Half-yearly Report
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 Statement
Introduction
Despite the instability in the world economy during the first half of 2009, the
Company maintained consistent levels of turnover compared to the same period
last year. During the period under review, the Company has been actively
monitoring costs and reducing them where necessary. The Company's cost cutting
strategy has led to a 23 per cent. reduction in the Company's loss per share to
HK$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 are
pleased that revenue generation and gross profit has been maintained despite
difficult economic conditions. In addition, the gross profit margin for the
period 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 period
by 20 per cent. (June 2009: Loss of HK$3.1m; June 2008: Loss of HK$3.9m) and
improved EBITDA by 56 per cent. (June 2009: Loss of HK$1.5m; June 2008: Loss of
HK$3.4m).
Review of Activities
In the six months to 30 June 2009, sales in the PRC were stable compared to the
same period in 2008 with overseas sales increasing by 6 per cent. from HK$3.3m
for the six month period to 30 June 2008 to HK$3.5m for the same period in
2009. The sustained levels of turnover can be attributed to a switch in sales
focus to feed mills rather than animal farms, as the Board believes the former
are more consistent consumers of the Company's products than the latter,
particularly in a difficult economic climate. The Board is hopeful that this
sales trend will continue in the future.
Outlook
As mentioned in my statement which accompanied the results for the full year,
the Company has a new programme of promoting the energy saving efficacy in
feedstuffs of the Company's products which was soft-launched in August this
year. The energy saving concept has been well received by the feed mills as it
helps them to ease the pressure on their production costs caused by the
escalating price of the agricultural commodities such as corns and soy beans.
The new approach by the Company allows feed mills to reduce the unit cost of
feedstuffs through an improvement on the utilisation efficiency of feedstuffs,
thereby increasing margins for the feed mills. The Company intends to focus its
marketing strategy on helping feed mills to lower their unit costs through the
use of the Company's products. We expect that this will help the Company to
penetrate into the feed mill market more easily and result in a positive effect
on the Company's future performance.
Eddie K M Chan
Chairman
28 September 2009
UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE PERIOD ENDED 30 JUNE 2009
Note Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2009 2008 2008
HK$'000 HK$'000 HK$'000
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 SHEET
AT 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 - 371
on 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 - - - - - - - 754 754
additional 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 16 116
on 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 - 536
equity-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 - 50
plant and equipment
Amounts due from - - 91
associates-non-trade related
Interest received 8 78 120
Dividends received from an - 328 -
associate
Acquisition of subsidiaries, net of - 264 4,699
cash acquired
Dividends paid to minority - (439) -
shareholders
Net cash (used in) / generated from (1,311) (1,352) 2,405
investing 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 5,046
beginning of the period/year
Exchange gains / (loss) on cash and 1 (43) 122
cash 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 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 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$'000
Bank interest income 8 75 120
Interest on bank loans (21) (39) (72)
Interest on bank overdrafts (1) (12) (38)
Other interest --- --- (8)
(14) 24 2
4. INCOME TAX EXPENSE
No provision for Hong Kong income tax has been made (June 2008: HK$nil; 2008:
HK$nil) as the group companies did not have assessable profit subject to 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 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 the
Company of HK$3,252,124 (June 2008: HK$4,001,388; 2008: HK$9,297,050) during
the period and the weighted average number of 68,834,388 ordinary shares (June
2008: 64,910,891; 2008: 65,661,287) in issue during the period/year. No diluted
loss per share is to be reported for the period/year.
6. DIVIDENDS
No payment of dividend was recommended for the first six months of 2009 (June
2008: HK$ 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 loan
for the acquisition of a property to the extent of HK$809,584. The mortgage
loan was secured by the property situated in Thailand. At 30 June 2009, the net
book value of the property included in the property, plant and equipment was
HK$ 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$'000
Loss before income tax (3,082) (3,863) (8,912)
Adjustments for:
Depreciation 353 216 457
Amortisation of patents 194 232 472
Patents written off - - 2,308
Inventories written off - - 288
Issuance of share-based compensation 536 - 500
Share of loss in associates - - 12
Interest income (8) (75) (120)
Interest expenses 22 51 118
Loss on disposal of an associate - 89 -
Loss / (gain) on disposal of property, plant 486 - (48)
and equipment
Impairment loss on goodwill - - 3
Foreign exchange loss/(gain), net 82 (125) 86
Operating loss before changes in working (1,417) (3,475) (4,836)
capital
Decrease in inventories 25 405 38
Decrease/(increase) in trade and other 707 (445) 1,125
receivables
Decrease in amount due from associate-trade 76 1,596 1,232
related
(Decrease)/increase in trade and other (94) 291 (421)
payables
Cash used in operations (703) (1,628) (2,862)
10. RECONCILIATION OF LOSS BEFORE INCOME TAX TO EBITDA
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2009 2008 2008
HK$'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 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. POST BALANCE SHEET EVENT
The 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 by
the Bank of Communications of Shanghai and is secured by a corporate guarantee
provided by an independent third party guarantee provider. The facilities were
drawn down in July 2009 with the funds being placed on term deposit.
In return for guaranteeing the Company's obligations to the bank, the Company
has 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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