WALG.L Regulatory News (WALG)

WALCOM GROUP LTD - Half-yearly Report

PR Newswire

London, September 23

23 September 2015

Walcom Group Limited

(“Walcom” or “the Company”)

Half-yearly results for the six months ended 30 June 2015

The Company's today announces its interim results for the six months ended 30 June 2015. These results are also available from the Company's website at http://www.walcomgroup.com/

Further enquiries:

CHAIRMAN’S STATEMENT

Introduction

Despite the slow growth in the PRC economy during the first six months of the year and the continued poor performance of the pig farming industry during the same period, the Company was able to increase its revenue by 15 per cent. compared with the same period last year. The Company encountered difficulties, however, in passing on the adverse impact of escalating production costs and operating expenses to its customers owing to the weak economies in China and worldwide. The Company incurred a loss per share for the period of HK$2.81 cents compared with a loss per share of HK$4.98 cents in the same period last year, an improvement of 44 per cent.

Results for the Period

The Company generated revenues of HK$19.3 million during the period (June 2014: HK$16.8 million) and gross profits of HK$12.1 million (June 2014: HK$10.0 million), representing increases of 15 per cent. and 21 per cent. respectively compared with the same period last year. In addition, the gross profit margin for the period improved from 60 per cent. in the same period last year to 63 per cent. during this financial period. This increase is mainly due to the aggregate effect of a lower unit production cost as a result of an increase in the production volume, and a rise in sales in Thailand, where profit margins were higher than in other regions. The Company reduced its net loss by 47 per cent. to HK$1.8 million (June 2014: loss of HK$3.5 million) and incurred a loss of HK$1.4 million at the EBITDA level, a decrease of 55 per cent. over the same period last year (June 2014: HK$3.1 million).

Review of Activities and Market

In the six months to 30 June 2015, sales in the PRC were maintained at HK$10.5 million, about the same level as last year (June 2014: HK$10.7 million) while the overseas sales increased by 46 per cent. to HK$8.8 million (June 2014: HK$6.1 million).

During the financial period, the animal feed market in the PRC has continued to decline. This now represents, what the Board considers to be, an unusually long period over which the pig farming industry has weakened, dating back to late 2013. Although the pig farm gate price has started to rise since March this year, the number of farmed pigs has not increased owing to the large number of discontinued pig farms during 2014. The Board believes it will take some time for the pig numbers to go back to their previous level. As a result, the animal feed market has not yet recovered and this in turn has affected the volume of sales of the Company’s products.

The Company’s overseas sales have improved mainly due to an increase in sales in the Thai market. Unfortunately, the Korean market has weakened during the period under review.

Sales in Thailand have recovered since the period of political instability in the country. Turnover in this market has increased by 61 per cent. to HK$8.0 million (June 2014: 5.0 million) during the period. The improving sales trend in Korea during 2014 did not continue during the period under review and sales decreased by 47 per cent. to HK$0.5 million (June 2014: 1.0 million).

Outlook

As I mentioned in the Chairman’s Statement in the 2014 Annual Report, the Chinese economy continues to grow, albeit at a slower rate than has been seen historically. The rebalancing and de-leveraging of the economy are still ongoing and although the Chinese central government is implementing stimulus measures, the effect has not yet been reflected in the market. Efforts have been made to explore new markets in Asia and to increase the Company’s portfolio of customers, which will result in improved sales in the overseas market. Despite the unstable situation of the global economies, the Directors are cautiously optimistic in the performance of the Company in the second half of the year.

Frankie Y. L. WongChairman23 September 2015 

UNAUDITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

FOR THE SIX MONTHS ENDED 30 JUNE 2015

UNAUDITED CONSOLIDATED STATEMENT OF PROFIT OR LOSSAND OTHER COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2015

 UNAUDITED CONSOLIDATED BALANCE SHEET

AT 30 JUNE 2015

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2015

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 30 JUNE 2015

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2015

(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 2014.

(2) SEGMENT REPORTING

(a) Primary reporting format - Geographical Segment

The group’s operations are mainly located in Hong Kong, PRC, 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 2014: HK$nil; 2014: HK$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 2015 is HK$74,906 (June 2014: HK$20,864; 2014: HK$908,987).

(8) LOSS PER SHARE

The calculation of the basic loss per share for the six months ended 30 June 2015, is based on the loss attributable to ordinary equity shareholders of the company of HK$1,935,378 (June 2014: HK$3,429,897; 2014: HK$300,602) during the period and the weighted average number of 68,834,388 ordinary shares (June 2014: 68,834,388; 2014: 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 2015 (June 2014: HK$ nil; 2014: 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 2015, the Group’s trade receivables of HK$508,758 (June 2014: HK$741,562, 2014: 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

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All ordinary shares rank equally with regard to the Company’s residual assets.

(13) TRADE AND OTHER PAYABLES

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

(14) BANK BORROWINGS

(15) RELATED PARTY TRANSACTIONS

(16) RECONCILIATION OF (LOSS) / PROFIT BEFORE INCOME TAX TO EBITDA

EBITDA is defined herein as earnings before depreciation, amortization, interest and tax, plus specific charges which are considered non-recurring in nature. Specific charges include impairment loss in value and gain/loss in disposal of non-current assets, and amortization of fair value of share-based compensation. EBITDA is not a recognised term under generally accepted accounting principles and does not purport to be an alternative to net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Because not all companies use identical calculations, this presentation may not be comparable to other similarly titled measures of other companies.