Final Results

RNS Number : 6167D
Ukrproduct Group Ltd
27 June 2019
 

 

27 June 2019

 

UKRPRODUCT GROUP LIMITED

("Ukrproduct", the "Company" or, together with its subsidiaries, the "Group")

 

FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2018

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 2018.

 

Copies of the 2018 Annual Report and Accounts, will shortly be posted to shareholders and will be available on the Company's website at www.ukrproduct.com. In addition, a Notice of Annual General Meeting ("AGM"), along with a Proxy Form, will shortly be posted to shareholders and will be available at the Company's website at www.ukrproduct.com.

 

The AGM will be held at the head office of the Company, 10th Floor, 39-41 Shota Rustaveli Street, 01033 Kyiv, Ukraine at 6.00 pm (Kyiv time) / 4.00 pm (London time) on 30 July 2019.

 

 

For further information contact:

 

Ukrproduct Group Ltd

 

Jack Rowell, Non-Executive Chairman

Tel: +380 44 232 9602

Alexander Slipchuk, Chief Executive Officer

www.ukrproduct.com

Strand Hanson Limited

 

Nominated Adviser and Broker

Rory Murphy, James Dance, Jack Botros

Tel: +44 20 7409 3494

www.strandhanson.co.uk

 

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's Statement

 

Trading

 

During the year to 31 December 2018 ("FY 2018"), the Ukrainian economy showed moderate growth, accompanied by wage inflation, which has helped consumer confidence. Ukrproduct Group Ltd ("Ukrproduct", the "Company" or, together with its subsidiaries, "the Group") continued focusing on cash generation while aiming to address opportunities in export markets, beverages and B2B, as well as expanding its dairy business.

 

The Group reports improved revenue of approximately £36,9 million (approximately 1.3 billion UAH). Gross profit in UAH terms increased 4.3% to approximately 115 million UAH, however, in GBP terms, the negative impact of exchange rate differences resulted in a decrease of 2.5% to approximately £3.2 million.

 

The Group reports an operating profit of approximately £0.2 million (approximately UAH 6.2 million) in FY2018, compared with an operating profit of approximately £0.5 million (approximately UAH 16.2 million) in 2017.

 

Overall, for FY 2018, the Company reports net profit of approximately £0.1 million (approximately 2.7 million UAH) compared to a loss of approximately £1.1 million (approximately 40.6 million UAH) in 2017. Net profit for 2018 is lower than previously expected (as announced on 7 May 2019) as a result of increased operating expenses. Net profit for FY2018 included lower finance charges related to the outstanding debt with EBRD, although total finance expenses increased to approximately £0.5 million (approximately 16.2 million UAH) from approximately £0.4 million (approximately 15.1 million UAH) in 2017.

 

Overall, the Group reports that its sales volumes have grown by 4%, including sales of branded products in its key packaged butter and processed cheese segments. However, both export sales volumes and revenue decreased due to the worldwide contraction of skimmed milk powder prices. Although the Company continued to capitalise on its spare dairy processing capacity by acquiring new B2B partners, Ukrproduct's B2B gross profit slightly decreased in 2018. Whilst gross profit of branded products showed substantial growth, it was unfortunately offset by losses caused by the decline in both skimmed milk powder and butter prices.

 

Sales of beverages significantly increased as a result of the Group's targeted marketing initiatives and the introduction of new drinks.

 

Financial Position

 

As at 31 December 2018, Ukrproduct reports net assets of approximately £1.0 million (approximately 35.13 million UAH) and net current liabilities of approximately £0.03 million (approximately 1.05 million UAH), with cash balances of approximately £0.2 million (approximately 6.4 million UAH). During FY 2018, the Group met its outstanding obligations, including the EBRD loan repayments, which were paid on schedule in the amount of €0.52 million.

 

 

Outlook

 

Ukrproduct's strategy going forward is to generate cash by improving the profitability of its key dairy product and beverage segments and to further enhance its working capital position.

 

The Group expects to boost its sales volume and revenue in 2019 by launching new products in its key business areas, introducing new marketing activities and capitalising further on export opportunities.

 

 

 

 

Jack Rowell

Alexander Slipchuk

Non-Executive Chairman

Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

Year ended

 

Year ended

31 December 2018

31 December 2017

£ '000

£ '000

 

 

 

 

 

 

 

Revenue

 

 

 

36 928

 

30 525

Cost of sales

 

 

 

(33 751)

 

(27 267)

GROSS PROFIT

 

 

 

3 177

 

3 258

Administrative expenses

 

 

 

(1 061)

 

(1 031)

Selling and distribution expenses

 

 

 

(1 799)

 

(1 561)

Other operating expenses

 

 

 

(131)

 

(156)

 

 

 

186

 

510

Net finance expenses

 

 

 

(494)

 

(437)

Net foreign exchange gain (loss)

 

 

 

398

 

(1 250)

PROFIT / (LOSS) BEFORE TAXATION

 

 

 

90

 

(1 177)

Income tax expense

 

 

 

 -

 

62

PROFIT / (LOSS) FOR THE YEAR

 

 

 

90

 

(1 115)

Attributable to:

 

 

 

 

 

 

Owners of the Parent

 

 

 

90

 

(1 115)

Non-controlling interests

 

 

 

 -

 

 -

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

Basic (pence)

 

 

 

 0,23

 

 (2,81)

Diluted (pence)

 

 

 

 0,23

 

 (2,81)

 

 

 

 

 

 

 

OTHER COMPREHENSIVE INCOME:

 

 

 

 

 

 

Items that may be subsequently reclassified to profit or loss

 

 

 

 

 

 

Currency translation differences

 

 

 

(8)

 

(113)

Items that will not be reclassified to profit or loss

 

 

 

 

 

 

Gain on revaluation of property, plant and equipment

 

 

 

 -

 

 -

Income tax in respect of revaluation reserve

 

 

 

 -

 

 -

OTHER COMPREHENSIVE INCOME, NET OF TAX

 

 

 

(8)

 

(113)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

 

 

 

82

 

(1 228)

Attributable to:

 

 

 

 

 

 

Owners of the Parent

 

 

 

82

 

(1 228)

Non-controlling interests

 

 

 

 -

 

 -

 

 

 

 

 

 

 

As at

 

As at

31 December 2018

31 December 2017

£ '000

£ '000

ASSETS

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

Property, plant and equipment

 

 

 

 

Intangible assets

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Inventories

 

 

 

 

Trade and other receivables

 

 

 

 

Current taxes

 

 

 

 

Other financial assets

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

 

 

 

 

 

 

 

 

 

 

EQUITY AND LIABILITIES

 

 

 

 

 

 

Equity attributable to owners of the parent

 

 

 

 

 

 

Share capital

 

 

 

 

Share premium

 

 

 

 

Translation reserve

 

 

 

 

Revaluation reserve

 

 

 

 

Retained earnings

 

 

 

 

 

 

 

 

 

Non-controlling interests

 

 

 

 

TOTAL EQUITY

 

 

 

 

Non-Current Liabilities

 

 

 

 

 

 

Bank loans

 

 

 

 

Long-term payables

 

 

 

 

Deferred tax liabilities

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Bank loans

 

 

 

 

Trade and other payables

 

 

 

 

Other taxes payable

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

 

 

TOTAL EQUITY AND LIABILITIES

 

 

 

 

 

Ukrproduct Group

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

AS AT 31 December 2018

(in thousand GBP, unless otherwise stated)

 

 

Attributable to owners of the parent

Total

Non-con-trolling interests

Total Equity

 

Share capital

Share premium

Revaluation reserve

Retained earnings

Translation reserve

 

 

 

 

£ '000

£ '000

£ '000

£ '000

£ '000

£ '000

£ '000

£ '000

 

 

 

 

 

 

 

 

 

As At 1 January 2017

 

 

 

 

 

 

 

 

 

Loss for the year

Other comprehensive income

 

 

 

 

 

 

 

 

Currency translation differences

Total comprehensive income

 

 

 

 

 

 

 

 

 

Depreciation on revaluation of property, plant and equipment

As At 31 December 2017

 

 

 

 

 

 

 

 

 

Profit for the year

Other comprehensive income

 

 

 

 

 

 

 

 

Currency translation differences

Total comprehensive income

 

 

 

 

 

 

 

 

 

Depreciation on revaluation of property, plant and equipment

As At 31 December 2018

 

Ukrproduct Group

CONSOLIDATED STATEMENT OF CASH FLOWS

AS AT 31 December 2018

(in thousand GBP, unless otherwise stated)

 

 

 

 

 

Year ended

 

Year ended

31 December 2018

31 December 2017

£ '000

£ '000

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from sale of property, plant and equipment

 

 

 

 

Repayments of loans issued

 

 

 

 

Net cash used in investing activities

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

Interest paid

 

 

 

 

Decrease in short term borrowing

 

 

 

 

Repayments of long term borrowing

 

 

 

 

Net cash (used in)/ generated from financing activities

 

 

 

 

 

 

 

 

 

 

 

Net Increase / (decrease) in cash and cash equivalents

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

 

 

Cash and cash equivalents at the beginning of the year

 

 

 

 

Cash and cash equivalents at the end of the year

 

 

 

 

 

These consolidated financial statements were approved and authorised for issue by the Board of Directors on 26 June 2019 and were signed on its behalf by Alexander Slipchuk.

Nature of Financial Information

 

The financial information contained in this announcement does not constitute statutory accounts as defined under section 113 of the Companies (Jersey) Law 1991 but has been extracted from the Group's 2018 statutory financial statements. It contained no statement under section 113B of the Companies (Jersey) Law 2011. The financial statements for 2018 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 (£000) except where otherwise indicated.

 

2.   Going concern

 

The consolidated financial statements have been prepared on the assumption that the Group is able to  continue its operations on a going concern basis for the foreseeable future.

 

For the year ended 31 December 2018, net profit amounted to approximately £0.1 million (year ended 31 December 2017 net loss of approximately £1.1 million). As at 31 December 2018, the Group continued to breach certain loan covenant terms of its loan with European Bank for Reconstruction and Development ("EBRD").

 

These conditions indicate a significant uncertainty with regard to the Group's ability to continue its operations on a going concern basis.

 

According to the Company's management, the Group's ability to continue its operations on a going concern basis is permissible based on the following assumptions:

 

1.  The Group received waivers from EBRD - in respect of the annual financial statements for 2018 and the first quarter of 2019 and the Board believes that EBRD will not demand accelerated repayment of the loan due to the breach of covenants;

2.  The Group continues to repay the loan to EBRD according to the agreement and timely settled the last two tranches after the reporting date;

3.  On 7 February 2018, the Company announced that it had entered into an agreement for a new loan facility with PJSC Creditwest Bank ("Creditwest Bank"), under which it could draw down up to UAH 65 million for refinancing purposes (to repay the OTP Bank Loan) as well as for financing working capital ("New Loan Agreement"). All amounts drawn down by the Group under the New Loan Agreement, together with interest accrued, is due to be repaid on 5 February 2021. The interest rate under the New Loan Agreement is fixed at 18% per annum. Any draw down under the facility is secured on appropriate collateral provided by the Group (real estate, equipment etc), including non-current assets located in Zhytomyr and equipment for production of Zhiviy Kvass. On 9 February 2018, the Group announced that it had drawn down UAH 32.3 million under the terms of the New Loan Agreement in order to fully repay all amounts outstanding to OTP Bank. Accordingly, the Group extinguished all outstanding liabilities to OTP Bank; and

4.  The Group is planning to raise funding in H2 2019.

 

The Group's current strategy is to further expand its export sales worldwide with a focus on Asia and Africa. CIS markets also remain strategically important for the Group not least Kazakhstan where the Company increased its export volumes. Ukrproduct is also looking to expand domestic sales in Ukraine driven in part by the introduction of new products and rebranding. The Group continues to boost its dairy processing volumes via close cooperation with local farmers and cooperatives, thereby increasing its capacity utilization.

 

3.   Bank Loans and Overdrafts

 

On 7 February 2018, the Company announced that it had entered into an agreement for a new loan facility with PJSC Creditwest Bank ("Creditwest Bank"), under which it could draw down up to UAH 65 million for refinancing purposes (to repay the OTP Bank Loan) as well as for financing working capital ("New Loan Agreement"). All amounts drawn down by the Group under the New Loan Agreement, together with interest accrued, is due to be repaid on 5 February 2021. The interest rate under the New Loan Agreement is fixed at 18% per annum. Any draw down under the facility is secured on appropriate collateral provided by the Group (real estate, equipment etc), including non-current assets located in Zhytomyr and equipment for production of Zhiviy Kvass.

 

On 9 February 2018, the Group announced that it had drawn down UAH 32.3 million under the terms of the New Loan Agreement in order to fully repay all amounts outstanding to OTP Bank. Accordingly, the Group extinguished all outstanding liabilities to OTP Bank.

 

As at 31 December 2018 the Group has two loans: the loan from Creditwest Bank in the amount of 1 850 thousand GBP (in UAH 65,0 million) and the loan from EBRD in the amount of 5,813 thousand GBP (in EUR 6,439 thousand).

 

During 2018, 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.

 

Fixed assets with a net book value of GBP 4,872 thousand at 31 December 2018 (2017: GBP 4,829 thousand) were pledged as collateral.

 

Assets pledged as security for the EBRD loan include property and land in Starokonstantinov, equipment for dairy production and production of hard cheese, as well as trademarks.

 

 

Bank

Currency

Type

Opening date

Termination date

Interest rate

Limit

As At 31 December 2018

As at 31 December 2017

£ '000

£ '000

£ '000

EBRD

EUR

Loan

31.03.2011

30.11.2024

5-7%

7 493

5 813

6 178

OTP Bank

UAH

Credit line

09.08.2011

09.02.2018

2,12%

1 139

-

856

Creditwest Bank Ukraine

UAH

Credit line

05.02.2018

05.02.2021

15,89%

1 850

1 850

-

Total

 

 

 

 

 

 

7 663

7 034

 

 

The average interest rate as at 31 December 2018 was 6,15% (2017: 5,27%).


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