TIDMUKR
RNS Number : 5049A
Ukrproduct Group Ltd
30 September 2020
30 September 2020
UKRPRODUCT GROUP LIMITED
("Ukrproduct", the "Company" or, together with its subsidiaries,
the "Group")
U N A U DIT E D I N TERIM F I NANC I AL RE S UL T S F OR THE S
IX M ONTHS EN D ED 30 J U NE 20 20
Ukrproduct Group Limited (AIM:UKR), one of the leading Ukrainian
producers and distributors of branded dairy foods and beverages
(kvass), today announces its unaudited interim financial results
for the six months ended 30 June 2020.
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").
For further information contact:
Ukrproduct Group Ltd
Jack Rowell, Non-Executive Chairman Tel: +380 44 232 9602
Alexander Slipchuk, Chief Executive www.ukrproduct.com
Officer
Strand Hanson Limited
Nominated Adviser and Broker Tel: + 44 20 7409 3494
Rory Murphy, James Dance, Jack Botros www.strandhanson.co.uk
Chairman and Chief Executive Statement
Ukrproduct, one of the leading Ukrainian producers and
distributors of branded dairy foods and beverages (kvass), is
pleased to announce its interim results for the half year ended 30
June 2020 ("1H 2020") and outlook for 2020.
1H 2020 financial highlights
-- Revenue increased by 24% to GBP27.5 million (1H 2019: GBP22.2 million)
-- Gross profit increased by 1 5 % to GBP2. 2 million (1H 2019: GBP1.9 million)
-- Operating profit increased by 2 3 % to GBP0.49 million (1H 2019: 0. 4 million)
-- EBITDA margin decreased to 2. 8 % (1H 2019: 3%)
-- Net foreign exchange loss of GBP0.67 million (1H2019: gain GBP0.59 million)
-- Loss after tax of GBP0.4 2 million (1H 2019: Profit GBP0.74 million)
1H 2020 Trading Update
Overall, the Ukrainian economy, in the first half of 2020, faced
decline caused by COVID-19 related quarantine measures. The
restrictions had an impact on services in general, resulted in a
significant fall in investment, deepened the decline in consumer
spending. This was primarily due to the difficult fiscal situation
and weaker growth in private consumption and exports amid weakening
external demand. According to National Bank of Ukraine, the economy
will contract by 6% in 2020. Despite the coronavirus crisis,
consumer spending has continued to rise, including on essential
goods. However, consumer behavior has changed on the back of the
prevailing economic uncertainty, which has caused an increase in
the consumption of cheaper products rather than premium ones.
Nevertheless, in this challenging operating environment, for 1H
2020, the Group is pleased to report improved revenue of
approximately GBP27.5 million, which is an increase of 24% compared
with the 6 months to 30 June 2019 ("1H 2019"). Overall for 2020,
the Group plans to report improved revenue when compared to
2019.
Operating profit increased by 2 3% to approximately GBP0.49
million. The Group`s ongoing pursuit to deliver cost efficiencies
helped to improve 1H 2020 gross profit by 1 5 % against 1H 2019,
however these results are below the Company's pre-COVID quarantine
expectations at the beginning of the year.
Financial position
Ukrproduct report ed net assets of GBP2.6 million as at 30 June
2020, including cash balances of GBP0.3 9 million.
During 2020, the Group continued to breach certain loan
covenants in relation to the EBRD debt. However, the Company
continued to settle certain amounts to EBRD according to an agreed
schedule. The Directors are confident that EBRD will not demand
accelerated repayment of the loan due to breach of covenants.
Outlook for 2020
Overall, the business environment in Ukraine in general and in
the food industry in particular has been recovering since
quarantine restrictions were eased. The Group's management is
seeking further improvements and efficiencies in order to improve
the Group results in 2H 2020. The financial result is negatively
affected by the decline of protein prices in the world market,
however, the Group compensates these losses by increasing sales and
market share for processed cheese, butter, spreads and implementing
cost cutting projects. Though the Group expects to report improved
operating results and profit from operations for 2020, the net
profitability performance is still difficult to predict due to the
volatile local currency (UAH) exchange rate.
Statement of Management's Responsibilities
for preparation and approval of condensed consolidated interim
financial statements for the six months ended 30 June 20 20
The directors are responsible for the preparation of the
condensed consolidated interim financial statements in accordance
with applicable Jersey law and other regulations and enactments in
force at the time. The Companies (Jersey) Law 1991 as amended
requires the directors to prepare financial statements for each
year in accordance with Generally Accepted Accounting
Principles.
The directors of the Group are responsible for preparing the
condensed consolidated interim financial statements which reflect
in all material aspects the financial position of the Group as at
30 June 2020, as well as the results of its activities, cash flows
and changes in equity for the six months then ended in accordance
with International Financial Reporting Standards (IFRS) as adopted
by the European Union.
In preparing condensed consolidated interim financial statements
the Group's Management is responsible for:
- selecting appropriate accounting policies and their consistent application ;
- making reasonable measurement and calculation ;
- following principles of IFRS as adopted by the European Union
or disclosing all considerable deviations from IFRS in the notes to
condensed consolidated interim financial statements;
- preparing condensed consolidated interim financial statements
of the Group on the going concern basis, except for the cases when
such assumption is not appropriate .
The board of directors confirms that the Group has complied with
the abovementioned requirements in preparing its condensed
consolidated interim financial statements.
The directors are also responsible for:
- implementing and maintaining an efficient and reliable system
of internal controls in the Group ;
- keeping accounting records in compliance with the legislation
and accounting standards of the respective country of the Group's
registration;
- taking reasonable steps within its cognizance to safeguard the
assets of the Group ;
- detecting and preventing from fraud and other
irregularities.
These condensed consolidated interim financial statements as at
3 0 June 2020 prepared in compliance with IFRS as approved by the
European Union are approved on behalf of the Group's Directors on 2
9 September 2020.
Management Statements
This statement is provided to confirm that, to the best of our
knowledge, the condensed consolidated interim financial statements
for the six months ended 30 June 2020, and the comparable
information, have been prepared in compliance with International
Financial Reporting Standards (IFRS) as issued by the International
Accounting Standards Board and as adopted by the European Union and
give a true, fair and clear view of Group's assets, financial
standing and net results.
Single Management Report
1. Operational and Financial Results
The following table sets forth the Group's results of operations
derived from the condensed consolidated interim financial
statements:
Six months Six months Changes
ended ended in
--------
3 0 June 20 30 June 201
20 9
------------ ------------ --------
GBP '000 GBP '000 %
------------ ------------ --------
Revenue 27 523 22 236 24%
Cost of sales (25 308) ( 20 310 ) 25%
------------ ------------ --------
GROSS PROFIT 2 215 1 926 15%
Administrative expenses (576) ( 534 ) 8%
Selling and distribution expenses (1 158) ( 943 ) 23%
Other operating incomes /(
expenses ) 5 ( 53 ) -109%
------------ ------------ --------
PROFIT FROM OPERATIONS 486 396 23%
Net finance expenses (253) ( 265 ) -4%
Net foreign exchange ( loss
) gain (673) 592 -214%
------------ ------------ --------
PROFIT BEFORE TAXATION (440) 723 -1 61 %
Income tax ( expense ) / credit 19 1 7 12%
------------ ------------ --------
( LOSS ) / PROFIT FOR THE
SIX MONTHS (421) 740 -157%
============ ============ ========
Attributable to:
Owners of the Parent (421) 740 -157%
Non-controlling interests - -
Earnings per share:
Basic (pence) (1,06) 1 ,8 6
Diluted (pence) (1,06) 1 , 86
OTHER COMPREHENSIVE INCOME:
Items that may be subsequently
reclassified to profit or
loss
Currency translation differences (167) ( 332 ) -50%
Items that will not be reclassified
to profit or loss
OTHER COMPREHENSIVE INCOME,
NET OF TAX (167) (3 32 ) -50%
------------ ------------ --------
TOTAL COMPREHENSIVE INCOME
FOR THE SIX MONTHS (588) 408 -244%
============ ============ ========
Attributable to:
Owners of the Parent (588) 408 -244%
Non-controlling interests - -
Non-IFRS financial information
The Group's results are reported under International Financial
Reporting Standards (IFRS). However, the Group uses Non-IFRS
measures including earnings before interest and taxes (EBIT) and
earnings before interest, taxes, depreciation and amortisation
(EBITDA) which are used to measure segment performance. Non-IFRS
measures have not been subject to audit or review.
The Group uses EBIT and EBITDA as key measures of its
performance.
EBIT is an indicator of a Group`s profitability, calculated as
revenue less expenses, the latter excluding tax and interest. To
external users, EBIT provides information on the Group's ability to
generate earnings directly from its operations, disregarding its
cost of capital and the tax burden and thus making the Group's
results comparable to similar companies across the industry where
those companies may have varying capital structures or tax
environments. To the management, EBIT provides a performance
measure additionally adjusted for expenses that may be deemed fixed
(i.e. stemming from the given capital structure) or externally
imposed by the environment (i.e. the tax burden).
Six months ended Six months ended
30 June 20 20 30 June 201 9
----------------- -----------------
GBP '000 GBP '000
----------------- -----------------
CONTINUING OPERATIONS
Revenue for the period 27 523 22 236
Cost of sales ( 25 308 ) ( 20 310 )
Operating expenses ( 1729 ) (1530)
----------------- -----------------
EBIT 486 396
================= =================
EBITDA is calculated as revenue less expenses, the latter
excluding tax, interest, depreciation and amortisation. Being a
proxy to the operating cash flow before working capital changes,
EBITDA is widely used as an indicator of a company's ability to
generate cash flows, as well as its ability to service debt.
Consequently, to the management, EBITDA serves as a measure to
estimate financial stability of the Group. Besides, excluding the
effect of depreciation and amortisation, along with cost of capital
and taxation, provides to external users another measure to compare
to similar companies, regardless of varying tax environments,
capital structures or depreciation accounting policies.
Six months ended Six months ended
30 June 20 20 30 June 201 9
----------------- -----------------
GBP '000 GBP '000
----------------- -----------------
CONTINUING OPERATIONS
EBIT 486 39 6
Depreciation and amortization 297 278
----------------- -----------------
EBITDA 783 674
================= =================
Revenue
The Group's revenue from sales of finished products increased by
37% in 1H 2020 in comparison with previous period.
The most significant portion of the Group's revenue comes from
selling packaged butter and supplementary products, which
represented 51.9% in the first half of 2020 and 57.2% in first half
of 2019 of total revenue for the relevant periods.
Cost of sales
The Group's cost of sales increased to GBP 2 5 .3 million in the
current period from GBP 20.3 million in previous period. The
following table sets forth the principal components of the Group's
cost of sales for the periods indicated:
Six months Six months Changes
ended ended in
--------
30 June 20 30 June 201
20 9
----------- ------------ --------
GBP '000 GBP '000 %
----------- ------------ --------
Raw materials 15 293 11 787 30%
Supplementary products 5 590 5 951 -6%
Manufacturing overhead 2 117 1 016 108%
Wages and salaries 1 173 552 113%
Transport 670 532 26%
Fuel and energy supply 537 620 -13%
Depreciation and amortization 239 135 77%
Other expenses 29 84 -65%
Adjustments ( 340 ) (367) -7%
----------- ------------ --------
25 3 08 20 310 25%
=========== ============ ========
Gross profit/(loss)
The Group's gross profit increased to GBP 2.2 million in 1H 2020
from GBP 1.9 million of gross profit in 1H 2019.
Selling and distribution expenses
Selling and distribution expenses increased year-on-year to GBP
1.2 million in the current period from GBP 0.9 million in 1H 2019,
reflecting an increase in sales volume and delivery costs in
2020.
Net foreign exchange loss
In 1H 2020, the Group reports a net foreign exchange loss of GBP
0.7 million versus a net gain of GBP 0.6 million in the 1H
2019.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE
INCOME
FOR THE SIX MONTHSED 30 JUNE 2020
(in thousand GBP, unless otherwise stated)
Note Six months Six months
ended ended
3 0 June 2020 30 June 2019
-------------- -------------
GBP '000 GBP '000
-------------- -------------
Revenue 8 27 523 22 236
Cost of sales (25 308) ( 20 310 )
-------------- -------------
GROSS PROFIT 2 215 1 926
Administrative expenses (576) ( 534 )
Selling and distribution expenses (1 158) ( 943 )
Other operating expenses 5 ( 53 )
-------------- -------------
PROFIT FROM OPERATIONS 486 396
Net finance expenses (253) ( 2 65)
Net foreign exchange (loss)/gain (673) 592
-------------- -------------
(LOSS)/ PROFIT BEFORE TAXATION (440) 7 23
Income tax credit 19 1 7
-------------- -------------
(LOSS)/ PROFIT FOR THE SIX MONTHS (421) 740
============== =============
Attributable to:
Owners of the Parent (421) 7 40
Non-controlling interests - -
Earnings per share:
Basic (in pence) 9 (1,06) 1 ,8 7
Diluted (in pence) 9 (1,06) 1 , 8 7
OTHER COMPREHENSIVE INCOME:
Items that may be subsequently
reclassified to profit or loss
Currency translation differences (167) ( 3 32)
OTHER COMPREHENSIVE INCOME, NET
OF TAX (167) (332)
-------------- -------------
TOTAL COMPREHENSIVE INCOME FOR
THE SIX MONTHS (588) 408
============== =============
Attributable to:
Owners of the Parent (588) 408
Non-controlling interests - -
CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL
POSITION
AS AT 30 JUNE 2020
(in thousand GBP, unless otherwise stated)
Note As at As at As at
-----
30 June 31 December 30 June
2020 2019 2019
----- --------- ------------ ---------
GBP '000 GBP '000 GBP '000
--------- ------------ ---------
ASSETS
Non-current assets
Property, plant and equipment 6 538 6 994 6 663
Intangible assets 546 493 504
Deferred tax assets - - -
7 084 7 487 7 167
Current assets
Inventories 6 6 386 5 071 4 713
Trade and other receivables 7 292 7 257 5 555
Current taxes 427 310 484
Other financial assets 32 31 26
Cash and cash equivalents 389 231 227
--------- ------------ ---------
14 526 12 900 11 005
--------- ------------ ---------
TOTAL ASSETS 21 610 20 387 18 172
========= ============ =========
EQUITY AND LIABILITIES
Equity attributable to owners
of the parent
Share capital 3 967 3 967 3 967
Share premium 4 56 2 4 56 2 4 562
(15 2 3
Translation reserve (14 904) (14 737) 4)
Revaluation reserve 3 348 3 437 3 538
Retained earnings 5 59 9 5 93 2 4 5 40
--------- ------------ ---------
2 572 3 160 1 372
Non-controlling interests - - -
--------- ------------ ---------
TOTAL EQUITY 2 572 3 160 1 372
Non-current Liabilities
Bank loans - - 5 170
Long-term payables - - 463
Liabilities of rent assets(LT) 50 69 -
Liabilities of rent assets(ST) - (1) -
Deferred tax liabilities 215 242 244
--------- ------------ ---------
265 310 5 877
Current liabilities
Bank loans 7 834 7 213 2 222
Short-term payables 441 -
Trade and other payables 10 907 9 245 8 673
Current income tax liabilities - - -
Other taxes payable 32 18 28
--------- ------------ ---------
18 773 16 917 10 923
--------- ------------ ---------
TOTAL LIABILITIES 19 038 17 227 16 800
--------- ------------ ---------
TOTAL EQUITY AND LIABILITIES 21 610 20 387 18 172
CONDENSED CONSOLIDATED INTERIM STATEMENT OF C HANGES IN
EQUITY
FOR THE SIX MONTHSED 30 JUNE 2020
(in thousand GBP, unless otherwise stated)
Attributable to owners of the parent Total Non-con-trolling Total
interests Equity
------ ----------------- --------
Share Share Revaluation Retained Translation
capital premium reserve earnings reserve
--------- --------- ------------ ---------- ------------ ------ ----------------- --------
GBP GBP '000 GBP '000 GBP '000 GBP '000 GBP GBP '000 GBP
'000 '000 '000
--------- --------- ------------ ---------- ------------ ------ ----------------- --------
As At 1 January
201 9 3 967 4 562 3 619 3 718 (14 902) 964 - 964
Profit for
the six months - - - 740 - 740 - 740
Currency (3
translation (3 32 32 (3
differences - - - - ) ) - 32 )
--------- --------- ------------ ---------- ------------ ------ ----------------- --------
Total
comprehensive (3 32
income - - - 740 ) 408 - 408
Depreciation
on revaluation
of property,
plant and
equipment - - (81) 81 - - - -
--------- --------- ------------ ---------- ------------ ------ ----------------- --------
As At 30 June 4 5 (15 2
201 9 3 967 4 562 3 538 3 9 34 ) 1 372 - 1 372
========= ========= ============ ========== ============ ====== ================= ========
Profit for
the six months - - - 1 291 - 1 291 - 1 291
Currency
translation
differences - - - - 497 497 - 497
--------- --------- ------------ ---------- ------------ ------ ----------------- --------
Total
comprehensive
loss - - - 1 291 497 1 788 - 1 788
Depreciation
on revaluation
of property,
plant and
equipment - - (101) 101 - - - -
--------- --------- ------------ ---------- ------------ ------ ----------------- --------
As At 31 December
20 19 3 967 4 562 3 437 5 931 (14 737) 3 160 - 3 160
========= ========= ============ ========== ============ ====== ================= ========
Loss for the
six months - - - (421) - (421) - (421)
Currency
translation
differences - - - (167) (167) - (167)
--------- --------- ------------ ---------- ------------ ------ ----------------- --------
Total
comprehensive
income - - - (421) (167) (588) - (588)
Depreciation
on revaluation
of property,
plant and
equipment - - (89) 89 - - - -
--------- --------- ------------ ---------- ------------ ------ ----------------- --------
As At 30 June 4 56 5 59
20 20 3 967 2 3 348 9 (14 904) 2 572 - 2 572
========= ========= ============ ========== ============ ====== ================= ========
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
FOR THE SIX MONTHSED 30 JUNE 20 20
(in thousand GBP, unless otherwise stated)
Six months ended Six months ended
3 0 June 2020 30 June 2019
----------------- -----------------
GBP '000 GBP '000
----------------- -----------------
Cash flows from operating activities
Profit before taxation (440) 7 23
Adjustments for:
Exchange difference 67 3 (592)
Depreciation and amortization 297 278
Loss on disposal of non-current assets 5 4
Write off of receivables/payables 1 (1)
Impairment of inventories 82 78
Interest income (1) -
Interest expense on bank loans 254 2 65
----------------- -----------------
Operating cash flow before working capital
changes 871 75 5
Increase in inventories (1 389) (1 05 7 )
Increase in trade and other receivables (143) (2 547)
Increase in trade and other payables 1 682 3 8 73
----------------- -----------------
Changes in working capital 150 269
----------------- -----------------
Cash generated from operations 1 021 1 024
Interest received 1 -
Income tax paid 5 (15)
----------------- -----------------
Net cash generated from operating activities 1 027 1 009
Cash flows from investing activities
Purchases of property, plant and equipment
and intangible assets (334) ( 124 )
Proceeds from sale of property, plant
and equipment 11 5
Repayments of loans issued (3) -
----------------- -----------------
Net cash used in investing activities (326) ( 119 )
Cash flows from financing activities
Interest paid (270) ( 250 )
Decrease in short term borrowing - (163)
Repayments of long term borrowing (42) ( 162 )
----------------- -----------------
Net cash used in from financing activities (312) (575)
Net increase in cash and cash equivalents 389 315
Effect of exchange rate changes on cash
and cash equivalents (231) (269)
----------------- -----------------
Cash and cash equivalents at the beginning
of the six months 231 181
Cash and cash equivalents at the end
of the six months 389 227
================= =================
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHSED 30 JUNE 20 20
(in thousand GBP, unless otherwise stated)
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES
1. REPORTING ENTITY
Ukrproduct Group Limited ("the Company") is a public limited
liability company registered in Jersey with a registered office at
26 New Street, St Helier, Jersey, JE2 3RA, Channel Islands.
The Group's overall management and production facilities are
based in Ukraine, with the HQ in Kyiv. The Group commands leading
positions in the Ukrainian processed cheese and packaged butter
markets and owns a range of widely recognisable trademarks in
Ukraine, including "Nash Molochnik" (translated as Our Dairyman),
"Narodniy Product" (People's Product) "Molendam" and "Vershkova
Dolina" (Creamy Valley).
2. BASIS OF PREPARATION
(a) Statement of compliance
The unaudited condensed consolidated financial statements are
prepared in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union (EU). The
condensed consolidated financial information in this half yearly
report has been prepared in accordance with International
Accounting Standard 34 'Interim Financial Reporting' (IAS 34), as
adopted by the EU, and the Disclosure Guidance and Transparency
Rules of the Financial Conduct Authority.
The interim financial statements are unaudited but have been
reviewed by the auditors.
The condensed 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 (GBP000) except where otherwise
indicated.
The accounting policies used and the methods of computation is
the same as those disclosed in the Group's recent annual
consolidated financial statements except for the adoption of new
and revised accounting standards as disclosed in Note 3.
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 Board has reviewed the Group's ongoing commitments for the
next twelve months and beyond.
The Board's review included the Group's strategic plans and
updated forecasts, capital position, liquidity and credit
facilities. Based on this review no material uncertainties that
would require disclosure have been identified in relation to the
ability of the Group to remain a going concern for at least the
next twelve months, from both the date of the Condensed
Consolidated Statement of Financial Position and the approval of
the Condensed Consolidated Financial Statements.
(a) Going concern
These condensed consolidated interim financial statements have
been prepared on a going concern basis, which envisages the
disposal of assets and the settlement of liabilities in the normal
course of business. The recoverability of Group's assets, as well
as the future operations of the Group, may be significantly
affected by the current and future economic environment.
EBRD covenants
The Board notified EBRD in advance on a breach of one of the
covenants of the loan agreement with EBRD during the first half of
2020. At the same time, EBRD noted that there was significant
progress in compliance with the covenants in general when compared
to the previous period. As such, EBRD has not demanded accelerated
repayment of the loan.
Impact of COVID-19 pandemic
The impact of COVID-2019 on the Group in 1H 2020 was not
material and the Group largely continued to operate as usual. The
management implemented a range of measures for preventing sickness
and spread of infection within the Group premises (including but
not limited to remote working, additional medical screenings,
corporate transportation to and from the workplaces, obligatory use
of protective masks etc.). Additionally the Group reorganised work
in its production facilities in smaller shifts to increase social
distance and to minimise potential spread of infection. So far, the
COVID-19 and respective quarantine impact on the Group's operations
has been limited. Looking ahead, whilst COVID-19 creates
significant economic uncertainty, the Group will continue to apply
acquired experience - most notably remote working - to streamline
and optimise certain administrative and operational processes.
Finally, though the Group faced net foreign exchange loss of GBP
0.67 million, the overall financial results were solid and the
Group generated positive cash flow from operating activities
totaling GBP 1.03 million. Accordingly, the management believes
that th e Group has reliable access to finance capable to support
growing sales and respective increase in working capital
requirements.
(b) Foreign currency translation
Functional and presentation currency
The Ukrainian Hryvnia is the currency of the primary economic
environment in which the majority of
the Group companies operate.
Items included in the financial statements of each of the
Group's companies are measured using the currency of the primary
economic environment in which the company operates ("the functional
currency"). For the companies operating in Cyprus and BVI the
functional currency is United States Dollars ("USD"). For the
Parent company, which is located in Jersey, the functional currency
is Pound Sterling ("GBP"). For the companies operating in Ukraine
the functional currency is Ukrainian Hryvnia ("UAH").
These condensed consolidated interim financial statements are
presented in the thousands of Pound Sterling ("GBP"), unless
otherwise indicated.
Foreign currency transactions and balances
Transactions in foreign currencies are initially recorded by the
Group entities at their respective functional currency rates
prevailing at the date of the transaction.
Monetary assets and liabilities denominated in foreign
currencies are retranslated at the functional currency spot rate of
exchange ruling at the reporting date.
Non-monetary items that are measured in terms of historical cost
in a foreign currency are translated using the exchange rates as at
the dates of the initial transactions. Non-monetary items measured
at fair value in a foreign currency are translated using the
exchange rates at the date when the fair value is determined.
The principal exchange rates used in the preparation of these
condensed consolidated interim financial statements are as
follows:
Currency 30 June Average for 31 December 30 June Average for
2020 the six months 201 9 2019 the six months
ended ended
(spot rate) 30 June (spot rate) (spot rate) 30 June
2020 2019
---------- ------------- ---------------- ------------- ------------- ----------------
UAH/GBP 33,08 33,47 31,02 33,18 34,87
UAH/USD 26,69 26,72 23,69 26,17 26,94
UAH/EUR 29,95 30,05 26,42 29,73 30,45
--------------- ------------- ---------------- ------------- ------------- ----------------
(c) Reclassification
Where applicable, comparatives have been adjusted to present
them on the same basis as current period figures.
(d) Rounding of amounts
Amounts in this financial report have, unless otherwise
indicated, been rounded to the nearest thousand pounds.
3. ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS
IFRS 16 'Leases'
IFRS 16 replaced the existing standard IAS 17 'Leases' with
effect from 1 January 2019. Its objective
is to ensure that lessees and lessors provide relevant
information in a manner that faithfully represent
lease transactions.
The Group elected to use the following practical expedients on
transition:
- Use of single discount rates to reflecting similar lease terms
and economic environments;
- Recognition exemptions for lease contracts that at the
transition date have a remaining lease term
of 12 months or less;
- Exclusion of initial direct costs from the measurement of the
right of use asset;
- The use of hindsight in determining the lease term for
contracts containing options to extend or terminate the lease;
Recognition and measurement
The lease liability is recognised at the inception of a lease as
the present value of the fixed and certain
variable lease payments, plus any guaranteed residual values,
any termination penalties if the lease term
assumes termination options will be exercised and the purchase
option value if it is reasonably certain
that it will be exercised.
Interest is accrued on the lease liability based on the discount
rate at commencement of the lease and is
accounted for in finance costs and subsequent payments are
deducted from the lease liability.
The right of use asset is initially measured as the value of the
lease liability, adjusted for any indirect
costs incurred to obtain the lease, restoration provisions and
any lease payments made before the commencement of the lease.
The right of use asset will be depreciated over the life of the
contract on a straight line basis.
Where the Group act as a lessor the lease will be classified as
a finance lease if it transfers substantially
all the risk and rewards incidental to ownership of the
underlying asset, or otherwise as an operating
lease.
An amendment to IFRS 16
The amendments with regard to COVID-19 are effective for annual
reporting periods beginning on or after June 1, 2020.
Nature and effect of amendment to IFRS 16
There are no significant impact on the Group's consolidated
financial statements.
4. ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE
IFRS 17 'Insurance Contracts'
The International Accounting Standards Board (IASB) issued IFRS
17 'Insurance Contracts' in May 2017 to replace IFRS 4 'Insurance
Contracts' for annual reporting periods beginning, at the latest,
on or after 1 January 2021. The IASB tentatively decided to defer
the effective date of IFRS 17 'Insurance Contracts' to annual
periods beginning on or after January 1, 2022. In this connection,
the IASB also published "Extension of the Temporary Exemption from
Applying IFRS 9 (Amendments to IFRS 4)' to defer the fixed expiry
date of the amendment also to annual periods beginning on or after
January 1, 2023.
Draft legislation has been laid before Parliament to ensure that
IFRS as endorsed by the EU at the date of the UK leaving the EU
will be adopted for use in the UK as well as providing the
Secretary of State with the power to adopt and endorse IFRS for use
in the UK. It is expected that this power will be delegated to a UK
IFRS Endorsement Board. In the event that IFRS 17 has not been
endorsed by the EU by the time the UK leaves the EU, including any
transitional period or arrangements that may be agreed, then the UK
IFRS Endorsement Board will have responsibility for its
endorsement. This is being monitored closely.
Other pronouncements
There are a number of amendments to IFRS that have been issued
by the IASB that become mandatory during 2020 or in a subsequent
accounting period. The Group has evaluated these changes and none
have had, or are expected to
have, a significant impact on the consolidated financial statements.
5. ESTIMATES AND JUDGEMENTS
The preparation of the interim financial report requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates.
6. INVENTORY WRITE OFF TO NET REALISABLE VALUE
Inventories are measured at the lower of cost or net realisable
value.
The cost of inventories comprises all costs of purchase, costs
of conversion and other costs incurred in bringing the inventories
to their present location and condition.
The cost of work in progress and finished goods includes costs
of direct materials and labor and other direct productions costs
and related production overheads (based on normal operating
capacity).
The cost of inventories is assigned by using the FIFO
method.
Net realisable value is the estimated selling price in the
ordinary course of business, less estimated costs of completion and
the estimated costs necessary to make the sale.
The Group periodically analyses inventories to determine whether
they are damaged, obsolete or slow-moving or if their net
realisable value has declined, and makes an allowance for such
inventories.
The loss from impairment of inventories amounted to:
Six months ended Six months ended
30 June 20 20 30 June 201 9
----------------- -----------------
GBP '000 GBP '000
----------------- -----------------
Impairment of finished goods (82) (7 8 )
----------------- -----------------
7. RELATED PARTY TRANSACTIONS
A related party is a person or an entity that is related to the
reporting entity:
1. A person or a close member of that person's family is related
to a reporting entity if that person has control, joint control, or
significant influence over the entity or is a member of its key
management personnel.
2. An entity is related to a reporting entity if, among other
circumstances, it is a parent subsidiary, fellow subsidiary,
associate, or joint venture of the reporting entity, or it is
controlled, jointly controlled, or significantly influenced or
managed by a person who is a related party.
The Group enters into transactions with related parties in the
ordinary course of business.
Related parties comprise the Group's shareholders and companies
that are under control of the Group's shareholders.
All sales and purchases were with related parties under common
control of the ultimate beneficiaries of the Company.
Six months ended Six months ended
30 June 20 20 30 June 201 9
----------------- -----------------
GBP '000 GBP '000
----------------- -----------------
Sales - -
Purchases - -
Administrative expenses 9 7
Other operational incomes 38 -
Other operational expenses 113 3
----------------- -----------------
Balances due from/(to) related parties at each period end are
shown below.
Six months ended Six months ended
30 June 20 20 30 June 201 9
----------------- -----------------
GBP '000 GBP '000
----------------- -----------------
Trade debtors 4 15
Receivables and prepayments - 25
Trade and other payables (7) (11)
Prepayments received - (60)
----------------- -----------------
8. SEGMENT INFORMATION
IFRS 8 requires segment information to be presented on the same
basis as that used by the Board for assessing performance and
allocating resources.
Segment information is presented in respect of the group's key
operating segments. The operating segments are based on the group's
management and internal reporting structure.
At 30 June 2020, the Group was organised internationally into
five main business segments:
1) Branded products - processed cheese, hard cheese, packaged butter and spreads
2) Beverages - kvass, other beverages
3) Non-branded products - skimmed milk powder, other skimmed milk products
4) Distribution services and other - resale of third-party goods and processing services
5) Supplementary products - export trading activities with
non-dairy products. The Group has expanded export sales into
non-dairy products such as corn, protein meal and oil. These
operations make use of third party logistics services and are
financed by deferring payment for purchased products.
Branded Beverages Non-branded Distribution Supplementary Total
products products services products
and other
---------- ---------- ------------ ------------- -------------- -------
GBP '000 GBP '000 GBP '000 GBP '000 GBP '000
---------- ---------- ------------ ------------- -------------- -------
Sales 17 291 772 3 256 1 180 5 024 27 523
Gross profit 2 200 439 (879) 320 135 2 215
---------- ---------- ------------ ------------- -------------- -------
The segment results for the six months ended 30 June 2020 are as
follows:
The segment results for the six months ended 30 June 2019 are as
follows:
Branded Beverages Non-branded Distribution Supplementary Total
products products services products
and other
---------- ---------- ------------ ------------- -------------- -------
GBP '000 GBP '000 GBP '000 GBP '000 GBP '000
---------- ---------- ------------ ------------- -------------- -------
Sales 11 228 927 3 447 816 5 81 8 22 236
Gross profit 1 791 465 (690) 197 163 1 926
---------- ---------- ------------ ------------- -------------- -------
9. EARNINGS PER SHARE
The earnings per ordinary share are calculated by reference to
the profit attributable to the ordinary shareholders and the
weighted average number of shares in issue during the period.
Basic earnings per share are calculated by dividing the profit
attributable to the ordinary shareholders of the Parent Company by
the weighted average number of ordinary shares in issue during the
period, excluding ordinary shares purchased by various employee
share trusts and held as own shares.
Diluted earnings per share are calculated by dividing the profit
attributable to the ordinary shareholders of the Parent Company by
the diluted weighted average number of ordinary shares in issue
during the period, excluding ordinary shares purchased by various
employee share trusts and held as own shares.
Six months ended Six months ended
30 June 20 30 June 201
20 9
GBP '000 GBP '000
----------------- -----------------
Net profit attributable to ordinary
shareholders (421) 740
Weighted number of ordinary shares in
issue 39 673 049 39 673 049
Basic earnings per share, pence (1,06) 1,8 7
Diluted average number of shares 39 673 049 39 673 049
Diluted earnings per share, pence (1,06) 1,8 7
10. SUBSEQUENT EVENTS
As at 3 0 June 20 20 , the Group was in breach of the Debt
Service Coverage ratio covenant in the loan facility in place with
European Bank for Reconstruction and Development ("EBRD"). The
Group remained in breach of this covenant as of date of issue of
the report and EBRD has not issued a waiver in respect of this
breach. There has been no demand for repayment of the loan. The
Company continues to communicate with EBRD and the agreed loan
repayments are being met as they fall due.
11. APPROVAL OF INTERIM STATEMENTS
The unaudited condensed consolidated financial statements were
approved by the board of directors on 29 September 2020.
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END
IR BIGDCBXDDGGC
(END) Dow Jones Newswires
September 30, 2020 02:00 ET (06:00 GMT)
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