Univision Regulatory News (UVEL)

RNS ANNOUNCEMENT: The information communicated in this announcement contains inside information for the purposes of Article 7 of Regulation 596/2014.

For immediate release: 16 August 2018

UniVision Engineering Limited

("UniVision" or the "Company")

Final Results for the year ended 31 March 2018

and

Notice of Annual General Meeting

UniVision, 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, today announces its audited final results for the financial year ended 31 March 2018.

The Annual General Meeting will be held at UniVision Engineering Limited, Unit 01A, 2/F., Sunbeam Centre, 27 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong, on 20 September 2018 at 5:00 p.m. The full Annual Report and Notice of AGM will shortly be posted to shareholders and be made available on the Company's website, www.uvel.com.

Highlights:

· Turnover from continuing operations increased by 18.5%* to £5.6m (2017: £4.8m);

· Gross profit margin for continuing operations remained stable at 32% (2017: 34%);

· Current ratio for continuing operations remained at 1.8 (2017: 1.8);

· Profit before income tax from continuing operations was £735K (2017: £452K);

· Earnings per share from continuing operations were to 0.19p (2017: 0.11p); and

· Proposed final dividend HK0.43 cents (approx. 0.0389 pence) per share.

(2017: HK0.41 cents)

* Underlying rate (net of translation effect on foreign exchange

For further information visit www.uvel.com or contact:

CHAIRMAN'S STATEMENT

INTRODUCTION

I am pleased to report the Company's audited results for the financial year ended 31 March 2018.

Turnover for the year increased by 18.5% (underlying rate) to £5.6m (2017: £4.8m). This increase was mainly due to the 34% growth in construction contracts which came largely from the Replacement of CCTV Systems Project ("the Major Contract") with MTR Corporation Limited ("MTRC") in Hong Kong which was commenced in May 2017. As we have previously informed shareholders, we believe that this Major Contract is transformational for the business and leads to a step-change in revenue and profitability of the Company. The Board expects that the Company will achieve a substantial growth in the business, which will become more evident in the current financial year as we will be able to demonstrate a whole 12 months' contribution from the Major Contract, which will build a base for the forthcoming periods until that contract completes in 2023.

In maintaining its dividend policy, the Board declares a final dividend of 0.43 HK cents (gross) per share for the financial year ended 31 March, 2018 (2017: 0.41 HK cents), an increase of 4.9%.

The Directors are confident of the future of UniVision and are optimistic about the Company's prospects.

NEW MAJOR CONTRACT WITH MTRC

As announced on 12 May 2017, the Company won a major contract of value HK$389.4m (£38.1m) with MTRC following a tender process. With further, already agreed add-ons HK$17.9m to this contract, the total value of this contract is now HK$407.3m. The contract provides for the replacement works of the Closed Circuit Television (CCTV) systems for numerous MTRC railway lines. The Company is responsible to replacing the existing analogue CCTV system installed in the stations along the specified lines with a unified IP-based, digital CCTV system. 

The Major Contract commenced mid May 2017 and the expected completion date is November 2023. The first invoice was billed in January 2018, with payment being received in mid-March 2018. The Board expects regular billing, on work completed and certified on a monthly basis, during the period of contract.

As announced on 17 April 2018, the Company invoiced HK$5.1m to MTRC in the financial year ended 31 March 2018. This leaves a further value of HK$402.2m over the remaining five and half years of the contract. The Company spent a number of months, from May 2017, on design and testing before the actual installation works commenced, which meant that there was back loading of billing in the year to 31 March 2018.

The Company is now fully engaged on the installation stage of the Major Contract. Up to the date of this Statement, the Group has invoiced HK$33.4m to MTRC with 10% retention money held. The gross valuation or certified works on the Contract was HK$37.1m up to 30 April 2018. 

The Company acts as the main contractor for the project. According to the contract, the Company is required to provide a performance bond equivalent to 3% of the contract sum, i.e. HK$11.7m. As announced on 29 January 2018, a leading insurance company has provided a surety bond facility of HK$30m. The Company has used HK$11.7m of the facility for the Major Contract with MTRC. The

unutilised facility as today is HK$18.3m that can be utilised for other potential substantial projects. It minimises the cash burden and provides liquidity for business development.

The Board is always reviewing and negotiating with suppliers and sub-contractor for favourable credit terms. Few major suppliers are willing to offer longer credit period for the equipment. The Board closely monitor the status of working capital for the project. As announced on 29 January 2018, HSBC, one of the Company's major bankers, provided banking facilities, including an invoice discounting/factoring facility of HK$45m and trade facility of HK$8m. This facility provides additional working capital to ensure the contract with MTRC can operate smoothly.

After the annual review in late July 2018, HSBC has increased our trade facility to the Company from HK$8m to HK$13m, including an overdraft limit of HK$4m, with immediate effect. We believe that this demonstrates HSBC's growing confidence in the Company's business and it provides more funding capacity and funding flexibility for the Company's operations. The invoice discounting/factoring facility remains unchanged.

FINANCIAL REVIEW

The profit attributable to the equity holders of the Company is £735K (2017: £452K).

The improvement in performance in the year is mainly attributable to:i) 34% growth in the income from construction contracts; andii) Improved gross profit margin of 7% from maintenance contracts. 

Having regard to the keen competitive environment and increased costs, the Directors are encouraged by this result.

The net working capital at the year ended was £2.8m (2017: £2.5m) The Directors attribute this to close monitoring and effective control of working capital and the banking facilities.

During the year under review the relative weakness of the HK$ against GBP has led to a 1.9% appreciation in the GBP reported amount in the Consolidated Statement of Comprehensive Income. Also, a relative weakness of the HK$ at the year-end has led to a 14% depreciation in the GBP reporting amount in the Consolidated Statement of Financial Position. It also led to the significant non-cash other comprehensive loss of £779K (2017: income £768K) on exchange differences arising on translation of foreign operations.

All figures in the Financial Statements needed to be adjusted for comparison purposes. All comparative % stated in the Chairman's Statement are adjusted to show the underlying change (net of translation effect on foreign exchange).

'Continuing operations' represent the Group's Security and Surveillance Systems business undertaken by the Hong Kong Company. The same business undertaken by the Taiwan Subsidiary prior to disposal by the Group is classified as discontinued operations. The loss from the discontinued operations during the year was Nil (2017: £41K). 

Turnover in the year increased by 18.5% to £5.6m (2017: £4.8m). This increase was mainly due to the significant growth in construction contract income. The revenue from construction contracts significantly increased by 34% as compared with last year.

The growth of construction revenue was mainly due to the income generated from the following contracts:

MTRC Replacement of CCTV Systems (the Major Project)

Hong Kong-Zhuhai-Macao Bridge Project

Liangtang Traffic Control and Surveillance System Project

Central Wanchai By Pass Project

Modern Terminal CCTV System Upgrade Project

In addition, construction contracts including the installation, relocation, modification and replacement works were provided by MTR Corporation Limited also contributed to the increase.

On the other hand, revenue from the Company's maintenance contracts decreased slightly by 5.6% compared with last year. The CCTV replacement project for the railway lines of MTRC led to low demand for maintenance works for MTRC. The slow growth was mainly due to the change in scope of the services provided. The existing maintenance contract for MTRC, was renewed during the period for a further three years to 31 December 2020.

Gross profit margin for the Company remained stable at 32% (2017: 34%). The main reason was the decrease in gross profit from 34% to 30% in the Company's construction contracts, where the Major Contract has been at a relatively lower margin when compared to many of our other construction contracts, which have a much lower revenue. On the other hand, our profit margin for the maintenance contracts was improved by 7% to 44% (2017: 37%) This increment was contributed from a few orders with comparatively high profit margin. In facing the increased operating costs, inflation and the long-term contract period, the Company will maintain to impose the effective and efficient control of human resources, material costs, logistics and sub-contracting charges to maintain the level of profit margin.

Administration expenses in the year decreased by 4.4% to £0.99m (2017: £1.05m). This was achieved through effective control of human resources, operating costs and other overheads.

Finance costs was increased to £2K (2017: £0.1K) since the Company commenced to use its banking facility with HSBC in the 4th quarter of the financial year. Interest was charged at HSBC's Hong Kong Dollars Best Lending Rate.

Net profit before income tax from continuing operations was £735K (2017: £452K). Basic earnings from continuing operations per share for this year increased to 0.19p (2017: 0.11p).

No significant capital investment occurred in the year.

The Directors propose the payment of a final dividend of 0.43 HK cents (gross) per share for the financial year ended 31 March, 2018 (2017: 0.41 HK cents), an increase of 4.9%. The dividend timetable is as follows:

Ex date 13 September 2018

Record date 14 September 2018

Payment date 8 October 2018

Payment of the dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in the financial statements.

BUSINESS REVIEW

Markets

According to the WiseGuy Report:Video Surveillance as a Service Global Market 2018- Key Application Opportunities, Demand, Status, Trends, Share, Forecast 2022, the market is projected to grow with a Compound Annual Growth Rate of 26.25% during the period 2017 to 2022. 

Growing focus on infrastructure protection, public safety and increasing demand for high resolution imaging are some of the key factors driving the market growth. Besides, technological advancements have led to enhanced cyber security systems and efficient remote monitoring, leading to burgeoning demand for these systems over the forecast period.  

The Board regards the increasing demand for wireless network infrastructure as the key growth driver for the surveillonce market. The major contract with MTRC that replacing CCTV cameras from analogue-based with IP-based units is a very good example of that market trended. The Board anticipates that the demand for Security and Surveillance Systems from local government infrastructure projects and the private sector to increase in coming years.

The Board believes being awarded the Major Contract to UniVision, by MTRC, will give the Company a great opportunity to market its brand to purchasers of similar systems outside Hong Kong, 

The Company currently considering looking at other market segments, such as rolling stock business in railway, to strengthen our business growth.

As the Company has secured a big order from MTRC on IP-based CCTV System, a logical new step would be Video Analytics, in particular Facial Recognition. This technology is being enhanced rapidly and UniVision is in a very good position to enter into this market, which is considered as a big wave in the near future.

Business

The Company has the opportunity to win additional potential contracts from MTRC that are associated with the Main Contract, as we have already demonstrated. The additional works amounting to HK$10.9m (£1.05m) for the integration of the Station CCTV System in the Hung Hom to Admiralty Section of the Shatin to Central Link project, as announced on 1 November 2017 is a good example.

Under the Major Contract with MTRC, the Company acts as the network service provider in the application of CCTV systems. During the current year, the Company recruited additional professional staff to handle those tasks. The Board considers that entering the new business as a provider of network service and information technology may offer the Company further business opportunities in related areas.

MTRC has renewed the existing contract with the Company to provide maintenance services to MTRC's network of Closed Circuit Television ("CCTV") systems and public address systems on seven railway lines in Hong Kong. The contract has been renewed for a further three year period commencing on 1 January 2018.

Customers

The Company's major customers are public organisations and sizeable private enterprises, such as the Electrical and Mechanical Services Department ("EMSD") of the Hong Kong Government and MTRC in Hong Kong which were major customers in this financial year.

The Major Contract with MTRC led to a significant annualised outstanding workload value which requires the Company to have additional working capital in the financial assessment by the Hong Kong Government. Works Branch. A shortfall in working capital of GBP 0.62m (HK$6m) existed in the 2017 financial test. This meant that the Company is suspended, by this customer, from tendering for additional public works contracts for up to six months from 27 July 2018 until the shortfall has rectified. The Board regard the effect of this temporary suspension as insignificant given the current state of the business. The Company currently concentrates its resources on the Major Contract with MTRC, the main driver for the business which means that, with our other construction and maintenance contracts we are currently operating close to full capacity. Nevertheless, the Company will apply to uplift the suspension as soon as possible.

Whilst the Board is delighted with its major customer relationships, to avoid the concentration of customers, the Company has initiated a plan to diversify our customer base, particularly looking to the sizeable private and domestic sectors.

UPDATE ON DIRECTOR SHARE TRANSFER

Further to the announcement on 20 September 2017, the terms regarding the sale of shares by Stephen Koo, Chairman of UniVision, to Nan Ning Hai Li Real Estate Development Limited ("Hai Li") and Mr. Xin Hai were extended to 30 September 2017. Up to date, Stephen Koo had not received the consideration for this transaction. As the extended final date for the settlement of consideration has expired, the Memorandum of Understanding and the Sale and Purchase Agreement for acquiring the shares owned by Stephen Koo are ineffective due to non-performance. As a result, there has been no change to the majority shareholding position of the Company.

PROSPECTS

The Board expects that the high demand for its network and high definition security and surveillance system will provide the ground for the Company to grow in these markets. Given our current commitment to the Major Contract and other customers, we will need to manage our growth carefully and will manage our expansion carefully, with a view to controlling cost and maintaining our margins.

As there are several major local infrastructure projects are due to be completed in the coming years, including the High Speed Railway extension (Hong Kong Section), the new runway for Hong Kong International Airport and the extension of MTR lines in Hong Kong, these will provide opportunity for business growth.

We believe that demand for Security and Surveillance Systems will remain high and the Company's core competence relies on our dedicated and experienced management and personnel. The Company will reward the employees according to the Company's and their individual performance. 

Finally, on behalf of the Board, I would like to thank our customers, suppliers, sub-contractors and shareholders for their continued support of UniVision. I would also like to acknowledge the hard work of the management and all staff for their contribution and dedication to the Company.

MR. STEPHEN SIN MO KOO

EXECUTIVE CHAIRMAN

UNIVISION ENGINEERING LIMITED

STATEMENT OF PROFIT OR LOSS AND OTHER

COMPREHENSIVE INCOME

For the year ended 31 March 2018

UNIVISION ENGINEERING LIMITED

STATEMENT OF FINANCIAL POSITION

As at 31 March 2018

UNIVISION ENGINEERING LIMITED

STATEMENT OF CHANGES IN EQUITY

For the year ended 31 March 2018

The currency translation from Hong Kong Dollars ("HK$") to the presentation currency of Sterling Pound ("£") used in the financial statements has no impact on the available distributable reserves of the Company at 31 March 2018.

Notes:

1. Share premium

The Company, by resolution reduced the share premium account during the year ended 31 March 2017.

2. Special capital reserve "A"

Pursuant to the Order of the High Court dated 20 November 2004, any future recoveries of the Company's accumulated provision for obsolete inventories and provision for bad debts amounting to HK$1,935,002 and HK$3,592,540 respectively will be credited to non-distributable special capital reserve "A" account.

3. Special capital reserve "B"

By a special resolution passed on 30 July 2004 and Order of the High Court dated 20 November 2004, the authorised and issued capital of the Company was reduced from HK$159,245,000 divided into 31,849 ordinary shares of HK$5,000 each to HK$16,405,000 divided into 3,281 ordinary shares of HK$5,000 each. The reduction of capital was effected by cancellation of 28,568 ordinary shares of HK$5,000 each in the issued and paid up share capital of the Company. The Company established a non-distributable special capital reserve "B" account into which HK$2,071,307 was credited as a result of the capital reduction.

UNIVISION ENGINEERING LIMITED

STATEMENT OF CASH FLOWS

For the year ended 31 March 2018

1. GENERAL

UniVision Engineering Limited ("the Company") is incorporated in Hong Kong with limited liability and its shares are listed on the Alternative Investment Market of the London Stock Exchange ("AIM"). The address of the registered office is Unit 1A, 2/F., Sunbeam Centre, 27 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong.

The financial statements are presented in Sterling Pound ("£"), which is the presentation currency of the Company.

The Company is mainly engaged in the supply, design, installation and maintenance of closed circuit television and surveillance systems and the sale of security system related products in Hong Kong.

2. BASIS OF PREPARATION

The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSs") as issued by the International Accounting Standards Board ("IASB").

The measurement basis used in the preparation of the financial statements is the historical cost basis.

The preparation of financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Judgements made by management in the application of IFRSs that have significant effect on the financial statements and major sources of estimation uncertainty are discussed in note 5 to the financial statements.

3. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRSs")

(a) New and revised IFRSs that have been issued and effective

The following standards have been adopted by the Company for the first time for the year ended 31 March 2018:

· Amendments to IAS 7 "Disclosure initiative"

· Amendments to IAS 12 "Recognition of deferred tax assets for unrealised losses"

· Annual improvements to IFRS 2014-2016 cycle "Amendments to IFRS 12"

The application of the above amendments to IFRSs and IAS in the current year has had no material impact on the Company's financial performance and positions for the current and prior years and/or on the disclosures set out in these financial statements.

(b) New and revised IFRSs that have been issued but are not yet effective

The following new and revised IFRSs, potentially relevant to the Company's operations, have been issued and are mandatory for adoption by the Company for accounting periods beginning on or after 1 January 2018 or later periods. However, the Company has not early adopted them.

· Amendments to IFRS 2 "Classification and measurement of share-based payment transactions" 1

· IFRS 9 "Financial instruments" 1

· Amendments to IFRS 9 "Prepayment features with negative compensation" 2

· Amendment to IFRS 10 and IAS 28 (2011) "Sale or contribution of assets between and investor and its associate or joint venture" 4

· IFRS 15 "Revenue from contracts with customers" 1

· Amendments to IFRS 15 "Clarification to IFRS 15 Revenue from contracts with customers" 1

· IFRS 16 "Leases" 2

· IFRIC 22 "Foreign currency transactions and advance consideration" 1

· IFRIC 23 "Uncertainty over income tax treatments" 2

· Annual improvements 2014-2016 cycle "Amendments to IFRS 1 and IAS 28" 1

· Annual improvements to IFRS 2015-2017 cycle 2

The Company has not applied any new or revised IFRSs that are not yet effective for the year ended 31 March 2018.

1 Effective for annual periods beginning on or after 1 January 2018

2 Effective for annual periods beginning on or after 1 January 2019

3 Effective for annual periods beginning on or after 1 January 2021

4 No mandatory effective date yet determined but available for adoption

3. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRSs") (CONTINUED)

(c) The impact of these new and revised IFRSs

The Company is in the process of making an assessment of the impact of these amendments and new standards in the period of initial application. So far the Company has identified some aspects of the new standards which may have a significant impact on the financial statements. Further details of the expected impacts are discussed below.

IFRS 15 was issued which establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. IFRS 15 will supersede the current revenue recognition guidance including IAS 18"Revenue", IAS 11 "Construction contracts" and the related interpretations when it becomes effective. The core principle of IFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the standard introduces a 5-step approach to revenue recognition:

• Step 1: Identify the contract(s) with a customer

• Step 2: Identify the performance obligations in the contract

• Step 3: Determine the transaction price

• Step 4: Allocate the transaction price to the performance obligations in the contract

• Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation

Under IFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when 'control' of the goods or services underlying the particular performance obligation is transferred to the customer. Far more prescriptive guidance has been added in IFRS 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by IFRS 15.

The directors of the Company anticipate that the application of IFRS 15 in the future may affect the amounts reported and related disclosures. However, it is not practicable to provide a reasonable estimate of the effect of IFRS 15 until the Company performs a detailed review.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

4.1 Segment reporting

An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incurs expenses, including revenues and expenses that relate to transactions with other components of the Company. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The Company's Executive Director, Mr. Stephen Sin Mo KOO is responsible for allocating resources and assessing performance of the operating segments.

4.2 Foreign currency

(a) Functional and presentation currency

Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the Company operates ("the functional currency"), which is Hong Kong Dollars ("HK$"). The financial statements are presented in Sterling Pound ("£"), which is the Company's presentation currency. As the Company is listed on AIM, the directors consider that this presentation is more useful for its current and potential investors.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of profit or loss and other comprehensive income, except when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges.

Foreign exchange gains and losses that relate to cash and bank balances are presented in the statement of profit or loss and other comprehensive income within "finance income or cost". All other foreign exchange gains and losses are presented in the statement of comprehensive income within "administrative expense" or "other income".

4.3 Plant and equipment

Plant and equipment is initially recognised at cost and subsequently carried at cost less accumulated depreciation and accumulated impairment loss. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to working condition for its intended use.

On disposal of an item of plant and equipment, the difference between the net disposal proceeds and its carrying amount is taken to profit or loss.

Depreciation is calculated using the straight-line method to allocate their depreciable amounts over the estimated useful lives as follows:

Fully depreciated plant and equipment is retained in the financial statements until the items are no longer in use and no further charge for depreciation is made in respect of these assets.

The residual values, useful life and depreciation method are reviewed at the end of each reporting period to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of plant and equipment. The effects of any revision are recognised in profit or loss when the changes arise.

Subsequent expenditure relating to plant and equipment that has already been recognised is added to the carrying amount of the asset only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repair and maintenance expenses are recognised in profit or loss when incurred.

4.4 Impairment of assets

The carrying amounts of non-current assets, such as plant and equipment, are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount is estimated.

Calculation of recoverable amount

The recoverable amount of an asset is the greater of its fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit).

Recognition of impairment losses

An impairment loss is recognised in profit or loss if the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds the recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or group of units) and then, to reduce the carrying amount of the other assets in the unit (or group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs of disposal (if measurable), or value in use (if determinable).

Reversals of impairment losses

An impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount.

A reversal of an impairment loss is limited to the asset's carrying amount that would have been determined had no impairment loss been recognised in prior years. Reversals of impairment losses are credited to profit or loss in the year in which the reversals are recognised.

4.5 Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average method and comprises design costs, raw materials, direct labour, other direct costs and other costs incurred in bringing the inventories to their present location and condition. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

4.6 Financial instruments

Financial assets and financial liabilities are recognised when an entity becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.

4.6.1 Financial assets

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including trade and other receivables and bank balances and cash) are measured at amortised cost using the effective interest method, less any impairment (see accounting policy on impairment of loans and receivables below).

Interest income is recognised by applying the effective interest rate, except for short-term receivables where the recognition of interest would be immaterial.

Impairment of loans and receivables

Loans and receivables are assessed for indicators of impairment at the end of each reporting period. Loans and receivables are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the loans and receivables, the estimated future cash flows of loans and receivables have been affected.

Objective evidence of impairment could include:

• significant financial difficulty of the issuer or counterparty; or

• breach of contract, such as default or delinquency in interest and principal payments; or

• it becoming probable that the borrower will enter bankruptcy or financial re-organisation.

For certain categories of loans and receivables, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Company's past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or local economic conditions that correlate with default on receivables.

The amount of the impairment loss recognised is the difference between the asset's carrying amount and the present value of the estimated future cash flows discounted at the loans and receivables' original effective interest rate.

The carrying amount of loans and receivables is reduced by the impairment loss directly for all loans and receivables with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

If, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that, the carrying amount of the loan and receivable at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

4.6.2 Financial liabilities and equity instruments

Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instrument

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.

Financial liabilities

Financial liabilities (including trade and other payables) are subsequently measured at amortised cost, using the effective interest method.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Interest expense is recognised on an effective interest basis.

Derecognition

The Company derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.

On derecognition of a financial asset in its entirety, the difference between the asset's carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.

The Company derecognises financial liabilities when, and only when, the Company's and Company's obligations are discharged, cancelled or expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

4.6.3 Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

4.7 Trade and other receivables

Trade and other receivables are initially recognised at fair value and thereafter stated at amortised cost less allowance for impairment of bad and doubtful debts, except where the receivables are interest-free loans made to related parties without any fixed repayment terms or the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less allowance for impairment of doubtful debts.

4.8 Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition. Bank overdrafts are shown under current liabilities on the statement of financial position.

4.9 Trade and other payables

Trade and other payables are initially recognised at fair value and subsequently stated at amortised cost unless the effect of discounting would be immaterial, in which case they are stated at cost.

4.10 Share capital

Ordinary shares are classified as equity.

4.11 Dividend distributions

Dividend distributions to the Company's shareholders are recognised as liabilities in the financial statements in the period in which the dividends are approved by the shareholders or directors, where appropriate.

4.12 Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and rendering of services in the ordinary course of activities. Revenue is shown net of rebates and discounts.

The Company recognises revenue when the amount of revenue and related cost can be reliably measured, it is probable that future economic will flow to the entity and when specific criteria has been met for each of the activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Company bases the best estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

(i) Construction contracts

Revenue from construction contracts is recognised when the outcome of a construction contract can be estimated reliably:

§ revenue from a fixed price contract is recognised using the percentage of completion method, measured by reference to the percentage of contract costs incurred to date to the estimated total contract costs for the contract; and

§ revenue from a cost plus contract is recognised by reference to the recoverable costs incurred during the period plus an appropriate proportion of the total fee, measured by reference to the proportion that costs incurred to date bear to the estimated total costs of the contract.

When the outcome of a construction contract cannot be estimated reliably, revenue is recognised only to the extent of contract costs incurred that it is probable will be recoverable.

(ii) Maintenance contracts

Revenue from maintenance contracts is recognised on a straight line basis over the term of the maintenance contract.

(iii) Product sales

Revenue from product sales is recognised on the transfer of risks and rewards of ownership, which generally coincides with the delivery of goods to customers and the passing of title to customers.

(iv) Interest income

Interest income is recognised as it accrues using the effective interest method.

4.13 Construction contracts

When the outcome of a construction contract can be estimated reliably, contract costs are recognised as an expense by reference to the stage of completion of the contract at the end of the reporting period. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. When the outcome of a construction contract cannot be estimated reliably, contract costs are recognised as an expense in the period in which they are incurred.

Contracts in progress at the end of the reporting period are recorded in the statement of financial position at the net amount of costs incurred plus recognised profit less recognised losses and progress billings, and are presented under the caption of "Trade and other receivables" or "Trade and other payables" in the statement of financial position as the "Amounts due from customers for contracts-in-progress" (as an asset) or the "Amounts due to customers for contracts-in-progress" (as a liability), as applicable. Progress billings not yet paid by the customer are included in the statement of financial position. Amounts received before the related work is performed are included in the statement of financial position, as a liability, as "Advances received".

4.14 Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Operating lease payments are recognised as an expense on a straight-line basis over the lease term. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis.

4.15 Employee benefit

These comprise short term employee benefits and contributions to defined contribution retirement plans.

Short-term employee benefits, including salaries, annual bonuses, paid annual leave, leave passage, contributions to defined contribution retirement plans and the cost of non-monetary benefits are accrued in the year in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values.

Contributions to the defined contribution scheme are charged to profit or loss when incurred.

4.16 Income tax

Income tax expense for the year comprises current and deferred tax. Tax is recognised in the statement of profit or loss and other comprehensive income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

4.17 Provisions and contingent liabilities

Provisions are recognised for other liabilities of uncertain timing or amount when the Company has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditure expected to settle the obligation.

4.18 Events after the reporting period

Events after the reporting period that provide additional information about the Company at the end of the reporting period or those that indicate the going concern assumption is not appropriate are adjusting events and are reflected in the financial statements. Events after the reporting period that are not adjusting events are disclosed in the notes to the financial statements when material.

4.20 Related parties

(1) A person, or a close member of that person's family, is related to the Company if that person:

(i) has control or joint control over the Company;

(ii) has significant influence over the Company; or

(iii) is a member of the key management personnel of the Company or the Company's parent

(2) An entity is related to the Company if any of the following conditions applies:

(i) The entity and the Company are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

(iii) Both entities are joint ventures of the same third party.

(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

(v) The entity is a post-employment benefit plan for the benefit of employees of either the Company or an entity related to the Company.

(vi) The entity is controlled or jointly controlled by a person identified in (1).

(vii) A person identified in (1)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

(viii) The entity, or any member of a group of which it is a part, provides key management personnel services to the Company or to the Company's parent.

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.

5. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Critical judgements in applying accounting policies

In the process of applying the accounting policies, Management has made the following judgements that have the most significant effect on the amounts recognised in the financial statements (apart from those involving estimations, which are dealt with below).

(i) Estimation of contract costs

Estimated costs to complete contracts are judged by the Directors through the application of their experience and knowledge of the industry in which the Company operates. However, contract performance can be difficult to predict accurately. The Directors believe that contract budgets do not deviate materially from actual costs incurred due to a strong cost control system with regular reviews of budgets which highlight any incidences that could affect estimated costs to completion.

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

(i) Impairment of trade and other receivables

The estimation of impairment of trade and other receivables includes an assessment of recoverability of individual account balances and a review of ageing analysis of trade and other receivables by the Directors. The Directors will also review the credit history of customers in assessing the recoverability of trade and other receivables. When any indication comes to their attention that a trade and other receivable might not be recovered in full, impairment will be made and recognised as an expense in the statement of comprehensive income. As at 31 March 2018, the total carrying amount of the Company's trade and other receivables was £7,404,128 (2017: £6,517,809).

(ii) Income taxes

The Company are subject to income tax in Hong Kong. Significant estimates are required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

As at 31 March 2018, the Company has unused tax losses of £3,591,859 (2017: £4,808,854) available for offset against future profits. A deferred tax asset of £592,657 (2017: £793,461) has not been recognised in respect of the unused tax losses. In cases where there are future profits generated to utilise the tax losses, a material deferred tax asset may arise, which would be recognised in the statement of profit or loss and other comprehensive income for the period in which such future profits are recorded.

6. FINANCIAL INSTRUMENTS

(a) Categories of financial instruments

(b) Financial risk management objectives and policies

The Company's major financial instruments include amounts due from related parties, bank and cash, trade and other receivables and trade and other payables. Details of these financial instruments are disclosed in the respective notes. The risks associated with these financial instruments include currency risk, interest rate risk, credit risk and liquidity risk. The policies on how these risks are mitigated are set out below. Management manages and monitors these exposures to ensure appropriate measures are implemented in a timely and effective manner.

(i) Market risk

(1) Currency risk

The Company has foreign currency transactions and have foreign currency denominated monetary assets and liabilities, which expose the Company to foreign currency risk. The Company has foreign currency transactions, which expose the Company to foreign currency risk.

The carrying amounts of the Company's foreign currency denominated monetary assets and monetary liabilities, mainly represented by trade and other receivables, cash and bank balances, trade and other payables, at the end of each reporting period are as follows:

The Company currently does not have any policy on hedges of foreign currency risk. However, Management monitors the foreign currency risk exposure and will consider hedging significant foreign currency risk should the need arise.

Sensitivity analysis

The following table details the Company's sensitivity to a 5% increase and decrease in Sterling against the relevant foreign currencies and all other variables were held constant. 5% (2017: 5%) is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management's assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the end of the reporting period for a 5% (2017: 5%) change in foreign currency rates. A positive/(negative) number indicates a decrease/(increase) in post-tax profit/(loss) for the year when Sterling strengthens 5% (2017: 5%) against the relevant foreign currencies. For a 5% (2017: 5%) weakening of Sterling against the relevant currency, there would be an equal but opposite impact on the post-tax profit/(loss) for the year.

(2) Interest rate risk

The Company is exposed to fair value interest rate risk in relation to fixed rate bank deposits at fixed rates. The Company is exposed to cash flow interest rate risk due to fluctuation of the prevailing market interest rate on certain bank borrowings which carry at prevailing market interest rates as shown in note 25. The Company currently does not have an interest rate hedging policy. However, Management monitors interest rate exposure and will consider hedging significant interest rate exposure should the need arises.

The Company's exposures to interest rates on financial liabilities are detailed in the liquidity risk management section of this note.

Sensitivity analysis

The sensitivity analysis below has been determined based on the change in interest rates and the exposure to interest rates for the non-derivative financial liabilities at the end of the reporting period and on the assumption that the amount outstanding at the end of the reporting period was outstanding for the whole year and held constant throughout the financial year. The 25 basis points increase or decrease represents Management's assessment of a reasonably possible change in interest rates over the period until the next fiscal year. The analysis is performed on the same basis for 2017.

For the year ended 31 March 2018, if interest rates had been 25 basis points higher/lower, with all other variables held constant, the Company's post-tax profit for the year would increase/decrease by approximately £1,141 (2017: £0).

(ii) Credit risk

At 31 March 2018, the Company's maximum exposure to credit risk in the event of the counterparties' failure to perform their obligations in relation to each class of recognised financial assets is the carrying amount of those assets as stated in the statements of financial position.

The Company's credit risk is primarily attributable to its trade and other receivables. In order to minimise the credit risk, Management has a credit policy in place and the exposures to these credit risks are monitored on an ongoing basis. Credit evaluations of its customers' financial position and condition are performed on each and every major customer periodically. These evaluations focus on the customer's past history of making payments when due and current ability to pay, and take into account information specific to the customer as well as pertaining to the economic environment in which the customer operates. Debts are usually due within 90 days from the date of billing. Exposure to credit risk is influenced mainly by the individual characteristics of each customer. The default risk of the industry and country in which customers operate also has an influence on credit risk. At the end of the reporting period, the Company had no significant concentrations of credit risk where individual trade and other receivables balance exceeding 10% of the total trade and other receivables at the end of the reporting period.

The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies. Also, the Company has no significant concentration of credit risk, with exposure spread over a number of counterparties and customers.

Further quantitative disclosures in respect of the Company's exposure to credit risk arising from trade and other receivables are set out in note 19.

(iii) Liquidity risk

The Company is responsible for its own cash management, including the raising of loans to cover the expected cash demands. In managing liquidity risk, the Company's policy are to regularly monitor current and expected liquidity requirements and its compliance with lending covenants, to ensure that it maintains sufficient reserves of cash and adequate committed funding lines from the financial institutions to meet its liquidity requirements in the short and longer term. At 31 March 2018, the Company's banking facilities amounted to £4,797,248 (2017: £0) and the unused facilities were £4,295,457 (2017: £0).

The following table details the contractual maturities of the Company's financial liabilities at the end of each reporting period, which is based on the undiscounted cash flows and the earliest date on which the Company can be required to pay. The table includes both interest and principal cash flows.

(c) Fair value

The fair values of financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis. Balances with a subsidiary are unsecured, interest free and have no fixed repayment terms.

The Directors of the Company consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements approximate to their fair values at the end of the reporting period.

(d) Capital risk management

The primary objectives when managing capital are to safeguard the Company's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

The Company actively and regularly review and manage the capital structure to maintain a balance between the higher shareholder returns that might be possible with a higher level of borrowings and the advantages and security afforded by a sound capital position, and makes adjustments to the capital structure in light of changes in economic conditions.

The Company monitor its capital structure on the basis of a net debt-to-adjusted capital ratio. For this purpose the net debt is defined as total debt (which includes bank borrowings and other financial liabilities) less bank deposits and cash and cash equivalents. Adjusted capital comprises all components of equity less unaccrued proposed dividends.

The strategy during 2018, which was unchanged from 2017, was to maintain the net debt-to-adjusted capital ratio as low as feasible. In order to maintain or adjust the ratio, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The Company is not subjected to externally imposed capital requirements.

The net debt-to-adjusted capital ratios of the Company at the end of the reporting period were as follows:

7. SEGMENT INFORMATION

Management has determined the operating segments based on the reports reviewed by the chief operating decision maker, being the chief executive officer, that are used to make strategic decisions.

Information reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance focuses on types of goods or services delivered or provided. The Company has a single reportable operating segment in security and surveillance business for the year ended 31 March 2018.

(a) Segment revenues and results

The following is an analysis of the Company's revenue and results by operating segment:

(b) Information about major customers

Revenues of approximately £2,737,825 (2017: £2,882,250) are derived from two external customers (2017: two), who contributed to 10% or more of the Company's revenue in 2018 and 2017.

8. OTHER INCOME

9. OTHER GAINS/(LOSSES), NET

10. EXPENSES BY NATURE