts
The majority of the Group’s sales are realized under contracts and/or orders with one-off implementation
within a limited time period, the prices of which are fixed upon contract signing and are not subject to change.
To the extent there are framework contracts or projects with phased implementation over a longer period of
time, Group companies aim to embed therein appropriate mechanisms of price indexation in case of
significant changes in market conditions, exchange rates and other factors. However, such mechanisms are
not always feasible and in line with the established market practices or statutory rules of certain dealings, such
as public procurement bids. In order to comply with such rules or stay on par with competitors, the Group
may therefor assume the price risk relative to such dealings, while doing its best to minimize or compensate
for its impact with the negotiation of higher discounts from respective suppliers or by the terms of future
dealings.
In their operations, Group companies are exposed to risks of long-term price fixation under some long-term
contracts for maintenance and managed services described in section III.2.7 of this Report. The policy of
limiting these risks is based on the embedding of higher reserves for long-term cost variation upon the
negotiation of respective prices.
Consolidated Annual Report 2021
xxxix
XI.2.2 Risk of unfavourable changes in market prices
In their activities, Group subsidiaries are exposed to the risks relative to the market and competitive
environment described in section III.2.3 of this Report, which may result in decreasing market prices of offered
products and services.
The business profile and strategy of the Group are focused on limiting the consequences of these risks to the
prices and gross profitability of the offered base products and services by their integration into complex
solutions and services with high added value, the development of specific solutions without direct market
analogues and the policy of sustainable increase of the share of such solutions and services in the Group’s
revenues as a whole. Another substantial factor is the Group’s strategic focus on the establishment of an
optimal organization for the provision of services and maintaining the quality of service on the highest level.
The awareness of the Group’s clients of the above benefits as a part of the overall utility of the solutions
offered thereby as compared to competitive offers is a prerequisite for limiting price competition as a factor
of the client’s final choice and its potential adverse effects on the financial position and operating results.
Тhe strategic partnerships of Group companies with leading global manufacturers also contribute significantly
to limiting the impact of decreases in the resale prices of equipment and software. Through the policies of
preferential pricing integrated therein and support for the implementation of large projects, these
partnerships are a prerequisite for achieving the highest discount levels providing protection of the Group’s
profitability in times of fierce competition and decreasing market prices.
XI.2.3 Credit risk exposure and management
In their operations, Group subsidiaries are exposed to the credit risks described in section III.2.8.4 of this
Report.
Group companies aim to trade only with established and solvent counterparties. The balances and maturities
of receivables are subject to continuous current monitoring, both reactively and preventively, with regard to
the timely identification of any potential risk of non-payment or significant delay taking into account the
client’s development and situation. Therefore, the Group’s exposure to credit risk is considered to be relatively
insignificant.
While some major clients account for significant shares in consolidated sales and receivables, these clients
usually represent well established and solvent companies and institutions, including leading telecom
operators, governmental and municipal organizations, leading multinational or public enterprises, and/or
long-term partners with proven payment history.
As pointed out in section XII.2.2 of this Report, during and towards the end of the reporting period, there were
only two clients with shares of over 10% in the Group’s total sales and/or trade receivables.
XI.2.4 Exposure and management of liquidity and cash flow risks
In their activities, Group subsidiaries are exposed to the liquidity and cash flow risks described in sections
III.2.8.2 and III.2.8.3 of this Report.
Group companies manage liquidity risk and cash flow risks through the systematic monitoring of the quality
and maturities of their receivables and payables and timely planning of incoming and outgoing cash flows.
With regard to covering cash deficits arising from the current variation of net working capital, leading and
other Group companies negotiate credit limits with renowned local banks providing sufficient liquidity
reserves for specific and general purposes. In case of necessity, the similar needs of other Group companies
Consolidated Annual Report 2021
xl
are met through intra-Group funding in the form of loan agreements with one-off or multiple drawdown and
the option for ad-hoc prepayment of withdrawn funds.
The management of TBS Group considers currently agreed credit limits under contracts between TBSG AD and
Raiffeisenbank (Bulgaria) EAD and betweenTBS EAD and Unicredit Bulbank AD in Bulgaria, between Comutel
and Raiffeisen Banka A.D. Beograd in Serbia, between TBS Macedonia and Pro Credit Banka AD Skopje and
between Telelink Slovenia and UniCredit Banka Slovenija d.d. sufficient to secure operations, while
maintaining its readiness to initiate negotiations for their increase and/or the signing of new bank credit
agreements in case of additional increases in working capital funding requirements going forward.
Consolidated Annual Report 2021
xli
XII ADDITIONAL INFORMATION AS PER APPENDIX № 2 TO
ORDINANCE № 2 OF THE FSC
XII.1 Revenues by main categories of products and services
The leading driver of growth in consolidated revenues were sales in the Modern Workplace technology group,
which increased by 147% from 2020 with the main contribution of the growing number of large projects in the
Bulgarian education sector. In total, the amount of revenue recorded by the business line in 2021 reached
BGN 54,744 thousand or 33% of Group sales, as compared to 16% in 2020.
Favoured by the implementation of a broad range of large and medium projects in all main sectors and regions,
sales of Hybrid Cloud solutions registered a 35% increase from 2020 and were the second major growth driver
for the Group in 2021, reaching BGN 39,959 thousand and coming second in consolidated sales with a share
of 24%, as compared to 22% in 2020.
Relating mostly to the customized developments, which complemented technologies from third-party
suppliers within one of the big projects implemented by TBS EAD in the Bulgarian educational sector, the
Group also recorded substantial sales of Application Services in the amount of BGN 3,777 thousand or 2% of
consolidated revenue for the period, representing a nearly twelvefold increase from 2020.
Reflecting the decrease in revenues from the telecom sector and public projects featuring carrier-grade
network infrastructure in Bulgaria, as well as the growing share of other technology groups in sales to telecom
accounts realized from the Mid-Western Balkans region, the Group recorded 16% lower sales of Service
Provider Solutions from 2020. Nevertheless, the BGN 35,579 thousand of revenues recorded in this technology
group remained significant and continued to play a substantial role in the formation of consolidated sales with
a decreasing, yet significant share of 21%, comparing to 31% in 2020.
A similar trend was observed in Enterprise Connectivity, where the Group registered a 30% drop as a result of
substantially lower revenues from the public sector and an overall decrease in the average size of the projects
implemented in Bulgaria and Macedonia, but continued to record nonetheless significant revenues.
Amounting to BGN 24,441 thousand, the latter accounted for 15% of consolidated sales as compared to 26%
in 2020.
31.12.2021 31.12.2020
change
share
31.12.21
share
31.12.20
Service Provider Solutions (1) 35,579 42,461 -16% 21% 31%
Enterprise Connectivity (2) 24,441 34,985 -30% 15% 26%
Hybrid Cloud (3) 39,959 29,525 35% 24% 22%
Application Services (4) 3,777 324 11.6x 2% 0%
Modern Workplace (5) 54,744 22,189 147% 33% 16%
Information Security (6) 3,748 5,075 -26% 2% 4%
Other (7) 3,440 935 268% 2% 1%
Data Networks (1+2) 60,021 77,446 -22% 36% 57%
Data Center (3+4) 43,736 29,849 47% 26% 22%
Office Productivity (5) 54,744 22,189 147% 33% 16%
Information Security (6) 3,748 5,075 -26% 2% 4%
Others (7) 3,440 935 268% 2% 1%
Total 165,688 135,495 22% 100% 100%
Net Sales Revenue (BGN thousand)
Technology Group
Consolidated Annual Report 2021
xlii
Registering an annual drop of 26%, also as a result of the smaller number and size of projects in the Bulgarian
public sector, Information Security sales continued to consist mainly of small and medium projects in Bulgaria
and Macedonia with a relatively limited impact of BGN 3,748 thousand or 2% of consolidated revenues,
comparing to 4% in 2020.
While showing a more than threefold increase from 2020, reflecting mostly some complementary services and
deliveries within public sector projects implemented in Bulgaria and Serbia, reported sales outside the above
main product groups in the amount of up to BGN 3,440 thousand remained of typically marginal importance
to the Group with a share of 2% of consolidated revenues.
XII.2 Revenues by geographic market and significant counterparties
XII.2.1 Revenues by geographic markets
As a main factor behind revenue growth in TBS EAD, deliveries made on the territory of Bulgaria recorded 21%
of annual growth, reaching BGN 98,845 thousand and maintaining a majority share of 60% in consolidated
Group revenues.
With the launch of deliveries from subsidiaries in the Mid-Western Balkans region to clients from the Greek
telecom sector, the Group also recorded significant growth in sales to Other Balkan Markets. Together with
clients registered in Romania, these accounted for BGN 7,594 thousand or 5% of consolidated revenues as
compared to their negligible contribution in 2020 and stood out as the second major growth driver for the
Group in 2021.
Significant growth was also achieved in sales to the South-Western Balkans region, wherein the impact of
newly launched and/or implemented projects in Macedonia and the implementation of a sizeable public
project in Kosovo by TBS Macedonia outbalanced by far the decrease in revenues from the Group’s main
Albanian client to date. In total, respective sales for 2021 increased more than twofold by 120% year on year,
reaching BGN 11,814 thousand or 7% of consolidated sales as compared to 4% in 2020.
31.12.2021 31.12.2020
change
share
31.12.2021
share
31.12.2020
Bulgaria 98,845 81,806 21% 60% 60%
Serbia 21,727 22,689 -4% 13% 17%
Slovenia 10,077 10,389 -3% 6% 8%
North Macedonia 8,096 3,549 128% 5% 3%
Bosnia and Herzegovina 5,822 7,785 -25% 4% 6%
Croatia 1,767 193 817% 1% 0%
Albania 1,001 1,811 -45% 1% 1%
Montenegro 157 97 62% 0% 0%
Other 18,196 7,177 154% 11% 5%
Bulgaria 98,845 81,806 21% 60% 60%
Mid-Western Balkans 39,550 41,152 -4% 24% 30%
South-Western Balkans 11,814 5,360 120% 7% 4%
Other Balkan Markets 7,594 225 33.7x 5% 0%
Central & Eastern Europe 6,554 5,566 18% 4% 4%
Other Markets 1,331 1,385 -4% 1% 1%
Total 165,688 135,495 22% 100% 100%
* By registration of the client.
Net Sales Revenue (BGN thousand)
Country/Region*
Consolidated Annual Report 2021
xliii
Maintaining a share of 4% of consolidated revenues, the BGN 6,554 thousand of sales in Central and Western
Europe attained in 2021 also exhibited substantial 18% growth and continued to consist mostly of cross-border
and multinational clients serviced by TBS EAD.
At the same time, the Group registered a certain slowdown of combined local sales in the Mid-Western
Balkans region, wherein accelerating revenues in Croatia compensated only in part observed decreases in
Bosnia and Herzegovina and Serbia. Totaling BGN 39,550 thousand, revenues from the region exhibited a slight
4% drop from 2020 but remained of a nonetheless high importance to the generation of Group revenues with
a declining yet substantial share of 24%, comparing to 30% for the same period 2020.
In spite of their relative decrease by 4%, sales on Other markets outside Europe continued to include growing
revenues from USA-based clients, including affiliates of multinational companies serviced by TBS EAD’s,
whereas the observed decline occurred mostly on the background of significant one-time deliveries made to
another international client in Armenia and the UAE in 2020.
XII.2.2 Significant clients
The Group identifies as a significant client accounting for more than 10% of consolidated annual revenues for
2021 telecom operatorA1 Bulgaria EAD with a share of 13.1%. The goods delivered by the Group were
purchased by the company for resale within a one-time implementation project. As of December 31 2021, A1
had no trade payables towards the Group and was not a concern in terms of credit risk.
As of December 31 2021, there was one client (Serbia Broadband - Srpske kablovske mreže doo (“SBB”) with
a share of more than 10% (28.5%) in the Group’s consolidated trade receivables. The company is a traditional
Group client with proven track record. With this regard, the above exposure is not considered to be a source
of substantial credit risk.
XII.2.3 Significant suppliers
Key sources of externally supplied elements of the products and complex solutions (integrating products and
services) offered by the Group include leading global manufacturers and local and regional distributors of ICT
equipment and software.
The Group identifies the following counterparties from the above categories as significant suppliers with
purchases (credit turnovers оn trade payables accounts) exceeding 10% of the consolidated annual cost of
sales for 2021:
• Dell Emerging Markets (EMEA) Ltd
The company is a leading global manufacturer and technology partner of the Group in the fields of
Data Center, Modern Workplace, etc. The ratio of respective purchases to the consolidated cost of
sales for 2021 amounted to 20.5%.
• Cisco International Limited
The company is a leading global manufacturer and technology partner of the Group in the field of Data
Networks, Managed Services, including Equipment as a service, etc. The ratio of respective purchases
to the consolidated cost of sales for 2021 amounted to 18.2%.
• Also Bulgaria EOOD
Consolidated Annual Report 2021
xliv
The company is a distributor for Bulgaria and direct supplier to TBS EAD of equipment manufactured
by Cisco Systems, DellEMC, etc. The ratio of respective purchases to consolidated cost of sales for
2021 is 11.7%.
• Comtrade Distribution doo Beograd
The company is a distributor and direct supplier to the Group of equipment manufactured by the
group of Cisco Systems, etc. for the Western Balkans region. The ratio of respective purchases to
consolidated cost of sales for 2021 is 11.0%.
Аs of December 31 2021, there were no suppliers with of more than 10% in the Group’s consolidated trade
payables.
XII.3 Large transactions and transactions of significance for the issuer’s
operations
The Company defines as significant transactions that lead or may be reasonably assumed to lead to a
favourable or unfavourable change of 5% or more in consolidated revenues or consolidated net profit.
In 2021, a deal was made between TBS EAD and telecom operator A1 Bulgaria EAD for the delivery of
equipment as a part of a one-time implementation project, which accounted for more than 5% of consolidated
revenues for the reporting period. As of December 31 2021, all corresponding deliveries and payments
between the parties had been carried out in full.
XII.4 Transactions made between the Issuer and related parties during the
reporting period, proposals for the signing of such transactions and
dealings outside its ordinary course of business or deviating
substantially from market terms, whereto the Issuer or a subsidiary
thereof is party
XII.4.1 Dealings between the Issuer and related parties during the reporting period
The following contracts signed in previous periods between the Company and its subsidiaries for the provision
of services relative to the respective subsidiary’s corporate and business development, including but not
limited to product positioning, business planning consultancy, financial reporting and audit, consulting on legal
matters, consulting and services relative to PR and marketing activities and business popularization, remained
in force during the reporting period:
• Agreement from August 15 2019 between the Company and TBS EAD and the annexes thereto, with
provided services for the reporting period amounting to BGN 1,771 thousand;
• Agreement from August 15 2019 between the Company and Comutel and the annexes thereto, with
provided services for the reporting period amounting to BGN 21 thousand;
• Agreement from August 15 2019 between the Company and Telelink Montenegro and the annexes
thereto, with provided services for the reporting period amounting to BGN 3 thousand;
• Agreement from August 15 2019 between the Company and Telelink Bosnia and the annexes thereto,
with provided services for the reporting period amounting to BGN 4 thousand;
• Agreement from August 15 2019 between the Company and Telelink Slovenia and the annexes
thereto, with provided services for the reporting period amounting to BGN 4 thousand;
Consolidated Annual Report 2021
xlv
• Agreement from August 15 2019 between the Company and Telelink Albania and the annexes thereto,
with provided services for the reporting period amounting to BGN 8 thousand;
• Agreement from August 15 2019 between the Company and TBS Macedonia and the annexes thereto,
with provided services for the reporting period amounting to BGN 13 thousand.
On September 01 2022, a similar contract was also signed between the Company and TBS Croatia, with
provided services for the reporting period amounting to BGN 26 thousand.
During the reporting period, а contract for the lease of equipped workplaces signed between the Company
and TBS EAD on November 1 2019 remained in force, with the Company’s workplace rental expenses for the
period amounting to BGN 148 thousand.
The Cash loan agreement signed on September 02 2019 between the Company (borrower) and TBS EAD
(lender) with a limit of up to BGBN 4,000 thousand and an interest rate of 2.25% p.a. over utilized funds also
remained in force during the reporting period, with the Company’s corresponding interest expenses
amounting to BGN 19 thousand. As of December 31 2021, there were outstanding principal and interest
obligations arising from the agreement.
On September 21 2021, a Cash loan agreement was signed between TBSG AD (lender) and TBS Croatia
(borrower) with a limit of EUR 200 thousand subject to revolving utilization and repayment for a term of 12
months, at an annual interest rate of 2.5%. As of December 31 2021, the utilized loan amount was BGN 153
thousand.
XII.4.2 Proposals for entering transactions with between the Issuer and related parties
during the reporting period
On an extraordinary GMS of TBSG AD held on September 14 2021, the shareholders resolved to authorize the
Company’s MB for the period October 01 2021 – December 31 2023 to sign cash loan agreements with TBS
EAD up to a maximum amount of BGN 4,000 thousand at an interest rate of 2.25%, subject to possible
increases up to 4.00% in case of significant changes in EURIBOR, with repayment term until December 31 2023.
The above transactions are of internal nature to the Group and should not participate in the formation of its
consolidated assets and liabilities.
During the reporting period, the Company and its subsidiaries have not made transactions out of the ordinary
course of business or deviating substantially from market terms.
XII.5 Extraordinary events and indicators for the issuer with a significant
impact on its operations
Except for the foreign exchange revaluation of a previously impaired loan, referred to in section II.3.4 of this
Report and section 23 of the Explanatory notes to the consolidated financial statements, as of December 31
2021 and during the reporting period as a whole, there were no events or indicators of extraordinary nature
to the Issuer and the Group affecting substantially results from operations.
XII.6 Off-balance sheet items
Contingent commitments undertaken by the Company and Group subsidiaries as of December 31 2021 are
disclosed in sections XII.9.2XII.9.4 and XII.9.4 of this Report, as well as in section 35 of the notes to the
consolidated annual financial statements.
Consolidated Annual Report 2021
xlvi
XII.7 Equity interests and main investments in the country and abroad
XII.7.1 Shares in subsidiaries
As of December 31 2021, the Company reported total investments in directly owned subsidiaries in the
amount of BGN 15,795 thousand, of which BGN 15,718 thousand transferred under its reorganization from
August 14 2019 as a part of the assets attributable to the separated activity of Business Services, and BGN 77
thousand stemming from the establishment of TBS Macedonia in September 2019, the increase of the
participation in Telelink Albania and the establishment of TBS Croatia in 2020 and the establishment of TBS
USA and TBS Romania in 2021.
Shares held in the capital of subsidiaries are shown in percentage by subsidiary in section I.2 of this Report.
The amount of recorded investments by subsidiary as of December 31 2021 is shown in section 12 of the notes
to the Company’s individual annual financial statements.
As of December 31 2021, the Company did not hold any equity investments in companies outside the Group.
The shares held by TBS EAD in Telelink BS Staffing EOOD and Green Border OOD, which have remained inactive
during the period and as of the date of this Report, maintain a relatively insignificant balance sheet value. The
reported investment in Telelink BS Staffing EOOD corresponds to its authorized capital of BGN 2, and, in view
of the project-based nature of Green Border OOD, the participation of BGN 10 thousand therein is reported
essentially as a short-term asset.
XII.7.2 Investments in intangible assets
As of December 31 2021 the Group reported consolidated intangible assets of BGN 482 thousand, reflecting
investments by TBS Group and TBS EAD.
Intangible assets owned by the Company included an externally developed branding concept transferred to
the Company by means of the Reorganization as a part of the assets attributable to the separated activity of
Business Services, and the development of the Group’s new website. The initial cost of these investments
amounted to BGN 145 thousand, and their balance sheet value as of December 31 2021 – to BGN 67 thousand.
Intangible assets reported by TBS EAD are related mainly to the purchase and development of software. The
initial value of the company’s capital expenditures for the acquisition or formation of present intangible assets
totalled BGN 3,665 thousand. The balance sheet value of BGN 413 thousand reported as of December 31 2021
stemmed mostly from the company’s development activities in the fields of Information Security and the
Internet of Things.
XII.7.3 Real estate investments
As of December 31 2021, the Group reported as a part of its consolidated non-current assets investment
properties in the amount of BGN 409 thousand, corresponding to an independent external appraisal as of the
same date of an office area owned by Comutel and leased out to third parties outside the Group.
As of reporting period end, TBS EAD remained in possession of apartments acquired in previous periods as
collateral to trade receivables. In accordance with the management’s intentions for their realization, these
properties are classified as assets held for sale and are not accounted as investments of the Group.
XII.7.4 Investments in financial instruments and other companies
As of December 31 2021, Group companies held no investments in financial instruments, nor in equity
securities of companies outside the Company’s economic group.
Consolidated Annual Report 2021
xlvii
XII.8 Loan agreements signed by the Issuer, a subsidiary thereof or a parent
company in their capacity of borrowers
XII.8.1 Loan agreements, guarantees and undertakings of liabilities by the Company
Until December 31 2021, the Company continued to be a party (borrower) to the Cash loan agreement with
TBS EAD (lender) from September 02 2019 with a limit of BGN 4,000 thousand, as described in section XII.9.3.
No security, including suretyships or undertaking of liabilities by third parties, has been stipulated by or
established under the agreement. As of December 31 2021, principal and interest obligations from the loan
had been fully repaid and the agreement’s term had not been extended.
Guarantees and liabilities provided and undertaken by the Company are referred to in section XII.9.2.
XII.8.2 Loan agreements, guarantees and undertakings of liabilities by subsidiaries
XII.8.2.1 Agreements signed by TBS EAD
In May 2021, TBS EAD signed an Annex for the extension of the availability period of the Agreement for
undertaking credit commitments under an overdraft credit line with Unicredit Bulbank AD from May 31 2021
until June 02 2021. On June 02 2021 the company also signed an Annex for the annual renewal of the same
agreement with an availability period until May 31 2022.
The provisions of the latter Annex regarding the limits for the effective drawing of cash funds and the
undertaking of contingent commitments under the agreement included:
• overdraft credit limit of up to EUR 3,000 thousand, with a utilization period until May 31 2022;
• revolving credit limit of up to EUR 4,000 thousand, with a utilization period until May 31 2022;
• contingent bank credit of up to EUR 13,000 thousand, with a utilization period until June 30 2029;
• extension of letters of credit terms until May 15 2023.
All limits remain available for utilization in BGN, EUR or USD at respectively applicable interest rates of BIR +
1.357%, 1m. EURIBOR + 1.5% and 1m. LIBOR + 1.5%, but no less than 1.5% (regardless of the currency of
utilization).
In line with the extended availability period, the repayment deadline for utilized overdraft was extended until
July 31 2022, and for the repayment of utilized revolving credit – until the receipt of proceeds from clients
under each financed project, but no later than May 31 2022. The agreement remains subject to annual renewal
based on an annual review of the borrower and approval of the lending bank.
Security provided under the agreement includes:
• pledge over receivables from accounts with the bank;
• pledge of all existing and future receivables from individualized contracts of TBS EAD securing utilized
overdraft funds and additional pledges of current and future receivables of TBS EAD from projects
financed with revolving credit;
• pledge over 100% of the shares in the capital of TBS EAD and related receivables;
• suretyship by TBS Group, including a commitment to maintain its participation in the capital of TBS
EAD.
As of December 31 2021, TBS EAD did not have any utilized overdraft and revolving credit funds.
Guarantees and liabilities provided and undertaken by the Company are referred to in section XII.9.2XII.9.4.
Consolidated Annual Report 2021
xlviii
XII.8.2.2 Agreements signed by Comutel
On February 03 2021, Comutel signed an Annex for the annual renewal of the Credit facility agreement with
Raiffeisen Banka AD Beograd (Serbia) initially signed in 2015 until January 27 2022.
The limit for the effective drawing of cash funds under the agreement in the form of revolving working capital
facility, subject to utilization on the basis of separate requests up to the amount of respectively pledged
receivables from clients, remained in the amount of USD 4,200 thousand.
The interest rate applied under the agreement was changed to 1m. LIBOR + 2.1% for utilization in USD, with
the added possibility to utilize funds in RSD at an interest rate if 1m. BELIBOR + 1.5%.
Security provided under the agreement includes:
• pledges over specified receivables from a key account of the company, presented at each separate
drawdown;
• suretyship by TBS EAD.
As of December 31 2021, funds utilized by Comutel under the agreement were equivalent to BGN 1,724
thousand.
In December 2021, Comutel signed an annex to the Credit facility agreement for the issuance of bank
guarantees with Raiffeisen Banka AD Beograd (Serbia) initially signed in 2016 for a term extension until March
31 2023.
XII.8.2.3 Agreements signed by Telelink Albania
In 2021,Telelink Albania remained party to a Short-term financing agreement with First Investment Bank –
Albania SA with a limit of EUR 500 thousand for the financing of receivables as per invoices issued to a specified
telecom account of the company. Security provided under the agreement includes a pledge over the
receivables from financed invoices. As of December 31 2021, all due amounts under the agreement were
repaid and it was terminated.
As of reporting period end, Telelink Albania was party (borrower) to a Cash loan agreement with TBSG AD
(lender) from February 15 2021 with a limit of up to EUR 500 thousand, annual interest rate of 2.5% and a
term until December 31 2022, in accordance with Annex 1 from December 31 2021. The loan is unsecured.
Additional information about the terms and funds utilized under the agreement are specified in section XII.9.3
of this Report.
The obligations and corresponding receivables of TBS EAD from the agreement are internal to the Group and
do not form a part of its consolidated assets and liabilities.
XII.8.2.4 Agreements signed by TBS Macedonia
On July 20 2021, TBS Macedonia signed a framework agreement for financing and guarantees with Pro Credit
Banka AD Skopje with a limit of up to EUR 500 thousand, annual interest rate of 3% and a maximum term until
July 15 2031.
As of reporting period end, TBS Macedonia was also party (borrower) to a Cash loan agreement with TBS EAD
(lender) from February 15 2021 with a limit of up to EUR 2,000 thousand, annual interest rate of 2.5% and a
term until December 31 2022, as per Annex 1 from December 2021. The loan is unsecured. Additional
information about the terms and funds utilized under the agreement as of December 31 2021 are specified in
section XII.9.3 of this Report.
Consolidated Annual Report 2021
xlix
The obligations and corresponding receivables of TBS EAD from the agreement are internal to the Group and
do not form a part of its consolidated assets and liabilities.
XII.8.2.5 Agreements signed by Telelink Slovenia
As of reporting period end, Telelink Slovenia was party (borrower) to a Cash loan agreement with TBS EAD
(lender) from May 28 2021 with a limit of up to EUR 800 thousand, annual interest rate of 2.5% and a term
until December 31 2021. The loan is unsecured. Additional information about the terms and funds utilized
under the agreement as of December 31 2021 are specified in section XII.9.3 of this Report.
The obligations and corresponding receivables of TBS EAD from the agreement are internal to the Group and
do not form a part of its consolidated assets and liabilities.
XII.8.2.6 Agreements signed by TBS Croatia
As of reporting period end, TBS Croatia was party (borrower) to a Cash loan agreement with TBS EAD (lender)
from September 21 2021 with a limit of up to EUR 800 thousand, annual interest rate of 2.5% and a term until
September 21 2021. The loan is unsecured. Additional information about the terms and funds utilized under
the agreement as of December 31 2021 are specified in section XII.9.3 of this Report.
The obligations and corresponding receivables of TBSG AD from the agreement are internal to the Group and
do not form a part of its consolidated assets and liabilities.
XII.9 Loan agreements signed by the Issuer, a subsidiary thereof or a parent
company in their capacity of lenders
XII.9.1 Loans granted by the Company
On September 21 2021, a Cash loan agreement was signed between TBSG (lender) and TBS Croatia (UIN
081341811) (borrower) with a maximum amount up to EUR 200 thousand, subject to revolving utilization and
repayment, for a period of 12 months, at an annual interest rate of 2.5%. As of December 31 2021, utilized
principal was equivalent to BGN 153 thousand.
The receivables and corresponding obligations of TBS Croatia from the agreement are internal to the Group
and do not form a part of its consolidated assets and liabilities.
XII.9.2 Provided guarantees and undertaking of liabilities by the Company
As of December 31 2021 and during the reporting period as a whole, the Issuer maintained its commitments
as a guarantor, respectively pledgor under the following contracts signed in 2019 as security to the obligations
of TBS EAD (UIN 130545438) under an Agreement for the undertaking of credit commitments under an
overdraft credit line with Unicredit Bulbank AD:
• a suretyship agreement with Unicredit Bulbank AD, securing all receivables of the bank from TBS EAD
stemming from the above credit agreement and the annexes thereto until their final repayment;
• a share pledge agreement with Unicredit Bulbank AD over the Issuer’s 100% stake in the capital of TBS
EAD, securing all receivables of the bank from TBS EAD stemming from the above credit agreement
and annexes thereto until their final repayment.
On January 29 2021, the Company issued a counter-guarantee securing a guarantee on behalf of TBS
Macedonia (UIN 7385986) with regard to a contract for a hardware hybrid cloud platform, in favour of Agency
of electronic communications, Skopje, North Macedonia, for the amount of EUR 105,900, valid until May 15
2022.
Consolidated Annual Report 2021
l
On December 10 2021, the Company issued a corporate guarantee securing the obligations of Telelink Albania
(UIN L91803017J) as purchaser with regard to the supply of equipment from Veracomp Croatia, for with regard
to a contract for a hardware hybrid cloud platform, for the amount of USD 145,435.43, valid until March 31
2022.
As of 31.12.2021, the Company maintained a corporate guarantee issued on July 01 2020 in favour of Citi Bank
and Cisco Systems International B.V. (the Netherlands), securing the possibility for Comutel (UIN 07554133)
and Telelink Slovenia (UIN 6596240000) to make high-volume equipment purchases under contracts with
Cisco Systems International B.V. on deferred payment terms, up to the amount of USD 5,100 thousand.
As of 31.12.2021, the Company maintained a corporate guarantee issued on December 29 2020 in favour of
TBS Macedonia (UIN 7385986) in the amount of USD 730,000 securing future liabilities towards TBS Europe
BVBA, Belgium, with regard to the supply of high-value equipment on deferred payment terms.
As of 31.12.2021, the Company maintained a counter-guarantee issued on October 26 2020 in favour of TBS
Macedonia (UIN 7385986) in the amount of EUR 22,000 with regard to a contract with Operator electrical
distribution systems, North Macedonia, valid until November 10 2023.
The Company has also extended a counter-guarantee in the amount of EUR 10,550, securing the due
performance of the obligations of TBS Macedonia (UIN 7385986) with regard to a contract with Agency of
electronic communications, Skopje, North Macedonia, until March 10 2022.
XII.9.3 Loans granted by subsidiaries
As of December 31 2021 and during the reporting period as a whole, there were the following active
agreements for loans granted by the Issuer’s subsidiaries:
• a Cash loan agreement from September 02 2019 between TBS EAD (lender) and TBS Group (borrower)
with a revolving limit of up to BGN 4,000 thousand, granted under the terms of partial utilization and
repayment, with an initial full repayment deadline until December 31 2020 extended until December
31 2021, interest rate of 2.25% p.a. on the utilized part of the limit, the obligations from which were
fully repaid as of December 31 2021;
• a Cash loan agreement from February 15 2021 and an Annex thereto from December 31 2021 between
TBS EAD (lender) and Telelink Albania (UIN L91803017J) (borrower) with a revolving limit of up to EUR
500 thousand, granted under the terms of partial utilization and repayment, with a full repayment
deadline until December 31 2022, interest rate of 2.5% p.a. on the utilized part of the limit and
outstanding receivables for principal and accrued interest as of December 31 2021 in the amount of
EUR 127 thousand;
• a Cash loan agreement from May 28 2021 between TBS EAD (lender) and Telelink SLovenia (UIN
6596240000) (borrower) with a revolving limit of up to EUR 800 thousand, granted under the terms
of partial utilization and repayment, with a full repayment deadline until December 31 2021, interest
rate of 2.5% p.a. on the utilized part of the limit, the obligations from which were fully repaid as of
December 31 2021.
All receivables and respective obligations under the above agreements are internal to the Group and do not
form a part of its consolidated assets and liabilities.
XII.9.4 Provided guarantees and undertaking of liabilities by subsidiaries
As of December 31 2021, TBS EAD has provided the following guarantees securing third-party obligations with
regard to the implementation of projects by the Group:
Consolidated Annual Report 2021
li
XII.10 Utilization of funds from a new issuance of shares performed
during the reporting period
During the reporting period, including the realized third tranche of public offering, the Company has not issued
and received any proceeds from new shares, other securities and options thereon.
Except for the registered capital contributions of USD 10 thousand and EUR 9.9 thousand paid in pursuant to
the establishment of TBS USA and TBS Romania, Group subsidiaries have not issued or received any proceeds
from new shares, other securities and options thereon.
The capital of the above subsidiaries was paid in by TBSG AD and did not generate any proceeds for the Group
on a consolidated basis.
XII.11 Analysis of the ratio between achieved financial results reflected
in the financial statements for the year and previously published
forecasts for these results
On March 23 2021 the Issuer disclosed as a part of a digital event “Financial Outlook and Strategy 2021-2025“
and published on its web page a presentation featuring the budgeted consolidated financial results for 2021
shown in column “Budget” of the table below (the “Budget”).
On September 16 2021 the Issuer disclosed as a part of a digital event “Financial Overview of H1’2021 and
Updated Guidance 2021-2025“ and published on its web page a presentation featuring an updated forecast
of the consolidated financial results for 2021 shown in column “Updated Guidance (UG)” of the table below
(the “Updated Guidance”).
The ratios of actually achieved consolidated results for 2021 to Budget 2021 and Updated Guidance 2021 are
shown in section “Final Results for 2021” of the same table.
Gurantee securing obligations of: UIN Guarantee type
Guarantee
amount (BGN)
Validity
Consortium ATP SERVICES DZZD 176884047 performance 38,057.32 01.02.2022
Consortium Green border 177273169 performance 135,000.00 08.09.2022
Consortium Technolink 177359593 performance 28,834.89 31.08.2023
Consortium SYSTEL DZZD 177424500 performance 212,121.21 29.10.2023
Consortium Safe Borders TELESEC DZZD 177158206 performance 66,359.75 30.12.2024
Consortium Telelink Group DZZD 177239104 performance 66,238.86 17.06.2024
TBS Macedonia 7385986 counter-guarantee 135,433.97 15.10.2024
TBS Macedonia 7385986 performance 378,453.12 31.03.2023
TBS Macedonia 7385986 performance 1,513,812.50 31.03.2023
Consolidated Annual Report 2021
lii
As evidenced by the above ratios, actual consolidated revenue for 2021 were moderately lower than the
Budget and the Updated Guidance, showing respective deviations of 4% and 3% therefrom mostly as a result
of delayed deliveries from leading global equipment vendors. At the same time, the Group also registered
substantial economies in sales and marketing expenses, amounting to 21% of those embedded the Budget
and 6% of the respective Updated Guidance, while maintaining general and administrative expenses in line
with their budgeted and forecasted amount. Considering the above, the registered negative deviations in
consolidated operating and net profit and EBITDA from the initial Budget were mostly the consequence of the
significantly lower gross profitability of realized sales, as elaborated in section II.3.1 of this Report. Compared
to the Updated Guidance, actual profits for the period were largely in line with disclosed expectations.
In а territorial aspect, realized revenues exhibited substantial relative deviations from the Budget in terms of
the higher contribution of the Mid-Western Balkans region and lower sales in the South-Western Balkans, with
the latter also lagging to the highest extent behind the Updated Guidance. Nevertheless, the overall moderate
lag in revenues was due predominantly to their biggest component, i.e. sales from Bulgaria, while, in spite of
the relatively high percentage deviations, the South-Western Balkans and, particularly, Macedonia remained
the Group’s fastest growing territorial segment in in 2021.
In product perspective, the development of actual sales against the initial Budget was marked mostly by thе
high level of substitution of lower sales in Service Provider Solutions, Enterprise Connectivity, Application
Services, Information Security and Other deliveries with much higher than expected revenues from the
Modern Workplace and Hybrid Cloud groups. In spite of the also observed various deviations from the
Updated Guidance, to overall moderate lag of sales in this aspect was largely due to lower revenues from
Other goods and services and Modern Workplace, regardless of which the latter product line remained the
Group’s fastest during the period.
EUR'М BGN'000 EUR'М BGN'000 EUR'М BGN'000
% dev.
from B
% dev.
from UG
Net sales revenue 88.2 172,504 87.4 170,940 84.7 165,688 -4% -3%
Gross Profit 17.3 33,836 15.3 29,924 15.1 29,472 -13% -2%
Sales and Marketing Expenses -5.5 -10,757 -4.6 -8,997 -4.3 -8,492 -21% -6%
General and Administrative Expenses -3.3 -6,454 -3.3 -6,454 -3.3 -6,423 0% 0%
EBITDA 10.1 19,754 8.8 17,211 8.9 17,356 -12% 1%
Operating Profit 8.7 17,016 7.5 14,669 7.5 14,640 -14% 0%
Net Profit 7.5 14,669 6.4 12,517 6.3 12,407 -15% -1%
Revenue by Country/Region*:
Bulgaria 57.4 112,265 56.3 110,113 54.4 106,355 -5% -3%
Mid-Western Balkans 22.3 43,615 24.7 48,309 24.3 47,499 9% -2%
South-Western Balkans 8.0 15,647 6.5 12,713 6.1 11,834 -24% -7%
Romania 0.5 978 0.0 0 0.0 0 -100% 0%
Revenue by Technology Group
Service Provider Solutions 21.8 42,637 19.5 38,139 18.2 35,579 -17% -7%
Enterprise Connectivity 15.9 31,098 12.0 23,470 12.5 24,441 -21% 4%
Hybrid Cloud 19.0 37,161 19.1 37,356 20.4 39,959 8% 7%
Application Services 3.1 6,063 2.0 3,912 1.9 3,777 -38% -3%
Modern Workplace 21.4 41,855 28.9 56,523 28.0 54,744 31% -3%
Information Security 4.3 8,410 2.1 4,107 1.9 3,748 -55% -9%
Other 2.7 5,281 3.8 7,432 1.8 3,440 -35% -54%
* By invoicing country / region.
Updated
Guidance (UG)
Final Results for 2021
Financials
Budget (B)
Consolidated Annual Report 2021
liii
XII.12 Financial resource management policy, debt service capacity,
potential threats and measures towards their neutralization
The policy of managing financial resources with regard to the timely and due fulfilment of the obligations of
Group companies is based on the procurement of available funds from the following main sources:
• revenue from sales to third parties, which are the main source for all subsidiaries of the Group involved
directly in the performance of operating activities in the field of ICT;
• revenue from sales to other Group companies which are an ancillary source for Group subsidiaries
involved directly in the performance of operating activities in the field of ICT and a main source for
TBS Group on a standalone basis;
• revenue from dividends from direct participations in the capital of Group subsidiaries, which are a
significant source for TBS Group on a standalone basis;
• securing additional funds needed to honour liabilities to third parties and other Group companies with
overdraft and revolving credit limits under credit lines agreed with leading local banks, which are a
significant backup source for top subsidiaries TBS EAD and Comutel and a complementary one for TBS
Macedonia;
• securing additional funds needed to honour liabilities to third parties and other Group companies with
loans from leading Group subsidiaries, which are a significant actual or potential ancillary source for
TBS Group and all Group companies except TBS EAD and Comutel on a standalone basis.
The above sources and the planned signing of an independent bank loan agreement by Telelink Slovenia are
expected to be sufficient for the coverage of working capital funding requirements and purchases of non-
current assets for general purposes in the normal course of business of Group companies, as well as for the
payment of dividends and the buyback of shares for the purposes of management and employee incentives
by TBS Group. Nevertheless, the Company and Group subsidiaries continue to monitor and plan their financial
resources on an ongoing basis, while maintaining their readiness for the timely negotiation or renegotiation
of existing and new credit facilities, should such necessities arise.
XII.13 Assessment of the possibilities for realization of investment
plans, available funds and possible changes in their funding structure
As of December 31 2021 and the date of this Report, the Group’s investment plans relate mainly to а a
substantial increase in the purchases of equipment by TBS EAD for subsequent provision to clients under
extensions of current and implementations of new long-term contracts for managed services signed in 2021
and beyond with multinational companies similar to those implemented during the reporting and previous
periods. In accordance with its established practices, TBS EAD intends to finance the above investments with
a mix of own funds and finance lease contracts similar to those signed in previous periods, whenever such
financing is deemed necessary and/or appropriate.
With regard to the introduction of new product specializations and groups, the Group’s management has
provided for moderate growth in capital expenditures on development activities in the field of IoT. According
to the established practice, these expenditures are expected to be financed predominantly or entirely from
internal sources.
The Group intends to maintain its policy of using vehicles predominantly under operating lease contracts
without incurring capital expenditures on their acquisition. To the extent that, in exception to this policy, there
Consolidated Annual Report 2021
liv
may be new purchases of vehicles similar to those made by TBS Macedonia in previous periods, they should
be effected on the basis of secured funding with special-purpose medium-term bank loans or finance leases.
Group companies have planned on moderate expenditures on the acquisition of other non-current assets,
including computing hardware, machinery, equipment and software for the general assurance of employees,
the internal IT infrastructure and other common business needs. Funds available as of December 31 2021 and
future cash generation are expected to be sufficient to cover these capital expenditures without recourse to
credit instruments for their finanicng.
As of December 31 2021 and the date of this Report, Group companies have not planned material capital
expenditures other than the above.
The Company’s Management recognizes that any future acquisition of equity interests and other investments
exceeding its available financial resources should be undertaken only after securing additional funds from
intra-Group loans, debt financing from third parties and/or capital increase.
XII.14 Information about changes in the fundamental principles of
governance of the Issuer and its economic group
During the reporting period, there were no changes in the fundamental principles of governance of the
Company and the Group.
XII.15 Information on the main characteristics of the Issuer’s internal
control and risk management systems with regard to the process of
financial reporting
Respective information is provided in section 3 of the Declaration of corporate governance as per art. 100n,
par. 8 of the POSA, which is a separate document published together with this Report.
XII.16 Information about changes in the Company’s governing bodies
On October 08 2021, the TRRNPO with the Registry Agency published the resolution of the Company’s MB
from October 01 2021, whereby Paun Ivanov was replaced in its capacity of a member of the MB by Orlin
Rusev.
During the reporting period, there were no other changes in the composition and authorizations of the
Company’s MB and SB.
XII.17 Information about the amount of the remunerations, awards and
benefits of each of the members of the governing bodies for the
reporting year, paid by the Issuer, which is not a public company,
respectively the person as per § 1d of the additional provisions of POSA,
and its subsidiaries, regardless of whether they were included in the
expenses of the issuer, which is not a public company, respectively the
person as per § 1d of the additional provisions of POSA, or stemmed
from profit distributions
Considering TBSG AD’s public company status, the information about the remunerations of the members of
the governing and controlling bodies was provided in accordance with art. 100n, par. 4, item 5 of the POSA
Consolidated Annual Report 2021
lv
as a part of the Report on the implementation of the remuneration policy to the individual annual report of
the Company published on March 03 2022.
XII.18 Shares of the Issuer held by members of the managing bodies,
procurators and senior management
XII.18.1 Shares of the Issuer owned by members of its managing bodies
As of December 31 2021, the members of the MB own a total of 142,924 shares representing 1.14% of the
Company’s registered capital.
As of December 31 2021, the members of the SB owned a total of 502,561 shares, representing 4.02% of the
Company’s share capital.
As of the date of this Report, the Company has not issued and there are no members of the MB, SB and/or its
top management holding options on shares in its capital or other securities issued thereby.
XII.18.2 Shares of the Issuer held by members of the managing bodies of its
subsidiaries
As of December 31 2021, the following members of the managing and controlling bodies of subsidiaries of the
Issuer, other than members of the Company’s MB and SB, held shares in its capital:
• Lyubomir Minchev, chairman of the SB of Comutel, holding 66.97%;
• Iordan Popov, member of the SB of Comutel, holding 0.67%;
• Iordanka Klenovska, member of the Board of Directors of TBS EAD and the SB of TBS Croatia, holding
0.01%;
• Bobi Cvetkovski, manager of TBS Macedonia, holding 0.003%;
• Ivo Rusev, member of the Board of Directors of TBS EAD and the SB of TBS Croatia, holding 0.002%.
31.12.2021 %* 31.12.2020 %*
Ivan Zhtiyanov 133,258 1.07% 133,258 1.07%
Teodor Dobrev 4,996 0.04% 4,996 0.04%
Orlin Rusev* 284 0.00% - -
Nikoleta Stanailova 3,352 0.03% 3,352 0.03%
Gojko Martinovic 1,034 0.01% 1,034 0.01%
Paun Ivanov** - - 125,000 1.00%
Total 142,924 1.14% 267,640 2.14%
* % of the registered share capital
** not a member as of 31.12.2020
*** not a member as of 31.12.2021
Number of shares held
by the members of the
Owned as of
31.12.2021 %* 31.12.2020 %*
Hans van Houvelingen 900 0.01% 900 0.01%
Ivo Evgeniev 501,661 4.01% 591,786 4.73%
Bernard Moscheni 0 0.00% 0 0.00%
Total 502,561 4.02% 592,686 4.74%
* % of the registered share capital
Number of shares held
by the members of the
Owned as of
Consolidated Annual Report 2021
lvi
As of the date of this Report, the Company has not issued and there are no members of the managing and
controlling bodies and senior management of its subsidiaries hold any options on shares in its capital or other
securities issued thereby.
XII.19 Agreements known to the Company that may result in future
changes in the relative weights of shares held by current shareholders
On December 17 2019 an Agreement on the Restriction of the Disposal of Shares (Lockup Agreement) was
signed among the Company and Lyubomir Minchev, Spas Shopov, Ivo Evgeniev, Ivan Zhitiyanov, Paun Ivanov,
Iordan Velchev and Iordan Popov in their capacity of shareholders. According to the preamble to the
Agreement and the provisions thereof and of the Annex thereto signed on September 16 2020 effective as of
the date of this Report:
• Lyubomir Minchev, Spas Shopov and Ivo Evgeniev intend to sell on the BSE up to 30% (3,750,000) of
the Company’s existing shares
• Lyubomir Minchev has committed to maintain a stake of at least 51% (6,375,000 shares) in the
Company’s capital by the end of 2022, except in the cases of disposal in favour of spouses or relatives
upon the undertaking of a corresponding commitment thereby, or change of control over the
Company.
To the extent that shares sold during the public offering tranches realized in 2020-2021 amounted to to total
of 21% of the Company’s registered capital and the intention to realize up to 30% stated in the Agreement’s
preamble has not been explicitly limited in time or waived and the commitment to maintain majority
ownership does not preclude the above intention, the Agreement continues to imply the possibility for an
additional overall decrease in the shares held by Lubomir Minchev, Spas Shopov and Ivo Evgeniev by up to 9%.
The possibility of additional share offerings is also provided in the Updated procedure for the sale of shares in
TBSG AD signed on June 02 2021, according to which Lubomir Minchev, Spas Shopov, Ivo Evgeniev are entitled
to offer the remainder up to 30% of the Company’s registered capital in subsequent tranches within the
limitations of the Agreement, depending on identified investor interest.
XII.20 Information on pending court cases, administrative and
arbitration proceedings concerning receivables or payables equal or
greater than 10% of the Issuer’s equity
As of the date of this Report, there are no pending court cases, administrative or arbitration proceedings to
which the Company is party and/or concerning receivables or payables thereof equal or greater than 10% of
its equity.
XII.21 Information about the Investor Relations Director
As of December 31 2020, the Company’s Investor Relations Director is Ivan Daskalov, available at telephone
number +359 2 9882413 and e-mail addressIR-TBS@tbs.tech.
XII.22 Non-financial Statement
As of 31 December 2021 and the date of this Report, neither the Company, nor the Group, exceeded on a
consolidated basis the criteria as per Article 19a and Article 29a of Directive 2014/95/EU of the European
Parliament and of the Council and Article 41 of the Accountancy Act for an average number of 500 employees
during the financial year. Therefore, no obligation arises for the Company and the Group as a whole to include
a non-financial statement in the consolidated activity report.
Consolidated Annual Report 2021
lvii
XII.23 Additional Information at the Company’s Discretion
In the Company’s estimation, there is no further information about the Group other than the included in this
Report, the Declaration of Corporate Governance and the Consolidated Financial Statements, which has not
been publicly disclosed and which would be of substantial importance to the making of reasonable investment
decisions by the shareholders and potential investors in the Company.
Date of preparation:
April 27 2022
____________________________________________
Ivan Zhitiyanov,
Telelink Business Services Group AD
IVAN
KRASIMIROV
ZHITIYANOV
Digitally signed by IVAN
KRASIMIROV ZHITIYANOV
Date: 2022.04.29 10:20:30
+03'00'
Page 1 / 15
CORPORATE GOVERNANCE STATEMENT
TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTС
OF TELELINK BUSINESS SERVICES GROUP AD
PURSUANT TO ARTICLE 100Н, PARA. 8
OF THE PUBLIC OFFERING OF SECURITIES ACT
Page 2 / 15
Information on the application of the
National Code of Corporate Governance
Аfter its registration as a public company by a decision of the Financial Supervision Commission (FCS),
dated 28
th
November 2019, TELELINK BUSINESS SERVICES GROUP AD performs its operations in
compliance with the National Corporate Governance Code and conducts its business in accordance with
the principles and provisions of the Code.
TELELINK BUSINESS SERVICES GROUP AD does not apply corporate governance practices in addition to
the National Corporate Governance Code.
Implementation of the National Corporate Governance Code
Until 28
th
November 2019 TELELINK BUSINESS SERVICES GROUP AD did not have the status of a public
company, therefore, its activities have been carried out in accordance with the provisions of the
Commerce Act, the Accountancy Act, and the good corporate practices applicable to the industry in which
it operates.
Since its listing as a public company, respectively since the admission of its shares to trading on a regulated
market organized and maintained by the Bulgarian Stock Exchange AD, the activities of the Managing
Board and the Supervisory Board of TELELELINK BUSINESS SERVICES GROUP AD have been carried out in
compliance with the regulatory requirements, set forth in the Public Offering of Securities Act (POSA) and
its implementing acts, in the Company's Articles of Association, as well as in the National Code of
Corporate Governance.
The corporate management of TELELINK BUSINESS SERVICES GROUP AD has taken all necessary legal and
factual actions in 2021 to fully implement all recommendations of the Code.
The corporate management of TELELINK BUSINESS SERVICES GROUP AD is aware that sustainable
development is about achieving the balance between social and environmental principles, such as socially
justifiable and environmentally sound economic development, and is therefore committed to establishing
specific actions and policies regarding the sustainable development of the Company, including but not
limited to the disclosure of information, related to social and environmental aspects of its operations.
As a technological company, TELELINK BUSINESS SERVICES GROUP AD strives to provide "purposeful
technology" that makes production cleaner and infrastructure more energy efficient. In doing so, the
Company supports its customers, as well as cities and countries, to achieve their individual sustainability
goals to create a variety of benefits for employees, people and society as a whole.
Company's ongoing environmental efforts follow and implement the guidelines and requirements of the
international standard ISO 14001:2015 Environmental Management Systems. Implementation Guide.
The corporate management of TELELINK BUSINESS SERVICES GROUP AD, in the performance of its
functions, works to set sustainable development goals and a model for their achievement and reporting.
There are recommendations of the Code that are not applicable to TELELINK BUSINESS SERVICES GROUP
AD due to the capital structure, the organisation of the business and the overall concept of corporate
governance of the Company. The inapplicability of the recommendations is described in a statement with
the reasons, substantiating the inapplicability.
The Code is applied on a "comply or explain" basis. This means that the Company complies with the Code
and in the event of deviation, its management should clarify the reasons for this.
Page 3 / 15
І. Corporate management
TELELINK BUSINESS SERVICES GROUP AD (hereinafter referred to as the "Company") is a company with a
two-tier management system.
The Company is managed and represented by a Managing Board, under the control of a Supervisory
Board.
As of the date of preparation of this document, members of the Managing Board are:
Ivan Krasimirov Zhitiyanov – President and Executive Member of the Managing Board
Teodor Dimitrov Dobrev – Member of the Managing Board
Orlin Emilov Rusev – Member of the Managing Board as of 8
th
October 2021
Nikoleta Elenkova Stanailova – Member of the Managing Board
Gojko Martinovic – Member of the Managing Board
As of the date of preparation of this document, members of the Supervisory Board are:
Hans van Huvelingen – President of the Supervisory Board
Ivo Evgeniev – Member of the Supervisory Board
Bernard Jean Luc Mosccheni – Vice-President of the Supervisory Board
Functions and duties of the Managing Board
The Managing Board manages the Company and is supervised by the Supervisory Board, and exercises its
rights and duties in accordance with the requirements of law, the Articles of Association and the
Regulation of its proceedings. The Company’s Managing Board makes decisions, as its exclusive
competence, for:
1. Closure or transfer of enterprises or significant parts of them to subsidiaries of the Company;
2. Significant change in the activity of the Company;
3. Significant organizational changes;
4. Opening and closing branches and representative offices of the Company in the country and
abroad;
5. Acquisition, cancellation or other disposal of shares, other securities, shares or share participation
in commercial companies in the country and abroad, as well as in non-profit legal entities;
6. Formation of monetary funds and arranging the procedure for their raising and spending;
7. Execution of the transactions under Article 236 of the Commerce Act;
8. Acquisition and alienation of real estate properties and the related rights in rem;
9. Preparation, acceptance and signing prospectuses for public offering of securities issued by the
Company;
10. Appointment and release of investment intermediaries to undertake and/or administer an issue
of Company securities, designated for public offering;
11. Acceptance and presentation of the annual financial statements of the Company, the annual
report on the activity and the report of the registered auditors to the Supervisory Board;
12. Acceptance of the annual consolidated financial statements of the Company;
13. Adoption of the annual budget and business plan of the Company and/or its subsidiary, as well as
amendments to the annual budget and business plan;
14. Taking decisions for transactions or actions, which do not fall within the usual commercial activity
of the Company, and transactions, which are not concluded under market conditions;
15. Taking bank loans;
16. Transfer of the rights to perform the expanded activity of the Company and the persons directly
related to it to entity, which is not exclusively owned by the Company or to a person, directly
related to the Company;
17. Any transfer, rental or establishment of a right of usufruct, rent, pledge, mortgage or other
encumbrances on the property of the Company and the persons directly related to the Company;
Page 4 / 15
18. Proposal to the General Meeting of Shareholders separation of particular spheres of activity of
the Company and the persons directly related to it, so that one or more of these spheres of activity
to be transferred to a Company or companies, which are not related to the Company, regardless
the form of separation of the respective sphere of activity;
19. Concluding or amending management contracts with the executive director of the Company;
20. All other issues related to the Company’s management, which are not within the exclusive
competence of the General Meeting of Shareholders or the Supervisory Board.
The Managing Board takes decisions if at least half of its members are present in person or are
represented by another member of the Board. A member who presents may not represent more than one
absent member. Decisions are taken by simple majority.
The Managing Board may take written resolutions if all members of the Board agree in writing to these
decisions.
The Managing Board reports on its activities to the Supervisory Board at least once quarterly.
Election and dismissal of members of the Managing Board
The Supervisory Board elects and dismisses the members of the Managing Board in accordance with the
law and the Company’s Articles of Association, as well as in accordance with the principles of continuity
and sustainability of the proceedings of the Managing Board.
In case of proposals for election of new members of the Managing Board, the principles of compliance of
the competence of the candidates with the nature of the National Code of Corporate Governance in the
activity of the Company are observed.
All members of the Managing Board should meet the legal requirements for holding their office. The
functions and obligations of the corporate management, as well as its structure and competence, are in
accordance with the requirements of the Code.
The contracts for assignment of management, concluded with the members of the Managing Board,
determine their obligations and tasks, their duty of loyalty to the Company and the grounds for dismissal.
Structure and competences of the Managing Board
The number of members and the structure of the Managing Board are determined in the Company’s
Articles of Association. The Company's Managing Board consists of five members, which is an optimal
number with a view to ensuring the effective operation of the Company.
The Managing Board is composed of professionals with various competencies, including those with
financial and accounting expertise, technical and technological, commercial and managerial, in order to
ensure the professionalism, impartiality and independence of its decisions in relation to the management
of the Company. The functions and duties of the corporate management, as well as its structure and
competence, are in accordance with the requirements of the Code.
The Managing Board ensures the proper division of the tasks and responsibilities among its members in
order to achieve efficiency of the activities of the Company, in accordance with the interests and rights of
the shareholders.
The competences, rights and obligations of the members of the Managing Board follow the requirements
of the laws, the by-laws and the standards of good professional and managerial practice. The members of
the Managing board are obliged to keep themselves informed about new trends in corporate governance
and sustainability.
Board members have the professional experience and knowledge of management, finance, commerce
and technology required for their position.
Improving the qualification of the members of the Managing Board is their constant commitment, thus
they attend various trainings, international exhibitions and seminars and trade fairs.
The members of the Managing Board should have the necessary time to perform their tasks and duties.
The Articles of Association of the Company do not determine the number of companies in which the
Page 5 / 15
members of the Managing Board may hold managerial positions. This point shall be taken into account in
the nomination and election of new members of the Managing Board.
Conflict of interests
The members of the Managing Board must avoid and not allow real or potential conflicts of interest.
The members of the Managing Board shall immediately disclose conflicts of interest, if applicable. In the
event that such conflicts arise in respect of the members of the Managing Board of the public company,
they undertake to disclose such conflict by submitting a declaration under Art. 114b of the POSA, including
not to participate in the decision making on matters where such conflict is deemed to exist.
The Articles of Association of the Parent Company explicitly states that not later than at the time of
opening the meeting, the member of the Managing Board shall notify the Chairman in writing that he/she
or a person related to him/her has a conflict of interest in a matter on the agenda and shall not participate
in the decision-making.
In 2020 the Managing Board has developed a procedure for avoiding conflicts of interests in transactions
with stakeholders and disclosure of information, and the procedure had been followed during 2021 as
well.
Functions and duties of the Supervisory Board
The Supervisory Board of the Company makes decisions, as its exclusive competence, on the following:
1. Election and dismissal of the members of the Managing Board and determination of the
remuneration of the members of the Managing Board and the CEOs;
2. Approval of the business plan and the annual budget of the Company and its subsidiaries;
3. Approval of the following resolutions of the Managing Board:
3.1. Allocation of functions among the members of the Managing Board and authorization of
members of the Managing Board to represent the Company;
3.2. Opening and closing branches and representative offices of the Company in the country
and abroad;
3.3. Acquisition, cancellation or other disposal of shares, other securities, shares or share
interest in companies in the country and abroad, as well as in non-profit legal entities:
3.4. Carrying out the transactions under Art. 236 of the Commerce Act;
3.5. Approval of the Rules of Procedure of the Managing Board and any proposed amendments
or additions thereto;
3.6. Other matters, explicitly stated in the Rules of Procedure of the Supervisory Board.
4. The Supervisory Board has the right to request, at any time, the Managing Board to submit
information, reports or draft resolutions on all matters, affecting the Company.
The Supervisory Board has the right to check all documents, books and reports concerning the
activities of the Company and to request written and oral information on all matters from all
members of the Managing Board and from all employees of the Company.
The Supervisory Board meets at least once quarterly. The meetings are convened by the
President of the Supervisory Board on his/her initiative or at the request of a member of the
Supervisory Board or at the request of a member of the Managing Board, made through the
President of the Managing Board.
The Supervisory Board takes resolutions if at least half of its members are present in person or are
represented by another member of the Board. A member, attending the session, may not represent more
than one absent member. The resolutions are taken by simple majority.
The Supervisory Board may take written resolutions if all members of the Board agree to these
resolutions. in writing
Page 6 / 15
Election and dismissal of members of the Supervisory Board
The members of the Supervisory Board is elected and dismissed by the members of the General Meeting
of Shareholders in accordance with the law and the Company’s Articles of Association, as well as in
accordance with the principles of continuity and sustainability of the proceedings of the Supervisory
Board.
When considering proposals for election of new members of the Supervisory Board, the principles of
compliance of the competence of the candidates are observed, as required by the National Code of
Corporate Governance, implemented in the activity of the Company.
All members of the Supervisory Board should meet the legal requirements for filling their positions. The
functions and obligations of the corporate management, as well as its structure and competence, are in
accordance with the requirements of the Code.
The contracts for assignment of the management, concluded with the members of the Supervisory Board,
determine their obligations and tasks, their duty of loyalty to the Company and the grounds for dismissal.
Structure and competences of the Supervisory Board
The number of members and the structure of the Supervisory Board is determined in the Company’s
Articles of Association. The Company's Supervisory Board consists of three members, which is an optimal
number with a view to exercising effective control over the Company's activities.
The composition of the Supervisory Board is structured in a way that guarantees the professionalism,
impartiality and independence of its resolutions. The functions and obligations of the corporate
management, as well as its structure and competences, are in accordance with the requirements of the
Code.
The competences, rights and obligations of the members of the Supervisory Board follow the
requirements of the laws, the by-laws and the standards of good professional and managerial practice,
whereas the members are obliged to follow the new trends in corporate governance and sustainability.
The members of the Supervisory Board shall have the appropriate knowledge and experience, required
for the position they hold. They include professionals with more than 20 years of experience in investment
and finance, high technology and telecommunications.
Improving the qualification of the members of the Supervisory Board is their constant commitment.
The members of the Supervisory Board should have the necessary time to perform their tasks and duties.
The Company’s Articles of Association do not determine the number of companies in which the members
of the Supervisory Board may hold managerial positions. This point shall be observed in the nomination
and election of new members of the Supervisory Board.
The election of the members of the Supervisory Board of the Company is done through a transparent
procedure that provides, among others, timely and sufficient information about the personal and
professional qualities of the candidates for members. As a part of the documents for the General Meeting,
at which the election of a new member of the Supervisory Board is proposed, all declarations required by
the POSA and the Commerce Act, a criminal record certificate and a professional CV of the candidate for
the position have to be submitted.
Upon election of members of the Supervisory Board, the candidates confirm, by a declaration or in person,
to the shareholders the accuracy of the submitted data and information. The election procedure are
conducted by open voting and taking into account the votes "For", "Against" and "Abstentions". The
results of the voting are announced through the minutes of the General Meeting of Shareholders.
Conflict of interests
The members of the Supervisory Board must avoid and not allow real or potential conflicts of interest.
The members of the Supervisory Board will immediately disclose conflicts of interest and provide access
to information on transactions between the Company and members of the Supervisory Board or persons
related to it by submitting the declaration under Art. 114b of the POSA.
Page 7 / 15
The Company’s Articles of Association explicitly provide that not later than at opening the meeting, the
member of the Supervisory Board is obliged to notify in writing its chairperson that he/she or a related
person has a conflict of interests on an issue included in the agenda and shall not participate in the
decision-making.
Remuneration of the members of the Supervisory and Managing Boards
The remuneration of the members of the Managingand Supervisory Boards of Telelink Business Services
Group AD is determined by the general meeting of the shareholders and is paid in accordance with the
remuneration policy, adopted by the shareholders.
The remuneration policy for the members of the Supervisory and Managing Board of TELELINK BUSINESS
SERVICES GROUP AD was adopted by a decision of the Supervisory Board of the Company on 3
rd
August
2020 and was approved by the first annual General Meeting of the Company's shareholders held on 10
th
September 2020.
The policy has entered into force on the date of its approval by the General Meeting of Shareholders of
the Company. Since its adoption, up to the date of this document, there have been two amendments and
additions to the adopted policy, developed by the members of the Supervisory Board and adopted by
resolutions of the General Meeting of Shareholders, held on 10th December 2020 and 14th September
2021, respectively.
The Company has allocated and paid remuneration in accordance with the remuneration policy adopted
by the General Meeting.
Information on the principles for the formation of the remuneration of the members of the Managing
Board and Supervisory Board of the Company, as well as on their amount, is disclosed in a report on the
application of the remuneration policy for the members of the Supervisory Board and Managing Board,
prepared in accordance with the requirements of Article 12 of Regulation No. 48 of the FSC of 20
th
March
2013 on the requirements for remuneration. In accordance with the requirements of the Ordinance, the
report on the implementation of the remuneration policy is included in the written materials for the
annual general meeting and the shareholders are given the opportunity to make recommendations on
the content and presentation of the information in the report. The shareholders are given easy access to
information on the remuneration, paid to the members of the Supervisory Board and the Managing Board
of Telelink Business Services Group AD via the Company's website, where the report on the
implementation of the remuneration policy is published annually, once it has been adopted by the
shareholders' general meeting.
Managing boards of subsidiaries
The managing boards of the subsidiaries are appointed and dismissed by the management of Telelink
Business Services Group AD in compliance with the rules for avoiding conflicts of interest in cases where
a member of the Managing board of the controlling company has an interest in a particular decision.
The managing boards of the subsidiaries are entitled to carry out all actions and transactions that are
related to the company's business. With regard to transactions for the conclusion of which, according to
the companies' articles of association, a resolution of another body such as the board of directors, the
supervisory board and/or the sole owner is required, the transactions shall be concluded after the
approval of the relevant resolution. Examples of such transactions are:
▪ issuing bonds or other debt securities;
▪ any sale, assignment or transfer of the business of the company or the going concern or any part
thereof;
▪ establishment of branches and representative offices of the company - in the country and abroad;
▪ entering into a contract or transaction on non-market terms, including, but not limited to, any
transaction with related party;
▪ acquisition and termination of interests in other companies in the country and abroad, as well as
in non-profit legal entities;
Page 8 / 15
▪ establishment or modification of profit sharing, stock option or other bonus schemes for the
Company's employees;
▪ any capital expenditure or disposal of assets not approved in the annual budget and exceeding a
certain amount;
▪ taking out any bank loans or borrowings, including leases;
▪ acquisition or transfer of immovable property, encumbrances on immovable property;
Conflict of interest with respect to the Management of the subsidiaries
The members of the managing boards of the subsidiaries must avoid and not allow real or potential
conflicts of interest.
The members of the management bodies of the Group companies shall promptly disclose potential or
actual conflicts of interest, if any, and the subsidiaries shall notify their controlling company, Telelink
Business Services Group AD, of such conflicts in writing.
In 2020 the Managing Board has developed a procedure for avoiding conflicts of interest in transactions
with interested parties and disclosures, which procedure had also been applied in 2021. Pursuant to the
developed procedure and best practices, the Managing Board approves transactions of its subsidiaries in
cases where the latter are party to transactions resulting in the acquisition, transfer and provision for use
or as collateral of their assets of high value and where counterparties to the transactions are interested
parties.
Remuneration of the members of the managing boards of subsidiaries
The remuneration of the members of the management bodies of the subsidiaries is determined based on
objective criteria in determining the remuneration of the management of the subsidiaries, with a view to
attracting and retaining qualified and loyal members of the managing boards and motivating them to work
in the best interests of the company they manage and the Group as a whole.
ІІ. Description of the internal control and risk management system of TELELINK BUSINESS SERVICES
GROUP AD (TBSG) and the Group in connection with the financial reporting process.
The Company has an Audit Committee, elected by the General Meeting of Shareholders. The procedures
for election of members of the Audit Committee, the manner of its functioning, reporting and tenure,
are described in the Audit Committee Statute as of 10
th
September 2020.
The Group Companies have established and operate a system for internal control and risk management,
which provides the companies with a holistic management approach, applying preventive (risk
assessment and treatment), control (internal control) and corrective actions (internal audit) that provide
a mechanism for continuous improvement of the processes in the companies and ensure the effective
functioning of the reporting and disclosure systems.
Description of the main characteristics of the internal control and risk management systems has taken
into account that the POSA and the National Corporate Governance Code do not define an internal control
framework, that public companies in Bulgaria should follow. Therefore, for the purpose of fulfilling the
Company's obligations under Article 100n(8)(4) of the POSA, the description of the main features of the
systems is based on the frameworks of:
• International Standard on Auditing
• International Standard ISO 31000:2018 Risk management – Principles and Guidelines
• International Standard ISO 31010:2019 Risk management — Risk assessment techniques
The Management observes the following basic principles in establishing, managing and maintaining the
internal control and risk management system:
• Provision of a basis for informed decision making
• Ensured feasibility and applicability to the Company's operations
• Ensured integrity of the Company's processes
Page 9 / 15
• Taking into account the human, cultural and organisational factors
• Competence: the Company's Board and those involved in the internal control and risk
management process, have the necessary knowledge and skills.
• Contribution to the continuous improvement of the Company's processes
• Contribution to the achievement of the Company's objectives
The purpose of the internal control in the Company and the Group is to monitor the functioning of the
processes, the implementation of the adopted rules, compliance with the applicable legislation and
standards, identification of audit processes / areas, as well as risk indicators monitoring. The internal
financial reporting control system is based on the previous experience of the Management, studies of
good reporting and control practices, and compliance with legal requirements, as to ensure the effective
functioning of reporting systems and disclosure of information. It is in a constant process of monitoring
and continuous improvement.
Internal control is conducted continuously and provides the Company's Managing Board with data to
make informed decisions regarding the operation of processes, risks and opportunities management,
improvement of controls and operations, and reliable information regarding compliance with the
applicable laws and standards.
Internal control is exercised over all activities, whether financial or not.
The internal control is implemented through continuous monitoring of indicators embedded in the
Company's operational and management processes without interfering Company's operations.
The Management of the Companies in the Group is responsible for the preparation of the annual financial
statements, which give a true and fair view of the financial condition of each enterprise, in accordance
with the applicable accounting policy.
Management's responsibility also includes implementation of an internal control system to prevent,
detect and correct errors and misstatements, resulting from actions of the accounting system, based on
the following main principles:
• Observance of the accounting policy, completeness and correctness of the accounting
information disclosed in the financial statements;
• Recording of all operations in accordance with the laws and regulations;
• Timely recording of operations and events, with their exact amount, during the preparation of
financial statements;
• Observance of the precautionary principle in the valuation of assets, liabilities, income and
expenses; detection and cessation of fraud and errors;
• Preparation of reliable financial information;
• Adherence to international financial reporting standards and compliance with the "going
concern" principle.
Risk Management
The purpose of the Risk Management is to create a mechanism for making informed and consistent
decisions by the Management of the companies in the TBSG Group in order to achieve sustainable
business development.
In order to achieve maximum efficiency, the risk management process is an integral part of the activities
of the companies in the Group, built as a structured approach according to the internal and external
context of the organization and consistent with the dynamic changes that may occur in this context.
Historical and current information, future forecasting and the influence that the human factor can have,
are used to carry out this process.
Telelink Business Services Group constantly monitors and adapts the risk management approach to
ensure continuous improvement.
A detailed description of the risks, specific to the activity of TELELINK BUSINESS SERVICES GROUP AD, is
presented in the section MAIN RISKS FACING THE COMPANY of the activity report.
Page 10 / 15
Information system and related business processes, essential for financial reporting and
communication
The Group has an information system, essential for the purposes of financial reporting, corporate
governance and communication; it is an integrated set of systems, platforms and procedures, that are
used to:
• initiate, record, process, and report transactions and operations of the Company (as well as events
and conditions) and maintain accounting for related assets, liabilities and equity;
• solve problems with incorrect processing of transactions and operations;
• transfer information from deal and transaction processing systems to the general ledger;
• cover information that is essential for the financial reporting of events and conditions other than
transactions and operations.
The experts from the accounting teams, working with the Information System of the Companies and
performing the related business processes, have the necessary competence and clearly understand the
individual roles and responsibilities related to the internal control - their own and those of the
management staff, and understand how their activities in the information financial reporting system are
related to the work of others and the means to report exceptions to the Corporate Management. Open
communication channels help to ensure that exceptions are reported and acted upon.
Ongoing monitoring of controls
Ongoing monitoring of controls is a process for assessing the effectiveness of the results of the functioning
of internal control over the time. It includes timely assessment of the effectiveness of controls and taking
the necessary remedial actions. Corporate Management performs ongoing monitoring of controls through
ongoing activities, separate assessments, or a combination of both. Ongoing monitoring activities are
often embedded in the companies' normal recurring activities and include regular management and
supervisory activities.
ІІІ. Protection of TBSG shareholders' rights
The Corporate Management guarantees equal treatment of all shareholders, including minority and
foreign shareholders, protects their rights, as well as facilitates their exercise within the limits allowed by
the current legislation and in accordance with the provisions of the Company's bylaws.
The invitation for the General Meeting contains the information required under the Commerce Act and
the POSA, as well as additional information regarding the exercise of the right to vote and the possibility
new items to be added to the agenda under Art. 223a of the Commerce Act.
The corporate management keeps all current and prospective investors informed by publishing on the
Company's website, as well as on the Company's chosen news agency for providing regulated information
(X3 News), information on the Company's financial results, as well as on upcoming corporate events (such
as holding a general meeting, dividend distribution, etc.).
General Meeting of the shareholders
All shareholders are informed about the rules according to which the General Meetings of the
shareholders are convened and held, including the voting procedures, through the Company’s Articles of
Association, as well as through an invitation for each specific General Meeting of the shareholders.
The Corporate Management provides sufficient and timely information on the date and place of the
General Meeting, as well as complete information on the issues to be discussed and resolved at the
meeting.
Page 11 / 15
The invitation and the materials for the General Meeting of the shareholders are announced through the
media agency Extra News and reach the public, the Financial Supervision Commission and the regulated
securities market. In order to facilitate the exercise of rights by cross-border shareholders, the Company
provides the Central Depository with notifications of upcoming corporate events. After presenting the
invitation and the materials for the General Meeting of shareholders, they are available on the Company's
website.
Shareholders with voting rights have the opportunity to exercise their voting rights at the General Meeting
of the Company in person or through representatives and by mail.
As a part of the materials for the General Meeting of shareholders, the Managing Board provides a Sample
Power of Attorney, Rules for voting by proxy and the Mail voting rules.
The Managing Board exercises effective control by creating the necessary organization for the mail voting
or the voting of the authorized persons in accordance with the instructions of the shareholders and in the
ways permitted by law. By order of the CEO, the members of the Mandate Commission, who register the
shareholders for each specific General Meeting are determined. The management of the General
Assembly strictly monitors the lawful conduct of the General Assembly, including the manner of voting of
the authorized persons. When ascertaining differences in the will of the authoriser and the vote of the
authorized person, this circumstance is entered in the minutes and the will of the principal is taken into
account accordingly.
The Managing Board organizes the procedures and the order for holding the General Meeting of
shareholders in a way that does not complicate or increase the cost of voting unnecessarily.
In order to facilitate the exercise of the right to vote of shareholders in a situation of health crisis, the
Company’s Articles of Association introduced an additional method for exercising the right to vote by
mail.
In addition, the Company provides its shareholders who cannot attend the general meeting in person, nor
exercise their voting rights by mail or proxy, with the opportunity to observe the meeting in real time
without being able to exercise their voting rights. The purpose is to ensure that information on the
resolutionds taken by the shareholders, as well as management's answers to questions raised during the
meeting about the Company's financial situation, reaches all persons who have acquired shares of Telelink
Business Services Group AD.
Materials for the General Meeting of 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. They are available to the shareholders from the day of the
announcement of the invitation for its convening in the Commercial Register and are published on the
website of the Company. All proposals regarding major corporate events are presented as separate items
on the agenda of the General Meeting, including the profit distribution proposal.
The Managing Board, according to the current legislation, assists the shareholders entitled to include
additional issues and to propose resolutions on issues already included in the agenda of the General
Meeting, performing all necessary legal and factual actions to disclose the additional issues on the agenda
of an already convened General Meeting.
The Managing Board guarantees the right of the shareholders to be informed about the resolutions taken
by the General Meeting of shareholders by announcing the Minutes of the General Meeting of
shareholders through the selected media agency.
Equal treatment of shareholders of one class
According to the Company’s Articles of Association and the internal acts of the Company, all shareholders
of one class are treated equally, and all shares within one class give equal rights to the shareholders of
the same class.
The Managing Director ensures the provision of sufficient information to the investors about the rights
granted by all shares of each class before their acquisition through the information published on the
Page 12 / 15
Company's website, as well as by conducting conversations and personal meetings with the Management
and/or the Investor Relations Manager.
Consultations among shareholders on basic shareholder rights
The Managing Board does not prevent shareholders, including institutional ones, from consulting each
other on matters relating to their fundamental shareholder rights in a manner that prevents abuse.
Shareholder' transactions with controlling rights and abusive transactions
The Managing Board does not allow transactions with shareholders with controlling rights, which violate
the rights and/or legitimate interests of other shareholders, including under the terms of negotiating with
yourself. Upon carrying out such type of transactions, an explicit decision of the Managing Board is
required, as the interested parties are excluded from the voting. In case of indications for exceeding the
statutory thresholds under Art. 114, para. 1 of the POSA, the Managing Board prepares a reasoned report
and initiates the convening and holding of a General Meeting of shareholders, at which the transactions
to be put to the vote.
ІV. Disclosure of information by TBSG
The Managing Board of TBSG has developed Rules for disclosure of inside information regarding insiders
for Telelink Business Services Group AD, effective since 26
th
May 2020 and implemented in all companies
in the Group. On the basis of these rules, the Managing Board of Telelink Business Services Group AD
requires prior information from the management bodies of its subsidiaries for upcoming high-value
transactions and when interested parties are involved.
The document has been developed in accordance with legal requirements and the Company's Articles of
association. In accordance with the adopted rules, the Corporate Management has created and maintains
a system for disclosure of information.
As at the date of this document, the requirement of disclosure of non-financial information is not
applicable to Telelink Business Services Group AD.
The information disclosure system ensures equality of the addressees of the information (shareholders,
stakeholders, investment community) and does not allow misuse of inside information.
The inside information is disclosed in the legally established forms, order and terms through the selected
media agency. The Company uses a single point for disclosure of information electronically, thus the
information reaches both the public and the Financial Supervision Commission and the regulated
securities market in an unadjusted form. Information in unadjusted form and in the same volume is also
published on the Company's website. In this way, the Company ensures that the information disclosure
system provides complete, timely, accurate and understandable information that allows for objective and
informed decision-making and assessments.
The Executive Management promptly discloses the capital structure of the Company and agreements that
lead to control according to its disclosure rules.
The Managing Board ensures that the rules and procedures under which the acquisition of controls and
extraordinary transactions, such as conversions and the sale of significant parts of assets, are carried out,
are clearly and promptly disclosed.
The Managing Board approves and controls the process of preparation of the annual and interim reports,
as well as the interim financial notifications, and the procedure for disclosure of information.
The Company maintains a website with approved content, scope and periodicity of the information
disclosed through it. The content of the Company's website fully covers the recommendations of the
National Corporate Governance Code.
The Company regularly discloses information about corporate governance.
The Managing Board believes that its activities in 2021 have created the conditions for sufficient
transparency in its relations with investors, financial media and capital market analysts.
Page 13 / 15
In 2021 the Company has disclosed any regulated information within the deadlines and in accordance
with the procedure, provided for in the Public Offering of Securities Act and the regulations on its
implementation.
V. Stakeholders
The Company has developed a policy towards stakeholders, which defines stakeholders and establishes
the principles of effective interaction with them in accordance with legal requirements and in compliance
with the principles of transparency, accountability and business ethics, adopted by the Company’s
Supervisory Board.
TELELINK BUSINESS SERVICES GROUP AD regularly communicates to the stakeholders both financial and
non-financial information in connection with the corporate policy, adopted by the Managing Board.
VI. Information pursuant to Directive 2004/25/EC of the European Parliament and of the Council of 21
April 2004 on takeover bids (Information referred to in Article 10 (1) (c), (d), (f), (h) and (i).
6.1. Information referred to in Article 10 (1) (c) of Directive 2004/25/EC of the European Parliament and
of the Council of 21 April 2004 on takeover bids – significant direct or indirect shareholdings (including
indirect shareholdings through pyramid structures and cross-shareholdings) within the meaning of
Article 85 of Directive 2001/34/EC.
As of 31
st
December 2021 the shareholders holding 5 per cent or more of the capital and the voting rights
in the General Meeting of the Company are:
• Lyubomir Minchev directly holding 8 371 678 shares with a nominal value of BGN 1 each,
representing 66.97 % of the total equity of the Company;
• UTILICO EMERGING MARKETS TRUST PLC directly holding 1 733 837 with a nominal value of BGN
1 each, representing 13.87% of the total equity of the Company.
Information on persons who reached, exceeded or fell below one of the following limits of 10%, 20%, 1/3,
50% and 2/3 in 2021:
N/A
6.2. Information referred to in Article 10 (1) (d) of Directive 2004/25/EC of the European Parliament and
of the Council of 21 April 2004 on takeover bids – holders of all securities with special control rights and
a description of those rights.
TELELINK BUSINESS SERVICES GROUP AD has no shareholders with special control rights.
6.3. Information referred to in Article 10 (1) (f) of Directive 2004/25/EC of the European Parliament and
of the Council of 21 April 2004 on takeover bids – any restrictions on voting rights, such as restrictions
on voting rights of holders of a certain percentage or number of votes, deadlines for the exercise of
voting rights or systems by which, in cooperation with the Company, the financial rights granted to the
securities are separated from the holding of the securities.
There are no restrictions on the voting rights of the shareholders of TELELINK BUSINESS SERVICES GROUP
AD.
6.4. Information referred to in Article 10 (1) (h) of Directive 2004/25/EC of the European Parliament
and of the Council of 21 April 2004 on takeover bids – the rules governing the appointment or
replacement of members of the Board and making amendments to the Articles of Association.
According to the provisions of Art. 17, item 4 of the Articles of Association of TELELINK BUSINESS SERVICES
GROUP AD, the General Meeting of shareholders determines the number, elects and dismisses the
members of the Supervisory Board and determines their remuneration.
According to the provisions of Art. 29, para. 2 of the Articles of Association of "TELELINK BUSINESS
SERVICES" GROUP AD, the Supervisory Board determines the number, elects and dismisses the members
of the Managing Board.
Page 14 / 15
The General Meeting of shareholders, respectively the Supervisory Board, may at any time decide to make
changes in the number and composition of the Supervisory Board, respectively the Managing Board, and
the members of the Boards may be re-elected without restriction. A member of the Supervisory and
Managing Board may be any capable natural person or legal entity that meets the requirements of the
law and has the necessary professional qualifications in respect to the activities of the Company.
According to the provision of Art. 17, item 1 of the Articles of Association of TELELINK BUSINESS SERVICES
GROUP AD, the General Meeting of shareholders is the body that may amend and supplement the Articles
of Association of "TELELINK BUSINESS SERVICES GROUP" AD.
6.5. Information referred to in Article 10 (1) (i) of Directive 2004/25/EC of the European Parliament and
of the Council of 21 April 2004 on takeover bids – powers of members of the Board, in particular the
right to issue or buy back shares.
The Managing Board cannot make decisions for issuance or buyback of shares of the Company. These
decisions are within the powers of the General Meeting of shareholders.
In 2020 and 2021 the Managing Board was authorized to repurchase shares under certain conditions and
terms, according to decisions of the General Meeting of shareholders held on 30
th
June 2020 and 10
th
December 2020 and 21
st
June 2021.
VII. Description of the diversity policy applied to the Administrative, Management and Supervisory
Bodies of TELELINK BUSINESS SERVICES GROUP AD and its subsidiaries.
TELELINK BUSINESS SERVICES GROUP AD and its subsidiaries are committed to maintaining compliance
with the highest ethical and legal standards in the field of human rights, labour rights, environmental
protection and the fight against corruption.
A number of internal documents have been developed that can be classified as a diversity policy with
regard to Managing and Supervisory Bodies in relation to aspects such as age, gender or education and
professional experience.
Such internal documents are:
• Code of Ethics and Professional Conduct of TELELINK BUSINESS SERVICES GROUP AD that aims to
establish the moral and ethical norms, principles and standards of conduct of employees in
accordance with corporate principles such as legality, professionalism, confidentiality, teamwork,
responsibility and accountability, mutual respect, respect of personal dignity and knowledge
exchange.
• General personal data processing policy.
Each of the above documents, individually and collectively, builds the diversity policy of the Managing and
Supervisory Boards in relation to aspects such as age, gender or education and professional experience.
The Group companies apply a balanced policy to nominating members of the corporate management who
have education and qualifications that correspond to the nature of the Company's work, its long-term
goals and business plan.
The internal acts of the companies in the Group encourage maintenance gender balance at all
management levels.
The Companies do not discriminate the members of the corporate management and administrative
bodies on the basis of age or gender.
The Companies prohibit and shall not in any way discriminate directly or indirectly on the basis of race,
nationality, ethnicity, human genome, citizenship, sex, ancestry, religion, education, age, disability,
HIV/AIDS status, political affiliation, beliefs, personal and social status, trade union membership, sexual
orientation, marital status, property status or any other special characteristic established by law or
international treaty and shall comply with all applicable employment laws against discrimination.
The prohibition of direct or indirect discrimination applies to all activities of the companies and is
consciously applied in the recruitment of personnel, including in relation to employees participation in
the administrative, management or supervisory bodies of the Group companies, as well as in relation to
the working conditions and remuneration of the employees.
Page 15 / 15
In the Group Companies, any manifestation of discriminatory behaviour by the Companies' employees
towards other persons is expressly prohibited, as is inducement to discrimination or the carrying out of
harassment on this basis. Any report or complaint of discrimination or harassment is subject to
investigation and verification.
Date issued:
27
th
April 2022 ____________________________________________
Ivan Zhitiyanov,
TELELINK BUSINESS SERVICES GROUP AD
IVAN
KRASIMIROV
ZHITIYANOV
Digitally signed by
IVAN KRASIMIROV
ZHITIYANOV
Date: 2022.04.29
10:22:29 +03'00'
Telelink Business Services Group AD
DECLARATION
In accordance with Article 100n, paragraph 4, item 4 of Public Offering of Securities Act
The undersigned,
Ivan Krasimirov Zhitiyanov, in my capacity as Executive Director of TELELINK BUSINESS SERVICES
GROUP AD,
Jordanka Lyubchova Klenovska, in my capacity as Deputy Financial Director and preparer of the аnnual
consolidated financial statements of TELELINK BUSINESS SERVICES GROUP AD for the year 2021,
hereby DECLARE that to the best of our knowledge,
1. The Annual consolidate financial statements as of 31st of December 2021, prepared in accordance
with the applicable accounting standards, present correctly and fairly the information regarding the
assets and liabilities, the financial position and profit of TELELINK BUSINESS SERVICES GROUP AD.
and
2. The Annual consolidated management report as of 31st of December 2021 includes a fair review of
the development and performance of TELELINK BUSINESS SERVICES GROUP AD, as well as the state of
the Group together with a description of major risks and uncertainties faced thereby.
27.04.2022 г.
Sofia
________________________________________
Ivan Krasimirov Zhitiyanov
Executive Director
________________________________________
Jordanka Lyubchova Klenovska
Deputy Financial Director
YORDANKA
LYUBCHOVA
KLENOVSKA
Digitally signed by
YORDANKA LYUBCHOVA
KLENOVSKA
Date: 2022.04.29 10:06:26
+03'00'
IVAN
KRASIMIROV
ZHITIYANOV
Digitally signed by
IVAN KRASIMIROV
ZHITIYANOV
Date: 2022.04.29
10:25:16 +03'00'