TIDMUKR
RNS Number : 9747M
Ukrproduct Group Ltd
27 September 2021
27 September 2021
UKRPRODUCT GROUP LTD
("Ukrproduct", the "Company" or, together with its subsidiaries,
the "Group")
UNAUDITED INTERIM FINANCIAL RESULTS FOR THE SIX MONTHSED 30 JUNE
2021
Ukrproduct Group Ltd (AIM: UKR), one of the leading Ukrainian
producers and distributors of branded dairy foods and beverages
(kvass), today announces its unaudited interim financial results
for the six months ended 30 June 2021.
The full unaudited interim financial results for the six months
ended 30 June 2021 are available on the Company's website at
www.ukrproduct.com .
For further information contact:
Ukrproduct Group Ltd
Jack Rowell, Non-Executive Chairman Tel: +44 1534 814814
Alexander Slipchuk, Chief Executive www.ukrproduct.com
Officer
Strand Hanson Limited
Nominated Adviser and Broker Tel: +44 20 7409 3494
Rory Murphy, Rob Patrick www.strandhanson.co.uk
This announcement contains inside information for the purposes
of Article 7 of EU Regulation No. 596/2014, which forms part of
United Kingdom domestic law by virtue of the European (Withdrawal)
Act 2018.
Ukrproduct Group Ltd is one of the leading Ukrainian producers
and distributors of branded dairy products and kvass, a traditional
fermented beverage. The Group's current product portfolio includes
processed and hard cheese, packaged butter, skimmed milk powder
(SMP) and kvass. Ukrproduct has built a range of recognisable
product brands ("Our Dairyman", "People's Product", "Creamy
Valley", "Molendam", "Farmer's") that are well known and highly
regarded by consumers. Ukrproduct's securities are traded under the
symbol "UKR" on AIM, a market operated by the London Stock
Exchange.
Chairman and Chief Executive Statement
Ukrproduct, one of the leading Ukrainian producers and
distributors of branded dairy foods and beverages (kvass), is
pleased to announce its interim results for the half year ended 30
June 2021 ("1H 2021") and outlook for 2021.
2021 Half-Year Highlights:
-- Consolidated revenue of the Group in local currency increased
by 7.3%, however owing to devaluation of UAH to GBP it decreased by
7.2% to GBP25.5 million on a like-for-like basis (1H 2020: GBP27.5
million). Growth in volume stood at 8.1%.
-- The Group significantly changed the product portfolio and
sales structure compared to the prior half a year in order to
support the product margins: a significant rise in revenue of 71.1%
was provided by processed cheese and associated product (with its
market share increasing from 22% to 41%), while the revenue from
butter decreased by 42.6% as the Group reoriented from the mass
towards the premium market (with its market share decreasing from
33% to 21%).
-- Despite the increase in sales, pressure on the input costs
owing to higher prices for raw milk on a comparable basis and
energy related expenses triggered the decline of the gross profit
by 9.8% to GBP2.0 million (1H 2020: GBP2.2 million).
-- Higher material costs had a negative impact on the operating
result, as EBITDA amounted to GBP0.49 million (1H 2020: GBP0.78
million) corresponding to EBITDA margin of 1.9% (1H 2020:
2.8%).
-- Net profit for the period amounted to GBP0.15 million
compared to the loss in the prior period (1H 2020: GBP0.42 million)
owing to the positive exchange difference of GBP0.36 million.
2021 Half-Year Trading Update
According to the State Statistics Service of Ukraine, in the
first half of 2021 the total milk production in Ukraine declined by
5.6%, or 255 thousand tons compared to the same period last year,
to 4.3 million tons. T hough t his decrease was offset by imports,
primarily from the European Union, it resulted in local raw milk
prices increasing. It is noteworthy to highlight that in the first
half of 2021, there was no seasonal decline in raw milk prices. In
May-June 2021, prices excluding VAT were generally in line with the
prices in January-February and sometimes even exceeded them. The
average purchase prices of milk (of all categories) by agricultural
enterprises increased in the first half of 2021 by more than 24%
against the corresponding level in 2020 owing to the general rally
of food commodities worldwide. While the average extra grade raw
milk (produced by the farmers) price increased by around 20%, the
average first grade raw milk (supplied by the villagers) price rose
by almost 30%. Additionally, the prices of another important raw
material - palm oil - skyrocketed by circa 30% during the first
half of 2021.
Consequently, the Group experienced the material financial
impact of raw materials inflation, while the products' profit
margins were limited following challenging negotiations with the
local retailers. However, Ukrproduct partially offset such
financial impacts through improved productivity and its optimised
product portfolio, as well as by a number of further measures
focused on margin improvement, including but not limited to the
regular cost-efficiency exercises and ongoing optimisation of the
raw milk supply.
Financial position
As of 30 June 2021, Ukrproduct had net assets of GBP5.7 million
compared to GBP2.6 million as of 30 June 2020.
In the first half of 2021, the Group was in breach of several
provisions of the loan agreement with the European Bank for
Reconstruction and Development ("EBRD") and the bank has not issued
a waiver for the breaches. On 1 June 2021, the Group had settled
the interest amount due on 1 June 2021, however it did not repay
the quarterly loan tranche due on that date. On 3 September 2021,
with reference to the loan agreement, the Group settled the payment
of overdue principal in the amount of EUR 106,200.
In June 2021, Ukrproduct entered discussions with the EBRD to
potentially restructure the loan repayment schedule as a result of
pressure on the working capital requirements of the business owing
to increased raw materials costs and growing working capital
requirements as the Group significantly increased its sales via
retailers as a result of the COVID-19 related restrictions imposed
on the other distribution channels during a number of consequential
lockdowns.
Outlook for 2021
The development of the business in the second half of 2021
remains highly uncertain due to ongoing COVID-19 pandemic and
further inflation in prices of agriculture commodities worldwide in
the second half of the year. Though Ukrproduct's team continues
implementing further efficiencies in procurement, processing,
distribution and sales of its products with a major focus on
pricing on shelves reflecting raw materials costs increase, the
Group expects its margins to experience further pressure until the
end of this year.
Jack Rowell Alexander Slipchuk
Non-Executive Chairman Chief Executive Officer
Ukrproduct Group
CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE
INCOME
FOR THE SIX MONTHSED 30 JUNE 2021
(in thousand GBP, unless otherwise stated)
Six months Six months
ended ended
3 0 June 2021 30 June 2020
-------------- -------------
GBP '000 GBP '000
-------------- -------------
Revenue 25 532 27 523
Cost of sales (23 534) (25 308)
-------------- -------------
GROSS PROFIT 1 998 2 215
Administrative expenses (631) (576)
Selling and distribution expenses (1 250) (1 158)
Other operating (expenses)/income (170) 5
-------------- -------------
PROFIT/(LOSS) FROM OPERATIONS (53) 486
Net finance expenses (232) (253)
Net foreign exchange gain/(loss) 366 (673)
-------------- -------------
PROFIT/(LOSS) BEFORE TAXATION 81 (440)
Income tax credit 70 19
-------------- -------------
PROFIT/ (LOSS) FOR THE SIX MONTHS 15 1 (421)
============== =============
Attributable to:
Owners of the Parent 15 1 (421)
Earnings per share:
Basic (in pence) 0 . 38 (1 . 06)
Diluted (in pence) 0 . 38 (1 . 06)
OTHER COMPREHENSIVE INCOME:
Items that may be subsequently
reclassified to profit or loss
Currency translation differences 269 (167)
OTHER COMPREHENSIVE INCOME, NET
OF TAX 269 (167)
-------------- -------------
TOTAL COMPREHENSIVE INCOME FOR
THE SIX MONTHS 42 0 (588)
============== =============
Attributable to:
Owners of the Parent 42 0 (588)
Non-controlling interests - -
Ukrproduct Group
CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL
POSITION
AS AT 30 JUNE 2021
(in thousand GBP, unless otherwise stated)
As at As at As at
30 June 31 December 30 June
202 1 20 20 20 20
--------- ------------ ---------
GBP '000 GBP '000 GBP '000
--------- ------------ ---------
ASSETS
Non-current assets
Property, plant and equipment 9 909 9 934 6 538
Intangible assets 765 598 546
Deferred tax assets - - -
10 674 10 532 7 084
Current assets
Inventories 5 919 7 317 6 386
Trade and other receivables 6 976 6 155 7 292
Current taxes 305 214 427
Other financial assets 41 27 32
Cash and cash equivalents 147 156 389
--------- ------------ ---------
13 388 13 829 14 526
--------- ------------ ---------
TOTAL ASSETS 24 062 24 361 21 610
========= ============ =========
EQUITY AND LIABILITIES
Equity attributable to owners
of the parent
Share capital 3 967 3 967 3 967
Share premium 4 562 4 562 4 56 2
Translation reserve (14 962) (15 231) (14 904)
Revaluation reserve 6 715 7 031 3 348
Retained earnings 5 403 4 935 5 59 9
--------- ------------ ---------
5 685 5 264 2 572
Non-controlling interests - - -
--------- ------------ ---------
TOTAL EQUITY 5 685 5 264 2 572
Non-current Liabilities
Liabilities of rent assets (LT) - 13 50
Liabilities of rent assets (ST) - - -
Deferred tax liabilities 937 1 029 215
--------- ------------ ---------
937 1 042 265
Current liabilities
Bank loans 6 812 6 628 7 834
Short-term payables - 467 -
Trade and other payables 10 610 10 947 10 907
Current income tax liabilities - - -
Other taxes payable 18 13 32
--------- ------------ ---------
17 440 18 055 18 773
--------- ------------ ---------
TOTAL LIABILITIES 18 377 19 097 19 038
--------- ------------ ---------
TOTAL EQUITY AND LIABILITIES 24 062 24 361 21 610
Ukrproduct Group
CONDENSED CONSOLIDATED INTERIM STATEMENT OF C HANGES IN
EQUITY
FOR THE SIX MONTHSED 30 JUNE 2021
(in thousand GBP, unless otherwise stated)
Attributable to owners of the parent Total Non-con-trolling Total
interests Equity
------ ----------------- --------
Share Share Revaluation Retained Translation
capital premium reserve earnings reserve
--------- --------- ------------ ---------- ------------ ------ ----------------- --------
GBP GBP '000 GBP '000 GBP '000 GBP '000 GBP GBP '000 GBP
'000 '000 '000
--------- --------- ------------ ---------- ------------ ------ ----------------- --------
As at 31 December
20 19 3 967 4 562 3 437 5 931 (14 737) 3 160 - 3 160
Loss for the
six months - - - (421) - (421) - (421)
Currency
translation
differences - - - (167) (167) - (167)
--------- --------- ------------ ---------- ------------ ------ ----------------- --------
Total
comprehensive
income - - - (421) (167) (588) - (588)
Depreciation
on revaluation
of property,
plant and
equipment - - (89) 89 - - - -
--------- --------- ------------ ---------- ------------ ------ ----------------- --------
As at 30 June 4 56 5 59
20 20 3 967 2 3 348 9 (14 904) 2 572 - 2 572
========= ========= ============ ========== ============ ====== ================= ========
Profit for the
six months - - - (739) - (739) - (739)
Currency
translation
differences - - - - (327) (327) - (327)
--------- --------- ------------ ---------- ------------ ------ ----------------- --------
Total
comprehensive (1
loss - - - (739) (327) 066) - (1 066)
Reduction of
revaluation
reserve - - (98) - - (98) - (98)
Gain on
revaluation
of property,
plant and
equipment - - 3 856 - - 3 856 - 3 856
Depreciation
on revaluation
of property,
plant and
equipment - - (75) 75 - - - -
--------- --------- ------------ ---------- ------------ ------ ----------------- --------
As at 31 December
20 20 3 967 4 562 7 031 4 935 (15 231) 5 264 - 5 264
========= ========= ============ ========== ============ ====== ================= ========
Profit for the
six months - - - 152 - 152 - 152
Currency
translation
differences - - - - 269 269 - 269
--------- --------- ------------ ---------- ------------ ------ ----------------- --------
Total
comprehensive
income - - - 152 269 421 - 421
Depreciation
on revaluation
of property,
plant and
equipment - - (316) 316 - - - -
--------- --------- ------------ ---------- ------------ ------ ----------------- --------
As at 30 June
20 21 3 967 4 562 6 715 5 403 (14 962) 5 685 - 5 685
========= ========= ============ ========== ============ ====== ================= ========
Ukrproduct Group
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
FOR THE SIX MONTHSED 30 JUNE 20 21
(in thousand GBP, unless otherwise stated)
Six months ended Six months ended
3 0 June 2021 30 June 2020
----------------- -----------------
GBP '000 GBP '000
----------------- -----------------
Cash flows from operating activities
Profit/(loss) before taxation 8 1 (440)
Adjustments for:
Exchange difference (36 6 ) 67 3
Depreciation and amortization 537 297
Loss on disposal of non-current assets 5 5
Write off of receivables/payables 166 1
Impairment of inventories 9 82
Interest income - (1)
Interest expense on bank loans 232 254
----------------- -----------------
Operating cash flow before working capital
changes 664 871
Increase in inventories 1 390 (1 389)
Increase in trade and other receivables (1 128) (143)
Increase in trade and other payables (366) 1 682
----------------- -----------------
Changes in working capital (104) 150
----------------- -----------------
Cash generated from operations 560 1 021
Interest received - 1
Income tax paid 9 5
----------------- -----------------
Net cash generated from operating activities 569 1 027
Cash flows from investing activities
Purchases of property, plant and equipment
and intangible assets (519) (334)
Proceeds from sale of property, plant
and equipment - 11
Repayments of loans issued (13) (3)
----------------- -----------------
Net cash used in investing activities (532) (326)
Cash flows from financing activities
Interest paid (188) (270)
Repayments of long term borrowing (57) (42)
----------------- -----------------
Net cash used in from financing activities (245) (312)
Net (decrease)/increase in cash and
cash equivalents (208) 389
Effect of exchange rate changes on cash
and cash equivalents 199 (231)
----------------- -----------------
Cash and cash equivalents at the beginning
of the six months 156 231
Cash and cash equivalents at the end
of the six months 147 389
================= =================
Ukrproduct Group
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHSED 30 JUNE 20 21
(in thousand GBP, unless otherwise stated)
EXTRACTS FROM NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
1. Basis of preparation
The unaudited condensed consolidated financial statements are
prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union (EU). The
condensed consolidated financial information in this half yearly
report has been prepared in accordance with International
Accounting Standard 34 'Interim Financial Reporting' (IAS 34), as
adopted by the EU, and the Disclosure Guidance and Transparency
Rules of the Financial Conduct Authority.
2. Going concern
These condensed consolidated interim financial statements have
been prepared on a going concern basis, which envisages the
disposal of assets and the settlement of liabilities in the normal
course of business. The recoverability of Group's assets, as well
as the future operations of the Group, may be significantly
affected by the current and future economic environment.
EBRD
In the first half of 2021, the Group continued to be in breach
of several provisions of the loan agreement with the European Bank
for Reconstruction and Development ("EBRD") and the bank has not
issued a waiver for the breaches. On 1 June 2021, Ukrproduct
entered discussions with the EBRD to potentially restructure the
loan repayment schedule as a result of pressure on the working
capital requirements of the business due to increased raw milk
costs and an increase in volumes required to meet demand. The Group
also notified EBRD that although Ukrproduct had settled the
interest amount due on 1 June 2021, it did not repay the quarterly
loan tranche due on that date. In September, with reference to the
loan agreement dated 31 March 2011, as amended on 24 June 2016, the
Company made the repayment of the overdue (by 1 June 2021)
principal in the amount of EUR 106 200 and settled the due interest
amount of EUR 28 582, however, the Group informed EBRD that it
could not undertake the next repayment at the amount of EUR 294 006
that was due on 1 September 2021.
Ukrproduct is seeking to increase its working capital facility
provided locally in Ukraine. The Group's management continues to
have discussions with EBRD and, at present, EBRD has taken no
action to accelerate repayment of the loan. Though the Company is
hopeful that an agreement can be reached in due course that works
for both parties, the management is seeking to secure sufficient
additional funding from the local banks to refinance the existing
loan on more competitive terms. To the best of its knowledge, the
Board has a reasonable expectation that the Group has sufficient
liquidity to continue its operations going forward and to apply the
going concern basis in preparation of the financial statements.
Ukrproduct Group
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHSED 30 JUNE 2021
(in thousand GBP, unless otherwise stated)
2. Going concern (continued)
Overall, the Group's management has been implementing a number
of steps focused on margin improvement and working capital
replenishment that include, but are not limited to, the actions
described below. Ukrproduct undertakes ongoing optimisation of the
raw milk supply and its settlement scheme that is complemented with
development of the products' portfolio aimed at increasing the
Company's overall margin and turnover. Additionally, the Group's
management is introducing new cost efficiency initiatives in
procurement, processing, distribution, marketing and logistics as
well as carefully reducing overhead.
The Company has launched new B2B partnerships (as well as
developing existing ones) in dairy processing, logistics and
distribution to capitalise on economies of scale. Moreover,
Ukrproduct continues to introduce new dairy products and beverages
appealing to shifting consumer demand, which is complemented by
focused marketing and promotion efforts, while export trading is
being developed with new packaging to adapt to international
consumer requirements. On a daily basis, the management team is
engaged in proactive negotiation with retailers and other trading
partners in order to reflect input costs volatility in the current
pricing of its end products on shelves, however this process is
challenging and takes time.
Impact of COVID-19 pandemic
As part of the going concern assessment, the Directors performed
an analysis on future cash flows and budgets. The analysis has
shown that the Group will continue to maintain relevant cash
resources and uninterrupted flow of revenues for the foreseeable
future. The Group closely monitors the evolution of the COVID-19
pandemic, including how it may affect the markets, the general
population and the financial impact of these events.
3. Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each of the
Group's companies are measured using the currency of the primary
economic environment in which the company operates ("the functional
currency"). For the companies operating in Cyprus and BVI the
functional currency is United States Dollars ("USD"). For the
Parent company, which is located in Jersey, the functional currency
is Pound Sterling ("GBP"). For the companies operating in Ukraine
the functional currency is Ukrainian Hryvnia ("UAH").
These condensed consolidated interim financial statements are
presented in the thousands of Pound Sterling ("GBP"), unless
otherwise indicated.
Foreign currency transactions and balances
Transactions in foreign currencies are initially recorded by the
Group entities at their respective functional currency rates
prevailing at the date of the transaction.
Monetary assets and liabilities denominated in foreign
currencies are retranslated at the functional currency spot rate of
exchange ruling at the reporting date.
Non-monetary items that are measured in terms of historical cost
in a foreign currency are translated using the exchange rates as at
the dates of the initial transactions. Non-monetary items measured
at fair value in a foreign currency are translated using the
exchange rates at the date when the fair value is determined.
The principal exchange rates used in the preparation of these
condensed consolidated interim financial statements are as
follows:
Currency 30 June Average for 31 December 30 June Average for
2021 the six months 20 20 2020 the six months
ended ended
(spot rate) 30 June (spot rate) (spot rate) 30 June
2021 2020
---------- ------------- ---------------- ------------- ------------- ----------------
UAH/GBP 37 . 58 38 . 55 38 . 44 33 . 08 33 . 47
UAH/USD 27 . 18 27 . 77 28 . 27 26 . 69 26 . 72
UAH/EUR 32 . 30 33 . 46 34 . 74 29 . 95 30 . 05
---------------- ------------- --- ---------------- --- ------------- --- ------------- --- ----------------
4. Subsequent events
Ukrproduct has a significant number of financial obligations to
EBRD. The Group's management has been in negotiations with EBRD to
restructure the current repayment schedule, focusing on, amongst
other things, financial viability assessment and business
projections and financial model covering long-term financial
forecasts. At present, EBRD has taken no action to accelerate
repayment of the loan.
In September 2021, with reference to the loan agreement dated 31
March 2011, as amended on 24 June 2016 the Group made the repayment
of the overdue (by 1 June 2021) principal in the amount of EUR 106
200 and settled the due interest amount of EUR 28 582, however the
Group informed EBRD that it could not undertake the next repayment
at the amount of EUR 294 006 that was due on 1 September 2021.
There were no other material events after the end of the
reporting date, which have a bearing on the understanding of the
financial statement.
5. Approval of interim statements
The unaudited condensed consolidated financial statements were
approved by the board of directors on 23 September 2021.
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END
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