Final Results

30 June 2011

SerVision Plc

("SerVision" or the "Company")

Final Results for the Year Ended 31 December 2010

SerVision (AIM:SEV), the AIM listed developer and manufacturer of digital security systems, is pleased to announce its audited results for the year ended 31 December 2010.

Highlights:

·; Revenue maintained at $5.3 million (12 months to 31 December 2009: £5.3 million);

·; Revenue from franchises increased by 133% to $1.4 million (12 months to 31 December 2009: $600,000);

·; Operating profit increased by 148% to $709,000 (12 months to 31 December 2009: $285,000);

·; Net profit increased by 232% to $641,000 (12 months to 31 December 2009: $193,000);

·; New distribution agreements secured in the UK, Europe, South America and Asia to supply systems for buses, cash-in transit, taxis, airports and emergency services;

·; Manufacturing agreement entered into with Rich Wonder Technology Limited for manufacturing of all of SerVision's narrow band-width video gateway products to be sold in China and other authorised territories; and

·; Increased interest in SerVision's products from cellular operators for use in the residential sector;

Gidon Tahan, CEO and Chairman of SerVision, commented, "2010 was a definite step forward for the Company, as we extended a number of projects with some of our existing clients and also began high-profile trials with new clients across a range new market segments, such as airports, ATMs, taxis and train companies, into countries as diverse as Colombia, India, Kazakhstan, the US and Russia. Our breadth of new contracts is evidence that our products continue to gain traction globally. The Board continue to believe that our patented compression technology remains amongst the most technologically advanced on the market."

Posting of accounts and notice of Annual General Meeting

SerVision's annual report and accounts for the year to 31 December 2010 will be posted to shareholders today and will be available on the Company's website, at www.servision.net.

Shareholders have also been sent a notice of the Company's annual general meeting, which will be held at the offices of Adams & Remers, Dukes Court, 32 Duke Street, St James's, London, SW1Y 6DF on Tuesday 26 July 2011 at 10:00 am.

CHAIRMAN'S STATEMENT

I am pleased to announce SerVision's consolidated group financial statements for the twelve months ending 31 December 2010, and in light of the modest increase in profits compared to 2009, the Company is proud to have sustained its overall positive record of growth.

SerVision had a number of notable successes over the course of 2010. We expanded ongoing projects with all of the major UK-based cash service operators including G4S, Loomis and Brinks, as well as projects with all our major bus operators in Israel. The company's most recently released product, the CVG-M, was used for a high-profile airport project during the 2010 Asian Games as well as several important pilots conducted over the year. The pilot projects included a large school bus project in the US, a taxi project in Colombia, a police project in Mexico, an ATM project in India, and a train project in Moscow. The Board have received favourable feedback and are confident that these pilot projects will culminate in orders and contracts for SerVision during the 2011 financial year. Discussions with major mobile operators that began in 2010 are still underway and we hope to see some results in the future.

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 successfully entered into a number of markets in Eastern Europe during the period as the Company supplied several hundred HVG units for a school project in Kazakhstan and signed a distribution agreement with NSS Sp. Z.o.o., a large security company in Poland, for the delivery of 1,000 units across the range of SerVision's products. The Company has also been short-listed for a number of high-profile pilots projects in 2010 that are now beginning to move forward. These include a school bus pilot in San Antonio, Texas which has recently resulted in a new order for 200 MVG units. The Directors anticipate that SerVision's MVG product will eventually be deployed on the school district's fleet of over 1,000 vehicles. A major selling point for SerVision's CVG-M product is its combined ability to offer a live video solution for security applications, as well as to serve as a platform for advertising content paid for by local vendors. After successfully passing the pilot, SerVision received a letter of intent from the Taxi Company and the Municipality of Bogota in Colombia to deploy the solution city-wide. Another significant pilot from 2010 was converted into an agreement to equip 2,000 ATM machines throughout India with SerVision's UVG gateway. The first 100 units have already been supplied and further orders are expected over the coming months. Ongoing projects with Cash-in-Transit companies in the UK and ATM monitoring projects in Singapore also contributed to the company's sales growth in 2010.

The Company also announced in May 2010 a manufacturing rights agreement with Rich Wonder Technology Limited to manufacture all of SerVision's narrow band-width video gateway products to be sold in China and other authorised territories. Under this agreement the consideration payable to SerVision was US$2.0 million of which US$600,000 was settled through payment of cash to SerVision with the balance being settled through the supply of 3,730 of SerVision's MVG 400 units (which at the manufacturing cost of US$375/unit have a value of US$1.4 million). A production line has been established in China and quality control has been undertaken on the production line of the stock manufacturer. The Board at SerVision is happy with the progress being made on the establishment of the production line in China and expect to start receiving delivery of the MVG 400 units shortly.

Research and Development

SerVision's R&D team had a number of achievements throughout 2010. In addition to developing a client software application for the iPhone, the Company created a new enterprise-level control centre/wireless backup solution to support large scale commercial projects, or projects that have outgrown the existing software monitoring solution. In parallel, new functionality was added to SerVision's line of mobile gateways to help the products gain traction in the fleet management market. These new features include speed alerts, geo-fencing, and an optional integrated G-Force sensor. In addition to the newly added features and optimisations made to the existing range of products, exploratory work was conducted to begin selecting hardware for the next generation of mobile gateways, which we hope to release in 2012.

Financials

·; Revenues remained steady at $5,301,000 (12 months to 31 December 2009 : $5,367,000)

·; Operating profit for the period increased to $709,000 (12 months to 31 December 2009 : $285,000)

·; Net profit for the period increased to $641,000 compared to $193,000 for 2009

Conclusion

I am pleased to report on SerVision's upward trend of profitability throughout 2010 and I remain optimistic about SerVision's growth prospects into 2011. Following the launch of our CVG-M series of products in 2010 designed for use in smaller vehicles such as taxis we have entered into a market that we view with significant growth potential. In addition the pipeline of new distribution agreements remains healthy. Finally, I am especially grateful to our staff for their outstanding work and dedication, as well as to our shareholders for their continued support.

Gideon Tahan

Chairman and Chief Executive Officer

30 June 2011

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED BALANCE SHEET

AT 31 DECEMBER 2010

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2010

CONSOLIDATED 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 2011) 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.

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 2009 and 2010.

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 2010 was £1 = US$1.547.

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 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.

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 Black-Scholes 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 2 customers that accounted for more than 10% of revenue in 2010 (2009: 10%) one of which is the segment Rest of the world and the other in Europe.  

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 2010 was US$608,000 (2009: loss US$1,262,000).

8. PROFIT PER SHARE

Basic earnings per share is calculated by reference to the profit on ordinary activities after taxation of $641,000 (2009: profit $161,000) and on the weighted average of 41,897,768 (2009: 31,717,721) 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 41,911,067 (2009: 31,731,020) shares calculated as follows:

30,000 (2009: 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 2,740,000 ordinary £0.01 shares for a total consideration of £342,500.

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 Black-Scholes 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 Group has five bank loans. The first loan is with Bank Mizrahi for $38,690 and is repayable in monthly instalments until February 2012. The second loan is with Bank Otzar for US$133,025 and is repayable in monthly instalments until January 2014. The third loan is with Bank Mizrahi for US$112,838 and is renewable every two months. The fourth loan is with Bank Hapoalim for US$49,366 and is repayable in monthly instalments until March 2011. The fifth loan is with Bank Otzar for US$18,197 and is repayable in monthly instalments until April 2011. The Group also has other short term loans totalling $119,000.

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.

20. CONTINGENT LIABILITY

The subsidiary is required to pay royalties to the 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.

21. FINANCIAL RISK MANAGEMENT

The Group's activities give rise to a number of financial risks: market risk, credit risk and liquidity risk. Market risk includes foreign exchange risk and cash flow and fair value interest rate risk. The Group has in place risk management policies that seek to limit the adverse effects on the financial performance.

Foreign exchange risk

Most of the Group's sales and income are in US dollars; however the expenses are divided between the US dollar and the Israeli Shekel. The cost of goods (components) are paid in dollars and part of the operational costs such as rent and other service providers quote their fees in dollars. Labour costs however are paid in Israeli Shekels. The Group has therefore a partial currency risk in the event the Israeli shekel is strengthened against the US dollar that could influence the bottom line of the Group's financial results.

The Group is subscribed to a weekly circular from the two Israeli main banks regarding the main financial institutions expectations for foreign currency changes. The management reviews them carefully and will consider with the board weather it should purchase financial instruments sold by local banks, to protect itself from this foreign exchange risk.

Financial instruments

The Group does not use derivative financial instruments but has bank loans. The Group finances its operations simply using bank balances and overdraft, plus debtors and creditors. The cash flow is regularly monitored and the overdraft is occasionally extended to meet requirements as they arise.

Capital risk management

The Group manages its cash carefully. In order to reduce its risk, the Group may take measurements to reduce its labour costs if performance is below the Group's expectations. The Group may conduct placing for new shares of the Company to raise additional capital as required when monitoring its performance, to continue its operations.

Significant accounting policies

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 1 to the financial statements.

Accounting policies for financial instruments are applied on the following Balance Sheet items:

All of the Group's liabilities have been classified as other financial liabilities. The Group does not have assets or liabilities which are classified as 'Assets or Liabilities at Fair value through profit and loss'.

Fair value of financial instruments

The fair values of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets is determined with reference to quoted market price;

·; the fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets is determined with reference to quoted market price;

·; the fair value of other financial assets and financial liabilities (excluding derivative instruments) is determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions and dealer quotes for similar instruments;

The Group applied the following methods and assumptions during the estimation of fair value of financial instruments:

Receivables and deposits at banks

For assets which mature within 3 months, carrying value is similar to fair value due to shortness of these instruments. For longer-term assets, contracted interest rates do not significantly defer from current market interest rates, and due to that their fair value is similar to its carrying value.

Loan liabilities

Fair value of short term liabilities is similar to its carrying value due to shortness of these instruments. For long term liabilities, contracted interest rates do not significantly differ from current market interest rates, and due to that their fair value is similar to their carrying value.

Other financial instruments

Financial instruments of the Group which are not valuated at fair value are trade accounts receivable, other receivables, trade accounts payable and other payables. Historic carrying value of assets and liabilities, including the provisions, which are in accordance with the usual business conditions, is similar to their fair value.

Financial risk management objectives

The Group's management monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyse exposures by degree and magnitude of risks. These risks include market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk.

.

(a) Liquidity risk

At 31 December 2010 the consolidated cash position of the Group is $87,000 and there is currently no procedure to centralise and manage cash by a treasury manager.

The Group manages its liquid resources so as to obtain the best available rates of return on cash investments, whilst retaining access to those resources. Cash that is not needed for short term requirements is deposited for periods of one month (or more), based on the Directors' assessment of prevailing interest rate trends, the interest rates available and the liquid resource requirements of the Group. In addition, cash is placed on instant access deposit with the Group's bankers, which is available for shorter-term requirements.

(b) Interest rate risk

The Company, nor any of its subsidiaries, has any debt subject to rate indexation. Hence there is no major impact on our finances from potential rate variations.

(c) Currency risk

The Company has not implemented a specific policy to protect against currency fluctuations. The fact that the Group is trading in the three main international currencies could have a negative impact.

(d) Credit risk management

The Group is exposed to credit risks if its customers fail to pay for goods supplied by the Group. In order to minimise this risk the Company has a policy of:

·; Selling only to respectable integrators and distributors and not to the end customer.

·; Orders from customers in certain regions are shipped only after an approved letter of credit is received by the group's bank.

·; On going customers must pay 50% before shipping.

·; Only high rated customers receive credit from the group(GE, ADI, G4S Israel)

The group's maximum exposure to credit risk is $3,296,000 represented by Trade and other receivables.

The Directors do not believe there to be an ultimate controlling party.

Since the year end the Group has issued 9,062,500 new ordinary shares of 1p each at a price of 8p per share, raising £725,000 before expenses.

Included within Other Receivables is a loan of US $168,000 (2009: $42,000 ) to G Tahan, a director. The loan is unsecured and is due within one year.

25. STANDARDS ISSUED BUT NOT YET EFFECTIVE

Standards issued but not yet effective up to the date of issuance of the company's financial statements are

listed below. This listing is of standards and interpretations issued, which the company reasonably expects to be applicable at a future date. The company intends to adopt those standards when they become effective. The company does not expect the impact of such changes on the financial statements to be material.

IAS 24 Related Party Disclosures (Amendment)

The amended standard is effective for annual periods beginning on or after 1 January 2011. It clarified the

definition of a related party to simplify the identification of such relationships and to eliminate inconsistencies in its application. The revised standard introduces a partial exemption of disclosure requirements for government-related entities. The company does not expect any impact on its financial position or performance.

Early adoption is permitted for either the partial exemption for government-related entities or for the entire

standard.

IFRS 9 Financial Instruments: Classification and Measurement

IFRS 9 as issued reflects the first phase of the IASBs work on the replacement of IAS 39 and applies to

classification and measurement of financial assets as defined in IAS 39. The standard is effective for annual periods beginning on or after 1 January 2013. In subsequent phases, the IASB will address classification and measurement of financial liabilities, hedge accounting and derecognition. The completion of this project is expected in early 2011. The adoption of the first phase of IFRS 9 will have an effect on the classification and measurement of the company's financial assets. The company will quantify the effect in conjunction with the other phases, when issued, to present a comprehensive picture.

Improvements to IFRSs (issued in May 2010)

The IASB issued Improvements to IFRSs, an omnibus of amendments to its IFRS standards. The amendments have not been adopted as they become effective for annual periods on or after either 1 July 2010 or 1 January 2011. The amendments listed below, are considered to have a reasonable possible impact on the company:

·; IFRS 7 Financial Instruments: Disclosures

·; IAS 1 Presentation of Financial Statements

The company, however, expects no impact from the adoption of the amendments on its financial position or performance.