TIDMUKR
RNS Number : 2526B
Ukrproduct Group Ltd
30 September 2022
30 September 2022
UKRPRODUCT GROUP LIMITED
("Ukrproduct", the "Company" or, together with its subsidiaries,
the "Group")
UNAUDITED INTERIM FINANCIAL RESULTS FOR THE SIX MONTHSED 30 JUNE
2022
Ukrproduct Group Limited (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 2022.
The full unaudited interim financial results for the six months
ended 30 June 2022 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 , Richard Johnson www.strandhanson.co.uk
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 2022 ("1H 2022") and outlook for the remainder of 2022.
2022 Half-Year Trading Update
Trading in 2022 was severely affected by the Russian invasion of
Ukraine and the ongoing war. Ukrainian regions experienced a loss
of production capacity in the occupied territory and in the war
zone. Moreover, damaged infrastructure and increases in fuel prices
together with fuel shortages, have impacted transportation and
adversely affected logistics costs, both on the supply and
distribution side. As the Ukrainian sea ports have been blockaded
by the Russian Navy, there is increased pressure on the remaining
routes for export.
In 2022, dairy processing enterprises throughout Ukraine did not
have the opportunity to fully utilize production capacities as a
result of difficulties in sourcing raw material. In the first half
of 2022 the total milk production in Ukraine declined by 13.2% down
to 3.7 million tons compared to the same period last year.
Decreases in milk production, increases in fuel price and the
effect of the occupation of part of the territories of Ukraine has,
of course, led to an increase in the purchase price of milk.
As a result, management took steps to secure the supply chain
vital for operational continuity. The Group concluded contracts
with new alternative suppliers, where necessary, and developed new
logistics routes. The central warehouse was moved to the one of
Group's main plants at Zhytomyr, away from the line of active
hostilities.
2022 Half-Year Highlights
Consolidated revenue of the Group for the 1H 2022 decreased by
28.4% to GBP18.3 million while Gross profit increased by 63.6% to
GBP3.3 million. The Group raised prices for products several times
and decreased trade marketing activities, which made it possible to
compensate for the increase in prices for raw materials, fuel and
energy and to increase gross profit margins.
Selling, general and administrative expenses, as well as CAPEX,
have been reduced to the minimum required to meet the primary needs
of the Group's core business.
Major customers have not been affected by the hostilities and
continue to cooperate and fulfil their contractual obligations with
the Group. Nevertheless, the Group recognized additional provision
for trade receivables of GBP1.2 million, which is a part of Other
operating expenses.
Trading headwinds were significant and meant the Group's EBITDA
in 1H 2022 reduced by 7.7% to GBP0.4 million compared with 1H 2021,
with the EBITDA margin increasing from 1.9% in 1H 2021 to 2.4% in
1H 2022. The Group's EBITDA in 1H 2022, if adjusted and stated
before expenses relating to the war (including additional bad debt
provision for receivables from customers which have been affected
by the hostilities ) would amount to GBP1.6 million.
The consolidated net loss of Ukrproduct for 1H 2022 amounted to
GBP0.2 million compared with a net profit of GBP0.2 million in 1H
2021.
Financial position
As at 30 June 2022, Ukrproduct had net assets of GBP 6. 3
million compared to GBP5.7 million as at 30 June 2021.
For the six months ended 30 June 2022, the Group continued to be
in breach of several provisions of the loan agreement with the
European Bank for Reconstruction and Development ("EBRD"), missed
some interest payments and repayments and the EBRD has not issued a
waiver for the breaches. The Company has been holding negotiations
with the EBRD to potentially restructure the loan repayment
schedule since June 2021. At this current stage the active phase of
negotiations with EBRD has been slowed owing to the ongoing war in
Ukraine. At present, the EBRD has taken no action to accelerate
repayment of the loan.
Outlook for 2022
The development of the business in the second half of 2022
remains highly uncertain due to the ongoing war and further local
currency devaluation and inflation in Ukraine. Ukrproduct continues
to implement further efficiencies in procurement, processing,
distribution and sales of its products, with a major focus on
diversifying risks, maintaining profitability and Group assets.
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 202 2
(in thousand GBP, unless otherwise stated)
Note Six months Six months
ended ended
3 0 June 2022 30 June 2021
-------------- -------------
GBP '000 GBP '000
-------------- -------------
Revenue 9 18 278 25 532
Cost of sales (15 009) (23 534)
-------------- -------------
GROSS PROFIT 3 269 1 998
Administrative expenses (554) (631)
Selling and distribution expenses (1 113) (1 250)
Other operating expenses (1 543 ) (170)
-------------- -------------
PROFIT/(LOSS) FROM OPERATIONS 59 (53)
Net finance expenses (231) (232)
Net foreign exchange gain 20 366
-------------- -------------
(LOSS)/ PROFIT BEFORE TAXATION (152) 81
Income tax (expense) / credit (45) 70
-------------- -------------
(LOSS)/ PROFIT FOR THE SIX MONTHS (197) 151
============== =============
Attributable to:
Owners of the Parent (197) 151
Non-controlling interests - -
Earnings per share from continuing
and total operations:
Basic (in pence) 10 (0.50) 0.38
Diluted (in pence) 10 (0.50) 0.38
OTHER COMPREHENSIVE INCOME:
Items that may be subsequently
reclassified to profit or loss
Currency translation differences 506 269
OTHER COMPREHENSIVE INCOME, NET
OF TAX 506 269
-------------- -------------
TOTAL COMPREHENSIVE INCOME FOR
THE SIX MONTHS 309 420
============== =============
Attributable to:
Owners of the Parent 309 420
Non-controlling interests - -
Ukrproduct Group
CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL
POSITION
AS AT 30 JUNE 202 2
(in thousand GBP, unless otherwise stated)
Note As at As at As at
-----
30 June 31 December 30 June
202 2 20 21 20 21
----- --------- ------------ ---------
GBP '000 GBP '000 GBP '000
--------- ------------ ---------
ASSETS
Non-current assets
Property, plant and equipment 9 926 9 795 9 909
Intangible assets 842 809 765
10 768 10 604 10 674
Current assets
Inventories 6 4 556 4 655 5 919
Trade and other receivables 5 528 6 763 6 976
Current taxes 120 920 305
Other financial assets 43 40 41
Cash and cash equivalents 293 312 147
--------- ------------ ---------
1 0 540 12 690 13 388
--------- ------------ ---------
TOTAL ASSETS 21 308 23 294 24 062
========= ============ =========
EQUITY AND LIABILITIES
Equity attributable to owners
of the parent
Share capital 4 282 4 282 4 282
Treasury shares (315) (315) (315)
Share premium 4 562 4 562 4 562
(14 4 81
Translation reserve ) (14 987) (14 962)
Revaluation reserve 6 182 6 348 6 715
Retained earnings 6 026 6 057 5 403
--------- ------------ ---------
6 256 5 947 5 685
TOTAL EQUITY 6 256 5 947 5 685
Non-current Liabilities
Deferred tax liabilities 748 796 937
--------- ------------ ---------
748 796 937
Current liabilities
Bank loans 6 394 6 039 6 812
Short-term payables 448 587 -
Trade and other payables 7 032 9 829 10 610
Current income tax liabilities 154 41 -
Other taxes payable 276 55 18
--------- ------------ ---------
14 304 16 551 17 440
--------- ------------ ---------
TOTAL LIABILITIES 15 052 17 347 18 377
--------- ------------ ---------
TOTAL EQUITY AND LIABILITIES 21 308 23 294 24 062
Ukrproduct Group
CONDENSED CONSOLIDATED INTERIM STATEMENT OF C HANGES IN
EQUITY
FOR THE SIX MONTHSED 30 JUNE 202 2
(in thousand GBP, unless otherwise stated)
Attributable to owners of the parent
Share Share Share Revaluation Retained Translation Total Total
capital trasury premium reserve earnings reserve Equity
--------- --------- --------- ------------ ---------- ------------ ------ --------
GBP GBP GBP GBP '000 GBP GBP '000 GBP GBP
'000 '000 '000 '000 '000 '000
--------- --------- --------- ------------ ---------- ------------ ------ --------
As At 31 4 (315
December 2020 282 ) 4 562 7 031 4 935 (15 231) 5 264 5 264
Loss for the
six months - - - 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 4
June 2021 282 (315) 4 562 6 715 5 403 (14 962) 5 685 5 685
========= ========= ========= ============ ========== ============ ====== ========
Profit for
the six months - - - 287 - 287 287
Currency translation (25 (25
differences - - - - (25 ) ) )
--------- --------- --------- ------------ ---------- ------------ ------ --------
Total comprehensive
loss - - - 287 (25 ) 262 262
Depreciation
on revaluation
of property,
plant and
equipment - - (367 ) 367 - - -
--------- --------- --------- ------------ ---------- ------------ ------ --------
As At 31 4 (315 (14 987
December 2021 282 ) 4 562 6 348 6 057 ) 5 947 5 947
========= ========= ========= ============ ========== ============ ====== ========
Loss for the (197 (197 (197
six months - - - ) - ) )
Currency translation
differences - - - - 506 506 506
--------- --------- --------- ------------ ---------- ------------ ------ --------
Total comprehensive (197
income - - - ) 506 309 309
Depreciation
on revaluation
of property,
plant and
equipment - - (166 ) 166 - - -
--------- --------- --------- ------------ ---------- ------------ ------ --------
As At 30 4
June 2022 282 (315) 45 262 6 182 6 026 (14 481) 6 256 6 256
========= ========= ========= ============ ========== ============ ====== ========
Ukrproduct Group
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
FOR THE SIX MONTHSED 30 JUNE 20 22
(in thousand GBP, unless otherwise stated)
Six months Six months
ended ended
3 0 June 2022 30 June 2021
-------------- -------------
GBP '000 GBP '000
-------------- -------------
Cash flows from operating activities
Profit before taxation (152) 81
Adjustments for:
Exchange difference (20) (366)
Depreciation and amortization 387 537
Loss on disposal of non-current assets - 5
Provision for bad debt 1 435 166
Impairment of inventories 18 9
Interest expense on bank loans 232 232
-------------- -------------
Operating cash flow before working
capital changes 1 9 00 664
Increase in inventories 85 1 390
Increase/Decrease in trade and other
receivables 5 96 (1 128)
Increase in trade and other payables (2 653) (366)
-------------- -------------
Changes in working capital ( 1 97 2 ) (104)
-------------- -------------
Cash generated from operations (7 2 ) 560
Interest received 1 -
Income tax paid 33 9
-------------- -------------
Net cash generated from operating activities ( 38 ) 569
Cash flows from investing activities
Purchases of property, plant and equipment
and intangible assets (194) (519)
Issuance of loans (2) (13)
-------------- -------------
Net cash used in investing activities (196) (532)
Cash flows from financing activities
Interest paid (149) (188)
Repayments of long term borrowing - (57)
-------------- -------------
Net cash used in from financing activities (149) (245)
Net decrease in cash and cash equivalents (383) (208)
Effect of exchange rate changes on cash
and cash equivalents 364 199
-------------- -------------
Cash and cash equivalents at the beginning
of the six months 312 156
Cash and cash equivalents at the end
of the six months 293 147
============== =============
Ukrproduct Group
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 20 22
(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
On 24 February 2022, the Russian Federation launched a
full-scale military invasion of Ukraine. Having examined the
existing and potential implications of the war for the Ukraine
located businesses, the management of the Group have identified
several points of specific concern that require careful analysis
and assessment. They include, but are not limited to, the
following:
- risks related to safety of personnel;
- risk of physical destruction of the production assets;
- risks of disruption of the supply and distribution chains;
- risk of liquidity and limited access to financing.
In preparing these financial statements, the Directors have
assessed the Group's ability to continue as a going concern. T he
Company performed an analysis of the future cash flows and budgets
for the next 12 months based on the known facts and events applying
to them, including multiple scenarios as a result of the ongoing
war with the Russian Federation . The analysis revealed that the
Group would continue to maintain sufficient cash resources as well
as a stable flow of revenues in due course. The Group fully
complies with all sanctions rules and regulations regarding Russia
and Belarus.
Management is taking steps to secure the supply chain which is
vital for operational continuity. The Group concluded contracts
with new alternative suppliers where necessary and developed new
logistics routes. The central warehouse was moved to the one of
Group 's main plant s at Zhytomyr , away from the line of active
hostilities. Major customers have not been affected by the
hostilities and continue to cooperate and fulfil their contractual
obligations with the Group. The military action has had no critical
impact on the local distribution. The share of sales in the most
affected regions does not exceed 15%.
Selling, general and administrative and other operating
expenses, as well as CAPEX, has been reduced to the minimum
required to meet the primary needs of the Group's core
business.
The Group's management is exploring various opportunities to
attract additional financing to support the Group's the liquidity
under different state aid programs.
Ukrproduct Group
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2022
(in thousand GBP, unless otherwise stated)
2. Going concern (continued)
For the six months ended 30 June 2022, the Group continued to be
in breach of several provisions of the loan agreement with the
European Bank for Reconstruction and Development ("EBRD"), missed
some interest payments and repayments and the EBRD has not issued a
waiver for the breaches. The Company has been holding negotiations
with the EBRD to potentially restructure the loan repayment
schedule since June 2021. At this current stage the active phase of
negotiations with EBRD has been slowed owing to the ongoing war in
Ukraine. At present, the EBRD has taken no action to accelerate
repayment of the loan.
These financial statements are prepared using the going concern
basis assumption.
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 British
Virgin Islands, 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.
Ukrproduct Group
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2022
(in thousand GBP, unless otherwise stated)
The principal exchange rates used in the preparation of these
condensed consolidated interim financial statements are as
follows:
Currency 30 June Average 31 December 30 June Average
202 2 for the six 20 2 1 2021 for the six
months ended months ended
(spot rate) 30 June (spot (spot rate) 30 June
2022 rate) 2021
----------- -------------- -------------- ------------- -------------- --------------
UAH/GBP 35,55 37,72 36,84 37,58 38,55
UAH/USD 29,25 28,91 27,28 27,18 27,77
UAH/EUR 30,77 31,74 30,92 32,30 33,46
---------------- -------------- -------------- ------------- -------------- --------------
4. Subsequent events
As of the date of this report, the Group continues to operate.
The management of the Group controls all of its operations. Office
staff mostly work remotely, while production staff perform their
duties at their sites. As of the date of this report, the war in
Ukraine continues.
The duration and consequences of the war in Ukraine are
currently unclear. It is not possible to reliably estimate the
duration and severity of these consequences, as well as their
impact on the financial position and results of the Group in future
periods.
Subsequent to 31 December 2021 and up to the date of these
consolidated financial statements, the Group has not settled the
principal and interest payment with reference to the loan agreement
schedule with the EBRD. The Company have been holding negotiations
with the EBRD to potentially restructure the loan repayment
schedule since June 2021. At this current stage the active phase of
negotiations with EBRD has slowed owing to the ongoing war in
Ukraine. At present the EBRD has taken no action to accelerate
repayment of the loan.
On 22 July 2022 the National Bank of Ukraine increased the
official exchange rate of EUR to UAH up to 37.27 UAH from 29.81 as
at 21 July 2022. As a result, the Group expect significant foreign
exchange losses related to EBRD loan liabilities in the second half
of 2022.
There were no other events after the end of the reporting date,
which would have a material impact on the financial statements.
5. Approval of interim statements
The unaudited condensed consolidated financial statements were
approved by the board of directors on 29 September 2022
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END
IR DZGZLRLFGZZM
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September 30, 2022 02:00 ET (06:00 GMT)
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