30 December 2021

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 (as in force in the United Kingdom pursuant to the European Union (Withdrawal) Act 2018).  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 2021

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 2021. 

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

Nick Emerson

 CHAIRMAN'S STATEMENT

INTRODUCTION

Though the Company is not engaged in an industry seriously affected by COVID-19, the pandemic together with other factors described below have caused delays to projects and held up billing to customers and respective certifications. The Board remains cautious about the Group's business in the second half of the financial year. 

THE MAJOR CONTRACT WITH MTRC

The major contract with Mass Transit Railway Corporation ("MTRC") was awarded May 2017 and had an initial value of HK$389.4m. Under the contract, the Group provides replacement work on Closed-Circuit Television (CCTV) systems and installs a unified IP-based, digital CCTV system for numerous railway lines in Hong Kong. With further agreed orders of HK$100.2m since May 2017, the total value of the Major Contract is now HK$489.7m. Following the additional orders and supplementary agreements added, the Board anticipates that the expected date for completion of contract works is July 2024. 

The contract was in the installation stage during the current financial period. Due to the persistence of the pandemic project progress has been affected. During the period under review, one major sub-contractor who performed the installation works for a railway line, has been in dispute with the Company over the value of certain work. The Company believes the sub-contractor has under-performed tasks, which has caused delays.   

Since the key network equipment for the contract has now changed, the Company is required to purchase a large amount of new equipment from a separate supplier. Cash resources are required to purchase the new equipment, it also requires time and manpower to check with MTRC for matching, replacement and compatibility with the existing equipment. To cope with this challenge, the Company has deployed resources for the outstanding work.

The Company has sourced additional subcontractors to perform the installation works in place of the original installer. The installation work was relatively more labour intensive than originally anticipated. For cost effectiveness, the Company has agreed with MTRC that it can use its resources for the low margin installation works. Nevertheless, the Company also intends to organise its own workforce to perform the project.         

As stated above, the dispute with the one major subcontractor and its unsatisfactory performance has affected the progress of installation works. Further, the change of key network equipment caused additional delays. These factors adversely affected the process of certification and has led to slow billing to MTRC. This is the primary reason for the significant increase in Contract Assets.   

The Company has invoiced, in total, HK$184.5m to MTRC up to 30 September 2021. This leaves a further value of HK$305.2m over the remaining years of the contract, assuming no further additions to the work. The gross valuation of certified works on the Major Contract was HK$212m up to 30 June 2021.

The Hongkong and Shanghai Banking Corporation ("HSBC"), the Group's major bank, has provided a trade finance facility and an invoice discounting/factoring facility. These facilities are crucial to provide additional working capital for delivery of the Major Contract and other sizeable projects. The Board closely monitors the Company's status of working capital.           

FINANCIAL REVIEW

The profit attributable to the equity holders of the Company is approximately £0.14m (H1 2020: £0.39m). In the six months period under review, revenue for the Group increased by 34% to HK$53.5m (H1 2020: HK$39.9m). The increase in revenue was mainly contributed from construction contract income which increased of HK$21.6m to HK$50.5m (H1 2020: $28.9m).

The increase was largely due to numerous jobs completing and associated project income being realised during the reporting period and the installation works carried out for the Major Contract.

Income from the maintenance business fell 68% to HK$2.9m (H1 2020: $8.9m) since the Company ceased to provide maintenance services for the network of CCTV and public address systems on seven railway lines in Hong Kong to MTRC from April 2021. Due to expected timely disputes with MTRC on the final account of last maintenance contract ended 31 December 2020 and the three months' extended contract ended 31 March 2021, an impairment loss for provision for unbilled receivable was made. Total amount of HK$6.8m as presented in the Statement of Comprehensive Income as other loss.

Gross profit margin in the construction business rose from 23% to 30.5%. This was mainly due to numerous jobs completed and recognised project income during the reporting period.

The change of key network equipment for the Major Contract, together with the disputes with a subcontractor for installation works have caused delays in the process of the project and led to slow billing to MTRC for certification. These are the key reasons for significant increase of HK$40.6m on Contract Assets to HK$107.8m (H1 2020: HK$67.2m).

Administration expenses for the period decreased by 7% to HK$7.6m (H1 2020: HK$8.2m). This was mainly caused by effective cost control on rental expenses and repairs and maintenance expenses.

To manage the execution of the Major Contract, the Company has employed professional and technical staff, including a number of system design and networks engineers. The number of staff was 76 as at 30 September 2021 (H1 2020: 78).        

Finance costs increased to HK$827k (2020: HK$378k) as a result of increased adoption of trade finance and creation of new term loans. During the reporting period, the Company raised new term loans from HSBC with amount HK$23.9m of which HK$10m is for financing the deposit placed for a life insurance policy as additional security for the banking facility. The Company is required to pay the principal and interest monthly. The interest payable for trade finance and factoring were charged at the bank's Hong Kong Dollars Best Lending Rate, currently 5% per annum.

The profit attributable to the equity holders of the Company for the period is HK$1.5m (2020 underlying profit: HK$1.8m). Profit before interest and income tax from operations during the period was HK$2.3m (H1 2020: HK$4.2m).

During the period under review, the relative strength of HK$ at the period-end has led to a 2.1% appreciation in the GBP reporting amount in the Statement of Financial Position. It is also the reason for the significant gain of £181k (H1 2020: loss £329k) 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 2020 that were unaffected by exchange rate fluctuations.

BUSINESS REVIEW

Markets

The CCTV surveillance market is growing rapidly with increasing demand for digital and intelligent video products. The Company anticipates more business opportunities in government infrastructure and public security projects. There is also increasing demand for wireless system such as 5G network for video surveillance to enhance public safety and security.

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 is now exploring the opportunity of developing the overseas market by tendering prospective projects. 

The Company now actively participates in other market segments, such as provision of UPS (Uninterrupted Power Supply), to strengthen business growth in the Group.

Business

Under the Major Contract, the Company is a 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.

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 Board always explores and seeks to capture the business opportunity in other business, particularly in the Electrical and Mechanical ("E&M') business.

Customers

MTR Corporation is the Company's largest customer in this financial period with the implementation of the Major Contract. The Company is on the list of Approved Specialist Contractors for Public Works under the category "Video Electronics Installation". As such,  Electrical and Mechanical Services Department ("EMSD"), Hong Kong Police Force ("HKPF") and Correctional Services Department ("CSD") of the Hong Kong Government also provided another source for business income.

In particular, with our successful deployment of Video Analytic System for the first Smart Prison in Hong Kong, the Company would anticipate more business opportunities with "CSD" in other potential projects. 

PROSPECTS

The Government has announced new infrastructure projects including the new railway lines and urban development in northern territories. Those projects will include large scale CCTV systems for safety protection. With our technical expertise and project experience in the security industry, the Company has a competitive advantage to tender these potential projects.

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 2021

UniVision Engineering Limited

Statements of Comprehensive Income (Unaudited)

For the six months ended 30 September 2021

UniVision Engineering Limited

Statements of Financial Position (Unaudited)

As at 30 September 2021

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 2021

Notes to the Interim financial statements for the six months ended 30 September 2021

1.     Basis of preparation

The unaudited interim financial statements for the six months ended 30 September 2021 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 2021, 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 2020, 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 2021 of HK$1.5m (H1 2020: HK$3.8m), and the weighted average of 383,677,323 (H1 2020: 383,677,323) ordinary shares in issue during the period.

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

3.     Interim report

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