28 Sep 2009 07:00
28 September 2009 Walcom Group Limited ("Walcom" or "the Company") Half-yearly unaudited results for the six months ended 30 June 2009
Walcom presents its unaudited half-yearly results for the six months ended 30 June 2009.
Highlights
* Loss per share reduced by 23 per cent. due to savings in operating costs
* Turnover and gross profit stable despite difficult economic conditions * Overseas sales increased by 6 per cent. with PRC sales stable * New feed-energy saving products soft launched in August 2009 Further enquiries:Walcom Francis Chi (Chief Executive Officer) Tel: +8621 5027
6567
Albert Wong (Chief Financial Officer) John East & Partners Limited, a subsidiary of Merchant Securities PLC
Bidhi Bhoma/Virginia Bull Tel: +44 20 7628 2200 Chairman's StatementIntroduction
Despite the instability in the world economy during the first half of 2009, theCompany maintained consistent levels of turnover compared to the same periodlast year. During the period under review, the Company has been activelymonitoring costs and reducing them where necessary. The Company's cost cuttingstrategy has led to a 23 per cent. reduction in the Company's loss per share toHK$4.72 cents (June 2008: HK$6.16 cents).
Results for the Period
The Company generated turnover during the period of HK$11.8m (June 2008:HK$11.7m) and gross profits of HK$6.5m (June 2008: HK$6.4m). The Directors arepleased that revenue generation and gross profit has been maintained despitedifficult economic conditions. In addition, the gross profit margin for theperiod remained unchanged, at 55 per cent., from the same period last year.During the period the Company relocated its Hong Kong office to Shanghai which,in addition to other cost saving measures, reduced the net loss for the periodby 20 per cent. (June 2009: Loss of HK$3.1m; June 2008: Loss of HK$3.9m) andimproved EBITDA by 56 per cent. (June 2009: Loss of HK$1.5m; June 2008: Loss ofHK$3.4m).Review of Activities
In the six months to 30 June 2009, sales in the PRC were stable compared to thesame period in 2008 with overseas sales increasing by 6 per cent. from HK$3.3mfor the six month period to 30 June 2008 to HK$3.5m for the same period in2009. The sustained levels of turnover can be attributed to a switch in salesfocus to feed mills rather than animal farms, as the Board believes the formerare more consistent consumers of the Company's products than the latter,particularly in a difficult economic climate. The Board is hopeful that thissales trend will continue in the future.
Outlook
As mentioned in my statement which accompanied the results for the full year,the Company has a new programme of promoting the energy saving efficacy infeedstuffs of the Company's products which was soft-launched in August thisyear. The energy saving concept has been well received by the feed mills as ithelps them to ease the pressure on their production costs caused by theescalating price of the agricultural commodities such as corns and soy beans.The new approach by the Company allows feed mills to reduce the unit cost offeedstuffs through an improvement on the utilisation efficiency of feedstuffs,thereby increasing margins for the feed mills. The Company intends to focus itsmarketing strategy on helping feed mills to lower their unit costs through theuse of the Company's products. We expect that this will help the Company topenetrate into the feed mill market more easily and result in a positive effecton the Company's future performance.Eddie K M ChanChairman28 September 2009UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENTFOR THE PERIOD ENDED 30 JUNE 2009 Note Unaudited Unaudited Audited six months six months year ended ended ended 30 June 30 June 31 December 2009 2008 2008 HK$'000 HK$'000 HK$'000 Revenue 11,790 11,727 26,027 Cost of sales (5,298) (5,304) (11,320) Gross profit 6,492 6,423 14,707 Other income 2 178 89 205 Research and development expenses (890) (677)
(1,418)
Selling and distribution expenses (2,972) (3,879)
(7,705)
General and administrative expenses (5,876) (5,843) (14,691) Loss from operation (3,068) (3,887) (8,902) Net finance (cost) / income 3 (14) 24 2 Share of loss of associates - - (12) Loss before income tax (3,082) (3,863) (8,912) Income tax expense 4 (52) (59) (133) Loss for the period / year (3,134) (3,922) (9,045) Attributable to: Equity shareholders of the Company (3,252) (4,001) (9,297) Minority interest 118 79 252 Loss for the period / year (3,134) (3,922) (9,045)
Loss per share - basic, HK cents 5 (4.72) (6.16) (14.16)
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETAT 30 JUNE 2009 Unaudited Unaudited Audited 30 June 30 June 31 December 2009 2008 2008 HK$'000 HK$'000 HK$'000 ASSETS NON-CURRENT ASSETS Property, plant and equipment 3,014 1,814 2,646 Patents 5,515 7,694 5,558 Goodwill 128 128 128 Interests in an associate - - - 8,657 9,636 8,332 CURRENT ASSETS Inventories 1,396 1,340 1,421 Trade and other receivables 3,261 4,769 3,968 Amount due from an associate 2,153 1,957 2,229 Tax recoverable 212 - 212 Cash and cash equivalents 7 4,423 6,119 8,328 11,445 14,185 16,158 TOTAL ASSETS 20,102 23,821 24,490 EQUITY AND LIABILITIES EQUITY Share capital 688 649 688 Reserves 15,088 17,167 17,704 15,776 17,816 18,392 Minority interest 510 209 376 16,286 18,025 18,768 CURRENT LIABILITIES Trade and other payables 2,751 3,222 2,845 Tax payable 52 54 18 Dividend payable 204 208 198 Bank borrowings 8 122 179 1,160 Bank overdrafts 7 & 8 - 1,152 1,501 3,129 4,815 5,722 NON-CURRENT LIABILITIES Bank borrowings 8 687 981 - TOTAL EQUITY AND LIABILITIES 20,102 23,821 24,490
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD ENDED 30 JUNE 2009
Share Share Merger Share-based Exchange
Accumulated Total Minority Total
capital premium reserve compensation reserve losses before interest reserve Minority interest HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
HK$'000 HK$'000 HK$'000 HK$'000
At 1 January 2008 649 89,843 23,852 - 459 (93,357) 21,446 - 21,446 Exchange differences - - - - 371 - 371 - 371on translation of financial statements of overseas subsidiaries Net (loss) / profit - - - - - (4,001) (4,001) 79 (3,922)for the period Total recognised - - - - 371 (4,001) (3,630) 79 (3,551)income and expense for the period Acquisition of - - - - - - - 754 754additional interest upon business combination from minority shareholders Dividend paid to - - - - - - - (624) (624)minority shareholders At 30 June 2008 649 89,843 23,852 - 830 (97,358) 17,816 209 18,025 At 1 January 2009 688 95,299 23,852 500 707 (102,654) 18,392 376 18,768 Exchange differences - - - - 100 - 100 16 116on translation of financial statements of overseas subsidiaries Net (loss) / profit - - - - - (3,252) (3,252) 118 (3,134)for the period Total recognised - - - - 100 (3,252) (3,152) 134 (3,018)income and expense for the period Recognition of - - - 536 - - 536 - 536equity-settled share-based payments At 30 June 2009 688 95,299 23,852 1,036 807 (105,906) 15,776 510 16,286
UNAUDITED CONDENSED CONSOLIDATED CASH FLOW STATEMENT FOR THE PERIOD ENDED 30 JUNE 2009
Note Unaudited Unaudited Audited six months six months year ended ended ended 30 June 30 June 31 December 2009 2008 2008 HK$'000 HK$'000 HK$'000 Operating activities Cash used in operations 9 (703) (1,628) (2,862) Interest paid (22) (51) (117) Corporate income tax paid (18) (5) (328) Net cash used in operating (743) (1,684) (3,307)activities Investing activities Payment for the purchase of (1,193) (625) (1,185)property, plant and equipment Payment for patents (151) (958) (1,370)
Proceeds from sales of property, 25 -
50plant and equipment Amounts due from - - 91associates-non-trade related Interest received 8 78 120 Dividends received from an - 328 -associate Acquisition of subsidiaries, net of - 264 4,699cash acquired Dividends paid to minority - (439) -shareholders Net cash (used in) / generated from (1,311) (1,352) 2,405investing activities Financing activities Repayment of secured bank (1,160) - -borrowings Drawdown of new secured bank 809 - -borrowings Decrease in restricted bank 3,000 - -balances Dividends paid to minority - - (439)interests Net cash generated from / (used in) 2,649 - (439)financing activities Net increase / (decrease) in cash 595 (3,036) (1,341)and cash equivalents Cash and cash equivalents at the 3,827 8,046 5,046beginning of the period/year
Exchange gains / (loss) on cash and 1 (43)
122cash equivalents
Cash and cash equivalents at the 7 4,423 4,967 3,827 end of the period/year
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30 JUNE 2009
1. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES
The unaudited condensed 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 condensed consolidated financial statements have been preparedunder the historical cost convention. The same accounting policies,presentation and methods of computation are followed in these unauditedcondensed consolidated financial statements as were applied in the preparationof the group's financial statements for the year ended 31 December 2008.2. OTHER INCOME Unaudited Unaudited Audited six months six months year ended ended ended 30 June 30 June 31 December 2009 2008 2008 HK$'000 HK$'000 HK$'000
Gain on disposal of plant and equipment - -
48 Service income 36 - 60 Sundry income 142 89 97 178 89 205
3. NET FINANCE (COST) / INCOME
Unaudited Unaudited Audited six months six months year ended ended ended 30 June 30 June 31 December 2009 2008 2008 HK$'000 HK$'000 HK$'000 Bank interest income 8 75 120 Interest on bank loans (21) (39) (72) Interest on bank overdrafts (1) (12) (38) Other interest --- --- (8) (14) 24 24. INCOME TAX EXPENSENo provision for Hong Kong income tax has been made (June 2008: HK$nil; 2008: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 2009 is HK$51,585 (June 2008: HK$59,367; 2008:HK$133,440).
5. LOSS PER SHARE
The calculation of the basic loss per share for the period ended 30 June 2009,is based on the loss attributable to ordinary equity shareholders of theCompany of HK$3,252,124 (June 2008: HK$4,001,388; 2008: HK$9,297,050) duringthe period and the weighted average number of 68,834,388 ordinary shares (June2008: 64,910,891; 2008: 65,661,287) in issue during the period/year. No dilutedloss per share is to be reported for the period/year.
6. DIVIDENDS
No payment of dividend was recommended for the first six months of 2009 (June 2008: HK$ nil; 2008: HK$ nil).
7. CASH AND CASH EQUIVALENTS Unaudited Unaudited Audited 30 June 30 June 31 December 2009 2008 2008 HK$'000 HK$'000 HK$'000 Cash and cash equivalents 4,423 6,119 8,328 Less: cash at bank - restricted - - (3,000) 4,423 6,119 5,328 Bank overdrafts - (1,152) (1,501) Cash and cash equivalents 4,423 4,967 3,827 in the cash flow statement
8. BANK BORROWINGS AND OVERDRAFTS
Unaudited Unaudited Audited 30 June 30 June 31 December 2009 2008 2008 HK$'000 HK$'000 HK$'000 Bank overdrafts (secured) - 1,152 1,501 Bank borrowings (secured) - current portion 122 179 1,160 - non-current portion 687 981 - 809 2,312 2,661
On 13 January 2009, the group fully repaid the short-term secured bank borrowings of HK$2,661,092, which were secured by time deposits of not less than HK$3,000,000 with the bank.
During the period ended 30 June 2009, the group obtained a new mortgage loanfor the acquisition of a property to the extent of HK$809,584. The mortgageloan was secured by the property situated in Thailand. At 30 June 2009, the netbook value of the property included in the property, plant and equipment wasHK$ 986,658.
9. RECONCILIATION OF LOSS BEFORE INCOME TAX TO CASH USED IN OPERATIONS
Unaudited Unaudited Audited six months six months year ended ended ended 30 June 30 June 31 December 2009 2008 2008 HK$'000 HK$'000 HK$'000 Loss before income tax (3,082) (3,863) (8,912) Adjustments for: Depreciation 353 216 457 Amortisation of patents 194 232 472 Patents written off - - 2,308 Inventories written off - - 288
Issuance of share-based compensation 536 -
500 Share of loss in associates - - 12 Interest income (8) (75) (120) Interest expenses 22 51 118
Loss on disposal of an associate - 89
-
Loss / (gain) on disposal of property, plant 486 - (48)and equipment
Impairment loss on goodwill - -
3
Foreign exchange loss/(gain), net 82 (125)
86
Operating loss before changes in working (1,417) (3,475) (4,836)capital Decrease in inventories 25 405 38 Decrease/(increase) in trade and other 707 (445) 1,125 receivables Decrease in amount due from associate-trade 76 1,596 1,232related (Decrease)/increase in trade and other (94) 291 (421) payables Cash used in operations (703) (1,628) (2,862)
10. RECONCILIATION OF LOSS BEFORE INCOME TAX TO EBITDA
Unaudited Unaudited Audited six months six months year ended ended ended 30 June 30 June 31 December 2009 2008 2008 HK$'000 HK$'000 HK$'000 Loss before income tax (3,082) (3,863) (8,912) Depreciation 353 216 457 Amortisation of patents 194 232 472 Interest income (8) (75) (120) Interest expenses 22 51 118 Patents written off - - 2,308 Loss / (gain) on disposal of property, plant 486 - (48)and equipment Impairment loss on goodwill - - 3
Issuance of share-based compensation 536 -
500 EBITDA (1,499) (3,439) (5,222)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. POST BALANCE SHEET EVENTThe group obtained a new banking facility of up to RMB1.5 million(approximately HK$1,701,645) in July 2009. The facility has been provided bythe Bank of Communications of Shanghai and is secured by a corporate guaranteeprovided by an independent third party guarantee provider. The facilities weredrawn down in July 2009 with the funds being placed on term deposit.In return for guaranteeing the Company's obligations to the bank, the Companyhas given the guarantor a pledge over its shares in Shanghai Walcom Bio-Chem.Co Ltd, in accordance with normal banking practices in the PRC.
12. COPIES OF REPORT AND ACCOUNTS
Copies of the Report and Accounts will be available shortly on the company's website www.walcomgroup.com.
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