TIDMUKR
RNS Number : 0818B
Ukrproduct Group Ltd
29 September 2022
29 September 2022
UKRPRODUCT GROUP LIMITED
("Ukrproduct", the "Company" or, together with its subsidiaries,
the "Group")
FINAL RESULTS FOR THE YEARED 31 DECEMBER 2021
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 2021.
The 2021 Annual Report and Accounts ("2021 Annual Report"), a
notice of Annual General Meeting ("AGM") and a Proxy Form, have
been posted to shareholders and copies are available on the
Company's website at www.ukrproduct.com . .
The Company's shares were temporarily suspended from trading on
AIM on 1 July 2022, as the Company was not able to publish and post
the 2021 Annual Report by 30 June 2022. As a result of this
announcement, restoration to trading of the Company's shares is
expected to take effect at 7:30 am this morning.
The AGM will be held at the 6th floor, office 36, 8 Sikorsky
Street, Kyiv, Ukraine, 04112 at 4:00 pm (Kyiv time) / 2:00 pm
(London time) on 3 November 2022.
The interim results for the 6 months to 30 June 2022 are
expected to be released by 4:30pm tomorrow.
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, Richard Johnson www.strandhanson.co.uk
Chairman and Chief Executive Statement
Trading
Ukrproduct Group Ltd ("Ukrproduct", the "Company" or, together
with its subsidiaries, "the Group") is one of the leading Ukrainian
producers and distributors of branded dairy foods and beverages
(kvass).
During 2021, Ukrproduct experienced several global challenges.
There was an acute, ongoing shortage of dairy raw materials, and an
increase in imports of dairy products from abroad which hampered
the development of the Ukrainian dairy products market. Rising
costs of raw materials and consumables, energy and transport
created additional problems. Increases in selling prices could not
keep pace with the growth in costs and this affected manufacturers
in 2021. Manufacturers were forced to raise selling prices in
stages and over time, as they faced resistance from retailers.
For FY 2021, consolidated sales stood at GBP52.0 million, down
6.3% from the previous year (2020: GBP55.5 million), though in
local currency it grew 0.6%.
Due to an increase of 18% in the price of raw milk over the
period, the Group limited the volume of raw milk procured and used
previously purchased, semi-finished products for production. The
Group also suspended operations at its minor production facility in
Letychiv due to the rise in raw milk prices in its captive raw milk
zone.
Despite the challenging situation and limited marketing
activities, Ukrproduct exceeded its expectations in sales of
branded dairy products in 2021 achieving 7% growth compared to
2020. This increase in sales was delivered following a revision of
the Company's marketing strategy with renewed focus on processed
cheese and processed cheese products, where sales have grown by 24%
and 98% respectively. The overall Group market share in processed
cheese and processed cheese products in Ukraine increased from 14%
in 2020 to 21% in 2021.
Also in 2021, the Group resumed cooperation with the largest
national retail chain in Ukraine, ATB-Market LLC, for the
production of Private Label Cheese. However, due to a significant
increase in costs as a result of the above noted factors, the sales
margin of processed cheese and other processed cheese products
decreased from 20.2% and 7.5% in 2020 to 16.0% and 6.4% in 2021,
respectively.
In order to maintain profitability in the Company's key segment,
butter, Ukrproduct reduced low-margin sales of packaged butter in
retail chains in the second half of 2021 and utilised the butter in
the production of processed cheeses. This led to a 46.3% decrease
in sales of packaged butter in 2021, but allowed for a significant
increase in the category's margin (from 7.4% in 2020 to 10.6% in
2021), which almost maintained the gross margin at 2020 levels.
The Group increased sales of spreads by 8.1% in 2021, despite
the market contraction in Ukraine. However, a significant increase
in the cost of vegetable fats (up 35% compared to 2020) led to a
decrease in sales margin from 19.9% in 2020 to 14.7% in 2021.
An additional factor contributing to the slight growth of
turnover in 2021 (in local currency) was an increase in sales of
kvass and beverages of 5.8% in volume and 5.9% in value. Ukrproduct
continued to increase its range of products in 2021, launching
several new drinks into the market during the year.
The Group expanded its exports in 2021 both in terms of
geographic locations and penetration in existing markets, which
resulted in an increase in sales of exported branded products by
55.5% in volume (from 3,600 tons in 2020 to 5,600 tons in 2021),
and by 60.5% in value (from $7.1 million in 2020 to $11.4 million
in 2021). The main growth was delivered in the processed cheese
category, sales of which increased 2.4 times in volume (from 1,900
tons in 2020 to 4,600 tons in 2021) and 2.6 times in value (from
$3.2 million in 2020 to $8.4 million in 2021).
In 2021, the Group minimized production and export of skimmed
milk powder, instead using the raw milk in the production of other
semi-processed products.
The export of spreads declined significantly compared to 2020
due to cost inflation, the impact of COVID-19 lockdowns on
transportation, and a reluctance by major customers including
retailers to pass on the respective price increases.
Additionally, Ukrproduct undertook a number of initiatives to
improve its operational cost efficiency, including optimised energy
consumption and production standards complemented with increased
productivity. The Group was also successful in maintaining the same
level of logistical costs as in 2020 due to further optimisation of
transportation routes and processes. This was a material
achievement offsetting fuel inflation in 2021.
In 2021, the Group operating expenses rose by 12.0% compared to
2020, mainly driven by increases in salaries, legal and audit
costs, marketing and fuel expenses.
These trading headwinds were significant and meant the Group's
EBITDA in 2021 level reduced by 21.6% to GBP1.1 million compared
with the prior year, with the EBITDA margin decreasing from 2.6% in
2020 to 2.2% in 2021.
The consolidated net profit of Ukrproduct for 2021 amounted to
GBP0.4 million compared with a net loss of GBP1.2 million loss in
2020 .
Financial Position
As at 31 December 2021, Ukrproduct reports net assets of GBP5.9
million including cash balances of GBP0. 3 million compared to net
assets of GBP5.3 million as of 31 December 2020 with a cash
balances of GBP0.2 million.
For the year ended 31 December 2021, the Group was in breach of
several provisions of the loan agreement with the European Bank for
Reconstruction and Development ("EBRD"), missed some repayments and
the bank has not issued a waiver for the breaches. The Company have
been holding negotiations with the EBRD to potentially restructure
the loan repayment schedule since June 2021. At this current stage
the active phase of negotiations with EBRD have been slowed owing
to the ongoing war in Ukraine. At present the EBRD has taken no
action to accelerate repayment of the loan.
Outlook
Trading in 2022 has been severely affected by the Russian
invasion of Ukraine and the ongoing war. Dairy processing
enterprises will not have the opportunity to maximize production
capacity in 2022. For the first 5 months of 2022 raw material
supply for processing was down to 2.9 million tons (16% lower than
last year). Ukrainian regions have experienced a loss of production
capacity in the occupied territory and in the war zone. Moreover,
damaged infrastructure, and increases in fuel prices complemented
with fuel shortages, have impacted transportation and adversely
affected logistics costs, both on the supply and distribution side.
As the Ukrainian sea ports have been blockaded by the Russian Navy,
there is increased pressure on the remaining routes for export.
Ukrproduct expects to make provisions for some of its sales to
distributors, which operate in the regions engaged in military
activities and cannot pay on time.
Jack Rowell Alexander Slipchuk
Non-Executive Chairman Chief Executive Officer
INDEPENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF UKRPRODUCT
GROUP LIMITED
Report on the Audit of the Financial Statements
Opinion
We have audited the consolidated financial statements of
Ukrproduct Group Limited and its subsidiaries (the "Group") which
comprise the consolidated statement of comprehensive income, the
consolidated statement of financial position as at 31 December
2021, the consolidated statement of changes in equity, consolidated
statement of cash flows and notes to the financial statements
including significant accounting policies. The financial reporting
framework that has been applied in their preparation is applicable
law and International Financial Reporting Standards ('IFRS') as
adopted by the European Union.
In our opinion the financial statements:
-- give a true and fair view of the state of the Group's affairs
as at 31 December 2021 and of its results for the year then
ended;
-- have been properly prepared in accordance with IFRS as adopted by the European Union; and
-- have been prepared in accordance with the requirements of the Companies (Jersey) Law 1991.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the consolidated
financial statements section of our report. We are independent of
the Group in accordance with the ethical requirements that are
relevant to our audit of the consolidated financial statements in
Jersey, including the FRC's Ethical Standard as applied to listed
entities, and we have fulfilled our ethical responsibilities in
accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our audit opinion.
An overview of the scope of our audit
During our audit planning, we determined materiality and
assessed the risks of material misstatement in the consolidated
financial statements including the consideration of where Directors
made subjective judgements, for example, in respect of the
assumptions that underlie significant accounting estimates and
their assessment of future events that are inherently uncertain. We
tailored the scope of our audit in order to perform sufficient work
to enable us to provide an opinion on the consolidated financial
statements as a whole taking into account the Group, its accounting
processes and controls and the industry in which it operates.
Key Audit Matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the
consolidated financial statements of the current period and include
the most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those which
had the greatest effect on the overall audit strategy; the
allocation of resources in the audit; and directing the efforts of
the engagement team. These matters were addressed in the context of
our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on
these matters.
Key Audit Matter How the matter was addressed in
the audit
Going Concern In assessing the appropriateness
of the going concern assumption used
The financial statements have in preparing the financial statements,
been prepared on a going concern our procedures included, amongst
basis as discussed in note others:
2. The Group is in a net current * Assessing the cash flow requirements of the Group
liability position due to over 12 months from expected signoff of these
a breach of loan covenants. consolidated;
The net current liability
presented in the Consolidated
Balance Sheet totalled was * Understanding what forecast expenditure is committed
in the amount of GBP3.8m as and what could be considered discretionary;
at 31 December 2021. We included
the going concern assumption
as a key audit matter given * Assessing the liquidity of existing assets on the
both the continuing net current statement of financial position that can be used to
liability position as well repay the Group's obligations;
as the ongoing Russian military
action in Ukraine (refer note
2.1 b to the financial statements). * Considering the terms of the EBRD and other bank loan
and trade finance facilities and the amount available
for drawdown as well as the probability of EBRD
agreeing to restructure the facilities;
* Considering the impact of the ongoing military
conflict in Ukraine to the Group's operations and the
Group's business continuity plan, if any; and,
* Considering potential downside scenarios and the
resultant impact on available funds.
Key Observations
In our opinion, a material uncertainty
exists that may cast significant
doubt as to the ability of the Group
to continue as a going concern. This
has been highlighted in our Material
uncertainty related to going concern
paragraph of the audit report.
Risk of fraud in revenue
recognition
Revenue is material and an Our main audit procedures in respect
important determinant of the of revenue recognition were as follows:
Group's performance and profitability. * We obtained an understanding of the policies and
This gives rise to inherent procedures applied to revenue recognition, as well as
risk that revenue recognised compliance therewith, including an analysis of the
is overstated in order to effectiveness of the design and implementation of
present more profitable results controls related to revenue recognition employed by
for the year. The Group's the Group;
revenue from local and export
sales of milk, dairy foods
and beverages amounted to * We performed sample based tests of details over the
GBP51.90 million, excluding accuracy and occurrence of sales during the year
the charge of bonuses. Given specially responsive to the risk of fraud in revenue
the magnitude of the amount occurrence;
and the inherent
risk of revenue overstatement,
we consider revenue recognition * We performed analytical procedures, including gross
to be a key audit matter (Refer profit margin analysis and obtained explanations for
to note 2.2.11 & 8). significant variances as compared to the previous
year;
* We tested a sample of journal entries relating to
income recognition by reference to supporting
documents;
* We performed sales cut-off procedures for a sample of
revenue transactions at the year end in order to
conclude on whether they were recognized in the
correct accounting period; and,
* We reviewed the disclosures related to revenue
included in the notes to the consolidated financial
statements.
Key Observations
We did not note any material issues
arising from the procedures performed
in this area.
------------------------------------------------------------------------
Material uncertainty related to going concern
We draw attention to note 2.1 (b), in the financial statements,
which indicates that the Russian Federation launched a full-scale
military invasion of Ukraine, and the Group is in breach of
covenants in respect of funding received from the European Bank for
Reconstruction and Development (EBRD); - these events have
continued after the year end. These events and conditions, along
with other matters as set in note 2.1 (b) to the financial
statements, indicate that a material uncertainty exists that may
cast significant doubt on the Group's ability to continue as a
going concern. Our opinion is not modified in respect of this
matter.
Our application of materiality
We define materiality as the magnitude of misstatements in the
consolidated financial statements that makes it probable that the
economic decisions of a reasonably knowledgeable person would be
changed or influenced. We use materiality to determine the scope of
our audit and the nature, timing and extent of our audit procedures
and to evaluate the results of that work. Materiality was
determined as follows:
Consolidated financial statements as a whole:
Materiality was calculated at GBP520,000 which is approximately
1% of Total Revenue. This benchmark is considered the most
appropriate because, based on our professional judgement, we
considered that this is the primary measure used by the users of
the consolidated financial statements in assessing the performance
of the Group.
Communication of misstatements to the Board:
We agreed with the Directors that any misstatement above
GBP26,000 identified during our audit will be reported, together
with any misstatement below that threshold that, in our view,
warranted reporting on qualitative grounds.
Other information
The Directors are responsible for the other information. The
other information comprises the information included in the annual
report set out on page 3 to 17 other than the consolidated
financial statements and our auditor's report thereon. Our opinion
on the consolidated financial statements does not cover the other
information and we do not express any form of assurance conclusion
thereon.
In connection with our audits of the consolidated financial
statements, our responsibility is to read the other information
identified above when it becomes available and, in doing so,
consider whether the other information is materially inconsistent
with the consolidated financial statements, or our knowledge
obtained in the audits or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether there
is a material misstatement of the consolidated financial statements
or a material misstatement of the other information. If, based on
the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact.
We have nothing to report in this regard.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies (Jersey) Law 1991 requires us to report to you
if, in our opinion:
-- adequate accounting records have not been kept, or
-- returns adequate for our audit have not been received from branches not visited by us; or
-- the financial statements are not in agreement with the accounting records and returns; or
-- we have not received all the information and explanations we require for our audit.
Responsibilities of directors for the consolidated financial
statements
As explained more fully in the Statement of Directors'
Responsibilities on page 18, the Directors are responsible for the
preparation of the consolidated financial statements which give a
true and fair view, and for such internal control as the Directors
determine is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the consolidated financial statements, the
Directors are responsible for assessing the Group's ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the
Group or to cease operations, or have no realistic alternative but
to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements are free from material misstatement,
whether due to fraud or error, and to issue an auditor's report
that includes our opinion.
Reasonable assurance is a high level of assurance but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of
these consolidated financial statements.
Explanation as to what extent the audit was considered capable
of detecting irregularities, including fraud
The objectives of our audit, in respect to fraud, are; to
identify and assess the risks of material misstatement of the
financial statements due to fraud; to obtain sufficient appropriate
audit evidence regarding the assessed risks of material
misstatement due to fraud, through designing and implementing
appropriate responses; and to respond appropriately to fraud or
suspected fraud identified during the audit. However, the primary
responsibility for the prevention and detection of fraud rests with
both those charged with governance of the entity and
management.
Our approach was as follows:
-- We obtained an understanding of the legal and regulatory
frameworks that are applicable to the Group and determined that the
most significant are those that relate to the Companies (Jersey)
Law 1991 and the AIM Rules for Companies. We also reviewed the laws
and regulations applicable to the Group that have an indirect
impact on the financial statements.
-- We gained an understanding of how the Group is complying with
Companies (Jersey) Law 1991 and the AIM Rules for Companies by
making inquiries of management. We corroborated our inquiries
through our review of minutes of Board of Directors meetings and
the review of various correspondence examined in the context of our
audit and noted that there was no contradictory evidence.
-- We assessed the susceptibility of the Group's financial
statements to material misstatement, including how fraud might
occur, by meeting with management to understand where they
considered there was susceptibility to fraud. We also considered
performance targets and their propensity to influence management to
manage earnings and revenue by overriding internal controls. We
performed specific procedures to respond to the fraud risk of
inappropriate revenue recognition. Our procedures also included
testing a risk-based sample of journal entries that may have been
posted with the intention of overriding internal controls to
manipulate earnings. These procedures were designed to provide
reasonable assurance that the financial statements were free from
fraud or error.
-- Based on this understanding, we designed specific appropriate
audit procedures to identify instances of non-compliance with laws
and regulations. This included making enquiries of management and
those charged with governance and obtaining additional
corroborative evidence as required.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at
https://www.frc.org.uk/auditorsresponsibilities.This description
forms part of our auditor's report
Use of our report
This report is made solely to the Group's shareholders as a
body, in accordance with Article 113A of the Companies (Jersey) Law
1991. Our audit work has been undertaken so that we might state to
the Group's shareholders those matters we are required to state to
them in an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Group and the Group's
shareholders as a body, for our audit work, for this report, or for
the opinions we have formed.
Ukrproduct Group
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 202 1
(in thousand GBP, unless otherwise stated)
Note Year ended Year ended
31 December 31 December
202 1 20 20
GBP '000 GBP '000
Revenue 8 51 985 55 508
Cost of sales 9 (47 457) (50 778)
GROSS PROFIT 4 528 4 730
Administrative expenses 9 (1 415) (1 205)
Selling and distribution expenses 9 (2 751) (2 464)
Other operating expenses 9 (192) (223)
PROFIT FROM OPERATIONS 170 838
Net finance expenses 11 (440) (486)
Net foreign exchange gain (loss) 10 599 (1 547)
PROFIT/(LOSS) BEFORE TAXATION 329 (1 195)
Income tax redit 13 1 1 0 35
PROFIT/(LOSS) FOR THE YEAR 439 (1 160)
Attributable to:
Owners of the Parent 439 (1 160)
Earnings per share from continuing
and total operations:
Basic (pence) 26 1 . 11 (2.92)
Diluted (pence) 26 1 . 11 (2.92)
OTHER COMPREHENSIVE INCOME
Items that may be subsequently reclassified
to profit or loss
Currency translation differences 244 (494)
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 244 3 264
TOTAL COMPREHENSIVE INCOME FOR THE
YEAR 683 2 104
Attributable to:
Owners of the Parent 683 2 104
Non-controlling interests - -
Ukrproduct Group
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 202 1
(in thousand GBP, unless otherwise stated)
Note As at As at
------------------------------------- -----
31 December 31 December
202 1 20 20
-----
GBP '000 GBP '000
------------------------------------- ----- ------------ ------------
ASSETS
Non-current assets
Property, plant and equipment 14 9 795 9 934
Intangible assets 15 809 598
------------ ------------
10 604 10 532
Current assets
Inventories 17 4 655 7 317
Trade and other receivables 18 6 763 6 115
Current taxes 19 920 214
Other financial assets 20 40 27
Cash and cash equivalents 21 312 156
------------ ------------
12 690 13 829
------------ ------------
TOTAL ASSETS 23 294 24 361
============ ============
EQUITY AND LIABILITIES
Equity attributable to owners of
the parent
Share capital 22 4 282 4 282
Treasury shares (315) (315)
Share premium 23 4 562 4 562
(14 98 7
Translation reserve 23 ) (15 231)
Revaluation reserve 23 6 348 7 031
Retained earnings 6 0 57 4 935
------------ ------------
5 9 47 5 264
TOTAL EQUITY 5 9 47 5 264
Non-Current Liabilities
Liabilities for right-of-use assets - 13
Deferred tax liabilities 16 796 1 029
------------ ------------
796 1 042
Current liabilities
Bank loans 24 6 039 6 628
Short-term payables 587 467
Trade and other payables 25 9 829 10 947
Current income tax liabilities 41 -
Other taxes payable 55 13
------------ ------------
16 5 51 18 055
------------ ------------
TOTAL LIABILITIES 17 3 47 19 097
------------ ------------
TOTAL EQUITY AND LIABILITIES 23 294 24 361
============ ============
Ukrproduct Group
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 202 1
(in thousand GBP, unless otherwise stated)
Attributable to owners of the parent
Share Treasury Share Revaluation Retained Translation Total Non-con-trolling Total
capital shares premium reserve earnings reserve interests Equity
--------------- -------- --------- -------- ------------ --------- ------------ ------ ----------------- ---------
GBP GBP '000 GBP GBP '000 GBP GBP '000 GBP GBP GBP '000
'000 '000 '000 '000 '000
--------------- -------- --------- -------- ------------ --------- ------------ ------ ----------------- ---------
As At 31
December ( 14
2019 4 282 (315) 4 562 3 437 5 931 737 ) 3 160 - 3 160
Profit for (1 ( 1
the year - - - - (1 160) - 160) - 160 )
Other - - - - - - - - -
comprehensive
income
Currency
translation ( 494 ( 494 ( 494
differences - - - - - ) ) - )
-------- --------- -------- ------------ --------- ------------ ------ ----------------- ---------
Total ( 1 ( 1
comprehensive 160 ( 494 654 ( 1
income - - - - ) ) ) 654 )
Reduction
of ( 98 ( 98
revaluation - - - ( 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 ( 15
2020 4 282 (315) 4 562 7 031 4 935 231 ) 5 264 - 5 264
======== ========= ======== ============ ========= ============ ====== ================= =========
Profit for
the year - - - - 439 - 439 - 439
Other - - - - - - - - -
comprehensive
income
Currency
translation
differences - - - - - 244 244 - 244
-------- --------- -------- ------------ --------- ------------ ------ ----------------- ---------
Total
comprehensive
income - - - - 439 244 683 - 683
Reduction - - - - - - - - -
of revaluation
reserve
Gain on - - - - - - - - -
revaluation
of property,
plant and
equipment
Depreciation
on
revaluation
of property,
plant and ( 683
equipment - - - ) 683 - - - -
-------- --------- -------- ------------ --------- ------------ ------ ----------------- ---------
As At 31
December ( 14
2021 4 282 (315) 4 562 6 348 6 057 987 ) 5 947 - 5 947
======== ========= ======== ============ ========= ============ ====== ================= =========
Ukrproduct Group
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 202 1
(in thousand GBP, unless otherwise stated)
Note Year ended Year ended
-------------------------------------------- -----
31 December 31 December
202 1 20 20
-----
GBP '000 GBP '000
-------------------------------------------- ----- ------------ ------------
Cash flows from operating activities
Profit/(Loss) before taxation 3 29 (1 195)
Adjustments for:
Exchange difference 10 (599) 1 54 7
Depreciation and amortization 9 1 003 61 8
Profit/ (Loss)on disposal of non-current
assets 9 10 (4)
Profit on revaluation 9 - 225
Write off of receivables/payables 9 192 ( 53 )
Impairment of inventories 9 (41) ( 42)
Interest income 11 - (2)
Interest expense on bank loans 11 441 488
------------ ------------
Operation cash flow before working
capital changes 1 3 35 1 582
Decrease / (Increase) in inventories 2 703 (2 2 46 )
(Increase) / Decrease in trade and
other receivables (1 558) 1 232
(Decrease) / Increase in trade and
other payables (1 118) 1 662
------------ ------------
Changes in working capital 27 6 48
------------ ------------
Cash generated from operations 1 3 62 2 230
Interest received - 2
Income tax paid 12 (2)
------------ ------------
Net cash generated from operating
activities 1 3 74 2 230
Cash flows from investing activities
Purchases of property, plant and equipment
and intangible assets (723) (688)
Proceeds from sale of property, plant
and equipment - 13
Repayments of loans issued (11) (3)
------------ ------------
Net cash used in investing activities (734) (678)
Cash flows from financing activities
Interest paid 24 (379) (494)
Decrease in short term borrowing - -
Repayments of long term borrowing 24 (161) (525)
------------ ------------
Net cash used in financing activities (540) (1 019)
Net Increase in cash and cash equivalents 100 533
Effect of exchange rate changes on
cash and cash equivalents 56 ( 608 )
------------ ------------
Cash and cash equivalents at the
beginning of the year 156 231
Cash and cash equivalents at the
end of the year 21 312 156
============ ============
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 2021 statutory financial statements. It contained no
statement under section 113B of the Companies (Jersey) Law 2011.
The financial statements for 2021 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
On 24 February 2022, the Russian Federation launched a
full-scale military invasion of Ukraine ( Note 32) . Having
examined the existing and potential implications of the war for the
Ukraine located businesses, the management of the Group have
identified several points of specific concern that require careful
analysis and assessment. They include, but are not limited to, the
following:
- risks related to safety of personal;
- risk of physical destruction of the production assets;
- risks of disruption of the supply and distribution chains;
- risk of liquidity and limited access to financing.
In preparing these financial statements, the Directors have
assessed the Group's ability to continue as a going concern. T he
Company performed an analysis of the future cash flows and budgets
for the next 12 months based on the known facts and events applying
to them, including multiple scenarios as the result of the ongoing
war with Russian Federation . The analysis revealed that the Group
would continue to maintain sufficient cash resources as well as
stable flow of revenues in due course. The Group fully complies
with all sanctions rules and regulations regarding Russia and
Belarus.
Management is taking steps to secure the supply chain which is
vital for operational continuity. The Group concluded contracts
with new alternative suppliers, where necessary and developed new
logistics routes. The central warehouse was moved to the one of
Group 's main plant at Zhytomyr , away from the line of active
hostilities. Major customers have not been affected by the
hostilities and continue to cooperate and fulfil their contractual
obligations with the Group. The military action had no critical
impact on the local distribution. The share of sales in the most
affected regions does not exceed 15%.
Selling, general and administrative and other operating
expenses, as well as CAPEX, have been reduced to the minimum
required to meet the primary needs of the Group's core
business.
The management is exploring various opportunities to attract
additional financing to support Group's the liquidity under
different state aid programs.
In addition the following key assumptions were used for the
forecasts: no further significant progression of Russian troops
into the territory of Ukraine that could severely affect the
Group's assets, production facilities located in the uncontrolled
territories remaining physically undamaged and being able to
continue operating ; remaining logistic routes will continue to be
available; maintain sales level to cover operational expenses level
and debt servicing.
For the year ended 31 December 2021, the Group was in breach of
several provisions of the loan agreement with EBRD, missed some
repayments and the bank has not issued a waiver for the breaches.
The Company has been holding negotiations with the EBRD to
potentially restructure the loan repayment schedule since June
2021. At this current stage the active phase of negotiations with
EBRD have been slowed owing to the ongoing war in Ukraine. At
present the EBRD has taken no action to accelerate repayment of the
loan.
The financial statements are prepared using the going concern
basis assumption.
2. Bank Loans and short-term payables
As at 31 December 202 1 the Group has two loans: the loan from
Creditwest Bank in the amount of 1. 735 thousand GBP (in UAH 6 3 .
9 million) and the loan from the EBRD in the amount of 4. 304
thousand GBP (in EUR 5. 127 thousand).
In March 2021 the Group made a principal payment at the amount
of EUR 65 435 and an interest payment of EUR 32 240. The Group
agreed to defer the principal amount payment of EUR 200 000 due to
the loan terms.
On 1 June 2021, Ukrproduct entered discussions with the EBRD to
potentially restructure the loan repayment schedule as a result of
pressure on the working capital requirements. The Group settled the
interest amount due June 2021, however it did not repay the
quarterly loan tranche due on that date. In September 2021 with
reference to the loan agreement, the Group settled the payment of
interest in the amount of EUR 28 582 and overdue principal in the
amount of EUR 107 200. In December 2021 the Group settled only the
interest in the amount of EUR 29 899.
The Group classified the loan from the EBRD as a current
liability following the breach of certain covenants and as no
formal waivers were received by the Group from the EBRD. At present
the EBRD has taken no action to accelerate repayment of the
loan.
Bank Currency Type Opening Termination Interest Limit As At As at
date date rate 31 December 31 December
202 1 20 20
------------ ---------- -------- ------------ ------------- ---------
GBP GBP '000 GBP '000
'000
------------ ---------- -------- ------------ ------------- --------- ------ ------------- -------------
EBRD EUR Loan 31.03.2011 30.11.2024 5-7% 7 070 4 304 4 956
Creditwest
Bank Credit
Ukraine UAH line 05.02.2018 05.02.2021 15.89% 2 095 1 735 1 672
Total 6 039 6 628
============= =============
The average interest rate as at 31 December 202 1 was 11% (20 20
: 11%).
SUBSEQUENT EVENTS
(a) EBRD - breach of loan covenants
As at 31 December 2021 the Group had been in breach of loan
covenants with EBRD. As at the date of this announcement, the EBRD
has taken no action to accelerate either repayment of the EBRD
loan, or its put right.
(b) War
On 24 February 2022, the Russian Federation launched a
full-scale military invasion of Ukraine. The ongoing military
attack has caused and continues to cause significant casualties,
population displacement, infrastructure damage and disruption to
economic activity in Ukraine. Seaports and airports are closed and
damaged. Export through seaports is completely frozen. This raises
significant pressure on other means of alternative transportation
for export operation. The situation remains highly volatile and the
outlook highly uncertain.
On 15 March 2022, the Verkhovna Rada of Ukraine adopted the Law
of Ukraine "On amendments to the Tax Code of Ukraine and other
legislative acts of Ukraine concerning the effect of regulations
for the period of martial law" 2120-IX in order to support
Ukrainian business for the period of martial law. The key
innovation is that all companies can now waive VAT and income tax
(CIT) by switching to a 2% sales tax. For automotive fuel, the
excise tax is reset to zero, and the VAT rate is reduced from 20%
to 7%.
As of the date of this report, the Group continues to operate.
The management of the Group controls all its operations. The
Group's production facilities are located in Khmelnytskyi and
Zhytomyr regions, where missiles attacks have been incurred. As a
result, the Group's business activities have been affected as
follows:
- none of the Group's critical facilities or infrastructure has
suffered any significant damage;
- as at 23 September 2022 all the Group's assets are located in the de-occupied territories;
- the Group does not have a labor shortage and has managed to
retain its staff. Office staff work remotely, while production
staff work at their sites;
- the Group have lost sales of dairy products in the occupied territories;
- Black Sea ports in Ukraine remain blocked for export
activities. Alternative logistics chains for dairy products exports
by other means of transportations have been developed;
- the Group concluded contracts with new alternative suppliers.
As of June 2022 the price of energy-intensive products increased
by up to 90.9% because of the war and overall input prices are
expected to rise considerably. The higher prices of these inputs
will translate into higher production costs.
War has interrupted regular economic and livelihood activities
and has constrained income flows. In January 2022 Ukraine
experienced elevated levels of food price inflation prior to the
outbreak of the war. In June 2022, consumer inflation accelerated
to 21.5% yoy, up from 18% in May. Concerns exist that the
continuation of hostilities and war-induced disruptions could keep
food inflation levels persistently high in Ukraine, thus decreasing
the purchasing power of local populations adversely affect the
Group's net sales.
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END
FR UWRARUBUKUUR
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September 29, 2022 02:00 ET (06:00 GMT)
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