TIDMUKR
RNS Number : 3519R
Ukrproduct Group Ltd
29 June 2020
29 June 2020
UKRPRODUCT GROUP LIMITED
("Ukrproduct", the "Company" or, together with its subsidiaries,
the "Group")
FINAL RESULTS FOR THE YEARED 31 DECEMBER 2019
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 2019.
Copies of the 2019 Annual Report and Accounts, will shortly be
posted to shareholders and will be available on the Company's
website at www.ukrproduct.com . In addition, a Notice of Annual
General Meeting ("AGM"), along with a Proxy Form, will shortly be
posted to shareholders and is available at the Company's website at
www.ukrproduct.com .
The AGM will be held at 39-41 Shota Rustaveli Street, 01033
Kyiv, Ukraine at 6.00 pm (Kyiv time) / 4.00 pm (London time) on 30
July 2020.
For further information contact:
Ukrproduct Group Ltd
Jack Rowell, Non-Executive Chairman Tel: +44 1534 814814
Alexander Slipchuk, Chief Executive www.ukrproduct.com
Officer
Strand Hanson Limited
Nominated Adviser and Broker Tel: +44 20 7409 3494
Rory Murphy, James Dance, Jack Botros www.strandhanson.co.uk
The information contained within this announcement is deemed by
the Company to constitute inside information as set out in 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 Statement
Trading
Ukrproduct Group Ltd ("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).
The Ukrainian economy performed robustly during the year ended
31 December 2019 ("FY 2019"), reporting GDP growth of over 2% for
the year, which included growth in excess of 4% in Q4. Whilst the
strengthening of the hryvnia (UAH) during 2019 had a noticeable
negative impact on Ukrainian exports, it increased the purchasing
power of the population. Due to the growth of consumer incomes,
retail sales increased significantly, with Q3 and Q4 showing
greater than 10% year on year growth. As a result, the Group`s
operating performance exceeded expectations, as announced on 19
March 2020.
In FY 2019, the Group reports improved revenues by 35% up to
approximately GBP50.0 million (approximately UAH 1.6 billion)
compared with revenues of GBP36.9 million (approximately UAH 1.3
billion) in FY 2018. Gross profit increased by 50% up to GBP4.73
million (approximately UAH 156 million) compared with gross profit
of GBP3.18 million (approximately UAH 105 million) in FY 2018, with
dairy products and beverages showing strong performances in
particular.
Operating profit increased by 684% to approximately GBP1.49
million (approximately UAH 49 million) in FY 2019, compared with an
operating profit of approximately GBP0.19 million (approximately
UAH 6.2 million) in FY 2018.
Overall, for FY 2019, the Company reports net profit of
approximately GBP2.0 million (approximately UAH 66.9 million)
compared to a net profit of approximately GBP0.1 million
(approximately UAH 2.7 million) in FY 2018, which includes a net
foreign exchange gain of GBP1.08 million (approximately UAH 37
million) , compared to GBP0.4 million (approximately UAH 15.1
million) in FY 2018.
Gross margins improved as a result of higher prices for skimmed
milk powder and the Group's ongoing pursuit of cost efficiencies.
Such cost efficiencies helped offset inflationary wage
pressures.
Financial Position
As at 31 December 2019, Ukrproduct reports net assets of
approximately GBP3.2 million (approximately UAH 10 million)
compared to approximately GBP1.0 million (approximately UAH 35.13
million) as at 31 December 2018, including cash balances of
approximately GBP0.23 million (approximately UAH 8 million)
compared to GBP0.2 million (approximately UAH 6.4 million).
During FY 2019, the Group continued to breach a loan covenant in
relation to the EBRD debt. However, the Company continued to settle
certain amounts to EBRD according to an agreed schedule. The
Directors are confident that EBRD will not demand accelerated
repayment of the loan due to breach of covenants.
Outlook
Whilst the Company plans to consolidate and build on the
progress achieved in FY 2019 with regard to profitability, with
trading in Q1 2020 in line with the Board's expectations, the
negative impact that COVID-19 is likely to have on consumer
spending and the Group's performance is difficult to quantify and
predict at this stage. The Company will provide any necessary
updates via regulatory announcements as and when appropriate.
Jack Rowell Alexander Slipchuk
Non-Executive Chairman Chief Executive Officer
26 June 2020 26 June 2020
Ukrproduct Group
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2019
(in thousand GBP, unless otherwise stated)
Y ear ended Y ear ended
---------------------------------------------
31 December 31 December
201 9 201 8
GBP '000 GBP '000
---------------------------------------------- ------------ ------------
Revenue 49 961 36 928
Cost of sales (45 233) (33 751)
------------ ------------
GROSS PROFIT 4 728 3 177
Administrative expenses (1 137) (1 061)
Selling and distribution expenses (2 175) (1 799)
Other operating expenses 74 (131)
------------ ------------
PROFIT FROM OPERATIONS 1 490 186
Net finance expenses (578) (494)
Net foreign exchange gain (loss) 1 081 398
------------ ------------
PROFIT / (LOSS) BEFORE TAXATION 1 993 90
Income tax expense 38 -
------------ ------------
PROFIT / (LOSS) FOR THE YEAR 2 031 90
============ ============
Attributable to:
Owners of the Parent 2 031 90
Non-controlling interests - -
OTHER COMPREHENSIVE INCOME:
Items that may be subsequently reclassified
to profit or loss
Currency translation differences 165 (8)
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 165 (8)
------------ ------------
TOTAL COMPREHENSIVE INCOME FOR THE
YEAR 2 196 82
============ ============
Attributable to:
Owners of the Parent 2 196 82
Non-controlling interests - -
Earnings per share from continuing
and total operations:
Basic (pence) 5,12 0,23
Diluted (pence) 5,12 0,23
Ukrproduct Group
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2019
(in thousand GBP, unless otherwise stated)----
As at As at
-------------------------------
31 December 31 December
2019 2018
GBP '000 GBP '000
------------------------------- ------------ ------------
ASSETS
Non-current assets
Property, plant and equipment 6 994 6 420
Intangible assets 493 524
------------ ------------
7 487 6 944
Current assets
Inventories 5 071 3 735
Trade and other receivables 7 257 3 156
Current taxes 310 349
Other financial assets 31 24
Cash and cash equivalents 231 181
------------ ------------
12 900 7 445
------------ ------------
TOTAL ASSETS 20 387 14 389
============ ============
EQUITY AND LIABILITIES
Equity attributable to owners
of the parent
Share capital 3 967 3 967
Share premium 4 562 4 562
(14 73 7
Translation reserve ) (14 902)
Revaluation reserve 3 437 3 619
Retained earnings 5 931 3 718
------------ ------------
3 160 964
Non-controlling interests - -
------------ ------------
TOTAL EQUITY 3 160 964
Non-Current Liabilities
Bank loans - 5 208
Long-term payables - 467
Liabilities of rent assets 68 -
Deferred tax liabilities 242 274
------------ ------------
310 5 949
Current liabilities
Bank loans 7 213 2 455
Short-term payables 441 -
Trade and other payables 9 245 5 008
Other taxes payable 18 13
------------ ------------
16 917 7 476
------------ ------------
TOTAL LIABILITIES 17 227 13 425
------------ ------------
TOTAL EQUITY AND LIABILITIES 20 387 14 389
============ ============
Ukrproduct Group
CONSOLIDATED STATEMENT OF C HANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2019
(in thousand GBP, unless otherwise stated)
Attributable to owners of the parent Total Non-con-trolling Total
interests Equity
Share Share Revaluation Retained Translation
capital premium reserve earnings reserve
------------------- --------- --------- ------------ ---------- ------------ ------ ----------------- --------
GBP GBP '000 GBP '000 GBP '000 GBP '00 GBP GBP '000 GBP
'000 0 '000 '000
------------------- --------- --------- ------------ ---------- ------------ ------ ----------------- --------
As At 1 January
2018 3 967 4 562 3 769 3 478 (14 894) 882 - 882
Profit for
the year - - - 90 - 90 - 90
Other
comprehensive
income
Currency
translation
differences - - - - (8) (8) - (8)
--------- --------- ------------ ---------- ------------ ------ ----------------- --------
Total
comprehensive
income - - - 90 (8) 82 - 82
Depreciation
on revaluation
of property,
plant and
equipment - - (150) 150 - - - -
--------- --------- ------------ ---------- ------------ ------ ----------------- --------
As At 31 December
2018 3 967 4 562 3 619 3 718 (14 902) 964 - 964
========= ========= ============ ========== ============ ====== ================= ========
Profit for
the year - - - 2 031 - 2 031 - 2 031
Other
comprehensive
income
Currency
translation
differences - - - - 165 165 - 165
--------- --------- ------------ ---------- ------------ ------ ----------------- --------
Total
comprehensive
income - - - 2 031 165 2 196 2 196
Depreciation
on revaluation
of property,
plant and
equipment - - (182) 182 - - - -
--------- --------- ------------ ---------- ------------ ------ ----------------- --------
As At 31 December
2019 3 967 4 562 3 437 5 931 (14 737) 3 160 - 3 160
========= ========= ============ ========== ============ ====== ================= ========
Ukrproduct Group
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2019
(in thousand GBP, unless otherwise stated)
Y ear ended Y ear ended
-----------------------------------------
31 December 31 December
201 9 201 8
GBP '000 GBP '000
----------------------------------------- ------------ --------------
Cash flows from operating activities
Gain before taxation 1 993 90
Adjustments for:
Exchange difference (1 081) (398)
Depreciation and amortisation 636 523
Loss on disposal of non-current
assets 7 4
Write off of receivables/payables (118) 21
Impairment of inventories (28) 72
Interest income (1) -
Interest expense on bank loans 579 494
------------ --------------
Operation cash flow before working
capital changes 1 987 806
Increase in inventories (1 309) (1 380)
Increase in trade and other receivables (3 973) (1 096)
Increase in trade and other payables 4 210 1 437
------------ --------------
Changes in working capital (1 072) (1 039)
------------ --------------
Cash generated from/(used in) operating
activities 915 (233)
Interest received 1 2
Income tax paid 2 1
------------ --------------
Net cash generated from/(used in)
operating activities 918 (230)
Cash flows from investing activities
Purchases of property, plant and
equipment and intangible assets (2 9 7) (181)
Proceeds from sale of property, 28 -
plant and equipment
Repayments of loans issued (3) 7
------------ --------------
Net cash used in investing activities (2 7 2) (174)
Cash flows from financing activities
Interest paid (530) (421)
Decrease in short term borrowing (21) 901
Repayments of long term borrowing (347) (459)
------------ --------------
Net cash generated from/(used in)
financing activities (898) 21
Decrease in cash and cash equivalents (252) (383)
Effect of exchange rate changes
on cash and cash equivalents 30 2 68
------------ --------------
Cash and cash equivalents at the
beginning of the year 181 496
Cash and cash equivalents at the
end of the year 231 181
============ ==============
These consolidated financial statements were approved and
authorised for issue by the Board of Directors on 26
June 2020 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 2019 statutory financial statements. It contained no
statement under section 113B of the Companies (Jersey) Law 2011.
The financial statements for 2019 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 significant items of property,
plant and equipment which have been measured using revaluation
model. The consolidated financial statements are presented in
British Pounds Sterling (GBP) and all values are rounded to the
nearest thousand (GBP000) 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
a going concern basis for the foreseeable future.
For the year ended 31 December 2019, net profit amounted to
approximately GBP 2 .0 million ( year ended 31 December 2018 net
profit of approximately GBP0.1 million ). As at 31 December 2019,
the Group continued to breach certain loan covenant terms of its
loan with European Bank for Reconstruction and Development
("EBRD"). The bank has not issued a waiver for the breach. As a
consequence, the loan is reclassified as a Current Liability (for
the impact of such reclassification on the financial statements,
please see page 84). There has been no demand for repayment of the
loan. The Company continues to communicate with EBRD and loan
repayments are being met as they fall due. Should the Group be
required to raise additional working capital, the Directors expect
this would be raised from local banks.
Ukrproduct is also looking to expand domestic sales 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 utilisation. 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 the Company increased its export
volumes by signing new agreements.
3. Bank Loans and Overdrafts
As at 31 December 2019 the Group has two loans: the loan from
Creditwest Bank in the amount of 2 073 thousand GBP (UAH 65,0
million) and the loan from EBRD in the amount of 5 140 thousand GBP
(EUR 6,036 thousand).
During the year to 31 December 2019, the Group continued to
breach certain loan covenants in relation to the EBRD debt. The
bank has not issued a waiver for the breach. As a consequence the
loan is reclassified as a C urrent L ability. However, the Company
continued to settle certain amounts to EBRD according to an agreed
schedule. The Group completed installments of payments and in
accordance with an agreement between all parties, the payment of
the tranche in December was postponed to subsequent periods.
Before reclassification Impact of Adjusted
Impact of reclassification on reclassification
balance sheet
--------------------------- --------------------- ------------
000,GBP 000,GBP 000,GBP
Bank loans 4 913 (4 913) -
Long-term payables 441 (441) -
Liabilities of rent assets 68 - 68
Deferred tax liabilities 242 - 242
Current liabilities
Bank loans 2 300 4 913 7213
Short-term payables 0 441 441
Trade and other payables 9 245 - 9 245
Other taxes payable 18 - 18
--------------------------- --------------------- ------------
TOTAL LIABILITIES 17 227 - 17 227
--------------------------- --------------------- ------------
Impact of reclassification on Impact of
P&L Before reclassification reclassification Adjusted
000,GBP 000,GBP 000,GBP
--------------------------- --------------------- ------------
Profit from operations 1 599 (109) 1 490
Profit before taxation 2 102 (109) 1 993
--------------------------- --------------------- ------------
Profit for the year 2 140 (109) 2 031
--------------------------- --------------------- ------------
Impact of reclassification on Cash flow
Before reclassification Impact of Adjusted
reclassification
000,GBP 000,GBP 000,GBP
Cash generated from operating
activities 1 0 33 (115) 918
Cash used in investing activities (272) - (272)
Cash generated from financing
activities (898) - (898)
Effect of exchange rate changes
on cash and cash equivalents 187 115 302
Cash and cash equivalents at the
beginning of the year 181 - 181
Cash at the end of the year 231 - 231
Fixed assets with a net book value of GBP 3,177 thousand at 31
December 201 9 (201 8 : GBP 4, 872 thousand) were pledged as
collateral. 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 Termination Interest Limit As At As at
date date rate 31 31
December December
201 9 201 8
------------- ----------- --------- ------------- ------------- ---------
GBP GBP '000 GBP '000
'000
------------ ---------- -------- ------------ ------------- --------- ------ --------- ---------
EBRD EUR Loan 31.03.2011 30.11.2024 5-7% 7 070 5 140 5 813
Creditwest
Bank Credit
Ukraine UAH line 05.02.2018 05.02.2021 15,89% 2 095 2 073 1 850
Total 7 213 7 663
========= =========
The average interest rate as at 31 December 201 9 was 11% (201 8 : 6 , 15 %).
SUBSEQUENT EVENTS
(a) EBRD - breach of loan covenants
As at 31 December 2019, the Group was in breach of the Debt
Service Coverage ratio covenant in the loan facility in place with
European Bank for Reconstruction and Development ("EBRD"). The
Group remained in breach of this covenant as at 31 March 2020 and
EBRD has not issued a waiver in respect of this breach. There has
been no demand for repayment of the loan. The Company continues to
communicate with EBRD and the agreed loan repayments are being met
as they fall due.
(b) Installment
In Q1 2020, the Company, under the terms of its agreement with
EBRD, agreed to defer payment of 200 000 EUR, resulting in a
payment of 14 752.75 EUR plus an interest payment of 37 906 EUR. In
Q2 2020, the Company, under the terms of its agreement with EBRD,
agreed to defer payment of 200 000 EUR, resulting in a payment of
32
934,57 EUR plus an interest payment of 38 671,92 EUR.
(c) Foreign exchange rates
Post year end, the Ukrainian Hryvnia continued to depreciate
against the EUR, GBP. However, the Ukrainian Hryvnia strengthened
against the US dollar. In particular, according to the National
Bank of Ukraine the following are key exchange rates:
Currency 26 June 2020
UAH/GBP 33.18
-------------
UAH/USD 26.7 0
-------------
UAH/EUR 29.91
-------------
(d) Impact of COVID-19 pandemic
The outbreak of COVID-19 has had an unprecedented global impact
on economic activities in most countries, including Ukraine.
Nevertheless, Ukrproduct has taken all of the steps it can in order
to safeguard the wellbeing of its employees and ensure continued
stable operations.
Prior to the lockdown period commencing in Ukraine in March
2020, Ukrproduct began implementing a number of measures aimed at
preventing the spread of COVID-19 amongst the Group's employees and
their families.
The Company is pleased to report that, as at the date of this
report, these measures have resulted in relatively few employees,
in the context of the Group's workforce of over 800 personnel,
showing symptoms of the virus. As such, so far, the impact on the
Group's operations has been limited. Looking ahead, whilst COVID-19
creates significant economic uncertainty, the Group expects to
utilise the experience gained during the pandemic, most notably
from remote working, to streamline and optimise certain
administrative and operational processes.
As would be expected in the context of a global pandemic, the
onset of COVID-19 has had a number of connotations for the Group's
business:
Exports
Since the implementation of the lockdown in Ukraine, whilst the
sales price achieved by the Group for SMP has been higher than the
Company had expected given the lockdown, largely driven by the sale
of SMP to CIS countries, such as Kazakhstan and Moldova,
unfortunately, such prices are lower than budgeted at the beginning
of the year.
However, with regard to the export of other products (butter and
spreads), pleasingly the lockdown experienced in the Group's target
markets has not had a significant impact on sales prices. In
addition, Ukproduct has managed to sign contracts for butter with
new customers with significant sales volumes, which the Company
expects should positively impact profitability in H2 2020.
Imports
The imposition of the lockdown in the Ukraine has had a negative
impact on the imports of butter and other products, with such
imports reducing significantly as a result of, firstly, an initial
depreciation in the Hryvnia against the dollar, and, secondly,
lockdown-related logistical issues in relation to customs
activities.
The Board is of the view that the situation is improving as a
result of lockdown restrictions easing from 11 May 2020 combined
with the recent appreciation of the Hryvnia against the dollar.
Domestic market
The impact of the lockdown period in Ukraine has not, overall,
had a significant impact on sales, as a result of the strong brand
recognition and market share of the Group's products. In addition,
the Group sells its products in supermarkets and other stores that
have remained open during the lockdown, thereby providing a stable
retail channel.
Moreover, the sale of the Group's products via outlets that have
remained open has offered a competitive advantage, such that the
Group has been able reduce milk prices in order to maintain volumes
(with many competitors experiencing vastly reduced volumes) and
increase the profitability of milk processing via access to cheaper
raw materials and the ability source raw materials directly.
However, sales of kvass and other beverages (both bottled and in
kegs) have suffered significantly as a result of the lockdown
period. For bottled kvass and other beverages, the season started
later than expected notwithstanding lockdown, however, the lockdown
has predictably negatively impacted kvass sales, particularly keg
sales, given it is primarily sold from retail street vendors. As a
result, the Board is considering opportunities to increase bottled
kvass sales in light of the challenging environment for keg sales.
Nevertheless, the Board is hopeful that the Group can meet the
annual budget expectations for bottled kvass and other beverages
and expects keg sales to start picking up again in H2 2020.
As stated above, as of 11 May 2020, lockdown restrictions in
Ukraine have started to ease and the Board will continue to monitor
the changing conditions on an ongoing basis.
We continue to maximize sales efforts across the Group and
implement measures to drive profitability in order to generate
value for shareholders.
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.
END
FR KKCBDOBKKPAB
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