Annual Report
Ukrproduct Group
Annual Report 2023
Annual Report
Table of Contents
Chairman and Chief Executive Statement ....................................................................................... 3
The Board of Directors .................................................................................................................... 6
Remuneration Committee Report .................................................................................................... 8
Corporate Governance Report ....................................................................................................... 10
Corporate Social Responsibility Report ........................................................................................ 13
Directors’ Report ........................................................................................................................... 15
Statements of Directors’ Responsibilities ...................................................................................... 18
INDEPENDENT AUDITOR’S REPORT ..................................................................................... 19
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ...................................... 26
CONSOLIDATED STATEMENT OF FINANCIAL POSITION ................................................ 27
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ................................................. 28
CONSOLIDATED STATEMENT OF CASH FLOWS ............................................................... 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ................................................... 30
Annual Report
Chairman and Chief Executive Statement
Trading
Ukrproduct Group Limited (“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).
In the financial year ended 31 December 2023 (“FY2023”), Ukrproduct continued to face a volatile
operating environment due to the challenges of the war in Ukraine. As in 2022, one of the Group's key
objectives was to ensure the safety of employees and maintain its operations and assets.
Ukrproduct’s consolidated revenue in FY2023 increased by 8.0% in local currency. The general growth
in sales was due to a focus on the development of key products, namely processed cheese and processed
cheese products, the development of new product categories, snacks and beverages, and the expansion
of the Group’s presence in retail chains. After currency translation, revenue decreased by 5.4% to £37.0
million year-on-year, due to the 14.1% impact of foreign exchange rates, in particular reflecting the
depreciation of the Ukrainian hryvnia against the British pound sterling.
In the processed cheese and processed cheese product category, sales amounted to £24.9 million,
reflecting a revenue increase of 25.7% in local currency compared with the previous year. Sales
represented an increase in volume of 12.4%. This was mainly attributable to the increase in export
volumes to the Middle East, the focus of marketing campaigns on these product categories and the
development of new items.
In FY2023, butter sales amounted to £3.1 million, reflecting a revenue increase of 3.4% in local currency
compared with the previous year, although sales represented a decline of 4.3% in volume. The Group
took a flexible approach by prioritizing key sales channels, such as exports and major distributors. A
significant increase in the purchase price of raw milk and bulk butter in Ukraine during the second half
of 2023, rising logistics costs and strengthened market competition led to a decrease in the margins of
butter sales.
Sales of spreads decreased to £4.6 million in FY2023 compared with £5.6 million in the prior year. This
constituted a decrease in sales of 6.0% in local currency and reduction of 12.9% in volume. The decrease
was principally due to the increased competition in the market.
Sales generated from skimmed milk powder decreased significantly by 52.1% in local currency to
£1.1 million, compared with £2.5 million in the previous year. In terms of volume, skimmed milk powder
sales decreased by 43.4%, which continues the dramatic decline seen in the previous period. Due to a
significant reduction in prices for skimmed milk powder in 2023, the Group minimized its output of this
product for sale in favour of utilizing semi-processed milk protein as an ingredient in the production of
processed cheese.
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Annual Report
Sales of kvass and beverages amounted to £1.8 million in FY2023, corresponding to a growth of 90.2%
in local currency and 42.8% in terms of volume, in each instance compared with the previous period. The
growth was due to the revival of full sales period in FY2023 whereas in FY2022 the sales season in key
kvass sales regions was delayed till June due to the Russian invasion of Ukraine.
In FY2023, the Group’s administrative and selling expenses amounted to £4.1 million; a 0.4% increase
compared to FY2022. In FY2023 the Group focused on carrying out trade marketing activities, in
particular providing discounts to customers and consumers, rather than on advertising campaigns. As a
result, marketing costs were reduced by 51.3% compared with the previous year. The changes in other
types of expenses were mainly driven by sales dynamics and routine business activities throughout
FY2023. In contrast, in FY2022, following the start of the Russian invasion of Ukraine, the Group was
forced to temporarily suspend or minimise some of its activities and processes.
Other operating expenses in FY2023 totaled £1.1 million (FY2022: £1.6 million), including losses from
impairment of stock of supplementary products that the Group was unable to sell for export due to the
blockade of Ukrainian Black Sea ports, as well as minor fines and some VAT losses.
The Group’s operations recorded an EBITDA of £2.4 million, representing a strong increase of 32.8%
year on year. The Group’s EBITDA margin improved from 4.6% to 6.5%.
Finance costs in FY2023 grew by 67.6% year on year, to £0.78 million, primarily driven by increased
interest rates and recognized additional interest expenses for the European Bank for Reconstruction and
Development (“EBRD”) loan for the previous periods. In June 2023, notwithstanding the challenging
operating environment due to the war in Ukraine, the EBRD decided to exercise its right under the loan
agreement and increased the interest rate on the loan retrospectively from September 2021.
Net profit after tax for FY2023 amounted to £0.4 million, a swing of £1.2 million compared to FY2022
(loss: £0.8m), principally driven by the significantly lower currency translation losses, which are due to
the devaluation of the Ukrainian hryvnia against the British pound and Euro.
Financial Position
As at 31 December 2023, Ukrproduct reported net assets of £4.5 million including cash balances of
£0.4 million, compared to net assets of £4.6 million as at 31 December 2022 and cash balances of
£0.4 million.
For the year ended 31 December 2023, the Group continued to be in breach of several provisions of the
loan agreement with the EBRD. The Group failed to repay Tranche A (aggregate EUR 2.1 million
principal, equivalent to £1.8 million) before the maturity date of 1 December 2022 and has missed interest
payments since 1 March 2022. In June 2023 the EBRD notified the Group about a recalculation and an
increased interest rate in respect of the aggregate EUR 5.7 million (equivalent to £4.9 million) principal
and interest of Tranche A and Tranche B from 1 September 2021.
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Annual Report
The Group has been negotiating with the EBRD since June 2021 to potentially restructure the loan
repayment and active negotiations are ongoing but have been slowed down owing to the ongoing war in
Ukraine. At present, the EBRD has taken no action to accelerate repayment of the loan. The Group
resumed repayment of interest to EBRD starting from December 2023.
In January 2024, after the period end, the Group fully repaid the previous working capital loan of UAH
63.8 million (GBP 1.3 million) and arranged a new facility of UAH 70.0 million (GBP 1.4 million), with
the same Ukrainian bank, for general working capital purposes. The new facility has a significantly lower
interest of 9% (against 20% on the repaid previous facility).
Outlook
The Group continues to make every effort to navigate its strategy in a very challenging business
environment, not least ensuring a stable power supply and responding to new challenges. In 2024, the
Group expects to focus on maintaining existing production facilities, sustaining sales volumes and
ongoing improvement of operational efficiency.
Sergey Evlanchik
Interim Chairman
Oleksandr Slipchuk
Chief Executive Officer
5
Annual Report
The Board of Directors
As of the date of the approval of the 2023 Annual Report, the Board members are as follows:
Name
Sergey Evlanchik
Oleksandr Slipchuk
Yuriy Hordiychuk
Position
Interim Chairman - Executive Director
Chief Executive Officer
Chief Operational Officer
Date appointed
April 2008
November 2004
January 2013
All directors were re-elected at Annual General Meeting (AGM) on 3 August 2023.
Jack Rowell
Non-Executive Chairman – Retired on June 19, 2024
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.
Jack Rowell has retired from the Board as of 19 June 2024 following a 19 year tenure as Chairman.
Oleksandr Slipchuk
Chief Executive Officer
Oleksandr 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, Oleksandr 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, Oleksandr took on the
executive positions at the Molochnik and the Starokonstantynivsky Dairy plants, Ukrproduct’s two main
operating assets.
Sergey Evlanchik
Interim Chairman - Executive Director
Sergey Evlanchik received his Master’s degree at Oxford University, where he studied Business
Administration at Said Business School. Together with Oleksandr 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.
energy
In 2011 under the leadership of Sergey Evlanchik the Group secured debt finance with EBRD focused
on
facilities.
Sergey is also a partner in Rengy Development that is focused on development of renewable projects –
mainly solar power generation in Ukraine.
efficiency upgrade of
existing production
and production
the
After Jack Rowell retired from the Board Sergey Evlanchik agreed to become Interim Chairman on a
temporary basis, in addition to his role as Executive Director of Ukrproduct.
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Annual Report
Yuriy Hordiychuk
Chief Operational Officer
Yuriy 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. Yuriy has a successful track record of business administration and a degree in
“Production Organization Management”.
Senior 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 a Master`s degree in Finance and has 17 years’
experience in corporate finance, including 11 years in managerial positions.
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Annual Report
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 in relation to the financial year ended 31 December 2023. Subsequent to the year end,
on 19 June 2024 Jack Rowell retired as Chairman and Sergey Evlanchik agreed to become Interim
Chairman on a temporary basis, in addition to his role as Executive Director of Ukrproduct, until a
replacement independent Non-Executive Chairperson is appointed, at which time the composition of the
Board Committees will be updated.
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 Committee is also responsible for the evaluation of the performance of
Executive Directors.
The board members were invited to discuss issues on the Remuneration Committee, which held two
meetings during 2023.
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;
are rooted in practices exercised in countries where the Group operates;
intend to align the interests of 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.
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.
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Annual Report
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. Annual bonus for the Executive Directors on the basis of 2022 extraordinary circumstances and
financial results was approved in the amount of £110,000 in FY2023.
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
2023
£ 000
2022
£ 000
2023
£ 000
Non-cash
compensation
2022
2023
2022
£ 000
£ 000 £ 000
cash
Total
remuneration
2022
2023
£ 000
£ 000
Executive
Oleksandr Slipchuk
Sergey Evlanchik
Yuriy Hordiychuk
Non-Executive
Jack Rowell
General manager
Yuriy Hordiychuk*
90.0
70.0
50.3
210.3
45.0
35.0
15.0
95.0
45.0
35.0
30.0
110.0
45.0
22.5
9.7
10.9
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
135.0
105.0
80.3
320.3
45.0
35.0
15.0
95.0
45.0
22.5
9.7
10.9
*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 2023 there are no outstanding options issued by Group.
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Annual Report
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 on the creation of medium to long-term value for shareholders without stifling the
entrepreneurial spirit in which small to medium sized companies, such as Ukrproduct Group Limited,
have been created. The Company will provide annual updates on its compliance with the QCA Code in
its Annual Report.
Subsequent to the financial year end, on 19 June 2024 Jack Rowell retired as Chairman and Sergey
Evlanchik agreed to become Interim Chairman on a temporary basis, in addition to his role as Executive
Director of Ukrproduct, until a replacement independent Non-Executive Chairperson is appointed, at
which time the Corporate Governance Policy and composition of the Board Committees will be updated.
The Board
The Board now consists of three Executive Directors with one of those acting as Interim
Chairmanreflecting a blend of different experience and backgrounds. The Board acknowledges that there
is now no director who can be classified as an independent Non-Executive Director under the QCA
guidelines. The Company is currently searching for a new independent Non-Executive Director.
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.
When a new independent Non-Executive Director will be appointed, the Board will be satisfied that it
has a suitable balance between independence on the one hand, and knowledge of the Company on 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 website
at http://ukrproduct.com/en/investor-relations-aim-rule-26/board-of-directors/
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 Interim Chairman is not considered
independent. A new appointee will be and he or she will have 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.
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Annual Report
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, which will be comprised of the new independent Non-Executive
Chairman when appointed. The committees are as follows:
The Audit Committee
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 relating to the
Group’s financial performance and reviewing significant financial reporting judgments contained
therein are monitored;
The Group’s published financial statements represent a true and fair reflection of this position;
and taken as a whole are balanced and understandable, providing the information necessary for
shareholders to assess the Group’s performance, business model and strategy;
The external audit is conducted 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.
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Annual Report
Remuneration Committee
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
ensure that the elements of the remuneration package are competitive and help in promoting the
Group.
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 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 Andrii Honcharuk, the CFO. The
essential elements of the Group’s internal financial 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
In accordance with the AIM Rules for Companies, the Company departs from the QCA Code in the
following ways:
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 currently has no Non-Executive Directors,
but this will be rectified in the near term with the appointment of a new Non-Executive Chairman who
will also be considered to be independent. The Company has three Executive Directors. The Executive
Directors have valuable industry knowledge and are integral to the running of the business.
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.
Sergey Evlanchik
Interim Chairman
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Annual Report
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 long-term and healthy relationships with the Group’s partners, customers and other
affiliated parties.
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.
Customers
Customer satisfaction is at the core of the Group’s business model. Therefore, the Board is keen to
continue supplying the customers with high quality, affordable 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.
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Annual Report
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 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.
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Annual Report
Directors’ Report
The Directors present their report and the audited consolidated financial statements of Ukrproduct Group
Limited (referred to as the “Сompany” and together with its subsidiaries, the “Group”) for the year ended
31 December 2023.
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 Group recorded a net financial profit
of £0.4 million in 2023, compared to a loss of £0.8 million in 2022. The effect of exchange rates led to
the Group reporting a net foreign exchange loss of £0.4 million (2022: £1.1 million loss).
The Board has decided not to recommend the payment of a dividend in respect of the year ended
31 December 2023.
Directors
Details of members of the Board of Directors are shown on page 6.
The Directors’ interests in the share capital of the Company as at 31 December 2023 and 31 December
2022 are shown below:
Shares
Share options
2023
2022
2023
2022
14,967,133
14,967,133
14,939,133
14,939,133
-
-
138,690
138,690
-
-
-
-
-
-
-
-
Executive
Sergey Evlanchik
Oleksandr Slipchuk
Yuriy Hordiychuk
Non-executive
Jack Rowell
Powers of the Directors
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 Articles of Association.
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Annual Report
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, foreign exchange risk and commodity price 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 implementation of all policies as
approved by the Board of Directors.
For further details of the Group’s risk management please see Note 5 on page 54-59.
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 remuneration and 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 2023 was 813
(2022: 836).
Payment Policy
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.
Going Concern
At the time of publication of this 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 61 employees joined Ukrainian military forces and
territorial defense. Personnel of production facilities and central office remained in their working area or
worked remotely. While personnel-related challenges have been manageable so far, the anticipated
escalation of conscription efforts in Ukraine heightens operational risks for the Group.
- 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 was reduced significantly. Alternative 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.
- Due to the constant Russian shelling targeting vital Ukrainian energy infrastructure the Group is
prepared to mitigate possible disruptions to its operations, equipped its key assets with diesel generators.
16
Annual Report
In January 2024, after the period end, the Group repaid the previous working capital loan of UAH 63.8
million (GBP 1.3 million) and arranged a new facility in the amount of UAH 70.0 million (GBP 1.4
million),with the same Ukrainian bank, for general working capital purposes. The new facility has a
significantly lower interest rate of 9% (against 20% on the repaid previous facility).
For the year ended 31 December 2023, the Group continued to be in breach of several provisions of the
loan agreement with the EBRD. The Group failed to repay Tranche A (aggregate EUR 2.1 million
principal, equivalent to £1.8 million) before the maturity date of 1 December 2022 and has missed interest
payments since 1 March 2022. In June 2023 the EBRD notified the Group about a recalculation and an
increased interest rate in respect of the aggregate EUR 5.7 million (equivalent to £4.9 million) principal
and interest of Tranche A and Tranche B from 1 September 2021.
The Group has been negotiating with the EBRD since June 2021 to potentially restructure the loan
repayment and negotiations are ongoing but have been slowed owing to the ongoing war in Ukraine. At
present, the EBRD has taken no action to accelerate repayment of the loan. The Group reverted to the
repayment of interest for long-term credit line from the EBRD starting from December 2023.
Management acknowledges that future development of military actions and their duration as well as
consequences of a covenant breach of the loan agreement with the EBRD represent major sources 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 to the Group and thus believes that the
application of the going concern assumption for the preparation of these consolidated financial statements
is appropriate.
Annual General Meeting
Ukrproduct’s AGM will be held on 1 August 2024. 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 2023
financial year by the resolution of the Directors held on 3 August 2023. 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.
Sergey Evlanchik
Interim Chairman
24 June 2024
17
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 the Companies 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 that the financial information complies with IFRS as adopted by the United Kingdom,
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:
Sergey Evlanchik
Interim Chairman
24 June 2024
18
Moore Stephens Audit & Assurance
(Jersey) Limited
1 Waverley Place
Union Street, St Helier
Jersey, Channel Islands JE4 8SG
T +44 (0) 1534 880088
E mail@moorestephens-jersey.com
www.moorestephensci.com
GST No: 0044828
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF UKRPRODUCT GROUP LIMITED
Opinion
We have audited the consolidated financial statements of Ukrproduct Group Limited and its subsidiaries
(the “Group”) for the year ended 31 December 2023 which comprise the consolidated statement of
comprehensive income, the consolidated statement of financial position as at 31 December 2023, 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 consolidated financial statements:
• give a true and fair view, of the state of the Group’s affairs as at 31 December 2023 and of its results
for the year then ended;
• have been properly prepared in accordance with IFRS as adopted by the United 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 of the consolidated financial statements section of our report. We are
independent of the Group in accordance with the ethical requirements that are relevant to our audit of
the consolidated financial statements in Jersey, including the FRC’s Ethical Standard as applied to listed
entities, and we have fulfilled our ethical responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
An overview of the scope of our audit
During our audit planning, we determined materiality and assessed the risks of material misstatement
in the consolidated financial statements including the consideration of where Directors made subjective
judgements, for example, in respect of the assumptions that underlie significant accounting estimates
and their assessment of future events that are inherently uncertain. We tailored the scope of our audit
in order to perform sufficient work to enable us to provide an opinion on the consolidated financial
statements as a whole taking into account the Group, its accounting processes and controls and the
industry in which it operates.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on the overall audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were addressed in the context of our audit
of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
An independent member firm of Moore Global Limited -
member firms in principal cities throughout the world.
The registered office address is: 1 Waverley Place, Union
Street, St. Helier, Jersey, Channel Islands JE4 8SG
DocuSign Envelope ID: F4724C3B-5F34-48F8-93F1-A155A50F4F31
Key Audit Matter
Going Concern
The consolidated 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 based on
financial
the consolidated statement of
position amounted to £2.73 million as of
31 December 2023. 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 consolidated financial statements).
Risk of fraud in revenue recognition
Revenue
important
is material and an
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 £36.99 million, excluding the
charge of bonuses. Given the magnitude of
the amount and the inherent risk of revenue
overstatement, we
revenue
recognition to be a key audit matter (Refer to
note 2.2.11 & 8).
consider
How the matter was addressed in the audit
Key Observations
Our work performed and our conclusions in respect
of going concern have been detailed in ‘Material
uncertainty related to going concern section’ of our
audit report.
Our main audit procedures in respect of revenue
recognition were as follows:
recognition,
▪ We obtained an understanding of the
to
policies and procedures applied
as
revenue
compliance
an
analysis of the effectiveness of the design
and implementation of controls related to
revenue recognition employed by
the
Group;
as well
including
therewith,
▪ 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
the correct
accounting period; and,
in
▪ We reviewed the disclosures related to
revenue included in the notes to the
consolidated financial statements.
Key Observations
We did not note any material issues arising from
the procedures performed in this area.
DocuSign Envelope ID: F4724C3B-5F34-48F8-93F1-A155A50F4F31
Risk of Management Override of Controls
is
in unique position
Management
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 a
risk of material misstatements due to fraud
and thus a significant risk. Also, the Group has
voluminous
requires
complex calculations.
transactions
and
Risk of Non-compliance with
covenants
loan
The Group has loans from European Bank for
Reconstruction and Development (EBRD) and
there is a risk that the Group doesn’t meet the
covenants as stated in the loan agreement.
Violation of the Group’s loan covenants could
have a potential material unfavourable impact
to the Group.
During the review of loan agreements, we
is non-compliance with
noted that there
certain covenant contained within
those
agreements, particularly on
the missed
payments of principal and interests (Refer to
financial
to
Note 24
statements).
the consolidated
Risk of Subsequent Events
Due to the ongoing Russian invasion of
Ukraine, there is a risk that future escalation
of military actions and their duration could
have a material impact to the Group.
Our main audit procedures
respect of
Management Override of Controls were as follows:
in
▪ We have obtained understanding of the
financial reporting process.
▪ We have reviewed opening balances and
completeness of journals.
▪ We have reviewed high-risk journals as
part of our testing.
▪ We have reviewed accounting estimates
and potential management bias.
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 contract with EBRD
in relation to their view and actions on the
breach of terms of the loan agreement
(loan covenants) and failure 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: missed
principal and interest payments.
in
Our main audit procedures
Subsequent events were as follows:
respect of
▪ We have obtained 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 have read the 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.
DocuSign Envelope ID: F4724C3B-5F34-48F8-93F1-A155A50F4F31
▪ 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.
Material uncertainty related to going concern
We draw attention to note 2.1 (b), in the consolidated financial statements, which indicates the ongoing
full-scale military invasion of Ukraine launched by the Russian Federation, and that the Group is in
breach of covenants in respect of its loan agreement with 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 consolidated 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.
In auditing the consolidated financial statements, we have concluded that the use of the going concern
basis of accounting in the preparation of the consolidated financial statements is appropriate. In
assessing the appropriateness of the going concern assumption used in preparing the consolidated
financial statements, our procedures included, amongst others:
▪ Assessing the cash flow requirements of the Group over 12 months from expected signoff of
these consolidated financial statements;
▪ Understanding what forecast expenditure is committed and what could be considered
discretionary;
▪ Assessing the liquidity of existing assets on the consolidated 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.
Our responsibilities and the responsibilities of the directors with respect to going concern are described
in the relevant sections of this report.
Our application of materiality
We define materiality as the magnitude of misstatements in the consolidated financial statements that
makes it probable that the economic decisions of a reasonably knowledgeable person would be changed
or influenced. We use materiality to determine the scope of our audit and the nature, timing and extent
of our audit procedures and to evaluate the results of that work. Materiality was determined as follows:
Consolidated financial statements as a whole:
Materiality was calculated at £557,262 which is approximately 1.5% of Total Revenue. This benchmark
is considered the most appropriate because, based on our professional judgement, we considered that
this is the primary measure used by the users of the consolidated financial statements in assessing the
performance of the Group.
Communication of misstatements to the Board:
We agreed with the Directors that any misstatement above £27,863 identified during our audit will be
reported, together with any misstatement below that threshold that, in our view, warranted reporting on
qualitative grounds.
DocuSign Envelope ID: F4724C3B-5F34-48F8-93F1-A155A50F4F31
Other information
The Directors are responsible for the other information. The other information comprises the information
included in the annual report set out on page 3 to 17 other than the consolidated financial statements
and our auditor’s report thereon. Our opinion on the consolidated financial statements does not cover
the other information and we do not express any form of assurance conclusion thereon.
In connection with our audits of the consolidated financial statements, our responsibility is to read the
other information identified above when it becomes available and, in doing so, consider whether the
other information is materially inconsistent with the consolidated financial statements, or our knowledge
obtained in the audits or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether there is a
material misstatement of the consolidated financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact.
We have nothing to report in this regard.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies (Jersey) Law 1991
requires us to report to you if, in our opinion:
• adequate accounting records have not been kept, or
•
•
• we have not received all the information and explanations we require for our audit.
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
Responsibilities of directors for the consolidated financial statements
As explained more fully in the Statement of Directors’ Responsibilities on page 17, the Directors are
responsible for the preparation of the consolidated financial statements which give a true and fair view,
and for such internal control as the Directors determine is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to fraud or
error.
In preparing the consolidated financial statements, the Directors are responsible for assessing the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the directors either intend to liquidate
the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
DocuSign Envelope ID: F4724C3B-5F34-48F8-93F1-A155A50F4F31
Explanation as to what extent the audit was considered capable of detecting irregularities,
including fraud
The objectives of our audit, in respect to fraud, are; to identify and assess the risks of material
misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence
regarding the assessed risks of material misstatement due to fraud, through designing and implementing
appropriate responses; and to respond appropriately to fraud or suspected fraud identified during the
audit. However, the primary responsibility for the prevention and detection of fraud rests with both those
charged with governance of the entity and management.
Our approach was as follows:
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the
Group and determined that the most significant are those that relate to the Companies (Jersey) Law
1991 and the AIM Rules for Companies. We also reviewed the laws and regulations applicable to
the Group that have an indirect impact on the financial statements.
• We gained an understanding of how the Group is complying with Companies (Jersey) Law 1991 and
the AIM Rules for Companies by making inquiries of management. We corroborated our inquiries
through our review of minutes of Board of Directors meetings and the review of various
correspondence examined in the context of our audit and noted that there was no contradictory
evidence.
• We assessed the susceptibility of the Group's financial statements to material misstatement,
including how fraud might occur, by meeting with management to understand where they considered
there was susceptibility to fraud. We also considered performance targets and their propensity to
influence management to manage earnings and revenue by overriding internal controls. We
performed specific procedures to respond to the fraud risk of inappropriate revenue recognition. Our
procedures also included testing a risk-based sample of journal entries that may have been posted
with the intention of overriding internal controls to manipulate earnings. These procedures were
designed to provide reasonable assurance that the financial statements were free from fraud or error.
• Based on this understanding, we designed specific appropriate audit procedures to identify instances
of non-compliance with laws and regulations. This included making enquiries of management and
those charged with governance and obtaining additional corroborative evidence as required.
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council's website at https://www.frc.org.uk/auditorsresponsibilities.This description
forms part of our auditor's report.
DocuSign Envelope ID: F4724C3B-5F34-48F8-93F1-A155A50F4F31
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.
Phillip Callow
For and on behalf of Moore Stephens Audit & Assurance (Jersey) Limited
1 Waverley Place
Union Street
St Helier
Jersey
Channel Islands
JE4 8SG
24 June 2024
DocuSign Envelope ID: F4724C3B-5F34-48F8-93F1-A155A50F4F31
Ukrproduct Group
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
Note
Year ended
31 December
2023
£ ‘000
Year ended
31 December
2022
£ ‘000
Revenue
Cost of sales
GROSS PROFIT
Administrative expenses
Selling and distribution expenses
Other operating expenses
PROFIT FROM OPERATIONS
Net finance expenses
Net foreign exchange loss
PROFIT/(LOSS) BEFORE TAXATION
Income tax
PROFIT/(LOSS) FOR THE YEAR
Attributable to:
Owners of the Parent
Non-controlling interests
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
OTHER COMPREHENSIVE INCOME, NET OF TAX
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
Attributable to:
Owners of the Parent
Non-controlling interests
8
9
9
9
9
11
10
13
26
26
36 992
(30 140)
6 852
(1 569)
(2 507)
(1 074)
1 702
(781)
(435)
486
(96)
390
390
-
0.98
0.98
(449)
(449)
(59)
(59)
-
39 111
(32 555)
6 556
(1 342)
(2 719)
(1 571)
924
(466)
(1 113)
(655)
(149)
(804)
(804)
-
(2.03)
(2.03)
(550)
(550)
(1 354)
(1 354)
-
The notes on pages 30 – 85 are an integral part of these consolidated financial statements.
26
Ukrproduct Group
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
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
Note
As at
31 December
2023
£ ‘000
As at
31 December
2022
£ ‘000
14
15
17
18
19
20
21
7 158
501
7 659
2 783
5 400
471
38
436
9 128
16 787
7 916
681
8 597
4 296
3 073
591
35
403
8 398
16 995
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital
22
Treasury shares
23
Share premium
23
Translation reserve
23
Revaluation reserve
Retained earnings
TOTAL EQUITY
4 282
(315)
4 562
(15 986)
5 797
6 194
4 534
4 282
(315)
4 562
(15 537)
6 005
5 597
4 594
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
16
24
25
392
392
5 777
609
5 212
64
199
11 861
12 253
16 787
530
530
6 116
493
5 162
48
52
11 871
12 401
16 995
These consolidated financial statements were approved and authorised for issue by the Board of Directors
on 24 June 2024 and were signed on its behalf by:
Oleksandr Slipchuk
Chief Executive Officer
The notes on pages 30 – 85 are an integral part of these consolidated financial statements.
27
Ukrproduct Group
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
Attributable to owners of the parent
Share
capital
Treasury
shares
Share
premium
Revaluation
reserve
Retained
earnings
Translation
reserve
Total
£ ‘000
£ ‘000
£ ‘000
£ ‘000
£ ‘000
£ ‘000
£ ‘000
As At 31
December 2021
Loss for the year
Currency translation
differences
Total
comprehensive
income
Depreciation on
revaluation of
property, plant and
equipment
As At 31
December 2022
Profit for the year
Currency translation
differences
Total
comprehensive
income
Depreciation on
revaluation of
property, plant and
equipment
As At 31
December 2023
4 282
(315)
4 562
6 348
6 057
(14 987)
5 947
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(804)
-
-
(550)
(804)
(550)
(804)
(550)
(1 354)
(343)
343
-
-
4 282
(315)
4 562
6 005
5 596
(15 537)
4 593
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
390
-
-
390
(449)
(449)
390
(449)
(59)
(208)
208
-
-
4 282
(315)
4 562
5 797
6 194
(15 986)
4 534
Non-
con-
trollin
g
interes
ts
£ ‘000
-
-
-
-
-
-
-
-
-
-
-
Total
Equity
£ ‘000
5 947
(804)
(550)
(1 354)
-
4 593
390
(449)
(59)
-
4 534
The notes on pages 30 – 85 are an integral part of these consolidated financial statements.
28
Ukrproduct Group
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
Cash flows from operating activities
Profit/(Loss) before taxation
Adjustments for:
Exchange differences
Depreciation and amortization
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
Net increase in cash and cash equivalents including 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
Note
10
9
9
9
11
11
24
24
21
Year ended
31 December
2023
£ ‘000
Year ended
31 December
2022
£ ‘000
486
435
697
58
627
(6)
787
3 084
945
(2 245)
(366)
(1 666)
1 418
6
(106)
1 318
(582)
(6)
(588)
(312)
(4)
(316)
414
(381)
33
403
436
(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)
91
312
403
The notes on pages 30 – 85 are an integral part of these consolidated financial statements.
29
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
The Group’s overall management and production facilities are based in Ukraine, with the Head Quarters
in Kyiv. The Group commands leading positions in the Ukrainian processed cheese and packaged butter
markets and owns a range of widely recognisable trademarks in Ukraine, including “Nash Molochnik”
(translated as Our Dairyman), “Narodniy Product” (People’s Product) “Molendam” and “Vershkova
Dolina” (Creamy Valley). The average number of employees of the Group during the year ended
31 December 2023 was 813 (2022: 836).
(b) Share capital
Significant shareholders of the Company as at 31 December are as follows:
Ukrproduct Group
Oleksandr Slipchuk
Sergey Evlanchik
Year ended
31 December
2023
Year ended
31 December
2022
34.89%
34.96%
34.89%
34.96%
As at 31 December 2023, 7.34% (2022: 7.34%) of the Company’s issued share capital was held in
treasury.
(c) Ukrainian environment
Despite the ongoing war, Ukraine’s economy grew by 5.3% in 2023 compared to 2022, when the figure
fell by 28.8% year-over-year according to the State Statistics Service of Ukraine. In 2023 nominal GDP
amounted to UAH 6.54 trillion, with a deflator change of 18.5%. After peaking at 26.6% at the end of
2022, consumer price inflation in Ukraine slowed to 5.1% in 2023. This is mainly attributed to better
harvests, lower global energy prices and the NBU monetary policy actions in 2023.
High adaptability of businesses and households to operating in wartime played an important role. Ukraine
suffered further losses and destruction as full-scale war dragged on throughout 2023. Specifically, attacks
on energy infrastructure continued and electricity shortages persisted at the beginning of 2023. However,
the energy sector situation stabilized in the second half of February 2023, thanks primarily to quick
repairs and reinforced air defense capabilities. Coupled with the high resilience of businesses and
households and a loose fiscal policy, this led to a significant slowing, to 10.3%, of the fall in GDP in Q1
2023, compared to the 30.6% plunge in Q4 2022, and put GDP back on a growth track later in 2023: Q2
2023 - by 19.2% y/y, Q3 2023 – by 9.6% y/y, and Q4 2023 – by 4.7% y/y. In the summer of 2023, the
Russian military destroyed the Kakhovka HPP, flooding large swaths of land and causing water supply
disruptions in the areas south of the HPP site. Air raids halted business activity, causing a noticeable
adverse impact throughout 2023.
30
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
1.
(c)
GROUP AND PRINCIPAL ACTIVITIES (continued)
Ukrainian environment (continued)
According to the Ministry of Agrarian Policy and Food, over the 2023 year, the number of cows in
Ukraine decreased by 4.6% to 1.29 million head. The biggest reduction occurred in small producers,
whereas medium and large specialized agricultural companies accounted for only a 1.3% reduction. At
the same time, total milk production decreased by only 3.3% to about 7,412 thousand tons.
In 2023, the average price of raw milk in Ukraine increased by 14% in local currency. In the second half
of 2023, prices for raw milk increased significantly - both in hryvnia terms and in terms of euros. In
December 2023, prices exceeded the level of 15 UAH/kg, while in July 2023 they averaged 11.6
UAH/kg, up by 30%. As a result, the difference between the level of prices in Ukraine and the EU
countries in 2023 was constantly decreasing. In April-May 2023 the price of raw milk in Ukraine was
70% of the average for the EU and, in particular, since October 2023 it was about 90%, of the price in
Poland.
Fresh dairy products rose by about 7-10%, cheeses by 7%, and butter increased in price by almost 40%
in 2023 compared to the previous year.
Unlike in 2022, demand for dairy products in the domestic market has increased in Ukraine, as the
number of consumers has increased. According to the International Organization for Migration, as of
September 2023, about 1 million citizens returned to Ukraine from abroad.
According to State Statistics Service of Ukraine, in 2023 Ukraine exported 108 thousand tons of dairy
products worth $253 million. In 2023, export volumes decreased by 4%, and cash revenue fell by 38%
compared to 2022. Among the factors that influenced the reduction of Ukraine's exports of dairy products
were the lack of milk-raw materials in the domestic market, the intensification of consumer demand, the
gradual equalization of prices for milk-raw materials of Ukrainian and European production, as well as
logistical problems. The main export categories in monetary terms during 2023 were the following goods:
milk and cream, condensed - 25%; cheeses - 21%; butter - 17%; casein and caseinates - 13%; milk and
cream, not condensed - 10%.
Imports increased by 15% in 2023 with increases in nearly all categories of dairy products. Dairy products
were imported from the EU, the UK, Switzerland and Norway. A significant turning point occurred in
October 2023 when the import of butter surpassed its export, resulting in the most negative balance for
this trade item in November.
The negative balance of export-import amounted to $77.2 million, whereas in the previous year, 2022,
the balance was positive and amounted to $28.2 million.
31
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1. Basis of preparation
The consolidated financial statements have been prepared on an 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 the International
Accounting Standards Board (IASB), as adopted by the United Kingdom (collectively “IFRS”).
The preparation of consolidated 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 this report the war is ongoing and the significant general uncertainties
inherent to the continued war, which began on 24 February 2022, remain. 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 more than 50 employees joined Ukrainian military
forces and territorial defense. Personnel of production facilities and central office remained in their
working area or worked remotely. While personnel-related challenges have been manageable so far, the
anticipated escalation of conscription efforts in Ukraine heightens operational risks for the Group.
- 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 was reduced significantly. Alternative 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.
- Due to the constant Russian shelling targeting vital Ukrainian energy infrastructure, the Group has
mitigated the possible disruptions to its operations, by equipping its key assets with diesel generators.
The Group repaid a short-term loan of UAH 63.8 million (GBP 1.3 million) and signed a new facility
with a Ukrainian bank for working capital needs in the amount UAH 70.0 million (GBP 1.4 million) in
January 2024.
For the year ended 31 December 2023, the Group continued to be in breach of several provisions of the
loan agreement with the EBRD. The Group failed to repay Tranche A (aggregate EUR 2.1 million
principal, equivalent to £1.8 million) before the maturity date of 1 December 2022 and has missed interest
payments since 1 March 2022. In June 2023 the EBRD notified the Group about a recalculation and an
increased interest rate in respect of the aggregate EUR 5.7 million (equivalent to £4.9 million) principal
and interest of Tranche A and Tranche B from 1 September 2021.
32
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
2.1. Basis of preparation (continued)
(b) Going concern (continued)
The Group has been negotiating with the EBRD since June 2021 to potentially restructure the loan
repayment and negotiations are ongoing. At present, the EBRD has taken no action to accelerate
repayment of the loan. The Group reverted to the payment of interest for the long-term credit from the
EBRD starting from December 2023.
Management acknowledges that future 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 to the Group and thus
believes that the application of the going concern assumption for the preparation of these consolidated
financial statements is appropriate.
(c) Consolidation Principles
The consolidated financial statements comprise the financial statements of Ukrproduct Group Limited
and its subsidiaries as at 31 December 2023.
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:
-
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.
Power over the investee (i.e., existing rights that give it the current ability to direct the relevant
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.
33
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
2.1. Basis of preparation (continued)
(c) Consolidation Principles (continued)
All intra-group balances, income and 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 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:
- De-recognises the assets (including goodwill) and liabilities of the subsidiary;
- De-recognises the carrying amount of any non-controlling interests;
- De-recognises 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 liabilities
incurred to the 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.
34
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
2.1. Basis of preparation (continued)
(c) Consolidation Principles (continued)
The consolidated financial statements of the Group include the following companies:
Group’s company
Country of
incorporation
Effective
ownership ratio
Principal activities
Molochnik LLC*
Starokonstantinovskiy Molochniy Zavod
SC****
Krasilovsky Molochny Zavod Private
Enterprise SC****
Molochaia Dolina LLC****
Zhiviy Kvas LLC**
Alternative Investments MCVIF**
Ukrproduct Group LLC
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
As at 31 December
2023
2022
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
LinkStar Limited
Cyprus
100%
100%
Solaero Global Alternative Fund Limited
Dairy Trading Corporation Limited
Ukrproduct Group LTD
Cyprus
BVI
Jersey
100%
100%
100%
100%
Holder of some assets
Production
Owner of land assets
Owner of land assets
Production
Asset management
Holder of some assets and
operating companies
Holder of Group's trademarks
and assets
Holder of Group's trademarks
and assets
Export operations
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.
(d) Accounting for acquisitions of companies under common control
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 included in these
consolidated financial statements until the cash consideration is paid.
No goodwill is recognised where the Group acquires additional interests in the acquired companies from
the ultimate controlling shareholders. The difference between the share of net assets acquired and the
cost of investment is recognised directly in equity.
35
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
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 majority of
the Group companies operate.
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
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 or valuation where items are re-measured. 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 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 consolidated 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 December 2023
Average exchange
rate for 2023
31 December 2022
Average exchange
rate for 2022
UAH/GBP
UAH/USD
UAH/EUR
45,4757
36,5750
39,5619
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.
48,4883
37,9824
42,2079
44,0048
36,5686
38,9510
39,8699
32,3684
33,9954
36
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
2.2. Significant accounting policies (continued)
2.2.2. Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits held on call with banks and other short-term
highly liquid investments with original maturities of three months or less. Bank overdrafts are included
in current liabilities in the consolidated statement of financial position.
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.
The Group identifies the following types of inventories:
- raw and other materials (including main and auxiliary operating supply and materials);
- work in progress (including semi-finished products);
- finished goods;
- other inventories (including fuel, packaging, building materials, spare parts, other materials, goods of
little value and high wear goods).
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.
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 Income (e.g. through depreciation,
impairment or sale).
37
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
2.2. Significant accounting policies (continued)
2.2.4. Property, plant and equipment (continued)
(a) Recognition and measurement of property, plant and equipment (continued)
Subsequent costs that increase 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.
(b)
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.
(c) Depreciation of property, plant and equipment
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
38
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
2.2. Significant accounting policies (continued)
2.2.4. Property, plant and equipment (continued)
(c) Depreciation of property, plant and equipment (continued)
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.
2.2.5. Assets under construction
Assets under construction are reported at their 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 2.2.20. 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.
2.2.6. 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.
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
Costs of computer software licenses are 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.
39
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
2.2. Significant accounting policies (continued)
2.2.6. Intangible assets (continued)
(b)
Amortisation and useful life (continued)
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 in the
consolidated statement of comprehensive income.
(c) Business combinations and goodwill
The consideration transferred for 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.
When the Group acquires a business, it assesses the financial assets and liabilities 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.
The amount of impairment is determined by assessing the recoverable amount, which may 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.
40
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
2.2. Significant accounting policies (continued)
2.2.6. Financial assets (continued)
Three measurement categories into which the Group classifies its debt financial assets are as follows:
1) 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 is included 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.
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 FVOCI. Movements in the carrying amount are taken through
other comprehensive income, except for the recognition of impairment gains or losses, 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 net within other operating income / (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 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 similar financial instruments
predominated as at reporting date. If the price model is used entering figures are based on average market
data predominated as at reporting date.
41
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
2.2. Significant accounting policies (continued)
2.2.6. Financial assets (continued)
(c)
Subsequent measurement
After initial recognition, the Group measure a financial asset at:
(a) amortised cost;
(b) fair value through other comprehensive 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.
(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) Credit risk has not increased significantly since initial recognition – recognise 12 months ECL, and
recognise interest on a gross basis;
(b) Credit risk has increased significantly since initial recognition – recognise 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.
In accordance with the requirements of IFRS 9, the Company reflects the estimated provision for
expected credit losses on all borrowings and other debt financial assets that are not measured at fair value
through profit or loss.
(d) The expected credit losses are recognised in two stages. For credit exposures for which there has not
been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that
result from default events that are possible within the next 12-months (a 12-month ECL).
For those credit exposures for which there has been a significant increase in credit risk since initial
recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure,
irrespective of the timing of the default (a lifetime ECL).
(e) For trade receivables, the Group applies a simplified approach in calculating ECLs. Therefore, the
Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime
ECLs at each reporting date. The Group has established a provision matrix that is based on its historical
credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic
environment.
It is the Group’s policy to measure ECLs on such instruments on a 12-month basis. However, when there
has been a significant increase in credit risk since origination, the allowance will be based on the lifetime
ECL.
42
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
2.2. Significant accounting policies (continued)
2.2.6. Financial assets (continued)
(d)
Impairment of financial assets (continued)
(f) The Group considers a financial asset in default when contractual payments are 365 days past due.
However, in certain cases, the Group may also consider a financial asset to be in default when internal
or external information indicates that the Group is unlikely to receive the outstanding contractual amounts
in full before taking into account any credit enhancements held by the Group. A financial asset is written
off when there is no reasonable expectation of recovering the contractual cash flows.
(e) De-recognition
Financial assets are de-recognised 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 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 cost using the
effective interest rate 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.
(b) Subsequent measurement
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 at fair value less transaction costs, are subsequently
measured at amortized cost; any difference between the amount of received resources and the sum of
repayment is 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.
2.2.9 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.
43
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
2.2. Significant accounting policies (continued)
2.2.10 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.
2.2.11 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 reliably measured. Revenue is measured simultaneously with an increase in asset
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.
Revenue is the amount of cash or cash equivalents received or receivable. However, 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.
The Group recognises revenue from main operating activities in accordance with the requirements of
IFRS 15 "Revenue from Contracts with Customers". Revenue from contracts with customers is
recognised when control of the goods or services are transferred to the customer at an amount that reflects
the consideration to which the Group expects to be entitled in exchange for those goods or services.
Transfer of control means customers ability to manage asset utilization and receive virtually all other
benefits from it. The control includes the ability to prohibit other entities from managing the use of an
asset and benefiting from it.
For the fulfillment of each performance obligation, the Group determines at the time of the conclusion
of the contract whether it will fulfill the obligation over time, or whether it will satisfy this obligation to
perform at a certain point in time. The Group sells dairy foods and beverages (kvass), so the performance
obligation is satisfied at a certain point in time rather than over time.
The following recognition criteria must be met before revenue is recognised:
(a) Revenue from sale of goods (products):
- 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.
44
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
2.2. Significant accounting policies (continued)
2.2.11. Revenue recognition (continued)
(b) Revenue from sale of services:
- 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.
Revenue from sale of products is recognised at the point in time when control of the asset is transferred
to the customer, generally on delivery of the products at the customer’s location or at the time of shipment
of products to the customer’s transport.
The time of payment for products is specified in each agreement separately. As a rule, this is a period of
up to 3 months.
There is no a significant financing component for these contracts considering the length of time between
the customers’ payment and the transfer of products.
The Group doesn't receive non-cash consideration for products.
The Group has a loyalty programme, which allows customers to accumulate bonuses. Revenue is reduced
by the amount of accrued bonuses.
There are no contractual assets as the Group has no rights to compensation that is contingent on factors
other than the shipment of products and transfer of control. No contractual obligations arise either.
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.
2.2.13. Financial expenses
Interest expenses and other costs on borrowings to finance construction or 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.
45
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
2.2. Significant accounting policies (continued)
2.2.14. Value added tax
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 consolidated financial statements in accordance with 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.
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.
Assessment of deferred tax 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 companies and joint activities, except in cases where the Group controls the
timing of the reversal of temporary differences, and where there is a significant probability that the
temporary difference will not be reduced in the foreseeable future.
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 assets. Any such reduction is restored to the extent
to which there is the likelihood that sufficient taxable profit is accrued.
Deferred tax assets and liabilities are not discounted.
46
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
2.2. Significant accounting policies (continued)
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 to the Ukrainian 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 are included in staff costs. The Group does not operate any other pension schemes.
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 costs include the costs of
preparing the prospectus, accounting, tax and legal expenses, underwriting fees and valuation fees in
respect of the shares and of other assets.
2.2.19. Leases
Group as a lessee
The Group as a lessee leases various 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.
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.
47
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
2.2. Significant accounting policies (continued)
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 of
estimated impairment of the cash-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. Losses from impairment are recognised as expenses directly in the consolidated
statement of comprehensive income.
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.
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.
48
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
2.2. Significant accounting policies (continued)
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, through one or more intermediaries, 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);
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; and
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 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.
49
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
2.2. Significant accounting policies (continued)
2.2.23. Fair value measurement (continued)
All assets and liabilities for which fair value is measured or disclosed in the consolidated 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.
2.2.24. Dividends
Equity dividends are recognised in 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.
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, expenses, assets and
liabilities, and the 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 consolidated financial
statements:
(a) Estimates of fair value of property, plant and equipment based on revaluation
The Group is required, periodically as 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.
(b) Useful lives of intangible assets and 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 reviewed for continued 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.
50
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
(continued)
(d) Legal proceedings
In accordance with IFRS the Group only 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 the relevant
Ukrainian 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.
51
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
(continued)
(f) Quality claims (continued)
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 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 2022 within the required deadline, and at
present the Group is preparing all necessary documentation controlled transactions for the year ended
31 December 2022 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 property, plant and
equipment and intangible assets with finite useful lives at each reporting date. If any events or changes
in circumstances indicate that the carrying amount 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
The fair value of financial assets and liabilities is determined by applying various valuation
methodologies. Management uses 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.
52
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
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,
2023. New and revised standards and interpretations, adopted by the Group for the first time as at
January 01, 2023 are provided below.
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.
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 their "significant" accounting policies with a requirement to disclose their "material" accounting
policies and adding guidance on how entities should apply the concept of materiality in making decisions
about accounting policy disclosures.
Amendments to IAS 12 "Income Taxes" - "Deferred Tax Related to Assets and Liabilities Arising from a
Single Transaction"
These amendments clarify that the exemption from initial recognition specified in the Art. 15 and 24 of
the standard is not applied to transactions in which equal amounts of deductible and taxable temporary
differences arise on initial recognition (e.g., leases, decommissioning obligations).
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.
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.
Amendments are effective for 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.
53
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
4. ADOPTION OF NEW AND REVISED IFRS (continued)
Amendments to IAS 1 "Presentation of Financial Statements" - "Non-current liabilities with 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.
Amendments are effective for reporting periods beginning on or after January 01, 2024. Amendments
are adopted retrospectively; early adoption is permitted. The amendments may affect the classification
of the liabilities in the Group's statement of financial position.
Amendments to IFRS 16 "Leases" - "Lease liability in a sale and leaseback transactions"
In June 2020, the IFRS 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 amendments will not significantly affect the Group's 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, foreign exchange risk and commodity price risk. The main
purpose of the Group's risk management programme is to evaluate, monitor and manage these risks and
to minimize 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.
54
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
5. FINANCIAL RISK MANAGEMENT (continued)
(a) Principal financial instruments (continued)
The principal financial instruments are as follows:
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
Year ended
31 December
2023
£ ‘000
Year ended
31 December
2022
£ ‘000
4 722
436
38
5 196
2 625
403
35
3 063
Year ended
31 December
2023
£ ‘000
609
5 777
3 545
846
10 777
Year ended
31 December
2022
£ ‘000
493
6 116
4 036
383
11 028
(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’s 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.
The Board provides broad 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.
The Board has overall responsibility for the determination of the Group’s risk management objectives
and policies and, whilst retaining ultimate responsibility for them, 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
Group is mainly exposed to credit risk from credit sales to customers in Ukraine.
55
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
5. FINANCIAL RISK MANAGEMENT (continued)
(c) Credit risk (continued)
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 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.
According to the Group’s risk assessment policy, implemented 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.
The Group uses the following indicators to determine that there is no reasonable expectation of recovery:
- the counterparty is declared bankrupt or liquidated
- the Group received the decision of the court authorities and, as a result of its execution, it was discovered
that the counterparty could not fulfill its obligations
- the period during which, according to the law, the Group can go to court to oblige the counterparty to
fulfill its obligations has expired.
The Group doesn’t have any trade and other receivables that has been already written off, but still subject
to enforcement activity.
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.
56
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
5. FINANCIAL RISK MANAGEMENT (continued)
(c) Credit risk (continued)
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:
- 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 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.
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
JSC OTP Bank
PJSC Raiffeisen Bank Aval
CreditWest
Other
Year ended
31 December
2023
Rating
uaAAA
uaAAA
uaAAA
Year ended
31 December
2022
Rating
uaAAA
uaAAA
uaAAA
Year ended
31 December
2023
£ ‘000
7
33
237
159
436
Year ended
31 December
2022
£ ‘000
7
28
278
90
403
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.
57
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
5. FINANCIAL RISK MANAGEMENT (continued)
(c) Credit risk (continued)
The Group’s exposure to credit risk, where the carrying value of financial assets is unsecured, is as shown
below:
Year ended
31 December
2023
£ ‘000
Carrying Value
436
4 358
364
38
5 196
Year ended
31 December 2023
£ ‘000
Maximum exposure
(unsecured)
436
4 358
364
38
5 196
Year ended
31 December
2022
£ ‘000
Carrying Value
403
2 273
352
35
3 063
Year ended
31 December 2022
£ ‘000
Maximum exposure
(unsecured)
403
2 273
352
35
3 063
Cash and cash equivalents
Trade receivables
Other receivables
Other financial assets
(d)
Liquidity risk
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.
Detailed information is contained in Note 24.
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 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.
(e) 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:
58
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
5. FINANCIAL RISK MANAGEMENT (continued)
(e) Market risk (continued)
(i) Interest-rate risk
The Group’s interest-rate risk arises from short-term and long-term loans. 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 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 57 770 (decrease 2022:
-1% - decrease by GBP 61 160).
(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 devaluation of national currencies, which affects the prices
of raw materials (vegetable fats), packaging materials, energy and fuel. The Group makes every effort to
minimize this risk by using various alternative raw materials and other components, both foreign and
domestic. An increase in export sales is another step taken to deal with exchange risks. All export sales
are made in a stable currencies.
Purchase of raw milk, main semi-processed products and other components of the cost price are produced
in Ukraine and are represented in UAH. All Group’s outstanding balances of the trade accounts payable
are in UAH. Currency analysis is provided in Note 29.
The Group has a long-term loan from EBRD, denominated in EUR and therefore the weakening of the
UAH can have a significant impact on financial results of the Group in future periods. The sensitivity
analysis shows that UAH depreciation against EUR by 10% would cause an exchange rate loss of GBP
154 thousand (2022 by 3%: GBP 195 thousand).
(iii) Commodity price risk
The Group 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 by comparing alternative offers from different suppliers.
- 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.
59
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
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, equity and partner sharing opportunities in order to balance the
highest returns to shareholders overall with the most advantageous timing of investment flows;
- to provide an adequate return to shareholders by delivering the products in demand by the customers at
prices commensurate with the level of risk and expectations of shareholders.
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 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.
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 2023, the D/E ratio consists of approximately 2.606 improved compared to
31 December 2022 by 2.612 bp. In 2023 the management implemented long-term strategy to decrease
D/E ratio down to 0.6 (60%).
Total debt
Less: Cash and cash equivalents
Net debt
Total equity
D/E ratio
Year ended
31 December
2023
£ ‘000
12 253
(436)
11 817
Year ended
31 December
2022
£ ‘000
12 401
(403)
11 998
4 534
260.6%
4 594
261.2%
60
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
7. SEGMENT INFORMATION
At 31 December 2023, the Group was organised internally into five main business segments:
1) Branded products – processed cheese, hard cheese, packaged butter and spreads
2) Beverages – kvass, other beverages
3) Non-branded products – skimmed milk powder, other skimmed milk products
4) Distribution services and other –resale of third-party goods and processing services
5) Supplementary products – grain crops
The segment results for the year ended 31 December 2023 as reported to the Board are as follows:
Branded
products
Beverages
Non-
branded
products
Distribution
services and
other
Supplementary
products
Un-
allocated
Total
£ ‘000
£ ‘000
£ ‘000
£ ‘000
£ ‘000
Sales
Gross profit
Administrative expenses
Selling and distribution
expenses
Other operating expenses
Profit from operations
Finance expenses, net
Loss from exchange
differences
Profit before taxation
Taxation
Profit for the year
Segment assets
Unallocated corporate
assets
Consolidated total assets
Segment liabilities
Unallocated corporate
liabilities
Unallocated deferred tax
Consolidated total
liabilities
Depreciation and
amortization
£ ‘000
32 592
5 866
(1 082)
(1 730)
-
3 054
-
-
3 054
-
3 054
12 925
-
12 925
3 601
-
-
3 601
372
1 826
897
(69)
(111)
-
717
-
-
717
-
717
448
-
448
-
-
-
-
1 318
(193)
(42)
(67)
-
(302)
-
-
(302)
-
(302)
1 116
-
1 116
-
-
-
-
14
311
1 256
282
(41)
(66)
-
175
-
-
175
-
175
-
-
-
307
-
-
307
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The unallocated corporate liabilities represent bank loans, overdrafts and accruals.
£ ‘000
36 992
6 852
(1 569)
-
-
(335)
(533)
(2 507)
(1 074)
(1 942)
(781)
(1 074)
1 702
(781)
(435)
(435)
(3 158)
(96)
(3 254)
-
2 298
2 298
-
7 820
525
486
(96)
390
14 489
2 298
16 787
3 908
7 820
525
8 345
12 253
-
697
61
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
7. SEGMENT INFORMATION (continued)
The segment results for the year ended 31 December 2022 as reported to the Board are as follows:
Branded
products
Beverages
Non-
branded
products
Distribution
services and
other
Supplementary
products
Un-
allocated
Total
£ ‘000
£ ‘000
£ ‘000
£ ‘000
£ ‘000
£ ‘000
31 571
5 788
(862)
1 095
444
(38)
2 727
(262)
(94)
(2 145)
(76)
(190)
-
-
-
2 781
330
(546)
-
-
-
-
-
-
2 781
330
(546)
-
-
-
2 781
13 085
330
454
(546)
1 130
-
-
-
13 085
3 645
-
-
3 645
454
1 130
-
-
-
-
-
-
-
-
3 144
584
(108)
(219)
-
257
-
-
257
-
257
-
-
-
311
-
-
311
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
amortization
574
2
-
-
-
(240)
£ ‘000
39 111
6 556
(1 342)
-
-
2
-
(89)
(2 719)
(1 571)
(1 900)
(466)
(1 571)
924
(466)
-
(1 113)
(1 113)
2
-
2
-
(3 479)
(149)
(3 628)
-
(655)
(149)
(804)
14 669
-
2 326
2 326
-
-
2 326
-
16 995
3 956
-
7 915
7 915
-
530
530
-
8 445
12 401
471
18
393
-
-
-
882
62
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
7. SEGMENT INFORMATION (continued)
Secondary reporting format - geographical segments:
Sales by country (consignees)
Ukraine
Republic of Iraq
Azerbaijan
Republic of Moldova
Lebanon
Netherlands
Singapore
Tajikistan
Georgia
Saudi Arabia
France
Israel
Armenia
Jordan
Palestine
Uzbekistan
Poland
Other countries
Total
Year ended
31 December 2023
£ ‘000
28 864
4 924
1 397
724
193
189
88
86
81
48
48
23
14
-
-
-
-
313
36 992
Sales by country (consignees)
Ukraine
Republic of Iraq
Azerbaijan
Republic of Moldova
Lebanon
Netherlands
Singapore
Tajikistan
Georgia
Saudi Arabia
France
Israel
Armenia
Jordan
Palestine
Uzbekistan
Poland
Other countries
Total
Year ended
31 December 2022
£ ‘000
29 935
4 280
1 754
1 006
219
500
309
-
37
-
-
-
-
75
20
32
736
208
39 111
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.
Non-current assets by country
Ukraine
Cyprus
BVI
Total
Net book value at
31 December 2023
£ ‘000
7 387
270
2
7 659
Non-current asset by country
Ukraine
Cyprus
BVI
Total
Net book value at
31 December 2022
£ ‘000
8 244
350
3
8 597
The amounts of additions to non-current assets amounting to GBP 579 thousand for 2023 (2022: GBP
765 thousand) mainly refers to Ukraine.
63
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
8. REVENUE
For the years ended 31 December 2023 and 31 December 2022 sales revenue was presented as follows:
Branded (including bonuses)
Beverages (including bonuses)
Non-branded products
Distribution services
Supplementary products
Gross revenue
Charges of bonuses
Total revenue (excluding bonuses)
Year ended
31 December 2023
£ ‘000
33 768
2 165
1 318
1 256
-
38 507
(1 515)
36 992
Year ended
31 December 2022
£ ‘000
32 595
1 267
2 727
3 144
574
40 307
(1 196)
39 111
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.
64
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
9. EXPENSES BY NATURE
For the years ended 31 December 2023 and 31 December 2022, items of expenses were presented as
follows:
Cost of sales
Including:
Raw materials and consumables used, cost of goods sold, 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 (Note 18)
Penalties
Loss on disposal of non-current assets
Amortization and depreciation
Wages and salaries, social security costs (Note 12)
Write-off of input VAT
Provision for the VAT losses related to the impairment of inventory
Other
Year ended
31 December
2023
£ ‘000
(30 140)
Year ended
31 December
2022
£ ‘000
(32 555)
(27 302)
(2 372)
(466)
(1 569)
(666)
(316)
(95)
(50)
(34)
(88)
(88)
(70)
(37)
(14)
(111)
(2 507)
(1 225)
(389)
(212)
(69)
(207)
(118)
(33)
(-)
(254)
(1 074)
(627)
(58)
(5)
(-)
(25)
(1)
(195)
(134)
(29)
(29 582)
(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)
(121)
(1 065)
(97)
(310)
(31)
(-)
(-)
(-)
53
65
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
10. NET FOREIGN EXCHANGE LOSS
For the years ended 31 December 2023 and 31 December 2022, net foreign exchange gain (loss), consists
of:
Exchange difference in trade and other receivables
Exchange difference in trade and other payables
Exchange difference in short and long credits
Effect of exchange rate changes and restatements on cash and cash
equivalents
Total net foreign exchange loss
11. NET FINANCE EXPENSES
Year ended
31 December
2023
£ ‘000
6
(58)
(417)
34
(435)
Year ended
31 December
2022
£ ‘000
180
(59)
(1 172)
(62)
(1 113)
For the years ended 31 December 2023 and 31 December 2022, financial (expenses) / income were
presented as follows:
Finance expense
Interest expense on bank loans
Finance income
Interest income
Net finance expense recognised in the consolidated statement of
comprehensive income
Interest expense by bank
EBRD
Creditwest Bank
Vostok Bank
Total interest expense by bank
12. EMPLOYEE BENEFIT EXPENSES
Year ended
31 December
2023
£ ‘000
Year ended
31 December
2022
£ ‘000
(787)
6
(781)
Year ended
31 December
2023
£ ‘000
(507)
(280)
-
(787)
(472)
6
(466)
Year ended
31 December
2022
£ ‘000
(168)
(293)
(11)
(472)
For the years ended 31 December 2023 and 31 December 2022, employee benefit expenses were
presented as follows:
Wages and salaries (including key management personnel)
Social security costs
Total
Year ended
31 December
2023
£ ‘000
(2 776)
(475)
(3 251)
Year ended
31 December
2022
£ ‘000
(2 615)
(508)
(3 123)
Average number of employees
813
836
66
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
12. EMPLOYEE BENEFIT EXPENSES (continued)
Wages and salaries of operating personnel
Wages and salaries of administrative personnel
Wages and salaries of distribution personnel
Wages and salaries of personnel related to other operating expenses
Total
Wages and salaries of key management personnel:
Year ended
31 December
2023
£ ‘000
(2 372)
(666)
(212)
(1)
(3 251)
Year ended
31 December
2022
£ ‘000
(2 434)
(430)
(259)
(3 123)
For the year ended 31 December 2023, remuneration of the Group's key management personnel
amounted to GBP 365.3 thousand (2022: GBP 117.5 thousand).
Key management personnel received only short term benefits during the years ended 31 December 2023
and 31 December 2022. The key management personnel are those persons remunerated by the Group
who are members of the Board of Directors of the Company (Ukrproduct Group Limited).
13. INCOME TAX EXPENSES
For the years ended 31 December 2023 and 31 December 2022, 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
31 December
2023
£ ‘000
174
17
(95)
96
Year ended
31 December
2022
£ ‘000
410
-
(261)
149
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% (2022: 18%).
67
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
13. INCOME TAX EXPENSES (continued)
The numerical reconciliation between tax charge and the product of accounting profit multiplied by the
applicable tax rate(s) is provided in the following table.
Profit before tax:
Ukraine
Cyprus
Other (BVI, Jersey)
Profit before tax, total
Tax calculated at domestic tax rates applicable to profits in the relevant
countries
Ukraine (2023: 18%, 2022: 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
Year ended
31 December
2023
£ ‘000
Year ended
31 December
2022
£ ‘000
1 129
(116)
(527)
(486)
203
-
203
(124)
17
(107)
79
17
(96)
18%
10%
Nil
28%
481
(12)
(1 124)
(655)
87
-
87
62
-
62
149
-
(149)
18%
10%
Nil
26%
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.
68
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
13. INCOME TAX EXPENSES (continued)
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 31 December 2023, the Group tested property, plant and equipment and capital investments for
impairment signs, as a result of which management recognized that the recoverable amount of property,
plant and equipment and capital investments exceeds their carrying amount. Accordingly, for the year
ended 31 December 2023, 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 2024 budget value and takes into consideration
trends of value indexes for 2020-2024.
69
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
14. PROPERTY, PLANT AND EQUIPMENT (continued)
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 on investment of Group
investors. Specific segment risks are included 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 brands 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 discounted future cash flows from each CGU is not expected to
be below its acquisition cost and, therefore, no impairment considerations have been included in the
valuation.
70
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
14. PROPERTY, PLANT AND EQUIPMENT (continued)
As at 31 December 2023 and 31 December 2022, property, plant and equipment were presented as
follows:
n
r
e
o
d
i
t
n
c
u
u
r
s
t
t
s
e
n
s
o
s
A
C
£ ‘000
42
382
(380)
-
(13)
31
-
-
-
-
-
-
31
554
(528)
-
(11)
46
-
-
-
-
-
-
46
31
42
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
Cost or valuation
At 1 January 2023
Additions
Transfers to/from AUC
Disposals
Exchange differences on translation to
the presentation currency
At 31 December 2023
Accumulated depreciation
At 1 January 2023
Depreciation charge
Disposals
Revaluation depreciation
Exchange differences on translation to
the presentation currency
At 31 December 2023
Net book value at 31 December 2023
Net book value at 31 December 2022
Net book value at 31 December 2021
d
n
a
d
n
a
L
s
g
n
d
i
l
i
u
B
d
n
a
t
n
a
l
P
i
y
r
e
n
h
c
a
M
s
e
l
c
i
h
e
V
,
s
t
n
e
m
u
r
t
s
n
I
d
n
a
s
l
o
o
t
r
e
h
t
o
t
n
e
m
p
u
q
e
i
l
a
t
o
T
£ ‘000
£ ‘000
£ ‘000
£ ‘000
£ ‘000
3 974
-
39
(69)
(590)
3 354
233
73
(7)
87
(48)
338
3 354
-
137
(2)
(319)
3 170
338
66
(1)
74
(40)
437
2 733
3 016
3 741
5 305
-
250
(410)
(535)
4 610
473
172
(60)
142
(99)
628
4 610
-
236
(5)
(444)
4 397
628
195
(3)
83
(87)
816
3 581
3 982
4 832
499
-
7
-
(96)
410
142
61
-
73
(68)
208
410
-
7
(1)
(43)
373
208
36
(1)
26
(42)
227
146
202
357
1 118
-
84
(104)
(17)
1 081
295
199
(5)
41
(134)
396
1 081
-
148
(37)
(114)
1 078
396
266
(5)
25
(256)
426
652
685
823
10 938
382
-
(583)
(1 251)
9 486
1 143
505
(72)
343
(349)
1 570
9 486
554
-
(45)
(931)
9 064
1 570
563
(10)
208
(425)
1 906
7 158
7 916
9 795
71
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
14. PROPERTY, PLANT AND EQUIPMENT (continued)
As at 31 December 2023 the Group has no contractual commitments to purchase property, plant and
equipment.
Fixed assets with a net book value of GBP 2.330 thousand at 31 December 2023 (2022: GBP 2.446
thousand) were pledged as collateral for loans.
As at 31 December 2023 any prepayments for property, plant and equipment were included within Assets
under construction in the amount of GBP 2 thousand (2022: GBP 7 thousand).
As at 31 December 2023 fully depreciated assets have been included within property, plant and
equipment with the original cost of GBP 626 thousand (2022: GBP 516 thousand).
The net book value of property, plant, and equipment recognized at historical cost plus accumulated
depreciation would be as follows:
r
e
d
n
u
s
t
e
s
s
A
n
o
i
t
c
u
r
t
s
n
o
C
£ ‘000
46
Net book value at 31 December 2023
Net book value at 31 December 2022
31
s
g
n
d
i
l
i
u
B
d
n
a
d
n
a
L
£ ‘000
520
728
d
n
a
t
n
a
l
P
i
y
r
e
n
h
c
a
M
£ ‘000
681
961
s
e
l
c
i
h
e
V
£ ‘000
28
49
s
l
o
o
t
t
n
e
m
p
u
q
e
i
,
s
t
n
e
m
u
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t
s
n
I
r
e
h
t
o
d
n
a
£ ‘000
87
141
l
a
t
o
T
£ ‘000
1 362
1 910
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.
72
Rights to use
natural
resources
£ ‘000
Trademarks
Total
£ ‘000
£ ‘000
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
15. INTANGIBLE ASSETS
As at the reporting dates intangible assets were presented as follows:
Cost or valuation
At 1 January 2022
Additions
Disposals
Exchange differences on translation to the
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
Cost or valuation
At 1 January 2023
Additions
Disposals
Exchange differences on translation to the
presentation currency
At 31 December 2023
Accumulated amortization
At 1 January 2023
Amortization charge for the year
Disposals
Exchange differences on translation to the
presentation currency
At 31 December 2023
Net book value at 31 December 2023
Net book value at 31 December 2022
Net book value at 31 December 2021
Computer
software
£ ‘000
469
383
(21)
(449)
382
30
27
(21)
(6)
30
382
28
-
(63)
347
30
70
-
(8)
92
255
352
439
53
-
-
(9)
44
-
2
-
-
2
44
-
-
(4)
40
2
2
-
-
4
36
42
53
842
-
-
98
940
525
62
-
66
653
940
-
-
(54)
886
653
62
-
(39)
676
210
287
317
The total 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;
1 364
383
(21)
(360)
1 366
555
91
(21)
60
685
1 366
28
-
(121)
1 273
685
134
-
(47)
772
501
681
809
73
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
15. INTANGIBLE ASSETS (continued)
The Group performed its annual impairment test in December 2023 and 2022. The Group considers the
relationship between its market capitalisation and its book value, among other factors, when reviewing
for indicators of impairment. As at 31 December 2023, 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 1 780 thousand as at 31 December
2023, 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 for products and services. The discount rate applied to cash
flow projections is 20% (2022: 20.1%). 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 1 570 thousand
as at 31 December 2023, 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% (2022: 20.1%). 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.
16. DEFERRED TAX ASSETS AND LIABILITIES
For the year ended 31 December 2023 and 31 December 2022, deferred tax assets and liabilities were
presented as follows:
As at 31
December 2023
£ ‘000
As at 31
December 2022
£ ‘000
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
530
(47)
(48)
-
392
(43)
-
796
(183)
(76)
(7)
-
530
74
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
17. INVENTORIES
As at the reporting dates inventories were presented as follows:
Raw materials
Finished goods
Semi-finished products
Other inventories
Provision for impairment of inventories
Total
Movement in the provision for inventories are as follows:
Balance at the beginning of the period
Accruals of provision for slow moving items
(Reversal) /Accrual of provision for impairment to net realized value
Effect of translation to presentation currency
Balance at the end of the period
18. TRADE AND OTHER RECEIVABLES
Trade receivables
Other receivables
Prepayments
Allowance for impairment losses
Total
As at
31 December
2023
£ ‘000
983
1 404
392
753
(749)
2 783
As at
31 December
2023
£ ‘000
99
702
(75)
23
749
As at
31 December
2023
£ ‘000
5 689
364
678
(1 331)
5 400
As at
31 December
2022
£ ‘000
1 257
1 887
385
866
(99)
4 296
As at
31 December
2022
£ ‘000
23
44
77
(45)
99
As at
31 December
2022
£ ‘000
3 900
352
448
(1 627)
3 073
The Group’s management believes that the carrying value of trade and other receivables is a reasonable
approximation of their fair value.
Maturity of trade receivables as at 31 December 2023 and 31 December 2022 is presented as follows:
Total
£ ‘000
4 358
2 273
Non-
overdue
debt
£ ‘000
2 970
1 315
Past due debt
<30
days
£ ‘000
153
310
30-60
Days
£ ‘000
7
76
61-90
days
£ ‘000
70
15
91-120
days
£ ‘000
61
9
>120
Days
£ ‘000
1 097
548
2023
2022
75
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
18.TRADE AND OTHER RECEIVABLES (continued)
Provisions were recognised for impaired trade and other receivables and expected credit losses on
receivables which are not considered to be impaired. The movements in allowance for impairment losses
are as follows:
Balance at the beginning of the year
Accrual
Use of allowances
Effect of translation to presentation currency
Balance at the end of the year
19. CURRENT TAXES
VAT receivable
Current income tax prepayments
Other prepaid taxes
Total
20. OTHER FINANCIAL ASSETS
Loans and receivables
Loans issued to third parties
Total
As at
31 December
2023
£ ‘000
1 627
58
-
(354)
1 331
As at
31 December
2023
£ ‘000
291
18
162
471
As at
31 December
2023
£ ‘000
38
38
As at
31 December
2022
£ ‘000
268
1 065
-
294
1 627
As at
31 December
2022
£ ‘000
521
40
30
591
As at
31 December
2022
£ ‘000
35
35
Loans issued are short term in nature, repayable on demand and are interest free.
21. CASH AND CASH EQUIVALENTS (EXCLUDING BANK OVERDRAFTS)
As at the reporting dates cash and cash equivalents were presented as follows:
Cash on hand - on UAH
Cash in bank - on UAH
Cash in Bank - in other currencies
Total
As at
31 December
2023
£ ‘000
29
287
120
436
As at
31 December
2022
£ ‘000
36
232
135
403
76
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
22. SHARE CAPITAL
As at the reporting dates share capital was presented as follows:
Authorised
As at
As at
As at
As at
31 December 2023 31 December 2023 31 December 2022 31 December 2022
Number '000
60 000
£ ‘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 2023 31 December 2023 31 December 2022 31 December 2022
Number '000
39 673
-
39 673
£ ‘000
3 967
-
3 967
Number '000
39 673
-
39 673
£ ‘000
3 967
-
3 967
Ordinary shares of 10p each
At beginning of the year
Own shares acquired during
the year
At end of the year (excluding
shares held as treasury
shares)
Treasury shares
As at
As at
As at
As at
31 December 2023 31 December 2023 31 December 2022 31 December 2022
Number '000
3 145
3 145
£ ‘000
315
315
Number '000
3 145
3 145
£ ‘000
315
315
At beginning of the year
At end of the year
Share capital and treasury shares are presented as separate lines in the consolidated statement of financial
position as at 31 December 2023.
As at 31 December 2023 and 31 December 2022 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.
77
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
23. OTHER RESERVES
At the reporting date other reserves were presented as follows:
At 1 January 2022
Depreciation on revaluation of property,
plant and equipment
Exchange differences on translation to the
presentation currency
At 31 December 2022
Depreciation on revaluation of property,
plant and equipment
Exchange differences on translation to the
presentation currency
At 31 December 2023
Share premium
£ '000
4 562
-
-
4 562
-
-
4 562
Translation
reserve
£ '000
(14 987)
Revaluation
reserve
£ '000
6 348
Total other
reserves
£ '000
(4 077)
-
(550)
(15 537)
-
(449)
(15 986)
(343)
-
6 005
(208)
-
5 797
(343)
(550)
(4 970)
(208)
(449)
(5 627)
Reserve
Description and purpose
Share premium
Revaluation
Translation
Amount subscribed for share capital in excess of nominal value.
Gains arising on the revaluation of the Group’s property, plant and equipment. The balance on
this reserve is wholly undistributable.
Amount of all foreign exchange differences arising from the translation of the financial
information of Group entities to presentation currency.
78
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
24. BANK LOANS
As at 31 December 2023 the Group has two loans: the loan from Creditwest Bank in the amount of
GBP 1.314 thousand (in UAH 63.684 million) and the loan from the EBRD in the amount of
GBP 4.463 thousand (in EUR 5.127 thousand).
For the year ended 31 December 2023, the Group continued to be in breach of several provisions of the
loan agreement with the EBRD. The Group failed to repay Tranche A (aggregate EUR 2.1 million
principal, equivalent to £1.8 million) before the maturity date of 1 December 2022 and has missed interest
payments since 1 March 2022. In June 2023 the EBRD notified the Group about a recalculation and an
increased interest rate in respect of the aggregate EUR 5.7 million (equivalent to £4.9 million) principal
and interest of Tranche A and Tranche B from 1 September 2021.
The Group has been negotiating with the EBRD since June 2021 to potentially restructure the loan
repayment and negotiations are ongoing. At present, the EBRD has taken no action to accelerate
repayment of the loan. The Group reverted to the repayment of interest for long-term credit line from the
EBRD starting from December 2023.
Fixed assets with a net book value of GBP 2.330 thousand at 31 December 2023 (2022: GBP 2.446
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.
Bank
Currency
Type
Opening
date
Termination
date
Interest
rate
Limit
£ ‘000
As At 31
December
2023
£ ‘000
As at 31
December
2022
£ ‘000
EBRD
EUR
Loan
31.03.2011
01.12.2024
1% –
10.975%
7 225
4 463
4 665
Creditwest
Bank
Total
UAH
Credit line 05.02.2018
05.02.2024
20%
1 341
1 314
5 777
1 451
6 116
The average interest rate as at 31 December 2023 was 13.6% (2022: 7.7%).
Future interest payments
In less than 1 year
In more than 1 year
Total
Year ended
31 December
2023
£ ‘000
1 250
-
1 250
Year ended
31 December
2022
£ ‘000
1 218
415
1 633
79
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
24. BANK LOANS (continued)
Maturity of financial liabilities
Overdue
In less than 1 year
In more than 1 year
Total
Interest rate profile of financial liabilities
Year ended
31 December
2023
£ ‘000
Year ended
31 December
2022
£ ‘000
1 627
4 150
-
5 777
1 627
4 489
-
6 116
Overdue
Expiry within 1 year
Expiry in more than 1 year
Total
Floating rate
Fixed rate
As at
As at
31 December 2023 31 December 2022
£ '000
1 627
2 836
-
4 463
£ '000
-
1 314
-
1 314
£ ‘000
1 627
4 150
-
5 777
£ ‘000
1 627
4 489
-
6 116
The currency profile of the Group's financial liabilities is as follows:
UAH
EUR
Total
Floating rate
liabilities
Fixed rate
liabilities
Total as at 31
December 2023
Total as at 31
December 2022
£ '000
-
4 463
4 463
£ '000
1 314
-
1 314
£ '000
1 314
4 463
5 777
£ '000
1 451
4 665
6 116
The book value and fair value of financial liabilities are as follows:
Bank loans
Total
Book value as at
31 December
2023
£ '000
5 777
5 777
Fair value as at
31 December
2023
£ '000
5 777
5 777
Book value as at
31 December
2022
£ '000
6 116
6 116
Fair value as at
31 December
2022
£ '000
6 116
6 116
80
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
24. BANK LOANS (continued)
Reconciliation of liabilities arising from financing activities
As at 31
December
2022
Financing
cash
flows
Accrual
of
interest
£ '000
6 116
383
6 499
£ '000
£ '000
(4)
(312)
(316)
-
787
787
Foreign
exchange
move-
ment
£ '000
417
56
473
Other
changes
£ '000
(173)
-
(173)
Effect from
translation to
presentation
currency
£ '000
(579)
(79)
(658)
As at 31
December
2023
£ '000
5 777
835
6 612
Bearing loans and
borrowings
Interest
Interest-bearing
loans and borrowings
25. TRADE AND OTHER PAYABLES
At the reporting date trade and other payables were presented as follows:
Trade payables
Prepayments received
Accruals
Interests payable
Provisions
Other payables
Total
As at
31 December
2023
£ ‘000
3 414
132
105
846
584
131
5 212
As at
31 December
2022
£ ‘000
3 956
119
199
383
425
80
5 162
The Group’s management believes that the carrying value of trade and other payables is a reasonable
approximation of their fair value.
For the year ended 31 December 2023, provisions were presented as follows:
Provision for unused vacation
Provision for VAT
Provision for fines
Provision for audit services
Provision for other expenses and
payments
Total
Allowance
at the
beginning
of the
year
117
97
59
90
62
425
Accrual
Use of
allowances
(Reversal)
212
278
78
81
84
733
(167)
(94)
(57)
(87)
(115)
(520)
Effect of
translation
to
presentation
currency
(14)
(20)
(7)
(8)
(5)
(54)
Allowance
at the end
of the year
148
261
73
76
26
584
81
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
26. EARNINGS PER SHARE
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.
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
27. DIVIDENDS
Year ended
31 December
2023
£ ‘000
390
39 673
0.98
39 673
0.98
Year ended
31 December
2022
£ ‘000
(804)
39 673
(2.03)
39 673
(2.03)
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 2023.
28. SHARE-BASED PAYMENTS
The Company operates an equity-settled share based remuneration scheme for employees. During 2023,
the Group did not issue options to any third parties. They were not exercised. There are no outstanding
options issued by the Group.
29. CURRENCY ANALYSIS
Currency analysis for the year ended 31 December 2023 is set out below:
Assets
Trade and other receivables
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
UAH
4 667
471
38
339
5 515
1 314
3 401
64
199
4 978
USD
GBP
EUR
53
-
-
33
86
-
19
-
-
19
2
-
-
64
66
-
99
-
-
99
-
-
-
-
-
5 072
26
-
-
5 098
Total
4 722
471
38
436
5 667
6 386
3 545
64
199
10 194
82
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
29. CURRENCY ANALYSIS (continued)
Currency analysis for the year ended 31 December 2022 is set out below:
Assets
Trade and other receivables
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
UAH
2 566
574
35
273
3 448
1 451
3 928
48
52
5 479
USD
GBP
EUR
57
-
-
125
182
-
12
-
-
12
2
-
-
-
2
-
87
-
-
87
-
17
-
5
22
5 158
9
-
-
5 167
Total
2 625
591
35
403
3 654
6 609
4 036
48
52
10 745
The table below details the Group’s sensitivity to a 10% strengthening of Hryvnia rate against the US
dollar and 10% strengthening of Hryvnia rate against the Euro as at 31 December 2023 and 2022, and
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.
USD
EUR
USD
EUR
Increase/
decrease in rate
Effect on income before tax in
2023
Effect on income before tax in
2022
10%
10%
(10)%
(10)%
£ ‘000
7
(510)
(7)
510
£ ‘000
5
(926)
(5)
926
83
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
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 2023. There were no guarantees
given to or provided by the Group to related parties and vice versa.
The ultimate controlling owners and beneficiaries of the related parties were Mr. Oleksandr Slipchuk and
Mr. Sergey Evlanchik.
31. COMMITMENTS AND CONTINGENCIES
(a) Economic environment
The Group carries out most of its operations in Ukraine. Laws and other regulatory acts 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 2023 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 covenants related primarily to its borrowings. As at 31 December 2023 the Group
had been in breach of certain covenants regarding the loan repayments settlement with the EBRD. The
Group failed to repay Tranche A (aggregate EUR 2.1 million principal, equivalent to £1.8 million) before
the maturity date of 1 December 2022 and has missed interest payments since 1 March 2022. In June
2023 the EBRD notified the Group about a recalculation and an increased interest rate in respect of the
aggregate EUR 5.7 million (equivalent to £4.9 million) principal and interest of Tranche A and
Tranche B from 1 September 2021. 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.
84
Ukrproduct Group
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in thousand GBP, unless otherwise stated)
31.COMMITMENTS AND CONTINGENCIES (continued)
(d) Litigations and claims
The Group’s operations and financial position will continue to be affected by Ukrainian political
developments including the application of existing and future 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
The amount of non-cancellable lease commitments is insignificant.
As at 31 December 2023 the Group does not possess any finance lease and hire purchase commitments,
capital commitments and guarantees.
31. SUBSEQUENT EVENTS
At the time of publication of the annual report the war, which began on 24 February 2022, is ongoing.
The Group continues to operate. The management of the Group controls all its operations.
The Group repaid the short-term loan of UAH 63.8 million (GBP 1.3 million) and signed a new facility
with a Ukrainian bank for working capital needs in the amount of UAH 70.0 million (GBP 1.4 million)
in January 2024.
As at 31 December 2023 the Group had been in breach of loan covenants with EBRD. Ukrproduct has
been in negotiations with the EBRD to potentially restructure the loan repayment schedule since June
2021. The negotiations with EBRD are ongoing.
In February 2024 Linkstar Limited, subsidiary of the Company, started the procedure of strike-off.
As of 19 June 2024 Jack Rowell has retired from the Board following a 19 year tenure as Chairman.
After Jack Rowell retired from the Board Sergey Evlanchik agreed to become Interim Chairman on a
temporary basis, in addition to his role as Executive Director of Ukrproduct
85