18 September 2019
WALCOM GROUP LIMITED
(“Walcom” or “the Company”)
Interim Results
for the six months ended 30 June
2019
Walcom is pleased to announce its interim results for the six
months ended 30 June 2019. Copies of
the interim report will shortly be available on the Company’s
website at www.walcomgroup.com.
Further enquiries:
Walcom Group Limited
Francis Chi (Chief Executive Officer/Chief Financial Officer)
Jessie Chan (Deputy Chief Financial Officer) |
+852 2494 0133 |
Allenby Capital Limited
David Hart / Asha Chotai |
+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 2019.
Introduction
During the first half of 2019, the growth in the Chinese economy
remained slow amid ongoing trade tensions with the United States and weakening global demand.
The pig farming industry also suffered a significant setback due to
the African Swine Fever (“ASF”) outbreak which was first reported
in China in August 2018. The ASF outbreak is yet to be
contained and new cases are still being reported despite various
measures by the Chinese government to contain its spread within the
country including but not limited to the mass culling of pigs in
affected areas and banning of long-distance, trans-region
transportation of live pigs and pork products. As there is
currently no treatment or vaccine, and the only way to stop the
disease is to cull all affected or exposed swine herds, the swine
herd population in China has
decreased considerably since the outbreak.
As a result, demand for the Group’s products in China has reduced significantly resulting in a
55 per cent decrease in revenues compared with the same period last
year. The Group incurred a loss per share for the period of HK
Cents 4.73 compared with a loss per
share of HK Cents 15.21 in the same
period last year (the higher loss per share in 2018 is mainly due
to a provision for doubtful debt of HK$7.9
million). Without the effects of the doubtful debt provision
the loss per share for the same period in 2018 was HK Cents 3.23.
Results for the Period
The Group generated revenues of HK$8.7
million during the period (June
2018: HK$19.2 million) and
gross profits of HK$4.1 million
(June 2018: HK$10.5 million), representing a decrease of 55
per cent and 61 per cent respectively compared with the same period
last year.
Gross profit margins decreased by approximately 7.8 per cent to
47 per cent (June 2018: 55 per cent)
mainly due to the higher per unit fixed costs as a result of lower
production volumes and is partially offset by the effects of a
stronger Hong Kong Dollar exchange rate against Renminbi. The
average exchange rate of Hong Kong Dollar against Renminbi
appreciated by approximately 6 per cent during the period under
review compared with the same period last year.
The Group incurred a net loss of HK$3.3
million compared to HK$10.1
million for the same period last year which included the
effects of a doubtful debt provision of HK$7.9 million.
At the EBITDA level, the Group recorded a higher loss of
HK$3.29 million, an increase of 91
percent compared to the same period last year (June 2018: HK$1.72
million).
Review of Activities and Market
Turnover in China was
HK$3.5 million, 66 per cent lower
compared with the same period last year (June 2018: HK$10.2
million), mainly attributable to a 58 per cent decline in
domestic sales volume and the impact of a stronger Hong Kong
Dollar, which strengthened against the Renminbi by an average of 6
per cent during the period under review.
The impact of ASF on the Group’s performance has been severe as
the demand for feedstuff from the Group’s customers in China has declined significantly following the
closure of farms and businesses impacted by ASF. Although the rate
of infections has slowed down compared to the initial outbreak in
August 2018 and despite various
measures implemented by the Chinese government to contain the
spread of ASF, new cases are still emerging around the country. The
Group expects the ASF to continue to affect the pig farming
industry for at least the next six months following which the Board
is hopeful that pig producers will gradually start to restock and
the increase in swine population will have positive impact on the
Group’s business. The Group is also actively working on increasing
its customer base and penetration within the poultry feed sector
and beef cattle sector with the hope that the Group will see the
benefit of these efforts in the latter part of the year.
The decline in sales revenue in China compared to the same period last year is
also due loss of sales contribution from the Group’s largest
customer in China (June 2019: HK$nil; June
2018: HK$3.9 million) wherein
the Group ceased business with this customer after unsuccessful
attempts to recover outstanding debts. During the
corresponding period in 2018, the Group made a provision for
doubtful debts of HK$7.9 million in
relation to this customer’s outstanding trade receivables. The
Group commenced legal proceedings against the customer in an effort
to recover the debt and whilst the court ruled in favour of the
Group in June 2019, the customer has
since filed an appeal against the court’s judgement. It remains
unclear whether the overdue receivables will be recovered.
The Group’s overall overseas sales decreased by 42 per cent to
HK$5.2 million compared with the same
period last year (June 2018:
HK$8.9 million). The decline is
mainly due to the disposal of Walcom Bio-Chem (Thailand) Company Limited (“Walcom Thai”) in
March 2019 resulting in the
non-consolidation of its results from the second quarter of 2019
onwards. Walcom Thai was disposed of to ease the Group’s short-term
working capital position, raising net proceeds of approximately
HK$3.0 million which was received at
the end of March 2019. Thailand remains an important market to the
Group and subsequent to the disposal, Walcom Thai was appointed as
the exclusive distributor of the Group’s products.
Sales to Thailand remained the
main contributor, representing 81 per cent of the Group’s overseas
sales (June 2019: HK$4.2 million; June
2018: HK$8.1 million) while
demand from the Korean market remained the same during the period
under review with sales of HK$0.7
million (June 2018:
HK$0.7 million).
Outlook
The Chinese economy continues to grow at a slower rate in the
first half of 2019 amidst slower global economic growth, escalating
trade tensions with the US and domestic downward pressure. Faced
with a complex external environment and emerging downward pressure
in the second half, China will
continue to take coordinated steps to stabilize growth and
undertake structural reforms to promote development in order to
facilitate sustained and healthy development of the economy. It is
expected that the macro-economic environment coupled with the
impact of ASF on the pig industry will continue to affect the
Group’s operations in China in the
second half of the year.
Over the past 12 months the Company has made regular
announcements in relation to the weak performance of the Group,
which as a result of the aforementioned factors, has continued to
place added pressure on the Group’s working capital position. These
announcements have also highlighted the impact on the Company and
its shareholders if the working capital position cannot be resolved
in the short term. The Board will continue to closely monitor the
Group’s working capital position and is in discussions regarding
seeking additional funding arrangements to safeguard its
liquidity.
Frankie Y. L.
Wong
Chairman
18 September
2019
UNAUDITED CONSOLIDATED STATEMENT OF
PROFIT OR LOSS
FOR THE SIX MONTHS ENDED 30 JUNE 2019
|
Note |
|
Unaudited
six months
ended
30 June 2019 |
|
Unaudited
six months
ended
30 June 2018 |
|
Audited
year ended
31 December 2018 |
|
|
|
HK$ |
|
HK$ |
|
HK$ |
|
|
|
|
|
|
|
|
Revenue |
3 |
|
8,713,318 |
|
19,163,440 |
|
34,691,030 |
|
|
|
|
|
|
|
|
Cost of sales |
|
|
(4,634,319) |
|
(8,697,989) |
|
(15,320,919) |
|
|
|
|
|
|
|
|
Gross
profit |
|
|
4,078,999 |
|
10,465,451 |
|
19,370,111 |
|
|
|
|
|
|
|
|
Other income |
4 |
|
400,849 |
|
100,719 |
|
207,762 |
|
|
|
|
|
|
|
|
Research and
development expenses |
|
|
(285,603) |
|
(881,279) |
|
(1,222,370) |
|
|
|
|
|
|
|
|
Selling and
distribution expenses |
|
|
(2,734,959) |
|
(5,849,284) |
|
(16,589,116) |
|
|
|
|
|
|
|
|
General and
administrative expenses |
|
|
(4,637,295) |
|
(13,630,612) |
|
(10,063,495) |
|
|
|
|
|
|
|
|
Loss from
operations |
5 |
|
(3,178,009) |
|
(9,795,005) |
|
(8,297,108) |
|
|
|
|
|
|
|
|
Net finance
expenses |
6 |
|
(107,336) |
|
(122,389) |
|
(268,616) |
|
|
|
|
|
|
|
|
Loss
before income tax |
|
|
(3,285,345) |
|
(9,917,394) |
|
(8,565,724) |
|
|
|
|
|
|
|
|
Income tax refund /
(expense) |
7 |
|
8,378 |
|
(205,131) |
|
(919,124) |
|
|
|
|
|
|
|
|
Loss for the period
/ year |
|
|
(3,276,967) |
|
(10,122,525) |
|
(9,484,848) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) / profit attributable to: |
|
|
|
|
|
|
|
Owners of the
Company |
|
|
(3,252,648) |
|
(10,469,044) |
|
(10,253,282) |
Non-controlling
interests |
|
|
(24,319) |
|
346,519 |
|
768,434 |
|
|
|
|
|
|
|
|
Loss for the
period / year |
|
|
(3,276,967) |
|
(10,122,525) |
|
(9,484,848) |
|
|
|
|
|
|
|
|
Loss per share – basic, HK cents |
8 |
|
(4.73) |
|
(15.21) |
|
(14.90) |
– diluted, HK cents |
|
|
(4.73) |
|
(15.21) |
|
(14.90) |
|
|
|
|
|
|
|
|
UNAUDITED CONSOLIDATED STATEMENT OF
PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2019
|
Note |
|
Unaudited
six months
ended
30 June 2019 |
|
Unaudited
six months
ended
30 June 2018 |
|
Audited
year ended
31 December 2018 |
|
|
|
HK$ |
|
HK$ |
|
HK$ |
|
|
|
|
|
|
|
|
Loss for the
period / year |
|
|
(3,276,967) |
|
(10,122,525) |
|
(9,484,848) |
|
|
|
|
|
|
|
|
Other comprehensive
income |
|
|
|
|
|
|
|
Exchange difference on
translation of |
|
|
|
|
|
|
|
financial
statements of overseas subsidiaries |
|
|
175,170 |
|
(443,061) |
|
(1,701,349) |
|
|
|
|
|
|
|
|
Total comprehensive
loss |
|
|
|
|
|
|
|
for
the period / year |
|
|
(3,101,797) |
|
(10,565,586) |
|
(11,186,197) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive
loss |
|
|
|
|
|
|
|
attributable to: |
|
|
|
|
|
|
|
Owners of the
Company |
|
|
(3,195,158) |
|
(10,874,678) |
|
(11,965,901) |
Non-controlling
interests |
|
|
93,361 |
|
309,092 |
|
779,704 |
|
|
|
|
|
|
|
|
Total comprehensive
loss |
|
|
|
|
|
|
|
for
the period / year |
|
|
(3,101,797) |
|
(10,565,586) |
|
(11,186,197) |
UNAUDITED CONSOLIDATED BALANCE
SHEET
AT 30 JUNE 2019
|
Note |
|
Unaudited
30 June 2019 |
|
Unaudited
30 June 2018 |
|
Audited
31 December 2018 |
|
|
|
HK$ |
|
HK$ |
|
HK$ |
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT
ASSETS |
|
|
|
|
|
|
|
Property, plant and
equipment |
|
|
452,310 |
|
5,876,007 |
|
5,849,236 |
Patents |
|
|
82,249 |
|
405,836 |
|
97,094 |
Goodwill |
|
|
- |
|
- |
|
- |
Deferred tax
assets |
|
|
575,845 |
|
1,072,500 |
|
575,845 |
|
|
|
1,110,404 |
|
7,354,343 |
|
6,522,175 |
|
|
|
|
|
|
|
|
CURRENT
ASSETS |
|
|
|
|
|
|
|
Inventories |
|
|
1,527,574 |
|
3,083,831 |
|
2,169,866 |
Trade and other
receivables |
10 |
|
1,433,758 |
|
3,968,541 |
|
4,085,775 |
Tax recoverable |
|
|
316,151 |
|
464,357 |
|
210,263 |
Cash and cash
equivalents |
11 |
|
1,169,733 |
|
3,395,045 |
|
4,825,759 |
|
|
|
4,447,216 |
|
10,911,774 |
|
11,291,663 |
|
|
|
|
|
|
|
|
TOTAL
ASSETS |
|
|
5,557,620 |
|
18,266,117 |
|
17,813,838 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY AND
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
|
|
Share capital |
12 |
|
688,344 |
|
688,344 |
|
688,344 |
Reserves |
|
|
(1,219,562) |
|
3,156,840 |
|
2,065,617 |
TOTAL
EQUITY ATTRIBUTABLE TO
OWNERS OF THE COMPANY |
|
|
(531,218) |
|
3,845,184 |
|
2,753,961 |
Non-controlling
interests |
|
|
- |
|
3,213,527 |
|
3,203,016 |
CAPITAL DEFICIENCY
/ TOTAL EQUITY |
|
|
(531,218) |
|
7,058,711 |
|
5,956,977 |
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES |
|
|
|
|
|
|
|
Trade and other
payables |
13 |
|
3,474,310 |
|
5,781,740 |
|
7,126,883 |
Tax payables |
|
|
- |
|
207,303 |
|
253,830 |
Loans from
non-controlling interests |
|
|
- |
|
473,967 |
|
481,626 |
Bank borrowings |
14 |
|
2,614,528 |
|
4,744,396 |
|
3,994,522 |
|
|
|
6,088,838 |
|
11,207,406 |
|
11,856,861 |
TOTAL LIABILITIES |
|
|
6,088,838 |
|
11,207,406 |
|
11,856,861 |
|
|
|
|
|
|
|
|
TOTAL
EQUITY AND LIABILITIES |
|
|
5,557,620 |
|
18,266,117 |
|
17,813,838 |
|
|
|
|
|
|
|
|
NET CURRENT
LIABILITIES |
|
|
(1,641,622) |
|
(295,632) |
|
(565,198) |
|
|
|
|
|
|
|
|
TOTAL
ASSETS
LESS CURRENT LIABILITIES |
|
|
(531,218) |
|
7,058,711 |
|
5,956,977 |
WALCOM GROUP LIMITED
UNAUDITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS
ENDED 30 JUNE 2019
|
|
|
|
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
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January
2019 |
688,344 |
95,298,644 |
23,852,469 |
815,521 |
(917,976) |
3,773,101 |
(120,756,142) |
2,753,961 |
3,203,016 |
5,956,977 |
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss |
|
|
|
|
|
|
|
|
|
|
Loss for the
period |
- |
- |
- |
- |
- |
- |
(3,252,648) |
(3,252,648) |
(24,319) |
(3,276,967) |
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive
income |
|
|
|
|
|
|
|
|
|
|
Exchange difference on
translation of |
|
|
|
|
|
|
|
|
|
|
financial statements
of overseas subsidiaries |
- |
- |
- |
- |
57,490 |
- |
- |
57,490 |
117,680 |
175,170 |
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive
loss for the period |
- |
- |
- |
- |
57,490 |
- |
(3,252,648) |
(3,195,158) |
93,361 |
(3,101,797) |
|
|
|
|
|
|
|
|
|
|
|
Disposal of a
subsidiary |
- |
- |
- |
- |
(90,021) |
- |
- |
(90,021) |
(3,296,377) |
(3,386,398) |
|
|
|
|
|
|
|
|
|
|
|
At 30 June 2019 |
688,344 |
95,298,644 |
23,852,469 |
815,521 |
(950,507) |
3,773,101 |
(124,008,790) |
(531,218) |
- |
(531,218) |
UNAUDITED CONSOLIDATED STATEMENT OF
CASH FLOWS
FOR THE SIX MONTHS
ENDED 30 JUNE 2019
|
Note |
|
Unaudited
six months
ended
30 June 2019 |
|
Unaudited
six months
ended
30 June 2018 |
|
Audited
year ended
31 December 2018 |
|
|
|
HK$ |
|
HK$ |
|
HK$ |
Cash flow from operating
activities |
|
|
|
|
|
|
|
Loss before income tax |
|
|
(3,285,345) |
|
(9,917,394) |
|
(8,565,724) |
Amortisation of patents |
|
|
14,845 |
|
47,030 |
|
92,447 |
Depreciation |
|
|
57,238 |
|
109,684 |
|
209,083 |
Foreign exchange loss / (gain),
net |
|
|
5,823 |
|
(325,103) |
|
(1,665,315) |
Gain on disposal of a
subsidiary |
|
|
(180,760) |
|
- |
|
- |
Interest received |
|
|
(4,266) |
|
(5,157) |
|
(23,059) |
Interest paid |
|
|
111,602 |
|
127,547 |
|
291,675 |
Provision of impairment of trade
receivables |
|
|
- |
|
7,899,419 |
|
5,750,768 |
Patents written
off
Property, plant and equipment written off |
|
|
-
- |
|
-
15,597 |
|
278,922
6,752 |
|
|
|
|
|
|
|
|
Operating loss
before |
|
|
|
|
|
|
|
working capital
changes |
|
|
(3,280,863) |
|
(2,048,377) |
|
(3,624,451) |
(Increase) / decrease in
inventories |
|
|
(768,432) |
|
(176,564) |
|
737,401 |
Decrease / (increase) in trade
and other receivables |
|
|
1,284,322 |
|
(108,163) |
|
2,571,802 |
(Decrease) / increase in trade
and other payables |
|
|
(2,479,547) |
|
209,879 |
|
1,338,290 |
|
|
|
|
|
|
|
|
Net cash (used in) / generated
from operations |
|
|
(5,244,520) |
|
(2,123,225) |
|
1,023,042 |
Corporate income tax paid |
|
|
(971) |
|
(315,466) |
|
(562,513) |
Interest paid |
|
|
(111,602) |
|
(127,547) |
|
(291,675) |
Net cash (used in) / generated from operating
activities |
|
|
(5,357,093) |
|
(2,566,238) |
|
168,854 |
|
|
|
|
|
|
|
|
Cash flow from investing
activities |
|
|
|
|
|
|
|
Purchase of property, plant and
equipment |
|
|
(23,877) |
|
(39,701) |
|
(45,038) |
Proceeds from disposal of a
subsidiary |
|
|
3,109,462 |
|
- |
|
- |
Interest received |
|
|
4,266 |
|
5,157 |
|
23,059 |
Net cash generated from /
(used in) investing activities |
|
|
3,089,851 |
|
(34,544) |
|
(21,979) |
|
|
|
|
|
|
|
|
Cash flow from financing
activities |
|
|
|
|
|
|
|
Repayment of bank
borrowings |
|
|
(2,500,853) |
|
- |
|
(2,282,584) |
Proceeds from new
bank borrowings |
|
|
1,136,751 |
|
2,375,015 |
|
3,994,522 |
Dividend paid to
non-controlling interests |
|
|
- |
|
- |
|
(264,391) |
Decrease in
restricted bank balance |
|
|
- |
|
116,377 |
|
117,249 |
Net cash (used in) / generated
from financing activities |
|
|
(1,364,102) |
|
2,491,392 |
|
1,564,796 |
|
|
|
|
|
|
|
|
Net (decrease) /
increase in cash and cash equivalents |
|
|
(3,631,344) |
|
(109,390) |
|
1,711,671 |
|
|
|
|
|
|
|
|
Cash and cash
equivalents at the beginning of the period / year |
|
|
4,825,759 |
|
3,594,050 |
|
3,594,050 |
|
|
|
|
|
|
|
|
Exchange gain on
cash and cash equivalents |
|
|
(24,682) |
|
(89,615) |
|
(479,962) |
|
|
|
|
|
|
|
|
Cash and cash
equivalents at the end of the period / year |
11 |
|
1,169,733 |
|
3,395,045 |
|
4,825,759 |
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2019
(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 2018 except for
those that relate to new standards and interpretations effective
for the first time for periods beginning on (or after) 1 January 2019, and will be adopted in the 2019
annual financial statements.
The following new standards and interpretations became effective
on 1 January 2019 and have been
adopted by the group:
On 1 January 2019, the Group has
performed an assessment on the impact of the adoption of IFRS 16
and concluded that no material financial impact exists, and
therefore no adjustment to the opening balance sheet on
1 January 2019 was recognised.
The consolidated financial statements have been prepared on a
going concern basis notwithstanding that the Group had incurred a
loss for the period of HK$3,276,967
during the period ended 30 June 2019
and, as of that date, the Group’s current liabilities exceeded its
current assets by HK$1,641,622. These
conditions indicate the existence of a material uncertainty which
may cast significant doubt about the Group’s ability to continue as
a going concern. In preparing the consolidated financial
statements, the directors have carefully reviewed the Group’s cash
position as at the balance sheet date and the cash flow forecast
for the next six months. In reviewing the Group’s cash flows, the
directors have considered the following factors:
- A stable sales target for 2019 and stable gross profit ratio
with the escalating cost of production
- Continuous close monitoring of outgoing expenses
- Current cash level and committed lines of funding from
financial institutions
- Failure to renew or replace the above mentioned lines of
funding from financial institutions
The directors believe that the Group is able to meet its
financial obligations in full as and when they fall due and
consider that the preparation of the consolidated financial
statements on going concern basis is appropriate.
(2) SEGMENT
REPORTING
(a)
Primary reporting format - Geographical Segment
The group’s operations are mainly located in Hong Kong and PRC. The group’s sales revenue
by geographical location of customers are analysed as follows:
|
Unaudited
six months
ended
30 June 2019 |
|
Unaudited
six months
ended
30 June 2018 |
|
Audited
year ended
31 December 2018 |
|
HK$ |
|
HK$ |
|
HK$ |
|
|
|
|
|
|
PRC |
3,500,668 |
|
10,216,380 |
|
15,994,416 |
Thailand |
4,229,382 |
|
8,102,788 |
|
17,012,750 |
Korea |
702,000 |
|
702,000 |
|
1,541,592 |
Others |
281,268 |
|
142,272 |
|
142,272 |
|
8,713,318 |
|
19,163,440 |
|
34,691,030 |
(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 2019 |
|
Unaudited
six months
ended
30 June 2018 |
|
Audited
year ended
31 December 2018 |
|
HK$ |
|
HK$ |
|
HK$ |
|
|
|
|
|
|
PRC |
4,574,668 |
|
6,687,472 |
|
7,181,498 |
Thailand (see Note 16) |
- |
|
8,962,265 |
|
9,738,811 |
Hong Kong |
900,703 |
|
2,210,544 |
|
868,917 |
Others |
82,249 |
|
405,836 |
|
24,612 |
|
5,557,620 |
|
18,266,117 |
|
17,813,838 |
(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 2019 |
|
Unaudited
six months
ended
30 June 2018 |
|
Audited
year ended
31 December 2018 |
|
HK$ |
|
HK$ |
|
HK$ |
|
|
|
|
|
|
Government subsidy |
- |
|
- |
|
105,096 |
Gain on disposal of a
subsidiary |
180,760 |
|
- |
|
- |
Sundry income |
220,089 |
|
100,719 |
|
102,666 |
|
400,849 |
|
100,719 |
|
207,762 |
(5) OPERATING
LOSS
Operating loss is stated after charging the following
items:-
|
Unaudited
six months
ended
30 June 2019 |
|
Unaudited
six months
ended
30 June 2018 |
|
Audited
year ended
31 December 2018 |
|
HK$ |
|
HK$ |
|
HK$ |
|
|
|
|
|
|
Amortisation of patents |
14,845 |
|
47,030 |
|
92,447 |
Auditor’s remuneration |
183,240 |
|
183,808 |
|
298,683 |
Cost of inventories |
5,285,773 |
|
8,349,076 |
|
14,648,394 |
Depreciation |
57,238 |
|
75,736 |
|
139,287 |
Exchange losses / (gains), net |
5,823 |
|
(325,103) |
|
(1,665,315) |
Provision of impairment of trade
receivables |
- |
|
7,899,419 |
|
5,750,768 |
Property, plant and equipment
written off |
- |
|
- |
|
6,752 |
Patents written off |
- |
|
15,597 |
|
278,922 |
Rental charges under
operating leases
in respect of land and buildings |
476,930 |
|
486,701 |
|
1,022,660 |
Staff costs
(including directors’ emoluments) |
|
|
|
|
|
- wages and salaries |
3,441,848 |
|
4,853,038 |
|
9,321,216 |
- contributions to retirement
benefits |
427,552 |
|
452,386 |
|
893,779 |
- other staff benefits |
754,861 |
|
1,380,641 |
|
2,496,701 |
(6) NET FINANCE
EXPENSES
|
Unaudited
six months
ended
30 June 2019 |
|
Unaudited
six months
ended
30 June 2018 |
|
Audited
year ended
31 December 2018 |
|
HK$ |
|
HK$ |
|
HK$ |
|
|
|
|
|
|
Bank interest income |
4,266 |
|
5,157 |
|
23,059 |
Interest expense on loans |
|
|
|
|
|
from non-controlling interest |
(10,011) |
|
(35,592) |
|
(64,690) |
Interest expense on bank loans |
(101,591) |
|
(91,954) |
|
(226,985) |
|
(107,336) |
|
(122,389) |
|
(268,616) |
(7) INCOME TAX REFUND /
(EXPENSE)
No provision for Hong Kong Profits Tax has been made
(June 2018: HK$nil; 2018: HK$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 refund provided for the six months
ended 30 June 2019 is HK$8,378 (June
2018: Tax expense HK$205,131;
2018: Tax expense HK$422,469).
(8) LOSS PER
SHARE
The calculation of the basic loss per share for the six months
ended 30 June 2019, is based on the
loss attributable to ordinary equity shareholders of the company of
HK$3,252,648 (June 2018: HK$10,469,044; 2018: HK$10,253,282) during the period and the weighted
average number of 68,834,388 ordinary shares (June 2018: 68,834,388; 2018: 68,834,388) in issue
during the period/year. No diluted loss per share is to be reported
for the period/year.
(9)
DIVIDENDS
No payment of dividend was recommended for the first six months
of 2019 (June 2018: HK$nil; 2018:
HK$nil).
(10) TRADE AND OTHER
RECEIVABLES
|
Unaudited
30 June 2019 |
|
Unaudited
30 June 2018 |
|
Audited
31 December 2018 |
|
HK$ |
|
HK$ |
|
HK$ |
|
|
|
|
|
|
Trade receivables |
5,786,882 |
|
10,628,698 |
|
8,333,556 |
Less: provision for impairment
loss |
(5,410,936) |
|
(7,899,419) |
|
(5,432,550) |
|
375,946 |
|
2,729,279 |
|
2,901,006 |
Other receivables |
184,599 |
|
221,943 |
|
244,801 |
Prepayments and deposits |
873,213 |
|
1,017,319 |
|
939,968 |
|
1,433,758 |
|
3,968,541 |
|
4,085,775 |
(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 2019 |
|
Unaudited
six months
ended
30 June 2018 |
|
Audited
year ended
31 December 2018 |
|
HK$ |
|
HK$ |
|
HK$ |
|
|
|
|
|
|
At 1 January |
5,432,550 |
|
508,758 |
|
508,758 |
Impairment loss recognised |
- |
|
7,899,419 |
|
5,750,768 |
Written off
Exchange difference |
-
(21,614) |
|
(508,758)
- |
|
(508,758)
(318,218) |
At 30 June/31 December |
5,410,936 |
|
7,899,419 |
|
5,432,550 |
The Group applies the IFRS 9 simplified approach to provide for
expected credit losses which uses a lifetime expected loss
provision for trade receivables.
The Group does not hold any collateral over these balances.
As at 30 June 2019, the trade
receivables of HK$5,474,594
(June 2018: HK$nil; 2018:
HK$5,992,011) were pledged as
securities for secured bank borrowings (note 14).
(11) CASH AND CASH
EQUIVALENTS
|
Unaudited
30 June 2019 |
|
Unaudited
30 June 2018 |
|
Audited
31 December 2018 |
|
HK$ |
|
HK$ |
|
HK$ |
|
|
|
|
|
|
Cash at bank and on
hand |
1,169,733 |
|
3,395,045 |
|
4,825,759 |
|
|
|
|
|
|
|
|
|
(12) SHARE CAPITAL
|
Unaudited
30 June 2019 |
|
Unaudited
30 June 2018 |
|
Audited
31 December 2018 |
|
HK$ |
|
HK$ |
|
HK$ |
Authorised |
|
|
|
|
|
150,000,000 (June 2018: 150,000,000 and Dec 2018: 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 2018: 68,834,388
and
Dec 2018: 68,834,388) ordinary
shares of HK$0.01 each |
688,344 |
|
688,344 |
|
688,344 |
The holders of ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at meetings of the Company. All ordinary shares rank
equally with regard to the Company’s residual assets.
(13) TRADE AND OTHER
PAYABLES
|
Unaudited
30 June 2018 |
|
Unaudited
30 June 2018 |
|
Audited
31 December 2018 |
|
HK$ |
|
HK$ |
|
HK$ |
|
|
|
|
|
|
Trade
payables
Contract liabilities |
1,039,560
4,567 |
|
1,384,916
- |
|
1,295,639
329,062 |
Other payables and
accrued expenses |
2,430,183 |
|
4,396,824 |
|
5,502,182 |
|
3,474,310 |
|
5,781,740 |
|
7,126,883 |
All of the trade and other payables are expected to be settled
within one year.
(14) BANK BORROWINGS
|
|
Unaudited
30 June 2019 |
|
Unaudited
30 June 2018 |
|
Audited
31 December 2018 |
|
|
HK$ |
|
HK$ |
|
HK$ |
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
Bank borrowing, unsecured |
|
1,136,751 |
|
4,744,396 |
|
1,711,938 |
Bank borrowings, secured |
|
1,477,777 |
|
- |
|
2,282,584 |
|
(a) |
2,614,528 |
|
4,744,396 |
|
3,994,522 |
|
|
|
|
|
|
|
- The effective interest rate per annum for bank borrowings at
balance sheet date is at 6.4% (June
2018: 5.7%, 2018: 6.4%) per annum.
(15) RECONCILIATION OF
LOSS BEFORE INCOME TAX TO EBITDA
|
Unaudited
six months
ended
30 June 2019 |
|
Unaudited
six months
ended
30 June 2018 |
|
Audited
year ended
31 December 2018 |
|
HK$ |
|
HK$ |
|
HK$ |
|
|
|
|
|
|
Loss before income tax |
(3,285,345) |
|
(9,917,394) |
|
(8,565,724) |
Depreciation |
57,238 |
|
109,684 |
|
209,083 |
Amortisation of patents |
14,845 |
|
47,030 |
|
92,447 |
Interest income |
(4,266) |
|
(5,157) |
|
(23,059) |
Interest expenses |
111,602 |
|
127,546 |
|
291,675 |
Patents written off |
- |
|
15,597 |
|
278,922 |
Gain on disposal of a
subsidiary |
(180,760) |
|
- |
|
- |
Impairment loss of trade
receivables |
- |
|
7,899,419 |
|
5,750,768 |
Property, plant and
equipment written off |
- |
|
- |
|
6,752 |
EBITDA |
(3,286,686) |
|
(1,723,275) |
|
(1,959,136) |
EBITDA is defined herein as earnings before depreciation,
amortisation, 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 amortisation 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) DISPOSAL OF A
SUBSIDIARY
On 20 March 2019, the Group
disposed of its entire interest in its 55 per cent. owned
subsidiary, Walcom Bio-Chen (Thailand) Company Limited, to non-controlling
interests for a consideration of THB16.5
million (approximately HK$4.1
million). After deduction of certain amounts due to the
purchaser, the net proceeds received were approximately
HK$3 million.
|
HK$ |
Net assets of the subsidiary at the
date of disposal were as follows: |
|
|
|
Property, plant and equipment |
5,559,426 |
Inventory |
1,410,724 |
Trade and other receivables |
1,261,807 |
Cash and cash equivalents |
1,010,182 |
Trade and other payables |
(1,417,507) |
Loans from non-controlling
interests |
(499,350) |
|
7,325,282 |
Non-controlling interests |
(3,296,377) |
Exchange reserves |
(90,021) |
|
3,938,884 |
Gain on disposal of a
subsidiary |
180,760 |
Total consideration |
4,119,644 |
|
|
Net cash inflow arising on disposal
of a subsidiary: |
|
Cash consideration received |
4,119,644 |
Cash and cash equivalents disposed
of |
(1,010,182)
3,109,462 |
|
|
|
|
(17) COPIES OF THE HALF YEARLY
REPORT
Copies of the half-yearly report will be available shortly from
the Company’s website www.walcomgroup.com.