WALG.L Regulatory News (WALG)

9 May 2013 WALCOM GROUP LIMITED ("Walcom" or "the Company") CHAIRMAN'S STATEMENT

On behalf of the board of directors (the "Board"), I am pleased to present thefinal results for the year ended 31 December 2012.

Results

Despite the weak world economy and slow growth in the PRC market during 2012,the Company's sales momentum was maintained during the period. With the impactof increasing production costs and operating expenses, the Company finished theyear under review with a slightly reduced profit attributable to the equityshareholders of HK$0.9 million (2011: Profit HK$1.3 million). Turnover andgross profit levels for the year under review increased by 7 per cent. (2012:HK$47.2 million; 2011: HK$44.2 million) and 5 per cent. (2012: HK$29.6 million;2011: HK$28.0 million) respectively compared to the previous year. Net profitfor the year decreased by 15 per cent. to HK$1.7 million (2011: HK$2.0 million)and EBITDA decreased by 11 per cent. to HK$6.4 million from HK$7.3 million forthe same period last year.

A summary of the results for the period is set out below:

Year ended Year ended Change 31 December 31 December 2012 2011 HK$'000 HK$'000 per cent. Turnover 47,239 44,208 7 Gross profit 29,556 28,091 5 Operating profit 3,725 3,946 (6) EBITDA 6,444 7,258 (11) Net finance expense (109) (116) (6) Profit for the year 1,701 1,997 (15) Earnings per share 1.24 1.88 (34) - basic (HK cents) 1.24 1.88 (34) - diluted (HK cents) Net asset value per share (HK cents) 27.82 25.84

8

Operation and market review

Although the Chinese economy slowed down in 2012，the Company maintained itssales momentum in the region. However, the escalating production costs loweredthe gross profit margin to 62.6% in 2012 from 63.5% in 2011, and the increasingoperating expenses lowered the net profit of the Company during the year. TheCompany continued and compounded its strategy of marketing directly topotential customers which was originally adopted in 2010. The PRC salesproduced approximately the same level as last year, although 2012 was adifficult year for the animal feed industry in China. As mentioned in mystatement in last year's annual report, the `Alpha' project, which was designedto promote the energy saving efficacy in feedstuffs of the Company's products,continues to play a major role in new business development and sales. As the political situation in Thailand became more stable during 2012, sales inthe country increased by 40 per cent. Some customers are increasing thefrequency of use of our products in their production which contributes to thehigher demand in the country. The Company's product for improving milkproduction in cows, launched in late 2011, is still undergoing testing but thisis necessary to enhance the Company's products' brand reputation. As a resultof the focused effort made over the past few years, the Company's products havebecome a trusted brand in the Thai market and, accordingly, the Directors areexpecting further improvement in the country due to higher recognition andconfidence in our products.

Sales in the Philippines were disappointing owing to the continuing pooreconomy in the country. The Company ceased the operations of its associatecompany in the Philippines at the end of 2012. However, the Company hasappointed a sales distributor in the Philippines to keep the presence ofCompany's products in the country.

Recent Developments

As it has been in previous years, China continues to be the major market forthe Company's products and it is expected to continue as such in the future.Since 2011, the Company has built up better channels of communication with andgained more trust from potential customers after adopting a new sales strategyaimed at building up a direct and personal relationship with them. The Companyutilized its data and technology to develop new techniques to solve commonproblems encountered in the feed industry, and has helped our customers toimprove their knowledge particularly in areas of feed formulation, productionmanagement and management of sales team.

Patents

At the end of 2012 the Group held 52 granted patents in respect of:

* its core Cysteamine technology in China, Hong Kong, North Korea, New

Zealand, Ukraine, Russia, South Africa, Australia, India, South Korea and

Vietnam; * poultry feed in the UK, North Korea, Taiwan, Hong Kong, Russia, China, Australia and Philippines;

* dairy cow feed in New Zealand, the UK, Hong Kong, Europe, Mexico, India,

China, Russia, Australia and Malaysia; * fish feed in the UK, Hong Kong, Indonesia, Russia, China, Thailand, Philippines, Vietnam and Taiwan; and

* shellfish feed in Europe, Vietnam, Indonesia, Malaysia, Taiwan, Philippines

and China.

Most of the patents the Company applied for in the past years have beengranted. The Directors believe that there is wide patent coverage in placeswhere they expect that there will be significant demand for the Company'sproducts. Some patents which the Directors believe have a reduced chance ofcommercialisation were dropped during the year.

Debt

As at the year end, the Group had a short term bank loan of HK$2.5 million,which was used to finance the Group's general working capital.

Dividend

The Directors do not recommend any dividend payment for the year ended 31December 2012.

Annual General Meeting

The Annual General Meeting will be held at the offices of the Company'ssolicitors, Reeds Smith Richards Butler in Hong Kong at 2:30pm on Tuesday 18June 2013.

Outlook The Company achieved a net profit of HK$1.7 million and EBITDA of HK$6.4million in 2012. Looking to 2013, it will be another challenging year for theCompany. Slower growth in the Chinese economy has been confirmed by the newleadership of the Chinese government. The prolonged effects of the debt crisisin the United States and Europe's currency threat on the European Unionintroduce further volatility in the global economy. Escalating production costsand operating expenses will continue to be the major difficulties affecting theCompany's operation. However, the Directors are optimistic that with theincreasing portfolio of the Company's business partners and customers, theCompany will produce another set of fruitful results in 2013.

On behalf of the Board, I would like to express our sincere thanks to themanagement team and staff, professional advisers and shareholders for theircontinued support during the year.

Eddie K.M. ChanChairman9 May 2013 Further enquiries: Walcom Group Limited +852 2494 0133 Francis Chi (Chief Executive Officer)Albert Wong (Chief Financial Officer) Sanlam Securities UK Limited +44 20 7628 2200Lindsay Mair/Virginia Bull Consolidated income statementFor the year ended 31 December 2012(Expressed in Hong Kong dollars) 2012 2011 HK$ HK$ Revenue 47,239,167 44,207,817 Cost of sales (17,683,088 ) (16,116,325 ) Gross profit 29,556,079 28,091,492 Other income 379,894 124,556 Research and development expenses (1,434,131 ) (

1,580,780 )

Selling and distribution expenses (10,905,767 )

(10,712,894 )

General and administrative expenses (13,870,697 ) (11,976,400 ) Profit from operations 3,725,378 3,945,974 Net finance expense (108,922 ) (116,477 ) Profit before income tax 3,616,456 3,829,497 Income tax expense (1,915,658 ) (1,832,990 ) Profit for the year 1,700,798 1,996,507 Profit / (loss) attributable to: Owners of the Company 850,980 1,291,396 Non-controlling interests 849,818 705,111 Profit for the year 1,700,798 1,996,507 Earnings / (loss) per share - basic, HK cents 1.24 1.88 - diluted, HK cents 1.24 1.88 Consolidated statement of comprehensive incomeFor the year ended 31 December 2012(Expressed in Hong Kong dollars) 2012 2011 HK$ HK$ Profit for the year 1,700,798 1,996,507 Other comprehensive income Exchange difference on translation of financial statements of overseas subsidiaries 111,796

631,579

Total comprehensive income for the year 1,812,594

2,628,086

Total comprehensive income attributable to: Owners of the Company 915,274 1,996,312 Non-controlling interests 897,320 631,774 Total comprehensive income for the year 1,812,594

2,628,086

Consolidated balance sheet as at 31 December 2012(Expressed in Hong Kong dollars) 2012 2011 HK$ HK$ ASSETS NON-CURRENT ASSETS Property, plant and equipment 1,841,668 2,153,287 Patents 3,097,696 4,003,839 Goodwill - - Investment in associate - - 4,939,364 6,157,126 CURRENT ASSETS Inventories 1,418,664 1,221,152 Trade and other receivables 9,422,778 7,985,454 Amounts due from associate - 753,163 Tax recoverable 163,616 410,238 Cash and cash equivalents 14,831,853 11,736,464 25,836,911 22,106,471 TOTAL ASSETS 30,776,275 28,263,597 EQUITY Share capital 688,344 688,344 Reserves 18,463,809 17,101,037 Total equity attributable to OWNERs of the 19,152,153 17,789,381Company Non-controlling interests 1,696,306 1,398,458 TOTAL EQUITY 20,848,459 19,187,839 CURRENT LIABILITIES Trade and other payables 6,457,925 5,705,808 Tax payables 1,003,496 902,946 Bank borrowings 2,466,395 2,467,004 9,927,816 9,075,758 TOTAL LIABILITIES 9,927,816 9,075,758 TOTAL EQUITY AND LIABILITIES 30,776,275 28,263,597 NET CURRENT ASSETS 15,909,095 13,030,713 TOTAL ASSETS LESS CURRENT LIABILITIES 20,848,459

19,187,839

Consolidated statement of changes in equity

For the year ended 31 December 2012

(Expressed in Hong Kong dollars)

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$ (Note 23 (Note 23 (Note 23 (b)(i)) (b)(ii)) (b)(iii)) At 688,344 95,298,644 23,852,469 1,379,181 1,418,169 (107,512,376) 15,124,431 1,042,541 16,166,9721 January2011 Comprehensiveloss Loss for the - - - - - 1,291,396 1,291,396 705,111 1,996,507year Othercomprehensiveincome Exchangedifference ontranslation offinancial - - - - 704,916 - 704,916 (73,337) 631,579statements ofoverseassubsidiaries Total - - - - 704,916 1,291,396 1,996,312 631,774 2,628,086comprehensiveincome for theyear Recognition ofequity-settledshare-based - - - 668,638 - - 668,638 - 668,638payments Dividends to - - - - - - - (275,857) (275,857)non-controllinginterests

At31 December 688,344 95,298,644 23,852,469 2,047,819 2,123,085 (106,220,980) 17,789,381 1,398,458 19,187,8392011

At1 January 688,344 95,298,644 23,852,469 2,047,819 2,123,085 (106,220,980) 17,789,381 1,398,458 19,187,8392012 Comprehensiveincome Profit for the - - - - - 850,980 850,980 849,818 1,700,798year Othercomprehensiveincome Exchangedifference ontranslation offinancial - - - - 64,294 - 64,294 47,502 111,796statements ofoverseassubsidiaries Total - - - - 64,294 850,980 915,274 897,320 1,812,594comprehensiveincome for theyear Recognition ofequity-settledshare-based - - - 447,498 - - 447,498 - 447,498payments Lapse of share (39,909) - 39,909 - - -options Dividends to - - - - - - - (599,472) (599,472)non-controllinginterests At31 December 688,344 95,298,644 23,852,469 2,455,408 2,187,379 (105,330,091) 19,152,153 1,696,306 20,848,4592012 Consolidated statement of cash flowsFor the year ended 31 December 2012(Expressed in Hong Kong dollars) 2012 2011 HK$ HK$ Cash flow from operating activities Profit before income tax 3,616,456 3,829,497 Amortisation of patents 335,728 376,251 Bad debts written off 2,011 Interest received (66,971 ) (47,796 ) Depreciation 620,951 690,874 Foreign exchange loss, net 3,021 419,720 Interest paid 175,893 164,273 Loss on disposal of property, plant and 77,451 9,336equipment Loss on cessation of a subsidiary's assets -

11,540

Provision for impairment losses on amounts due - 752,000from associate Written off of amounts due from associate 580,273 Impairment loss on goodwill - 127,857 Patents written off 655,021 653,581 Inventories written off 18,740 103,029 Share-based compensation 447,498 668,638

Operating profit before working capital changes 6,466,072 7,758,800

(Increase) / decrease in inventories (216,252 )

(451,832 )

Increase in trade and other receivables (1,439,335 )

(1,763,721 )

Decrease in amounts due from associate - trade - 320,684related Increase in trade and other payables 796,967

1,596,760

Net cash generated from operations 5,607,452 7,460,691 Corporate income tax paid (1,568,486 ) (1,696,602 ) Interest paid (175,893 ) (164,273 ) Net cash generated from operating activities 3,863,073

5,599,816

Cash flow from investing activities Payment for patents (129,456 ) (307,310 ) Purchases of property, plant and equipment (363,229 )

(152,099 )

Proceeds from sales of property, plant and 3,060 equipment Decrease / (increase) in amounts due from 172,890 (192,913 )associate - non-trade related Interest received 66,971 47,796 Net cash used in investing activities (249,764 )

(604,526 )

Cash flow from financing activities Dividends paid to minority interests ( 599,472 ) (275,857 ) Repayment of bank borrowings (2,467,004 ) (2,056,208 ) Proceeds from new bank borrowings 2,466,395

2,590,354

Net cash generated from financing activities (600,081 )

258,289

Net increase in cash and cash equivalents 3,013,228

5,253,579

Cash and cash equivalents at the beginning of 11,736,464 6,285,006the year Exchange gain on cash and cash equivalents 82,161

197,879

Cash and cash equivalents at the end of the year 14,831,853 11,736,464

Notes to the consolidated financial statementsFor the year ended 31 December 2012(Expressed in Hong Kong dollars)

1 Publication of non-statutory accounts

The financial information set out in this preliminary announcement does notconstitute statutory accounts.

The financial information for the period ended 31 December 2012 has beenextracted from the Company's financial statements to that date which havereceived an unqualified auditors' report.

2 Basis of preparation

The consolidated financial statements have been prepared in accordance withInternational Financial Reporting Standards ("IFRS"). These consolidatedfinancial statements also comply with the applicable disclosure provisions ofthe AIM Rules for Companies of the London Stock Exchange. They have beenprepared under the historical cost convention.

The preparation of financial statements in conformity with IFRS requires theuse of certain critical accounting estimates. It also requires management toexercise its judgment in the process of applying the Group's accountingpolicies. The areas involving a higher degree of judgment or complexity, orareas where assumptions and estimates are significant to the consolidatedfinancial statements, are disclosed in note 29, of the Report and Accounts.

3 Profit before income tax

Profit before income tax is stated after charging the following items :-

(a) Staff costs (including directors' emoluments)

2012 2011 HK$ HK$ Salaries, wages and commission 10,620,164

8,646,228

Contributions to defined contribution retirement 814,571 688,611plans Share-based compensation 447,498 668,638 Other staff benefits 2,788,715 2,255,176 14,670,948 12,258,653 (b) Other items 2012 2011 HK$ HK$ Amortisation of patents 335,728 376,251 Auditor's remuneration 261,311 240,000 Bad debts written off 2,011 2,011 Cost of inventories sold 17,683,088 16,116,325 Depreciation 290,334 266,471 Exchange losses, net 3,021 419,720

Loss on disposal of property, plant and equipment 77,451 9,336

Loss on cessation of a subsidiary - 33,906 Impairment loss on goodwill - 127,857 Patents written off - 752,000 Provision for impairment losses on amounts due 580,273 from associate Written off of amounts due from associate Rental charges under operating leases in respect of land and buildings 739,762 577,007 4 Income tax expense 2012 2011 HK$ HK$ Current income tax - Thailand corporate income tax 693,193

617,380

- Shanghai foreign enterprise income tax 1,222,465 1,215,610 1,915,658 1,832,990

(a) Taxation for the Company

No provision for profits tax has been made for the Company as it is exemptedfrom taxation in the British Virgin Islands.

No deferred taxation has been provided as the Company has no materialunprovided deferred tax assets or liabilities which are expected to becrystallized in the foreseeable future (2011: HK$nil).

(b) Taxation for the Group

(i) Taxation on overseas profits has been calculated on the estimatedassessable profit for the year at the rate of taxation prevailing in thecountries in which the Group companies operate. The income tax expense statedin consolidated statement of comprehensive income represented the corporateincome tax and foreign enterprise income tax arisen from the business ofsubsidiaries operating in Thailand and Shanghai respectively.

Hong Kong Profits Tax is calculated at 16.5% (2011: 16.5%) of the estimatedassessable profit for the year. However, no provision for Hong Kong profits taxhas been made (2011: HK$nil) as the Group did not have assessable profitsubject to Hong Kong profits tax for the year.

Provision for foreign enterprise income tax ("FEIT") in the People's Republicof China ("PRC") has been made at 12.5% (2011: 12%) as Shanghai Walcom Bio-ChemCo., Ltd. ("Shanghai Walcom"), a wholly owned subsidiary operating in Shanghai,has assessable profits for the year. Pursuant to the relevant income tax rules and regulations in the PRC, ShanghaiWalcom is granted certain tax relief whereby it is exempted from FEIT for thefirst two years and 50% reduction for the following three years commencing fromthe first profitable year of operation after fully set off against theaccumulated losses brought forward. On 16 March 2007, the National People's Congress approved the Corporate IncomeTax Law of the People's Republic of China ("the new tax law"), which tookeffect on 1 January 2008. Under the new tax law, the PRC income tax rate wasgradually increased to a standard rate of 25% for all domestic and foreignenterprises over the next five years with effective from 1 January 2008.According to the Circular 39 passed by the State Council on 26 December 2007,the tax exemption and reduction was terminated latest by 2012. Accordingly,Shanghai Walcom was exempted from PRC income tax for the years from 1 January2008 to 31 December 2009, followed by a 50% reduction in the tax rate for theremaining three years from 1 January 2010 to 31 December 2012. The applicableincome tax rate was 11%, 12% and 12.5% for the year 2010, 2011 and 2012respectively.

(ii) A reconciliation between the Group's income tax expense and the accountingprofit, at the applicable tax rate, is set out below:-

2012 2011 HK$ HK$ Profit before income tax 3,616,456 3,829,497 Notional tax credit on profit before income 469,183

344,418

tax, calculated at the rates applicable toprofits in the countries concerned Tax effect of: Expenses not deductible for tax purpose 905,218 919,091 Non-taxable revenue (5) (2) Temporary differences not recognized (958)

188

Unused tax losses not recognized 542,220 569,295 Income tax charges 1,915,658 1,832,990 (iii) A deferred tax asset amounting to HK$9,470,481 (2011: HK$8,928,261) inrespect of tax losses of a subsidiary incorporated in Hong Kong ofapproximately HK$57,397,000 (2011: HK$54,111,000) has not been recognised inthe financial statements as it is not certain that future taxable profit willbe available against which these losses can be utilised.

5 Dividends

The Company does not recommend the payment of any dividend for the year ended31 December 2012 (2011: HK$Nil).

6 Earnings per share

There is no difference between basic and diluted earnings per share. The basicand diluted earnings per share for the year ended 31 December 2012 arecalculated by dividing the Group's profit attributable to owners of the Groupof HK$850,980 (2011: HK$1,291,396) by the weighted average number of 68,834,388ordinary shares (2011: 68,834,388 ordinary shares). The computation of dilutedearnings per share does not assume the exercise of the Company's outstandingshare options because the exercise price of the options is higher than theaverage market price for the years ended 31 December 2012 and 2011.

7 Trade and other receivables

Group 2012 2011 HK$ HK$ Trade Receivables 8,402,438 7,695,607 Less: provision for impairment loss (440,942) (545,899) Trade receivables - net 7,961,496 7,149,708 Deposits and prepayments 828,065 529,543 Other receivables 633,217 306,203 9,422,778 7,985,454

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

a. Impairment of trade receivables

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

2012 2011 HK$ HK$ At 1 January 545,899 699,577 Written off (104,848) (179,469) Exchange difference (109) 25,791 At 31 December 440,942 545,899 At 31 December 2012, the Group's trade receivables of HK$440,942 (2011:HK$545,899) have been outstanding for a certain period of time. The managementassessed that only a portion of the receivables is expected to be recoverable.No further individually provision of impairment for doubtful debts was providedin the year ended 31 December 2012 (2011: HK$nil).

The Group does not hold any collateral over these balances.

b. Trade receivables that are not impaired

Majority of the Group's turnover are with credit terms ranging from 30 to 60days. Ageing analysis of trade receivables that are neither individually norcollectively considered to be impaired are as follows: 2012 2011 HK$ HK$ Neither past due nor impaired 6,929,408

4,661,195

Less than one month past due 538,809 772,218 1 to 4 months past due 493,279 1,716,295 Over 4 months past due - - 1,032,088 2,488,513 7,961,496 7,149,708

Receivables that were neither past due nor impaired relate to a wide range ofcustomers for whom there was no recent history of default.

Receivables that were past due but not impaired relate to a number ofindependent customers that have a good track record with the Group. Based onpast experience, management believes that no impairment allowance is necessaryin respect of these balances as there has not been a significant change incredit quality and the balances are considered fully recoverable. The Groupdoes not hold any collateral over these balances. c. The carrying amounts of trade receivables are denominated in the following currencies: Group 2012 2011 Unites States Dollars USD 43,620- Philippine Peso PHP 2,689,244 Thai Baht THB 5,974,900 THB 4,207,825 Renminbi RMB 4,549,720 RMB 4,959,800 8 Cash and cash equivalents Group 2012 2011 HK$ HK$ Cash and cash equivalents in the statement 14,831,853 11,736,464of cash flows The Company 2011 2010 HK$ HK$ Cash and cash equivalents in the balance 22,299

22,899

sheet Included in the cash and cash equivalents of the Group, HK$10,135,603 (2011:HK$8,639,078) were denominated in RMB and kept in PRC. The remittance of thesefunds out of the PRC is subject to the foreign exchange control restrictionsimposed by the PRC government. Included in cash and cash equivalents in the consolidated balance sheet are thefollowing amounts denominated in a currency other than the functional currencyof the entity to which they relate: 2012 2011 United States dollars US$ 120,283 US$ 96,688 British Pound GB£ 1,223 GB£ 1,223 Thai Baht THB 14,083,398 THB 8,757,326 9 Trade and other payables Group 2012 2011 HK$ HK$ Trade payables 2,914,956 3,623,273 Other payables and accrued expenses 3,542,969 2,082,535 6,457,925 5,705,808

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

The carrying amounts of trade payables are denominated in the followingcurrencies: 2012 2011 Renminbi RMB 2,363,155 RMB 2,937,387 10 Bank borrowings At 31 December 2012, the bank borrowings were secured and repayable as follows: Group 2012 2011 HK$ HK$ Current liabilities Bank borrowings - short term portion, 2,466,395 2,467,004secured Total borrowings 2,466,395 2,467,004

a. The maturity of borrowings is as follows:

Group 2012 2011 HK$ HK$ Within 1 year or on demand 2,466,395 2,467,004 (b) The effective interest rate per annum for bank borrowings at balance sheetdate is at 15% (2011: 20%) over one-year benchmark deposits and loan interestrate promulgated by The People's Bank of China plus certain basis points perannum. During the 2012 reporting period, the Group fully repaid a bank borrowing ofHK$2,467,004 denominated in RMB, which was secured by the corporate guaranteeissued by an independent third party. On 13 June 2012, an indirectly held subsidiary of the Group situated in PRC("the subsidiary") has obtained a bank borrowing of HK$2,466,395 denominated inRMB with maturity of 1 year. The bank borrowing was secured by the corporateguarantee issued by an independent third party. For the grant of corporateguarantee, the holding company of the subsidiary, which is also an indirectlyheld subsidiary of the Group, has pledged its shareholding of the subsidiary tothe independent third party.

11 Copies of Report and Accounts

Copies of the Report and Accounts will be sent to shareholders shortly and willbe available from the principal place of business of the Company, Part D,Mingtai Bldg, No 351 Guo Shai Jing Road, ZJ Hi-tech Park, Shanghai 201203, PRC,and on the Company's website www.walcomgroup.com.