Management report
CHAIRMAN AND CHIEF EXECUTIVE
STATEMENT ���������������������������������������������������6
THE BOARD OF DIRECTORS ������������������������8
REMUNERATION
COMMITTEE REPORT �������������������������������� 12
Corporate Governance Report
CORPORATE GOVERNANCE REPORT ����� 16
CORPORATE SOCIAL
RESPONSIBILITY REPORT ����������������������� 19
DIRECTORS’ REPORT �������������������������������� 22
STATEMENTS
OF DIRECTORS’ RESPONSIBILITIES ������� 25
INDEPENDENT AUDITOR’S REPORT �������� 26
Financial statements
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME ��������������������� 36
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION ������������������������� 37
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY �������������������������� 38
CONSOLIDATED STATEMENT
OF CASH FLOWS ��������������������������������������� 39
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS ������������������������ 40
2
3
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)�
While reporting on the results of the financial year
2022, it is necessary to highlight that the unprovoked
and illegal aggression of Russia has completely
obscured the peace and life of all Ukrainians and
placed a heavy toll on the business in Ukraine�
The impact of these factors and the resulting
uncertainties on the Company’s results, balance
sheet and cash flows have been considered and
are reflected in the figures reported. The Group has
had to adjust to the new emergency conditions, the
key objectives of which were to ensure the safety
of the employees and to maintain operations and
assets� One of the key challenges for the Group’s
operations has been the inability to export goods
via Ukrainian Black Sea ports, which significantly
reduced the Group’s export operations in the first
half of 2022� The Group focused its efforts on
establishing alternative export routes via the border
between Ukraine and the EU�
Ukrproduct’s consolidated revenue in FY2022 fell
by 19�9% in local currencies� The general decline in
sales in the domestic market is due to a decrease
in the solvency of consumers, the outflow of
Ukrainian population and the loss of part of the
Ukrainian sales market due to active hostilities and
the temporary occupation of territories in Ukraine�
After currency translation, revenue decreased by
24�8% to £39�1 million year-on-year, due to the
6% impact of foreign exchange rates, in particular
reflecting the depreciation of the Ukrainian Hryvnia
against the British pound�
In the processed cheese and processed cheese
product category, sales amounted to £22�6 million,
reflecting a revenue increase of 5.4% compared with
the previous year on a nominal basis, although sales
represented a decline of 18�3% in volume� Sales
have fallen due to market trends, the termination of
cooperation with some retail networks and losses
of some export sales�
In FY2022, butter sales reduced considerably, on a
nominal basis, by 61�6% compared with the previous
year, to £3�4 million� This was due to the planned
butter reduction, especially low-margin contracts�
The Company took a flexible approach by focusing
on priority sales channels (export, key distributors),
and benefiting from margin
improvements. A
significant price increase of butter in Ukraine and
marginality growth assisted to offset much of the
volume decline within the segment�
Sales of spreads increased to £5�6 million in
FY2022 compared with £4�4 million in the prior year�
This constituted an increase in sales of 35�9%, on
a nominal basis, but reduction of 1�1% in volume�
This is mainly attributable to the losses of some
export sales�
Sales generated from skimmed milk powder
decreased by 22�1% on a nominal basis to £2�5
million, compared with £3�4 million in the previous
year� In terms of volume, skimmed milk powder
sales decreased by 44.6% impacted by difficulties
with the Black Sea ports in Ukraine� The Group’s
skimmed milk powder sales and exports from
Ukraine in the first half of the year reduced by 69%
year on year due to the low demand for the supply
of skimmed milk powder to outside countries�
55
4
Sales of kvass and beverages amounted to £1�1
million in FY2022, corresponding to a decline
of 33�7% on a nominal basis and 38�3% in terms
of volume, in each instance compared with the
previous period� The decrease was principally
due to the late start of the season due to active
hostilities in key kvass sales regions, impacting the
period of active sales which was less than half that
achieved in FY2021�
In FY2022,
the Group’s administrative and
selling expenses amounted to £4�1 million; a
2�5% decrease compared to FY2021� The Group
optimized costs for payroll, rents, communication
and banks services� The Group’s Central Warehouse
was closed, and its functions were transferred to
production warehouses in Zhytomyr� Marketing
campaigns were also significantly reduced. As a
result of a 87�6% increase in fuel prices, transport
and logistics costs increased by 53�3% in FY2022
compared to the previous period, to £0�0 million�
Due to the impact of the war, other operating
expenses during the reporting period totaled
£1�6 million (2021: £0�2 million), including losses
from impairment of trade receivables, write-off of
materials and finish goods, fines, and VAT losses.
The Group’s operations recorded an EBITDA of £1�7
million, representing an increase of 57�2% year on
year� The Group’s EBITDA margin improved from
2�2% to 4�6%� This notable performance was largely
attributed to a significant reduction in marketing
and trade marketing activities, several product price
increases, a reduction in the cost of production and
an increase in production efficiency, and a focus on
the most profitable product groups.
Net loss after tax for FY2022 amounted to a loss of
£0�8 million, a decrease of £1�2 million compared
to FY2021, stemming from the negative currency
translation due to the 26% devaluation of the
Ukrainian hryvnia against the Euro�
Financial Position
As at 31 December 2022, Ukrproduct reported net
assets of £4�6 million including cash balances of
£0�4 million compared to net assets of £5�9 million
as at 31 December 2021 and a cash balances of
£0�3 million�
For the year ended 31 December 2022, the Group was
in breach of several provisions of its loan agreement
with the European Bank for Reconstruction and
Development (“EBRD”) and missed repayments
for which the bank has not issued a waiver� The
Company have been holding negotiations with the
EBRD to potentially restructure the loan repayment
schedule since June 2021� These negotiations with
EBRD are ongoing� At present, the EBRD has taken
no action to accelerate repayment of the loan�
Outlook
The Company continues to make every effort
to navigate its strategy in a changing business
environment and to respond to new challenges�
The Group expects that in 2023 the focus will be
placed on maintenance of the existing production
facilities, maintaining sales volumes and increasing
operating efficiency.
Jack Rowell
Non-Executive Chairman
Alexander Slipchuk
Chief Executive Officer
6
6
7
The Board of Directors
As of the date of the approval of the 2022 Annual Report, the Board members are as follows:
NAME
Jack Rowell
POSITION
DATE APPOINTED
Non-Executive Chairman
November 2004
Sergey Evlanchik
Executive Director
April 2008
Alexander Slipchuk
Chief Executive Officer
November 2004
Yuriy Hordiychuk
Chief Operational Officer
January 2013
All directors were re-elected at Annual General Meeting (AGM) on 4 November 2022�
Jack Rowell
Non-Executive Chairman
Jack Rowell has acted as Chairman of a number of companies in the public
and private sector, mainly within the food production industry� He was previously
an executive director on the board of Dalgety plc responsible for the consumer
foods division� Jack also served as Chairman of Celsis plc� He has also been
Manager of Bath Rugby, then the Champions of England and the English national
team� Prior to this, Jack Rowell was CEO of Golden Wonder Ltd� and Lucas Food
Ingredients (also part of the Dalgety Food Group)� He was educated at Oxford
University and is a Chartered Accountant�
Alexander Slipchuk
Chief Executive Officer
Alexander Slipchuk is responsible for the Group’s overall performance and
strategy implementation and is a founder of Ukrproduct Group�He studied at Far-
Eastern High Engineering Marine School in USSR and graduated as a maritime
navigator in 1989� Together with Sergey Evlanchik, Alexander established the
securities house Alfa-Broker in 1994, developed the equity trading business
and acquired initial stakes in the companies that later became part of
Ukrproduct Group� Later in 1998, Alexander took on the executive positions
at the Molochnik and the Starokonstantynivsky Dairy plants, Ukrproduct’s two
main operating assets�
Sergey Evlanchik
Executive Director
Sergey Evlanchik received his Master’s degree at Oxford University, where he
studied Business Administration at Said Business School� Together with Alexander
Slipchuk, he established the equity trading group, Alfa-Broker in 1994 and after
the downturn of equity markets in 1998, Mr Evlanchik refocused his activities on
business development in the industrial sector of Ukraine, particularly within the
dairy industry, where he joined the companies that would subsequently form
Ukrproduct Group in 2004� Sergey then led the Group to its successful listing on
the AIM market of the London Stock Exchange in 2005�
In 2011 under the leadership of Sergey Evlanchik the Group secured debt finance
with EBRD focused on energy and production efficiency upgrade of the existing
production facilities�
Sergey is also a partner in Rengy Development that is focused on development of
renewable projects – mainly solar power generation in Ukraine�
Yuriy Hordiychuk
Chief Operational Officer
Yuri Hordiychuk has been with the Group since 2002� Firstly, he was Director
of Procurement, and in 2005 was promoted to Director of Production� The next
significant step in the career of Mr. Hordiychuk was taken in 2008, when the
owners of Ukrproduct Group appointed him as Chief Operational Officer of the
Company� Yuri has a successful track record of business administration and a
degree in “Production Organization Management”�
Andrii Honcharuk
Chief Financial Officer
Andrii Honcharuk joined the Group in September 2021 and has overall control and
responsibility for all financial aspects of Company strategy. He holds Master`s
degree in Finance and has15 years’ in corporate finance, including 10 years in
managerial positions�
8
9
Remuneration
Committee Report
This report is prepared by the Remuneration
Committee of the Board and sets out the Group’s
policy on the remuneration of the Directors,
with a description of service agreements and
remuneration packages for each Director�
Remuneration Committee
The Remuneration Committee comprises
one Non-Executive Director, Jack Rowell� This
Committee is scheduled to meet at least twice
per annum to advise the Board on the Group’s
remuneration strategy and to determine the
terms of employment and total remuneration of
the respective Executive Directors of the Group
and of its subsidiary companies, including the
granting of share options� Among others, the
objective of this Committee is to attract, retain
and motivate Executives capable of delivering
the Group’s objectives� The Remuneration
the
Committee
evaluation of the performance of Executive
Directors�
responsible
is also
for
The board members were invited to discuss
issues on the Remuneration Committee, three
meetings took place during 2022�
Remuneration Policy
The Group’s remuneration policy is to provide
remuneration packages which:
• are designed to attract, motivate and retain
high calibre Executives;
• are competitive and in line with comparable
businesses;
rooted
• are
in practices exercised
in
countries where the Group operates;
• intend
to align
interests of
the
the
Executives with those of the shareholders
by means of fixed and performance related
remuneration; and
• set challenging performance targets and
motivate Executives to achieve those
targets both in the short and long-term�
12
Base salary
The Committee on an annual basis reviews base
salaries of the respective Executive Directors of
the Company and its subsidiaries, taking into
account job responsibilities, competitive market
rates and the performance of the Executive
concerned� Consideration is also given to the
cost of living and the Director’s professional
experience� While determining the base salaries,
the Committee also considers general aspects
of the employment terms and conditions of
employees elsewhere in the Group�
Incentive Bonus Plans
and Equity Arrangements
The Committee continues to plan to introduce
long-term equity incentive arrangements to
make the overall Executive Remuneration
structure more performance-related, more
competitive and aligned with shareholders’
interests subject to an improving environment
in Ukraine�
Service contracts
The appointments of the respective Executive
Directors of the Company and its subsidiaries
are valid for an indefinite period and may be
terminated with three months’ notice given by
either party at any time�
The Group’s policy, including for individual
subsidiaries, for compensation for loss of
office is to provide compensation that reflects
the Group’s or a subsidiary’s contractual
obligations�
Bonus Scheme
The Committee has established a cash bonus
scheme for Executive Directors based on
the overall performance of the Group and/or
respective subsidiary company and attainment
of the operating profit targets. No bonus
awards were made for FY 2022�
Non-Executive Directors
The appointments of non-executive Directors
are valid for an indefinite period and may be
terminated with three months notice given by
either party at any time� The decision to re-
appoint, as well as the determination of the
fees of the non-executive Directors, rests with
the Board� The non-executive Directors may
accept appointments with other companies,
although any such appointment is subject to
the Board’s approval, terms, and conditions of
Service Agreements�
Directors’ remuneration
Details of the Directors’ cash remuneration are
outlined below� Information in the table has
been audited�
Annual Salary/fee
Bonus
Non-cash compensation Total cash remuneration
2022
£ 000
2021
£ 000
2022
£ 000
2021
£ 000
2022
£ 000
2021
£ 000
2022
£ 000
2021
£ 000
Executive
Alexander Slipchuk
45�0
45�0
Sergey Evlanchik
Yuriy Hordiychuk
Non-Executive
Jack Rowell
General manager
35�0
15�0
95.0
35�0
15�0
95.0
22�5
22�5
Yuriy Hordiychuk*
10�9
10�8
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
45�0
35�0
15�0
95.0
45�0
35�0
15�0
95.0
22�5
22�5
10�9
10�8
*This relates to fees paid to Yuriy Hordiychuk for general management services under a separate contract to his
service contract�
Share based payments
As at 31 December 2022 there are no outstanding options issued by Group�
13
CORPORATE
GOVERNANCE
REPORT
Corporate Governance Policy
As an AIM-quoted company, the Company
is required to apply a recognised corporate
governance code, demonstrating how the Group
complies with such corporate governance
code and where it departs from it�
The Directors of the Company have formally
made the decision to apply the Quoted
Companies Alliance Corporate Governance
Code (the “QCA Code”)� The Board recognises
the principles of the QCA Code, which focuses
long-term
on the creation of medium to
value for shareholders without stifling the
entrepreneurial spirit in which small to medium
sized companies, such as Ukrproduct Group
Ltd, have been created� The Company will
provide annual updates on its compliance with
the QCA Code in its Annual Report�
The Board
The Board consists of three Executive Directors
and one Non-Executive Chairman, being
the Chairman, reflecting a blend of different
experience and backgrounds� The Board
considers Jack Rowell to be classified as an
independent Non-Executive Director under the
QCA guidelines�
The Board meets four times a year� At these
quarterly meetings the Board, inter alia, discusses
the implementation of strategy, reviews financial
progress and evaluates the
individual and
collective accountability of the Board�
The Group’s day-to-day operations are managed
by the Executive Directors� All Directors have
access to the Company Secretary and any
Director needing
independent professional
advice in the furtherance of their duties may
obtain this advice at the expense of the Group�
The Board is satisfied that it has a suitable
balance between independence on the one
hand, and knowledge of the Company on
16
the other, to enable it to discharge its duties
and responsibilities effectively, and that all
Directors have adequate time to fill their roles.
Details of the current Directors, their roles
and background are set out on the Company’s
http://ukrproduct�com/en/
website
kompaniya/management-structure/�
at
The role of the Chairman is to provide leadership
of the Board and ensure its effectiveness on all
aspects of its remit to maintain control of the
Group� In addition, the Chairman is responsible
for the implementation and practice of sound
corporate governance� The Chairman is considered
independent and has adequate separation from
the day-to-day running of the Group�
The role of the Chief Executive Officer is for
the strategic development of the Group and
for communicating it clearly to the Board and,
once approved by the Board, for implementing
it. In addition, the Chief Executive Officer is
responsible for overseeing the management of
the Group and its executive management�
Application of the QCA Code
It is the Board’s job to ensure that the Group
is managed for the long-term benefit of all
shareholders and other stakeholders with
effective and efficient decision-making.
Corporate governance is an important part
of that job, reducing risk and adding value to
the Group� The Board will continue to monitor
the governance framework of the Group as it
grows�
The Company remains committed to listening
to, and communicating openly with,
its
shareholders to ensure that
its strategy,
business model and performance are
clearly understood� The AGM is a forum for
shareholders to engage in dialogue with the
Board� The results of the AGM will be published
via RNS and on the Company’s website�
Regular progress reports are also made via a
Regulatory Information Service� The point of
contact for shareholders is Andrii Honcharuk,
Chief Financial Officer, andrii.honcharuk@
ukrproduct�com�
The Company’s management maintains a
close dialogue with local communities and
its workforce� Where issues are raised, the
Board takes the matters seriously and, where
appropriate, steps are taken to ensure that these
are integrated into the Company’s strategy�
Both the engagement with local communities
and the performance of all activities in an
environmentally and socially
responsible
way are closely monitored by the Board and
ensure that ethical values and behaviours are
recognised�
Corporate Governance
Committees
The Board has two committees comprising the
following:
The Audit Committee
The Audit Committee consists of Jack Rowell
(Non-Executive Chairman)� The
terms of
reference of the Audit Committee are to assist
all the Directors in discharging the individuals
of appropriate ability and experience and to
help in promoting the following:
• The Group’s financial and accounting
systems provide accurate and up-to-
date information on its current financial
position, including all significant issues
and going concern;
• The
integrity of the Group’s financial
statements and any formal announcements
financial
relating
performance and reviewing significant
financial reporting judgments contained
therein are monitored;
the Group’s
to
providing
is conducted
understandable,
• The Group’s published financial statements
represent a true and fair reflection of this
position; and taken as a whole are balanced
and
the
information necessary for shareholders to
assess the Group’s performance, business
model and strategy;
• The external audit
in an
independent, objective thorough, efficient and
effective manner, through discussions with
management and the external auditor; and
• A recommendation is made to the Board
for it to put to shareholders at a general
meeting, in relation to the reappointment,
appointment and removal of the external
auditor and to approve the remuneration
and terms of engagement of the external
auditor�
Remuneration Committee
The Remuneration Committee consists of
Jack Rowell (Non-Executive Chairman)� The
terms of reference of the Remuneration
Committee are to:
• recommend to the Board a framework for
rewarding senior management,
including
Executive Directors, bearing in mind the need
to attract and retain individuals of the highest
calibre and with the appropriate experience; and
the
remuneration package are competitive and
help in promoting the Group�
the elements of
• ensure
that
Nominations Committee
Given the Company’s size, the Board has not
considered it appropriate to have a Nominations
Committee�
Internal control
The Directors acknowledge their responsibility
for the Group’s system of internal control,
which is designed to ensure adherence to
17
Principle 7 – “Evaluate board
performance based on clear
and relevant objectives, seeking
continuous improvement.”
The Board is small and extremely focussed
on
implementing the Company’s strategy�
However, given the size and nature of the
Company, the Board does not consider it
appropriate to have a formal performance
evaluation procedure in place, as described
and recommended in Principle 7 of the QCA
Code� The Board will closely monitor the
situation as it grows�
Jack Rowell
Chairman
the Group’s policies whilst safeguarding the
assets of the Group, in addition to ensuring the
completeness and accuracy of the accounting
records� Responsibility for implementing a
system of internal financial control is delegated
to Volodymyr Vardzielov, the CFO� The essential
internal financial
elements of the Group’s
control procedures involve:
• Strategic business planning: strategic
business planning is undertaken annually�
This
includes financial budget for the
following year�
• Performance review: the Directors aim to
monitor the Group’s performance through
the preparation of monthly management
accounts and regular reviews of expenditure
and projections�
• The internal control system: the internal
control system is further enforced by the
Group’s internal audit department with the
main objectives of ensuring the safety of
the Group’s assets and the reliability of
accounting records�
Departure from the QCA Code
for
In accordance with
Companies, the Company departs from the
QCA Code in the following ways:
the AIM Rules
Principle 5: “Maintain the board
as a well-functioning, balanced
team led by the chair.”
The Company does not comply with the
recommendation of Principle 5 that the Board
should have at least two independent non-
executive directors� The Company only has one
Non-Executive Director, the Chairman, who is
considered independent, but has three Executive
Directors� The Executive Directors have valuable
industry knowledge and are integral to the
running of the business� The Chairman has an
extensive business experience at the Board level
especially in the Food industry�
18
Corporate Social Responsibility Report
Corporate Social Responsibility
The Board is committed to developing and
implementing corporate social responsibility
(CSR) policies aimed at:
• Promoting equality and fairness among
employees, partners and suppliers
• Ensuring safe working conditions
• Maintaining
the Group’s
corporate
reputation and dedication to business
ethics
• Supporting the communities in which the
Group operates
• Establishing
healthy
long-term
relationships with the Group’s partners,
customers and other affiliated parties�
and
The main elements of the Group’s approach
towards fulfilling the above objectives are as
follows:
Employees
The Group is committed to ensuring equal
opportunities to all its employees, both current
and prospective� Each employee’s efforts
are highly valued and the Board believes that
a diverse mix of the workforce facilitates
innovation, efficiency and teamwork. As a
matter of corporate policy, regular training
and development workshops are conducted
for Ukrproduct’s staff� These are aimed at
all employee groups,
including managerial,
technical and production personnel� The training
programmes encourage staff to progress up
the career ladder and are central to the Group’s
continuing growth and success�
Health and safety
Management at business units within the Group
are responsible for developing and maintaining
the underlying practices that provide for a
safe working environment� Special attention
is given to the production facilities, where the
equipment, including lighting, air conditioning,
workspace and other constituents, undergo
constant reviews and improvements� Regular
monitoring is carried out to ensure that the
required standards are met and that employees
use the provided communication channels
to further improve their surrounding working
conditions�
high quality,
Customers
Customer satisfaction is at the core of the
Group’s business model� Therefore, the Board
is keen to continue supplying the customers
with
products
required by current market demands� The
Group’s segmentation practices are aimed at
segregating various customer groups in order
to meet their respective needs with maximum
efficiency. In addition, regular market research
and surveys are conducted to ensure maximum
value is consistently offered to customers�
affordable
Environment
The Group recognises the importance of good
environmental practices and seeks to minimise
any negative impact that its operations or
products might have on the production sites
and surrounding areas� The Group adopted the
environmental laws and regulations of Ukraine
to reduce, control and eliminate various types
of pollution and to protect natural resources�
Ukrproduct monitors and controls all
its
production facilities regularly in order to ensure
that air quality is not adversely impacted by
its operations� The Group focuses on cutting
water and energy consumption, as well as
reducing the volumes of waste� Collection
and processing of waste have been organised
through the local waste collection plants� The
Group’s development programme puts specific
19
emphasis on acquiring and installing only the
most advanced and environmentally friendly
production and auxiliary equipment�
Food safety
Food safety is one of key priorities for the Group�
Ukrproduct is committed to produce high quality
and safe food and ensures that high standards
are maintained within its supplier base� The
certified food safety management system in
compliance with ISO 22000 was implemented by
the Group� This system provides the possibility
of fully monitoring all production stages - from
forage control and sound health of the cattle to
the final product distribution.
Community support
The Group is keen to further enhance and
maintain its partnership with local communities
by supporting their initiatives and charitable
events� The Group contributes cash donations
and gifts, as well as employee time, by
encouraging staff to participate as volunteers�
20
21
Directors’ Report
The Directors present their report and the audited
consolidated financial statements of Ukrproduct
Group Ltd (referred to as the “Сompany” and
together with its subsidiaries, “the Group”) for the
year ended 31 December 2022�
Principal Activities
and Business Review
Ukrproduct is a holding company for a group
of food and beverages businesses located in
Ukraine� The principal activities of the Group
are the production and distribution of highly
branded dairy foods and beverages (kvass) in
Ukraine and for export of milk powder� The Group
is one of the leading branded food producers
in Ukraine with its own nationwide distribution
network� More detailed commentary on the
Group’s activities during the year, its financial
performance, future plans, and prospects are
outlined in the Chairman and Chief Executive
Statement�
Results and Dividends
The results of the Group for the year are set
out on the page 25� The Company recorded a
net financial loss of £0.8 million, compared to
a profit of £0.4 million in 2021. The effect of
exchange rates led to the Group reporting a net
foreign exchange loss of £1�1 million�
The Board has decided not to recommend the
payment of a dividend in respect of the year
ended 31 December 2022�
Directors
Details of members of the Board of Directors are
shown on page 8�
The Directors’ interests in the share capital of
the Company as at 31 December 2022 and 31
December 2021 are shown below:
Executive
Sergey Evlanchik
Alexander Slipchuk
Yuriy Hordiychuk
Non-executive
Jack Rowell
Shares
Share options
2022
2021
2022
2021
14,967,133
14,939,133
-
14,967,133
14,939,133
-
138,690
138,690
-
-
-
-
-
-
-
-
22
Powers of the Directors
Payment Policy
Subject to the Company’s Memorandum and
Articles of Association, Companies (Jersey)
Law 1991, as amended and any directions
given by special resolution, the business of the
Company shall be managed by the Directors who
may exercise all such powers of the Company�
The rules in relation to the appointment and
replacement of Directors are set out in the
Сompany’s Article of Association.
The Group has a general set of guidelines for
paying its suppliers based on specific criteria.
However, it is normal practice to agree payment
terms with a specific supplier when entering
into a purchase contract� The Group seeks to
abide by the payment terms agreed whenever it
is satisfied that the goods or services have been
provided in accordance with the agreed terms
and conditions�
Financial Risks Facing the Group
The principal financial risks of the business
are credit risk, liquidity risk and market risk,
including fair value or cash flow, interest-
rate risk and foreign exchange risk� The main
purpose of the Group's risk management
programme is to evaluate, monitor and manage
these risks and to minimise potential adverse
effects on the Group's financial performance
and shareholders. The Chief Financial Officer of
the Group is in charge of risk management and
introduction of all policies as approved by the
Board of Directors�
further details of
For
risk
management please see Note 5 on page 65-69�
the Group’s
Employees
The Group is committed to ensuring provision
of equal opportunities for all employees,
which is reflected by its selection, recruitment
and training policies� The Group considers
its employees to be one of its most valuable
assets and rewards high performance through
competitive
incentive
schemes� The Directors also consider it a
priority to give employees the opportunity
to communicate their ideas and opinions to
all levels of management, both directly and
through various surveys� The average number of
employees of the Group during the year ended
31 December 2022 was 836 (2021: 852)�
remuneration
and
Going Concern
At the time of publication of the 2022 annual
report the war is ongoing and the significant
general uncertainties inherent to the continued
war exist, which began on 24 February 2022�
The Group’s management has analyzed the
observable impact of the war on its business
as described below, and has taken the following
actions in response to the current situation:
- For the period after the Russian invasion
of Ukraine 58 employees joined Ukrainian
military forces and territorial defense�
Personnel of production facilities and
central office remained in their working
area or worked remotely� The Group does
not have a labor shortage and has managed
to retain its staff;
- No critical assets preventing the Group
from continuing operations are damaged or
located in the uncontrolled territories� The
Group optimized utilization of production
facilities to meet domestic demand and
export orders;
- All of the Group’s inventories are in good
condition and are in safe storage�
- Export sales flow via Ukrainian ports
reduced significantly� Alternative
was
export routes are expanded in length and
significantly more expensive in comparison
with sea ones� Black Sea ports in Ukraine
remain blocked for export activities�
- During the fourth quarter of 2022, there
were severe power outages in Ukraine
23
and
generation
caused by Russia's attacks on Ukrainian
power
distribution
infrastructure� These outages caused
temporary instability of work of the Group�
To mitigate the impact on its business, the
Group equipped its key assets with diesel
generators� Difficulties with power supply
persisted throughout January 2023 and
only began to partially improve in February
2023�
- 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 loss of the market in the east and
south of Ukrainey is expected to be offset
partly by increased demand in central and
western Ukraine, where a large number of
internally displaced persons temporarily
reside�
that
future
acknowledges
Management
development of military actions and their
duration represent a single source of material
uncertainty which may cast significant doubt
about the Group’s ability to continue as a going
concern and, therefore, the Group may be unable
to realize its assets and discharge its liabilities
in the normal course of business� Despite the
single material uncertainty relating to the war
in Ukraine, management is continuing to take
actions to minimize the impact on the Group
and thus believes that application of the going
concern assumption for the preparation of these
Сonsolidated financial statements is appropriate.
For the year ended 31 December 2022, the
Group was in breach of several provisions of
its loan agreement with the EBRD and missed
repayments for which the bank has not issued
a waiver� The Company has been holding
negotiations with the EBRD to potentially
restructure the loan repayment schedule since
June 2021� The negotiations with EBRD are
ongoing� At present the EBRD has taken no
action to accelerate repayment of the loan�
Annual General Meeting
Ukrproduct’s AGM will be held on 3 August 2023�
The Notice of AGM will be sent to shareholders
no less than 21 days prior to the date of the
meeting�
Auditors
Moore Stephens Audit & Assurance (Jersey)
Limited was appointed as the Group’s auditors
for the 2022 financial year by the resolution
of the Directors held on 3 November 2022� A
resolution to reappoint them will be proposed at
the forthcoming AGM�
Statement as to disclosure of
information to the auditor
All of the current Directors have taken the
necessary steps to make themselves aware of
any information needed by the Group's auditors
for the purposes of their audit and to establish
that the auditors are aware of that information�
The Directors are not aware of any relevant audit
information of which the auditors are unaware�
Jack Rowell
Chairman
29 June 2023
Statements of Directors’ Responsibilities
The directors are responsible for the preparation
of the consolidated 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�
Under that law, the directors have elected to
prepare the consolidated financial statements
in accordance with International Financial
Reporting Standards (IFRS) as adopted by
the United Kingdom� Under company Law, the
directors must not approve the consolidated
financial statements unless they are satisfied
that they give a true and fair view of the state
of affairs of the Group and of its profit or loss
for the period ended�
In preparing these consolidated financial
statements, the directors are required to:
• select suitable accounting policies and
then apply them consistently;
• make judgments and estimates that are
reasonable and prudent;
• state
the
that
financial
information
complies with IFRS, subject to any material
departures disclosed and explained in the
consolidated financial statements; and
• prepare
the
consolidated
financial
statements on the going concern basis
unless it is inappropriate to presume that
the Group will continue in business�
The board of directors confirms that the
Group has complied with the above mentioned
requirements in preparing its consolidated
financial statements.
The directors are also responsible for:
• implementing and maintaining an efficient
and reliable system of internal controls in
the Group;
• keeping proper accounting records that
disclose with reasonable accuracy at any
time the financial position of the Group;
• taking reasonable steps to safeguard the
assets of the Group and to prevent and
detect fraud and other irregularities; and
• the maintenance and
integrity of the
Group's website�
On behalf of the Directors:
29 June 2023
24
25
INDEPENDENT AUDITOR’S REPORT
TO THE SHAREHOLDERS
OF UKRPRODUCT GROUP LIMITED
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
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 2022, 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 United Kingdom�
In our opinion the financial statements:
• give a true and fair view of the state of the
Group’s affairs as at 31 December 2022
and of its results for the year then ended;
• have been properly prepared in accordance
IFRS as adopted by the United
with
Kingdom; 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
the consolidated financial statements
of
26
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
Key Audit Matter
Going Concern
The financial statements have been prepared
on a going concern basis as discussed in note
2� The Group is in a net current liability position
due to a breach of loan covenants� The net
current liability presented in the Consolidated
Balance Sheet totalled was in the amount of
£3�47m as at 31 December 2022� We included
the going concern assumption as a key audit
matter given both the continuing net current
liability position as well as the ongoing Russian
military action in Ukraine (refer note 2�1 b to the
financial statements).
How the matter was addressed in the audit
In assessing the appropriateness of the going
concern assumption used in preparing the
financial statements, our procedures included,
amongst others:
• Assessing the cash flow requirements of
the Group over 12 months from expected
signoff of these consolidated;
• Understanding what forecast expenditure
is committed and what could be considered
discretionary;
• Assessing the liquidity of existing assets on
the statement of financial position that can
be used to repay the Group’s obligations;
• 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�
27
Risk of fraud in revenue recognition
important
is material and an
Revenue
determinant of the Group’s performance and
profitability. This gives rise to inherent risk that
revenue recognised is overstated in order to
present more profitable results for the year. The
Group’s revenue from local and export sales
of milk, dairy foods and beverages amounted
to £39�11 million, excluding the charge of
bonuses� Given the magnitude of the amount
and the inherent risk of revenue overstatement,
we consider revenue recognition to be a key
audit matter (Refer to note 2�2�11 & 8)�
Our main audit procedures in respect of revenue
recognition were as follows:
• We obtained an understanding of the policies
and procedures applied to revenue recognition,
as well as compliance therewith, including an
analysis of the effectiveness of the design and
implementation of controls related to revenue
recognition employed by the Group;
• We performed sample based tests of
details over the accuracy and occurrence of
sales during the year specially responsive
to the risk of fraud in revenue occurrence;
• We performed analytical procedures,
including gross profit margin analysis
and obtained explanations for 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�
Risk of Management Override of Controls
Key Observations
We did not note any material issues arising
from the procedures performed in this area�
is
Management
in a unique position to
perpetrate fraud because of management's
ability to manipulate accounting records and
prepare fraudulent financial statements by
overriding controls that otherwise appear to be
operating effectively� Although the level of risk
of management override of controls will vary
from entity to entity, the risk is nevertheless
present in all entities� Due to the unpredictable
way in which such override could occur, it is
Our main audit procedures
in respect of
Management Override of Controls were as follows:
• We have Obtained an understanding of the
financial reporting process�
• We have reviewed of opening balances and
completeness of journals�
• We have reviewed high-risk journals as a
part of our testing�
• We have reviewed accounting estimates
and potential management bias�
28
a risk of material misstatement due to fraud
and thus a significant risk. Also, the Group has
voluminous transactions and requires complex
calculations�
Key Observations
We did not note any material issues arising
from the procedures performed in this area�
Risk of Foreign exchange results
The risk in foreign exchange difference is due
to the instability of the Ukrainian Hryvnia (UAH)
against to the EUR, USD and GBP� In addition, the
Group's functional currency is UAH, while the
Group's financial statements are presented in
GBP� We included the foreign exchange results
as a key audit matter as the ongoing Russian
military action in Ukraine (refer note 1c, 2�2�1
and Note 10 to the financial statements).
Risk of Non-compliance with loan covenants
The Group has ERBD loans and there is a risk that
the group doesn't meet the debt service ratio as
per stated in the loan agreement� Continuous of
violating (same breach in prior year) the Group's
loan covenants could have a potential material
unfavourable impact to the Group�
During the review of loan agreements, we
noted that there is non-compliance with certain
covenants contained within those agreements�
Please refer note 24 to the financial statements).
Our main audit procedures in respect of foreign
exchange results were as follows:
• We have tested the appropriate calculation
of the movement in the currency translation
from functional currency
to reporting
currency by audit procedures on all
translations included in the consolidation
file prepared by management�
• We have assessed
the disclosures
differences in the financial statements�
relating
the adequacy of
to exchange
Key Observations
We did not note any material issues arising
from the procedures performed in this area�
Our main audit procedures in respect of Non-
compliance with loan covenants were as follows:
• We have recalculated the loan covenant
and confirmed that they are according to
the terms of the loan�
• We have reviewed the correspondences
with EBRD�
• We have checked the contact with EBRD
in relation to their view and actions on the
breach of terms of the loan agreement
(loan covenants) and failed to pay interest
and capital repayments�
Key Observations
We have noted a material issue arising from
the procedures performed in this area� The
specific instance identified by our audit was:
Debt Service Ratio
Based on the agreement, the indicator for debt
service ratio should be “>1�2”� However, as per our
audit re-calculation, the indicator is equal to 0�8
29
Risk of Subsequent Events
Due to ongoing Russian invasion in Ukraine,
there is a risk that the group hasn't disclosed
enough information in relation to subsequent
war�
Material uncertainty related
to going concern
launched a
We draw attention to note 2.1 (b), in the financial
statements, which indicates that the Russian
Federation
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.
30
Our main audit procedures
Subsequent events were as follows:
in respect of
• We have obtained an understanding of the
procedures management has established
to ensure that subsequent events are
identified�
• We enquired of management whether any
subsequent events have occurred which
might affect the financial statements�
• We read minutes of all relevant meetings
since the end of the reporting period to
identify any relevant subsequent events, to
include where applicable:
a� general meetings;
b� management meetings;
c� board meetings�
• We read all management and
interim
financial statements produced since the
end of the reporting period�
Key Observations
We did not note any material issues arising
from the procedures performed in this area�
Our application of materiality
it probable
that makes
We define materiality as the magnitude of
misstatements in the consolidated financial
that
statements
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 £391,108 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:
the Directors
We agreed with
that any
misstatement above £19,555 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 6 to 24 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�
information
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
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
the financial
assurance about whether
31
are
statements
from material
free
misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes
our opinion�
is a high
Reasonable assurance
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
the economic
be expected
decisions of users taken on the basis of these
consolidated financial statements.
influence
to
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�
32
• We gained an understanding of how the
is complying with Companies
Group
(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
the Financial Reporting
is
located on
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�
Jeff Vincent
For and on behalf of Moore Stephens Audit &
Assurance (Jersey) Limited
1 Waverley Place, Union Street, St Helier,
Jersey, Channel Islands, JE4 8SG
29 June 2023
33
FINANCIAL
STATEMENTS
Ukrproduct Group
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022 (in thousand GBP, unless otherwise stated)
Ukrproduct Group
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER 2022 (in thousand GBP, unless otherwise stated)
Revenue
Cost of sales
GROSS PROFIT
Administrative expenses
Selling and distribution expenses
Other operating expenses
PROFIT FROM OPERATIONS
Net finance expenses
Net foreign exchange gain (loss)
(LOSS)/PROFIT BEFORE TAXATION
Income tax сredit
(LOSS)/PROFIT FOR THE YEAR
Attributable to:
Owners of the Parent
Earnings per share from continuing and total operations:
Basic (pence)
Diluted (pence)
OTHER COMPREHENSIVE INCOME
Items that may be subsequently reclassified to profit or loss
Currency translation differences
Items that will not be reclassified to profit or loss
OTHER COMPREHENSIVE INCOME, NET OF TAX
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
Attributable to:
Owners of the Parent
Non-controlling interests
Note
Year ended
Year ended
31 December
31 December
8
9
9
9
9
11
10
13
26
26
2022
£ ‘000
39 111
2021
£ ‘000
51 985
(32 555)
(47 457)
6 556
(1 342)
(2 719)
(1 571)
924
(466)
(1 113)
(655)
(149)
(804)
(804)
(2�03)
(2�03)
4 528
(1 415)
(2 751)
(192)
170
(440)
599
329
110
439
439
1�11
1�11
(550)
244
(550)
(1 354)
(1 354)
-
244
683
683
-
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Current assets
Inventories
Trade and other receivables
Current taxes
Other financial assets
Cash and cash equivalents
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital
Treasury shares
Share premium
Translation reserve
Revaluation reserve
Retained earnings
TOTAL EQUITY
Non-Current Liabilities
Deferred tax liabilities
Current liabilities
Bank loans
Short-term payables
Trade and other payables
Current income tax liabilities
Other taxes payable
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
Note
As at
31 December
2022
£ ‘000
As at
31 December
2021
£ ‘000
14
15
17
18
19
20
21
22
23
23
23
16
24
25
7 916
681
8 597
4 296
3 073
591
35
403
8 398
16 995
4 282
(315)
4 562
(15 537)
6 005
5 597
4 594
530
530
6 116
493
5 162
48
52
11 871
12 401
16 995
9 795
809
10 604
4 655
6 763
920
40
312
12 690
23 294
4 282
(315)
4 562
(14 987)
6 348
6 057
5 947
796
796
6 039
587
9 829
41
55
16 551
17 347
23 294
36
The notes on pages 36 – 94 are an integral part of these consolidated financial statements.
These consolidated financial statements were approved and authorised for issue by the Board of Directors on 29
June 2023 and were signed on its behalf by:
Alexander Slipchuk
Chief Executive Officer
37
Ukrproduct Group
Ukrproduct Group
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022 (in thousand GBP, unless otherwise stated)
CONSOLIDATED STATEMENT
OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022 (in thousand GBP, unless otherwise stated)
Attributable to owners of the parent
Share
Treasury
Share
Revaluation
Retained
Translation
Total
Non-con-
Total
capital
shares
premium
reserve
earnings
reserve
trolling
Equity
£ ‘000
£ ‘000
£ ‘000
£ ‘000
£ ‘000
£ ‘000
£ ‘000
£ ‘000
£ ‘000
interests
As At 31 December 2019
4 282
(315)
4 562
7 031
4 935
(15 231)
5 264
As At 31 December 2020
4 282
(315)
4 562
6 348
6 057
(14 987)
5 947
Profit for the year
Other comprehensive
income
Currency translation
differences
Total comprehensive
income
Reduction of revaluation
Gain on revaluation
of property, plant and
equipment
Depreciation on
revaluation of property,
plant and equipment
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Loss for the year
Other comprehensive
income
Currency translation
differences
Total comprehensive
income
Reduction of revaluation
reserve
Gain on revaluation
of property, plant and
equipment
Depreciation on
revaluation of property,
plant and equipment
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
439
-
-
-
-
439
-
244
244
439
244
683
-
-
-
-
-
-
(683)
683
(804)
-
-
-
-
(804)
-
(550)
(550)
(804)
(550)
(1 354)
-
-
-
-
-
-
(343)
343
-
-
-
-
As At 31 December 2022
4 282
(315)
4 562
6 005
5 596
(15 537)
4 594
38
The notes on pages 36 – 94 are an integral part of these consolidated financial statements.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5 264
439
-
244
683
-
-
-
5 947
(804)
-
(550)
(1 354)
-
-
-
4 594
Note
Year ended
31 December
2022
£ ‘000
Year ended
31 December
2021
£ ‘000
Cash flows from operating activities
(Loss)/Profit before taxation
Adjustments for:
Exchange difference
Depreciation and amortization
Profit on disposal of non-current assets
Write off of receivables/payables
Impairment of inventories
Interest income
Interest expense on bank loans
Operation cash flow before working capital changes
Decrease in inventories
Decrease / (Increase) in trade and other receivables
Decrease in trade and other payables
Changes in working capital
Cash generated from operations
Interest received
Income tax paid
Net cash generated from operating activities
Cash flows from investing activities
Purchases of property, plant and equipment and intangible
assets
Repayments of loans issued
Net cash used in investing activities
Cash flows from financing activities
Interest paid
Repayments of long term borrowing
Net cash used in financing activities
Net Increase in cash and cash equivalents
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
10
9
9
9
9
11
11
24
24
21
(655)
1 113
882
-
1 065
121
(6)
471
2 991
94
3 116
(4 986)
(1 776)
1 215
6
(201)
1 020
( 409)
(2)
(411)
(292)
-
(292)
317
( 226)
312
403
329
(599)
1 003
10
192
(41)
-
441
1 335
2 703
(1 558)
(1 118)
27
1 362
-
12
1 374
(723)
(11)
(734)
(379)
(161)
(540)
100
56
156
312
39
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022 (in thousand GBP, unless otherwise stated)
1. GROUP AND PRINCIPAL
ACTIVITIES
(a) Introduction
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�
in
leading
positions
The Group’s overall management and
production facilities are based in Ukraine,
with the Head Quarters in Kyiv� The Group
the
commands
Ukrainian processed cheese and packaged
butter markets and owns a range of widely
Ukraine,
trademarks
recognisable
including “Nash Molochnik” (translated as
Our Dairyman), “Narodniy Product” (People’s
Product) “Molendam” and “Vershkova Dolina”
(Creamy Valley)� The average number of
employees of the Group during the year ended
31 December 2022 was 836 (2021: 852)�
in
(b) Share capital
Significant shareholders of the Company as at
31 December are as follows:
Ukrproduct Group
Slipchuk Alexander
Evlanchik Sergey
Year ended
31 December
2022
Year ended
31 December
2021
34�89%
34�96%
34�89%
34�96%
As at 31 December 2022, 7�34% (2021: 7�34%)
of the Company’s issued share capital was held
in treasury�
(c) Ukrainian environment
On 24 February 2022 the Russian Federation
started a full-scale military invasion of Ukraine
which, due to broad security concerns, became
challenging for the further stable development
in
of economical and finance segments
Ukraine� The operating environment remains
risky and highly uncertain �
According to the State Statistics Services of
Ukraine the GDP decline in 2022 is estimated at
29�1% compared with a 3�4% growth in 2021� At
the beginning of the full-scale invasion, preliminary
GDP estimates ranged between 40 and 50%� The
consumption expenditures of households fell
by 26�7% while the expenditures of the general
government sector increased by 18�0%�
At the start of the invasion, all Ukrainian Black
Sea ports stopped provision of transshipment
services due to the armed conflict in the territory
of Ukraine� Notably, some areas fully froze
exports made via Ukrainian seaports� According
to the deal brokered on 22 July 2022 by the United
Nations and Turkey on the Safe Transportation
of Grain and Foodstuffs from Ukrainian ports
(ISTGFUP), also referred to as “Grain Deal”, three
Ukrainian Black Sea ports were unblocked at the
beginning of August 2022�
The Ukrainian economy has experienced
significant challenges and the government
has heavily relied on international financial
support� The Ukrainian government received
financing and donations from international
organizations, such as
International
Monetary Fund and the European Union, and
directly from numerous countries to support
the
financial stability and to finance social related
payments and military needs�
In December 2022, annual inflation in Ukraine
reached 26�6%� Processed food products
increased in price by 29�3%
to 32 euros/100 kg� In the end, the price began
to gradually rise against the background of the
strengthening of the hryvnia and the increase in
the price of milk in the hryvnia equivalent� As a
result, the price of milk in November 2022 was
fixed at the level of 36 euros/100 kg.
At the outbreak of the Russian invasion, the
National Bank of Ukraine switched from a flexible
to a fixed exchange rate regime at UAH/USD 29.25
and further has increased the official exchange
rate of the Ukrainian hryvnia against U�S� dollar by
25%, to UAH/USD 36�5686 from 21 July 2022�
In June 2022 the National Bank of Ukraine
increased the key policy rate from 10% to 25%
per annum�
According to State Statistics Service estimates,
milk production in Ukraine in 2022 amounted
to 7�7 million tons, which is 12�1% less than in
2021� In the three quarters of 2022, processing
enterprises received 2,056�2 thousand tons of
raw milk, which is 15�3% less than in 2021�
Purchase prices for milk, despite the high
indicators of the export of dairy products,
remained 35�5% lower than in the EU in 2022
and almost 10% lower than in 2021�
The main reason for this is Russia's war
against Ukraine with all its consequences� The
destruction of raw milk and finished product
sales chains in the first months of the war, as
well as the destruction of dairy farms and milk
processing plants, caused the price of milk to
drop by 4�6 euros/100 kg in March 2022�
After that, in the period from May to July 2022, the
price in currency stabilized at the level of 37�55-
37�76 EUR/100 kg due to the increase in exports�
However, the National Bank of Ukraine’s increase
in the dollar-hryvnia exchange rate in July and
its subsequent devaluation at the interbank level
affected the price of milk such that it dropped
In 2022, Ukraine’s exported dairy products were
worth USD$344�6 million, which is 39% more
than in 2021� The factors that contributed to
such growth include temporary cancellation by
the Council of the EU of customs duties and
fees on Ukrainian exports from 4 June 2022
until 5 June 2023, high world prices for dairy
products during the first three quarters of the
year and the competitiveness of Ukrainian
dairy products on the European market in the
Summer-Autumn period� The exception was
the fourth quarter whereby prices for dairy
products in the world began to fall, and with
them the volume of shipments�
The main export categories, in monetary terms,
were milk powder (26% of the total structure),
butter (24%) and casein (21%)�
Against the background of devaluation, hryvnia
purchases of the main imported category
of dairy products, cheeses, decreased
significantly, and domestic cheesemakers
began to increase production, both to meet the
needs of the domestic market and for export�
In FY2022, 9,000 tons of cheese (29�8% more
than FY2021) were delivered to foreign markets
at a total cost of USD$42�3 million, which was
58�4% more than the previous year�
At the same time, the volume of imports of dairy
products in 2022, compared to the same period
last year, decreased by 46% and amounted to
59�9 thousand tons� The largest reduction is
recorded in the following categories: milk and
condensed cream, reduced by 6�5 times to
1�2 thousand tons, and butter, reduced by 8�1
times to 1�1 thousand tons�
40
The notes on pages 36 – 94 are an integral part of these consolidated financial statements.
41
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
2.1. 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 the revaluation model� The consolidated
financial statements are presented in British
Pounds Sterling (GBP) and all values are
rounded to the nearest thousand (£000) except
where otherwise indicated�
(a) Statement of compliance
These consolidated financial statements have
been prepared in accordance with International
Financial Reporting Standards, International
Accounting Standards and
Interpretations
issued by
International Accounting
the
Standards Board (IASB), as adopted by the
United Kingdom (collectively “IFRS”)�
The preparation of financial statements
in
conformity with IFRS requires the use of certain
critical accounting estimates� It also requires
management to exercise its judgment in the
process of applying the Group’s accounting
policies� Further information is provided in Note 3�
(b) Going concern
At the time of publication of the annual
report the war, which began on 24 February
2022, is ongoing and the significant general
uncertainties inherent to the continued war
still exist� The Group’s management has
analyzed the observable impact of the war
on its business as described below, and has
taken the following actions in response to the
current situation:
- For the period after the Russian invasion of
Ukraine 58 employees joined Ukrainian military
forces and territorial defense� Personnel of
production facilities and central office remained
in their working area or worked remotely� The
Group does not have a labor shortage and has
managed to retain its staff;
- No critical assets preventing the Group to
continue operations are damaged or located
in the uncontrolled territories� The Group
optimized utilization of production facilities
to meet domestic demand and export orders;
- All of the Group’s inventories are in good
condition and are in safe storage�
- Export sales flow via Ukrainian ports was
reduced significantly� Alternative export
routes are expanded in length and are
significantly more expensive in comparison
in Ukraine
with sea� Black Sea ports
remains blocked for export activities�
- During the fourth quarter of 2022, there were
severe power outages in Ukraine caused by
Russia's attacks on Ukrainian power generation
and distribution infrastructure� These outages
caused temporary instability of work of the
Group� To mitigate the impact on its business,
the Group equipped its key assets with diesel
generators. Difficulties with power supply
persisted throughout January 2023 and only
began to partially improve in February 2023�
- 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 loss of the market in the east and south
of the country is expected to be offset partly
by increased demand in central and western
Ukraine, where a large number of internally
displaced persons temporarily reside�
that
future
Management acknowledges
development of military actions and their
duration represent a single source of material
uncertainty which may cast significant doubt
about the Group’s ability to continue as a
going concern and, therefore, the Group may
be unable to realize its assets and discharge
42
The notes on pages 36 – 94 are an integral part of these consolidated financial statements.
its liabilities in the normal course of business�
Despite the single material uncertainty relating
to the war in Ukraine, management is continuing
to take actions to minimize the impact on the
Group and thus believes that application of the
going concern assumption for the preparation
of these Consolidated financial statements is
appropriate�
For the year ended 31 December 2022, the
Group was in breach of several provisions of
its loan agreement with the EBRD and missed
repayments which the bank has not issued a
waiver for� The Company have been holding
negotiations with the EBRD to potentially
restructure the loan repayment schedule since
June 2021� The negotiations with EBRD are
ongoing� At present the EBRD has taken no
action to accelerate repayment of the loan�
(c)
Consolidation Principles
financial
consolidated
statements
The
comprise
statements of
Ukrproduct Group Limited and its subsidiaries
as at 31 December 2022�
the financial
Subsidiaries are consolidated from the date of
acquisition, being the date on which the Group
obtains control, and continue to be consolidated
until the date that such control ceases�
Control is achieved when the Group is exposed,
or has rights, to variable returns from its
involvement with the investee and has the ability
to affect those returns through its power over
the investee. Specifically, the Group controls an
investee if, and only if, the Group has:
- Power over the investee (i�e�, existing rights
that give it the current ability to direct the
relevant activities of the investee);
- Exposure, or rights, to variable returns from
its involvement with the investee;
- The ability to use its power over the
investee to affect its returns�
Generally, there is a presumption that a majority
of voting rights result in control� To support this
presumption and when the Group has less than
a majority of the voting or similar rights of an
investee, the Group considers all relevant facts
and circumstances in assessing whether it has
power over an investee, including:
- The contractual arrangement with the
other vote holders of the investee;
- Rights arising from other contractual
arrangements;
- The Group’s voting rights and potential
voting rights�
The Group re-assesses whether or not it
controls an investee if facts and circumstances
indicate that there are changes to one or more
of the three elements of control� Consolidation
of a subsidiary begins when the Group obtains
control over the subsidiary and ceases when
the Group loses control of the subsidiary�
Assets, liabilities, income and expenses of a
subsidiary acquired or disposed of during the
year are included in the consolidated financial
statements from the date the Group gains
control until the date the Group ceases to
control the subsidiary�
intra-group balances,
income and
All
expenses and unrealised gains and losses
resulting from intra-group transactions are
eliminated in full on consolidation� A change
in the ownership interest of a subsidiary,
without a change of control, is accounted
for as an equity transaction, that is, as
transactions with owners in their capacity as
owners� Profit or loss and each component of
other comprehensive income are attributed
to the owners of the parent and to the non-
controlling interests� Total comprehensive
income is attributed to the owners of the
parent and to the non-controlling interests
even if this results in the non-controlling
interests having a deficit balance� When
necessary, adjustments are made to the
43
financial statements of subsidiaries to bring
their accounting policies into line with the
Group’s accounting policies�
If the Group loses control over a subsidiary, it:
- Derecognises
the assets
(including
goodwill) and liabilities of the subsidiary;
- Derecognises the carrying amount of any
non-controlling interests;
- Derecognises the cumulative translation
differences, recorded in equity;
- Recognises
the
fair value of
the
consideration received;
- Recognises any investment retained in the
former subsidiary at its fair value at the
date when control is lost;
- Recognises any surplus or deficit in profit
or loss;
- Reclassifies
the parent’s share of
components previously recognised in other
comprehensive income to profit or loss�
The Group applies the acquisition method
to account for business combinations� The
consideration transferred for the acquisition
of a subsidiary is the fair value of the assets
transferred, the
incurred to the
liabilities
former owners of the acquiree and the equity
interests issued by the Group. Identifiable
assets acquired and liabilities and contingent
liabilities assumed in a business combination
are measured initially at their fair values at the
acquisition date�
Acquisition-related costs are expensed as
incurred�
Non-controlling interests represent a portion
of profits or losses and net assets not owned
by the Group� Non-controlling interests are
presented separately from parent share capital
in equity in the Consolidated statement of
financial position.
The Consolidated financial statements of the Group include the following companies:
Group’s company
Country of
Effective ownership ratio
Principal activities
incorporation
Molochnik LLC*
Starokonstantinovskiy Molochniy Zavod
Ukraine
Ukraine
SC****
As at 31 December
2022
100%
100%
2021
100%
100%
Holder of some assets
Production
Krasilovsky Molochny Zavod Private
Ukraine
100%
100%
Owner of land assets
Enterprise SC****
Molochaia Dolina LLC****
Zhiviy Kvas LLC****
Alternative Investments MCVIF**
Ukrproduct Group LLC
Ukraine
Ukraine
Ukraine
Ukraine
100%
100%
100%
100%
100%
100%
100%
100%
Owner of land assets
Production
Asset management
Holder of some
assets and operating
companies
LinkStar Limited
Cyprus
100%
100%
Holder of Group's
Solaero Global Alternative Fund Limited
Cyprus
100%
100%
Holder of Group's
trademarks and assets
Dairy Trading Corporation Limited
Ukrproduct Group LTD
BVI
Jersey
100%
100%
Export operations
trademarks and assets
Parent company traded
on AIM
* The Company is held through Ukrproduct Group LLC which is a 100%-owned subsidiary of the
Company�
** Subsidiary of Solaero Global Alternative Fund Limited, the Group's holder of trademarks and
assets�
**** Subsidiaries of Alternative Investments MCVIF�
Alternative Investments MCVIF is a limited life entity and will cease to exist on 4 April 2032�
44
The notes on pages 36 – 94 are an integral part of these consolidated financial statements.
45
(d) Accounting for acquisitions of companies
under common control
majority of the Group companies operate�
Acquisitions of controlling interests in companies
that were previously under the control of the
ultimate beneficiaries of the Company are
accounted for as if the acquisition had occurred
at the beginning of the earliest comparative period
presented or, if later, at the date on which control
was obtained by the ultimate beneficiaries of the
Company� The assets and liabilities acquired are
recognised at their book values� The components
of equity of the acquired companies are added to
the same components within Group equity except
that any share capital of the acquired companies
is recorded as a part of merger reserve� The cash
consideration for such acquisitions is recognised
as a liability to or a reduction of receivables from
related parties, with a corresponding reduction
in equity, from the date the acquired company
is
in these consolidated financial
statements until the cash consideration is paid�
included
No goodwill is recognised where the Group
acquires additional interests in the acquired
the ultimate controlling
companies
shareholders� The difference between the
share of net assets acquired and the cost of
investment is recognised directly in equity�
from
2.2. Significant accounting
policies
Significant accounting policies given below have
been consistently applied by the Group in the
preparation of these financial statements, unless
otherwise stated�
2.2.1. Foreign currency
translation and transactions
(a) Functional and presentation currency
The Ukrainian Hryvnia is the currency of the
primary economic environment in which the
Transactions in currencies that differ from the
functional currency are considered to be foreign
currency transactions�
Management has considered what would be
the most appropriate presentation currency for
consolidated IFRS financial statements and has
concluded that the Group should use British
Pounds Sterling (hereinafter “GBP” or £) as the
Group’s presentation currency� This is because
the Ukrainian Hryvnia is not a major convertible
or recognisable currency outside of Ukraine, and
also because the Group’s public shareholder
base is located predominantly in the UK
(b) Transactions and balances
Foreign currency transactions are translated
into the functional currency using the exchange
rates prevailing at the dates of the transactions
items are re-measured�
or valuation where
Foreign exchange gains or losses resulting from
the settlement of such transactions and from
the translation at the year-end exchange rates
of monetary assets and liabilities denominated
in foreign currencies are recognised in the
statement of comprehensive income, except
when deferred in equity as qualifying cash flow
hedges and qualifying net investment hedges�
Foreign exchange gains and losses are presented
in the Consolidated Statement of Comprehensive
Income within “Net foreign exchange gain (loss)”�
The financial results and financial position of
the Group's companies are translated into the
presentation currency as follows:
- For current year, all assets and liabilities
are translated at the rate effective at the
reporting date� Income and expense items
are translated at rates approximating to
those ruling when the transactions took
place;
- Equity
items are translated
into the
46
The notes on pages 36 – 94 are an integral part of these consolidated financial statements.
presentation currency using the historical
rate;
- For comparative figures, all assets and
liabilities are translated at the closing rate
existing at the relevant reporting date�
Income and expense items are translated
at rates approximating to those ruling
when the transactions took place;
- Income and expenses for each Statement
of Comprehensive Income are translated
at monthly average exchange rates; and
- All resulting exchange differences are
recognised as a separate component of
equity within "Translation reserve"�
The principal UAH exchange rates used in
the preparation of Consolidated Financial
Statements are as follows:
Currency
31
Average
31
Average
December
exchange
December
exchange
2022
rate for
2021
rate for
2022
2021
UAH/GBP
44,0048
39,8699
36,8392
37,514
UAH/USD
36,5686
32,3684
27,2782
27,2659
UAH/EUR
38,9510
33,9954
30,9226
32,259
Foreign currency can be freely converted
within Ukraine at a rate close to the rate of the
National Bank of Ukraine� At present, the UAH
is not a freely convertible currency outside
Ukraine�
2.2.2. Cash and cash equivalents
Cash and cash equivalents comprise cash on
hand, deposits held on call with banks and
investments
other short-term highly
with original maturities of three months or
less� Bank overdrafts are included in current
liabilities in the Consolidated Statement of
Financial Position�
liquid
2.2.3. Inventories
Inventories are stated at the lower of cost and
net realisable value� Cost is determined using
the weighted average method� Net realisable
value is the estimated selling price in the
ordinary course of business less applicable
variable selling expenses�
raw and other materials (including main
The Group identifies the following types of
inventories:
-
and auxiliary operating supply and materials);
(including semi-
work
-
finished products);
-
finished goods;
other inventories (including fuel, packaging,
-
building materials, spare parts, other materials,
goods of little value and high wear goods)�
in progress
The cost of finished goods and semi-finished
products comprises
raw materials, direct
labour, other direct costs and related production
overheads (based on normal operating capacity)
but excludes borrowing costs� The cost of raw
materials and other inventories comprises all
costs of purchase, costs of conversion and
other costs incurred in bringing the inventories
to their present location and condition�
At each reporting date the Group analyses
inventories to determine whether they are
damaged, obsolete or slow-moving or whether
their net realisable value has declined� The net
realisable value is the estimated selling price in
the ordinary course of business, less applicable
variable selling expenses�
The Group periodically checks inventories to
determine whether they are damaged, obsolete
or slow-moving or if their net realisable value
has declined for any other reason and reduces
accordingly the value of inventory to properly
reflect
in the Consolidated Statement of
Comprehensive Income within cost of sales�
47
2.2.4. Property, plant and
equipment
(a) Recognition and measurement of
property, plant and equipment
The cost of an item of property, plant and
equipment is recognised as an asset only if
it is probable that future economic benefits
associated with the item will flow to the Group
and the cost of the item can be measured
reliably and the entity expects to use the items
during more than one reporting period (more
than 12 months)�
The Group adopts the revaluation model
(as defined in IAS 16: Property, Plant and
Equipment) for all classes of assets, except
office equipment which is carried at cost.
Management believes that this policy provides
more reliable and relevant financial information
because it better reflects the value in use of
such assets to the Group�
All significant categories of property, plant
and equipment are subsequently carried at
fair value at the date of revaluation, less any
subsequent accumulated depreciation and
subsequent accumulated impairment losses�
Changes in fair value are recognised in equity
(the “Revaluation reserve”)� An appropriate
transfer is made from the revaluation reserve
to the retained earnings when assets are
expensed through the Consolidated Statement
of Comprehensive
through
depreciation, impairment or sale)�
Income
(e�g�
that
increase
Subsequent costs
future
economic benefits of the item of property,
plant and equipment also increase its carrying
amount� Otherwise, the Group recognises
subsequent costs as expenses of the period in
which they were incurred. The Group classifies
costs, associated with property, plant and
equipment, for the following categories: repairs
and maintenance; capital repairs, including
modernisation�
(c) Depreciation of property, plant and
equipment
(a) Impairment of property, plant and
equipment
At each reporting date the Group assesses
the carrying value of its property, plant and
equipment to determine whether there is any
evidence that the assets have lost part of their
value as a result of impairment� If such evidence
exists, the expected recoverable amount of
such an asset is calculated to determine the
amount of impairment loss, if any� In case it
is not practicable to determine the expected
recoverable amount of a separate asset, the
Group determines the expected recoverable
amount of a cash-generating unit, to which the
asset belongs�
When, according to estimates, the expected
recoverable amount of an asset (or a cash-
generating unit) is lower than its carrying
value, the carrying value of an asset (or a cash
generating unit) is reduced to its expected
recoverable amount� Impairment losses are
immediately recognised as expenses, except
when the asset is carried at revalued price� In
such cases, the impairment loss is considered
as a decrease in the revaluation reserve� If the
impairment loss is subsequently reversed, the
asset’s carrying value (or a cash generating
unit) is increased to the revised estimate of its
expected recoverable amount� In such a case,
the increased carrying value should not exceed
the carrying value that could be determined
in case the impairment loss for an asset (or
a cash-generating unit) was not recognised in
previous years� The reversal of the impairment
loss is immediately recognised as income�
Gains and losses on disposals are determined
by comparing proceeds with the carrying
amount and are included in profit and loss on
disposal of non-current assets�
Depreciation of an asset begins when
it
becomes available for use� Depreciation of an
asset terminates with the termination of its
recognition� Depreciation does not terminate
when an asset is idle or if it is removed from
active use and is intended for disposal, unless
it is already fully depreciated�
Depreciation is applied to all items of property,
plant and equipment with the exception of
land and assets under construction� The
Group calculates the depreciation using the
straight-line method to allocate their cost or
revalued amounts to their residual values over
their estimated useful lives� The Group has
applied the production method of depreciation
to all production equipment as management
considered this method to be the most
appropriate for the production assets�
Terms of useful lives by groups of property, plant
and equipment (except for those depreciated
under production method) are listed below:
Group of property, plant and
equipment
Buildings
Plant and machinery
Vehicles
Instruments, tools and other
equipment
Useful life
7 - 62 years
2 - 20 years
5 - 12 years
2 - 20 years
The assets’ residual values, useful lives and
methods of depreciation are reviewed at each
financial year-end and adjusted prospectively, if
appropriate� Impact of any changes arising from
estimates made in prior periods is recorded as
a change in an accounting estimate�
2.2.4. Assets under construction
Assets under construction are reported at their
48
The notes on pages 36 – 94 are an integral part of these consolidated financial statements.
cost of construction including costs charged
by third parties and the capitalisation of the
Group's material costs incurred� No depreciation
is charged on assets under construction� Upon
completion, the Group assesses whether there
is any indication that an asset may be impaired�
If any such indication exists, the Group performs
impairment testing as described in Note 2�2�19�
Unless an indication of impairment exists, all
accumulated costs of the asset are transferred
to the relevant fixed asset category and
depreciated at applicable rates from the time
the asset is completed and ready for use�
2.2.5. Intangible assets
(a) Recognition and measurement of
intangible assets
Intangible assets are recognised at historical
cost
less accumulated amortisation and
accumulated impairment losses�
The Group recognises an item as an intangible
asset if it meets the following criteria for
recognition: it is probable that the Group will
receive future economic benefits associated
with the asset and costs of the asset can be
reasonably estimated�
The Group identifies the following types of
intangible assets:
• Computer software licenses;
• Rights to use natural resources;
• Trademarks�
Acquired computer software
licenses are
capitalised on the basis of the costs incurred
to acquire and bring to use the specialised
software�
Rights to use natural resources are capitalised
on the basis of the costs incurred to acquire�
Trademarks are shown at historical cost�
49
An intangible asset is derecognised at disposal,
or when the Group no longer expects receipt
from this asset of any economic benefits. The
profit from cancellation or disposal is defined
by the difference between net proceeds on
the sale and the carrying value of intangible
assets� If the intangible asset is exchanged for
a similar asset, the value of the acquired asset
is equal to the value of the disposed asset�
(b) Amortisation and useful life
licenses are
Costs of computer software
amortised over their estimated useful lives
using the straight-line method (1-10 years),
right of use natural resources (15-20 years)�
The amortisation expense is included within
administrative expenses in the Consolidated
Statement of Comprehensive Income�
Trademarks have finite useful lives and are
carried at cost less accumulated amortisation�
Amortisation is calculated using the straight-
line method to allocate the cost of trademarks
over their estimated useful lives (11-18 years)�
The amortisation expense is included within
selling and distribution expenses
the
Consolidated Statement of Comprehensive
Income�
in
(c) Business combinations and goodwill
for
transferred
consideration
the
The
acquisition of a subsidiary is the fair value of
the assets transferred, the liabilities incurred
to the former owners of the acquiree and
the equity interests issued by the group� The
consideration transferred
includes the fair
value of any asset or liability resulting from
a contingent consideration arrangement�
Acquisition-related costs are expensed as
incurred�
assumed for appropriate classification and
designation in accordance with the contractual
terms, economic circumstances and pertinent
conditions as at the acquisition date� This
includes
the separation of embedded
derivatives in host contracts by the acquiree�
If the business combination is achieved in
stages, the acquisition date fair value of the
acquirer’s previously held equity interest in the
acquiree is remeasured to fair value as at the
acquisition date through profit and loss.
Any contingent consideration to be transferred
by the acquirer will be recognised at fair value
at the acquisition date� Subsequent changes to
the fair value of the contingent consideration
which is deemed to be an asset or liability,
will be recognised in accordance with IFRS 9
''Financial Instruments" either in profit or loss
or as change to other comprehensive income�
If the contingent consideration is classified
as equity, it shall not be remeasured until it is
finally settled within equity.
Goodwill is initially measured at cost being the
excess of the consideration transferred over
the Group’s net identifiable assets acquired
and liabilities assumed� If this consideration
is lower than the fair value of the net assets
of the subsidiary acquired, the difference is
recognised in profit or loss.
Goodwill is not amortised but is subject to
testing for impairment as at the reporting
date or more frequently, if events or changes
in circumstances indicate the possibility of
reducing its usefulness� At the acquisition date,
goodwill is allocated to each asset or group
of assets that generate cash, and benefits
from which are expected to be received upon
consolidation�
When the Group acquires a business,
it
assesses the financial assets and liabilities
The amount of impairment is determined by
assessing the recoverable amount, which may
50
The notes on pages 36 – 94 are an integral part of these consolidated financial statements.
be obtained for a cash-generating asset (group
of cash generating assets) to which goodwill
relates� Where the recoverable amount is less
than the book value of cash generating asset
(group of cash generating assets), impairment
is recognised�
2.2.7. Financial assets
The Group classifies its financial assets in the
following measurement categories:
• those to be subsequently measured at fair
value (either through other comprehensive
income (“FVOCI”), or through profit or loss
(“FVPL”), and
• those to be measured at amortised cost�
The classification depends on the Group’s
business model for managing the financial
assets and the contractual terms of the cash
flows.
Three measurement categories into which the
Group classifies its debt financial assets are as
follows:
1)
included
Amortised cost: assets that are held for
collection of contractual cash flows where
those cash flows represent solely payments
of principal and interest are measured
at amortised cost� Interest income from
these financial assets
in
finance income using the effective interest
rate method� Any gain or loss arising on
derecognition is recognised directly in profit
or loss and presented in other operating
income / (expenses)� Impairment losses
are presented in other operating income
/ (expenses) or as a separate line item in
the consolidated comprehensive income
statement, if material�
is
2)
Fair value through other comprehensive
income: Assets that are held for collection
of contractual cash flows and for selling
the financial assets, where the assets
cash flows represent solely payments of
principal and interest, are measured at
losses,
FVOCI� Movements in the carrying amount
are taken through other comprehensive
income, except for the recognition of
impairment gains or
interest
revenue and foreign exchange gains and
losses which are recognised in profit or
loss� Interest income from these financial
assets is included in profit or loss using the
effective interest rate method� Impairment
are presented in other operating income /
(expenses) or as a separate line item in the
consolidated statement of comprehensive
income, if material�
3)
Fair value through profit or
loss:
Assets that do not meet the criteria for
amortised cost or FVOCI are measured at
FVPL� A gain or loss on a debt investment
that is subsequently measured at FVPL is
recognised in profit or loss and presented
income /
net within other operating
(expenses) in the period in which it arises�
(a)
Initial recognition
Financial assets at fair value through profit and
loss are initially recorded at fair value� All other
financial assets are initially recorded at fair
value plus transaction costs� Fair value at initial
recognition is best evidenced by the transaction
price� A gain or loss on initial recognition is
only recorded if there is a difference between
fair value and transaction price which can be
evidenced by other observable current market
transactions in the same instrument or by a
valuation technique whose inputs include only
data from observable markets�
All purchases and sales of financial
instruments that require delivery within the
time frame established by regulation or market
convention (“regular way” purchases and sales)
are recorded at trade date, which is the date
that the Group commits to deliver a financial
instrument� All other purchases and sales are
recognised on the settlement date with the
51
change in value between the commitment date
and settlement date not recognised for assets
carried at cost or amortised cost; recognised in
the consolidated statement of comprehensive
income for trading investments; and recognised
in equity for assets classified as assets that are
held for collection of contractual cash flows
and for selling the financial assets.
(b) Fair value estimation principles
Fair value of financial instruments is based at
their market value, established at the reporting
date, less transaction costs� If market value
is not available, fair value of the instrument is
determined by means of pricing and discounted
cash flow models.
If a discounted cash flow model is applied,
the determination of future cash flows is
based on optimal management estimations
and the discounting rate is market rate for
instruments predominated
similar financial
as at reporting date� If the price model is used
entering figures are based on average market
data predominated as at reporting date�
(d)
Impairment of financial assets
The Group use a three-stage impairment model,
based on whether there has been a significant
increase in the credit risk of a financial asset
since its initial recognition� These three-stages
then determine the amount of impairment to
be recognised as expected credit losses (ECL)
at each reporting date as well as the amount
of interest revenue to be recorded in future
periods:
(a)
increased
Credit
initial recognition –
significantly since
recognise 12 months ECL, and recognise
interest on a gross basis;
risk has not
(b)
initial
Credit risk has increased significantly
since
recognise
recognition –
lifetime ECL, and recognise interest on a
gross basis;
(c)
Financial asset is credit impaired
(using the criteria currently included in
IFRS 9) – IFRS 9 requires that credit losses
on financial assets are measured and
recognised using the 'expected credit loss
(ECL) approach�
(e) Derecognition
monetary liabilities, which are recognised
at amortised cost�
- Bank borrowings, overdrafts, promissory
notes and bonds issued by the Group are
initially carried at fair value, being the
amount advanced net of any transaction
costs directly attributable to the issue of the
instrument� Such interest bearing liabilities
are subsequently measured at amortised
interest rate
cost using the effective
method, which ensures that any interest
expense over the period to repayment is at a
constant rate on the balance of the liability
carried in the consolidated statement of
financial position�
“Interest expense” in this context includes
initial transaction costs and interest payable on
redemption, as well as any interest or coupon
payable while the liability is outstanding�
(a) Initial recognition
Financial liabilities are initially recognized at
fair value, adjusted in case of borrowings for
directly attributable transaction expenses�
(c) Subsequent measurement
(b) Subsequent measurement
After initial recognition, the Group measure
a financial asset at:
amortised cost;
fair value through other comprehensive
(a)
(b)
income; or
(c)
fair value through profit or loss�
Financial assets at amortised cost are
measured at amortised cost less impairment
losses� Amortised cost is calculated using the
effective interest rate method� Premiums and
discounts, including initial transaction costs,
are included in the carrying amount of the
related instrument and amortised based on the
effective interest rate of the instrument�
Financial assets are derecognised when the
rights to receive cash flows from the financial
assets have expired or where the Group has
transferred substantially all risks and rewards
of ownership�
2.2.8. Financial liabilities
The Group classifies its financial liabilities
into categories depending on the purpose for
which the liability was acquired� The Group has
not classified any of its liabilities at fair value
through profit and loss.
Financial liabilities held at amortised cost
include the following items:
- Trade payables and other short-term
52
The notes on pages 36 – 94 are an integral part of these consolidated financial statements.
Trade and other accounts payable initially
recognized at fair value, are subsequently
accounted for at amortized cost at effective
interest rate method�
Borrowings and liabilities initially recognized
less transaction costs, are
at fair value
subsequently measured at amortized cost; any
difference between the amount of received
is
resources and the sum of repayment
represented as interest cost using the effective
interest rate method during the period, when
borrowings were received�
(с) Derecognition
A financial liability is derecognised when the
obligation under the liability is discharged,
cancelled or expires�
2.2.4. Share capital
The ordinary shares are classified as share
capital� The difference between the fair value
of consideration received and the nominal
value of issued share capital is recognized as
share premium�
2.2.5. Treasury shares
The price paid for treasury shares is deducted
from Companies’ shareholders' equity until
the shares are cancelled or reissued� When
treasury shares are sold or reissued, the amount
received is recognized as an increase in equity�
Treasury stock is held at cost until retired or
reissued� Legal, brokerage, and other costs to
acquire shares are not included in the cost of
treasury stock� When treasury stock is reissued,
any gains are included as part of additional
paid-in capital� Losses upon reissuance reduce
additional paid-in capital to the extent that
previous net gains from the same class of stock
have been recognized and any losses above
that are recognized as part of retained earnings�
2.2.6. Revenue recognition
Revenue is recognised to the extent that it
is probable that the economic benefits will
flow to the Group and the revenue can be
is measured
reliably measured� Revenue
in asset
simultaneously with an
or decrease in liabilities, which causes the
increase in shareholder’s equity (excluding
the capital
increase through contributions
from members of the enterprise), provided
that the amount of income can be reasonably
estimated. Revenue is reflected in the amount
of the fair value of assets received�
increase
Revenue is the amount of cash or cash
equivalents received or receivable� However,
53
in case of delay in receipt of cash or cash
equivalents, the fair value of the consideration
may be less than received or the nominal
amount of cash expected to be received�
When the arrangement effectively constitutes
a financing transaction, the fair value of the
consideration is determined by discounting
all future receipts using an imputed rate of
interest� Revenue (proceeds) from sale of
products (goods, works and services) is not
corrected by an amount of related doubtful and
uncollectible receivables� The amount of such
debt is recognized as expenses of the Group�
Revenue comprises the invoiced value of sales
of goods and services net of value added tax,
rebates and discounts after eliminating sales
within the Group� Revenues and expenses are
recognized on an accruals basis�
are satisfied:
- the amount of revenue can be reliably
measured;
- inflow of economic benefits related to the
transaction is probable;
- the stage of completion of the transaction
at the end of the reporting period can be
measured reliably; and
- the costs incurred for the transaction and
the costs to complete the transaction can
be measured reliably�
To recognise revenue under IFRS 15, the
Company applies the following five steps:
- definition of the contract with the customer;
- definition of contractual obligations;
- determining the transaction price;
- allocation of prices
to contractual
obligations;
(a) Revenue from sale of goods (products)
Revenue from the sale of goods (products) is
recognised when all the following conditions
are satisfied:
- the significant risks and rewards of
ownership of the goods have passed to the
buyer;
- the Group is no longer involved in the
management to the extent that is usually
associated with ownership, and has no
control over the goods sold;
- the amount of revenue can be measured
reliably;
- it is probable that the economic benefits
associated with the transaction will flow to
the Group; and
- the costs incurred or to be incurred in
respect of the transaction can be measured
reliably�
(b) Revenue from sale of services
The revenue from rendering of services is
recognised when all the following conditions
- determination of
from
fulfillment of contractual obligations�
revenue
the
2.2.12. Expenses recognition
Expenses which can not be related directly to a
gain in a certain period, are shown as a part of
expenses of the period they were incurred in�
If an asset provides economic benefits receivable
during several reporting periods, expenses are
calculated by allocating its value on a systematic
basis over respective reporting periods�
Writing off deferred expenses is made on
a straight-line basis within the periods to
which they relate, during which the receipt of
economic benefits is expected.
Expenses which were incurred in the reporting
period but relate to production of semi-finished
products which will be further processed to
finished goods and sold in future reporting
periods, are accounted for in the current period
in the item "Work-in-progress", included within
“Inventories” in the consolidated statement of
financial position.
54
The notes on pages 36 – 94 are an integral part of these consolidated financial statements.
2.2.13. Financial expenses
Interest expenses and other costs on
to finance construction or
borrowings
production of qualifying assets are capitalized
during the period of time that is required to
complete and prepare the asset for its intended
use� All other borrowing costs are expensed�
Net financial expenses are recorded in the
consolidated statement of comprehensive
income�
2.2.14. Value added tax
VAT is levied at two rates: 20% on Ukrainian
domestic sales and imports of goods, works
and services and 0% on export of goods and
provision of works or services to be used
outside Ukraine�
VAT output equals the total amount of VAT
collected within a reporting period, and arises
on the earlier of the date of shipping goods to
a customer or the date of receiving payment
from the customer� VAT input is the amount
that a taxpayer is entitled to offset against
their VAT liability in the reporting period� Rights
to VAT input arise on the earlier of the date of
payment to the supplier or the date goods are
received�
2.2.15. Tax
Taxation has been provided for in the financial
statements
relevant
legislation currently in force� The charge for
taxation in the consolidated statement of
comprehensive income for the year comprises
current tax and changes in deferred tax�
in accordance with
Current tax is the amount of income tax
payable/recoverable
in respect of taxable
profit/tax loss for the period determined in
accordance with rules established by the tax
authorities in respect of which income tax shall
be paid/refundable�
Current tax liabilities and assets are measured
at the amount expected to be paid to or
recovered from the taxation authorities, using
the tax rates and laws that have been enacted,
or substantively enacted, by the reporting date�
Deferred tax assets and liabilities are calculated
in respect of temporary differences using
the balance sheet liability method� Deferred
income taxes are provided on all temporary
differences arising between the tax bases
of assets and liabilities and their carrying
amounts for financial reporting purposes,
except in situations where the deferred tax
arising on initial recognition of goodwill or
of an asset or liability in a transaction that is
not a deal to merge companies and which, at
the time of its commission, has no effect on
accounting or taxable profit or loss.
tax
Assessment of deferred
liabilities
and deferred tax assets reflects the tax
consequences that would arise depending
on the ways in which the Group assumes the
reporting date of realisation or settlement of
the carrying value of its assets or liabilities�
A deferred tax asset is recognised only to
the extent to which there is a substantial
probability that future taxable profit, which
may be reduced by the amount of deductible
temporary differences, will be
received�
Deferred tax assets and liabilities are measured
at tax rates, the use of which is expected in the
period of the asset or liability is settled, based
on the provisions of the legislation enacted, or
declared at that date�
Deferred income taxes are recognised for
all temporary differences associated with
investments in subsidiaries and associated
in
companies and
cases where the Group controls the timing
of the reversal of temporary differences, and
where there is a significant probability that the
joint activities, except
55
temporary difference will not will be reduced in
the foreseeable future�
are included in staff costs� The Group does not
operate any other pension schemes�
The Group reviews the carrying amount of
deferred tax assets at each reporting date
and reduces it to the extent to which there
is no longer the probability that there will be
sufficient taxable profits, which allow to realise
the benefits of part or all of this deferred tax
asset� Any such reduction is restored to the
extent to which there is the likelihood that
sufficient taxable profit is accrued.
2.2.18. Share issue costs
All qualifying transaction costs in respect of
the issue of shares are accounted for as a
deduction from share premium, net of any
related tax deduction� Qualifying transaction
include the costs of preparing the
costs
prospectus, accounting, tax and legal expenses,
underwriting fees and valuation fees in respect
of the shares and of other assets�
Deferred tax assets and liabilities are not
discounted�
2.2.16. Share-based payments
Where share options are awarded to employees,
the fair value of the options at the date of grant
is charged to the consolidated statement of
comprehensive income over the vesting period�
Where the terms and conditions of options
are modified before they vest, the increase
in the fair value of the options, measured
immediately before and after the modification,
is also charged to the consolidated statement
of comprehensive income over the remaining
vesting period� Where equity instruments are
granted to persons other than employees, the
consolidated statement of comprehensive
income is charged with the fair value of goods
and services received� Where fair value of goods
and services received from persons other than
employees is difficult to identify, the fair value
of the instruments granted is charged to the
consolidated statement of comprehensive
income over the vesting period�
2.2.17. Pension costs
The Group contributes
the Ukrainian
to
mandatory state pension scheme, social
insurance and employment funds in respect
of its employees� The Group's pension scheme
contributions are expensed as incurred and
2.2.19. Leases
Group as a lessee
lessee
leases various
The Group as a
warehouses and
vehicles� The Group
recognizes a lease liability and a corresponding
right-of-use asset at the commencement date
of a lease� A lease is a contract — or part of a
contract — that conveys a right to control the
use of an identified asset for a period of time in
exchange for consideration� In general, Group
splits the contractual consideration into a lease
and a non-lease component based on their
relative stand-alone prices� For vehicle leases,
however, Group applies the practical expedient
not to make this split but rather accounts
for the fixed consideration as a single lease
component� In addition, payments related to
short-term leases (leases with a term shorter
than 12 months) are recognized on a straight-
line basis in profit or loss.
Right-of-use assets are measured at cost
comprising the following:
- the amount of the initial measurement of
lease liability;
- any lease payments made at or before
the commencement date less any lease
incentives received;
- any initial direct costs, and;
- restoration costs�
56
The notes on pages 36 – 94 are an integral part of these consolidated financial statements.
Right-of-use assets are generally depreciated
over the shorter of the asset's useful life and
the lease term on a straight-line basis� If
the group is reasonably certain to exercise
a purchase option, the right-of-use asset is
depreciated over the underlying asset’s useful
life� Payments associated with short-term
leases and of low-value assets are recognised
on a straight-line basis as an expense in profit
or loss�
Group as a lessor
Amounts due from lessees under finance
leases are recorded as receivables at the
amount of the Group’s investment in the
relevant leases. Income from finance leases
is allocated to accounting periods so as to
reflect a constant periodic rate of return on the
Group’s net investment outstanding in respect
of the relevant leases�
Lease income from operating leases where the
group is a lessor is recognised in income on
a straightline basis over the lease term� Initial
direct costs incurred in obtaining an operating
lease are added to the carrying amount of the
underlying asset and recognised as expense
over the lease term on the same basis as
lease income� The respective leased assets
are included in the balance sheet based on
their nature
2.2.20. Impairment of assets
In respect of all assets, the Group conducts the
following procedures ensuring accounting for
these assets at an amount, not exceeding their
recoverable amount:
- at each reporting date the condition of
these assets is analyzed for impairment;
- in case any impairment indicators exist,
the amount of expected recovery of such
asset
is calculated to determine the
amount of losses from impairment, if any�
If it is impossible to determine the amount
of losses from impairment of a separate
asset, the Group determines the amount
impairment of the cash-
of estimated
generating unit, to which the asset belongs�
The amount of expected recovery is the higher
of two estimates: net selling price and “value
in use” of the asset� In estimating value in
use of asset, estimated future cash flows are
discounted to their current value using a pre-
tax discount rate that reflects current market
estimates of time value of money and risks
related to the asset�
If according to estimates the amount of
expected recovery of assets (or a cash-
generating unit) is less than its book value, the
book value of asset (or a cash-generating unit)
is reduced to the amount of expected recovery�
recognised
from
Losses
as expenses directly
in the consolidated
statement of comprehensive income�
impairment are
2.2.21 Contingent liabilities and
assets
Contingent liabilities are potential liabilities of the
Group arising from past events the existence of
which will be confirmed only by the occurrence
or non-occurrence of one or more future events,
which are not under the complete control of
the Group, or current obligations resulting from
past events are not recognised in the financial
statements in connection with the fact that the
Group does not consider an outflow of resources
embodying economic benefits, and required
to settle liabilities as probable, or the value of
liabilities can not be reliably determined�
The Group does not recognise contingent
liabilities in the financial statements. The Group
discloses information about contingent liabilities
in the notes to the financial statements except
when the probability of outflow of resources
required to settle the obligation, is remote�
57
Contingent assets are not recognised
in
the consolidated financial statements, but
disclosed in the Notes where there is a sufficient
probability of future economic benefits.
Provisions are recognized when the Group has
a present obligation (legal or constructive) as
a result of a past event, it is probable that an
outflow of resources embodying economic
benefits will be required to settle the obligation
and a reliable estimate can be made of the
amount of the obligation
2.2.22. Related parties
A related party is a person or an entity that is
related to the reporting entity:
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�
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�
While considering any relationship which can
be defined as a related party transaction, the
Group takes into consideration the substance
of the transaction not just its legal form�
The Group classifies the related parties
according to existing criteria in the following
categories:
a) companies that directly or
indirectly,
intermediaries,
through one or more
exercise control over
the Group, are
controlled by it, or together with it are
under common control (this
includes
holding companies, subsidiaries and fellow
subsidiaries of the parent company);
b) associates are companies whose
activities are significantly influenced by
the Group, but are neither subsidiaries, nor
joint ventures of the investor;
c) individuals, directly or indirectly holding
ordinary shares that give them a possibility to
significantly influence the Group's activities;
d) key management personnel are persons
having authority and responsibility for
planning, managing and controlling the
activities of the Group, including directors
and senior officials (as well as the non-
executive director and close relatives of
these individuals); and
e) companies, large blocks of shares with
voting rights of which are owned directly
or indirectly by any person described in
paragraphs (c) or (d), or a person influenced
significantly by such persons� This includes
enterprises owned by directors or major
shareholders of the Group, and companies
which have a common key management
member with the Group;
f) the entity, or any member of a group of
which it is a part, provides key management
personnel services to the reporting entity
or to the parent of the reporting entity
2.2.23. Fair value measurement
Fair value is the price that would be received
to sell an asset or paid to transfer a liability
in an orderly transaction between market
participants at the measurement date� The
is based on the
fair value measurement
presumption that the transaction to sell the
asset or transfer the liability takes place either
in the principal market for the asset or liability,
or in the absence of a principal market, in the
most advantageous market for the asset or
liability� The principal or the most advantageous
market must be accessible to the Group�
A fair value measurement of a non-financial
asset takes into account a market participant’s
58
The notes on pages 36 – 94 are an integral part of these consolidated financial statements.
ability to generate economic benefits by using
the asset in its highest and best use or by
selling it to another market participant that
would use the asset in its highest and best use�
All assets and liabilities for which fair value
is measured or disclosed in the financial
statements are categorised within the fair
value hierarchy, described as follows, based on
the lowest level input that is significant to the
fair value measurement as a whole:
• Level 1: Quoted (unadjusted) market prices
in active markets for identical assets or
liabilities�
• Level 2: Valuation techniques for which
the lowest level input that is significant to
the fair value measurement is directly or
indirectly observable�
• Level 3: Valuation techniques for which the
lowest level input that is significant to the
fair value measurement is unobservable�
recognised
2.2.24. Dividends
Equity dividends are
the
consolidated financial statements when they
become legally payable� Interim dividends are
recognised when they are paid� In the case of
final dividends, this is when approved by the
shareholders at the annual general meeting�
in
3. SIGNIFICANT ACCOUNTING
JUDGEMENTS, ESTIMATES AND
ASSUMPTIONS
The preparation of the Group's consolidated
financial statements requires management to
make judgments, estimates and assumptions
that affect the reported amounts of revenues,
liabilities, and the
expenses, assets and
disclosure of contingent liabilities, at the end
of the reporting period� However, uncertainty
about these assumptions and estimates could
result in outcomes that require a material
adjustment to the carrying amount of the asset
or liability affected in future periods�
In the process of applying the Group's
accounting policies, management has made
the following judgments, which have the most
significant effect on the amounts recognised
in the financial statements:
Estimates of fair value of property,
(a)
plant and equipment based on revaluation
is
required, periodically as
The Group
determined by the directors, to conduct
revaluations of
its property, plant and
equipment� Such revaluations are conducted by
independent valuers who employ the valuation
methods
in accordance with International
Valuation Standards such as cost approach,
comparative (market) approach and revenue
(income) approach�
Useful lives of intangible assets and
(b)
property, plant and equipment
Intangible assets and property, plant and
equipment are amortised or depreciated over
their useful lives� Useful lives are based on
the management’s estimates of the period
that the assets will generate revenue, which
are periodically
for continued
reviewed
appropriateness� Due to the long life of certain
assets, changes to the estimates used can
result in significant variations in the carrying
value� Further information is contained in
Notes 14 and 15�
(c)
Inventory
The Group reviews the net realisable value of,
and demand for, its inventory on a quarterly
basis to ensure recorded inventory is stated
at the lower of cost or net realisable value�
Factors that could affect estimated demand
and selling prices are the timing and success
of future technological innovations, competitor
actions, supplier prices and economic trends�
Further information is contained in Note 17�
59
(d)
Legal proceedings
IFRS the Group only
In accordance with
recognises a provision where there is a present
obligation from a past event, a transfer of
economic benefits is probable and the amount
of costs of the transfer can be estimated reliably�
In instances where the criteria are not met, a
contingent liability may be disclosed in the notes
to the financial statements. Realisation of any
contingent liabilities not currently recognised or
disclosed in the financial statements could have
a material effect on the Group’s financial position.
Application of these accounting principles to legal
cases requires the Group’s management to make
determinations about various factual and legal
matters beyond its control� The Group reviews
outstanding legal cases following developments
in the legal proceedings and at each reporting
date, in order to assess the need for provisions
in its financial statements. Among the factors
considered in making decisions on provisions
are the nature of litigation, claim or assessment,
the legal process and potential level of damages
in the jurisdiction in which the litigation, claim or
assessment has been brought, the progress of
the case (including the progress after the date
of the financial statements but before those
statements are issued), the opinions or views
of legal advisers, experience on similar cases
and any decision of the Group’s management as
to how it will respond to the litigation, claim or
assessment�
(e)
Income taxes
The Group is subject to income tax in several
jurisdictions and significant judgment is required
in determining the provision for income taxes�
During the ordinary course of business, there are
many transactions and calculations for which
the ultimate tax determination is uncertain� As a
result, the Group recognises tax liabilities based on
estimates of whether additional taxes and interest
will be due� These tax liabilities are recognised
when, despite the Group’s belief that its tax return
positions are supportable, the Group believes that
certain positions are likely to be challenged and
may not be fully sustained upon review by tax
authorities� The Group believes that its accruals
for tax liabilities are adequate for all open audit
years based on its assessment of many factors
including past experience and interpretations of
tax law� This assessment relies on estimates and
assumptions and may involve a series of complex
judgments about future events� To the extent that
the final tax outcome of these matters is different
than the amounts recorded, such differences will
impact income tax expense in the period in which
such determination is made� Further information
is contained in Notes 13 and 16�
(f)
Quality claims
The Group supplies consumers and industrial
customers in Ukraine with dairy products
manufactured in accordance with the current
laws, food safety standards and technical
requirements of
relevant Ukrainian
the
authorities� The Group voluntarily applies
non-domestic standards – ISO and HASSP
– to some of the Group’s operations� For the
industrial customers both domestically and
outside of Ukraine, the food products are
manufactured to the technical specifications
agreed with the buyers in advance of the sale�
In instances where the quality criteria and/
or technical specifications are not met or the
delivery of products are made close to expiry date,
a quality claim may arise and the corresponding
contingent liability may be disclosed in the notes
to the financial statements.
Realisation of any such contingent liabilities not
currently recognised or disclosed in the financial
statements could have a material effect on the
Group’s financial position. Application of these
accounting principles to quality claims requires
the Group’s management to make determinations
60
The notes on pages 36 – 94 are an integral part of these consolidated financial statements.
about the future matters that may, at the time
of determination, be beyond management’s
control� Among the factors considered in making
decisions on quality claims provisions are: the
nature of the claim, the quantifiable variances in
quality giving rise to a claim, the potential loss
from satisfying the claim and any decision of the
Group’s management as to how it will respond to
the claim�
(g)
Transfer pricing
The transfer pricing methods, established by the
Tax Code of Ukraine, are in line with the OECD
Guidelines� The Group exports dairy products
and skimmed milk powder and performs
intercompany transactions, which is in the scope
of the Ukrainian TP regulations� The Group has
submitted the controlled transaction report for
the year ended 31 December 2020 within the
required deadline, and at present the Group is
preparing all necessary documentation controlled
transactions for the year ended 31 December
2021 as required by legislation� Management
believes that the Group has been in compliance
with all requirements of effective tax legislation�
(h) Impairment of non-financial assets
Management assesses whether there are
any indicators of possible impairment of non-
financial assets at each reporting date. If any
events or changes in circumstances indicate
that the current value of the assets may not be
recoverable or the assets, goods or services
relating to a prepayment will not be received,
the Group estimates the recoverable amount
of assets� If there is objective evidence that
the Group is not able to collect all amounts
due to the original terms of the agreement,
the corresponding amount of the asset is
reduced directly by the impairment loss in the
consolidated statement of comprehensive
income� Subsequent and unforeseen changes
in assumptions and estimates used in testing
for impairment may lead to the result different
from the one presented in the consolidated
financial statements.
(i) Fair value of financial instruments
uses
The fair value of financial assets and liabilities
is determined by applying various valuation
methodologies� Management
its
judgment to make assumptions based on
market conditions existing at each balance
sheet date. Where the fair values of financial
assets and financial liabilities recorded in the
consolidated statement of financial position
cannot be derived from active markets, they
are determined using valuation techniques
including the discounted cash flows model.
(j) Fair value measurement
Fair value is the price that would be received to
sell an asset or paid to transfer a liability in an
orderly transaction between market participants
at the measurement date� The fair value
measurement is based on the presumption that
the transaction to sell the asset or transfer the
liability takes place either in the principal market
for the asset or liability, or in the absence of a
principal market, in the most advantageous
market for the asset or liability�
The principal or the most advantageous market
must be accessible to the Group� A fair value
measurement of a non-financial asset takes
into account a market participant’s ability
to generate economic benefits by using the
asset in its highest and best use or by selling
it to another market participant that would
use the asset in its highest and best use� All
assets and liabilities for which fair value is
measured or disclosed in the consolidated
financial statements are categorized within
the fair value hierarchy as the lowest level
input that is significant to the entire fair value
measurement�
61
4. ADOPTION OF NEW AND
REVISED IFRS
Application of new standards
In general, the accounting policy is consistent
with those applied in the prior reporting year�
Some new standards and interpretations have
become mandatory for adoption beginning on
or after January 01, 2022� New and revised
standards and interpretations, adopted by the
Group for the first time as at January 01, 2022,
are provided below�
Amendments to IFRS 3 "Business Combinations"
- "Reference to the Conceptual Framework"
These amendments replace the reference to the
"Conceptual Framework for the Preparation and
Presentation of Financial Statements", issued
in 1989, with the reference to the "Conceptual
Framework for Financial Reporting", issued
in March 2018, without making significant
changes to the requirements of the standard�
These amendments did not affect the Group's
financial statements.
Amendments to IAS 16 "Property, Plant and
Equipment" - "Proceeds before Intended Use"
Amendments to IAS 16 prohibit entities to
deduct from the historical cost of an item of
property, plant and equipment any proceeds
from the sale of products manufactured
during the delivery of such item to the location
and bringing it into condition required for
its operation in a manner determined by
the management� Instead, the entity should
recognize proceeds from the sale of such
products, as well as the cost of their production,
in profit or loss. These amendments did not
affect the Group's financial statements.
Amendments to IAS 37 "Provisions, Contingent
Liabilities and Contingent Assets" — "Onerous
Contracts — Cost of Fulfilling a Contract"
Amendments to IAS 37 clarify which costs
an entity should consider when assessing
whether a contract is onerous or unprofitable.
According to the amendments, costs directly
related to the contract for the provision of
goods or services should be taken into account,
which include both additional costs for the
performance of this contract and allocated
costs directly related to the performance
of the contract� General and administrative
expenses not directly related to the contract
are excluded, except when they are clearly
subject to reimbursement by the counterparty
under the contract� These amendments did not
affect the Group's financial statements.
"Annual Improvements to IFRS" (2018-2020
cycle)
Amendments to IFRS 1 "First-time Adoption of
International Financial Reporting Standards" -
"Subsidiary as a First-time Adopter"
According to these amendments, subsidiaries,
associates and joint ventures have the right
rate
to measure accumulated exchange
differences using the amounts reflected in the
parent company's financial statements, based
on the date of the parent company's transition
to IFRS� These amendments did not affect the
Group's financial statements.
Amendments to IFRS 9 "Financial Instruments" -
"Fees in the ‘10 per cent’ Test for Derecognition
of Financial Liabilities"
These amendments clarify what amounts
of fees an entity takes into account when
assessing whether the terms of a new or
modified financial liability differ significantly
from the terms of the initial financial liability.
include only fees paid or
Such amounts
received between the borrower (the reporting
entity) and the lender, including fees paid or
received by the lender or borrower on behalf
62
The notes on pages 36 – 94 are an integral part of these consolidated financial statements.
of the other party� These amendments did not
affect the Group's financial statements.
Amendments to IAS 41 "Agriculture" - "Taxation
in Fair Value Measurements"
information
comparative
is required� Early
adoption is permitted, provided that an entity
also adopts IFRS 9 and IFRS 15 on or before
the date of the first adoption of IFRS 17. This
standard is not applied to the Group�
These amendments eliminate the requirement
to exclude from the calculation of cash
flows the amounts related to taxation when
measuring the fair value of assets falling within
to the scope of IAS 41� These amendments did
not affect the Group's financial statements.
Amendments to IFRS 16 "Leases" - "Amendment
to Illustrative Example"
The illustration of a lessor's reimbursement
of leasehold improvements is removed from
the Illustrative Example 13, accompanying this
standard, in order to eliminate any disagreement
about the interpretation of lease incentives
that might arise due to the way how they were
illustrated in this example� These amendments
did not affect the Group's financial statements.
IFRS and interpretations issued but not yet
effective
The Group did not adopt the following IFRS,
Interpretations to IFRS and IAS, changes and
amendments to them, which were issued but
not yet effective� The Group plans to apply
these changes from the date when they
become effective�
IFRS 17 "Insurance Contracts"
IFRS 17 is a new financial reporting standard
insurance contracts that addresses the
for
recognition and evaluation issues, presentation
and disclosures� IFRS 17 will replace IFRS 4
"Insurance Contracts", which was issued in 2005�
IFRS 17 is effective for reporting periods
beginning on or after January 01, 2023;
Amendments to IAS 1 "Presentation of Financial
Statements" - "Classification of current and non-
current liabilities"
These amendments establish that the right
of an entity to defer repayment of a liability
for at least twelve months after the reporting
period must exist at the end of the reporting
period and must have an economic sense� The
classification of the liability is not affected by
the intention and expectation of whether the
entity exercises its right to defer settlement of
the liability for at least twelve months after the
reporting period�
for
Amendments are effective
reporting
periods beginning on or after January 01, 2024�
Amendments are adopted
retrospectively;
early adoption is permitted� The amendments
may affect the classification of liabilities in the
Group's statement of financial position.
Amendments to IAS 1 "Presentation of Financial
Statements"
liabilities with
"Non-current
covenants"
-
Following the issue of the amendments to
IAS 1 regarding the classification of liabilities
as current and non-current, the IFRS Board
made additional amendments to IAS 1 in
October 2022� Under these amendments,
only covenants that an entity must comply
with at or before the reporting date, affect the
classification of the liability as current or non-
current� In addition, an entity must disclose
information in the notes that enables users of
the financial statements to understand the risk
that non-current liabilities with covenants may
be repaid within twelve months�
63
concept of materiality in making decisions
about accounting policy disclosures�
amendments will not significantly affect the
Group's financial statements.
for
Amendments are effective
reporting
periods beginning on or after January 01, 2024�
retrospectively;
Amendments are adopted
early adoption is permitted� The amendments
may affect the classification of the liabilities in
the Group's statement of financial position.
Amendments to IAS 8 "Accounting policies,
changes in accounting estimates and errors" –
"Definition of Accounting Estimates"
These amendments introduce a definition of
"accounting estimates"� These amendments
clarify the distinction between changes in
accounting estimates and changes in the
accounting policies and the correction of errors�
Also, they clarify how entities use measurement
techniques and inputs to develop accounting
estimates� The amendments are effective
for annual reporting periods beginning on
or after January 01, 2023, and are applied to
changes in accounting policies and changes in
accounting estimates that occur on or after the
beginning of the abovementioned period� Early
adoption is permitted if this fact is disclosed�
It is expected that these amendments will
not significantly affect the Group's financial
statements�
Amendments to IAS 1 "Presentation of Financial
Statements" and IFRS Practice Statement 2 –
"Disclosure of Accounting Policies"
In February 2021, the IASB issued amendments
to IAS 1 and IFRS Practice Statement 2
"Making Materiality Judgements", which
provide guidance and examples, which assist
entities in applying materiality judgements
to accounting policy disclosures� The
amendments aim to assist entities in providing
accounting policy disclosures that are more
useful by replacing the requirement for entities
to disclose
"significant" accounting
policies with a requirement to disclose their
"material" accounting policies and adding
guidance on how entities should apply the
their
Amendments to IAS 1 are applicable for annual
reporting periods beginning on or after January
01, 2023, with early adoption permitted� It
is expected that these amendments will
not significantly affect the Group's financial
statements�
Amendments to IAS 12 "Income Taxes" -
"Deferred Tax Related to Assets and Liabilities
Arising from a Single Transaction"
taxable
These amendments clarify that the exemption
from initial recognition specified in the Art.
15 and 24 of the standard is not applied
in which equal amounts
to transactions
of
temporary
and
deductible
differences arise on initial recognition (e�g�,
leases, decommissioning obligations)� The
amendments to IAS 12 are effective for annual
reporting periods beginning on or after January
01, 2023, with early adoption permitted� It
is expected that these amendments will
not significantly affect the Group's financial
statements�
Amendments to IFRS 16 "Leases" - "Lease
liability in a sale and leaseback transactions"
the
IFRS
In June 2020,
Interpretations
Committee adopted a decision on the agenda
- "Sale and leaseback with variable payments"�
This issue was submitted to the IFRS Board,
which issued amendments to IFRS 16 in
September 2022� These amendments require
the seller-lessee to define "lease payments" or
"revised lease payments" in such a way that the
seller-lessee does not recognize any amount of
profit or loss related to the right-to-use retained
by the seller-lessee�
Amendments are effective for reporting periods
beginning on or after January 01, 2024� Early
adoption is permitted� It is expected that these
64
The notes on pages 36 – 94 are an integral part of these consolidated financial statements.
5. FINANCIAL RISK
MANAGEMENT
The principal risks facing the Group’s business
are credit risk, liquidity risk and market risk,
including fair value or cash flow interest-
rate risk and foreign exchange risk� The main
purpose of the Group's risk management
programme is to evaluate, monitor and manage
these risks and to minimise potential adverse
effects on the Group's financial performance
and shareholders. The Chief Executive Officer
of the Group is in charge of risk management
and introduction of all policies as approved by
the Board of Directors�
(a) Principal financial instruments
The principal financial instruments used by the
Group, from which financial instrument risk
arises, are as follows:
- trade and other receivables;
- other financial assets;
- cash and cash equivalents;
- bank loans;
- trade and other payables;
- short-term payables�
The principal financial instruments are as
follows:
Year ended
31 December 2022
£ ‘000
Year ended
31 December 2021
£ ‘000
Financial assets
Financial assets at amortised cost
- trade and other receivables (excluding non-financial assets)
- cash and cash equivalents
- other financial assets
Financial liabilities
Financial liabilities at amortised cost:
- short-term payables
- current bank loans
- trade and other payables (excluding non-financial liabilities)
- interest payable
2 625
403
35
3 063
493
6 116
4 036
383
11 028
6 264
312
40
6 616
587
6 039
8 967
193
15 786
65
(b) General objectives, policies and
processes
The Group's overall
risk management
programme recognises the unpredictability
of financial markets and seeks to minimise
potential adverse effects on the Group’s
financial performance. Risk management is
carried out by the Group Chief Executive Officer
(CEO) under policies approved by the Board
of Directors (the “Board”)� The Group CEO
identifies and evaluates financial risks in close
co-operation with the Group’s operating units�
broad
provides
The Board
guidance
and operating principles for overall risk
management, as well as written policies
covering specific areas, such as foreign
exchange risk, interest-rate risk, credit risk, and
investing excess liquidity�
for
them,
responsibility
The Board has overall responsibility for the
determination of the Group’s risk management
objectives and policies and, whilst retaining
ultimate
it has
delegated the authority for designing and
operating processes that ensure the effective
implementation of the objectives and policies
to the Group’s finance function. The overall
objective of the Board is to set polices that
seek to reduce risk as far as possible without
unduly affecting the Group’s competitiveness
and flexibility. Further details regarding these
policies are laid out below�
(c) Credit risk
Credit risk is the risk that a counterparty will not be
able to meet its obligations in full when due� The
Ukrproduct Group is mainly exposed to credit risk
from credit sales to customers in Ukraine� The
Group manages its credit risk through the Group’s
risk assessment policy by evaluating each new
customer before signing a contract using the
following criteria: trading history and the strength
66
of own balance sheet� The Group attempts to
reduce credit risk by conducting periodic reviews
which includes obtaining external ratings and in
certain cases bank references�
implemented
According to the Group’s risk assessment
policy,
locally, every new
customer
is appraised before entering
contracts; trading history and the strength
of their own balance sheet being the main
indicators of creditworthiness� While starting
the commercial relationship with the Group,
a new customer is offered the terms that are
substantially tighter than those for the existing
customers and stipulate, as a rule, the cash-
on-delivery payments terms and no-returns
policy (quality-related claims exempted)� If
the relationship progresses successfully, the
terms are gradually relaxed to fall in line with
the Group’s normal business practices and
local specifics as required by the market.
The Group’s periodic review includes external
ratings, when available, and in some cases bank
references� Purchase limits are established for
each customer, which represents the maximum
open amount without requiring approval from
the CEO� These limits are reviewed quarterly�
Customers that fail to meet the Group’s
benchmark creditworthiness may transact
with the Group on a prepayment basis only�
Quantitative disclosures of the credit risk
exposure
in relation to trade and other
receivables, which are neither past due nor
impaired, are made in Note 18� The Group
does not rate trade receivables by category or
recoverability, as the Group’s historical default
rates have been negligible in the past (less than
5%); essentially all trade receivables due to the
Group had been recovered�
In the future, the default rate on trade receivables
overdue
is expected to remain stable or
even fall because in Ukraine the Group deals
increasingly with the modern-format retailers
whose creditworthiness is conducive to the
payment discipline required by the Group�
Maximum exposure to the trade and other
receivables component of credit risk at the
reporting date is the fair value of trade and
other receivables� There is no collateral held as
security or other credit enhancements�
The Group’s credit controllers monitor the
utilisation of the credit limits on a daily basis
by customer and apply the delivery stop
orders immediately if the individual limits are
exceeded� The Group’s procedure for recovery
of the trade receivables past due includes the
following steps:
claim for the amount overdue and the visit
of the representative of the commercial
credit control department to the customer
premises- 2 weeks thereafter;
- filing a claim to the commercial court for
repayment of the amount overdue and late
payment fees - 2 weeks thereafter;
- obtaining a court order for repayment of the
amount due and collaboration with bailiff -
2 weeks thereafter�
Credit risk also arises from cash and cash
equivalents and deposits with banks and
financial institutions. The Group reviews the
banks and financial institutions it deals with to
ensure that standards of credit worthiness are
maintained�
- identification of the date and exact amount
of the receivable past due, termination of
all further deliveries and forwarding to the
customer of the details of the amount due and
the notice of the failure to pay - 3 days after the
past due date;
- delivery to the customer of the formal
Maximum exposure to the cash and cash
equivalents and deposits with banks and
financial
institutions component of credit
risk at the reporting date is the fair value of
the cash balances due from such banks and
financial institutions. There is no collateral held
as security or other credit enhancements�
Cash at bank and short term deposits are kept on the accounts in the following banks:
Bank
Year ended
Year ended
Year ended
Year ended
31 December
31 December
31 December
31 December
JSC OTP Bank
PJSC Raiffeisen Bank Aval
CreditWest
Other
2022
Rating
uaAAA
uaAAA
uaAAA
Caa3
2021
Rating
uaAAA
uaAAA
uaAAA
Caa3
2022
£ ‘000
7
28
278
90
403
2021
£ ‘000
8
53
146
105
312
The Group does not enter into derivatives to
manage credit risk, although in certain isolated
cases may take steps to mitigate such risks if
it is sufficiently concentrated.
The Group is also exposed to a credit risk with
regard to loans issued to third parties, related
parties and employees� This risk is considered
to be low and is managed according to the
Group’s risk assessment policy�
67
The Group’s exposure to credit risk, where the carrying value of financial assets is unsecured, is
as shown below:
Year ended
Year ended
Year ended
Year ended
31 December 2022
31 December 2022
31 December 2021
31 December 2021
£ ‘000
£ ‘000
£ ‘000
£ ‘000
Carrying Value
Maximum exposure
Carrying Value
Maximum exposure
(unsecured)
(unsecured)
Cash and cash
equivalents
Trade receivables
Other receivables
Other financial assets
(d) Liquidity risk
403
2 273
352
35
3 063
Liquidity risk is a function of the possible
difficulty to be encountered in raising funds to
meet financial obligations. The Group’s policy
is to ensure that it will always have sufficient
cash to enable it to meet its obligations as
they fall due by maintaining the minimum
cash balances and agreed overdraft facilities�
The Group also seeks to reduce liquidity risk
by fixing interest rates and hence cash flows
on substantially all of its borrowings� Detailed
information is contained in Notes 2�1 (b), 4�
The Group’s operating divisions (plants) have
different liquidity requirement profiles. As the
Group’s products have short-cycled and long-
cycled production, the liquidity risk of each
plant is monitored and managed centrally by
the Group Treasury function� Each plant has
a cash facility based on cash budgets with
the Group Treasury� The cash budgets are set
locally and agreed by the CEO in advance�
The CEO (and the Board, if requested) receives
rolling quarterly cash flow projections on a
monthly basis as well as information regarding
the daily cash balances at each plant and overall�
In the ordinary course of business, the Group
relies on a combination of the available overdraft
facilities and cash balances to fund the on-going
liquidity needs� Capital expenditures are usually
403
2 273
352
35
3 063
312
5 894
370
40
6 616
312
5 894
370
40
6 616
funded through longer-term bank loans� In case of
the inadequate cash balances and the overdraft
facilities close to the agreed ceilings, the Group
is expected to revert to the emergency funding
made available through temporary freeze to the
current portion of capital spending, immediate
operating cost reductions, postponement of
payments to the third parties, and expansion of
the overdraft ceilings� Although undesirable and
never occurring in the past, such emergency
funding is the last resort on which the Group
may have to draw while ensuring the ongoing
continuity of the business�
(е) Market risk
Market risk may arise from the Group’s use of
interest bearing, tradable and foreign currency
financial instruments. Market risk comprises
fair value interest rate risk, foreign exchange
risk and commodity price risk and is further
assessed below:
(i) Interest-rate risk
interest-rate risk arises only
The Group’s
from short-term credits, and is considered
to be insignificant. The Group analyses the
interest rate exposure on a year basis� Detailed
information is contained in Note 24�
A sensitivity analysis
is performed by
applying various interest rate scenarios to
68
The notes on pages 36 – 94 are an integral part of these consolidated financial statements.
the borrowings� A change of interest rate by
1 percentage points (being the maximum
reasonably possible expectation of changes
in interest rates) would cause a decrease in
interest expense by GBP 61 160 (decrease
2021: -1%-GBP 60 390)�
(ii) Foreign exchange risk
Regardless of the increase of sales in Ukraine,
the Group's management believes that currency
risk is rather high� This risk can be expressed
in the growth of currencies of dependent raw
materials (vegetable fats), packaging materials,
energy resources and fuel� The Group does
its best to minimise this risk by replacing raw
materials and other components� An increase
in export sales is another step taken to deal
with exchange risks� All sales are made in a
stable currency�
Purchase of raw milk, main semi-processed
products and other components of
the
cost price are produced in Ukraine and are
represented in hryvnia� All Group’s outstanding
balances of the trade accounts payable are in
UAH� Currency analysis is provided in Note 29�
therefore
The Group has a long-term loan from EBRD,
the
in euro, and
denominated
weakening of the hryvnia can have a significant
impact on financial results of the Group in
future periods� The sensitivity analysis shows
that UAH depreciation against EUR by 3%
would cause an exchange rate loss of GBP 195
thousand (2021 by 3%: GBP 174 thousand)�
(iii) Commodity price risk
Ukrproduct’s principal raw material needs
consist primarily of:
-
materials needed to produce dairy
products and beverage products, mainly
raw milk, sugar, palm oil, corn starch
etc� Changes in market prices for these
raw materials can adversely influence on
Group’s financial results� In terms of value,
milk is the main raw material purchased
from local producers or dairy farms� Its
price is set locally, over contractual periods
that vary from one region to another� Other
materials are purchased through tenders
or on stocks�
- packaging materials such as foil corrugated
packaging� Prices are influenced by supply
and demand at the global and regional
levels, economic cycles�
- energy supplies�
(f) Operational risk
Operational risk is a risk arising from systems
failure, human error, fraud or external events�
When controls fail to work, this could have
legal consequences or lead to financial losses.
The Group cannot expect that all operational
risks have been eliminated, but with the help of
control system and by monitoring the reaction
to potential risks, the Group may manage
such risks� The control system provides an
effective separation of duties, access rights,
approval and verification, personnel training,
and valuation procedures�
6. CAPITAL MANAGEMENT
POLICIES
The Group’s definition of the capital is ordinary
share capital, share premium, accumulated
retained earnings and other equity reserves�
The Directors view their role as that of corporate
guardians responsible for preservation and
growth of the capital, as well as for generation
of the adequate returns to shareholders�
The Group’s objectives when maintaining and
growing capital are:
- to safeguard the Group's ability to continue
as a going concern, so that it can continue
to provide returns for shareholders and
benefits for other stakeholders;
- to identify the appropriate mix of debt,
69
equity and partner sharing opportunities
in order to balance the highest returns
to shareholders overall with the most
advantageous timing of investment flows;
net debt to shareholder equity� Net debt is
calculated as total debt (as shown in the
statement of financial position) less cash and
cash equivalents�
- to provide an adequate
to
shareholders by delivering the products
in demand by the customers at prices
commensurate with the level of risk and
expectations of shareholders�
return
The Group sets the amount of capital it requires
in proportion to risk� The Group manages its
capital structure and makes adjustments to it
in the light of changes in economic conditions
and the risk characteristics of the current
trading environment� The Group’s core assets
consist predominantly of the property, plant
and equipment – the resources that have
proven their ability to withstand the competitive
erosion and inflationary pressure.
In order to maintain or adjust the capital
structure, the Group may issue new shares,
adjust the amount of dividends paid to
shareholders, repay the debt, return capital
to shareholders or sell assets to improve
the cash position. Historically, the first three
methods were used to achieve and support the
desired capital structure� The Group monitors
capital on the basis of the net debt to equity
ratio (D/E ratio)� This ratio is calculated as
Traditionally, the Group’s conservative strategy
was to maintain the D/E ratio at 0�6 (60%)
maximum� The Directors believe that for the
Group, as an operating company and a public
entity, the maintenance of the prudent debt
policy is crucial in preserving the capital of the
business�
As at 31 December 2022, the D/E ratio consists
of approximately 0�48 improved compared to
31 December 2021 by 1�06 bp� In 2022 the
management implemented long-term strategy
to decrease D/E ratio down to 0�6 (60%)�
Year ended
Year ended
31 December
31 December
Total debt
Less: Cash and
cash equivalents
Net debt
Total equity
D/E ratio
2022
£ ‘000
2 625
(403)
2 222
4 594
48.3%
2021
£ ‘000
6 626
(312)
6 314
5 947
106.1%
70
The notes on pages 36 – 94 are an integral part of these consolidated financial statements.
7. SEGMENT INFORMATION
At 31 December 2022, the Group was organised
internally into five main business segments:
1)
Branded products – processed cheese,
hard cheese, packaged butter and spreads
2)
3)
4)
Beverages – kvass, other beverages
Non-branded products – skimmed
milk powder, other skimmed milk products
Distribution services and other –
resale of third-party goods and processing
services
5)
Supplementary products – grain crops
The segment results for the year ended 31 December 2022 as reported to the Board are as follows:
Branded
products
Beverages
£ ‘000
31 571
5 788
(862)
£ ‘000
1 095
444
(38)
Non-
branded
products
£ ‘000
2 727
(262)
(94)
Distribution
services and
other
£ ‘000
3 144
584
(108)
Supplementary
products
Un-
allocated
Total
£ ‘000
574
2
-
£ ‘000
-
-
(240)
£ ‘000
39 111
6 556
(1 342)
(2 145)
(76)
(190)
(219)
-
(89)
(2 719)
-
-
-
-
-
(1 571)
(1 571)
2 781
330
(546)
257
2
(1 900)
924
-
-
-
-
-
-
-
-
-
-
(466)
(466)
(1 113)
(1 113)
2 781
330
(546)
257
2
(3 479)
(655)
-
2 781
13 085
-
-
330
454
-
-
(546)
1 130
-
-
257
-
-
-
2
-
-
(149)
(3 628)
-
2 326
(149)
(804)
14 669
2 326
13 085
454
1 130
-
-
2 326
16 995
3 645
-
-
-
-
-
-
-
-
311
-
-
3 645
-
-
311
471
18
393
-
-
-
-
-
-
-
7 915
3 956
7 915
530
530
8 445
12 401
-
882
Sales
Gross profit
Administrative
expenses
Selling and
distribution
expenses
Other operating
expenses
Profit from
operations
Finance expenses,
net
Loss from exchange
differences
Loss before
taxation
Taxation
Loss for the year
Segment assets
Unallocated
corporate assets
Consolidated total
assets
Segment liabilities
Unallocated
corporate liabilities
Unallocated
deferred tax
Consolidated total
liabilities
Depreciation and
amortisation
The unallocated corporate liabilities represent bank loans, overdrafts and accruals�
71
The segment results for the year ended 31 December 2021 as reported to the Board are as follows:
Secondary reporting format - geographical segments:
Branded
Beverages
Non-
Distribution
Supplementary
Un-
Total
Sales by country
Year ended 31 December
Sales by country
Year ended 31 December
products
branded
services
products
allocated
(consignees)
products
and other
Sales
Gross profit
Administrative expenses
£ ‘000
37 152
4 104
(983)
Selling and distribution
(2 420)
expenses
Other operating expenses
Profit from operations
Finance expenses, net
Loss from exchange
differences
Profit before taxation
Taxation
Profit for the year
Segment assets
-
701
-
-
701
-
701
19 198
Unallocated corporate
-
assets
£ ‘000
1 756
792
(147)
(618)
-
27
-
-
27
-
27
913
-
£ ‘000
3 764
(720)
175
720
-
175
-
-
175
-
175
1 954
-
Consolidated total assets
19 198
913
1 954
Segment liabilities
8 348
Unallocated corporate
liabilities
Unallocated deferred tax
-
-
Consolidated total
8 348
liabilities
-
-
-
-
-
-
-
-
£ ‘000
2 240
218
(68)
(294)
-
(144)
-
-
(144)
-
(144)
-
-
-
406
-
-
406
Depreciation and
783
176
44
-
amortization
£ ‘000
7 073
134
(42)
(50)
-
42
-
-
42
-
42
-
-
-
-
-
-
-
-
£ ‘000
-
-
(350)
(89)
(192)
(631)
(440)
599
(472)
110
(362)
-
1 229
£ ‘000
51 985
4 528
(1 415)
(2 751)
(192)
170
(440)
599
329
110
439
22 065
1 229
1 229
23 294
-
7 703
8 754
7 703
890
890
8 593
17 347
-
1 003
72
The notes on pages 36 – 94 are an integral part of these consolidated financial statements.
Ukraine
Republic of Iraq
Azerbaijan
Moldova
Poland
The Netherlands
Singapore
Lebanon
Jordan
Georgia
Uzbekistan
Palestine
Kazakhstan
Turkey
2022
£ ‘000
29 935
4 280
1 754
1 006
736
500
309
219
75
37
32
20
-
-
(consignees)
Ukraine
Republic of Iraq
Azerbaijan
Moldova
Poland
The Netherlands
Singapore
Lebanon
Jordan
Georgia
Uzbekistan
Palestine
Kazakhstan
Turkey
2021
£ ‘000
41 805
4 811
1 981
775
231
990
376
233
-
125
83
-
161
99
315
51 985
Other countries
Total
208
39 111
Other countries
Total
The majority of the Group’s assets and liabilities are in Ukraine� Sales to the countries in Europe
represent sales to international traders of milk powders located in Europe� These traders
consequently resell the milk powders to other countries worldwide� The Group has no single
customers that exceed 10% of total sales�
8. REVENUE
For the years ended 31 December 2022 and 31 December 2021, sales revenue was presented as
follows:
Year ended
Year ended
31 December 2022
31 December 2021
Branded (including bonuses)
Beverages (including bonuses)
Non-branded products
Distribution services (including bonuses)
Supplementary products
Gross revenue
Charges of bonuses
Total revenue (excluding bonuses)
£ ‘000
32 595
1 267
2 727
3 144
574
40 307
(1 196)
39 111
£ ‘000
38 720
2 120
3 755
2 420
7 073
54 088
(2 103)
51 985
Bonuses are compensation granted to the Group’s main customers within its distribution network�
Bonuses are accounted for based on a fixed percentage of the product sold by customers who comprise
retail networks and distributors� Cash compensation is paid on a periodic basis during the year�
73
9. EXPENSES BY NATURE
10. NET FOREIGN EXCHANGE GAIN (LOSS)
For the years ended 31 December 2022 and 31 December 2021, items of expenses were
presented as follows:
For the years ended 31 December 2022 and 31 December 2021, net foreign exchange gain (loss),
consists of:
Cost of sales
Including:
Year ended
Year ended
31 December 2022
31 December 2021
£ ‘000
(32 555)
£ ‘000
(47 457)
Exchange difference in trade and other receivables
Exchange difference in trade and other payables
Raw materials and consumables used, cost of goods sold,
(29 582)
(43 482)
Exchange difference in short and long credits
Year ended
Year ended
31 December 2022
31 December 2021
£ ‘000
180
(59)
(1 172)
(62)
(1 113)
£ ‘000
(2)
18
612
(29)
599
Effect of exchange rate changes and restatements on cash
and cash equivalents
Total net foreign exchange gain (loss)
11. NET FINANCE EXPENSES
manufacture overheads etc�
Wages and salaries, social security costs (Note 12)
Depreciation
Administrative expenses
Including:
Wages and salaries, social security costs (Note 12)
PR, nominated broker, secretary, legal services etc�
Security
Lease and current repair and maintenance
Bank service
Communication
Amortization and depreciation
Audit fees
Taxes and compulsory payments
IT materials, household expenses, reading materials
Other
Selling and distribution expenses
Including:
Delivery costs
Promotion
Wages and salaries, social security costs (Note 12)
Lease and current repair and maintenance
Packaging
Amortization and depreciation
Veterinary certificates, medical examination, permits
Impairment of inventories
Other
Other operating (expenses)/income
Including:
Impairment of inventories
Impairment of trade receivables
Penalties
Profit / (loss) on disposal of non-current assets
Amortization and depreciation
Other
74
(2 434)
(539)
(1 342)
(430)
(332)
(116)
(65)
(28)
(79)
(74)
(105)
(38)
(10)
(65)
(2 719)
(1 081)
(414)
(259)
(45)
(191)
(238)
(32)
(2)
(457)
(1 571)
(119)
(1 065)
(97)
(310)
(31)
57
(3 159)
(816)
(1 415)
(436)
(260)
(121)
(77)
(74)
(97)
(77)
(61)
(39)
(14)
(159)
(2 751)
(858)
(847)
(384)
(144)
(164)
(102)
(46)
(6)
(200)
(192)
(146)
(157)
(19)
(333)
(8)
471
The notes on pages 36 – 94 are an integral part of these consolidated financial statements.
For the years ended 31 December 2022 and 31 December 2021, financial (expenses) / income
were presented as follows:
Year ended
Year ended
31 December 2022
31 December 2021
£ ‘000
(471)
6
(466)
(440)
£ ‘000
(441)
1
(440)
(486)
Finance expense
Interest expense on bank loans
Interest expense on lease liabilities
Finance income
Interest income
Net finance expense recognised in the statement of
comprehensive income
12. EMPLOYEE BENEFIT EXPENSES
For the years ended 31 December 2022 and 31 December 2021, employee benefit expenses were
presented as follows:
Year ended
Year ended
31 December 2022
31 December 2021
Wages and salaries (including key management personnel)
Social security costs
Total
Average number of employees
£ ‘000
(2 615)
(508)
(3 123)
836
£ ‘000
(3 282)
(697)
(3 979)
852
75
Wages and salaries of operating personnel
Wages and salaries of administrative personnel
Wages and salaries of distribution personnel
Total
Year ended
Year ended
31 December 2022
31 December 2021
£ ‘000
(2 434)
(430)
(259)
(3 123)
£ ‘000
(3 159)
(436)
(384)
(3 979)
Profit before tax:
Ukraine
Cyprus
Other (BVI, Jersey)
Profit before tax, total
Wages and salaries of key management personnel:
Tax calculated at domestic tax rates applicable to profits in
For the year ended 31 December 2022, remuneration of the Group's key management personnel
amounted to GBP 117�5 thousand (2021: GBP 117�5 thousand)�
Key management personnel received only short term benefits during the years ended 31 December
2022 and 31 December 2021� The key management personnel are those persons remunerated by
the Group who are members of the Board of Directors of the Company (Ukrproduct Group Ltd)�
13. INCOME TAX EXPENSES
For the years ended 31 December 2022 and 31 December 2021, income tax expenses were
presented as follows:
Current tax charge – Ukraine
Current tax charge - non-Ukraine
Deferred tax relating to the origination and reversal of
temporary differences
Total income tax expenses
Year ended
Year ended
31 December 2022
31 December 2021
£ ‘000
410
-
(261)
149
£ ‘000
162
-
(272)
(110)
Differences in treatment of certain elements of financial statements by IFRS and Ukrainian
statutory taxation regulations give rise to temporary differences� The tax effect of the movement
on these temporary differences is recognised at the rate of 18% (2021: 18%)�
Year ended
Year ended
31 December 2022
31 December 2021
£ ‘000
481
(12)
(1 124)
(655)
87
-
87
62
-
62
149
-
(149)
18%
8%
Nil
26%
£ ‘000
1 051
(3 520)
2 798
329
(189)
-
(189)
(299)
-
(299)
(110)
-
(110)
18%
8%
Nil
26%
the relevant countries
Ukraine (2021: 18%, 2020: 18%)
Cyprus (10%)
Tax calculated at domestic tax rates applicable to net income
not subject to tax and expenses not deductible for tax
purposes
Ukraine
Cyprus
Tax charge
Ukraine
Cyprus
The weighted average applicable tax rate
Ukraine
Cyprus
BVI, Jersey
There are a number of laws related to various taxes imposed by both central and regional
governmental authorities� Although laws related to these taxes have not been in force for
significant periods, the practice of taxation and implementation of regulations are well established,
documented with a sufficient degree of clarity and adhered to by the taxpayers. Nevertheless,
there remain certain risks in relation to the Ukrainian tax system: few court precedents with regard
to tax related issues exist; different opinions regarding legal interpretation may arise both among
and within government ministries and regulatory agencies; tax compliance practice is subject to
review and investigation by a number of authorities with overlapping responsibilities�
Generally, tax declarations remain subject to inspection for an indefinite period. In practice,
however, the risk of retroactive tax assessments and penalty charges decreases significantly
after three years� The fact that a year has been reviewed does not preclude the Ukrainian tax
service performing a subsequent inspection of that year�
76
The notes on pages 36 – 94 are an integral part of these consolidated financial statements.
77
included
on investment of Group investors. Specific
segment risks are
in usage of
separate facts of beta-testing� Beta factors are
estimated annually using generally accessible
market data� The WACC used in the model for
both CGUs is 21,5%�
Production value increase – is derived from
published consumer price index for Ukraine
or world price tendencies for export product
groups�
Increase of raw material price – forecast is
obtained got from published consumer price
index for Ukraine�
Predicted increase data – the data are based
on published industry research in Ukraine and
management estimates�
Assumption regarding business segments –
in so far as the directors are aware, forecasts
in relation to the growth rate of each business
segment are based on a comparison with
the forecast growth rates of the Group’s
competitors�
The growth of sales of branded products on
the local market is related to the development
of sales of the brands “Nash Molochnik”,
“Arseniivskyi” and “Molendam”� These brand
gave more than 50% of revenue�
Industry forecast
is not used for kvass
(beverage) sales forecasting, as the Group
produces the unique product “Zhyviy Kvass”
that has no competitors in Ukraine by its
nature� The model is based on management’s
forecasts including sensitivity analysis� Brand
development plans include:
- Extension of brand presence in distribution
networks;
- Kvass in kegs sales increase;
- Extension of beverage product range
(production of white kvass);
The given product is dependent on weather
conditions�
In so far as the directors are aware, the future
cash inflow from each CGU is not expected to
be below its acquisition cost and, therefore, no
impairment considerations have been included
in the valuation�
The Group’s management believes that it has
adequately provided for tax liabilities in the
accompanying financial statements; however,
the risk remains that those relevant authorities
could take different positions with regard to
interpretative issues�
During the period under review, the Ukrainian
companies within the Group paid royalties and
interest charges on the outstanding credits
to another Group company – Solaero Global
Alternative Fund Limited (Cyprus)� These
payments were not taxable in Ukraine due to
the existing Double Taxation Treaty between
Ukraine and Cyprus�
14. PROPERTY, PLANT AND
EQUIPMENT
In accordance with IAS 16 “Property, Plant
and Equipment”, the Group carries out
revaluations, with sufficient regularity (at
least once every five years) to ensure that the
carrying amount does not differ materially
from fair value� An independent valuation of
the Group's property, plant and equipment
was undertaken by Price Consulting LLC as
at 1 December 2020�
As at December 31, 2022, the Group tested
property, plant and equipment and capital
investments for impairment signs, as a result
of which management recognized that the
cost of use of property, plant and equipment
and capital investments exceeds their carrying
amount� Accordingly, for the years ended
December 31, 2022, no impairment losses
on property, plant and equipment and capital
investments were recognized�
The Group is divided into two cash-generating
units (CGU)�
Dairy production
Dairy productions consists of production
assets for butter, cheese, protein and skimmed
dairy products:
- Production assets of SE Starokostyantynivski
Dairy Plant and two other units in Zhytomir
and Letychiv;
- Group vehicle park used for raw material
and product transportation;
- “Nash Molochnik”, “Vershkova Dolyna” and
“Narodny product” trade marks�
Beverage production
Beverage production combines the production
assets of Live kvass “Arseniivsky”� It consists
of:
- Production assets of “Zhyvyi Kvass” LTD
and,
- “Arseniivsky” Trade mark�
Main assumptions used in value in use
calculation
Value in use calculation for production both
dairy products and beverages is sensitive to
the following assumptions:
Gross profit margin – Gross profit margin is
based on 2022 budget value and takes into
consideration trends of value indexes for 2020-
2024.
Discount rate – Discount rate assumes current
market estimates risks, specific for each CGU,
inclusive of cash cost and individual risks and
corresponding assets excluded from the cash
flow valuation. The discount rate calculation
is based on specific Group circumstances
and operational segment and based on from
Weighted Average Cost of Capital (WACC)�
WACC takes into account both loan and
owned capital� The value of owned capital is
calculated on the basis of predicted return
78
The notes on pages 36 – 94 are an integral part of these consolidated financial statements.
79
As at 31 December 2022 the Group has
no contractual commitments to purchase
property, plant and equipment�
Fixed assets with a net book value of GBP 2�446
thousand at 31 December 2021 (2021: GBP
2�562 thousand) were pledged as collateral for
loans�
As at 31 December 2022 any prepayments for
property, plant and equipment were included
within Assets under construction in the amount
of GBP 7 thousand (2021: GBP 19 thousand)�
As at 31 December 2022 fully depreciated
assets have been included within property,
plant and equipment with the original cost of
GBP 516 thousand (2021: GBP 345 thousand)�
to provide
impracticable
information
It’s
about the carrying amounts of all classes of
assets, except office equipment, as they were
measured using the cost model without undue
cost and effort�
In 2020, the Group made a revaluation of
fixed assets. An independent valuation of the
Group's property, plant and equipment was
undertaken by Price Consulting LLC as at 01
December 2020
14. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
As at 31 December 2022 and 31 December 2021, property, plant and equipment were presented
as follows:
C
o
n
s
t
r
u
c
t
i
o
n
A
s
s
e
t
s
u
n
d
e
r
B
u
i
l
i
d
n
g
s
L
a
n
d
a
n
d
M
a
c
h
n
e
r
y
i
l
P
a
n
t
a
n
d
V
e
h
i
c
l
e
s
i
e
q
u
p
m
e
n
t
o
t
h
e
r
t
o
o
l
s
a
n
d
I
n
s
t
r
u
m
e
n
t
s
,
T
o
t
a
l
£ ‘000
£ ‘000
£ ‘000
£ ‘000
£ ‘000
£ ‘000
10
754
(745)
-
23
42
-
-
-
-
-
-
3 750
4 858
-
120
(43)
147
-
526
(257)
178
493
-
18
(12)
-
1 038
10 149
-
81
(33)
32
754
-
(345)
380
3 974
5 305
499
1 118
10 938
27
46
(4)
161
3
233
44
109
(30)
341
9
11
44
(4)
83
8
133
63
(4)
98
5
215
262
(42)
683
25
473
142
295
1 143
42
382
(380)
-
(13)
3 974
5 305
499
1 118
10 938
-
39
(69)
(590)
-
250
(410)
(535)
-
7
-
(96)
-
84
(104)
(17)
382
-
(583)
(1 251)
31
3 354
4 610
410
1 081
9 486
-
-
-
-
-
-
31
42
10
233
73
(7)
87
(48)
338
3 016
3 741
3 723
473
172
(60)
142
(99)
628
3 982
4 832
4 814
142
61
-
73
(68)
208
202
357
482
295
199
(5)
41
1 143
505
(72)
343
(134)
(349)
396
685
823
905
1 570
7 916
9 795
9 934
Cost or valuation
At 1 January 2021
Additions
Transfers to/from AUC
Disposals
Exchange differences on translation to
the presentation currency
At 31 December 2021
Accumulated depreciation
At 1 January 2021
Depreciation charge
Disposals
Revaluation depreciation
Exchange differences on translation to
the presentation currency
At 31 December 2021
Cost or valuation
At 1 January 2022
Additions
Transfers to/from AUC
Disposals
Exchange differences on translation to
the presentation currency
At 31 December 2022
Accumulated depreciation
At 1 January 2022
Depreciation charge
Disposals
Revaluation depreciation
Exchange differences on translation to
the presentation currency
At 31 December 2022
Net book value at 31 December 2022
Net book value at 31 December 2021
Net book value at 31 December 2020
80
The notes on pages 36 – 94 are an integral part of these consolidated financial statements.
81
The remaining amortization periods of the
intangible assets are as follows:
- Computer software 1-10 years;
- Trademarks 11-18 years;
- Right of use natural resources 15-20 years;
The Group performed its annual impairment
test in December 2022 and 2021� The Group
considers the relationship between its market
its book value, among
capitalisation and
other factors, when reviewing for indicators
of impairment� As at 31 December 2022, the
market capitalisation of the Group was below
the book value of its equity, indicating a potential
impairment of goodwill and impairment of the
assets of the operating segment�
Trademark “Zhyviy Kvas”
The recoverable amount of the trademark
“Zhyviy Kvas” CGU, GBP 1 302 thousand as
at 31 December 2022, has been determined
based on a value in use calculation using
cash flow projections from financial budgets
approved by senior management covering a
five-year period. The projected cash flows have
been updated to reflect the recovering demand
15. INTANGIBLE ASSETS
As at the reporting dates intangible assets were presented as follows:
Computer
Rights to use natural
Trademarks
Total
software
£ ‘000
resources
£ ‘000
Cost or valuation
At 1 January 2021
Additions
Disposals
Exchange differences on translation to the
presentation currency
At 31 December 2021
Accumulated amortization
At 1 January 2021
Amortization charge for the year
Disposals
Exchange differences on translation to the
presentation currency
At 31 December 2021
Cost or valuation
At 1 January 2022
Additions
Disposals
260
211
-
(2)
469
36
2
-
(8)
30
469
383
(21)
Exchange differences on translation to the
(449)
presentation currency
At 31 December 2022
Accumulated amortization
At 1 January 2022
Amortization charge for the year
Disposals
Exchange differences on translation to the
presentation currency
At 31 December 2022
Net book value at 31 December 2022
Net book value at 31 December 2021
Net book value at 31 December 2020
382
30
27
(21)
(6)
30
352
439
224
-
53
-
-
53
-
-
-
-
-
53
-
-
(9)
44
-
2
-
-
2
42
53
-
£ ‘000
£ ‘000
996
-
-
(154)
1 256
264
-
(156)
842
1 364
622
56
-
(153)
525
842
-
-
98
940
525
62
-
66
653
287
317
374
658
58
-
(161)
555
1 364
383
(21)
(360)
1 366
555
91
(21)
60
685
681
809
598
for products and services� The discount rate
applied to cash flow projections is 20,1% (2021:
19�3%)� The growth rate used to extrapolate
the cash flows of the unit beyond the five-
year period is 0%� As a result of the analysis,
management did not identify an impairment
for this CGU�
Group of the trademarks within the “Dairy
segment”
the
recoverable amount of
The
three
trademarks within the “Dairy segment” CGU,
GBP 1 428 thousand as at 31 December
2022, is also determined based on a value in
use calculation using cash flow projections
from financial budgets approved by senior
management covering a five-year period. The
projected cash flows have been updated to
reflect the decreased recovering for products
and services� The pre-tax discount rate applied
to the cash flow projections is 20,1% (2021:
19�3%)� The growth rate used to extrapolate
the cash flows of the unit beyond the five-
year period is 0 %� As a result of the analysis,
management did not identify an impairment
for this CGU�
82
The notes on pages 36 – 94 are an integral part of these consolidated financial statements.
83
16. DEFERRED TAX ASSETS AND LIABILITIES
For the year ended 31 December 2022, deferred tax assets and liabilities were presented as
follows:
As at 31 December
As at 31 December
Deferred tax assets at the beginning of the year
Deferred tax liability at the beginning of the year
Deferred tax liability recognised in SOCI during the year
Reduction in deferred tax due to decrease in property, plant and
equipment revaluation reserve because of amortization
Exchange differences on translation to the presentation currency
Deferred tax assets at the end of the year
Deferred tax liability at the end of the year
2022
£ ‘000
796
(183)
(76)
(7)
530
2021
£ ‘000
-
1 029
(122)
(150)
39
-
796
Maturity of trade receivables as at 31 December 2022 and 31 December 2021 is presented as
follows:
Total
Neither past
Past due but not impaired
due nor impaired
<30 days
30-60 days
61-90 days 91-120 days
>120 days
2022
2021
£ ‘000
2 273
5 894
£ ‘000
1 315
4 067
£ ‘000
£ ‘000
£ ‘000
£ ‘000
£ ‘000
310
822
76
149
15
124
9
136
548
597
Provisions were created for both impaired trade and other receivables and expected credit losses
on receivables which are not considered to be impaired�
17. INVENTORIES
As at the reporting dates inventories were presented as follows:
As at
As at
Impaired trade and other receivables at the beginning of the
year
Accrual / (Reversal)
Use of allowances
31 December 2022
31 December 2021
Effect of translation to presentation currency
Finished goods
Raw materials
Work in progress
Other inventories
Total
£ ‘000
1 854
1 257
385
800
4 296
£ ‘000
2 665
749
339
902
4 655
During 2022, GBP 29,582 thousand (2021: GBP 43,512 thousand) was recognised as an expense
in cost of sales�
18. TRADE AND OTHER RECEIVABLES
Impaired trade and other receivables at the end of the year
19. CURRENT TAXES
VAT receivable
Current income tax prepayments
Other prepaid taxes
Total
As at
As at
31 December 2022
31 December 2021
20. OTHER FINANCIAL ASSETS
Trade receivables, net of impairment
Other receivables
Prepayments
Total
£ ‘000
2 273
352
448
3 073
£ ‘000
5 894
370
499
6 763
Loans and receivables
Loans issued to third parties
Total
As at
As at
31 December 2022
31 December 2021
£ ‘000
268
(1 065)
-
2 424
1 627
£ ‘000
277
157
-
(166)
268
As at
As at
31 December 2022
31 December 2021
£ ‘000
521
40
30
591
£ ‘000
838
54
28
920
As at
As at
31 December 2022
31 December 2021
£ ‘000
35
35
£ ‘000
40
40
The Group’s management believes that the carrying value for trade and other receivables is a
reasonable approximation of their fair value�
Loans issued are short term in nature, repayable on demand and are interest free�
84
The notes on pages 36 – 94 are an integral part of these consolidated financial statements.
85
21. CASH AND CASH EQUIVALENTS (EXCLUDING BANK
OVERDRAFTS)
As at the reporting dates cash and cash equivalents were presented as follows:
23. OTHER RESERVES
At the reporting date other reserves were presented as follows:
Cash on hand - on UAH
Cash in bank - on UAH
Cash in Bank - in other currencies
Total
As at
As at
31 December 2022
31 December 2021
£ ‘000
36
232
135
403
£ ‘000
7
273
32
312
22. SHARE CAPITAL
As at the reporting dates share capital was presented as follows:
As at
As at
As at
As at
31 December 2022 31 December 2022 31 December 2021 31 December 2021
Authorised
Ordinary shares of 10p each
60 000
Number '000
£ ‘000
6 000
Number '000
60 000
£ ‘000
6 000
Issued and fully paid at beginning and end of the year
As at
As at
As at
As at
31 December 2022 31 December 2022 31 December 2021 31 December 2021
Ordinary shares of 10p each
At beginning of the year
Own shares acquired
Number '000
-
39 673
-
At end of the year (excluding
39 673
shares held as treasury shares)
£ ‘000
-
3 967
-
3 967
Number '000
-
39 673
-
39 673
£ ‘000
-
3 967
-
3 967
Treasury shares
As at
As at
As at
As at
31 December 2022 31 December 2022 31 December 2021 31 December 2021
Number '000
£ ‘000
Number '000
£ ‘000
Ordinary shares of 10p each
At beginning of the year
At end of the year
-
3 145
3 145
-
315
315
-
3 145
3 145
-
315
315
Share capital and treasury shares presented as separate lines in the Consolidated statement
of financial position as at 31 December 2022. In the Annual report 2021 the Share capital was
presented on a net value reduced by the value of treasury shares�
As at 31 December 2022 and 31 December 2021 the Group held a total of 3,144�800 ordinary
shares as treasury shares and the total number of ordinary shares in issue (excluding shares held
as treasury shares) was 39,673�049�
86
The notes on pages 36 – 94 are an integral part of these consolidated financial statements.
Share premium
Translation
Revaluation
Total other
At 1 January 2021
Depreciation on revaluation of property,
plant and equipment
Exchange differences on translation to
the presentation currency
At 31 December 2021
£ '000
4 562
-
-
reserve
£ '000
(15 231)
-
244
4 562
(14 987)
Depreciation on revaluation of property,
plant and equipment
Exchange differences on translation to
-
-
-
reserve
£ '000
7 031
(683)
reserves
£ '000
(3 638)
(683)
-
244
6 348
(343)
(4 077)
(343)
(550)
-
(550)
the presentation currency
At 31 December 2022
4 562
(15 537)
6 005
(4 970)
Reserve
Description and purpose
Share premium
Amount subscribed for share capital in excess of nominal value�
Revaluation
Gains arising on the revaluation of the Group’s property� The balance on this reserve is
wholly undistributable�
Translation
Amount of all foreign exchange differences arising from the translation of the financial
information of Group entities to presentation currency�
87
24. BANK LOANS AND SHORT-
TERM PAYABLES
the EBRD has taken no action to accelerate
repayment of the loan
Maturity of financial liabilities
As at 31 December 2022 the Group has two
loans: the loan from Creditwest Bank in the
amount of 1�451 thousand GBP (in UAH 63�860
million) and the loan from the EBRD in the
amount of 4�665 thousand GBP (in EUR 5�309
thousand)�
For the year ended 31 December 2022, the
Group was in breach of several provisions of
its loan agreement with the EBRD� With the
beginning of the military aggression of the
Russian Federation against Ukraine on 24
February 2022 the Group suspended all the
principal payments and interests of EBRD loans
as a result of force majeure circumstances,
which the bank has not issued a waiver for�
Ukrproduct has been in negotiations with
the EBRD to potentially restructure the loan
repayment schedule since June 2021� The
negotiations with EBRD are ongoing� At present
Fixed assets with a net book value of GBP 2�102
thousand at 31 December 2022 (2021: GBP 2�562
thousand) were pledged as collateral for loan�
Assets pledged as security for the EBRD loan
include property and land in Starokonstantinov,
equipment for dairy production and production
of hard cheese, as well as trademarks�
According to the terms of the agreements with
the EBRD, in case of non-fulfilment of any of
the obligations under agreement, including
financial covenants, the EBRD may demand
from the Group full
return of all outstanding loan amounts� 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 31
As at 31
date
date
rate
December
December
EUR
UAH
Loan
31�03�2011 30�11�2024
5-7%
Credit line 05�02�2018 05�02�2021
15�89%
EBRD
Creditwest
Bank Ukraine
Total
£ ‘000
7 347
1 477
2022
£ ‘000
4 665
1 451
2021
£ ‘000
4 304
1 735
6 116
6 039
The average interest rate as at 31 December 2022 was 11% (2021: 11%)�
Year ended
31 December 2022
Year ended
31 December 2021
£ ‘000
-
6 116
-
6 116
£ ‘000
-
6 039
-
6 039
On demand
In less than 1 year
In more than 1 year
Total
Interest rate profile of financial liabilities
On demand
Expiry within 1 year
Expiry in more than 1 year
Total
Floating rate
Fixed rate
As at
As at
31 December 2022 31 December 2021
£ '000
-
4 665
-
4 665
£ '000
-
1 451
-
1 451
£ ‘000
-
6 116
-
6 116
£ ‘000
-
6 039
-
6 039
The currency profile of the Group's financial liabilities is as follows:
Floating rate
Fixed rate liabilities
Total as at 31
Total as at 31
liabilities
£ '000
-
4 665
4 665
December 2022
December 2021
£ '000
1 451
-
1 451
£ '000
1 451
4 665
6 116
£ '000
1 735
4 304
6 039
UAH
EUR
Total
The book value and fair value of financial liabilities are as follows:
Book value as at 31
Fair value as at 31
Book value as at 31
Fair value as at 31
December 2022
December 2022
December 2021
December 2021
Bank loans
Total
£ '000
6 116
6 116
£ '000
6 116
6 116
£ '000
6 039
6 039
£ '000
6 039
6 039
88
The notes on pages 36 – 94 are an integral part of these consolidated financial statements.
89
Reconciliation of liabilities arising from financing activities
26. EARNINGS PER SHARE
As at 31
Financing
Accrual of
Foreign
Other
Effect from
As at 31
December
cash flows
interest
exchange
changes
translation to
December
2021
£ '000
6 039
193
Bearing loans and
borrowings
Interest
Interest-bearing loans
6 232
and borrowings
movement
presentation
2022
£ '000
£ '000
(1)
-
(292)
(293)
550
550
£ '000
1 180
61
1 241
£ '000
(9)
-
(9)
currency
£ '000
(1 093)
(130)
(1 223)
£ '000
6 116
383
6 499
Basic earnings per share have been calculated by dividing net profit attributable to the ordinary
shareholders by the weighted average number of shares in issue�
Year ended
Year ended
31 December 2022
31 December 2021
Net profit/loss attributable to ordinary shareholders
Weighted number of ordinary shares in issue
Basic earnings per share, pence
Diluted average number of shares
Diluted earnings per share, pence
£ ‘000
(804)
39 673
(2.03)
39 673
(2.03)
£ ‘000
439
39 673
1.11
39 673
1.11
25. TRADE AND OTHER PAYABLES
At the reporting date trade and other payables were presented as follows:
27. DIVIDENDS
Due to the business circumstances dictating prudence and cash conservation, the Board has
decided not to pay a final dividend in respect of the year ended 31 December 2022.
28. SHARE-BASED PAYMENTS
The Company operates an equity-settled share based remuneration scheme for employees�
During 2022, the Group did not issue options to any third parties� They were not exercised� There
are no outstanding options issued by the Group�
As at
As at
31 December 2022
31 December 2021
Trade payables
Prepayments received
Accruals
Interests payable
Provisions
Other payables
Total
£ ‘000
3 956
119
199
383
425
80
5 162
£ ‘000
8 847
174
253
193
242
120
9 829
The Group’s management believes that the carrying value for trade and other payables is a
reasonable approximation of their fair value�
For the year ended 31 December 2022, provisions were presented as follows:
As at
As at
31 December 2022
31 December 2021
Allowance at the beginning of the
year
Accrual/(Reversal)
Use of allowances
Effect of translation to presentation
currency
Allowance at the end of the year
£ ‘000
242
367
(354)
171
425
£ ‘000
176
262
(304)
108
242
90
The notes on pages 36 – 94 are an integral part of these consolidated financial statements.
91
29. CURRENCY ANALYSIS
Currency analysis for the year ended 31 December 2022 is set out below:
UAH
USD
GBP
EUR
Total
Assets
Trade and other receivables
2 566
Current taxes
Other financial assets
Cash and cash equivalents
Total assets
Liabilities
Bank borrowings
Trade and other payable
Current income tax liabilities
Other taxes payable
Total Liabilities
574
35
273
3 448
1 451
3 928
48
52
5 479
57
-
-
125
182
-
12
-
-
12
2
-
-
-
2
-
87
-
-
87
-
17
-
5
22
5 158
9
-
-
2 625
591
35
403
3 654
6 609
4 036
48
52
5 167
10 745
Currency analysis for the year ended 31 December 2021 is set out below:
UAH
USD
GBP
EUR
Total
Assets
Trade and other receivables
6 171
Current taxes
Other financial assets
Cash and cash equivalents
Total assets
Liabilities
Bank borrowings
Trade and other payable
Current income tax liabilities
Other taxes payable
Total Liabilities
889
40
286
7 386
1 735
8 907
-
55
10 697
93
31
-
25
149
-
16
-
-
16
-
-
-
-
-
-
30
-
-
30
-
-
-
1
1
4 304
14
-
-
6 264
920
40
312
7 536
6 039
8 967
-
55
4 318
15 061
3% strengthening of Hryvnia rate against the US dollar and 18% strengthening of Hryvnia rate
against the Euro the following currencies as at 31 December 2022 and 2021, would increase /
decrease the amount of profits /or losses for the period by the amounts mentioned below. This
analysis was conducted based on the assumption that all other variables, in particular, interest
rates, remained unchanged� The change of the British pound exchange rate does not have
an impact on the result as all the balances in the British pound are attributable to the Group’s
companies where the British pound is a functional currency�
Increase/ decrease in rate
Effect on income before
Effect on income before
tax in 2022
tax in 2021
USD
EUR
USD
EUR
3%
18%
3%
18%
£ ‘000
5
(926)
(5)
926
£ ‘000
4
(777)
(4)
777
30. RELATED PARTY
TRANSACTIONS
A related party is a person or an entity that is
related to the reporting entity:
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�
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�
Remuneration of key management personnel is
disclosed in Note 12�
The Group had no commercial relationships
with the related parties in 2022� There were no
guarantees given to or provided by the Group to
related parties and vice versa�
ultimate
and
controlling
The
beneficiaries of the related parties were Mr.
Alexander Slipchuk and Mr� Sergey Evlanchik�
owners
30. COMMITMENTS AND
CONTINGENCIES
(a) Economic environment
affecting the activities of Ukrainian enterprises
may be subject to changes and amendments
within a short period of time� As a result, the
assets and operating activity of the Group
may be exposed to the risk in case if any
unfavourable changes that take place in the
political and economic environment�
(b) Retirement and other liabilities
Employees of the Group receive pension
benefits from the Pension Fund, a Ukrainian
Government organization in accordance with
the applicable laws and regulations of Ukraine�
The Group is required to contribute a specified
percentage of the payroll to the Pension Fund
to finance the benefits. The only obligation of
the Group with respect to this pension plan
is to make the specified contributions from
salaries� As at 31 December 2022 the Group
had no liabilities for supplementary pensions,
health care, insurance benefits or retirement
indemnities to its current or former employees�
(c) Compliance with covenants
The Group is subject to a covenant related primarily
to its borrowings� As at 31 December 2022 the
Group had been in breach of certain covenants
regarding the loan repayments settlement with
the EBRD. The Group classified the loan from the
EBRD as a Current Liability following the breach
of certain covenants and no formal waivers were
received by the Group from the bank� To the best
of the Group’s management knowledge, as of
today the EBRD has taken no action to accelerate
repayment of the loan�
92
The notes on pages 36 – 94 are an integral part of these consolidated financial statements.
The Group carries out most of its operations
in Ukraine� Laws and other regulatory acts
(d) Litigations and claims
The Group’s operations and
financial
93
position will continue to be affected by
Ukrainian political developments including
future
the application of existing and
legislation and tax regulations� Management
believes that the Group has complied with
all regulations and paid or accrued all taxes
that are applicable� In the ordinary course
of business, the Group is subject to various
legal actions and complaints� Management
believes that the ultimate liability, if any,
arising from such actions or complaints
will not have a material adverse effect on
the financial condition or the results of the
Group’s operations� Where the risk of outflow
of resources is probable, the Group has
accrued liabilities based on management’s
best estimate�
(e) Other
amount of
non-cancellable
The
lease
commitments is insignificant. As at 31 December
2022, the Group does not possess any finance
lease and hire purchase commitments, capital
commitments and guarantees�
31. SUBSEQUENT EVENTS
(a) EBRD – breach of loan covenants
As at 31 December 2022 the Group had been in
breach of loan covenants with EBRD� The Group
was still in breach of this covenant as at 01
June 2023� Ukrproduct has been in negotiations
with the EBRD to potentially restructure the
loan repayment schedule since June 2021� The
negotiations with EBRD are ongoing�
(b) 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
UAH/GBP
UAH/USD
UAH/EUR
(c) War
28 June 2023
46�52
36�56
40�02
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�
located
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
in Khmelnytskyi and
facilities are
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 30 June 2023 all the Group's assets
are located in the non-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�
94
The notes on pages 36 – 94 are an integral part of these consolidated financial statements.
95
Corporate advisers
Group secretary
Ocorian Ltd
PO Box 75
26 New Street
St Helier
Jersey JE2 3RA
Nominated adviser and broker
Strand Hanson Limited
26 Mount Row, Mayfair,
London W1K 3SQ,
United Kingdom
Registrars
Neville Registrars Limited
Neville House
18 Laurel Lane
Halesowen B63 3DA
Shareholder Information
Registered Office
PO Box 75
26 New Street
St Helier
Jersey JE2 3RA
Registered Number
88352 (Jersey)
Investor Relations
Yuliia Bovsunovska
Phone: +380-44-232-96-02
Email : ir@ukrproduct.com
Ukrproduct Group
5th Floor , 4/6 Ioanna Pavla II St�,
Kyiv 01042 Ukraine
Tel/fax (+380 44) 232-96-02
Tel/fax (+380 44) 232-96-03