Final Results

SERVOCA Plc

Preliminary announcement of the results for the year ended 30 September 2010

Highlights

For the year ended 30 September 2010

·; Revenue £50.2 million (2009: £57.6 million, including £2.5 million from closed businesses)

·; Gross profit £14.0 million (2009: £16.8 million)

·; Administrative expenses down 17.3% to £11.9 million (2009: £14.4 million)

·; Profit before taxation (excluding amortisation and share based payment charges) £2.0 million (2009: 2.2 million)

·; Profit after tax £1.99 million (2009: £2.03 million)

·; Basic EPS of 2.15p before amortisation and share based payment charges (2009: 2.89p)

·; Net debt reduced from £3.4 million at September 2009 to £3.0 million at September 2010

·; Cash generated from operations in the year was £2.4 million (2009: £3.2 million)

Enquiries:

Servoca 020 3031 4820

Andy Church

FinnCap 020 7600 1658

Geoff Nash

Ed Frisby

Tom Jenkins/Simon Starr (Broking)

Introduction

For the year ended 30 September 2010, we are pleased to report a level of profitability just below the year ended 30 September 2009, despite difficult trading conditions.

As cautioned in our Interim Statement for the six months ended 31 March 2010, the uncertainty and pressures regarding public sector spending have continued to impact on the business in the second half. At the half year we reported a reduction in revenue from our Education Recruitment activities and this has become a full year reduction of over £5m. The second half has also seen deterioration in trading conditions in our Healthcare Recruitment businesses though the impact has been felt more in some areas than others. On a like for like basis (excluding businesses closed during year ended 30 September 2009) our Healthcare revenues are marginally higher when compared to last year however this does not reflect the current run rates.

A brighter note has been struck in the corporate security company within our Security operations where we have seen an improved trading environment in a business largely focussed on the private sector. Action taken towards the end of last year ensured the security business entered the year positioned for improved profitability. We are pleased to report that this helped deliver a healthy increase in revenue, gross margin and net profit. We have also achieved growth in our Domiciliary Care business which bodes well for further development.

In light of the challenging trading conditions in our public sector recruitment activities we have continued to drive down the Group's overheads, which have reduced by £2.5m compared to the previous year.

Financial Review

For the year ended 30 September 2010, Group revenue was £50.2 million compared with £57.6 million (2009), a reduction of 12.8%. Gross profit for the year was £14.0 million against £16.8 million (2009), a reduction of 16.7%.

Operating profit for the year was £2.1 million (before share based payment and amortisation of intangibles of £0.6 million) compared with an operating profit in the prior year of £2.6 million (before share based payment charges and amortisation of intangibles of £0.3 million).

Profit before taxation (excluding share based payment charges) was £2.0 million compared to £2.2 million (2009).

The basic earnings per share for the year were 1.69p compared with 2.5p (2009).

Net debt reduced from £3.4 million at September 2009 to £3.0 million at September 2010.

Cash generated from operations in the year was £2.4 million (2009: £3.2 million).

Acquisition

On 14 August 2010 the Company acquired, as a going concern, the business, trade and assets of Phoenix Employment Services Limited ("Phoenix") from the administrators. The total consideration paid was £0.96m in cash of which £0.77m was for the net assets and £0.19m for goodwill.

Full details of this transaction are disclosed in note 8.

Operational highlights

Strategy and delivery

The management team remains focussed on profit delivery within its existing operations. Mindful however of the challenging trading conditions in our public sector recruitment businesses, the Group is committed to the development of its outsourcing activities in the short to medium term.

Healthcare Recruitment

Our Healthcare Recruitment business operates through a number of discrete brands and supply is focused on doctors, nurses, care workers and allied health professionals.

The core of our Healthcare Recruitment revenue is concentrated in two discreet areas; Doctors and Nursing and Care workers. Both areas faced challenging trading conditions, notably in the second half, but with differing impacts on their results. In our Nursing and Care operations the momentum built in the first half helped overcome the reduced demand in the second half, although growth therefore became difficult towards the end of the year, revenue, gross margin and net contribution towards central costs were all up in the second half over the first half. These businesses enter financial year 2011 with an improved year on year run rate.

The amount of nursing hours we were able to provide was helped by our decision to position our supply entirely through the NHS supply framework, PASA, at the start of the year. This helped the business survive a period of reduced demand relative to previous years. Profitability and growth were aided by an increased level of supply into the private sector, where margin and demand were stronger than in the NHS. This supply was aided by our increased candidate flow as a consequence of our framework status.

In our doctors supply business the impact of the trading conditions on their second half results was more significant. Despite increasing annual revenue by £500k over the previous year and maintaining a similar level of profitability, the run rate was reduced substantially as we approached the year end. This was particularly so after the August period, which sees the NHS recruit its largest intake of newly qualified doctors on a permanent basis. This led to a 15% reduction in revenue in H2 compared to H1 and means that the doctors business enters financial year 2011 with a substantially reduced run rate.

Education Recruitment

Our Education Recruitment business operates through three brands, Academics, Day to Day Teachers and Dream Education.

Academics operate as an education recruitment and training provider which supplies education professionals on a contract or permanent basis to clients in London and the Home Counties. Academics were a major contributor to the Group's profitability during the financial year 2009 and were expected to deliver a similar level of contribution in the financial year 2010. However, as cautioned in our Interim Statement, trading conditions have continued to prove difficult and this has had the expected impact on the full year result. The second half saw both contract and permanent revenues fall well short of internal expectations and consequently the full year result was substantially lower than last year. Despite this fall from 2009, it is anticipated that there remains growth in this market in the short term.

Dream Education provides long-term teaching professionals to schools across the UK, mostly within secondary schools. The business entered the financial year under new management and with a mandate to develop a new operating model. The historic provision of exclusively overseas candidates was no longer viable as changes to work permit regulations and the increased availability of UK trained teaching professionals had severely affected both supply and demand for this type of resource. The business has made steady progress in becoming a quality supplier of UK trained teaching professionals but was also affected by the difficult trading climate. The result was that profitability was also substantially reduced.

Day to Day Teachers provides supply teachers and classroom assistants to cover short-term periods of absence within schools. This business proved more resilient over the period with net contribution fractionally up on the prior year. Improved operational management and action taken to close unprofitable branches in financial year 08/09 helped deliver this performance.

As we enter the new financial year we have consolidated the business of Dream Education and Day to Day Teachers to create a new brand, Servoca Education Resourcing, under the new management appointed earlier in the year ended 30 September 2010.

Secure Solutions

Our Security Division - Secure Solutions - incorporates two main business areas; corporate security services and criminal justice operations. Our corporate security offering comprises manned guarding, systems services and a corporate investigations unit that engages in a variety of sensitive and highly specialist activities. Our criminal justice operation provides resourcing and outsourcing services to a majority of police constabularies throughout the UK. This area also provides investigative skills and services to a range of local and central government authorities.

We are pleased to report that in our corporate security business, within our Security operations, the progress reported in our Interim statement continued into the second half of the year. This resulted in a substantial improvement in its financial performance for the full year with revenue, gross margin and net contribution all ahead of the prior year.

The Criminal Justice operation was exposed to more difficult trading conditions in the second half of the year and this curtailed internal growth expectations over that period. Again, as this area is under pressure from public sector finances, conditions were challenging.

Board changes

Miles Davis resigned as a Director with effect from 11 February 2010 and we thank him for his valuable contribution to the Group.

Summary and prospects

Outlook

Although all our public sector recruitment businesses are facing a challenging trading environment during 2011, we expect some areas to be impacted more than others. As a consequence we still expect improved profitability in some areas of supply to offset reduced levels of profitability in others.

Mindful of the current trading conditions in our public sector recruitment businesses, the Group is committed to the development of its outsourcing activities in the short-medium term. The Group believes that both its Security and Domiciliary Care businesses hold good growth potential and our recent acquisition of Phoenix in the latter area gives the Group a much enlarged presence in this market. We are pleased to report that this acquisition has bedded in very well and is trading ahead of expectations. New management has been appointed to take our Security business forward and the Group is committed to investment in this area for the year ahead to substantially improve our service offering in this market and grow our profitability.

26 January 2011

SERVOCA Plc

Consolidated statement of financial position

At 30 September 2010

SERVOCA Plc

Consolidated statement of changes in equity

For the year ended 30 September 2010

SERVOCA Plc

Consolidated statement of cash flows

For the year ended 30 September 2010

Notes forming part of the preliminary announcement

For the year ended 30 September 2010

1 Accounting policies

Basis of preparation

The preliminary results were authorised for issue by the Board of Directors on 26 January 2011. The financial information set out above does not constitute statutory accounts for the years ended 30 September 2010 or 2009, but is derived from those accounts. Statutory accounts for 2009 have been delivered to the Registrar of Companies whereas those for 2010 will be delivered shortly. The auditors have reported on those accounts; their report was unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 2006.

The principal accounting policies are set out in the Group's financial statements for the year ended 30 September 2010. This preliminary announcement has been prepared on the same basis as the prior year accounts.

This preliminary announcement has been prepared in accordance with International Financial Reporting Standards (IFRSs and IFRIC interpretations) published by the International Accounting Standards Board (IASB), as endorsed for use in the European Union, and with those parts of the Companies Act 2006 applicable to companies preparing their financial statements under IFRS.

Copies of the annual accounts and financial statements for the year ended 30 September 2010 are not being posted to shareholders but will be available to view and download from the company's website, www.servoca.com

Going concern

The Group's business activities together with factors likely to affect its future development, performance and position are set out in the Chairman/Chief Executive Officer report on pages 2 to 5. The Group's objectives, policies and processes for managing its capital, its financial risk management objectives, details of its financial instruments and hedging activities and its exposure to credit risk and liquidity risk are described in the Group's financial statements for the year ended 30 September 2010.

The Group's principal sources of financing are equity and invoice discounting facilities secured on book debts. Due to the reliance on invoice discounting facilities, the Group is in a net current liabilities position. A combination of improved working capital management and continued profitability has resulted in significantly improved generation of cash during the year allowing the acquisition during the year to be financed internally.

The directors have prepared trading and cash flow forecasts for the period to 31 March 2012 which indicate adequate headroom in borrowing facilities. Accordingly, they continue to adopt the going concern basis in preparing this preliminary announcement.

2 Segmental analysis

The Group's primary format for reporting segment information is by business segment, being by type of service supplied. The operating divisions are organised and managed by reporting segment where applicable and by divisions within a reporting entity where necessary.

The Group provides recruitment services to the healthcare and education sectors and the Secure Solutions segment provides outsourced services to the Security sector.

The Group's customers and assets are all located in the UK and therefore it does not report by geographical location. There is no inter-segment revenue.

2 Segmental analysis(continued)

3 Exceptional items

The exceptional items can be summarised as follows:

Restructuring costs and claims:

In 2009, exceptional items relate to a claim in relation to specific employment legislation which the Group is liable to settle, based on legal advice.

Legal costs:

The Group was involved in two legal cases during the prior year. Favourable outcomes in both cases resulted in reduced outflows compared to original expectations and these were adjusted for in the prior year accordingly.

4 Earnings per share

The calculation of earnings per share for the year ended 30 September 2010 is based on a weighted average number of shares in issue during the year of:

The above number of shares excludes own shares held in the Servoca Plc Employee Benefit Trust and are used in all of the earnings per share calculations below.

Additional disclosure is also given in respect of earnings per share before amortisation of intangible assets and exceptional costs as the directors believe this gives a more accurate presentation of maintainable earnings.

5 Trade and other receivables

The fair values of financial assets classified as loan and receivables approximate to their carrying value.

Trade receivables are non-interest bearing and are generally on 14-60 day terms. At 30 September 2010, trade receivables of £937,000 (30 September 2009: £794,000) were impaired and fully provided for.

At 30 September 2010 the analysis of trade receivables is:

At 30 September 2009 the analysis of trade receivables was:

Movements on the Group provision for impairment of trade receivables are as follows:

6 Provisions

Legal claims

The legal claims are in relation to specific employment legislation which the Group is liable to settle, based on legal advice which remains applicable at the current statement of financial position date.

Business restructuring

As part of the Group's restructuring programme, the Board has terminated all loss making businesses which includes the revision of the management structure, streamlining the operational management, simplifying the corporate structure and continued the rationalisation of the front and back office systems and a reduction of operational and administrative staff and overheads.

Vacant property costs

Part of the restructuring has necessitated vacating certain of the Group's leasehold premises for which provisions have been made for the expected costs to the expiry of the leases. The timing of the cash flows resulting from this provision will be completed within five to ten years.

National Insurance on share options

National Insurance is payable on gains made by employees on exercise of certain share options granted to them. The eventual liability to National Insurance is dependant on:

·; The market price of the company's shares at the exercise date;

·; The number of options available; and

·; The prevailing rate of National Insurance at the date of the exercise.

7 Called up share capital

The deferred shares hold no rights to attend or vote at general meetings, have no dividend rights and would not participate in the assets of the company on a winding up.

The preference shares, none of which are issued, hold no dividend rights except in the event of a winding up of the Company when any assets held for distribution are first applied to the holders of these shares to the extent they are paid up.

Movements in issued share capital

In January 2010, the Company issued 4,400,000 Ordinary 1p shares in respect of a subscription by the Servoca Plc Employee Benefit Trust.

8 Acquisition

Phoenix ES Limited

On 14 August 2010, the Company acquired, as a going concern, the business, trade and assets of Phoenix Employment Services Limited from their administrators. The total consideration paid of £0.96 million was in cash, of which £0.77 million was for the net assets and £0.19 million for goodwill. Phoenix trades from three locations in the Midlands and Home Counties and provides outsourcing and recruitment services for the domiciliary care and nursing markets. The business will enhance the existing Healthcare segment of the Group.