Preliminary Unaudited Results

Servoca plc

("Servoca" or "the Group")

Preliminary unaudited results

for the year ended 30 September 2014

Highlights

· Revenue £49.0 million (2013: £43.1 million), an increase of 13.7%

· Gross profit £14.2 million (2013: £12.3 million), an increase of 15.4%

· Administrative expenses (excluding amortisation and share based payments) £12.4 million (2013: £11.4 million)

· Doubling of profit before taxation (excluding amortisation and share based payments) to £1.7 million (2013: £0.8 million)

· Net debt reduced to £2.6m (2013: £3.1m)

· Basic EPS of 1.08p before amortisation and share based payments increased by 93% (2013: 0.56p)

Commenting on the results, CEO Andy Church says:

"We are delighted with the progress made by the Group with substantial growth helping to more than double pre-tax profits. We continue to see improvements to both trading conditions and internal capabilities across some of our key markets and look well placed to build on this progress".

Enquiries:

Servoca 020 3031 4820

Andy Church

FinnCap 020 7220 0500

Geoff Nash

Grant Bergman

Malar Velaigam (Broking)

Media and analyst queries

Robyn McConnachie

Newgate Threadneedle 020 7653 9850

Chairman/CEO Review and Strategic Report

Introduction

We are pleased to report that in the year ended 30 September 2014 we continued to see significant improvement in the performance of the Group. Strong organic growth in our revenues coupled with an increase in gross profit has more than doubled pre-tax profits over the prior year. Our second half profitability was especially strong compared to the first half as a result of an excellent contribution from our Education recruitment business which continued to deliver outstanding growth. This excellent performance by the Group reflects improving trading conditions and validates our strategy of internal investment to enhance our capabilities.

Our Healthcare related businesses have also seen strong growth which has helped drive a material improvement in profitability. As reported in our interim statement for the six months ended 31 March 2014, our Nursing businesses have performed particularly well, with strong revenue growth fuelling an uplift of more than 50% in their operating profit.

Our Police and Security related businesses also delivered a good result for the year.

Financial review

For the year ended 30 September 2014, Group revenue was £49.0 million compared with £43.1 million (2013), an increase of 13.7%. Gross profit for the year was £14.2 million against £12.3 million (2013), an increase of 15.4%.

Operating profit for the year was £1.8 million*, compared with an operating profit in the prior year of £0.9 million (on the same basis), an increase of 100%.

Profit before taxation was £1.7 million* (2013: £0.8 million), an increase of 113%.

Profit after taxation was £1.4 million* (2013: £0.7 million), an increase of 100%.

The basic earnings per share for the year were 1.08p* compared with 0.56p (2013), an increase of 93%.

Net debt decreased from £3.1 million at September 2013 to £2.6 million at September 2014.

Cash generated from operations in the year was £0.8 million (2013: £0.7 million).

* before share based payment charges and amortisation of intangibles

Operational highlights

Strategy and delivery

The focus in the period has remained the development of the Group's capabilities in those areas that the Board believes afford good growth opportunities. We would like to thank all of our employees for their excellent contribution to the continued improvement in the Group's performance.

Outsourcing

Our outsourcing activities are primarily based in two areas; Domiciliary Care and Security.

In our statement for the six months ended 31 March 2014 we reported that our Domiciliary Care business had started the year positively. We are pleased to report that for the full year the business has seen growth in revenues and gross profits over the prior year, which has delivered a healthy increase in operating profits. Following several years of challenging conditions as a result of government spending cuts, the trading conditions have stabilised. We have seen positive momentum in the second half of the year with all financial measures showing an increase on the first half.

Our Security business improved revenues and operating profits and benefited in the second half of the year from a significant volume of work at the Commonwealth Games in Scotland. We continue to build on our Electronic and Event Security offerings which have strong gross margins.

Recruitment

Our recruitment businesses supply into the Education, Healthcare and Police markets.

Our Education businesses have enjoyed another year of significant growth. Revenues, gross profit and operating profit were all substantially ahead of the prior year. The operation benefited from improved market conditions and the continued investment in increased sales headcount, management and new branch openings. The pivotal September period helped deliver an outstanding performance for the year and positioned the business favourably going forward.

Following our actions to reduce overheads in the year ended 30 September 2013, our Healthcare operation has enjoyed a material improvement in profitability and has also seen a return to growth. Strong demand in our Nursing business saw revenues increase sharply, helping operating profit to increase by over 50% in that area. Profitability in the second half was significantly improved over the first half with the run rate margin in the final quarter almost 50% up on the first quarter of the year.

Our Police business delivered another solid performance in a niche market, although margin pressure had a minor impact on operating profits despite a rise in revenues.

Outlook

The year ended 30 September 2014 saw another 12 months of significant progress for the Group. Outstanding growth during the year, particularly the second half, has driven a significant increase in profitability.

Our Education and Healthcare recruitment businesses are benefiting from both improved market conditions and the investments made to enhance our internal capabilities. We will continue to invest in organic growth, increasing sales headcount, new branch openings and management. These businesses are well placed for future growth.

Consolidated statement of comprehensive income

For the year ended 30 September 2014

Consolidated statement of financial position

For the year ended 30 September 2014

Consolidated statement of cash flows

For the year ended 30 September 2014

Notes to the Preliminary Financial Statements

For the year ended 30 September 2014

1. Financial information

The preliminary financial information for the full year ended 30 September 2014 does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.

The financial information for the year ended 30 September 2014 is unaudited. The comparative figures for the year ended 30 September 2013 are audited but are not the full statutory accounts for the year. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors have reported on those accounts; their reports were unqualified, did not contain an emphasis of matter paragraph and did not contain a statement under Section 498 of the Companies Act 2006.

2. Basis of preparation and accounting policies

The preliminary financial statements have been prepared using the recognition and measurement principles of IFRS as endorsed for use in the European Union.

The accounting policies adopted in the preparation of this preliminary financial information are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 30 September 2013 and no new standards or interpretations that have come into effect in the year have a material impact on the results of the business.  

3. Segmental information

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 segment where necessary. This information is provided to the Board of Directors.

The Outsourcing segment provides services to the Domiciliary Care and Security sectors.

The Recruitment segment provides recruitment services to the Healthcare, Education and Police sectors.

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

Segmental analysis(continued)

1 The profit for each operating segment does not include holding company director costs, group legal costs, central share based payment charges or a share of central property costs.

4. Earnings per share

The calculation of earnings per share for the year ended 30 September 2014 is based on a weighted average number of shares in issue during the year of:

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

Diluted earnings per share are calculated by dividing the net profit attributable to the equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all dilutive potential ordinary shares into ordinary shares. Share options totalling 1,953,558 that could potentially dilute basic earnings per share in the future have not been included in the calculation of diluted earnings per share because they are antidilutive for the periods presented

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

5. Share capital

The Company acquired 200,613 of its own shares in the year. The total amount paid to acquire the shares, net of income tax, was £18,248 and has been deducted from earnings within shareholders' equity. The shares are held as "treasury shares". The Company has the right to re-issue these shares at a later date.

6. Cash and cash equivalents

7. Net debt

8. Annual General Meeting

The Annual General Meeting of Servoca Plc will be held at the Company's registered office on 27 January 2015 at 2pm. It is expected that the Notice of Meeting will be mailed to shareholders prior to 30 December 2014. The Financial Statements will be sent to the Registrar following the Annual General Meeting.