Final Results

Walcom Group Limited (the "Group" or the "Company") Preliminary Results for the year ended 31 December 2006 Chairman's Statement I am pleased to present my first report since the shares of the Company were admitted to trading on the AIM market of the London Stock Exchange, under the symbol WALG, on 21 December 2006. Overview of Results Turnover and gross profit increased dramatically in 2006. However, the loss before tax was higher than that of last year after taking into account Admission costs and discounts on convertible loan notes which were recognised as non-recurring finance costs pursuant to the International Financial Reporting Standards (IFRS) adopted. The results are summarised as follows: Change 2006 2005 % HK$'000 HK$'000 Turnover +181 14,168 5,046 Gross profit +282 9,374 2,451 Operating loss before Admission and finance -76 (3,049) (12,784) costs Non-recurring admission costs n/a (8,695) 0 Non-recurring non-cash finance costs* +1,689 (16,639) (930) Other finance costs +71 (1,794) (1,047) Loss before tax +101 (29,643) (14,783) Net asset value per share (HK$) n/a 0.40 (0.17) restated *These are discounts on convertible loan notes written off as non-recurring and non-cash finance costs in accordance with IFRS 2 "Share-based Payment". Outlook As our business is the manufacture of "natural" animal feedstuffs, the Group should benefit from the global trend of promoting a more liveable environment: * Food safety measures are being tightened around the world including China and South East Asia, which gives more room for our "non hormonal", "non antibiotic" and "non gene-altering" products; * Avian Influenza continues to be a major threat to the world. Our immunity enhancing products will play a much more important role in animal husbandry; and * The world is facing increasing demand for energy, particularly in the area of fossil fuel, and one of the alternatives is the adoption of ethanol fuel. However, the newly established ethanol fuel plants have created an additional demand for corn which has driven the price of corn to a high level. Since corn is a major energy source in feedstuffs, the elevated price of corn has had a strong impact on the cost structure of the feed industry. We are developing a product to increase the efficiency of energy utilization from feedstuff thereby enabling feed companies to deliver more energy in a given mass of feedstuff and conserve energy. This will result in a reduction of the total cost of production. We believe this will be a revolutionary solution to the very competitive global feed / animal nutrition industry. Recent Development The Group had recently completed a large scale farm trial of our newly developed shrimp product "Aquanin plus" in Thailand, which have shown impressive improvements in feed conversion ratios, weight gains and decreased mortality rates. We believe that this product will make a significant contribution to the Group's sales in the near future. Patents At the end of 2006 the Group had been granted 14 patents in respect of: * its core Cysteamine technology in China, Hong Kong, North Korea, New Zealand, Ukraine and Russia; * poultry feed in the UK, North Korea, Taiwan and Hong Kong; * dairy cow feed in New Zealand and the UK; * antibodies to adipose tissues in the UK; and * fish feed in the UK. More patents are expected to be granted in the future as it is the policy of the Group to pursue wide patent coverage in places where we believe there are significant demand for the Group's products. Since the year end, the Company was assigned a further 19 patent filings, held by Omega Bio-Pharma (I.P.1) Limited for a total cash consideration of HK$804,112, covering materials and methods for improving shellfish health, immunity and growth. Borrowings The Group had no outstanding loans at the year end except for a temporary bank overdraft of HK$0.5 million, compared with HK$11.46 million convertible loan notes last year. On Admission, the convertible loan notes were converted into shares of the Company. Colleagues and Advisers I would like to take this opportunity to thank our professional advisers who have guided and assisted the Company through the Admission process and also my colleagues who have contributed to the Group over the past year. Eddie K.M. Chan Chairman 27 April 2007 Consolidated Income Statement For the year ended 31 December 2006 2006 2005 HK$ HK$ Turnover 14,168,404 5,046,293 Cost of sales (4,794,781) (2,595,091) Gross profit 9,373,623 2,451,202 Other income 1,658,591 107,484 Research and development expenses (1,277,809) (1,120,621) Selling and distribution expenses (5,492,121) (5,484,228) General and administrative expenses (16,005,909) (8,737,924) Operating loss (11,743,625) (12,784,087) Net finance costs (18,432,698) (1,976,927) Share of profits/(losses) of associated 533,592 (22,175) companies Loss before income tax (29,642,731) (14,783,189) Income tax - - Loss attributable to shareholders (29,642,731) (14,783,189) Loss per share - basic (0.56) (0.28) Turnover and losses are derived from continuing operations. Consolidated Balance Sheet As at 31 December 2006 2006 2005 HK$ HK$ Assets Non-current assets Property, plant and equipment 1,005,773 1,224,962 Patents 5,563,252 4,927,386 Associated companies 582,571 48,979 7,151,596 6,201,327 Current assets Inventories 606,528 559,446 Trade and other receivables 2,777,336 1,290,627 Amounts due from associated companies 3,556,606 1,001,485 Cash and bank balances 19,205,028 430,236 26,145,498 3,281,794 Total assets 33,297,094 9,483,121 Equity and liabilities Equity Share capital 649,109 448 Reserves 25,227,790 (8,893,007) 25,876,899 (8,892,559) Current liabilities Trade and other payables 6,919,405 4,328,885 Amount due to a related company - 1,632,142 Amounts due to directors - 954,363 Bank overdrafts - unsecured 500,790 - Convertible loan notes - 11,460,290 7,420,195 18,375,680 Total equity and liabilities 33,297,094 9,483,121 Consolidated cash flow statement For the year ended 31 December 2006 2006 2005 HK$ HK$ Cash flows from operating activities Loss from ordinary activities before income (29,642,731) (14,783,189) tax Adjustments for: Amortisation of patents 308,916 245,482 Interest received (49,385) (39,940) Depreciation 409,614 689,466 Exchange realignment 56,114 9,873 Impairment loss on amount due from an - 1,712,019 associated company Interest paid 18,482,083 2,016,867 Loss on disposal of property, plant and 256 10,663 equipment Share of (profits)/losses of associated (533,592) 22,175 companies Written off of amount due from a related - 552,626 company Operating loss before working capital changes (10,968,725) (9,563,958) Movements in working capital elements:- Inventories (47,082) (8,391) Trade and other receivables (1,486,709) 274,409 Trade receivables from associated companies (2,111,585) (927,904) Trade and other payables 2,590,520 1,483,918 Cash used in operations (12,023,581) (8,741,926) Interest paid (555,058) (804,575) Net cash used in operating activities (12,578,639) (9,546,501) Cash flows from investing activities Purchases of patents (944,782) (944,143) Purchases of property, plant and equipment (157,365) (173,219) Proceeds from disposal of property, plant and - 1,550 equipment Acquisition of interest in an associated - (71,154) company Accounts with associated companies (443,536) (1,038,325) Interest received 49,385 39,940 Net cash used in investing activities (1,496,298) (2,185,351) Cash flows from financing activities Proceeds from issue of new shares 22,065,444 - Proceeds from issue of convertible loan notes 12,870,000 3,900,000 Accounts with related companies (1,632,142) (1,677,246) Repayment of interest bearing loan due to a - (2,340,000) related company Accounts with directors (954,363) 954,363 Net cash generated from financing activities 32,348,939 837,117 Net increase/(decrease) in cash and cash 18,274,002 (10,894,735) equivalents Cash and cash equivalents at the beginning of 430,236 11,324,971 the year Cash and cash equivalents at the end of the 18,704,238 430,236 year Notes to the Financial Statements 1. Publication of non-statutory accounts The financial information set out in this preliminary announcement does not constitute statutory accounts. The financial information for the year ended 31 December 2006 has been extracted from the Company's financial statements to that date which have received an unqualified auditors' report. 2. Basis of presentation The consolidated financial statements (from which the preliminary results have been drawn) have been prepared under the historical cost convention in accordance with International Financial Reporting Standards ("IFRSs"), which comprise standards and interpretations issued by the International Accounting Standards Board ("IASB"), and International Accounting Standards ("IASs") and Interpretations issued by the International Financial Reporting Interpretations Committee that remain in effect and comply with the AIM Rules issued by the London Stock Exchange. During the year, the group has applied, for the first time, a number of new IFRSs, IASs and Interpretations (hereinafter collectively referred to as "new IFRSs") issued by the IASB that are effective for accounting periods beginning on or after 1 January 2006, which had not been early adopted by the Group for the year ended 31 December 2005. The adoption of the new IFRSs has had no material effect on how the results for the current or prior accounting years are prepared and presented. Accordingly, no prior year adjustment has been made. 3. Dividends The Directors do not propose the payment of a dividend. 4. Loss per share The calculation of the basic earnings per share for the year ended 31 December 2006, is based on the loss attributable to shareholders of HK$29,642,731 during the year and the weighted average number of 53,265,469 ordinary shares in issue during the year after adjusting for the effects of the following issuance of shares: * 52,384,799 ordinary shares on capitalisation of share premium of HK$523,848 on 30 November, 2006 * 7,989,506 ordinary shares on conversion of convertible loan notes with nominal value of US$3,000,000 on 30 November, 2006 * 4,491,735 ordinary shares on placing of shares on the AIM on 21 December, 2006 The calculation of the basic earnings per share for the year ended 31 December 2005, is based on the loss attributable to shareholders of HK$14,783,189 during the year and the weighted average number of approximately 52,429,650 ordinary shares in issue during the year. 5. Annual General Meeting The Annual General Meeting will be held at the office of Richards Butler, Hong Kong at 2:30pm on Wednesday 13 June 2007. All Shareholders are welcome to this important event which provides an opportunity for them to meet the Directors as well as other shareholders. 6. Copies of the Report and Accounts will be sent to shareholders shortly and will be available from the principal place of business of the Company, Unit 613, 6/F West Wing Office Building, New World Centre, 20 Salisbury Road, Tsimshatsui, Kowloon, Hong Kong. Enquiries: Walcom Group Ltd +852 2494 0133 Francis Chi (Chief Executive Officer) Albert Wong (Chief Financial Officer) John East & Partners Limited +44 20 7628 2200 Jeffrey Coburn/Simon Fox

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