Interim Results

Ukrproduct Group Ltd
25 September 2007

25 September 2007



            Ukrproduct Group Ltd ("Ukrproduct Group" or the "Group")

        Unaudited interim results for the six months ended 30 June 2007


Ukrproduct Group is a leading Ukraine-based producer and distributor of branded
dairy foods.

Consolidated results (figures for the six months ended 30 June 2006 in
brackets):

  • Net revenues increased by 26% to £21.9m (£17.4m)
  • Gross profit increased by 36% to £4.8m (£3.5m)
  • Profit before tax up 150% to £1.6m (£0.6m)
  • Profit after tax up 136% to £1.4m (£0.6m)
  • Basic earnings per share up to 3.3p (1.4p)
  • Interim dividend of 0.60p (0.1p)



Iryna Yevets, CEO of Ukrproduct Group, commented:

"Trading overall has been ahead of budget with the core product segments showing
strong progress. During this period, the Group made substantial progress in many
areas of the business, including the implementation of a programme for the
improvement of milk quality and accreditation of the Starkon Plant to HASSP
(Health Approved Safety Standards Protection) and ISO 22000 standards.

In processed cheese, the trends reported in the Spring and at the AGM in June
have continued. The low-quality, low-cost domestic manufacturers have, in our
opinion, expended their financial and marketing resources beyond their means and
consumers have been returning to their normal pattern of quality preferences.
The Group's ISO-certified Molochnik plant therefore proved its worth by
delivering a steady output of the Group's higher grade products. As a result,
the processed cheese market achieved a certain equilibrium whereby overall
volume stabilised and market shares of the leading suppliers remained intact. In
addition, with the advent of Autumn we are experiencing the usual seasonal
upturn in trading performance, which is anticipated to continue until the end of
the year.

In packaged butter, although market share and volumes have stayed at roughly
last year's levels, gross margins on this product have improved by approximately
1.5 percentage points in comparison to the first half of last year. This
improvement has resulted in additional profit generation for the Group. For the
remainder of the year, we expect butter to continue as a stable profitable
category with the possibility of increased sales during the pre-Christmas buying
period.

Skimmed milk powder ("SMP") has continued to enjoy strong performance since the
beginning of the year. The Group managed to take full advantage of a combination
of expanded manufacturing capacity and very encouraging export prices. In the
first half, we produced nearly 4,000 tonnes of SMP, which compared to 2,000
tonnes in the first half of 2006. The subsequent increase in profit generated
from this product has been more than commensurate with the increase in sales
with gross profit almost quadrupling. In the second half, this positive trend is
continuing. In addition, the quality of SMP produced by the Group was audited by
Nestle Ukraine and further confirmed by the UN World Food Programme ("WFP") as
being in full compliance with WFP requirements. It is the quality of product
that allows the Group to obtain a premium to the typical prices of SMP supplied
from Ukraine. We are expecting this good performance to continue until at least
the end of the year.

Hard cheese, the new product in our range, is in its second month of production.
Due to the maturation requirements (up to two months), only limited quantities
of this product have been manufactured and sold. We are moving in line with our
strategy of trial testing limited quantities via various non-retail channels
before we look to move the product to the shelves of supermarkets. So far,
customer feedback regarding the quality and taste of this product has been
encouraging. We are looking forward to following through a strategy of gradual
introduction towards the end of the year.

At the operating level, the Group remains cash generative, and the capital
expenditure programme continues to plan. In the first half the Group increased
the bank borrowing modestly in order to fund the completion of the hard cheese
plant and to finalise the seasonal forward storage - both of which are now
accomplished. Subsequently, the levels of bank debt are being reduced, and the
finance costs are decreasing.

We are pleased with the overall trading and performance of the Group. In the
light of the encouraging financial results, the Board has approved an interim
dividend of 0.60 pence per share (0.1p in the first half of 2006) to the
shareholders on record as at 5 October 2007 payable on 26 October 2007. The
Board looks forward to presenting a further set of good figures at the end of
the financial year."


For further information:

Ukrproduct Group
Iryna Yevets, CEO,                                              [phone]
Dmitry Dragun, CFO                                              [phone]

WH Ireland Limited                                              [phone]
David Youngman




CONSOLIDATED BALANCE SHEET
As at 30 June 2007 and 30 June 2006


                                                       30/06/2007       30/06/2006
                                                       Unaudited        Unaudited
                                                         £ '000           £ '000
Assets
Non-current assets
   Property, plant and equipment (PPE)                        11,635            9,055
   Intangible assets                                           1,200            1,502
   Financial assets                                              264               92
   Deferred tax assets                                           104               28

Total non-current assets                                      13,203           10,677

Current assets
   Inventories                                                 2,997            2,649
   Trade and other receivables                                 4,159            3,662
   Other financial assets                                        626              132
   Cash and cash equivalents                                     679              370

Total current assets                                           8,461            6,813
Total  assets                                                 21,664           17,490

Equity attributable to equity holders of the parent
   Share capital                                               4,121            4,121
   Other reserves                                              3,992            5,311
   Retained earnings                                           5,255            3,415
                                                              13,368           12,847

Minority interest                                                207              172
Total  equity                                                 13,575           13,019

Liabilities
Non-current Liabilities
   Long-term loans                                                 -              143
   Deferred tax liability                                        791              730

Total non-current liabilities                                    791              873

Current liabilities
   Bank loans                                                  3,260            1,098
   Trade and other payables                                    2,812            2,351
   Current portion of long term liabilities                    1,051              106
   Current tax liabilities                                       175               43

Total current liabilities                                      7,298            3,598

Total equity and liabilities                                  21,664           17,490




CONSOLIDATED INCOME STATEMENT
For the six months ended 30 June 2007 and 30 June 2006


                                                       30/06/2007       30/06/2006
                                                        Unaudited        Unaudited
                                                         £ '000           £ '000

Revenue                                                       21,924            17,395

Cost of sales                                               (17,153)          (13,891)

Gross profit                                                   4,771             3,504

Administrative expenses                                      (1,341)           (1,342)
Selling and distribution costs                               (1,323)           (1,275)
Other operating expenses                                       (291)             (188)

Profit from operations                                         1,816               699

Gain / (loss) from exchange rate differences                     (2)                25
Finance costs                                                  (203)              (79)

Profit before tax                                              1,611               645

Tax expense                                                    (222)              (57)

Profit for the period                                          1,389               588

Attributable to:
Equity holders of the parent                                   1,377               590
Minority interest                                                 12               (2)
                                                               1,389               588
Earnings per share (Note 3)
- Basic (pence)                                                  3.3               1.4
- Diluted (pence)                                                3.2               1.4




CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 30 June 2006 and 30 June 2005


                                                                 1/01/2007 to     1/01/2006 to 
                                                                     30/06/07         30/06/06
                                                                    Unaudited        Unaudited
                                                                      £ '000           £ '000

Operating activities
Profit before tax                                                           1,611              645
Adjustments for:
   Foreign exchange losses                                                      2             (25)
   Depreciation and amortisation                                              669              663
   Loss on disposal of non-current assets                                      30                -
   Interest expense                                                           203               79

Operating profit before changes in working                                  2,515            1,362

capital and provisions

   (Increase)/decrease in trade and other receivables                     (1,026)              742
   (Increase)/decrease in inventories                                       (442)            1,660
   Increase/(decrease) in trade and other payables                          1,016              188

Cash generated from operations                                              2,063            3,952

Interest paid                                                               (203)             (79)
Income tax paid                                                             (102)            (185)

Net cash flows from operating activities                                    1,758            3,688

Investing activities
Purchases of PPE and investments                                          (1,446)          (1,760)

Net cash used in investing activities                                     (1,446)          (1,760)

Financing activities
Issue of bonds and loans received                                             578               46
Dividends paid                                                              (210)            (206)
Net proceeds from short term borrowings                                       177          (1,809)
Loans repaid or issued                                                      (320)                -

Net cash generated by/(used in) financing activities                          225          (1,969)

Increase/(decrease) in cash and cash equivalents                              537             (41)

Cash and cash equivalents at the beginning of the period                      159              453

Effect of exchange rate changes and restatements on cash and                 (17)             (42)
cash equivalents

Cash and cash equivalents at the end of the period                            679              370






NOTES



1. Accounting Policy Statement and Basis of Preparation



The accounting policies used in preparation of the above statements are those
used in preparing the annual financial results for the year ended 31 December
2006 and are presented in a form consistent with that which will be adopted in
the next annual accounts (including accounting policies) having regard to
accounting standards applicable to such accounts. The accounting policies are
expected to remain the same for the Company in preparing its annual financial
results for the year ended 31 December 2007.



2. Segmental analysis




                    Sales     Sales     Sales    Sales         Gross         Gross     Gross     Gross
                  H1 2007   H1 2006   H1 2007   H1 2006      Profit     Profit      margin   margin
                      £ 000     £ 000         %        %     H1 2007    H1 2006      H1 2007   H1 2006
                                                                 £ 000       £ 000
Cheese                5,241     6,927       25%      40%          1,255      1,487     23.9%     21.5%
Butter                5,583     5,431       25%      31%          1,453      1,332     26.0%     24.5%
SMP                   9,906     3,280       45%      19%          1,914        452     19.3%     13.8%
Services                266       459        1%       3%             69         99     25.9%     21.5%
Third-Party             928     1,298        4%       7%             80        134      8.6%     10.4%
Total                21,924    17,395      100%     100%          4,771      3,504     21.8%     20.1%







3. Earnings per share



Basic earnings per share have been calculated by dividing the profit after tax
attributable to ordinary shareholders by the weighted average number of shares
in issue during the period.


                                                                            Consolidated        Consolidated
                                                                              Six months          Six months
                                                                                ended 30            ended 30
                                                                               June 2007           June 2006

Profit after tax attributable to ordinary shareholders (£'000)                     1,377                 590

Weighted average number of ordinary shares                                    41,214,953          41,214,953

Basic earnings per share (pence)                                                     3.3                 1.4

Number of ordinary shares granted under warrants and option                    2,214,924           2,214,924
agreements

Diluted average number of ordinary shares                                     43,429,877          43,429,877

Diluted earnings per share (pence)                                                   3.2                 1.4








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