Last checked at 28 Sep 2023 12:00
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 |
Strand Hanson Limited | |
Nominated Adviser and Broker Rory Murphy, Richard Johnson | Tel: +44 20 7409 3494 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 (spot rate) | Average for the six months ended30 June 2023 | 31 December 2022 (spot rate) | 30 June 2022 (spot rate) | Average for the six months ended30 June 2022 | |||||
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