REG - UniVision Eng Ltd - Interim Results - 6 months ended 30 September 2020
29 December 2020
The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.
UniVision Engineering Limited
("UniVision" or the "Company" or the "Group")
Interim Results
For the Six Months Ended 30 September 2020
UniVision (AIM: UVEL), the Hong Kong based Group whose principal activities are the supply, design, installation and maintenance of closed-circuit television and surveillance systems, and the sale of security related products, is pleased to announce its unaudited interim results for the six months ended 30 September 2020.
For further information visit www.uvel.com or contact:
UniVision Engineering Limited
Tel: +852 2389 3256
Stephen Koo, Chairman
Peter Yip Tak Chan, Chief Executive Officer
Danny Kwok Fai Yip, Finance Director
Nicholas Lyth, Non-Executive Director
Ivor Shrago, Non-Executive Director
Tel: +44 (0)7769 906686
Tel: +44 (0) 7900251 925
SPARK Advisory Partners Limited
(Nominated Adviser)
Tel: +44 (0)20 3368 3551
Mark Brady / Neil Baldwin
SI Capital Limited
(Broker)
Tel: +44 (0)1483 413500
Nick Emerson
CHAIRMAN'S STATEMENT
INTRODUCTION
During 2020 Hong Kong, like other countries, has been facing the crisis of the COVID-19 pandemic which has led to unprecedented economic contraction. The impact is much higher than that of anti-amendment of extradition bill crisis in Hong Kong last year. Although the Company is not engaged in the most seriously affected industry, the Company has still experienced a downturn in revenue for the six months ended 30 September 2020, when compared to the same period last year. Nevertheless, the Board is optimistic about the Group's business and anticipates that the performance should improve in the second half of the financial year.
THE MAJOR CONTRACT WITH MTRC
The major contract with Mass Transit Railway Corporation ("MTRC") represents the contract awarded in May 2017 with contract sum of HK$389.43m for providing the replacement works of the Closed-Circuit Television (CCTV) systems by a unified IP-based, digital CCTV systems for numerous railway lines in Hong Kong ("Major Contract"). With further agreed orders of HK$84m, the total value of the Major Contract is HK$473.4m. The expected date for completion of base contract works is November 2023.
The contract was, and remains, in the installation stage during the current financial period. During the period under review, the Major Contract was relatively more labour intensive when compared with last year resulting in a lower margin.
The Company is the main contractor for the Major Contract. Major suppliers have offered long credit period for the equipment. The Company has sourced a few more subcontractors for performing the installation works for cost effectiveness.
The Company has invoiced, in total, HK$144m to MTRC up to 30 September 2020. This leaves a further value of HK$329m over the remaining years of the contract, assuming no further additions to this work. The gross valuation of certified works on the Major Contract was HK$191.8m up to 30 September 2020. The Work from Home policy, due to the pandemic, has caused some delay in the process of certification and has led to slow billing to MTRC. This is the primary reason for increase in Contract Assets.
HSBC, the Group's major banker, has provided a trade facility HK$26m after the latest review. The invoice discounting/factoring facility is provided up to HK$15m. These facilities provide additional working capital for performance of the Major Contract. The Board closely monitors the status of working capital for this project.
FINANCIAL REVIEW
The profit attributable to the equity holders of the Company is approximately £0.4m (2019: £0.21m).
In the six months period under review, revenue for the Group decreased by 19.3% to HK$39.9m (H1 2019: HK$49.5m). The decrease in construction revenue was mainly due to the income decreased of HK$22m to HK$13m (H1 2019: $33m) for the Major Contract due primarily to the delay of the Project for the installation of key equipment.
Revenue for the Group's maintenance business recorded a growth of 23% to HK$8.96m (H1 2019: HK$7.27m). The Group currently provides maintenance services to MTRC's network of CCTV systems and public address systems on seven railway lines in Hong Kong. The revenue for this contract was relatively stable at HK$3.9m which represented over 44% in the segment for the period.
Gross profit margin in the maintenance business rose from 29% to 32%. This was mainly due to a decrease in replacement of equipment and change of main sub-contractor. The gross margin of the Group's construction business was increased by 4% to 23% (2019: 19%) for the period.
Administration expenses for the period increased by 5.8% to HK$8.2m (H1 2019: HK$7.8m). This was caused by the increased headcount and associated personnel expenses (salaries, staff benefit and provident fund contribution), rental expenses, repairs and maintenance expenses and electricity charges.
To manage the execution of the Major Contract, the Company has recruited more professional and technical staff, including a number of system design and networks engineers. The number of staff has increased to 78 as at 30 September 2020 (H1 2019: 76). Also, one more unit at the same building was rented for office use from January 2020 that increased the operating cost.
Finance costs was decreased to HK$378k (2019: HK$461k) after the Company adopted more effective treasury measures to monitor the using of banking facilities. The interest for trade finance and factoring were charged at the bank's Hong Kong Dollars Best Lending Rate, currently at 5% per annum. The Company required paying loan interest monthly for the long term revolving loan of HK$6.6m for financing the life insurance plan.
The profit attributable to the equity holders of the Company for the period is HK$3.8m. The underlying profit is HK$1.8m (2019: HK$1.7m) which excluded other income HK$50K from Construction Industry "Anti-Epidemic Fund", Hong Kong Government Employment Support HK$1.9m for the month of June to Aug 2020 and HK$20K subsidy from Transport Department (2019: HK$1.7m). These amounts represent part of the anti-epidemic relief of Hong Kong Government. Profit before interest and income tax from operations during the period was HK$4.2m (H1 2019: HK$2.2m).
The Government's "Work from Home" policy due to outbreak of the COVID-19 pandemic has caused delays in the process of certification and led to slow billing to MTRC and the Hong Kong Government. This is the reason for increase of HK$24m on Contract Assets to HK$67.2m (H1 2019: HK$43.2m).
During the period under review, the relative weakness of HK$ at the period-end has led to a 3.9% depreciation in the GBP reporting amount in the Statement of Financial Position. It is also the reason for the significant loss of £329k (H1 2019: gain £504k) on exchange differences arising on the translation. All figures in GBP in the Financial Statements have therefore needed to be adjusted for comparative purposes. The financial data is also presented in HK$ to provide a comparison with the comparative figures in 2019 that were unaffected by exchange rate fluctuations.
BUSINESS REVIEW
Markets
The increasing demand for wireless network infrastructure (such as IP and 5G) and the drive to enhance safety and security are the key growth drivers for the video surveillance system market. The protests in Hong Kong last year had also increased the demand on infrastructure protection and public security. Digital cameras and computer vision software applications are channelled to detect and highlight undesirable behaviour.
The Board believes that the Major Contract should allow UniVision to market its brand to the customers of similar systems outside Hong Kong. The Group has formed a new subsidiary in September 2020 to explore the opportunity of developing the overseas market by tendering prospective projects. Also, the Board is considering setting up a branch or office in U.K. to expand its core business during 2021.
The Company now actively participates in other market segments, such as provision of UPS (Uninterrupted Power Supply), to strengthen business growth in the Group. The Supplementary Agreement No. 3 of the Major Contract as announced on 1 September 2020 is a good example of this diversification.
Business
Under the Major Contract, the Company performs as network service provider in the application of CCTV systems. By acquiring skills and training in networking and wireless technology area and software skills for video analytics and facial recognition applications to customisation and localisation for our clients. As the Company has maintained its own team of network professional staff, it is a good position for the Company entering the new business as a provider of network service in the application in other fields to seek new contracts.
The Company keeps moving forward in the CCTV segment and gradually towards the safe city concept by introducing video based analytics to big data AI processing.
The Group continues to explore potential business opportunities in other areas, such as Electrical and Mechanical business ("E&M").
Customers
MTR Corporation is the Company's largest customer in this financial period with the implementation of the Major Contract. Electrical and Mechanical Services Department ("EMSD") of the Hong Kong Government is also a major customer for the Group. The Company is eligible to tender for new government projects as it is on the list of Approved Specialist Contractors for Public Works.
To avoid the concentration of customers, the Company has diversified the base of customers including other public organisations and sizeable private enterprises.
PROSPECTS
The high demand for public security, network and high definition security and surveillance system provides the Group the opportunity for business growth in the coming years.
The Major Contract provides a solid base for the Group over the next few years. With the existing technical and financial resources, the Group has the capacity to tender for new contracts, including, but not limited to, additional major infrastructure projects in Hong Kong and overseas.
Finally, on behalf of the Board, I would like to thank our customers, suppliers, sub-contractors, bankers and shareholders for their continued support of UniVision. I would also like to express my gratitude to the management team and all staff for their continued support, contribution and dedication to the Group.
MR. STEPHEN SIN MO KOO
EXECUTIVE CHAIRMAN
29 December 2020
UniVision Engineering Limited
Statements of Comprehensive Income (Unaudited)
For the six months ended 30 September 2020
For the six months ended 30 September
2020
2019
2020
2019
HK$'000
HK$'000
￡'000
￡'000
Revenue
39,944
49,542
4,061
5,032
Cost of sales
(29,668)
(39,403)
(3,016)
(4,002)
Gross profit
10,276
10,139
1,045
1,030
Other income
2,225
111
226
11
Other loss
-
(88)
-
(9)
Selling and distribution expenses
(21)
(124)
(2)
(12)
Administrative expenses
(8,222)
(7,829)
(837)
(795)
Finance costs
(378)
(461)
(38)
(47)
Profit before income tax
3,880
1,748
394
178
Income tax
-
-
-
-
Profit for the period
3,880
1,748
394
178
Other comprehensive income/(loss):
Exchange differences arising on translation of foreign operations
-
-
(329)
504
Total comprehensive income/(loss) for the period
3,880
1,748
65
682
Profit attributable to:
Equity shareholders of the Company
3,880
1,748
394
178
3,880
1,748
394
178
Total comprehensive income / (loss) attributable
Equity shareholders of the Company
3,880
1,748
65
682
3,880
1,748
65
682
Earnings per share - Basic and Diluted
HK Cents
HK Cents
Pence
Pence
Basic
1.0112
0.4556
0.1028
0.0463
Diluted
1.0112
0.4556
0.1028
0.0463
UniVision Engineering Limited
Statements of Financial Position (Unaudited)
As at 30 September 2020
For the six months ended 30 September
2020
2019
2020
2019
HK$'000
HK$'000
￡'000
￡'000
ASSETS
Non-current assets
Plant and equipment
1,253
1,494
126
155
Right-of use assets
1,003
2,054
100
213
Deposit paid for life insurance policy
9,171
8,884
919
922
Amounts due from related companies
30,385
32,539
3,046
3,375
Prepayments
626
855
63
89
Total non-current assets
42,438
45,826
4,254
4,754
Current assets
Inventories
10,911
6,852
1,094
711
Trade and other receivables
19,832
30,233
1,988
3,137
Contract assets
67,181
43,194
6,735
4,481
Cash and bank balances
2,967
4,939
297
512
Total current assets
100,891
85,218
10,114
8,841
Total assets
143,329
131,044
14,368
13,595
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables
34,045
25,147
3,413
2,609
Bank loans
6,552
6,552
657
680
Contract liabilities
12,122
12,224
1,215
1,268
Lease liabilities
922
1,654
92
172
Total current liabilities
53,641
45,577
5,377
4,729
Non-current liability
Lease liabilities
140
427
14
44
Amount due to a related company
4,200
4,200
421
436
Total non-current liabilities
4,340
4,627
435
480
Total liabilities
57,981
50,204
5,812
5,209
UniVision Engineering Limited
Statements of Financial Position (Unaudited)
As at 30 September 2020
For the six months ended 30 September
2020
2019
2020
2019
HK$'000
HK$'000
￡'000
￡'000
Capital and reserves
Share capital
55,034
55,034
3,890
3,891
Reserves
30,314
25,806
4,666
4,495
Total equity
85,348
80,840
8,556
8,386
Total liabilities and equity
143,329
131,044
14,368
13,595
UniVision Engineering Limited
Statements of Changes in Equity (Unaudited)
in ￡'000
Share capital
Retained earnings
Special capital Reserve "A"
Special capital Reserve "B"
Translation reserve
Total equity
￡'000
￡'000
￡'000
￡'000
￡'000
￡'000
Balance at 1 Apr 2019
3,891
2,211
156
143
1,517
7,918
Profit for the year
-
452
-
-
-
452
Other comprehensive income
Exchange difference arising on translation of financial statements
-
-
-
-
548
548
Total comprehensive income
-
452
-
-
548
1,000
Dividend paid
-
(212)
-
-
-
(212)
Balance at 31 Mar 2020
3,891
2,451
156
143
2,065
8,706
Profit for the six months ended 30 Sep 2020
-
394
-
-
-
394
Other comprehensive income
Exchange difference arising on translation of foreign operations
-
-
-
-
(329)
(329)
Total comprehensive income
-
394
-
-
(329)
65
Dividend declared
-
(215)
-
-
-
(215)
Balance at 30 Sep 2020
3,891
2,630
156
143
1,736
8,556
UniVision Engineering Limited
Statements of Changes in Equity (Un-audited)
in HK$'000
Share capital
Retained earnings
Special capital Reserve "A"
Special capital Reserve "B"
Total equity
HK$'000
HK$'000
HK$'000
HK$'000
HK$'000
Balance at 1 April 2019
55,034
21,980
2,181
2,007
81,202
Profit for the year
-
4,486
-
-
4,486
Total comprehensive income
-
4,486
-
-
4,486
Dividend paid
-
(2,110)
-
-
(2,110)
Balance at 31 Mar 2020
55,034
24,356
2,181
2,007
83,578
Profit for the six months ended 30 Sep 2020
-
3,880
-
-
3,880
Total comprehensive income
-
3,880
-
-
3,880
Dividend declared
-
(2,110)
-
-
(2,110)
Balance at 30 Sep 2020
55,034
26,126
2,181
2,007
85,348
UniVision Engineering Limited
Statements of Cash Flows (Un-audited)
For the six months ended 30 September 2020
For the six months ended 30 September
2020
2019
2020
2019
HK$'000
HK$'000
￡'000
￡'000
CASH FLOW FROM OPERATING ACTIVITIES
Profit before income tax
3,880
1,748
394
178
Adjustments for:
Interest income
(1)
(111)
-
(11)
Depreciation of plant and equipment
288
280
29
28
Depreciation of right-of use assets
1,059
822
108
83
Unrealized gain on life insurance policy
(130)
-
(13)
-
Interest expense on bills payable and factoring
255
303
26
31
Interest expense on bank borrowings
81
93
8
9
Interest on lease liabilities
42
65
4
7
Gain on disposal of plant and equipment
-
(2)
-
-
Operating cash flows before working capital changes
5,474
3,198
556
325
Changes in operating assets and liabilities:
Inventories
(982)
(264)
(59)
(27)
Trade and other receivables
2,260
(2,289)
315
(233)
Contract assets
(7,246)
(6,514)
(492)
(662)
Amount due from related companies
(70)
1,537
(7)
156
Contract liabilities
(516)
2,414
(101)
245
Trade and other payables
(3,665)
(2,818)
(486)
(286)
Net cash used in generated from operating activities
(4,745)
(4,736)
(274)
(482)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received
1
111
-
11
Purchase of plant and equipment
(244)
(306)
(20)
(31)
Deposit paid for life insurance policy
-
(8,884)
-
(902)
Decrease in pledged deposits
2,890
-
301
-
Proceeds from disposal of plant and equipment
-
2
-
-
Net cash used in investing activities
2,647
(9,077)
281
(922)
CASH FLOWS FROM FINANCING ACTIVITIES
Interest expense on bills payable and factoring
(255)
(303)
(26)
(31)
Interest expense on bank borrowings
(81)
(93)
(8)
(9)
New bank loans raised
-
6,552
-
666
Capital element of lease liabilities paid
(1,077)
(796)
(109)
(80)
Interest element of lease liabilities paid
(42)
(65)
(4)
(7)
Net cash generated from/used in financing activities
(1,455)
5,295
(147)
539
UniVision Engineering Limited
Statements of Cash Flows (Un-audited)(continued)
For the six months ended 30 September 2020
For the six months ended 30 September
2020
2019
2020
2019
HK$'000
HK$'000
￡'000
￡'000
NET (DECREASE) / INCREASE IN CASH AND CASH EQUIVALENTS
(3,553)
(8,518)
(140)
(865)
EFFECT OF FOREIGN EXCHANGES RATE CHANGES, NET
-
-
(242)
65
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
6,520
13,457
679
1,312
CASH AND CASH EQUIVALENTS AT END OF PERIOD
2,967
4,939
297
512
Notes to the Interim financial statements for the six months ended 30 September 2020
1. Basis of preparation
The unaudited interim financial statements for the six months ended 30 September 2020 have been prepared in accordance with International Financial Reporting Standards ("IFRSs") using the policies consistent with those applied to the annual financial statements for the year ended 31 March 2020, except for the adoption of the new and revised IFRSs (which include all IFRSs, International Accounting Standards ("IASs") and Interpretations) that are initially adopted for the current period financial statements. The interim financial statements, together with the comparative information contained in this report for the six months ended 30 September 2019, do not constitute the statutory accounts of the Company.
2. Earnings per share
The calculation of basic earnings per ordinary share is based on the profit attributable to equity holders of the Group for the six months ended 30 September 2020 of HK$3.8m (H1 2019: HK$1.7m), and the weighted average of 383,677,323 (H1 2019: 383,677,323) ordinary shares in issue during the period.
There were no potential dilutive instruments at either financial period end.
3. Event after the reporting period
On 22 December 2020, the Company announced that it had received notification of a claim from Dimension Data China/Hong Kong Limited ("DDCHKL"), one of its suppliers, in the High Court in Hong Kong alleging breach of contract by the Company and claiming the damages for the same.
The Company has been advised that the claim is fully defensible and the Company intends to defend it in full. The Company has further been advised that it has a cross claim against DDCHKL, inter alia, for breach of the contract and/or negligence and/or misrepresentation and it intends accordingly to claim damages for the same.
The Board is satisfied that the Company is well able to meet the claim should this be necessary but, in the light of the advice it has been given, it does not consider that the claim has any foundation.
4. Interim report
Copies of the interim report will be available for inspection at the registered office of the Company, Unit 201, 2/F., Sunbeam Centre, 27 Shing Yip Street, Kwun Tong, Hong Kong and available on the Company's website (www.uvel.com) in accordance with Rule 26 of the AIM Rules for Companies.
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