Final year results - 31 December 13

12 March 2014

Servelec Group plc

Full year results for the year ended 31 December 2013

Maiden results in line with Board expectations; Acquisitions successfully integrated; strong sales momentum going into 2014

Servelec Group plc ("Servelec" or the "Group") the UK-based technology group which provides software, hardware and services predominantly to the UK healthcare, oil & gas, nuclear, power, water, utilities and broadcast sectors, today announces its results for the twelve months ended 31 December 2013.

FINANCIAL HIGHLIGHTS

* after adding back amortisation, share based payments and royalty charges from previous parent

OPERATIONAL HIGHLIGHTS

· Successful Initial Public Offering (IPO) on the main market of the London Stock Exchange completed on 2 December 2013

· Strong cash generation through the year

o £6.5 million dividend returned to CSE Global Limited of Singapore prior to the Group's IPO

o IPO completed with cash balances of circa £5.0 million

· Important product innovation, development and roll-out

o Servelec Healthcare: successful delivery of major software update of RiO

o Servelec Technologies: launch of new RTU products

· Corporate development: key acquisitions successfully completed and integrated

o February 2013: Tynemarch Systems acquired, which delivers real time optimisation for Servelec's Automation division

o October 2013: acquisition of Semaphore which adds two RTU brands and a worldwide distributor network for RTU sales

o December 2013: disposal of non-core Slovakian division, CSE Controls sro.

Alan Stubbs, Chief Executive Officer, commented:

I am delighted with the performance of the Servelec Group in 2013 and I look forward to 2014 with great enthusiasm. As a newly independent business and recently listed on the main market of the London Stock Exchange, Servelec is well positioned to take advantage of the considerable opportunities for growth and development in the year ahead and beyond.

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Notes to Editors

Servelec Group plc is a UK-based technology group, with significant intellectual property, providing software, hardware and services predominantly to the UK healthcare, oil & gas, nuclear, power, water, utilities and broadcast sectors.

Servelec Group has two divisions; Servelec Healthcare and Servelec Automation:

- Servelec Healthcare specialises in the design, development and implementation of Electronic Patient Record and Patient Administration software within secondary care settings and is a market leader in the Mental Health and Community Health sectors in England

- Servelec Automation provides complex, mission-critical control systems to large blue-chip companies mainly in the UK, focusing on the oil & gas, nuclear, power, water, utilities and broadcast industries. Servelec Automation also provides services from consultancy through to design, implementation, delivery, installation and on-going customer support and maintenance.

CHAIRMAN'S STATEMENT

Overview

The Group performed well in 2013 and has reported results in line with expectations set at the time of the IPO. Revenue for the year ended 31 December 2013 amounted to £42.0m (2012: £39.4m) an increase of 6.7% and profit before taxation of £10.9m (2012: £10.9m). Strong revenue growth of 20% in the Automation division was partially offset by the expected decline in revenues in the Healthcare division.

The Healthcare division had revenues of £14.9m in 2013 compared to £16.7m in 2012. This reduction was attributable to lower revenues from the National Programme for IT (NPfIT) in the National Health Service, which comes to an end in October 2015. Revenues from individual health sector Trusts have already started to flow and are anticipated to increase substantially this year and next.

The Automation division, which comprises Servelec Controls (a provider of safety and control systems to the Oil, Gas, Power and Nuclear sectors) and Servelec Technologies (a supplier of Telemetry monitoring and control solutions and products to the Utilities and Broadcast sectors) has also performed in line with expectations set at the time of the IPO, with revenue for the Automation division totalling £27.1m in 2013 compared to £22.6m in 2012. New project wins in 2013 amounted to £25.8m, the bulk of which will be recognised in 2014.

As at 31 December 2013, Servelec had net cash balances of £7.5m and cash conversion was a healthy 83%. We remain focused on maintaining positive cash flows as we continue to grow, although, due to the nature of certain projects and internal investments, the level of cash generation varies month to month.

Dividend

The Group has traditionally paid dividends to its Singaporean parent company each year. Servelec is committed to having a progressive dividend policy. Due to the proximity of the year end to the date of the IPO it was decided, as noted in the IPO prospectus, that no final dividend would be paid in respect of the year ended 31 December 2013. The first dividend as a listed company is expected to be paid, as an interim dividend, in respect of the six months ended 30 June 2014.

Board and Employees

I would like to take this opportunity to thank all employees of Servelec for their hard work and support during 2013, a year culminating in the IPO, which absorbed substantial management time and effort. We have, through the hard work and dedication of our staff, continued to develop our businesses and provide excellent service and support to our customers.

As part of the preparation for the IPO, Mr Lim Ming Seong stood down as a Director of Servelec, being a Director of the Singaporean Parent Company CSE Global Limited. I should like to thank him and Mr Lim Boon Kheng for their support and guidance to the Company and its management over many years.

I am delighted to formally welcome Mr Roger McDowell and Mr Bernie Waldron as Non-Executive Directors of Servelec. Their support during the IPO process has already been greatly appreciated. I look forward to working with them in the years to come on the growth and further development of the Group.

Outlook

The Board looks forward to 2014 with great enthusiasm as it considers Servelec, a newly-independent business and recently listed on the main market of the London Stock Exchange, is well poised to take advantage of the considerable opportunities for growth and development available to it. As at 1 January 2014 the order bank, for delivery in the year, amounted to £38.9m and represents an excellent start to the year.

A reason for Servelec listing on the London Stock Exchange was to benefit from the wider availability of capital for the development and growth of its business including funding for acquisitions. Whilst organic growth and development of the Group is fundamental, we will also look for suitable acquisition opportunities that will enhance and accelerate the overall growth and development of the Group.

CHIEF EXECUTIVE'S REVIEW

Introduction

Servelec Group plc was admitted on to the main market of the London Stock Exchange (LSE) on 2 December 2013. After 13 years of ownership by CSE Global Limited of Singapore this was a major step for the business and involved considerable effort from the senior management team, our sponsor, Investec, and our other advisors. The challenge for 2013 was to separate Servelec Group from the ownership of CSE Global Limited, change the financial reporting from UK GAAP to IFRS and IPO the company on the main market of the LSE, whilst delivering on the profit, cash generation and operational expectations set for the business. There was potential for significant distraction during the IPO process which commenced with discussions with CSE Global Limited in early 2013, but we are pleased to report that 2013 has been one of solid performance and results are aligned to the targets we set for the year.

Corporate Development

During 2013 we successfully acquired Tynemarch Systems, a company working in the water industry. Their Miser and Pioneer products enhance our capability to deliver true real-time business optimisation, enabling our customers to realise cost and performance benefits.

In the later part of 2013 we acquired Semaphore from CSE Global and established our Servelec Technologies business, which comprises Semaphore, Servelec Systems and Tynemarch.

Semaphore is a welcome addition to the Servelec Group bringing significant scale to our RTU (Remote Telemetry) business. Semaphore will increase revenues into the Servelec Group in 2014 (FY2013 revenue for Semaphore was circa £9.0m). We now have a global RTU business, operating in a wide range of end user markets including; Broadcast, Oil & Gas, Rail and Water together with a distribution channel covering Canada, USA, Europe, China, Asia, Australia and New Zealand. Our RTU brands are now Kingfisher, Seprol and T-Box.

In December 2013, Servelec Automation concluded the disposal of its non-core Slovakian operation; the consideration received was in line with management expectation with minimal impact on Group results. The disposal of this business will enable management to focus on more profitable opportunities.

We are pleased to welcome Andy Sullivan who joined the business from Ultra Electronics to head up the Servelec Technologies business. Andy's role will be to bring together and exploit the synergies that exist between the three subsidiary companies - Semaphore, Servelec Systems and Tynemarch Systems.

GROUP CORPORATE STRATEGY

Our strategy is made up of four distinct elements:

1. Push the organic growth of Automation & Healthcare:

§ We have a broad range of organic growth opportunities that fit with the capabilities of the business. These range from brownfield refurbishment of platforms around the UK coastline, to efficiency improvements and cost reductions for our utilities clients to the continued delivery of true electronic patient record systems that meet the objectives set by the UK Government and more importantly the needs of our healthcare clients as they strive to deliver improved patient care in an environment of ever increasing need.

§ Our clients are important to Servelec and we have been working with a number of them for many years. In 2014 we'll strive to maintain client satisfaction thus increasing our level of repeat business and recurring revenues.

§ Procurement activity is now happening across all our markets and we'll continue to engage pro-actively with the customer procurement processes with the right resources to ensure the future success of Servelec, in both project wins and their successful delivery.

2. Continue to enhance our product capability:

§ Investment in our products will continue in 2014 and we plan to enhance our products to meet the needs of our clients now and in the future to comply with their requirements to meet the demands placed upon them by legislation, regulation or changing market requirements.

§ A focus for 2014 will be the successful integration of Semaphore and action a coherent road map for RTU developments.

3. Develop our distribution channels to market:

§ Semaphore came with a ready built distribution channel with distributors in Canada, USA, Europe, China, Thailand, Australia and New Zealand.

§ We now need to develop the range of products that can be pushed to market via this channel. The first target will be the Seprol range of RTUs, but we envisage that this will be expanded to the SCOPE-X product family and our business optimisation products; Miser and Pioneer.

4. Acquire where beneficial to the business:

In line with Servelec Group's policy, we continue to search for potential acquisitions that will have a long-term benefit to the Group. The Group wishes to acquire companies that are in-line with our strategy and that will benefit from being part of the Servelec Group by providing them with the potential to grow faster and bigger than as a standalone business. Other characteristics which we look for in potential targets include:

§ A strong management team already in place

§ Companies which are profitable - not a turnaround

§ Targets which would be earnings accretive in the short and longer term

Cash Generation

Cash generation during the year remained strong and we returned a final dividend of £6.5m to Singapore as we completed the IPO process and retained circa £5m of cash in the business with zero debt. With the delivery and go-live of the final version (R2) of RiO on time in October 2013, we have unlocked the "work in progress" on the BT contract (via the National Program for Information Technology: NPfIT) that will boost our cash collection during 2014.

Current Trading and Outlook

Following a strong finish to 2013, we have seen an encouraging start to 2014 in both Automation and Healthcare. Sales activity is high across the whole Group, which gives comfort that the order entry expectations for 2014 will be met.

Healthcare is particularly active: as the NPfIT is coming to an end, the RiO Trusts in London and the South have to "refresh" their IT systems. As the dominant and incumbent supplier, we have a natural competitive advantage. However, this remains a highly competitive market. Therefore, we are particularly pleased to have been selected as preferred bidder on the first three Trusts to select a new supplier under the Camden Framework (being the process of renewal at the end of the NPfIT in London and the South of England). Two of these Trusts have also selected Servelec Healthcare to provide hosting services for the RiO system. Healthcare sales activity continues to develop in other parts of the country outside of the Camden Framework, including a recent go-live of our third Accident & Emergency system, Oceano A&E, deployed to Portsmouth Hospitals NHS Trust.

In Servelec Automation, where a number of opportunities are completing their design stage, we are now pricing these projects with an expectation of order placement in the first half of 2014. Semaphore which came into the Servelec Group in October 2013 has made an exceptionally good start to 2014 and when this is combined with recent wins in Servelec Automation, such as the phase 1 Airport refresh, we are optimistic of a solid performance for the segment in 2014.

SERVELEC HEALTHCARE

Introduction

Servelec Healthcare operates exclusively in the UK healthcare sector, with the majority of its business conducted in England. The business delivers and supports proprietary Patient Administration Software (PAS) and Electronic Patient Record (EPR) software products RiO and Oceano which are designed for secondary care providers.

The RiO software suite is a proven, end-to-end EPR solution specifically designed for Mental Health and Community Health organisations in both the NHS and private sector, to enable them to deliver cost effective clinical care and meet the UK Government's Healthcare Agenda objectives such as the paperless agenda and patient empowerment strategies that are key Government drivers. In these two sections we have a significant market-leadership position. The Oceano software is targeted at Acute hospitals and focuses on providing modern functionality that addresses the administrative and clinical requirements for acute care. This blends a powerful patient administration engine with unique clinical application functionality.

Performance in 2013

* 2012 excludes £0.2m of royalty charge from CSE Global Ltd

Servelec Healthcare has performed steadily during 2013 and met forecast operating profit targets. The delivery of a major update to RiO software, R2, within the NPfIT via BT, constituted a large proportion of revenues in 2013. In respect of this programme the major update to the RiO software was delivered in accordance with the agreed timescales to one major Trust and Servelec is now in the process of rolling out the software to other Mental Health and Community Health Trusts in London and the South of England.

In addition, in the first half of 2013, Servelec Healthcare won several major new clients in the North of England and has successfully delivered all systems to agreed timescales. In the second half of 2013, Servelec Healthcare was selected as preferred supplier for the first two Trusts exiting the National Programme in London and the South (the Camden Refresh); these become order entry in Q1 2014. Whilst Servelec Healthcare experienced a drop in expected revenue in 2013 due to some contracts slipping into Q1 2014, this enabled a number of smaller projects and contract variations for our existing customers to be successfully completed instead, enabling the business to maintain the forecast profitability.

Market Overview

The UK healthcare sector comprises primarily the NHS, which deals with circa 1 million patients every day. The Healthcare sector in England (which is significantly the largest portion of the overall UK healthcare sector) is currently implementing the changes introduced via the Health & Social Care Act 2012, including the abolition of the Primary Care Trusts and Strategic Health Authorities, which are being replaced by Clinical Commissioning Groups. This has resulted in changes to the way that care is commissioned which had a short-term impact on our target customer base because of the disruption and uncertainty resulting from these organisation changes. These changes to the structure of the English healthcare market will enable Servelec Healthcare to capitalise on a broader interoperability agenda that will bring previously disparate care settings together and create opportunities for Servelec to integrate its solutions and support its customers in sharing data. This is directly aligned to the UK Government's Healthcare Agenda and an area in which Servelec has demonstrated considerable competency.

The end of the National Programme in 2015 (and 2016 in the North of England) will increase the opportunities for Servelec Healthcare across all care sectors, as organisations must decommission the systems that have been delivered to them under the National Programme and procure systems that are more flexible and comprehensive, and which will enable NHS Trusts to position themselves for market challenges up to and beyond 2018. This will provide Servelec Healthcare with increased opportunities for growth in our core market sectors of Mental Health and Community Health and allows us to access the market for Acute Care PAS and EPR solutions.

Size of the Market Opportunity

Within the Mental Health and Community Health sectors, as the NPfIT comes to an end, 39 organisations in London and the South will need to refresh their RiO systems by October 2015 and there are significant opportunities for providing new and refreshed systems in the North of England. Within the Acute sector only a small percentage of the 161 Acute Trusts in England were delivered a modern system as part of the NPfIT and this creates significant additional growth opportunities for Servelec's Oceano software.

Outlook

We are pleased that 2014 has started extremely well with three out of three tender wins for RiO as part of the Camden Refresh, together with a new community go-live in the North of England and a go-live in our third A&E department.

Our focus in 2014 will be to secure our existing RiO client base in London and the South whilst winning new business in the North of England with our RiO product. We shall be looking to increase our share of the UK Acute Healthcare market in both A&E systems, driven by the pressures being put on those departments and the demonstrable speed in which an Oceano A&E can be deployed. Our position in the Acute market is being strengthened by the planned go-live of our Oceano product in University Hospitals Birmingham (UHB), which will provide a very credible reference site for future business.

The Government's "Safer Hospitals, Safer Wards" agenda is met by our own products and a system which has been developed on deployed with UHB known as PICS. This system has a proven track record in delivering cost effective patient care are Saving lives. Servelec Healthcare has been working with UHB for some considerable time commercialising PICS so that deployments outside of UHB can take place. The first Trust to announce the selection of PICS for use within the Trust is Birmingham Children's Hospital.

Servelec will continue to develop its own product suite so that we can meet the requirements of the market, the growing demands for healthcare and, more importantly, the effective delivery of healthcare, which Servelec Healthcare has a proven track record.

SERVELEC AUTOMATION

The Automation reporting segment is made up of two operating segments, Controls and Technologies, which have been aggregated as the board consider that they have similar economic characteristics.

SERVELEC CONTROLS

Introduction

Servelec Controls provides complex, mission critical systems to many large blue chip companies mainly in the oil & gas, power and nuclear industry sectors. We provide specialised software and hardware solutions utilising commercially available third party products.

We are the UK's largest independent Tier 2 supplier of safety and protection controls systems. The deep domain knowledge of our staff covering the whole lifecycle of a project from engineering services and project management consultancy through to design, implementation, delivery of installation and then on-going customer support for these complex systems is seen as a key competitive advantage by our clients.

Servelec Controls has operated mainly in the UK in the oil and gas sectors for over 40 years and has well established relationships with both UK and international clients. These range from major blue chip companies through to Tier 1 and Tier 2 contractors and engineering consultants. Examples of Oil & Gas customers include Centrica Energy and Storage, BP, Shell, Perenco, Costain, E-on, Total, Apache, Costain, Exxon-Mobil, Siemens and AB. Examples of Power and Nuclear customers include Sellafield, EDF, Costain, Scottish Power, AWE, MOD and Nuvia.

Performance in 2013

Servelec Controls had another strong year with profitability being well ahead of the forecast. Building on the high demand for front end design services, our Warrington office, which opened during 2012, contributed well to the performance in 2013. In addition, the renewals of the framework support contract mainly from our Aberdeen office secured revenues for 2013 and a pipeline for 2014 and beyond. We have worked hard to ensure that we grow our staff levels and expertise so that as the design work moves into the implementation phase we have sufficient resources to take on this additional work without having to divert resources from future design and consultancy work.

During the year we moved our Glasgow operation to modern offices. The move was very successful, helping Servelec Controls to recruit additional staff and more importantly win new clients and new business.

Market Overview and Position

Servelec Controls is the largest Tier 2, vendor agnostic, Systems Integrator in the UK, providing mission critical control systems to blue chip clients in the Oil & Gas, Power and Nuclear industries, predominately operating in the UK. The UK is a mature market with limited new build being undertaken which provides real opportunity for Servelec Controls to refresh and replace existing critical control systems.

Offshore Oil & Gas is major market for Servelec Controls. It is a mature market and one that has been starved of investment as the Tier 2 operators, having bought the assets from Shell and BP operated in an "end of life" mode. The latest estimate is that there are between 12 billion to 24 billion barrels of oil & gas reserves that are exploitable and this requires the infrastructure in the seas around the UK to remain operational.

A leading research and energy consultancy recently forecast that more than £44 billion is to be invested in Oil & Gas offshore infrastructure in the next five years. The latest report by Sir Ian Wood on 24 February 2014, indicated that the UK Government and the Oil & Gas Industry had to work together to ensure that these reserves are exploited. The issues are significant and the opportunity that these create for Servelec Controls is significant. There are over 300 aging platforms around the UK, health and safety regulation is demanding that the controls systems on these platforms be upgraded to meet modern standards which will benefit Servelec Controls.

Many of these platforms have had more than 25 years of operational life in the North Sea which, through rusting, has compromised the structural integrity of some of the platforms to the extent that health and safety regulations may demand the closure of the platform. Several of our clients are planning to address this issue by reducing the weight of the top-side by removing the accommodation block, crane and helideck and turning the platform into "remote operations". This process demands a higher level of integrity for the control system, coupled with monitoring from the shore. All these technologies are a speciality of the Servelec Group.

The competitive landscape in the Tier 2 system integrator space is fragmented and populated with many small suppliers. It usual for Servelec to regularly compete against these companies time and time again so we work to ensure that we remain competitive with respect to the market value of projects. Our size and strength allows Servelec Controls, together with the Quality Standards, to which the supplier must be accredited a gives us a competitive edge in the procurement process. Some of our major contracts in the Oil & Gas sector are on a single source basis because of the skill set and strong history of successful delivery.

Outlook

The main driver of spend for our customers is increasingly more stringent health and safety regulation. Rigs, platforms and plants cannot be operated without appropriate safety systems in place and, as such, Servelec's offerings are mission critical.

The other key industry driver is the increased focus on refurbishment of brownfield sites as opposed to decommissioning. This dynamic applies especially to the offshore platforms network. Over recent months a number of surveys from the UK Oil & Gas industry trade body have indicated that offshore operators and contractors are looking to materially increase their spend over the coming years on refurbishing platforms.

We believe this provides a very attractive outlook for the Servelec Controls business for many years to come with the addressable market for system refurbishment being an estimated £250m per year and growing at approximately 5% per annum.

SERVELEC TECHNOLOGIES

Introduction

Servelec Technologies designs, manufactures and sells end-to-end remote telemetry monitoring and control systems to the Utilities (Water, Gas and Electricity), Broadcast and Transport markets. We also provide consultancy services to implement our own business optimisation software products, Miser and Pioneer, to allow our clients to measure and data and run assets more efficiently.

Approximately half of Servelec Technologies revenue currently comes from the Water industry, but our systems are applicable to any industry that requires remote monitoring and has a geographically distributed asset base. We differentiate ourselves from our competitors by being able to offer an end-to-end system from the collection and processing of data (e.g. water flow rates, pumping levels) through to the analysis of the data output that enables improved operational efficiency.

Performance in 2013

Servelec Technologies performed ahead of expectations in 2013, both in terms of pre acquisition operations and also acquired businesses. Servelec Technologies achieved a 21% increase in revenue and a 9% increase in gross margin on operations excluding acquisitions for the year to 31 December 2013. Tynemarch contributed a further £1.9m in revenue and £0.2m of operating profit following their acquisition in February 2013 and Semaphore contributed a further £2.0m in revenue and £0.1m of operating profit in the period following their acquisition in October 2013. The overall performance of the business including the acquisitions was £11.8m in revenue and £2.3m operating profit.

Market Overview and Position

With around a half of our UK revenue coming from the UK water industry, the key growth driver is Ofwat's regulatory objective which includes the requirement for reduced leakage, lower cost production of water and greater operational efficiencies. These are relatively new focus areas that have come out of the most recent industry spending review and the Government's Water White Paper published in 2012. This change in emphasis in the regulatory backdrop is creating a positive industry environment which Servelec Technologies are well placed to exploit.

The next spending review is now in focus, with Ofwat having published its AMP6 (Asset Management Period) 2015-2020 methodology in July 2013. The report focused on more efficient supply of water, with the reduction in clean water leakage and reduced production costs (electricity, chemical, resource) a priority. Both Ofwat and Defra have placed strong emphasis on leakage management for the Water industry and how this will drive regulation and price controls. We aim to be a beneficiary of this, given that our remote monitoring telemetry systems and business optimisation software gives an end to end system explicitly targeting leakage reduction and more efficient water production. We estimate that the current UK RTU estate in the water sector is around 50,000 units with a refresh of RTUs needed approximately every 15 years. Based upon our estimated 20% market share, we are targeting circa £0.5m-£1m revenue per annum. Regulators have also identified 25,000 sites that need to be adopted by the industry before the end of AMP6 in 2020 which is an additional driver for spend on RTUs as these assets get brought into the networks.

Other industries and clients have their own requirements that are driving spend. On the back of the Begg Report (the independent report into the 2010 Heathrow Winter Resilience Enquiry), BAA is looking to replace all of their operational control systems at Heathrow in the next five years. Trinity Lighthouse, a customer of Servelec, will be consolidating its Lighthouse network, as required by Government legislation, which will require additional RTUs.

Our competitors fall into our three areas of activity: They are either an RTU supplier, both an RTU and central monitoring supplier, or a business optimisation software provider. Currently, we believe that we are the only company in the UK that offers a complete end to end solution, creating what we see as a very distinct competitive advantage. Schneider and Siemens are the main remote telemetry competitors. The RTU players are Broderson, Schneider, Xylem, Technolog and Metasphere. Derceto and Takadu offer business optimisation software.

Outlook

We take confidence in the market assessments and strategies outlined above because of a strong and growing pipeline of opportunities during 2014 and beyond. These opportunities include follow-on work under frameworks for UK water Customers, along with potential new frameworks. In addition, they include opportunities for a global market penetration using the broad IP and integrated solutions now available with the synergies created following the acquisitions in 2013.

Risk Management

Servelec adopts a formal risk identification and management process designed to ensure that risks are properly identified, prioritised, evaluated and mitigated to the extent that is possible. Risk management is embedded in the operations of the business.

Business operations maintain risk registers compiled and monitored by the Group's Quality and Compliance Manager. The Audit Committee reports to the Board on the risk management process, including on matters of internal audit and the evaluation of potential impacts, both financial and reputational.

The following risks are, in the opinion of the Board, the principal risks which affect Servelec Group.

It is not intended to be a complete analysis of all risks and may change over time.

Responsibility Statement of the Directors in respect of the Annual Report and Financial Statements

We confirm that to the best of our knowledge the accounts, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and

the Directors' report includes a fair review of the development and performance of the business and the position of the issuer and undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

Annual General Meeting

The Annual General Meeting of the Company will be held in Room 1, techUK, 10 St Brides Street, London, EC4A 4AD on Tuesday 29 April 2014. Full details will be included in the published Annual Report and Financial Statements, which will be sent to shareholders in due course.

Basis of Preparation

The preliminary announcement has been prepared in accordance with applicable International Financial Reporting Standards as adopted by the EU and applied in accordance with the Companies Act 2006.

The accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 December 2013, as described in those annual financial statements.

These financial results do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. The Group Income Statement, Group Statement of Comprehensive Income, Group Statement of Financial Position, Group Statement of Changes in Equity and Group Cash Flow statement and selected notes for the year then ended have been extracted from the Group's audited financial statements for 2013 and audited financial statements for 2012. The audited financial information contained within the preliminary announcement for the year ended 31 December 2013 was approved by the Board on 12 March 2014. Statutory accounts for the year ended 31 December 2012 were approved by the Board of Directors on 28 March 2013 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified and did not contain any statement under Section 498 of the Companies Act 2006.

The 2013 Annual Report will be available in due course on our website:

http://www.servelec-group.com

Servelec Group plc (formerly CSE-Global (UK) Limited)

Group income statement

For the year ended 31 December

Servelec Group plc (formerly CSE-Global (UK) Limited)

Group statement of comprehensive income

For the year ended 31 December

Servelec Group plc (formerly CSE-Global (UK) Limited)

Group statement of financial position

Servelec Group plc (formerly CSE-Global (UK) Limited)

Group statement of changes in equity

Servelec Group plc (formerly CSE-Global (UK) Limited)

Group cash flow statement

Servelec Group plc (formerly CSE-Global (UK) Limited)

Notes to the financial statements

Segment information

For management purposes, the Group is organised into business units according to the nature of the products and services, and has two reportable segments as follows:

§ The Healthcare segment develops high quality, enterprise-wide systems for implementation across community, mental health, child health and hospital based services. The segment supplies software and IT solutions and services into the healthcare and social services markets.

§ The Automation segment is engaged in the provision of complex, mission critical systems to the oil & gas, power, nuclear and water industries. The segment specialises in safety systems, protection systems, control systems and wide area telemetry control systems. The segment also offers business optimisation consultancy and remote telemetry units, which are designed and manufactured in house.

The Automation reporting segment is made up of two operating segments, Controls and Technologies, which have been aggregated as the board consider that they have similar economic characteristics.

Management monitors the operating results of its business units separately for the purposes of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss, which in certain respects, as explained in the table below, is measured differently from operating profit or loss in the consolidated financial statements. This measurement basis excludes the effect of central services, non-recurring expenditure and group financing costs which are not allocated to operating segments.

Transfer prices between operating segments are on an arm's length basis in a manner similar to transactions with third parties.

The following tables present revenue and profit information for continuing operations regarding the Group's business segments for the years ended 31 December 2013 and 31 December 2012. The discontinued operation would have been included in Automation, however, has been separately disclosed.

Servelec Group plc (formerly CSE-Global (UK) Limited)

Notes to the financial statements

Operating assets and liability information are measured on a Group basis and so have not been disclosed at segment level.

Adjustments and eliminations

Segment profit for each operating segment excludes net finance costs of £4,000 (2012: nil).

Non-current assets for this purpose consist of property, plant and equipment and intangible assets and are all located in the United Kingdom.

Information about major customers

Revenue from one customer amounted to £10,050,000 in the year ended 31 December 2013 (£13,967,000 in the year ended 31 December 2012) arising from sales reported in the Healthcare segment.

Servelec Group plc (formerly CSE-Global (UK) Limited)

Notes to the financial statements

Group operating profit

The year ended 31 December 2012 includes amounts from both continuing and discontinued operations.

Servelec Group plc (formerly CSE-Global (UK) Limited)

Notes to the financial statements

Earnings per share

Basic earnings per share amounts are calculated by dividing profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

The following reflects the income and share data used in the basic earnings per share computation:

The weighted average number of shares has been calculated assuming all shares were converted from £1 to 18p shares as from 1 January 2012 in line with IAS.33.27.

There have been no transactions involving ordinary shares between the reporting date and the date of completion of the historical financial information.

On 9 January 2014, a further 47,232 share options were granted to employees.

Servelec Group plc (formerly CSE-Global (UK) Limited)

Notes to the financial statements

Income tax expense

a) Tax charged in the income statement

b) Tax relating to items charged or credited to other comprehensive income

Servelec Group plc (formerly CSE-Global (UK) Limited)

Notes to the financial statements

c) Reconciliation of income tax credit/charge

The income tax expense in the income statement for the period differs from the standard rate of corporation tax in the

 UK of 23.25%, (2012: 24.5%). The differences are reconciled below:

The standard rate of corporation tax in the United Kingdom for the year is 23.25% (2012: 24.5%). The Finance Act 2013 received Royal Assent on 17 July 2013 and enacted a reduction in the main rate of corporation tax to 21% with effect from 1 April 2014 and a further reduction of 1% will be applied to bring the main rate of corporation tax to 20% from 1 April 2015. Deferred tax has therefore been provided at 20%.

Servelec Group plc (formerly CSE-Global (UK) Limited)

Notes to the financial statements

d) Deferred tax

Deferred tax included in the balance sheet is as follows:

Issued capital and reserves

Authorised shares

Servelec Group plc (formerly CSE-Global (UK) Limited)

Notes to the financial statements

Ordinary shares issued and fully paid

On 18 October 2013, the Group issued 7,093,000 £1 shares at par to CSE Global Limited for the purchase of the Semaphore Group of Companies.

On 18 October 2013, the Group issued 600,000 £1 shares at par to CSE Global Limited for the purchase of the Intellectual Property Rights relating to the Semaphore Group Kingfisher products.

On 2 December 2013, the 12,271,500 £1 shares were converted into 68,175,000 18 pence shares.

On 2 December 2013 156,911 18 pence shares were issued to employees of the Servelec Group at the strike price of £1.79.

Related party transactions

The following table is an extract of the related party transaction note describes the material transactions with related parties in the period.

Servelec Group plc (formerly CSE-Global (UK) Limited)

Notes to the financial statements

Servelec Group plc (formerly CSE-Global (UK) Limited)

Notes to the financial statements

Business combinations

Acquisition of Tynemarch Holdings Limited

On 5 February 2013, the Group acquired 100% of the voting shares of Tynemarch Holdings Limited and its subsidiary Tynemarch Systems Engineering Limited, a technology-led consultancy to the water and environmental management industries. Tynemarch's business will provide a base for the Group to further expand its existing activities within the water and environmental management sectors.

The fair values of the identifiable assets and liabilities of Tynemarch Holdings Limited and Tynemarch Systems Engineering Limited as at the date of acquisition were:

The goodwill of £916,000 comprises the value of the assembled workforce and expected value of synergies. Goodwill is allocated entirely to the Automation segment. Due to the contractual terms imposed on acquisition, the customer list is not separable. None of the goodwill is expected to be deductible for income tax purposes.

All receivables are expected to be collected and fair value equals gross value.

Servelec Group plc (formerly CSE-Global (UK) Limited)

Notes to the financial statements

From the date of acquisition, Tynemarch Holdings Limited has contributed £1,919,000 of revenue and £196,000 to the profit before tax from continuing operations of the Group. If the combination had taken place at the beginning of the year, Group revenue from continuing operations would have been £42,228,000 and the profit before tax from continuing operations for the Group would have been £10,975,000.

The deferred tax liability mainly comprises the accelerated depreciation for tax purposes of tangible and intangible assets.

The fair value of the consideration given is £3,335,000.

Transaction costs of £39,000 have been expensed and are included in administrative expenses.

As part of the purchase agreement with the previous owner of Tynemarch Holdings Limited a contingent consideration has been agreed. There will be additional cash payments to the previous owners of Tynemarch Holdings of: £450,000, if the entity generates £1,455,000 of profit before tax in the 36-month period after the acquisition date. An amount at a fair value of £360,000 is included in provisions.

Acquisition of Semaphore Group

On 18 October 2013, the Group acquired 100% of the voting shares of CSE-Semaphore Belgium SA, CSE-Semaphore Australia Pty Limited and its subsidiary CSE-Semaphore Inc. The Semaphore Group is an RTU (Remote Telemetry Unit) manufacturer and has a worldwide distribution network which will enable the Group to access international markets.

Servelec Group plc (formerly CSE-Global (UK) Limited)

Notes to the financial statements

The fair value of the identifiable assets of the Semaphore Group at the date of acquisition are:

Servelec Group plc (formerly CSE-Global (UK) Limited)

Notes to the financial statements

The goodwill of £3,819,000 comprises the value of the assembled workforce and expected value of synergies. Goodwill is allocated entirely to the Automation segment. None of the goodwill is expected to be deductible for income tax purposes.

The fair value of the trade receivables at acquisition is £2,519,000. The gross amount on acquisition was £2,807,000 and the adjustment made of £288,000 is for receivables not expected to be received.

From the date of acquisition, the Semaphore Group has contributed £1,989,000 of revenue and £120,000 to the profit before tax from continuing operations of the Group. If the combination had taken place at the beginning of the year, Group revenue from continuing operations would have been £48,960,000 and the profit before tax from continuing operations for the Group would have been £11,124,000.

The deferred tax liability mainly comprises the accelerated depreciation for tax purposes of tangible and intangible assets.

The fair value of the consideration given is £7,675,000. Transaction costs were met by CSE Global Limited, the seller.