Unaudited Interim Financial Results

RNS Number : 4912S
Ukrproduct Group Ltd
24 September 2014
 



 

 

FOR IMMEDIATE RELEASE                                                                             September 24, 2014

 

UKRPRODUCT ANNOUNCES UNAUDITED INTERIM FINANCIAL RESULTS

FOR THE SIX MONTHS ENDED 30 JUNE 2014

 

Kyiv, Ukraine - September 24 2014 - Ukrproduct Group Limited ("Ukrproduct" 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 2014.

 

KEY FIGURES

(Figures in brackets are for the six months ended and as at 30 June 2013 when the exchange rate was the 12.33 UAH/GBP compared to 16.99 UAH/GBP in this reporting period)

 

·        Total revenues decreased by 30% year on year to GBP 17.2 m (GBP 24.7 m), however the decrease in national currency made up 5%

·        Gross profit margin improved to 22.7% (15.0%) resulting in gross profit increase by 5% to GBP 3.9 m (GBP 3.7m)

·        Revenues in dairy branded products segment decreased by 41% year on year to GBP 11.3 million (GBP 19.1 million) and gross profit decreased by 20% year on year to GBP 2.1 million (GBP 2.7 million)

·        In kvass the revenues decreased by 40% year on year to GBP 0.7 million (GBP 1.2 million) and gross profit down by 39% year-on-year

·        Skimmed Milk Powder (SMP) revenues increased by 36% to GBP 4.7 million (GBP 3.5 million) and gross profit increased to GBP 1.3 million (GBP 0.3 million)

·        EBITDA increased by 42% to GBP 1.8 million (GBP 1.3 million) year-on-year

·        Profit from operations more than doubled year on year reaching GBP 1.3 million (GBP 0.6 million)

·        Profit before FOREX increased to GBP 835 k (GBP 33 k)

·        The negative effect of currency exchange differences amounted to GBP 2.8 million

·        Cash balance of GBP 0.4 million (GBP 0.6 million).

 

CEO'S REPORT

As to be expected the unstable political and economic situation has provided a challenging business environment for all businesses in Ukraine. Consumer confidence has fallen and the population's purchasing power has been reduced by rising costs including the very significant increase in fuel prices due to the deterioration of relations between Ukraine and Russia. The significant hryvna devaluation has further accentuated the management challenge. It has increased the cost of imported materials but potentially affords export opportunities.

In dairy the lack of exports to Russia led to an oversupply and some dumping on the domestic market. However and importantly it led to improved milk availability that was followed by a decline in raw milk prices. Branded dairy products experienced lower sales given the market conditions and also not least as the result of consumer price increases necessitated earlier in the year by the pressure on unit cost. At the same time more raw milk availability at lower prices coupled with the consumer price increase ensured a good improvement in the profit margins of branded dairy category. Thus despite the revenues decline the gross profit in H1'2014 has increased year-on-year.

In butter segment the Company saw the decrease in both volumes and revenues, however the margins improved substantially. The overall market of spreads in Ukraine continues to decline as consumers switch their preferences back to the traditional butter. Thus Ukrproduct's category of spreads saw a decrease in both sales and profits. Processed cheese showed the decrease in revenues and gross profit despite the improvement in contribution margin. The hard cheese sales have been the most affected by the restrictions on exports to Russia and dumping of product and as result have reduced year-on-year.

With the hryvna devaluation vs US dollar of 47% in H1'2014 the Company aimed at increasing export revenues significantly improving its SMP export sales and exploring new export markets for its branded products.

Skimmed Milk Powder (SMP)- The SMP segment showed a significant year-on-year growth in H1'2014 benefitting from higher domestic and export demand and better prices given the exchange rate. Moreover the Company continued to enhance its reputation as the high quality and reliable supplier to the large multinational companies in Ukraine as planned following the upgrade of production facility within the scope of the EBRD financed project.

The sales of kvass showed a decrease in H1'2014 compared to the same period last year due to the summer weather colder than usual and difficulties selling into Crimea. However the Company expects the second half of the season to improve on sales not least due to an extensive marketing support and further development of geographical coverage.

Distribution services- Given the commoditization in this business segment the Company now operates at a lower level with focus on growing quality business allowing good profitability. As result although the revenues in this segment decreased in H1'2014 compared to the last year, the gross margin showed an improvement.

Finances - Overall the aforementioned factors resulted in the sizeable year-on-year increase in Company's EBITDA and operating profit for the first half of 2014. Operating cash-flow was substantially improved during the period. The significant hryvna devaluation has offset such operating improvement via a negative exchange difference charge. The effect of exchange rate has led to the Group reporting a loss for H1'2014.

As previously announced the banking confidence in Ukraine has fallen and this is limiting credit facilities. Ukrproduct Group however has successfully renewed its bank facilities for working capital. Ukrproduct also benefited from further support of the European Bank for Reconstruction and Development ("EBRD") which has restructured the loan repayment taking into account significant hryvna devaluation.

The Group's cash levels and bank facilities are sufficient to meet current debt obligations in the short and medium term.

On the operational side the Company continued its progress implementing the second stage of modernization project with the European Bank for Reconstruction and Development. Meanwhile the Company is continuing to see the positive effect of the first stage of the project which has become even more relevant given the rise in energy costs.

Additionally the Company has adjusted its business model including change of sales and logistics structure. This proved to be successful and resulted in better efficiency of operations. The financial outcomes of these initiatives are now being seen.

Outlook - Within the context of the unstable environment, Ukrproduct will sustain its positive approach adapting to changes in opportunity with its trading partners and the consumer. In particular restoration of branded product volumes will receive focus underpinned by a strong marketing programme. The final stage of modernization project, EBRD supported, will become fully operational by the end of the year.

 

Conference call information

Ukrproduct management will host a conference call today at 12 am (London time) / 1 pm

(CET) / 2 pm (Kiev Time) to present and discuss the unaudited financial results for the six

months ended 30 June 2014.

 

The dial-in numbers for the conference call are:

+44 (0) 20 3003 2666  - Standard International Access

0808 109 0700  - UK Toll Free

Password - UKR

 

***

 

For the play-back of further information, please visit www.ukrproduct.com or contact: 

 


Ukrproduct Group Ltd.

Sergey Evlanchik

Chief Executive Officer

Tel: +380 44 232 9602

sergey.evlanchik@ukrproduct.com

 

Cantor Fitzgerald Europe

Nominated Adviser and Broker

Stewart Dickson /  Jeremy Stephenson

Tel: +44 (0) 20 7894 7000

 

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 21.1 million as at June 30, 2014 and consolidated revenues of approximately GBP 17.2 million for the six months ended June 30, 2014. 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.



 

FINANCIAL REVIEW













(GBP thousands)

(UAH thousands)













Jan-June 2014

Jan-June 2013

YOY Change

Jan-June 2014

Jan-June 2013

YOY Change













Revenue


17 237

24 689

-30%

290 443

304 523

-5%

Gross Profit


3 913

3 710

5%

65 934

45 760

44%

EBITDA


1 840

1 299

42%

31 004

16 022

94%

(Loss) / profit after tax


-2 007

173

n/a

-33 818

2 122

n/a

















































































(GBP thousands)

(UAH thousands)













Jan-June 2014

Jan-June 2013

YOY Change

Jan-June 2014

Jan-June 2013

YOY Change













Revenue




























 - Branded products


11 342

19 116

-41%

191 113

235 784

-19%

 - Skimmed milk products


4 717

3 458

36%

79 481

42 652

86%

 - Kvass


737

1 224

-40%

12 418

15 097

-18%

 - Services


164

196

-16%

2 763

2 418

14%

 - Other


277

695

-60%

4 667

8 572

-46%

Gross Profit



























 - Branded products


2 119

2 652

-20%

35 704

32 712

9%

 - Skimmed milk products


1 293

270

379%

21 787

3 330

554%

 - Kvass


390

640

-39%

6 572

7 894

-17%

 - Services


70

28

150%

1 180

345

242%

 - Other


41

120

-66%

691

1 480

-53%

 

 



 

UKRPRODUCT GROUP LIMITED

UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENT

FOR THE PERIOD ENDED 30 JUNE 2014 AND 2013

(in thousand GBP, unless otherwise stated)



















































Six months ended

Six months ended





















30 June 2014

30 June 2013









































£ '000

£ '000
















Revenue



                     17 237

                     24 689


including of branded and SMP products



                    16 059 

                     22 574


Cost of sales



                   (13 324)

                   (20 979)


Gross profit



                       3 913

                       3 710


Administrative expenses



                     (1 163)

                     (1 158)


Selling and distribution expenses



                     (1 349)

                     (1 907)


Other operating income/ expenses, net



                        (110)

                          (71)


Profit from operations



                        1 291

                          574


Finance expense, net



                        (456)

                        (541)


Profit before FOREX



                          835

                            33


Effect of foreign currency translation



                     (2 822)

                          112


Profit before taxation



                     (1 987)

                          145


Income tax expense



                          (20)

                            28


Profit for the Six months



                     (2 007)

                          173


Attributable to:






Equity holders of the Parent



                     (2 007)

                          173


Non-controlling interest



                             -  

                            -  





                     (2 007)

                          173


Earnings per share:














Basic


















                       (5,06)

0,4


Diluted

















                       (5,06)

0,4

 

UKRPRODUCT GROUP LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE PERIOD ENDED 30 JUNE 2014 AND 2013

(in thousand GBP, unless otherwise stated)







































































Six months ended

Six months ended





















30 June 2014

30 June 2013









































£ '000

£ '000


Profit for the Six months



   (2 007)

  173


Other comprehensive income






Exchange differences on translation to the presentation currency



   (5 377)

  932


Other comprehensive income for the Six months, net of tax



   (5 377)

  932


Total comprehensive income for the Six months, net of tax



   (7 384)

  1 105


Attributable to:






Equity holders of the Parent



   (7 384)

  1 105


Non-controlling interests



 -  

   -  





















   (7 384)

  1 105

 



 

UKRPRODUCT GROUP LIMITED






UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION






AS AT 30 JUNE 2014 AND 31 DECEMBER 2013 AND 30 June 2013






(in thousand GBP, unless otherwise stated)

















































































As at

As at

As at




30 June 2014

31 December 2013

30 June 2013





















£ '000

£ '000

£ '000


ASSETS




















Non-current assets








Property, plant and equipment


11 719

18 185

19 192


Intangible assets




1 082

1 136

1 262


Available for sale investments




-

-

32


Deferred tax assets




12

66

87


Total non-current assets




   12 813

  19 387

  20 573


Current assets








Inventories




   1 725

   3 010

   3 738


Trade and other receivables




   4 615

   6 919

   7 442


Current taxes




   1 435

   2 399

   2 659


Other financial assets




   122

   176

   163


Cash and cash equivalents




   434

   1 006

   653


Total current assets




8 331

  13 510

  14 655


TOTAL ASSETS




   21 144

  32 897

  35 228


Equity and liabilities








Equity attributable to equity holders








Share capital




   3 967

   3 967

   3 967


Other reserves




  (4 051)

   1 430

   2 529


Retained earnings




  10 758

  12 672

  13 798


Total equity attributable to equity holders of the parent




  10 674

  18 069

  20 294


Non-controlling interest




  -  

 -  

  -  


Total equity




  10 674

  18 069

  20 294


Liabilities








Non-Current Liabilities








Bank borrowings




   5 322

   5 118

4 998


Deferred tax liabilities




   361

   636

   636


Total Non Current Liabilities




   5 683

   5 754

   5 634


Current Liabilities








Bank borrowings




   2 482

   5 802

   5 883


Trade and other payables




   2 230

   3 226

   3 272


Current income tax liabilities




28

18

90


Other taxes payable




47

28

55


Total Current Liabilities




   4 787

   9 074

   9 300


TOTAL LIABILITIES AND EQUITY




   21 144

  32 897

  35 228

 



 

UKRPRODUCT GROUP LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE PERIOD ENDED 30 JUNE 2014 AND 2013

(in thousand GBP, unless otherwise stated)



















































Six months ended

Six months ended



















30 June 2014

30 June 2013









































£ '000

£ '000


Cash flows from operating activities
















Profit before taxation for the six months





(1 987)

145


Adjustments for:








Exchange difference





2 822

(112)


Depreciation and amortisation





549

725


Loss of disposal of non-current assets





9

1


Impairment of trade receivables





34

1


Disposal of subsidiaries





-

20


Interest income





(3)

(1)


Interest expense





459

542


Decrease / (increase) of inventories





298

(147)


Decrease in trade and other receivables





221

320


Increase/ (decrease) in trade and other payables





146

(1 545)


Cash generated from operations





2 548

-51


Interest received





3

1


Income tax paid





(48)

(156)


Net cash generated by operating activities





2 503

(206)


Cash flows from investing activities








Payments for property, plant and equipment





(300)

(523)


Proceeds from sale of property, plant and equipment





12

12


Repayments / (proceeds) from loans issued





(8)

44


Net cash used in investing activities





(296)

(467)


Cash flows from financing activities








Own shares acquisition





-

(109)


Interest paid





(459)

(542)


Net proceeds / (repayments) from short term borrowing





(1 928)

1 539


Repayments of investment borrowing





(64)

-


Net cash used in financing activities





(2 451)

888


Net (decrease) / increase in cash and cash equivalents





(244)

215


Effect of exchange rate changes
on cash and cash equivalents





(328)

23


Cash and cash equivalents at the beginning of the six months





1 006

415


Cash and cash equivalents at the end of the six months





434

653





















 -  

   -  

 



 

UKRPRODUCT GROUP LIMITED










CONSOLIDATED STATEMENT OF CHANGES IN EQUITY










FOR THE PERIOD ENDED 30 JUNE 2014 AND 2013










(in thousand GBP, unless otherwise stated)



















































Attributable to equity holders

Total attributable to equity holders of the parent

Non-controlling interest

Total Equity













Share capital

Share premium

Merger reserve

Revaluation reserve

Retained earnings

Translation reserve

























£ '000

£ '000

£ '000

£ '000

£ '000

£ '000

£ '000

£ '000

£ '000









































As at 1 January 2013


 4 082

  4 555

(367)

3 877

 13 496

 (6 339)

   19 304

 -  

  19 304









































Profit for the six months






 173


  173

 -  

   173


Other comprehensive income







  932

  932


   932









































Total  comprehensive income


   -  

 -  

   -  

 -  

 173

  932

   1 105

 -  

 1 105









































Depreciation on revaluation
of non current assets




 (135)

 135


 -  


   -  


Reduction of revaluation reserve





 -  

   (6)


   (6)


  (6)


Dividends paid 






   -  


 -  


   -  


Acquiring of shares


  (115)

  6





   (109)


 (109)









































As at 30 June 2013


 3 967

   4 561

 (367)

   3 742

 13 798

 (5 407)

   20 294

 -  

20 294









































Profit for the six months






  (877)


   (877)

 -  

 (877)


Other comprehensive income





 38


 (1 361)

   (1 323)


(1323)









































Total  comprehensive income


   -  

 -  

   -  

 38

  (877)

 (1 361)

   (2 200)

 -  

(2200)









































Depreciation on revaluation
of non current assets




 (112)

 112


 -  


   -  


Reduction of revaluation reserve





   (32)

 6


  (26)


   (26)


Group restructuring completion




 367


  (367)




   -  


Acquiring of shares


   -  

  1





  1


   1














As at 31 December 2013


 3 967

  4 562

   -  

   3 636

 12 672

 (6 768)

   18 069

 -  

18 069









































Profit for the year






(2 007)


   (2 007)

 -  

(2007)


Other comprehensive income






 (5 377)

   (5 377)


(5377)









































Total  comprehensive income


   -  

 -  

   -  

 -  

(2 007)

 (5 377)

   (7 384)

 -  

(7384)









































Depreciation on revaluation
of non current assets




   (91)

   91


 -  


   -  


Reduction of revaluation reserve




   (15)

 2


  (13)


   (13)


Effect from tax rate change




 2



  2


   2


Acquiring of shares


   -  

 -  





 -  


   -  


As at 30 June 2014


 3 967

  4 562

   -  

   3 532

10 758

 (12 145)

   10 674

 -  

10 674

 

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 whose review report is set out below.

 




































 


The unaudited condensed consolidated financial statements have been prepared under the historical cost convention, except for 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 2013, except for the impact of the items described below.

 


 


 




































 


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 2014 are extracted from the Group's consolidated financial statements for the year ended 31 December 2013. The auditor's report for those accounts was unqualified, but did include references to an emphasis of matter in respect of the Group incurring a loss during the year, primarily as a result of the volatile political and economic situation in Ukraine. This has resulted in a number of challenges to the Group, including but not limited to the significant devaluation of the local currency and the increase in raw milk prices. The Group applied for a waiver from the EBRD in connection with financial covenants contained in the loan agreement, which was granted by the EBRD. Group management believes that they will continue to receive the support of the EBRD for the foreseeable future. The directors have also put in place a number of additional cost efficiency measures including but not limited to the reconstruction of manufacturing facilities in Starokonstantinov, further optimization in the number of its subsidiaries and streamlining its business processes. Additionally, due to the position in the Ukraine, there is a risk that the Group may not be able to operate in Crimea following its occupation by Russia. As at the year end 31 December 2013 and subsequently as at the period ended 30 June 2014 of this report the Group continues to operate in Crimea, and monitor the situation.

 


 


 


 


 


 


 


 


 


 


 




































 


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.

During the period, the Group has breached its loan covenants with the EBRD, and has since obtained a loan waiver from the EBRD. It is our view that the EBRD will continue to support the Group through our capital projects, during a time of political unrest. Director's view, have therefore concluded that is  appropriate to prepare these financial statements on a going concern basis. The financial statements do not include adjustments that would be required if the Group was unable to continue as a going concern.

 


 


 


 


 


 


 




































 


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 2014

30 June 2013






 


























 


Net (loss) / profit attributable to ordinary shareholders, £'000


                     (2 007)

173






 


Weighted number of ordinary shares in issue


              39 673 050

              39 673 050






 


Basic earnings per share, pence


                       (5,06)

0,4






 


Diluted average number of shares


              39 673 050

              39 673 050






 


Diluted earnings per share, pence


                       (5,06)

0,4






 




































 




































 


3. Approval of interim financial statements























 




































 


The unaudited condensed consolidated financial statements were approved by the board of directors on 19 September 2014.

 

 


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