23 Sep 2008 16:44
23 September 2008 Walcom Group Limited ("the Company") Half-yearly unaudited results for the six months ended 30 June 2008
The Board of Walcom Group Limited presents the Company's unaudited half-yearly results for the six months ended 30 June 2008.
Highlights
* Loss per share increases by 16 per cent. due to escalating costs and appreciation of the Reminbi * Turnover and gross profit increase by 54 per cent. and 25 per cent., respectively * Sales in the PRC increase by 134 per cent. * Overseas sales decrease by 18 per cent. * Promotion of new products with an innovative energy saving efficacy in feedstuffs Further enquiries:Walcom Group Limited Tel: +852 2494 0133 Francis Chi (Chief Executive Officer) Albert Wong (Chief Financial Officer) John East & Partners Limited Tel: 020 7628 2200 Jeffrey Coburn/Bidhi Bhoma Chairman's StatementIntroduction
The Company, like most other companies having manufacturing bases in China had a difficult six month period in the first half of 2008 due to the unusual bad weather and disastrous earthquake followed by the global economic slowdown. Due to high cost inflation and appreciation of the Reminbi, the Company has incurred a loss per share of 6.16 Hong Kong cents (June 2007: 5.29 Hong Kong cents), which is 16 per cent. more than that of the equivalent period for the previous year.
Results for the Period
The Company showed increases of 54 per cent. and 25 per cent. in turnover (June 2008: HK$11.7m; June 2007: HK$7.6m) and gross profits (June 2008: HK$6.4m; June 2007: HK$5.1m), respectively, compared to the same period last year. Despite the escalating costs of raw materials and appreciation of the Reminbi, the selling prices of our products could not be raised due to highly competitive market conditions and this resulted in the gross profit margin falling by 12 per cent. (June 2008: 55 per cent.; June 2007: 67 per cent.) from the same period last year.
Review of Activities
Partly due to the appreciation of the Reminbi, there was an increase of 134 per cent. (June 2008: HK$8.4m; June 2007: HK$3.6m) in sales in the PRC during the period. This was in part due to an increase in feed mill business and in part due to the continuing threat of pig diseases. Overseas sales dropped by 18 per cent. (June 2008: HK$3.3m; June 2007: HK$4.0m) due, mainly, to the effect of the world economic recession.
As described in note 19 to the financial statements, the Company has agreed to acquire the entire issued share capital of Beijing New World Bio-Technology Company Limited ("BNW"), by the issue to the vendor of 3,923,497 new shares. BNW is engaged in the sale of Chinese herb and natural plant extracts. The acquisition is still awaiting the approval of the relevant Chinese authorities. Following approval the new shares will be issued to the vendor to complete the acquisition.
Outlook
Due to the continuing threat of animal diseases in China and some South East Asian countries, we expect the sales of our products in this sector to continue to grow. A new programme of promoting the energy saving efficacy in feedstuffs of our products will be started in the fourth quarter of this year. We expect that this will help to give us greater penetration of the feed mill market and provide us with a more stable customer base which will help us to ride out the world financial crisis and economic recession.
Eddie K M ChanChairman23 September 2008
UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE PERIOD ENDED 30 JUNE 2008
Note Unaudited Unaudited Audited six months six months year ended ended ended 30 June 30 June 31 December 2008 2007 2007 HK$'000 HK$'000 HK$'000 Turnover 11,727 7,634 18,453 Cost of sales (5,304) (2,513) (6,487) Gross profit 6,423 5,121 11,966 Other income 89 83 788 Research and development expenses (677) (546) (1,208) Selling and distribution expenses (3,879) (3,028) (5,590) General and administrative (5,843) (5,612) (11,595)expenses Operating loss (3,887) (3,982) (5,639) Net finance income 2 24 226 367 Share of profit in associates - 321 508 Loss before taxation (3,863) (3,435) (4,764) Income tax 3 (59) - - Loss for the period / year (3,922) (3,435) (4,764) Attributable to: Equity shareholders of the (4,001) (3,435) (4,764)company Minority interest 79 - - Loss for the period / year (3,922) (3,435) (4,764)
Loss per share - basic, HK cents 4 (6.16) (5.29) (7.34)
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
AT 30 JUNE 2008 Note Unaudited Unaudited Audited 30 June 30 June 31 December 2008 2007 2007 HK$'000 HK$'000 HK$'000 ASSETS NON-CURRENT ASSETS Property, plant and equipment 1,814 983 1,244 Patents 7,694 6,730 6,967 Goodwill 128 - - Interests in associates 6 - 720 718 9,636 8,433 8,929 CURRENT ASSETS Inventories 1,340 1,260 1,552 Trade and other receivables 7 4,769 2,324 2,424 Amounts due from associates 6 1,957 3,966 3,553 Cash and cash equivalents 8 6,119 9,144 9,144 14,185 16,694 16,673 TOTAL ASSETS 23,821 25,127 25,602 EQUITY AND LIABILITIES EQUITY Share capital 649 649 649 Reserves 17,167 21,890 20,797 17,816 22,539 21,446 Minority interest 209 - - 18,025 22,539 21,446 CURRENT LIABILITIES Trade and other payables 3,222 2,588 1,898 Tax payable 54 - - Dividend payable 208 - - Bank borrowings 179 - - Bank overdrafts 8 1,152 - 1,098 4,815 2,588 2,996 NON CURRENT LIABILITIES Bank borrowings 981 - 1,160 TOTAL EQUITY AND LIABILITIES 23,821 25,127 25,602
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 JUNE 2008
Share Share Merger Exchange Accumulated Total Minority Total before capital premium reserve reserve losses interest HK$'000 Minority HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 interest HK$'000 At 1 January 2007 649 89,843 23,852 126 (88,593) 25,877 - 25,877 Exchange - - - 97 - 97 - 97differences on translation of financial statements of overseas subsidiaries Net loss for the - - - - (3,435) (3,435) - (3,435)period Total recognised - - - 97 (3,435) (3,338) - (3,338)income and expense for the period At 30 June 2007 649 89,843 23,852 223 (92,028) 22,539 - 22,539 At 1 January 2008 649 89,843 23,852 459 (93,357) 21,446 - 21,446 Exchange - - - 371 - 371 - 371differences on translation of financial statements of overseas subsidiaries Net loss for the - - - - (4,001) (4,001) 79 (3,922)period Total recognised - - - 371 (4,001) (3,630) 79 (3,551)income and expense for the period Acquisition of - - - - - - 754 754additional interest upon business combination from minority shareholders Dividend paid to - - - - - - (624) (624)minority shareholders At 30 June 2008 649 89,843 23,852 830 (97,358) 17,816 209 18,025
UNAUDITED CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE PERIOD ENDED 30 JUNE 2008
Note Unaudited Unaudited Audited six months six months year ended ended ended 30 June 30 June 31 December 2008 2007 2007 HK$'000 HK$'000 HK$'000 Operating activities Cash used in operations 9 (1,628) (8,466) (10,412) Interest paid (51) - (5) Tax paid (5) - - Net cash used in operating activities (1,684) (8,466) (10,417) Investing activities Payment for the purchase of property, (625) (143) (534)plant and equipment Payment for patents (958) (1,341) (1,802) Proceeds from sales of property, - - 1plant and equipment Amounts due from associates-non-trade - - 185related Interest received 78 206 372 Dividends received from an associate 328 184 372 Acquisition of additional interest 264 - -upon business combination Dividends paid to minority (439) - -shareholders Net cash used in investing activities (1,352) (1,094) (1,406) Financing activities Proceeds from new bank borrowings - - 1,160 Net cash from financing activities - - 1,160 Net decrease in cash and cash (3,036) (9,560) (10,663)equivalents Cash and cash equivalents at the 8,046 18,704 18,704beginning of the period/year Effect of foreign exchange rate (43) - 5changes, net
Cash and cash equivalents at the end 8 4,967 9,144 8,046 of the period/year
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2008
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 prepared under the historical cost convention. The same accounting policies, presentation and methods of computation are followed in these unaudited condensed consolidated financial statements as were applied in the preparation of the group's financial statements for the year ended 31 December 2007.
In the current period, the group has adopted International Financial Reporting Standard 3 "Business Combinations" for the acquisition of additional interest in Walcom Bio-Chem (Thailand) Company Limited (Walcom Thailand), a former associate (note 10). Goodwill amounting to HK$127,857 representing the excess of cost of acquisition over the share of the net identifiable assets, liabilities and contingent liabilities of Walcom Thailand is capitalised and presented separately in the balance sheet.
2. NET FINANCE INCOME Unaudited Unaudited Audited six months six months year ended ended ended 30 June 30 June 31 December 2008 2007 2007 HK$'000 HK$'000 HK$'000 Bank interest income 75 226 372 Interest on bank loans (39) - - Interest on bank overdrafts (12) - (5) 24 226 3673. INCOME TAX
No provision for Hong Kong income tax has been made (June 2007: HK$nil; 2007: HK$nil) as the group companies have no assessable profit for Hong Kong profits tax purposes in the period/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 period ended 30 June 2008 is HK$ 59,367 (June 2007: HK$ nil; 2007: HK$ nil).
4. LOSS PER SHARE
The calculation of the basic loss per share for the period ended 30 June 2008, is based on the loss attributable to ordinary equity shareholders of the company of HK$4,001,388 (June 2007: HK$3,435,101; 2007: HK$4,764,018) during the period and the weighted average number of 64,910,891 ordinary shares (June 2007: 64,910,891; 2007: 64,910,891) in issue during the period/year. No diluted loss per share is to be reported for the period/year.
5. DIVIDENDS
No payment of dividend was recommended for the first six months of 2008 (June 2007: HK$ nil; 2007: HK$ nil).
6. INTERESTS IN ASSOCIATES Unaudited Unaudited Audited 30 June 30 June 31 December 2008 2007 2007 HK$'000 HK$'000 HK$'000 Share of net assets - 720 718 Amounts due from associates * Trade related balances 1,677 3,633 3,221 * Non-trade related balances 1,992 2,045 2,044
Provision for impairment losses on (1,712) (1,712) (1,712) non-trade related balances
1,957 3,966 3,553
The amounts due from associates are denominated in United States dollars. The credit period granted for the trade related balances ranges from 90 days to 180 days. The non-trade related balances are unsecured, interest free and have no fixed terms of repayment.
On 25 January 2008, the group acquired a further 18 per cent. interest in Walcom Bio-Chem (Thailand) Company Limited (`Walcom Thailand'), thereby increasing its total shareholding to 55 per cent., at which point Walcom Thailand became a subsidiary of the group.
7. TRADE AND OTHER RECEIVABLES
Unaudited Unaudited Audited 30 June 30 June 31 December 2008 2007 2007 HK$'000 HK$'000 HK$'000 Trade receivables 4,048 2,407 2,098
Less: provision for impairment loss (677) (505) (636)
3,371 1,902 1,462 Other receivables 605 - 199 Prepayments and deposits 793 422 763 4,769 2,324 2,424
a. All trade and other receivables, are expected to be recovered within one year.
b. Impairment of trade receivables
The movement in the allowance for doubtful debts during the period/year, including both specific and collective loss components, is as follows:
Unaudited Unaudited Audited six months six months year ended ended ended 30 June 30 June 31 December 2008 2007 2007 HK$'000 HK$'000 HK$'000 At 1 January 636 493 493 Impairment loss recognised 41 12 143 At 30 June/31 December 677 505 636
At 30 June 2008, the group's trade receivables of HK$677,059 (June 2007: HK$607,418, 2007: HK$635,701) have been outstanding for a certain period of time. The management assessed that only a portion of the receivables is expected to be recoverable. Consequently, specific allowances for doubtful debts was recognised for the individually impaired receivables.
The group does not hold any collateral over these balances.
8. CASH AND CASH EQUIVALENTS Unaudited Unaudited Audited 30 June 30 June 31 December 2008 2007 2007 HK$'000 HK$'000 HK$'000
Cash and cash equivalents in the 6,119 9,144 9,144 balance sheet
Bank overdrafts (1,152) - (1,098)
Cash and cash equivalents in the 4,967 9,144 8,046 cash flow statement
9. RECONCILIATION OF LOSS BEFORE TAXATION TO CASH USED IN OPERATIONS
Unaudited Unaudited Audited six months six months year ended ended ended 30 June 30 June 31 December 2008 2007 2007 HK$'000 HK$'000 HK$'000 Loss before taxation (3,863) (3,435) (4,764) Adjustments for: Depreciation 216 189 355 Amortisation of patents 232 174 399 Share of profit in associates - (321) (508) Interest income (75) (226) (372) Interest expenses 51 - 5 Loss on disposal of an associate 89 - - Loss on disposal of property, plant and - - 6equipment Impairment losses on trade receivables - - 143 Foreign exchange (loss)/gain, net (125) 75 262 Operating loss before changes in (3,475) (3,544) (4,474)working capital Decrease/(increase) in inventories 405 (654) (945) (Increase)/decrease in trade and other (445) 556 210 receivables
Decrease/(increase) in amounts due from 1,596 (492) (182) associates-trade related
Increase/(decrease) in trade and other 291 (4,332) (5,021)
payables Cash used in operations (1,628) (8,466) (10,412)
10. RELATED PARTY TRANSACTIONS
Unaudited Unaudited Audited six months six months year ended ended ended 30 June 30 June 31 December 2008 2007 2007 HK$'000 HK$'000 HK$'000 Associates Sales of goods 1,404 3,733 7,894 Technical support fee income - 33 73 Related companies Acquisition of patent -- 804 804 Legal and professional fees paid 189 151 304 Beneficial shareholders Consultancy fee paid - 200 20011. ACQUISITION
On 27 June 2008, the group entered into an agreement, subject to the satisfaction of certain conditions, to acquire the entire issued share capital of Beijing New World Bio-Technology Company Limited (`BNW'). BNW is engaged in the sale of Chinese herb and natural plant extracts. The consideration is to be satisfied by the issue to the vendor of 3,923,497 new shares in the capital of the company. At the date of the agreement, the shares were quoted at GBP 0.11 per share, which makes the cost of the acquisition GBP431,585. The acquisition was classified as a related party transaction under the AIM Rules as the vendor is connected to the group. The acquisition is still awaiting the approval of the relevant Chinese authorities. After approval is obtained, the new shares will be issued to the vendor to complete the acquisition.
12. POST BALANCE SHEET EVENT
On 16 July, 2008 share options over 1,760,000 ordinary shares were granted to directors and employees of the group. Of the 1,760,000 options granted, 1,200,000 options were granted to directors of the company.
The options have been granted under the company's Share Option Scheme for any director or employee of the group. The exercise price for all of the options granted is GBP 0.11 per share, equivalent to the closing mid-market price on 15 July 2008. The options can be exercised at any time between 16 July 2009 and 16 July 2013.
13. COPIES OF INTERIM RESULTS
Copies of the half-yearly report will be available shortly from the Company's website www.walcomgroup.com
vendor