WALG Walcom Group Limited

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

 20 March 2019

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

Further re. disposal of Walcom Bio-Chem (Thailand) Company Limited

Further to its announcement on 13 March 2019, Walcom announces that it has today entered into an agreement for the disposal of its entire interest in its 55 per cent. owned subsidiary Walcom Bio-Chem (Thailand) Company Limited (“Walcom Thailand”), to Mr Paitoon Buddhinunta-opas (the “Purchaser”), General Manager of, and 40 per cent. shareholder in, Walcom Thailand for a cash consideration of 16.5 million Thai Baht, (approximately HK$4.1m or £0.39m), (the “Disposal”). Certain amounts owed to the Purchaser will be repaid from the consideration for the Disposal such that the net proceeds to Walcom will be 12.1 million Thai Baht, (approximately HK$3.0m or £0.29m).

Walcom Thailand’s operating business is focused on the trading of chemical animal feed additive products in Thailand. Following the Disposal, the Purchaser will own 95,000 shares in Walcom Thailand, representing 95 per cent. of Walcom Thailand’s issued share capital, with the remaining 5,000 shares being held by minority shareholders.

As previously announced, Walcom’s working capital position has been severely constrained due to difficult trading conditions and defaults on payments from one of its major customers. The net proceeds of the Disposal will be used to ease the Group’s working capital position in the short term and the Board expects that these net proceeds will enable the Group to meet its liabilities as they fall due until the middle of June 2019. The Group continues to closely monitor its working capital position and continues to consider all options available to it in order to mitigate its working capital position.

In conjunction with the Disposal, the Group has entered into an agreement with Walcom Thailand, whereby Walcom Thailand has been appointed as the Group’s exclusive partner in Thailand for the sale and distribution of Walcom’s products (the “Distribution Agreement”). The Distribution Agreement will run for five years and renews automatically unless either party serves notice terminating the agreement. The Distribution Agreement includes an undertaking by Walcom Thailand to purchase a minimum of eighty tones of Walcom products every year, subject to review by both parties on an annual basis. All other terms of the Distribution Agreement mirror those in place between Walcom and Walcom Thailand prior to the Disposal. As a result of the Distribution Agreement, the Board expects Walcom Thailand will remain a significant trading partner of the Group, and will continue to contribute to the Group’s revenues.

In the year ended 31 December 2017, Walcom Thailand had audited revenues totalling HK$16.85m (c.£1.62m), and a profit of HK$0.89m (c.£86k). As at 31 December 2017, Walcom Thailand had audited net assets of HK$6.5m (c.£620k). The Group reported in its unaudited interim results for the six months ended 30 June 2018 that revenues for Walcom Thailand were HK$8.12m (c.£778k).  Following the Disposal, Walcom Thailand will no longer be a subsidiary of Walcom and its financial information will no longer be consolidated with that of the Group.  As a result of the entering into of the Distribution Agreement, the future financial contribution of Walcom Thailand will be reflected in Walcom’s financial reports on the same basis as other customers of the Group.

The Purchaser is an existing director of Walcom Thailand. Both the Disposal and the entering into of the Distribution Agreement are deemed to constitute related party transactions under the AIM Rules for Companies. The directors of Walcom, having consulted with the Group’s nominated adviser, Allenby Capital Limited, consider the terms of the Disposal and the Distribution Agreement to be fair and reasonable insofar as the Group’s shareholders are concerned.

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