The shareholders ‘meeting of the pharmaceutical company JSC Olainfarm on September 22 will also decide on the replacement of the council, according to the company’s announcement to the Nasdaq Riga stock exchange about the draft resolutions of the shareholders’ meeting.
The issue is included in the agenda of the meeting at the suggestion of Olainfarm shareholder Nika Saveļjeva. She represents 7.79% of the share capital of Olainfarm and has made this request using the rights of Section 274, Paragraph two of the Commercial Law.
At the suggestion of Saveljeva, it will also be decided to amend Olainfarm’s articles of association, conduct an internal audit, recall the audit committee and elect a new audit committee.
At the request of Olainfarm shareholder Olfim OÜ, it is planned to decide on the same issues – replacement of the Supervisory Board and the Audit Committee – on September 22 at 15.00 at the company’s extraordinary shareholders’ meeting.
In its report, the Supervisory Board of Olainfarm notes that the current members of the Supervisory Board were elected on April 1, 2019, thus the Supervisory Board has been operating in this composition for nine months in 2019. According to the Council, all the company’s performance indicators were better than in 2018. The total revenue of the group in 2019 reached 137 million euros, which was 10% more than in 2018. Gross profit was 85 million euros, an increase of 10 million euros. Gross profit margin increased from 60% in 2018 to 62% in 2019.
In the opinion of the Supervisory Board, the overall financial position of the Group is stable. In 2019, the Company has reduced its borrowings from financial institutions by 31%. Financial stability is evidenced by both the cash balance at the end of the year, which has increased 5.6 times, and the amount of available but unused credit.
The Council points out that the results of the Group’s operations in 2019 were significantly affected by the evaluation and review of the operating practices of previous periods, introducing additional control mechanisms and re-evaluating the concluded transactions and usual processes. As a result of such activities, in 2019 provisions were made for impairment losses of various assets of the Group in the amount of 7 million euros. Most of the write-downs are for assets not related to the production and distribution of medicines.
In the opinion of the Supervisory Board, the Board of the Company performed significant activities in 2019, which ensured the increase of the Group’s value. During the reporting period, Olainfarm’s operating processes in key markets were reviewed, new practices in product development were introduced, financial control and risk management were improved. The activities performed and the market situation have ensured good financial results for the Group, which together with the amount of available funds enables the Board to prepare a dividend payment offer to shareholders in the amount of 20% of the parent company’s profit.
The Audit Committee has regularly informed the Board, submitted its reports on the performed inspections and identified facts, risks and problems. “In 2019, the Audit Committee drew attention, carried out visits, requested data on the activities of the company’s dependent (subsidiaries) companies and representative offices abroad, for example, in Ukraine, Uzbekistan, Azerbaijan and other countries. The Council was provided with essential information to improve the operation and management of the agencies and dependent (subsidiaries), in particular in the areas of investment, marketing expenditure, administrative expenditure planning, control and performance monitoring. The operation of the Audit Committee in monitoring the internal control system is of significant importance, especially in the time until the establishment of a professional Internal Audit Team in the second half of 2019, ”the report of the Supervisory Board states.
Evaluating their work, the councils point out that the main tasks for the council in 2019 were to improve the management system and strengthen the internal control system. The work of the Supervisory Board was related to the in-depth analysis of the company’s operations, achievement of the set goals, monitoring of the Group’s financial results, formation of the Management Board, development of the new strategy and approval of management policies. In the opinion of the Supervisory Board, the activities performed in 2019 were aimed at increasing the value of the Group, ensuring return to shareholders, as well as mitigating the negative consequences of convening multiple extraordinary shareholders’ meetings “to change the company’s governance, .
The Council has taken a number of steps to establish a professional and highly qualified board. The Council has been actively involved in the development of the company’s strategy, “which culminated in the identification of new, focused development directions and the development of the strategy, as well as the start of implementation already in 2020”.
“The Supervisory Board, together with the Management Board, continues to work on the improvement of the company’s financing model in order to optimize the financing of capital, loans, the company’s assets and development and the established strategy. In general, the company continues to finance a significant part of its operations with capital and operating cash flow, but there are various other options and instruments, such as bond issuance, use of financial instruments offered by the EU, etc., ”the council report said.
As reported, the shareholders at the meeting will consider the possibility of filing a lawsuit against the former board for several million losses to the company. The audit performed by Olainfarm revealed that the previous Olainfarm officials had concluded a transaction on behalf of the company with Banestar Management Limited, a company registered in Cyprus, at the beginning of 2017, as a result of which Olainfarm has suffered losses in the amount of several million euros. The suspicious transactions were performed from January 2, 2017 to April 4, 2019. Olainfarm reported the discovery to the State Police.
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