20 Sep 2012 13:28
20 September 2012 Walcom Group Limited ("Walcom" or "the Company") Half-yearly unaudited results for the six months ended 30 June 2012
The Board of Walcom Group Limited presents the Company's unaudited results for the six months ended 30 June 2012.
Highlights
* Loss per share reduced by 21 per cent. to 1.50 HK cents
* Revenue and gross profit rose by 12 per cent. to HK$20.0 million and 17 per
cent. to HK$12.7 million respectively
* PRC and overseas sales increased by 4 per cent. to HK$14.6 million and 42
per cent. to HK$5.4 million respectively
* Sales traction gained in the last two years 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 STATEMENTIntroduction
Although the Chinese economy has slowed, the production costs and operatingexpenses of the Company have continually increased. The Company is pleased toreport, however, that the sales traction built up over the last two years hascontinued and the Company's revenue grew by 12 per cent. compared with the sameperiod last year. The sales of the Company are usually weaker in the first halfof the year, due to being affected by seasonal factors, which led to a loss pershare for the period. This loss was, however, reduced by 21 per cent. for theperiod to HK$1.50 cents (June 2011: loss HK$1.89 cents).
Results for the Period
The Company generated revenues during the period of HK$20.0 million (June 2011:HK$17.9 million) and gross profits of HK$12.7 million (June 2011: HK$10.9million), representing increases of 12 per cent. and 17 per cent. respectivelycompared with the same period last year. In addition, the gross profit marginfor the period improved, increasing from 61 per cent. in the same period lastyear to 64 per cent. during this financial period. This increase is mainly dueto a higher percentage of direct sales to customers in the PRC and animprovement in sales in Thailand during the period, both of which produce ahigher profit margin than has been the case historically. Owing to the strongersales and improved gross profit margin, the Company reduced its net loss by 55per cent. to HK$0.5 million (June 2011: loss of HK$1.1 million) and achieved aprofit of HK$1.1 million at an EBITDA level, an increase of 267 per cent. overthe same period last year (June 2011: HK$0.3 million).
Review of Activities and Market
In the six months to 30 June 2012, sales in the PRC and overseas improved by 4per cent. and 42 per cent. to HK$14.6 million (June 2011: HK$14.1 million) andHK$5.4 million (June 2011: HK$3.8 million), respectively. The sales in the PRCduring the period were maintained at approximately the same level as last yeardespite the slower Chinese economy and the weak demand for pork. Theimprovement in overseas sales was mainly due to the contribution from the Thaimarket.With the uncertainty in the world economy and the slow growth in the PRCmarket, the first half of the year was very challenging for the Company.Increasing prices of crops such as corn, soy and wheat (owing to the extremeclimate conditions the world over), however, provide opportunities for theCompany to expand its market share as demand for complete feeds increase andthus demand for the Company's products. As mentioned in my statement in the2011 annual report, the Company's market share is slowly increasing at a steadypace, owing to the direct marketing approach to potential customers adopted inthe last 2 years. The `Alpha' project, which was designed to promote the energysaving efficacy in feedstuffs of the Company's products, continues to play amajor role in new business development and sales.Sales in Thailand were the major contributors to the Company's overseas marketresults. They increased by 53 per cent. to HK$5.2 million (June 2011: 3.4million) during the period under review. The market opportunity is stillimproving as more of the sales effort implemented in the past years starts
toproduce rewards.OutlookIn the business outlook of the 2011 Chairman's Statement, I highlighted thatthe Company's business in 2012 would be affected by unfavourable factors, inparticular, slower growth in the Chinese economy, uncertainties associated withthe lingering effects of the debt crisis in both the United States and Europeaneconomies, and higher production costs and operating expenses. All thesefactors remain which make trading conditions difficult for the Company. TheDirectors are optimistic, however, that the management of the Company will dealwith these unfavourable conditions and present a good result for the full year2012.Eddie K M ChanChairman20 September 2012
UNAUDITED CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2012
Note Unaudited Unaudited Audited six months six months year ended ended ended 30 June 2012 30 June 2011 31 December 2011 HK$ HK$ HK$ Revenue 19,976,736 17,875,168 44,207,817 Cost of sales (7,276,481) (6,967,894) (16,116,325) Gross profit 12,700,255 10,907,274 28,091,492 Other income 2 20,218 72,753 124,556 Research and development (851,173) (812,563) (1,580,780)expenses Selling and distribution (4,988,588) (5,183,390) (10,712,894)expenses General and administrative (6,657,385) (5,560,654) (11,976,400)expenses Profit / (loss) from operation 223,327 (576,580) 3,945,974s Net finance cost 3 (49,473) (41,197) (116,477) Profit / (loss) before income 173,854 (617,777) 3,829,497tax Income tax expense 4 (696,587) (469,536) (1,832,990) (Loss) / profit for the period (522,733) (1,087,313) 1,996,507/ year Loss attributable to: Owners of the Company (1,034,047) (1,299,477) 1,291,396 Non-controlling interests 511,314 212,164 705,111 (Loss) / profit for the period (522,733) (1,087,313) 1,996,507/ year (Loss) / earnings per share - 5 (1.50) (1.89) 1.88basic, HK cents - diluted, HK cents (1.50) (1.89) 1.88
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2012
Note Unaudited Unaudited Audited six months six months year ended ended ended 30 June 2012 30 June 2011 31 December 2011 HK$ HK$ HK$ (Loss) / profit for the period (522,733) (1,087,313) 1,996,507/ year Other comprehensive income Exchange difference on translation of financial statements of (179,164) 343,840 631,579overseas subsidiaries Total comprehensive (loss) / income for the period / year (701,897) (743,473) 2,628,086 Total comprehensive (loss) / income attributable to: Owners of the Company (1,200,678) (929,210) 1,996,312 Non-controlling interests 498,781 185,737 631,774 Total comprehensive (loss) / income for the period/year (701,897) (743,473) 2,628,086
UNAUDITED CONSOLIDATED BALANCE SHEET
AT 30 JUNE 2012 Note Unaudited Unaudited Audited 30 June 201 30 June 201 2 1 31 December 2011 HK$ HK$ HK$ ASSETS NON-CURRENT ASSETS Property, plant and equipment 2,029,851 2,439,400 2,153,287 Patents 3,783,659 4,720,610 4,003,839 Goodwill - 127,857 - Interests in an associate - - - 5,813,510 7,287,867 6,157,126 CURRENT ASSETS Inventories 1,907,922 1,266,101 1,221,152 Trade and other receivables 7 6,737,884 6,376,446 8,395,692 Amounts due from an associate 928,663 1,388,163 753,163 Cash and cash equivalents 8 12,271,809 7,266,927 11,736,464 21,846,278 16,297,637 22,106,471 TOTAL ASSETS 27,659,788 23,585,504 28,263,597 EQUITY AND LIABILITIES EQUITY Share capital 688,344 688,344 688,344 Reserves 16,210,054 13,838,448 17,101,037 TOTAL EQUITY ATTRIBUTABLE TO 16,898,398 14,526,792 17,789,381 OWNERS OF THE COMPANY Non-controlling interests 1,567,456 1,228,278 1,398,458 TOTAL EQUITY 18,465,854 15,755,070 19,187,839 CURRENT LIABILITIES Trade and other payables 9 6,138,869 4,909,012 5,705,808 Tax payables 601,679 443,428 902,946 Bank borrowings 10 2,453,386 2,477,994 2,467,004 9,193,934 7,830,434 9,075,758 TOTAL LIABILITIES 9,193,934 7,830,434 9,075,758 TOTAL EQUITY AND LIABILITIES 27,659,788 23,585,504 28,263,597 NET CURRENT ASSETS 12,652,344 8,467,203 13,030,713 TOTAL ASSETS 18,465,854 15,755,070 19,187,839 LESS CURRENT LIABILITIES
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2012
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 688,344 95,298,644 23,852,469 1,379,181 1,418,169 (107,512,376) 15,124,431 1,042,541 16,166,9722011 ComprehensivelossLoss for the - - - - - (1,299,477) (1,299,477) 212,164 (1,087,313)period OthercomprehensiveincomeExchangedifference ontranslation offinancial - - - - 370,267 - 370,267 ( 26,427) 343,840statements ofoverseassubsidiaries Total - - - - 370,267 (1,299,477) (929,210) 185,737 (743,473)comprehensivelossfor the period Recognition ofequity-settledshare-based - - - 331,571 - - 331,571 - 331,571payments At 30 June 2011 688,344 95,298,644 23,852,469 1,710,752 1,788,436 (108,811,853) 14,526,792 1,228,278 15,755,070 At 1 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 ComprehensivelossLoss for the - - - - - (1,034,047) (1,034,047) 511,314 (522,733)period OthercomprehensiveincomeExchangedifference ontranslation offinancial - - - - (166,631) - (166,631) (12,533) (179,164)statements ofoverseassubsidiaries Total - - - - (166,631) (1,034,047) (1,200,678) 498,781 (701,897)comprehensivelossfor the period Dividends to - - - - - - - (329,783) (329,783)non-controllinginterests Recognition ofequity-settledshare-based - - - 309,695 - - 309,695 - 309,695payments
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
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 JUNE 2012
Note Unaudited Unaudited Audited six months six months year ended ended ended 30 June 201 30 June 201 31 December 2 1 2011 HK$ HK$ HK$ Cash flow from operating activities Profit / (Loss) before income tax 173,854 (617,777) 3,829,497 Amortisation of patents 167,610 190,634 376,251 Interest received (35,827) (21,198) (47,796) Depreciation 333,057 332,442 690,874 Foreign exchange (gain) / loss, (84,960) 230,862 419,720net Interest paid 85,300 62,395 164,273 Loss on disposal of property, 11,740 - 9,336plant and equipment Loss on cessation of a - - 11,540subsidiary's assets Provision for impairment losses - - 752,000on amounts due from associate Impairment loss on goodwill - - 127,857 Patents written off 83,140 - 653,581 Inventories written off - - 103,029 Share-based compensation 309,695 331,571 668,638
Operating profit before working
capital changes 1,043,609 508,929 7,758,800 Increase in inventories (686,770) (393,752) (451,832) Decrease / (increase) in trade 1,657,808 260,827 (1,763,721)and other receivables Decrease in amount due from 19,500 244,771 320,684associate - trade related Increase in trade and other 433,061 799,964 1,596,760payables Net cash generated from operati 2,467,208 1,420,739 7,460,691ons Corporate income tax paid (997,854) (797,968) (1,696,602) Interest paid (85,300) (62,395) (164,273) Net cash generated from operating 1,384,054 560,376 5,599,816activities Cash flow from investing activities Purchase of property, plant and (234,164) (68,657) (152,099)equipment Payment for patents (75,421) (184,883) (307,310) Amounts due from (195,000) - (192,913)associates-non-trade related Interest received 35,827 21,198 47,796 Net cash used in investing (468,758) (232,342) (604,526)activities Cash flow from financing activities Repayment of bank borrowings (2,467,004) (1,896,919) (2,056,208) Dividend paid to minority (329,783) - (275,857)interests
Proceeds from new bank borrowings 2,453,386 2,405,002 2,590,354
Net cash (used in) / generated (343,401) 508,083 258,289from financing activities Net increase in cash and cash 571,895 836,117 5,253,579equivalents
Cash and cash equivalents at the 11,736,464 6,285,006 6,285,006 beginning of the period/year
Exchange (loss) / gain on cash (36,550) 145,804 197,879and cash equivalents
Cash and cash equivalents at the 8 12,271,809 7,266,927 11,736,464 end of the period/year
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2012
(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 2011.(2) OTHER INCOME Unaudited Unaudited Audited six months six months year ended ended ended 30 June 20 30 June 2011 31 December 12 2011 HK$ HK$ HK$ Government subsidy - 59,780 33,801 Sundry income 20,218 12,973 50,255 Written back of accrued - - 40,500expenses 20,218 72,753 124,556(3) NET FINANCE COST Unaudited Unaudited Audited six months six months year ended ended ended 30 June 201 31 December 30 June 201 1 2011 2 HK$ HK$ HK$ Bank interest income 35,827 21,198 47,796
Interest expense on bank loans (85,300) (62,395) (164,273)
(49,473) (41,197) (116,477)(4) INCOME TAX EXPENSENo provision for Hong Kong Profits Tax has been made (June 2011: HK$nil; 2011:HK$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 2012 is HK$696,587 (June 2011: HK$469,536; 2011:HK$1,832,990).
(5) (LOSS) / EARNINGS PER SHARE
The calculation of the basic loss per share for the six months ended 30 June2012, is based on the loss attributable to ordinary equity shareholders of thecompany of HK$1,034,047 (June 2011: HK$1,299,477; 2011: profit of HK$1,291,396)during the period and the weighted average number of 68,834,388 ordinary shares(June 2011: 68,834,388; 2011: 68,834,388) in issue during the period/year. Nodiluted loss per share is to be reported for the period/year.
(6) DIVIDENDS
No payment of dividend was recommended for the first six months of 2012 (June 2011: HK$ nil; 2011: HK$nil).
(7) TRADE AND OTHER RECEIVABLES
Unaudited Unaudited Audited 30 June 20 30 June 2011 31 December 12 2011 HK$ HK$ HK$ Trade receivables 6,164,097 5,743,784 7,695,607 Less: provision for (542,885) (668,663) (545,899)impairment loss 5,621,212 5,075,121 7,149,708 Amounts due from a related - 30,802 -company Other receivables 449,950 614,163 716,441 Prepayments and deposits 666,722 656,360 529,543 6,737,884 6,376,446 8,395,692
(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 201 30 June 201 11 2 1 HK$ HK$ HK$ At 1 January 545,899 699,577 699,577 Written off - (46,079) (179,469) Exchange difference (3,014) 15,165 25,791 At 30 June/31 December 542,885 668,663 545,899
(b) Impairment of trade receivables (continued)
At 30 June 2012, the Group's trade receivables of HK$542,885 (June 2011: HK$668,663, 2011: HK$545,899) have been outstanding for a certain period of time. The management assessed that only a portion of the receivables is expected to be recoverable. Consequently, specific allowance for doubtful debts was recognised for the individually impaired receivables.
The Group does not hold any collateral over these balances.
c. The amount due from a related company is interest-free, unsecured and
repayable on demand.
(8) CASH AND CASH EQUIVALENTS
Unaudited Unaudited Audited 30 June 2012 30 June 2011 31 December 201 1 HK$ HK$ HK$ Cash at bank and on 12,271,809 7,266,927 11,736,464hand Cash and cash 12,271,809 7,266,927 11,736,464equivalents in the cash flow statement (9) TRADE AND OTHER PAYABLES Unaudited Unaudited Audited 30 June 2012 30 June 2011 31 December 20 11 HK$ HK$ HK$ Trade payables 3,016,406 2,186,507 3,623,273 Other payables and 3,122,463 2,722,505 2,082,535accrued expenses 6,138,869 4,909,012 5,705,808All of the trade and other payables are expected to be settled within one year.(10) BANK BORROWINGS Unaudited Unaudited Audited 30 June 201 30 June 201 31 December 20 2 1 11 HK$ HK$ HK$ Current Mortgage loan (a) - 72,992 - Bank borrowings, secured (b) 2,453,386 2,405,002 2,467,004 2,453,386 2,477,994 2,467,004
a. The mortgage loan was secured by a property situated in Thailand. During
the 2011 reporting period, the Group fully repaid the mortgage loan.
b. On 25 May 2012, an indirectly held subsidiary of the Group situated in PRC
("the subsidiary") obtained a bank borrowing of HK$2,453,386 denominated in
RMB with maturity of 1 year. The bank borrowing was secured by the
corporate guarantee issued by an independent third party. For the grant of
corporate guarantee, the holding company of the subsidiary, which is also
an indirectly held subsidiary of the Group, has pledged its shareholding of
the subsidiary to the independent third party.
(11) RECONCILIATION OF PROFIT / (LOSS) BEFORE INCOME TAX TO EBITDA
Unaudited Unaudited Audited six months six months year ended ended ended 31 December 20 30 June 201 30 June 201 11 2 1 HK$ HK$ HK$ Profit / (loss) before income 173,854 (617,777) 3,829,497tax Depreciation 333,057 332,442 690,874 Amortisation of patents 167,610 190,634 376,251 Interest income (35,827) (21,198) (47,796) Interest expenses 85,300 62,395 164,273 Patents written off 83,140 - 653,581
Loss on disposal of property, 11,740 - 9,336plant and equipment Provision for impairment losses - - 33,906
on amounts due from associate Impairment loss on goodwill - - 752,000 Share-based compensation - - 127,857 Issuance of share-based 309,696 331,571 668,638compensation EBITDA 1,128,570 278,067 7,258,417EBITDA 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.