Condensed consolidated interim financial statements

Ukrproduct Group

Condensed consolidated interim financial statements

For the six months ended 30 June 2022

Condensed consolidated interim financial statements

Table of Contents

CHAIRMAN AND CHIEF EXECUTIVE STATEMENT...............................................................................

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STATEMENT OF MANAGEMENT'S RESPONSIBILITIES......................................................................

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MANAGEMENT STATEMENTS............................................................................................................................

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MANAGEMENT REPORT .........................................................................................................................................

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CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE

INCOME .........................................................................................................................................

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CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION.......

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CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY.…. .13

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS ......................

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS...................

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Condensed consolidated interim financial statements

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 2022 ("1H 2022") and outlook for the remainder of 2022.

2022 Half-Year Trading Update

Trading in 2022 was severely affected by the Russian invasion of Ukraine and the ongoing war. Ukrainian regions experienced a loss of production capacity in the occupied territory and in the war zone. Moreover, damaged infrastructure and increases in fuel prices together 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.

In 2022, dairy processing enterprises throughout Ukraine did not have the opportunity to fully utilize production capacities as a result of difficulties in sourcing raw material. In the first half of 2022 the total milk production in Ukraine declined by 13.2% down to 3.7 million tons compared to the same period last year. Decreases in milk production, increases in fuel price and the effect of the occupation of part of the territories of Ukraine has, of course, led to an increase in the purchase price of milk.

As a result, management took steps to secure the supply chain 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 plants at Zhytomyr, away from the line of active hostilities.

2022 Half-Year Highlights

Consolidated revenue of the Group for the 1H 2022 decreased by 28.4% to £18.3 million while Gross profit increased by 63.6% to £3.3 million. The Group raised prices for products several times and decreased trade marketing activities, which made it possible to compensate for the increase in prices for raw materials, fuel and energy and to increase gross profit margins.

Selling, general and administrative expenses, as well as CAPEX, have been reduced to the minimum required to meet the primary needs of the Group's core business.

Major customers have not been affected by the hostilities and continue to cooperate and fulfil their contractual obligations with the Group. Nevertheless, the Group recognized additional provision for trade receivables of £1.2 million, which is a part of Other operating expenses.

Trading headwinds were significant and meant the Group's EBITDA in 1H 2022 reduced by 7.7% to £0.4 million compared with 1H 2021, with the EBITDA margin increasing from 1.9% in 1H 2021 to 2.4% in 1H 2022. The Group's EBITDA in 1H 2022, if adjusted and stated before expenses relating to the war (including additional bad debt provision for receivables from customers which have been affected by the hostilities) would amount to £1.6 million.

The consolidated net loss of Ukrproduct for 1H 2022 amounted to £0.2 million compared with a net profit of £0.2 million in 1H 2021.

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Condensed consolidated interim financial statements

Financial position

As at 30 June 2022, Ukrproduct had net assets of £6.3 million compared to £5.7 million as at 30 June 2021.

For the six months ended 30 June 2022, the Group continued to be in breach of several provisions of the loan agreement with the European Bank for Reconstruction and Development ("EBRD"), missed some interest payments and repayments and the EBRD 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 has been slowed owing to the ongoing war in Ukraine. At present, the EBRD has taken no action to accelerate repayment of the loan.

Outlook for 2022

The development of the business in the second half of 2022 remains highly uncertain due to the ongoing war and further local currency devaluation and inflation in Ukraine. Ukrproduct continues to implement further efficiencies in procurement, processing, distribution and sales of its products, with a major focus on diversifying risks, maintaining profitability and Group assets.

Jack Rowell

Alexander Slipchuk

Non-Executive Chairman

Chief Executive Officer

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Condensed consolidated interim financial statements

Statement of Management's Responsibilities

for preparation and approval of condensed consolidated interim financial statements for the six months ended 30 June 2022

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 2022, 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 measurements and calculations;
  • 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 30 June 2022 prepared in compliance with IFRS as approved by the European Union are approved on behalf of the Group's Directors on 29 September 2022.

On behalf of the Directors:

29 September 2022

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Ukrproduct Group Ltd. published this content on 30 September 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 September 2022 05:13:04 UTC.