TIDMUKR
RNS Number : 1332D
Ukrproduct Group Ltd
25 June 2021
25 June 2021
UKRPRODUCT GROUP LIMITED
("Ukrproduct", the "Company" or, together with its subsidiaries,
the "Group")
FINAL RESULTS FOR THE YEARED 31 DECEMBER 2020
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 2020.
The 2020 Annual Report and Accounts, together with the Notice of
Annual General Meeting ("AGM") and Proxy Form will be posted to
shareholders today and are available on the Company's website at
www.ukrproduct.com .
The AGM will be held at the 4th floor, office 22, 8 Sikorsky
Street, Kyiv, Ukraine, 01033 at 6.00 pm (Kyiv time) / 4.00 pm
(London time) on 22 July 2021.
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, Rob Patrick www.strandhanson.co.uk
This announcement contains inside information for the purposes
of Article 7 of EU Regulation No. 596/2014, which forms part of
United Kingdom domestic law by virtue of the European (Withdrawal)
Act 2018.
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
The outbreak of COVID-19 had an unprecedented global impact on
economic activities in most countries, including Ukraine. Due to
the COVID-19 pandemic, the Ukrainian economy contracted by 4.4
percent in 2020 compared to the previous year according to t he
National Bank of Ukraine. Until February 2020, the Ukrainian
economy was still in a robust macroeconomic state with declining
public debt, falling inflation and optimistic growth forecasts, but
the outbreak of the pandemic turned it around. However , the dairy
industry withstood the blow of the pandemic and a number of
lockdowns in 2020, largely due to the products being considered
necessities by the consumer. Nevertheless, Ukrproduct has taken all
measures to safeguard the wellbeing of its employees and managed to
steer through this volatile environment, maintaining its
performance without interruptions and adapting to the changing
market requirements.
The introduction of lockdown in Ukraine had a negative impact on
the imports of butter and other products, with such imports
reducing significantly as a result of, firstly, the initial
devaluation of the hryvnia against the dollar, and, secondly, the
lockdown-related logistical issues in respect of customs
requirements. Overall, the launch of the lockdown measures in
Ukraine did not materially impact the Group's sales due to the
strong brands' recognition and substantial market shares for its
products.
Moreover, unlike smaller competitors, as the Group delivers most
of its products to consumers through food retailers, which remained
open during lockdown, Ukrproduct was able to utilize this
competitive advantage and adapt its procurement processes and
supply chains to the shift in how demand is met so maintaining
volumes, whereas many competing dairy processors had to reduce
their business.
Though the bottled sales of kvass grew in 2020 the overall sales
revenues for beverages were at the levels of 2019 - at GBP1.7
million, which was due to the quarantine measures that suspended
distribution over all food channels with the exception of the food
and drink retailers. The sales of kvass produced a strong recovery
in the second half of the year that helped partial catch up on the
annual budget targets.
For FY 2020, the Group reports an improvement in revenue by
11.1% up to GBP55.5 million (UAH 1.9 billion) compared with GBP50
million (UAH 1.6 billion) in FY 2019. The growth was delivered via
revision of the Company's sales strategy, with spreads and
processed cheese sales demonstrating the most pronounced increases
of 132.8% and 79.9% respectively. However, the gross profit
remained at a similar level to 2019, amounting to GBP4.7 million
(UAH 165 million) , whilst the annual operating profit declined by
43.7% to GBP0.84 million (UAH 29.3 million), compared with GBP1.5
million (UAH 49.1 million) in FY 2019. Despite an increase in
sales, the Company recorded a net loss of GBP1.16 million (UAH 40.5
million), compared to the profit of GBP2.031 million (UAH 66.9
million) in 2019. This decline was mainly attributed to the
negative foreign exchange differences of GBP1.5 million.
Financial Position
As of 31 December 2020, Ukrproduct reports net assets of GBP5.3
million (UAH 202 million) compared to GBP3.2 million (UAH 104
million) as of 31 December 2019 including cash balances of GBP0. 16
million (UAH 6.0 million) compared to GBP0.23 million (UAH 7.1
million) respectively.
For the year ended 31 December 2020, the Group was in breach of
several provisions of the loan agreement with the European Bank for
Reconstruction and Development ("EBRD") and the bank has not issued
a waiver for the breaches. Though to 31 May 2021 the Group serviced
its debt on time in accordance with the loan agreements with its
lenders, on 1 June 2021 the Company entered discussions with the
EBRD to potentially restructure the loan repayment schedule as a
result of pressure on the working capital requirements of the
business due to increased raw milk costs and an increase in volumes
required to meet demand. Ukrproduct also notified the EBRD that
although the Company had settled the interest amount due on 1 June
2021, it did not repay the quarterly loan tranche due on that date.
At the same time Ukrproduct is seeking to increase its working
capital facility provided locally in Ukraine. The Group's
management continues to have discussions with the EBRD and at
present the EBRD has taken no action to accelerate repayment of the
loan. Though the Company is hopeful that an agreement can be
reached in due course that works for both parties.
Outlook
Looking ahead, whilst COVID-19 creates significant economic
uncertainty, Ukrproduct expects to utilize its experience gained
during the pandemic, most notably from remote working, to
streamline and optimize certain administrative and operational
processes. Ukrproduct plans to pursue stronger margins and to
further increase sales of processed cheese and spreads, as well as
to improve margins of packaged butter by a continuous upgrade into
the premium market segment. However, the raw milk price trends in
Ukraine will be fundamental for the dairy processing industry
overall. The Group is looking into the most efficient ways of
procuring raw milk, which is subject to local competition that has
been strengthening and thus increasing prices.
Jack Rowell Alexander Slipchuk
Non-Executive Chairman Chief Executive Officer
Ukrproduct Group
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2020
(in thousand GBP, unless otherwise stated)
Year ended Year ended
31 December 31 December
2020 2019
GBP '000 GBP '000
Revenue 55 508 49 961
Cost of sales (50 778) (45 233)
GROSS PROFIT 4 730 4 728
Administrative expenses (1 205) (1 137)
Selling and distribution expenses (2 464) (2 175)
Other operating (expenses) /income (223) 74
PROFIT FROM OPERATIONS 838 1 490
Net finance expenses (486) (578)
Net foreign exchange gain (loss) (1 547) 1 081
(LOSS) / PROFIT BEFORE TAXATION (1 195) 1 993
Income tax redit 35 38
(LOSS) / PROFIT FOR THE YEAR (1 160) 2 031
Attributable to:
Owners of the Parent (1 160) 2 031
Earnings per share:
Basic (pence) (2.92) 5.12
Diluted (pence) (2.92) 5.12
OTHER COMPREHENSIVE INCOME
Items that may be subsequently reclassified
to profit or loss
Currency translation differences (494) 165
Items that will not be reclassified
to profit or loss
Gain on revaluation of property, plant
and equipment 3 758 -
OTHER COMPREHENSIVE INCOME, NET OF
TAX 2 104 165
TOTAL COMPREHENSIVE INCOME FOR THE
YEAR 2 104 2 196
Attributable to:
Owners of the Parent 2 104 2 196
Non-controlling interests - -
Ukrproduct Group
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2020
(in thousand GBP, unless otherwise stated)
As at As at
--------------------------------------
31 December 31 December
2020 2019
GBP '000 GBP '000
-------------------------------------- ------------ ------------
ASSETS
Non-current assets
Property, plant and equipment 9 934 6 994
Intangible assets 598 493
------------ ------------
10 532 7 487
Current assets
Inventories 7 317 5 071
Trade and other receivables 6 115 7 257
Current taxes 214 310
Other financial assets 27 31
Cash and cash equivalents 156 231
------------ ------------
13 829 12 900
------------ ------------
TOTAL ASSETS 24 361 20 387
============ ============
EQUITY AND LIABILITIES
Equity attributable to owners of the
parent
Share capital 3 967 3 967
Share premium 4 562 4 562
Translation reserve (15 231) (14 737)
Revaluation reserve 7 031 3 437
Retained earnings 4 935 5 931
------------ ------------
5 264 3 160
TOTAL EQUITY 5 264 3 160
Non-Current Liabilities
Liabilities for right-of-use assets 13 68
Deferred tax liabilities 1 029 242
------------ ------------
1 042 310
Current liabilities
Bank loans 6 628 7 213
Short-term payables 467 441
Trade and other payables 10 947 9 245
Other taxes payable 13 18
------------ ------------
18 055 16 917
------------ ------------
TOTAL LIABILITIES 19 097 17 227
------------ ------------
TOTAL EQUITY AND LIABILITIES 24 361 20 387
============ ============
Ukrproduct Group
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2020
(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 '000 GBP GBP '000 GBP
'000 '000 '000
------------------- --------- --------- ------------ ---------- ------------ ------ ----------------- --------
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
========= ========= ============ ========== ============ ====== ================= ========
Profit for (1
the year - - - (1 160) - 160) - (1 160)
Other - - - - - - - -
comprehensive
income
Currency
translation
differences - - - - (494) (494) - (494)
--------- --------- ------------ ---------- ------------ ------ ----------------- --------
Total
comprehensive (1
income - - - (1 160) (494) 654) (1 654)
Reduction of
revaluation
reserve - - (98) - - (98) - (98)
Gain on
revaluation
of property,
plant and
equipment - - 3 856 - - 3 856 - 3 856
Depreciation
on revaluation
of property,
plant and
equipment - - (164) 164 - - - -
--------- --------- ------------ ---------- ------------ ------ ----------------- --------
As At 31 December
2020 3 967 4 562 7 031 4 935 (15 231) 5 264 - 5 264
========= ========= ============ ========== ============ ====== ================= ========
Ukrproduct Group
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2020
(in thousand GBP, unless otherwise stated)
Year ended Year ended
--------------------------------------------
31 December 31 December
2020 2019
GBP '000 GBP '000
-------------------------------------------- ------------ ------------
Cash flows from operating activities
(Loss) / Profit before taxation (1 195) 1 993
Adjustments for:
Exchange difference 1 54 7 (1 081)
Depreciation and amortization 61 8 636
(Loss)/Profit on disposal of non-current
assets (4) 7
(Loss)/ Profit on revaluation 225 -
Write off of receivables/payables ( 53 ) (118)
Impairment of inventories ( 42) (28)
Interest income (2) (1)
Interest expense on bank loans 488 579
------------ ------------
Operation cash flow before working
capital changes 1 582 1 987
Increase in inventories (2 2 46 ) (1 309)
Decrease / (Increase) in trade and
other receivables 1 232 (3 973)
Increase in trade and other payables 1 662 4 210
------------ ------------
Changes in working capital 6 48 (1 072)
------------ ------------
Cash / generated from operations 2 230 915
Interest received 2 1
Income tax paid (2) 2
------------ ------------
Net cash / generated from operating
activities 2 230 918
Cash flows from investing activities
Purchases of property, plant and equipment
and intangible assets (688) (297)
Proceeds from sale of property, plant
and equipment 13 28
Repayments of loans issued (3) (3)
------------ ------------
Net cash used in investing activities (678) (272)
Cash flows from financing activities
Interest paid (494) (530)
Decrease in short term borrowing - (21)
Repayments of long term borrowing (525) (347)
------------ ------------
Net cash used in financing activities (1 019) (898)
Net Increase / (decrease) in cash
and cash equivalents 533 (252)
Effect of exchange rate changes on
cash and cash equivalents ( 608 ) 302
------------ ------------
Cash and cash equivalents at the beginning
of the year 231 181
Cash and cash equivalents at the end
of the year 156 231
============ ============
These consolidated financial statements were approved and
authorised for issue by the Board of Directors on 24 June 2021 and
were signed on its behalf by Mr. 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 2020 statutory financial statements. It contained no
statement under section 113B of the Companies (Jersey) Law 2011.
The financial statements for 2020 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
For the year ended 31 December 2020, net loss amounted to
GBP1.16 million, including the exchange difference loss of GBP1.5
million (2019: net profit of GBP2.031 million after the exchange
difference gain of GBP1.081 million).
For the year ended 31 December 2020, the Group was in breach of
several provisions of the loan agreement with the European Bank for
Reconstruction and Development ("EBRD") and the bank has not issued
a waiver for the breaches. Though to 31 May 2021 the Group serviced
its debt on time in accordance with the loan agreements with its
lenders, on 01 June 2021 the Company entered discussions with the
EBRD to potentially restructure the loan repayment schedule as a
result of pressure on the working capital requirements of the
business due to increased raw milk costs and an increase in volumes
required to meet demand. Ukrproduct also notified the EBRD that
although the Company had settled the interest amount due on 1 June
2021, it did not repay the quarterly loan tranche due on that date.
At the same time Ukrproduct is seeking to increase its working
capital facility provided locally in Ukraine. The Group's
management continues to have discussions with the EBRD and at
present the EBRD has taken no action to accelerate repayment of the
loan. Though the Company is hopeful that an agreement can be
reached in due course that works for both parties, the management
is seeking to secure sufficient additional funding from the local
banks to refinance the existing loan on more competitive terms. To
the best of their knowledge the Board has a reasonable expectation
that the Group has sufficient liquidity to continue its operations
going forward and to apply the going concern basis in preparation
of the financial statements.
Overall, the Company's management has been implementing a number
of steps focused on margin improvement and working capital
replenishment that include, but are not limited to, the actions
described below. Ukrproduct undertakes ongoing optimisation of the
raw milk supply and its settlement scheme that is complemented with
optimisation of the products' portfolio aimed at increasing the
overall margin and turnover. Additionally, the Group's management
is introducing new cost efficiency initiatives in procurement,
processing, distribution, marketing and logistics as well as
carefully reducing overhead.
The Company has launched new B2B partnerships (as well as
developing existing ones) in dairy processing, logistics and
distribution to capitalise on economy of scale. Moreover,
Ukrproduct continues to introduce new dairy products and beverages
appealing to shifting consumer demand, which is complemented by
focused marketing and promotion efforts, while export trading is
being developed with new packaging to adapt to international
consumer requirements. On a daily basis the management team is
engaged in proactive negotiation with retailers and other trading
partners in order to reflect input costs volatility in the current
pricing of its end products on shelves, however, this process is
challenging and takes time.
T he Board acknowledges that COVID-19 had a modest impact on the
balance sheet and overall performance of the Group in FY2020 and
Ukrproduct has already taken a set of the relevant measures to
adapt to the changing marketplace. As a part of the going concern
assessment the Company performed a broad analysis of the future
cash flows and budgets, applying to them multiple scenarios and
stress tests including but not limited to the potential impact of
COVID-19 on the future trading performance. The analysis revealed
that the Group would continue to maintain sufficient cash resources
as well as stable flow of revenues in due course. Finally, to the
best of their knowledge the management does not believe that
COVID-19 has a direct negative financial impact on its operations
and closely monitors the pandemic evolution and its potential
pressure on the markets, consumers etc.
3. Bank Loans and Short-Term Payables
As at 31 December 2020 the Group has two loans: the loan from
Creditwest Bank in the amount of 1.673 thousand GBP (in UAH 65.0
million) and the loan from the EBRD in the amount of 4.955 thousand
GBP (in EUR 5.482 thousand).
During 2020, the Group fulfilled its obligations under the EBRD
loan in accordance with the agreement. 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.
Bank Currency Type Opening Termination Interest Limit As At As at
date date rate 31 December 31 December
2020 2019
------------ ---------- -------- ------------ ------------- ---------
GBP GBP '000 GBP '000
'000
------------ ---------- -------- ------------ ------------- --------- ------ ------------- -------------
EBRD EUR Loan 31.03.2011 30.11.2024 5-7% 7 070 4 956 5 140
Creditwest
Bank Credit
Ukraine UAH line 05.02.2018 05.02.2021 15,89% 2 095 1 673 2 073
Total 6 628 7 213
============= =============
The average interest rate as at 31 December 2020 was 11% (2019:
11%).
SUBSEQUENT EVENTS
(a) EBRD - breach of loan covenants
As at 31 December 2020 the Group had been in breach of one of
covenants regarding the loan with EBRD- debt service coverage
ratio. The Group was still in breach of this covenant as at 31
March 2021, however the Board believes that the EBRD will not
demand accelerated payments in respect of this breach, therefore no
further commitments or contingencies have arisen.
(b) Installments
The Group agreed to defer the principal amount payment of EUR
200 000.00 due on 1 March 2021 under the terms of the loan
agreement with the EBRD, resulting in a principal payment at the
amount of EUR 65 434. 57 and an interest payment of EUR 32 240. 41
.
On 1 June 2021 the Company entered discussions with the EBRD to
potentially restructure the loan repayment schedule as a result of
pressure on the working capital requirements of the business due to
increased raw milk costs and an increase in volumes required to
meet demand. Accordingly, Ukrproduct also notified the EBRD that on
1 June 2021 the Company had settled the due interest amount without
repayment of the next loan tranche at the amount of EUR 294 0066.00
that was due under the loan agreement. However, the Company settled
the respective interest payment of EUR 33 089.98 in full and on
time.
(c) Foreign exchange rates
Post year end, the Ukrainian Hryvnia has strengthened against
the USD, EUR and GBP. According to the information provided by the
National Bank of Ukraine, the main exchange rates are set at the
following rates:
Currency 24 June 2021
UAH/GBP 38.15
-------------
UAH/USD 27.27
-------------
UAH/EUR 32.60
-------------
(d) Increase in the statutory capital of a Group company
On 24 March 2021, there was an increase in the authorized
capital of the Starokonstantinovskiy Molochniy Zavod SC in the
amount of 4 . 222 k GBP. 100% of Starokonstantinovskiy Molochniy
Zavod SC belongs to MCNVIF "Alternative Investments".
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END
FR UVUNRAKUNURR
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