Half-yearly Report
27 September 2010
Walcom Group Limited
("Walcom" or "the Company")
Half-yearly unaudited results for the six months ended 30 June 2010
The Board of Walcom Group Limited presents the Company's unaudited half-yearly
results for the six months ended 30 June 2010.
Highlights
* Loss per share reduced by 43 per cent. due to improvement in performance
* Revenue and gross profit rose by 10 per cent. and 15 per cent. respectively
* PRC sales increased by 24 per cent.
* Sales of new feed-energy saving products commenced.
Enquiries:
Walcom Group Limited +852 2494 0133
Francis Chi (Chief Executive Officer)
Albert Wong (Chief Financial Officer)
Merchant Securities Limited +44 20 7628 2200
Bidhi Bhoma / Virginia Bull
Chairman's statement
Introduction
Despite the unstable global financial market and slowing of the growth in
Chinese economy during the first half of 2010, the Company's revenue grew by 10
per cent. in comparison with the same period last year. During the period under
review, the Company has been actively promoting its new energy saving products
(branded as `alpha' products), which has contributed to the Company's
performance. The Company's loss per share for the period was reduced by 43 per
cent. to HK$2.67 cents (June 2009: HK$4.72 cents).
Results for the Period
The Company generated revenues during the period of HK$13.0m (June 2009:
HK$11.8m) and gross profits of HK$7.5m (June 2009: HK$6.5m), representing
increases of 10 per cent. and 15 per cent. respectively, compared to the same
period last year. In addition, the gross profit margin for the period improved
slightly to 57 per cent. from 55 per cent. in the same period last year. This
is mainly due to the initial sales of alpha products which were made during the
period which produce a higher profit margin than the Company's historic product
range. Owing to the stronger sales and improved gross profit margin, the
Company reduced its net loss by 48 per cent. to HK$1.6m (June 2009: Loss of
HK$3.1m) and improved EBITDA by 33 per cent. to a loss of HK$1.0m (June 2009:
Loss of HK$1.5m).
Review of Activities
In the six months to 30 June 2010, sales in the PRC improved by 24 per cent. to
HK$10.3m, (June 2009: HK$8.3m). However, overseas sales decreased by 22 per
cent. to HK$2.8m (June 2009: HK$3.5m). The sales of alpha products contributed
to the increased sales in the PRC, although at a slower pace than the Directors
first expected. Besides selling into the feed mills, animal farms have become
important consumers of the alpha products, as direct and immediate savings can
be achieved. More importantly, animal farmers are more willing to share this
cost saving, which makes the Company's sales effort easier and more effective.
The unstable political situation in Thailand and a continuously poor economy in
the Philippines were previously the main factors causing decreased overseas
sales. However, sales in Thailand improved during the period as the country's
political environment stabilised.
Outlook
The Company's new products, which promote the energy saving efficacy in
feedstuffs, have proved successful over the last few months. The energy saving
concept has been well received not only by the feed mills, as it helps them to
ease the pressure on their production costs, but also by animal farms as it
provides them with immediate savings on feedstuff by using less
energy-intensive products like corns and soy beans. Although early in their
stage of commercialisation, sales of the alpha products to integrated animal
farms have had some success. The Directors are confident that sales will grow
and the Board believe that, once traction in the market has been gained, they
will grow at an increasing pace.
Eddie K M Chan
Chairman
27 September 2010
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD ENDED
30 JUNE 2010
Note Unaudited Unaudited Audited
six months six months year ended
ended ended 31 December
30 June 30 June 2009
2010 2009
HK$ HK$ HK$
Revenue 13,027,342 11,789,680 25,529,170
Cost of sales (5,559,813) (5,297,408) (10,697,432)
Gross profit 7,467,529 6,492,272 14,831,738
Other income 2 113,234 177,868 248,932
Research and development expenses (911,964) (890,323) (1,527,831)
Selling and distribution expenses (4,091,748) (2,971,370) (7,292,260)
General and administrative (4,067,075) (5,876,363) (10,547,393)
expenses
Loss from operation (1,490,024) (3,067,916) (4,286,814)
Net finance cost 3 (27,219) (14,506) (66,888)
Loss before income tax (1,517,243) (3,082,422) (4,353,702)
Income tax expense 4 (113,734) (51,585) (154,389)
Loss for the period / year (1,630,977) (3,134,007) (4,508,091)
Other comprehensive income
Exchange difference on 153,949 115,954 158,112
translation of financial
statements of overseas
subsidiaries
Total comprehensive loss for the (1,477,028) (3,018,053) (4,349,979)
period/year
Loss attributable to:
Owners of the Company (1,835,865) (3,252,125) (4,745,297)
Non-controlling interests 204,888 118,118 237,206
Loss for the period / year (1,630,977) (3,134,007) (4,508,091)
Total comprehensive loss
attributable to:
Owners of the Company (1,704,674) (3,151,770) (4,616,212)
Non-controlling interests 227,646 133,717 266,233
Total comprehensive loss for the (1,477,028) (3,018,053) (4,349,979)
period/year
Loss per share - basic, HK cents 5 (2.67) (4.72) (6.89)
- diluted, HK cents (2.67) (4.72) (6.89)
UNAUDITED CONSOLIDATED BALANCE SHEET AT 30 JUNE 2010
Note Unaudited Unaudited Audited
30 June 30 June 31 December
2010 2009 2009
HK$ HK$ HK$
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 2,735,361 3,014,022 2,898,144
Patents 4,708,840 5,515,095 4,844,916
Goodwill 127,857 127,857 127,857
Interests in an associate - - -
7,572,058 8,656,974 7,870,917
CURRENT ASSETS
Inventories 1,603,773 1,396,008 1,247,319
Trade and other receivables 4,548,243 3,261,134 4,309,726
Amount due from an associate 1,670,374 2,153,421 1,861,701
Tax recoverable - 212,071 143,524
Cash and cash equivalents 7 3,244,990 4,422,693 3,872,520
11,067,380 11,445,327 11,434,790
TOTAL ASSETS 18,639,438 20,102,301 19,305,707
EQUITY AND LIABILITIES
EQUITY
Share capital 688,344 688,344 688,344
Reserves 11,965,121 15,088,495 13,668,470
TOTAL EQUITY ATTRIBUTABLE TO 12,653,465 15,776,839 14,356,814
OWNERS OF THE COMPANY
Non-controlling interests 869,747 509,585 642,101
TOTAL EQUITY 13,523,212 16,286,424 14,998,915
NON-CURRENT LIABILITIES
Bank borrowings 8 194,955 687,688 634,711
CURRENT LIABILITIES
Trade and other payables 2,922,260 2,749,465 3,444,441
Tax payable 113,263 52,719 97,115
Dividend payable - 204,109 -
Bank borrowings 8 1,885,748 121,896 130,525
4,921,271 3,128,189 3,672,081
TOTAL LIABILITIES 5,116,226 3,815,877 4,306,792
TOTAL EQUITY AND LIABILITIES 18,639,438 20,102,301 19,305,707
NET CURRENT ASSETS 6,146,109 8,317,138 7,762,709
TOTAL ASSETS LESS CURRENT 13,718,167 16,974,112 15,633,626
LIABILITIES
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD ENDED 30
JUNE 2010
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 2009 688,344 95,298,644 23,852,469 500,473 706,951 (102,654,285) 18,392,596 375,868 18,768,464
Comprehensive loss
Loss for the - - - - - (3,252,125) (3,252,125) 118,118 (3,134,007)
period
Other
comprehensive
income
Exchange
difference on
translation of
financial
statements of
overseas
subsidiaries - - - - 100,355 - 100,355 15,599 115,954
Total
comprehensive loss
for the period - - - - 100,355 (3,252,125) (3,151,770) 133,717 (3,018,053)
Recognition of
equity-settled
share-based - - - 536,010 - - 536,010 - 536,010
payments
At 30 June 2009 688,344 95,298,644 23,852,469 1,036,483 807,306 (105,906,410) 15,776,836 509,585 16,286,421
At 1 January 2010 688,344 95,298,644 23,852,469 1,080,903 836,036 (107,399,582) 14,356,814 642,101 14,998,915
Comprehensive loss
Loss for the year - - - - - (1,835,865) (1,835,865) 204,888 (1,630,977)
Other
comprehensive
income
Exchange
difference on
translation of
financial
statements of
overseas
subsidiaries - - - - 131,191 - 131,191 22,758 153,949
Total
comprehensive loss
for the period - - - - 131,191 (1,835,865) (1,704,674) 227,646 (1,477,028)
Recognition of
equity-settled
share-based - - - 1,325 - - 1,325 - 1,325
payments
At 30 June 2010 688,344 95,298,644 23,852,469 1,082,228 967,227 (109,235,447) 12,653,465 869,747 13,523,212
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD ENDED 30 JUNE
2010
Note Unaudited Unaudited Audited
six months six months year ended
ended ended 31 December
30 June 30 June 2009
2010 2009
HK$ HK$ HK$
Cash flow from operating activities
Loss before income tax (1,517,243) (3,082,422) (4,353,702)
Amortisation of patents 176,836 193,989 398,277
Interest received (5,235) (7,900) (26,238)
Depreciation 291,051 352,867 602,691
Foreign exchange loss, net 81,934 82,525 104,497
Interest paid 32,454 22,406 93,126
Loss on disposal of property, plant - 486,247 494,016
and equipment
Patent written off - - 716,417
Inventories written off - - 137,187
Share-based compensation 1,325 536,010 580,430
Operating loss before working (938,878) (1,416,278) (1,253,299)
capital changes
(Increase) / decrease in inventories (356,454) 24,539 36,041
(Increase) / decrease in trade and (94,993) 706,910 (341,682)
other receivables
Decrease in amount due from 152,490 75,913 358,800
associate - trade related
(Decrease) / increase in trade and (522,181) (95,938) 401,518
other payables
Net cash used in operations (1,760,016) (704,854) (798,622)
Corporate income tax paid (97,586) (16,794) (6,655)
Interest paid (32,454) (22,406) (93,126)
Net cash used in operating (1,890,056) (744,054) (898,403)
activities
Cash flow from investing activities
Purchase of property, plant and (77,447) (1,192,721) (1,367,556)
equipment
Payment for patents (40,760) (150,966) (401,492)
Proceeds from sales of property, - 25,012 24,806
plant and equipment
Amounts due from 38,837 - 8,833
associates-non-trade related
Interest received 5,235 7,900 26,238
Net cash used in investing (74,135) (1,310,775) (1,709,171)
activities
Cash flow from financing activities
Release of restricted balance of - 3,000,000 3,000,000
cash and cash equivalents
Repayment of bank borrowings (403,928) (1,208,168) (1,252,516)
Proceeds from new bank borrowings 1,719,395 857,752 857,752
Net cash generated from financing 1,315,467 2,649,584 2,605,236
activities
Net (decrease) / increase in cash (648,724) 594,755 (2,338)
and cash equivalents
Cash and cash equivalents at the 3,872,520 3,826,940 3,826,940
beginning of the period/year
Exchange gains on cash and cash 21,194 998 47,918
equivalents
Cash and cash equivalents at the end 7 3,244,990 4,422,693 3,872,520
of the period/year
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED
30 JUNE 2010
(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 2009.
(2) OTHER INCOME
Unaudited Unaudited Audited
six months six months year ended
ended ended 31 December
2009
30 June 30 June
2010 2009
HK$ HK$ HK$
Tax refund - - 31,958
Government subsidy 84,920 56,685 56,685
Service income - 36,000 36,000
Sundry income 28,314 85,183 124,289
113,234 177,868 248,932
(3) NET FINANCE COST
Unaudited Unaudited Audited
six months six months year ended
ended ended 31 December
30 June 30 June 2009
2010 2009
HK$ HK$ HK$
Bank interest income 5,235 7,900 26,238
Interest on bank loans (32,454) (21,282) (91,998)
Interest on bank overdrafts - (1,124) (1,128)
(27,219) (14,506) (66,888)
(4) INCOME TAX EXPENSE
No provision for Hong Kong income tax has been made (June 2009: HK$nil; 2009:
HK$nil) as the group companies did not have assessable profit subject to Hong
Kong profits tax purposes for 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 2010 is HK$113,734 (June 2009: HK$51,585; 2009:
HK$154,389).
(5) LOSS PER SHARE
The calculation of the basic loss per share for the period ended 30 June 2010,
is based on the loss attributable to ordinary equity shareholders of the
company of HK$1,838,639 (June 2009: HK$3,252,124; 2009: HK$4,745,297) during
the period and the weighted average number of 68,834,388 ordinary shares (June
2009: 68,834,388; 2009: 68,834,388) in issue during the period/year. No diluted
loss per share is to be reported for the period/year.
(6) DIVIDENDS
No payment of dividend was recommended for the first six months of 2010 (June
2009: HK$ nil; 2009: HK$ nil).
(7) CASH AND CASH EQUIVALENTS
Unaudited Unaudited Audited
30 June 30 June 31 December
2010 2009 2009
HK$ HK$ HK$
Cash at bank and on hand 2,671,858 4,422,693 3,872,520
Short-term bank deposits 573,132 - -
Cash and cash equivalents in the 3,244,990 4,422,693 3,872,520
cash flow statement
(8) BANK BORROWINGS
Unaudited Unaudited Audited
30 June 30 June 31 December
2010 2009 2009
HK$ HK$ HK$
Non-current
Mortgage loan (a) 194,955 687,688 634,711
Current
Mortgage loan (a) 166,353 121,896 130,525
Bank borrowings, secured (b) 1,719,395 - -
2,080,703 809,584 765,236
(a) The mortgage loan was secured by the property situated in Thailand. At 30
June 2010, the net book value of the property included in the property, plant
and equipment was HK$992,839.
b. On 13 May 2010, an indirectly held subsidiary of the Group situated in PRC
("the subsidiary") has obtained a bank borrowing of HK$1,719,395
denominated in RMB with maturity of 1 year. The bank borrowing was secured
by the corporate guarantee issued by an independent third party. For the
grant of corporate guarantee, the holding company of the subsidiary, which
is also an indirectly held subsidiary of the Group, has pledged its
shareholding of the subsidiary to the independent third party.
(9) RELATED PARTY TRANSACTIONS
Unaudited Unaudited Audited
six months six months year ended
ended ended 31 December
30 June 30 June 2009
2010 2009
HK$ HK$ HK$
Associates
Sales of goods 460,590 936,000 1,502,280
Related companies
Legal and professional fees paid 74,754 61,310 109,995
Service income - 36,000 36,000
(10) RECONCILIATION OF LOSS BEFORE INCOME TAX TO EBITDA
Unaudited Unaudited Audited
six months six months year ended
ended ended 31 December
30 June 30 June 2009
2010 2009
HK$ HK$ HK$
Loss before income tax (1,520,017) (3,082,422) (4,353,702)
Depreciation 291,051 352,867 602,691
Amortisation of patents 176,836 193,989 398,277
Interest income (5,235) (7,900) (26,238)
Interest expenses 32,454 22,406 93,126
Patents written off - - 716,417
Loss on disposal of property, - 486,247 494,016
plant and equipment
Issuance of share-based 1,325 536,010 580,430
compensation
EBITDA (1,023,586) (1,498,803) (1,494,983)
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.
(11) COPIES OF HALF YEARLY REPORT
Copies of the half-yearly report will be available shortly from the Company's
website www.walcomgroup.com.
Friday, 17th May 2024
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