1.         GENERAL INFORMATION

 

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 Company's registered office is Unit 201, 2/F., Sunbeam Centre, 27 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong.

 

These 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

 

These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSs") issued by the International Accounting Standards Board. The measurement basis used in the preparation of these 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 key sources of estimation uncertainty are discussed in note 5 to the financial statements.

 

 

3.         APPLICATION OF NEW AND REVISED IFRSs

 

(a)       Initial application of IFRSs

 

In the current year, the Company initially applied the following IFRSs:

 

IFRS 16	Leases
IFRIC 23	Uncertainty over Income Tax Treatments
Amendments to IFRS 9	Prepayment Features with Negative Compensation
Amendments to IAS 19	Plan Amendment, Curtailment or Settlement
Amendments to IAS 28	Long-term Interests in Associates and Joint Ventures
Annual Improvements to IFRSs (2015-2017)	Amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23

 

The Company had to change its accounting policies following the adoption of IFRS 16. For details, please refer to note 3(c) to the financial statements. The other amendments listed above did not have material impact on the Company's financial statements for the current or prior years.

 

(b)       IFRSs in issue but not yet effective

 

The following IFRSs in issue at 31 March 2020 have not been applied in the preparation of these financial statements since they were not yet effective for the annual period beginning on 1 April 2019:

 

IFRS 17	Insurance Contracts2
Amendments to IFRS 3	Definition of Business1
Amendments to IFRS 10 and IAS 28	Sale or Contribution of Assets between an Investor and its Associate or Joint Venture3
Amendments to IAS 1 and IAS 8	Definition of Material2
Amendments to IAS 39, IFRS 7 and IFRS 9	Hedge accounting1
Conceptual Framework for Financial Reporting 2018	Revised Conceptual Framework for Financial Reporting1

 

¹                 Effective for the Company's annual financial statements beginning on 1 April 2020

²                 Effective for the Company's annual financial statements beginning on 1 April 2022

³                 Effective for the annual periods beginning on or after a date to be determined

 

The Company is in the process of making an assessment of what the impact of these amendments, new standards and interpretations is expected to be in the period of initial application.

 

(c)        Changes in accounting policies

 

This note explains the impact of the adoption of IFRS 16 on the Company's financial statements and also discloses the new accounting policies that have been applied from 1 April 2019, where they are different to those applied in prior periods.

 

IFRS 16 replaces IAS 17, Leases, and the related interpretations, IFRIC-Int 4, Determining whether an arrangement contains a lease, ISIC-Int 15, Operating leases - incentives, and ISIC-Int 27, Evaluating the substance of transactions involving the legal form of a lease. It introduces a single accounting model for lessees, which requires a lessee to recognise a right-of-use asset and a lease liability for all leases, except for leases that have a lease term of 12 months or less ("short-term leases") and leases of low-value assets. The lessor accounting requirements are brought forward from IAS 17 substantially unchanged.

 

IFRS 16 also introduces additional qualitative and quantitative disclosure requirements which aim to enable users of the financial statements to assess the effect that leases have on the financial position, financial performance and cash flows of an entity.

 

The Company has initially applied IFRS 16 on 1 April 2019. The Company has elected to use the modified retrospective approach and has therefore recognised the cumulative effect of initial application as an adjustment to the opening balances of right-of-use assets and lease liabilities at 1 April 2019. Comparative information has not been restated and continues to be reported under IAS 17.

 

Further details of the nature and effect of the changes to previous accounting policies and the transition options applied are set out below:

 

New definition of a lease

 

The change in the definition of a lease mainly relates to the concept of control. IFRS 16 defines a lease on the basis of whether a customer controls the use of an identified asset for a period of time, which may be determined by a defined amount of use. Control is conveyed where the customer has both the right to direct the use of the identified asset and to obtain substantially all of the economic benefits from that use.

 

The Company applies the new definition of a lease in IFRS 16 only to contracts that were entered into or changed on or after 1 April 2019. For contracts entered into before 1 April 2019, the Company has used the transitional practical expedient to grandfather the previous assessment of which existing arrangements are or contain leases. Accordingly, contracts that were previously assessed as leases under IAS 17 continue to be accounted for as leases under IFRS 16 and contracts previously assessed as non-lease service arrangements continue to be accounted for as executory contracts.

 

Lease accounting and transitional impact

 

IFRS 16 eliminates the requirement for a lessee to classify leases as either operating leases or finance leases, as was previously required by IAS 17. Instead, the Company is required to capitalise all leases when it is the lessee, including leases previously classified as operating leases under IAS 17, other than those short-term leases and leases of low-value assets which are exempt. As far as the Company is concerned, these newly capitalised leases are primarily in relation to right-of-use assets as disclosed in note 17 to the financial statements. For an explanation of how the Company applies lessee accounting, see note 4.10 to the financial statements.

 

At the date of transition to IFRS 16 (i.e. 1 April 2019), the Company determined the length of the remaining lease terms and measured the lease liabilities for the leases previously classified as operating leases at the present value of the remaining lease payments, discounted using the relevant incremental borrowing rates at 1 April 2019. The weighted average of the incremental borrowing rates used for determination of the present value of the remaining lease payments was 5.125%.

 

To ease the transition to IFRS 16, the Company applied the following recognition exemption and practical expedients at the date of initial application of IFRS 16:

 

(1)   the Company elected not to apply the requirements of IFRS 16 in respect of the recognition of lease liabilities and right-of-use assets to leases for which the remaining lease term ends within 12 months from the date of initial application of IFRS 16, i.e. where the lease term ends on or before 31 March 2020; and

 

(2)   when measuring the lease liabilities at the date of initial application of IFRS 16, the Company applied a single discount rate to a portfolio of leases with reasonably similar characteristics (such as leases with a similar remaining lease term for a similar class of underlying asset in a similar economic environment).

 

The following table reconciles the operating lease commitments as disclosed in note 31 to the financial statements to the opening balance for lease liabilities recognised as at 1 April 2019:

 

			£
Operating lease commitments at 31 March 2019			337,485
Less: commitment relating to leases exempt from capitalisation
-  short-term leases and other leases with remaining lease term ended on or before 31 March 2020			(43,628)
			293,857
Less: total future interest expenses			(13,365)
Total lease liabilities recognised at 1 April 2019			280,492

 

The right-of-use assets in relation to leases previously classified as operating leases have been recognised at an amount equal to the amount recognised for the remaining lease liabilities, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the statement of financial position at 31 March 2019.

 

The following table summarises the impacts of the adoption of IFRS 16 on the Company's statement of financial position:

 

	At 31 March 2019		Capitalisation of lease contracts		At 1 April 2019
	£		£		£
Non-current assets
Right-of-use assets	-		280,492		280,492
Current liabilities
Lease liabilities	-		(157,201	)	(157,201	)
Non-current liabilities
Lease liabilities	-		(123,291	)	(123,291	)

 

 

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 revenue and incurs expenses, including revenue 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.

 

4.2       Foreign currency

 

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 Dollar ("HK$"). These financial statements are presented in Sterling Pound ("£"), which is the Company's presentation currency. As the Company is listed on the AIM, the directors consider that this presentation is more useful for its current and potential investors.

 

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 re-measured.  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 profit or loss, except when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges.

 

4.3       Plant and equipment

 

Plant and equipment are 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:

 

Furniture and fixtures	3 - 5 years
Computer equipment	2 - 5 years
Motor vehicles	3 years

 

Fully depreciated plant and equipment are retained in the financial statements until the items are no longer in use.

 

The residual values, useful lives 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 non-financial assets

 

The carrying amounts of non-current assets, including plant and equipment and right-of-use assets, 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 the Company becomes a party to the contractual provisions of the instrument.

 

Financial assets and financial liabilities are initially measured at fair value except for trade receivables arising from contracts with customers which are initially measured in accordance with IFRS 15. 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

 

Classification and subsequent measurement of financial assets

 

Financial assets that meet the following conditions are subsequently measured at amortised cost:

 

-         the financial asset is held within a business model whose objective is to collect contractual cash flows; and

-         the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

All other financial assets are subsequently measured at fair value through profit or loss.

 

Impairment of financial assets

 

The Company recognises a loss allowance for ECL on financial assets and other assets which are subject to impairment under IFRS 9. The amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition.

 

Lifetime ECL represents the ECL that will result from all possible default events over the expected life of the relevant instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events that are possible within 12 months after the reporting date. Assessments are done based on the Company's historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current conditions at the reporting date as well as the forecast of future conditions.

 

The Company always recognises lifetime ECL for trade receivables and contract assets. The ECL on these assets is assessed individually for debtors with significant balances and/or collectively using a provision matrix with appropriate groupings. For all other instruments, the Company measures the loss allowance equals to 12-month ECL, unless when there has been a significant increase in credit risk since initial recognition, the Company recognises lifetime ECL. The assessment of whether lifetime ECL should be recognised is based on significant increases in the likelihood or risk of a default occurring since initial recognition.

 

In assessing whether the credit risk of a financial instrument has increased significantly since initial recognition, the Company compares the risk of default occurring on the financial instrument assessed at the reporting date with that assessed at the date of initial recognition. In making this reassessment, the Company considers that a default event occurs when (i) the borrower is unlikely to pay its credit obligations to the Company in full, without recourse by the Company to actions such as realising security (if any is held); or (ii) the financial asset is 90 days past due. The Company considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort.

 

In particular, the following information is taken into account when assessing whether credit risk has increased significantly since initial recognition:

 

-         failure to make payments of principal or interest on their contractually due dates;

-         an actual or expected significant deterioration in a financial instrument's external or internal credit rating (if available);

-         an actual or expected significant deterioration in the operating results of the debtor; and

-         existing or forecast changes in the technological, market, economic or legal environment that have a significant adverse effect on the debtor's ability to meet it obligation to the Company.

 

Depending on the nature of the financial instruments, the assessment of a significant increase in credit risk is performed on either an individual basis or a collective basis. When the assessment is performed on a collective basis, the financial instruments are grouped based on shared credit risk characteristics, such as past due status and credit risk ratings.

 

ECLs are re-measured at each reporting date to reflect changes in the financial instrument's credit risk since initial recognition. Any change in the ECL amount is recognised as an impairment gain or loss in profit or loss. The Company recognises an impairment gain or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account, except for investments in debts securities that are measured at fair value through other comprehensive income (recycling), for which the loss allowances are recognised in other comprehensive income and accumulated in the fair value reserve (recycling).

 

Interest income is calculated based on the gross carrying amount of the financial asset unless the financial asset is credit-impaired, in which case interest income is calculated based on the amortised cost (i.e. the gross carrying amount less loss allowance) of the financial asset.

 

At each reporting date, the Company assesses whether a financial asset is credit-impaired. A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable events:

 

-         significant financial difficulties of the debtor;

-         a breach of contract, such as a default or delinquency in interest or principal payments;

-         it becoming probable that the borrower will enter into bankruptcy or other financial reorganisation;

-         significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor; or

-         the disappearance of an active market for a security because of financial difficulties of the issuer.

 

The gross carrying amount of a financial asset or contract asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off.

 

Subsequent recoveries of an asset that was previously written off are recognised as a reversal of impairment in profit or loss in the period in which the recovery occurs.

 

4.6.2    Financial liabilities and equity instruments

 

Debt and equity instruments issued by the Company 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 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.

 

4.6.3    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 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.

 

4.6.4    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       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.

 

4.8       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.

 

4.9       Revenue recognition

 

Revenue from contracts with customers

 

Under IFRS 15, the Company 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.

 

A performance obligation represents a good or service (or a bundle of goods or services) that is distinct or a series of distinct goods or services that are substantially the same.

 

Control is transferred over time and revenue is recognised over time by reference to the progress towards complete satisfaction of the relevant performance obligation if one of the following criteria is met:

 

-         the customer simultaneously receives and consumes the benefits provided by the Company's performance as the Company performs;

-         the Company's performance creates or enhances an asset that the customer controls as the Company performs; or

-         the Company's performance does not create an asset with an alternative use to the Company and the Company has an enforceable right to payment for performance completed to date.

 

Otherwise, revenue is recognised at a point in time when the customer obtains control of the distinct good or service.

 

A contract asset represents the Company's right to consideration in exchange for goods or services that the Company has transferred to a customer that is not yet unconditional. It is assessed for impairment in accordance with IFRS 9. In contrast, a receivable represents the Company's unconditional right to consideration, i.e. only the passage of time is required before payment of that consideration is due.

 

A contract liability represents the Company's obligation to transfer goods or services to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer.

 

A contract asset and a contract liability relating to the same contract are accounted for and presented on a net basis.

 

Contracts with multiple performance obligations (including allocation of transaction price)

 

For contracts that contain more than one performance obligations (provision of design and installation services and sales of goods), the Company allocates the transaction price to each performance obligation on a relative stand-alone selling price basis.

 

The stand-alone selling price of the distinct good or service underlying each performance obligation is determined at contract inception. It represents the price at which the Company would sell a promised good or service separately to a customer. If a stand-alone selling price is not directly observable, the Company estimates it using appropriate techniques such that the transaction price ultimately allocated to any performance obligation reflects the amount of consideration to which the Company expects to be entitled in exchange for transferring the promised goods or services to the customer.

 

Over time revenue recognition: measurement of progress towards complete satisfaction of a performance obligation

 

The progress towards complete satisfaction of a performance obligation is measured based on input method, which is to recognise revenue on the basis of the Company's efforts or inputs to the satisfaction of a performance obligation relative to the total expected inputs to the satisfaction of that performance obligation, that best depicts the Company's performance in transferring control of goods or services.

 

Service revenue from supply, design and installation of closed circuit television and surveillance systems is recognised over time by reference to the progress towards complete satisfaction of the relevant performance obligation using input method as the Company's performance does not create an asset with an alternative use to the Company and the Company has an enforceable right to payment for performance completed to date.

 

Service revenue from maintenance contracts is recognised over time as the customer simultaneously receives and consumes the benefits provided by the Company. Revenue is recognised on a straight-line basis because the Company's inputs are expended evenly throughout the performance period.

 

Trading income is recognised at a point in time when the customer obtains control of the distinct good.

 

4.10     Leases

 

After application of IFRS 16 on 1 April 2019

 

At inception of a contract, the Company assesses whether the contract is, or contains, a lease. A contract is, or contains,  a  lease  if  the  contract  conveys  the  right  to  control  the  use of an identified asset for a period of time in exchange for consideration. Control is conveyed where the customer has both the right to direct the use of the identified asset and to obtain substantially all of the economic benefits from that use.

 

As a lessee

 

Where the contract contains lease component(s) and non-lease component(s), the Company has elected not to separate non-lease components and accounts for each lease component and any associated non-lease components as a single lease component for all leases.

 

At the lease commencement date, the Company recognises a right-of-use asset and a lease liability, except for short-term leases that have a lease term of 12 months or less and leases of low-value assets. When the Company enters into a lease in respect of a low-value asset, the Company decides whether to capitalise the lease on a lease-by-lease basis. The lease payments associated with those leases which are not capitalised are recognised as an expense on a systematic basis over the lease term.

 

Where the lease is capitalised, the lease liability is initially recognised at the present value of the lease payments payable over the lease term, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, using a relevant incremental borrowing rate. After initial recognition, the lease liability is measured at amortised cost and interest expense is calculated using the effective interest method. Variable lease payments that do not depend on an index or rate are not included in the measurement of the lease liability and hence are charged to profit or loss in the accounting period in which they are incurred.

 

The right-of-use asset recognised when a lease is capitalised is initially measured at cost, which comprises the initial amount of the lease liability plus any lease payments made at or before the commencement date, and any initial direct costs incurred. Where applicable, the cost of the right-of-use assets also includes an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, discounted to their present value, less any lease incentives received. The right-of-use asset is subsequently stated at cost less accumulated depreciation (Note 17) and impairment losses.

 

The lease liability is remeasured when there is a change in future lease payments arising from  a change in an index or rate, or there is a change in the Company's estimate of the amount expected to be payable under a residual value guarantee, or there is a change arising from the reassessment of whether the Company will be reasonably certain to exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

 

The Company presents right-of-use assets and lease liabilities separately in the statement of financial position.

 

Before application of IFRS 16 on 1 April 2019

 

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.

 

4.11     Employee benefits

 

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

 

Short-term employee benefits, including salaries, annual bonuses, paid annual leave and 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.

 

4.12     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 operates and generates 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 a 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.

 

4.13     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.

 

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow is remote.  Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow is remote.

 

4.14     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.

 

4.15     Related parties

 

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.

 

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 the above paragraph.

(vii)      A person identified in (i) of the above paragraph 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.         KEY SOURCES OF ESTIMATION UNCERTAINTY

 

The following are 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.

 

Revenue recognition on service contracts

 

The Company recognises revenue on service contracts from supply, design and installation of closed circuit television and surveillance systems by reference to the progress towards complete satisfaction of the relevant performance obligation using the input method, measured based on the proportion of contract costs incurred for work performed to date relative to the estimated total contract costs. The management regularly discusses with the project team in order to review and revise the estimates of the total contract costs and stage of completion of the work performed to date with reference to the performance and status of corresponding service contract work. Accordingly, revenue recognition on service contracts involves a significant degree of management estimates and judgment, with estimates being made to assess the total contract costs and contract costs incurred for work performed to date.

 

The management reviews and revises the estimates of total contract costs and contract costs incurred for work performed to date as the contract progresses, the actual outcome of the contract in terms of its total costs may be higher or lower than the estimates and this will affect the revenue and profit recognised.

 

Estimated provision of ECL for receivables measured at amortised cost and contract assets

 

The management of the Company estimates the amount of impairment loss for ECL on receivables measured at amortised cost and contract assets based on the credit risk of these assets. The amount of the impairment loss based on ECL model is measured as the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive, discounted at the effective interest rate determined at initial recognition. Where the future cash flows are less than expected, or being revised downward due to changes in facts and circumstances, a material impairment loss may arise.

 

The provision of ECL is sensitive to changes in estimates.

 

Income taxes

 

The Company is subject to profits 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 2020, the Company has unused tax losses of approximately £1,838,000 (2019: £2,179,000) available for offset against future profits and no deferred tax asset has been recognised thereon. 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 a recognition takes place.

 

 

6.         FINANCIAL INSTRUMENTS

 

(a)        Categories of financial instruments

 

		2020		2019
		£		£
Financial assets
Amounts due from related companies		3,157,799		3,322,882
Deposit placed for a life insurance policy		941,772		-
Trade and other receivables		2,406,863		2,274,267
Cash and bank balances		980,238		1,750,056
Financial liabilities
Trade and other payables		3,824,759		2,521,122
Amount due to a related company		437,500		409,556
Bank borrowings		682,486		-
Lease liabilities		284,165		-

 

(b)        Financial risk management objectives and policies

 

Details of the Company's major 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. The Company's management manages and monitors these exposures to ensure appropriate measures are implemented in a timely and effective manner.

 

(i)         Market risk

 

Currency risk

 

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

 

The carrying amounts of the Company's foreign currency denominated financial assets and liabilities at the end of each reporting period are as follows:

 

	Assets				Liabilities
	2020		2019		2020		2019
	£		£		£		£
Renminbi	5,323		161,387		568,750		567,360
United States dollar	948,100		134,671		1,023,750		-

 

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

 

The following table details the Company's sensitivity to a 5% increase and decrease in Sterling Pound against the relevant foreign currencies with all other variables held constant. 5% (2019: 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 financial instruments and adjusts their translation at the end of the reporting period for a 5% (2019: 5%) change in foreign currency rates. 

 

	2020		2019
	£		£
Renminbi
Post-tax profit for the year	29,654		21,367
United States dollar
Post-tax profit for the year	3,982		(7,088)

Interest rate risk

 

The Company is exposed to fair value interest rate risk in relation to its bank deposits. The Company is exposed to cash flow interest rate risk due to fluctuation of the prevailing market interest rate on bank borrowings which carry interest at prevailing market interest rates as shown in notes 26 and 32 to the financial statements.

 

The Company currently does not have an interest rate hedging policy. However, the management monitors interest rate exposure and will consider hedging significant interest rate exposure should the need arises.

 

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

 

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 the 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 2019.

 

For the year ended 31 March 2020, 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 £4,081 (2019: £2,736).

 

(ii)       Credit risk

 

At 31 March 2020, 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 statement of financial position.

 

In order to minimise credit risk, the management has a credit policy in place and the exposure to these credit risks is monitored on an ongoing basis.  Credit evaluations of the counterparties' financial position and conditions are performed on each and every major debtor periodically. 

 

The Company measures ECLs for trade and other receivables and contract assets at an amount calculated using a provision matrix, details of which are set out in notes 20 and 21 to the financial statements. At the end of the reporting period, the Company had concentrations of credit risk where trade and other receivables balance of the Company's largest external customer exceeds 10% of the total trade and other receivables at the end of the reporting period.

 

The credit risk on deposit placed for a life insurance policy and liquid funds is limited because the counterparties are banks/financial institutions with high credit ratings assigned by international credit rating agencies.

 

The Company's exposure credit risk is considered limited.

 

(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 is 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 2020, the Company's banking facilities amounted to £7,858,538 (2019: £5,655,778) and the unused facilities were £5,903,189 (2019: £4,553,605).

 

The following table details the contractual maturities of the Company's non-derivative 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.

 

	2020
	Weighted		Within		More than		More than				Carrying
	average		1 year		1 year but		2 years but		Total		amount
	effective		or on		less than		less than		undiscounted		at 31
	interest rate		demand		2 years		5 years		cash flow		March 2020
	%		£		£		£		£		£
Trade and other payables	Nil		3,708,335		-		-		3,708,335		3,708,335
Amount due to a related company	Nil		-		437,500		-		437,500		437,500
Bank borrowings	3.55		684,538		-		-		684,538		682,486
Lease liabilities	5.125		222,031		72,444		-		294,475		284,165
			4,614,904		509,944		-		5,124,848		5,112,486

 

		2019
		Weighted		Within		More than		More than				Carrying
		average		1 year		1 year but		2 years but		Total		amount
		effective		or on		less than		less than		undiscounted		at 31
		interest rate		demand		2 years		5 years		cash flow		March 2019
		%		£		£		£		£		£
	Trade and other payables	Nil		2,521,122		-		-		2,521,122		2,521,122
	Amount due to a related company	Nil		-		409,556		-		409,556		409,556
				2,521,122		409,556		-		2,930,678		2,930,678

 

(c)        Fair value

 

The directors of the Company consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in these financial statements approximate 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 reviews and manages 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 monitors its capital structure on the basis of a net debt-to-adjusted capital ratio.  For this purpose, net debt is defined as total debt less bank deposits and cash and cash equivalents. Adjusted capital comprises all components of equity less proposed dividends but not yet accrued.

 

The strategy during 2020, which is unchanged from 2019, is 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 net debt-to-adjusted capital ratio of the Company at the end of the reporting period is as follows:

 

	2020		2019
	£		£
Total liabilities	6,545,356		3,887,294
Cash and bank balances	(980,238	)	(1,750,056	)
Net debt	5,565,118		2,137,238
Total equity	8,706,138		7,918,342
Net debt-to-adjusted capital ratio	64%		27%

 

 

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 2020.

 

(a)        Segment revenues and results

 

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

 

	2020		2019
	£		£
Segment revenue by major products and services
-   Construction contracts	8,891,163		12,635,262
-   Maintenance contracts	1,625,775		1,426,493
-   Product sales	211,606		159,742
Revenue from contracts with customers and external customers	10,728,544		14,221,497
Segment profit	546,926		1,784,355
Finance costs	(95,243	)	(55,409	)
Profit before income tax	451,683		1,728,946

 

(b)        Information about major customers

 

Revenue of approximately £8,812,800 (2019: £11,995,000) is derived from one external customer (2019: one customer), who contributed to 10% or more of the Company's revenue in 2020 and 2019.

 

 

8.         OTHER INCOME

 

	2020		2019
	£		£
Interest income	36,905		3,947
Sundry income	-		194
	36,905		4,141

 

 

9.         OTHER GAINS AND LOSSES, NET

 

	2020		2019
	£		£
Foreign exchange loss	(11,250	)	(10,203	)
Gain/(loss) on disposal of plant and equipment	201		(128	)
Inventories write-off	-		(50,457	)
Others	-		(9,872	)
	(11,049	)	(70,660	)

 

 

10.       EXPENSES BY NATURE

 

	2020			2019
	£			£
Cost of inventories recognised as expenses	5,709,694			8,673,468
Sub-contracting costs	1,185,287			1,013,057
Depreciation - owned plant and equipment	56,694			47,318
Depreciation - right-of-use assets	179,977			-
Research and development costs	23,875			31,148
Selling and distribution cost	2,709			2,995
Minimum lease payments for lease previously classified as operating lease under IAS 17	-			187,090
Short-term lease expenses	54,411			-
Other expenses	453,342			322,189
Staff costs, including directors' remuneration
-   Wages and salaries	2,415,640			1,988,631
-   Pension scheme contributions	99,379			78,128
	2,515,019			2,066,759
Auditor's remuneration
-   Audit services	26,466			26,599
Total cost of sales, selling and distribution, administrative expenses	10,207,474			12,370,623

 

 

11.       DIRECTORS' REMUNERATION

 

Directors' remuneration for the year is as follows:

 

	Salaries, bonuses and allowances	Pension scheme contributions	2020
Executive directors	£	£	£
Stephen Sin Mo KOO	-	-	-
Peter Yip Tak CHAN	74,399	1,812	76,211
Chun Pan WONG	74,410	1,359	75,769
Danny Kwok Fai YIP	72,108	1,812	73,920
Mike Chiu Wah CHAN	51,472	1,057	52,529
	272,389	6,040	278,429
Non-executive directors
Nicholas James LYTH	14,497	-	14,497
Ivor Colin SHRAGO	14,497	-	14,497
	28,994	-	28,994
	301,383	6,040	307,423

 

Messrs. Mike Chiu Wah CHAN and Chun Pun WONG resigned as the Company's directors on 31 October 2019 and 26 December 2019 respectively.

 

	Salaries, bonuses and allowances	Pension scheme contributions	2019
Executive directors	£	£	£
Stephen Sin Mo KOO	-	-	-
Peter Yip Tak CHAN	71,076	1,743	72,819
Chun Pan WONG	101,052	1,743	102,795
Danny Kwok Fai YIP	67,800	1,743	69,543
Mike Chiu Wah CHAN	40,724	1,017	41,741
	280,652	6,246	286,898
Non-executive directors
Nicholas James LYTH	15,684	-	15,684
Ivor Colin SHRAGO	7,126	-	7,126
	22,810	-	22,810
	303,462	6,246	309,708

 

 

12.       FINANCE COSTS

 

	2020		2019
	£		£
Interest expense on bills payable and factoring	61,501		55,409
Interest expense on bank borrowings	21,205		-
Interest on lease liabilities	12,537		-
	95,243		55,409

 

 

13.       INCOME TAX

 

(a)        Income tax in the statement of profit or loss and other comprehensive income

 

No provision for Hong Kong profits tax has been accrued for in these financial statements as the Company has unused tax losses brought forward to offset against its taxable profit for the year.

 

Reconciliation between income tax and profit before income tax is as follows:

 

	2020		2019
	£		£
Profit before income tax	451,683		1,728,946
Notional tax on profit before income tax, calculated at Hong Kong profits tax rate of 16.5%	74,528		285,276
Tax effect of non-taxable income	(43	)	(8	)
Tax effect of non-deductible expenses	10,918		9,974
Tax effect of temporary differences not recognised	(7,440	)	(18,240	)
Utilisation of unrecognised tax losses	(77,963	)	(277,002	)
Income tax	-		-

 

(b)        Deferred tax

 

At 31 March 2020, the Company's significant temporary difference included unused tax losses of £1,838,451 (2019: £2,178,697) available for offset against future taxable profits. No deferred tax asset has been recognised due to the uncertainty of future profit streams.

 

	2020		2019
	£		£
Balance at beginning of year	2,178,697		3,591,859
Set-off against assessable profit for the year	(472,506	)	(1,678,799	)
Foreign exchange difference	132,260		265,637
Balance at end of year	1,838,451		2,178,697

 

No provision for deferred tax liabilities has been made in the financial statements as the tax effect of temporary differences arising from depreciation allowances is immaterial to the Company.

 

 

14.       EARNINGS PER SHARE

 

The calculation of basic earnings per share is based on the profit attributable to the equity shareholders of the Company for the year of £451,683 (2019: £1,728,946), and the weighted average of 383,677,323 (2019: 383,677,323) ordinary shares in issue during the year.

 

There were no potential dilutive instruments at either financial year end.

 

 

15.       DIVIDENDS

 

(i)         Dividends payable to equity shareholders of the Company attributable to the year:

 

	2020		2019
	£		£
Final dividend proposed after the reporting period of 0.55 HK cents, equivalent to 0.0573 pence per ordinary share (2019: 0.55 HK cents, equivalent to 0.0536 pence, per ordinary share)	219,815		205,775

 

The final dividend proposed after the reporting period has not been recognised as a liability at the end of the reporting period.

 

(ii)        Dividends payable to equity shareholders of the Company attributable to the previous financial year, approved and paid during the year

 

	2020		2019
	£		£
Final dividend in respect of the previous financial year, approved and paid during the year, of 0.55 HK cents, equivalent to 0.05537 pence, per ordinary share (2019: 0.43 HK cents, equivalent to 0.04163 pence per ordinary share)	212,447		159,726

 

 

16.       PLANT AND EQUIPMENT

	Furniture and fixtures		Computer equipment		Motor vehicles		Total
	£		£		£		£
Cost
At 1 April 2018	49,195		81,964		65,577		196,736
Additions	117,324		14,533		-		131,857
Disposal	(174	)	(549	)	-		(723	)
Foreign translation difference	4,650		6,439		30,123		41,212
At 31 March 2019	170,995		102,387		95,700		369,082
Additions	4,163		12,180		23,155		39,498
Disposal	-		-		(3,624	)	(3,624	)
Foreign translation difference	11,811		7,408		7,207		26,426
At 31 March 2020	186,969		121,975		122,438		431,382
Accumulated depreciation
At 1 April 2018	28,776		68,242		45,756		142,774
Charge for the year	27,113		11,048		9,157		47,318
Disposal	(174	)	(411	)	-		(585	)
Foreign translation difference	2,419		5,354		28,656		36,429
At 31 March 2019	58,134		84,233		83,569		225,936
Charge for the year	31,195		11,038		14,461		56,694
Disposal	-		-		(3,624	)	(3,624	)
Foreign translation difference	5,049		6,129		6,077		17,255
At 31 March 2020	94,378		101,400		100,483		296,261
Net book value
At 31 March 2020	92,591		20,575		21,955		135,121
At 31 March 2019	112,861		18,154		12,131		143,146

 

17.       RIGHT-OF-USE ASSETS

 

			Leasehold
			properties
			£
Cost
At 1 April 2019			280,492
Additions			157,254
Foreign translation difference			24,593
At 31 March 2020			462,339
Accumulated depreciation
At 1 April 2019			-
Charge for the year			179,977
Foreign translation difference			6,243
At 31 March 2020			186,220
Net book value
At 31 March 2020			276,119

 

            On 1 April 2019, the Company recognised right-of-use assets of £280,492 newly capitalised under IFRS 16.

 

            The Company has entered into lease agreements to obtain the right to use properties as its office premises and warehouse and as a result incurred lease liabilities (Note 25). The leases typically run for an initial period of 2 years.

 

 

18.       DEPOSIT PLACED FOR A LIFE INSURANCE POLICY

 

            In April 2019, the Company entered into a life insurance policy with an insurance company to insure Mr. Stephen Sin Mo KOO, a Director of the Company. Under the policy, the Company is the beneficiary and policy holder and the total insured sum is US$2,500,000. The Company has paid an upfront deposit of US$1,203,528. The Company can terminate the policy at any time and receive cash back based on the cash value of the policy at the date of withdrawal, which is determined by the upfront deposit payment of US$1,203,528 plus accumulated interest earned and minus the accumulated insurance charge and policy expense charge ("Cash Value").

 

In addition, if withdrawal is made between the first to nineteenth policy year, as appropriate, a specified amount of surrender charge would be imposed.

 

The insurance company will pay the Company an interest of 4.25% per annum on the outstanding Cash Value for the first year. Commencing on the second year, the interest will be at least 2% guarantee interest per annum. The guarantee interest rate is also the effective interest rate for the deposit placed on initial recognition, determined by discounting the estimated future cash receipts through the expected life of the insurance policy, excluding the financial effect of surrender charge.

 

The deposit placed is carried at amortised cost using the effective interest method. The Directors considered that the possibility of terminating the policy during the first to nineteenth policy year was low and the expected life of the insurance policy remained unchanged since the initial recognition. Accordingly, the difference between the carrying amount of deposit placed for a life insurance policy as at 31 March 2020 and the Cash Value of the life insurance policy is insignificant.

 

At 31 March 2020, the life insurance policy has been pledged as security for banking facilities granted to the Company (Note 32).

 

19.       INVENTORIES

 

	2020		2019
	£		£
Raw materials	309,386		290,697
Finished goods	724,903		351,678
	1,034,289		642,375

 

No provision for obsolete inventories is recognised for the year (2019: £nil) on slow-moving inventories.

 

No inventories write-off (2019: £50,457) was recorded for the year.

 

 

20.       TRADE AND OTHER RECEIVABLES

 

	2020		2019
	£		£
Trade receivables	634,931		858,592
Less: allowance for doubtful debts	(66,024	)	(61,806	)
Trade receivables, net	568,907		796,786
Other receivables	1,330,320		1,267,203
Deposits and prepayments	507,636		210,278
Total carrying amount	2,406,863		2,274,267

 

All of the trade and other receivables are expected to be recovered within one year. 

 

Trade receivables

 

Impairment losses in respect of trade receivables are recorded using an allowance account unless the Company is satisfied that recovery of the amount is remote, in which case the impairment loss is written off against trade receivables directly. Movements in the allowance for doubtful debts:

 

	2020		2019
	£		£
At beginning of year	61,806		48,140
Provision for the year	-		9,872
Foreign translation difference	4,218		3,794
At end of year	66,024		61,806

 

 

The ageing analysis of trade receivables, net at the end of the reporting period is as follows:

 

	2020		2019
	£		£
0 to 90 days	470,672		717,632
91 to 365 days	88,190		77,980
Over 365 days	10,045		1,174
	568,907		796,786

 

The Company measures loss allowances for trade receivables at an amount equals to lifetime ECLs, which is calculated using a provision matrix. As the Company's historical credit loss experience does not indicate significantly different loss patterns for different customer segments, the loss allowance based on past due status is not further distinguished between the Company's different customer bases.

 

The following table provides information about the Company's exposure to credit risk and ECLs for trade receivables at the end of the reporting period:

 

	2020						2019
	Expected  loss rate		Gross carrying amount		Loss allowance		Expected  loss rate		Gross carrying amount		Loss allowance
	%		£		£		%		£		£
0 to 90 days	-		470,672		-		-		717,632		-
91 to 365 days	-		88,190		-		-		77,980		-
Over 365 days	87		76,069		66,024		98		62,980		61,806
			634,931		66,024				858,592		61,806

 

Expected loss rates are based on actual loss experience over the past 3 years. These rates are adjusted to reflect differences between economic conditions during the periods over which the historic data has been collected, current conditions and the Company's view of economic conditions over the expected lives of the receivables.

 

Other receivables

 

The amount of £406,007 (2019: £271,869) in other receivable is interest-free, repayable on demand and due from Mr. Stephen Sin Mo KOO, a Director of the Company.

 

No loss allowance was recognised in profit or loss during the years ended 31 March 2020 and 2019.

 

 

 

 

21.       CONTRACT ASSETS

 

	2020		2019
	£		£
Supply, design and installation of closed circuit television and surveillance systems services	6,243,276		3,576,824

 

The contract assets primarily relate to the Company's right to consideration for work completed and not billed because the rights are conditioned on the Company's future performance in achieving specified milestones at the reporting date on the comprehensive architectural services. The contract assets are transferred to trade receivables when the rights become unconditional. The Company typically transfer contract assets to trade receivables upon achieving the specified milestones in the contracts.

 

There was no retention monies held by customers for contract works performed at the end of each reporting period. The Company classifies these contract assets as current because the Company expects to realise them in its normal operating cycle.

 

The Company makes specific provision for contract assets whose credit risk are considered significantly increased or identified as credit-impaired. For remaining balance of contract assets, the Company makes general provision based on ageing analysis and project status.

 

As at 31 March 2020, the gross amount of contract assets was £6,344,943 (2019: £3,671,998) and the provision of impairment was £101,667 (2019: £95,174).

 

The following table provides information about the Company's exposure to credit risk and ECLs for contract assets at the end of the reporting period:

 

	2020						2019
	Expected  loss rate		Gross carrying amount		Loss allowance		Expected  loss rate		Gross carrying amount		Loss allowance
	%		£		£		%		£		£
Within 3 years	-		6,243,276		-		-		3,576,824		-
Over 3 years	100		101,667		101,667		100		95,174		95,174
			6,344,943		101,667				3,671,998		95,174

 

No loss allowance was recognised in profit or loss during the years ended 31 March 2020 and 2019.

 

 

22.      CASH AND BANK BALANCES

 

(a)        Cash and cash equivalents

 

	2020		2019
	£		£
Cash at bank and in hand	679,186		1,312,211
Deposits with banks	301,052		437,845
	980,238		1,750,056
Less: restricted cash	(301,052	)	(437,845	)
Cash and cash equivalents in the statement of cash flows	679,186		1,312,211

 

(b)        Cash and bank balances are denominated in the following currencies:

 

	2020		2019
	£		£
Hong Kong dollar	970,936		1,650,769
Renminbi	5,904		62,100
United States dollar	2,544		35,792
Others	854		1,395

 

(c)        Restricted cash

 

At 31 March 2020, bank balance of £301,052 (2019: £437,845) is restricted as bank deposits with maturities less than three months. Such restricted bank balances were held for the purpose of the issuance of performance bonds in respect of maintenance contracts undertaken by the Company.

 

The effective interest rate on bank deposits ranged from 0.2% to 2.7% (2019: 0.2% to 1.33%) per annum.

 

 

23.       TRADE AND OTHER PAYABLES

 

	2020		2019
	£		£
Current liabilities
Trade payables	1,206,558		103,756
Bills payable	1,272,863		1,102,173
Due to related parties (Note 29)	-		45,746
Accruals and other payables	1,345,338		1,269,447
	3,824,759		2,521,122
Non-current liabilities
Due to a related company (Note 29)	437,500		409,556
	4,262,259		2,930,678

 

Trade and other payables are expected to be repaid within one year, other than the amount due to a related company.

 

Bills payable carry interest at annual rate at the Hong Kong Best Lending Rate and are repayable within 90 days.

 

 

24.       CONTRACT LIABILITIES

 

	2020		2019
	£		£
Supply, design and installation of closed circuit television and surveillance systems services	1,316,446		956,616

 

Contract liabilities represent the Company's obligation to transfer performance obligation to customers for which the Group has received considerations from the customers.

 

Revenue recognised during the year ended 31 March 2020 that was included in the contract liabilities at the beginning of the year was amounted to £956,616 (2019: £1,429,172).

 

 

25.       LEASE LIABILITIES

 

            The following table shows the remaining contractual maturities of the Company's lease liabilities at the end of the reporting period and the date of transition to IFRS 16.

 

	Present value of				Minimum
	minimum lease payments				lease payments
	31 March 2020		1 April 2019		31 March 2020		1 April 2019
	£		£		£		£
Within one year	213,288		157,201		222,031		167,918
In the second to fifth year	70,877		123,291		72,444		125,939
	284,165		280,492		294,475		293,857
Less: Future finance charges					(10,310	)	(13,365	)
Present value of lease obligation					284,165		280,492

 

The Company has initially applied IFRS 16 using the modified retrospective approach and adjusted the opening balances at 1 April 2019 to recognise lease liabilities relating to leases which were previously classified as operating leases under IAS 17.

 

 

26.       BANK BORROWINGS

 

	2020		2019
	£		£
Revolving loans	682,486		-

 

The loans are denominated in Hong Kong dollar and carry interest at annual rate at 1.5% over Hong Kong Interbank Offered Rate.

 

Details of securities are disclosed in note 32 to the financial statements.

 

 

27.       SHARE CAPITAL

 

	2020		2019
	£		£
Issued and fully paid:
383,677,323 ordinary shares of HK$55,033,572, translated at historical rate	3,890,257		3,890,257

 

The Company has one class of ordinary shares which has no par value.

 

 

28.       EMPLOYEE RETIREMENT BENEFITS

 

The Company operates a Mandatory Provident Fund scheme (the "MPF scheme") under the Hong Kong Mandatory Provident Fund Schemes Ordinance for employees employed under the jurisdiction of the Hong Kong Employment Ordinance. The MPF scheme is a defined contribution retirement scheme administered by independent trustees. Under the MPF scheme, the Company and its employees are each required to make contributions to the scheme at 5% of the employees' relevant income, subject to a cap of monthly relevant income of HK$30,000. Contributions to the MPF scheme vest immediately.

 

Saved as set out above, the Company has no other material obligations to make payments in respect of retirement benefits of the employees. 

 

 

29.       RELATED PARTY TRANSACTIONS

 

Compensation of key management personnel

 

The remuneration of the key management personnel of the Company during the year was as follows:

 

	2020		2019
	£		£
Salaries, bonus and allowances	560,115		414,908

 

The remuneration of key management personnel comprises the remuneration of Executive Directors and key executives.

 

Executive Directors include the Executive Chairman, Chief Executive Officer and Finance Director of the Company.  The remuneration of the Executive Directors is determined by the Remuneration Committee having regard to the performance of individuals, the overall performance of the Company and market trends. Further information about the Remuneration Committee and the Directors' remuneration is provided in the Remuneration Report and the Report on Corporate Governance to the Annual Report and note 11 to the financial statements.

 

Key executives include the Director of Operations, Software Development Manager and Sales Manager of the Company.  The remuneration of the key executives is determined by the Executive Directors annually having regard to the performance of individuals and market trends.

 

Biographical information on key management personnel is disclosed in the Directors' and Senior Management's Biographies section of the Annual Report.

 

Transactions with related parties

 

(a)        At 31 March 2020, there are balances of £406,007 (2019: £271,869) and £Nil (2019: £45,746) due from and due to Mr. Stephen Sin Mo KOO respectively, a Director of the Company, which are unsecured, interest-free and repayable on demand (Notes 20 and 23).

 

(b)        At 31 March 2020, there is a payable balance of £437,500 (2019: £409,556) due to a shareholder, Univision Holdings Limited, which is unsecured, interest-free and repayable after 12 months (Note 23).

 

(c)        At 31 March 2020, there are receivable balances of £3,157,799 (2019: £3,322,882) due from related companies controlled by common shareholders of the Company, which are guaranteed by a shareholder of the Company, interest-free and repayable in September 2021.

 

Apart from the transactions disclosed above and elsewhere in these financial statements, the Company had no other material transactions with related parties during the year.

 

 

30.       CASH FLOWS FROM LIABILITIES ARISING FROM FINANCING ACTIVITIES

 

The table below details changes in the Company's liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are liabilities for which cash flows were, or future cash flows will be, classified in the Company's statement of cash flows as cash flows arising from financing activities.

 

	Amount due toa related company		Bank borrowings		Lease liabilities		Total
	£		£		£		£
At 1 April 2018	108,617		-		-		108,617
Financing cash flows:
Advances from a related company	290,444		-		-		290,444
Other changes:
Foreign translation difference	10,495		-		-		10,495
At 31 March 2019	409,556		-		-		409,556
Impact of initial application of IFRS 16 (Note 3(c))	-		-		280,492		280,492
At 1 April 2019	409,556		-		280,492		690,048
Financing cash flows:
New bank loans	-		659,606		-		659,606
Interest paid	-		(21,205	)	-		(21,205	)
Capital element of lease liabilities paid	-		-		(172,201	)	(172,201	)
Interest element of lease liabilities paid	-		-		(12,537	)	(12,537	)
Other changes:
New leases	-		-		157,254		157,254
Interest on lease liabilities	-		-		12,537		12,537
Interest expense on bank borrowings	-		21,205		-		21,205
Foreign translation difference	27,944		22,880		18,620		69,444
At 31 March 2020	437,500		682,486		284,165		1,404,151

 

Amounts included in the statement of cash flows for cash outflows for leases comprise the following:

           

	2020		2019
	£		£
Within:
Operating cash flows	54,411		187,090
Financing cash flows	184,738		-
	239,149		187,090

 

These amounts relate to the following:

           

	2020		2019
	£		£
Lease rentals paid	239,149		187,090

 

 

31.       COMMITMENTS

 

(a)        Capital commitments

 

At 31 March 2020, the Company did not have any material outstanding capital commitments.

 

(b)        Operating lease commitments

 

At 31 March 2019, the Company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

 

			£
Within one year			211,546
Between two to five years			125,939
			337,485

 

The Company is the lessee in respect of its office and warehouse premises held under leases for a term of 1 to 2 years with fixed monthly rentals, which were previously classified as operating leases under IAS 17. The Company has initially applied IFRS 16 using the modified retrospective approach. Under this approach, the Company adjusted the opening balances at 1 April 2019 to recognise lease liabilities relating to these leases (Note 3(c)). From 1 April 2019 onwards, future lease payments are recognised as lease liabilities in the statement of financial position in accordance with the policies set out in note 4.10 to the financial statements, and the details regarding the Company's future lease payments are disclosed in note 25 to the financial statements.

 

 

32.       BANKING FACILITIES

 

At 31 March 2020, the banking facilities of the Company were as follows:

 

(a)        The revolving trade financing facilities amounted to £2,187,500 (equivalent to HK$21,000,000) and carried annual interest at the Hong Kong Dollars Best Lending Rate with a repayment term of 90 days. The facilities are subject to the fulfilment of certain covenants relating to the Company's net worth and the loans to its related parties.  If the Company is in breach of the covenants, the facilities would become payable on demand.  At 31 March 2020, the facilities were utilised to the extent of £1,272,863 (2019 : £1,102,173).

 

(b)        The revolving term facilities amounted to £2,604,167 (equivalent to HK$25,000,000) were secured by floating charges over the bills receivable from the Company's major customer. At 31 March 2020, no facilities were utilised.

 

(c)        The revolving loans facilities amounted to £682,486 (equivalent to HK$6,551,867) were secured by the life insurance policy of the Company (Note 18). At 31 March 2020, these facilities were fully utilised.

 

(d)        The bonding line facilities amounted to £2,083,333 (equivalent to HK$20,000,000) were secured by a charge over deposits limited to £625,000 (equivalent to HK$6,000,000) granted by the Company. At 31 March 2020, no facilities were utilised.

 

(e)        The banking facilities for issuance of letter of credit and guarantee amounted to £301,052 (equivalent to HK$2,890,100) were secured by a charge over a fixed deposit of £301,052 (equivalent to HK$2,890,100) granted by the Company. At 31 March 2020, no facilities were utilised.

 

The Company regularly monitors its compliance with these covenants.  Further details of the Company's management of liquidity risk are set out in note 6(b)(iii) to the financial statements.

 

 

33.       MAJOR NON-CASH TRANSACTION

 

During the year, the final dividend for the year ended 31 March 2019 payable to the shareholder, Mr. Stephen Sin Mo KOO, of £145,338 was set-off against with other receivables.

 

 

34.       EVENTS AFTER THE REPORTING PERIOD

 

On 21 August 2020, the Board of Directors proposed a final dividend for the year ended 31 March 2020. Further details are disclosed in note 15(i) to the financial statements.

 

In mid of April 2020, HSBC has increased the Company's trade facilities from HK$21m to HK$26m.

 

On 7 April 2020 and 16 June 2020, a charge over a fixed deposit of HK$2,890,100 placed at Bank of China (Hong Kong) Limited and a charge over deposits limited to HK$6,000,000 placed at HSBC were released respectively.

 

~ ENDS ~