RNS Number : 8117S
Ukrproduct Group Ltd
27 June 2018
27 June 2018
UKRPRODUCT GROUP LIMITED
("Ukrproduct", the "Company" or, together with its subsidiaries, the "Group")
FINAL RESULTS
ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2017
NOTICE OF AGM
Ukrproduct Group Limited (AIM: UKR), one of the leading Ukrainian producers and distributors of branded dairy foods and beverages (kvass) today announces its audited results for the year ended 31 December 2017.
Copies of the Group's annual report and accounts, incorporating the 2017 Audited Financial Statements, have today been posted to shareholders and will be available on the Company's website at www.ukrproduct.com. Copies will also be available from the Company's head office, 10th Floor, 39-14 Shota Rustaveli St., Kiev 01033, Ukraine.
The Board of Ukrproduct is also pleased to announce that the Notice of Annual General Meeting ("AGM"), along with a Proxy Form, has also been posted to shareholders.
The AGM will be held at the head office of the Company, 10th Floor, 39-41 Shota Rustaveli Street, 01033 Kyiv, Ukraine at 6 pm (Kyiv time) on Thursday, 3 August 2018. Copies of the Notice of AGM and Proxy Form will be available for download on the Company's website at www.ukrproduct.com, as well as by request at the following address: Bedell Secretaries Limited, Secretary, 26 New Street St. Helier, Jersey JE2 3RA Channel Islands.
For further information contact:
Ukrproduct Group Ltd
Jack Rowell, Non-Executive Chairman
Tel: +380 44 232 9602
Alexander Slipchuk, Chief Executive Officer
www.ukrproduct.com
Strand Hanson Limited
Nominated Adviser and Broker Rory Murphy, James Dance, Jack Botros
Tel: +44 20 7409 3494 www.strandhanson.co.uk
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR").
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's Statement
Trading
During the year ended 31 December 2017 ("FY2017"), the Ukrainian economy showed encouraging growth in GDP, with increased wages leading to an improvement in consumer confidence. As a result, whilst the operating environment remains competitive, the Group's trading conditions have improved domestically. In addition, the weakening of the hryvna has provided the Group with additional business development opportunities in its export markets. Ukrproduct's strategy has been to continue to focus on cash generation, ensure that its product offerings and service levels remain competitive, exploit export opportunities and to seek further cost efficiencies.
For FY2017 the Group reports improved revenue of UAH 1.0 billion (approximately £30.5 million) as well as a stronger gross margin, with the Group increasing sales of branded products in its key segments of packaged butter and processed cheese. The Group has also pursued several export opportunities resulting in the doubling of export revenues in FY2017, primarily as a result of increased sales in packaged butter. Private label sales were lower in FY2017 as the Company pursued stronger margin revenue streams. The Group also reports increased kvass beverage sales as new products were introduced to the market in FY2017.
Growth in sales of butter led to more skimmed milk powder being produced as a related product. Whilst the sale of skimmed milk powder itself is lossmaking due to the global market price imposed, the overall milk processing business is profitable.
Ukrproduct's spray drying facility at its Starokonstantyniv plant, which produces powdered milk, afforded the opportunity to enhance profits, by providing a service for drying milk requested by other manufacturers of dairy products, thereby enhancing the Group's profits.
As a result, the Group reports an operating profit of UAH 16.2 million (approximately £0.5 million) in FY2017, compared with an operating loss of UAH 7.4 million (approximately £0.2 million) for the full year ended 31 December 2016 ("FY2016"). The operating profit for FY2017 included lower finance charges related to the outstanding debt with EBRD.
Following the Group's increase in gross profit, the Group recorded an improved EBITDA margin of 3.5%, however, an overall loss £1.1 million for the year is recorded, due to the negative impact of exchange rate differences.
Financial Position
As at 31 December 2017, the Group reports total liabilities of UAH 428.0 million (approximately £11.3 million), with cash balances of UAH 18.7 million (approximately £0.5 million). However, post year end, the Group's financial position was improved following the UAH 65.0 million (approximately £1.7 million) new loan agreement with PJSC Creditwest Bank ("Creditwest") and the subsequent repayment, in full, of the OTP Bank Loan, and, in March 2018 and June 2018, Ukrproduct made scheduled repayments of €177,175 and €176,529 to EBRD respectively.
Outlook
Ukrproduct will continue to work to enhance its operating profitability and cash flow generation and continue to seek to improve its competitive position in the markets in which it operates. The year 2018 is showing a continued improvement in financial performance.
Ukrproduct Group
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2017
(in thousand GBP, unless otherwise stated)
year ended
year ended
31 December 2017
31 December 2016
£ '000
£ '000
Revenue
30 525
20 190
Cost of sales
(27 267)
(18 071)
GROSS PROFIT
3 258
2 119
Administrative expenses
(1 031)
(930)
Selling and distribution expenses
(1 561)
(1 367)
Other operating expenses
(156)
(17)
PROFIT/(LOSS)FROM OPERATIONS
510
(195)
Net finance expenses
(437)
(623)
Foreign exchange loss, net
(1 250)
(743)
LOSS BEFORE TAXATION
(1 177)
(1 561)
Income tax expenses
62
77
LOSS FOR THE YEAR
(1 115)
(1 484)
Attributable to:
Owners of the Parent
(1 115)
(1 484)
Non-controlling interests
-
-
Earnings per share (p):
Basic
(2,81)
(3,74)
Diluted
(2,81)
(3,74)
OTHER COMPREHENSIVE INCOME:
Items that may be subsequently reclassified to profit or loss
Currency translation differences
(113)
513
Items that will not be reclassified to profit or loss
Gain on revaluation of property, plant and equipment
-
-
Income tax in respect of revaluation reserve
-
-
OTHER COMPREHENSIVE INCOME, NET OF TAX
(113)
513
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
(1 228)
(971)
Attributable to:
Owners of the Parent
(1 228)
(971)
Non-controlling interests
-
-
Ukrproduct Group
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 December 2017
(in thousand GBP, unless otherwise stated)
As at
As at
31 December 2017
31 December 2016
£ '000
£ '000
ASSETS
Non-current assets
Property, plant and equipment
6 288
7 511
Intangible assets
543
656
Deferred tax assets
-
-
6 831
8 167
Current assets
Inventories
2 426
1 855
Trade and other receivables
2 171
2 507
Current taxes
271
230
Other financial assets
30
18
Cash and cash equivalents
496
175
5 394
4 785
TOTAL ASSETS
12 225
12 952
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital
3 967
3 967
Share premium
4 562
4 562
Translation reserve
(14 894)
(14 781)
Revaluation reserve
3 769
3 935
Retained earnings
3 478
4 427
882
2110
Non-controlling interests
-
-
TOTAL EQUITY
882
2110
Non-Current Liabilities
Bank loans
5 716
-
Long-term payables
459
441
Deferred tax liabilities
262
363
6 437
804
Current liabilities
Bank loans
1 318
7 162
Trade and other payables
3 565
2 854
Current income tax liabilities
-
10
Other taxes payable
23
12
4 906
10 038
TOTAL LIABILITIES
11 343
10 842
TOTAL EQUITY AND LIABILITIES
12 225
12 952
Ukrproduct Group
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
AS AT 31 December 2017
(in thousand GBP, unless otherwise stated)
Attributable to owners of the parent
Non-controlling interests
Total Equity
Share capital
Share premium
Revaluation reserve
Retained earnings
Translation reserve
Total
£ '000
£ '000
£ '000
£ '000
£ '001
£ '000
£ '000
£ '000
As At 1 January 2016
3 967
4 562
4 192
5 654
(15 294)
3 081
-
3 081
Loss for the year
-
-
-
(1 484)
-
(1 484)
-
(1 484)
Other comprehensive income
Gain on revaluation of property, plant and equipment
-
-
-
-
-
-
-
Currency translation differences
-
-
-
-
513
513
-
513
Total comprehensive income
-
-
-
(1 484)
513
(971)
-
(971)
Depreciation on revaluation of property, plant and equipment
-
-
(248)
248
-
-
-
-
Reduction of revaluation reserve
-
-
(9)
9
-
-
-
-
As At 31 December 2016
3 967
4 562
3 935
4 427
(14 781)
2 110
-
2 110
Loss for the year
-
-
-
(1 115)
-
(1 115)
-
(1 115)
Other comprehensive income
Currency translation differences
-
-
-
(113)
(113)
-
(113)
Total comprehensive income
-
-
-
(1 115)
(113)
(1 228)
-
(1 228)
Depreciation on revaluation of property, plant and equipment
-
-
(166)
166
-
-
-
-
As At 31 December 2017
3 967
4 562
3 769
3 478
(14 894)
882
-
882
Ukrproduct Group
CONSOLIDATED STATEMENT OF CASH FLOWS
AS AT 31 December 2017
(in thousand GBP, unless otherwise stated)
year ended
year ended
31 December 2017
31 December 2016
£ '000
£ '000
Cash flows from operating activities
Loss before taxation
(1 177)
(1 561)
Adjustments for:
Exchange difference
1 250
743
Depreciation and amortisation
553
589
Loss/(Profit) on disposal of non-current assets
8
25
Write off of receivables/payables
(5)
32
Impairment of inventories
82
120
Loss from disposal of subsidiaries
(3)
Interest income
-
(1)
Interest expense on bank loans
437
624
Operation cash flow before working capital changes
1 148
568
(Increase) in inventories
(653)
(472)
(Increase) / decrease in trade and other receivables
298
(933)
Increase / (decrease) in trade and other payables
473
1 122
Changes in working capital
118
(283)
Cash generated from operations
1 266
285
Interest received
1
1
Income tax paid
(31)
(32)
Net cash generated by / (used in) operating activities
1 236
254
Cash flows from investing activities
Purchases of property, plant and equipment and intangible assets
(93)
(217)
Proceeds from sale of property, plant and equipment
1
17
Repayments of loans issued
(15)
(11)
Net cash used in investing activities
(107)
(211)
Cash flows from financing activities
Interest paid
(378)
(372)
(Decrease) / increase in short term borrowing
-
(63)
Repayments of long term borrowing
(259)
-
Net cash generated by financing activities
(637)
(435)
Net decrease in cash and cash equivalents
492
(392)
Effect of exchange rate changes on cash and cash equivalents
(171)
474
Cash and cash equivalents at the beginning of the year
175
93
Cash and cash equivalents at the end of the year
496
175
These consolidated financial statements were approved and authorised for issue by the Board of Directors on 27 June 2018 and were signed on its behalf by Alexander Slipchuk.
Nature of Financial Information
The financial information contained in this announcement does not constitute statutory accounts as defined under section 113 of the Companies (Jersey) Law 1991 but has been extracted from the Group's 2017 statutory financial statements. The auditors have reported on the 2017 financial statements: their report was unqualified but did contain a paragraph that highlighted a material uncertainty related to going concern and non-observance of the terms of the loan agreement with the European Bank of Reconstruction and Development (EBRD). It contained no statement under section 113B of the Companies (Jersey) Law 2011. The financial statements for 2017 will be delivered to the Registrar of Companies after adoption at the Company's Annual General Meeting.
EXTRACTS FROM NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of preparation
The consolidated financial statements have been prepared on a historical cost basis, except for property, plant and equipment which have been measured at fair value. The consolidated financial statements are presented in British Pounds Sterling (GBP) and all values are rounded to the nearest thousand (£000) except where otherwise indicated.
2. Going concern
These consolidated financial statements have been prepared on the assumption that the Group is able to continue its operations on an going concern basis in the near future.
For the year that ended on 31 December 2017, the cumulative losses amounted to £1.115 million (£1.484 million - For the year that ended on 31 December 2016). Although as at 31 December 2017 the Group increased its cash flow from operations and met all European Bank for Reconstruction and Development ("EBRD") covenants but one, overall it has continued to breach the EBRD covenant requirements of the loan with that indicates a significant uncertainty with regard to the Group to continue its operations on a going concern basis.
According to Management, the assumption of the Group's ability to continue its operations on going concern basis is sustainable, as:
1. The Group received waivers from EBRD - in respect of the annual financial statements for 2017 and the first quarter of 2018;
2. The Group continues to repay a loan to EBRD according to the agreement and timely settled the last two tranches after the reporting date;
3. The Company increased its cash flow from operations;
4. During 2017, the Group kept prolonging the loan agreements with OTP Bank. In December 2017, the Group received an offer of for 65.0 million UAH (£1.723 million) from Creditwest Bank Ukraine to allow both the refinancing of its loan with OTP and increase of its working capital. In February 2018, the Group met all requirements of Creditwest Bank Ukraine, signed a loan agreement and refinanced its loan with OTP moving its entire working capital facility to Creditwest Bank Ukraine.
The Group's current strategy is to further expand its export sales worldwide with a focus on Asia and Africa. CIS markets also remain strategically important for the Group not least Kazakhstan where to the Company increased its export volumes. Ukrproduct is also looking to expand domestic sales in Ukraine driven in part by the introduction of new products and rebranding. The Group continues to boost its dairy processing volumes via close cooperation with local farmers and cooperatives, thereby increasing its capacity utilization.
3. Bank Loans and Overdrafts
As at 31 December 2017 the Group has two loans: a loan from OTP Bank in the amount of 856 thousand GBP (in UAH 32,3 million) and EBRD in the amount of 6,178 thousand GBP (in EUR 6,959 thousand).
During 2017, the Group fulfilled its obligations under the EBRD loan in accordance with the agreement. The Group applied instalments of payments and in accordance with an agreement between all parties; the payment of the tranche in December was postponed to subsequent periods.
Fixed assets with a net book value of GBP 4,829 thousand at 31 December 2017 (2016: GBP 5,366 thousand) were pledged as collateral for both loans:
- assets pledged as security for the EBRD loan include property and land in Starokonstantinov, equipment for dairy production and production of hard cheese, as well as TMs. Fixed assets pledged as security total 3,403 thousand GBP. The intangible assets pledged total 213 thousand GBP;
- assets pledged as security for the for the OTP loan include property and land in Zhitomir and in Krasiliv, together with equipment for the production of processed cheese, and the Company's vehicles. Fixed assets pledged as security total 1,426 thousand GBP. Also, inventories with a net book value of GBP 318 thousand at 31 December 2017 (2016: GBP 360 thousand) were pledged as collateral for the OTP loan.
During 2017, the Group prolonged agreement with OTP Bank three times. The last tranche extension with OTP related to the 6 March 2018 loan repayment. In December, the Group received confirmation of expansion of crediting with Creditwest Bank Ukraine for the amount of 65 million UAH. Funds received would be used to settle the outstanding balance with OTP and to open additional budgeting backed by Zhiviy Kvass equipment. The loan term is 3 years, the interest rate - 18%.
In 2018, the Group fulfilled conditions of the Creditwest Bank Ukraine and in February 2018 the first Tranche from Creditwest Bank Ukraine was received and repayment of the loan balance with OTP Bank was carried out. With the refinancing of OTP Bank the pledge was transferred to Creditwest Bank Ukraine. Non-current assets located in Zhytomyr and transport were pledged as collateral for Creditwest Bank Ukraine. Also, to extend the credit line, the Company has provided equipment for production of Zhiviy Kvass.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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