18 September 2018
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
2018
Walcom is pleased to announce its interim results for the six
months ended 30 June 2018. These
results are also available from the Company’s website
at www.walcomgroup.com.
Further enquiries:
Walcom Group
Limited
Francis Chi (Chief Executive Officer)
Albert Wong (Chief Financial Officer) |
+852 2494 0133 |
Allenby Capital
Limited
Virginia Bull |
+44 20 3328 5656 |
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 2018.
Introduction
During the first six months of the year the economy in
China remained slow and the
overall performance of the pig farming industry had not improved
due to low pig farmgate prices. The Group’s revenue decreased by 2
per cent compared with the same period last year. Due to the
provision for a bad debt of HK$7.9
million and the continuing increase in production costs and
operating expenses, the Group incurred a loss per share for the
period of HK Cents 15.21 compared
with a loss per share of HK Cents
5.03 in the same period last year.
Results for the Period
The Group generated revenues of HK$19.2
million during the period (June
2017: HK$19.6 million) and
gross profits of HK$10.5 million
(June 2017: HK$11.0 million), representing a decrease of 2
per cent and 5 per cent respectively compared with the same period
last year. The gross profit margin decreased by approximately
1.8 per cent to 54.6 per cent (June
2017: 56.4 per cent) due to the increase in the production
costs which were incurred in Renminbi and the monthly average
exchange rate of Renminbi against Hong Kong Dollar which
appreciated by 7.6 per cent during the period under review compared
with the same period last year. During the period under review, the
Group made a provision for bad debt of HK$7.9 million on a trade receivable from its
largest customer in China
(June 2017: nil). This was the
primary contributor to the Group’s net loss increasing by 201 per
cent to HK$10.12 million
(June 2017: HK$3.36 million), without this, the Group had an
improved loss of HK$1.72 million at
the EBITDA level, a decrease of 41 per cent over the same period
last year (June 2017: HK$2.92 million).
Review of Activities and Market
Compared to the same period last year, the monthly average
exchange rate of Renminbi strengthened against the Hong Kong Dollar
by 7.6 per cent during the period under review. While reporting in
Hong Kong Dollar, this currency advantage in sales was set off by
the decrease of 10 per cent in the quantity of sales in
China, which resulted in the sales
turnover in the PRC decreasing by 6 per cent to HK$10.2 million compared with the same period
last year (June 2017: HK$10.8 million). Overseas sales remained
relatively stable, increasing slightly by 2 per cent to
HK$8.9 million compared with same
period last year (June 2017:
HK$8.7 million).
The Group’s largest customer in China, which is a sizable listed company,
experienced a number of problems which, combined with adverse
developments in the capital market during the first half year of
2018, resulted in trading in its shares being suspended on the
Chinese stock exchange. After repeated unsuccessful attempts to
demand payment of the overdue debt, the Group started legal
proceedings against the customer to recover the debt and the Group
has made a full provision of the trade receivable (HK$7.9 million) for prudence. Following the
commencement of legal proceedings, there has been positive progress
with the customer paying a small sum towards the outstanding debt
and engaging in negotiations for a payment plan with the Company.
The Board is, therefore, hopeful that the trade receivable might be
recoverable.
The pig farmgate price in China
continued to drop during the first five months of 2018 and, as a
result, the pig numbers had not increased to its previous level.
This being the case, the demand for feedstuff remained weak.
Belatedly, the pig farmgate price has started to rise,
although slowly, since June this year. Since August 2018, an epidemic African swine fever on
pigs has happened in some provinces in northern China. Emergency measures have been taken
which restricted the trafficking of pigs among different provinces
in the country. As a result, the pig farmgate price in the
unaffected provinces, which are the principal regions where the
Group operates, has risen significantly. If the rise in the pig
price continues in the remaining months of this year, it is
forecasted that the pig numbers in those regions which are not
affected by the swine fever will increase during the second half of
2018. This will have a positive impact on the animal feed market
which in turn will likely benefit the operating results of the
Group.
The Group’s major sales effort remained focused on increasing
sales penetration into the Group’s existing larger customers which
have low usage and also those integrated meat producing companies
whose businesses include feed milling, pig farming, pig
slaughtering and pork product production. Initial positive results
were achieved in the first half of 2018, although this effort was
undermined by the weakening pig farming industry as mentioned
above. With the prospect of an improvement in the industry in the
second half of the year, the Board is hopeful for an increase in
the Group’s sales.
The Group’s overall overseas sales improved by 2 per cent
compared with last year.
Sales in Thailand remained the
main contributor, which presented 91 per cent of the Group’s
overseas sales (June 2018:
HK$8.1 million; June 2017: HK$7.9
million).
The Korean market remained weak during the period under review
and sales decreased by 9 per cent to HK$0.70
million (June 2017:
HK$0.77 million).
Outlook
While the structural transformation of the Chinese economy
continues, which has resulted in slower growth over the past few
years, the recent China-US trade war has added further uncertainty
to the Chinese economy. Although the Chinese economy has
recently shown some recovery in sectors like the service industry,
the expected interest rate hike in the
United States and the recent devaluation of Renminbi are
expected to have an adverse impact on its growth. This will affect
the domestic consumer market and the negative impact could be
passed on to the Group’s sales in the PRC market.
Frankie Y. L.
Wong
Chairman
18 September
2018
UNAUDITED CONSOLIDATED STATEMENT OF
PROFIT OR LOSS FOR THE SIX MONTHS ENDED 30
JUNE 2018
|
Note |
|
Unaudited
six months
ended
30 June 2018 |
|
Unaudited
six months
ended
30 June 2017 |
|
Audited
year ended
31 December 2017 |
|
|
|
HK$ |
|
HK$ |
|
HK$ |
|
|
|
|
|
|
|
|
| Revenue |
3 |
|
19,163,440 |
|
19,560,955 |
|
44,488,372 |
|
|
|
|
|
|
|
|
| Cost of sales |
|
|
(8,697,989) |
|
(8,534,341) |
|
(20,177,334) |
|
|
|
|
|
|
|
|
| Gross profit |
|
|
10,465,451 |
|
11,026,614 |
|
24,311,038 |
|
|
|
|
|
|
|
|
| Other income |
4 |
|
100,719 |
|
15,842 |
|
215,041 |
|
|
|
|
|
|
|
|
| Research and development
expenses |
|
|
(881,279) |
|
(328,530) |
|
(1,482,466) |
|
|
|
|
|
|
|
|
| Selling and distribution
expenses |
|
|
(5,849,284) |
|
(5,435,032) |
|
(12,743,778) |
|
|
|
|
|
|
|
|
| General and administrative
expenses |
|
|
(13,630,612) |
|
(8,474,239) |
|
(15,096,244) |
|
|
|
|
|
|
|
|
| Loss from operations |
5 |
|
(9,795,005) |
|
(3,195,345) |
|
(4,796,409) |
|
|
|
|
|
|
|
|
| Net finance expenses |
6 |
|
(122,389) |
|
(56,290) |
|
(123,687) |
|
|
|
|
|
|
|
|
| Loss before income
tax |
|
|
(9,917,394) |
|
(3,251,635) |
|
(4,920,096) |
|
|
|
|
|
|
|
|
| Income tax expense |
7 |
|
(205,131) |
|
(112,609) |
|
979,861 |
|
|
|
|
|
|
|
|
| Loss for the period /
year |
|
|
(10,122,525) |
|
(3,364,244) |
|
(3,940,235) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (Loss) / profit
attributable to: |
|
|
|
|
|
|
|
| Owners of the Company |
|
|
(10,469,044) |
|
(3,458,992) |
|
(4,341,039) |
| Non-controlling interests |
|
|
346,519 |
|
94,748 |
|
400,804 |
|
|
|
|
|
|
|
|
| Loss for the period /
year |
|
|
(10,122,525) |
|
(3,364,244) |
|
(3,940,235) |
|
|
|
|
|
|
|
|
Loss per share – basic, HK cents |
8 |
|
(15.21) |
|
(5.03) |
|
(6.31) |
| – diluted, HK cents |
|
|
(15.21) |
|
(5.03) |
|
(6.31) |
|
|
|
|
|
|
|
|
UNAUDITED CONSOLIDATED STATEMENT OF
PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE SIX MONTHS
ENDED 30 JUNE 2018
|
|
Unaudited
six months
ended
30 June 2018 |
|
Unaudited
six months
ended
30 June 2017 |
|
Audited
year ended
31 December 2017 |
|
|
HK$ |
|
HK$ |
|
HK$ |
|
|
|
|
|
|
|
| Loss for the period /
year |
|
(10,122,525) |
|
(3,364,244) |
|
(3,940,235) |
|
|
|
|
|
|
|
| Other comprehensive
income |
|
|
|
|
|
|
| Exchange difference on translation
of financial |
|
|
|
|
|
|
| statements of overseas
subsidiaries |
|
(443,061) |
|
1,571,508 |
|
3,429,000 |
|
|
|
|
|
|
|
| Total comprehensive loss |
|
|
|
|
|
|
| for the period /
year |
|
(10,565,586) |
|
(1,792,736) |
|
(511,235) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total comprehensive loss |
|
|
|
|
|
|
| attributable
to: |
|
|
|
|
|
|
| Owners of the Company |
|
(10,874,678) |
|
(2,027,469) |
|
(1,151,641) |
| Non-controlling interests |
|
309,092 |
|
234,733 |
|
640,406 |
|
|
|
|
|
|
|
| Total comprehensive loss |
|
|
|
|
|
|
| for the
period / year |
|
(10,585,586) |
|
(1,792,736) |
|
(511,235) |
UNAUDITED CONSOLIDATED BALANCE SHEET AT 30 JUNE
2018
|
Note |
|
Unaudited
30 June 2018 |
|
Unaudited
30 June 2017 |
|
Audited
31 December 2017 |
|
|
|
HK$ |
|
HK$ |
|
HK$ |
| ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| NON-CURRENT
ASSETS |
|
|
|
|
|
|
|
| Property, plant and equipment |
|
|
5,876,007 |
|
5,821,135 |
|
6,001,662 |
| Patents |
|
|
405,836 |
|
1,681,327 |
|
468,463 |
| Goodwill |
|
|
- |
|
- |
|
- |
| Deferred tax assets |
|
|
1,072,500 |
|
- |
|
1,072,500 |
|
|
|
7,354,343 |
|
7,502,462 |
|
7,542,625 |
|
|
|
|
|
|
|
|
| CURRENT ASSETS |
|
|
|
|
|
|
|
| Inventories |
|
|
3,083,831 |
|
2,890,996 |
|
2,907,267 |
| Trade and other receivables |
10 |
|
3,968,541 |
|
9,279,392 |
|
12,090,127 |
| Tax recoverable |
|
|
464,357 |
|
- |
|
134,027 |
| Cash and cash equivalents |
11 |
|
3,395,045 |
|
4,397,076 |
|
3,594,050 |
| Restricted cash |
11 |
|
- |
|
111,768 |
|
111,377 |
|
|
|
10,911,774 |
|
16,679,232 |
|
18,841,848 |
|
|
|
|
|
|
|
|
| TOTAL ASSETS |
|
|
18,266,117 |
|
24,181,694 |
|
26,384,473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| EQUITY AND LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| EQUITY |
|
|
|
|
|
|
|
| Share capital |
12 |
|
688,344 |
|
688,344 |
|
688,344 |
| Reserves |
|
|
3,156,840 |
|
13,155,690 |
|
14,031,518 |
TOTAL EQUITY
ATTRIBUTABLE TO
OWNERS OF THE COMPANY |
|
|
3,845,184 |
|
13,844,034 |
|
14,719,862 |
| Non-controlling interests |
|
|
3,213,527 |
|
2,498,762 |
|
2,904,435 |
| TOTAL EQUITY |
|
|
7,058,711 |
|
16,342,796 |
|
17,624,297 |
|
|
|
|
|
|
|
|
| CURRENT LIABILITIES |
|
|
|
|
|
|
|
| Trade and other payables |
13 |
|
5,781,740 |
|
5,133,569 |
|
5,571,861 |
| Tax payables |
|
|
207,303 |
|
400,916 |
|
317,638 |
| Loans from non-controlling
interests |
|
|
473,967 |
|
- |
|
478,046 |
| Bank borrowings |
14 |
|
4,744,396 |
|
2,304,413 |
|
2,392,631 |
|
|
|
11,207,406 |
|
7,838,898 |
|
8,760,176 |
TOTAL LIABILITIES |
|
|
11,207,406 |
|
7,838,898 |
|
8,760,176 |
|
|
|
|
|
|
|
|
| TOTAL EQUITY AND
LIABILITIES |
|
|
18,266,117 |
|
24,181,694 |
|
26,384,473 |
|
|
|
|
|
|
|
|
| NET CURRENT (LIABILITIES)
/ ASSETS |
|
|
(295,632) |
|
8,840,334 |
|
10,081,672 |
|
|
|
|
|
|
|
|
TOTAL ASSETS
LESS CURRENT LIABILITIES |
|
|
7,058,711 |
|
16,342,796 |
|
17,624,297 |
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30
JUNE 2018
|
|
|
|
|
|
|
Share-based |
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
Share |
|
Share |
|
Merger |
|
compensation |
|
Exchange |
|
Surplus |
|
Accumulated |
|
|
|
controlling |
|
Total |
|
capital |
|
premium |
|
reserve |
|
reserve |
|
reserve |
|
reserve |
|
losses |
|
Total |
|
interests |
|
equity |
|
HK$ |
|
HK$ |
|
HK$ |
|
HK$ |
|
HK$ |
|
HK$ |
|
HK$ |
|
HK$ |
|
HK$ |
|
HK$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At 1 January
2017 |
688,344 |
|
95,298,644 |
|
23,852,469 |
|
1,568,769 |
|
(2,394,755) |
|
3,602,327 |
|
(106,744,295) |
|
15,871,503 |
|
2,264,029 |
|
18,135,532 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss for the period |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(3,458,992) |
|
(3,458,992) |
|
94,748 |
|
(3,364,244) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other comprehensive
income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Exchange difference on translation
of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| financial statements of overseas
subsidiaries |
- |
|
- |
|
- |
|
- |
|
1,431,523 |
|
- |
|
- |
|
1,431,523 |
|
139,985 |
|
1,571,508 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total comprehensive
loss for the period |
- |
|
- |
|
- |
|
- |
|
1,431,523 |
|
- |
|
(3,458,992) |
|
(2,027,469) |
|
234,733 |
|
(1,792,736) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Lapse of share option |
- |
|
- |
|
- |
|
(684,771) |
|
- |
|
- |
|
684,771 |
|
- |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At 30 June 2017 |
688,344 |
|
95,298,644 |
|
23,852,469 |
|
883,998 |
|
(963,232) |
|
3,602,327 |
|
(109,518,516) |
|
13,844,034 |
|
2,498,762 |
|
16,342,796 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At 1 January
2018 |
688,344 |
|
95,298,644 |
|
23,852,469 |
|
883,998 |
|
794,643 |
|
3,773,101 |
|
(110,571,337) |
|
14,719,862 |
|
2,904,435 |
|
17,624,297 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss for the period |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(10,469,044) |
|
(10,469,044) |
|
346,519 |
|
(10,122,525) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other comprehensive
income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Exchange difference on
translation of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| financial statements of overseas
subsidiaries |
- |
|
- |
|
- |
|
- |
|
(405,634) |
|
- |
|
- |
|
(405,634) |
|
(37,427) |
|
(443,061) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total comprehensive
loss for the period |
- |
|
- |
|
- |
|
- |
|
(405,634) |
|
- |
|
(10,469,044) |
|
(10,874,678) |
|
309,092 |
|
(10,565,586) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Lapse of share option |
- |
|
- |
|
- |
|
(68,477) |
|
- |
|
- |
|
68,477 |
|
- |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At 30 June 2018 |
688,344 |
|
95,298,644 |
|
23,852,469 |
|
815,521 |
|
389,009 |
|
3,773,101 |
|
(120,971,904) |
|
3,845,184 |
|
3,213,527 |
|
7,058,711 |
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE
SIX MONTHS ENDED 30 JUNE 2018
|
Note |
|
Unaudited
six months
ended
30 June 2018 |
|
Unaudited
six months
ended
30 June 2017 |
|
Audited
year ended
31 December 2017 |
|
|
|
HK$ |
|
HK$ |
|
HK$ |
| Cash flow from operating
activities |
|
|
|
|
|
|
|
| Loss before income tax |
|
|
(9,917,394) |
|
(3,251,635) |
|
(4,920,096) |
| Amortisation of patents |
|
|
47,030 |
|
132,769 |
|
265,538 |
| Depreciation |
|
|
109,684 |
|
144,293 |
|
285,927 |
| Foreign exchange (gain) / loss,
net |
|
|
(325,103) |
|
968,688 |
|
2,260,760 |
| Interest received |
|
|
(5,157) |
|
(8,861) |
|
(14,220) |
| Interest paid |
|
|
127,547 |
|
65,151 |
|
137,907 |
| Impairment of trade
receivables |
|
|
7,899,419 |
|
- |
|
- |
| Impairment loss of
patents |
|
|
- |
|
- |
|
766,073 |
| Patents written off |
|
|
15,597 |
|
- |
|
314,022 |
| (Gain) / loss on disposal of
property, plant and equipment |
|
|
- |
|
(23) |
|
2,286 |
|
|
|
|
|
|
|
|
| Operating loss
before |
|
|
|
|
|
|
|
| working capital
changes |
|
|
(2,048,377) |
|
(1,949,618) |
|
(901,803) |
| Increase in inventories |
|
|
(176,564) |
|
(1,510,268) |
|
(1,526,539) |
| Increase in trade and other
receivables |
|
|
(108,163) |
|
(251,236) |
|
(3,104,139) |
| Increase in trade and other
payables |
|
|
209,879 |
|
389,456 |
|
827,748 |
|
|
|
|
|
|
|
|
| Net cash used in
operations |
|
|
(2,123,225) |
|
(3,321,666) |
|
(4,704,733) |
| Corporate income tax paid |
|
|
(315,466) |
|
(769,329) |
|
(924,496) |
| Interest paid |
|
|
(127,547) |
|
(65,151) |
|
(137,907) |
Net cash used in operating activities |
|
|
(2,566,238) |
|
(4,156,146) |
|
(5,767,136) |
|
|
|
|
|
|
|
|
| Cash flow from investing
activities |
|
|
|
|
|
|
|
| Purchase of property, plant and
equipment |
|
|
(39,701) |
|
(816,090) |
|
(920,725) |
| Proceeds from disposal of fixed
assets |
|
|
- |
|
23 |
|
23 |
| Interest received |
|
|
5,157 |
|
8,861 |
|
14,220 |
| Net cash used in
investing activities |
|
|
(34,544) |
|
(807,206) |
|
(906,482) |
|
|
|
|
|
|
|
|
| Cash flow from financing
activities |
|
|
|
|
|
|
|
| Repayment of bank
borrowings |
|
|
- |
|
- |
|
(2,392,631) |
| Proceeds from new
bank borrowings |
|
|
2,375,015 |
|
- |
|
2,392,631 |
| Proceeds from loans
from non-controlling interests |
|
|
- |
|
- |
|
478,046 |
| Increase in
restricted bank balance |
|
|
116,377 |
|
(4,974) |
|
(424) |
| Net cash generated from / (used
in) financing activities |
|
|
2,491,392 |
|
(4,974) |
|
477,622 |
|
|
|
|
|
|
|
|
| Net decrease in cash and cash
equivalents |
|
|
(109,390) |
|
(4,968,326) |
|
(6,195,996) |
|
|
|
|
|
|
|
|
| Cash and cash
equivalents at the beginning of the period / year |
|
|
3,594,050 |
|
9,012,203 |
|
9,012,203 |
|
|
|
|
|
|
|
|
| Exchange (gain) /
loss on cash and cash equivalents |
|
|
(89,615) |
|
353,199 |
|
777,843 |
|
|
|
|
|
|
|
|
| Cash and cash
equivalents at the end of the period / year |
11 |
|
3,395,045 |
|
4,397,076 |
|
3,594,050 |
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2018
(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 2017 except for
those that relate to new standards and interpretations effective
for the first time for periods beginning on (or after) 1 January 2018, and will be adopted in the 2018
annual financial statements.
The following new standards and interpretations became effective
on 1 January 2018 and have been
adopted by the group:
| - |
IFRS 9 |
Financial Instruments |
| - |
IFRS 15 |
Revenue from Contracts with
Customers |
On 1 January 2018, the Group has
performed an assessment on the impact of the adoption of IFRS 9 and
IFRS 15 respectively and concluded that no material financial
impact exists, and therefore no adjustment to the opening balance
of equity at 1 January 2018 was
recognised.
For the six months ended 30 June
2018, impairment based on the expected credit loss model on
the group’s trade receivables of HK$7,899,419 have been made.
(2) SEGMENT
REPORTING
(a) Primary
reporting format - Geographical Segment
The group’s operations are mainly located in Hong Kong, PRC, Thailand. The group’s sales revenue by
geographical location of customers are analysed as follows:
|
Unaudited
six months
ended
30 June 2018 |
|
Unaudited
six months
ended
30 June 2017 |
|
Audited
year ended
31 December 2017 |
|
HK$ |
|
HK$ |
|
HK$ |
|
|
|
|
|
|
| PRC |
10,216,380 |
|
10,821,546 |
|
25,759,215 |
| Thailand |
8,102,788 |
|
7,894,388 |
|
16,854,536 |
| Korea |
702,000 |
|
- |
|
1,799,741 |
| Others |
142,272 |
|
845,021 |
|
74,880 |
|
19,163,440 |
|
19,560,955 |
|
44,488,372 |
(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
|
Unaudited
six months
ended
30 June 2018 |
|
Unaudited
six months
ended
30 June 2017 |
|
Audited
year ended
31 December 2017 |
|
HK$ |
|
HK$ |
|
HK$ |
|
|
|
|
|
|
| PRC |
6,687,472 |
|
13,854,608 |
|
13,943,939 |
| Thailand |
8,962,265 |
|
8,039,316 |
|
9,613,986 |
| Hong Kong |
2,210,544 |
|
606,442 |
|
2,449,543 |
| Others |
405,836 |
|
1,681,328 |
|
377,005 |
|
18,266,117 |
|
24,181,694 |
|
26,384,473 |
(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
|
Unaudited
six months
ended
30 June 2018 |
|
Unaudited
six months
ended
30 June 2017 |
|
Audited
year ended
31 December 2017 |
|
HK$ |
|
HK$ |
|
HK$ |
|
|
|
|
|
|
| Government subsidy |
- |
|
- |
|
177,946 |
| Gain on disposal of property, plant
and |
|
|
|
|
|
| equipment |
- |
|
23 |
|
- |
| Sundry income |
100,719 |
|
15,819 |
|
37,095 |
|
100,719 |
|
15,842 |
|
215,041 |
(5) OPERATING
(LOSS) / PROFIT
Operating (loss) / profit is stated after charging the following
items:-
|
Unaudited
six months
ended
30 June 2018 |
|
Unaudited
six months
ended
30 June 2017 |
|
Audited
year ended
31 December 2017 |
|
HK$ |
|
HK$ |
|
HK$ |
|
|
|
|
|
|
| Amortisation of patents |
47,030 |
|
132,769 |
|
265,538 |
| Auditor’s remuneration |
183,808 |
|
182,040 |
|
335,977 |
| Cost of inventories |
8,349,076 |
|
8,139,119 |
|
19,190,422 |
| Depreciation |
75,736 |
|
96,012 |
|
189,086 |
| Exchange (gains) /losses, net
(a) |
(325,103) |
|
968,688 |
|
2,260,760 |
| Impairment loss of trade
receivables |
7,899,419 |
|
- |
|
- |
| Impairment loss of patents |
- |
|
- |
|
766,073 |
| Loss on disposal of property, plant
and equipment |
- |
|
- |
|
2,286 |
| Patents written off |
15,597 |
|
- |
|
314,022 |
Rental charges under
operating leases
in respect of land and buildings |
486,701 |
|
410,733 |
|
841,008 |
Staff costs
(including directors’ emoluments) |
|
|
|
|
|
| - wages and salaries |
4,853,038 |
|
5,549,091 |
|
10,186,056 |
| - contributions to retirement
benefits |
452,386 |
|
419,466 |
|
877,054 |
| - other staff benefits |
1,380,641 |
|
1,527,712 |
|
3,042,257 |
- The net exchange (gains)/losses were mainly attributable to the
elimination of intragroup balances.
(6) NET FINANCE (EXPENSES)/
INCOME
|
Unaudited
six months
ended
30 June 2018 |
|
Unaudited
six months
ended
30 June 2017 |
|
Audited
year ended
31 December 2017 |
|
HK$ |
|
HK$ |
|
HK$ |
|
|
|
|
|
|
| Bank interest income |
5,157 |
|
8,861 |
|
14,220 |
| Interest expense on loans |
|
|
|
|
|
| from non-controlling interest |
(35,592) |
|
- |
|
(4,780) |
| Interest expense on bank loans |
(91,954) |
|
(65,151) |
|
(133,127) |
|
(122,389) |
|
(56,290) |
|
(123,687) |
(7) INCOME TAX
EXPENSE
No provision for Hong Kong Profits Tax has been made
(June 2017: HK$nil; 2017: HK$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 2018 is HK$205,131 (June
2017: HK$112,609; 2017:
HK$92,639).
(8) LOSS PER
SHARE
The calculation of the basic loss per share for the six months
ended 30 June 2018, is based on the
loss attributable to ordinary equity shareholders of the company of
HK$10,469,044 (June 2017: HK$3,458,992; 2017: HK$4,341,039) during the period and the weighted
average number of 68,834,388 ordinary shares (June 2017: 68,834,388; 2017: 68,834,388) in issue
during the period/year. No diluted loss per share is to be reported
for the period/year.
(9)
DIVIDENDS
No payment of dividend was recommended for the first six months
of 2018 (June 2017: HK$ nil; 2017:
HK$nil).
(10) TRADE AND OTHER
RECEIVABLES
|
Unaudited
30 June 2018 |
|
Unaudited
30 June 2017 |
|
Audited
31 December 2017 |
|
HK$ |
|
HK$ |
|
HK$ |
|
|
|
|
|
|
| Trade receivables |
10,628,698 |
|
8,275,752 |
|
11,501,231 |
| Less: provision for impairment
loss |
(7,899,419) |
|
(508,758) |
|
(508,758) |
|
2,729,279 |
|
7,766,994 |
|
10,992,473 |
| Other receivables |
221,943 |
|
524,206 |
|
77,896 |
| Prepayments and deposits |
1,017,319 |
|
988,192 |
|
1,019,758 |
|
3,968,541 |
|
9,279,392 |
|
12,090,127 |
(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:
|
Unaudited
six months ended
30 June 2018 |
|
Unaudited
six months
ended
30 June 2017 |
|
Audited
year ended
31 December 2017 |
|
HK$ |
|
HK$ |
|
HK$ |
|
|
|
|
|
|
| At 1 January |
508,758 |
|
508,758 |
|
508,758 |
| Impairment loss recognised |
7,899,419 |
|
- |
|
- |
| Written off |
(508,758) |
|
- |
|
- |
| At 30 June/31 December |
7,899,419 |
|
508,758 |
|
508,758 |
At 30 June 2018, the Group’s trade
receivables of HK$7,899,419
(June 2017: HK$508,758, 2017: HK$508,758) have been outstanding for a certain
period of time. The management assessed that only a portion of the
receivables is expected to be recoverable. Consequently,
specific allowance for doubtful debts was recognised for the
individually impaired receivables.
The Group does not hold any collateral over these balances.
(11) CASH AND CASH
EQUIVALENTS
|
Unaudited
30 June 2018 |
|
Unaudited
30 June 2017 |
|
Audited
31 December 2017 |
|
HK$ |
|
HK$ |
|
HK$ |
|
|
|
|
|
|
| Cash at bank and on hand |
3,395,045 |
|
4,508,844 |
|
3,710,427 |
| Less: Cash at bank - restricted |
- |
|
(111,768) |
|
(116,377) |
Cash and cash
equivalents
in the cash flow statement |
3,395,045 |
|
4,397,076 |
|
3,594,050 |
|
|
|
|
|
|
|
|
|
|
(12) SHARE CAPITAL
|
Unaudited
30 June 2018 |
|
Unaudited
30 June 2017 |
|
Audited
31 December 2017 |
|
HK$ |
|
HK$ |
|
HK$ |
| Authorised |
|
|
|
|
|
|
150,000,000 (June 2017: 150,000,000 and Dec 2017: 150,000,000)
ordinary shares of HK$0.01 each |
1,500,000 |
|
1,500,000 |
|
1,500,000 |
|
|
|
|
|
|
| Issued and fully paid |
|
|
|
|
|
68,834,388 (June 2017: 68,834,388
and
Dec 2017: 68,834,388) ordinary
shares of HK$0.01 each |
688,344 |
|
688,344 |
|
688,344 |
The holders of ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at meetings of the Company. All ordinary shares rank
equally with regard to the Company’s residual assets.
(13) TRADE AND OTHER
PAYABLES
|
Unaudited
30 June 2018 |
|
Unaudited
30 June 2017 |
|
Audited
31 December 2017 |
|
HK$ |
|
HK$ |
|
HK$ |
|
|
|
|
|
|
| Trade payables |
1,384,916 |
|
1,478,806 |
|
1,238,690 |
| Other payables and accrued
expenses |
4,396,824 |
|
3,654,763 |
|
4,333,171 |
|
5,781,740 |
|
5,133,569 |
|
5,571,861 |
All of the trade and other payables are expected to be settled
within one year.
(14) BANK BORROWINGS
|
|
Unaudited
30 June 2018 |
|
Unaudited
30 June 2017 |
|
Audited
31 December 2017 |
|
|
HK$ |
|
HK$ |
|
HK$ |
|
|
|
|
|
|
|
| Current |
|
|
|
|
|
|
| Bank borrowings, unsecured |
(a) |
4,744,396 |
|
2,304,413 |
|
2,392,631 |
|
|
|
|
|
|
|
- The effective interest rate per annum for bank borrowings at
balance sheet date is at 5.7% (June
2017: 5.7%, 2017: 5.7%) per annum.
(15) RECONCILIATION OF
LOSS BEFORE INCOME TAX TO EBITDA
|
Unaudited
six months
ended
30 June 2018 |
|
Unaudited
six months
ended
30 June 2017 |
|
Audited
year ended
31 December 2017 |
|
HK$ |
|
HK$ |
|
HK$ |
|
|
|
|
|
|
| Loss before income tax |
(9,917,394) |
|
(3,251,635) |
|
(4,920,096) |
| Depreciation |
109,684 |
|
144,293 |
|
285,927 |
| Amortisation of patents |
47,030 |
|
132,769 |
|
265,538 |
| Interest income |
(5,157) |
|
(8,861) |
|
(14,220) |
| Interest expenses |
127,546 |
|
65,151 |
|
137,907 |
| Patents written off |
15,597 |
|
- |
|
314,022 |
| Impairment loss of patents |
- |
|
- |
|
776,073 |
| Impairment loss of trade
receivables |
7,899,419 |
|
- |
|
- |
| (Gain) / loss on
disposal of property, plant and equipment |
- |
|
(23) |
|
2,286 |
| EBITDA |
(1,723,275) |
|
(2,918,306) |
|
(3,162,563) |
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 .