Final Results

SerVision PLC

("SerVision" or the "Company")

Final Results for the year ended 31 December 2013

SerVision (AIM: SEV), the AIM quoted developer and manufacturer of digital security systems, is pleased to announce its audited final results for the year ended 31 December 2013.

A copy of the annual report and accounts, along with notice of the Company's annual general meeting, to be held at the offices of Adams & Remers LLP, Dukes Court, 32 Duke Street, St James's, London, SW1Y 6DF at 11 a.m. on 30 July 2014, will today be posted to shareholders and will be available shortly from the Company's website, www.servision.net.

Chairman's statement

The Board today announces SerVision's consolidated group financial statements for the year ended 31 December, 2013. Although revenue for this twelve month period was a modest $3,512,000, the company had a strong H2 in comparison to a disappointing H1 and I am pleased to report that revenue for H1 of the current year is much stronger than was achieved for the same period in 2013. I am further encouraged by a steady rise in sales of our mobile DVR products, and by our healthy business pipeline.

Sales and Marketing

Despite the sluggish start to 2013 SerVision successfully entered into strategic distribution agreements with new partners in India, Russia and Nigeria over the course of the year, and these partners remain hard at work pursuing new opportunities with banks, police departments and various other companies who may be in need of SerVision's mobile video security solutions. New high-value asset (HVA) transport projects in the UK were rolled by OEM partner Cobra in H2 of 2013. We anticipate further growth opportunities with Cobra as the company recently announced that it is being acquired by Vodafone, the world's second largest mobile telecommunications company.

Furthermore, during 2013, SerVision cooperated closely with NICE Systems on a police project in Honduras. In addition to developing a number of customized features to accommodate NICE's project requirements, we facilitated full-scale integration of our DVR's protocol into their company's PSIM software platform. The first stage of project deployment is finally nearing completion and new business is expected to follow in the police and public transportation sectors. In parallel, NICE will be offering SerVision's mobile video platform as a key new product for public safety applications in the United States. Also during 2013, SerVision installed a pilot system on board a Jerusalem light rail train manufactured by Alstom, a global leader in rail infrastructure. After many months of testing, Alstom has conveyed their intention to replace the mobile DVR solution that was previously installed on the Jerusalem trains with SerVision's kit. Upon successful completion of this project we hope to standardize SerVision solution for Alstom train projects worldwide.

In another important development that occurred in late 2013, SerVision was awarded a project with Monsey Trails, a private bus company in New York. For the first time ever, SerVision submitted a full turnkey proposal for this project that included both the supply and installation of our mobile DVRs for the company's fleet of fifty buses. This was a win-win situation for both SerVision and Monsey Trails as the bus company received the most cost-effective proposal possible, and SerVision's enjoyed a larger than normal profit. After successfully outfitting the Monsey Trails buses, SerVision opened an installation department in Israel for local projects and will be looking to offer a full turnkey solution for additional projects abroad going forward.

Sales for H1 of the current year are indicative of a rebound from where we were one year ago. A new distribution agreement in the United States valued at $4m over a 24 month period has bolstered sales during the current six month period. And despite delayed implementation of our Manufacturing Agreement in China, SerVision was awarded a contract in 2013 to supply an initial quantity of 150 DVRs for a fireworks factory, paving the way for us to sign a new distribution Agreement with Beijing SIVI Technologies which was finalized earlier this month. The new Agreement is valued at $2.5m over a 24 month period ($1m in 2014 and $1.5m in 2015) and will supersede all previous Distribution Agreements for the Chinese market.

Research and Development

After releasing the 2-channel MVG200 to market in 2013, R&D resources shifted to the development of our entirely new Linux-based, mobile DVR platform which will support both IP and Analogue cameras, HD recording and SerVision's optimized codec (based on the H.264 standard) for live streaming over cellular networks.

The new platform is still in development and we still have a lot of work ahead of us, but basic recording and live streaming functionality has already been implemented, and we have already installed the new unit on-board one of Alstom's trains for testing purposes. We have so far received outstanding feedback on the system's stability and performance, but we are still working on GPS integration, audio support, and a range of other functionality including geo-fencing, speed alerts, and G-Force detection. We are working very hard to have the product ready by the end of 2014.

In addition to this work, our software team has recently begun to develop a new web-based video monitoring platform that will be highly scalable in terms of storage capacity and the quantity of DVRs which can be simultaneously connected to it. It will support RESTful HTTP API for easy integration with third party companies who want to create their own client software for our server, and it will be easily deployable and accessible for support and maintenance purposes, even when the solution is used inside of a closed VPN. We hope that the new web client platform will be ready for market during H2 of 2015.

Financials

· Revenues for this period were $3,512,000 compared to $ 4,023,000 for the same period in 2012.  

· Operating loss for the period was $2,732,000 compared to an operating loss of $1,484,000 for the same period in 2012. The increase of the loss is primarily due to provisions against old debts totalling $1,820,000 including a write off of $1,124,000 which resulted from the delayed implementation of our Manufacturing Agreement in China.

· Net loss for the period was $2,820,000 compared to a loss of $1,576,000 for the same period in 2012.

The Company is at an advanced stage of an equity fundraise with new investors through a subscription of new ordinary shares in the Company. As of today the Company has received approximately £625,000 in cash from these private investors but no shares have yet been issued or allotted. The issue price for the subscription is expected to be 5.2 pence per share. The Company has not yet received signed subscription letters from the investors. Once the investors have entered into subscription letters with the Company, the Company will allot the shares and make application for the listing of the new shares to trading on AIM. The fundraise will be undertaken within the Company's existing share authorities.

Conclusion

Despite the fact that our results for 2013 were below management expectations, I remain cautiously optimistic that the company has indeed rebounded from this slump and I am confident that we will continue on an upward trend going forward. Our new product line which will support IP cameras and HD recording, coupled with our optimized codec for live streaming at low bit rates, will open up a range of new market opportunities for SerVision, and I fully believe it will help us achieve and sustain our anticipated growth prospects going forward.

As always I would like to express my sincere gratitude to our shareholders for their continued support and to thank SerVision staff for their hard work and dedication.

Gideon Tahan

Chairman and CEO

Consolidated Income Statement For The Year Ended 31 December 2013

Consolidated Balance Sheet as at 31 December 2013

Consolidated Cash Flow Statement for the Year Ended 31 December 2013

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2013

Extracted notes to the financial statements

1. ACCOUNTING POLICIES

Basis of Preparation

These financial statements have been prepared in accordance with International Financial Reporting Standards and IFRIC interpretations issued and effective or issued and early adopted as at the time of preparing these statements (June 2014) and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared under the historical cost convention and a summary of the more important accounting policies is set out below.

The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.

Going concern

The directors have prepared and reviewed sales forecasts & budgets for the next twelve months and are optimistic that the group will make significant progress towards these targets. Having considered these forecast cash flows together with the availability of other financing sources, including equity finance and potential sources of debt finance if required, the directors have concluded that the group will have access to sufficient resources to meet its working capital and financing commitments for at least the next twelve months from the date of this report.

The directors believe that due to the post year end developments, including the equity fund raising that is currently in progress and the significant order detailed in the review of post balance sheet events, that the Group is a going concern. However, the future of the Group is dependent on it substantially achieving its trading projections and on the directors being successful in their bid to secure new equity funding.

Therefore, subject to the developments disclosed above, the directors review of sales and cash flow forecasts and having made further relevant enquiries, the directors have a reasonable expectation that the Group and the Company 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 financial statements.

The financial statements do not include any adjustments that would be necessary should this basis not be appropriate.

Basis of Consolidation

The Group financial statements consolidate the financial statements of Servision plc and its subsidiaries (the "Group") for the years ended 31 December 2012 and 2013.

The accounts of subsidiaries are prepared for the same reporting year as the parent company, using consistent accounting policies. All inter-company balances and transactions, including unrealised profits arising from them, are eliminated. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group.

No separate income statement is presented for the company as provided by section 408, Companies Act 2006.

Revenue recognition

Sale of systems

The subsidiaries generate revenues mainly from sales of systems. The subsidiaries sell their products directly through the group's distribution networks worldwide.

Revenues from systems sales are recognised mostly upon delivery of the system or upon installation at the customer site, where applicable, provided that the system fee is fixed or determinable and persuasive evidence of an arrangement exists.

For transactions of the "charged and held" type, for which delivery of inventory was postponed until after the balance sheet date, revenue is recorded upon completion of the system only upon the condition that the customer confirms in writing the terms of the postponed delivery.

Sale of products

Revenues from the sale of purchased products are recognised upon delivery of the products to the customers.

Franchise income

When applicable revenues from franchises are recognised in line with the agreed terms of the franchise agreement.

Warranty costs

The Group generally offers a one year warranty for all its products. The Group includes in its statements of operations an allowance for warranty claims totalling 1.5% of annual sales at the time revenues are recognised, for estimated material costs during the warranty period.

Property, plant and equipment

Property, plant and equipment are stated at cost less depreciation. Depreciation is calculated to write down the cost of all tangible fixed assets by equal monthly instalments over their estimated useful lives at the following rates:-

Leasehold improvements 10% per annum

Office furniture and equipment 6-15% per annum

Computer equipment 20-33% per annum

Vehicles 15% per annum

Foreign currencies

Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. The presentational currency of the Group is the United States Dollar. The functional currency of the parent company is sterling because the parent company is based in the United Kingdom and has all its transactions in that currency.

The functional currency of the subsidiaries is the US Dollar as the majority of revenues are generated in this currency and the majority of costs are incurred in dollars.

The exchange rate used at 31 December 2013 was £1 = US$1.6564.

Operating lease agreements

Rentals applicable to operating leases where substantially all of the benefits and risks of ownership remain with the lessor are charged to the income statement as incurred.

Trade and other receivables

Trade and other receivables are recognised and carried at original invoice value less an allowance for any credit losses. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when identified.

Investments

Investments in subsidiary undertakings are stated at cost less provisions for impairment.

Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within bank loans and overdrafts in current liabilities on the balance sheet.

Inventories

Inventories represent raw materials, work in progress and goods for resale and stated at the lower of cost and net realisable value.

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 intangible 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 economic lives once the related technology is available for use.

Software

Intangible assets purchased separately, such as software licenses that do not form an integral part of related hardware, are capitalised at cost and amortised over their useful economic life.

Impairment of tangible and intangible assets

At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have been adjusted.

Post retirement benefits

The Servision Ltd subsidiary operates defined benefit plans for the payment of severance pay in accordance with the Severance Pay Law of Israel at the termination of employment of employee services for the subsidiary. According to the law in Israel employees are entitled to receive severance pay in the event that they are fired or if they retire. The severance is calculated according to the last month's salary of the employee at the termination period of services multiplied by the number of years of service at the subsidiary.

The subsidiary deposits funds for its obligations towards severance pay for a part of its employees in an ongoing manner to pension funds and insurance companies and to a general fund deposited in a banking institution (hereafter the "Plan Assets").

The calculation of the liabilities, prepared by an authorised actuary, was established by the use of techniques of an actuarial estimate which includes established assumptions which include among other items the capitalisation rate, the expected rate of return on plan assets, the rate of increase to salaries, and the rate of employee turnover. There exist material uncertainties for these estimates since the plan is long-term.

Liabilities for post employment benefits recorded in the balance sheets represent the present value of the defined benefit plans according to the fair value of plan assets. Assets derived from this calculation are limited to the prior cost of services provided in addition to the present value of available funds and less future amounts to be deposited to the plans.

Changes in the post employment liabilities were attributed, according to the actuarial report, to salaries and interest expenses in the profit and loss statement and to actuarial gains or losses in a separate statement of recognised income and expenses.

Grants from the Office of the Chief Scientist

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

Group management reassess the balance repayable at each reporting date according to their estimates of future sales of products funded by the OCS funding. These estimates of future sales are based on demand for and past sales of, the funded products.

Share-based payments

The Group grants options to employees and third party suppliers on a discretionary basis. The cost of granting share options and other share-based remuneration is recognised through the share premium as a cost of raising equity with a corresponding increase in other reserves in equity or in the income statement if the award relates to the remuneration of employees. The Group uses a Bi-nominal option valuation model.

Deferred tax

Deferred tax assets are recognised in respect of losses only where the group considers it probable that taxable profits will be available against which the losses can be utilised.

2. BUSINESS SEGMENT ANALYSIS

In identifying its operating segments, management generally follows the Group's geographical regions, which represent the main way segments are analyzed in the Group.

The measurement policies the Group uses for segment reporting under IFRS 8 are the same as those used in its financial statements. Segment assets and liabilities are not reported internally by management to the Board.

The Group's revenue from external customers are divided into the following geographical areas, by location of operation.

All of the Group's non-current assets are held in Israel.

The Group has two customers that accounted for more than 25 % of revenue in 2013 (2012: 30%) one of which is based in the Rest of the world and the other in the Far & Middle East.

4. PROFIT PER SHARE

Basic earnings per share is calculated by reference to the loss on ordinary activities after taxation of $2,862,000(2012: loss $1,563,000) and on the weighted average of 56,616,482(2012: 51,573,217) shares in issue. The calculation of diluted earnings per share is based on the profit on ordinary activities after taxation and the diluted weighted average of 56,638,389 (2012: 51,591,170) shares calculated as follows: