9 May
2018
WALCOM GROUP
LIMITED
(“Walcom” or “the
Company”)
Final results for
the year ended 31 December 2017
CHAIRMAN’S STATEMENT
On behalf of the board of directors (the “Board”) of Walcom
Group Limited (the “Company”), I am pleased to present the final
results of the Company and its subsidiaries (together referred to
as the “Group”) for the year ended 31
December 2017.
Results
In line with China’s slowing economy and the continued poor
performance of the domestic pig farming industry, the Group’s sales
in China recorded a small decrease
during 2017. With the aggregated effect of greater
competition in the market and escalating costs in raw materials, a
loss attributable to the Company’s shareholders of HK$4.34 million (2016: profit HK$1.26 million) was incurred for the year under
review. Further, the high volatility in the exchange rate of
Renminbi against Hong Kong Dollar has resulted in an accounting
exchange loss of HK$2.2 million
(2016: profit HK$2.1 million) in
foreign currency translations, which is the major cause of the set
back in the Group’s 2017 annual results.
Turnover (2017: HK$44.5 million;
2016: HK$46.5 million) and gross
profit (2017: HK$24.3 million; 2016:
HK$27.3 million) for the year
decreased by approximately four per cent. and 11 per cent.
respectively. The Group reported a net loss of HK$3.94 million for the year under review as
compared with a net profit of HK$1.42
million in 2016. EBITDA also recorded a loss of HK$3.16 million in 2017 (2016: profit
HK$3.38 million).
A summary of the results for the period under review is set out
below:
|
Year
ended |
Year
ended |
Change |
|
31
December |
31
December |
|
|
2017 |
2016 |
|
|
HK$’000 |
HK$’000 |
per
cent. |
Turnover |
44,488 |
46,469 |
(4.26) |
Gross profit |
24,311 |
27,322 |
(11.02) |
(Loss) / profit from
operations |
(4,796) |
2,811 |
n/a |
EBITDA |
(3,163) |
3,376 |
n/a |
Net finance
expense |
(124) |
(70) |
77.14 |
(Loss) / profit for
the year |
(3,940) |
1,424 |
n/a |
|
Year ended |
Year ended |
Change |
|
31
December |
31
December |
|
|
2017 |
2016 |
|
|
HK$’000 |
HK$’000 |
per
cent. |
(Loss) /
profit attributable to owners of the Company
- total
- basic per share (HK cents)
- diluted per share (HK cents) |
(4,341)
(6.31)
(6.31) |
1,263
1.84
1.84 |
n/a
n/a
n/a |
Total
equity attributable to owners of the Company
-total
-per share (HK cents) |
14,720
21.38 |
15,872
23.06 |
(7.26)
(7.26) |
Operation and market review
As a result of the weak consumer market in China during 2017, the demand for pork and
meat products remained low, which continued to drive the farmgate
pig prices down. Accordingly, the pig farms and feedmills,
both of which are highly cost sensitive, reduced the use of feed
additive products in their feedstuffs during the period. This led
to reduced demand for feed additive products, including the Group’s
products. In line with these weak market conditions, the
Group’s sales in the PRC decreased by two per cent. to HK$25.8 million during 2017 when compared with
the HK$26.4 million in 2016.
Sales in Thailand increased by
two per cent. to HK$16.9 million in
2017 (2016: HK$16.6 million),
representing approximately 38 per cent. (2016: 36 per cent.) of the
Group’s total sales. Although the economy in Thailand has still not recovered fully from
the change of government regime in 2014, it has shown slow
improvement. The increase in sales in Thailand can be attributed to an increase in
consumption of the Group’s products by existing customers.
Sales in Korea decreased by 47 per cent. to HK$1.8 million in 2017 (2016: HK$3.4 million), representing approximately four
per cent. (2016: seven per cent.) of the Group’s total sales. The
Group’s distributor in Korea lost a major customer during 2017
which caused the decline in the Group’s sales in the country.
The Group’s financial statements are reported in Hong Kong
Dollars (“HKD”). During the period under review, the average
monthly exchange rate of HKD currency appreciated approximately one
per cent. against China’s Renminbi (“RMB”). As approximately 58 per
cent. of the Group’s sales were transacted in RMB, the appreciation
of the HKD has had a negative exchange impact on the Group’s 2017
revenue. As mentioned above, during the years 2016 and 2017, the
RMB exchange rate has been highly volatile against the HKD and this
has caused an accounting exchange loss of HK$2.2 million in 2017, comparing to an
accounting exchange profit of HK$2.1
million in 2016, in translating assets and liabilities
within the Group.
Recent Developments
As mentioned in my statement in the 2017 half-yearly report, the
Group has focused on increasing sales penetration of existing big
customers which have low usage of the Group’s products and also
those integrated meat producing companies whose businesses include
feed milling, pig farming, pig slaughtering and pork product
production. Enhanced by other sales tactics, this sales strategy
has successfully gained some sales traction during the year,
although more time is needed for it to become fruitful.
Patents
At the end of 2017 the Group held 36 granted patents in respect
of:
- its core Cysteamine technology in China, India,
South Korea and Vietnam;
- poultry feed in the UK, North
Korea, Taiwan, Russia, China, Australia, Philippines and Thailand;
- dairy cow feed in New Zealand,
the UK, Europe, Mexico, India, China,
Russia, Australia and Malaysia;
- fish feed in the UK, China,
Thailand, Philippines, Vietnam and Taiwan; and
- shellfish feed in Europe,
Vietnam, Indonesia, Taiwan, Philippines and China.
Most of the patents for which the Group has applied in recent
years have been granted. The Directors believe that there is wide
patent coverage in jurisdictions where there are significant
demands for the Group’s products. Some patents, which the
management believes have a lower chance of commercialisation, were
dropped during the year.
Debt
As at the year end, the Group had a short-term bank loan of
HK$2.4 million and two short-term
loans amounting to an aggregate of HK$0.5
million from minority shareholders of its subsidiary in
Thailand, both of which were used
to finance the Group’s general working capital. In addition, as
announced on 14 February 2018, the
Group has negotiated and agreed a new secured three-year
RMB 2 million revolving credit
facility via its wholly owned subsidiary Shanghai Walcom Bio-Chem
Co., Ltd. The funds will be used to finance the Group’s general
working capital.
Dividend
The Directors do not recommend any dividend payment for the year
ended 31 December 2017.
Annual General Meeting
The Company’s annual general meeting (the “AGM”) will be held at
the offices of the Company’s solicitors, Reeds Smith Richards
Butler, in Hong Kong at
2:30 pm on Thursday 14 June
2018. A notice of the AGM will be sent to the Company’s
shareholders, along with the 2017 annual report and financial
statements, during the third week of May
2018.
Outlook
A new term of the PRC government, which is basically a
continuation of the leadership from the last administration, has
started in 2018. Therefore it is highly likely that the policy of
structural transformation in the country’s economy, which was
brought forward from the previous administration, will continue in
the coming years. In line with the last few years, this
policy of economic structural transformation is expected to cause
slower growth in the Chinese economy for the foreseeable
future. The trade war between the governments of China and the United
States of America has been escalating and the outcome has
yet to be confirmed. In addition, the expected interest rate hikes
in the United States of America
this year has added uncertainty to the global economy. With all
these factors in mind, the Board believes 2018 will be another
challenging year for the Group as the Board anticipates a volatile
global economic outlook for the year. Although the increase in the
raw material costs and the production costs of the Group’s products
have become less significant than 2017, they nevertheless will
still have an adverse impact on the Group’s gross profit margin
this year.
On behalf of the Board, I would like to express our sincere
thanks to the management team and staff, professional advisers and
shareholders for their continued support and contributions during
the year.
Frankie Y. L. Wong
Chairman
9 May
2018
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 |
Consolidated statement of profit or
loss
For the year ended 31 December 2017
(Expressed in Hong Kong
dollars)
|
Note |
2017 |
|
2016 |
|
|
|
HK$ |
|
HK$ |
|
|
|
|
|
|
|
Revenue |
3 |
44,488,372 |
|
46,469,041 |
|
|
|
|
|
|
|
Cost of sales |
|
(20,177,334) |
|
(19,147,412) |
|
Gross profit |
|
24,311,038 |
|
27,321,629 |
|
|
|
|
|
|
|
Other income |
4 |
215,041 |
|
275,269 |
|
|
|
|
|
|
|
Research and development
expenses |
|
(1,482,466) |
|
(1,565,262) |
|
|
|
|
|
|
|
Selling and distribution
expenses |
|
(12,743,778) |
|
(11,346,594) |
|
|
|
|
|
|
|
General and administrative
expenses |
|
(15,096,244) |
|
(11,874,526) |
|
(Loss) / profit from
operations |
|
(4,796,409) |
|
2,810,516 |
|
|
|
|
|
|
|
Net finance expense |
5 |
(123,687) |
|
(70,342) |
|
|
|
|
|
|
|
(Loss) / profit before income
tax |
6 |
(4,920,096) |
|
2,740,174 |
|
|
|
|
|
|
|
Income tax credit /
(expense) |
7 |
979,861 |
|
(1,316,475) |
|
(Loss) / profit for
the year |
|
(3,940,235)
|
|
1,423,699
|
|
|
|
|
|
|
|
(Loss) / profit attributable
to: |
|
|
|
|
|
Owners of the Company |
|
(4,341,039) |
|
1,263,286 |
|
Non-controlling
interests |
|
400,804 |
|
160,413 |
|
(Loss) / profit for the
year |
|
(3,940,235) |
|
1,423,699 |
|
|
|
|
|
|
|
(Losses) /earnings per share -
basic, HK cents |
10 |
(6.31) |
|
1.84 |
|
-
diluted, HK cents |
|
(6.31) |
|
1.84 |
|
|
|
|
|
|
|
Consolidated statement of profit or
loss and other comprehensive income
For the year ended 31 December 2017
(Expressed in Hong Kong
dollars)
|
|
2017 |
|
2016 |
|
|
|
HK$ |
|
HK$ |
|
|
|
|
|
|
|
(Loss) / profit for
the year |
|
(3,940,235)
|
|
1,423,699 |
|
Other comprehensive
income |
|
|
|
|
|
Exchange difference on
translation of |
|
|
|
|
|
financial statements of overseas
subsidiaries |
|
3,429,000 |
|
(2,603,259) |
|
|
|
|
|
|
|
Total comprehensive loss for the
year |
|
(511,235) |
|
(1,179,560) |
|
|
|
|
|
|
|
Total comprehensive loss
attributable to: |
|
|
|
|
|
Owners of the Company |
|
(1,151,641) |
|
(1,356,994) |
|
Non-controlling
interests |
|
640,406 |
|
177,434 |
|
Total comprehensive loss for the
year |
|
(511,235) |
|
(1,179,560) |
|
|
|
|
|
|
|
Consolidated balance sheet as at
31 December 2017
(Expressed in Hong Kong
dollars)
|
Note |
|
2017 |
|
|
2016 |
|
|
|
|
HK$ |
|
|
HK$ |
|
ASSETS |
|
|
|
|
|
|
|
NON-CURRENT
ASSETS |
|
|
|
|
|
|
|
Property, plant and
equipment |
12 |
|
6,001,662 |
|
|
4,832,774 |
|
Patents |
13 |
|
468,463 |
|
|
1,814,096 |
|
Goodwill |
14 |
|
- |
|
|
- |
|
Deferred tax assets |
23 |
|
1,072,500 |
|
|
- |
|
|
|
|
7,542,625 |
|
|
6,646,870 |
|
|
|
|
|
|
|
|
|
CURRENT ASSETS |
|
|
|
|
|
|
|
Inventories |
16 |
|
2,907,267 |
|
|
1,380,728 |
|
Trade and other
receivables |
17 |
|
12,090,127 |
|
|
8,985,988 |
|
Tax
recoverable |
|
|
134,027 |
|
|
42,168 |
|
Cash and
cash equivalents |
18 |
|
3,594,050 |
|
|
9,012,203 |
|
Restricted cash |
18 |
|
116,377 |
|
|
105,210 |
|
|
|
|
18,841,848 |
|
|
19,526,297 |
|
TOTAL ASSETS |
|
|
26,384,473 |
|
|
26,173,167 |
|
|
|
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
|
|
Share
capital |
22 |
|
688,344 |
|
|
688,344 |
|
Reserves |
|
|
14,031,518 |
|
|
15,183,159 |
|
Total equity attributable to
OWNERs of the Company |
|
|
14,719,862 |
|
|
15,871,503 |
|
|
|
|
|
|
|
|
|
Non-controlling interests |
|
|
2,904,435 |
|
|
2,264,029 |
|
TOTAL EQUITY |
|
|
17,624,297 |
|
|
18,135,532 |
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
Trade and other
payables |
19 |
|
5,571,861 |
|
|
4,744,113 |
|
Tax
payables |
|
|
317,638 |
|
|
1,057,636 |
|
Loans from
non-controlling interests |
20 |
|
478,046 |
|
|
- |
|
Bank
borrowings |
21 |
|
2,392,631 |
|
|
2,235,886 |
|
|
|
|
8,760,176 |
|
|
8,037,635 |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
|
8,760,176 |
|
|
8,037,635 |
|
TOTAL EQUITY AND
LIABILITIES |
|
|
26,384,473 |
|
|
26,173,167 |
|
NET CURRENT ASSETS |
|
|
10,081,672 |
|
|
11,488,662 |
|
TOTAL ASSETS LESS CURRENT
LIABILITIES |
|
|
17,624,297 |
|
|
18,135,532 |
|
Consolidated statement of changes in
equity
For the year ended 31 December 2017
(Expressed in Hong Kong
dollars)
|
|
|
|
|
|
|
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$ |
|
|
|
(Note 22(b)(i)) |
|
(Note 22(b)(ii)) |
|
|
|
(Note 22(b)(iii)) |
|
(Note 22(b)(iv)) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January
2016 |
688,344 |
|
95,298,644 |
|
23,852,469 |
|
1,568,769 |
|
225,525 |
|
3,263,694 |
|
(107,668,948) |
|
17,228,497 |
|
2,086,595 |
|
19,315,092 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
1,263,286 |
|
1,263,286 |
|
160,413 |
|
1,423,699 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive
income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange difference on translation
of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
financial statements of overseas
subsidiaries |
- |
|
- |
|
- |
|
- |
|
(2,620,280) |
|
- |
|
- |
|
(2,620,280) |
|
17,021 |
|
(2,603,259) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive loss for the year |
- |
|
- |
|
- |
|
- |
|
(2,620,280) |
|
- |
|
1,263,286 |
|
(1,356,994) |
|
177,434 |
|
(1,179,560) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Appropriation to surplus
reserve |
- |
|
- |
|
- |
|
- |
|
- |
|
338,633 |
|
(338,633) |
|
- |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2016 |
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) / profit for the year |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(4,341,039) |
|
(4,341,039) |
|
400,804 |
|
(3,940,235) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive
income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange difference on translation
of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
financial statements of overseas
subsidiaries |
- |
|
- |
|
- |
|
- |
|
3,189,398 |
|
- |
|
- |
|
3,189,398 |
|
239,602 |
|
3,429,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive loss for the year |
- |
|
- |
|
- |
|
- |
|
3,189,398 |
|
- |
|
(4,341,039) |
|
(1,151,641) |
|
640,406 |
|
(511,235) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lapse of share options |
- |
|
- |
|
- |
|
(684,771) |
|
- |
|
|
|
684,771 |
|
- |
|
- |
|
- |
Appropriation to surplus
reserve |
- |
|
- |
|
- |
|
- |
|
- |
|
170,774 |
|
(170,774) |
|
- |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2017 |
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated statement of cash
flows
For the year ended 31 December 2017
(Expressed in Hong Kong
dollars)
|
Note |
2017 |
|
2016 |
|
|
|
HK$ |
|
HK$ |
|
Cash flow from
operating activities |
|
|
|
|
|
(Loss) / profit
before income tax |
|
(4,920,096) |
|
2,740,174 |
|
Amortisation
of patents |
6(b) |
265,538 |
|
265,538 |
|
Impairment loss of
patents |
6(b) |
766,073 |
|
- |
|
Interest
received |
5 |
(14,220) |
|
(63,460) |
|
Depreciation |
12 |
285,927 |
|
288,704 |
|
Foreign
exchange loss / (gain), net |
6(b) |
2,260,760 |
|
(2,083,712) |
|
Interest
paid |
5 |
137,907 |
|
133,802 |
|
Loss on
disposal of property, plant and equipment |
6(b) |
2,286 |
|
11,317 |
|
Patents
written off |
6(b) |
314,022 |
|
- |
|
Operating (loss) /
profit before working capital changes |
|
(901,803) |
|
1,292,363 |
|
(Increase) /
decrease in inventories |
|
(1,526,539) |
|
867,156 |
|
Increase in trade
and other receivables |
|
(3,104,139) |
|
(1,290,281) |
|
Increase /
(decrease) in trade and other payables |
|
827,748 |
|
(210,806) |
|
Net cash (used in)
/ generated from operations |
|
(4,704,733) |
|
658,432 |
|
Corporate income tax
paid |
|
(924,496) |
|
(961,878) |
|
Interest
paid |
|
(137,907) |
|
(133,802) |
|
Net cash used in
operating activities |
|
(5,767,136) |
|
(437,248) |
|
|
|
|
|
|
|
Cash flow from
investing activities |
|
|
|
|
|
Purchases of
property, plant and equipment |
|
(920,725) |
|
(3,649,857) |
|
Proceeds from
disposal of property, plant and equipment |
|
23 |
|
- |
|
Interest
received |
|
14,220 |
|
63,460 |
|
Net cash used in
investing activities |
|
(906,482) |
|
(3,586,397) |
|
|
|
|
|
|
|
Cash flow from
financing activities |
|
|
|
|
|
Increase in
restricted bank balances |
28 |
(424) |
|
(1,397) |
|
Proceeds from loans
from non-controlling interests |
28 |
478,046 |
|
- |
|
Repayment of bank
borrowings |
28 |
(2,392,631) |
|
(2,387,205) |
|
Proceeds from new
bank borrowings |
28 |
2,392,631 |
|
2,235,886 |
|
Net cash generated
from / (used in) financing activities |
|
477,622 |
|
(152,716) |
|
Net decrease in cash
and cash equivalents |
|
(6,195,996) |
|
(4,176,361) |
|
|
|
|
|
|
|
Cash and cash
equivalents at the beginning of the year |
|
9,012,203 |
|
13,670,351 |
|
|
|
|
|
|
|
Exchange gain /
(loss) on cash and cash equivalents |
|
777,843 |
|
(481,787) |
|
|
|
|
|
|
|
Cash
and cash equivalents at the end of the year |
18 |
3,594,050 |
|
9,012,203 |
|
Notes to the consolidated financial
statements
For the year ended 31 December 2017
(Expressed in Hong Kong
dollars)
1 Publication of non-statutory
accounts
The financial information set out in this preliminary
announcement does not constitute statutory accounts.
The financial information for the year ended 31 December 2017 has been extracted from the
Company’s financial statements to that date, which have received an
unqualified auditors’ report.
2 Basis of preparation
The consolidated financial statements of the Group have been
prepared in accordance with International Financial Reporting
Standards (“IFRSs”). These consolidated financial statements also
comply with the applicable disclosure provisions of the AIM Rules
for Companies of the London Stock Exchange. The financial
statements have been prepared on a historical cost basis.
3
Revenue
The principal activities of the Group are manufacturing and sale
of chemical feed additive products.
Revenue represents the sales value of goods supplied to
customers less returns, discounts, value added tax and sales
taxes.
|
2017 |
2016 |
Sale of chemical feed additive products |
HK$ |
HK$ |
|
44,488,372 |
46,469,041 |
|
|
|
4 Other income
|
2017 |
2016 |
|
HK$ |
HK$ |
Government grants |
177,946 |
248,841 |
Sundry income |
37,095 |
26,428 |
|
215,041 |
275,269 |
Note: During the years ended 31 December
2017 and 2016, the Group received grants from local
government bodies in the PRC, which aimed at the technology
development of the Group.
5 Net
finance expense
|
2017 |
2016 |
|
HK$ |
HK$ |
|
|
|
Bank interest income |
14,220 |
63,460 |
Interest expense on loans from
non-controlling interests |
(4,780) |
- |
Interest expense on bank loan |
(133,127) |
(133,802) |
|
(123,687) |
(70,342) |
6 (Loss)
/ profit before income tax
(Loss) / profit
before income tax is stated after charging the following
items:-
(a) Staff costs (including directors’ emoluments)
|
2017 |
2016 |
|
HK$ |
HK$ |
|
|
|
Salaries, wages and commission |
10,186,056 |
10,275,948 |
Contributions to defined
contribution retirement plans |
877,054 |
839,484 |
Other staff benefits |
3,042,257 |
3,545,683 |
|
14,105,367 |
14,661,115 |
(b) Other items
|
2017 |
2016 |
|
HK$ |
HK$ |
|
|
|
Amortisation of patents |
265,538 |
265,538 |
Auditor’s remuneration |
335,977 |
312,226 |
Cost of inventories sold (note
16) |
19,190,422 |
17,675,779 |
Depreciation not charged to cost of
sales |
189,086 |
210,131 |
Exchange losses/(gains), net |
2,260,760 |
(2,083,712) |
Loss on disposal of property, plant
and equipment |
2,286 |
11,317 |
Patents written off |
314,022 |
- |
Impairment loss of patents |
766,073 |
- |
Rental charges under operating
leases in respect of |
|
|
land and buildings |
841,008 |
878,599 |
7 Income
tax (credit) / expense
|
2017 |
2016 |
|
HK$ |
HK$ |
Current income tax |
|
|
- Thailand corporate income tax |
237,963 |
122,526 |
- Shanghai foreign enterprise income
tax |
141,999 |
1,193,949 |
|
379,962 |
1,316,475 |
Adjustments in respect of prior
years |
|
|
- Shanghai foreign enterprise income
tax |
(287,323) |
- |
|
92,639 |
1,316,475 |
Deferred income tax (Note 23) |
(1,072,500) |
- |
|
(979,861) |
1,316,475 |
|
|
|
(a) Taxation for the Company
No provision for
profits tax has been made for the Company as it is exempted from
taxation in the British Virgin
Islands.
No deferred taxation
has been provided as the Company has no material unprovided
deferred tax assets or liabilities which are expected to be
crystallised in the foreseeable future (2016: Nil).
(b) Taxation for the Group
(i) Taxation on overseas profits has
been calculated on the estimated assessable profit for the year at
the rate of taxation prevailing in the countries in which the Group
companies operate. The income tax expense stated in consolidated
statement of profit or loss and other comprehensive income
represented the corporate income tax and foreign enterprise income
tax arisen from the business of subsidiaries operating in
Thailand and Shanghai respectively.
Hong Kong Profits Tax
is calculated at 16.5% (2016: 16.5%) of the estimated assessable
profit for the year. However, no provision for Hong Kong profits tax has been made (2016:
Nil) as the Group’s assessable profit subject to Hong Kong profits tax for the year is fully
set-off by tax loss brought forward from last year.
Provision for foreign enterprise income tax (“FEIT”) in the
People’s Republic of China (“PRC”)
has been made at 25% (2016: 25%) as Shanghai Walcom Bio-Chem Co.,
Ltd. (“Shanghai Walcom”), a wholly owned subsidiary operating in
Shanghai, has assessable profits
for the year.
Pursuant to the relevant income tax rules and regulations in the
PRC, Shanghai Walcom is not granted tax relief whereby the
applicable income tax rate was 25% for the years 2016 and 2017.
Thailand Corporate Income Tax is calculated at 20% (2016: 20%)
of the net profit for the year.
(b) Taxation for the Group (continued)
(ii) A reconciliation between the Group’s
income tax (credit) / expense and the accounting (loss) / profit,
at the applicable tax rate, is set out below:-
|
2017 |
2016 |
|
HK$ |
HK$ |
|
|
|
(Loss) / profit before income
tax |
(4,920,096) |
2,740,174 |
|
|
|
Notional tax calculated on (loss) /
profit before income tax, calculated |
|
|
at the rates applicable
to profits in the countries concerned |
(858,046) |
931,990 |
Tax effect of: |
|
|
Expenses not deductible for tax
purpose |
1,614,889 |
692,099 |
Non-taxable revenue |
(8) |
(13) |
Temporary differences not
recognised |
572 |
(911) |
Overprovision in prior years |
(287,323) |
- |
Tax losses not recognised |
5,474 |
- |
Previously unrecognised tax losses
used to reduce deferred tax expenses |
(1,072,500) |
- |
Utilisation of previously
unrecognised tax losses |
(382,919) |
(306,690) |
Income tax (credit) /
expense |
(979,861) |
1,316,475 |
(iii) At 31 December
2017, the Group has unused tax losses of approximately
HK$45,585,000 (2016: HK$47,905,000) available for offset against
future profits. During the year, deferred tax asset of
approximately HK$1,073,000 (2016:
Nil) has been recognised in respect of such tax losses. No deferred
tax asset has been recognised in respect of the remaining
HK$34,085,000 due to the
unpredictability of future profit streams. The unrecognised tax
losses may be carried forward indefinitely.
8 Loss
attributable to shareholders
Loss attributable to owners of the Company for the year ended
31 December 2017 dealt with in the
financial statements of the Company was approximately HK$239,000 (2016: Profit of HK$55,000).
9
Dividends
The Company does not recommend the payment of any dividend for
the year ended 31 December 2017
(2016: Nil).
10 (Losses) /
earnings per share
There is no difference
between basic and diluted (losses) / earnings per share. The basic
and diluted losses per share for the year ended 31 December 2017 are calculated by dividing the
Group’s loss attributable to owners of the Group of HK$4,341,039 (2016: profit of HK$1,263,286) by the weighted average number of
68,834,388 ordinary shares (2016: 68,834,388 ordinary shares). The
computation of diluted (losses) / earnings per share does not
assume the exercise of the Company’s outstanding share options
because the exercise price of the options is higher than the
average market price for the years ended 31
December 2017 and 2016.
11 Segment
reporting
(a) Segment reporting
Information reported to the
Executive Directors of the Company, being the chief operating
decision makers (“CODM”), for the purpose of resource allocation
and assessment of segment performance focuses on type of goods
delivered.
The executive directors
have identified that, the Group has only one reportable operating
segment, which is the manufacture, distribution and sales of
chemical feed additive products. Since this is the only reportable
operating segment of the Group, no further operating segment
analysis thereof is presented.
(b) Geographical information
The following table sets
out information about the geographical location of (i) the group’s
revenue from external customers and (ii) the group’s fixed assets,
intangible assets, goodwill and other current and non-current
assets. The geographical location of customers is based on the
location at which the services were provided or the goods
delivered. The geographical location of the assets is allocated
based on the operations of the segment and the physical location of
the asset.
(i) Sales revenue by
geographical location of customers
|
2017 |
2016 |
|
HK$ |
HK$ |
|
|
|
PRC |
25,759,215 |
26,447,044 |
Thailand |
16,854,536 |
16,643,536 |
Korea |
1,799,741 |
3,378,461 |
Others |
74,880 |
- |
|
|
|
|
44,488,372 |
46,469,041 |
(b) Geographical information (continued)
(ii) Segment assets by geographical
location of the assets
|
2017 |
2016 |
|
HK$ |
HK$ |
|
|
|
Hong Kong |
2,449,543 |
1,499,263 |
PRC |
13,943,939 |
14,882,387 |
The Philippines |
- |
93,115 |
Thailand |
9,613,986 |
8,287,443 |
Taiwan |
- |
252,221 |
Other Asia-Pacific countries |
164,232 |
577,499 |
Europe and United Kingdom |
183,478 |
538,778 |
America and Canada |
29,295 |
34,046 |
Others |
- |
8,415 |
|
|
|
|
26,384,473 |
26,173,167 |
(c) Information about major customers
The Group’s customer base is diversified and includes only three
customers with whom transactions have exceeded 10% of the Group’s
revenue.
|
2017 |
2016 |
Revenue from major customers: |
HK$ |
HK$ |
|
|
|
Sale of chemical feed additive
products |
|
|
Customer A |
7,612,493 |
7,447,862 |
Customer B |
7,458,638 |
5,709,373 |
Customer C |
6,050,715 |
6,718,528 |
12 Property, plant and equipment
|
|
|
Furniture |
|
|
|
|
|
Land and |
Leasehold |
and |
Office |
Plant and |
Motor |
|
Group |
building |
improvements |
fixtures |
equipment |
machinery |
vehicles |
Total |
|
HK$ |
HK$ |
HK$ |
HK$ |
HK$ |
HK$ |
HK$ |
|
|
|
|
|
|
|
|
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1.1.2016 |
944,835 |
1,374,847 |
89,716 |
999,121 |
2,563,331 |
534,043 |
6,505,893 |
Additions |
3,496,822 |
- |
- |
56,892 |
96,143 |
- |
3,649,857 |
Disposal |
- |
- |
- |
(103,227) |
(9,943) |
- |
(113,170) |
Exchange |
|
|
|
|
|
|
|
realignment |
9,425 |
(75,011) |
(4,230) |
(43,881) |
(162,276) |
(33,852) |
(309,825) |
At 31.12.2016 |
4,451,082 |
1,299,836 |
85,486 |
908,905 |
2,487,255 |
500,191 |
9,732,755 |
|
|
|
|
|
|
|
|
At 1.1.2017 |
4,451,082 |
1,299,836 |
85,486 |
908,905 |
2,487,255 |
500,191 |
9,732,755 |
Additions |
759,587 |
- |
- |
151,448 |
9,690 |
- |
920,725 |
Disposals |
- |
- |
(7,094) |
(7,804) |
(8,193) |
- |
(23,091) |
Exchange |
|
|
|
|
|
|
|
Realignment |
507,950 |
96,473 |
6,552 |
84,372 |
174,269 |
35,066 |
904,682 |
At 31.12.2017 |
5,718,619 |
1,396,309 |
84,944 |
1,136,921 |
2,663,021 |
535,257 |
11,535,071 |
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1.1.2016 |
286,594 |
1,249,504 |
64,748 |
805,348 |
2,257,863 |
321,138 |
4,985,195 |
Charge for |
|
|
|
|
|
|
|
the year |
43,545 |
16,968 |
8,236 |
59,120 |
80,560 |
80,275 |
288,704 |
Eliminated |
|
|
|
|
|
|
|
on disposals |
- |
- |
- |
(92,905) |
(8,948) |
- |
(101,853) |
Exchange |
|
|
|
|
|
|
|
realignment |
2,196 |
(72,892) |
(3,151) |
(34,926) |
(142,935) |
(20,357) |
(272,065) |
At 31.12.2016 |
332,335 |
1,193,580 |
69,833 |
736,637 |
2,186,540 |
381,056 |
4,899,981 |
|
|
|
|
|
|
|
|
At 1.1.2017 |
332,335 |
1,193,580 |
69,833 |
736,637 |
2,186,540 |
381,056 |
4,899,981 |
Charge for |
|
|
|
|
|
|
|
the year |
45,662 |
17,792 |
3,966 |
64,504 |
91,373 |
62,630 |
285,927 |
Eliminated |
|
|
|
|
|
|
|
on disposals |
- |
- |
(6,385) |
(7,023) |
(7,374) |
- |
(20,782) |
Exchange |
|
|
|
|
|
|
|
Realignment |
35,535 |
87,728 |
5,459 |
54,078 |
156,505 |
28,978 |
368,283 |
At 31.12.2017 |
413,532 |
1,299,100 |
72,873 |
848,196 |
2,427,044 |
472,664 |
5,533,409 |
|
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31.12.2017 |
5,305,087 |
97,209 |
12,071 |
288,725 |
235,977 |
62,593 |
6,001,662 |
|
|
|
|
|
|
|
|
At 31.12.2016 |
4,118,747 |
106,256 |
15,653 |
172,268 |
300,715 |
119,135 |
4,832,774 |
|
|
|
|
|
|
|
|
On 18 July 2016, a subsidiary of
the Group and the non-controlling interests (the “Joint Operators”)
entered into an agreement pursuant of which the Joint Operators
jointly purchased one piece of land in Samut Sakorn Province, which
is located in the outskirt area of Bangkok, Thailand. The Group and the
non-controlling interests hold 66.67% and 33.33% interests in the
land respectively after completion of the purchase. The transaction
constituted to a joint arrangement.
As at 31 December 2017, the
carrying amount of HK$4,666,918
represented the Group’s interest of 66.67% in the land (2016:
HK$3,496,822).
13 Patents
|
Group
HK$ |
Cost |
|
|
At 1.1.2016 and 31.12.2016 |
4,610,405 |
|
Patent written off |
(989,146) |
|
|
|
|
At 31.12.2017 |
3,621,259 |
|
|
|
Accumulated amortisation
and impairment |
|
|
At 1.1.2016 |
2,530,771 |
|
Charge for the year |
265,538 |
|
At 31.12.2016 |
2,796,309 |
|
Charge for the year |
265,538 |
|
Patent written off |
(675,124) |
|
Impairment loss |
766,073 |
|
|
|
|
At 31.12.2017 |
3,152,796 |
|
|
|
Net book value |
|
|
|
|
|
At 31.12.2017 |
468,463 |
|
|
|
|
At 31.12.2016 |
1,814,096 |
The remaining amortisation period of the patents ranged from 3
years to 10 years. The amortisation charge is included in selling
and distribution expenses in the consolidated statement of profit
or loss and other comprehensive income.
14 Goodwill
|
Group
HK$ |
Cost |
|
|
At 31.12.2016 and 31.12.2017 |
127,857 |
|
|
|
Impairment losses |
|
|
At 31.12.2016 and 31.12.2017 |
127,857 |
|
|
|
Net book value |
|
|
|
|
|
At 31.12.2017 |
- |
|
|
|
|
At 31.12.2016 |
- |
15 Investments in
subsidiaries
|
Company |
|
2017 |
2016 |
|
HK$ |
HK$ |
|
|
|
Unlisted investment, at cost |
384 |
384 |
|
|
|
Amounts due from subsidiaries |
|
|
- Non-trade related balances
|
36,487,626 |
42,005,281 |
- Impairment losses on non-trade related balances
|
(36,487,626) |
(42,005,281) |
|
|
|
|
- |
- |
(a) The amounts due from subsidiaries are unsecured,
interest-free and have no fixed terms of repayment.
(b) Listed below are the Group’s principal
subsidiaries:
|
|
|
Proportion of ownership interest |
|
Name |
Place of incorporation/
business |
Particulars of issued / registered
and fully paid share capital |
Group’s
effective interest |
Held by the
company |
Held by non-
controlling
interests |
Principal activities |
|
|
|
|
|
|
|
Walcom International Limited |
The British Virgin
Islands |
4,000,000 ordinary shares of US$1
each |
100% |
100% |
- |
Investment holding
|
Shanghai Walcom
Bio-Chem Co., Ltd. |
The People’s
Republic of China |
US$1,500,000
Registered
Capital |
100% |
- |
- |
Manufacturing
of chemical
feed
additive
products |
Walcom
Bio-Chemicals
Industrial Limited |
Hong Kong |
100 ordinary
shares 10,000 non-voting
deferred shares* |
100% |
- |
- |
Investment
holding and
trading of
chemical feed
additive
products |
Walcom Nutritions
International Limited |
Hong Kong |
2 ordinary shares |
100% |
- |
- |
Investment
holding |
Walcom Bio-Chem
(Thailand)
Company Limited |
Thailand |
100,000 ordinary
shares of
THB 10 each |
55% |
- |
45% |
Trading of
chemical feed
additive
products |
Walcom
Bio-Chemicals
(USA) LLC |
Delaware,
United
States of
America |
US$100
Registered
capital |
100% |
- |
- |
Investment
holding |
Walcom Animal
Science
(I.P) Limited |
Republic of
Mauritius |
1 ordinary share
of US$1 each |
100% |
- |
- |
Holding of
Patents |
Walcom Animal
Science
(I.P.2) Limited |
Republic of
Mauritius |
1 ordinary share
of US$1 each |
100% |
- |
- |
Holding of
Patents |
Walcom Animal
Science
(I.P.3) Limited |
Republic of
Mauritius |
1 ordinary share
of US$1 each |
100% |
- |
- |
Holding of
Patents |
Walcom Animal
Science
(I.P.5) Limited |
Republic of
Mauritius |
1 ordinary share
of US$1 each |
100% |
- |
- |
Holding of
Patents |
* The deferred shares, which are
not held by the Group, carry practically no rights to dividends nor
to receive notice of, nor attend or vote at any general meeting of
the subsidiaries nor to participate in any distribution or winding
up.
16 Inventories
|
Group |
|
2017 |
2016 |
|
HK$ |
HK$ |
|
|
|
Raw materials |
1,068,157 |
546,031 |
Finished goods |
1,839,110 |
834,697 |
|
|
|
|
2,907,267 |
1,380,728 |
The cost of inventories sold recognised as expenses and included
in cost of sales amounted to HK$19,190,422 (2016: HK$17,675,779).
17 Trade and other
receivables
|
Group |
|
2017 |
2016 |
|
HK$ |
HK$ |
|
|
|
Trade receivables |
11,501,231 |
8,019,256 |
Less: provision for impairment
loss |
(508,758) |
(508,758) |
Trade receivables - net |
10,992,473 |
7,510,498 |
|
|
|
Deposits and prepayments |
1,019,758 |
1,237,171 |
Other receivables |
77,896 |
238,319 |
|
|
|
|
12,090,127 |
8,985,988 |
All trade and other receivables are expected to be recovered
within one year.
- Impairment of trade receivables
The movement in the provision of impairment for doubtful debts
during the year, including both specific and collective loss
components, is as follows:
|
2017 |
2016 |
|
HK$ |
HK$ |
|
|
|
At 1 January |
508,758 |
508,758 |
Written off |
- |
- |
|
|
|
At 31 December |
508,758 |
508,758 |
|
|
|
At 31 December 2017, the Group’s
trade receivables of HK$508,758
(2016: HK$508,758) have been
outstanding for a certain period of time. The management assessed
that only a portion of the receivables is expected to be
recoverable. No further individual provision of impairment for
doubtful debts was provided in the year ended 31 December 2017 (2016: Nil).
The Group does not hold any collateral over these balances.
- Trade receivables that are not impaired
Majority of the Group’s revenue are with credit terms ranging
from 30 to 60 days. Ageing analysis of trade receivables that are
neither individually nor collectively considered to be impaired are
as follows:
|
2017 |
2016 |
|
HK$ |
HK$ |
|
|
|
Neither past due nor impaired |
5,816,790 |
5,519,269 |
|
|
|
Less than one month past due |
725,390 |
985,081 |
1 to 4 months past due |
1,579,136 |
1,006,148 |
Over 4 months past due |
2,871,157 |
- |
|
5,175,683 |
1,991,229 |
|
10,992,473 |
7,510,498 |
Receivables that were neither past due nor impaired relate to a
wide range of customers for whom there was no recent history of
default.
Receivables that were past due but not impaired relate to a
number of independent customers that have a good track record with
the Group. Based on past experience, management believes that
no impairment allowance is necessary in respect of these balances
as there has not been a significant change in credit quality and
the balances are considered fully recoverable. The Group does
not hold any collateral over these balances.
(c) The carrying amounts of trade receivables are
denominated in the following currencies:
|
Group |
|
2017 |
2016 |
|
|
|
Thai Baht |
THB 14,229,327 |
THB 13,636,000 |
Renminbi |
RMB
6,345,600 |
RMB
4,072,800 |
18 Cash and bank
balances
|
Group |
|
2017 |
2016 |
|
HK$ |
HK$ |
|
|
|
Cash at bank and on hand |
3,710,427 |
9,117,413 |
Less: Cash at bank – restricted |
(116,377) |
(105,210) |
|
|
|
Cash and cash equivalents in the
statement of cash flows |
3,594,050 |
9,012,203 |
|
|
|
|
The Company |
|
2017 |
2016 |
|
HK$ |
HK$ |
|
|
|
Cash and cash
equivalents in the balance sheet |
25,327 |
25,309 |
Included in the cash and cash equivalents of the Group,
HK$1,420,165 (2016: HK$4,562,565) were denominated in RMB and kept in
PRC. The remittance of these funds out of the PRC is subject to the
foreign exchange control restrictions imposed by the PRC
government.
As at 31 December 2017,
HK$116,377 (2016: HK$105,210) denominated in THB in a saving bank
account in Thailand has been
pledged to a bank as security to obtain a facility under a forward
exchange contract.
Included in cash and cash equivalents in the consolidated
balance sheet are the following amounts denominated in a currency
other than the functional currency of the entity to which they
relate:
|
|
2017 |
|
|
2016 |
|
|
|
|
|
|
Renminbi
United States dollars |
RMB
US$ |
1,187,643
168,649 |
|
RMB
US$ |
4,081,738
433,896 |
British Pound |
GB£ |
856 |
|
GB£ |
2,267 |
Thai Baht |
THB |
1,362,910 |
|
THB |
2,924,537 |
19 Trade and other
payables
|
Group |
|
2017 |
2016 |
|
HK$ |
HK$ |
|
|
|
Trade payables |
1,238,690 |
1,318,966 |
Other payables and
accrued expenses |
4,333,171 |
3,425,147 |
|
|
|
|
5,571,861 |
4,744,113 |
All of the trade and other payables are expected to be settled
within one year.
The carrying amounts of trade payables are denominated in the
following currencies:
|
|
|
|
2017 |
2016 |
|
|
|
Renminbi |
RMB 1,035,421 |
RMB 1,179,815 |
20 Loans from
non-controlling interests
At 31 December 2017, the loans
from non-controlling interests were unsecured and repayable as
follows:
|
Group |
|
2017 |
2016 |
|
HK$ |
HK$ |
Current liabilities |
|
|
Loans from non-controlling interests – unsecured |
478,046 |
- |
Total
borrowings |
478,046 |
- |
- The maturity of borrowings is as follows:
|
Group |
|
2017 |
2016 |
|
HK$ |
HK$ |
|
|
|
Within 1 year or on
demand |
478,046 |
- |
- The effective interest rate per annum for loans from
non-controlling interests at balance sheet date is at 12% (2016:
Nil) per annum.
On 28 November 2017, an indirectly
held subsidiary of the Group situated in Thailand has obtained borrowings of
HK$478,046 denominated in THB with
maturity of 1 year. The borrowing was unsecured.
21 Bank
borrowings
At 31 December 2017, the bank
borrowings were unsecured and repayable as follows:
|
Group |
|
2017 |
2016 |
|
HK$ |
HK$ |
Current liabilities |
|
|
Bank borrowings – unsecured |
2,392,631 |
2,235,886 |
Total
borrowings |
2,392,631 |
2,235,886 |
- The maturity of borrowings is as follows:
|
Group |
|
2017 |
2016 |
|
HK$ |
HK$ |
|
|
|
Within 1 year or on
demand |
2,392,631 |
2,235,886 |
- The effective interest rate per annum for bank borrowings at
balance sheet date is at 5.7% (2016: 5.7%) per annum.
During the 2017 reporting period, the Group fully repaid a bank
borrowing of HK$2,235,886 denominated
in RMB, which was unsecured.
On 14 November 2017, an indirectly
held subsidiary of the Group situated in the PRC has obtained a
bank borrowing of HK$2,392,631
denominated in RMB with maturity of 1 year. The bank borrowing was
unsecured.
22 Capital and
reserves
(a) Share capital
|
2017 |
2016 |
|
No. of |
|
No. of |
|
|
Shares |
HK$ |
shares |
HK$ |
Authorised: |
|
|
|
|
|
|
|
|
|
Ordinary shares of
HK$0.01 each |
150,000,000 |
1,500,000 |
150,000,000 |
1,500,000 |
|
|
|
|
|
Ordinary shares, issued |
|
|
|
|
and fully paid: |
|
|
|
|
At 1 January and 31
December |
68,834,388 |
688,344 |
68,834,388 |
688,344 |
|
|
|
|
|
The holders of ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at meetings of the Company. All ordinary shares rank
equally with regard to the Company’s residual assets.
(b) Nature and purpose of reserves
Company
|
|
|
Share |
|
Capital |
|
Accumulated |
|
|
|
|
|
|
premium |
|
reserve |
|
losses |
|
Total |
|
|
|
|
HK$ |
|
HK$ |
|
HK$ |
|
HK$ |
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
1.1.2016 |
|
|
95,298,644 |
|
6,410,193 |
|
(102,827,765) |
|
(1,118,928) |
|
Comprehensive
income |
|
|
|
|
|
|
|
|
|
|
Profit for the year |
|
|
- |
|
- |
|
54,854 |
|
54,854 |
|
Balance at
31.12.2016 |
|
|
95,298,644 |
|
6,410,193 |
|
(102,772,911) |
|
(1,064,074) |
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
1.1.2017 |
|
|
95,298,644 |
|
6,410,193 |
|
(102,772,911) |
|
(1,064,074) |
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income |
|
|
|
|
|
|
|
|
|
|
Lapse of share options |
|
|
- |
|
(684,771) |
|
684,771 |
|
- |
|
Loss for the year |
|
|
- |
|
- |
|
(238,889) |
|
(238,889) |
|
Balance at
31.12.2017 |
|
|
95,298,644 |
|
5,725,422 |
|
(102,327,029) |
|
(1,302,963) |
|
|
|
|
|
|
|
|
|
|
|
|
(i) Share premium
The application of the share premium account is governed by the
Memorandum and Articles of the Association of the Company. In
accordance with the Companies Law of the British Virgin Islands, the share premium
account is distributable to the shareholders of the Company
provided that immediately following the date on which the dividend
is proposed to be distributed, the Company will be in a position to
pay off its debts as they fall due in the ordinary course of
business. The share premium may also be distributed in the
form of fully paid bonus shares.
(ii) Merger reserve
The merger reserve arose in the Group reorganisation before
Admission to AIM. There was no movement during the year.
(iii) Exchange reserve
The exchange reserve comprises all foreign exchange differences
arising from the translation of the financial statements of foreign
operations. The reserve is dealt with in accordance with the
accounting policies set out in note 2(u) to the report and
accounts.
(iv) Surplus reserve
Surplus reserve of the Group currently comprises statutory
surplus reserve. In accordance with the laws and regulations in the
PRC, the PRC entities are required to appropriate 10% of their
profit after tax, after offsetting any prior years’ losses, to the
statutory surplus reserve. When the balance of the statutory
surplus reserve reaches 50% of the PRC entities’ registered share
capital, any further appropriation is optional. The statutory
surplus reserve can be used to offset prior years’ losses, if any,
and may be converted into share capital by issuing new shares to
shareholders in proportion to their existing shareholding or by
increasing the par value of the shares currently held by them,
provided that the remaining balance of the statutory surplus
reserve after such issue is not less than 25% of share capital.
(v) Capital reserve of the Company
The capital reserve comprises the followings:
- The fair value of the actual or estimated number of unexercised
share options granted to employees of the Group recognised in
accordance with the accounting policy adopted for share-based
payment in note 2(v) of the report and accounts; and
- There was HK$4,841,424 balance
brought forward as a result of the Group reorganization in
2004.
(c) Distributability of reserves
Save as mentioned in note 22(b)(i), no reserves were available
at 31 December 2016 and 2017 for cash
distribution as the Company recorded accumulated losses for the
year.
(d) Capital management
The Group’s primary objectives when managing capital are to
safeguard the Group’s ability to continue as a going concern, so
that it can continue to provide returns for shareholders, by
pricing products and services commensurately with the level of risk
and by securing access to finance at a reasonable cost.
The Group actively and regularly reviews and manages its capital
structure to ensure optimal capital structure and shareholder
returns that might be possible with higher levels of borrowings and
the advantages and security afforded by a sound capital position,
and makes judgements to the capital structure in light of changes
in economic conditions.
Consistent with industry practice, the Group monitors its
capital structure using a gearing ratio, which is total debts
divided by adjusted capital. Total debts represent total bank
overdrafts and borrowings. Adjusted capital includes all
components of shareholders’ equity less unrealised reserves.
In order to maintain or adjust the gearing ratio, the Group may
issue new shares, return capital to shareholders, raise new debt
financing or sell assets to reduce debt.
The gearing at 31 December 2017
and 2016 were 21% and 12% respectively, calculated as follows :
|
|
2017 |
|
2016 |
|
|
|
HK$ |
|
HK$ |
|
Current liabilities: |
|
|
|
|
|
- Loans from non-controlling
interests |
|
478,046 |
|
- |
|
- Bank borrowings |
|
2,392,631 |
|
2,235,886 |
|
|
|
|
|
|
|
Total debts |
|
2,870,677 |
|
2,235,886 |
|
|
|
|
|
|
|
Owners’ equity |
|
14,719,862 |
|
15,871,503 |
|
(Less) / add : Exchange reserve |
|
(794,643) |
|
2,394,755 |
|
|
|
|
|
|
|
Adjusted capital |
|
13,925,219 |
|
18,266,258 |
|
|
|
|
|
|
|
Gearing ratio |
|
21% |
|
12% |
|
23 Deferred tax
assets
The analysis of
deferred tax assets is as follows:
|
2017 |
2016 |
|
HK$ |
HK$ |
Deferred tax assets: |
|
|
-Deferred income tax
assets to be recovered after more than 12 months |
858,000 |
- |
-Deferred income tax
assets to be recovered within 12 months |
214,500 |
- |
|
1,072,500 |
- |
|
|
|
The movement in
deferred income tax assets is as follows:
|
Tax
losses |
|
2017 |
2016 |
|
HK$ |
HK$ |
At 1 January |
- |
- |
Credited to the
consolidated statement of profit or loss (note 7) |
1,072,500 |
- |
At 31 December |
1,072,500 |
- |
|
|
|
24 Share option
scheme
A share option scheme (the “scheme”) was adopted pursuant
to a resolution of an extraordinary general meeting of the Company
held on 20 September 2006 for the
purpose of providing incentives and rewards to any director of any
member of the Group who is in service with any such Company or any
employee of any member of the Group (the “eligible directors and
employees”).
The maximum number of shares in respect of which options or
rights to subscribe for shares pursuant to the scheme when
aggregated with number of shares in respect of which options or
rights to subscribe for shares has been granted in previous years
under the scheme and other share option or share incentive plan
adopted by the Company shall not exceed 10% of the shares issued by
the Company from time to time. An option share shall only be
exercisable (a) after one year from date of grant, (b) before the
expiry of the option period, (c) at a time permitted by the Model
Code for Securities Transactions by Directors of Listed Issuers,
and (d) if any performance conditions imposed pursuant to the
scheme rules have been fulfilled or obtained.
As at 31 December 2017, 1,830,000
ordinary shares options have been granted to directors and
employees of the Company under the Share Option Scheme. During the
year, 1,500,000 options were lapsed and no other options were
exercised or cancelled.
(a) The terms and conditions of the grants that existed
during the year are as follows, hereby all options are settled by
physical delivery of shares:
Participant |
|
Date of grant |
|
No. of options outstanding as at
31 December 2017 |
|
Vesting
period |
|
Exercise
period |
|
Exercise
price |
|
|
|
|
|
|
|
|
|
|
|
Options granted to
directors: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yong Chian Tan |
|
9 June 2010 |
|
500,000 |
|
2 years commencing from 9 June
2010 |
|
From 9 June 2012 to 8 June 2020
(both days inclusive) |
|
GB£ 0.07 |
|
|
9 June 2010 |
|
500,000 |
|
3 years commencing from 9 June
2010 |
|
From 9 June 2013 to 8 June 2020
(both days inclusive) |
|
GB£ 0.07 |
|
|
|
|
|
|
|
|
|
|
|
Albert Siu Fai Wong |
|
9 June 2010 |
|
250,000 |
|
2 years commencing from 9 June
2010 |
|
From 9 June 2012 to 8 June 2020
(both days inclusive) |
|
GB£ 0.07 |
|
|
9 June 2010 |
|
250,000 |
|
3 years commencing from 9 June
2010 |
|
From 9 June 2013 to 8 June 2020
(both days inclusive) |
|
GB£ 0.07 |
|
|
|
|
|
|
|
|
|
|
|
Options granted to
employees: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employees of the Group |
|
9 June 2010 |
|
165,000 |
|
2 years commencing from 9 June
2010 |
|
From 9 June 2012 to 8 June 2020
(both days inclusive) |
|
GB£ 0.07 |
|
|
9 June 2010 |
|
165,000 |
|
3 years commencing from 9 June
2010 |
|
From 9 June 2013 to 8 June 2020
(both days inclusive) |
|
GB£ 0.07 |
|
|
|
|
|
|
|
|
|
|
|
(b) Fair value of share options
The fair value of the share options granted
during the year ended 31 December
2010 have been valued by an independent qualified valuer
using Binomial Option Pricing Model.
25 Share award
plan
The Company’s share award plan (the “plan”) was adopted pursuant
to a resolution of an extraordinary general meeting of the Company
held on 20 September 2006 for the
purpose of providing incentives or rewards to selected PRC
employees and officers of the Group but excluding officers of the
Company (the “eligible PRC officers”).
Prior to the Admission to AIM, 433,163 ordinary shares were
transferred to Walcom China Staff Incentive Limited (the “trustee”)
by certain of the then existing shareholders of the Company, to
hold pursuant to the terms of the trust deed applicable to the
plan. These shares are held on trust for the eligible PRC
officers.
The plan shall be valid and effective for a term of ten years
from the date of adoption and it shall be subject to the
administration of a committee delegated from time to time by the
board and the trustee in accordance with the provisions of the
trust deed and plan rules. The term of the plan was extended
for another ten years and the board of directors was empowered to
terminate the plan before its expiry in accordance with the plan
rules. There were 70,163 (2016: 70,163) ordinary shares held by the
trustee at 31 December 2017.
26 Related party
transactions
The management considered the ultimate controlling party since
date of incorporation to 31 December
2017 was Mr. Francis Chi.
|
2017 |
2016 |
|
HK$ |
HK$ |
|
|
|
(a) Transactions
with key management personnel |
|
|
Salaries and other short
term employee benefits |
5,608,629 |
7,530,816 |
|
|
|
(b) Transactions
with non-controlling interests |
|
|
Interest expenses |
4,780 |
- |
Balances with related
parties are disclosed in the balance sheet and in note 15.
27 Commitments
(a) Capital commitments
Capital expenditure
contracted for at the balance sheet date but not yet incurred is as
follows:
|
2017 |
2016 |
|
HK$ |
HK$ |
|
|
|
Property, plant and equipment |
- |
726,720 |
(b) Operating lease commitments
The future aggregate
minimum lease rental expenses in respect of the manufacturing
plants and office premises under non-cancellable operating
lease are payable in the following periods:
|
2017 |
2016 |
|
HK$ |
HK$ |
|
|
|
Within one year |
1,561,711 |
1,335,881 |
In the second to fifth years
inclusive |
- |
24,952 |
|
1,561,711 |
1,360,833 |
28 Reconciliations
of liabilities arising from financing activities
|
Other assets |
Liabilities from
financing activities |
|
|
|
|
|
|
|
Restricted
bank balances
(Current) |
Loans from
non-controlling interests
(Current) |
Bank
Borrowings
(Current) |
Total |
|
HK$ |
HK$ |
HK$ |
HK$ |
|
|
|
|
|
As at 1 January 2017 |
105,210 |
- |
(2,235,886) |
(2,130,676) |
Inflow from financing
activities |
- |
(478,046) |
(2,392,631) |
(2,870,677) |
Outflow from financing
activities |
424 |
- |
2,392,631 |
2,393,055 |
Currency translations |
10,743 |
- |
(156,745) |
(146,002) |
As at 31 December 2017 |
116,377 |
(478,046) |
(2,392,631) |
(2,754,300) |
29 Critical
accounting estimates and judgements
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions
that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities with the next
financial year are discussed below.
(a) Patents
The carrying amount of patents representing mainly legal costs
for application of patents in respect of the various uses of
formulation of cysteamine in various regions is HK$468,463 (2016: HK$1,814,096). The Group carried an
impairment test based on a variety of assumptions of the
possibilities that the pending patents could be circumvented and
concluded that no impairment was required. Should the pending
patents be circumvented, for example by an alternative formulation
of cysteamine, then an impairment might arise and could have
significant effect on the carrying amount of the patents stated at
the balance sheet date.
(b) Depreciation
The measurement determines the estimated useful lives and
residual values for its property, plant and equipment. Property,
plant and equipment are depreciated on a straight-line basis over
the estimated useful lives. The Group reviews annually the
useful life of an asset and its residual value, if any. The
depreciation expense for future periods is revised if there are
significant changes from previous estimation.
(c) Impairments
In considering the impairment loss that may be required for
certain property, plant and equipment, investments in subsidiaries
of the Group, recoverable amount of the asset needs to be
determined. The recoverable amount is the greater of the net
selling price and the value in use. It is difficult to
precisely estimate selling price because quoted market prices for
these assets may not be readily available. In determining the
value in use, expected cash flows generated by the asset are
discounted to their present value, which requires significant
judgement relating to items such as level of turnover and amount of
operating costs. The Group uses all readily available
information in determining an amount that is reasonable
approximation of recoverable amount, including estimates based on
reasonable and supportable assumptions and projections of items
such as turnover and operating costs.
Impairment losses for bad and doubtful debts are assessed and
provided based on the directors’ regular review of ageing analysis
and evaluation of collectability. A considerable level of
judgement is exercised by the directors when assessing the credit
worthiness and past collection history of each individual
customer.
An increase or decrease in the above impairment loss would
affect the net (loss) / profit in the year and in future years.
(d) Income taxes
Determining income tax provisions involves judgement on the
future tax treatment of certain transactions and interpretation of
tax rules. The Group carefully evaluates tax implications of
transactions and tax provisions are set up accordingly. The
tax treatment of such transactions is reconsidered periodically to
take into account all changes in tax legislation.
Deferred tax assets are recognised for tax losses not yet used
and temporary deduction differences. As those deferred tax
assets can only be recognised to the extent that it is probable
that future profit will be available against which the unused tax
credit can be utilised, management’s judgement is required to
assess the probability of future taxable profits.
Management’s assessment is constantly reviewed and additional
deferred tax assets are recognised if it becomes probable that
future taxable profits will allow the deferred tax asset to be
recovered.
(e) Inventory provision
The Group performs regular reviews of the carrying amounts of
inventories with reference to aged inventories analyses,
projections of expected future saleability of goods and management
experience and judgement. Based on this review, write-down of
inventories will be made when the carrying amounts of inventories
decline below their estimated net realisable value. Due to
changes in customers’ performance, actual saleability of goods may
be different from estimation and profit or loss could be affected
by differences in this estimation.
30 Reconciliation of
(loss) / profit before income tax to EBITDA
|
2017 |
2016 |
|
HK$ |
HK$ |
|
|
|
(Loss) / profit before income
tax |
(4,920,096) |
2,740,174 |
Depreciation |
285,927 |
288,704 |
Amortisation of patents |
265,538 |
265,538 |
Interest income |
(14,220) |
(63,460) |
Interest expenses |
137,907 |
133,802 |
Patents written off |
314,022 |
- |
Impairment loss of patents |
766,073 |
- |
Loss on disposal of property, plant
and equipment |
2,286 |
11,317 |
EBITDA |
(3,162,563) |
3,376,075 |
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 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.