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Share Name Share Symbol Market Type Share ISIN Share Description
Ukrproduct Group Limited LSE:UKR London Ordinary Share GB00B03HK741 ORD 10P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.0% 5.25 4.50 6.00 0.00 01:00:00
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Food Producers 5.5 -1.2 -2.9 - 2

Ukrproduct Group Ltd Final Results and Notice of AGM

25/06/2021 7:32am

UK Regulatory (RNS & others)


Ukrproduct (LSE:UKR)
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TIDMUKR

RNS Number : 1332D

Ukrproduct Group Ltd

25 June 2021

25 June 2021

UKRPRODUCT GROUP LIMITED

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

FINAL RESULTS FOR THE YEARED 31 DECEMBER 2020

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 2020.

The 2020 Annual Report and Accounts, together with the Notice of Annual General Meeting ("AGM") and Proxy Form will be posted to shareholders today and are available on the Company's website at www.ukrproduct.com .

The AGM will be held at the 4th floor, office 22, 8 Sikorsky Street, Kyiv, Ukraine, 01033 at 6.00 pm (Kyiv time) / 4.00 pm (London time) on 22 July 2021.

For further information contact:

 
   Ukrproduct Group Ltd 
   Jack Rowell, Non-Executive Chairman                 Tel: +44 1534 814814 
   Alexander Slipchuk, Chief Executive                 www.ukrproduct.com 
    Officer 
   Strand Hanson Limited 
   Nominated Adviser and Broker                        Tel: +44 20 7409 3494 
    Rory Murphy, James Dance, Rob Patrick               www.strandhanson.co.uk 
 

This announcement contains inside information for the purposes of Article 7 of EU Regulation No. 596/2014, which forms part of United Kingdom domestic law by virtue of the European (Withdrawal) Act 2018.

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 Statement

Trading

The outbreak of COVID-19 had an unprecedented global impact on economic activities in most countries, including Ukraine. Due to the COVID-19 pandemic, the Ukrainian economy contracted by 4.4 percent in 2020 compared to the previous year according to t he National Bank of Ukraine. Until February 2020, the Ukrainian economy was still in a robust macroeconomic state with declining public debt, falling inflation and optimistic growth forecasts, but the outbreak of the pandemic turned it around. However , the dairy industry withstood the blow of the pandemic and a number of lockdowns in 2020, largely due to the products being considered necessities by the consumer. Nevertheless, Ukrproduct has taken all measures to safeguard the wellbeing of its employees and managed to steer through this volatile environment, maintaining its performance without interruptions and adapting to the changing market requirements.

The introduction of lockdown in Ukraine had a negative impact on the imports of butter and other products, with such imports reducing significantly as a result of, firstly, the initial devaluation of the hryvnia against the dollar, and, secondly, the lockdown-related logistical issues in respect of customs requirements. Overall, the launch of the lockdown measures in Ukraine did not materially impact the Group's sales due to the strong brands' recognition and substantial market shares for its products.

Moreover, unlike smaller competitors, as the Group delivers most of its products to consumers through food retailers, which remained open during lockdown, Ukrproduct was able to utilize this competitive advantage and adapt its procurement processes and supply chains to the shift in how demand is met so maintaining volumes, whereas many competing dairy processors had to reduce their business.

Though the bottled sales of kvass grew in 2020 the overall sales revenues for beverages were at the levels of 2019 - at GBP1.7 million, which was due to the quarantine measures that suspended distribution over all food channels with the exception of the food and drink retailers. The sales of kvass produced a strong recovery in the second half of the year that helped partial catch up on the annual budget targets.

For FY 2020, the Group reports an improvement in revenue by 11.1% up to GBP55.5 million (UAH 1.9 billion) compared with GBP50 million (UAH 1.6 billion) in FY 2019. The growth was delivered via revision of the Company's sales strategy, with spreads and processed cheese sales demonstrating the most pronounced increases of 132.8% and 79.9% respectively. However, the gross profit remained at a similar level to 2019, amounting to GBP4.7 million (UAH 165 million) , whilst the annual operating profit declined by 43.7% to GBP0.84 million (UAH 29.3 million), compared with GBP1.5 million (UAH 49.1 million) in FY 2019. Despite an increase in sales, the Company recorded a net loss of GBP1.16 million (UAH 40.5 million), compared to the profit of GBP2.031 million (UAH 66.9 million) in 2019. This decline was mainly attributed to the negative foreign exchange differences of GBP1.5 million.

Financial Position

As of 31 December 2020, Ukrproduct reports net assets of GBP5.3 million (UAH 202 million) compared to GBP3.2 million (UAH 104 million) as of 31 December 2019 including cash balances of GBP0. 16 million (UAH 6.0 million) compared to GBP0.23 million (UAH 7.1 million) respectively.

For the year ended 31 December 2020, the Group was in breach of several provisions of the loan agreement with the European Bank for Reconstruction and Development ("EBRD") and the bank has not issued a waiver for the breaches. Though to 31 May 2021 the Group serviced its debt on time in accordance with the loan agreements with its lenders, on 1 June 2021 the Company entered discussions with the EBRD to potentially restructure the loan repayment schedule as a result of pressure on the working capital requirements of the business due to increased raw milk costs and an increase in volumes required to meet demand. Ukrproduct also notified the EBRD that although the Company had settled the interest amount due on 1 June 2021, it did not repay the quarterly loan tranche due on that date. At the same time Ukrproduct is seeking to increase its working capital facility provided locally in Ukraine. The Group's management continues to have discussions with the EBRD and at present the EBRD has taken no action to accelerate repayment of the loan. Though the Company is hopeful that an agreement can be reached in due course that works for both parties.

Outlook

Looking ahead, whilst COVID-19 creates significant economic uncertainty, Ukrproduct expects to utilize its experience gained during the pandemic, most notably from remote working, to streamline and optimize certain administrative and operational processes. Ukrproduct plans to pursue stronger margins and to further increase sales of processed cheese and spreads, as well as to improve margins of packaged butter by a continuous upgrade into the premium market segment. However, the raw milk price trends in Ukraine will be fundamental for the dairy processing industry overall. The Group is looking into the most efficient ways of procuring raw milk, which is subject to local competition that has been strengthening and thus increasing prices.

 
 Jack Rowell                                                     Alexander Slipchuk 
 Non-Executive Chairman                                          Chief Executive Officer 
 

Ukrproduct Group

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEARED 31 DECEMBER 2020

(in thousand GBP, unless otherwise stated)

 
                                                  Year ended    Year ended 
                                                  31 December   31 December 
                                                      2020          2019 
                                                   GBP '000      GBP '000 
 
 
 Revenue                                             55 508       49 961 
 Cost of sales                                     (50 778)      (45 233) 
 GROSS PROFIT                                        4 730         4 728 
 Administrative expenses                            (1 205)       (1 137) 
 Selling and distribution expenses                  (2 464)       (2 175) 
 Other operating (expenses) /income                  (223)          74 
 PROFIT FROM OPERATIONS                               838          1 490 
 Net finance expenses                                (486)         (578) 
 Net foreign exchange gain (loss)                   (1 547)        1 081 
 (LOSS) / PROFIT BEFORE TAXATION                    (1 195)        1 993 
 Income tax redit                                     35            38 
 (LOSS) / PROFIT FOR THE YEAR                       (1 160)        2 031 
 Attributable to: 
 Owners of the Parent                               (1 160)        2 031 
 
 Earnings per share: 
 Basic (pence)                                      (2.92)         5.12 
 Diluted (pence)                                    (2.92)         5.12 
 
 OTHER COMPREHENSIVE INCOME 
 Items that may be subsequently reclassified 
  to profit or loss 
 Currency translation differences                    (494)          165 
 Items that will not be reclassified 
  to profit or loss 
 Gain on revaluation of property, plant 
  and equipment                                      3 758           - 
 
   OTHER COMPREHENSIVE INCOME, NET OF 
   TAX                                               2 104          165 
 TOTAL COMPREHENSIVE INCOME FOR THE 
  YEAR                                               2 104         2 196 
 Attributable to: 
 Owners of the Parent                                2 104         2 196 
 Non-controlling interests                             -             - 
 
 

Ukrproduct Group

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2020

(in thousand GBP, unless otherwise stated)

 
                                              As at         As at 
-------------------------------------- 
                                           31 December   31 December 
                                               2020          2019 
                                            GBP '000      GBP '000 
--------------------------------------    ------------  ------------ 
 ASSETS 
 Non-current assets 
 Property, plant and equipment                9 934         6 994 
 Intangible assets                             598           493 
                                          ------------  ------------ 
                                             10 532         7 487 
 Current assets 
 Inventories                                  7 317         5 071 
 Trade and other receivables                  6 115         7 257 
 Current taxes                                 214           310 
 Other financial assets                        27            31 
 Cash and cash equivalents                     156           231 
                                          ------------  ------------ 
                                             13 829        12 900 
                                          ------------  ------------ 
 TOTAL ASSETS                                24 361        20 387 
                                          ============  ============ 
 
 EQUITY AND LIABILITIES 
 Equity attributable to owners of the 
  parent 
 Share capital                                3 967         3 967 
 Share premium                                4 562         4 562 
 Translation reserve                        (15 231)      (14 737) 
 Revaluation reserve                          7 031         3 437 
 Retained earnings                            4 935         5 931 
                                          ------------  ------------ 
                                              5 264         3 160 
 TOTAL EQUITY                                 5 264         3 160 
 Non-Current Liabilities 
 Liabilities for right-of-use assets           13            68 
 Deferred tax liabilities                     1 029          242 
                                          ------------  ------------ 
                                              1 042          310 
 Current liabilities 
 Bank loans                                   6 628         7 213 
 Short-term payables                           467           441 
 Trade and other payables                    10 947         9 245 
 Other taxes payable                           13            18 
                                          ------------  ------------ 
                                             18 055        16 917 
                                          ------------  ------------ 
 TOTAL LIABILITIES                           19 097        17 227 
                                          ------------  ------------ 
 TOTAL EQUITY AND LIABILITIES                24 361        20 387 
                                          ============  ============ 
 

Ukrproduct Group

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEARED 31 DECEMBER 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 31 December 
  2018                 3 967      4 562        3 619        3 718      (14 902)      964           -             964 
 
 Profit for 
  the year               -          -            -          2 031          -        2 031          -            2 031 
 Other 
 comprehensive 
 income 
 Currency 
  translation 
  differences            -          -            -            -           165        165           -             165 
                     ---------  ---------  ------------  ----------  ------------  ------  -----------------  -------- 
 Total 
  comprehensive 
  income                 -          -            -          2 031         165       2 196          -            2 196 
 
 Depreciation 
  on revaluation 
  of property, 
  plant and 
  equipment              -          -          (182)         182           -          -            -              - 
                     ---------  ---------  ------------  ----------  ------------  ------  -----------------  -------- 
 As At 31 December 
  2019                 3 967      4 562        3 437        5 931      (14 737)     3 160          -            3 160 
                     =========  =========  ============  ==========  ============  ======  =================  ======== 
 
 Profit for                                                                          (1 
  the year               -          -            -         (1 160)         -         160)          -           (1 160) 
 Other                   -          -            -            -            -          -            -              - 
 comprehensive 
 income 
 Currency 
  translation 
  differences            -          -            -            -          (494)      (494)          -            (494) 
                     ---------  ---------  ------------  ----------  ------------  ------  -----------------  -------- 
 Total 
  comprehensive                                                                      (1 
  income                 -          -            -         (1 160)       (494)       654)                      (1 654) 
 
 Reduction of 
  revaluation 
  reserve                -          -          (98)           -            -        (98)           -            (98) 
 Gain on 
  revaluation 
  of property, 
  plant and 
  equipment              -          -          3 856          -            -        3 856          -            3 856 
 Depreciation 
  on revaluation 
  of property, 
  plant and 
  equipment              -          -          (164)         164           -          -            -              - 
                     ---------  ---------  ------------  ----------  ------------  ------  -----------------  -------- 
 As At 31 December 
  2020                 3 967      4 562        7 031        4 935      (15 231)     5 264          -            5 264 
                     =========  =========  ============  ==========  ============  ======  =================  ======== 
 

Ukrproduct Group

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEARED 31 DECEMBER 2020

(in thousand GBP, unless otherwise stated)

 
                                                 Year ended    Year ended 
-------------------------------------------- 
                                                 31 December   31 December 
                                                     2020          2019 
                                                  GBP '000      GBP '000 
--------------------------------------------    ------------  ------------ 
 Cash flows from operating activities 
 (Loss) / Profit before taxation                   (1 195)        1 993 
 Adjustments for: 
 Exchange difference                               1 54 7        (1 081) 
 Depreciation and amortization                      61 8           636 
 (Loss)/Profit on disposal of non-current 
  assets                                             (4)            7 
 (Loss)/ Profit on revaluation                       225            - 
 Write off of receivables/payables                 ( 53 )         (118) 
 Impairment of inventories                          ( 42)         (28) 
 Interest income                                     (2)           (1) 
 Interest expense on bank loans                      488           579 
                                                ------------  ------------ 
 Operation cash flow before working 
  capital changes                                   1 582         1 987 
 Increase in inventories                          (2 2 46 )      (1 309) 
 Decrease / (Increase) in trade and 
  other receivables                                 1 232        (3 973) 
 Increase in trade and other payables               1 662         4 210 
                                                ------------  ------------ 
 Changes in working capital                         6 48         (1 072) 
                                                ------------  ------------ 
 Cash / generated from operations                   2 230          915 
 Interest received                                    2             1 
 Income tax paid                                     (2)            2 
                                                ------------  ------------ 
 Net cash / generated from operating 
  activities                                        2 230          918 
 
 Cash flows from investing activities 
 Purchases of property, plant and equipment 
  and intangible assets                             (688)         (297) 
 Proceeds from sale of property, plant 
  and equipment                                      13            28 
 Repayments of loans issued                          (3)           (3) 
                                                ------------  ------------ 
 Net cash used in investing activities              (678)         (272) 
 
 Cash flows from financing activities 
 Interest paid                                      (494)         (530) 
 Decrease in short term borrowing                     -           (21) 
 Repayments of long term borrowing                  (525)         (347) 
                                                ------------  ------------ 
 Net cash used in financing activities             (1 019)        (898) 
 
 Net Increase / (decrease) in cash 
  and cash equivalents                               533          (252) 
 Effect of exchange rate changes on 
  cash and cash equivalents                        ( 608 )         302 
                                                ------------  ------------ 
 Cash and cash equivalents at the beginning 
  of the year                                        231           181 
 Cash and cash equivalents at the end 
  of the year                                        156           231 
                                                ============  ============ 
 

These consolidated financial statements were approved and authorised for issue by the Board of Directors on 24 June 2021 and were signed on its behalf by Mr. 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 2020 statutory financial statements. It contained no statement under section 113B of the Companies (Jersey) Law 2011. The financial statements for 2020 will be delivered to the Registrar of Companies after adoption at the Company's Annual General Meeting.

EXTRACTS FROM NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

   1.   Basis of preparation 

The consolidated financial statements have been prepared on a historical cost basis, except for significant items of property, plant and equipment which have been measured using revaluation model. The consolidated financial statements are presented in British Pounds Sterling (GBP) and all values are rounded to the nearest thousand (GBP000) except where otherwise indicated.

   2.       Going concern 

For the year ended 31 December 2020, net loss amounted to GBP1.16 million, including the exchange difference loss of GBP1.5 million (2019: net profit of GBP2.031 million after the exchange difference gain of GBP1.081 million).

For the year ended 31 December 2020, the Group was in breach of several provisions of the loan agreement with the European Bank for Reconstruction and Development ("EBRD") and the bank has not issued a waiver for the breaches. Though to 31 May 2021 the Group serviced its debt on time in accordance with the loan agreements with its lenders, on 01 June 2021 the Company entered discussions with the EBRD to potentially restructure the loan repayment schedule as a result of pressure on the working capital requirements of the business due to increased raw milk costs and an increase in volumes required to meet demand. Ukrproduct also notified the EBRD that although the Company had settled the interest amount due on 1 June 2021, it did not repay the quarterly loan tranche due on that date. At the same time Ukrproduct is seeking to increase its working capital facility provided locally in Ukraine. The Group's management continues to have discussions with the EBRD and at present the EBRD has taken no action to accelerate repayment of the loan. Though the Company is hopeful that an agreement can be reached in due course that works for both parties, the management is seeking to secure sufficient additional funding from the local banks to refinance the existing loan on more competitive terms. To the best of their knowledge the Board has a reasonable expectation that the Group has sufficient liquidity to continue its operations going forward and to apply the going concern basis in preparation of the financial statements.

Overall, the Company's management has been implementing a number of steps focused on margin improvement and working capital replenishment that include, but are not limited to, the actions described below. Ukrproduct undertakes ongoing optimisation of the raw milk supply and its settlement scheme that is complemented with optimisation of the products' portfolio aimed at increasing the overall margin and turnover. Additionally, the Group's management is introducing new cost efficiency initiatives in procurement, processing, distribution, marketing and logistics as well as carefully reducing overhead.

The Company has launched new B2B partnerships (as well as developing existing ones) in dairy processing, logistics and distribution to capitalise on economy of scale. Moreover, Ukrproduct continues to introduce new dairy products and beverages appealing to shifting consumer demand, which is complemented by focused marketing and promotion efforts, while export trading is being developed with new packaging to adapt to international consumer requirements. On a daily basis the management team is engaged in proactive negotiation with retailers and other trading partners in order to reflect input costs volatility in the current pricing of its end products on shelves, however, this process is challenging and takes time.

T he Board acknowledges that COVID-19 had a modest impact on the balance sheet and overall performance of the Group in FY2020 and Ukrproduct has already taken a set of the relevant measures to adapt to the changing marketplace. As a part of the going concern assessment the Company performed a broad analysis of the future cash flows and budgets, applying to them multiple scenarios and stress tests including but not limited to the potential impact of COVID-19 on the future trading performance. The analysis revealed that the Group would continue to maintain sufficient cash resources as well as stable flow of revenues in due course. Finally, to the best of their knowledge the management does not believe that COVID-19 has a direct negative financial impact on its operations and closely monitors the pandemic evolution and its potential pressure on the markets, consumers etc.

   3.   Bank Loans and Short-Term Payables 

As at 31 December 2020 the Group has two loans: the loan from Creditwest Bank in the amount of 1.673 thousand GBP (in UAH 65.0 million) and the loan from the EBRD in the amount of 4.955 thousand GBP (in EUR 5.482 thousand).

During 2020, the Group fulfilled its obligations under the EBRD loan in accordance with the agreement. The Group completed installments of payments and in accordance with an agreement between all parties, the payment of the tranche in December was postponed to subsequent periods.

 
    Bank       Currency     Type       Opening     Termination    Interest   Limit      As At          As at 
                                         date          date         rate              31 December    31 December 
                                                                                         2020           2019 
------------  ----------  --------  ------------  -------------  --------- 
                                                                              GBP      GBP '000       GBP '000 
                                                                              '000 
------------  ----------  --------  ------------  -------------  ---------  ------  -------------  ------------- 
 EBRD             EUR       Loan     31.03.2011     30.11.2024      5-7%     7 070      4 956          5 140 
 Creditwest 
  Bank                     Credit 
  Ukraine         UAH        line    05.02.2018     05.02.2021     15,89%    2 095      1 673          2 073 
 Total                                                                                  6 628          7 213 
                                                                                    =============  ============= 
 

The average interest rate as at 31 December 2020 was 11% (2019: 11%).

SUBSEQUENT EVENTS

(a) EBRD - breach of loan covenants

As at 31 December 2020 the Group had been in breach of one of covenants regarding the loan with EBRD- debt service coverage ratio. The Group was still in breach of this covenant as at 31 March 2021, however the Board believes that the EBRD will not demand accelerated payments in respect of this breach, therefore no further commitments or contingencies have arisen.

(b) Installments

The Group agreed to defer the principal amount payment of EUR 200 000.00 due on 1 March 2021 under the terms of the loan agreement with the EBRD, resulting in a principal payment at the amount of EUR 65 434. 57 and an interest payment of EUR 32 240. 41 .

On 1 June 2021 the Company entered discussions with the EBRD to potentially restructure the loan repayment schedule as a result of pressure on the working capital requirements of the business due to increased raw milk costs and an increase in volumes required to meet demand. Accordingly, Ukrproduct also notified the EBRD that on 1 June 2021 the Company had settled the due interest amount without repayment of the next loan tranche at the amount of EUR 294 0066.00 that was due under the loan agreement. However, the Company settled the respective interest payment of EUR 33 089.98 in full and on time.

(c) Foreign exchange rates

Post year end, the Ukrainian Hryvnia has strengthened against the USD, EUR and GBP. According to the information provided by the National Bank of Ukraine, the main exchange rates are set at the following rates:

 
 Currency    24 June 2021 
 UAH/GBP     38.15 
            ------------- 
 UAH/USD     27.27 
            ------------- 
 UAH/EUR     32.60 
            ------------- 
 

(d) Increase in the statutory capital of a Group company

On 24 March 2021, there was an increase in the authorized capital of the Starokonstantinovskiy Molochniy Zavod SC in the amount of 4 . 222 k GBP. 100% of Starokonstantinovskiy Molochniy Zavod SC belongs to MCNVIF "Alternative Investments".

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END

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