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MiLOC Group Ltd NEX:ML.P NEX Ordinary Share KYG613521031
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MiLOC Group Limited Interim results for the six months to 30 June 2018

28/09/2018 3:00pm

UK Regulatory (RNS & others)


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RNS Number : 3581C

MiLOC Group Limited

28 September 2018

28 September 2018

MiLOC Group Limited

("MiLOC", the "Group" or the "Company")

Interim results for the six months ended 30 June 2018

Chief Executive Officer's Statement

MiLOC Group Limited (NEX: ML.P), the pharmaceutical and healthcare group announces the results of the Company and its subsidiaries for the six month period ended 30 June 2018.

The nature of the Company's operations and its principal activities are to act as the holding company of a group engaged in (i) the provision of Traditional Chinese Medicine ("TCM") healthcare services, including consultations and TCM therapies, through a network of clinics in Hong Kong, and (ii) the sale and distribution of TCM healthcare and skincare products through wholesale outlets and TCM clinics, the Group's retail store in Hong Kong and other non-related TCM retail outlets, as well as directly to customers through the Company's online store.

This announcement contains inside information as defined in Article 7 of the Market Abuse Regulation No. 596/2014 and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations.

Financial highlights

-- Revenue for the six months ended 30 June 2018: HK$5,268,337 (30 June 2017: HK$7,222,843)

-- Gross profit for the six months ended 30 June 2018: HK$2,232,572 (30 June 2017: HK$3,266,360)

-- Loss for the six months ended 30 June 2018: HK$24,955,951 (30 June 2017: HK$4,112,418)

-- The basic and diluted loss per share for the six months ended 30 June 2018: HK$0.34 (30 June 2017: HK$0.058)

-- The Group's cash position as at 30 June 2018: HK$7,650,652 (30 June 2017: HK$801,342)

Review of significant activities

The Group has, over the last few years, invested considerable time and expense in establishing itself and introducing the concept of TCM, medical products and healthcare to the wider public. The Board believes that the establishment of TCM Plus skincare products and AKFS Plus haircare products will make a very substantial positive contribution to the Group's revenue in long term and it has invested significantly in research and development of these products.

(a) Private Placings

On 14, 15, 22 and 27 December 2017, the Company entered into a total of four agreements to issue 1,684,551 new US$0.001 ordinary shares at the placing price of 28.5p per share to raise approximately HK$5,106,010. The Company also agreed to pay a referral fee of 5% of the fundraising amount to a consultant of the Company by allotting and issuing a total of 78,283 new ordinary shares of US$0.001 each at a price of 30.0p per share. These placings and allotments were completed during January 2018.

On 26 February 2018, the Company entered into a placing agreement to issue 313,396 new US$0.001 ordinary shares at a placing price of 28.5p per share to raise approximately HK$1,000,000. The Company also agreed to pay a referral fee of 5% of the fundraising amount to a consultant of the Company by allotting and issuing a total of 14,887 new ordinary shares of US$0.001 each at a price of 30.0p per share. The placing and allotment were completed during March 2018.

(b) Convertible Bond

On 19 January 2018, the Company entered into an extension agreement for the Convertible Bond. The maturity date extended to 19 January 2019 and the coupon rate increased from six percent (6%) per annum to seven point two percent (7.2%) per annum. All other terms remain unchanged.

(c) Incorporation of Subsidiaries

On 20 March 2018, MiLOC Pharmaceutical (HK) Limited ("MPHK"), one of the Group's wholly owned subsidiaries, signed a subscription agreement with Huge Port International Limited ("HPL"), a company incorporated in Hong Kong which is owned by one of the Company's substantial shareholders, Mr. Liu Wei Hung. HPL agreed to invest RMB10,000,000 (Approximately GBP 1,160,000) into Richmond Group Limited ("RGL"), a newly incorporated company in Hong Kong, of which HPL owns 33% of the issued share capital of RGL. MPHK owns 57% of the shares of RGL and Mr. Yuan Fei, who is a resident of the People's Republic of China, owns 10% of the shares of RGL. Mr. Yuan will contribute to the business with his experience and networks in China. The principal activity of RGL is investment holding.

On 28 April 2018, RGL set up a wholly owned subsidiary, namely Star Collaboration (Guangzhou) Limited ("StarC") in Guangzhou China with a registered capital of RMB10 million. The principal activity of StarC is the distribution of MiLOC's TCM hair-care and skin-care products.

Financial review

(i) Income statement items

The Group's revenue for the six months ended 30 June 2018 amounted to HK$5,268,337, a decrease of HK$1,954,506 or 27.1% as compared to the six months ended 30 June 2017. This was attributable to decreased revenue generated from wholesale orders by approximately HK$1,680,000. The wholesales business consists of health supplement products and TCM Plus skincare and AKFS Plus haircare products. The Group's gross profits and gross profit margin for the six months ended 30 June 2018 amounted to HK$2,232,572 and 42.4% (30 June 2017: HK$3,266,360 and 45.2%) respectively. The Group's other revenue from management fee income for the six months ended 30 June 2018 amounted to HK$157,733, an increase of 23.8% as compared to the six months ended 30 June 2017.

The Group's distribution costs for the six months ended 30 June 2018 amounted to HK$20,574,611, a significant increase of HK$18,842,313 or 1087.7% as compared to the same period in 2017. This was due to the provision of royalty fee of HK$ 16,692,679 and the provision of commission fee of HK$3,510,000 related to the AKFS Plus haircare products which was launched on 16 December 2017. The Group's administrative expenses for the six months ended 30 June 2018 amounted to HK$6,409,101, an increase of HK$641,897 or 11.1% as compared to the six months ended 30 June 2017. This was due to recognition of legal and professional fee expenses and the rental expenses for the period ended 30 June 2018.

The Finance Costs for the six months ended 30 June 2018 amounted to HK$149,723, this was related to the interest paid for the convertible bond.

The unaudited net loss for the period ended 30 June 2018 shows a significant increase of HK$20,843,533 and 506.8% compared to the same period in 2017. This was attributable to the provision of royalty fee and commission fee in distribution costs and administrative expenses incurred related to the AKFS haircare products by the Group during the period.

The Directors do not recommend the payment of a dividend in respect of the period.

The interim results have not been reviewed by the Company's auditor.

(ii) Balance sheet items

The Group's tangible fixed assets mainly comprised of leasehold improvements and office equipment, decreased in amount by HK$579,041 as at 30 June 2018, compared to the same period in 2017, mainly due to the depreciation for leasehold improvement.

The Group's goodwill as at 30 June 2018 was valued at HK$485,999 which represented a decrease of HK$439,872 compared with HK$925,871 as at 30 June 2017, due to a recognised impairment for goodwill of a subsidiary.

The Group's inventories as at 30 June 2018 amounted to HK$6,085,378 with a decrease of HK$1,049,558 over the balance as at 30 June 2017. This was mainly due to the Company's sale of TCM Plus skincare products and AKFS Plus haircare products. Inventories mainly consisted of TCM Plus Skincare and AKFS Plus haircare products purchased during in 2016 and 2017 respectively.

The Group's other receivables and prepayments as at 30 June 2018 increased by HK$1,138,637 or 156.4% compared to the same period in 2017. This was due to the rental deposit paid by a subsidiary and advance payment for AKFS Plus productions.

The Group's trade payables as at 30 June 2018 amounted to HK$977,329 with a decrease of HK$2,521,401 over the balance as at 30 June 2017, this was mainly due to a settlement of TCM Plus production fee in the year end of 2017.

The Group's cash and cash equivalents increased by HK$6,849,310 as at 30 June 2018 compared to 30 June 2017, this was mainly due to one of substantial shareholder's investment in a newly incorporated subsidiary.

Outlook

The Company will continue to work towards its long term objective to expand its TCM based product portfolio and actively promoting the TCM Fast-Moving Consumer Goods ("FMCG") side of the business. The Group is also actively building up both online and offline distribution channels and to enter into distribution agreements with leading distributors in Hong Kong, Taiwan and Mainland China.

The Company is near the end of negotiations with a few large distributors and is confident that the launch of "AKFS Plus", the TCM hair-care product linked with Aaron Kwok, will lead to a significant growth in sales in the coming years.

Regarding our medical business, we will continue to maintain and provide professional TCM services to our patients and we believe that it will promote the brand name of "MiLOC" including the medical services while we continue to input more resources for the marketing of our TCM FMCG products. This will eventually bring more business and positive revenue to the Group.

Finally, on behalf of the Board of Directors, I would like to extend our utmost appreciation to all our employees, partners, shareholders, customers, business associates and suppliers, for their continued support.

The Directors of the Company accept responsibility for the contents of this announcement.

Michael Ong

Chief Executive Officer

For further information, please contact:-

 
MiLOC                                           Tel: +852 2110 4221 
 ONG Ban Poh Michael - Chief Executive Officer 
 CHOI Ronnie - Chief Financial Officer 
 
NEX Exchange Corporate Adviser                  Tel: +44 (0)20 7469 
 PETERHOUSE CAPITAL LIMITED                      0930 
 Guy Miller 
 Mark Anwyl 
 

MiLOC Group Limited

Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2018

 
                                                              The Group 
                                        ----------------------------------------------------- 
                                              Unaudited         Unaudited               Audited 
                                        ---------------   ---------------   ------------------- 
                                         6 months ended    6 months ended            Year ended 
                                           30 June 2018      30 June 2017           31 December 
                                                                                           2017 
                                        ---------------   ---------------   ------------------- 
                                                    HK$               HK$                   HK$ 
 From continuing operations 
 
 Revenue                                      5,268,337         7,222,843            11,618,098 
 Cost of sales                              (3,035,765)       (3,956,483)           (6,384,891) 
 
 
 Gross profit                                 2,232,572         3,266,360             5,233,207 
 
 Other revenue                                  157,734           127,422               253,146 
 Distribution costs                        (20,574,611)       (1,732,298)           (8,201,371) 
 Administrative expenses                    (6,409,101)       (5,767,204)          (13,350,470) 
 Foreign exchange gains/(losses), 
  net                                         (213,336)           (6,698)             (282,949) 
 
 
 Operating loss                            (24,806,742)       (4,112,418)          (16,348,437) 
 
 Impairment for intangible 
  asset and goodwill                                  -                 -             (439,872) 
 Finance costs                                (149,723)                 -             (481,311) 
 Interest income                                    514                 -                     2 
 
 
 Loss before taxation                      (24,955,951)       (4,112,418)          (17,269,618) 
 Taxation                                             -                 -                     - 
 
 
 
 Loss for the period/year                  (24,955,951)       (4,112,418)          (17,269,618) 
 
 Other comprehensive 
  income                                              -                 -                     - 
 
 
 Total comprehensive 
  result for the period/year               (24,955,951)       (4,112,418)          (17,269,618) 
 
 
 Attributable to: 
 Equity holders of 
  the parent entity                        (24,915,691)       (4,112,418)          (17,269,618) 
 Non-controlling interests                     (40,260)                 -                     - 
 
 
                                           (24,955,951)       (4,112,418)          (17,269,618) 
 
 
 Loss per share - from 
  continuing operations 
  (HK$) 
 Basic and diluted                               (0.34)           (0.058)                (0.24) 
 
 
 
 

Loss per share - from continuing operations

The calculation of basic loss per share is based on the consolidated loss attributable to the equity holders of the parent entity of HK$24,915,691 (For the six months ended 30 June 2017: Loss of HK$4,112,418; For the 12 months ended 31 December 2017: Loss of HK$17,269,618) and the weighted average number of ordinary shares of 73,269,911 (For the six months ended 30 June 2017 weighted average number of ordinary shares of 71,093,259; For the 12 months ended 31 December 2017: 72,309,826) in issue during the period.

MiLOC Group Limited

Consolidated Statement of Financial Position

As at 30 June 2018

 
 
                                                                                 Audited 
                                               Unaudited       Unaudited        As at 31 
                                                As at 30        As at 30        December 
                                               June 2018       June 2017            2017 
                                         ---------------   -------------   ------------- 
                                                     HK$             HK$             HK$ 
 Assets 
 Non-current assets 
 Fixed assets                                    713,517       1,292,558         892,342 
 Other intangible assets                       4,285,714       4,642,857       4,285,714 
 Goodwill                                        485,999         925,871         485,999 
 Deferred tax assets                                   -               -               - 
 
 
                                               5,485,230       6,861,286       5,664,055 
 
 
 Current assets 
 Inventories                                   6,085,378       7,134,936       7,366,776 
 Trade receivables                                84,182          67,139         369,824 
 Other receivables and prepayments             1,866,586         727,948         776,015 
 Cash and cash equivalents                     7,650,652         801,342       3,891,331 
 
 
                                              15,686,798       8,731,365      12,403,946 
 
 
 Total assets                                 21,172,028      15,592,651      18,068,001 
 
 
 Equity and liabilities 
 Equity 
 Share capital                                   598,333         558,661         582,022 
 Share premium                                71,417,033      56,157,739      65,027,334 
 Retained earnings                          (92,329,169)    (54,256,278)    (67,413,478) 
 
 
 Equity attributable to the 
  parent entity                             (20,313,803)       2,460,122     (1,804,122) 
 Non-controlling interest                      9,134,821               -               - 
 
 
 Total equity                               (11,178,982)       2,460,122     (1,804,122) 
 
 
 Liabilities 
 Current liabilities 
 Trade payables                                  977,329       3,498,730         934,687 
 Other payables and accruals                  23,899,027       2,636,519      11,459,155 
 Amount due to directors                       2,111,056       2,111,366       2,111,056 
 
                                              26,987,412       8,246,615      14,504,898 
 
 Non-current liabilities 
 Borrowings                                    5,363,598       4,885,914       5,367,225 
 
 
 Total liabilities                            32,351,010      13,132,529      19,872,123 
 
 
 Total equity and liabilities                 21,172,028      15,592,651      18,068,001 
 
 
 

The Group's consolidated financial statements for the six months ended 30 June 2017 and 2018 disclosed above have neither been audited nor reviewed by the Company's auditors.

The same accounting policies and methods of computation as included in the Group's consolidated financial statements for the year ended 31 December 2017 have been adopted in the preparation of the Group's unaudited consolidated financial statements for the six months ended 30 June 2018.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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