TIDMUKR
RNS Number : 8117S
Ukrproduct Group Ltd
27 June 2018
27 June 2018
UKRPRODUCT GROUP LIMITED
("Ukrproduct", the "Company" or, together with its subsidiaries,
the "Group")
FINAL RESULTS
ANNUAL REPORT FOR THE YEARED 31 DECEMBER 2017
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 2017.
Copies of the Group's annual report and accounts, incorporating
the 2017 Audited Financial Statements, have today been posted to
shareholders and will be available on the Company's website at
www.ukrproduct.com. Copies will also be available from the
Company's head office, 10th Floor, 39-14 Shota Rustaveli St., Kiev
01033, Ukraine.
The Board of Ukrproduct is also pleased to announce that the
Notice of Annual General Meeting ("AGM"), along with a Proxy Form,
has also been posted to shareholders.
The AGM will be held at the head office of the Company, 10th
Floor, 39-41 Shota Rustaveli Street, 01033 Kyiv, Ukraine at 6 pm
(Kyiv time) on Thursday, 3 August 2018. Copies of the Notice of AGM
and Proxy Form will be available for download on the Company's
website at www.ukrproduct.com, as well as by request at the
following address: Bedell Secretaries Limited, Secretary, 26 New
Street St. Helier, Jersey JE2 3RA Channel Islands.
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 Tel: +44 20 7409 3494
Rory Murphy, James Dance, Jack Botros www.strandhanson.co.uk
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ("MAR").
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 ended 31 December 2017 ("FY2017"), the Ukrainian
economy showed encouraging growth in GDP, with increased wages
leading to an improvement in consumer confidence. As a result,
whilst the operating environment remains competitive, the Group's
trading conditions have improved domestically. In addition, the
weakening of the hryvna has provided the Group with additional
business development opportunities in its export markets.
Ukrproduct's strategy has been to continue to focus on cash
generation, ensure that its product offerings and service levels
remain competitive, exploit export opportunities and to seek
further cost efficiencies.
For FY2017 the Group reports improved revenue of UAH 1.0 billion
(approximately GBP30.5 million) as well as a stronger gross margin,
with the Group increasing sales of branded products in its key
segments of packaged butter and processed cheese. The Group has
also pursued several export opportunities resulting in the doubling
of export revenues in FY2017, primarily as a result of increased
sales in packaged butter. Private label sales were lower in FY2017
as the Company pursued stronger margin revenue streams. The Group
also reports increased kvass beverage sales as new products were
introduced to the market in FY2017.
Growth in sales of butter led to more skimmed milk powder being
produced as a related product. Whilst the sale of skimmed milk
powder itself is lossmaking due to the global market price imposed,
the overall milk processing business is profitable.
Ukrproduct's spray drying facility at its Starokonstantyniv
plant, which produces powdered milk, afforded the opportunity to
enhance profits, by providing a service for drying milk requested
by other manufacturers of dairy products, thereby enhancing the
Group's profits.
As a result, the Group reports an operating profit of UAH 16.2
million (approximately GBP0.5 million) in FY2017, compared with an
operating loss of UAH 7.4 million (approximately GBP0.2 million)
for the full year ended 31 December 2016 ("FY2016"). The operating
profit for FY2017 included lower finance charges related to the
outstanding debt with EBRD.
Following the Group's increase in gross profit, the Group
recorded an improved EBITDA margin of 3.5%, however, an overall
loss GBP1.1 million for the year is recorded, due to the negative
impact of exchange rate differences.
Financial Position
As at 31 December 2017, the Group reports total liabilities of
UAH 428.0 million (approximately GBP11.3 million), with cash
balances of UAH 18.7 million (approximately GBP0.5 million).
However, post year end, the Group's financial position was improved
following the UAH 65.0 million (approximately GBP1.7 million) new
loan agreement with PJSC Creditwest Bank ("Creditwest") and the
subsequent repayment, in full, of the OTP Bank Loan, and, in March
2018 and June 2018, Ukrproduct made scheduled repayments of
EUR177,175 and EUR176,529 to EBRD respectively.
Outlook
Ukrproduct will continue to work to enhance its operating
profitability and cash flow generation and continue to seek to
improve its competitive position in the markets in which it
operates. The year 2018 is showing a continued improvement in
financial performance.
Ukrproduct Group
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2017
(in thousand GBP, unless otherwise stated)
=========================================================================
year year ended
ended
31 31 December
December 2016
2017
GBP '000 GBP '000
---------- ------------
Revenue 30 525 20 190
Cost of sales (27 267) (18 071)
---------- ------------
GROSS PROFIT 3 258 2 119
Administrative expenses (1 031) (930)
Selling and distribution expenses (1 561) (1 367)
Other operating expenses (156) (17)
---------- ------------
PROFIT/(LOSS) FROM OPERATIONS 510 (195)
Net finance expenses (437) (623)
Foreign exchange loss, net (1 250) (743)
---------- ------------
LOSS BEFORE TAXATION (1 177) (1 561)
Income tax expenses 62 77
========== ============
LOSS FOR THE YEAR (1 115) (1 484)
Attributable to:
Owners of the Parent (1 115) (1 484)
Non-controlling interests - -
Earnings per share (p):
Basic (2,81) (3,74)
Diluted (2,81) (3,74)
OTHER COMPREHENSIVE INCOME:
Items that may be subsequently reclassified
to profit or loss
Currency translation differences (113) 513
---------- ------------
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 (113) 513
---------- ------------
TOTAL COMPREHENSIVE INCOME FOR THE YEAR (1 228) (971)
========== ============
Attributable to:
Owners of the Parent (1 228) (971)
Non-controlling interests - -
Ukrproduct Group
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 December 2017
(in thousand GBP, unless otherwise stated)
=============================================================================================================
As at As at
31 December 2017 31 December 2016
GBP '000 GBP '000
----------------------------- -----------------------------
ASSETS
Non-current assets
Property, plant and equipment 6 288 7 511
Intangible assets 543 656
Deferred tax assets - -
6 831 8 167
----------------------------- -----------------------------
Current assets
Inventories 2 426 1 855
Trade and other receivables 2 171 2 507
Current taxes 271 230
Other financial assets 30 18
Cash and cash equivalents 496 175
5 394 4 785
----------------------------- -----------------------------
TOTAL ASSETS 12 225 12 952
============================= =============================
EQUITY AND LIABILITIES
Equity attributable to owners of
the parent
Share capital 3 967 3 967
Share premium 4 562 4 562
Translation reserve (14 894) (14 781)
Revaluation reserve 3 769 3 935
Retained earnings 3 478 4 427
882 2110
Non-controlling interests - -
TOTAL EQUITY 882 2110
----------------------------- -----------------------------
Non-Current Liabilities
Bank loans 5 716 -
Long-term payables 459 441
Deferred tax liabilities 262 363
6 437 804
----------------------------- -----------------------------
Current liabilities
Bank loans 1 318 7 162
Trade and other payables 3 565 2 854
Current income tax liabilities - 10
Other taxes payable 23 12
4 906 10 038
----------------------------- -----------------------------
TOTAL LIABILITIES 11 343 10 842
----------------------------- -----------------------------
TOTAL EQUITY AND LIABILITIES 12 225 12 952
============================= =============================
Ukrproduct Group
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
AS AT 31 December 2017
(in thousand GBP, unless otherwise stated)
========================================================================================== ========= ===========================
Attributable to owners of the parent Non-controlling Total
interests Equity
Share Share Revaluation Retained Translation Total
capital premium reserve earnings reserve
GBP GBP GBP '000 GBP '000 GBP '001 GBP '000 GBP '000 GBP '000
'000 '000
-------- -------- ------------ --------- ------------ --------- ---------------- ---------
As At 1 January 2016 3 967 4 562 4 192 5 654 (15 294) 3 081 - 3 081
-------- -------- ------------ --------- ------------ --------- ---------------- ---------
Loss for the year - - - (1 484) - (1 484) - (1 484)
Other comprehensive income
Gain on revaluation of - - - - - - -
property, plant and equipment
Currency translation
differences - - - - 513 513 - 513
-------- -------- ------------ --------- ------------ --------- ---------------- ---------
Total comprehensive income - - - (1 484) 513 (971) - (971)
======== ======== ============ ========= ============ ========= ================ =========
Depreciation on revaluation
of property, plant and
equipment - - (248) 248 - - - -
Reduction of revaluation
reserve - - (9) 9 - - - -
As At 31 December 2016 3 967 4 562 3 935 4 427 (14 781) 2 110 - 2 110
======== ======== ============ ========= ============ ========= ================ =========
Loss for the year - - - (1 115) - (1 115) - (1 115)
Other comprehensive income
Currency translation
differences - - - (113) (113) - (113)
Total comprehensive income - - - (1 115) (113) (1 228) - (1 228)
======== ======== ============ ========= ============ ========= ================ =========
Depreciation on revaluation
of property, plant and
equipment - - (166) 166 - - - -
As At 31 December 2017 3 967 4 562 3 769 3 478 (14 894) 882 - 882
======== ======== ============ ========= ============ ========= ================ =========
Ukrproduct Group
CONSOLIDATED STATEMENT OF CASH FLOWS
AS AT 31 December 2017
(in thousand GBP, unless otherwise stated)
====================================================================================================================
year ended year ended
31 December 2017 31 December 2016
GBP '000 GBP '000
------------------------------ ------------------------------
Cash flows from operating activities
Loss before taxation (1 177) (1 561)
Adjustments for:
Exchange difference 1 250 743
Depreciation and amortisation 553 589
Loss/(Profit) on disposal of non-current
assets 8 25
Write off of receivables/payables (5) 32
Impairment of inventories 82 120
Loss from disposal of subsidiaries (3)
Interest income - (1)
Interest expense on bank loans 437 624
------------------------------ ------------------------------
Operation cash flow before working
capital changes 1 148 568
(Increase) in inventories (653) (472)
(Increase) / decrease in trade and other
receivables 298 (933)
Increase / (decrease) in trade and other
payables 473 1 122
------------------------------ ------------------------------
Changes in working capital 118 (283)
Cash generated from operations 1 266 285
Interest received 1 1
Income tax paid (31) (32)
------------------------------ ------------------------------
Net cash generated by / (used in)
operating activities 1 236 254
Cash flows from investing activities
Purchases of property, plant and
equipment and intangible assets (93) (217)
Proceeds from sale of property, plant and
equipment 1 17
Repayments of loans issued (15) (11)
------------------------------ ------------------------------
Net cash used in investing activities (107) (211)
Cash flows from financing activities
Interest paid (378) (372)
(Decrease) / increase in short term
borrowing - (63)
Repayments of long term borrowing (259) -
Net cash generated by financing
activities (637) (435)
------------------------------ ------------------------------
Net decrease in cash and cash equivalents 492 (392)
Effect of exchange rate changes on cash
and cash equivalents (171) 474
Cash and cash equivalents at the
beginning of the year 175 93
Cash and cash equivalents at the end of
the year 496 175
These consolidated financial statements were approved and
authorised for issue by the Board of Directors on 27 June 2018 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 2017 statutory financial statements. The auditors have
reported on the 2017 financial statements: their report was
unqualified but did contain a paragraph that highlighted a material
uncertainty related to going concern and non-observance of the
terms of the loan agreement with the European Bank of
Reconstruction and Development (EBRD). It contained no statement
under section 113B of the Companies (Jersey) Law 2011. The
financial statements for 2017 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 property, plant and equipment
which have been measured at fair value. The consolidated financial
statements are presented in British Pounds Sterling (GBP) and all
values are rounded to the nearest thousand (GBP000) except where
otherwise indicated.
2. Going concern
These consolidated financial statements have been prepared on
the assumption that the Group is able to continue its operations on
an going concern basis in the near future.
For the year that ended on 31 December 2017, the cumulative
losses amounted to GBP1.115 million (GBP1.484 million - For the
year that ended on 31 December 2016). Although as at 31 December
2017 the Group increased its cash flow from operations and met all
European Bank for Reconstruction and Development ("EBRD") covenants
but one, overall it has continued to breach the EBRD covenant
requirements of the loan with that indicates a significant
uncertainty with regard to the Group to continue its operations on
a going concern basis.
According to Management, the assumption of the Group's ability
to continue its operations on going concern basis is sustainable,
as:
1. The Group received waivers from EBRD - in respect of the
annual financial statements for 2017 and the first quarter of
2018;
2. The Group continues to repay a loan to EBRD according to the
agreement and timely settled the last two tranches after the
reporting date;
3. The Company increased its cash flow from operations;
4. During 2017, the Group kept prolonging the loan agreements
with OTP Bank. In December 2017, the Group received an offer of for
65.0 million UAH (GBP1.723 million) from Creditwest Bank Ukraine to
allow both the refinancing of its loan with OTP and increase of its
working capital. In February 2018, the Group met all requirements
of Creditwest Bank Ukraine, signed a loan agreement and refinanced
its loan with OTP moving its entire working capital facility to
Creditwest Bank Ukraine.
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 to 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
As at 31 December 2017 the Group has two loans: a loan from OTP
Bank in the amount of 856 thousand GBP (in UAH 32,3 million) and
EBRD in the amount of 6,178 thousand GBP (in EUR 6,959
thousand).
During 2017, the Group fulfilled its obligations under the EBRD
loan in accordance with the agreement. The Group applied
instalments 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 4,829 thousand at 31
December 2017 (2016: GBP 5,366 thousand) were pledged as collateral
for both loans:
- 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 TMs. Fixed assets pledged as
security total 3,403 thousand GBP. The intangible assets pledged
total 213 thousand GBP;
- assets pledged as security for the for the OTP loan include
property and land in Zhitomir and in Krasiliv, together with
equipment for the production of processed cheese, and the Company's
vehicles. Fixed assets pledged as security total 1,426 thousand
GBP. Also, inventories with a net book value of GBP 318 thousand at
31 December 2017 (2016: GBP 360 thousand) were pledged as
collateral for the OTP loan.
During 2017, the Group prolonged agreement with OTP Bank three
times. The last tranche extension with OTP related to the 6 March
2018 loan repayment. In December, the Group received confirmation
of expansion of crediting with Creditwest Bank Ukraine for the
amount of 65 million UAH. Funds received would be used to settle
the outstanding balance with OTP and to open additional budgeting
backed by Zhiviy Kvass equipment. The loan term is 3 years, the
interest rate - 18%.
In 2018, the Group fulfilled conditions of the Creditwest Bank
Ukraine and in February 2018 the first Tranche from Creditwest Bank
Ukraine was received and repayment of the loan balance with OTP
Bank was carried out. With the refinancing of OTP Bank the pledge
was transferred to Creditwest Bank Ukraine. Non-current assets
located in Zhytomyr and transport were pledged as collateral for
Creditwest Bank Ukraine. Also, to extend the credit line, the
Company has provided equipment for production of Zhiviy Kvass.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SELFIWFASEDM
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