TIDMUKR
RNS Number : 0692C
Ukrproduct Group Ltd
26 September 2018
September 26, 2018
UKRPRODUCT GROUP LIMITED
("Ukrproduct", the "Company" or, together with its subsidiaries,
the "Group")
UNAUDITED INTERIM FINANCIAL RESULTS FOR THE SIX MONTHSED 30 JUNE
2018
Kyiv, Ukraine - September 26, 2018 - Ukrproduct Group Limited
("Ukrproduct", "UPG" or the "Group") (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 2018.
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ("MAR").
For further information contact:
Ukrproduct Group Ltd
Jack Rowell, Non-Executive Chairman Tel: +380 44 232 9602
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
CEO's REPORT
The business environment in Ukraine continues to recover, with
the economy growing by 2.5% in 2017. Sectors such as manufacturing
and domestic trade grew by over 5% in 2017. Economic growth could
improve to 3.5% in 2018 and 4% in 2019*. Consumer demand has
improved due to an increase in the minimum wage. As a result,
whilst the operating environment remains competitive, the Group's
trading opportunities have improved domestically.
Trading
Revenue growth for the six months to 30 June 2018 (the "Period")
came predominantly from Beverages, Services and Supplementary
products. The Board estimates that Ukrproduct's butter market share
in the Ukraine has increased by approximately 1% to 6.5%, whilst
market share in processed cheese and processed cheese products has
increased by approximately 0.5% to 9%. Consumer demand for
processed cheese and processed cheese products is growing, as the
price of hard cheese rises. Competition in processed cheese and
processed cheese products' market is growing and includes more than
10 key players: 5 of them are making significant investments to
product promotion. The Period also saw improved kvass beverage
sales, helped by a new cider product: Lemon and Ginger.
During the Period, revenue from export sales increased due to
bulk butter shipments, however, export sales of packaged butter and
spreads decreased. Skimmed milk products continue to decline given
low prices worldwide.
The Group has expanded export sales into non-dairy products -
other food commodities (supplementary products). The Company has
sufficient experience and opportunities in the export market and
has seen profitable operations. These operations make use of third
party logistics services and are financed by deferring payment for
purchased products.
Finances
The Group earned profit after tax of GBP408,000 for the
Period.
On 7 February 2018, Ukrproduct announced that on 05 February
2018 it entered into an agreement for a new loan facility with
Creditwest Bank Ukraine (the "New Loan Agreement"). Under the terms
of the New Loan Agreement, UAH 65 million was made available for
refinancing purposes and for working capital.
On 9 February 2018, Ukrproduct announced that it had drawn down
UAH 32.3 million under the terms of the New Loan Agreement with
Creditwest Bank Ukraine in order to fully repay all amounts
outstanding to OTP Bank. Accordingly, the Company has no
outstanding liabilities to OTP Bank. As at today's date, the
Company has fully drawn down the loan available under the New Loan
Agreement, which is due for repayment on 5 February 2021, as
announced by the Company on 7 February 2018.
As at 30 June 2018, the Group had total liabilities of UAH 522,9
million (approx. GBP15.1 million) and net assets of UAH 38,8
million (approx. GBP1.1 million) with cash balances of UAH 4,0
million (approx. GBP0.1 million). The Group's financial position
was improved following the New Loan Agreement. In September 2018
Ukrproduct made a scheduled repayment of EUR175.809 to EBRD.
However, in relation to the Period, 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 2018.
Outlook
In FY2018, it is expected that the Ukrainian economy will
continue its recovery from the fall in 2014-2015, but downside
risks, largely stemming from mounting domestic political tensions
and geopolitical uncertainties, remain significant.
As part of a continuing process, Ukrproduct is evaluating its
business in light of the competitive marketplace. Ukrproduct will
seek to sustain operational improvement via a strategy focused on
cash production, operating efficiency and building profitable sales
with a competitive product/service offering.
* Source: The World Bank
UKRPRODUCT GROUP LIMITED
UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE PERIODED 30 JUNE 2018 AND 2017
(in thousand GBP, unless otherwise stated)
Six months ended Six months ended
30 June 2018 30 June 2017
GBP '000 GBP '000
Revenue 14,827 14,910
including branded and
SMP products 11,837 13,637
including Supplementary 563 -
products
Cost of sales (13,583) (13,216)
including Supplementary (557) -
products
----------------- -----------------
Gross profit 1,244 1,694
Administrative expenses (534) (482)
Selling and distribution
expenses (842) (716)
Other operating income/
expenses, net (55) (88)
----------------- -----------------
(Loss)/profit from operations (187) 408
Finance expense, net (231) (220)
Effect of foreign currency
translation 793 (230)
----------------- -----------------
Profit/(loss) before
taxation 375 (42)
Income tax expense 33 46
----------------- -----------------
Profit for the Six months 408 4
Attributable to:
Equity holders of the
Parent 408 4
Non-controlling interest - -
----------------- -----------------
408 4
================= =================
Earnings per share (pence):
Basic 1.03 0.01
Diluted 1.03 0.01
UKRPRODUCT GROUP LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
FOR THE PERIODED 30 JUNE 2018 AND 2017
(in thousand GBP, unless otherwise stated)
Six months ended Six months ended
30 June 2018 30 June 2017
GBP '000 GBP '000
Profit for the six months 408 4
Other comprehensive income
Exchange differences
on translation to the
presentation currency (170) (226)
----------------- -----------------
Other comprehensive income
for the six months, net
of tax (170) (226)
----------------- -----------------
Total comprehensive income
for the six months, net
of tax 238 (222)
Attributable to:
Equity holders of the
Parent (238) (222)
Non-controlling interests - -
----------------- -----------------
(238) (222)
================= =================
UKRPRODUCT GROUP LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
FOR THE PERIODED 30 JUNE 2018 AND 2017
(in thousand GBP, unless otherwise stated)
As at As at As at
30 June 2018 31 December 30 June 2017
2017
GBP '000 GBP '000 GBP '000
ASSETS
Non-current assets
Property, plant and
equipment 6,701 6,288 7,166
Intangible assets 523 543 592
Deferred tax assets 2 - 1
Total non-current
assets 7,226 6,831 7,759
============= ============ =============
Current assets
Inventories 4,953 2,426 2,375
including supplementary 1,388 - -
products
Trade and other receivables 3,602 2,171 2,779
including Receivables 570 - -
for sold supplementary
products
Current taxes 279 271 473
Other financial assets 26 30 32
Cash and cash equivalents 116 496 237
Total current assets 8,976 5,394 5,896
------------- ------------ -------------
TOTAL ASSETS 16,202 12,225 13,655
============= ============ =============
EQUITY AND LIABILITIES
Equity attributable
to equity holders
Share capital 3,967 3,967 3,967
Share premium 4,562 4,562 4,562
Translation reserve (15,064) (14,894) (15,007)
Other reserves 3,683 3,769 3,845
Retained earnings 3,972 3,478 4,521
Total equity attributable
to equity holders
of the parent 1,120 882 1,888
------------- ------------ -------------
Non-controlling interest - - -
------------- ------------ -------------
TOTAL EQUITY 1,120 882 1,888
------------- ------------ -------------
LIABILITIES
Non-Current Liabilities
Bank borrowings 5,381 5,716 5,815
Long-term payables 456 459 476
Deferred tax liabilities 234 262 308
Total Non Current
Liabilities 6,071 6,437 6,599
------------- ------------ -------------
Current Liabilities
Bank borrowings 1,998 1,318 1,350
Trade and other payables 6,960 3,565 3,774
including Payables 2,218 - -
for supplementary
products
Current income tax
liabilities 16 - 16
Other taxes payable 37 23 28
Total Current Liabilities 9,011 4,906 5,168
------------- ------------ -------------
TOTAL LIABILITIES
AND EQUITY 16,202 12,225 13,655
============= ============ =============
UKRPRODUCT GROUP LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIODED 30 JUNE 2018 AND 2017
(in thousand GBP, unless otherwise stated)
Six months ended Six months ended
30 June 2018 30 June 2017
GBP '000 GBP '000
Cash flows from operating
activities
Profit/(Loss) before taxation
for the six months 375 (42)
Adjustments for:
Exchange difference (793) 230
Depreciation and amortisation 258 288
Impairment of trade receivables 25 5
Impairment of inventories 102 79
Interest income (2) -
Interest expense 233 220
Increase of inventories (2,629) (599)
including supplementary (1,388) -
products
Increase in trade and other
receivables (1,471) (523)
including Receivables for (570) -
sold supplementary products
Increase in trade and other
payables 3,629 1,015
including Payables for 2,218 -
supplementary products
Cash generated from operations (273) 673
Interest received 2 -
Income tax paid 5 (6)
----------------------------------- -------------------------------
Net cash (used in)/generated
by operating activities (266) 667
Cash flows from investing
activities
Payments for property,
plant and equipment (140) (41)
Proceeds from sale of property,
plant and equipment - 1
Repayments / (proceeds)
from loans issued 5 (15)
----------------------------------- -------------------------------
Net cash used in investing
activities (135) (55)
Cash flows from financing
activities
Interest paid (182) (185)
Net proceeds from short 510 -
term borrowing
Repayments of investment
borrowing (223) (176)
----------------------------------- -------------------------------
Net cash used in financing
activities 105 (361)
Net (decrease) / increase
in cash and cash equivalents (296) 251
----------------------------------- -------------------------------
Effect of exchange rate
changes
on cash and cash equivalents (84) (189)
----------------------------------- -------------------------------
Cash and cash equivalents
at the beginning of the
six months 496 175
Cash and cash equivalents
at the end of the six months 116 237
=================================== ===============================
UKRPRODUCT GROUP LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIODED 30 JUNE 2018 AND 2017
(in thousand GBP, unless otherwise stated)
Attributable to equity holders
Share Share Revaluation Retained Translation Total Non-Controlling Total
capital premium reserve earnings reserve attributable Interest Equity
to equity
holders
of the
parent
GBP '000 GBP '000 GBP '000 GBP '000 GBP '000 GBP '000 GBP '000 GBP '000
As at 1
January 2017 3,967 4,562 3,935 4,427 (14,781) 2,110 - 2,110
=================== =============== ================= ================== ================ =================== =================== ===============
Profit for the
six months - - - 4 - 4 - 4
Other
comprehensive
income - - - - (226) (226) (226)
------------------- --------------- ----------------- ------------------ ---------------- ------------------- ------------------- ---------------
Total
comprehensive
income - - - 4 (226) (222) - (222)
=================== =============== ================= ================== ================ =================== =================== ===============
Depreciation
on
revaluation
of non
current
assets - - (90) 90 - - - -
Reduction of - - - - - - - -
revaluation
reserve
As at 30 June
2017 3,967 4,562 3,845 4,521 (15,007) 1,888 - 1,888
=================== =============== ================= ================== ================ =================== =================== ===============
Loss for the
six months - - - (1,119) - (1,119) - (1,119)
Other
comprehensive
income - - - - 113 113 113
------------------- --------------- ----------------- ------------------ ---------------- ------------------- ------------------- ---------------
Total
comprehensive
income - - - (1,119) 113 (1,006) - (1,006)
=================== =============== ================= ================== ================ =================== =================== ===============
Depreciation
on
revaluation
of non
current
assets - - (76) 76 - - - -
Reduction of - - - - - - - -
revaluation
reserve
As at 31
December 2017 3,967 4,562 3,769 3,478 (14,894) 882 - 882
=================== =============== ================= ================== ================ =================== =================== ===============
Profit for the
six months - - - 408 - 408 - 408
Other
comprehensive
income - - - - (170) (170) (170)
------------------- --------------- ----------------- ------------------ ---------------- ------------------- ------------------- ---------------
Total
comprehensive
income - - - 408 (170) 238 - 238
=================== =============== ================= ================== ================ =================== =================== ===============
Depreciation
on
revaluation - - (86) 86 - - - -
As at 30 June
2018 3,967 4,562 3,683 3,972 (15,064) 1,120 - 1,120
=================== =============== ================= ================== ================ =================== =================== ===============
UKRPRODUCT GROUP LIMITED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE PERIODED 30 JUNE 2018
1. Basis of preparation
The unaudited condensed consolidated financial statements have
been prepared in accordance with International Accounting Standard
("IAS") 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 these unaudited condensed
consolidated financial statements as were applied in the
preparation of the Group's financial statements for the year ended
31 December 2017.
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 2017 are
extracted from the Group's consolidated financial statements for
the year ended 31 December 2017. The auditor's report for those
accounts was unqualified, but did include a paragraph on material
uncertainty related to going concern, in respect of the losses
incurred by the Group during the year ended 31 December 2017 and
surrounding the breach of the loan agreement with the European Bank
for Reconstruction and Development (the "EBRD").
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 a profit of GBP408,000 for the six months ended
30 June 2018. Nevertheless, for the same period, the Group
generated a negative cash flow from operating activities of
GBP266,000. The Group also has a net current liabilities position
of GBP35,000 as at the period end date.
These conditions represent a material uncertainty which may cast
significant doubt on the Group's ability to continue as a going
concern and, in such case, the Group may be unable to realize its
assets and discharge its liabilities in the normal course of
business.It is worth noting that the Group held goods for sale that
were prepaid as at 30 June 2018. During the subsequent period the
Group has sold such prepaid inventories and received Gross Profit
in the amount of GBP418,000.
The loan with EBRD is divided into 2 tranches. Tranche A has a
maturity date of 01 December 2022 and interest is payable at a
margin of 5% over EURIBOR per annum. Tranche B has a maturity date
of 1 December 2024 and is subject to interest at the higher of
EURIBOR or 1% per annum before 1 December 2022 after which date
interest is charged at a margin of 5% over EURIBOR per annum.
Following the restructuring of the loan in 2016 the Group has
complied with the new repayment terms. The Board notified EBRD in
advance of covenant breaches of the Loan and EBRD provided waivers
in respect of the breached covenants as at 30 June 2018.
On 7 February 2018, Ukrproduct announced that a new loan
facility with Creditwest Bank Ukraine (the "New Loan Agreement")
had been entered into on 5 February 2018. Under the terms of the
New Loan Agreement, UAH 65 million was made available for
refinancing purposes and for working capital. The interest rate
under the New Loan Agreement is fixed at 18% per annum.
On 8 February 2018, Ukrproduct announced that it had drawn down
UAH 32.3 million under the terms of the New Loan Agreement with
Creditwest Bank Ukraine in order to fully repay all amounts
outstanding to OTP Bank. Accordingly, the Group has no outstanding
liabilities to OTP Bank. As at today's date, the Group has fully
drawn down the loan available under the New Loan Agreement, which
is due for repayment on 5 February 2021, as announced by the Group
on 7 February 2018.
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. Write-off of inventories to net realizable value
In accordance with requirements of IAS 2, "The value of
inventories must be recorded at the lower of cost or net realisable
value. Where net realisable value drops to below the cost of
inventory the loss is to be recognised as an expense in the period
in which the drop of value occurs." The Group conducted an
evaluation of inventories as at 30 June 2018 and 30 June 2017. The
loss from impairment of inventories amounted to:
Six months ended Six months ended
30 June 2018 30 June 2017
GBP '000 GBP '000
Impairment of finished
goods (279) (79)
3. Related party transactions
Parties are considered to be related if one party has the
ability to control the other party or exercise significant
influence over the other party in making financial or operational
decisions as defined by IAS 24 "Related Party Disclosures". In
considering each possible related party relationship, attention is
directed to the substance of the relationship, not merely the legal
form.
Transactions and balances between the Group companies and other
related parties are set out below.
Sales of goods and services to related parties and purchases
from related parties are summarised below. All sales and purchases
were with related parties under common control of the ultimate
beneficiaries of the Group.
Six months ended Six months ended
30 June 2018 30 June 2017
GBP '000 GBP '000
Sales 0 0
Purchases 42 7
Administrative expenses 7 7
Other operational incomes 0 -
Other operational expenses 0 -
Balances due from/(to) related parties at each period end are
shown below.
As at As at
30 June 2018 30 June 2017
GBP '000 GBP '000
Receivables and prepayments 26 39
(Allowance for trade debtors) - (14)
Other financial assets - 12
Trade and other payables (11) (2)
In the first half of 2018, the Group's commercial relationships
with the related parties comprised of sales and purchases. The
terms and conditions for the contracts with the related parties
were similar to the terms and conditions applied in dealings with
unrelated parties. There were no guarantees given by the Group to
related parties and vice versa.
The ultimate controlling owners and beneficiaries of the related
parties were Messrs Alexander Slipchuk and Sergey Evlanchik,
directors of the Group.
4. Segment information
At 30 June 2018, the Group was organised internationally into
five main business segments:
1) Branded products - processed cheese, hard cheese, packaged butter and spreads
2) Beverages - kvass, other beverages
3) Non-branded products - skimmed milk powder, other skimmed milk products
4) Distribution services and other - resale of third-party goods and processing services.
5) Supplementary products - export trading activities with
non-dairy products. The Group has expanded export sales into
non-dairy products such as corn. The group has sufficient
experience and opportunities in the export market and has seen
profitable operations. These operations make use of third party
logistics services and are financed by deferring payment for
purchased products.
The segment results for the six months ended 30 June 2018 are as
follows:
Branded Beverages Non-branded Distribution Supplementary Total
products products services products
and other
GBP '000 GBP '000 GBP '000 GBP '000 GBP '000 GBP '000
-------------- ---------- ---------- ------------ ------------- -------------- ---------
Sales 10,016 611 1,822 1,815 563 14,827
-------------- ---------- ---------- ------------ ------------- -------------- ---------
Gross profit 1,265 346 (829) 456 6 1,244
-------------- ---------- ---------- ------------ ------------- -------------- ---------
The segment results for the six months ended 30 June 2017 were
as follows:
Branded Beverages Non-branded Distribution Supplementary Total
products products services products
and other
GBP '000 GBP '000 GBP '000 GBP '000 GBP '000 GBP '000
-------------- ---------- ---------- ------------ ------------- -------------- ---------
Sales 9,575 488 4,062 785 0 14,910
-------------- ---------- ---------- ------------ ------------- -------------- ---------
Gross profit 1,720 254 (579) 299 0 1,694
-------------- ---------- ---------- ------------ ------------- -------------- ---------
5. Earnings per share
Basic earnings per share have been calculated by dividing net
profit attributable to the ordinary shareholders (profit for the
period) by the weighted average number of shares in issue.
Six months ended Six months ended
30 June 2018 30 June 2017
------------------------------------- --------------------------------- -------------------------------
Net profit attributable to ordinary
shareholders, GBP'000 408 4
Weighted number of ordinary shares
in issue 39,673,050 39,673,050
Basic earnings per share, pence 1.03 0.01
Diluted average number of shares 39,673,050 39,673,050
Diluted earnings per share, pence 1.03 0.01
------------------------------------- --------------------------------- -------------------------------
6. Approval of interim financial statements
The unaudited condensed consolidated financial statements were
approved by the board of directors on 26 September 2018. A copy
will shortly be available on the Group's website at
www.ukrproduct.com.
This information is provided by RNS, the news service of the
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END
IR BLGDCIGDBGIL
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