WALG.L Regulatory News (WALG)

21 September 2016

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR")

WALCOM GROUP LIMITED

("Walcom" or the "Company")

Half-yearly results for the six months ended 30 June 2016

Walcom is pleased today to announce its interim results for the six months ended 30 June 2016. These results are also available from the Company's website at www.walcomgroup.com.

Further enquiries:

CHAIRMAN'S STATEMENT

Introduction

The growth in the PRC economy remained slow during the first six months of the year and the performance of the pig farming industry did not improve during the same period. However, the Company was able to increase its revenue by 7 per cent. compared with the same period last year. Despite the adverse exchange impact of the Renminbi and Thai Baht during this financial period and the continuing increase in production costs and operating expenses, the Company incurred a smaller loss per share for the period of HK$2.46 cents compared with a loss per share of HK$2.81 cents in the same period last year, showing an improvement of 13 per cent.

Results for the Period

The Company generated revenues of HK$20.7 million during the period (June 2015: HK$19.3 million) and gross profits of HK$11.7 million (June 2015: HK$12.1 million), representing an increase of 7 per cent. and a decrease of 3 per cent., respectively, compared with the same period last year. The gross profit margin reduced to 56.5 per cent. (June 2015: 62.6 per cent.) owing to the aggregate impact of the devaluation of Renminbi and Thai Baht, which had significant adverse effect on the sales made in these two currencies, and the escalated production costs, in particular raw materials, labour and rental expenses. Notwithstanding the above unfavourable factors, the Company reduced its net loss by 8 per cent. to HK$1.69 million (June 2015: loss of HK$1.83 million) and incurred a loss of HK$1.12 million at the EBITDA level, a decrease of 20 per cent. over the same period last year (June 2015: HK$1.40 million).

Review of Activities and Market

Despite the weakened Renminbi, but as a result of increase in sales quantity, during the six months to 30 June 2016, the sales turnover in the PRC increased by 13 per cent. to HK$11.8 million as compared to the same period last year (June 2015: HK$10.5 million) while overseas sales were maintained at HK$8.9 million, approximately the same level as last year (June 2015: HK$8.8 million).

Although the pig farm gate price in China began to rise in April 2015 and remained at a comparatively high level during the first 6 months of 2016, the demand for feedstuff remained weak as the number of farmed pigs remained low as a result of the large number of discontinued pig farms during 2014. The Board estimated last year that it would take some time for pig numbers to return to their previous level and this is still the situation at the moment. The animal feed market has not yet fully recovered and this in turn has affected the operating results of the Company.

The Company's overseas sales were maintained at about the same level as last year. Sales in Thailand in terms of quantity remained the same as last year. However, owing to the weakened Thai Baht and lower average unit selling price in Thailand, the Thai sales reported in Hong Kong Dollars were 9% less than last year (June 2016: 7.3 million; June 2015: 8.0 million).

Sales in Korea recovered during the period under review and sales increased by 188 per cent. to HK$1.6 million (June 2015: HK$0.5 million).

Acquisition of Land in Thailand

Further to the Company's announcement made on 21 July 2016, the acquisition of the land in Thailand for the purpose of developing a feed manufacturing plant is expected to be completed in November this year. In view of the growth of sales of the Company's products in the Association of Southeast Asian Nations Economic Communities ("AEC") in the coming years, the Directors are optimistic that the building of a manufacturing plant in Thailand, which is an AEC country, should offer beneficial trading terms for the Company due to the region's trade treaties.

Outlook

The ongoing structural transformation of the Chinese economy has resulted in a slower growth in the economy in the past two years. The consumer market has been inevitably affected, which has had a negative impact on the Company's sales in the PRC market. However, efforts are being made in exploring new markets in the AEC region and to increase the Company's portfolio of customers with some encouraging results and the Directors are confident that this will result in improved sales in the overseas market. In view of the coming high sales season of the Company's products in the PRC market and the expected growth in the Asian markets in the second half of the year, the Directors are cautiously optimistic in the overall performance of the Company in the year 2016.

Frankie Y. L. Wong

Chairman

21 September 2016

WALCOM GROUP LIMITED

UNAUDITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

FOR THE SIX MONTHS ENDED 30 JUNE 2016

WALCOM GROUP LIMITED

UNAUDITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

AND OTHER COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2016

WALCOM GROUP LIMITED

UNAUDITED CONSOLIDATED BALANCE SHEET

AT 30 JUNE 2016

WALCOM GROUP LIMITED

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2016

WALCOM GROUP LIMITED

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 30 JUNE 2016

WALCOM GROUP LIMITED

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2016

(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 2015.

(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:

(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.

(c) Segment assets by geographical location of assets

(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

(5) OPERATING (LOSS) / PROFIT

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

(6) NET FINANCE (EXPENSES)/ INCOME

(7) INCOME TAX EXPENSE

No provision for Hong Kong Profits Tax has been made (June 2015: HK$nil; 2015: HK$nil) as the Group's assessable profit subject to Hong Kong profits tax for the period is fully set-off by tax loss brought forward from last 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 2016 is HK$240,916 (June 2015: HK$74,906; 2015: HK$1,308,485).

(8) LOSS PER SHARE

The calculation of the basic loss per share for the six months ended 30 June 2016, is based on the loss attributable to ordinary equity shareholders of the company of HK$1,690,571 (June 2015: HK$1,935,378; 2015: Profit HK$333,473) during the period and the weighted average number of 68,834,388 ordinary shares (June 2015: 68,834,388; 2015: 68,834,388) in issue during the period/year. No diluted loss per share is to be reported for the period/year.

(9) DIVIDENDS

No payment of dividend was recommended for the first six months of 2016 (June 2015: HK$ nil; 2015: HK$nil).

(10) TRADE AND OTHER RECEIVABLES

(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:

At 30 June 2016, the Group's trade receivables of HK$508,758 (June 2015: HK$508,758, 2015: HK$508,758) have been outstanding for a certain period of time. The management assessed that only a portion of the receivables is expected to be recoverable. Consequently, specific allowance for doubtful debts was recognised for the individually impaired receivables.

The Group does not hold any collateral over these balances.

(11) CASH AND CASH EQUIVALENTS

(12) SHARE CAPITAL