Final Results
Ukrproduct Group Ltd
25 April 2006
25 April 2006
UKRPRODUCT GROUP LTD ('UPG')
Ukrproduct Group Ltd is a leading Ukraine-based producer and distributor of
branded dairy foods.
Preliminary Results for the year ended 31 December 2005
Highlights (2004 - in brackets)*
• Sales: £39.9 million + 47% £27.1 million)
• EBITDA: £3.5 million + 34% (£2.6 million)
• PBT: £2.3 million + 33% (£1.7 million)
• Net profit: £2.0 million + 39% (£1.4 million)
• Gross margin:16.9 % (16.3%)
• Basic Earnings per share: 5p (4.8p)
• Proposed final dividend of 0.5p per share giving 0.85p for the full year
• Acquisitions of Jhmerinka & Letichiv providing the necessary increases in
production, raw material capacity & expansion of geographic coverage
• Maintained market leadership in core segments of processed cheese and
packaged butter
• Successful introduction of new products
• Continued focus on operational improvements
* Numbers rounded up. For the complete numbers please refer to the Financial
Statements.
Commenting on the FY2005 results, Sergey Evlanchik, Chief Executive of
Ukrproduct Group, said:
"Ukrproduct Group has delivered strong growth in sales and profits during 2005
due to our proven strategy set out at the IPO. UPG will continue to focus on
driving the organic growth of the business by leveraging the strengths of its
operating, manufacturing and distribution capabilities to take advantage of the
opportunities within the dynamic, Ukrainian, FMCG market. Ukraine's current
negotiations with Russia have created some unpredictability within the Ukrainian
economy. Nevertheless, current trading is in line with expectations and we seek
further progress in 2006."
For further information:
Ukrproduct Group April 25 2006
Sergey Evlanchik, CEO, and Dmitry Dragun, CFO +44 20 7831 3113
Thereafter
+38 044 502 8014
Financial Dynamics +44 20 7831 3113
Ben Foster/ Charles Watenphul
Notes to editors
Ukrproduct Group Ltd (UPG) is one of Ukraine's leading producers of branded
foods. Headquartered in Kyiv and registered in Jersey, the company's main
business focuses on the production and distribution of branded food products,
namely packaged butter and processed cheese, to wholesale and retail outlets in
Ukraine through its own distribution network. UPG also produces skimmed milk
powder for export to countries across Europe as well as the Far East. UPG is the
market leader in the processed cheese and packaged butter segments, with
estimated market shares of 29% and 21% respectively. UPG is one of Ukraine's
fastest growing companies within its sector, with compound average sales growth
of 55% between 2001-2004.
On 11 February 2005,Ukrproduct Group Ltd, became the first Ukrainian trading
group to be admitted to AIM. The company successfully placed 27.2% of its share
capital at 53.5p per share, giving the company an initial market capitalisation
of £22.5 million.
CHAIRMAN'S STATEMENT
I am pleased to announce the Group's first annual results as a public company
following our successful admission to AIM in February 2005. The Group has
maintained its market leading positions within its chosen segments of processed
cheese and packaged butter at 29% and 21% respectively. We have continued to
improve the Group's overall operational performance through the continued
modernisation of our production facilities. Despite a challenging business
environment UPG remains one of the most profitable and dynamic FMCG businesses
in Ukraine.
Results
I am delighted to report a year of continued, strong growth for the company.
Sales increased by 47% to £39.9 million (2004: £27.1 million) with operating
profits (EBITDA) increasing by 34% to £3.5 million. Profit before taxes grew by
33% to £2.3million. Profit margins improved at the gross level to 16.9% (2004:
16.3%).
Acquisitions
In November 2005 we completed the acquisitions of 100% of the share capital of
Jhmerinka Butter & Cheese Plant Ltd and a 62% stake in Letichiv Dairy Plant for
a total cash consideration of £1.3 million. The acquisitions provided the Group
with the necessary increase in production and raw material capacity to meet
consumer demand, as well as expanding the geographic coverage of the Group
through the extension of our raw milk supply zone and product coverage. The
Group is in the process of significantly improving the performance of both
plants through the introduction of improved cost controls, leveraging of the
distribution network and optimisation of the product mix. The plants have been
fully operational since the beginning of April 2006 and expect to have a
positive effect on the Group's overall performance.
Dividends
The Group is committed to a progressive dividend policy whilst maintaining a
balance between reinvesting profits and distributing funds to shareholders. As a
result, the Board is recommending a final dividend payment of 0.5 pence per
ordinary share for the year ended 31 December 2005 which equates to 0.85 pence
per ordinary share for the full year. If approved at the AGM, the final dividend
will be paid on 30 June 2006 to shareholders on the register as at 2 June 2006.
Strategy
Ukrproduct Group remains committed to its strategy of developing its
market-leading positions in its two core segments of processed cheese and
packaged butter as well as expanding the Group's product offering. The
fragmented FMCG market in Ukraine also provides the Group with the opportunity
to leverage its current strengths in order to react to opportunities as they
arise and further increase its domestic presence.
The Group's manufacturing excellence has provided us with a key advantage in the
Ukrainian FMCG market. We will continue to improve the operating performance of
our plants both in terms of increased quality and efficiency, as evidenced by
the planned redevelopment at Starkon and developments at Jhmerinka and Letichiv.
The strength of our brands remain the cornerstone of the business. We will
continue to invest in each of our core brands whilst analysing future
opportunities across the dairy based product segment that will drive the overall
growth and profitability of the business.
Our distribution network continues to increase in size, furthering the
geographic reach of the group and the growth in the distribution of
non-competing third party products. During 2006, Ukrproduct will continue to
focus on leveraging the existing strength of the network to ensure that the
Group remains at the forefront of supply chain development in Ukraine.
Succession Planning
Sergey Evlanchik has decided to step down as chief executive in order to
dedicate more time to developing other business interests. He has been
instrumental in UPG's success, establishing the Group as one of the market
leaders in the Ukrainian FMCG sector and in leading the company to its admission
on AIM in February 2005. He will, however, remain closely involved in the
development of the company; allowing UPG to continue to benefit from his
experience in his new role as an executive director. I am pleased to announce
that Iryna Yevets, currently chief operating officer of UPG, will replace Sergey
as CEO. These changes will take effect from 1June 2006.
Iryna Yevets (38) joined Ukrproduct Group in 2002 as Finance Director becoming
COO in 2004. Prior to joining UPG, Iryna founded her own audit company in 1994
before becoming chief accountant in 2001 of Latoritsa, one of Ukraine's leading
integrated food companies. Iryna holds an honours degree in Economics and
Engineering from Lviv University and will shortly complete her MBA.
Over the last four years she has played a key part in developing the operating
efficiencies of the Group, its distribution network and branded food products.
Iryna's in-depth knowledge of the company and market will prove invaluable as
UPG furthers its operational development and builds on its market leading
positions. The Board and I look forward to working even more closely with her in
the future.
On behalf of the Board, I would like to convey my appreciation to everyone in
the Group for their help in ensuring the continuing success of the business.
Jack Rowell
Chairman
25 April 2006
CHIEF EXECUTIVE'S STATEMENT
Introduction
2005 was a dynamic and exciting year for the Group. Not only was it the
Company's first year as a public entity, following its successful admission to
AIM, but it was also a year of major changes in Ukraine initiated by the new
government following the "Orange revolution" in late 2004.
It was a year of significant development for Ukrproduct Group with regards to
operational performance, development of new products and expansion of
Ukrproduct's geographic coverage. I am pleased to report that the Group was
successful in maintaining its market leading shares in its key business segments
of processed cheese and packaged butter.
Sales grew by 47% to £39.9 million (2004: £27.1 million); profit before
interest, taxes, depreciation and amortisation (EBITDA) of £3.5 million was up
34% over the prior year. Profit before tax was £2.3million, an increase of 33%.
Net profit increased by 39% to reach £2.0 million. Gross profit margin base
expanded to 16.9% (2004: 16.3%), EBITDA margin decreased from 9.6% in 2004 to
8.6% in the year under review, mainly as a result of increasing indirect costs.
Net profit margin of 5.0% was broadly in line with the prior year's number of
5.3%. As highlighted in the trading update provided to the market in December
2005, margins were impacted by high raw material prices and lower prices for
skimmed milk powder in the export market. However, we managed to address this
impact through the introduction of new higher margin products and the
renegotiation of raw milk prices as well as through the gradual implementation
of increased pricing across our product range.
On 11 February 2005, Ukrproduct Group took a major step forward in its
development plans. Following the restructuring of the Group. UPG was
successfully admitted to AIM on the London Stock Exchange. The company raised £6
million gross on admission and the Group's market capitalisation based on the
placing price of 53.5p per share was approximately £22 million.
We were able to efficiently utilise the funds raised on admission to improve the
operational performance of the Group through the strengthening of its sales and
distribution network, completion of the new processed cheese workshop at
Molochnik and the continued investment in the development of new products.
Operating review
The construction of the Group's new facility for the production of processed
cheese at the "Molochnik" plant in Zhytomir was completed on schedule during the
summer. Construction had commenced in May 2004. This plant, the biggest of its
kind in Ukraine, allowed the Group to almost double the capacity of "Molochnik"
to 2,000 tonnes of processed cheese per month, as well as to develop production
space for new processed cheese products, cheese spreads.
In November 2005 the Group completed the acquisition of 100% of the share
capital of Jhmerinka Butter & Cheese Plant and 62% of the share capital of the
Letichiv Dairy Plant. The Jhmerinka plant, located in the region of Vinnitza,
Central Ukraine produces a regional range of well established processed cheeses
and packaged butters. According to the official data of the Ukrainian State
Committee of Statistics, it was the twelfth largest manufacturer of processed
cheese in Ukraine in 2005. The Letichiv plant, located in Letichiv, Western
Ukraine produces various dairy-based products such as cream, butter and casein
with the capacity to collect up to 100 tonnes of raw milk per day. The
acquisition of the plant expanded the Group's raw milk zone in the region, which
is central for ensuring the continued supply of raw materials needed for the
increase in production at the Starkon plant.
The production and sales of the Group progressed well despite slowing GDP growth
and weaker consumer spending. The production of processed cheese increased by
almost 20% to 14,700 tonnes, excluding the effect of acquisitions at the year
end (FY2004: 12,300 tonnes), while the output of packaged butter was maintained
at 9,200 tonnes (FY2004: 9,200 tonnes). The production of milk powder also
increased during the year totalling over 3,700 tonnes (FY2004: 3,500 tonnes).
Market
The Group's core markets in Ukraine continued to demonstrate growth. The
processed cheese market is estimated to have grown to nearly 50,000 tonnes in
2005, representing an increase of 17% over 2004. UPG's share in the processed
cheese segment in 2005 was approximately 29%. During 2005, the packaged butter
market grew by around 6% year on year with volumes estimated to have reached
42,900 tonnes by the year end. Ukrproduct's share of the packaged butter segment
was approximately 21%. The skimmed milk powder market decreased slightly
compared to 2004 totalling 73,000 tonnes. The Group's share of this output
reached 5.1%.
Prospects
Taking into account the dynamic growth trends of our core markets in Ukraine,
the Board consistently reviews and evaluates potential opportunities that will
further the development of the Group.
We continuously aim to improve the operational efficiency of the Group and its
high standards of quality. As a result, we are planning to commence the
modernisation of the Starkon plant later this year. The majority of this work
will involve the upgrading of equipment and is expected to be completed by the
year end. These developments will increase its operational efficiency helping to
reduce costs as well as further increasing the quality of the products produced
such as milk powder.
Alongside the modernisation of Starkon, we plan to install equipment for the
production of hard ("cheddar") cheese. The construction of the plant is expected
to take 12-18 months with the facility becoming fully operational by the third
quarter of 2007. The total investment will be funded through a medium to long
term credit facility.
The hard cheese sector in Ukraine represents a good opportunity for UPG to enter
a growing and profitable market enabling the Group to increase its product base
and sales. The hard cheese sector is estimated to be three times larger than
processed cheese with an average growth rate of 20% per annum (2001-2005). There
is an opportunity to deliver additional value through the conversion of the main
by product of the production process, liquid milk derivatives, into skimmed milk
powder. Since 2004, UPG has gained valuable experience in the sale and promotion
of third party hard cheese through its distribution network. We plan to
leverage the inherent strengths of the Company's unique distribution network,
production, branding and quality control to ensure that UPG's domestic entry
into this segment is as successful as possible.
We will continue to ensure that the purchasing and forward storage of raw
materials is as cost effective as possible. The Group believes that this can be
achieved through the leveraging of the Company's purchasing power in the
Khmelnitsky region, forward sales contracts and increased performance of the
Starkon plant.
I would like to take this opportunity to welcome Iryna to the role of chief
executive. I believe she is the ideal candidate to continue to drive the
business forward. I look forward to remaining closely involved in the
development of the company; through my new role as an executive director.
I would like to express my gratitude to both the Management team and all of the
employees of the Group who have been instrumental in our achievements and
developments.
Outlook
Ukrproduct Group has delivered strong growth in sales and profits during 2005
due to our proven strategy set out at the time of our AIM IPO. UPG will continue
to focus on driving the organic growth of the business by leveraging the
strengths of its operating, manufacturing and distribution capabilities to take
advantage of the opportunities within the dynamic, Ukrainian, FMCG market.
Ukraine's current negotiations with Russia have created some unpredictability
within the Ukrainian economy. Nevertheless, current trading is in line with
expectations and we seek further progress in 2006.
Sergey Evlanchik
Chief Executive Officer
25 April 2006
FINANCIAL REVIEW
Results
Sales have increased by 47% to £39.9 million (2004: £27.1 million) with the
large part of this increase being achieved through organic growth. By segment,
processed cheese accounted for 41% of sales (£16.2 million, 2004: £10.0
million), butter for 28% (£11.4 million, 2004: £9.5 million) and milk powders
for 21% (£8.5 million, 2004: £5.4 million) with the balance made up by the
third-party services. Profit before interest, taxes, depreciation and
amortisation (EBITDA) of £3.5 million was up 34% over the prior year. Profit
before taxes (PBT) was £2.3 million, an increase of 33%. Net profit increased by
39% to reach £2.0 million. Gross profit margin base expanded to 16.9% (2004:
16.3%), EBITDA margin decreased from 9.6% in 2004 to 8.6% in the year under
review, mainly as a result of costs associated with being a listed company and
our investment in Selling & Distribution which underpins our continued growth.
Net profit margin is reported at 5.0%, a slight decrease over the prior year's
number of 5.3%.
Acquisitions
In November 2005, the Group acquired 100% of the share capital of Jhmerinka
Butter & Cheese Plant Ltd and a 62% stake in Letichiv Dairy Plant for a total
cash consideration of £1.3 million. The acquisitions were funded through funds
raised at flotation. In the year immediately preceding the acquisition, the
plants had aggregated sales of £6 million and operating profits of £0.23
million. The Group intends to invest approximately £400K in aggregate capex in
2006. The performance of the acquired plants has been improved via a combination
of key personnel changes, introduction of improved cost controls, leveraging of
the distribution network and optimisation of the product mix.
Cash flow
The net cash flow from operating activities during the year was a negative £1.2
million. This reflected a substantial increase in trade receivables and
inventories, the latter predominantly due to our new strategy to forward store
semi-processed dairy materials in order to eliminate the uncertainty in supply
of the materials to the Group's enlarged plants. The underlying cash generation
of the Group remained strong, with the cash position increasing comfortably at
the year end. The forward storage of raw materials has been completed which will
further strengthen the cash flow this year.
Capital expenditure
Capital expenditure for the year was £3.5 million (2004: £1.6 million) funded by
a combination of money raised at flotation and borrowed capital. The main areas
of investment were the modernisation of the Group's manufacturing plants,
purchasing of new equipment, upgrading of the distribution facilities and
increase in working capital.
Bank facilities
The Group has a working capital facility of up to £4.5 million provided by
Ukraine Raiffeisen bank at variable interest rates in both Hryvna and US Dollar.
The facility is renewable in May 2008 and has various clauses protecting the
Group from excessive increases in interest rates and occurrence of other
unexpected events. Further funding for working capital needs and project
finance, if necessary, is available upon request from either the principal
bankers or other banking institutions in Ukraine.
Earnings per share
The basic earnings per share (eps) in the year were 5.0 pence (2004: 4.8 pence),
up 4%. The basic eps has been calculated by dividing net profit attributable to
ordinary shareholders (profit for the year) by the time-weighted average number
of shares in issue throughout the year. The diluted earnings per share was 4.8
pence for the year (2004: 4.8 pence).
Dividends
As a result of the Group's strong performance, the Board is recommending a final
dividend of 0.5 pence per ordinary share for the year ended 31 December 2005
which would lead to 0.85 pence per ordinary share for the full year. If approved
at the AGM, the final dividend will be paid on 30 June 2006 to shareholders on
the register as at 2 June 2006.
Dmitry Dragun
Chief Financial Officer
25 April 2006
CONSOLIDATED BALANCE SHEET
As at December 31, 2005, £'000
Notes As at 31 As at 31
December 2005 December 2004
(re-stated)
Assets
Non-current assets
Property, plant and equipment 2 9,034 5,023
Intangible assets 1551 3
Investments 97 83
Deferred tax assets 90 36
10,772 5,145
Current assets
Inventories 4,523 2,328
Trade and other receivables 4,068 2,023
Other debtors 358 218
Cash and cash equivalents 453 300
9,402 4,869
Total assets 20,174 10,014
Equity capital and reserves attributable to
equity holders
Share capital 4 4,121 3,000
Other reserves 5 5,192 607
Retained earnings 3,815 1,412
13,128 5,019
Minority interest 186 132
Total equity 13,314 5,151
Liabilities
Non-Current Liabilities
Long term loans 152 221
Other long term liabilities - 938
Deferred tax liabilities 837 703
989 1,862
Current Liabilities
Bank loans and overdrafts 3,042 1,077
Trade and other payables 2,606 1,671
Current portion of long term liabilities 67 -
Current income tax liabilities 156 253
5,871 3,001
Total equity and liabilities 20,174 10,014
These financial statements were approved and authorized for issue by the Board
of Directors on April 25, 2006.
CONSOLIDATED INCOME STATEMENT
For the year ended December 31, 2005, £'000
Notes Year ended 31 Year ended 31
December 2005 December 2004
(re-stated)
Revenues 1 39,962 27,115
Costs of sales (33,194) (22,698)
Gross profit 6,768 4,417
Other operating income 594 63
General and administrative expenses (2,167) (1,045)
Selling and distribution expenses (2,084) (1,070)
Other operating expenses (563) (296)
Interest income 41 -
Interest expenses (244) (312)
Profit before taxation 2,345 1,757
Income tax expense (337) (301)
Profit after taxation 2,008 1,456
Attributable to:
Equity holders 2,003 1,436
Minority interest 5 20
Earnings per share basic, pence 6 5.0 4.8
Earnings per share diluted, pence 6 4.8 4.8
UKRPRODUCT GROUP LTD
CONSOLIDATED CASH FLOW STATEMENT
For the year ended December 31, 2005, £'000
Notes Year ended 31 Year ended 31
December 2005 December 2004
Cash flows from operating activities
Net profit before taxation 2,345 1,757
Adjustments for:
Exchange difference (594) -
Depreciation 2 892 520
Interest expense 244 305
Interest income (41) -
Share based payments 76 -
2,922 2,582
(Increase) in inventories (1,507) (872)
(Increase) in trade and other receivables (1,026) (71)
(Decrease)in trade and other payables (990) (349)
Cash (used by)/generated from operations (601) 1,290
Interest paid (244) (305)
Interest received 41 -
Income tax paid/(refunded) (384) (66)
Net cash (used in)/ generated by operating activities (1,188) 919
Cash flows from investing activities
Purchase of property, plant and equipment (3,480) (1,566)
Purchase of investments (net of cash acquired) (1,282) 1
Proceeds from sale of property, plant and equipment - 3
Proceeds from sale of investments - (7)
Loans repaid/ (issued) 197 (207)
Net cash used in investing activities (4,565) (1,776)
Cash flows from financing activities
Net proceeds/ (repayments) from long term borrowing (99) 232
Proceeds/ (repayments) from issue of bonds (964) 680
Proceeds from issue of shares 5,519 -
Cash paid on liquidation of Ukrproduct Group plc (12) -
Fund-raising expenses (361) -
Dividends paid 7 (148) -
Net proceeds from issue of promissory notes - (20)
Net proceeds from short term borrowing 1,656 147
Net cash generated by/(used in) financing activities 5,591 1,039
Effect of exchange rate changes and restatements on 315 (17)
cash and cash equivalents
Net increase/(decrease) in cash and cash equivalents 153 168
Cash and cash equivalents at the beginning of the year 300 132
Cash and cash equivalents at the end of the year 453 300
1 Segment information
At 31 December 2005, the Group was organised on a worldwide basis into three
main business segments:
(1) Cheese;
(2) Butter; and
(3) Milk powders
The segment results for the year ended 31 December 2005 are as follows:
Cheese Butter Milk Total Services Other Total
powders dairy
Sales to external customer 16,251 11,374 8,515 36,140 627 3,195 39,962
Gross profit 3,794 1,689 972 6,455 110 203 6,768
Administrative expenses (966) (599) (148) (1,713) (26) - (1,739)
Selling and distribution (1,256) (673) (18) (1,947) (31) - (1,978)
expenses
Unallocated - - - - - - (503)
operating income/expenses
Interest income - - - - - - 41
Interest expenses - - - - - - (244)
Profit before taxation 1,572 417 806 2,795 53 203 2,345
Taxation - - - - - - (337)
Profit after taxation 1,572 417 806 2,795 53 203 2,008
Segment assets 9,994 5,063 1,558 16,615 243 847 17,705
Unallocated corporate assets - - - - - - 2,379
Unallocated deferred tax - - - - - - 90
Total assets 9,994 5,063 1,558 16,615 243 847 20,174
Segment Liabilities 904 589 162 1,655 54 379 2,088
Unallocated corporate - - - - - - 3,935
liabilities
Unallocated deferred tax - - - - - - 837
Total liabilities 904 589 162 1,655 54 379 6,860
Other segment information:
Depreciation 525 241 89 855 13 - 868
Unallocated Depreciation - - - - - - 24
Capital expenditure 2,593 686 240 3,519 45 4 3,568
Unallocated Capital expenditure - - - - - - 29
The segment results for the year ended 31 December 2004 are as follows:
Milk Total
Cheese Butter powders dairy Services Other Total
Sales to external 10,064 9,512 5,453 25,029 188 1,898 27,115
customer
Gross profit 2,357 1,175 820 4,352 12 53 4,417
Other operating
income/expenses (453) (492) (301) (1,246) (1) (51) (1,298)
Unallocated
operating income/ - - - - - - (1,050)
expenses
Interest expenses - - - - - - (312)
Profit before taxation 1,904 683 519 3,106 11 2 1,757
Taxation - - - - - - (301)
Profit after taxation 1,904 683 519 3,106 11 2 1,456
Segment assets 4,604 2,529 989 8,122 50 1,145 9,317
Unallocated corporate - - - - - - 662
assets
Unallocated deferred - - - - - - 35
tax
Total assets 4,604 2,529 989 8,122 50 1,145 10,014
Segment Liabilities 1,423 380 243 2,046 22 177 2,245
Unallocated corporate
liabilities
and shareholders'
equity - - - - - - 1,915
Unallocated deferred - - - - - - 703
tax
Total liabilities 1,423 380 243 2,046 22 177 4,863
Other segment
information:
Depreciation 286 159 46 491 4 25 520
Capital expenditure 1,198 301 82 1,581 2 36 1,619
Unallocated Capital
expenditure - - - - - - 19
Secondary reporting format - geographical segments:
Sales by country Year ended 31 Year ended 31
December 2005 December 2004
Ukraine 33,689 22,669
Germany 2,179 -
Russia 1,376 680
Denmark 669 1,921
Holland 479 205
Bulgaria 431 228
Azerbaijan 293 -
Poland 184 -
Other countries 662 1,412
39,962 27,115
The majority of the Group's recognised assets and liabilities are in Ukraine.
2 Property, plant and equipment
Assets under Land and Plant and Vehicles Total
Construction Buildings Machinery and
equipment
Cost or valuation
Opening balance 992 3,941 1,365 1,138 7,436
Acquisition 3 138 240 204 585
Additions/ (Disposals) (144) 1,211 1,157 1,164 3,388
Exchange differences on 162 798 364 319 1,643
translation to the presentation
currency
Closing balance 1,013 6,088 3,126 2,825 13,052
Accumulated depreciation
Opening balance - 1,447 552 414 2,413
Acquisition - 63 96 111 270
Depreciation charge - 113 219 537 869
Disposals - 6 (21) (44) (59)
Exchange differences on - 271 127 127 525
translation to the presentation
currency
Closing balance - 1,900 973 1,145 4,018
Net book amount at 31 1,013 4,188 2,153 1,680 9,034
December 2005
Cost or valuation
Opening balance 40 412 439 347 1,238
Revaluation 289 4,160 603 187 5,239
Additions/ (Disposals) 717 (325) 413 454 1,259
Exchange differences on (54) (306) (90) 150 (300)
translation to the presentation
currency
Closing balance 992 3,941 1,365 1,138 7,436
Accumulated depreciation
Opening balance 0 136 50 36 222
Revaluation 0 1,471 474 146 2,091
Depreciation charge 0 132 90 298 520
Disposals 0 (115) (23) (41) (179)
Exchange differences on 0 (177) (39) (25) (241)
translation to the presentation
currency
Closing balance 0 1,447 552 414 2,413
Net book amount at 31 992 2,494 813 724 5,023
December 2004
Fixed assets with a net book value of £4,453,000 as at 31 December 2005
(£2,339,000 at 31 December 2004) were pledged as collateral for loans.
The assets of the Group were revalued in January 2004 according to the
revaluation policy. The valuation included a combination of different methods
used by independent appraisers. It was carried out by "Podilia-Expert" LLC
(Ukraine), who valued the assets using the cost and comparables method, and by "
BGS-Aktiv" LLC (Ukraine), who used the asset cash generating method. The company
expects to conduct the valuation of the assets of the Group in January-February
2007.
3 Acquisition of subsidiaries
On 1 November 2005, Ukrproduct Group CJSC acquired 62.2 % of the share capital
of Letichevsky Maslozavod OJSC and 100 % of the share capital of Jmerinsky
Maslosyrzavod LLC (both are dairy products production plants). This acquisition
gave rise to Goodwill of £1,148,000.
If the acquisition had occurred at the beginning of the period (1 January 2005),
Group revenue would have been £43,527,000 and profit before tax would
have been £2,463,000.
Letichevsky Jmerinsky Total
Maslozavod Maslosyrzavod
OJSC LLC
Non-Current Assets
Property, Plant and equipment 122 234 356
Current assets
Cash and cash at bank 1 17 18
Inventories 16 151 167
Receivables and prepayments 519 374 893
536 542 1,078
Total assets 658 776 1,434
Liabilities -
Trade and other payable 484 736 1,220
Net assets 174 40 214
Minority interest (37.8%) (62) - (62)
Net assets acquired 112 40 152
Acquisition price 1,300
Goodwill 1,148
Purchase consideration settled in cash 1,300
Cash and cash equivalents in subsidiary acquired (18)
Cash outflow on acquisition 1,282
These companies have been consolidated into the Group. The management is
planning to appraise the assets acquired within 12 months after the acquisition
date in order to reflect their fair value in the financial statements of the
next reporting period.
4 Share capital
Authorised
As at 31 As at 31 As at 31 As at 31
December December December December
2005 2005 2004 2004
Number £ Number £
Ordinary shares of 10p each 50,000 30,000
5,000 3,000
Issued and fully paid
2005 2005 2004 2004
Number £ Number £
Ordinary shares of 10p each
At beginning of the year 30,000 3,000 - -
Other issues during the year 11,215 1,121 30,000 3,000
At end of the year 41,215 4,121 30,000 3,000
Issue of shares
On 11 February 2005 the common shares of the Company were admitted to the
Alternative Investment Market of the London Stock Exchange. The details of the
share offering by the Company are provided below:
Number of shares placed with public investors 11,214,953
Nominal value of a share, (GBP) 0.1
Proceeds from issue of shares, 5,519
including:
Increase in share capital 1,121
Share premium 4,398
5 Other reserves
Notes Share Revaluation Merger Share Total
premium reserve reserve option equity
reserve
Balance at 1 January 2004 - - (1,414) - (1,414)
Gain on revaluation of fixed - 3,073 - - 3,073
assets
Deferred income tax on gain on - (674) - - (674)
revaluation
Merger reserve arising an - - (15,288) - (15,288)
acquisition of Operating Group
Net profit for the period - - - - -
Depreciation on revaluation of - (154) - - (154)
fixed assets
Elimination of shares issued and - - 15,288 - 15,288
merger reserve on acquisition of
Operating Group
Exchange differences on - (224) - (224)
translation to the presentation
currency
Balance at 31 December 2004 - 2,021 (1,414) - 607
Issue of shares 4,398 - - - 4,398
Fund-raising expenses (361) - - (361)
Share based payment (120) - - 196 76
Exclusion from Group - - (12) - (12)
Depreciation on revaluation of - (108) - - (108)
fixed assets
Reduction of revaluation reserve - (25) - - (25)
Decrease of minority Interest - 28 - - 28
Exchange differences on - 336 253 - 589
translation to the presentation
currency
Balance at 31 December 2005 3,917 2,252 (1,173) 196 5,192
The reduction in revaluation reserve is due to sale of property, plant and
equipment which have previously been revalued. The following describes the
nature and purpose of each reserve within owners' equity.
Reserve Description and purpose
Share capital Amount subscribed for share capital at nominal value.
Share premium Amount subscribed for share capital in excess of nominal value.
Revaluation Gains arising on the revaluation of the Group's property (other than investment
property). The balance on this reserve is wholly undistributable.
Merger Losses arising on the application of the pooling of interests method of consolidation
used to account for the merger of Ukrproduct Group Ltd and its subsidiaries.
Share option Amount arising from share based payments (issue of share options).
Retained earnings Cumulative net gains and losses recognised in the consolidated income statement.
Minority interest Portion of the profit or loss and net assets of the subsidiary attributable to equity
interests that are not owned, directly or indirectly through the subsidiaries, by the
parent.
Fund-raising expenses. The Group has entered into equity-settled share-based
transactions with parties other than employees and has measured the transactions
indirectly at the fair value of the instruments granted. This party was WH
Ireland who acted as broker of the fund-raising for the Group by placing
ordinary shares on the London Stock Exchange, section AIM in February 2005. The
fair value of the share-based instruments (warrants) given to the broker as part
of consideration was £120,000.
Reduction of the revaluation reserve. Reduction of the revaluation reserve
relates to sale of those assets that were previously revalued.
6 Earnings per share
Basic earnings per share has been calculated by dividing net profit attributable
to the ordinary shareholders (profit for the year) by the weighted average
number of shares in issue. The diluted earnings per share take into account the
potential exercise of all options and warrants in existence at the date of this
report. The options were granted to the Directors of the Company on 31 January,
2005 and are exercisable until 11 February 2009 at the price of £ 0.535. The
warrants were granted to the Company's Brokers on 31 January 2005 and are
exercisable until 31 January 2008 at the price of £ 0.535.
Year ended 31 Year ended 31
December 2005 December 2004
Net profit attributable to ordinary shareholders, £'000 2,003 1,436
Weighted number of ordinary shares in issue 39,924,465 30,000,000
Basic earnings per share, pence 5.0 4.8
Weighted number of WH Ireland warrants 1,152,974 -
Weighted number of Directors' option shares 807,082 -
Diluted average number of shares 41,884,521 -
Diluted earnings per share, pence 4.8 4.8
7 Dividends
As at 25 April 2006, the Board of Directors proposed the final dividend payment
of 0.5 pence per ordinary share for the year ended 31 December 2005 in the
amount of £200,000 which would lead to 0.85 pence per ordinary share for the
full year in the amount of £150,000. If approved at the AGM, the final dividend
will be paid on 30 June 2006 to the shareholders on the register as at 2 June
2006. No tax consequences for the Group will arise out of this transaction as
the Group's parent company is an entity registered under the Jersey laws.
This information is provided by RNS
The company news service from the London Stock Exchange
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