REG - Ukrproduct Group Ltd - Unaudited Interim Results
30/09/2022 07:01
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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 MONTHS ENDED 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 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 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 £18.3
million while Gross profit increased by 63.6% to £3.3 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 £1.2 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 £0.4 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 £1.6 million.
The consolidated net loss of Ukrproduct for 1H 2022 amounted to £0.2 million
compared with a net profit of £0.2 million in 1H 2021.
Financial position
As at 30 June 2022, Ukrproduct had net assets of £6.3 million compared to
£5.7 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 MONTHS ENDED 30 JUNE 2022
(in thousand GBP, unless otherwise stated)
Note Six months ended Six months ended
30 June 2022 30 June 2021
£ '000 £ '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 2022
(in thousand GBP, unless otherwise stated)
Note As at As at As at
30 June 2022 31 December 2021 30 June 2021
£ '000 £ '000 £ '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
10 540 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
Translation reserve (14 481) (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 CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2022
(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 2020 4 282 (315) 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 June 2021 4 282 (315) 4 562 6 715 5 403 (14 962) 5 685 5 685
Profit for the six months - - - 287 - 287 287
Currency translation differences - - - - (25) (25) (25)
Total comprehensive loss - - - 287 (25) 262 262
Depreciation on revaluation of property, plant and equipment - - (367) 367 - - -
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) 45 262 6 182 6 026 (14 481) 6 256 6 256
Ukrproduct Group
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 JUNE 2022
(in thousand GBP, unless otherwise stated)
Six months ended Six months ended
30 June 2022 30 June 2021
£ '000 £ '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 1 900 664
Increase in inventories 85 1 390
Increase/Decrease in trade and other receivables 596 (1 128)
Increase in trade and other payables (2 653) (366)
Changes in working capital (1 972) (104)
Cash generated from operations (72) 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 2022
(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. The 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 plants 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 2022 Average for the six months ended 31 December 2021 30 June 2021 Average for the six months ended
30 June 2022
30 June 2021
(spot rate) (spot rate) (spot rate)
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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