UniVision Engineering Limited Annual Report Year ended 31 March 2011 UNIVISION ENGINEERING LIMITED Annual Report Year ended 31 March 2011 Contents Page Board of Directors, Officers and Professional Advisers Chairman’s Statement Directors’and Senior Management’s Biographies Directors’Report Remuneration Report Report on Corporate Governance Statement of Directors’Responsibilities Independent Auditor’s Report to the Shareholders of UniVision Engineering Limited Consolidated Statement of Comprehensive Income Consolidated Balance Sheet Company Balance Sheet Consolidated Statement of Changes in Equity Company Statement of Changes in Equity Consolidated Statement of Cash Flows Company Statement of Cash Flows Notes to the Financial Statements Notice of Annual General Meeting 2 3 7 9 13 14 16 17 19 20 21 22 23 24 26 27 66 UNIVISION ENGINEERING LIMITED - 1 - ANNUAL REPORT 2011 BOARD OF DIRECTORS, OFFICERS AND PROFESSIONAL ADVISERS Board of Directors Stephen Sin Mo KOO, Executive Chairman Chun Hung WONG, Chief Executive Officer Chun Pan WONG, Technical Director Danny Kwok Fai YIP, Finance Director Andrew Ping Sum TANG, Non-Executive Director Nominated Adviser and Broker Allenby Capital Limited Claridge House, 32 Davies Street, Mayfair London W1K 4ND, UK Senior Management Mike Chiu Wah CHAN, Director of Operations Peter Yip Tak CHAN, Director of Sales and Marketing Audit Committee Andrew Ping Sum TANG, Chairman Stephen Sin Mo KOO Remuneration Committee Andrew Ping Sum TANG, Chairman Stephen Sin Mo KOO AIM Stock Code UVEL Company Secretary Danny Kwok Fai YIP Registered Office 8/F Lever Tech Centre, 69-71 King Yip Street, Kwun Tong, Kowloon, Hong Kong Tel: (852) 2389 3256 Fax: (852) 2797 8053 E-mail: uvel@hk.uvel.com Website: www.uvel.com Principal bankers Bank of China (Hong Kong) Hong Kong and Shanghai Banking Corporation Hua Nan Commercial Bank (Taiwan) Auditor HKCMCPA Company Limited Certified Public Accountants (Formerly known as ZYCPA Company Limited) 9/F Chinachem Hollywood Centre, 1-13 Hollywood Road, Central, Hong Kong Registrars Computershare Investor Services (Jersey) Limited Queensway House, Hilgrove Street, St Helier, Jersey JE1 1ES, Channel Islands UK Depositary Computershare Investor Services PLC The Pavilions, Bridgwater Road, Bristol BS13 8AE, UK UNIVISION ENGINEERING LIMITED - 2 - ANNUAL REPORT 2011 CHAIRMAN’SSTATEMENT INTRODUCTION I am pleased to report the Group’s audited resultsfor the financial year ended 31 March 2011. The impact on the Group’s prior results due to the impairment loss on the Group’s investment in Leader Smart Engineering (Shanghai) Limited (“Leader SmartShanghai” or the “Subsidiary”), the Group’s wholly owned subsidiary in the People’s Republic of China (“PRC”)has been recovered this year. Following the re- consolidation of Leader Smart Shanghai into the Group’s annual accounts, the aforementioned provision of impairment loss has been written back and the Group’s results are true reflection of the operations this year. Revenue from the Group’s Security and SurveillanceSystems business remained stable during the year. Whilst the transition from analogue to digital technology creates new opportunities for the Group, it has also lead to increased competition as companies within the IT industry enter the market. This has lead to a reduction in the profit margins available in this business area. However, we managed to face the competition by carefully assessing the available opportunities, providing better services to our customers and improving our efficiency. Also, our focus on maintenance services continues. Stable cash flow from maintenance revenue is important in the current market situations. More enquiries are being received in respect of infrastructure projects to be implemented in the coming years in Hong Kong. We anticipate that some will be finalised in the second half of the next financial year. Our objective for the expansion of our Electrical and Mechanical (“E&M”) business remains. However, due to the lack of available capital no new E&M contracts are currently being undertaken. We are exploring various methods which would allow the Group to recognise revenues from the Zhongshan Project in the PRC. This may or may not include the sale of the Group’s entitlement in the Zhongshan Project, against which the project income was secured. We are also planning to set up another branch in PRC for future potential opportunities. The Directors remain confident of the future of Univision and are optimistic about the Group’s prospects. FINANCIAL REVIEW On 12 October 2010, the Group announced that a final verdict on the litigation between UniVision and Mr Ip, the former legal representative of Leader Smart Engineering (Shanghai) Limited (“Leader Smart” or the “Subsidiary”), the Group’s wholly owned subsidiary inPRC had been issued by the Court in favour of the Group in September 2010. The Group has successfully obtained all of Leader Smart’schops which represent the Leader Smart’s seal, business license and the legal representative’s chop back from Mr Ip. The legal representative of Leader Smart was also changed from Mr Ip to Mr. Stephen Koo (the Executive Chairman of UniVision) in November 2010. The Group has now re-gained control over Leader Smart and restored the power to govern the financial and operating policies of Leader Smart. UniVision, as a result, is able to re- consolidate the accounts of Leader Smart into the Group’s annual accounts for the financial year ended 31 March 2011. The assets, liabilities and operating results of the Subsidiary have been reconsolidated into the Group’s financial statements in the current year. The Group recognised a gain on reconsolidation of £8.4m in the Consolidated Statement of Comprehensive Income. The capital deficiency of the Group has recovered from the deconsolidation of Leader Smart in the prior year, such that total assets exceeds total liabilities at the end of year by £6.5m (2010: -£2m). The profit attributable to the equity holders of Company in this year is £8.2m (2010: £10.3m loss). The Group has the provision for impairment loss on trade and other receivables totalling £0.9m (2010: £1.1m). UNIVISION ENGINEERING LIMITED - 3 - ANNUAL REPORT 2011 CHAIRMAN’SSTATEMENT (Continued) The Group generated net cash of £0.5m from its operating activities in the period (2010: £1.3m) mainly due to the increase in trade and other receivables of £1m. It maintained the cash and cash equivalents at 31 March 2011 of £1m (31 March 2010: £0.9m). During the year under review the relative strengthening in the HK$ against sterling has led to an 1.6% appreciation in the GBP reporting amount in the Consolidated Statement of Comprehensive Income, while a relative weak closing rate at the year-end in the HK$ against sterling led to a 6.9% depreciation in the GBP reporting amount in the Consolidated Balance Sheet. All figures in the Financial Statements therefore need to be adjusted for comparison purposes. Turnover in the period was increased by 32% to £8.6m (2010: £6.5m). This increase was mainly due to the inclusion of turnover from the formerly deconsolidated Subsidiary, restarting of the Group’s E&M business in Hong Kong , growth of 27 % in the value of the Group’s Hong Kong construction contracts and growth of £0.42m in the value of the Group’s Taiwan product sales. Our maintenance contracts recorded 20% growth for the Group as a whole, including a remarkable growth of 63% in the Taiwan business, which compensated for a 30% fall in revenue for its construction business. On the other hand, the Group’s business in Hong Kong is relatively stable and continues to provide a stable profit margin and steady cash flows for the Group’s operations. The Group’smajor customers in the Security and Surveillance Systems business are public organisations and government departments, which provide regular orders and reliable payment schedules. No bank overdraft and loan facilities are required for our Hong Kong company. The Directors believe there will be arise in demand for Security and Surveillance Systems business coming from proposed government infrastructure projects and from the commercial sector and a result anticipate that the Group’s turnover from this division will further improve in the next financial year. Gross profit margin improved to 39% (2010: 33%) despite an increase in operating costs as a result of inflation. The major contributing factors were business growth of 27% (£0.4m) in Hong Kong construction contracts and the inclusion of our E&M business (£1.5m) which had a higher gross profit margin than the overall business. The above factors offset the adverse effect from the 30% decline of Taiwan construction contracts which had a relatively higher gross margin than its maintenance contracts. In addition, the Group adopts effective cost control of its human resources, i.e. project and maintenance teams, sub-contractors, logistics teams, and inventory. Administration expenses increased by 20% from last year to £2m (2010: £1.7m) mainly as a result of the inclusion of £0.15m of expenses for the two years of Leader Smart whilst deconsolidated, an increase in legal and professional fees and the operating costs due to inflation. Finance costs remained constant during the year. The largest component of total finance costs (£0.62m) was the non-cash provision of accrual loan interest payable to our former holding company £0.58m (2010: £0.58m). The said provision of finance costs did not cause adverse impact on our Company’s cash flow. No significant capital investment occurred in the current year. Profit before Interest and Tax (PBIT) was £8.8m (2010 loss: £9.7m). Net profit before income tax was £8.3m (2010 loss: £10.3m). Basic earning per share for this year was 2.14p (2009 loss per share: 2.70p). UNIVISION ENGINEERING LIMITED - 4 - ANNUAL REPORT 2011 CHAIRMAN’SSTATEMENT (Continued) BUSINESS REVIEW Markets IMS Research’s latest report, “The World Market for CCTV and Video Surveillance Equipment –2011 Edition”, estimates that the world market for video surveillance equipment continued to achieve strong growth in 2010, in excess of 10% on the previous year, despite the persistent after-effects of the global economic downturn. The report states that growth was predominantly driven by sales of network video surveillance equipment. Network video surveillance growth continues to be bolstered by the trickle-through effect from government stimulus-funded projects and the increasing penetration of higher value network video surveillance products, such as HD cameras. IMS Research forecasts that the growth of the network video surveillance market and the decline of the analogue market will lead to a transition in 2014, with network video overtaking analogue in terms of sales revenue. However, the report predicts that in terms of shipments, analogue cameras are forecast to continue to outsell network cameras through to 2014. We have identified a number of good suppliers, manufacturers as well as technology partners, to provide complete solutions to our customers using the latest available technology. The Board is confident that we can exploit these opportunities in the coming years due to the strong growth of the network video market. Following the settlement of the litigation over Leader Smart, we will continue to explore our growth target of the E&M business in PRC. We are looking at various strategic options to access capital in order to be in a position to begin new projects. Technologies, Solutions and Products The market trend towards network video surveillance solutions continues. We are seeing increasing enquires and demand from our customers. Meanwhile, an increasing number of manufacturers are introducing high definition megapixel networked cameras in the market. We are also seeing demand for wireless video solutions. Though the video analytics market is at a relatively early stage compared to other areas of security and surveillance, it is expected that the potential of video content analysis applications is enormous. The algorithms used for video content analysis may be further enhanced and different technology, such as video indexing, may be applied to improve its application. The applications of video content analysis are considered in a sense that they are beyond surveillance purposes. We are working to indentify suitable products in these areas of the market that will provide added value to our existing portfolio of products, in order to adapt with the changing market. Acquisitions and Investments The Group continues to assess possible opportunities of new investments with a view to making a further strategic move. MTR Corporation Limited (“MTR”) & Maintenance Our maintenance contracts are particularly important to the Group as they provide regular and reliable revenue streams. We have experienced growth in this area of the business. In particular, our relationship with the MTR railway has proved to be extremely positive. We are confident that we will be able to secure other contracts in future confirmed and planned railway line developments in the coming few years, as well as continue providing our maintenance services to them. UNIVISION ENGINEERING LIMITED - 5 - ANNUAL REPORT 2011 CHAIRMAN’SSTATEMENT (Continued) PROSPECTS Our Security and Surveillance business remains stable. Due to the infrastructure projects to be implemented in the coming years in Hong Kong, as well as the expected growing demand on Network Security and Surveillance market, we anticipate a positive outlook in this area of our business in the coming years. The E&M business in the PRC is still one of our growth targets. However, we understand that access to the additional funds required to undertake these capital intensive projects depends on external macro economic conditions. Finally, on behalf of the Board, I would like to thank our customers, suppliers and shareholders for their continued support of UniVision. I would also like to acknowledge the hard work of the management and all the staff for their contribution and dedication to the Group. MR. STEPHEN SIN MO KOO EXECUTIVE CHAIRMAN 29 September 2011 UNIVISION ENGINEERING LIMITED - 6 - ANNUAL REPORT 2011 DIRECTORS’AND SENIOR MANAGEMENT’S BIOGRAPHIES DIRECTORS’BIOGRAPHIES Andrew Ping Sum TANG –Non-executive Director (aged 54) Mr. Tang was appointed as a Non-executive Director on 1 December 2005. Mr. Tang holds a Bachelor of Commerce Degree from the University of Western Australia and a Masters Degree in Applied Finance from Macquarie University. He is a member of the Hong Kong Institute of Certified Public Accountants, a member of the Institute of Certified Public Accountants of Australia and the Hong Kong Securities Institute, a director of the Institute of Securities Dealers and a member of the advisory board of the Society of Registered Financial Planners of Hong Kong. Mr. Tang was a Manager of the Licensing Department of Securities and Futures Commission. He monitored the registrants under Securities Ordinance and participated in the development of licensing systems and procedures. Mr. Tang has over 10 years experience in the financial services industry. He was the Deputy Chairman and General Manager of Hantec Investment Holdings Limited, a financial services group listed on the main board of the Stock Exchange of Hong Kong. Mr. Tang was the Director-China Business of Tai Fook Securities Group, a leading securities group which listed on the main board of the Stock Exchange of Hong Kong. He was the General Manager of Wing Fung Financial Group. Currently, Mr. Tang is a Director for an asset management company. Stephen Sin Mo KOO –Executive Chairman (aged 54) Mr. Koo joined UniVision in 1998 and was appointed as a Director on 3 March 2003. He is responsible for overall strategic planning of our Group. He holds both a Bachelor Degree from the University of Technology, Sydney, and a Masters Degree in Business from the Royal Melbourne Institute of Technology in Australia. He is the Director of Up Sky Investments Limited, the Group’s ultimate parent company. He is a Fellow of the Institute of Certified Public Accountants of Australia. Chun Hung WONG –Chief Executive Officer (aged 52) Mr. Wong joined UniVision in 1998 and was appointed as CEO on 1 January 2008. Before the appointment, he was the Director of Operations who was responsible for the management of the Project and Maintenance Divisions. Mr. Wong holds a Master of Business Administration degree from The Open University of Hong Kong. He has over 20 years experience in project management. Mr. Wong is responsible for formulating and overseeing the implementation of UniVision’s business development strategies and for the management of the Company’s operations. Chun Pan WONG –Technical Director (aged 51) Mr. Wong joined UniVision in 1991 and was appointed as a Director on 25 March 1992. He holds a Master Degree in Religious Studies in Chinese University of Hong Kong and a Bachelor Degree in Computer Science from the University of Edinburgh, Scotland, and over 17 years experience in the surveillance industry. He is responsible for the development of UniVision’s state of the art CCTV control and monitoring systems and smart card access systems. Danny Kwok Fai YIP –Finance Director (aged 47) Mr. Yip was appointed as Finance Director on 18 September 2007. He was the Financial Controller for the Group before the appointment. Mr. Yip obtained a Master of Corporate Finance degree from The Hong Kong Polytechnic University and a Bachelor of Commerce (Accounting) degree from The Curtin University of Technology, Australia. Before joining the Group, Mr. Yip was the Accounting Manager of Nissin Food Group, the leading instant noodle manufacturing MNC. Mr. Yip has over 20 years experience in finance and accounting in different industries. He is a fellow member of the Association of Chartered Certified Accountants and a member of Hong Kong Institute of Certified Public Accountants. He also acts as Company Secretary for the Corporation. UNIVISION ENGINEERING LIMITED - 7 - ANNUAL REPORT 2011 DIRECTORS’AND SENIOR MANAGEMENT’S BIOGRAPHIES (Continued) SENIOR MANAGEMENT’S BRIEF BIOGRAPHIES Mike Chiu Wah CHAN –Director of Operations (aged 37) Mr. Chan joined UniVision as Assistant Engineer in December 1996, and was promoted to a number of increasingly senior positions in maintenance and project department, prior to being appointed to his present position on 2 January 2008. He is now responsible for the management of UniVision’s Project and Maintenance Division. Mr. Chan holds a Bachelor of Engineering degree in Industrial and Manufacturing System Engineering from The University of Hong Kong. Peter Yip Tak CHAN –Director of Sales and Marketing (aged 47) Mr. Chan joined UniVision in 1995. He holds a Degree in Computing from the University of Northwest Missouri and has over 10 years experience in sales and project management. He is responsible for the management of UniVision’s Sales and Marketing Division. UNIVISION ENGINEERING LIMITED - 8 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED DIRECTORS’REPORT The Directors have pleasure in presenting their annual report together with the audited financial statements of the Group and the Company for the year ended 31 March 2011. Principal Activities The principal activities of the Company are the supply, design, consultation, installation and maintenance of closed circuit television and surveillance systems, and the sale of security related products. The Group is involved in similar activities as well as electrical and mechanical services. Review of the Business A review of the Group and its future development is included in the Chairman’s Statement. Financial Position The Group’s profit for the year ended 31 March 2011 and the state of affairs of the Group at that date are set out in the consolidated statement of comprehensive income on page 19 and in the consolidated balance sheet on page 20, respectively. The Group’s and the Company’s changes in shareholders’equity for the year ended 31 March 2011 are set out in the consolidated and the Company’s statement of changes in equity on page 22 and 23, respectively. The Group’s and the Company’s cash flow for the year ended 31 March 2011 is set out in the consolidated and the Company’s statement of cash flows on pages 24 to 26. Key Performance Indicators (KPI) Current Ratio: Current Assets / Current Liabilities Average Collection Period : Trade receivables (net of allowance for doubtful debts) / Sales per day Inventory Turnover : Cost of sales / Inventories Gross profit Margin : Gross profit / Sales Debt to Equity Ratio : Debt / Equity Profit/(Loss) /Equity : Profit /(Loss) attributable to equity holders of the Company / Equity Share Capital and Reserves Details of the movements in share capital are set out in note 27 on page 63. 2011 2010 1.5 0.7 37 days 39 days 5.8 39% 0.7 4.5 33% -2.5 130% -540% : : : : : : The movements in reserves during the year are set out in the consolidated statement of changes in equity on page 22. UNIVISION ENGINEERING LIMITED - 9 - ANNUAL REPORT 2011 DIRECTORS’REPORT (Continued) Dividends The Directors do not propose the payment of a dividend for the year ended 31 March 2011. Plant and Equipment Details of the movements in plant and equipment are set out in note 16 on pages 54 to 55. Directors The directors who held office during the year and to the date of this report were as follows: Stephen Sin Mo KOO Chun Hung WONG Andrew Ping Sum TANG Chun Pan WONG Danny Kwok Fai YIP Mr. Chun Hung WONG and Mr. Andrew Ping Sum TANG retire by rotation at the forthcoming annual general meeting in accordance with the Company’s Articles of Association and, being eligible, the current directors offer themselves for re-election. Directors’Interests in Contracts No director had a material interest in any contract of significance to the business of the Company to which the Company, its holding company, or its subsidiaries was a party at the end of the year or at any time during the year. Directors’Interests in Shares According to the register of Directors’Shareholdings kept by the Company, particulars of interests of the Directors (or their immediate families) who held office at the end of the financial year in the ordinary shares of the Company are as set out in the table below: Ordinary Shares held as at 31 March 2011 Stephen Sin Mo KOO Chun Hung WONG Andrew Ping Sum TANG Chun Pan WONG Danny Kwok Fai YIP 88,367,700* - - - - * 78,744,000 ordinary shares are registered under the name of Up Sky Investments Limited which is an investment holding company incorporated under the laws of the British Virgin Islands and is wholly-owned by Mr. Stephen Sin Mo KOO. Mr. Stephen Sin Mo KOO, is deemed to be interested in all the ordinary shares registered in the name of Up Sky Investments Limited. Following the Share Transaction on 8 July 2011, the entire stake of UniVision Holdings Limited (it holds 183,736,000 shares of the Company) was transferred to Up Sky Investments Limited, a company that is wholly owned by Mr. Stephen Koo. He is also interested in 9,623,700 ordinary shares in the Company. Therefore following the Share Transaction, he has a total direct and indirect interest in 272,103,700 ordinary shares in the Company, equivalent to 70.9% of the Company’s total issued share capital. Save as disclosed in this report, none of the Directors (or their immediate families) who held office at the end of the financial year had interests in the share capital of the Company during the financial year. UNIVISION ENGINEERING LIMITED - 10 - ANNUAL REPORT 2011 DIRECTORS’REPORT (Continued) Directors’Rights to Acquire Shares or Debentures At no time during the year were rights to acquire benefits by means of the acquisition of shares in or debentures of the Company granted to any director or their respective spouse or minor children, or were any such rights exercised by them; or was the Company, its holding company, or its subsidiaries a party to any arrangement to enable the directors of the Company to acquire by means of the acquisition of shares in, or debentures of any other body corporate. Substantial Shareholdings As at 23 September 2011, the Directors had been informed of the following companies that held 3% or more of the Company’s issued ordinary share capital: UniVision Holdings Limited (1) Up Sky Investments Limited (2) Barclayshare Nominees Limited W B Nominees Limited Number of ordinary shares 183,736,000 78,744,000 15,902,547 15,381,800 % of total issued share capital 47.9 20.5 4.1 4.0 (1) UniVision Holdings Limited is an investment holding company incorporated under the laws of the British Virgin Islands and was formerly owned by Mayne Management Limited. Up Sky Investments Limited acquired the entire stake from Mayne Management Limited on 8 July 2011 and became the major shareholder. (2) Up Sky Investments Limited is an investment holding company incorporated under the laws of the British Virgin Islands and is wholly-owned by Mr. Stephen Sin Mo KOO. Payments to Creditors The Group does not follow any code or standard on payment practice but instead the Group policy is to pay all creditors in accordance with agreed terms of business. Political and Charitable Donations During the year the Company made no political or charitable contributions (2010: Nil). Employees The Group values staff involvement at all levels of operations, and uses various means to train, inform and consult the employees. The Group encourages the management to discuss regularly with the employees on both corporate and individual matters and discloses information to them that will increase their awareness of the financial and economic factors affecting the Group. The Group recognises its obligations to provide a fair consideration on all vacancies towards people with disability and to ensure that such persons are not discriminated against on the grounds of their disability. For those employees who become disabled during their employment period, the Group will make every effort to ensure that their employment will continue and that sufficient training is arranged. Annual General Meeting The Annual General Meeting of the Company will be held at UniVision Engineering Limited, 8/F Lever Tech Centre, 69-71 King Yip Street, Kwun Tong, Kowloon, Hong Kong, on 29 October 2011 at 5:00p.m. The Notice of Meeting appears on page 66. UNIVISION ENGINEERING LIMITED - 11 - ANNUAL REPORT 2011 DIRECTORS’REPORT (Continued) Annual Report The annual report for the year ended 31 March 2011 will be uploaded on the Company’s website www.uvel.com on 29 September, 2011 and the hard copy will be sent to shareholders by our Registrars, Computershare Investor Services (Jersey) Limited. Auditor HKCMCPA Company Limited, Certified Public Accountants, (formerly known as ZYCPA Company Limited), remain as our auditor for the year. A resolution to re-appoint HKCMCPA Company Limited, Certified Public Accountants as auditor of the Company will be put to the forthcoming Annual General Meeting. By Order of the Board Mr. Stephen Sin Mo KOO Executive Chairman Hong Kong 29 September 2011 UNIVISION ENGINEERING LIMITED - 12 - ANNUAL REPORT 2011 REMUNERATION REPORT The Remuneration Committee presents this report to shareholders on behalf of the Board. Membership of Remuneration Committee The Remuneration Committee comprises Mr. Andrew Ping Sum TANG (our Non-executive Director) and Mr. Stephen Sin Mo KOO (our Executive Chairman) and is chaired by Mr. Andrew Ping Sum TANG. Policy Statement The Remuneration Committee sets the remuneration and all other terms of employment of the Executive Directors with a vision to provide a package which is suitable for the responsibilities involved. The remuneration of the Executive Directors is determined by the Remuneration Committee having regard to the performance and experience of individuals, the overall performance of the Group and market trends. Directors’Remuneration Details of individual director’s remuneration for the year are set out in the table below: Salary and fees £ Pension scheme contribution £ Bonus £ 2011 Total £ 2010 Total £ Executive Directors Stephen Sin Mo KOO Chun Pan WONG Chun Hung WONG Danny Kwok Fai YIP 70,535 39,242 49,822 33,678 - 993 993 993 5,630 3,245 4,090 2,766 76,165 43,480 54,905 37,437 71,981 41,674 52,129 35,518 Non-executive Director Andrew Ping Sum TANG 9,935 - - 9,935 9,771 Directors’Interests in Contracts and Interests in Shares Details of Directors’Interests in Contracts and Interests in Shares are given in the Directors’Report. UNIVISION ENGINEERING LIMITED - 13 - ANNUAL REPORT 2011 REPORT ON CORPORATE GOVERNANCE Introduction The Directors believe that their foremost function is to generate continuous profits for the Company’s investors, and that this should be achieved by a policy of high standards of corporate governance, integrity and ethics. As the Company is listed on AIM and not subject to the Listing Rules of the UK Listing Authority, it is not officially required to comply with the provisions detailed in the Combined Code on Corporate Governance. However, it is the intention of the Board to manage the Company’s and Group’s affairs in accordance with this Code, in so far as is practical and appropriate for a public company of this size and complexity. The following are a few examples on how the Directors have applied the principles of good corporate governance to manage the Company throughout the year. Board of Directors The Board directs and controls the Company and is responsible for strategy and operating performance. It meets regularly throughout the year and has adopted a schedule of matters specifically reserved for its decision. All Directors are elected by shareholders at the first opportunity after their initial appointment to the Board and to be re-elected thereafter at intervals of not more than three years. Biographical information on all the Directors is listed in the Directors’and Senior Management’s Biographies section to the annual report, which may help the shareholders to make a decision at the time of re-election. Upon their appointments, the Directors are offered an opportunity to request information and training relevant to their legal and other duties. They are also given written guidelines and rules defining their responsibilities within an AIM listed company. The Board considers that all Non-executive Directors are independent of management and day to day operation, and free from any commercial relationship with the Company. These Non-executive Directors do not participate in any of the Company’s pension schemes or bonuses. The Chairman of the Audit and Remuneration Committees is a Non-executive Director. Nomination Committee As the Board of Directors of the Company is small, there is no separate Nomination Committee. All nominations to the Board are considered by all of the Directors. Audit Committee Our Audit Committee comprises Mr. Andrew Ping Sum TANG (our Non-executive Director) and Mr. Stephen Sin Mo KOO (our Executive Chairman) and is chaired by Mr. Andrew Ping Sum TANG. The Chairman of the Audit Committee has full discretion to invite any Executive Directors to attend its meetings. The Audit Committee meets not less than twice per annum. The responsibilities of the Committee are to: - monitor the quality of the overall internal control system of all financial matters; - - - - - - review the Company’s Accounting Policies and ensure compliance with accounting standards; ensure that the financial performance of the Company is properly measured and reported on; consider the appointment/re-appointment of the external auditor; review the conduct of the audit and discuss the audit fees; review reports from the Auditors relating to the Company’s accounting and internal controls; to ensure the Company complies with the AIM Rules. UNIVISION ENGINEERING LIMITED - 14 - ANNUAL REPORT 2011 REPORT ON CORPORATE GOVERNANCE (Continued) Remuneration Committee Our Remuneration Committee comprises Mr. Andrew Ping Sum TANG (our Non-executive Director) and Mr. Stephen Sin Mo KOO (our Executive Chairman) and is chaired by Mr. Andrew Ping Sum TANG. The Remuneration Committee meets as required. The responsibilities of the Committee are to: - determine the specific remuneration package for each Director including Director’s fees, salaries, allowances, bonuses, options, benefits-in-kind; and seek professional advice, including comparison with similar businesses, in order to correctly fulfil its duties, as the Committee deems appropriate. - In discharging its functions, the Committee may obtain independent external legal and other professional advices as it deems necessary. The expense of such advice shall be borne by the Company. Internal Control The Board of Directors is responsible for ensuring that the Company maintains an internal financial control system with appropriate monitoring procedures for all Group companies. The purpose of this system is to reliable financial safeguard Company assets, maintain proper accounting records, and ensure that information is used within the Group and for publication purposes. However, the system is designed to manage rather than completely eliminate risk and can only provide reasonable but not absolute assurance against material misstatement. In order to achieve the above responsibilities, the Board meets regularly and monitors the Company’s internal financial control by reviewing the overall process and the performance of the systems, setting annual budgets and periodic forecasts, and seeking any prior approval for all significant expenditure. The Group currently does not have an internal audit department and after extensive review and consideration, the Board has concluded that the existing control mechanisms are sufficient for the size of the Group. This decision will be kept under review. Going Concern After making appropriate enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the Company’s and Group’s financial statements. Investor Relations The Company realises that effective communication can increase transparency and accountability to its shareholders; as such, the Company discloses its information to its shareholders through RNS (i.e. the news distribution service operated by the London Stock Exchange plc). The same information can also be found on the Company’s website (www.uvel.com). The Company will make every effort to ensure that all price- sensitive information is released publicly and immediately. If an immediate announcement is not possible, the Company will try to publicize the information at the earliest time possible to ensure that the shareholders and the public have fair access to it. The Company will send the Annual Report and the notice of the Annual General Meeting (AGM) to all its shareholders. This notice is also made available on RNS. The Company recognises the importance of the shareholders’views and encourages them to attend the AGMs where they can share their opinions and raise direct queries and concerns towards the Directors, including the chairperson of each of the Board Committees. The shareholders are also welcomed to discuss any issues on an informal basis at the conclusion of the AGMs. UNIVISION ENGINEERING LIMITED - 15 - ANNUAL REPORT 2011 STATEMENT OF DIRECTORS’RESPONSIBILITIES The Directors are responsible for preparing the Directors’Report and the financial statements in accordance with applicable law and regulations. The Directors are responsible for preparing financial statements for each financial year which give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss for that year. In preparing those financial statements, the Directors are required to: select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business. The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company. They have general responsibility for taking such steps as are reasonably available to them to safeguard the assets of the Group and the Company to prevent and detect fraud and other irregularities. UNIVISION ENGINEERING LIMITED - 16 - ANNUAL REPORT 2011 INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF UNIVISION ENGINEERING LIMITED (incorporated in Hong Kong with limited liability) We have audited the financial statements of UniVision Engineering Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) set out on pages 19 to 65, which comprise the consolidated and the Company’sbalance sheet as at 31 March 2011, and the consolidated statement of comprehensive income, the consolidated and the Company’s statements of changes in equity and the consolidated and the Company’s statements of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes. This report is made solely to the Company’s shareholders, as a body, in compliance with the Alternative Investment Market Rules (“AIM Rules”) for companies as published by the London Stock Exchange plc. Our work has been undertaken so that we might state to the Company’s shareholders those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s shareholders as a body for this report or for the opinions we have formed. Directors’responsibility for the financial statements The directors are responsible for the preparation and the true and fair presentation of these financial statements in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgments, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and true and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. UNIVISION ENGINEERING LIMITED - 17 - ANNUAL REPORT 2011 INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF UNIVISION ENGINEERING LIMITED (incorporated in Hong Kong with limited liability) Opinion In our opinion, the financial statements give a true and fair view of the state of affairs of the Company and of the Group as at 31 March 2011 and of the Group’sprofit and cash flows for the year then ended in accordance with International Financial Reporting Standards. HKCMCPA Company Limited (Formerly known as ZYCPA Company Limited) Certified Public Accountants Hong Kong, China 29 September 2011 UNIVISION ENGINEERING LIMITED - 18 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 March 2011 Revenue Cost of sales Gross profit Other income Selling and distribution expenses Administrative expenses Impairment loss recognised on goodwill Impairment loss recognised on trade and other receivables Loss on deconsolidation of a subsidiary Gain on reconsolidation of a subsidiary Finance costs Profit/(loss) before income tax Income tax expense Profit/(loss) for the year Other comprehensive income/(loss): Exchange differences arising on translation of foreign operations Release of translation reserve upon deconsolidation of a subsidiary Note 2011 £ 2010 £ 8 17 21 28 28 9 10 13 8,576,363 6,473,743 (5,209,729) (4,339,985) 3,366,634 2,133,758 53,757 (93,651) (2,000,677) - (881,891) - 8,426,380 (619,118) 143,360 (96,001) (1,695,991) (791,945) (1,088,223) (8,324,208) - (611,657) 8,251,434 (10,330,907) (20,053) (17,351) 8,231,381 (10,348,258) 375,798 (828,698) - (86,785) Other comprehensive income/(loss) for the year, net of tax 375,798 (915,483) Total comprehensive income/(loss) for the year 8,607,179 (11,263,741) Profit/(loss) attributable to : Equity holders of the Company Non-controlling interests Total comprehensive income/(loss) attributable to: Equity holders of the Company Non-controlling interests Earnings/(loss) per share Basic Diluted All revenues are from continuing operations. 8,192,288 39,093 (10,340,804) (7,454) 8,231,381 (10,348,258) 8,566,219 40,960 (11,255,214) (8,527) 8,607,179 (11,263,741) 14 14 2.14p N/A (2.70p) N/A UNIVISION ENGINEERING LIMITED - 19 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED CONSOLIDATED BALANCE SHEET As at 31 March 2011 Note 2011 £ 2010 £ 16 17 21 108,864 25,830 1,051,382 1,186,076 19 21 24(a) 22 901,257 14,842,916 - 1,023,526 197,093 25,830 - 222,923 966,333 4,400,341 4,384 884,174 16,767,699 6,255,232 17,953,775 6,478,155 23 24(a) 25 26 5,536,162 1,174,806 4,684,320 3,786 3,342,153 15,116 5,165,203 4,048 11,399,074 8,526,520 26 27 947 5,060 11,400,021 8,531,580 1,697,617 4,591,367 1,697,617 (3,974,852) ASSETS Non-current assets Plant and equipment Goodwill Trade and other receivables Total non-current assets Current assets Inventories Trade and other receivables Tax recoverable Cash and bank balances Total current assets Total assets LIABILITIES AND EQUITY Current liabilities Trade and other payables Current tax liability Interest-bearing borrowings Obligation under finance lease Total current liabilities Non-current liability Obligation under finance lease Total liabilities Equity Share capital Reserves Equity/(capital deficiency) attributable to equity holders of the Company 6,288,984 (2,277,235) Non-controlling interests Total equity / (capital deficiency) Total liabilities and equity 264,770 223,810 6,553,754 (2,053,425) 17,953,775 6,478,155 The financial statements on pages 19 to 65 were authorised for issue by the board of directors on 29 September 2011 and are were signed on its behalf by: Stephen Sin Mo KOO, Director Chun Hung WONG, Director UNIVISION ENGINEERING LIMITED - 20 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED COMPANY BALANCE SHEET As at 31 March 2011 Note 2011 £ 2010 £ 16 18 19 21 22 23 25 26 26 27 1,295 2,467,223 2,468,518 697,769 1,610,406 859,245 8,976 244,105 253,081 764,957 2,168,892 713,066 3,167,420 3,646,915 5,635,938 3,899,996 2,368,070 3,738,766 3,786 2,461,725 3,997,267 4,048 6,110,622 6,463,040 947 5,060 6,111,569 6,468,100 1,697,617 (2,173,248) 1,697,617 (4,265,721) (475,631) (2,568,104) 5,635,938 3,899,996 ASSETS Non-current assets Plant and equipment Investment in subsidiary undertakings Total non-current assets Current assets Inventories Trade and other receivables Cash and bank balances Total current assets Total assets LIABILITIES AND EQUITY Current liabilities Trade and other payables Interest-bearing borrowings Obligation under finance lease Total current liabilities Non-current liability Obligation under finance lease Total liabilities Equity Share capital Reserves Total capital deficiency Total liabilities and equity The financial statements on pages 19 to 65 were authorised for issue by the board of directors on 29 September 2011 and were signed on its behalf by: Stephen Sin Mo KOO, Director Chun Hung WONG, Director UNIVISION ENGINEERING LIMITED - 21 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 March 2011 Share capital £ Share premium £ (Note 1) Retained earnings/ (accumulated losses) £ Special capital reserve “A” £ (Note 2) Special capital reserve “B” £ (Note 3) Translation reserve £ Sub-total £ Non- controlling interest £ Total equity/ (capital deficiency) £ 1,697,617 2,192,640 2,615,675 155,876 143,439 2,172,732 8,977,979 232,337 9,210,316 - - - - - - - - (10,340,804) - - (10,340,804) - - - - - - - - - (10,340,804) (7,454) (10,348,258) (827,625) (827,625) (1,073) (828,698) (86,785) (86,785) - (86,785) (914,410) (11,255,214) (8,527) (11,263,741) 1,697,617 2,192,640 (7,725,129) 155,876 143,439 1,258,322 (2,277,235) 223,810 (2,053,425) - - - - - - 8,192,288 - 8,192,288 - - - - - - - 8,192,288 39,093 8,231,381 373,931 373,931 1,867 375,798 373,931 8,566,219 40,960 8,607,179 At 1 April 2009 Loss for the year Exchange difference arising on translation of foreign operations Release of translation reserve upon deconsolidation of a subsidiary Total comprehensive loss for the year At 31 March 2010 Profit for the year Exchange difference arising on translation of foreign operations Total comprehensive income for the year At 31 March 2011 1,697,617 2,192,640 467,159 155,876 143,439 1,632,253 6,288,984 264,770 6,553,754 The currency translation from Hong Kong Dollars (“HK$”)to the presentational currency of Sterling Pound (“£”)used in the financial statements has no impact on the available distributable reserves of the Company at 31 March 2011. Notes: 1. Share premium The Company may by resolution reduce the share premium account in any manner authorised and subject to any conditions prescribed by law. 2. 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. 3. Special capital reserve “B” By a special resolution passed on 30 July 2004 and 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. UNIVISION ENGINEERING LIMITED - 22 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED COMPANY STATEMENT OF CHANGES IN EQUITY For the year ended 31 March 2011 Share capital £ Share premium £ Retained earnings/ (accumulated losses) £ Special capital reserve “A” £ Special capital reserve “B” £ Translation reserve £ Total equity/ (capital deficiency) £ 1,697,617 2,192,640 (3,620,469) 155,876 143,439 450,224 1,019,327 - - - - - - - - (3,535,672) - - (3,535,672) - - - - - - - (3,535,672) (51,759) (51,759) (51,759) (3,587,431) 1,697,617 2,192,640 (7,156,141) 155,876 143,439 398,465 (2,568,104) - - - - - - 1,996,360 - 1,996,360 - - - - - - - 1,996,360 96,113 96,113 96,113 2,092,473 At 1 April 2009 Loss for the year Exchange difference arising on translation of foreign operations Total comprehensive loss for the year At 31 March 2010 Profit for the year Exchange difference arising on translation of foreign operations Total comprehensive income for the year At 31 March 2011 1,697,617 2,192,640 (5,159,781) 155,876 143,439 494,578 (475,631) UNIVISION ENGINEERING LIMITED - 23 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31 March 2011 Cash flows from operating activities Profit/(loss) for the year Adjustments for: Non-cash finance costs Finance costs paid Interest income recognised in profit or loss Depreciation of plant and equipment Recovery from allowance for obsolete inventories Write-back on trade and other payables Impairment loss recognised on trade and other receivables Impairment loss recognised on goodwill Loss on disposal of plant and equipment Loss on deconsolidation of a subsidiary Gain on reconsolidation of a subsidiary Changes in operating assets and liabilities: Decrease in tax recoverable Decrease/(increase) in inventories Increase in trade and other receivables (Decrease)/increase in trade and other payables Cash generated from operations Income tax (paid)/refund Note 2011 £ 2010 £ 8,251,434 (10,330,907) 16 10 8 10 17 10 28 28 581,184 37,934 (846) 85,498 (15,136) (7,489) 881,891 - 18,906 - (8,426,380) 1,406,996 - 35,080 (937,711) (32,609) 575,078 36,579 (521) 55,043 (26,467) (3,275) 1,088,223 791,945 21,454 8,324,208 - 531,360 4,039 (3,836) (75,333) 843,186 471,756 1,299,416 (1,733) 38 Net cash generated from operating activities 470,023 1,299,454 Cash flows from investing activities Interest received Purchase of plant and equipment Change in pledged bank deposits Proceeds on disposal of plant and equipment Net cash inflow (outflow) from re-consolidation of a subsidiary 28 Net cash (used in)/generated from investing activities 846 (17,813) - 1,945 4,461 (10,561) 521 (30,861) 369,056 773 (4,388) 335,101 UNIVISION ENGINEERING LIMITED - 24 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED CONSOLIDATED STATEMENT OF CASH FLOWS (Continued) For the year ended 31 March 2011 Note 2011 £ 2010 £ Cash flows from financing activities Interest paid Repayment of obligation under finance lease Repayment of interest-bearing borrowings Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Effect of changes in exchange rates (37,934) (3,924) (228,557) (36,579) (4,048) (70,220) (270,415) (110,847) 189,047 884,174 1,523,708 (102,172) (49,695) (537,362) Cash and cash equivalents at end of year 22 1,023,526 884,174 UNIVISION ENGINEERING LIMITED - 25 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED COMPANY STATEMENT OF CASH FLOWS For the year ended 31 March 2011 Cash flows from operating activities Profit/(loss) for the year Adjustments for: Non-cash finance costs Finance costs paid Interest income recognised in profit or loss Depreciation of plant and equipment Write-back on trade and other payables (Reversal of)/impairment loss recognised on investment in subsidiary undertakings Impairment loss recognised on trade and other receivables Loss on disposal of plant and equipment Changes in operating assets and liabilities: Decrease in inventories Decrease in trade and other receivables (Increase)/decrease in amounts due from subsidiaries Decrease in trade and other payables Note 2011 £ 2010 £ 1,996,360 (3,535,672) 16 18 581,184 2,044 (562) 7,810 - (2,152,039) 204,995 2,350 571,615 6,104 (308) 9,876 (3,275) 2,788,557 774,771 21 642,142 611,689 18,362 228,157 (168,182) (513,258) 13,674 286,863 61,140 (207,749) Net cash generated from operating activities 207,221 765,617 Cash flows from investing activities Interest received Purchase of plant and equipment Change in pledged bank deposits Proceeds on disposal of plant and equipment Net cash (used in)/generated from investing activities Cash flows from financing activities Interest paid Repayment of obligation under finance lease Repayment of interest-bearing borrowings Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Effect of changes in exchange rates 562 (4,576) - 1,775 (2,239) (2,044) (3,924) - (5,968) 199,014 713,066 (52,835) Cash and cash equivalents at end of year 22 859,245 308 (83) 369,056 - 369,281 (6,104) (4,048) (256,235) (266,387) 868,511 (196,467) 41,022 713,066 UNIVISION ENGINEERING LIMITED - 26 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 1. GENERAL 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 registered office is 8/F Lever Tech Centre, 69-71 King Yip Street, Kwun Tong, Kowloon, Hong Kong. The Company and its subsidiaries (hereinafter collectively referred to as the “Group”) are engaged in the supply, design, installation and maintenance of closed circuit television and surveillance systems, the sale of security system related products and provision for electronic and mechanical services. The principal activities of its subsidiaries are set out in note 18 to the financial statements. 2. BASIS OF PREPARATION The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The financial statements have been prepared under the historical cost convention basis, except as disclosed in the accounting policies below. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement and assumptions in the process of applying its accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 4. 3. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTINGS STANDARDS (“IFRS”) In the current financial year, the Group has adopted all the new and revised IFRS and IFRIC Interpretations that are relevant to its operations and effective for the current financial year. The adoption of these new/revised IFRSs and IFRIC Interpretations has no material effect on the financial statements. UNIVISION ENGINEERING LIMITED - 27 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 3. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTINGS STANDARDS (“IFRS”)(CONTINUED) New and Revised IFRSs and IFRIC Interpretations Certain new standards, amendments and interpretations to existing standards have been published and are mandatory that are relevant for the Group’s accounting periods beginning on or after 1 April 2011 or later periods and which the Group has not early adopted. They are as follows: Revised IAS 24 - Related Party Disclosures IFRS 9 Financial Instruments IFRS 10 Consolidated Financial Statements Effective for annual periods commencing 1 January 2011 or later Effective for annual periods commencing 1 January 2013 or later Effective for annual periods commencing 1 January 2013 or later IFRS 11 Joint Arrangements Effective for annual periods commencing 1 January IFRS 12 Disclosure of Interests in Other Entities IFRS 13 Fair Value Measurement IAS 19 Employee Benefits (Amendments) 2013 or later Effective for annual periods commencing 1 January 2013 or later Effective for annual periods commencing 1 January 2013 or later Effective for annual periods commencing 1 January 2013 or later The nature of the changes in accounting policy on adopting the revised IAS 24 is described below: The revised IAS 24 clarifies the definition of a related party to simplify the identification of such relationships and to eliminate inconsistencies in its application. The revised IAS 24 expands the definition of a related party and would treat two entities as related to each other whenever a person (or a close member of that person’s family) or a third party has control or joint control over the entity, of has significant influence over the entity. The revised standard also introduces a partial exemption of disclosures requirements for government-related entities. The Group is currently determining the impact the changes to the definition of a related party will have on the disclosures of related party transactions. As this is a disclosure standard, it will have no impact on the financial position or financial performance of the Group when implemented in 2011. The directors of the Company anticipate that the application of the other new and revised standards, amendments or interpretations will have no material impact on the financial statements. 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 4.1 Basis of consolidation (a) Subsidiaries Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. UNIVISION ENGINEERING LIMITED - 28 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 4.1 Basis of consolidation (continued) (a) Subsidiaries (continued) The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisitions related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments. Cost also includes direct attributable costs of investment. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the statement of comprehensive income. Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. (b) Transactions with non-controlling interests The Group treats transactions with non-controlling interests as transactions with equity owners of the Group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. When the Group ceases to have control or significant influence, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate. UNIVISION ENGINEERING LIMITED - 29 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 4.2 Segment reporting An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incurs expenses, including revenues and expenses that relate to transactions with other components of the Group. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker is responsible for allocating resources and assessing performance of the operating segments. 4.3 Foreign currency (a) Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measuredusing the currency of the primary economic environment in which the entity operates (“thefunctional currency”). The consolidated and company financial statements are presented in Sterling Pound (“£”), which is the Group’s presentation currency. As the Company is listed on AIM, the directors consider that this presentation is more useful for its current and potential investors. The functional currency of the Group’s entity is summarised as follows: 1. 2. 3. 4. UniVision Engineering Limited T-Com Technology Co. Limited Leader Smart Engineering Limited Leader Smart Engineering (Shanghai) Limited (“LSSH”) Hong Kong Dollars (“HK$”) New Taiwan Dollars (“NTD”) Hong Kong Dollars (“HK$”) (“RMB”) Renminbi Yuan (b) 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 remeasured. 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 the income statement, except when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges. Foreign exchange gains and losses that relate to borrowings and cash and bank balances are presented in the income statement within “finance income or cost”. Allother foreign exchange gains and losses are presented in the statement of comprehensive income within “administrative expense”or “other income”. Changes in the fair value of monetary securities denominated in foreign currency classified as available for sale are analysed between translation differences resulting from changes in the amortised cost of the security and other changes in the carrying amount of the security. Translation differences in respect of changes in amortised cost are recognised in profit or loss, and other changes in carrying amount are recognised in other comprehensive income. Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets, such as equities classified as available for sale, are included in other comprehensive income. UNIVISION ENGINEERING LIMITED - 30 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 4.3 Foreign currency (continued) (c) Group companies The results and financial position of all the group entities (none of which has the currency of a hyper- inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: (i) (ii) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and (iii) all resulting exchange differences are recognised in other comprehensive income. On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings and other currency instruments designated as hedges of such investments, are taken to other comprehensive income. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the statement of comprehensive income as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. 4.4 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 Computer equipment Motor vehicles Research assets 5 years 3 years 3 years 5 years Fully depreciated plant and equipment are retained in the financial statements until they are no longer in use and no further charge for depreciation is made in respect of these assets. UNIVISION ENGINEERING LIMITED - 31 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 4.4 Plant and equipment (continued) The residual values, useful life 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 carrying amount of the asset only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repair and maintenance expenses are recognised in profit or loss when incurred. 4.5 Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose, identified according to operating segment. 4.6 Research and development expenditure Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated: the technical feasibility of completing the intangible asset so that it will be available for use or sale; the intention to complete the intangible asset and use or sell it; the ability to use or sell the intangible asset; how the intangible asset will generate probable future economic benefits; the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and the ability to measure reliably the expenditure attributable to the intangible asset during its development. The amount initially recognised for internally-generated intangible asset is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria. Where no internally-generated intangible asset can be recognised, development expenditure is charged to profit or loss in the period in which it is incurred. Subsequent accumulated amortisation and accumulated impairment losses. to initial recognition, internally-generated intangible asset is reported at cost less UNIVISION ENGINEERING LIMITED - 32 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 4.7 Impairment of non-financial assets Assets that have an indefinite useful life, for example, goodwill or intangible assets not ready to use are not subject to amortisation and are tested annually for impairment. Other assets that are subject to amortisation or depreciation are reviewed for in circumstances indicate that the carrying amount may not be recoverable. The difference between the carrying amount and the recoverable amount is recognised as an impairment loss in profit or loss. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that have suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. impairment whenever events or changes the lowest 4.8 Financial assets Financial assets are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instruments. (i) Classification The Group classifies its financial assets as loans and receivables. The classification depends on the purpose for which the assets were acquired. Management determines the classification of its financial assets at initial recognition. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are presented as current assets, except for those maturing later than twelve months after the end of the reporting period which are presented as non-current assets. Loans and receivables are presented as “trade and other receivables” and “cash and bank balances” on the balance sheet. (ii) Recognition and derecognition Purchases and sales of financial assets are recognised and derecognised on trade dates – the dates on which the Group commits to purchase or sell the assets. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. On disposal of a financial asset, the difference between the carrying amount and the sale proceeds is recognised in profit or loss. (iii) Initial measurement Loans and receivables are initially recognised at fair value plus transaction costs. (iv) Subsequent measurement Loans and receivables are subsequently carried at amortised cost using the effective interest method. UNIVISION ENGINEERING LIMITED - 33 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 4.8 Financial assets (continued) (v) Impairment of financial assets The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired and recognises an allowance for impairment when such evidence exists. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy, and default or significant delay in payments are objective evidence that these financial assets are impaired. The carrying amount of these assets is reduced through the use of an impairment allowance account which is calculated as the difference between the carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. When the asset becomes uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are recognised against the same line item in profit or loss. The allowance for impairment loss account is reduced through profit or loss in a subsequent period when the amount of impairment loss decreases and the related decrease can be objectively measured. The carrying amount of the asset previously impaired is increased to the extent that the new carrying amount does not exceed the amortised cost, had no impairment been recognised in prior periods. 4.9 Financial liabilities Financial liabilities are recognised on the balance sheet when, and only when, the Group and Company becomes a party to the contractual provisions of the financial instrument. Financial liabilities are recognised initially at fair value, plus, in the case of financial liabilities other than derivatives, directly attributable transaction costs. Subsequent to initial recognition, financial liabilities are measured at amortised cost using the effective interest method. For financial liabilities, gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process. A financial liability is derecognised when the obligation under the liability is extinguished. UNIVISION ENGINEERING LIMITED - 34 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 4.10 Construction contracts 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 balance sheet date. 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 balance sheet date are recorded in the balance sheet 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 balance sheet as the “Amountsdue 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 balance sheet. Amounts received before the related work is performed are included in the balance sheet, as a liability, as “Advances received”. 4.11 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. 4.12 Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale are added to the cost of those assets until such time as the assets are substantially ready for their Investment income earned on the temporary investment of specific borrowings intended use or sale. pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. 4.13 Financial guarantee contracts A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of debt instrument. A financial guarantee contract issued by the Group is initially measured at its fair value, less transaction costs that are directly attributable to the issue of the financial guarantee contract. Subsequently, the Group measures the financial guarantee contract at the higher of: (i) the amount of the present legal or constructive obligation under the contract at the reporting date, as determined in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets; and (ii) the amount initially recognised less, where appropriate, cumulative amortisation. UNIVISION ENGINEERING LIMITED - 35 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 4.14 Revenue recognition 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 the Group’s activities. Revenue is shown net of business tax, value-added tax, rebates and discounts, and after eliminating sales within the Group. The Group 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 have been met for each of the Group’s 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 Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. (i) 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 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. (ii) Maintenance contracts Revenue from maintenance contracts is recognised on a straight line basis over the term of maintenance contract. (iii) 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. (iv) Interest income Interest income is recognised as it accrues using the effective interest method. UNIVISION ENGINEERING LIMITED - 36 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 4.15 Income tax Income tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, 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 balance sheet date in the countries where the company and its subsidiaries operate and generate 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 consolidated 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 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 balance sheet date 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 is provided on temporary differences arising on investments in subsidiaries and associates, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the group and it is probable that the temporary difference will not reverse in the foreseeable future. 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. UNIVISION ENGINEERING LIMITED - 37 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 4.16 Provisions Provisions are recognised for liabilities of uncertain timing or amount when the Group or 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 the amount can been reliably estimated. 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 reliably estimated, 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 of economic benefits is remote. 4.17 Employee benefit These comprise short term employee benefits and contributions to defined contribution retirement plan. Salaries, annual bonuses, paid annual leave, 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. 4.18 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. The Company and the Group as lessee – Assets held under finance leases are recognised as assets of the Company and the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to profit or loss. Operating lease payments are recognised as an expense on a straight line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are recognised as a reduction of rental expense over the lease term on a straight line basis. UNIVISION ENGINEERING LIMITED - 38 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the Group’s accounting policies, which are described in note 4, the directors of the Company are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. 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. (a) Critical judgements in applying the entity’s accounting policies The following are the critical judgements, apart from those involving estimations (see below), that the directors have made in the process of applying the entity’s accounting policies and that have the most significant effect on the amounts recognised in financial statements. (i) Estimation of contract costs Estimated costs to complete contracts are judged by the directors through the application of their experience and knowledge of the industry in which the Group operates. However, contract performance can be difficult to predict accurately. The directors believe that contract budgets do not deviate materially from actual costs incurred due to a strong cost control system with regular review of budgets which highlight any incidences that could affect estimated costs to completion. The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting periods, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below. (b) Key sources of estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting periods, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are: (i) Impairment of trade and other receivables The estimation of impairment of trade and other receivables includes an assessment of recoverability of individual account balances and a review of ageing analysis of trade and other receivables by the directors. The directors will also review the credit history of customers in assessing the recoverability of trade and other receivables. When any indication comes to their attention that a trade and other receivable might not be recovered in full, impairment will be made and recognised as an expense in the consolidated statement of comprehensive income. As at 31 March 2011, the total carrying amount of trade and other receivables are £14,842,916 (2010: £4,400,341). UNIVISION ENGINEERING LIMITED - 39 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (CONTINUED) (b) Key sources of estimation uncertainty (continued) (ii) Deferred income tax As at 31 March 2011, the Group has unused tax losses of £4,411,038 (2010: £5,368,856) available for offset against future profits. A deferred tax asset of £727,821 (2010: £885,861) has not been recognised in respect of the unused tax losses. 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 consolidated statement of comprehensive income for the period in which such future profits are recorded. 6. FINANCIAL INSTRUMENTS (a) Categories of financial instruments Financial assets: Loans and receivables (including cash and bank balances) - Trade and other receivables - Tax recoverable - Cash and bank balances Financial liabilities: - Trade and other payables - Current tax liability - Interest-bearing borrowings - Obligation under finance lease 2011 £ 2010 £ 14,842,916 - 1,023,526 4,400,341 4,384 884,174 5,536,162 1,174,806 4,684,320 4,733 3,342,153 15,116 5,165,203 9,108 (b) Financial risk management objectives and policies The Group’s major financial instruments include borrowings,trade and other receivables and trade and other payables. Details of these 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 management manages and monitors these exposures to ensure appropriate measures are implemented in a timely and effective manner. UNIVISION ENGINEERING LIMITED - 40 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 6. FINANCIAL INSTRUMENTS (CONTINUED) (b) Financial risk management objectives and policies (continued) (i) Market risk (1) Currency risk Certain entities in the Group have foreign currency transactions and have foreign currency denominated monetary assets and liabilities, which expose the Group to foreign currency risk. The Company has foreign currency transactions, which expose the Company to foreign currency risk. The carrying amounts of the Group’s and the Company’s foreign currency denominated monetary assets and monetary liabilities, mainly represented by trade and other receivables, cash and bank balances, trade and other payables and borrowings, at the end of the reporting period are as follows: The Group The Company Assets Liabilities Assets Liabilities 2011 2010 2011 2010 2011 2010 2011 2010 NTD RMB USD HK$ 110,429,36 125,592,045 459,128 29,255,983 112,770,825 - 347,897 29,769,288 94,792,795 34,640,001 8,280,118 9,793,489 93,930,365 15,216 7,448,385 17,739,283 - - 455,983 26,676,932 - - 346,274 - 955 8,280,118 29,243,150 ` 9,740,316 - 15,216 7,413,019 17,694,033 The Group currently does not have any policy on hedges of foreign currency risk. However, management monitors the foreign currency risk exposure and will consider hedging significant foreign currency risk should the need arise. UNIVISION ENGINEERING LIMITED - 41 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 6. FINANCIAL INSTRUMENTS (CONTINUED) (i) Market risk (continued) (1) Currency risk (continued) Sensitivity analysis The following table details the Group’s sensitivity to a 5% increase and decrease in £ against the relevant foreign currencies and all other variables were held constant. 5% (2010: 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 includes only outstanding foreign currencies exchange rates. The sensitivity analysis denominated monetary items and adjusts their translation at the year end for a 5% (2010: 5%) change in foreign currency rates. A positive/(negative) number indicates a decrease/(increase) in post-tax profit/(loss) for the year when £ strengthens 5% (2010: 5%) against the relevant foreign currencies. For a 5% (2010: 5%) weakening of £ against the relevant currency, there would be an equal but opposite impact on the post-tax profit/(loss) for the year. NTD Post-tax profit for the year RMB Post-tax profit/(loss) for the year USD Post-tax loss for the year HK$ Post-tax profit for the year (2) Interest rate risk 2011 £ 2010 £ 17,347 20,758 454,106 (78) (256,488) (248,970) 81,830 54,079 The Group and the Company is exposed to fair value interest rate risk in relation to fixed rate bank deposits and borrowings at fixed rates. The Group and 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 notes 25 and 26. The Group currently does not have an interest rate hedging policy. However, management monitors interest rate exposure and will consider hedging significant interest rate exposure should the need arises. The Group’s and the Company’s exposures to interest rates on financial liabilities are detailed in the liquidity risk management section of this note. UNIVISION ENGINEERING LIMITED - 42 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 6. FINANCIAL INSTRUMENTS (CONTINUED) (i) Market risk (continued) (2) Interest rate risk (continued) Sensitivity analysis 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 balance sheet date and on the assumption that the amount outstanding at the balance sheet date was outstanding for the whole year and held constant throughout the financial year. The 25 basis points increase or decrease represents management’s assessment of a reasonably possible change in interest rates over the period until the next annual balance sheet date. The analysis is performed on the same basis for 2010. For the year ended 31 March 2011, if interest rates had been 25 basis points higher/lower, with all other variables held constant, the Group’s post-tax profit the year would increase/decrease by approximately £2,302 (2010: £2,213). for (ii) Credit risk At 31 March 2011, the Group’s and 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 consolidated balance sheet. The Group’s credit risk is primarily attributable to its trade and other receivables. In order to minimise the credit risk, the management of the Group has a credit policy in place and the exposures to these credit risks are monitored on an ongoing basis. Credit evaluations of its customers’ financial position and condition are performed on each and every major customer periodically. These evaluations focus on the customer’s past history of making payments their due and current ability to pay, and take into account information specific to the customer as well as pertaining to the economic environment in which the customer operates. Debts are usually due within 90 days from the date of billing. The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The default risk of the industry and country in which customers operate also has an influence on credit the Group had no significant the balance sheet date, concentrations of credit risk where individual trade and other receivables balance exceed 10% of the total trade and other receivables at the balance sheet date. risk. At The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies. Also, the Group has no significant concentration of credit risk, with exposure spread over a number of counterparties and customers. Further quantitative disclosures in respect of the Group’s and the Company’s exposure to credit risk arising from trade and other receivables are set out in note 21. UNIVISION ENGINEERING LIMITED - 43 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 6. FINANCIAL INSTRUMENTS (CONTINUED) (iii) Liquidity risk In managing the liquidity risk, the Group’s policy is to regularly monitor and maintain an adequate level of cash and cash equivalents determined by management to finance the Group’s operations. Management also needs to ensure the continuity of funding for both the short and long terms, and to mitigate the effects of cash flow fluctuation. At 31 March 2011, the Group had aggregate banking facilities of £1,981,477 (2010: £2,346,849), of which £1,035,923 were unused (2010: £1,178,913). The following table details the contractual maturities of the Group’s financial liabilities at the balance sheet date, which is based on the undiscounted cash flows and the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows. The Group Non-derivative financial liabilities: Interest-bearing borrowings Trade and other payables Current tax liability Obligation under finance lease Financial guarantee Maximum amount guaranteed (note 31) Weighted average effective interest rate % Within 1 year or on demand £ 2011 More than More than 2 years but 1 year but less than less than 5 years 2 years £ £ Total undiscounted Carrying amount at 31 cash flow March 2011 £ £ 3.2% - 15% 5,254,254 - - 5,536,162 1,174,806 9.5% 4,529 11,969,751 - - - 1,133 1,133 4,400,000 - - - - - - - 5,254,254 4,684,320 5,536,162 1,174,806 5,536,162 1,174,806 5,662 4,733 11,970,884 11,400,021 4,400,000 4,400,000 UNIVISION ENGINEERING LIMITED - 44 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 6. FINANCIAL INSTRUMENTS (CONTINUED) (iii) Liquidity risk (continued) The Group Weighted average effective interest rate % Within 1 year or on demand £ 2010 More than More than 2 years but 1 year but less than less than 5 years 2 years £ £ Total undiscounted Carrying amount at 31 cash flow March 2010 £ £ 3.1%-15% 5,782,080 - - 3,342,153 15,116 9.5% 4,842 9,144,191 - - - 6,052 6,052 2,700,856 - - - - - - - 5,782,080 5,165,203 3,342,153 15,116 3,342,153 15,116 10,894 9,108 9,150,243 8,531,580 2,700,856 - Weighted average effective interest rate % Within 1 year or on demand £ 2011 More than More than 2 years but 1 year but less than less than 5 years 2 years £ £ Total undiscounted Carrying amount at 31 cash flow March 2011 £ £ 15% 4,299,581 - 2,368,070 9.5% 4,529 6,672,180 - - 1,133 1,133 - - - - 4,299,581 3,738,766 2,368,070 2,368,070 5,662 4,733 6,673,313 6,111,569 Non-derivative financial liabilities: Interest-bearing borrowings Trade and other payables Current tax liability Obligation under finance lease Financial guarantee Maximum amount guaranteed (note 31) The Company Non-derivative financial liabilities: Interest-bearing borrowings Trade and other payables Obligation under finance lease UNIVISION ENGINEERING LIMITED - 45 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 6. FINANCIAL INSTRUMENTS (CONTINUED) (iii) Liquidity risk (continued) The Company Weighted average effective interest rate % Within 1 year or on demand £ 2010 More than More than 2 years but 1 year but less than less than 5 years 2 years £ £ Total undiscounted Carrying amount at 31 cash flow March 2010 £ £ 15% 4,596,857 - 2,461,725 9.5% 4,842 7,063,424 - - 6,052 6,052 - - - - 4,596,857 3,997,267 2,461,725 2,461,725 10,894 9,108 7,069,476 6,468,100 Non-derivative financial liabilities: Interest-bearing borrowings Trade and other payables Obligation under finance lease (c) Fair value The fair values of financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis. The directors of the Company consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements approximate to their fair values. (d) Capital risk management The Group’s primary objectives when managing capital are to safeguard the Group’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 Group actively and regularly reviews and manages its 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 Group monitors its capital structure on the basis of a net debt-to-adjusted capital ratio. For this purpose the Group defines net debt as total debt (which includes bank borrowings and other financial liabilities) less bank deposits and cash. Adjusted capital comprises all components of equity less unaccrued proposed dividends. UNIVISION ENGINEERING LIMITED - 46 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 6. FINANCIAL INSTRUMENTS (CONTINUED) (d) Capital risk management (continued) During 2011, the Group’s strategy, which was unchanged from 2010, was to maintain the net debt-to-adjusted capital ratio as low as feasible. In order to maintain or adjust the ratio, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Neither the Company nor any of its subsidiary undertakings are subject to externally imposed capital requirements. The net debt-to-adjusted capital ratios of the Group and the Company at the end of the reporting period were as follows: Current liabilities Trade and other payables Interest-bearing borrowings Current tax liability Obligation under finance lease Non-current liabilities Obligation under finance lease The Group The Company 2011 £ 5,536,162 4,684,320 1,174,806 3,786 11,399,074 2010 £ 3,342,153 5,165,203 15,116 4,048 8,526,520 2011 £ 2,368,070 3,738,766 - 3,786 6,110,622 2010 £ 2,461,725 3,997,267 - 4,048 6,463,040 947 5,060 947 5,060 Total debt 11,400,021 8,531,580 6,111,569 6,468,100 Less: cash and bank balances 1,023,526 884,174 859,245 713,066 Net debt 10,376,495 7,647,406 5,252,324 5,755,034 Total equity / (capital deficiency) Net debt-to-adjusted capital ratio 6,553,754 (2,053,425) (475,631) (2,568,104) 158% -372% -1104% -224% UNIVISION ENGINEERING LIMITED - 47 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 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 Group’s reportable operating segments are summarised as follows: - - Security and surveillance Electrical and mechanical (a) Segment revenues and results The following is an analysis of the Group’s revenue and results by operating segment: Segment revenue by major products and services: - Construction contracts - Maintenance contracts - Product sales Revenue from external customers Security and surveillance £ Year ended 31 March 2011 Electrical and mechanical £ Total £ 4,006,634 2,464,360 627,212 7,098,206 1,478,157 - - 1,478,157 5,484,791 2,464,360 627,212 8,576,363 Segment profit/(loss) Gain on reconsolidation of a subsidiary Finance costs 2,738,348 - (37,934) (2,294,176) 8,426,380 (581,184) 444,172 8,426,380 (619,118) Profit before income tax 2,700,414 5,551,020 8,251,434 Security and surveillance £ Year ended 31 March 2010 Electrical and mechanical £ Total £ Segment revenue by major products and services: - Construction contracts - Maintenance contracts - Product sales Revenue from external customers 4,188,245 2,027,207 258,291 6,473,743 - - - - 4,188,245 2,027,207 258,291 6,473,743 Segment loss Loss on deconsolidation of a subsidiary Finance costs (1,018,997) - (40,042) (376,045) (8,324,208) (571,615) (1,395,042) (8,324,208) (611,657) Loss before income tax (1,059,039) (9,271,868) (10,330,907) UNIVISION ENGINEERING LIMITED - 48 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 7. SEGMENT INFORMATION (CONTINUED) (b) Segment assets and liabilities The following is an analysis of the Group’s assets and liabilities by operating segment: Segment assets Unallocated assets Consolidated total assets Segment liabilities Unallocated liabilities Consolidated total liabilities Segment assets Unallocated assets Consolidated total assets Segment liabilities Unallocated liabilities Consolidated total liabilities Security and surveillance £ At 31 March 2011 Electrical and mechanical £ 5,833,306 - 5,833,306 2,968,860 - 2,968,860 12,120,469 - 12,120,469 8,431,161 - 8,431,161 Security and surveillance £ At 31 March 2010 Electrical and mechanical £ 6,433,219 - 6,433,219 3,631,064 - 3,631,064 44,936 - 44,936 4,900,516 - 4,900,516 Total £ 17,953,775 - 17,953,775 11,400,021 - 11,400,021 Total £ 6,478,155 - 6,478,155 8,531,580 - 8,531,580 UNIVISION ENGINEERING LIMITED - 49 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 7. SEGMENT INFORMATION (CONTINUED) (c) Other segment information Amounts regularly provided to the chief operating decision maker but not included in the measure of segment profit or segment assets and not allocated to any operating segments: Security and surveillance £ Year ended 31 March 2011 Electrical and mechanical £ Total £ Capital expenditure Depreciation Impairment loss recognised on goodwill 17,813 85,498 - - - - 17,813 85,498 - Security and surveillance £ Year ended 31 March 2010 Electrical and mechanical £ Total £ Capital expenditure Depreciation Impairment loss recognised on goodwill 29,421 55,043 68,509 - - 723,436 29,421 55,043 791,945 * Capital expenditure represented plant and equipment. (d) Geographical segments In determining the Group’s geographical segments, revenues are attributed to the segments based on the location of the customers and assets are attributed to the segments based on the location of the assets. No further geographical segment information is presented as the Group’s revenue is materially derived from customers based in one geographic segment comprising Hong Kong, Macau, Taiwan and the PRC, and all of the Group’s assets are located in the same geographic segment. (e) Information about major customers Revenues of approximately £2,115,481 (2010: £1,676,208) are derived from two single external customers, who contributed to 10% or more of the Group’s revenue for both 2011 and 2010 fiscal years. UNIVISION ENGINEERING LIMITED - 50 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 8. OTHER INCOME Exchange gain Interest income Write-back on trade and other payables Sundry income 9. FINANCE COSTS Interest on bank loans and other borrowings wholly repayable within one year Finance charge on obligation under finance lease 10. PROFIT/(LOSS) BEFORE INCOME TAX Profit/(loss) before income tax is stated after charging/(crediting): Cost of inventories recognised as expenses Impairment loss recognised on trade and other receivables Impairment loss recognised on goodwill Recovery from allowance for obsolete inventories Auditor’s remuneration - audit services (parent company) Depreciation –leased plant and equipment Depreciation –owned plant and equipment Research and development costs Operating lease charges –minimum lease payments Loss on disposal of plant and equipment Loss on deconsolidation of a subsidiary Gain on reconsolidation of a subsidiary 2011 £ 40,594 846 7,489 4,828 53,757 2010 £ 17,771 521 3,275 121,793 143,360 2011 £ 2010 £ 618,348 770 610,900 757 619,118 611,657 2011 £ 2,367,480 881,891 - (15,136) 44,504 6,001 79,497 13,284 122,241 18,906 - (8,426,380) 2010 £ 2,165,974 1,088,223 791,945 (26,467) (13,928) 5,902 49,141 25,756 114,019 21,454 8,324,208 - UNIVISION ENGINEERING LIMITED - 51 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 11. DIRECTORS’ REMUNERATION Directors’ remuneration for the year is disclosed as follows: Directors’ fees Other emoluments: Salaries, bonuses and allowances Pension scheme contributions 12. STAFF COSTS (including directors’ remuneration) Wages and salaries Pension scheme contributions 2011 £ 2010 £ 80,470 81,752 138,473 2,979 126,390 2,931 221,922 211,073 2011 £ 2010 £ 1,903,111 80,076 1,747,441 74,810 1,983,187 1,822,251 13. INCOME TAX IN THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (a) Income tax in the consolidated statement of comprehensive income: Income tax expense (credit) Hong Kong profits tax PRC income tax Taiwan income tax 2011 £ 2010 £ - - 20,053 20,053 (5,045) - 22,396 17,351 No Hong Kong profits tax has been provided for in the financial statements as the Company has unused tax losses to offset against its taxable profit during the year. Taxes for subsidiary undertakings are calculated using the rates prevailing in the local jurisdictions, whereas PRC income tax rate is charged at 25% (2010: 25%) and Taiwan income rate is charged at 25% (2010: 25%). UNIVISION ENGINEERING LIMITED - 52 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 13. INCOME TAX IN CONSOLIDATED STATEMENT OF COMPREHENSVE INCOME (CONTINUED) (b) Reconciliation between income tax expense and accounting profit/(loss) at the applicable tax rates: 2011 £ 2010 £ Profit/(loss) before income tax 8,251,434 (10,330,907) Notional tax on profit/(loss) before tax, calculated at the rates applicable to profit/(loss) in the tax jurisdictions concerned Tax effect of non-taxable income Tax effect of non-deductible expenses Tax effect of temporary differences not recognised Utilisation of tax losses previously unrecognised deferred tax assets Tax losses not recognised as deferred tax assets Over provision in prior years 269,654 (324,180) 179,424 (143) (104,411) - (291) (613,269) (6) 621,058 (2) - 27,581 (18,011) Income tax expense 20,053 17,351 14. EARNINGS/(LOSS) PER SHARE The calculation of basic earnings/(loss) per share is based on the profit/(loss) attributable to the equity holders of the Company for the year of £8,192,288 (2010: loss of £10,340,804), and the weighted average of 383,677,323 (2010: 383,677,323) ordinary shares in issue during the year. There were no potential dilutive instruments at either financial year end. 15. DIVIDENDS No dividends have been declared or paid for the year ended 31 March 2011 (2010: £Nil). UNIVISION ENGINEERING LIMITED - 53 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 16. PLANT AND EQUIPMENT The Group Furniture and fixtures £ Computer equipment £ Motor vehicles £ Research assets £ Total £ Cost At 1 April 2009 Additions Disposals Deconsolidation Exchange translation 160,495 6,049 (619) (11,180) (4,834) 162,833 17,956 (94) - 7,381 120,675 5,416 (3,611) (29,326) (3,532) 967,171 - (61,425) (14,139) 9,448 1,411,174 29,421 (65,749) (54,645) 8,463 At 31 March 2010 149,911 188,076 89,622 901,055 1,328,664 At 1 April 2010 Additions Disposals Exchange translation 149,911 5,243 (113) 177 188,076 1,740 (35,517) (1,223) 89,622 10,830 (10,844) (968) 901,055 - (359,743) 3,254 1,328,664 17,813 (406,217) 1,240 At 31 March 2011 155,218 153,076 88,640 544,566 941,500 Accumulated depreciation At 1 April 2009 Charge for the year Disposals Deconsolidation Exchange translation 136,828 21,640 (619) (4,265) (38,992) 113,712 9,210 (73) - 42,031 66,458 14,530 (3,611) (7,918) 11 808,663 9,662 (39,256) (6,788) 10,348 1,125,661 55,042 (43,559) (18,971) 13,398 At 31 March 2010 114,592 164,880 69,470 782,629 1,131,571 At 1 April 2010 Charge for the year Disposals Exchange translation 114,592 17,282 (113) 108 164,880 10,586 (35,517) (1,283) 69,470 12,208 (6,719) (840) 782,629 45,422 (343,017) 2,948 1,131,571 85,498 (385,366) 933 At 31 March 2011 131,869 138,666 74,119 487,982 832,636 Net book value At 31 March 2011 At 31 March 2010 23,349 35,319 14,410 23,196 14,521 20,152 56,584 108,864 118,426 197,093 At the balance sheet date, the net carrying value of motor vehicle held under finance lease of the Group and the Company was £Nil (2010: £6,193). UNIVISION ENGINEERING LIMITED - 54 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 16. PLANT AND EQUIPMENT (CONTINUED) The Company Cost At 1 April 2009 Additions Disposals Exchange translation At 31 March 2010 At 1 April 2010 Additions Disposals Exchange translation At 31 March 2011 Accumulated depreciation At 1 April 2009 Charge for the year Disposals Exchange translation At 31 March 2010 At 1 April 2010 Charge for the year Disposals Exchange translation At 31 March 2011 Net book value At 31 March 2011 At 31 March 2010 Furniture and fixtures £ Computer equipment £ Motor vehicles £ Total £ 12,739 7 - (726) 12,020 12,020 876 - (780) 12,116 9,151 2,104 - (418) 10,837 10,837 1,093 - (712) 11,218 898 1,183 33,006 72 (94) (1,885) 31,099 31,099 389 - (1,955) 29,533 31,816 820 (73) (1,780) 30,783 30,783 284 - (1,931) 29,136 397 316 25,780 - - (1,471) 24,309 24,309 3,312 (6,872) (1,402) 19,347 10,117 6,952 - (237) 16,832 16,832 6,433 (2,747) (1,171) 19,347 - 7,477 71,525 79 (94) (4,082) 67,428 67,428 4,577 (6,872) (4,137) 60,996 51,084 9,876 (73) (2,435) 58,452 58,452 7,810 (2,747) (3,814) 59,701 1,295 8,976 UNIVISION ENGINEERING LIMITED - 55 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 17. GOODWILL The Group Cost At 1 April 2009, 31 March 2010 and 31 March 2011 Accumulated impairment loss At 1 April 2009 Impairment loss recognised in the year Exchange translation At 31 March 2010 and 31 March 2011 Net carrying amount At 31 March 2011 and 31 March 2010 £ 961,845 269,015 791,945 (124,945) 936,015 25,830 Impairment test for cash-generating unit containing goodwill Goodwill is allocated to the Group’s cash-generating unit (“CGU”) identified according to operating segment as follows: Security and surveillance 2011 £ 2010 £ 25,830 25,830 The recoverable amount of the CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a twelve month period. A discount rate of 15% has been used for the value-in-use calculations. Key assumptions used for value-in-use calculations: Gross margin Growth rate 2011 2010 25% 13% 30%-40% 11% Management determined the budgets based on their experience and knowledge in the construction contracts operations. The discount rate used is pre-tax and reflects specific risks relating to the relevant segment. Based on the impairment test performed, no impairment loss is recognised for the year (2010: £791,945). UNIVISION ENGINEERING LIMITED - 56 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 18. INVESTMENT IN SUBSIDIARY UNDERTAKINGS Shares in subsidiary undertakings Less: impairment loss Exchange translation 2011 £ 2010 £ 1,053,475 1,053,475 (1,191,416) 151,667 (1,191,416) 152,616 13,726 14,675 Amounts due from subsidiary undertakings 6,898,473 7,201,931 Less: impairment loss Exchange translation Total (5,242,383) 797,407 (7,146,630) 174,129 2,453,497 229,430 2,467,223 244,105 The amounts due from subsidiary undertakings are unsecured, interest-free and not expected to be recovered within one year. Particulars of the Group’s subsidiary undertakings at 31 March 2011 are set out below: Name Place of incorporation and operations Issued and fully paid up share capital/ registered capital Percentage of equity attributable to the Company Directly Indirectly Principal activities T-Com Technology Co Taiwan Limited NT$80,000,000 Ordinary share 52.25% Leader Smart Engineering Limited Hong Kong HK$10,000 Ordinary shares 100% - - Supply, design, installation and maintenance of closed circuit television and surveillance systems and the sale of security system related products Investment holding and engineering contractor Leader Smart Engineering (Shanghai) Limited The PRC US$1,000,000 Registered capital - 100% Supply, design, installation and maintenance of electrical and mechanical systems, construction decorations and provision of engineering consultancy services Note: Leader Smart Engineering (Shanghai) Limited (“LSSH”) is a wholly-foreign owned enterprise established in the PRC to operate for 20 years up to 2025. UNIVISION ENGINEERING LIMITED - 57 - ANNUAL REPORT 2011 19. INVENTORIES Raw materials Work in progress Finished goods Less: impairment loss UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 The Group The Company 2011 £ 311,085 20 650,719 961,824 (60,567) 2010 £ 388,497 5,262 647,882 1,041,641 (75,308) 2011 £ 311,085 20 386,664 697,769 - 2010 £ 388,497 5,262 371,198 764,957 - 901,257 966,333 697,769 764,957 The Group recognised a recovery of £15,136 (2010: £26,467) from impairment previously recognised on slow-moving inventories, due to subsequent sales during the 2011 fiscal year. The amount reversed has been included in “cost of sales”in the statement of comprehensive income. 20. CONTRACTS-IN-PROGRESS The Group The Company 2011 £ 2010 £ 2011 £ 2010 £ 24,789,114 (11,122,015) 11,384,702 (10,341,800) 9,454,549 (9,346,932) 8,210,875 (8,553,963) 13,667,099 1,042,902 107,617 (343,088) 14,231,427 (100,659) 2,247,009 - 671,945 (100,659) 830,524 - 14,130,768 2,247,009 571,286 830,524 Contract costs incurred plus attributable profits less foreseeable losses Progress billings to date Represented by: Amounts due from customers for contracts-in-progress (note 21) Less: allowance for doubtful debts Amounts due from customers for contracts-in-progress, net Amounts due to customers for contracts-in-progress (note 23) (463,669) (1,204,107) (463,669) (1,173,612) 13,667,099 1,042,902 107,617 (343,088) At 31 March 2011, the amount of retention receivables from construction customers recorded within “trade and other receivables” is £24,460 (2010: £85,883). Within amounts due from customers for construction contracts-in-progress are receivables totalling £10,836,487 (2010: £Nil), which have been pledged as security by the original land use rights certificate and the developing property of the customer in LSSH. UNIVISION ENGINEERING LIMITED - 58 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 21. TRADE AND OTHER RECEIVABLES The Group The Company 2011 £ 2010 £ 2011 £ 2010 £ Trade receivables Less: allowance for doubtful debts 2,319,255 (1,442,176) 2,042,502 (1,345,523) 1,521,462 (1,201,983) 1,756,031 (1,283,731) Trade receivables, net Bills receivable Other receivables Deposits and prepayments Amounts due from customers for contracts-in-progress, net (note 20) Pledged bank deposits Less: non-current portion – amounts due from customers for contracts-in-progress 877,079 - 556,747 92,668 696,979 267,521 851,195 83,941 319,479 - 397,268 85,337 472,300 - 537,173 75,199 14,130,768 237,036 15,894,298 2,247,009 253,696 4,400,341 571,286 237,036 1,610,406 830,524 253,696 2,168,892 (1,051,382) - - - 14,842,916 4,400,341 1,610,406 2,168,892 All of trade and other receivables are expected to be recovered within one year, other than those separately disclosed. At 31 March 2011, the Group had pledged bank deposits of £237,036 (2010: £253,696) to banks for performance bonds in respect of construction contracts undertaken by the Group and the Company. (a) Impairment of trade receivables Impairment losses in respect of trade receivables are recorded using an allowance account unless the Group 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: At 1 April Impairment loss recognised Exchange translation The Group The Company 2011 £ 1,345,523 176,845 (80,192) 2010 £ 569,057 766,906 9,560 2011 £ 1,283,731 1,314 (83,062) 2010 £ 508,293 766,906 8,532 At 31 March 1,442,176 1,345,523 1,201,983 1,283,731 Note: At 31 March 2011, trade receivables of the Group and the Company amounting to £176,845 (2010: £766,906) and £1,314 (2010: £766,906) respectively are individually determined to be impaired and an impairment was provided. These individually impaired receivables were outstanding over one year at the balance sheet date. UNIVISION ENGINEERING LIMITED - 59 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 21. TRADE AND OTHER RECEIVABLES (CONTINUED) (b) Trade receivables that are not impaired The following is an ageing analysis of trade receivables at the balance sheet date that were past due but not impaired: 0 to 90 days 91 to 365 days Over 365 days The Group The Company 2011 £ 586,745 152,321 138,013 2010 £ 429,672 205,777 61,530 2011 £ 246,484 63,185 9,810 2010 £ 371,571 100,473 256 877,079 696,979 319,479 472,300 Receivables that were past due but not impaired relate to a number of independent customers that have a good track record with the Group. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable. The Company does not hold any collateral over these balances. 22. CASH AND CASH EQUIVALENTS The Group The Company 2011 £ 2010 £ 2011 £ 2010 £ Cash and bank balances* 1,023,526 884,174 859,245 713,066 Cash and cash equivalents in the consolidated and the Company’s statement of cash flows 1,023,526 884,174 859,245 713,066 * At 31 March 2011, the Group maintained £80,688 (2010: £115,201) and £237,755 (2010: £253,696) as restricted cash to secure against the bank facility and bank loans as collaterals (note 25), respectively. UNIVISION ENGINEERING LIMITED - 60 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 23. TRADE AND OTHER PAYABLES Trade payables Bills payable Due to a related party (note 30(b)) Accruals and other payables Amounts due to customers for contracts-in-progress (note 20) The Group The Company 2011 £ 2,360,609 193,168 39,455 2,479,261 2010 £ 371,280 413,072 2,642 1,351,052 2011 £ 44,159 - - 1,860,242 2010 £ 40,616 - - 1,247,497 463,669 1,204,107 463,669 1,173,612 5,536,162 3,342,153 2,368,070 2,461,725 24. INCOME TAX IN THE BALANCE SHEET (a) Current tax liability in the balance sheet represents: Hong Kong profits tax PRC income tax Taiwan income tax The Group The Company 2011 £ - 1,122,740 52,066 1,174,806 2010 £ 2011 £ 2010 £ (4,384) - 15,116 10,732 - - - - - - - - (b) Unrecognised deferred tax assets At 31 March 2011, the Company had unused tax losses of £4,411,038 (2010: £5,368,856) that were available for offset against future taxable profits of the Company. No deferred tax assets have been recognised due to the unpredictability of the future profit streams. Such unused tax losses are available to be carried forward at no expiration. No provision for deferred tax liabilities has been made in the financial statements as the tax effect of temporary differences is immaterial to the Group and the Company. UNIVISION ENGINEERING LIMITED - 61 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 25. INTEREST-BEARING BORROWINGS Within one year or on demand Secured bank loans (note a) Loan from a shareholder (note b) The Group The Company 2011 £ 2010 £ 2011 £ 2010 £ 945,554 3,738,766 1,167,936 3,997,267 - 3,738,766 - 3,997,267 4,684,320 5,165,203 3,738,766 3,997,267 Notes: (a) The secured bank loans carried interest at rates ranging from 3.232% to 4% per annum (2010: 3.100% to 3.764%) and were secured by:- (i) (ii) Restricted cash (note 22) and; Personal guarantee by the director of the Company, Mr. Stephen Sin Mo KOO (note 30). (b) A loan of US$5,000,000 was provided on 31 December 2007 by Mayne Management Limited, the ultimate controlling party of the Company, which is the holding company of UniVision Holdings Limited and has a 47.9% equity interest of the Company at 31 March 2011. The loan facility is used exclusively to finance a major construction project in the PRC. The loan carries interest at the rate of 15% per annum (2010: 15%) and is payable on the maturity date of 31 March 2012. Security over the Group’s interest in a shopping mall contract within the PRC has been provided. 26. OBLIGATION UNDER FINANCE LEASE At 31 March 2011 and 2010, the Group and the Company has obligations under finance leases as follows: Minimum lease payment Present value of the minimum lease payment 2011 £ 4,529 1,133 5,662 929 4,733 2010 £ 4,842 6,052 2011 £ 3,786 947 2010 £ 4,048 5,060 10,894 4,733 9,108 1,786 9,108 Within one year Between two to five years Total minimum finance lease payments Less: future finance charges Present value of lease obligation UNIVISION ENGINEERING LIMITED - 62 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 27. SHARE CAPITAL Authorised : 800,000,000 ordinary shares of HK$0.0625 each 2011 £ 2010 £ 3,669,470 3,669,470 Issued and fully paid: 383,677,323 ordinary shares (2010: 383,677,323 ordinary shares) of HK$0.0625 each 1,697,617 1,697,617 The Company has one class of ordinary shares. 28. RECONSOLIDATION OF SUBSIDIARY During the 2010 fiscal year, the Group lost control of a wholly-owned subsidiary, LSSH as a result of a legal dispute with its former director. The financial results of LSSH were excluded from the consolidated financial statements of the Group from the date that control was lost. The consolidated statement of comprehensive income presented a loss on deconsolidation of a subsidiary amounting to £8,324,208. In September 2010, a final verdict on this litigation was issued by the Court in favour of the Group and the Group has regained the control in LSSH and assumed its authorised power to govern the financial and operating policies of LSSH. Accordingly, the results of LSSH have been reconsolidated in the financial statements under IAS 27 and the Group has recognised a gain on reconsolidation of a subsidiary amounting to £8,426,380 in the consolidated statement of comprehensive income. 29. OPERATING LEASE COMMITMENTS At the balance sheet date, the total future minimum lease payments under non-cancellable operating leases for the office and warehouse premises are payable as follows: Within one year Between two to five years The Group The Company 2011 £ 98,989 28,145 2010 £ 106,470 46,262 127,134 152,732 2011 £ 61,106 4,709 65,815 2010 £ 52,967 3,557 56,524 UNIVISION ENGINEERING LIMITED - 63 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 30. RELATED PARTY TRANSACTIONS Compensation of key management personnel The remuneration of the key management of the Group during the year was as follows:- Salaries, bonus and allowances 2011 £ 2010 £ 291,531 271,248 The remuneration of key management personnel comprises the remuneration of Executive Directors and key executives. Executive Directors include Executive Chairman, Chief Executive Officer, Technical Director 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 Group 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 Director of Operations and Director of Sales and Marketing 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) A loan of US$5,000,000 was provided on 31 December 2007 by Mayne Management Limited, the ultimate controlling party of the Company, which is the holding company of UniVision Holdings Limited and has a 47.9% equity interest in the Company at 31 March 2011. Effective from 1 October 2008, the principal amount was revised to US$6,000,000 (including the accrued interest of US$1,000,000) and renewed with maturity date due on 31 March 2012 and charge at interest rate of 15% per annum on the revised principal amount (note 25(b)). (b) At 31 March 2011, there is a payable balance of £39,455 (2010: £2,642) due to Mr. Stephen Sin Mo KOO, the director of the Company, which is unsecured, interest-free and repayable on demand (note 23). (c) At 31 March 2011, the bank loans amounting to £1,011,767 (2010: £1,004,851) are personally guaranteed by the director of the Company, Mr. Stephen Sin Mo KOO. No charge has been requested for this guarantee (note 25(a)). Apart from the transactions disclosed above and elsewhere in the financial statements, the Group and the Company had no other material transactions with related parties during the year. UNIVISION ENGINEERING LIMITED - 64 - ANNUAL REPORT 2011 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011 31. FINANCIAL GUARANTEE In accordance with the Circular of “Re-financing of Zhongshan shopping mall project”dated 10 December 2009, the Group’s wholly-owned subsidiary, LSSH provided a guarantee in respect of secured short-term financing arrangement with a maximum amount of up to £4.4 million (including outstanding principal and accrued interest and charges) at the date of report. Pursuant to the terms of the guarantee, at any time from the date of guarantee, in event of default in repayments, the Group is fully liable to repay the outstanding loan principal, together with penalty charges, accrued interest and related late fees, after netting off the pledged assets. The Group’s guarantee period starts from the date of grant of the financial arrangement and ends when it is fully repaid. At 31 March 2011, the secured short-term loan has become overdue and the financial arrangement is in negotiations for extension, but has not yet reached a final agreement as to repayment of the borrowings. In connection with the Zhongshan shopping mall project (the “Zhongshan Project”), the Group received a security over a certain share of interest in the Zhongshan Project. At 31 March 2011, the fair market value of the Zhongshan Project amounted to £24 million, based on the appraisal report issued by an independent valuer. The Group has engaged an independent valuer to measure the fair value of such financial guarantee. Up to the date of this report, the Group determines that no provision for financial guarantee is required because the maximum amount of the issued financial guarantee contract in which the guarantee could be demanded, is fully recovered by the fair value of certain interest held by the Group in the Zhongshan Project. 32. LEGAL PROCEEDINGS Up to the date of this report, the Group has received several legal claims against its wholly-owned subsidiary from the vendors in China in connection with the transactions previously entered into by the former director of LSSH. The Group plans to file counter-claims to the Court against the former director of LSSH for all costs and compensations in respect of these legal claims. At this point, the Group does not believe that these legal proceedings would have a material impact or result in significant contingencies, therefore no provision for any costs has been made by the Group. UNIVISION ENGINEERING LIMITED - 65 - ANNUAL REPORT 2011 NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN THAT the 2011 Annual General Meeting of UniVision Engineering Limited will be held at UniVision Engineering Limited, 8/F Lever Tech Centre, 69-71 King Yip Street, Kwun Tong, Kowloon, Hong Kong, on 29 October 2011 at 5:00p.m. The following businesses will be transacted then: 1. To receive and adopt the Company’s audited financial statements for the financial year ended 31 March 2011 together with the Directors’report and the Independent Auditor’s report; 2. To re-elect Mr. Chun Hung WONG who retired by rotation, as a Director of the Company; 3. To re-elect Mr. Andrew Ping Sum TANG who retired by rotation, as a Non-executive Director of the Company; 4. To reappoint auditor HKCMCPA Company Limited, Certified Public Accountants, (formerly known as ZYCPA Company Limited) as auditors of the Company, to hold office from the conclusion of the meeting to the conclusion of the next meeting, during which accounts will be laid before the Company and to authorize the Directors to adjust their remuneration packages; 5. To consider and, if considered appropriate, pass the following resolution as an ordinary resolution that the directors of the Company be and are hereby generally and unconditionally authorized to exercise all powers of the Company to allot ordinary shares of HK$0.0625 each in the capital of the Company (the ‘Ordinary Shares’). Such authority (unless and to the extent previously revoked, varied or renewed by the Company during the general meeting) to expire 15 months after the date of the passing of such resolution or on the conclusion of the Company’s next Annual General Meeting to be held, following the date of passing such resolution, whichever occurs first, save that the Company may before such expiry make any offer or agreement which would or might require Ordinary Shares to be allotted after such expiry, and that the Directors may allot Ordinary Shares in pursuance of such an offer or an agreement as if such authority had not expired. This authority substitutes all subsisting authorities to the extent unused. 6. To consider and, if considered appropriate, pass the following resolution as an ordinary resolution that the directors of the Company be and are hereby generally and unconditionally authorized to exercise all powers of the Company to repurchase the ordinary shares of HK$0.0625 each in the capital of the Company (the ‘Ordinary Shares’), including any form of depositary receipt. Such authority (unless and to the extent previously revoked, varied or renewed by the Company during the general meeting) to expire 15 months after the date of the passing of such resolution or on the conclusion of the Company’s next Annual General Meeting to be held, following the date of passing such resolution, whichever occurs first, save that the Company may before such expiry make any offer or agreement which would or might require Ordinary Shares to be repurchased after such expiry, and that the Directors may buy back Ordinary Shares in pursuance of such an offer or an agreement as if such authority had not expired. By Order of the Board Mr. Stephen Sin Mo KOO Executive Chairman 29 September 2011 Registered office: 8/F Lever Tech Centre, 69-71 King Yip Street Kwun Tong, Kowloon, Hong Kong. UNIVISION ENGINEERING LIMITED - 66 - ANNUAL REPORT 2011 NOTES: 1. Only holders of Ordinary Shares, or their duly appointed representatives, are entitled to attend and vote at the Annual General Meeting. A member so entitled may appoint one or more proxies (whether they are members or not) to attend and, on a poll, to vote in place of the member. 2. A form of proxy is enclosed with this notice. To be valid, the form of proxy and any power of attorney or other authority (if any) under which it is signed, or a notarized and certified copy of that power of authority, must be lodged with the Company’s registrars, Computershare Investor Services (Jersey) Limited at Queensway House, Hilgrove Street, St Helier, Jersey JE1 1ES, Channel Island, not less than 48 hours before the Annual General Meeting takes place. 3. Completion and return of a proxy does not preclude a member from attending and voting at the Annual General Meeting. 4. The Company pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001 specifies that only those shareholders registered in the Register of Members of the Company as of 29 September 2011 are entitled to attend or vote at the Annual General Meeting in respect to the number of shares registered in their name at that time. Changes to entries on the Register after that time will be disregarded when determining the rights of any person to attend or vote in the Annual General Meeting. UNIVISION ENGINEERING LIMITED - 67 - ANNUAL REPORT 2011