Final Results

30th Jun 2009 07:00



SerVision Plc

("SerVision" or "the Company")

FINAL RESULTS

SerVision (AIM:SEV), the AIM listed leading developer and manufacturer of digital security systems, announces its full year audited results for the financial year ended 31 December 2008.

Highlights:

Turnover for the period increased by 15.5% to $4.732m (2007: $4.097m)

Gross profit for the period increased by 16% to $2.227m (2007: $1.195m)

Loss for the period was reduced by 28% to $1.064m (2007: $1.497m)

Breakeven point reached in the final six months of the period

Commenting on the results Gidon Tahan, chairman and chief executive, said: "I am extremely pleased with the progress we have made since our last final results. To have reached breakeven point in the midst of a global recession is an achievement I am very proud of. Thank you to the employees of SerVision for all their hard work in making this possible."

The full text of the Annual Report and Audited Financial Statements including the notes to the Financial Statements for the financial year ended 31 December 2008 will be sent to shareholders on 30 June 2009 and are available on the Company's website.

Chairman's Statement

I am pleased to announce SerVision's condensed group financial statements for the twelve months ending 31 December 2008. The period under review was one of continued worldwide financial turmoil and SerVision has not been immune from feeling the effects of this crisis. Despite this however I am delighted to announce that we saw moderate revenue growth compared with 2007.

Additionally, after seven years of operating and investing heavily in research and development, the company reached break even point in last six months of 2008 making the yearly loss slightly less than the loss announced in the first six months of the year. Achieving this milestone despite the worldwide economic instability is extremely encouraging and I thank the shareholders for their continued support through the research and development phase.

Operating Review

In the period we have widened our distribution network and territorial reach by signing new distribution agreements. We have recently announced major distribution contracts in China and India and we hope to announce further agreements in the coming months. This expansion of our customer base and the growth in sales to existing customers has translated into a pleasing growth in revenue. 

Research and Development

The Company's research and development team has finished developing an eight channel mobile system which will enable vehicle operators to use a more efficient cost effective solution in larger vehicles doubling the number of channels in each system installed. If internal timetables are met, and market demand looks promising, this new technology could be commericialised in the fourth quarter of the current financial year. 

In addition, the Company is about to release to the market its new light weight (75 grams) one channel system that can be deployed on individuals such as policemen and soldiers. This product has the potential to reach customers who would not previously have had a need for SerVision's products. The widening of our target market we hope will contribute to the Company's future growth. Distribution of this new product is expected for both the military and civil markets through cooperation with cellular providers and could occur as early as the fourth quarter of the current financial year.

Financial Review

As mentioned above in the last six months of the period the company reached break even point for the first time since established.

Turnover for the annual period increased 15.5% to US$4.73m compared to US$4.09m for the same period last year. Losses of US$1.06m (2007 loss: US$1.48m) were well below the same period in 2007 representing a reduction of 28%. 

SerVision is tendering for a greater number of large contracts than in previous years and maintains a healthy indicative order book for 2009.

I am pleased that SerVision continues to make steady progress towards achieving its goals and we look forward to the future with cautious optimism. On a personal note, I would like to thank all of our dedicated staff for their loyalty and hard work throughout the period that was essential for our significant progress and growth.

Gidon Tahan

Chairman and Chief Executive Officer 

Results

The Directors present the annual report together with the financial statements and auditors report for the year ended 31 December 2008.

The Company was incorporated in the UK but its principal place of business is in Israel.

PRINCIPAL ACTIVITIES AND REVIEW OF BUSINESS

The Company's principal activity is the development and sale of video surveillance equipment. The results for the Group can be found on page 8.

ACCOUNTS PRODUCTION

The financial statements for the year ended 31 December 2008 have been prepared in accordance with International Financial Reporting Standards.

DIVIDENDS 

The Directors do not propose a final dividend (2007: £nil).

GOING CONCERN

After making enquiries, the Directors have a reasonable expectation that the Company has 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 accounts.

CONSOLIDATED INCOME STATEMENT

						2008	2007
						$’000	$’000
REVENUE						4,732	4,097
Cost of sales						(2,505)	(2,182)
						--------------	-------------
GROSS PROFIT						2,227	1,915
Administrative expenses						(2,040)	(1,821)
Depreciation and amortisation						(1,142)	(1,327)
Exchange rate differences						98	(117)
						---------------	-------------
OPERATING LOSS						(857)	(1,350)
Net finance expenditure						(207)	(129)
						---------------	-------------
LOSS ON ORDINARY
ACTIVITIES BEFORE TAXATION						(1,064)	(1,479)
Tax on ordinary activities						-	-
						---------------	-------------
LOSS FOR THE PERIOD						(1,064)	(1,479)
						========	======
LOSS PER SHARE
Basic and diluted						(4.12c)	(6.21c)
						======	======

  CONSOLIDATED BALANCE SHEET

		2008	2007
		$’000	$’000
ASSETS
Non-current assets
Intangible assets		3,860	3,456
Property, plant and equipment		66	96
		----------------	--------------
		3,926	3,552
		----------------	--------------
Current assets
Inventories		563	557
Trade and other receivables		1,455	1,010
Cash and cash equivalents		136	381
		----------------	--------------
		2,154	1,948
		----------------	--------------
		6,080	5,500
		========	========
EQUITY
Capital and reserves attributable to the Company’s
equity shareholders
Called up share capital		556	467
Share premium account		9,776	8,075
Merger reserve		1,979	1,979
Retained earnings and translation reserves		(10,060)	(8,566)
		----------------	--------------
TOTAL EQUITY		2,251	1,955
		========	========
LIABILITIES
Non-current liabilities
Bank loans		428	415
Loan from the office of the chief scientist		882	865
Post employment benefits		194	256
		-----------------	-----------------
		1,504	1,536
		-----------------	-----------------
Current liabilities
Bank loans and overdrafts		558	814
Loan from the office of the chief scientist		109	104
Trade and other payables		1,658	1,091
		-----------------	---------------
		2,325	2,009
		-----------------	---------------
TOTAL LIABILITIES		3,829	3,545
		-------------------	-----------------
TOTAL EQUITY AND LIABILITIES		6,080	5,500
		=========	========

  CONSOLIDATED CASH FLOW STATEMENT

 

		2008	2007
		$’000	$’000
Cash flows from operating activities
Loss before taxation		(1,064)	(1,479)
Adjustments for:
Net finance expense		207	129
Net interest paid		(207)	(129)
Depreciation and amortisation		1,140	1,327
Loss on disposal of fixed assets		9	--
Movement in trade and other receivables		(305)	(21)
Movement in inventories		(6)	(234)
Movement in grant from the office of the chief scientist		22	52
Movement in post retirement benefits		(62)	108
Movement in trade and other payables		567	(16)
		---------------	---------------
Net cash generated from operating activities		301	(263)
Cash flow from investing activities
Purchase of property, plant and equipment and intangibles		(1,523)	(1,512)
		-----------------	---------------
Net cash used in investing activities		(1,523)	(1,512)
		-----------------	---------------
Cash flows from financing activities
Issue of shares		1,650	1,012
Net loans undertaken less repayments		127	166
		-----------------	---------------
Cash generated from financing activities		1,777	1,178
		-----------------	--------------
Cash and cash equivalents at beginning of period		(87)	77
Net cash generated from all activities		555	(597)
Non-cash movement arising on foreign currency translation		(430)	433
		----------------	--------------
Cash and cash equivalents at end of period		38	(87)
		=======	======
Cash and cash equivalents comprise
Cash (excluding overdrafts) and cash equivalents		136	381
Overdrafts		(98)	(468)
		-----------------	--------------
		38	(87)
		========	======

  CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

			Share	Share	Merger	Retained	Translation
			Capital	Premium	Reserve	Earnings	Reserve	Total
			$’000	$’000	$’000	$’000	$’000	$’000
At 1 January 2007			429	7,101	1,979	(7,674)	154	1,989
Total recognised income
and expenses			-	-	-	(1,479)	-	(1,479)
Exchange rate differences			-	-	-	-	433	433
Issue of shares (net of costs)			38	974	-	-	-	1,012
			-----------	------------	-------------	-------------	------------	------------
At 31 December 2007			467	8,075	1,979	(9,153)	587	1,955
Total recognised income
and expenses			-	-	-	(1,064)	-	(1,064)
Exchange rate differences			-	-	-	-	(430)	(430)
Issue of shares (net of costs)			89	1,701	-	-	-	1,790
			-----------	------------	-----------	--------------	------------	--------------
At 31 December 2008			556	9,776	1,979	(10,217)	157	2,251
			=====	=====	=====	=======	======	======

  NOTES TO THE FINANCIAL STATEMENTS

 

1. ACCOUNTING POLICIES

Basis of Preparation

These financial statements have been prepared in accordance with those IFRS standards and IFRIC interpretations issued and effective or issued and early adopted as at the time of preparing these statements (June 2009). The policies set out below have been consistently applied to all the years presented. 

These consolidated financial statements have been prepared under the historical cost convention.

No separate profit and loss account is presented for the parent company as provided by Section 230, Companies Act 1985.

Basis of Consolidation

Group accounts consolidate the accounts of the company and its subsidiary undertakings made up to 31 December 2008.

All intercompany balances and transactions have been eliminated in full. Subsidiary undertakings are accounted for from the effective date of acquisition until the effective date of disposal.

Going concern

Since the year-end, the group has continued to suffer losses, impacting on the cashflow position. The directors are currently negotiating further financing and are continuing to develop the group's products. 

Subject to the successful completion of these events, and on this basis, the directors consider that it is appropriate to prepare the financial statements on the going concern basis. If additional financing by whatever means is not secured in the next twelve months, then it is unlikely that the company will be able to continue in its present form.

The ability of the group to continue as a going concern for the foreseeable future, is dependent on the following factors:

Securing further financing either in the form of debt or equity.

On the continued support in the form of grants receivable from the Office of the Chief Scientist.

Achieving its forecast results for the period to 30 June 2010 which the directors believe are achievable.

Continued support from the banks in terms of the loans/overdrafts currently in place.

If further financing does not occur then the group is able to scale down their operations to ensure that expenses are met.

Based on the above factors, the directors consider it appropriate to prepare the financial statements on the going concern basis. The financial statements do not include any adjustments that would be necessary should this basis not be appropriate.

Segment reporting 

The Company has one business segment that of developing and selling video surveillance equipment. Segmental reporting is produced on a geographical basis by place of sale.

Revenue recognition

Revenue comprises the fair value of the sale of goods and services, net of value added tax, rebates and discounts.

Grants from the Office of the Chief Scientist

Prior grants received from the Office of the Chief Scientist ("OCS") to finance research and development costs of the subsidiary were presented as a long-term loan at the date of receipt. The loan is repaid by the payment of royalties to the Chief Scientist and is calculated as a percentage of sales of the subsidiary.

The subsidiary is required to pay to the OCS under the subsidiary's research and development agreements with the OCS and pursuant to applicable laws royalties at the rate of 3-5% of sales for products developed with funds provided by the OCS, up to an amount equal to 100% of the OCS research and development grants received plus interest based on the 12-month LIBOR rate applicable to dollar deposits.

The subsidiary is obligated to repay the Israeli Government for the grants received only to the extent that there are sales for the funded products.

Research and development

Expenditure for research activities are recognised as an expense in the period in which it is incurred.

Expenditure for the development activities of technology used in the production of systems sold by the Company, are capitalised and presented as an asset in the balance sheets only if all of the following conditions are met:

Development costs of the technology are identifiable and separable.

It is probable that the developed technology will generate future economic benefits.

The development costs of the technology can be measured reliably.

 

Development costs meeting these criteria are capitalised and amortised on a straight-line basis over their useful lives once the related technology is available for use.

2. BUSINESS SEGMENT ANALYSIS

		UK	Europe	Middle East	North America	Rest of the world	Total
Year ended 31 December 2007:		$’000	$’000	$’000	$’000	$’000	$’000
	Revenue
	External sales	-	2,037	359	509	1,192	4,097
		=====	=====	=====	=======	======	======
	Loss
	Segment operating loss	(130)	(458)	(389)	(112)	(261)	(1,350)
	Net finance costs						(129)
							-------------
	Loss before taxation						(1,479)
							=======
	Capital expenditure	-	-	1,512	-	-	1,512
		=====	=====	=====	=======	======	======
	Depreciation and amortisation	-	-	1,327	-	-	1,327
		=====	=====	=====	=======	======	======
	At 31 December 2007:
	Assets and liabilities
	Segment assets	-	18	4,332	262	507	5,119
	Segment liabilities	(49)	(1)	(3,069)	(23)	(22)	(3,164)
		----------	-----------	------------	------------	-------------	-------------
	Net (liabilities)/assets	(49)	17	1,263	239	485	1,955
		=====	=====	======	======	======	======
	Year ended 31 December 2008:
	Revenue
	External sales	-	2,044	561	833	1,294	4,732
		=====	=====	=====	=======	======	======
	Loss
	Segment operating loss	(149)	(305)	(84)	(124)	(195)	(857)
	Net finance costs						(207)
							-------------
	Loss before taxation						(1,064)
							=======
	Capital expenditure	-	-	1,523	-	-	1,523
		=====	=====	=====	=======	======	======
	Depreciation and amortisation	-	-	1,140	-	-	1,140
		=====	=====	=====	=======	======	======
	At 31 December 2008:
	Assets and liabilities
	Segment assets	140	134	4,617	349	704	5,944
	Segment liabilities	(112)	(17)	(3,499)	(51)	(14)	(3,693)
		------------	-----------	------------	------------	---------------	---------------
	Net (liabilities)/assets	28	117	1,118	298	690	2,251
		======	=====	======	======	=======	=======

3	COST OF SALES		2008	2007
			$’000	$’000
	Materials and parts		1,966	1,606
	Employee benefit expense		325	339
	Sub contractors		-	56
	Other costs		214	181
			------------	-----------
			2,505	2,182
			======	=====

5	TRADE AND OTHER PAYABLES	2008		2007
		Group	Company	Group	Company
		$’000	$’000	$’000	$’000
	Trade payables	423	-	490	-
	Other taxes and social security	911	-	369	-
	Other payables	167	-	144	-
	Accruals and deferred income	157	112	88	49
		--------------	---------------	-----------------	---------------
		1,658	112	1,091	49
		=======	=======	========	=======

6	BANK LOANS AND OVERDRAFTS			2008	2007
				$’000	$’000
	Group
	Bank overdraft			98	468
	Bank loans: amounts due within one year			460	346
				---------------	---------------
	Current liability			558	814
	Bank loans: amounts due within two to five years			428	415
				--------------	---------------
	Total bank loans and overdrafts			986	1,229
				=======	=======

7. LOSS PER SHARE

The loss per share of 4.12c (2007: loss 6.21c) has been calculated on the weighted average number of shares in issue during the year namely 25,865,120 (2007: 23,831,197) and losses of US$1,064,500 (2007: US$1,478,953).

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Related Shares:

Servision PLC