Half Yearly Report

RNS Number : 6585Y

UniVision Engineering Ltd

30 December 2010

 



30 December 2010

UniVision Engineering Limited

("UniVision" or the "Group")

Interim Results

For the Six Months Ended 30 September 2010

UniVision, the Hong Kong based Group whose principal activities are the supply, design, installation and maintenance of closed circuit television and surveillance systems, and the sale of security related products, is pleased to today announce its unaudited interim results for the six months ended 30 September 2010. 

Highlights

·     Revenue decreased by 14% to HK$38m (H1 2009: HK$44m)

·     Operating profit decreased by 51% to HK$3.3m (H1 2009: HK$6.8m)

·     Loss attributable to owners of the Company at HK$0.6m (H1 2009: profit of HK$2.8m)

·     Basic loss per share HK$0.0015 (H1 2009: earnings per share of HK$0.007)

·     Gross profit margin decreased to 37.6% ((H1 2009: 40.1%)

·     Cash and cash equivalents at 30 September 2010 of HK$8.6m (30 September 2009: HK$5.6m)

Mr. Stephen Sin Mo KOO, Executive Chairman, added:

"Our performance has been affected as a result of the exclusion of Leader Smart Engineering (Shanghai) Limited, the Group's wholly owned subsidiary in the People's Republic of China, from these results. Now that the litigation has been concluded, the Board are confident of being able to re-consolidate Leader Smart Shanghai's accounts into the Group's annual accounts for the 12 months ended 31 March 2011.

The Group remains confident it will maintain a competitive advantage in the second half of the year in its core CCTV and surveillance business as a result of a number of infrastructure projects in the pipeline. We are also confident of achieving growth through our Electrical and Mechanical ("E&M") business."

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

UniVision Engineering Limited Stephen Sin Mo KOO, Executive Chairman Chun Hung WONG, Chief Executive Officer Danny Kwok Fai YIP, Finance Director	[phone]
Allenby Capital Limited (Nominated Adviser/Joint Broker) Nick Athanas/James Reeve	[phone]
SVS Securities plc (Joint Broker) Ian Callaway/Alex Mattey	[phone]

Chairman's Statement

I am pleased to report on the results of the Group for the six months ended 30 September 2010.

Financial Review

During the six month period revenues for the Group decreased by 14% to HK$38m (H1 2009: HK$44m). The decline in revenue was mainly due to the highly competitive environment in the Group's surveillance business. Operations in both Hong Kong and Taiwan have faced increased competition in job tendering that has led to a lower successful bidding rate for new projects and also reduced the profit margins.

Furthermore, the results in the period have been impacted by litigation proceedings which have resulted in the de-consolidation of Leader Smart Engineering (Shanghai) Limited ("Leader Smart Shanghai"), the Group's wholly-owned subsidiary in the People's Republic of China ("PRC"), from these interim accounts. As initially announced on 16 July 2010 the Group has, in the period under review, been involved in litigation proceedings with Mr June Ming Ip ("Mr Ip"), a former director and legal representative of Leader Smart Shanghai. Following the final verdict being issued in favour of the Group in August 2010 the Company applied for, and successfully obtained, all of Leader Smart Shanghai's chops, business licences and the legal representative's chop. Also, the legal representative of Leader Smart Shanghai has been changed from Mr. Ip to me. These indicate that the Group has re-gained the control over Leader Smart Shanghai. Nevertheless, we are not in a position to re-consolidate the accounts of Leader Smart Shanghai into these interim results since the accounting records of Leader Smart have not as yet been returned to the Group. Our legal attorney has issued a final notice to Mr Ip and the former finance manager of Leader Smart for the surrender of these accounting records to the Group. We are confident that we will be able to re-consolidate the accounts of Leader Smart Shanghai into the Group's annual accounts for the year ending 31 March 2011.    

Consequently, the turnover and profits of Leader Smart Shanghai are not shown in the Group's financials in the six month period ended 30 September 2010 due to the de-consolidation of Leader Smart from the Group's accounts.

Operating profit during the period decreased by 51% to HK$3.3m (H1 2009: HK$6.8m), whilst the Group recorded a loss attributable to the equity holders of the parent of HK$0.6m (H1 2009: profit of HK$2.8m). The loss in the period under review can be mainly attributable to the exclusion of Leader Smart Shanghai from the Group's accounts, unfavourable economic conditions in the regions which the Group operates in and the impact of increased competition. We remain optimistic on the ability of the Group to successfully tackle the increased market competition due to our proven track records of working on large projects, our experienced engineering and technical team, and the reliability of our systems, products and services.

During the period under review the financing costs for the Group's Zhongshan shopping mall project have also impacted the Group's profits. The US$6m loan from Mayne Management Limited, the Group's major shareholder, is exclusively to finance the above project for which Leader Smart Shanghai is the main contractor responsible for interior design and installation. The Group has recognised the financial liability in these interim accounts but the asset (amounts due from construction contract customers) has been deconsolidated from the accounts for the reasons detailed above.

The Group generated net positive cash flow from its operating activities in the period and maintained cash and cash equivalents at 30 September 2010 of HK$8.6m (30 September 2009: HK$5.6m).

During the period under review, the relative strengthening in the HK$ against GBP has led to a 3% appreciation in the GBP reporting amount in the consolidated income statement and a 0.85% appreciation in the consolidated balance sheet. All figures in GBP in the financial statements need to be adjusted for comparative purposes. The financial data is also presented in HK$ to provide a comparison with the comparative figures in 2009 that were unaffected by exchange rate fluctuations.

Business Review

Markets

IMS Research, a leading supplier of market research for the electronics industry, updated its assessment of the market for CCTV and video surveillance equipment in China in its published report in July 2010 entitled "The China market for CCTV and Video Surveillance Equipment - 2010 edition". It predicted that the Chinese CCTV and video surveillance market was expected to exceed 20% revenue growth in 2010 and be the solid core of the recovering global video surveillance equipment market. The market is forecast by IMS Research to grow at a compound annual growth rate of 20.2% between 2010 and 2014 and be worth an estimated $3.5 billion in 2014 - a substantial portion of the global market. The report also highlighted that network video surveillance products are growing more quickly than analogue video surveillance products. The Board of UniVision are of the same view that IP Video will be an increasing market trend as we receive increasing demand from customers for IP video solutions. The Group is working with a number of different solutions, including video compression technology, digital encoder and decoders with a built-in video analysis algorithm, as well as video management platforms.

The property linked Electrical and Mechanical ("E&M") business in the PRC remains our primary target for future growth. We are positive with regards to the prospects for the property market in PRC as well as the expected appreciation of the RMB.

Due to the lack of available capital, no further E&M contracts are currently being undertaken on our Huangshan Hotel project. At the Zhongshan shopping mall project, the concrete structure has been completed and the outstanding works to completion are the interior decoration and E&M installation. Our PRC partner on the Zhongshan project, who has rich experience in the commercial property market in PRC, is confident of putting in place a value-added strategy for the development of the shopping mall.

Technologies, Solutions and Products

We are working to identify suitable products for the strong growing market of network video solutions, such as video compression technology, digital encoders and decoders with built-in video analysis algorithms and video management platforms that will provide added value to our existing portfolio of products, in order to cope with the changing market.

Acquisitions and Investments

The Group is currently, in conjunction with a potential partner in the PRC, exploring strategic options with regards to the Group's assets in the PRC with the aim of generating value for shareholders. The partner has considerable expertise in the property market in the PRC which the Board believe will help with the expansion of the Group's E&M business stream in the PRC.

The process of establishing another WOFE (wholly-owned foreign enterprise) in China has been postponed as the Group has faced difficulty in obtaining the necessary approvals due to the tightening of policy and control measures in the PRC. However, we believe that, following re-gaining the control of Leader Smart Shanghai, it would be beneficial to us to establish a further WOFE so that we can concentrate our resources for the business in PRC. We will update shareholders as developments occur in respect of the establishment of WOFEs.

Prospects

Our Security and Surveillance System business remains stable. In the period under review we have been involved at the tendering stage of infrastructure projects and we anticipate being involved with further tenders in the short term. We are continuing to look to develop new technologies and solutions to cope with these opportunities.

The E&M business in the PRC still remains our growth target market. We continue to assess potential opportunities of obtaining funding to allow the Group to expand in the E&M marketplace in the PRC.

On behalf of the Board, I would like to thank our customers, suppliers and shareholders for their continued support of UniVision. I would also like to acknowledge the hard work of the management and all the staff for their contribution and dedication to the Group.

MR. STEPHEN SIN MO KOO

EXECUTIVE CHAIRMAN

29 December 2010

Consolidated Income Statement (Unaudited)
For the six months ended 30 September 2010
			For the six months ended 30 September
			2010	2009	2010		2009
			HK$000	HK$000	￡'000		￡'000
Revenue			37,741	44,408	3,179		3,628
Cost of sales			(23,544)	(26,589)	(1,983)		(2,172)
Gross profit			14,197	17,819	1,196		1,456
Other income			845	145	7		12
Selling and distribution expenses			(536)	(577)	(45)		(47)
Administrative expenses			(10,399)	(10,585)	(876)		(865)
Profit from operations			3,346	6,802	282		556
Finance costs			(3,793)	(3,852)	(320)		(315)
(Loss)/profit before income tax			(447)	2,950	(38)		241
Income tax expense			(0)	(484)	(0)		(39)
(Loss)/profit for the period			(447)	2,466	(38)		202
(Loss)/profit attributable to:
Owners of the Company			(557)	2,807	(47)		230
Non-controlling interests			110	(341)	9		(28)
			(447)	2,466	(38)		202
Loss/earnings per ordinary share			HK$	HK$	Pence		Pence
Basic			(0.0015)	0.007	(0.0122)		0.060
Diluted			N/A	N/A	N/A		N/A

Consolidated Statement of Financial Position (Unaudited)
As at 30 September 2010
	As at 30 September
	2010	2009	2010	2009
	HK$000	HK$000	￡'000	￡'000
ASSETS
Non-current assets
Plant and equipment	2,158	3,141	176	254
Goodwill	399	10,125	26	693
Total non-current assets	2,557	13,266	202	947
Current assets
Inventories	13,098	10,857	1,067	877
Amounts due from construction contract customers	25,536	152,959	2,080	12,355
Trade receivables	10,160	24,614	827	1,988
Deposits, prepayments and other receivables	15,859	32,552	1,292	2,630
Tax recoverable	117	273	9	22
Cash and cash equivalents	8,559	5,601	697	452
Total current assets	73,329	226,856	5,972	18,324
Total assets	75,886	240,122	6,174	19,271
Consolidated Statement of Financial Position (Unaudited) (Continued)
As at 30 September 2010
	As at 30 September
	2010	2009	2010	2009
	HK$000	HK$000	￡'000	￡'000
LIABILITIES AND EQUITY
Current liabilities
Amounts due to construction contract customers	16,286	11,095	1,326	896
Bank loans	12,362	11,764	1,007	951
Loan from a related company	46,800	46,800	3,812	3,780
Trade and other payables	24,860	49,038	2,025	3,960
Tax payable	127	13,976	10	1,129
Obligation under finance lease	47	47	4	4
Total current liabilities	100,482	132,720	8,184	10,720
Non-current liabilities
Obligation under finance lease	36	83	3	7
Total liabilities	100,518	132,803	8,187	10,727
Capital and reserves
Share capital	23,980	23,980	1,698	1,698
Share premium	31,054	31,054	2,193	2,193
Special capital reserve	4,188	4,188	299	299
(Accumulated losses)/retained earnings	(86,797)	43,562	(7,772)	2,845
Translation reserve	179	2,223	1,344	1,322
	(27,396)	105,007	(2,238)	8,357
Non-controlling interest	2,764	2,312	225	187
Total (capital deficiency)/ equity	(24,632)	107,319	(2,013)	8,544
Total liabilities and equity	75,886	240,122	6,174	19,271

Consolidated Statement of Changes in Equity (Unaudited)
For the six months ended 30 September 2010
					Retained earnings/	Special capital	Special capital			Non- controlling
			Share capital	Share premium	(accumulated losses)	reserve "A"	reserve "B"	Translation Reserve	Sub-total	interest
			￡'000	￡'000	￡'000	￡'000	￡'000	￡'000	￡'000	￡'000	￡'000
Balance at 1 April 2009			1,698	2,193	2,615	156	143	2,173	8,978	232	9,210
Net profit for the six months ended 30 September 2009			-	-	230	-	-	-	230	(28)	202
Effect of translation			-	-	-	-	-	(851)	(851)	(17)	(868)
Balance at 30 September 2009			1,698	2,193	2,845	156	143	1,322	8,357	187	8,544
Net loss for the six months ended 31 March 2010			-	-	(10,570)	-	-	-	(10,570)	21	(10,549)
Release of translation reserve upon deconsolidation								(87)	(87)	-	(87)
Effect of translation			-	-	-	-	-	23	23	16	39
Balance at 31 March 2010			1,698	2,193	(7,725)	156	143	1,258	(2,277)	224	(2,053)
Net loss for the six months ended 30 September 2010			-	-	(47)	-	-	-	(47)	9	(38)
Effect of translation			-	-	-	-	-	86	86	(8)	78
Balance at 30 September 2010			1,698	2,193	(7,772)	156	143	1,344	(2,238)	225	(2,013)

Consolidated Statement of Changes in Equity (Unaudited)
For the six months ended 30 September 2010
					Retained earnings/	Special capital	Special capital			Non- controlling
			Share capital	Share premium	(accumulated losses)	reserve "A"	reserve "B"	Translation Reserve	Sub-total	interest	Total equity
			HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000
Balance at 1 April 2009			23,980	31,054	40,755	2,117	2,071	1,616	101,593	2,565	104,158
Net profit for the six months ended 30 September 2009			-	-	2,807	-	-	-	2,807	(341)	2,466
Effect of translation			-	-	-	-	-	607	607	88	695
Balance at 30 September 2009			23,980	31,054	43,562	2,117	2,071	2,223	105,007	2,312	107,319
Net loss for the six months ended 31 March 2010			-	-	(129,802)	-	-	-	(129,802)	249	(129,553)
Release of translation reserve upon deconsolidation								(1,066)	(1,066)	-	(1,066)
Effect of translation			-	-	-	-	-	(704)	(704)	59	(645)
Balance at 31 March 2010			23,980	31,054	(86,240)	2,117	2,071	453	(26,565)	2,620	(23,945)
Net loss for the six months ended 30 September 2010			-	-	(557)	-	-	-	(557)	110	(447)
Effect of translation			-	-	-	-	-	(274)	(274)	34	(240)
Balance at 30 September 2010			23,980	31,054	(86,797)	2,117	2,071	179	(27,396)	2,764	(24,632)

Consolidated Cash Flow Statement (Unaudited)
For the six months ended 30 September 2010 For the six months ended 30 September 2010 2009 2010 2009 CASH FLOW FROM OPERATING ACTIVITIES HK$000 HK$000 £'000 £'000 Loss/(profit) before income tax (447) 2,950 (38) 241 Adjustments for: Depreciation 233 390 20 32 Loss on disposal of plant and equipment 28 - 2 - Interest income (2) (2) - (1) Interest expenses 3,793 3,852　 320 316 Operating cash generated before working capital changes 3,605 7,190 304 588 (Increase)/decrease in inventories (1,784) 736 (145) 59 Decrease/(increase) in trade receivables 1,132 (4,066) 92 (328) Decrease/(increase) in amounts due from construction contract customers 772 (1,761) 63 (142) (Increase)/decrease in deposits, prepayments and other receivables (1,941) 297 (158) 24 Increase in tax recoverable - (175) - (14) Increase/ (decrease) in amounts due to construction contract customers 2,188 (4,233) 178 (342) (Decrease)/increase in trade and other payables (Decrease)/increase in tax payable (3,680) (96) 3,885 3,312 (300) (8) 314 267 Net cash generated from/(used in) operations 196 5,185 26 426 Income tax paid (20)　 -　 (2)　 -　 Net cash generated from/(used in) operating activities 176 5,185 24 426 Consolidated Cash Flow Statement (Unaudited) (Continued) For the six months ended 30 September 2010 For the six months ended 30 September ) 2010 2009 2010 2009 HK$000 HK$000 £'000 £'000 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of plant and equipment (59) (1) (5) - Proceeds from disposal of plant and equipment - 10 - 1 Interest received 2 2 - - Decrease/(increase) in pledged bank deposits -　 4,324　 - 349 Net cash generated from/(used in) investing activities (57) 4,335 (5) 350 CASH FLOWS FROM FINANCING ACTIVITIES Interest paid (278) (337) (24) (31) (Repayment of)/proceeds from interest-bearing borrowings (1,312) (2,731) (107) (220) Capital element of finance lease rentals paid (24) (24) (2) (2) Interest element of finance lease rentals paid (5) (5) - (1) Net cash (used in)/generated from financing activities (1,619) (3,097) (133) (254) NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (1,500) 6,423 (114) 522 EFFECT OF CHANGE IN FOREIGN EXCHANGE RATES (293) 306 (73) 32 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 10,352 (1,128) 884 (102) CASH AND CASH EQUIVALENTS AT END OF PERIOD 8,559 5,601 697 452						GBP Rate :14.51

Notes to the Interim financial statements for the six months ended 30 September 2010

1.     Basis of preparation

The unaudited interim financial statements for the six months ended 30 September 2010 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 2010. The interim financial statements, together with the comparative information contained in this report for the six months ended 30 September 2010, does not constitute the statutory accounts of the Company. 

2.     (Loss)/Earnings per share

The calculation of basic loss per ordinary share is based on the loss attributable to equity holders of the Group for the six months ended 30 September 2010 of HK$0.6m (H1 2009: profit of HK$2.8m), and the weighted average of 383,677,323 (H1 2009: 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, 8/F Lever Tech Centre, 69-71 King 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.

 

END

 

 

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