Servelec Group plc Post Half Year Trading Update

27 July 2016

Servelec Group plc

("Servelec" or the "Group")

H1 Trading Update

Servelec, the UK-based technology and software group, announces a scheduled Trading Update for the half year to 30 June 2016. Trading remains in line with the revised Board expectations following the trading update announced on 15 June 2016.

Health & Social Care

Servelec Health & Social Care has been strengthened by the acquisitions of Synergy and Abacus in 2016, with Synergy already delivering three significant contract wins since the acquisition. More broadly, the momentum in Social Care is continuing with Servelec winning five out of seven contracts that have been awarded so far in 2016, with further opportunities remaining in this year's pipeline.

Healthcare has maintained a high win rate on available North New opportunities, winning three out of four recent tenders in the UK and winning one Mental Health system in the Republic of Ireland. The business is capitalising on the market in the Republic of Ireland to help mitigate the challenges brought about by the change of focus around the North Refresh.

Following the Trading Update in June, measures were taken in Healthcare to reduce headcount whilst strengthening sales resources to drive potential Healthcare opportunities. The Board is confident that sufficient measures have been taken in line with the revised expectations.

The Group believes that the Government is committed to its Digital Maturity agenda and Servelec is aligning its sales team with the Government objective for Trusts to reach digital maturity by 2020. Servelec has continued to demonstrate a high win rate from North New and expects opportunities to continue to come to market in the remainder of 2016 and into 2017/2018. Prospects are developing in the Republic of Ireland on the back of previous sales efforts and project wins, together with further potential in Northern Ireland, Scotland and Wales. The Social Care market remains strong and Servelec continues to gain market share by winning a high percentage of those local authorities that come to market.

Automation

As previously announced, there have been delays in the anticipated increase in demand in the end markets in which Servelec Automation operates. Servelec has reallocated resources across Automation businesses to reduce the impact of project delays and focus available manpower into the areas where there is a demand for additional resources together with some overall cost reduction.

In Servelec Controls, the Group is pleased to report that order entry for Power & Nuclear has already surpassed the order entry achieved in FY 2015. A renewed drive for sales in the Oil & Gas market positions the division to benefit from an expanded client base, the full impact of which will be realised in 2017 and beyond. The Group can confirm that the Combined Heat and Power installation in Turkey has been signed off by the relevant and necessary authorities as being able to generate power for the grid. Given the recent highly publicised instability in the region, the finalisation of the project has been temporarily delayed, but the Board believes the project will continue to a successful outcome.

In Servelec Technologies, sales of Remote Telemetry Units (RTUs) into the current asset renewal programme in the water industry (AMP6) remain slower than anticipated which was fully reflected in the previous trading statement. However, good progress is being made on securing positions on frameworks with UK water companies, positioning the company well for future sales. Global order entry and the pipeline of sales prospects via the company's global distribution channel, which trade into overseas markets, have increased on prior year.

Outlook

The Board remains positive about the outlook for Servelec with challenges to date arising as a result of timing setbacks rather than any structural change in business environment. The company remains in a robust financial position with a strong balance sheet. Net debt at the half year is £13m with this expected to reduce on the back of cash collection in the business during the remainder of the year.

Alan Stubbs, CEO of Servelec Group plc, commented, "Our half year position means we believe that our full year outlook will be in line with the Trading Update issued in June. Conditions in some of our markets remain challenging but we continue to gain market share and the Board is confident that we are taking the necessary corrective actions in both Health & Social Care and Automation, for the business to succeed. We remain confident that we will generate shareholder value going forward."

The Company will release its preliminary results for the half year ended 30 June 2016 on 7 September 2016.

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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 has two operating divisions; Servelec Health & Social Care and Servelec Automation:

- Servelec Health & Social Care specialises in the design, development and implementation of Electronic Patient Record (EPR) and Patient Administration Systems (PAS) and Social Care Case Management software within secondary care and social care settings and is a market leader in the Mental Health, Community Health and Social Care 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.