REG - Ukrproduct Group Ltd - Final Results and Notice of AGM
25/06/2024 07:00
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RNS Number : 6822T Ukrproduct Group Ltd 25 June 2024
25 June 2024
UKRPRODUCT GROUP LIMITED
("Ukrproduct", the "Company" or, together with its subsidiaries, the "Group")
FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2023
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 2023.
The full 2023 Annual Report and Accounts ("2023 Annual Report") has been
posted to shareholders and is available on the Company's website at
www.ukrproduct.com. (http://www.ukrproduct.com/) A notice of Annual General
Meeting ("AGM") and Proxy Form, will be shortly posted too.
It should be noted that the results and auditor's report set out below
reference notes contained in the 2023 Annual Report, which can be read in
full on the Company's website.
The AGM will be held at the 6th floor, office 36, 8 Sikorsky Street, Kyiv,
Ukraine, 04112 at 5.00 pm (Kyiv time) / 3.00 pm (London time) on 01 August
2024.
For further information contact:
Ukrproduct Group Ltd
Sergey Evlanchik, Interim Tel: +44 1534 507000
Chairman
Oleksandr Slipchuk, Chief Executive Officer www.ukrproduct.com (http://www.ukrproduct.com/)
Strand Hanson Limited
Nominated Adviser and Broker Tel: +44 20 7409 3494
Rory Murphy, Richard Johnson www.strandhanson.co.uk (http://www.strandhanson.co.uk/)
Trading
Ukrproduct Group Limited ("Ukrproduct", the "Company" or, together with its
subsidiaries, the "Group") is one of the leading Ukrainian producers and
distributors of branded dairy foods and beverages (kvass).
In the financial year ended 31 December 2023 ("FY2023"), Ukrproduct continued
to face a volatile operating environment due to the challenges of the war in
Ukraine. As in 2022, one of the Group's key objectives was to ensure the
safety of employees and maintain its operations and assets.
Ukrproduct's consolidated revenue in FY2023 increased by 8.0% in local
currency. The general growth in sales was due to a focus on the development of
key products, namely processed cheese and processed cheese products, the
development of new product categories, snacks and beverages, and the expansion
of the Group's presence in retail chains. After currency translation, revenue
decreased by 5.4% to £37.0 million year-on-year, due to the 14.1% impact of
foreign exchange rates, in particular reflecting the depreciation of the
Ukrainian hryvnia against the British pound sterling.
In the processed cheese and processed cheese product category, sales amounted
to £24.9 million, reflecting a revenue increase of 25.7% in local currency
compared with the previous year. Sales represented an increase in volume of
12.4%. This was mainly attributable to the increase in export volumes to the
Middle East, the focus of marketing campaigns on these product categories and
the development of new items.
In FY2023, butter sales amounted to £3.1 million, reflecting a revenue
increase of 3.4% in local currency compared with the previous year, although
sales represented a decline of 4.3% in volume. The Group took a flexible
approach by prioritizing key sales channels, such as exports and major
distributors. A significant increase in the purchase price of raw milk and
bulk butter in Ukraine during the second half of 2023, rising logistics costs
and strengthened market competition led to a decrease in the margins of butter
sales.
Sales of spreads decreased to £4.6 million in FY2023 compared with £5.6
million in the prior year. This constituted a decrease in sales of 6.0% in
local currency and reduction of 12.9% in volume. The decrease was principally
due to the increased competition in the market.
Sales generated from skimmed milk powder decreased significantly by 52.1% in
local currency to £1.1 million, compared with £2.5
million in the previous year. In terms of volume, skimmed milk powder sales
decreased by 43.4%, which continues the dramatic decline seen in the previous
period. Due to a significant reduction in prices for skimmed milk powder in
2023, the Group minimized its output of this product for sale in favour of
utilizing semi-processed milk protein as an ingredient in the production of
processed cheese.
Sales of kvass and beverages amounted to £1.8 million in FY2023,
corresponding to a growth of 90.2% in local currency and 42.8% in terms of
volume, in each instance compared with the previous period. The growth was due
to the revival of full sales period in FY2023 whereas in FY2022 the sales
season in key kvass sales regions was delayed till June due to the Russian
invasion of Ukraine.
In FY2023, the Group's administrative and selling expenses amounted to £4.1
million; a 0.4% increase compared to FY2022. In FY2023 the Group focused on
carrying out trade marketing activities, in particular providing discounts to
customers and consumers, rather than on advertising campaigns. As a result,
marketing costs were reduced by 51.3% compared with the previous year. The
changes in other types of expenses were mainly driven by sales dynamics and
routine business activities throughout FY2023. In contrast, in FY2022,
following the start of the Russian invasion of Ukraine, the Group was forced
to temporarily suspend or minimise some of its activities and processes.
Other operating expenses in FY2023 totaled £1.1 million (FY2022: £1.6
million), including losses from impairment of stock of supplementary products
that the Group was unable to sell for export due to the blockade of Ukrainian
Black Sea ports, as well as minor fines and some VAT losses.
The Group's operations recorded an EBITDA of £2.4 million, representing a
strong increase of 32.8% year on year. The Group's EBITDA margin improved from
4.6% to 6.5%.
Finance costs in FY2023 grew by 67.6% year on year, to £0.78 million,
primarily driven by increased interest rates and recognized additional
interest expenses for the European Bank for Reconstruction and Development
("EBRD") loan for the previous periods. In June 2023, notwithstanding the
challenging operating environment due to the war in Ukraine, the EBRD decided
to exercise its right under the loan agreement and increased the interest rate
on the loan retrospectively from September 2021.
Net profit after tax for FY2023 amounted to £0.4 million, a swing of £1.2
million compared to FY2022 (loss: £0.8m), principally driven by the
significantly lower currency translation losses, which are due to the
devaluation of the Ukrainian hryvnia against the British pound and Euro.
Financial Position
As at 31 December 2023, Ukrproduct reported net assets of £4.5 million
including cash balances of £0.4 million, compared to net assets
of £4.6 million as at 31 December 2022 and cash balances of
£0.4 million.
For the year ended 31 December 2023, the Group continued to be in breach of
several provisions of the loan agreement with the EBRD. The Group failed to
repay Tranche A (aggregate EUR 2.1 million principal, equivalent to £1.8
million) before the maturity date of 1 December 2022 and has missed interest
payments since 1 March 2022. In June 2023 the EBRD notified the Group about a
recalculation and an increased interest rate in respect of the aggregate EUR
5.7 million (equivalent to £4.9 million) principal and interest of Tranche A
and Tranche B from 1 September 2021.
The Group has been negotiating with the EBRD since June 2021 to potentially
restructure the loan repayment and active negotiations are ongoing but have
been slowed down owing to the ongoing war in Ukraine. At present, the EBRD has
taken no action to accelerate repayment of the loan. The Group resumed
repayment of interest to EBRD starting from December 2023.
In January 2024, after the period end, the Group fully repaid the previous
working capital loan of UAH 63.8 million (GBP 1.3 million) and arranged a new
facility of UAH 70.0 million (GBP 1.4 million), with the same Ukrainian bank,
for general working capital purposes. The new facility has a significantly
lower interest of 9% (against 20% on the repaid previous facility).
Outlook
The Group continues to make every effort to navigate its strategy in a very
challenging business environment, not least ensuring a stable power supply and
responding to new challenges. In 2024, the Group expects to focus on
maintaining existing production facilities, sustaining sales volumes and
ongoing improvement of operational efficiency.
Sergey Evlanchik Oleksandr Slipchuk
Interim Chairman Chief Executive Officer
Independent Auditor's Report to the Shareholders of UKRPRODUCT GROUP LIMITED
Report on the Audit of the Financial Statements
Opinion
We have audited the consolidated financial statements of Ukrproduct Group
Limited and its subsidiaries
(the "Group") which comprise the consolidated statement of comprehensive
income, the consolidated statement of financial position as at 31 December
2023, the consolidated statement of changes in equity, consolidated statement
of cash flows and notes to the financial statements including significant
accounting policies. The financial reporting framework that has been applied
in their preparation is applicable law and International Financial Reporting
Standards ('IFRS') as adopted by the United Kingdom.
In our opinion, the consolidated financial statements:
· give a true and fair view, of the state of the Group's affairs as at 31
December 2023 and of its results for the year then ended;
· have been properly prepared in accordance with IFRS as adopted by the
United Kingdom; and
· have been prepared in accordance with the requirements of the Companies
(Jersey) Law 1991.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's responsibilities for the
audit of the consolidated financial statements section of our report. We are
independent of the Group in accordance with the ethical requirements that are
relevant to our audit of the consolidated financial statements in Jersey,
including the FRC's Ethical Standard as applied to listed entities, and we
have fulfilled our ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit opinion.
An overview of the scope of our audit
During our audit planning, we determined materiality and assessed the risks of
material misstatement in the consolidated financial statements including the
consideration of where Directors made subjective judgements, for example, in
respect of the assumptions that underlie significant accounting estimates and
their assessment of future events that are inherently uncertain. We tailored
the scope of our audit in order to perform sufficient work to enable us to
provide an opinion on the consolidated financial statements as a whole taking
into account the Group, its accounting processes and controls and the industry
in which it operates.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the consolidated financial statements of
the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on the overall audit strategy; the allocation of
resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Key Audit Matter How the matter was addressed in the audit
Going Concern Key Observations
The consolidated financial statements have been prepared on a going concern Our work performed and our conclusions in respect of going concern have been
basis as discussed in note 2. The Group is in a net current liability position detailed in the 'Material uncertainty related to going concern section' of our
due to a breach of loan covenants. The net current liability, as set out in audit report.
the consolidated statement of financial position, amounted to £2.73 million
as of 31 December 2023. We included the going concern assumption as a key
audit matter given both the continuing net current liability position as well
as the ongoing Russian military action in Ukraine (Refer note 2.1 b to the
consolidated financial statements).
Risk of Fraud in Revenue Recognition
Revenue is material and an important determinant of the Group's performance
and profitability. This gives rise to inherent risk that revenue recognised is
overstated in order to present more profitable results for the year. The
Group's revenue from local and export sales of milk, dairy foods and beverages
amounted to £36.99 million, excluding the charge of bonuses. Given the
magnitude of the amount and the inherent risk of revenue overstatement, we
consider revenue recognition to be a key audit matter (Refer to note 2.2.11
& 8).
Our main audit procedures in respect of revenue recognition were as follows:
§ We obtained an understanding of the policies and procedures applied to
revenue recognition, as well as compliance therewith, including an analysis of
the effectiveness of the design and implementation of controls related to
revenue recognition employed by the Group;
§ We performed sample based tests of details over the accuracy and occurrence
of sales during the year specially responsive to the risk of fraud in revenue
occurrence;
§ We performed analytical procedures, including gross profit margin analysis
and obtained explanations for significant variances as compared to the
previous year;
§ We tested a sample of journal entries relating to income recognition by
reference to supporting documents;
§ We performed sales cut-off procedures for a sample of revenue transactions
at the year end in order to conclude on whether they were recognized in the
correct accounting period; and,
§ We reviewed the disclosures related to revenue included in the notes to the
consolidated financial statements.
Risk of Management Override of Controls
Key Observations
We did not note any material issues arising from the procedures performed in
Management is in a unique position to perpetrate fraud because of its ability this area.
to manipulate accounting records and prepare fraudulent financial statements
by overriding controls that otherwise appear to be operating effectively.
Although the level of risk of management override of controls will vary from
entity to entity, the risk is nevertheless present in all entities. Due to the Our main audit procedures in respect of Management Override of Controls were
unpredictable way in which such override could occur, it is a risk of material as follows:
misstatements due to fraud and thus a significant risk. Also, the Group has
voluminous transactions and requires complex calculations.
§ We have obtained understanding of the financial reporting process.
Risk of Non-compliance with Loan Covenants § We have reviewed opening balances and completeness of journals.
§ We have reviewed high-risk journals as part of our testing.
The Group has loans from EBRD and there is a risk that the Group doesn't meet § We have reviewed accounting estimates and potential management bias.
covenants as stated in the loan agreement. Violation of the Group's loan
covenants could have a potential material unfavourable impact to the Group.
During the review of loan agreements, we noted that there is non-compliance
with certain covenants contained within those agreements, particularly on the
missed payments of principal and interests (Refer to Note 23 to the
consolidated financial statements.)
Risk on Subsequent Events
Key Observations
Due to the ongoing Russian invasion in Ukraine, there is a risk that the Group
hasn't disclosed enough information in relation to subsequent war. We did not note any material issues arising from the procedures performed in
this area.
Our main audit procedures in respect of Non-compliance with loan covenants
were as follows:
§ We have recalculated the loan covenant and confirmed that they are
according to the terms of the loan.
§ We have reviewed the correspondences with EBRD.
§ We have checked the contract with EBRD in relation to their view and
actions on the breach of terms of the loan agreement (loan covenants) and
failure to pay interest and capital repayments.
Key Observations
We have noted a material issue arising from the procedures performed in this
area. The specific instance identified by our audit was: missed principal
and interest payments.
Our main audit procedures in respect of Subsequent events were as follows:
§ We have obtained understanding of the procedures management has established
to ensure that subsequent events are identified.
§ We enquired of management whether any subsequent events have occurred which
might affect the financial statements.
§ We have read the minutes of all relevant meetings since the end of the
reporting period to identify any relevant subsequent events, to include where
applicable:
a. general meetings;
b. management meetings;
c. board meetings.
§ We read all management and interim financial statements produced since the
end of the reporting period.
Key Observations
We did not note any material issues arising from the procedures performed in
this area.
Material uncertainty related to going concern
We draw attention to note 2.1 (b), in the consolidated financial statements,
which indicates the ongoing full-scale military invasion of Ukraine launched
by the Russian Federation, and that the Group is in breach of covenants in
respect of its loan agreement with the European Bank for Reconstruction and
Development (EBRD). These events have continued after the year end and, along
with other matters as set in note 2.1 (b) to the consolidated financial
statements, indicate that a material uncertainty exists that may cast
significant doubt on the Group's ability to continue as a going concern. Our
opinion is not modified in respect of this matter.
In auditing the consolidated financial statements, we have concluded that the
use of the going concern basis of accounting in the preparation of the
consolidated financial statements is appropriate. In assessing the
appropriateness of the going concern assumption used in preparing the
consolidated financial statements, our procedures included, amongst others:
§ Assessing the cash flow requirements of the Group over 12 months from
expected sign-off of these consolidated financial statements;
§ Understanding what forecast expenditure is committed and what could be
considered discretionary;
§ Assessing the liquidity of existing assets on the consolidated statement of
financial position that can be used to repay the Group's obligations;
§ Considering the terms of the EBRD and other bank loan and trade finance
facilities and the amount available for drawdown as well as the probability of
EBRD agreeing to restructure the facilities;
§ Considering the impact of the ongoing military conflict in Ukraine to the
Group's operations and the Group's business continuity plan, if any; and,
§ Considering potential downside scenarios and the resultant impact on
available funds.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
Our application of materiality
We define materiality as the magnitude of misstatements in the consolidated
financial statements that makes it probable that the economic decisions of a
reasonably knowledgeable person would be changed or influenced. We use
materiality to determine the scope of our audit and the nature, timing and
extent of our audit procedures and to evaluate the results of that work.
Materiality was determined as follows:
Consolidated financial statements as a whole:
Materiality was calculated at £557,262 which is approximately 1.5% of Total
Revenue. This benchmark is considered the most appropriate because, based on
our professional judgement, we considered that this is the primary measure
used by the users of the consolidated financial statements in assessing the
performance of the Group.
Communication of misstatements to the Board:
We agreed with the Directors that any misstatement above £27,863 identified
during our audit will be reported, together with any misstatement below that
threshold that, in our view, warranted reporting on qualitative grounds.
Other information
The Directors are responsible for the other information. The other information
comprises the information included in the annual report set out on page 3 to
17 other than the consolidated financial statements and our auditor's report
thereon. Our opinion on the consolidated financial statements does not cover
the other information and we do not express any form of assurance conclusion
thereon.
In connection with our audits of the consolidated financial statements, our
responsibility is to read the other information identified above when it
becomes available and, in doing so, consider whether the other information is
materially inconsistent with the consolidated financial statements, or our
knowledge obtained in the audits or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material
misstatement of the consolidated financial statements or a material
misstatement of the other information. If, based on the work we have
performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact.
We have nothing to report in this regard.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the
Companies (Jersey) Law 1991 requires us to report to you if, in our opinion:
· adequate accounting records have not been kept, or
· returns adequate for our audit have not been received from branches
not visited by us; or
· the financial statements are not in agreement with the accounting
records and returns; or
· we have not received all the information and explanations we require
for our audit.
Responsibilities of directors for the consolidated financial statements
As explained more fully in the Statement of Directors' Responsibilities on
page 17, the Directors are responsible for the preparation of the consolidated
financial statements which give a true and fair view, and for such internal
control as the Directors determine is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the consolidated financial statements, the Directors are
responsible for assessing the Group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the Group or to cease operations, or have no realistic alternative
but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements are free from material misstatement, whether due to fraud or error,
and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these consolidated financial statements.
Explanation as to what extent the audit was considered capable of detecting
irregularities, including fraud
The objectives of our audit, in respect to fraud, are; to identify and assess
the risks of material misstatement of the financial statements due to fraud;
to obtain sufficient appropriate audit evidence regarding the assessed risks
of material misstatement due to fraud, through designing and implementing
appropriate responses; and to respond appropriately to fraud or suspected
fraud identified during the audit. However, the primary responsibility for the
prevention and detection of fraud rests with both those charged with
governance of the entity and management.
Our approach was as follows:
· We obtained an understanding of the legal and regulatory frameworks
that are applicable to the Group and determined that the most significant are
those that relate to the Companies (Jersey) Law 1991 and the AIM Rules for
Companies. We also reviewed the laws and regulations applicable to the Group
that have an indirect impact on the financial statements.
· We gained an understanding of how the Group is complying with Companies
(Jersey) Law 1991 and the AIM Rules for Companies by making inquiries of
management. We corroborated our inquiries through our review of minutes of
Board of Directors meetings and the review of various correspondence examined
in the context of our audit and noted that there was no contradictory
evidence.
· We assessed the susceptibility of the Group's financial statements to
material misstatement, including how fraud might occur, by meeting with
management to understand where they considered there was susceptibility to
fraud. We also considered performance targets and their propensity to
influence management to manage earnings and revenue by overriding internal
controls. We performed specific procedures to respond to the fraud risk of
inappropriate revenue recognition. Our procedures also included testing a
risk-based sample of journal entries that may have been posted with the
intention of overriding internal controls to manipulate earnings. These
procedures were designed to provide reasonable assurance that the financial
statements were free from fraud or error.
· Based on this understanding, we designed specific appropriate audit
procedures to identify instances of non-compliance with laws and regulations.
This included making enquiries of management and those charged with governance
and obtaining additional corroborative evidence as required.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council's website at
https://www.frc.org.uk/auditorsresponsibilities.This description forms part of
our auditor's report.
Use of our report
This report is made solely to the Group's shareholders as a body, in
accordance with Article 113A of the Companies (Jersey) Law 1991. Our audit
work has been undertaken so that we might state to the Group's shareholders
those matters we are required to state to them in an auditor's report and for
no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Group and the Group's
shareholders as a body, for our audit work, for this report, or for the
opinions we have formed.
Phillip Callow
For and on behalf of Moore Stephens Audit & Assurance (Jersey) Limited
1 Waverley Place, Union Street, St Helier, Jersey, Channel Islands
Ukrproduct Group
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
Note Year ended Year ended
31 December 2023 31 December 2022
£ '000 £ '000
8 36 992 39 111
Revenue
Cost of sales 9 (30 140) (32 555)
GROSS PROFIT 6 852 6 556
Administrative expenses 9 (1 569) (1 342)
Selling and distribution expenses 9 (2 507) (2 719)
Other operating expenses 9 (1 074) (1 571)
PROFIT FROM OPERATIONS 1 702 924
Net finance expenses 11 (781) (466)
Net foreign exchange loss 10 (435) (1 113)
PROFIT/(LOSS) BEFORE TAXATION 486 (655)
Income tax 13 (96) (149)
PROFIT/(LOSS) FOR THE YEAR 390 (804)
Attributable to:
Owners of the Parent 390 (804)
Non-controlling interests - -
Earnings per share from continuing and total operations:
Basic (pence) 26 0.98 (2.03)
Diluted (pence) 26 0.98 (2.03)
OTHER COMPREHENSIVE INCOME
Items that may be subsequently reclassified to profit or loss
Currency translation differences (449) (550)
OTHER COMPREHENSIVE INCOME, NET OF TAX (449) (550)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR (59) (1 354)
Attributable to:
Owners of the Parent (59) (1 354)
Non-controlling interests - -
Ukrproduct Group
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
Note As at As at
31 December 2023 31 December 2022
£ '000 £ '000
ASSETS
Non-current assets
Property, plant and equipment 14 7 158 7 916
Intangible assets 15 501 681
7 659 8 597
Current assets
Inventories 17 2 783 4 296
Trade and other receivables 18 5 400 3 073
Current taxes 19 471 591
Other financial assets 20 38 35
Cash and cash equivalents 21 436 403
9 128 8 398
TOTAL ASSETS 16 787 16 995
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital 22 4 282 4 282
Treasury (315) (315)
shares
Share premium 23 4 562 4 562
Translation reserve 23 (15 986) (15 537)
Revaluation reserve 23 5 797 6 005
Retained earnings 6 194 5 597
TOTAL EQUITY 4 534 4 594
Non-Current Liabilities
Deferred tax liabilities 16 392 530
392 530
Current liabilities
Bank loans 24 5 777 6 116
Short-term payables 609 493
Trade and other payables 25 5 212 5 162
Current income tax liabilities 64 48
Other taxes payable 199 52
11 861 11 871
TOTAL LIABILITIES 12 253 12 401
TOTAL EQUITY AND LIABILITIES 16 787 16 995
Ukrproduct Group
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
Attributable to owners of the parent
Share capital Treasury shares Share premium Revaluation reserve Retained earnings Translation reserve Total Non-con-trolling interests Total Equity
£ '000 £ '000 £ '000 £ '000 £ '000 £ '000 £ '000 £ '000 £ '000
As At 31 December 2021 4 282 (315) 4 562 6 348 6 057 (14 987) 5 947 - 5 947
Loss for the year - - - - (804) - (804) - (804)
Currency translation differences - - - - - (550) (550) - (550)
Total comprehensive income - - - - (804) (550) (1 354) - (1 354)
Depreciation on revaluation of property, plant and equipment - - - (343) 343 - - - -
As At 31 December 2022 4 282 (315) 4 562 6 005 5 596 (15 537) 4 593 - 4 593
Profit for the year - - - - 390 - 390 - 390
Currency translation differences - - - - - (449) (449) - (449)
Total comprehensive income - - - - 390 (449) (59) - (59)
Depreciation on revaluation of property, plant and equipment - - - (208) 208 - - - -
As At 31 December 2023 4 282 (315) 4 562 5 797 6 194 (15 986) 4 534 - 4 534
Ukrproduct Group
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
Note Year ended Year ended
31 December 2023 31 December 2022
£ '000 £ '000
Cash flows from operating activities
Profit/(Loss) before taxation 486 (655)
Adjustments for:
Exchange differences 10 435 1 113
Depreciation and amortization 9 697 882
Write off of receivables/payables 9 58 1 065
Impairment of inventories 9 627 121
Interest income 11 (6) (6)
Interest expense on bank loans 11 787 471
Operation cash flow before working capital changes 3 084 2 991
Decrease in inventories 945 94
Decrease / (Increase) in trade and other receivables (2 245) 3 116
Decrease in trade and other payables (366) (4 986)
Changes in working capital (1 666) (1 776)
Cash generated from operations 1 418 1 215
Interest received 6 6
Income tax paid (106) (201)
Net cash generated from operating activities 1 318 1 020
Cash flows from investing activities
Purchases of property, plant and equipment and intangible assets (582) (409)
Repayments of loans issued (6) (2)
Net cash used in investing activities (588) (411)
Cash flows from financing activities
Interest paid 24 (312) (292)
Repayments of long term borrowing 24 (4) -
Net cash used in financing activities (316) (292)
Net increase in cash and cash equivalents 414 317
Effect of exchange rate changes on cash and cash equivalents (381) (226)
Net increase in cash and cash equivalents including effect of exchange rate 33 91
changes on cash and cash equivalents
Cash and cash equivalents at the beginning of the year 403 312
Cash and cash equivalents at the end of the year 21 436 403
These consolidated financial statements were approved and authorised for issue
by the Board of Directors on June 24 2024 and were signed on its behalf by Mr.
Oleksandr 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 2023 statutory financial
statements. Those financial statements contain no statement under section
113B of the Companies (Jersey) Law 2011. The financial statements for 2023
will be delivered to the Registrar of Companies after adoption at the
Company's Annual General Meeting.
EXTRACTS FROM NOTES TO CONSOLIDATED FINANCIAL STATEMENT
The 2023 Annual Report has been posted to shareholders and is available on the
Company's website at www.ukrproduct.com. Extracts from some Notes to
Consolidated Financial statements are presented below.
(http://www.ukrproduct.com/)
1. Basis of preparation
The consolidated financial statements have been prepared on a historical cost
basis, except for significant items of property, plant and equipment which
have been measured using the revaluation model. 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
At the time of publication of this report the war is ongoing and the
significant general uncertainties inherent to the continued war, which began
on 24 February 2022, remain. The Group's management has analyzed the
observable impact of the war on its business as described below, and has taken
the following actions in response to the current situation:
- For the period after the Russian invasion of Ukraine more than 50 employees
joined Ukrainian military forces and territorial defense. Personnel of
production facilities and central office remained in their working area or
worked remotely. While personnel-related challenges have been manageable so
far, the anticipated escalation of conscription efforts in Ukraine heightens
operational risks for the Group.
- No critical assets preventing the Group from continuing operations are
damaged or located in the uncontrolled territories. The Group optimized
utilization of production facilities to meet domestic demand and export
orders.
- All of the Group's inventories are in good condition and are in safe
storage.
- Export sales flow via Ukrainian ports was reduced significantly. Alternative
export routes are expanded in length and significantly more expensive in
comparison with sea ones. Black Sea ports in Ukraine remain blocked for export
activities.
- Due to the constant Russian shelling targeting vital Ukrainian energy
infrastructure, the Group has mitigated the possible disruptions to its
operations, by equipping its key assets with diesel generators.
The Group repaid a short-term loan of UAH 63.8 million (GBP 1.3 million) and
signed a new facility with a Ukrainian bank for working capital needs in the
amount UAH 70.0 million (GBP 1.4 million) in January 2024.
For the year ended 31 December 2023, the Group continued to be in breach of
several provisions of the loan agreement with the EBRD. The Group failed to
repay Tranche A (aggregate EUR 2.1 million principal, equivalent to £1.8
million) before the maturity date of 1 December 2022 and has missed interest
payments since 1 March 2022. In June 2023 the EBRD notified the Group about a
recalculation and an increased interest rate in respect of the aggregate EUR
5.7 million (equivalent to £4.9 million) principal and interest of Tranche A
and Tranche B from 1 September 2021.
The Group has been negotiating with the EBRD since June 2021 to potentially
restructure the loan repayment and negotiations are ongoing. At present, the
EBRD has taken no action to accelerate repayment of the loan. The Group
reverted to the payment of interest for the long-term credit from the EBRD
starting from December 2023.
Management acknowledges that future development of military actions and their
duration represent a single source of material uncertainty which may cast
significant doubt about the Group's ability to continue as a going concern
and, therefore, the Group may be unable to realize its assets and discharge
its liabilities in the normal course of business. Despite the single material
uncertainty relating to the war in Ukraine, management is continuing to take
actions to minimize the impact to the Group and thus believes that the
application of the going concern assumption for the preparation of these
consolidated financial statements is appropriate.
3. Bank loans
As at 31 December 2023 the Group has two loans: the loan from Creditwest Bank
in the amount of GBP 1.314 thousand (in UAH 63.684 million) and the loan from
the EBRD in the amount
of GBP 4.463
thousand (in EUR 5.127 thousand).
For the year ended 31 December 2023, the Group continued to be in breach of
several provisions of the loan agreement with the EBRD. The Group failed to
repay Tranche A (aggregate EUR 2.1 million principal, equivalent to £1.8
million) before the maturity date of 1 December 2022 and has missed interest
payments since 1 March 2022. In June 2023 the EBRD notified the Group about a
recalculation and an increased interest rate in respect of the aggregate EUR
5.7 million (equivalent to £4.9 million) principal and interest of Tranche A
and Tranche B from 1 September 2021.
Fixed assets with a net book value of GBP 2.330 thousand at 31 December 2023
(2022: GBP 2.446 thousand) were pledged as collateral for loan.
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 trademarks.
Bank Currency Type Opening date Termination date Interest rate Limit As At 31 December 2023 As at 31 December 2022
£ '000 £ '000 £ '000
EBRD EUR Loan 31.03.2011 01.12.2024 1% - 10.975% 7 225 4 463 4 665
Creditwest Bank UAH Credit line 05.02.2018 05.02.2024 20% 1 341 1 314 1 451
Total 5 777 6 116
The average interest rate as at 31 December 2023 was 13.6% (2022: 7.7%).
4. SUBSEQUENT EVENTS
At the time of publication of the annual report the war, which began on 24
February 2022, is ongoing. The Group continues to operate. The management of
the Group controls all its operations.
The Group repaid the short-term loan of UAH 63.8 million (GBP 1.3 million) and
signed a new facility with a Ukrainian bank for working capital needs in the
amount of UAH 70.0 million (GBP 1.4 million) in January 2024.
As at 31 December 2023 the Group had been in breach of loan covenants with
EBRD. Ukrproduct has been in negotiations with the EBRD to potentially
restructure the loan repayment schedule since June 2021. The negotiations with
EBRD are ongoing.
In February 2024 Linkstar Limited, subsidiary of the Company, started the
procedure of strike-off.
As of 19 June 2024 Jack Rowell has retired from the Board following a 19 year
tenure as Chairman. After Jack Rowell retired from the Board Sergey Evlanchik
agreed to become Interim Chairman on a temporary basis, in addition to his
role as Executive Director of Ukrproduct
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