Interim results 2017

RNS Number : 1528S

Ukrproduct Group Ltd

28 September 2017

 

FOR IMMEDIATE RELEASE                                                               September 28, 2017

UKRPRODUCT ANNOUNCES UNAUDITED INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2017

Kyiv, Ukraine - September 28, 2017 - Ukrproduct Group Limited ("Ukrproduct", "UPG" or the "Group") (AIM: UKR), one of the leading Ukrainian producers and distributors of branded dairy foods and beverages (kvass), today announces its unaudited interim consolidated IFRS financial results for the six months ended 30 June 2017.

KEY FIGURES

(Figures in brackets are for the six months ended and as at 30 June 2016 when the exchange rate was 36.61 UAH / GBP compared to 33.68 UAH /GBP in this reporting period)

Total revenues increased by 82% year on year to GBP 14.9 m (GBP 8.2 m). 
In Ukrainian Hryvna this represents an increase of 67.8%.

Gross profit margin increased to 11.4% (9.2%) resulting from a gross profit increase of 124.4% to GBP 1.7 m (GBP 0.8 m).  In Ukrainian Hryvna this represents an increase of 107.1%.

Kvass revenues have increased by 30.2% year on year to GBP 0.5 m (GBP 0.4 m) with gross profit in this area also increasing by 20.8% year-on-year.

Skimmed Milk Powder (SMP) revenues have increased by 127.2% to GBP 4.1 million (GBP 1.8m), however the gross profit in this area decreased to GBP -0.6 m (GBP -0.1 m).

EBITDA increased to GBP 696 k (GBP - 16 k) year on year.

Operating profit amounted to GBP 408 k (loss of GBP -220 k).

The negative effect of currency exchange differences amounted to GBP 0.2 million (GBP 0.3 m).

The cash balance as at June 30, 2017 stood at GBP 237 k (GBP 277 k).

CEO's REPORT

The business environment improved overall in the Ukraine as GDP increased by several points. Consumers became somewhat more positive as minimum wages were increased.

The dairy market place continues to be competitive.

Trading

Volumes & revenues increased substantially over the same period in 2016.

Branded sales improved overall, with the main categories of packaged butter improving and processed cheese sales leading the way. Hard cheese & spreads sales have remained consistent. Gross margins have more than doubled given the volumes & seasonal falling milk prices. Private label sales fell as low margin business was reduced. The kvass beverage sales improved, helped by a new cider product.

Export sales were even more buoyant given impetus by the exchange rate. Butter sales improved tenfold in volume & gross margin.

SMP continues to be a negative given low prices worldwide. The spray drying facility has been utilised for contract processing. Sales have improved & delivered a very strong profit contribution of £250k.

Finances

In the half year to June 2017 as stated, sales revenues increased substantially over last year. Gross margins advanced by over 2%.

EBITDA improved to 4.8% from negative. This led to profit from operations of £408k (£220k loss). After finance charges & tax, profit stood at £234k. A negative exchange difference of £230k leaves a net profit of £4k (£1,098k loss).

The move into profit was accompanied by a net increase in cash of £240k.

Repayments of the EBRD loan have commenced on schedule.

Outlook

The turnaround to a profit & related positive cash flow is encouraging. UPG has needed to reset its business in a competitive market place. This is a continuing process. UPG will seek to sustain operational improvement via a strategy of focusing on cash production, operating efficiency & building profitable sales with a competitive product/service offering.

***

For further information contact:

Ukrproduct Group Ltd                                              Tel: [phone]

Jack Rowell, Non-Executive Chairman                      www.ukrproduct.com

Alexander Slipchuk, Chief Executive Officer

ZAI Corporate Finance Ltd                                      Tel: [phone]

Nominated Adviser and Broker                                 www.zaicf.com

John Treacy

This announcement contains information which was previously inside information for the purposes of

Article 7 of the Market Abuse Regulation EU Regulation 596/2014.

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 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. The Group reported total assets of approximately GBP 13.0 million as at December 31, 2016 and consolidated revenues of approximately GBP 20.2 million for the twelve months ended December 31, 2016. Ukrproduct`s securities are traded under the symbol "UKR" on AIM, a market operated by the London Stock Exchange.

Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of the Group. You can identify forward looking statements by terms such as `expect,` `believe,` `anticipate,` `estimate,` `intend,` `will,` `could,` `may` or `might"` the negative of such terms or other similar expressions. These statements are only predictions and they may differ materially from the actual events or results. We do not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in such projections or forward-looking statements, including, among others, general economic conditions, our competitive environment, risks associated with operating in Ukraine, rapid technological and market change in our industry, as well as many other risks specifically related to the Group and its operations.

The information contained within this announcement is considered to be inside information prior to its release as defined in Article 7 of the Market Abuse Regulation No. 596-2014 and is disclosed in accordance with the Company`s obligations under Article 17 of those Regulations

 

UKRPRODUCT GROUP LIMITED
UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE PERIOD ENDED 30 JUNE 2017 AND 2016
(in thousand GBP, unless otherwise stated)
																				Six months ended					Six months ended
																				30 June 2017					30 June 2016
																				£ '000					£ '000
	Revenue																			14 910					8 192
	including of branded and SMP products																			13 637					7 642
	Cost of sales																			(13 216)					(7 436)
	Gross profit																			1 694					756
	Administrative expenses																			(482)					(388)
	Selling and distribution expenses																			(716)					(554)
	Other operating income/ expenses, net																			(88)					(34)
	Profit from operations																			408					(220)
	Finance expense, net																			(220)					(512)
	Effect of foreign currency translation																			(230)					(346)
	Profit before taxation																			(42)					(1 078)
	Income tax expense																			46					(20)
	Profit for the Six months																			4					(1 098)
	Attributable to:
	Equity holders of the Parent																			4					(1 098)
	Non-controlling interest																			-					-
																				4					(1 098)
	Earnings per share:
	Basic																			0,01					(2,77)
	Diluted																			0,01					(2,77)
UKRPRODUCT GROUP LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 30 JUNE 2017 AND 2016
(in thousand GBP, unless otherwise stated)
																				Six months ended					Six months ended
																				30 June 2017					30 June 2016
																				£ '000					£ '000
	Profit for the Six months																			4					(1 098)
	Other comprehensive income
	Exchange differences on translation to the presentation currency																			(226)					233
	Other comprehensive income for the Six months, net of tax																			(226)					233
	Total comprehensive income for the Six months, net of tax																			(222)					(865)
	Attributable to:
	Equity holders of the Parent																			(222)					(865)
	Non-controlling interests																			-					-
																				(222)					(865)

 

UKRPRODUCT GROUP LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2017 AND 31 DECEMBER 2016 AND 30 JUNE 2016
(in thousand GBP, unless otherwise stated)
																				As at					As at
																				30 June 2017					31 December 2016
																				£ '000					£ '000
	ASSETS
	Non-current assets
	Property, plant and equipment																			7 166					7 511
	Intangible assets																			592					656
	Deferred tax assets																			1					-
	Total non-current assets																			7 759					8 167
	Current assets
	Inventories																			2 375					1 855
	Trade and other receivables																			2 779					2 507
	Current taxes																			473					230
	Other financial assets																			32					18
	Cash and cash equivalents																			237					175
	Total current assets																			5 896					4 785
	TOTAL ASSETS																			13 655					12 952
	Equity and liabilities
	Equity attributable to equity holders
	Share capital																			3 967					3 967
	Other reserves																			(6 600)					(6 284)
	Retained earnings																			4 521					4 427
	Total equity attributable to equity holders of the parent																			1 888					2 110
	Non-controlling interest																			-					-
	Total equity																			1 888					2 110
	Liabilities
	Non-Current Liabilities
	Bank borrowings																			5 815					-
	Long-term payables																			476					441
	Deferred tax liabilities																			308					363
	Total Non Current Liabilities																			6 599					804
	Current Liabilities
	Bank borrowings																			1 350					7 162
	Trade and other payables																			3 774					2 854
	Current income tax liabilities																			16					10
	Other taxes payable																			28					12
	Total Current Liabilities																			5 168					10 038
	TOTAL LIABILITIES AND EQUITY																			13 655					12 952
																				-					-

 

UKRPRODUCT GROUP LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED 30 JUNE 2017 AND 2016
(in thousand GBP, unless otherwise stated)
																				Six months ended					Six months ended
																				30 June 2017					30 June 2016
																				£ '000					£ '000
	Cash flows from operating activities
	Profit/(Loss) before taxation for the six months																			(42)					(1 078)
	Adjustments for:
	Exchange difference																			230					346
	Depreciation and amortisation																			288					206
	Loss of disposal of non-current assets																			-					5
	Impairment of trade receivables																			5					31
	Disposal of subsidiaries																			-					(3)
	Impairment of inventories																			79					54
	Interest income																			-					-
	Interest expense																			220					512
	Increase of inventories																			(441)					(941)
	Increase in trade and other receivables																			(520)					(956)
	Increase in trade and other payables																			1 012					2 143
	Cash generated from operations																			831					319
	Interest received																			-					-
	Income tax paid																			(6)					(8)
	Net cash generated by operating activities																			825					311
	Cash flows from investing activities
	Payments for property, plant and equipment																			(41)					(77)
	Proceeds from sale of property, plant and equipment																			1					9
	Repayments / (proceeds) from loans issued																			(15)					(8)
	Net cash used in investing activities																			(55)					(76)
	Cash flows from financing activities
	Interest paid																			(185)					(182)
	Net proceeds / (repayments) from short term borrowing																			-					(59)
	Repayments of investment borrowing																			(176)					-
	Net cash used in financing activities																			(361)					(241)
	Net (decrease) / increase in cash and cash equivalents																			409					(6)
	Effect of exchange rate changes on cash and cash equivalents																			(348)					190
	Cash and cash equivalents at the beginning of the six months																			175					93
	Cash and cash equivalents at the end of the six months																			237					277
																									-

 

UKRPRODUCT GROUP LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 JUNE 2017 AND 2016
(in thousand GBP, unless otherwise stated)
												Attributable to equity holders
												Share capital			Share premium			Merger reserve			Revaluation reserve			Retained earnings			Translation reserve
												£ '000			£ '000			£ '000			£ '000			£ '000			£ '000
	As at 1 January 2016											3 967			4 562			-			4 192			5 654			(15 294)
	Loss for the six months																							(1 098)
	Other comprehensive income														(2)												235
	Total  comprehensive income											-			(2)			-			-			(1 098)			235
	Depreciation on revaluation of non current assets																				(83)			83
	Reduction of revaluation reserve																				(7)			7
	As at 30 June 2016											3 967			4 560			-			4 102			4 646			(15 059)
	Profit for the six months																							(386)
	Other comprehensive income														2												278
	Total  comprehensive income											-			2			-			-			(386)			278
	Depreciation on revaluation of non current assets																				(165)			165
	Reduction of revaluation reserve																				(2)			2
	As at 31 December 2016											3 967			4 562			-			3 935			4 427			(14 781)
	Profit for the six months																							4
	Other comprehensive income														1									-			(227)
	Total  comprehensive income											-			1			-			-			4			(227)
	Depreciation on revaluation of non current assets																				(90)			90
	Reduction of revaluation reserve																				-			-
	Reclassified equity items																							-			-
	As at 30 June 2017											3 967			4 563			-			3 845			4 521			(15 008)

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

     1. Basis of preparation                                                                                                                                                                       

     The unaudited condensed consolidated financial statements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting.

     The interim financial statements are unaudited but have been reviewed by the auditors.

     The unaudited condensed consolidated financial statements have been prepared under the historical cost convention, except for the revaluation of certain properties.

     The same accounting policies, presentation and methods of computation have been followed in this unaudited condensed consolidated financial statements as were applied in the preparation of the Group's financial statements for the year ended 31 December 2016.

     The preparation of the unaudited condensed consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from those estimates.

     The comparatives for the six months ended 30 June 2016 are extracted from the Group's consolidated financial statements for the year ended 31 December 2016. The auditor's report for those accounts was unqualified, but did include references to an emphasis of matter in respect of going concern due to the Group incurring a loss during the year as well as the uncertainty surrounding the breach of loan agreement convenants with the European Bank for Reconstruction and Development (the "EBRD") and the maturity of the external financing arrangements with OTP Bank falling due on 9 September 2017.

     Going concern

     The unaudited condensed consolidated financial statements have been prepared on a going concern basis which assumes that the Group will be able to meet its liabilities as they fall due, for the foreseeable future.
The Group earned profit of 4  thousand GBP for the six months ended 30 June 2017.  This is primarily due to increasing world prices for butter and increases in the volume of milk produced.
Despite the negative economic conditions in Ukraine the Group signed new terms in respect of the loan with EBRD with the loan being divided into Tranche A, with a maturity date 1 December 2022 and interest being payable at a margin of 5% over EURIBOR per annum, and Tranche B, with a maturity date 1 December 2024 and interest being payable at the higher of EURIBOR or 1% per annum upto 1 December 2022 and at a margin of 5% over EURIBOR per annum thereafter. Despite loan repayments being made as scheduled, the Group breached financial covenants as at 30 June  2017. The Board notified EBRD in advance of covenant breaches of the Loan and EBRD provided waivers in respect of the breached covenants dated 30 June  2017.  The Group has also agreed an extension to the loan agreement with OTP bank for a further three months with the maturity date being 8 December 2017. It is management's intention to revise the terms of this loan prior to this date.
Based on the existence of these conditions, the condensed consolidated financial statements have been prepared on a going concern basis, because management believes that it has employed sufficient and appropriate measures to underpin its cost cutting strategy including but not limited to: increasing volume of export sales and full production capacity.

     2. Earnings per share                                                                                                                                                                         

     Basic earnings per share have been calculated by dividing net loss/profit attributable to the ordinary shareholders (loss/profit for the year) by the weighted average number of shares in issue.

																			Six months ended	Six months ended
																			30 June 2017	30 June 2016
Net (loss) / profit attributable to ordinary shareholders, £'000																			4	(1 098)
Weighted number of ordinary shares in issue																			39 673 050	39 673 050
Basic earnings per share, pence																			0,01	(2,77)
Diluted average number of shares																			39 673 050	39 629 619
Diluted earnings per share, pence																			0,01	(2,77)

     3. Approval of interim financial statements                                                                                                                                  

     The unaudited condensed consolidated financial statements were approved by the board of directors on 29 September 2017. A copy will shortly be available on the Company's website at www.ukrproduct.com.

 

END

 

 

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