REG - Ukrproduct Group Ltd - Interim results 2017 <Origin Href="QuoteRef">UKR.L</Origin>

UkrproductAnnouncement

28/09/2017 16:51

RNS Number : 1528S
Ukrproduct Group Ltd
28 September 2017
FOR IMMEDIATE RELEASE September 28, 2017
UKRPRODUCT ANNOUNCESUNAUDITED INTERIMFINANCIAL RESULTS FOR THE SIX MONTHSENDED 30 JUNE 2017
Kyiv,Ukraine-September28,2017-UkrproductGroupLimited("Ukrproduct", "UPG"orthe "Group")(AIM:UKR),oneoftheleadingUkrainianproducersanddistributorsofbrandeddairy foodsandbeverages(kvass),todayannouncesits unaudited interim consolidatedIFRSfinancial results forthe sixmonthsended 30 June2017.
KEYFIGURES
(Figuresinbracketsareforthesixmonthsendedandasat30June2016whenthe exchange rate was 36.61 UAH / GBP compared to 33.68 UAH /GBP in this reporting period)
Total revenues increased by 82% yearonyeartoGBP14.9m(GBP8.2m).
InUkrainianHryvna this represents an increase of67.8%.
Grossprofitmarginincreasedto 11.4%(9.2%) resulting from agrossprofitincreaseof 124.4%toGBP1.7m(GBP0.8m). InUkrainian Hryvna this represents an increase of 107.1%.
Kvassrevenueshaveincreasedby30.2%yearonyeartoGBP0.5m(GBP0.4m) withgross profit in this area also increasingby 20.8%year-on-year.
SkimmedMilkPowder(SMP)revenueshaveincreasedby127.2%toGBP4.1million(GBP1.8m), however thegross profit in this area decreasedtoGBP -0.6m(GBP-0.1m).
EBITDAincreased toGBP696 k(GBP-16 k) year on year.
Operating profitamountedto GBP 408 k(lossofGBP-220 k).
Thenegativeeffect ofcurrency exchangedifferences amountedtoGBP0.2million(GBP 0.3m).
The cash balanceas at June30, 2017 stood at GBP 237 k(GBP277 k).
CEO's REPORT
The business environment improved overall in the Ukraine as GDP increased by several points. Consumers became somewhat more positive as minimum wages were increased. 
The dairy market place continues to be competitive. 
Trading
Volumes & revenues increased substantially over the same period in 2016. 
Branded sales improved overall, with the main categories of packaged butter improving and processed cheese sales leading the way. Hard cheese & spreads sales have remained consistent. Gross margins have more than doubled given the volumes & seasonal falling milk prices. Private label sales fell as low margin business was reduced. The kvass beverage sales improved, helped by a new cider product. 
Export sales were even more buoyant given impetus by the exchange rate. Butter sales improved tenfold in volume & gross margin. 
SMP continues to be a negative given low prices worldwide. The spray drying facility has been utilised for contract processing. Sales have improved & delivered a very strong profit contribution of 250k. 
Finances
In the half year to June 2017 as stated, sales revenues increased substantially over last year. Gross margins advanced by over 2%. 
EBITDA improved to 4.8% from negative. This led to profit from operations of 408k (220k loss). After finance charges & tax, profit stood at 234k. A negative exchange difference of 230k leaves a net profit of 4k (1,098k loss). 
The move into profit was accompanied by a net increase in cash of 240k. 
Repayments of the EBRD loan have commenced on schedule. 
Outlook
The turnaround to a profit & related positive cash flow is encouraging. UPG has needed to reset its business in a competitive market place. This is a continuing process. UPG will seek to sustain operational improvement via a strategy of focusing on cash production, operating efficiency & building profitable sales with a competitive product/service offering. 
***
For further information contact: 
Ukrproduct GroupLtd  Tel:+380 44 232 9602
Jack Rowell, Non-Executive Chairman www.ukrproduct.com
Alexander Slipchuk, Chief ExecutiveOfficer
ZAICorporate FinanceLtd Tel:+44 20 7060 2220
Nominated Adviser andBroker www.zaicf.com
John Treacy
Thisannouncementcontainsinformationwhichwaspreviouslyinsideinformationforthepurposesof
Article7 of the Market Abuse RegulationEURegulation596/2014.
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 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. The Group reported total assets of approximately GBP 13.0 million as at December 31, 2016 and consolidated revenues of approximately GBP 20.2 million for the twelve months ended December 31, 2016. Ukrproduct`s securities are traded under the symbol "UKR" on AIM, a market operated by the London Stock Exchange.
Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of the Group. You can identify forward looking statements by terms such as `expect,` `believe,` `anticipate,` `estimate,` `intend,` `will,` `could,` `may` or `might"` the negative of such terms or other similar expressions. These statements are only predictions and they may differ materially from the actual events or results. We do not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in such projections or forward-looking statements, including, among others, general economic conditions, our competitive environment, risks associated with operating in Ukraine, rapid technological and market change in our industry, as well as many other risks specifically related to the Group and its operations.
The information contained within this announcement is considered to be inside information prior to its release as defined in Article 7 of the Market Abuse Regulation No. 596-2014 and is disclosed in accordance with the Company`s obligations under Article 17 of those Regulations
UKRPRODUCT GROUP LIMITED
UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE PERIOD ENDED 30 JUNE 2017 AND 2016
(in thousand GBP, unless otherwise stated)
Six months ended
Six months ended
30 June 2017
30 June 2016
 '000
 '000
Revenue
14 910 
8 192 
including of branded and SMP products
13 637 
7 642 
Cost of sales
(13 216)
(7 436)
Gross profit
1 694 
756 
Administrative expenses
(482)
(388)
Selling and distribution expenses
(716)
(554)
Other operating income/ expenses, net
(88)
(34)
Profit from operations
408 
(220)
Finance expense, net
(220)
(512)
Effect of foreign currency translation 
(230)
(346)
Profit before taxation
(42)
(1 078)
Income tax expense
46 
(20)
Profit for the Six months
4 
(1 098)
Attributable to:
Equity holders of the Parent
4 
(1 098)
Non-controlling interest
- 
- 
4 
(1 098)
Earnings per share:
Basic
0,01 
(2,77)
Diluted
0,01 
(2,77)
UKRPRODUCT GROUP LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 30 JUNE 2017 AND 2016
(in thousand GBP, unless otherwise stated)
Six months ended
Six months ended
30 June 2017
30 June 2016
 '000
 '000
Profit for the Six months
4 
(1 098)
Other comprehensive income
Exchange differences on translation to the presentation currency
(226)
233 
Other comprehensive income for the Six months, net of tax
(226)
233 
Total comprehensive income for the Six months, net of tax
(222)
(865)
Attributable to:
Equity holders of the Parent
(222)
(865)
Non-controlling interests
- 
- 
(222)
(865)
UKRPRODUCT GROUP LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2017 AND 31 DECEMBER 2016 AND 30 JUNE 2016
(in thousand GBP, unless otherwise stated)
As at
As at
30 June 2017
31 December 2016
 '000
 '000
ASSETS
Non-current assets
Property, plant and equipment
7 166 
7 511 
Intangible assets
592 
656 
Deferred tax assets
1 
- 
Total non-current assets
7 759 
8 167 
Current assets
Inventories
2 375 
1 855 
Trade and other receivables
2 779 
2 507 
Current taxes
473 
230 
Other financial assets
32 
18 
Cash and cash equivalents
237 
175 
Total current assets
5 896 
4 785 
TOTAL ASSETS
13 655 
12 952 
Equity and liabilities
Equity attributable to equity holders
Share capital
3 967 
3 967 
Other reserves
(6 600)
(6 284)
Retained earnings
4 521 
4 427 
Total equity attributable to equity holders of the parent
1 888 
2 110 
Non-controlling interest
- 
- 
Total equity
1 888 
2 110 
Liabilities
Non-Current Liabilities
Bank borrowings
5 815 
- 
Long-term payables
476 
441 
Deferred tax liabilities
308 
363 
Total Non Current Liabilities
6 599 
804 
Current Liabilities
Bank borrowings
1 350 
7 162 
Trade and other payables
3 774 
2 854 
Current income tax liabilities
16 
10 
Other taxes payable
28 
12 
Total Current Liabilities
5 168 
10 038 
TOTAL LIABILITIES AND EQUITY
13 655 
12 952 
- 
- 
UKRPRODUCT GROUP LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED 30 JUNE 2017 AND 2016
(in thousand GBP, unless otherwise stated)
Six months ended
Six months ended
30 June 2017
30 June 2016
 '000
 '000
Cash flows from operating activities
Profit/(Loss) before taxation for the six months
(42)
(1 078)
Adjustments for:
Exchange difference
230 
346 
Depreciation and amortisation
288 
206 
Loss of disposal of non-current assets
- 
5 
Impairment of trade receivables
5 
31 
Disposal of subsidiaries
- 
(3)
Impairment of inventories
79 
54 
Interest income
- 
- 
Interest expense
220 
512 
Increase of inventories
(441)
(941)
Increase in trade and other receivables
(520)
(956)
Increase in trade and other payables
1 012 
2 143 
Cash generated from operations
831 
319 
Interest received
- 
- 
Income tax paid
(6)
(8)
Net cash generated by operating activities
825 
311 
Cash flows from investing activities
Payments for property, plant and equipment
(41)
(77)
Proceeds from sale of property, plant and equipment
1 
9 
Repayments / (proceeds) from loans issued
(15)
(8)
Net cash used in investing activities
(55)
(76)
Cash flows from financing activities
Interest paid
(185)
(182)
Net proceeds / (repayments) from short term borrowing
- 
(59)
Repayments of investment borrowing 
(176)
- 
Net cash used in financing activities
(361)
(241)
Net (decrease) / increase in cash and cash equivalents
409 
(6)
Effect of exchange rate changes
on cash and cash equivalents
(348)
190 
Cash and cash equivalents at the beginning of the six months
175
93
Cash and cash equivalents at the end of the six months
237 
277 
- 
UKRPRODUCT GROUP LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 JUNE 2017 AND 2016
(in thousand GBP, unless otherwise stated)
Attributable to equity holders
Share capital 
Share premium 
Merger reserve
Revaluation reserve
Retained earnings
Translation reserve
 '000
 '000
 '000
 '000
 '000
 '000
As at 1 January 2016
3 967 
4 562 
- 
4 192 
5 654 
(15 294)
Loss for the six months
(1 098)
Other comprehensive income
(2)
235 
Total comprehensive income
- 
(2)
- 
- 
(1 098)
235 
Depreciation on revaluation
of non current assets
(83)
83 
Reduction of revaluation reserve
(7)
7 
As at 30 June 2016
3 967 
4 560 
- 
4 102 
4 646 
(15 059)
Profit for the six months
(386)
Other comprehensive income
2 
278 
Total comprehensive income
- 
2 
- 
- 
(386)
278 
Depreciation on revaluation
of non current assets
(165)
165 
Reduction of revaluation reserve
(2)
2 
As at 31 December 2016
3 967 
4 562 
- 
3 935 
4 427 
(14 781)
Profit for the six months
4 
Other comprehensive income
1 
- 
(227)
Total comprehensive income
- 
1 
- 
- 
4 
(227)
Depreciation on revaluation
of non current assets
(90)
90 
Reduction of revaluation reserve
- 
- 
Reclassified equity items
- 
- 
As at 30 June 2017
3 967 
4 563 
- 
3 845 
4 521 
(15 008)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 1. Basis of preparation  
     
 The unaudited condensed consolidated financial statements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting.
 The interim financial statements are unaudited but have been reviewed by the auditors.
 The unaudited condensed consolidated financial statements have been prepared under the historical cost convention, except for the revaluation of certain properties.
 The same accounting policies, presentation and methods of computation have been followed in this unaudited condensed consolidated financial statements as were applied in the preparation of the Group's financial statements for the year ended 31 December 2016.
 The preparation of the unaudited condensed consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from those estimates.
 The comparatives for the six months ended 30 June 2016 are extracted from the Group's consolidated financial statements for the year ended 31 December 2016. The auditor's report for those accounts was unqualified, but did include references to an emphasis of matter in respect of going concern due to the Group incurring a loss during the year as well as the uncertainty surrounding the breach of loan agreement convenants with the European Bank for Reconstruction and Development (the "EBRD") and the maturity of the external financing arrangements with OTP Bank falling due on 9 September 2017. 
 Going concern
 The unaudited condensed consolidated financial statements have been prepared on a going concern basis which assumes that the Group will be able to meet its liabilities as they fall due, for the foreseeable future.
The Group earned profit of 4 thousand GBP for the six months ended 30 June 2017. This is primarily due to increasing world prices for butter and increases in the volume of milk produced.
Despite the negative economic conditions in Ukraine the Group signed new terms in respect of the loan with EBRD with the loan being divided into Tranche A, with a maturity date 1 December 2022 and interest being payable at a margin of 5% over EURIBOR per annum, and Tranche B, with a maturity date 1 December 2024 and interest being payable at the higher of EURIBOR or 1% per annum upto 1 December 2022 and at a margin of 5% over EURIBOR per annum thereafter. Despite loan repayments being made as scheduled, the Group breached financial covenants as at 30 June 2017. The Board notified EBRD in advance of covenant breaches of the Loan and EBRD provided waivers in respect of the breached covenants dated 30 June 2017. The Group has also agreed an extension to the loan agreement with OTP bank for a further three months with the maturity date being 8 December 2017. It is management's intention to revise the terms of this loan prior to this date.
Based on the existence of these conditions, the condensed consolidated financial statements have been prepared on a going concern basis, because management believes that it has employed sufficient and appropriate measures to underpin its cost cutting strategy including but not limited to: increasing volume of export sales and full production capacity.
 2. Earnings per share   
 Basic earnings per share have been calculated by dividing net loss/profit attributable to the ordinary shareholders (loss/profit for the year) by the weighted average number of shares in issue.
 
Six months ended
Six months ended
30 June 2017
30 June 2016
Net (loss) / profit attributable to ordinary shareholders, '000
 4 
(1 098)
Weighted number of ordinary shares in issue 
39 673 050 
39 673 050 
Basic earnings per share, pence
 0,01 
 (2,77)
Diluted average number of shares
39 673 050 
39 629 619 
Diluted earnings per share, pence
 0,01 
 (2,77)
 
 3. Approval of interim financial statements  
 
 The unaudited condensed consolidated financial statements were approved by the board of directors on 29 September 2017. A copy will shortly be available on the Company's website at www.ukrproduct.com.
 
 

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The company news service from the London Stock Exchange
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