REG - Ukrproduct Group Ltd - Interim Results June 2023
28/09/2023 12:00
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RNS Number : 8922N Ukrproduct Group Ltd 28 September 2023
28 September 2023
UKRPRODUCT GROUP LIMITED
("Ukrproduct", the "Company" or, together with its subsidiaries, the "Group")
UNAUDITED INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2023
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 2023.
The unaudited interim financial results for the six months ended 30 June 2023
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 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/)
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 2023 ("1H 2023") and outlook for the remainder
of 2023.
2022 Half-Year Trading Update
Ukrproduct Group's consolidated revenue amounted to £18.3 million in the
first half of 2023, the same as the half year ended 30 June 2022 ("1H 2022").
Whilst at the Group level, organic revenue growth in local currency was 19.5%,
achieved mainly by the improvement of topline drivers, including volume, mix
and price, this was impacted by negative exchange rate effects of £3.6
million. On a nominal basis, total volumes of sales were 21% higher in 1H
2023 than the prior period due to an increase in domestic demand as well as
the stabilization of exports, despite the effects of the war in Ukraine.
In the period, sales of processed cheese and processed cheese products
amounted to £12.0 million which was 17.2% higher than the 1H 2022. This was
due to the increase of export sales as well as the launch of new products in
Ukraine.
In 1H 2023, sales of spreads amounted to £2.2 million, which was 8.9% lower
than 1H 2022 due to an increase in competition. However, sales increased by
11.0% in local currency compared to 1H 2022. This was mainly due to rising
prices.
Sales of butter in the period amounted to £1.5 million which was 33.1% higher
than 1H 2022, mainly due to the recovered domestic demand and export sales.
Sales of kvass and other beverages grew by 81.3% in volume amounting to £0.8
million compared to 1H 2022. This was due to the sale of beverages covering
the whole period of 1H 2023 and active sales starting in April 2023 while in
1H 2022 sales were completely eliminated and restored in May-June 2022 due to
the beginning of war in Ukraine.
The Group's gross profit in 1H 2023 decreased by 2.3% compared to 1H 2022, to
£3.2 million. This was mainly as a result of marketing and trade marketing
campaigns in response to local competition.
In 1H 2023, the Group's administrative expenses and selling expenses increased
by 24.4% and 17.3% respectively, compared to 1H 2022. This was mainly due to
salary increases, the significant level of inflation in Ukraine in 2022-2023,
growth in marketing activities and resumption of fees for certain auxiliary
services which had been negotiated for provision on a complimentary basis last
year after the start of the full scale invasion. The major factor behind the
97.7% reduction of the Group's other operating expenses in 1H 2023 to £0.04
million was the impairment of trade receivables relating to temporary occupied
territories in 1H 2022 reflecting the direct impact of war.
EBITDA increased to £1.5 million in 1H 2023, up by 242.8%, compared with £
0.45 million in the prior period.
Finance costs in 1H 2023 grew by 68.0% year on year, to £0.39 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, the EBRD increased the
interest rate on the loan retrospectively and charged additional interest from
September 2021.
Financial position
As at 30 June 2023, Ukrproduct had net assets of £4.9 million (including cash
balances of £0.3 million) compared to £6.3 million (including cash
balances of £0.3 million) as at 30 June 2022.
For the six months ended 30 June 2023, the Group continued to be in breach of
several provisions of the loan agreement with the EBRD. The Company failed to
repay Tranche A (aggregate EUR 2.1 million principal) before the maturity date
of 1 December 2022 and has missed interest payments since 1 March 2022. In
June 2023 the EBRD notified the Company about a recalculation and an increased
interest rate in respect of the aggregate EUR 3.4 million principal and
interest of Tranche B from 1 September 2021. The Company 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.
Outlook for 2023
The development of the business in the second half of 2023 remains highly
uncertain due to the ongoing war in Ukraine. However, Ukrproduct has a
positive economic outlook for the next six months running on the back of
constant domestic demand, the stable operation of the energy system, and
improved inflation. Due to developments of the domestic market the Group
expects to increase sales slightly. Higher costs for energy and logistics will
likely require further sales price increases in the quarters to come.
Jack Rowell Alexander Slipchuk
Non-Executive Chairman Chief Executive
Officer
Ukrproduct Group
CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2023
(in thousand GBP, unless otherwise stated)
Note Six months ended Six months ended
30 June 2023 30 June 2022
£ '000 £ '000
Revenue 9 18 273 18 278
Cost of sales (15 078) (15 009)
GROSS PROFIT 3 195 3 269
Administrative expenses (689) (554)
Selling and distribution expenses (1 305) (1 113)
Other operating expenses (35) (1 543)
PROFIT FROM OPERATIONS 1 166 59
Net finance expenses (388) (231)
Net foreign exchange (loss) / gain (124) 20
PROFIT / (LOSS) BEFORE TAXATION 654 (152)
Income tax expense (1) (45)
PROFIT/ (LOSS) FOR THE SIX MONTHS 653 (197)
Attributable to:
Owners of the Parent 653 (197)
Non-controlling interests - -
Earnings per share from continuing and total operations:
Basic (in pence) 10 1.65 (0.50)
Diluted (in pence) 10 1.65 (0.50)
OTHER COMPREHENSIVE INCOME:
Items that may be subsequently reclassified to profit or loss
Currency translation differences (295) 506
OTHER COMPREHENSIVE INCOME, NET OF TAX (295) 506
TOTAL COMPREHENSIVE INCOME FOR THE SIX MONTHS 358 309
Attributable to:
Owners of the Parent 358 309
Non-controlling interests - -
Ukrproduct Group
CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2023
(in thousand GBP, unless otherwise stated)
Note As at As at As at
30 June 2023 31 December 2022 30 June 2022
£ '000 £ '000 £ '000
ASSETS
Non-current assets
Property, plant and equipment 7 454 7 916 9 926
Intangible assets 583 681 842
8 037 8 597 10 768
Current assets
Inventories 6 3 463 4 296 4 556
Trade and other receivables 7 4 740 3 073 5 528
Current taxes 172 591 120
Other financial assets 34 35 43
Cash and cash equivalents 295 403 293
8 704 8 398 10 540
TOTAL ASSETS 16 741 16 995 21 308
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
Translation reserve (15 832) (15 537) (14 481)
Revaluation reserve 5 901 6 005 6 182
Retained earnings 6 353 5 597 6 026
4 951 4 594 6 256
TOTAL EQUITY 4 951 4 594 6 256
Non-current Liabilities
Deferred tax liabilities 456 530 748
456 530 748
Current liabilities
Bank loans 5 965 6 116 6 394
Short-term payables 447 493 448
Trade and other payables 4 724 5 162 7 032
Current income tax liabilities 39 48 154
Other taxes payable 159 52 276
11 334 11 871 14 304
TOTAL LIABILITIES 11 790 12 401 15 052
TOTAL EQUITY AND LIABILITIES 16 741 16 995 21 308
Ukrproduct Group
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2023
(in thousand GBP, unless otherwise stated)
Attributable to owners of the parent
Share capital Share trasury Share premium Revaluation reserve Retained earnings Translation reserve Total Total Equity
£ '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 six months - - - (197) - (197) (197)
Currency translation differences - - - - 506 506 506
Total comprehensive income - - - (197) 506 309 309
Depreciation on revaluation of property, plant and equipment - - (166) 166 - - -
As At 30 June 2022 4 282 (315) 4 562 6 182 6 026 (14 481) 6 256 6 256
Profit for the six months - - - - (607) - (607) (607)
Currency translation differences - - - - - (1 056) (1 056) (1 056)
Total comprehensive loss - - - - (607) (1 056) (1 663) (1 663)
Depreciation on revaluation of property, plant and equipment - - - (177) 177 - - -
As At 31 December 2022 4 282 (315) 4 562 6 005 5 596 (15 537) 4 594 4 594
Profit for the six months - - - - 653 - 653 653
Currency translation differences - - - - - (295) (295) (295)
Total comprehensive income - - - - 653 (295) 358 358
Depreciation on revaluation of property, plant and equipment - - - (104) 104 - - -
As At 30 June 2023 4 282 (315) 4 562 5 901 6 353 (15 832) 4 951 4 951
Ukrproduct Group
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 JUNE 2023
(in thousand GBP, unless otherwise stated)
Six months ended Six months ended
30 June 2023 30 June 2022
£ '000 £ '000
Cash flows from operating activities
Profit / (loss) before taxation 654 (152)
Adjustments for:
Exchange difference 124 (20)
Depreciation and amortization 370 387
Provision for bad debt 40 1 435
(Reversal of) / Impairment of inventories (48) 18
Interest expense on bank loans 392 232
Operating cash flow before working capital changes 1 532 1 900
Increase in inventories 940 85
(Increase)/Decrease in trade and other receivables (1 306) 596
Increase in trade and other payables (580) (2 653)
Changes in working capital (946) (1 972)
Cash generated from operations 586 (72)
Interest received 4 1
Income tax paid (16) 33
Net cash generated from operating activities 574 (38)
Cash flows from investing activities
Purchases of property, plant and equipment and intangible assets (254) (194)
Issuance of loans - (2)
Net cash used in investing activities (254) (196)
Cash flows from financing activities
Interest paid (152) (149)
Repayments of long term borrowing (4) -
Net cash used in from financing activities (156) (149)
Net increase/(decrease) in cash and cash equivalents 164 (383)
Effect of exchange rate changes on cash and cash equivalents (272) 364
Cash and cash equivalents at the beginning of the six months 403 312
Cash and cash equivalents at the end of the six months 295 293
Ukrproduct Group
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2023
(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
Since the beginning of the full-scale military invasion of Ukraine, neither
the Group's critical facilities nor its infrastructure has suffered any
significant damage and the Group's efforts have been focused on maintaining
its operations to the full extent. The Group's business processes are
reorganized to adapt to current challenges and ensure business continuity. In
preparing these financial statements, the Directors have assessed the Group's
ability to continue as a going concern. In making this assessment, the
Directors have considered the level of debt and the facilities the Group have
had available at 30 June 2023, and the Group's forecast financial results for
the 12 months subsequent to the date of issue of these financial statements.
For the six months ended 30 June 2023, the Group continued to be in breach of
several provisions of the loan agreement with the EBRD. The Company failed to
repay Tranche A (aggregate EUR 2.1 million principal) before the maturity date
of 1 December 2022 and has missed interest payments since 1 March 2022. In
June 2023 the EBRD notified the company about a recalculation and an increased
interest rate in respect of the aggregate EUR 3.4 million principal and
interest of Tranche B from September 2021. The Company 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.
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.
Taking into account the assessment of forecast for financial results of the
next 12 months and existing risks, the Group's management believes that the
Group is able to continue its operations on a going concern basis.
Ukrproduct Group
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2023
(in thousand GBP, unless otherwise stated)
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.
The principal exchange rates used in the preparation of these condensed
consolidated interim financial statements are as follows:
Currency 30 June 2023 Average for the six months ended 31 December 2022 30 June 2022 Average for the six months ended
30 June 2023
30 June 2022
(spot rate) (spot rate) (spot rate)
UAH/GBP 46,28 45,08 44,00 35,55 37,72
UAH/USD 36,57 36,57 36,57 29,25 28,91
UAH/EUR 40,00 39,52 38,95 30,77 31,74
Ukrproduct Group
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2023
(in thousand GBP, unless otherwise stated)
4. Subsequent events
As of the date of this report, the war is ongoing in Ukraine. The Group
continues to operate. The management of the Group controls all of its
operations.
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.
Russia terminated the "Black Sea Grain Initiative" on 18 July 2023. Therefore,
the future possibilities for the Group to export goods via Ukrainian Black Sea
ports are uncertain.
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 27 September 2023
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