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RNS
UniVision Engineering Ltd   -  UVEL   

Final Results for the year ended 31 March 2019

Released 10:14 05-Sep-2019

RNS Number : 3501L
UniVision Engineering Ltd
05 September 2019
 

RNS ANNOUNCEMENT: The information communicated in this announcement contains inside information for the purposes of Article 7 of Regulation 596/2014.

 

For immediate release: 5 September 2019

 

UniVision Engineering Limited

("UniVision" or the "Company")

 

Final Results for the year ended 31 March 2019

 

UniVision (AIM: UVEL.L), 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, today announces its audited final results for the financial year ended 31 March 2019.

 

The Annual General Meeting will be held at UniVision Engineering Limited, Unit 201, 2/F., Sunbeam Centre, 27 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong, on 30 September 2019 at 5:00 p.m.

 

The full Annual Report and Notice of AGM will shortly be posted to shareholders and be made available on the Company's website, www.uvel.com.

 

Highlights:

 

·      Turnover increased by 154% to £14.2m (2018: £5.6m);

·      Profit before income tax increased by 135% to £1.73m (2018: £735K);

·      Cash flow generated from operations £0.81m (2018: negative £0.36m);

·      Current ratio improved to 2.4 (2018: 1.8);

·      Earnings per share increased 137% to 0.45p (2018: 0.19p); and

·      Proposed final dividend HK0.55 cents (approx. 0.0536 pence) per share.

     (2018: HK0.43 cents).

 

 

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

 

UniVision Engineering Limited

Tel: +852 2389 3256

Stephen Koo, Chairman                                                       

www.uvel.com

Chun Pan Wong, Chief Executive Officer 


Danny Kwok Fai Yip, Finance Director


Nicholas Lyth, Non-Executive Director

Tel: +44 (0)7769 906686

 



SPARK Advisory Partners Limited                                       

(Nominated Adviser)                            

Tel: +44 (0)20 3368 3551  

Mark Brady / Neil Baldwin

www.sparkadvisorypartners.com





SI Capital Limited

(Broker)

Tel:  +44 (0)1483 413500

www.sicapital.co.uk

Nick Emerson


 

 

 



CHAIRMAN'S STATEMENT

 

 

On behalf of the Board of Directors (the "Board"), I am delighted to report that profit before tax has increased by 135% to £1.73m for the financial year ended 31 March 2019, compared to £0.74m for the last financial year. Earnings per share has also jumped by 137% to 0.45p for this reporting period (2018: 0.19p).

 

The increase in profit was due primarily to the expected significant increase in  revenue of 153% to £14.2m (2018: £5.6m), underpinned by the key, full year contribution from the Replacement of CCTV Systems Project ("the MTRC Contract") awarded by MTR Corporation ("MTRC") of Hong Kong in 2017.

 

As a result of this positive profit contribution presented above, the Company's total equity attributable to shareholders stood at £7.92m as at 31 March 2019 (As at 31 March 2018: £5.88m).

 

Given the strength of these results, and in keeping with our recent dividend strategy, the Board has declared a final dividend of 0.55 HK cents per share, representing an increase of 28% for the financial year ended 31 March 2019 (2018: 0.43 HK cents).

 

The current protests against anti-extradition bill in Hong Kong may appear to be a cause for concern and affect current work in progress at certain locations in the past couple of months.  However, the long term effects of these protests may result in more opportunity for the Company as MTRC, Electrical and Mechanical Services Department ("EMSD"), and the Hong Kong Police Force are expected to make additional orders, or look to invest additional funds to provide enhanced security and surveillance, such as installation of additional cameras and also facial recognition technology, to help protect its premises, infrastructure and citizens respectively.

 

Therefore, I am optimistic about future prospects of the Company.

 

In the remainder of this report, I shall go into further details of our order book relating to the MTRC Contract, financial review, business review, and end with prospect statement. 

 

 

THE MAJOR CONTRACT WITH MTRC

 

As announced in May 2017, UniVision was awarded a contract valued at HK$389.4m (£38.1m) from MTRC. The contract provides for the replacement works of the Closed-Circuit Television (CCTV) systems for numerous MTRC railway lines. The Company is responsible for replacing the existing analogue CCTV system installed in the stations along the specified lines by a new Internet Protocol-based, digital CCTV system. With subsequent add-ons amounting to HK$17.9m, the total value of the MTRC Contract now equals to HK$407.3m. The MTRC Contract is expected to be completed by November 2023.

 

Up to the financial year ended 31 March 2019, UniVision has invoiced a total of approximately HK$90m leaving a further order book of HK$317.3m to be billed over the next four and half years. Note that, the MTRC Contract allows for monthly billing on work completed and certified. The MTRC Contract also allows for variation of orders and the Board expects that UniVision may receive additional orders in the next financial period and future.

 

To make the MTRC Contract profitable to our shareholders, the Company is continuously working with its suppliers and sub-contractors to ensure that we get favourable supply and credit terms. The Board also closely monitors UniVision's working capital to be certain that we have adequate financial resources to drive the project to completion.



FINANCIAL REVIEW 

 

Highlights of Profit and Loss Statement are:

 

·      As expected, revenue surged by 154% to £14.2m in the reporting period (2018: £5.6m). This revenue growth mainly came from contributions of construction contracts that increased by 206% as compared with last year. The majority of this significant increase came from the MTRC Replacement of CCTV Systems.

 

·      In the reporting period, other construction contracts include Liangtang Traffic Control and Surveillance System Project, Hong Kong-Zhuhai-Macao Bridge Project, and Central Wanchai Bypass Project also contributed to the increment.

 

·      Other construction contracts, including the installation, relocation, modification and replacement works that provided to MTRC also contributed to significant income, for example, the contract for MTRC Replacement of Network & Time Synchronization System.

 

·      Contribution from maintenance contracts were up by 10%, compared to the year before. The increase in maintenance contracts was mainly due to the wider scope in the services provided in the three-year maintenance contract with MTRC, started on 1 January 2018, which mitigated the effect of the lower revenue for maintenance work on the MTRC's CCTV replacement project.

 

·      The gross profit increased by 76% to £3.2m in the reporting period (2018: £1.8m), however, our gross margin was 22.5% which was lower than that of last reporting period (2018: 32.5%). The main reason for the decrease in gross profit margin was due to more work on lower margin construction contracts, and increases in costs relating to subcontracting charges and additional engineers working directly on construction contracts. The Company is working hard to minimise these cost increases and is working closely with its suppliers to retain its competitive edge.

 

·      Our operating expenses were mainly due to administration expenses. For the year, administrative expenses increased by 31.4% to £1.3m (2018: £0.98m), attributable to increase in staff costs. The number of staff has increased from 56 to 67 during the reporting period.

 

·      As a result of higher gross profit and better control of operating expenses, our profit before tax increased substantially by 135% to £1.73m in the reporting period (2018: £0.73m).

 

·      The Company has unused tax loss to offset the taxable profit for the year, and hence I am delighted to report that the profit attributable to the shareholders of the Company also increased by 135% to £1.73m for the financial year ended 31 March 2019, compared to £0.74m for the last financial year.

 

·      As a result of the surge in profit attributable to shareholders, basic earnings per share jumped by 137% to 0.45p for this reporting financial year (2018: 0.19p).

 

On the Balance Sheet, the highlights are:

 

·      Trade and other receivables decreased to £2.27m as at 31 March 2019, from £4.33m as at 31 March 2018, due to better debt collection from customers

 

·      Cash and cash equivalents stood at £1.75m as at 31 March 2019 (2018: £0.97m), representing an increase of £0.78m

 

·      Total equity attributable to shareholders stood at £7.92m as at 31 March 2019 (As at 31 March 2018: £5.88m), or an increase of £2.04m

 

 

On the Cash Flow, the highlights are:

 

·      The Company generated positive cash flow from operations of £0.81m in the reporting period (2018: negative £0.36m)

 

·      The Board attributes this to closer monitoring and effective control of working capital and more efficient use of our banking facilities.

 

·      There were no significant capital investments during the reporting year

 

 

During the year under review, a relative strengthening in the HK$ at the year-end has led to a 7% appreciation in the GBP reporting amount in the Statement of Financial Position. It led to the significant non-cash other comprehensive gain of £0.46m (2018: loss £0.78m) on exchange differences arising on translation of foreign operations.

 

All figures in the above require to be adjusted for comparison purposes. All comparative percentages stated in the Chairman's Statement are adjusted to show the underlying change (net of translation effect on foreign exchange).

 

On the strength of these results, the Board has proposed the payment of a final dividend of 0.55 HK cents (gross) per share for the financial year ended 31 March 2019 (2018: 0.43 HK cents), an increase of 28%. Dividend timetable is as follows:

 

Ex date:                                  12 September 2019

Record date:            13 September 2019

Payment date:        10 October 2019

 

Payment of the dividend is subject to the approval by the shareholders at the upcoming Annual General Meeting.

 

 

BUSINESS REVIEW

 

I wish to turn your attention to some of the key takeaways on our addressable market segments, business environment in which we operate, our customer base, and the management go-to-market strategy for the next reporting period.

 

 

Addressable Market Segments

 

According to the Market Research Report by Mordor Intelligence: Video Surveillance System Market-Growth, Trends, and Forecast (2019 - 2024), the global video surveillance system market was valued at USD 40.37 billion in 2018, and is expected to reach a value of USD 95.98 billion by 2024, recording a CAGR of 15.53% over the forecast period (2019 - 2024). So, our addressable market segment should undergo a healthy growth period.

 

The growth of the video surveillance market is expected to be fuelled by the introduction of new IP-based digital technologies, which the Company sees happening around the region, and is currently gaining traction in the Hong Kong market. We see digital cameras and computer vision software applications being channelled to help detect and prevent undesirable behaviour, such as shoplifting, thefts, fraudulent transactions, vandalism, and terror arracks.

 

Globally, the drive to enhance safety and security across different industries is adding significantly to this potential growth. The commercial sector is expected to show the largest market share during the forecast period. Growing focus on infrastructure protection, public safety and increasing demand for high resolution imaging are other key factors driving the market.        

 

The Board regards the increasing demand for networking and wireless infrastructure (such as IP, 4G and 5G) as the key growth driver for the market. The MTRC contract, which entails replacement of analogue cameras with IP-based ones, is an excellent example of this trend.

 

Since the Company has won the MTRC Contract, a logical next step would be adding video analytics, such as facial recognition. This technology is being enhanced rapidly and UniVision is in a very favourable position to participate effectively in this market. To illustrate this point, our new contract for supply and installation of the video analytic monitoring system at Tai Tam Correctional Institution that was awarded in June 2019, is a good example.

 

 

Business Environment

 

The recent protests against anti-extradition bill have seriously affected the business environment in Hong Kong. Violent clashes between radical protestors and police have broken out in recent weeks as I write this report. Doubtlessly, it will have adverse effects on the Hong Kong economy, particularly in the retail and tourism sectors. Politics aside, the ongoing protests do offer a business opportunity for the Company. Violence at MTR stations, police stations, and the airport, as well as against infrastructure, highlights the importance of public safety and security. The demand for upgrades the video surveillance system, such as facial recognition capabilities, is rising. Additional work orders for replacement of damaged CCTV equipment caused by vandalism are also likely to come through in due course.

 

 

Customer base

 

MTRC was the Company's largest customer this financial year, representing 84% of the Company's total revenue. In addition, EMSD and other commercial clients are also parts of our customer base.

 

The MTRC Contract has led to a significant equipment purchase and construction workload, which required UniVision to have adequate working capital, according to the financial assessment conducted by the Hong Kong Government - Works Branch. The technical shortfall in working capital in the 2017 financial test was rectified post the year end. Since UniVision is still in compliance with the technical and management criteria for the retention under the category of Approved Specialist Contractors for Public Works: Video Electronics Installation. UniVision's suspension from tendering for new public works contracts was lifted in May 2019. However, working capital remains our Company's top priority as the business grows.

 

UniVision is currently operating close to full capacity. Nevertheless, UniVision will continue to tender for certain government contracts to diversify our customer base and grow the business where we can make use of sub-contractors where we deem this appropriate.

 

 

Our Strategy

 

Given the above market, business opportunities, and customer base analysis, I see three key future objectives:

 

·      Financial: To deliver the MTRC Contract and other potential large-scale projects profitably, the Company is now seeking suitable subcontracting partner(s) with financial strength. This is to minimise the risks associated with working capital for such sizeable contracts.  The Board considers this outreach both desirable and prudent for the Company's further growth in the market.

 

·      Technology: The Company sees the need to acquire skills and training in networking and wireless technology area and software skills for video analytics and facial recognition applications, to help providing customisation and localisation for our clients. We will also embrace vendors in these technology areas to help us win further contracts.

 

·      People: In facing the high demand for large-scale CCTV replacement projects, the Company will look to strengthen our sales & marketing activities, as well as bringing key project managers with technical skills to help us delivering new contracts.

 

 

PROSPECTS

 

2019 marks the 40th anniversary of UniVision's incorporation in Hong Kong. It is a milestone that signifies the Company's longevity in the security and surveillance business. The Group's core competency relies on our UniVision's brand name; and its dedicated, experienced, and productive people.

 

The Board expects that high demand in security and surveillance market will provide the ground and stimulus for the Company to grow.  Given our sizable order book, especially the MTRC Contract, the Company will derive revenue growth in the next few reporting periods, but need to manage our delivery carefully, by controlling costs to generate profits attributable to shareholders. Barring unforeseen circumstances, the Board expects another year of growth ahead and the year has started well and broadly in line with management's expectations.

 

Finally, on behalf of the Board, I would like to thank our customers, suppliers, sub-contractors and shareholders for their continued support of UniVision. I would also like to acknowledge the hard work of the management and all our staff for their contribution.

 

 

MR. STEPHEN SIN MO KOO

EXECUTIVE CHAIRMAN



 

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the year ended 31 March 2019

 

 

 


Notes


2019


2018




£


£







Revenue

7(a)


14,221,497


5,593,171

Cost of revenue

10


(11,018,631)


(3,775,759)







Gross profit



3,202,866


1,817,412

Other income

8


 4,141


11,312

Other (losses)/gains, net

9


(70,660)


19,622

Selling and distribution expenses

10


(55,320)


(124,643)

Administrative expenses

10


(1,296,672)


(986,853)

Finance costs

12


(55,409)


(2,089)







Profit before income tax



1,728,946


734,761

Income tax

13


-


-







Profit for the year



1,728,946


734,761







Other comprehensive income/(loss), net of tax






Item that may be reclassified subsequently to profit or loss:






    Exchange differences on translation of financial statements



466,240


(779,178)







Total comprehensive income/(loss) for the year



2,195,186


(44,417)






Earnings per share - Basic and Diluted

14


0.45p


0.19p



 

STATEMENT OF FINANCIAL POSITION

As at 31 March 2019

 

 

 


Notes


2019


2018




£


£

ASSETS






Non-current assets






Plant and equipment

16


143,146


53,962

Amounts due from related companies

26


3,322,882


3,075,815

Prepayments



96,086


-







Total non-current assets



3,562,114


3,129,777







Current assets






Inventories

17


642,375


970,625

Trade and other receivables

19


2,274,267


4,328,313

Contract assets

20


3,576,824


-

Cash and bank balances

21


1,750,056


973,313







Total current assets



8,243,522


6,272,251







Total assets



11,805,636


9,402,028







LIABILITIES AND EQUITY






Current liabilities






Trade and other payables

22


 2,521,122


3,410,529

Contract liabilities

23


 956,616


-







Total current liabilities



3,477,738


3,410,529







Non-current liabilities






Amount due to a related company

22


409,556


108,617






Total liabilities



3,887,294


3,519,146







Capital and reserves






Share capital

24


3,890,257


3,890,257

Reserves



4,028,085


1,992,625







Total equity



7,918,342


5,882,882







Total liabilities and equity



11,805,636


9,402,028

 

 



STATEMENT OF CHANGES IN EQUITY

For the year ended 31 March 2019

 

 

 

 

 

 

Share

capital


Retained earnings


Special capital reserve "A"


Special

capital reserve "B"


Translation

reserve


Total



£


£


£


£


£


£







(Note 1)


(Note 2)



















Balance at 1 April 2017

3,890,257


58,522


155,876


143,439


1,830,608


6,078,702















Profit for the year

-


734,761


-


-


-


734,761


Other comprehensive loss, net of tax













Exchange difference arising on translation of financial statements

-


-


-


-


(779,178)


(779,178)















Total comprehensive income

-


734,761


-


-


(779,178)


(44,417)















Dividend paid in respect of year 2017 (Note 15)

-


(151,403)


-


-


-


(151,403)















Total transactions with owners, recognised directly in equity

-


(151,403)


-


-


-


(151,403)















Balance at 31 March 2018

3,890,257


641,880


155,876


143,439


1,051,430


5,882,882















Profit for the year

-


1,728,946


-


-


-


1,728,946


Other comprehensive income, net of tax













Exchange difference arising on translation of financial statements

-


-


-


-


466,240


466,240















Total comprehensive income

-


1,728,946


-


-


466,240


2,195,186















Dividend paid in respect of year 2018 (Note 15)

-


(159,726)


-


-


-


(159,726)















Total transactions with owners, recognised directly in equity

-


(159,726)


-


-


-


(159,726)















Balance at 31 March 2019

3,890,257


2,211,100


155,876


143,439


1,517,670


7,918,342


 

The currency translation from Hong Kong dollar to the presentation currency of Sterling Pound of these financial statements has no impact on the available distributable reserves of the Company as at 31 March 2019.

 

Notes:

 

1.         Special capital reserve "A"

 

Pursuant to the Order of the High Court dated 20 November 2004, any future recoveries of the Company's accumulated provision for obsolete inventories and provision for bad debts amounting to HK$1,935,002 and HK$3,592,540 respectively will be credited to non-distributable special capital reserve "A" account.

 

2.         Special capital reserve "B"

 

By a special resolution passed on 30 July 2004 and pursuant to the Order of the High Court dated 20 November 2004, the authorised and issued capital of the Company was reduced from HK$159,245,000 (divided into 31,849 ordinary shares of HK$5,000 each) to HK$16,405,000 (divided into 3,281 ordinary shares of HK$5,000 each). The reduction of capital was effected by cancellation of 28,568 ordinary shares of HK$5,000 each in the issued and paid up share capital of the Company. The Company established a non-distributable special capital reserve "B" account into which HK$2,071,307 was credited as a result of the capital reduction.



STATEMENT OF CASH FLOWS

For the year ended 31 March 2019

 


Notes


2019


2018




£


£







Cash flows from operating activities






Profit before income tax



1,728,946


734,761

Adjustments for:






Interest expense

12


55,409


2,089

Interest income

8


 (3,947)


(2,896)

Depreciation of plant and equipment

16


 47,318


30,580

Provision for warranty



 (9,681)


9,624

Inventories written-off



 50,457


47,832

Impairment loss reversed on amounts due from customers for contracts-in-progress



-


(57,256)

Loss/(gain) on disposal of plant and equipment



128


(1,444)







Operating cash flows before working capital changes



1,868,630


763,290

Changes in operating assets and liabilities:






Prepayments



 (95,397)


-

Inventories



 349,960


(53,454)

Trade and other receivables



44,735


(1,835,504)

Contract assets



(1,062,323)


-

Amounts due from related companies



 (9,154)


101,551

Trade and other payables



293,977


663,252

Contract liabilities



(578,893)


-







Net cash generated from/(used in) operating activities



811,535


(360,865)







Cash flows from investing activities






Interest received

8


 3,947


2,896

Purchase of plant and equipment



(131,857)


(40,364)

Proceeds from disposal of plant and equipment



10


577







Net cash used in investing activities



(127,900)


(36,891)







Cash flows from financing activities






Interest paid

12


 (55,409)


(2,089)

Dividend paid to shareholders of the Company

15


(159,726)


(151,403)

Advances from a related company

27


290,444


-







Net cash generated from/(used in) financing activities



75,309


(153,492)







Net increase/(decrease) in cash and cash equivalents



758,944


(551,248)

Cash and cash equivalents at beginning of year



524,329


1,188,268

Effect of foreign exchange rate changes, net



28,938


(112,691)







Cash and cash equivalents at end of year

21


1,312,211


524,329

 


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 9

Financial Instruments

IFRS 15

Revenue from Contracts with Customers

IFRIC 22

Foreign Currency Transactions and Advance Consideration

Amendments to IAS 40

Transfers of Investment Property

Amendments to IFRS 2

Classification and Measurement of Share-based Payment Transactions

Amendments to IFRS 4

Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts

Annual Improvements

  (2014-2016)

Amendments to IFRS 1 and IAS 28

 

The new and amendments to IFRSs have been applied in accordance with the relevant transition provisions in the respective standards. Except as described below, there are no other changes in the Company's accounting policies, amounts reported and/or disclosures from the initial adoption of the above IFRSs.

 

 

(a)        Initial application of IFRSs (cont'd)

 

IFRS 9 "Financial Instruments"

 

IFRS 9 replaces IAS 39 "Financial instruments: recognition and measurement". It sets out the requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. The Company has not been impacted by IFRS 9 in relation to classification/recognition of financial assets and financial liabilities.

 

The adoption of IFRS 9 has changed the Company's impairment model by replacing the IAS 39 "incurred loss model" to the "expected credit losses ("ECLs") model". IFRS 9 requires the Company to recognise ECLs for trade and other receivables earlier than IAS 39. Cash and cash equivalents are subject to ECL model but the impairment is immaterial for the current year. The new IFRS 9 impairment model does not result in additional impairment allowance for the Company as at 1 April 2018.

 

IFRS 15 "Revenue from Contracts with Customers"

 

IFRS 15 establishes a five-step model comprehensive framework for recognising revenue from contracts with customer: (i) identify the contract; (ii) identify performance obligations; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations; and (v) recognise 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. IFRS 15 replaces IAS 18 "Revenue", IAS 11 "Construction Contracts" and the related interpretations.

 

The Company has applied IFRS 15 retrospectively with the cumulative effect of initially applying this standard recognised at the date of initial application (1 April 2018). Any difference at the date of initial application is recognised in the opening retained profits (or other components of equity, as appropriate) and comparative information has not been restated. Furthermore, in accordance with the transition provisions in IFRS 15, the Company has elected to apply the standard retrospectively only to contracts that are not completed at 1 April 2018. Accordingly, certain comparative information may not be comparable as comparative information was prepared under IAS 18, IAS 11 and the related interpretations.

 

The Group recognises revenue from the following major sources which arise from contracts with customers:

 

-           Service revenue from supply, design and installation of closed circuit television and surveillance systems;

-           Service revenue from maintenance contracts; and

-           Trading income from sale of security system related products.

 

The following adjustments were made to the amounts recognised in the Company's statement of financial position as at 1 April 2018. Line items that were not affected by the changes have not been included.

 

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, such as plant and equipment, 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).

 

4.4                   Impairment of non-financial assets (cont'd)

 

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 since 1 April 2018. 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

 

After application of IFRS 9 on 1 April 2018

 

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.

 

After application of IFRS 9 on 1 April 2018 (cont'd)

 

Impairment of financial assets (cont'd)

 

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.

 

Impairment of financial assets (cont'd)

 

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.

 

Before application of IFRS 9 on 1 April 2018

 

Classification and subsequent measurement of financial assets

 

The Company's financial assets are classified as loans and receivables, which are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment.

 

Interest income is recognised by applying the effective interest rate, except for short-term receivables where the recognition of interest would be immaterial.

 

Impairment of loans and receivables

 

Loans and receivables are assessed for indicators of impairment at the end of each reporting period.  Loans and receivables are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the loans and receivables, the estimated future cash flows of loans and receivables have been affected.

 

Objective evidence of impairment could include:

 

-         significant financial difficulty of the issuer or counterparty; or

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

-         it becoming probable that the borrower will enter bankruptcy or financial re-organisation.  

 

Impairment of loans and receivables (cont'd)

 

For certain categories of loans and receivables, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Company's past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or local economic conditions that correlate with default on receivables.

 

The amount of the impairment loss recognised is the difference between the asset's carrying amount and the present value of the estimated future cash flows discounted at the loans and receivables' original effective interest rate.

 

The carrying amount of loans and receivables is reduced by the impairment loss directly for all loans and receivables with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

 

If, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that, the carrying amount of the loan and receivable at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

 

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 (upon application of IFRS 15)

 

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.

 

Revenue recognition (prior to 1 April 2018)

 

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and rendering of services in the ordinary course of activities. Revenue is shown net of rebates and discounts.

 

The Company recognises revenue when the amount of revenue and related cost can be reliably measured, it is probable that future economic will flow to the entity and when specific criteria has been met for each of the activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Company bases the best estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

 

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and rendering of services in the ordinary course of activities. Revenue is shown net of rebates and discounts.

 

The Company recognises revenue when the amount of revenue and related cost can be reliably measured, it is probable that future economic will flow to the Company and when specific criteria has been met for each of the activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Company bases the best estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

 

Construction contracts

 

Revenue from construction contracts is recognised when the outcome of a construction contract can be estimated reliably:

 

-         Revenue from a fixed price contract is recognised using the percentage of completion method, measured by reference to the percentage of contract costs incurred to date to the estimated total contract costs for the contract; and

-         Revenue from a cost plus contract is recognised by reference to the recoverable costs incurred during the period plus an appropriate proportion of the total fee, measured by reference to the proportion that costs incurred to date bear to the estimated total costs of the contract.

 

When the outcome of a construction contract cannot be estimated reliably, revenue is recognised only to the extent of contract costs incurred that it is probable will be recoverable.

 

Maintenance contracts

 

Revenue from maintenance contracts is recognised on a straight-line basis over the term of the maintenance contract.

 

Product sales

 

Revenue from product sales is recognised on the transfer of risks and rewards of ownership, which generally coincides with the delivery of goods to customers and the passing of title to customers.

 

Interest income

 

Interest income is recognised as it accrues using the effective interest method.

 

4.10                 Construction contracts (prior to 1 April 2018)

 

When the outcome of a construction contract can be estimated reliably, contract costs are recognised as an expense by reference to the stage of completion of the contract at the end of the reporting period. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. When the outcome of a construction contract cannot be estimated reliably, contract costs are recognised as an expense in the period in which they are incurred.

 

Contracts in progress at the end of the reporting period are recorded in the statement of financial position at the net amount of costs incurred plus recognised profit less recognised losses and progress billings, and are presented under the caption of "Trade and other receivables" or "Trade and other payables" in the statement of financial position as the "Amounts due from customers for contracts-in-progress" (as an asset) or the "Amounts due to customers for contracts-in-progress" (as a liability), as applicable.  Progress billings not yet paid by the customer are included in the statement of financial position. Amounts received before the related work is performed are included in the statement of financial position, as a liability, as "Advances received".

 

4.11                 Leases

 

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.

 

4.12                 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.

 

4.13                 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.

 

4.14                 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.

 

4.15                 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.

 

4.16                 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 2019, the Company has unused tax losses of approximately £2,189,000 (2018: £3,592,000) 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

 



2019


2018



£


£

Financial assets





Amounts due from related companies


3,322,882


3,075,815

Trade and other receivables


2,274,267


2,001,413

Cash and bank balances


1,750,056


973,313






Financial liabilities





Trade and other payables


 2,521,122


1,981,357

Amount due to a related company


409,556


108,617

 

(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


2019


2018


2019


2018


£


£


£


£









Renminbi

161,387


158,670


 567,360


580,222

United States dollar

 134,671


78,393


 -  


-

 

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% (2018: 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% (2018: 5%) change in foreign currency rates. 

 


2019


2018


£


£

Renminbi




Post-tax profit for the year

21.367


22,187





United States dollar




Post-tax profit for the year

(7,088)


(4,126)





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 certain bank borrowings which carry at prevailing market interest rates as shown in note 29 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 2018.

 

For the year ended 31 March 2019, 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 £2,736 (2018: £1,141).

 

(ii)                   Credit risk

 

At 31 March 2019, 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 19 and 20 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 liquid funds is limited because the counterparties are banks 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 2019, the Company's banking facilities amounted to £5,655,778 (2018: £4,797,248) and the unused facilities were £4,553,605 (2018: £4,295,457).

 

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.

 


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

 



2018



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 2018



%


£


£


£


£


£















Trade and other payables

Nil


1,981,357


-


-


1,981,357


1,981,357


Amount due to a related company

Nil


-


108,617


-


108,617


108,617


















1,981,357


108,617


-


2,089,974


2,089,974

 

(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 2019, which is unchanged from 2018, 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:

 


2019


2018



£


£







Total liabilities

3,887,294


3,519,146


Cash and bank balances

(1,750,056

)

(973,313

)






Net debt

2,137,238


2,545,833







Total equity

7,918,342


5,882,882







Net debt-to-adjusted capital ratio

27%


43%


 

 

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 2019.

 

(a)                    Segment revenues and results

 

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

 


2019


2018


£


£

Segment revenue by major products and services




-         Construction contracts

12,635,262


4,093,942

-         Maintenance contracts

 1,426,493


1,296,638

-         Product sales

 159,742


202,591





Revenue from contracts with customers and external customers

14,221,497


5,593,171





Segment profit

1,784,355


736,850

Finance costs

(55,409)


(2,089)





Profit before income tax

1,728,946


734,761

 

(b)                    Information about major customers

 

Revenue of approximately £11,995,000 (2018: £2,738,000) is derived from one external customer (2018: two customers), who contributed to 10% or more of the Company's revenue in 2019 and 2018.

 

 

 

8.         OTHER INCOME


2019


2018


£


£





Interest income

3,947


2,896

Sundry income

194


8,416






4,141


11,312

 

 

9.         OTHER (LOSSES)/GAINS, NET


2019


2018


£


£





Foreign exchange (loss)/gain

(10,203)


8,754

(Loss)/gain on disposal of plant and equipment

(128)


1,444

Impairment loss reversed on amounts due from customers for contracts-in-progress

-


57,256

Inventories write-off

(50,457)


(47,832)

Others

(9,872)


-






(70,660)


19,622

 

 

10.          EXPENSES BY NATURE


2019



2018



£



£








Cost of inventories recognised as expenses

 8,673,468



1,558,455


Sub-contracting costs

 1,013,057



1,060,199


Depreciation - owned plant and equipment

 47,318



30,580


Operating lease charges - minimum lease payments

 187,090



128,367


Research and development costs

 31,148



39,001


Selling and distribution cost

 2,995



3,692


Other expenses

322,189



423,678


Staff costs, including directors' remuneration






-   Wages and salaries

 1,988,631



1,555,911


-   Pension scheme contributions

 78,128



64,273



 2,066,759



1,620,184


Auditor's remuneration






-   Audit services

 26,599



23,099








Total cost of sales, selling and distribution, administrative expenses

12,370,623



4,887,255


 

 

11.       DIRECTORS' REMUNERATION

 

Directors' remuneration for the year is as follows:

 


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 


  280,653 


  6,246 


286,898 

Non-executive directors






Nicholas James LYTH

 15,684


 -  


 15,684

Ivor Colin SHARGO

7,126  


 -  


7,126 


   22,810  


 -  


   22,810  








303,463


  6,246 


309,709

 

Messrs. Mike Chiu Wah CHAN and Ivor Colin SHRAGO were appointed as the Company's directors on 21 September 2018 and 27 September 2018 respectively.

 


Salaries, bonuses and allowances


Pension scheme contributions

 

 

2018


£


£


£

Executive directors






Stephen Sin Mo KOO

-


-


-

Peter Yip Tak CHAN

61,259


1,732


62,991

Chun Pan WONG

78,790


1,732


80,522

Danny Kwok Fai YIP

60,948


1,732


62,680


200,997


5,196


206,193

Non-executive directors






Nicholas James LYTH

13,859


-


13,859








214,856


5,196


220,052

 

 

12.       FINANCE COSTS


2019


2018


£


£





Interest expense on bills payable and factoring

55,409


2,089

 

 

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:

 


2019


2018



£


£







Profit before income tax

1,728,946


734,761







Notional tax on profit before income tax, calculated at Hong Kong profits tax rate of 16.5%

285,276


121,236


Tax effect of non-taxable income

(8)


(11,793)


Tax effect of non-deductible expenses

9,974


6,665


Tax effect of temporary differences not recognised

(18,240)


(5,912)


Utilisation of unrecognised tax losses

(277,002)


(110,196)







Income tax

-


-


 

(b)                    Deferred tax

 

At 31 March 2019, the Company's significant temporary difference included unused tax losses of £2,178,697 (2018: £3,591,859) available for offset against future taxable profits. No deferred tax asset has been recognised due to the uncertainty of future profit streams.

 


2019


2018



£


£







Balance at beginning of year

3,591,859


4,808,854


Set-off against assessable profit for the year

(1,678,799)


(667,852)


Foreign exchange difference

265,637


(549,143)







Balance at end of year

2,178,697


3,591,859


 

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 £1,728,946 from operations (2018: £734,761), and the weighted average of 383,677,323 (2018: 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:

 


2019


2018


£


£

Final dividend proposed after the reporting period of HK$0.55, equivalent to 0.0536 pence per ordinary share (2018: HK$0.43, equivalent to 0.0389 pence, per ordinary share)

205,775


149,331

 

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

 


2019


2018


£


£

Final dividend in respect of the previous financial year, approved and paid during the year, of HK$0.43, equivalent to 0.0395 pence, per ordinary share (2018: HK$0.41, equivalent to 0.042 pence per ordinary share)

159,726


151,403

 

 

16.       PLANT AND EQUIPMENT


Furniture

and fixtures


Computer

equipment


Motor

vehicles


Total


£


£


£


£

Cost








At 1 April 2017

43,898


87,043


100,486


231,427

Additions

11,350


5,934


23,946


41,230

Disposal

-


-


(23,254)


(23,254)

Foreign translation difference

(6,053)


(11,013)


(35,601)


(52,667)









At 31 March 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









Accumulated depreciation








At 1 April 2017

26,280


65,637


89,431


181,348

Charge for the year

6,076


11,318


13,186


30,580

Disposal

-


-


(23,254)


(23,254)

Foreign translation difference

(3,580)


(8,713)


(33,607)


(45,900)









At 31 March 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









Net book value








At 31 March 2019

 112,861


 18,154


 12,131


 143,146









At 31 March 2018

20,419


13,722


19,821


53,962

 

17.       INVENTORIES


2019


2018


£


£





Raw materials

290,697


300,009

Finished goods

351,678


670,616






642,375


970,625

 

No provision for obsolete inventories is recognised for the year (2018: £nil) on slow-moving inventories.

 

Inventories write-off for the year of £50,457 (2018: £47,832) was recorded.

 

 

18.       CONTRACTS-IN-PROGRESS


2019


2018


£


£





Contract costs incurred plus attributable profits less foreseeable losses

-


27,320,142

Progress billings to date

-


(26,422,414)






-


897,728

Represented by:




Amounts due from customers for contracts-in-progress

-


2,599,665

Less: allowance for doubtful debts

-


(272,765)





Amounts due from customers for contracts-in-progress, net (Note 19)

-


2,326,900

Amounts due to customers for contracts-in-progress (Note 22)

-


(1,429,172)






-


897,728

 

At 31 March 2018, no retention receivables from construction customers were included within "trade and other receivables".

 

Movements in the allowance for doubtful debts are as follow:

 


2019


2018


£


£





At beginning of year

-


324,007

Reversal of provision made

-


(57,256)

Foreign translation difference

-


6,014





At end of year

-


272,765

 

 

19.       TRADE AND OTHER RECEIVABLES

 


2019


2018


£


£





Trade receivables

 858,592


609,599

Less: allowance for doubtful debts

 (61,806)


(48,140)





Trade receivables, net

 796,786


561,459

Other receivables

 1,267,203


1,077,495

Deposits and prepayments

 210,278


362,459

Amounts due from customers for contracts-in-progress, net (Note 18)

 -  


2,326,900





Total carrying amount

2,274,267


4,328,313

 

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:

 


2019


2018


£


£





At beginning of year

48,140


54,858

Provision for the year

 9,872


-

Foreign translation difference

 3,794


(6,718)





At end of year

61,806


48,140

 

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

 


2019


2018


£


£





0 to 90 days

 717,632


246,710

91 to 365 days

 77,980


305,520

Over 365 days

 1,174


9,229






796,786


561,459

 

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 as at 31 March 2019:


Expected

 loss rate


Gross carrying amount


Loss allowance



%


£


£









0 to 90 days

-


 717,632


 -  


91 to 365 days

-


 77,980


 -  


Over 365 days

98


 62,980


 61,806












 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 £271,869 in other receivable is interest-free, repayable on demand and due from Mr. Stephen Sin Mo KOO, a Director of the Company.

 

 

20.       CONTRACT ASSETS


At 31.3.2019


At 1.4.2018


£


£





Supply, design and installation of closed circuit television and surveillance systems services

3,576,824


2,326,900

 

The balance as at 1 April 2018 is the adjusted balance after the application of IFRS 15.

 

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 2019, the gross amount of contract assets was £3,671,998 and the provision of impairment brought forward from 1 April 2018 was £95,174.

 

The following table provides information about the Company's exposure to credit risk and ECLs for contract assets as at 31 March 2019:

 


Expected

 loss rate


Gross carrying amount


Loss allowance



%


£


£









Within 3 years

-


3,576,824


-


Over 3 years

100


95,174


95,174












3,671,998


95,174


 

 

 

21.       CASH AND BANK BALANCES

 

(a)        Cash and cash equivalents

 


2019


2018


£


£





Cash at bank and in hand

1,312,211


524,329

Deposits with banks

437,845


448,984






1,750,056


973,313

Less: restricted cash

(437,845)


(448,984)





Cash and cash equivalents in the statement of cash flow

1,312,211


524,329

 

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

 


2019


2018


£


£





Hong Kong dollar

1,650,769


909,653

Renminbi

62,100


60,001

United States dollar

35,792


2,004

Others

1,395


1,655

 

(c)        Restricted cash

 

At 31 March 2019, bank balance of £437,845 (2018: £448,984) 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 1.33% per annum (2018: 0.2% to 3.2%).

 

 

22.       TRADE AND OTHER PAYABLES


2019


2018


£


£

Current liabilities




Trade payables

103,756


339,703

Bills payable

1,102,173


429,373

Due to related parties (Note 26)

45,746


36,599

Accruals and other payables

1,269,447


1,175,682

Amounts due to customers for contracts-in-progress (Note 18)

-


1,429,172






2,521,122


3,410,529

Non-current liabilities




Due to a related company (Note 26)

409,556


108,617






2,930,678


3,519,146

 

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.

 

 

23.       CONTRACT LIABILITIES


At 31.3.2019


At 1.4.2018


£


£





Supply, design and installation of closed circuit television and surveillance systems services

956,616


1,429,172

 

The balance as at 1 April 2018 is the adjusted balance after the application of IFRS 15.

 

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

 

The contract liabilities as at 1 April 2018 were fully recognised as revenue in the current year.

 

 

24.       SHARE CAPITAL


2019


2018


£


£

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.

 

 

25.       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.

 

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

 

 

26.       RELATED PARTY TRANSACTIONS

 

Compensation of key management personnel

 

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

 


2019


2018


£


£





Salaries, bonus and allowances

414,908


372,563

 

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 2019, there are balances of £271,869 (2018: £Nil) and £45,746 (2018: £36,599) 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 (Note 19 and 22).

 

(b)        At 31 March 2019, there is a payable balance of £409,556 (2018: £108,617) due to a shareholder, Univision Holdings Limited, which is unsecured, interest-free and repayable after 12 months (Note 22).

 

(c)        At 31 March 2019, there are receivable balances of £3,322,882 (2018: £3,075,815) due from related companies controlled by common shareholders of the Company, which are guaranteed by a shareholder of the Company, interest-free and not expected to be repayable in the next twelve months.

 

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.

 

 

 

27.       CASH FLOWS FROM LIABILITIES ARISING FROM FINANCING ACTIVITIES

 

The table below details changes in the Company's liabilities 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 to a related company

2019


2018




£


£









At beginning of year

108,617


123,775



Financing cash flows - Advances

290,444


-



Other changes - Foreign translation difference

10,495


(15,158)







At end of year

409,556


108,617


 

 

28.       COMMITMENTS

 

(a)                     Capital commitments

 

At 31 March 2019, the Company did not have any material outstanding capital commitments.

 

(b)                     Operating lease commitments

 

At the end of the reporting period, the total future minimum lease payments under non-cancellable operating leases for the Company's office and warehouse premises are payable as follows:

 


2019


2018


£


£





Within one year

211,546


153,729

Between two to five years

142,126


213,253






353,672


366,982

 

The leases are negotiated for terms from 1 to 2 years with fixed monthly rental.

 

 

29.       BANKING FACILITIES

 

At 31 March 2019, the banking facilities of the Company were as follows:-

 

(a)        The revolving trade financing facilities amounted to £1,267,674 (equivalent to HK$13,000,000) and carried annual interest at the Hong Kong Dollars Best Lending Rate with a repayment terms of 90 days. The facilities are subject to the fulfilment of certain covenants relating to its 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 2019, the facilities were utilised to the extent of £1,102,173 (2018 : £429,373); and

 

(b)        The revolving term facilities amounted to £4,388,103 (equivalent to HK$45,000,000) were secured by floating charges over the bills receivable from its major customer. At 31 March 2019, 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.

 

 

30.       CONTINGENT LIABILITIES

 

On 10 March 2017, the Company received a writ of summons stating that it is being sued by Nan Ning Hai Li Real Estate Development Limited ("Hai Li"), a prospective investor in respect of breach of contract and/or duty in respect of a share transfer agreement (the "Agreement") entered into between Hai Li and the Company's director, Mr. Stephen Sin Mo KOO, on 14 December 2015 and a subsequent series of oral agreements.

 

On 5 September 2017, Hai Li discontinued the action against the Company's director, Mr. Stephen Sin Mo KOO and the Company.

 

In the opinion of directors of the Company, there were no other significant contingent liabilities from pending litigation or legal claims as at 31 March 2019.

 

 

31.       EVENTS AFTER THE REPORTING PERIOD

 

On 27 August 2019, the Board of Directors proposed a final dividend for the year ended 31 March 2019. Further details are disclosed in note 15(i) to the financial statements.

 

During the interim review in mid of April 2019, HSBC has increased the trade facilities from HK$13m to HK$21m.

 

On 15 April 2019, a life insurance plan ("keyman insurance plan") for the Group's Executive Chairman, Mr. Stephen Sin Mo KOO was provided by HSBC Life (International) Limited with sum insured of US$2.5m. HSBC has provided a long term revolving loan of HK$6.5m for financing certain portion of the premium. The Company is the policy holder for the keyman insurance plan that is assigned to HSBC for security for the facilities.

 

 

~Ends~


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Final Results for the year ended 31 March 2019 - RNS