19 Sep 2011 07:00
19 September 2011 Walcom Group Limited ("Walcom" or "the Company") Half-yearly unaudited results for the six months ended 30 June 2011
The Board of Walcom Group Limited presents the Company's unaudited half-yearly results for the six months ended 30 June 2011.
Highlights
* Loss per share reduced by 29 per cent. to HK$1.89 cents
* Revenue and gross profit rose by 37 per cent. to HK$17.9 million and 46 per
cent. to HK$10.9 million respectively
* PRC and overseas sales increased by 37 per cent. to HK$14.1 million and 36
per cent. to HK$3.8 million respectively
* Sales traction gained in recent months has continued
Further enquiries:Walcom Group Limited +852 2494 0133
Francis Chi (Chief Executive Officer) Albert Wong (Chief Financial Officer)
Merchant Securities Limited +44 20 7628 2200 Lindsay Mair/Virginia Bull CHAIRMAN'S STATEMENTIntroductionAs mentioned in my statement in the 2010 annual report, the Company hasexperienced increased production costs and operating expenses which, when addedto the slower growth in the Chinese economy, has resulted in difficult tradingconditions. The Company is pleased to report, however, that the sales tractiongained by the Company last year has continued and the Company's revenue grew by37 per cent. compared with the same period last year. The Company's loss pershare for the period reduced by 29 per cent. to HK$1.89 cents (June 2010: lossHK$2.67 cents).This continued improvement relates to the Company's `Alpha' project which waslaunched in August 2009 and has built up momentum over the last two years. The`Alpha' project was designed to promote the energy saving efficacy infeedstuffs of the Company's products and aimed to reduce the unit cost offeedstuffs through an improvement in the utilisation efficiency of feedstuffs,thereby increasing margins for feed mills.
Results for the Period
The Company generated revenues during the period of HK$17.9 million (June 2010:HK$13.0 million) and gross profits of HK$10.9 million (June 2010: HK$7.5million), representing increases of 37 per cent. and 46 per cent. respectivelycompared with the same period last year. In addition, the gross profit marginfor the period improved, increasing from 57 per cent. in the same period lastyear to 61 per cent. during this financial period. This increase is mainly dueto a higher percentage of sales of `Alpha' project products achieved 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 33 per cent. to HK$1.1 million (June 2010: lossof HK$1.6 million) and became profitable at an EBITDA level (HK$0.3 million)rather than a loss of HK$1.0 million in the same period last year.
Review of Activities
In the six months to 30 June 2011, sales in the PRC and overseas improved by 37per cent. and 36 per cent. to HK$14.1 million, (June 2010: HK$10.3 million) andHK$3.8 million (June 2010: HK$2.8 million), respectively. The sales of `Alpha'branded products were the main contributor to the increased sales in the PRC.During the last 18 months, the Company's sales strategy has been proven. Theincreased focus on promotion of the sales of energy saving products has beeneffective and the Company's adoption of a direct selling approach to sizablecustomers rather than through sales distributors, which resulted in a higheraverage unit selling price being achieved, has strengthened the Company for thebenefit of shareholders.The political situation in Thailand has stabilized and the sales in Thailandincreased by 44 per cent. during the period under review. Sales in thePhilippines, owing to the continuing poor economy in the country, remained adragging factor on overseas sales.
Outlook
The Board expects that during the remaining six months of the financial year,the operating environment for the Company will be more challenging as it has toface the continuously escalating production costs and operating expenses. This,in addition to the slower growth of the Chinese economy, and a highly uncertainand volatile global economy, will continue to make trading difficult. TheDirectors are confident, however, that the traction of the Company's salesgained during the past 18 months will continue to gather momentum at a steadypace.Eddie K M ChanChairman19 September 2011
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2011
Note Unaudited Unaudited Audited six months six months year ended ended ended 30 June 2011 30 June 2010 31 December 2010 HK$ HK$ HK$ Revenue 17,875,168 13,027,342 32,860,894 Cost of sales (6,967,894) (5,559,813) (12,793,665) Gross profit 10,907,274 7,467,529 20,067,229 Other income 2 72,753 113,234 203,642 Research and development (812,563) (911,964) (1,463,030)expenses Selling and distribution (5,183,390) (4,091,748) (8,186,502)expenses General and administrative (5,560,654) (4,067,075) (9,327,110)expenses (Loss) / profit from operation (576,580) (1,490,024) 1,294,229s Net finance cost 3 (41,197) (27,219) (85,552) (Loss) / profit before income (617,777) (1,517,243) 1,208,677tax Income tax expense 4 (469,536) (113,734) (809,988) (Loss) / profit for the period (1,087,313) (1,630,977) 398,689/ year Other comprehensive income Exchange difference on translation of financial statements of 343,840 153,949 678,442overseas subsidiaries Total comprehensive (loss) / income for the period / year (743,473) (1,477,028) 1,077,131 Loss attributable to: Owners of the Company (1,299,477) (1,835,865) (191,884) Non-controlling interests 212,164 204,888 590,573 (Loss) / profit for the period (1,087,313) (1,630,977) 398,689/ year Total comprehensive (loss) / income attributable to: Owners of the Company (929,210) (1,704,674) 390,249 Non-controlling interests 185,737 227,646 686,882 Total comprehensive (loss) / income for the period/year (743,473) (1,477,028) 1,077,131 Loss per share - basic, HK 5 (1.89) (2.67) (0.28)cents - diluted, HK cents (1.89) (2.67) (0.28)
UNAUDITED CONSOLIDATED BALANCE SHEET AT 30 JUNE 2011
Note Unaudited Unaudited Audited 30 June 20 30 June 20 11 10 31 December 2010 HK$ HK$ HK$ ASSETS NON-CURRENT ASSETS Property, plant and equipment 2,439,400 2,735,361 2,698,958 Patents 4,720,610 4,708,840 4,726,361 Goodwill 127,857 127,857 127,857 Interests in an associate - - - 7,287,867 7,572,058 7,553,176 CURRENT ASSETS Inventories 1,266,101 1,603,773 872,349 Trade and other receivables 7 6,376,446 4,548,243 6,637,273 Amounts due from an associate 1,388,163 1,670,374 1,632,934 Cash and cash equivalents 8 7,266,927 3,244,990 6,285,006 16,297,637 11,067,380 15,427,562 TOTAL ASSETS 23,585,504 18,639,438 22,980,738 EQUITY AND LIABILITIES EQUITY Share capital 688,344 688,344 688,344 Reserves 13,838,448 11,965,121 14,436,087 TOTAL EQUITY ATTRIBUTABLE TO 14,526,792 12,653,465 15,124,431 OWNERS OF THE COMPANY Non-controlling interests 1,228,278 869,747 1,042,541 TOTAL EQUITY 15,755,070 13,523,212 16,166,972 NON-CURRENT LIABILITIES Bank borrowings 10 - 194,955 - CURRENT LIABILITIES Trade and other payables 9 4,909,012 2,922,260 4,109,048 Tax payables 443,428 113,263 771,860 Bank borrowings 10 2,477,994 1,885,748 1,932,858 7,830,434 4,921,271 6,813,766 TOTAL LIABILITIES 7,830,434 5,116,226 6,813,766 TOTAL EQUITY AND LIABILITIES 23,585,504 18,639,438 22,980,738 NET CURRENT ASSETS 8,467,203 6,146,109 8,613,796 TOTAL ASSETS 15,755,070 13,718,167 16,166,972 LESS CURRENT LIABILITIES
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2011
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 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 ComprehensivelossLoss for the - - - - - (1,835,865) (1,835,865) 204,888 (1,630,977)period OthercomprehensiveincomeExchangedifference ontranslation offinancialstatements of - - - - 131,191 - 131,191 22,758 153,949overseassubsidiaries Totalcomprehensive - - - - 131,191 (1,835,865) (1,704,674) 227,646 (1,477,028)loss for theperiod 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
At 1 January 2011 688,344 95,298,644 23,852,469 1,379,181 1,418,169 (107,512,376) 15,124,431 1,042,541 16,166,972 ComprehensivelossLoss for the - - - - - (1,299,477) (1,299,477) 212,164 (1,087,313)period OthercomprehensiveincomeExchangedifference ontranslation offinancialstatements of - - - - 370,267 - 370,267 ( 26,427) 343,840overseassubsidiaries Totalcomprehensive - - - - 370,267 (1,299,477) (929,210) 185,737 (743,473)loss for theperiod Recognition ofequity-settled
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 JUNE 2011
Note Unaudited Unaudited Audited six months six months year ended ended ended 30 June 20 30 June 20 31 December 11 10 2010 HK$ HK$ HK$ Cash flow from operating activities (Loss) / profit before income tax (617,777) (1,517,243) 1,208,677 Amortisation of patents 190,634 176,836 358,632 Interest received (21,198) (5,235) (8,712) Depreciation 332,442 291,051 628,091 Foreign exchange loss, net 230,862 81,934 174,278 Interest paid 62,395 32,454 94,264
Loss on disposal of property, - -
14,599plant and equipment Inventories written off - - 17,804 Share-based compensation 331,571 1,325 377,368
Operating profit / (loss) before
working capital changes 508,929 (938,878) 2,865,001 (Increase) / decrease in (393,752) (356,454) 357,166inventories Decrease / (increase) in trade 260,827 (94,993) (2,184,023)and other receivables Decrease in amount due from 244,771 152,490 200,850associate - trade related Increase / (decrease) in trade 799,964 (522,181) 664,607and other payables Net cash generated from / (used 1,420,739 (1,760,016) 1,903,601in) operations Corporate income tax paid (797,968) (97,586) (135,243) Interest paid (62,395) (32,454) (94,264)
Net cash generated from / (used
in) operating activities 560,376 (1,890,056) (1,674,094) Cash flow from investing activities Purchase of property, plant and (68,657) (77,447) (259,026)equipment Payment for patents (184,883) (40,760) (240,077) Amounts due from - 38,837 27,917associates-non-trade related Interest received 21,198 5,235 8,712 Net cash used in investing (232,342) (74,135) (462,474)activities Cash flow from financing activities Repayment of bank borrowings (1,896,919) (403,928) (595,217) Dividend paid to minority - - (286,442)interests
Proceeds from new bank borrowings 2,405,002 1,719,395 1,762,839
Net cash generated from financing 508,083 1,315,467 881,180activities Net increase / (decrease) 836,117 (648,724) 2,092,800 in cash and cash equivalents Cash and cash equivalents at the 6,285,006 3,872,520 3,872,520beginning of the period/year Exchange gains on cash and cash 145,804 21,194 319,686equivalents
Cash and cash equivalents at the 8 7,266,927 3,244,990 6,285,006 end of the period/year
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2011
(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 2010.(2) OTHER INCOME Unaudited Unaudited Audited six months six months year ended ended ended 30 June 20 30 June 2010 31 December 11 2010 HK$ HK$ HK$ Government subsidy 59,780 84,920 134,871 Sundry income 12,973 28,314 68,771 72,753 113,234 203,642(3) NET FINANCE COST Unaudited Unaudited Audited six months six months year ended ended ended 30 June 20 31 December 30 June 20 10 2010 11 HK$ HK$ HK$ Bank interest income 21,198 5,235 8,712
Interest expense on bank loans (62,395) (32,454) (94,264)
(41,197) (27,219) (85,552)(4) INCOME TAX EXPENSENo provision for Hong Kong Profits Tax has been made (June 2010: HK$nil; 2010:HK$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 thesix months ended 30 June 2011 is HK$469,536 (June 2010: HK$113,734; 2010:HK$809,988).
(5) LOSS PER SHARE
The calculation of the basic loss per share for the six months ended 30 June2011, is based on the loss attributable to ordinary equity shareholders of thecompany of HK$1,299,477 (June 2010: HK$1,835,865; 2010: HK$191,884) during theperiod and the weighted average number of 68,834,388 ordinary shares (June2010: 68,834,388; 2010: 68,834,388) in issue during the period/year. No dilutedloss per share is to be reported for the period/year.
(6) DIVIDENDS
No payment of dividend was recommended for the first six months of 2011 (June 2010: HK$ nil; 2010: HK$nil).
(7) TRADE AND OTHER RECEIVABLES
Unaudited Unaudited Audited 30 June 20 30 June 2010 31 December 11 2010 HK$ HK$ HK$ Trade receivables 5,743,784 3,978,323 6,189,317 Less: provision for (668,663) (635,701) (699,577)impairment loss 5,075,121 3,342,622 5,489,740 Amounts due from a related 30,802 - -company Other receivables 614,163 636,008 640,324 Prepayments and deposits 656,360 569,613 507,209 6,376,446 4,548,243 6,637,273
(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 theperiod/year, including both specific and collective loss components, is asfollows: Unaudited Unaudited Audited six months six months year ended ended ended 31 December 20 30 June 20 30 June 20 10 11 10 HK$ HK$ HK$ At 1 January 699,577 635,701 635,701 Written off (46,079) - - Exchange difference 15,165 - 63,876 At 30 June/31 December 668,663 635,701 699,577
At 30 June 2011, the Group's trade receivables of HK$668,663 (June 2010: HKD635,701, 2010: HK$699,577) have been outstanding for a certain period of time. The management assessed that only a portion of the receivables is expected to be recoverable. Consequently, specific allowance for doubtful debts was recognised for the individually impaired receivables.
The Group does not hold any collateral over these balances.
c. The amount due from a related company is interest-free, unsecured and
repayable on demand.
(8) CASH AND CASH EQUIVALENTS
Unaudited Unaudited Audited 30 June 2011 30 June 2010 31 December 20 10 HK$ HK$ HK$ Cash at bank and on 7,266,927 2,671,858 6,285,006hand Short-term bank - 573,132 -deposits Cash and cash 7,266,927 3,244,990 6,285,006equivalents in the cash flow statement (9) TRADE AND OTHER PAYABLES Unaudited Unaudited Audited 30 June 2011 30 June 2010 31 December 20 10 HK$ HK$ HK$ Trade payables 2,186,507 1,185,696 1,595,625 Trade payables and accrued 2,722,505 1,736,564 2,513,423expenses 4,909,012 2,922,260 4,109,048All of the trade and other payables are expected to be settled within one year.(10) BANK BORROWINGS Unaudited Unaudited Audited 30 June 20 30 June 20 31 December 20 11 10 10 HK$ HK$ HK$ Non-current Mortgage loan (a) - 194,955 - Current Mortgage loan (a) 72,992 166,353 170,018 Bank borrowings, secured (b) 2,405,002 1,719,395 1,762,840 2,477,994 2,080,703 1,932,858
(a) The mortgage loan was secured by the property situated in Thailand. At 30June 2011, the net book value of the property included in the property, plantand equipment was HK$996,252.
b. On 31 May 2011, an indirectly held subsidiary of the Group situated in PRC
("the subsidiary") has obtained a bank borrowing of HK$2,405,002
denominated in RMB with maturity of 1 year. The bank borrowing was secured
by the corporate guarantee issued by an independent third party. For the
grant of corporate guarantee, the holding company of the subsidiary, which
is also an indirectly held subsidiary of the Group, has pledged its
shareholding of the subsidiary to the independent third party.
(11) RECONCILIATION OF (LOSS) / PROFIT BEFORE INCOME TAX TO EBITDA
Unaudited Unaudited Audited six months six months year ended ended ended 31 December 20 30 June 20 30 June 20 10 11 10 HK$ HK$ HK$ (Loss) / profit before income (617,777) (1,517,243) 1,208,677tax Depreciation 332,442 291,051 628,091 Amortisation of patents 190,634 176,836 358,632 Interest income (21,198) (5,235) (8,712) Interest expenses 62,395 32,454 94,264 Patents written off - - -
Loss on disposal of property, - - 14,599
plant and equipment Issuance of share-based 331,571 1,325 377,368compensation EBITDA 278,067 (1,020,812) 2,672,919EBITDA 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.
(12) COPIES OF HALF YEARLY REPORT
Copies of the half-yearly report will be available shortly from the Company's website www.walcomgroup.com.
XLON