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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Servision | LSE:SEV | London | Ordinary Share | GB00B0586C20 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.85 | 0.70 | 1.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMSEV
RNS Number : 8899C
SerVision plc
30 June 2016
30 June 2016
SerVision plc
("SerVision" or the "Company")
Final Results for the year ended 31 December 2015
SerVision (AIM: SEV), the AIM quoted developer and manufacturer of digital security systems, announces its audited final results for the year ended 31 December 2015.
A copy of the annual report and accounts, along with notice of the Company's annual general meeting, to be held at the offices of Adams & Remers LLP, Quadrant House, 55-58 Pall Mall, London SW1Y 5JH at 11.30 a.m. on 26 July 2016, will today be posted to shareholders and will be available shortly from the Company's website, www.servision.net.
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SerVision plc +972 2535 0000
Gidon Tahan, Chairman and CEO
Allenby Capital Limited (Nominated +44 (0)20 3328
Adviser and Joint Broker) 5656
Nick Athanas / James Reeve
Beaufort Securities Limited (Joint
Broker)
+44 (0)20 7382
Elliot Hance 8300
Cadogan Leander (Financial PR)
+44 (0)7795 168
Christian Taylor-Wilkinson 157
Notes to Editors
SerVision is a pioneer in the field of security communications technology and a leading developer and manufacturer of fully integrated video recording and transmission systems for homeland security and transportation applications. The Company's core technology is proprietary video compression which is optimised for streaming real-time video over any type of cellular or narrowband network.
CHAIRMAN'S STATEMENT
The Board today announces SerVision's consolidated group financial statement for the year ended 31 December 2015. The group's annual revenue for this period was a modest $2,154,000, representing a 49.1 per cent. decrease compared to the same period ending 31 December 2014. I attribute the low turnover and the increased loss to the initial challenges the company has faced in our transition to a new business model in the UK and the delayed release of our new High Definition mobile NVR, the IVG400-N. I am happy to report that these challenges are now behind us and I can confirm that SerVision's new recurring revenue model in the UK is starting to generate a steady income stream for the Company, and that we are beginning to receive positive market feedback on some important IVG400-N trials that began in H2 of 2015 and have continued into H1 of 2016.
Sales and Marketing
While SerVision's sales performance in 2015 was lower than anticipated, we achieved some notable contract wins for bus projects in Kazakhstan, Israel and Portugal, and received orders for new cash-in-transit and construction site monitoring projects in South Africa and the Netherlands respectively. These successes were unfortunately counterbalanced by lacklustre sales in China that, as previously noted, were held back by the late release of the IVG. Although the new mobile NVR is now available, a number of large commercial opportunities in China, including a large-scale bus project in ChongQing and an underground train project in Beijing, are still on hold while we work with our partners to localise our hardware and software interface for the Chinese market. We hope to have more promising news to share on these opportunities later in the year.
In May 2015 we announced a new order from Egged Israel Transport Cooperative Society Ltd ("Egged"), Israeli's largest transportation operator. Egged had informed SerVision at the time of the initial order that they intended to deploy, by 31 December 2016, mobile DVR units across their entire fleet of buses in Israel and 1,700 buses in Poland and Netherlands. Unfortunately the delays in the roll-out of the IVG-400-N have resulted in the further deployment of units on Egged buses stalling. Egged is also currently waiting on the passing of legislation that would subsidise the deployment of camera systems on public buses in Israel. At this stage Servision has not been given any indication of when any further units will be deployed.
In addition unfortunately our partnership agreement with Sectrans in Brazil, announced in April 2015, has failed to deliver further orders in the period under review over and above the 400 MVG400 units announced at that time. Due to the economic recession in Brazil, which affects all government agencies, including the public transportation sector, Sectrans is not able to commit to any further orders at this time.
SerVision market penetration in the UK began gaining momentum in H2 of 2015 due to new cooperation with several telematics companies, Gatwick Airport and a new high-value transport project with DHL. However, recurring monthly revenue has only recently accrued in a meaningful way. Our revenue stream from the UK has now stabilised and, since last year it has been further bolstered by recently announced co-operations with companies such as Maple Fleet Services, Verilocation, Stobart Rail, and Up Front Car Holdings Limited. The income derived from offering installation service, support and monthly data is growing as more customers are identified and brought on board. Concurrent with our UK operations, in conjunction with Handsfree, an existing UK partner and customer with branches in North America, we are currently experimenting with a similar business model for select projects in the US.
In addition following on from the product launches of the IVG400-N at the SEECAT show in Japan in November 2015, followed by the Security Transport show in the UK in December, IVG trials for a range of projects and market applications are currently underway in the US, the Netherlands, Belgium, UK, South Africa, Chile, China, Singapore and Israel. So far the new technology has been very well received. In particular, customers have noted a dramatic improvement in video quality for both live and recorded streams, and they are very pleased to know that we have maintained all the other useful features that were supported in previous generation devices. We hope to start seeing a larger volume of sales for the IVG product during H2 of this year as many of the pilots that began at the end of 2015 and in early 2016 are only now coming to a close.
Research and Development
Over the course of 2015, SerVision's R&D team was heavily focused on further development of the next generation IVG400-N, along with a new client software application called SVCentral. The IVG's feature set grew significantly in H2 2015 and the system today supports a broad range of functions including, inter alia, full HD recording, live streaming (using SerVision's proprietary transmission protocol), GPS tracking, audio, WiFi, sensors and email notifications. The new SVCentral platform enables live monitoring of HD quality video from the IVG, is compatible with older SerVision devices, and supports a range of new features including virtual desktops and full integration with a new cloud-based backup solution scheduled for rollout later this year.
In addition to starting work on a new cloud-based backup server which can automatically detect and store sensor-triggered video events as they occur on a vehicle or site, our R&D team also began integration with Mobileye's aftermarket solutions during H2 2015. Mobileye is the global leader in Advanced Driver Assistance Systems (ADAS) and when installed with the IVG400-N, Mobileye's collision avoidance technology is transformed into a real-time video monitoring platform that enables fleet managers to easily identify problematic driving behaviour. SerVision has just completed the integration and is currently preparing to roll this solution out to SerVision and Mobileye customers.
Financials
-- Revenues for this period were $2,154,000 compared to $4,236,000 for the same period in 2014.
-- Operating loss for the period was $2,416,000 compared to an operating loss of $665,000 for the same period in 2014.
-- Net loss for the period was $2,570,000 compared to a loss of $794,000 for the same period in 2014.
In February 2016, the Company entered into an agreement with Gabriel Sassoon, an existing shareholder in the Company, to provide the Company with an unsecured working capital loan facility of $1.0 million. The Loan facility was put in place to provide additional working capital facilities for the Company and supplement the Company's existing cash resources. At the date of the announcement the Company has drawn down US $900,000 of the loan facility.
In addition, as detailed in note 18 to the financial statements, in August 2015 a further GBP292,500 (net of costs) was drawn down by the Company under the existing loan facility with YA Global Master SPV Ltd to provide further working capital for SerVision. The Company has been making regular repayments under an agreed repayment schedule and, as at the date of this announcement, a total of GBP55,356 is outstanding under the facility. In connection with the further draw down, it was agreed that the Company would grant to Yorkville a further 1,210,653 warrants to subscribe for new ordinary shares of 1 pence each in the Company at a subscription price of 10.74 pence per Ordinary Share and with a three year exercise period.
Conclusion
Our final results for the year ended 31 December 2015 are underwhelming and a disappointing outcome for all shareholders. However the board takes confidence in the future prospects from our new business model in the UK which is beginning to gain increased traction, and I do anticipate significant, more consistent revenue growth in this important market going forward. In addition, we are excited and optimistic about the release of an entirely new hardware and software platform which we are confident has significant commercial potential worldwide, and by our new integration with Mobileye which is enabling us to enter a new vertical market for smart/safe driving applications.
I remain very grateful to our shareholders for their ongoing support, and to our staff for their hard work and commitment to the Company's success.
Gideon Tahan
Chairman and CEO
Date: _____________
STRATEGIC REPORT
Business Model, Strategy and Future Developments
SerVision develops and manufactures IP-based video monitoring solutions for the global security market. The Group's product range is comprised of professional video gateway systems (Digital Video Recorders/Video Transmitters) that enable live, remote video surveillance of any type of site - fixed or moving. It also includes a proprietary proxy server and video distributor, and a software-based control centre platform for centralized video management. SerVision's core technology is based on a proprietary video compression algorithm that is uniquely optimised for streaming high quality live/recorded video over any type of cabled, wireless or cellular network, regardless of bandwidth constraints.
The Group's revenues are principally derived from the sale of video gateways systems, software server licenses and occasionally from non-recurring engineering fees for the development of new features and functionality. In the UK, the Company also derives monthly recurring revenue for 24 or 36 month periods by offering service, support and cellular data. SerVision sells its solutions through a network of channel partners comprised of distributors and system integrators. The Group has, however, recently established an installation team for select projects in Israel and our new UK office has begun selling directly to end customers. Bidding on projects directly, as opposed to offering our solutions through integrators and other third parties, is a clear strategic objective of the Group going forward.
SerVision operates in a competitive environment that is increasingly moving from analogue to IP camera solutions. In response to this shift, the Group has developed a new, highly professional mobile NVR solution, the IVG400-N which supports IP cameras and full HD recording. The unique market advantage which SerVision currently maintains - outstanding video processing for low bit rate streaming over cellular and other bandwidth limited networks - will carry over into the new product line. The primary differentiators between our new platform and the existing solutions will be the ability to record in HD and to support a much more extensive range of cameras. This capability will provide customers with the highest available recording quality, therefore giving them a maximum level of choice when selecting cameras, together with the ability to stream high-quality live video over any type of cellular networks using our optimized video transmission protocol, without creating a bandwidth bottleneck.
Another emerging trend in the field of video surveillance entails a shift to cloud-based solutions. In response to this, SerVision has is developing a cloud-based backup solution that is highly scalable and easy for customers to deploy, with minimum maintenance requirements on their part. Going forward, the company will be focused on re-designing its enterprise level control-centre solution based on the new SVCentral monitoring software which is fully compliant with the new IVG400-N platform and the new cloud-based backup solution.
Another strategic objective that SerVision is actively pursuing includes wider co-operation with telematics solution providers to offer fully-integrated fleet management platforms with live video monitoring capabilities. Partnering with telematics companies who have an established customer base that are keen to see live video of their vehicles/drivers/cargo on top of more traditional fleet management parameters has broadened the Company's reach into the transportation market. More recently, SerVision has undertaken to integrate with Mobileye, the global leader in Advanced Driver Assistance Systems (ADAS). The integration essentially converts Mobileye's collision avoidance technology into a real-time video monitoring platform that enables fleet managers to easily identify problematic driving behaviour. This co-operation will further broaden the Company's market appeal as the combined solution is suitable for both mobile security and fleet safety applications.
Financial Risk Management
Foreign exchange risks
Most of the Group's sales and income are denominated in US Dollars which is the currency that the Group reports in. The Group's expenses however 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 are paid in Israeli Shekels. The Group has therefore a partial currency risk in the event the
Israeli Shekel strengthens against the US Dollar which could influence the bottom line of the Group's financial results. Recently, since the establishment of our UK office, our revenues and costs in GBP are increasing which will give the Group exposure to sterling exchange rate risk. Following the recent significant sterling exchange rate fluctuation following the UK's EU referendum these risks will increase.
The Group subscribes to a weekly circular from the two main Israeli banks regarding the main financial institutions expectations for foreign currency changes. The management reviews them carefully and will consider with the Board whether it should purchase financial instruments sold by local banks, to protect itself from this foreign exchange risk. There are no financial instruments in use at the date of this report.
Interest Rate Risks
The Group is exposed to interest risks as it uses credit lines and loans from its banks. Changes in the effective "prime" interest rate published monthly by the bank of Israel can influence the financing costs of the Group. The Group has attempted to diversify its credit lines in order to minimise its exposures to interest rate fluctuations by dividing its sources of finance into three categories:
(a) Variable interest rate facilities (which are exposed to interest rate fluctuations).
(b) Fixed rate facilities (which are not exposed to interest rate fluctuations).
(c) Shekel-dollar facilities (which are not exposed to interest rate fluctuations).
Credit Risk
The Group is exposed to credit risks if its customers fail to pay for goods supplied by the Group. In recent years, the Group has experienced a high level of bad-debt in comparison with revenue. The Directors examined the Group's credit risk policies in an effort to reduce bad-debt levels dramatically and have drawn some conclusions from this internal review process. They include:
(a) In the UK, and in other locations (when possible), the Group will reduce reliance on integrators and distributors by selling direct to End-Customers. Direct sales to end-customers result in more control over the deployment and success of the project, and give us direct knowledge about the project's status and customer's budget.
(b) Seeking to sell to respectable integrators and distributors only after having undergone an intense due-diligence investigation to confirm the company's stability.
(c) Orders from customers in certain regions are shipped only after an approved letter of credit is received by the Group's bank.
(d) Ongoing customers must pay 50% - 100% before shipping. (e) Only customers with high rated credit scores receive credit from the Group.
During the year a bad debt expense of $531,000 has been recognised, however $461,000 of this was in respect of sales made before the revised credit control procedures highlighted above.
Capital Risk Management
The Directors are highly aware of the significant losses that the company has incurred in recent years. They are closely monitoring the cash position of the Group in order to ensure the Company's ability to continue as a going concern. As a result, the Group conducted share placements and a debt conversion with Yorkville totalling GBP2,311,046 during 2015. And in February 2016, the Company entered into an agreement with Gabriel Sassoon, an existing shareholder in the Company, to provide the Company with an unsecured working capital loan facility of US$1.0 million. The Loan, of which US$900,000 has been drawn down, is to be used to provide additional working capital facilities for the Company and supplement the Company's existing cash resources. The Directors are pleased that its largest shareholder has demonstrated such confidence in the company's future. Since the Company has not yet reached profitability, the Directors will continue to carefully examine the Company's cash position and take measures accordingly.
Environmental Matters
SerVision is conscious of its responsibility as a provider of electronics equipment that it has a specific duty to minimise its environmental impact. This requires the Group to be fully compliant with a range of national, regional and international guidelines on safety, EMC emissions and energy efficiency.
Employment Matters
Employment polices
SerVision places considerable value on the involvement of its employees and has continued to keep them informed on matters affecting them as employees and on the various factors affecting the performance of the Group. This is achieved through both formal and informal meetings.
The Group gives full and fair consideration to applications for employment from disabled persons where the candidate's particular aptitudes and abilities meet the requirements of the job. In the event of any staff becoming disabled while with the Group, every effort will be made to ensure that their employment by the Group continues and that appropriate adjustments are made to their work environment.
SerVision is a responsible employer, that seeks to provide and pleasant and professional working environment in all locations. Management seek to ensure that the group is compliant with all relevant human resources and health and safety regulations, while the Group strives to offer competitive employment packages with opportunities for personal and professional development.
Regular updates on performance are provided in staff meetings and through internal communications. Clear and transparent company objectives are set each year which, in turn, are reflected in team and individual objectives.
Diversity
The Group does not discriminate on the grounds of age, race, sex, sexual orientation or disability.
The table below shows the number of persons of each sex who were directors, key management and employees of the Group.
Company Number of Number of Total Level Female Employees Male Employees Board - 3 3 Key Management - 4 4 Employees 4 28 32
Human Rights
Through careful selection and vetting of the supply chain - and strict code of conduct - SerVision is committed to ensuring manufacturing processes are fully compliant to international and local environmental and labour regulations.
Other matters
The Business Review of the Group, its results and other developments in the year, together with Key Performance Indicators (Revenue, Operating Result and Net Result) are included within the Chairman's Statement and are not repeated within this Strategic Report.
ON BEHALF OF THE BOARD
G TAHAN
30 June 2016
Chairman
Quadrant House,
55-58 Pall Mall,
London,
SW1Y 5JH
DIRECTORS' REPORT
The Directors present the annual report together with the financial statements and auditors' report for the year ended 31 December 2015. The Company is incorporated in the UK but its principal place of business is in Israel.
PRINCIPAL ACTIVITIES
The Group's principal activity is the development and sale of video surveillance equipment. Further information on the results of, and risks facing the Group can be found in the Chairman's Statement on pages 1-3 and the Group Strategic Report on pages 4-7.
ACCOUNTS PRODUCTION
The financial statements for the year ended 31 December 2015 have been prepared in accordance with International Financial Reporting Standards as adopted by the EU ("IFRS").
DIVIDS
The directors do not propose a final dividend (2014: GBPnil).
DIRECTORS
The directors who served during the year were:
G Tahan (Chairman)
C Levy (Director)
E T Yanuv (Chief Financial
Officer)
FUTURE DEVELOPMENTS
SerVision's new generation of video gateways with support for full HD (1080P) recording was released in H2 of 2015. The IVG400-N utilises SerVision's advanced video processing technology for real-time streaming of incidents using minimal bandwidth, while simultaneously recording in high resolution to produce the best available footage for post-event investigations. The system is powerful enough to run other applications beyond video encoding, and the Company has plans to integrate mobile advertising and analytics solutions into the IVG's platform in the future. With a built-in 3G/4G modem and a strong feature set that includes all the functionality supported in the company's current range of mobile DVRs, the Company sees strong potential for this product and we have many SerVsion customers who are eager to get the new unit included in their product portfolio and out into their local markets. In parallel to the release of the IVG400, SerVision has also recently introduced new client PC software called SVCentral that supports HD video playback and expanded monitoring functionality.
In addition to the recent launch of the IVG400-N, SerVision hopes to continue to capitalize on its cooperation with telematics solution providers who are now able to offer fully-integrated fleet management platforms with SerVision's live video monitoring capabilities, as well as on the recent integration with Mobileye, the global leader in Advanced Driver Assistance Systems (ADAS). Going forward, the company will be focused on re-designing its enterprise level control-centre solution based on the new SVCentral monitoring software which is fully compliant with the new IVG400-N platform and the new cloud-based backup solution.
POST BALANCE SHEET EVENTS
In February 2016, the Company entered into an agreement with Gabriel Sassoon, an existing shareholder in the Company, to provide the Company with an unsecured working capital loan facility of US $1.0 million. The Loan is being used to provide additional working capital facilities for the Company and supplement the Company's existing cash resources.
CORPORATE GOVERNANCE
Under the AIM Rules the Group is not obliged to implement the provisions of the UK Corporate Governance Code. However, the Group is committed to applying the principles of good governance contained in the UK Corporate Governance Code as appropriate to a Group of this size. The Board will continue to review compliance with the UK Corporate Governance Code at regular intervals.
In common with other organisations of a similar size, the Executive Directors are heavily involved in the day to day running of the business and meet regularly on an informal basis as well as at board meetings. The Board of Directors meets regularly and is responsible for formulating strategy, monitoring financial performance and approving major items of capital expenditure.
CHARITABLE AND POLITICAL DONATIONS
The Group did not make any charitable or political contributions during the year (2014: $nil).
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors are responsible for preparing the Strategic Report, the Directors' Report and the financial statements in accordance with applicable laws and regulations. Company law requires the directors to prepare Group and parent Company financial statements for each financial year. Under that law the directors are required to prepare the Group and parent Company financial statements in accordance with International Financial Reporting Standards ("IFRS").
The financial statements are required by law to give a true and fair view of the state of affairs of the Group and parent Company and of the profit and loss of the Group for that period.
In preparing each of the Group and parent Company financial statements the directors are required to:
-- select suitable accounting policies and then apply them consistently; -- make judgements and accounting estimates that are reasonable and prudent;
-- state whether they have been prepared in accordance with IFRS as adopted by the EU subject to any material departures disclosed and explained in the parent Company financial statements; and
-- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the parent Company will continue in business.
The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and parent Company and to enable them to ensure that the financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They have general responsibility for taking such steps as are reasonably open to safeguard the assets of the Group and parent Company and to prevent and detect fraud and other irregularities. Under applicable law and regulations the directors are also responsible for preparing a Directors' Report to comply with that law and those regulations. In determining how amounts are presented within terms in the income statement and balance sheet the directors have had regard to the substance of the reported transaction or arrangement in accordance with generally accepted accounting principles or practice.
So far as each of the directors is aware at the time the report is approved:
-- There is no relevant audit information of which the Company's auditors are unaware; and
-- The Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.
GOING CONCERN
The Directors have prepared and reviewed sales forecasts and budgets for the next twelve months and are optimistic that the Group will make significant progress towards these targets. Having considered these forecast cash flows together with the availability of other potential financing sources, including equity finance and potential sources of debt finance if required, the directors have concluded that the Group will have access to sufficient resources to meet its working capital and financing commitments for at least the next twelve months from the date of this report.
The directors believe that due to the aforementioned post year end developments, including the loan from the Company's major shareholder, that the Group is a going concern. However, the future of the Group is dependent on it substantially achieving its trading projections and on it being successful in securing further funding as and when required.
Therefore, subject to the success of future developments as disclosed above, the Directors' review of sales and cash flow forecasts and having made further relevant enquiries, the Directors have a reasonable expectation that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.
SUPPLIER PAYMENT POLICY
It is the Group's policy to settle the terms of payment with suppliers when agreeing the terms of the transaction, to ensure that suppliers are aware of these terms and to abide by them. Trade creditors at the year-end amount to 134 days (2014: 144 days) of average supplies for the year.
CREST
The Company's ordinary shares are eligible for settlement through CREST, the system for securities to be held and transferred in uncertificated electronic form rather than in certified form. Shareholders are not obliged to use CREST and can continue to hold and transfer shares in paper without loss of rights.
AUDITORS
A resolution reappointing haysmacintyre will be proposed at the AGM in accordance with S485 of the Companies Act 2006.
ELECTRONIC COMMUNICATIONS
The Company may deliver shareholder information including Annual and Interim Reports, Forms of Proxy and Notices of General Meetings in an electronic format to shareholders.
If you would like to receive shareholder information in electronic format, please register your request on the Company's Registrar's electronic database at www.capitaregistrars.com. You will initially need your unique 'investor code' which you will find at the top of your share certificate. There is no charge for this service. If you wish to subsequently change your mind, you may do so by contacting the Company's Registrars by post or through their website.
If you elect to receive shareholder information electronically, please note that it is the shareholder's responsibility to notify the Company of any change to their name, address, email address or other contact details. Shareholders should also note that, with electronic communication, the Company's obligations will be satisfied when it transmits the notification of availability of information or such other document as may be involved to the electronic address it has on file. The Company cannot be held responsible for any failure in transmission beyond its control any more than it can for postal failure. In the event of the Company becoming aware that an electronic notification is not successfully transmitted, a further two attempts will be made. In the event that the transmission is still unsuccessful a hard copy of the notification will be mailed to the shareholder. In the event that specific software is required to access information placed on the Company's website it will be available via the website without charge. Before electing for electronic communications shareholders should ensure that they have the appropriate equipment and computer capabilities sufficient for the purpose. The Company takes all reasonable precautions to ensure no viruses are present in any communication it sends out but cannot accept responsibility for loss or damage arising from the opening or use of any email or attachments from the Company and recommends that shareholders subject all messages to virus checking procedures prior to use. Any electronic communication received by the Company that is found to contain any virus will not be accepted.
Shareholders wishing to receive shareholder information in the conventional printed form will continue to do so and need take no further action.
Should you have any further questions on this, please contact the Company's Registrars, Capita Registrars on 0871 664 0300.
ON BEHALF OF THE BOARD
G TAHAN
30 June 2016
Chairman Quadrant House, 55-58 Pall Mall, London, SW1Y 5JH
Executive Director
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF SERVISION PLC
We have audited the financial statements of SerVision PLC for the year ended 31 December 2015 which comprise the Consolidated Income Statement, the Consolidated and Company Balance Sheets, the Consolidated and Company Cash Flow Statements, the Consolidated and Company Statement of changes in equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an Auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the Directors' Responsibilities Statement set out on page 8, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council's website at www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
-- the financial statements give a true and fair view of the state of the Group's and of the parent Company's affairs as at 31 December 2015 and of the Group's loss for the year then ended;
-- the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
-- the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and
-- the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the group financial statements, Article 4 of the IAS Regulation.
Emphasis of matter - Going concern
In forming our opinion, which is not modified, we have considered the adequacy of the disclosures made within note 1 of the accounting policies concerning the group's and the parent company's ability to continue as a going concern. The group incurred a net loss of $2,572,000 during the year ended 31 December 2015 and had net current liabilities of $305,000 as at that date. This, along with the other matters explained within note 1 of the accounting policies indicate the existence of a material uncertainty which may cast a significant doubt about the group and company's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the group and company were unable to continue as a going concern.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors' Report and Strategic Report for the financial year for which the financial statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
-- adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
-- the parent company financial statements are not in agreement with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or -- we have not received all the information and explanations we require for our audit.
Ian Daniels (Senior statutory auditor) 26 Red Lion Square
for and on behalf of haysmacintyre, Statutory Auditors London
30 June 2016 WCIR 4AG
CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 31 DECEMBER 2015
2 0 1
2 0 1 5 4
Notes $'000 $'000
Revenue 2 2,154 4,236
Cost of sales 3 (1,260) (1,843)
GROSS PROFIT 894 2,393
Administrative expenses (2,536) (2,592)
Depreciation and
amortisation (661) (604)
Exchange rate differences (113) 138
OPERATING LOSS 4 (2,416) (665)
Interest payable 5 (154) (129)
LOSS ON ORDINARY ACTIVITIES
BEFORE
INCOME TAX (2,570) (794)
Tax on ordinary activities 6 (2) (1)
NET LOSS FOR THE
YEAR (2,572) (795)
Translation difference arising
from translating into
presentation currency (329) 66
TOTAL COMPREHENSIVE LOSS FOR
THE YEAR (2,901) (729)
LOSS PER SHARE
( 3.18) ( 1.16)
BASIC 8 c c
( 3.18) (1.16)
DILUTED 8 c c
All activities arose from continuing activities.
CONSOLIDATED BALANCE SHEET
AT 31 DECEMBER 2015
2 0 1 5 2 0 1 4
Notes $'000 $'000
ASSETS
Non-current assets
Intangible assets 9 4,818 4,691
Investment 10 118 -
Deferred tax asset 6 80 82
Property, plant and equipment 11 56 70
5,072 4,843
Current assets
Inventories 13 702 597
Trade and other receivables 14 982 1,853
Cash and cash equivalents 78 101
1,762 2,551
6,834 7,394
EQUITY
Capital and reserves attributable
to the Group's
Equity shareholders
Called up share capital 15 2,090 1,224
Share premium account 16,127 13,588
Merger reserve 1,979 1,979
Other reserve 66 66
Retained earnings and translation
reserves (16,029) (13,128)
TOTAL EQUITY 4,233 3,729
LIABILITIES
Non-current liabilities
Loans and borrowings 18 255 443
Loan from the office of the
chief scientist 1 - 11
Post employment benefits 20 279 287
534 741
Current liabilities
Loans and borrowings 18 1,039 1,042
Loan from the office of the
chief scientist 1 173 161
Trade and other payables 17 855 1,721
2,067 2,924
TOTAL LIABILITIES 2,601 3,665
TOTAL EQUITY AND LIABILITIES 6,834 7,394
The financial statements were approved and authorised for issue by the Board of Directors and were signed below on its behalf by:
G Tahan E T Yanuv
Chairman Chief Financial Officer
30 June 2016
PARENT COMPANY BALANCE SHEET
AT 31 DECEMBER 2015
2 0 1 2 0 1
5 4
Notes $'000 $'000
ASSETS
Non-current assets
Investments 12 200 200
Trade and other
receivables 14 321 554
521 754
Capital and reserves attributable
to the Company's
equity shareholders
Called up share capital 15 2,090 1,224
Share premium account 16,127 13,588
Other reserve 66 66
Retained earnings and translation
reserves (18,143) (14,975)
TOTAL EQUITY 140 (97)
LIABILITIES
Current liabilities
Loan and borrowings 18 321 554
Trade and other payables 17 60 297
381 851
TOTAL EQUITY AND LIABILITIES 521 754
The financial statements were approved and authorised for issue by the Board of Directors and were signed below on its behalf by:
G Tahan
Chairman
30 June 2016
E T Yanuv
Chief Financial Officer
30 June 2016
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEARED 31 DECEMBER 2015
2 0 1
2 0 1 5 4
Notes $'000 $'000
Cash flows from operating
activities
Loss before taxation (2,570) (794)
Adjustments for:
Net finance expenditure 5 154 129
Depreciation and amortisation 668 604
Provision for bad debts 531 1,088
Movement in trade and other
receivables 340 (1,402)
Movement in inventories (105) (33)
Movement in post-retirement
benefits (8) (125)
Movement in trade and other
payables (866) 139
Net cash used in operating
activities (1,850) (394)
Cash flow from investing activities
Purchase of property, plant
and equipment and intangibles (781) (626)
Investment in available for (118) -
sale assets
Net cash used in investing
activities (899) (626)
Cash flows from financing
activities
Receipts from issue of shares
(net of issue costs) 3,405 1,189
Net finance costs (154) (129)
Net loans undertaken less
repayments (658) 155
Cash generated from financing
activities 2,593 1,215
Cash and cash equivalents
at beginning of period 101 (94)
Net cash (used)/generated
from all activities (162) 195
Cash and cash equivalents
at end of period (61) 101
Cash and cash equivalents
comprise:
Cash and cash equivalents 78 101
Overdrafts (139) -
(61) ((9 101
PARENT COMPANY CASH FLOW STATEMENT
FOR THE YEARED 31 DECEMBER 2015
2 0 1 2 0 1
5 4
$'000 $'000
Cash flows from operating
activities
Loss before taxation (3,169) (1,427)
Adjustments for:
Movement in trade and other
payables 1 (4)
Net cash used in operating
activities (3,168) (1,431)
Cash flows used in investing
activities
Loan to subsidiary 233 (215)
Cash flows from financing
activities
Loans (repaid)/undertaken (472) 454
Issue of shares (net of issue
costs) 3,407 1,192
Cash generated from financing
activities 2,935 1,646
Cash and cash equivalents
at beginning of period
Net cash used in all activities - -
Cash and cash equivalents - -
at end of period
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2015
Share Share Merger Other Retained Translation
Capital Premium Reserve Reserve Earnings Reserve Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000
At 1 January
2014 984 12,639 1,979 62 (12,495) 96 3,265
Issue of shares 240 949 - - - - 1,189
Total comprehensive
loss for the
year - - - - (795) 66 (729)
Share option
charge - - - 4 - - 4
At 31 December
2014 1,224 13,588 1,979 66 (13,290) 162 3,729
Issue of shares 866 2,539 - - - - 3,405
Total comprehensive
loss for the
year - - - - (2,572) (329) (2,901)
At 31 December
2015 2,090 16,127 1,979 66 (15,862) (167) 4,233
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
Share Share Other Retained Translation
Capital Premium Reserve Earnings Reserve Total
$'000 $'000 $'000 $'000 $'000 $'000
At 1 January
2014 984 12,639 62 (13,675) 128 138
Issue of shares
(net of issue costs) 240 949 -- -- -- 1,189
Total comprehensive
loss for the
year - - - (1,350) (78) (1,428)
Share option
charge - - 4 - - 4
At 31 December
2014 1,224 13,588 66 (15,025) 50 (97)
Issue of shares
(net of issue costs) 866 2,539 - - - 3,405
Total comprehensive
loss for the
year - - - (3,171) 3 (3,168)
At 31 December
2015 2,090 16,127 66 (18,196) 53 140
NOTES TO THE REPORT AND FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2015
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 2016) 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.
Going concern
The directors have prepared and reviewed sales forecasts & budgets for the next twelve months and are optimistic that the group will make significant progress towards these targets. Having considered these forecast cash flows together with the availability of other potential financing sources, including equity finance and potential sources of debt finance if required, the directors have concluded that the group will have access to sufficient resources to meet its working capital and financing commitments for at least the next twelve months from the date of this report.
The directors believe that due to the post year end developments, including the loan of US$1.0 million that was provided by the major shareholder and the facilities that the directors consider are likely to be available, that the Group is a going concern. However, the future of the Group is dependent on it substantially achieving its trading projections and on the directors being successful in their bid to secure new funding as and when required.
Therefore, subject to the developments disclosed above, the directors review of sales and cash flow forecasts and having made further relevant enquiries, the directors have a reasonable expectation that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.
The financial statements do not include any adjustments that would be necessary should this basis not be appropriate.
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 2014 and 2015.
The financial statements 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.
No separate income statement is presented for the company as provided by section 408, Companies Act 2006.
Revenue recognition
Sale of systems
The subsidiaries generate revenues mainly from sales of systems. The subsidiaries sell their products directly through the group's distribution networks worldwide.
Revenues from systems sales are recognised 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.
Sale of products
Revenues from the sale of purchased products are recognised upon delivery of the products to the customers where the group has fulfilled any related performance obligations.
Warranty costs
The Group generally offers a one year warranty for all its products. The Group 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
Vehicles 15% 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.
Foreign currencies (Continued)
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. For this reason the group uses the dollar as its presentational currency.
The exchange rate used at 31 December 2015 was GBP1 = US$1.48231 (2014: GBP1 = US$1.55916).
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.
The available for sale financial asset represents the Group's investment in a company in China. It is carried at fair value with changes in fair value recognised in other comprehensive income and the available for sale reserve. Where there is a significant or prolonged decline in the fair value of an available for sale asset which constitutes evidence of impairment, the full amount of the impairment including any amount previously recognised in other comprehensive income is recognised in profit or loss.
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 bank loans and overdrafts in current liabilities on the balance sheet.
Inventories
Inventories represent raw materials, 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 intangible asset in the balance sheet 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 economic lives (currently six years) 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 Servision Ltd 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
Grants received from the Office of the Chief Scientist ("OCS") in the past to finance research and development costs of the subsidiary were presented as a long-term loan at the date of receipt. The loan will be repaid by the payment of royalties to the Chief Scientist and is calculated as a percentage of sales of the subsidiary.
Group management reassess the balance repayable at each reporting date according to their estimates of future sales of products funded by the OCS funding. These estimates of future sales are based on demand for, and past sales of, the funded products.
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 income statement with a corresponding increase in other reserves in equity. The Group uses a Bi-nominal option valuation model.
Deferred tax
Deferred tax assets are recognised in respect of losses only where the group considers it probable that taxable profits will be available against which the losses can be utilised.
Critical accounting estimates and judgments
The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are explained below:
Intangible assets - as noted above, the group recognises Intangible Assets in respect of development assets. This recognition requires the use of estimates, judgements and assumptions.
Development costs are capitalised when management consider the chances that a project will be successful, both commercially and technologically are more than probable. Should the chances of success vary, this judgement would require reassessment.
Share options - as noted in above, the group fair values equity settled share based payments transactions using the Black Scholes model. The use of the model involves judgements and estimates including an assessment of whether the shares will vest. Should actual future outcomes differ from these assessments the amounts recognised on a straight line basis would vary from those currently recognised.
Warranty costs - as noted above, the group provides for the costs of meeting warranty claim costs. The allowance is based on historical experience and currently calculated at 1.5% of sales in a year. Should actual rates of claims change the required allowance would need to be increased or decreased accordingly.
2. BUSINESS SEGMENT ANALYSIS
In identifying its operating segments, management generally follows the Group's geographical regions, which represent the main way segments are analysed 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.
2 0 2 0
1 5 1 4
$'000 $'000
Europe 604 1,026
Far & Middle East 736 1,013
North America 702 986
Rest of the world 112 1,211
2,154 4,236
Sales of systems
and purchase products 2,122 4,056
Sale of software
and other income 32 180
------ ------
2,154 4,236
====== ======
All of the Group's non-current assets are held in Israel.
The Group has four customers that accounted for more than 37% of revenue in 2015 (2014: 25%) one of which is based in North America, two from Europe and one from the Middle East.
2 0 2 0
3. COST OF SALES 1 5 1 4
$'000 $'000
Materials and parts 980 1,395
Employee benefit expense 222 358
Other costs 58 90
1,260 1,843
2 0 2 0
4. OPERATING LOSS 1 5 1 4
$'000 $'000
The operating loss is stated
after charging/(crediting):
Employee benefit expense (see
below) 1,040 963
Exchange rate differences 113 (138)
Depreciation and amortisation 668 588
Provision for credit losses 531 1,088
Travel abroad 213 265
Trade shows - local and abroad 174 7
Operating lease rentals 77 59
Auditors' remuneration
- statutory audit services 15 15
- audit-related assurance
services 5 5
Employee benefit expense (including
directors)
Salaries and wages 987 993
Social security 60 58
Post retirement benefits (8) (88)
1,039 963
No. No.
The average number of persons
(including directors)
employed by the Group during
the year was as follows: 39 37
$'000 $'000
Directors remuneration
G Tahan 208 216
C Levy 10 10
E T Yanuv 30 30
E T Yanuv has been granted 30,000 shares in the company under long term share option incentive schemes. These shares have a term of ten years and an exercise price of 7p. These remain outstanding at the year end. The charge to the income statement in the year is $0 due to the full charge being recognised in prior years.
2 0 2 0
5. INTEREST PAYABLE 1 5 1 4
$'000 $'000
Interest payable and similar
charges on bank loans and
overdrafts 154 129
154 129
6. TAXATION
The Group is controlled and managed by its
Board in Israel. Accordingly, the interaction
of UK domestic tax rules and the taxation
agreement entered into between the U.K. and
Israel operate so as to treat the Company
as solely resident for tax purposes in Israel.
Servision PLC undertakes no business activity
in the UK such as might result in a Permanent
Establishment for tax purposes and accordingly
has no liability to UK corporation tax.
2 0 2 0
1 5 1 4
$'000 $'000
(a) The taxation credit charge:
Deferred tax 2 1
(b) Factors affecting tax charge for
the period
The tax assessed for the period
is different than the standard
rate of corporation tax. The differences
are explained below:
Loss on ordinary activities before
taxation (2,570) (794)
Multiplied by the standard rate
of corporation tax of 20.25% (2014:
21.49%) 520 171
Effects of:
Tax losses generated (518) (170)
Current year tax charge 2 1
(c) Factors affecting future
tax charges
The directors believe that the future tax
charge will be reduced by the use of tax losses
carried forward which can be used against
the profits made from the trading activity
in the Israeli subsidiary. Tax losses carried
(d) forward in the Group at 31 December 2015 are
$14,091,000 (2014: $12,083,000). The deferred
tax asset on these losses is not recognised
on the grounds of uncertain recoverability.
Deferred tax
A deferred tax asset is recognised in respect
of United States tax losses carried forward
on the basis that the subsidiary in the United
States is forecast to generate profits in
future periods.
2 0 1 5 2 0 1 4
$'000 $'000
At 1 January 2015 82 83
Credited to the income statement (2) (1)
At 31 December 2015 80 82
7. LOSS FOR THE FINANCIAL YEAR
The parent Company has taken advantage of section 408 of the Companies Act 2006 and has not included its own profit and loss account in these financial statements. The parent company loss for the year ended 31 December 2015 was US$ 3,168,000 (2014: loss US $1,428,000).
8. LOSS PER SHARE
Basic loss per share is calculated by reference to the loss on ordinary activities after taxation of $2,901,321 (2014: loss $728,802) and on the weighted average of 91,233,375 (2014: 62,901,799) shares in issue. The calculation of diluted loss per share is based on the loss on ordinary activities after taxation and the diluted weighted average of 91,233,375 (2014: 62,923,706) shares calculated as follows:
Number of shares
31 December 31 December
2 0 1 2 0 1
5 4
Basic weighted average
number of shares 91,233,375 62,901,799
Dilutive potential ordinary shares:
Share options - 21,907
Diluted weighted average
number of shares 91,233,375 62,923,706
9. INTANGIBLE FIXED ASSETS Development
expenditure
Group $'000
Cost or valuation
At 1 January 2014 12,349
Additions 626
At 31 December
2014 12,975
Additions 779
At 31 December
2015 13,754
Amortisation
At 1 January
2014 7,696
Charge in the
year 588
At 31 December
2014 8,284
Charge in the
year 652
At 31 December
2015 8,936
Net Book Value
At 31 December
2015 4,818
At 31 December
2014 4,691
10. INVESTMENT IN OTHER COMPANY
During the year Servision Plc made an investment
of 19% ownership in a company in China (hereafter
"the Other Company in China") which distributes
the Subsidiary's products in China. The Subsidiary
and the Other Company in China intend for the
Other Company in China in due course to be an
integrator in China and to establish an R&D
center in China in order to adapt new products
of the Subsidiary for production and marketing
in China. The Other Company is treated as an
available for sale financial asset. Due to the
close proximity to the year end the Directors
consider that the cost reflects fair value at
31 December 2015.
11. TANGIBLE FIXED Office
ASSETS Leasehold furniture
improvements and equipment Vehicles Total
Group $'000 $'000 $'000 $'000
Cost
At 1 January 2014 41 216 66 323
Additions - - - -
At 31 December
2014 41 216 66 323
Additions - 5 - 5
At 31 December
2015 41 221 66 328
Depreciation
At 1 January 2014 34 187 16 237
Charge in the year 3 4 9 16
At 31 December
2014 37 191 25 253
Charge in the year 3 6 10 19
At 31 December
2015 40 197 35 272
Net book value
At 31 December
2015 1 24 31 56
At 31 December
2014 4 25 41 70
12. INVESTMENTS $'000
Company
At 31 December 2015 and 31
December 2014 200
At 31 December 2015 the group held 20% or
more of a class of the allotted share capital
of the following:
Proportion Proportion
Country Class Held by Held Nature
of of Servision by of
Incorporation Share Plc Group Business
Capital
Video
Servision Surveillance
Ltd. Israel Ordinary 100% 100% Equipment
Video
Surveillance
Servision USA Ordinary - 100% Equipment
Inc.
Video
Servision Surveillance
UK. UK Ordinary 100% 100% Equipment
2 0 2 0
13. INVENTORIES 1 5 1 4
$'000 $'000
Group
Raw materials 215 446
Work in progress 185 92
Finished goods 302 59
702 597
14. TRADE AND OTHER RECEIVABLES 2 0 1 5 2 0 1 4
Group Company Group Company
$'000 $'000 $'000 $'000
Trade receivables 899 - 1,543 -
Due from subsidiary - 321 - 554
Other receivables 83 - 310 -
982 321 1,853 554
2 0 2 0
15. CALLED UP SHARE CAPITAL 1 5 1 4
$'000 $'000
Allotted, called up and
fully paid:
126,801,751 (2014: 70,690,963)
ordinary shares of GBP0.01 each 2,090 1,224
384,615 deferred shares - -
of GBP0.001 each
2,090 1,224
During the year 56,110,788 Ordinary shares of GBP0.01 each were issued at average of 4.2 pence per share. Total proceeds of $3,574,000 were raised before issue costs of $169,000.
16. 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 Binominal Model 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:
Number of share Exercise Exercise
At 1 January options At 31 December Price Date
2 0 1
5 Expired Granted Exercised 2 0 1 5 (pence)
10 years
from 11
817,500 - - - 817,500 7 Sept. 2011
The primary assumptions which have been used in the calculations of the fair value of the Options are:
(a) Value of the Parent Company's ordinary share of 4.75p
(b) Variable standard deviation of 66% to 135%
(c) Average risk free rate of interest of 0.3%
(d) Annual dividend yield 0%
17. TRADE AND OTHER PAYABLES 2 0 1 5 2 0 1 4
Group Company Group Company
$'000 $'000 $'000 $'000
Trade payables 362 - 699 -
Other taxes and social
security 19 - 257 -
Other payables 310 - 540 238
Accruals and deferred
income 164 60 225 59
855 60 1,721 297
2 0 1 2 0 1
18. LOANS AND BORROWINGS 5 4
$'000 $'000
Group
Bank overdraft 139 -
Other loan 526 554
Bank loans: amounts
due within one year 374 488
Current liability 1,039 1,042
Non current liabilities:
Other loan, due within 2
to 5 years 108 99
Non current liabilities:
Bank loans, due within 2
to 5 years 147 344
Non current liabilities 255 443
Total bank loans and
overdrafts 1,294 1,485
2 0 1 2 0 1
Company 5 4
$'000 $'000
Other loan 321 554
The other loan included in current liabilities
was received in 2014 and 2015, and stated net
of transaction costs. The total available facility
under the loan agreement is up to GBP1m as
detailed in the announcement released by the
Company on 1 September 2014.
The lender originally had the right to convert
the loan into Ordinary shares, by giving appropriate
notice, at a price equal to 70% of the trading
price at the end of the day of conversion.
On 18 August 2014, the Company and the lender
entered into in a deed of amendment date (the
"Deed of Amendment"), whereby the parties agreed
to restructure the repayments under the loan
agreement via the issue of 750,000 new ordinary
shares in the Company.
The new repayment schedule agreed pursuant
to the Deed of Amendment requires that, with
effect from 15 November 2014, the outstanding
principal of the loan bears interest of 12%
per annum and was repayable in 9 instalments
to July 2015
As announced by the Company on 20 July 2015, the outstanding principal and interest under the facility at that time was GBP43,640.97.
On 13 August 2015, a further GBP292,500 (net of costs) was drawn down under the existing loan agreement with the proceeds from this draw down being used to immediately repay the outstanding amount of GBP43,642 from previous tranches. Following this further draw down and subsequent repayment an amount equal to GBP292,500 was left outstanding under the facility which is being repaid in six bi-monthly instalments through to August 2016.
The state guaranteed bank loan that the Group's
Israeli subsidiary received from a banking institution
is repayable in 55 equal monthly instalments
to December 2018, bears interest at prime plus
1.8% (prime rate as of 31 December 2015 - 1.6%)
and is guaranteed by the Parent Company. The
loan is due as follows:
Year $'000
2017 108
2018 39
------
147
======
Included within Non current liabilities is a
loan of US $108,000 (2014: $96,000) from G. Tahan,
a director. The loan is unsecured and is due
in more than one year.
Included within current liabilities is a short
term loan of US $205,000 (2014: $207,000) from
G. Tahan. The loan is unsecured and due within
one year.
Total interest on both loans of $11,318 (2014:
$8,160) was accrued during the year.
19. OPERATING LEASES
The Group leases business premises in Israel, USA and UK under operating lease agreements. The lease expenditure charged to the income statement during the year is disclosed in note 4.
2 0 2 0
1 5 1 4
$'000 $'000
The future aggregate minimum lease
payments under
operating leases are as follows:-
No later than 1 year 140 108
20. POST EMPLOYMENT BENEFITS
Labour laws and severance laws in Israel obligate
the Company to pay severance pay to employees in
the event that they are fired or if they retire.
The severance is calculated for employee benefits
according to valid employment contracts and upon
the salary of the employees which according to management
creates the entitlement to receive severance. Plan
assets include funds deposited to managers' insurance
policies and to a central severance fund deposited
in a banking institution.
2 0 1 2 0 1
5 4
$'000 $'000
Net obligations 279 287
Expenses for defined benefits
plan:
Cost of current service
fees 57 62
Interest expense for obligations 15 16
Expected return on plan
assets (5) (2)
Severance paid (89) (116)
Actuarial loss, net 9 (85)
Total expenses included
in statement of operations (13) (125)
Activities at fair value for
defined benefits plan:
Balance at beginning of year 287 412
Interest expense 15 14
Cost of current service fees 57 62
Severance paid (89) (116)
Actuarial loss, net 9 (85)
Balance at end of year 279 287
2 0 1 2 0 1
5 4
$'000 $'000
Primary assumptions in establishing
obligations
Capitalisation rate of obligations 3.91% 3.76%
Expected real rate of return
for plan assets 2.11% 1.68%
Expected real rate of salary
increase 2.0% 2.0%
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, liquidity risk, 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 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
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.
The following table sets out the contractual maturities of financial liabilities:
Less 3 to More
Total than 2 to 12 months than
2 months 3 months 1 year
$'000 - 2015
Trade and other
payables 855 855 - - -
Loans from the
office of the
chief scientist 173 - - 173 -
Loans and overdrafts 1,294 170 62 807 255
Post employment
benefits 279 - - - 279
----- ----- --- ----- ---
Total 2,601 1,025 62 980 534
$'000 - 2014
Trade and other
payables 1,721 1,721 - - -
Loans from the
office of the
chief scientist 172 - - 161 11
Loans and overdrafts 1,485 358 130 554 443
Post employment
benefits 287 - - - 287
----- ----- --- ----- ----
Total 3,665 2,079 130 715 741
(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. The Group subscribes 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 whether it should purchase financial instruments sold by local banks, to protect itself from this foreign exchange risk.
(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.
-- Orders from customers in certain regions are shipped only after an approved letter of credit is received by the group's bank.
-- Ongoing customers must pay 50% before shipping. -- Only high rated customers receive credit from the group
The group's maximum exposure to credit risk is $982,000 (2014: $1,853,000) represented by Trade and other receivables.
The table below analyses by age the group's trade receivables which are past due as at the end of the reporting date but are not impaired
$'000 Total Current 30 days 60 days 90 days
past past past due
due due
2014 1,543 750 70 242 481
2015 982 553 84 93 252
At the year end the group made provisions of $531,000 (2014: $1,088,000) for possible credit losses. These balances are not included in the analysis above.
Financial instruments
The Group does not use derivative financial instruments but has bank loans. The Group finances its operations simply using bank balances, plus debtors and creditors. The cash flow is regularly monitored.
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.
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 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 the short term nature 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 valued 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.
22. CAPITAL MANAGEMENT
As part of its capital management process group management monitor "adjusted capital" which comprises all components of equity (i.e. share capital, share premium, share options, other reserves, and retained earnings) and debt finance.
Management objectives when maintaining capital are:
-- To safeguard the entity's ability to continue as a going concern; -- To provide sufficient working capital to meet trading needs;
-- To allow the group to structure itself in order to position itself for future growth and therefore to take advantage of strategic opportunities as they arise so the group can generate future returns for shareholders and benefits for other stakeholders.
The Group sets the amount of capital it requires in proportion to risk. The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to optimise, maintain or adjust the capital structure, the Group may obtain new or repay existing debt instruments, issue new shares, or sell assets to reduce debt.
There have been no changes to the Group's
capital management processes in the year under
review.
23. ULTIMATE CONTROLLING PARTY
The Directors do not believe there to be an ultimate controlling party.
24. RELATED PARTY TRANSACTIONS
Included within Non current liabilities is a loan of US $108,000 (2014: $96,000) from G. Tahan, a director. The loan is unsecured and is due in more than one year. Total interest on the loan of $11,318 (2014: $8,160) was accrued during the year.
Included within current liabilities is a short term loan of US $205,000 (2014: $207,000) from G. Tahan. The loan is unsecured and 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.
-- IFRS 9 Financial Instruments (effective from 1 January 2015). -- IFRS 14 Regulatory Deferral Accounts (effective from 1 January 2016). -- IFRS 15 Revenue Recognition (effective from 1 January 2018). -- IFRS 16 Leases (effective from 1 January 2019).
The remaining standards in issue but not yet effective are not deemed to have a material impact on the group.
The directors anticipate that the adoption of these Standards and Interpretations in future periods will have
no material impact on the financial statements of the Group.
26. RESERVES
Details of movements in reserves are set out in the consolidated statement of changes in equity (p16).
The following describes the nature and purpose of each reserve in equity:
-- Share premium - Amounts subscribed for share capital in excess of nominal value
-- Merger Reserve - Difference between the cost of investment and nominal value of Share Capital under Merger accounting
-- Other reserve - Amount relating to equity based share options
-- Retained Earnings - Cumulative net gains and losses recognised in the income statement
-- Translation reserve - Gains and losses from the retranslation of net assets of overseas operations into US dollars.
27. POST YEAR END EVENTS
In February 2016, the Company entered into an agreement with Gabriel Sassoon, an existing shareholder in the Company, to provide the Company with an unsecured working capital loan facility of US$1.0 million. The Loan will be used to provide additional working capital facilities for the Company and supplement the Company's existing cash resources.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BLGDLDXXBGLG
(END) Dow Jones Newswires
June 30, 2016 12:38 ET (16:38 GMT)
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