Final Results

SERVISION PLC

("SerVision" or "the Company")

FINAL RESULTS

FOR THE YEAR ENDED 31 DECEMBER 2012

SerVision (AIM: SEV), the AIM listed leading developer and manufacturer of an award winning range of digital security systems, is pleased to announce its audited final results for the year ended 31 December 2012. SerVision has developed and patented a video compression technology, which allows high quality, real-time CCTV transmissions to be streamed across mobile phone networks and is currently being used by bus, taxi and cash-in-transit fleets, ATM providers, vehicle tracking and remote location facilities.

A copy of the annual report and accounts, along with notice of the Company's annual general meeting, to be held at at the offices of Adams & Remers LLP, Dukes Court, 32 Duke Street, St James's, London, SW1Y 6DF on Monday Monday 5th August 2013 at 11 am, has today been posted to shareholders and is available from the Company's website, www.servision.net.

HIGHLIGHTS

·; Revenues for the period of $4,023,000 (2011: $6,214,000)

·; Operating loss for the period of $1,484,000 (2011 operating profit: $1,195,000)

·; Net loss for the period of $1,576,000 compared to net profit of $1,278,000 for 2011

CHAIRMAN'S STATEMENT

The Board today announces SerVision's consolidated group financial statements for the year ended 31 December, 2012. I would like to reaffirm my optimism regarding future growth prospects for the Company despite the decline in overall turnover and losses witnessed in 2012. SerVision's sales revenue during 2012 fell largely because we experienced a significant decline in sales of fixed DVRs. The increasing presence of many low-cost alternative solutions for the fixed site CCTV market has forced us to re-examine our sales and marketing approach, and to focus on customers who require remote monitoring solutions for vehicles and unmanned sites - projects that require video transmission over cellular networks. We sold more mobile units in 2012 than ever before, and I am confident that we'll achieve improved results going forward.

Sales and Marketing

SerVision's sales in 2012 were bolstered by new police projects in Mexico, Honduras and Argentina and by new projects in South Africa, where SerVision's mobile units are widely deployed on trucks carrying high value assets. A number of these projects will continue to provide revenue for the group in 2013. Other large-scale projects in the tobacco transport industry, including direct cooperation with Philip Morris in Central America, and with third party integrators who service this industry in Europe, were secured towards the end of last year and have generated revenue for the group in 2013. Pilots in the Nigerian oil sector and the transportation logistics sector in Europe are also now starting to bear fruit. During 2012, SerVision began supplying mobile DVRs for a rapidly growing train project with Russian Railways in St. Petersburg, and we won a tender for a very large project in Holland for the monitoring of remotely-located construction sites.

The board believe that prospects for the group winning new large-scale projects remain positive. On-going bus projects in Brazil, where SerVision already has a strong foothold in the mobile security sector through existing distribution agreements, are expected to expand considerably now that local legislative efforts are underway which oblige bus companies to have a live video streaming solution deployed across their fleet. I am also encouraged by the fact that no fewer than four Indian companies put forward our mobile solution for a recently announced bus project in Delhi which requires the deployment of live camera systems on up to 12,000 buses in Delhi. I am further pleased to report that SerVision's cooperation with Deutsche Telekom, solidified in a Frame Agreement signed in December 2012, is moving forward and the companies are now exploring joint commercial opportunities in the German tobacco transport and railway sectors. Lastly, SerVision's UK partners, including Vision Techniques and Cobra, anticipate further inroads in industries such as cash-in-transit, waste management, and transportation logistics.

On top of this, we have recently recruited Mr. Eyal Meir to serve as the new VP of Sales at SerVision, a non-board position. Eyal is the former Business Manager of Mobile Data Solutions at Motorola and brings with him over 17 years of sales experience in the mobile security sector.

Research and Development

During 2012, SerVision's R&D team spent significant time and resources customizing and improving the SVControlCenter's feature set. The SVControlCenter is a professional video monitoring platform for command and control centers. It now offers a full suite of advanced functionality that includes live network recording over cellular, enhanced wireless backup of recorded video and improved alarm video verification features.

SerVision was recently awarded a grant from SIIRD, the Singapore Israel Industrial Research and Development Foundation, to jointly collaborate on the development of a new product with WiSOL, a Singaporean system integrator and long-time partner of SerVision. Together we are in the process of developing a handheld personal video transmitter for foot patrol police officers. In addition to utilizing SerVision's advanced compression algorithm, the product will include an on-screen display, and utilize the latest encryption technologies for secure transmission. WiSOL is a trusted supplier of professional security solutions, including SerVision's mobile DVRs, to police forces throughout the Far East and the spec for this product is uniquely based on their police customers' immediate needs and requirements. Parallel R&D efforts are underway to move forward with the next generation of mobile DVRs and transmitters. Our hardware team has already selected the DSP platform on which the new products will run and we're now in the process of defining the feature set. In addition to providing more efficient processing power to enable higher quality recordings, the new line of DVRs will have support for IP as well as analogue cameras.

Financials

·; Revenues for the year were $4.02 million (12 months ended 31 December 2011 - $6.21 million).  

·; Operating loss for the period was $1.33 million (12 months ended 31 December 2011 - $1.20 million). 

·; Net loss for the period was $1.45 million (12 months ended 31 December 2011 - $1.28 million).

As at 31 December 2012 the Company had cash and cash equivalents of £0.05 million (31 December 2011: £0.09 million). On 27 December 2012, the Company announced that it had conditionally raised £320,000 from a small group of new investors at a premium to the then prevailing share price. The funds from this subscription were received in early January. The Company also secured a loan of US$384,000 from Mercantile Discount Bank in December 2012 which is guaranteed by the Israeli Ministry of Industry and has a term of 5 years.

The reduction in revenues and generation of losses has negatively impacted the working capital position of the group. The loan received from Mercantile Discount Bank in December 2012 and the subscription proceeds received in January 2013 provided additional working capital for the group. The board remains confident that it has sufficient working capital to operate the business should the expected pipeline of business crystallise in line with internal projections. The board is also exploring ways of strengthening its balance sheet over the coming months.

Conclusion

The results for 2012 were disappointing and the Company has continued to experience difficult market conditions in 2013 so far. Nevertheless we are beginning to see an upturn in activity levels over the past couple of months and I remain confident that the projects which only began during this period, particularly in the mobile sector, will facilitate growth over the coming years. I believe this, coupled with a new product offering in development and the addition of new personnel to our sales team, will ultimately yield more promising results 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

CONSOLIDATED BALANCE SHEET

AT 31 DECEMBER 2012

CONSOLIDATED CASH FLOW STATEMENT

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEARENDED 31 DECEMBER 2012

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 2013) 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 key 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

Despite disappointing results for 2012 the directors have prepared and reviewed sales forecasts and budgets for the next twelve months which reflect an upturn in activity levels since the year end.

Following a review of these forecasts and budgets and having considered the availability other sources of finance if necessary the board remains confident that it has sufficient working capital to operate the business. The board is also exploring ways of strengthening its balance sheet over the coming months and is currently in the process of securing additional loan finance.

Therefore subject to the group realising the forecast sales targets and raising additional working capital where necessary the directors consider it appropriate to prepare the financial statements on the going concern basis.

If the forecast sales are not achieved and additional financing, if required, are not secured in the next twelve months, then it is unlikely that the group will remain a going concern. 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 2011 and 2012.

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 subsidiary generates revenues mainly from sales of systems. The subsidiary sells its products directly through its 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

Revenues from franchises are recognised in line with the agreed terms of the franchise agreement.

Warranty costs

The subsidiary generally offers a one year warranty for all its products. The subsidiary 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

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 2012 was £1 = US$1.6153.

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 borrowings in current liabilities on the balance sheet.

Inventories

Inventories represent 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 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 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

Prior year 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.

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. As a result of the reassessment at 31 December 2011 the liability to the OCS at 31 December 2011 was reduced by $766,000.

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.

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 30% of revenue in 2012 (2011: 10%) one of which is based in the Rest of the world and the other in the Far & Middle East.

E T Yanuv has been granted 30,000 shares in the company under long term share option incentive schemes. These remain outstanding at the year end.

7. PROFIT FOR THE FINANCIAL YEAR

The parent Company has taken advantage of section 408 of the Companies Act 2006 and has not included its own profit and loss account in these financial statements. The parent company loss for the year ended 31 December 2012 was US$ 345,000 (2011: loss US$925,000).

8. PROFIT PER SHARE

Basic earnings per share is calculated by reference to the loss on ordinary activities after taxation of $1,563,000 (2011: profit $1,278,000) and on the weighted average of 51,573,217 (2011: 49,678,185 ) 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 51,591,170 (2011: 49,691,484 ) shares calculated as follows:

1,185,487 (2011: 1,180,833 00) share options could potentially dilute the basic earnings per share in the future, but have not been included in the calculation of diluted earnings per share because they are anti-dilutive for the periods presented.

During the year the Company issued 5,330,319 ordinary £0.01 shares for a total consideration of £320,000 net.

Subsequent to the year end a further 97,561 £0.01 shares were issued.

15. SHARE OPTIONS

Share options are granted to employees and certain third party service providers. The Group has no legal or constructive obligation to repurchase or settle the options in cash.

The options are valued using the Binominal Model option pricing model and no performance conditions were included in the fair value calculations.

During the year the Group had the following share options in issue:

The primary assumptions which have been used in the calculations of the fair value of the Options are:

(a) Value of the Parent Company's ordinary share of 47.5p

(b) Variable standard deviation of 66% to 70%

(c) Average risk free rate of interest of 0.3%

18. OPERATING LEASES

The Group leases business premises in Israel under operating lease agreements. The lease expenditure charged to the income statement during the year is disclosed in note 4.

19. ACCOUNTING ESTIMATE

Servision Ltd is required to pay royalties to the Israeli Office of the Chief Scientist ("OCS") under the subsidiary's research and development agreements with the OCS and pursuant to applicable laws, 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.

During the prior year the Directors have reassessed the projected sales for the products funded by the OCS and in light of falling demand following the development of new, more advanced technology the group's management have decided to market the products only until the end of 2011. This reduction in projected sales lead the Directors to conclude that the future royalty liability will be significantly lower and consequently the estimated liability was reduced by $766,000 in the year ended 31 December 2011.