Final Results

29 June 2012

SERVISION PLC

("Servision" or "the Company")

FINAL RESULTSFOR THE YEAR ENDED 31 DECEMBER 2011

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 2011. 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 23 July 2012 at 10 am, has today been posted to shareholders and is available from the Company's website, www.servision.net.

HIGHLIGHTS:

·; Revenues for the period increased by 17% to $6,214,000* (2010: $5,301,000)

·; Operating profit for the period increased to $1,156,000* (2010 : $709,000)*

·; Net profit for the period increased to $1,278,000 compared to $641,000 for 2010*

*Includes a one-off revaluation of $766,000 in the period on a loan owed to the Office of Chief Scientist

Gidon Tahan, Chairman and Chief Executive Officer of SerVision, commented, "We are excited by the developments in 2011, brought about by our dedicated sales and marketing efforts and also by our world class portfolio of digital video systems. The number of major new client wins during the year is a testament to these factors.

"We are now in the process of launching a new video gateway platform which will provide our customers with a range of upgraded services as well as new features, ensuring SerVision remains at the very forefront of its industry."

For further information:

CHAIRMAN'S STATEMENT

I am pleased to announce SerVision's group financial statements for the year ended 31 December 2011, and to confirm that the Company has sustained its positive record of growth and profitability, recording record sales in the year.

Financials

·; Revenues for the period increased by 17% to $6,214,000 (2010 revenues: $5,301,000)

·; Operating profit for the period increased to $1,156,000 (2010 : $709,000)

·; Net profit for the period increased to $1,278,000 compared to $641,000 for 2010

Operating Review

In February 2011 the Company announced that it had raised approximately £725,000 through an oversubscribed placing, which provided SerVision with additional working capital and to promote the commercialisation of the Company's product base. This additional funding has enabled the Company to execute its commercial strategy and has assisted in business growth in the Company's market segments.

Sales and Marketing

SerVision's achievements, particularly in the transportation security sector, over the course of 2011 were significant. Its sales figures for 2011 were bolstered by a number of important distribution agreements with well-established security companies including Cobra (UK), Mesan (Turkey), Graphic Image Technologies (South Africa), Cashfin (Mexico), Testronic (Angola), and AGS (India).

In addition to working with a broad range of newly appointed distributors across the globe, SerVision was awarded contracts to supply 750 UVGs for a nation-wide ATM project in India, and over 400 MVGs for a safe city project in Buenos Aires, Argentina. A number of other projects that began in 2010, including a school bus project in San Antonio, Texas and numerous public bus projects in Brazil, expanded significantly during the year.

New pilots across global markets for police patrol cars, buses, armoured cash-carrying vehicles, tobacco transport trucks, petrochemical vehicles and trains were commissioned in 2011, however these did not generate significant revenues in the year under review.

Research and Development

Over the course of 2011 SerVision's R&D team spent considerable time fine-tuning its recently-launched SVControlCenter Video Management Software (VMS) solution for professional Control Centers. In addition to optimizing the SVControlCenter's wireless backup module, a range of new enhancements were made to the GPS tracking and the alarm/event-handling modules. The launch of the SVControlCenter is highly significant because, in contrast to SerVision's SVMultiClient, it is highly scalable - a single server can support fleets that number in the thousands.

In parallel to its work on the SVControlCenter, SerVision's R&D team selected the hardware for the Company's next generation line of video gateway products and it has recently begun software development for the new platform. The new range of products will support full D1 resolution using SerVision's optimized H.264 compression. In addition to offering all the advanced features available on our existing systems (live video, bi-directional audio, GPS, built-in WiFi, G-Force, etc), the new systems will have more processing power, faster HD/SD interfaces, faster cellular connections, support for external device connectivity (such as disks-on-key) and have a modular design of 1-4 channels, with a modular master-slave architecture to allow chaining of devices. We anticipate having our first prototype based on the new platform ready by Q4 2012.

Current trading and prospects

We are pleased with the start to 2012, although we have seen a trend similar to 2011, where revenues are likely to be weighted towards the second half of the year. We are encouraged by the number of pilot programmes we are currently running and are cautiously optimistic that they will lead to sales in the current financial year.

Conclusion

I am pleased to report on SerVision's continued trend of profitability throughout 2011, and I am especially grateful to our staff for their hard work and commitment, as well as to our shareholders for their ongoing support. I remain optimistic about SerVision's growth and sustained profitability into 2012.

Gideon Tahan

Chairman and Chief Executive Officer

29 June, 2012

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2011

All activities arose from continuing activities.

CONSOLIDATED BALANCE SHEET

AT 31 DECEMBER 2011

PARENT COMPANY BALANCE SHEET

AT 31 DECEMBER 2011

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2011

PARENT COMPANY CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2011

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2011

PARENT COMPANY STATEMENT OF CHANGES IN EQUITY

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 2012) 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.

The directors have prepared and reviewed sales forecasts and budgets for the next twelve months and having considered these cash flows and the availability of other financing sources if required, have concluded that the group will remain a going concern. On this basis the financial statements have been prepared on a going concern basis.

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

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 2010 and 2011.

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.

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 2011 was £1 = US$1.5453.

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 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 has been 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 10% of revenue in 2011 (2010: 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 2011 was US$925,000 (2010: loss US$608,000).

8. PROFIT PER SHARE

Basic earnings per share is calculated by reference to the profit on ordinary activities after taxation of $1,278,000 (2010: profit $641,000) and on the weighted average of 49,678,185 (2010: 41,897,768) 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 49,691,484 (2010: 41,911,067) shares calculated as follows:

1,180,833 (2010: 30,000) 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 9,062,500 ordinary £0.01 shares for a total consideration of £725,000. Issue costs of $178,000 have been deducted from the share premium proceeds.

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: