29 December 2020

The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014.  Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

UniVision Engineering Limited

("UniVision" or the "Company" or the "Group")

Interim Results

For the Six Months Ended 30 September 2020

UniVision (AIM: UVEL), the Hong Kong based Group whose principal activities are the supply, design, installation and maintenance of closed-circuit television and surveillance systems, and the sale of security related products, is pleased to announce its unaudited interim results for the six months ended 30 September 2020. 

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

Nick Emerson

CHAIRMAN'S STATEMENT

INTRODUCTION

During 2020 Hong Kong, like other countries, has been facing the crisis of the COVID-19 pandemic which has led to unprecedented economic contraction. The impact is much higher than that of anti-amendment of extradition bill crisis in Hong Kong last year. Although the Company is not engaged in the most seriously affected industry, the Company has still experienced a downturn in revenue for the six months ended 30 September 2020, when compared to the same period last year.  Nevertheless, the Board is optimistic about the Group's business and anticipates that the performance should improve in the second half of the financial year. 

THE MAJOR CONTRACT WITH MTRC

The major contract with Mass Transit Railway Corporation ("MTRC") represents the contract awarded in May 2017 with contract sum of HK$389.43m for providing the replacement works of the Closed-Circuit Television (CCTV) systems by a unified IP-based, digital CCTV systems for numerous railway lines in Hong Kong ("Major Contract"). With further agreed orders of HK$84m, the total value of the Major Contract is HK$473.4m. The expected date for completion of base contract works is November 2023. 

The contract was, and remains, in the installation stage during the current financial period. During the period under review, the Major Contract was relatively more labour intensive when compared with last year resulting in a lower margin.   

The Company is the main contractor for the Major Contract. Major suppliers have offered long credit period for the equipment. The Company has sourced a few more subcontractors for performing the installation works for cost effectiveness.

The Company has invoiced, in total, HK$144m to MTRC up to 30 September 2020. This leaves a further value of HK$329m over the remaining years of the contract, assuming no further additions to this work. The gross valuation of certified works on the Major Contract was HK$191.8m up to 30 September 2020. The Work from Home policy, due to the pandemic, has caused some delay in the process of certification and has led to slow billing to MTRC. This is the primary reason for increase in Contract Assets.   

HSBC, the Group's major banker, has provided a trade facility HK$26m after the latest review. The invoice discounting/factoring facility is provided up to HK$15m. These facilities provide additional working capital for performance of the Major Contract. The Board closely monitors the status of working capital for this project.           

FINANCIAL REVIEW

The profit attributable to the equity holders of the Company is approximately £0.4m (2019: £0.21m).

In the six months period under review, revenue for the Group decreased by 19.3% to HK$39.9m (H1 2019: HK$49.5m). The decrease in construction revenue was mainly due to the income decreased of HK$22m to HK$13m (H1 2019: $33m) for the Major Contract due primarily to the delay of the Project for the installation of key equipment.

Revenue for the Group's maintenance business recorded a growth of 23% to HK$8.96m (H1 2019: HK$7.27m). The Group currently provides maintenance services to MTRC's network of CCTV systems and public address systems on seven railway lines in Hong Kong. The revenue for this contract was relatively stable at HK$3.9m which represented over 44% in the segment for the period.

Gross profit margin in the maintenance business rose from 29% to 32%. This was mainly due to a decrease in replacement of equipment and change of main sub-contractor. The gross margin of the Group's construction business was increased by 4% to 23% (2019: 19%) for the period. 

Administration expenses for the period increased by 5.8% to HK$8.2m (H1 2019: HK$7.8m). This was caused by the increased headcount and associated personnel expenses (salaries, staff benefit and provident fund contribution), rental expenses, repairs and maintenance expenses and electricity charges.

To manage the execution of the Major Contract, the Company has recruited more professional and technical staff, including a number of system design and networks engineers. The number of staff has increased to 78 as at 30 September 2020 (H1 2019: 76). Also, one more unit at the same building was rented for office use from January 2020 that increased the operating cost.        

Finance costs was decreased to HK$378k (2019: HK$461k) after the Company adopted more effective treasury measures to monitor the using of banking facilities. The interest for trade finance and factoring were charged at the bank's Hong Kong Dollars Best Lending Rate, currently at 5% per annum. The Company required paying loan interest monthly for the long term revolving loan of HK$6.6m for financing the life insurance plan.    

The profit attributable to the equity holders of the Company for the period is HK$3.8m. The underlying profit is HK$1.8m (2019: HK$1.7m) which excluded other income HK$50K from Construction Industry "Anti-Epidemic Fund", Hong Kong Government Employment Support HK$1.9m for the month of June to Aug 2020 and HK$20K subsidy from Transport Department (2019: HK$1.7m). These amounts represent part of the anti-epidemic relief of Hong Kong Government. Profit before interest and income tax from operations during the period was HK$4.2m (H1 2019: HK$2.2m).

The Government's "Work from Home" policy due to outbreak of the COVID-19 pandemic has caused delays in the process of certification and led to slow billing to MTRC and the Hong Kong Government. This is the reason for increase of HK$24m on Contract Assets to HK$67.2m (H1 2019: HK$43.2m).

During the period under review, the relative weakness of HK$ at the period-end has led to a 3.9% depreciation in the GBP reporting amount in the Statement of Financial Position. It is also the reason for the significant loss of £329k (H1 2019: gain £504k) on exchange differences arising on the translation. All figures in GBP in the Financial Statements have therefore needed to be adjusted for comparative purposes. The financial data is also presented in HK$ to provide a comparison with the comparative figures in 2019 that were unaffected by exchange rate fluctuations.

BUSINESS REVIEW

Markets

The increasing demand for wireless network infrastructure (such as IP and 5G) and the drive to enhance safety and security are the key growth drivers for the video surveillance system market. The protests in Hong Kong last year had also increased the demand on infrastructure protection and public security. Digital cameras and computer vision software applications are channelled to detect and highlight undesirable behaviour.

The Board believes that the Major Contract should allow UniVision to market its brand to the customers of similar systems outside Hong Kong. The Group has formed a new subsidiary in September 2020 to explore the opportunity of developing the overseas market by tendering prospective projects. Also, the Board is considering setting up a branch or office in U.K. to expand its core business during 2021.   

The Company now actively participates in other market segments, such as provision of UPS (Uninterrupted Power Supply), to strengthen business growth in the Group. The Supplementary Agreement No. 3 of the Major Contract as announced on 1 September 2020 is a good example of this diversification.

Business

Under the Major Contract, the Company performs as network service provider in the application of CCTV systems. By acquiring skills and training in networking and wireless technology area and software skills for video analytics and facial recognition applications to customisation and localisation for our clients. As the Company has maintained its own team of network professional staff, it is a good position for the Company entering the new business as a provider of network service in the application in other fields to seek new contracts.

The Company keeps moving forward in the CCTV segment and gradually towards the safe city concept by introducing video based analytics to big data AI processing.

The Group continues to explore potential business opportunities in other areas, such as Electrical and Mechanical business ("E&M").

Customers

MTR Corporation is the Company's largest customer in this financial period with the implementation of the Major Contract. Electrical and Mechanical Services Department ("EMSD") of the Hong Kong Government is also a major customer for the Group. The Company is eligible to tender for new government projects as it is on the list of Approved Specialist Contractors for Public Works.

To avoid the concentration of customers, the Company has diversified the base of customers including other public organisations and sizeable private enterprises.

PROSPECTS

The high demand for public security, network and high definition security and surveillance system provides the Group the opportunity for business growth in the coming years.

The Major Contract provides a solid base for the Group over the next few years. With the existing technical and financial resources, the Group has the capacity to tender for new contracts, including, but not limited to, additional major infrastructure projects in Hong Kong and overseas.

Finally, on behalf of the Board, I would like to thank our customers, suppliers, sub-contractors, bankers and shareholders for their continued support of UniVision. I would also like to express my gratitude to the management team and all staff for their continued support, contribution and dedication to the Group.

MR. STEPHEN SIN MO KOO

EXECUTIVE CHAIRMAN

29 December 2020

UniVision Engineering Limited

Statements of Comprehensive Income (Unaudited)

For the six months ended 30 September 2020

UniVision Engineering Limited

Statements of Financial Position (Unaudited)

As at 30 September 2020

UniVision Engineering Limited

Statements of Changes in Equity (Unaudited)

in ￡'000

UniVision Engineering Limited

Statements of Changes in Equity (Un-audited)

in HK$'000

UniVision Engineering Limited

Statements of Cash Flows (Un-audited)

For the six months ended 30 September 2020

UniVision Engineering Limited

Statements of Cash Flows (Un-audited)(continued)

For the six months ended 30 September 2020

Notes to the Interim financial statements for the six months ended 30 September 2020

1.     Basis of preparation

The unaudited interim financial statements for the six months ended 30 September 2020 have been prepared in accordance with International Financial Reporting Standards ("IFRSs") using the policies consistent with those applied to the annual financial statements for the year ended 31 March 2020, except for the adoption of the new and revised IFRSs (which include all IFRSs, International Accounting Standards ("IASs") and Interpretations) that are initially adopted for the current period financial statements. The interim financial statements, together with the comparative information contained in this report for the six months ended 30 September 2019, do not constitute the statutory accounts of the Company. 

2.     Earnings per share

The calculation of basic earnings per ordinary share is based on the profit attributable to equity holders of the Group for the six months ended 30 September 2020 of HK$3.8m (H1 2019: HK$1.7m), and the weighted average of 383,677,323 (H1 2019: 383,677,323) ordinary shares in issue during the period.

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

3.  Event after the reporting period

On 22 December 2020, the Company announced that it had received notification of a claim from Dimension Data China/Hong Kong Limited ("DDCHKL"), one of its suppliers, in the High Court in Hong Kong alleging breach of contract by the Company and claiming the damages for the same.

The Company has been advised that the claim is fully defensible and the Company intends to defend it in full. The Company has further been advised that it has a cross claim against DDCHKL, inter alia, for breach of the contract and/or negligence and/or misrepresentation and it intends accordingly to claim damages for the same.  

The Board is satisfied that the Company is well able to meet the claim should this be necessary but, in the light of the advice it has been given, it does not consider that the claim has any foundation. 

4.     Interim report

Copies of the interim report will be available for inspection at the registered office of the Company, Unit 201, 2/F., Sunbeam Centre, 27 Shing Yip Street, Kwun Tong, Hong Kong and available on the Company's website (www.uvel.com) in accordance with Rule 26 of the AIM Rules for Companies.