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Walcom Group Limited (WALG)

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Tuesday 24 September, 2013

Walcom Group Limited

Half Yearly Report

RNS Number : 7403O
Walcom Group Limited
24 September 2013
 



24 September 2013

 

Walcom Group Limited

("Walcom" or the "Company")

 

Half-yearly unaudited results for the six months ended 30 June 2013

 

The Board of Walcom Group Limited presents the Company's unaudited results for the six months ended 30 June 2013.

 

Highlights

 

² Loss per share increased by 112 per cent. to 3.18 HK cents

² Revenue and gross profit rose by 8 per cent. to HK$21.5 million and 6 per cent. to HK$13.5 million respectively

² PRC and overseas sales increased by 2 per cent. to HK$14.9 million and 23 per cent. to HK$6.6 million respectively

 

 

Further enquiries:

 

Walcom Group Limited

+852 2494 0133

Francis Chi (Chief Executive Officer)


Albert Wong (Chief Financial Officer)




Sanlam Securities Limited (Nominated adviser & broker)

+44 20 7628 2200

Lindsay Mair/Virginia Bull


 



CHAIRMAN'S STATEMENT

 

Introduction

Despite the slowing down in the Chinese economy, the Company is pleased to report that due to the improvement of sales in Thailand, the Company's revenue grew by 8 per cent. compared with the same period last year. However, due to the increased production costs and operating expenses the Company incurred a loss per share of HK$3.18 cents, an increase of 112 per cent. over the loss of HK$1.50 cents per share in June 2012.

 

Results for the Period

The Company generated revenues during the period of HK$21.5 million (June 2012: HK$20.0 million) and gross profits of HK$13.5 million (June 2012: HK$12.7 million), representing increases of 8 per cent. and 6 per cent. respectively compared with the same period last year. In addition, there was a minor decrease of the gross profit margin for the period from 64 per cent. in the same period last year to 63 per cent. during this financial period, owing to escalating production costs. With the impact of increasing operating expenses and in particular a compensation expense of HK$1 million for terminating the sales distributorship in Hunan Province, China, the Company increased its net loss by 225 per cent. to HK$1.7 million (June 2012: loss of HK$0.5 million) and recorded a loss of HK$0.6 million at the EBITDA level compared to a profit of HK$1.1 million over the same period last year.

 

Review of Activities and Market

In the six months to 30 June 2013, sales in the PRC and overseas improved by 2 per cent. and 23 per cent. to HK$14.9 million (June 2012: HK$14.6 million) and HK$6.6 million (June 2012: HK$5.4 million) respectively. The sales in the PRC during the period were maintained at approximately the same level as last year despite the slower Chinese economy and the weak demand for porkcaused by the outbreak of the lethal H7N9 avian flu during the second quarter of the year. Strong sales in Thailand remained the driving force behind the improvement in overseas sales.

 

In addition to the slower economy under the new Chinese leadership, the Company's sales in China also faced the following hardships during the first half year of 2013:

 

1.   The price of pork dropped significantly between the beginning of the year and June after which it recovered to the breakeven point in the pig farming industry. There was a material reduction in the pig population while the pig farms cut down their farming scale to minimise their loss. This in turn affected the feed consumption and thus the sales of the Walcom products;

 

2.   The outbreak of the lethal H7N9 avian flu during the second quarter had a further hit on the pig farming industry as there was a wide spread rumour that the H7N9 virus was closely connected with pigs. During the second quarter, the Chinese avoided eating birds and some more cautious consumers even skipped pork in their meals.

 

With the recent rise in the farm gate price and in the number of pigs in farms, the management expects an improvement in the sales of feeds which will in turn increase the sales of Walcom products. The management also projects a greater demand for the Company¡¦s products due to the higher seasonal demand in the last quarter of the year.

 

As in the same period last year, sales in Thailand remained the major contributor to the Company's overseas market results. They increased by 24 per cent. to HK$6.4million (June 2012: HK$5.2million) during the period under review. The sales effort implemented in the past few years has started to produce rewards as proved by a larger portfolio of customers achieved.

 

  

 

Outlook

Although the Chinese economy has slowed, the rising production costs and operating expenses will be the most unfavourable factors faced by the Company in the remaining months of the year. However, the management expects the Company's business portfolio will improve by breaking through the sales to new customers and expanding the sales coverage geographically. The Directors are optimistic that the Company will present a satisfactory result for the full year 2013.

 

 

Eddie K M Chan

Chairman

24 September 2013

 



UNAUDITED CONSOLIDATED INCOME STATEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2013


Note


Unaudited
six months
ended
30 June 2013


Unaudited
six months
ended
30 June 2012


 

Audited
year ended

31 December 2012




HK$


HK$


HK$









Revenue

3


21,499,898


19,976,736


47,239,167









Cost of sales



(8,027,980)


(7,276,481)


(17,683,088)









Gross profit



13,471,918


12,700,255


29,556,079









Other income

4


19,590


20,218


379,894









Research and development expenses



(819,412)


(851,173)


( 1,434,131)









Selling and distribution expenses



(5,143,730)


(4,988,588)


(10,905,767)









General and administrative expenses



(8,667,359)


(6,657,385)


(13,870,697)









(Loss) / profit from operations

5


(1,138,993)


223,327


3,725,378









Net finance expenses

6


(34,889)


(49,473)


(108,922)









(Loss) / profit before income tax



(1,173,882)


173,854


3,616,456









Income tax expense

7


(526,482)


(696,587)


(1,915,658)









(Loss) / profit for the period / year



(1,700,364)


(522,733)


1,700,798

















(Loss) / profit attributable to:








Owners of the Company



(2,187,134)


(1,034,047)


850,980

Non-controlling interests



486,770


511,314


849,818









(Loss) / profit for the period / year



(1,700,364)


(522,733)


1,700,798









 

(Loss) / earnings per share - basic, HK cents

 

8


 

(3.18)


 

(1.50)


 

1.24

- diluted, HK cents



(3.18)


(1.50)


1.24









 



UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2013


Note


Unaudited
six months
ended
30 June 2013


Unaudited
six months
ended
30 June 2012


 

Audited
year ended

31 December 2012




HK$


HK$


HK$









(Loss) / profit for the period / year



(1,700,364)


(522,733)


1,700,798









Other comprehensive income








Exchange difference on translation of








financial statements of overseas subsidiaries



434,206


(179,164)


111,796









Total comprehensive (loss) / income








for the period / year



(1,266,158)


(701,897)


1,812,594

















Total comprehensive (loss) / income








attributable to:








Owners of the Company



(1,717,700)


(1,200,678)


915,274

Non-controlling interests



451,542


498,781


897,320









Total comprehensive (loss) / income








for the period / year



(1,266,158)


(701,897)


1,812,594



UNAUDITED CONSOLIDATED BALANCE SHEET

AT 30 JUNE 2013


Note


Unaudited
30 June 2013


Unaudited
30 June 2012


Audited

31 December 2012




HK$


HK$


HK$

ASSETS








 








NON-CURRENT ASSETS








Property, plant and equipment



2,316,211


2,029,851


1,841,668

Patents



2,842,405


3,783,659


3,097,696




5,158,616


5,813,510


4,939,364









CURRENT ASSETS








Inventories



2,703,695


1,907,922


1,418,664

Trade and other receivables

11


7,529,722


6,737,884


9,586,394

Amounts due from an associate

10


-


928,663


-

Cash and cash equivalents

12


10,566,479


12,271,809


14,831,853




20,799,896


21,846,278


25,836,911

 








TOTAL ASSETS



25,958,512


27,659,788


30,776,275

 








 








EQUITY AND LIABILITIES








 








EQUITY








Share capital

13


688,344


688,344


688,344

Reserves



16,864,336


16,210,054


18,463,809

TOTAL EQUITY ATTRIBUTABLE TO

OWNERS OF THE COMPANY



 

17,552,680


 

16,898,398


 

19,152,153

Non-controlling interests



2,147,848


1,567,456


1,696,306

TOTAL EQUITY



19,700,528


18,465,854


20,848,459

 








CURRENT LIABILITIES








Trade and other payables

14


5,743,447


6,138,869


6,457,925

Tax payables



514,537


601,679


1,003,496

Bank borrowings

15


-


2,453,386


2,466,395




6,257,984


9,193,934


9,927,816

 

TOTAL LIABILITIES



 

6,257,984


 

9,193,934


 

9,927,816

 








TOTAL EQUITY AND LIABILITIES



25,958,512


27,659,788


30,776,275









NET CURRENT ASSETS



14,541,912


12,652,344

 

15,909,095









TOTAL ASSETS

LESS CURRENT LIABILITIES



19,700,528


18,465,854


20,848,459

 


UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2013








Share-based








Non-




Share


Share


Merger


compensation


Exchange


Accumulated




controlling


Total


capital


premium


reserve


reserve


reserve


losses


Total


interests


equity


HK$


HK$


HK$


HK$


HK$


HK$


HK$


HK$


HK$



















At 1 January 2012

688,344


95,298,644


23,852,469


2,047,819


2,123,085


(106,220,980)


17,789,381


1,398,458


19,187,839



















Comprehensive loss


















Loss for the period

-


-


-


-


-


(1,034,047)


(1,034,047)


511,314


(522,733)



















Other comprehensive income


















Exchange difference on translation of


















financial statements of overseas subsidiaries

-


-


-


-


(166,631)


-


(166,631)


( 12,533)


179,164



















Total comprehensive loss for the period

-


-


-


-


(166,361)


(1,034,047)


(1,200,678)


498,781


(701,897)



















Dividends to non-controlling interests

 

-


-


-


-


-


-


-


(329,783)


(329,783)

Recognition of equity-settled


















  share-based payments

-


-


-


309,695


-


-


309,695


-


309,695










   









At 30 June 2012

688,344


95,298,644


23,852,469


2,357,514


1,956,454


(107,255,027)


16,898,398


1,567,456


18,465,854





































At 1 January 2013

688,344


95,298,644


23,852,469


2,455,408


2,187,379


(105,330,091)


19,152,153


1,696,306


20,848,459



















Comprehensive loss


















Loss for the period

-


-


-


-


-


(2,187,134)


(2,187,134)


486,770


(1,700,364)



















Other comprehensive income


















Exchange difference on translation of


















financial statements of overseas subsidiaries

-


-


-


-


469,434


-


469,434


(35,228)


434,206



















Total comprehensive loss for the period

-


-


-


-


469,434


(2,187,134)


(1,717,700)


451,542


(1,266,158)



















Recognition of equity-settled


















  share-based payments

-


-


-


118,227


-


-


118,227


-


118,227










   









At 30 June 2013

688,344


95,298,644


23,852,469


2,573,635


2,656,813


(107,517,225)


17,552,680


2,147,848


19,700,528


UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 30 JUNE 2013


Note


Unaudited
six months
ended
30 June 2013


Unaudited
six months
ended
30 June 2012


 

Audited
year ended 

31 December 2012




HK$


HK$


HK$

Cash flow from operating activities








(Loss) / profit before income tax



(1,173,882)


173,854


3,616,456

Amortisation of patents



141,940


167,610


335,728

Bad debts written off



-


-


2,011

Interest received



(52,547)


(35,827)


(66,971)

Depreciation



174,147


333,057


620,951

Foreign exchange loss / (gain), net



295,581


(84,960)


3,021

Interest paid



87,436


85,300


175,893

(Gain) / loss on disposal of property, plant and equipment



 

(12,603)


 

11,740


 

77,451

Written off of amounts due from associate



-


-


580,273

Patents written off



113,351


83,140


655,021

Inventories written off



-


-


18,740

Share-based compensation



118,227


309,695


447,498









Operating profit before








   working capital changes



(308,350)


1,043,609


6,466,072

Increase in inventories



(1,285,031)


(686,770)


(216,252)

Increase / (decrease) in trade and other receivables



2,056,672


1,657,808


(1,439,335)

Decrease in amount due from associate ¡V trade related



-


19,500


-

(Decrease) / increase in trade and other payables



(714,478)


433,061


796,967

 








Net cash (used in) / generated from operations



(251,187)


2,467,208


5,607,452

Corporate income tax paid



(1,015,441)


(997,854)


(1,568,486)

Interest paid



(87,437)


(85,300)


(175,893)

Net cash (used in) / generated from operating activities



 

(1,354,065)


 

1,384,054


 

3,863,073

 








Cash flow from investing activities








Purchase of property, plant and equipment



(676,923)


(234,164)


(363,229)

Payment for patents



-


(75,421)


(129,456)

Proceeds from sales of property, plant and equipment



43,735


-


3,060

Amounts due from associates-non-trade related



-


(195,000)


172,890

Interest received



52,547


35,827


66,971

Net cash used in investing activities



(580,641)


(468,758)


(249,764)









Cash flow from financing activities








Repayment of bank borrowings



(2,466,395)


(2,467,004)   


(2,467,004)

Dividend paid to minority interests



-


(329,783)


(599,472)

Proceeds from new bank borrowings



-


2,453,386


2,466,395

Net cash used in financing activities



(2,466,395)


(343,401)


(600,081)









Net (decrease) / increase in cash and cash equivalents



(4,401,101)


571,895


3,013,228

 








Cash and cash equivalents at the beginning of the period / year



14,831,853


11,736,464


11,736,464

 








Exchange gain / (loss) on cash and cash equivalents



135,727


(36,550)


82,161

 








Cash and cash equivalents at the end of the period / year

12


10,566,479


12,271,809


14,831,853

 



NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2013

 

(1)    BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES

 

The unaudited consolidated financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards and in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting.

 

The unaudited consolidated financial statements have been prepared under the historical cost convention. The same accounting policies, presentation and methods of computation are followed in these unaudited consolidated financial statements as were applied in the preparation of the Group¡¦s financial statements for the year ended 31 December 2012.

 

(2)    SEGMENT REPORTING

 

(a)  Primary reporting format - Geographical Segment

 

The Group's operations are mainly located in Hong Kong, PRC and Thailand. The Group's sales revenue by geographical location of customers are analysed as follows:

 


Unaudited
six months
ended
30 June 2013


Unaudited
six months
ended
30 June 2012


 

Audited
year ended

31 December 2012


HK$


HK$


HK$







PRC

14,852,920


14,589,412


34,707,282

Thailand

6,415,474


5,186,396


11,819,121

The Philippines

-


78,000


-

Others

231,504


122,928


712,764


21,499,898


19,976,736


47,239,167

 

(b)  Secondary reporting format - Business Segment

 

The Group is principally engaged in the manufacture, distribution and sale of chemical feed and additive products. All of the Group's products are of a similar nature and subject to similar risk and returns. Accordingly, the Group's activities are attributable to a single business segment and no business segment analysis is presented.

 

(3)    REVENUE

 

Revenue represents the sales value of goods supplied to the customers less returns, discounts, value added tax and sales taxes.



(4)     OTHER INCOME

 


Unaudited
six months
ended
30 June 2013


Unaudited
six months
ended
30 June 2012


 

Audited
year ended

31 December 2012


HK$


HK$


HK$







Government subsidy

-


-


340,217

Sundry income

19,590



39,677


19,590


20,218


379,894

 

(5)     OPERATING (LOSS) / PROFIT

 

Operating (loss) / profit is stated after charging the following items:-

 


Unaudited
six months
ended
30 June 2013


Unaudited
six months
ended
30 June 2012


 

Audited
year ended

31 December 2012


HK$


HK$


HK$







Amortisation of patents

141,940


167,610


335,728

Auditor's remuneration

155,000


145,000


261,311

Cost of inventories

8,027,980


7,276,481


17,683,088

Depreciation

114,216


139,304


290,334

(Gain) / loss on disposal of property, plant and equipment

 

(12,603)


 

-


 

77,451

Rental charges under operating leases

 in respect of land and buildings

 

424,140


 

309,467


 

739,762

Staff costs

 (including directors' emoluments)






- wages and salaries

6,391,246


5,631,059


10,620,164

- contributions to defined contribution    retirement plans

 

424,084


 

410,690


 

814,571

- share-based compensation

118,227


309,696


447,498

- other staff benefits

1,321,446


1,212,035


2,788,715

 



(6)     NET FINANCE EXPENSE

 


Unaudited
six months
ended

 30 June 2013


Unaudited
six months
ended
30 June 2012


 

Audited
year ended

31 December 2012


HK$


HK$


HK$







Bank interest income

52,547


35,827


66,971

Interest expense on bank loans

(87,436)


(85,300)


(175,893)


(34,889)


(49,473)


(108,922)

 

(7)     INCOME TAX EXPENSE

 

No provision for Hong Kong Profits Tax has been made (June 2012: HK$nil; 2012: HK$nil) as the group companies did not have assessable profit subject to Hong Kong profits tax purposes for the period/year.

 

Taxation on overseas profits has been calculated on the estimated assessable profit for the period/year at the rate of taxation prevailing in the countries in which the group companies operate. The overseas income tax provided for the six months ended 30 June 2013 is HK$526,482 (June 2012: HK$696,587; 2012: HK$1,915,658).

 

(8)     (LOSS) / EARNINGS PER SHARE

 

The calculation of the basic loss per share for the six months ended 30 June 2013, is based on the loss attributable to ordinary equity shareholders of the company of HK$2,187,134 (June 2012: HK$1,034,047; 2012: profit of HK$850,980) during the period and the weighted average number of 68,834,388 ordinary shares (June 2012: 68,834,388; 2012: 68,834,388) in issue during the period/year. No diluted loss per share is to be reported for the period/year.

 

(9)     DIVIDENDS

 

(10)   INVESTMENT IN ASSOCIATE

 


Unaudited 
30 June 2013


Unaudited 
30 June 2012


Audited

31 December 2012


HK$


HK$


HK$







Share of net assets

-


-


-







Amounts due from an associate






-  Trade related balance

-


1,089,244


-

Non-trade related balance

-


2,303,438


-

Provision for impairment losses on trade related balances

 

-


 

(752,000)


 

-

Provision for impairment losses on non-trade related balances

 

-


 

(1,712,019)


 

-


-


928,663


-

 

The amounts due from an associate is denominated in United States dollars. The credit period granted for the trade related balance ranges from 90 days to 180 days. The non-trade related balance is unsecured, interest free and has no fixed terms of repayment.

 

(11)   TRADE AND OTHER RECEIVABLES

 


Unaudited
 30 June 2013


Unaudited
 30 June 2012


Audited
31 December 2012


HK$


HK$


HK$







Trade receivables

6,507,779


6,164,097


8,402,438

Less: provision for impairment loss

(387,346)


(542,885)


(440,942)


6,120,433


5,621,212


7,961,496

Other receivables

544,196


449,950


796,833

Prepayments and deposits

865,093


666,722


828,065


7,529,722


6,737,884


9,586,394

 

(a)  All trade and other receivables are expected to be recovered within one year.

 

(b)  Impairment of trade receivables

 

The movement in the provision of impairment for doubtful debts during the period/year, including both specific and collective loss components, is as follows:

 


Unaudited
 six months ended

30 June 2013


Unaudited
 six months

ended

30 June 2012


 

Audited
 year ended

31 December 2012


HK$


HK$


HK$







At 1 January

440,942


545,899


545,899

Written off

(44,758)


-


(104,848)

Exchange difference

(8,838)


(3,014)


(109)

At 30 June/31 December

387,346


542,885


440,942

 

(b)   Impairment of trade receivables (continued)

 

At 30 June 2013, the Group¡¦s trade receivables of HK$387,346 (June 2012: HK$542,885, 2012: HK$440,942) have been outstanding for a certain period of time. The management assessed that only a portion of the receivables are expected to be recoverable. Consequently, specific allowance for doubtful debts were recognised for the individually impaired receivables. 

 

The Group does not hold any collateral over these balances.



(12)  CASH AND CASH EQUIVALENTS

 


Unaudited
 30 June 2013


Unaudited
 30 June 2012


Audited

31 December 2012


HK$


HK$


HK$







Cash at bank and on hand

10,566,479


12,271,809


14,831,853







Cash and cash equivalents

in the cash flow statement

 

10,566,479


 

12,271,809


 

14,831,853

 

(13)   SHARE CAPITAL

 


Unaudited
 30 June 2013


Unaudited
 30 June 2012


Audited
 31 December 2012


HK$


HK$


HK$

Authorised






      150,000,000 (June 2012: 150,000,000 and Dec 2012: 150,000,000) ordinary shares of HK$0.01 each

 

 

1,500,000


 

 

1,500,000


 

 

1,500,000







Issued and fully paid






68,834,388 (June 2012: 68,834,388 and  Dec 2012: 68,834,388) ordinary shares of HK$0.01 each

 

 

688,344


 

 

688,344


 

 

688,344

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All ordinary shares rank equally with regard to the Company's residual assets.

(14)   TRADE AND OTHER PAYABLES

 


Unaudited
 30 June 2013


Unaudited
 30 June 2012


Audited
31 December 2012


HK$


HK$


HK$







Trade payables

2,624,381


3,016,406


2,914,956

Other payables and accrued expenses

3,119,066


3,122,463


3,542,969


5,743,447


6,138,869


6,457,925

 

All of the trade and other payables are expected to be settled within one year.

 

(15)  BANK BORROWINGS

 



Unaudited
 30 June 2013


Unaudited
 30 June 2012


Audited
 31 December 2012



HK$


HK$


HK$








Current







Bank borrowings, secured

(a)

-


2,453,386


2,466,395








(a)  The bank loan was repaid during the period. 

 

(16)   RELATED PARTY TRANSACTIONS

 


Unaudited
 six months ended

30 June 2013


Unaudited
 six months ended

30 June 2012


 

Audited
 year ended

31 December 2012


HK$


HK$


HK$

Related companies






Legal and professional fees paid

67,620


95,142


109,920

 

(17)     RECONCILIATION OF (LOSS) / PROFIT BEFORE INCOME TAX TO EBITDA

 

 

 

Unaudited
six months
ended

30 June 2013


Unaudited
six months
ended

30 June 2012


 

Audited
year ended

31 December 2012


HK$


HK$


HK$







(Loss) / profit before income tax

(1,173,882)


173,854


3,616,456

Depreciation

174,147


333,057


620,951

Amortisation of patents

141,940


167,610


335,728

Interest income

(52,547)


(35,827)


(66,971)

Interest expenses

87,436


85,300


175,893

Patents written off

113,351


83,140


655,021

(Gain) / loss on disposal of property, plant and equipment

 

(12,603)


 

 11,740


 

77,451

Written off of amounts due from associate

-


-


580,273

Bad debts written off

-


-


2,011

Share-based compensation

118,227


309,696


447,498

EBITDA

(603,931)


1,128,570


6,444,311

 

EBITDA is defined herein as earnings before depreciation, amortization, interest and tax, plus specific charges which are considered non-recurring in nature. Specific charges include impairment loss in value and gain/loss in disposal of non-current assets, and amortization of fair value of share-based compensation. EBITDA is not a recognised term under generally accepted accounting principles and does not purport to be an alternative to net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Because not all companies use identical calculations, this presentation may not be comparable to other similarly titled measures of other companies.

 

(18)   COPIES OF HALF YEARLY REPORT

Copies of the half-yearly report will be available shortly from the Company's website www.walcomgroup.com.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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