WALG.L Regulatory News (WALG)

Walcom Group Ltd - Half-yearly results

PR Newswire

London, September 19

19 September 2017

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR")

WALCOM GROUP LIMITED(“Walcom” or “the Company”)

Half-yearly results for the six months ended 30 June 2017

Walcom is pleased to announce its interim results for the six months ended 30 June 2017. These results are also available from the Company’s website at www.walcomgroup.com.

Further enquiries:

CHAIRMAN’S STATEMENT

On behalf of the board of directors (the “Board”), I am pleased to present the Company’s half-yearly results for the six months ended 30 June 2017.

Introduction

The PRC economy maintained steady growth during the first six months of the year but the overall performance of the pig farming industry did not improve during the same period due to a decreasing pig farmgate price. The Company’s revenue decreased by 5 per cent. compared with the same period last year. Due to the continuing increase in production costs and operating expenses, the Company incurred a loss per share for the period of HK$5.03 cents compared with a loss per share of HK$2.46 cents in the same period last year.

Results for the Period

The Company generated revenues of HK$19.6 million during the period (June 2016: HK$20.7 million) and gross profits of HK$11.0 million (June 2016: HK$11.7 million), representing a decrease of 5 per cent. and 6 per cent. respectively compared with the same period last year. The gross profit margin remained approximately the same as last year at 56.4 per cent. (June 2016: 56.5 per cent.) despite the escalating production costs, particularly raw materials, labour and rental expenses. Compared to 1 January 2017, as at 30 June 2017 the Hong Kong currency fell by approximately 3 per cent. against China’s Renminbi, which resulted in an accounting exchange loss of HK$0.90 million (June 2016: gain of HK$0.59 million) when translating the inter-company balances among the Group companies. This was a significant contributor to the Company’s net loss increasing by 99 per cent. to HK$3.36 million (June 2016: HK$1.69 million) and the Company incurring a loss of HK$2.92 million at the EBITDA level, an increase of 159 per cent. over the same period last year (June 2016: HK$1.12 million).

Review of Activities and Market

Compared to the same period last year, the average exchange rate of Renminbi weakened against the Hong Kong Dollar by 4.8 per cent. during the period under review. This, in combination with the decrease in the quantity of sales in China, resulted in the sales turnover in the PRC decreasing by 8 per cent. to HK$10.8 million compared with the same period last year (June 2016: HK$11.8 million). Overseas sales remained relatively stable, decreasing only slightly by 1 per cent. to HK$8.7 million compared with same period last year (June 2016: HK$8.8 million).

The pig farmgate price in China dropped during the first six months of 2017 and, accordingly, the pig number has not increased to its previous level. As such, the demand for feedstuff remained weak. The pig farming industry forecast estimated that the pig numbers will remain depressed during the second half of 2017 as the pig farmgate price is not expected to rise due to increasing competition from pork imported into China. This will affect the animal feed market which in turn will likely have an adverse effect on the operating results of the Company.

Earlier this year the Company strengthened its sales team by appointing Mr. Paitoon Buddhinunta-opas, the general manager of the Group’s subsidiary in Thailand, as the Company’s group sales director. The new sales team is focused on increasing sales penetration into the Company’s existing larger customers which have low usage of the Company’s products and also those integrated meat producing companies whose businesses include feed milling, pig farming, pig slaughtering and pork product production. From the Company’s previous experience, these integrated companies are more responsive to the gross margin impact that the Company’s products can have, which increases the Company’s chances of gaining sales traction. By putting this concept in practice, the Board is delighted to report that the Company has successfully sold its products into one of the largest integrated meat producing companies in China since July this year.

The Company’s overall overseas sales were maintained at about the same level as last year. 

Sales in Thailand in terms of quantity and turnover both increased by 8 per cent. over the same period last year (June 2017: HK$7.9 million; June 2016: HK$7.3 million).

Due to poorer performance of the feed mills, the Korean market weakened during the period under review and sales decreased by 50 per cent. to HK$0.8 million (June 2016: HK$1.6 million).

Outlook

It is believed that the structural transformation of the Chinese economy which resulted in a slower growth in the economy over the past three years will continue for the foreseeable future. However, with the promotion of the “internet plus” concept, the Chinese economy has shown recovery in some sectors especially the service industry. This will have a positive impact on the consumer market, the advantage of which will in turn be passed on to the Company’s sales in the PRC market. With the Company’s new sales team, the Directors are confident that this will result in improved sales in the second half of the year which will have positive effect in the overall performance of the Company in the year 2017.

Frankie Y. L. WongChairman19 September 2017

UNAUDITED CONSOLIDATED STATEMENT OF PROFIT OR LOSSFOR THE SIX MONTHS ENDED 30 JUNE 2017

UNAUDITED CONSOLIDATED STATEMENT OF PROFIT OR LOSSAND OTHER COMPREHENSIVE INCOMEFOR THE SIX MONTHS ENDED 30 JUNE 2017

UNAUDITED CONSOLIDATED BALANCE SHEETAT 30 JUNE 2017

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE SIX MONTHS ENDED 30 JUNE 2017

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE SIX MONTHS ENDED 30 JUNE 2017

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2017

(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 2016.

(2) SEGMENT REPORTING

(a) Primary reporting format - Geographical Segment

The group’s operations are mainly located in Hong Kong, PRC, Thailand. The group’s sales revenue by geographical location of customers are analysed as follows:

(b) Secondary reporting format - Business Segment

The Group is principally engaged in the manufacture, distribution and sale of chemical feed and additive products. All of the group’s products are of a similar nature and subject to similar risk and returns. Accordingly, the group’s activities are attributable to a single business segment and no business segment analysis is presented.

(c) Segment assets by geographical location of assets

(3) REVENUE

Revenue represents the sales value of goods supplied to the customers less returns, discounts, value added tax and sales taxes.

(4) OTHER INCOME

(5) OPERATING (LOSS) / PROFIT

Operating (loss) / profit is stated after charging the following items:-

(6) NET FINANCE (EXPENSES)/ INCOME

(7) INCOME TAX EXPENSE

No provision for Hong Kong Profits Tax has been made (June 2016: HK$nil; 2016: HK$nil) as the group’s assessable profit subject to Hong Kong profits tax for the period is fully set-off by tax loss brought forward from last 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 six months ended 30 June 2017 is HK$112,609 (June 2016: HK$240,916; 2016: HK$1,316,475).

(8) LOSS PER SHARE

The calculation of the basic loss per share for the six months ended 30 June 2017, is based on the loss attributable to ordinary equity shareholders of the company of HK$3,458,992 (June 2016: HK$1,690,571; 2016: Profit HK$1,263,286) during the period and the weighted average number of 68,834,388 ordinary shares (June 2016: 68,834,388; 2016: 68,834,388) in issue during the period/year. No diluted loss per share is to be reported for the period/year.

(9) DIVIDENDS

No payment of dividend was recommended for the first six months of 2017 (June 2016: HK$ nil; 2016: HK$nil).

(10) TRADE AND OTHER RECEIVABLES

(a) All trade and other receivables, are expected to be recovered within one year.

(b) Impairment of trade receivables

The movement in the provision of impairment for doubtful debts during the period/year, including both specific and collective loss components, is as follows:

At 30 June 2017, the Group’s trade receivables of HK$508,758 (June 2016: HK$508,758, 2016: HK$508,758) 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 allowance for doubtful debts was recognised for the individually impaired receivables. 

The Group does not hold any collateral over these balances.

(11) CASH AND CASH EQUIVALENTS

(12) SHARE CAPITAL

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All ordinary shares rank equally with regard to the Company’s residual assets.

(13) TRADE AND OTHER PAYABLES

All of the trade and other payables are expected to be settled within one year.

(14) BANK BORROWINGS

 (15) RECONCILIATION OF (LOSS) / PROFIT BEFORE INCOME TAX TO EBITDA

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.

(16) COPIES OF THE HALF YEARLY REPORT

Copies of the half-yearly report will be available shortly from the Company’s website www.walcomgroup.com .