Last checked at 27 Dec 2019 09:30
27 December 2019
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 2019
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 2019.
For further information visit www.uvel.com or contact:
UniVision Engineering Limited | Tel: +852 2389 3256 |
Stephen Koo, Chairman | www.uvel.com |
Peter Yip Tak Chan, Chief Executive Officer |
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Danny Kwok Fai Yip, Finance Director |
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Nicholas Lyth, Non-Executive Director Ivor Shrago, Non-Executive Director |
Tel: +44 (0)7769 906686 Tel: +44 (0) 7900251 925
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SPARK Advisory Partners Limited (Nominated Adviser) | Tel: +44 (0)20 3368 3551 |
Mark Brady / Neil Baldwin | www.sparkadvisorypartners.com |
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SI Capital Limited (Broker) | Tel: +44 (0)1483 413500 www.sicapital.co.uk |
Nick Emerson
CHAIRMAN'S STATEMENT
INTRODUCTION
For the reasons outlined below, the Company has experienced a downturn in both revenue and profit for the six months ended 30 September 2019, when compared to the same period last year Nevertheless, the second half of the year has started better and the Board anticipates that the performance of the Group's business will be improved in the second half of the 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$389.4m for providing the replacement works of the Closed-Circuit Television (CCTV) systems by an unified IP-based, digital CCTV systems for numerous railway lines in Hong Kong. With further agreed orders of HK$17.9m, the total value of the Major Contract is HK$407.3m. The expected date for completion 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 which mainly providing equipment and software to the sites, resulting in a lower margin contribution than in the comparable period last year.
The protest against anti-extradition bill in Hong Kong in the recent months since June 2019 has undoubtedly hindered the progress for installation work at MTRC. Numerous installation plans were delayed or postponed. This has led directly to a decrease in revenue in the current financial period under review.
The Company is the main contractor for the Major Contract. The Management is always reviewing and negotiating with suppliers and sub-contractors for more favourable terms. Major suppliers have offered long credit period for the equipment. The Company has sourced few new subcontractors for performing the installation works for cost effectiveness. The Board closely monitors the status of working capital for this project.
The Company has invoiced, in total, HK$116m to MTRC up to 30 September 2019. This leaves a further value of HK$291.3m over the remaining four years of the contract, assuming no further additions to this work. The gross valuation of certified works on the Major Contract was HK$144.5m (or 35.5% of contract value) up to 31 August 2019.
HSBC, the Group's major banker, has increased the trade facility from HK$13m to HK$21m after the latest review. The invoice discounting/factoring facility is provided up to HK$25m. These facilities provide additional working capital for performance of the Major Contract.
FINANCIAL REVIEW
The profit attributable to the equity holders of the Company is approximately £0.2m (2018: £1m).
The decline in the results performance in the period is mainly attributable to:-
i) 28.8% decrease in the income from construction contracts; andii) a decrease in gross profit margin of 18% from maintenance contracts.
In the six month period under review, revenue for the Group decreased by 25.8% to HK$49.5m (H1 2018: HK$66.8m). The substantial decrease in construction revenue was mainly due to the income decreased of HK$10m to HK$33m (H1 2018: $43m) for the MTRC Replacement of CCTV Systems (the Major Contract), which occurred obviously in the second quarter given the increased protests.
Revenue for the Group's maintenance business remains stable at HK$7.27m (H1 2018: HK$7.25m). 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 54% in the segment for the period.
Gross profit margin in the maintenance business declined from 47% to 29%. It was mainly due to increase in subcontractor charges, more replacement of equipment and recruit more field service engineers. The gross margin of the Group's construction business was reduced by 5% to 19% (2018: 24%) for the period.
Administration expenses for the period were increased by HK$1.6m to HK$7.8m (H1 2018: HK$6.2m). This was caused by the increased headcount and associated personnel expenses (salaries, directors' emoluments, bonus, provident fund contribution and recruitment fee), 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 few new networks engineers. The number of staff has increased to 76 as at 30 September 2019 (H1 2018: 65). Also, one more unit at the same building was rented for office use from January 2019 that increased the operating cost.
Finance costs was increased to HK$461k (2018: HK$226k) since the Company increased its use of the HBSC banking facility in this reporting period. The interest for trade finance and factoring were charged at the bank's Hong Kong Dollars Best Lending Rate. Also, the Company required paying loan interest 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 is HK$1.7m (2018: HK$10.6m). Profit before interest and income tax from operations during the period was HK$2.2m (H1 2018: HK$10.8m).
During the period under review, the relative strengthening of the HK$ against GBP has led to 6% appreciation in the GBP reporting amount in the Statement of Comprehensive Income. Also, a relative strengthening of HK$ at the period-end has led to a 6% appreciation in the GBP reporting amount in the Statement of Financial Position. It is also the reason for the significant gain of £504k (H1 2018: £509k) on exchange differences arising on the translation. All figures in GBP in the Financial Statements 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 2018 that were unaffected by exchange rate fluctuations.
BUSINESS REVIEW
Markets
The increasing demand for wireless network infrastructure (such as IP, 4G and 5G) and the drive to enhance safety and security are the key growth drivers for the video surveillance system market. The recent protests in Hong Kong have also increased the focus and 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 from MTRC should allow UniVision to market its brand to the customers of similar systems outside Hong Kong. The Group currently explores the opportunity of developing the overseas market by tendering prospective projects.
The Company actively explores other market segments, such as rolling stock business on railways, to strengthen business growth in the Group.
Business
Under the Major Contract, the Company performs as network service provider in the application of CCTV systems. As the Company has maintained its own team of network professional staff, the Board regards the Company at a good position entering the new business as a provider of network service and information technology in the application in other fields.
The Company keeps moving forward in CCTV segment and gradually to safe city concept by introducing video based analytics to big data AI processing.
The recent violence at MTR stations has provided additional work orders for replacement of damaged CCTV equipment from August 2019. More orders will be expected to be received in the second half year of the financial year.
Customers
MTR Corporation is the Company's largest customer in this financial period with the implementation of the Major Contract.
To avoid the concentration of customers, the Company has diversified the base of customers including the government departments, other public organizations and sizeable private enterprises.
As announced in May 2019, the Group is, once again, eligible to tender for new government projects from the Hong Kong Government Works Branch under the management of Electrical and Mechanical Services Department ("EMSD").
Future Strategy
As announced in November 2019, the Group has engaged CREHK-CRWE Joint Venture as a major sub-contractor for its sizeable contracts. CRWE is a subsidiary of China Railway Group Limited. CRWE will be able to devote significant manpower and other resources to assist the Group meet its contractual obligations in a more efficient and cost effective manner. The Board regards that it will bring a positive effect on the Group's contractual gross profit margins.
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 increased resources and capacity, provided by the recently-signed link up with China Rail Group, the Group will have the capacity to tender actively for new contracts, including but not limited to additional major infrastructure projects should the opportunities arise.
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
27 December 2019
UniVision Engineering Limited
Statements of Comprehensive Income (Unaudited)
For the six months ended 30 September 2019
For the six months ended 30 September | ||||
2019 | 2018 | 2019 | 2018 | |
HK$'000 | HK$'000 | ￡'000 | ￡'000 | |
Revenue | 49,542 | 66,798 | 5,032 | 6,373 |
Cost of revenue | (39,403) | (49,081) | (4,002) | (4,683) |
Gross profit | 10,139 | 17,717 | 1,030 | 1,690 |
Other income | 111 | 21 | 11 | 2 |
Other losses | (88) | (56) | (9) | (5) |
Selling and distribution expenses | (124) | (651) | (12) | (62) |
Administrative expenses | (7,829) | (6,196) | (795) | (591) |
Finance costs | (461) | (226) | (47) | (22) |
Profit before income tax | 1,748 | 10,609 | 178 | 1,012 |
Income tax | - | - | - | - |
Profit for the period | 1,748 | 10,609 | 178 | 1,012 |
Other comprehensive income: Item that may be reclassified subsequently to profit or loss: | ||||
Exchange differences arising on translation of foreign operations |
- |
- |
504 |
509 |
Total comprehensive income for the period | 1,748 | 10,609 | 682 | 1,521 |
Profit attributable to: | ||||
Equity shareholders of the Company | 1,748 | 10,609 | 178 | 1,012 |
1,748 | 10,609 | 178 | 1,012 | |
Total comprehensive income attributable to | ||||
Equity shareholders of the Company | 1,748 | 10,609 | 682 | 1,521 |
1,748 | 10,609 | 682 | 1,521 | |
Earnings per share - Basic and Diluted | HK Cents | HK Cents | Pence | Pence |
Basic | 0.4556 | 2.7651 | 0.0463 | 0.2638 |
Diluted | N/A | N/A | N/A | N/A |
UniVision Engineering Limited
Statements of Financial Position (Unaudited)
As at 30 September 2019
As at 30 September | ||||
2019 | 2018 | 2019 | 2018 | |
HK$'000 | HK$'000 | ￡'000 | ￡'000 | |
ASSETS | ||||
Non-current assets | ||||
Plant and equipment | 1,494 | 1,496 | 155 | 146 |
Right-of use assets | 2,054 | - | 213 | - |
Deposit paid for life insurance policy | 8,884 | - | 922 | - |
Amounts due from related companies | 32,539 | 33,983 | 3,375 | 3,330 |
Prepayments | 855 | - | 89 | - |
Total non-current assets | 45,826 | 35,479 | 4,754 | 3,476 |
Current assets | ||||
Inventories | 6,852 | 8,382 | 711 | 821 |
Trade and other receivables | 30,233 | 34,297 | 3,137 | 3,361 |
Contract assets | 43,194 | 26,600 | 4,481 | 2,607 |
Cash and bank balances | 4,939 | 10,953 | 512 | 1,073 |
Total current assets | 85,218 | 80,232 | 8,841 | 7,862 |
Total assets | 131,044 | 115,711 | 13,595 | 11,338 |
LIABILITIES AND EQUITY | ||||
Current liabilities | ||||
Trade and other payables | 25,147 | 27,277 | 2,609 | 2,672 |
Contract liabilities | 12,224 | 13,281 | 1,268 | 1,301 |
Lease liabilities | 1,654 | - | 172 | - |
Total current liabilities | 39,025 | 40,558 | 4,049 | 3,973 |
Non-current liabilities | ||||
Lease liabilities | 427 | - | 44 | - |
Bank loans | 6,552 | - | 680 | - |
Amount due to a related company | 4,200 | 1,200 | 436 | 118 |
Total non-current liabilities | 11,179 | 1,200 | 1,160 | 118 |
Total liabilities | 50,204 | 41,758 | 5,209 | 4,091 |
Capital and reserves | ||||
Share capital | 55,034 | 55,034 | 3,891 | 3,891 |
Reserves | 25,806 | 18,919 | 4,495 | 3,356 |
Total equity | 80,840 | 73,953 | 8,386 | 7,247 |
Total liabilities and equity | 131,044 | 115,711 | 13,595 | 11,338 |
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 April 2018 | 3,891 | 642 | 156 | 143 | 1,051 | 5,883 |
Profit for the year | - | 1,729 | - | - | - | 1,729 |
Other comprehensive income | ||||||
Exchange difference arising on translation of foreign operations |
- |
- |
- |
- |
466 |
466 |
Total comprehensive income | - | 1,729 | - | - | 466 | 2,195 |
Dividend paid | - | (160) | - | - | - | (160) |
Balance at 31 March 2019 | 3,891 | 2,211 | 156 | 143 | 1,517 | 7,918 |
Profit for the six months ended 30 September 2019 |
- |
178 |
- |
- |
- |
178 |
Other comprehensive income | ||||||
Exchange difference arising on translation of foreign operations |
- |
- |
- |
- |
504 |
504 |
Total comprehensive income | - | 178 | - | - | 504 | 682 |
Dividend declared | - | (214) | - | - | - | (214) |
Balance at 30 September 2019 | 3,891 | 2,175 | 156 | 143 | 2,021 | 8,386 |
UniVision Engineering Limited
Statements of Changes in Equity (Unaudited)
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 2018 | 55,034 | 5,772 | 2,117 | 2,071 | 64,994 |
Profit for the year | - | 17,858 | - | - | 17,858 |
Total comprehensive income | - | 17,858 | - | - | 17,858 |
Dividend paid | - | (1,650) | - | - | (1,650) |
Balance at 31 March 2019 | 55,034 | 21,980 | 2,117 | 2,071 | 81,202 |
Profit for the six months ended 30 September 2019 |
- |
1,748 |
- |
- |
1,748 |
Total comprehensive income | - | 1,748 | - | - | 1,748 |
Dividend declared | - | (2,110) | - | - | (2,110) |
Balance at 30 September 2019 | 55,034 | 21,618 | 2,117 | 2,071 | 80,840 |
UniVision Engineering Limited
Statements of Cash Flows (Unaudited)
For the six months ended 30 September 2019
For the six months ended 30 September |
| ||||||
2019 | 2018 | 2019 | 2018 |
| |||
HK$'000 | HK$'000 | ￡'000 | ￡'000 |
| |||
CASH FLOW FROM OPERATING ACTIVITIES | |||||||
Profit before income tax | 1,748 | 10,609 | 178 | 1,012 |
| ||
Adjustments for: |
| ||||||
Interest income | (111) | (19) | (11) | (2) |
| ||
Depreciation of plant and equipment | 280 | 248 | 28 | 23 |
| ||
Depreciation of right-of-use assets | 822 | - | 83 | - |
| ||
Interest expense | 396 | 226 | 40 | 22 |
| ||
Interest on lease liabilities | 65 | - | 7 | - |
| ||
Gain on disposal of plant and equipment | (2) | - | - | - |
| ||
Operating cash flows before working capital changes | 3,198 | 11,064 | 325 | 1,055 |
| ||
Changes in operating assets and liabilities: | |||||||
Inventories | (264) | 2,342 | (27) | 223 |
| ||
Trade and other receivables | (2,289) | (8,590) | (233) | (819) |
| ||
Contract assets | (6,514) | - | (662) | - |
| ||
Amounts due from related companies | 1,537 | - | 156 | - |
| ||
Contract liabilities | 2,414 | - | 245 | - |
| ||
Trade and other payables | (2,818) | 1,230 | (286) | 118 |
| ||
Net cash (used in) / generated from operating activities |
(4,736) |
6,046 |
(482) |
577 |
| ||
| |||||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||
Interest received | 111 | 19 | 11 | 2 |
| ||
Purchase of plant and equipment | (306) | (1,149) | (31) | (110) |
| ||
Deposit paid for life insurance policy | (8,884) | - | (902) | - |
| ||
Decrease in pledged deposits | - | 470 | - | 45 |
| ||
Proceeds from disposal of plant and equipment | 2 | - | - | - |
| ||
Net cash used in investing activities | (9,077) | (660) | (922) | (63) |
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CASH FLOWS FROM FINANCING ACTIVITIES | |||||||
Interest paid | (396) | (226) | (40) | (22) |
| ||
Payment of lease liabilities | (861) | - | (87) | - |
| ||
New bank loans raised | 6,552 | - | 666 | - |
| ||
Net cash generated from/(used in) financing activities |
5,295 |
(226) |
539 |
(22) |
| ||
For the six months ended 30 September | |||||
2019 | 2018 | 2019 | 2018 | ||
HK$'000 | HK$'000 | ￡'000 | ￡'000 | ||
NET (DECREASE) / INCREASE IN CASH AND CASH EQUIVALENTS |
(8,518) |
5,160 |
(865) |
492 | |
EFFECT OF FOREIGN EXCHANGE RATE CHANGES, NET |
- |
- |
65 |
57 | |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
13,457 |
5,793 |
1,312 |
524 | |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | 4,939 | 10,953 | 512 | 1,073 | |
Notes to the Interim financial statements for the six months ended 30 September 2019
1. Basis of preparation
The unaudited interim financial statements for the six months ended 30 September 2019 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 2019, 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 2018, does 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 2019 of HK$1.7m (H1 2018: HK$10.6m), and the weighted average of 383,677,323 (H1 2018: 383,677,323) ordinary shares in issue during the period.
There were no potential dilutive instruments at either financial period end.
3. 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.