Final Results

2 April 2014

Starcom PLC

("Starcom" or the "Company")

Final Results

For the Year Ended 31 December 2013

Starcom (AIM: STAR), which specialises in the development of wireless solutions for the remote tracking, monitoring and protection of a variety of assets and people, is pleased to announce its final results for the year ended 31 December 2013.

Highlights

· 11 per cent. increase in sales to $9m (2012: $8m)

· Strong H2 performance with sales increased 57 per cent. to $5.5m (H1: $3.5m)

· Gross margin increased to 56 per cent. (2012: 52 per cent.)

· Net profit of $0.7m (2012: $1.3m) reflecting significant non-recurring costs of approximately $0.6m

· Launch of new improved product versions: Helios TT and Triton 2, during Q4

· Since year end, WatchLock now being actively marketed by Assa Abloy's brands across UK

Michael Rosenberg, Chairman of Starcom, commented, "We are pleased to report an increase in revenues for the year despite the problems in Ukraine which led to the decision to cancel a major order for Watchlock. The Company continues to develop its various products to meet market needs and anticipates further growth in revenues during 2014, although most will occur in the second half of the year."

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CHAIRMAN'S STATEMENT

Overview

I am pleased to report further operational improvements and sales growth for Starcom, following a strong second half performance, with revenues of $5.5m. We ended 2013 with total sales for the year of $9m compared to $8m for the previous year. As referred to in more detail below, revenue would have been $1m higher but for the unfortunate events in the Ukraine which resulted in a long-standing customer being unable to honour his contract with us. This event also impacted our bottom line and, therefore, we report a lower profit after taxation of $0.7m compared with $1.3m for 2012. Further, our 2013 profits were also impacted by certain one off, non-recurring costs totalling $585,000 and exchange rate losses of $439,000. However, we were pleased to see gross margins increase to 56% compared with 52% in 2012, proving the success of our business model.

To ensure sufficient resources to successfully implement our strategy for the coming year, it was decided to raise further capital in the London market in February 2014. A total of £2m was raised by a placing of 13.3m shares at a price of 15p. The Board is confident that these additional resources will enable growth to continue as planned, including an increase in support staff to help facilitate the anticipated evolution of the business.

Operational Review

The Company continued to promote its main products into the global markets and, during 2013, we released updated versions of two of our products, as we looked to stay ahead of our competitors. We have now begun improving the build and technical abilities of WatchLock and should release WatchLock 2 in 2015.

We are pleased to report that Starcom increased the number of companies with which it works and only lost one customer in the year, further details of which are provided in the Helios section below. We are determined to be very selective of who we use as distribution partners at this early stage in our development, as we are focused on building a strong and reliable partner pipeline, which will see us become a much more competitive company in the future.

Unit Sales for the year were as follows:

Watchlock

Unit sales of WatchLock were ahead of expectations with sales of over 16,000 units during the year (2012: 5,879). A higher proportion was sold by the Company directly to the end user, rather than through its joint venture partner, Mul-T-Lock and this naturally resulted in a higher revenue contribution to the Company. In its first full year of sales since the product's initial launch in 2012 the WatchLock has now become the largest contributor to the Company's revenues. Since the start of 2014 our partners in this project have reorganised their approach to the marketing of WatchLock and are now actively embracing the product across all their globally recognised brand names within their group. A major launch of the product was initiated in the UK in February 2014 and a similar launch will follow in the USA later in the year.

As was reported on 21 March 2014, a major purchase order for 4,000 units, which had been previously included in sales for the year, has been impacted by the events in Ukraine. The Company has worked with a local distributor in that country for many years but unfortunately the current political and economic turbulence has changed the relationships previously held by that distributor, in particular with government agencies which were purchasing the products. Accordingly the Company has decided to cancel the order and now has possession of all the units which will be sold in due course to other customers.

Helios

As already announced unit sales of Helios, the vehicle tracking system, were lower than expected and were mainly impacted by the decision taken by the Company to cease trading with one of its large South American distributors due to concerns about their financial viability. A total of approximately 30,000 units were sold during the year (2013: 45,000). In addition the Directors decided to maintain prices in the face of increased market competition, thus maintaining margin but with lower sales. The Company feels that this strategy is the correct course to take, especially following the release, at the end of 2013, of a new generation of Helios products. This lower cost and much smaller unit, called the Helios TT also addresses, for the first time, the motorcycle market. Although we are still at an early stage in promoting Helios TT, the initial reaction from the market has been positive.

Triton

We are pleased with the release for commercial testing of the Triton 2. This product, which provides a simple and effective way to track and monitor freight containers in transit, and which now has the ability to monitor temperature and humidity, is being field tested by a major pharmaceutical company. Although we are still in the early days of testing and it is unlikely that sales for 2014 will be of significance, we have been informed that it is being well received by the market and we are confident that Triton 2 will widen the market opportunities available to us by entering the food and pharmaceutical industries. In 2013 the Company sold 1,278 units of Triton 1.

Kylos and Rainbow

This device is designed to track merchandise or personal goods. The Directors believe it is the world's smallest tracking device that contains light, temperature, humidity and location detectors. Customers are currently testing the product for a variety of applications. Commercial sales are not expected to start until 2015.

Despite some promising sales leads for the Rainbow, sales for 2013 were slow and did not contribute materially to revenues. The directors have taken the decision to focus on their more established products for 2014 and will review the prospects for the Rainbow later in the year but in the meantime do not anticipate meaningful revenues from the product in the current financial year

Starcom Online

At 31 December 2013 there were 43,787 (2012: 50,000) registered subscribers to Starcom Online, the Company's web application for online fleet and asset management. Since a large number of sales of Helios and WatchLock took place towards the end of 2013, the impact on revenues from online customers will not be felt, in any meaningful way, until later in 2014.

Financial Review

We recorded a very strong second half with sales of over $5.5m compared to $3.5m for the first half of the year in line with the release of new products and new version of existing products as well as better traction with some of our distributors.

As indicated above, the gross margin for the year showed an increase over 2013, with final figure at 56% (2013: 52%).

Sales and marketing expenses increased following the recruitment of additional staff and ancillary costs. General and administrative costs also increased due to additional staff and expenses related to the Company becoming an AIM listed public company.

Our operating profit increased to $1.8m compared with $0.6m in the first half of the year, and compared to $2m for the full year 2012.

Our net profit for the year was $0.7m compared to a loss of $89,000 in the first half and a profit of $1.3m for the full year 2012. The main impact on the profits were finance costs of which the majority were one-time costs as follows: The final settlement with Keren Hagshama Ltd in respect of the early repayment of their loans caused a one off expense of $340,000 and a sum of $89,000 due to the expiration of the repurchase option. In addition, profits were impacted by the calculation of the value attributable to options granted at the time of the IPO. This amounted to approximately $45,000. Exchange losses of $439,000 were also recorded. Following a change in the employment terms of certain senior management and due to recent changes in the Israeli severance law, it was necessary to make a one-time provision for notional termination of $110,000. No payment was made to the employees and no change made in the remuneration they receive and the effect is to remove the need for annual provisions under Israeli law to be made in the future.

Year end trade receivables were $6.2m, mainly reflecting the increase in sales towards the end of the year.

Outlook

The Directors expect further growth in 2014 due to the Company's enlarged range of products and stronger relations with its distribution and sales partners. They are also focused on replacing the lost sales revenue in the Ukraine, either through a new customer relationship or pending a hopeful return to stability in that country. As in 2013, they anticipate that the majority of our expected revenue growth in 2014 will fall into the second half of the year, due to the seasonal nature of our customers' purchasing activities.

Annual Report and Notice of General Meeting

A copy of the audited annual report for the year ended 31 December 2013 will be available to shareholders from 10 April 2014 when a copy will be available for inspection on the Group's website at http://www.starcomsystems.com/

The Notice of General Meeting will be posted to shareholders on or before 10 April 2014 and the General Meeting will be held at 11am on 27 May 2014 at the office of K&L Gates, One New Change, London, EC4M 9AF.

U.S. Dollars in thousands

* Reclassified.

U.S. Dollars in thousands (except shares data)

U.S. Dollars in thousands

U.S. Dollars in thousands

* Reclassified.