27 Sep 2010 09:30
27 September 2010 Walcom Group Limited ("Walcom" or "the Company") Half-yearly unaudited results for the six months ended 30 June 2010
The Board of Walcom Group Limited presents the Company's unaudited half-yearly results for the six months ended 30 June 2010.
Highlights
* Loss per share reduced by 43 per cent. due to improvement in performance
* Revenue and gross profit rose by 10 per cent. and 15 per cent. respectively
* PRC sales increased by 24 per cent. * Sales of new feed-energy saving products commenced. Enquiries:Walcom Group Limited +852 2494 0133
Francis Chi (Chief Executive Officer) Albert Wong (Chief Financial Officer)
Merchant Securities Limited +44 20 7628 2200 Bidhi Bhoma / Virginia Bull Chairman's statementIntroductionDespite the unstable global financial market and slowing of the growth inChinese economy during the first half of 2010, the Company's revenue grew by 10per cent. in comparison with the same period last year. During the period underreview, the Company has been actively promoting its new energy saving products(branded as `alpha' products), which has contributed to the Company'sperformance. The Company's loss per share for the period was reduced by 43 percent. to HK$2.67 cents (June 2009: HK$4.72 cents).
Results for the Period
The Company generated revenues during the period of HK$13.0m (June 2009:HK$11.8m) and gross profits of HK$7.5m (June 2009: HK$6.5m), representingincreases of 10 per cent. and 15 per cent. respectively, compared to the sameperiod last year. In addition, the gross profit margin for the period improvedslightly to 57 per cent. from 55 per cent. in the same period last year. Thisis mainly due to the initial sales of alpha products which were made during theperiod which produce a higher profit margin than the Company's historic productrange. Owing to the stronger sales and improved gross profit margin, theCompany reduced its net loss by 48 per cent. to HK$1.6m (June 2009: Loss ofHK$3.1m) and improved EBITDA by 33 per cent. to a loss of HK$1.0m (June 2009:Loss of HK$1.5m).Review of ActivitiesIn the six months to 30 June 2010, sales in the PRC improved by 24 per cent. toHK$10.3m, (June 2009: HK$8.3m). However, overseas sales decreased by 22 percent. to HK$2.8m (June 2009: HK$3.5m). The sales of alpha products contributedto the increased sales in the PRC, although at a slower pace than the Directorsfirst expected. Besides selling into the feed mills, animal farms have becomeimportant consumers of the alpha products, as direct and immediate savings canbe achieved. More importantly, animal farmers are more willing to share thiscost saving, which makes the Company's sales effort easier and more effective.The unstable political situation in Thailand and a continuously poor economy inthe Philippines were previously the main factors causing decreased overseassales. However, sales in Thailand improved during the period as the country'spolitical environment stabilised.
Outlook
The Company's new products, which promote the energy saving efficacy infeedstuffs, have proved successful over the last few months. The energy savingconcept has been well received not only by the feed mills, as it helps them toease the pressure on their production costs, but also by animal farms as itprovides them with immediate savings on feedstuff by using lessenergy-intensive products like corns and soy beans. Although early in theirstage of commercialisation, sales of the alpha products to integrated animalfarms have had some success. The Directors are confident that sales will growand the Board believe that, once traction in the market has been gained, theywill grow at an increasing pace.Eddie K M ChanChairman27 September 2010UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD ENDED30 JUNE 2010 Note Unaudited Unaudited Audited six months six months year ended ended ended 31 December 30 June 30 June 2009 2010 2009 HK$ HK$ HK$ Revenue 13,027,342 11,789,680 25,529,170 Cost of sales (5,559,813) (5,297,408) (10,697,432) Gross profit 7,467,529 6,492,272 14,831,738 Other income 2 113,234 177,868 248,932 Research and development expenses (911,964) (890,323)
(1,527,831)
Selling and distribution expenses (4,091,748) (2,971,370) (7,292,260) General and administrative (4,067,075) (5,876,363) (10,547,393)expenses Loss from operation (1,490,024) (3,067,916) (4,286,814) Net finance cost 3 (27,219) (14,506) (66,888) Loss before income tax (1,517,243) (3,082,422) (4,353,702) Income tax expense 4 (113,734) (51,585) (154,389) Loss for the period / year (1,630,977) (3,134,007) (4,508,091) Other comprehensive income Exchange difference on 153,949 115,954 158,112translation of financial statements of overseas subsidiaries Total comprehensive loss for the (1,477,028) (3,018,053) (4,349,979)period/year Loss attributable to: Owners of the Company (1,835,865) (3,252,125) (4,745,297) Non-controlling interests 204,888 118,118 237,206 Loss for the period / year (1,630,977) (3,134,007) (4,508,091) Total comprehensive loss attributable to: Owners of the Company (1,704,674) (3,151,770) (4,616,212) Non-controlling interests 227,646 133,717 266,233 Total comprehensive loss for the (1,477,028) (3,018,053) (4,349,979)period/year Loss per share - basic, HK cents 5 (2.67) (4.72) (6.89) - diluted, HK cents (2.67) (4.72) (6.89)
UNAUDITED CONSOLIDATED BALANCE SHEET AT 30 JUNE 2010
Note Unaudited Unaudited Audited 30 June 30 June 31 December 2010 2009 2009 HK$ HK$ HK$ ASSETS NON-CURRENT ASSETS Property, plant and equipment 2,735,361 3,014,022 2,898,144 Patents 4,708,840 5,515,095 4,844,916 Goodwill 127,857 127,857 127,857 Interests in an associate - - - 7,572,058 8,656,974 7,870,917 CURRENT ASSETS Inventories 1,603,773 1,396,008 1,247,319 Trade and other receivables 4,548,243 3,261,134
4,309,726
Amount due from an associate 1,670,374 2,153,421 1,861,701 Tax recoverable - 212,071 143,524 Cash and cash equivalents 7 3,244,990 4,422,693 3,872,520 11,067,380 11,445,327 11,434,790 TOTAL ASSETS 18,639,438 20,102,301 19,305,707 EQUITY AND LIABILITIES EQUITY Share capital 688,344 688,344 688,344 Reserves 11,965,121 15,088,495 13,668,470 TOTAL EQUITY ATTRIBUTABLE TO 12,653,465 15,776,839 14,356,814OWNERS OF THE COMPANY Non-controlling interests 869,747 509,585 642,101 TOTAL EQUITY 13,523,212 16,286,424 14,998,915 NON-CURRENT LIABILITIES Bank borrowings 8 194,955 687,688 634,711 CURRENT LIABILITIES Trade and other payables 2,922,260 2,749,465 3,444,441 Tax payable 113,263 52,719 97,115 Dividend payable - 204,109 - Bank borrowings 8 1,885,748 121,896 130,525 4,921,271 3,128,189 3,672,081 TOTAL LIABILITIES 5,116,226 3,815,877 4,306,792 TOTAL EQUITY AND LIABILITIES 18,639,438 20,102,301 19,305,707 NET CURRENT ASSETS 6,146,109 8,317,138 7,762,709 TOTAL ASSETS LESS CURRENT 13,718,167 16,974,112 15,633,626LIABILITIES UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD ENDED 30JUNE 2010 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 2009 688,344 95,298,644 23,852,469 500,473 706,951 (102,654,285) 18,392,596 375,868 18,768,464
Comprehensive lossLoss for the - - - - - (3,252,125) (3,252,125) 118,118 (3,134,007)period OthercomprehensiveincomeExchangedifference ontranslation offinancialstatements ofoverseassubsidiaries - - - - 100,355 - 100,355 15,599 115,954 Totalcomprehensive lossfor the period - - - - 100,355 (3,252,125) (3,151,770) 133,717 (3,018,053) Recognition ofequity-settledshare-based - - - 536,010 - - 536,010 - 536,010payments
At 30 June 2009 688,344 95,298,644 23,852,469 1,036,483 807,306 (105,906,410) 15,776,836 509,585 16,286,421
At 1 January 2010 688,344 95,298,644 23,852,469 1,080,903 836,036 (107,399,582) 14,356,814 642,101 14,998,915
Comprehensive lossLoss for the year - - - - - (1,835,865) (1,835,865) 204,888 (1,630,977) OthercomprehensiveincomeExchangedifference ontranslation offinancialstatements ofoverseassubsidiaries - - - - 131,191 - 131,191 22,758 153,949 Totalcomprehensive lossfor the period - - - - 131,191 (1,835,865) (1,704,674) 227,646 (1,477,028) Recognition ofequity-settledshare-based - - - 1,325 - - 1,325 - 1,325payments
At 30 June 2010 688,344 95,298,644 23,852,469 1,082,228 967,227 (109,235,447) 12,653,465 869,747 13,523,212
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD ENDED 30 JUNE
2010 Note Unaudited Unaudited Audited six months six months year ended ended ended 31 December 30 June 30 June 2009 2010 2009 HK$ HK$ HK$
Cash flow from operating activities
Loss before income tax (1,517,243) (3,082,422) (4,353,702) Amortisation of patents 176,836 193,989 398,277 Interest received (5,235) (7,900) (26,238) Depreciation 291,051 352,867 602,691 Foreign exchange loss, net 81,934 82,525 104,497 Interest paid 32,454 22,406 93,126 Loss on disposal of property, plant - 486,247 494,016and equipment Patent written off - - 716,417 Inventories written off - - 137,187 Share-based compensation 1,325 536,010 580,430 Operating loss before working (938,878) (1,416,278) (1,253,299)capital changes
(Increase) / decrease in inventories (356,454) 24,539 36,041
(Increase) / decrease in trade and (94,993) 706,910 (341,682)other receivables Decrease in amount due from 152,490 75,913 358,800associate - trade related (Decrease) / increase in trade and (522,181) (95,938) 401,518other payables Net cash used in operations (1,760,016) (704,854) (798,622) Corporate income tax paid (97,586) (16,794) (6,655) Interest paid (32,454) (22,406) (93,126) Net cash used in operating (1,890,056) (744,054) (898,403)activities
Cash flow from investing activities Purchase of property, plant and (77,447) (1,192,721) (1,367,556)equipment Payment for patents (40,760) (150,966) (401,492) Proceeds from sales of property, - 25,012 24,806plant and equipment Amounts due from 38,837 - 8,833associates-non-trade related Interest received 5,235 7,900 26,238 Net cash used in investing (74,135) (1,310,775) (1,709,171)activities
Cash flow from financing activities Release of restricted balance of - 3,000,000 3,000,000cash and cash equivalents Repayment of bank borrowings (403,928) (1,208,168)
(1,252,516)
Proceeds from new bank borrowings 1,719,395 857,752
857,752
Net cash generated from financing 1,315,467 2,649,584 2,605,236activities Net (decrease) / increase in cash (648,724) 594,755 (2,338)and cash equivalents Cash and cash equivalents at the 3,872,520 3,826,940 3,826,940beginning of the period/year Exchange gains on cash and cash 21,194 998 47,918equivalents
Cash and cash equivalents at the end 7 3,244,990 4,422,693 3,872,520 of the period/year
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30 JUNE 2010
(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 thehistorical cost convention. The same accounting policies, presentation andmethods of computation are followed in these unaudited consolidated financialstatements as were applied in the preparation of the group's financialstatements for the year ended 31 December 2009.(2) OTHER INCOME Unaudited Unaudited Audited six months six months year ended ended ended 31 December 2009 30 June 30 June 2010 2009 HK$ HK$ HK$ Tax refund - - 31,958 Government subsidy 84,920 56,685 56,685 Service income - 36,000 36,000 Sundry income 28,314 85,183 124,289 113,234 177,868 248,932(3) NET FINANCE COST Unaudited Unaudited Audited six months six months year ended ended ended 31 December 30 June 30 June 2009 2010 2009 HK$ HK$ HK$ Bank interest income 5,235 7,900 26,238 Interest on bank loans (32,454) (21,282) (91,998) Interest on bank overdrafts - (1,124) (1,128) (27,219) (14,506) (66,888)(4) INCOME TAX EXPENSENo provision for Hong Kong income tax has been made (June 2009: HK$nil; 2009:HK$nil) as the group companies did not have assessable profit subject to HongKong profits tax purposes for the period/year.Taxation on overseas profits has been calculated on the estimated assessableprofit for the period/year at the rate of taxation prevailing in the countriesin which the group companies operate. The overseas income tax provided for theperiod ended 30 June 2010 is HK$113,734 (June 2009: HK$51,585; 2009:HK$154,389).
(5) LOSS PER SHARE
The calculation of the basic loss per share for the period ended 30 June 2010,is based on the loss attributable to ordinary equity shareholders of thecompany of HK$1,838,639 (June 2009: HK$3,252,124; 2009: HK$4,745,297) duringthe period and the weighted average number of 68,834,388 ordinary shares (June2009: 68,834,388; 2009: 68,834,388) in issue during the period/year. No dilutedloss per share is to be reported for the period/year.
(6) DIVIDENDS
No payment of dividend was recommended for the first six months of 2010 (June 2009: HK$ nil; 2009: HK$ nil).
(7) CASH AND CASH EQUIVALENTS
Unaudited Unaudited Audited 30 June 30 June 31 December 2010 2009 2009 HK$ HK$ HK$ Cash at bank and on hand 2,671,858 4,422,693 3,872,520 Short-term bank deposits 573,132 - - Cash and cash equivalents in the 3,244,990 4,422,693 3,872,520cash flow statement (8) BANK BORROWINGS Unaudited Unaudited Audited 30 June 30 June 31 December 2010 2009 2009 HK$ HK$ HK$ Non-current Mortgage loan (a) 194,955 687,688 634,711 Current Mortgage loan (a) 166,353 121,896 130,525 Bank borrowings, secured (b) 1,719,395 - - 2,080,703 809,584 765,236
(a) The mortgage loan was secured by the property situated in Thailand. At 30June 2010, the net book value of the property included in the property, plantand equipment was HK$992,839.
b. On 13 May 2010, an indirectly held subsidiary of the Group situated in PRC
("the subsidiary") has obtained a bank borrowing of HK$1,719,395
denominated in RMB with maturity of 1 year. The bank borrowing was secured
by the corporate guarantee issued by an independent third party. For the
grant of corporate guarantee, the holding company of the subsidiary, which
is also an indirectly held subsidiary of the Group, has pledged its
shareholding of the subsidiary to the independent third party.
(9) RELATED PARTY TRANSACTIONS
Unaudited Unaudited Audited six months six months year ended ended ended 31 December 30 June 30 June 2009 2010 2009 HK$ HK$ HK$ Associates Sales of goods 460,590 936,000 1,502,280 Related companies Legal and professional fees paid 74,754 61,310 109,995 Service income - 36,000 36,000
(10) RECONCILIATION OF LOSS BEFORE INCOME TAX TO EBITDA
Unaudited Unaudited Audited six months six months year ended ended ended 31 December 30 June 30 June 2009 2010 2009 HK$ HK$ HK$ Loss before income tax (1,520,017) (3,082,422) (4,353,702) Depreciation 291,051 352,867 602,691 Amortisation of patents 176,836 193,989 398,277 Interest income (5,235) (7,900) (26,238) Interest expenses 32,454 22,406 93,126 Patents written off - - 716,417 Loss on disposal of property, - 486,247 494,016plant and equipment Issuance of share-based 1,325 536,010 580,430compensation EBITDA (1,023,586) (1,498,803) (1,494,983)EBITDA is defined herein as earnings before depreciation, amortization,interest and tax, plus specific charges which are considered non-recurring innature. Specific charges include impairment loss in value and gain/loss indisposal of non-current assets, and amortization of fair value of share-basedcompensation. EBITDA is not a recognised term under generally acceptedaccounting principles and does not purport to be an alternative to net incomeas a measure of operating performance or to cash flows from operatingactivities as a measure of liquidity. Because not all companies use identicalcalculations, this presentation may not be comparable to other similarly titledmeasures of other companies.
(11) COPIES OF HALF YEARLY REPORT
Copies of the half-yearly report will be available shortly from the Company's website www.walcomgroup.com.
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