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SerVision plc  -  SEV   

Half Yearly Report

Released 13:42 30-Sep-2015

RNS Number : 7651A
SerVision plc
30 September 2015
 



 

                                                                                                                       30 September 2015

 

 

SerVision PLC

("SerVision" or the "Company")

 

Interim Results

For the Six Months Ended 30 June 2015

 

The Board of SerVision (AIM: SEV), the AIM quoted leading developer and manufacturer of digital security systems, announces its unaudited results for the six months ended 30 June 2015.

 

 

For further information:

 

SerVision plc

+972 2535 0000

Gidon Tahan, Chairman and CEO

 


Allenby Capital Limited (Nominated Adviser and Joint Broker)

+44 (0)20 3328 5656

Nick Athanas / James Reeve 


 

Beaufort Securities Limited (Joint Broker)


Jon Levinson / Elliot Hance

+44 (0)20 7382 8300

 

Cadogan Leander (Financial PR)


Christian Taylor-Wilkinson

+44 (0)7795 168 157

 

 

 

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REPORT AND FINANCIAL STATEMENTS


CHAIRMAN'S STATEMENT

 

The Board today announces SerVision's consolidated group interim results for the six months ended 30 June 2015.  Revenue during this period amounted to a modest $1,242,000 and our net loss was $1,445,000.  While on the surface these numbers appear low (relative to last year's revenue of $1,842,000 and net loss of $892,000 for the same period), I can assure investors that the current results are an inevitable outcome of our transition to a new recurring revenue business model.  With this new commercial framework in place we are generating less revenue initially, but the Directors anticipate these will lead to more significant revenues of a recurring nature of a recurring nature in the long term.  In addition, a number of significant opportunities, particularly in China, were put on hold in H1 as customers have been reluctant to issue further purchase orders until our new IP-based IVG400-N is ready for market.  I am pleased to say that we have a healthy pipeline for H2 and I expect better results going forward, as our new IVG is slated for release in the coming weeks and we are poised to start collecting recurring monthly revenue from a number of existing projects and customers. 

 

 

SerVision's most significant accomplishment over the course of 2015 has been the opening of a UK office in Manchester that is now making direct sales to customers and offering full turn-key solutions for customers, including services and technical support.  We have already secured our first project with Gatwick Airport and has been approved as a supplier by the airport.  During H1, two major fleet and driver management companies, Matrix and GreenRoad, integrated SerVision's video streaming protocol into their platform, and they initiated a number of UK-based pilots which we believe have strong sales potential.  For all of these opportunities and contract wins, SerVision's UK office will be providing stand-alone and integrated systems, installation service, technical support, and cellular data packages that will be paid in monthly installments over a 24 or 36 month period.  The UK office has just hired a new support engineer and is currently operating with a staff of five.

 

During H1, SerVision supplied over seven hundred and fifty MVG400 units, aggregately valued at $915,000, for bus projects in Brazil and Kazakhstan, and it received new orders from cash-in-transit companies in South Africa as well as from Israel's largest bus operator, Egged.  Also, during this period, we began pilots for a range of new bus and cash-in-transit fleet projects in Nigeria, Tanzania, and Mexico.  We also recently completed the homologation process for SerVision's mobile DVRs in Peru, paving the way for new market penetration in that country.  In the United States we have been invited to participate in a pilot for Manhattan City School Buses (where the fleet size is 7,000), and we've recently submitted bids with four local police counties to supply a wearable CCTV solution based on the CVG-M. Earlier this month, after an extensive testing period, the Company learned that it has been short-listed for a project to supply up to 1,000 HVGs for deployment at select US traffic junctions nationwide. We also have a significant opportunity on the horizon for a bus project in the Chinese Municipality of ChongQuing (an existing SerVision customer) but, as mentioned above, the customer has delayed plans to begin this project until the new IVG400-N is available.  I anticipate further progress to be made in the Chinese marketplace once the new product has been launched. 

 

 

Our R&D team's primary focus during H1 (and subsequently) has been to get the new IVG400-N ready for market. The Directors believe that the system's support for IP cameras and High Definition (HD) recording give it a considerable advantage over the current range of mobile DVR solutions on the market (which only support analog cameras and standard definition recording). The IVG has a built-in 3G/4G modem and it supports advanced streaming/transcoding capabilities that are optimised for live transmission over low bit-rate networks.  In addition, like the MVG series, it has built-in support for WiFi, GPS, Audio and G-Force, as well as a range of virtual sensors to detect motion, ignition status, geo-fencing violations, speed thresholds and more.  A small quantity of IVGs have already been reserved for select customers with high sales potential, and we expect to be able to showcase the IVG400-N during the SEECAT Anti-Terrorism exhibition in Tokyo, Japan in October 2015.  The Directors expect that the product will be in mass production shortly thereafter. 

 

While our server team has been busy developing the IVG platform, our software team has been focused on developing a new client software application which will support HD streams and our new optimized H.264 streaming codec.  The new client is named "SVCentral," and it will be compatible with the IVG400 as well as the existing range of SerVision products.  It will be launched together with the IVG400-N.  Another high priority R&D initiative we undertook during H1 entailed adding support for a video streaming platform that enables customers to view live video streams from SerVision DVRs in any web-browser.  Prior to this, our SDK was only compatible with Internet Explorer so web client applications developed by third-parties could only access our systems from within this particular browser.  With newly added support for the NGNIX platform, video streaming web clients for SerVision products are now possible in Google's Chrome, Mozilla's Firefox and Apple's Safari.

 

 

·     Revenues for this period were $1,242,000 compared to $1,842,000 for the same period in 2014.  

·     Operating loss for the period was $1,436,000 compared to an operating loss of $814,000 for the same period in 2014. 

·     Net loss for the period was $1,445,000 compared to a loss of $892,000 for the same period in 2014.

 

In May 2015, the Company announced a subscription to raise £911,927 through a subscription for new ordinary shares with existing shareholders and new investors. The net proceeds of the subscription are being utilised to satisfy the Company's existing order book and for general working capital purposes.

 

Since the period end the Company announced, on 25 September 2015, a placing to raise a further £800,000 at a price of 3.5 per share with existing shareholders and new investors. The Placing was arranged by Beaufort Securities as the Company's joint broker.

 

 

Although we achieved modest results for H1 2015, I believe that our new recurring revenue business model is the correct long-term strategy for SerVision, and I am currently exploring this commercial model for South Africa where we already have a strong reputation and solid market presence.   I am very excited about our new product release and look forward to sharing better results in the future as we grow our market share in the UK, and begin introducing the IVG400-N into global markets. 

 

As always, I am grateful to our shareholders for their confidence and support, and also to the SerVision team for their dedication, commitment and outstanding work. 

 

Gideon Tahan

Chairman and CEO

 

30 September 2015

 



SERVISION PLC

 

CONDENSED GROUP COMPREHENSIVE INCOME STATEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2015

 




Six months to

Six months to

Year to 31




30 June 2015

30 June 2014

December 2014



Note

$'000

$'000

$'000




Unaudited

Unaudited

Audited

 




 

 

 

REVENUE


3

1,242

1,842

4,236




 

 

 

Cost of sales



   (752)

   (806)

  (1,843)







GROSS PROFIT



490

1,036

2,393







Administrative expenses



(1,926)

(1,850)

(3,058)







OPERATING LOSS



(1,436)

(814)

(665)







Net finance expense



     (22)   

     (77)   

       (129)







LOSS ON ORDINARY



 

 

 

ACTIVITIES BEFORE TAXATION



(1,458)

(891)

(794)

 



 

 


Tax on loss on ordinary activities


4

       13

       (1)

        (1)

 






NET LOSS  FOR THE PERIOD



(1,445)

(892)

(795)

 






Translation difference arising from

translating into presentation currency



     (99)

     (18)

 

        66

 





 

TOTAL COMPREHENSIVE 

LOSS  FOR THE PERIOD



   (1,544)

   (910)

 

  ( 729)          

 






Loss  per share



 

 

 




 

 

 

BASIC


5

(1.75)c

   (1.61)c

(1.16)c







DILUTED

 

(1.75)c

   (1.61)c  

(1.16)c


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONDENSED GROUP BALANCE SHEET

AT 30 JUNE 2015

 


As at 30 June

As at 30 June

As at 31

 

 


 2015

2014

December 2014

 

 


$'000

$'000

$'000

 

 


Unaudited

Unaudited

        Audited

 

ASSETS





 

Non-current assets


 



 

Intangible assets


4,749

4,605

4,691

 

Deferred tax asset 


96

83

82

 

Property, plant and equipment


         63

         77

       70

 

 


4,908

4,765

4,843

 

Current assets





 

Inventories


670

585

597

 

Trade and other receivables


1,341

1,613

1,853

 

Cash and cash equivalents


       24

       173

           101

 

 


     2,035

     2,371

    2,551

 

 





 

Total assets


    6,943

    7,136

    7,394

 

 





 

EQUITY





 

Capital and reserves attributable to the

Company's equity shareholders





 

Called up share capital


1,498

984

1,224

 

Share premium account


14,671

12,639

13,588

 

Merger reserve


1,979

1,979

1,979

 

Advance subscription


-

1,036

-

 

Other reserve


66

64

66

 

Retained earnings and translation reserves


   (14,672)

   (13,309)

     (13,128)

 

Total equity


     3,542

     3,393

   3,729

 

 





 

LIABILITIES





 

Current liabilities





 

Short term credit from banking institutions


873

1,144

1,042

 

Overdrafts


--

63

--

 

Loan from the office of the chief scientist


161

161

161

 

Trade and other payables


      1,635

      1,292

      1,721

 

 

 

2,669

2,660

2,924

 

Non-current liabilities





 

Long term loan from bank institution

without current maturity


 

434

 

656

 

443

 

Loan from Office of the Chief Scientist


11

11

11

 

Post employment benefits


        287

        416

    287

 

 


732

1,083

741

 

 





 

Total liabilities


    3,401

    3,743

   3,665

 

 




 

Total equity and liabilities

 


   6,943

   7,136

   7,394



 

 

CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2015

 


 

 

Share

 

 

Share

 

 

Merger

Other

 

 

Retained

 

 

Translation

 

 

 

 

Advance subscription

$'000


 

 


Capital

Premium

Reserve

Reserve

Earnings

Reserve

Total

 


$'000

$'000

$'000

$'000

$'000

$'000

$'000

 









 

As at 1 January 2014

984

12,639

1,979

62

(12,495)

96

-

3,265

 










 

 

Total recognised expense

 

-

 

-

 

-

 

-

(892)

 

(18)

 

-  

 

(910)

 










 

 

Advance subscription

 

-

 

-

 

-

 

-

 

-

 

-

 

1,036

 

1,036

 










 

Share option charge

           -

             -

                          -

                 2   

                             -

                          -

                          -

          2

 










 

      984

   12,639

     1,979             

          64

(13,387)

           78

   1,036

    3,393  

 

 

Total recognised expense

 

                       -

 

                       -

 

                       -

 

                       -

 

259

 

84

 

-

 

181

 










 

Issue of shares

240

949

-

-

-

-

(1,036)

153

 










 

Share option charge

                     -

                     --

                       --

                 2

                         -

                      -

                              -

                       2

 










 

 1,224

13,588

  1,979

      66

(13,290)

    162

               -  

  3,729

 










 

Issue of shares

274

1,083

-

-

-

-

-

1,357

 

 

Total recognised expense

 

-

 

-

 

-

 

-

(1,445)

 

(99)

 

-  

 

(1,544)

 










 

Share option charge

           -

             -

                          -

                     -

                             -

                          -

                -

          -

 










 

      1,498

   14,671

     1,979             

       66

(14,735)

           63

                -

    3,542  

 










 

 



 

 

CONDENSED GROUP CASH FLOW STATEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2015

 

 

Six months to

Six months to

Year to 31

 

30 June 2015

30 June 2014

December 2014

 

$'000

$'000

$'000

 

Unaudited

Unaudited

Audited

Cash flows from operating activities




 



 

Loss before taxation

(1,458)

(891)

(794)

Adjustments for:

 

 


Net finance expense

22

77

129

Doubtful debts

462

578

604

Depreciation and amortisation

333

387

1,088

Movement in trade and other receivables

73

(456)

(1,402)

Movement in tax assets

(13)

-

1

Movement in inventories

(74)

(21)

(33)

Movement in post retirement benefits

(1)

4

(125)

Movement in trade and other payables

         (86)

      (245)

               138    

 




Net cash outflow from operating activities

(742)

(567)

(394)

 




Cash flow from investing activities




 




Purchase of property, plant and equipment and intangibles

(384)

(329)

(626)

Deposit for leasing vehicles

         (35)

         -

          -

 




Net cash outflow from investing activities

(419)

(329)

(626) 

 




 




Cash flows from financing activities




Issue of shares

1,357

-

1,189

Advance subscription

-

1,036

-

Net finance costs

(22)

(77)

(129)

Net loans undertaken less repayments

      (251)

      141

     155

 




Cash inflow from financing activities

1,084

1,100

1,215

 




Cash and cash equivalents at beginning of period

101

(94)

(94)

Net cash inflow/(outflow) from all activities

      (77)

      204

     195

 




Cash and cash equivalents at end of period

        24

     110

     101

 




Cash and cash equivalents comprise




Cash (excluding overdrafts) and cash equivalents

24

173

101

Overdrafts

           -

     (63)

             -

 




 

        24

      110

       101

 




                                                                                                                                                                                                                               

 



 

NOTES TO THE REPORT AND CONDENSED GROUP FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2014

 

1.         BASIS OF PREPARATION

 

These consolidated interim group financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) as endorsed for use by Companies listed on an EU regulated market and in accordance with IAS34 - "Interim Financial Reporting".  The same accounting policies, presentation and methods of computation have been followed in the preparation of these results as were applied in the Group's latest annual audited financial statements.  It is not expected that there will be any changes or additions to these in the 2015 annual financial statements. 

 

This statement does not comprise statutory accounts as defined in Section 434 of the Companies Act 2006 and the results for the six months ended 30 June 2015 and for the six months ended 30 June 2014 are unaudited.

 

The financial information for the year ended 31 December 2014 is an extract from the latest group financial statements.  The statutory group financial statements for the year ended 31 December 2014, prepared in accordance with IFRS, on which the auditors gave an unqualified opinion, have been filed with the Registrar of Companies.  The audit report contained an emphasis of matter paragraph drawing the attention of the reader to material uncertainty regarding the group's ability to continue as a going concern.

 

These consolidated interim group financial statements are presented in US Dollars and all values are rounded to the nearest thousand dollars ($'000) except when otherwise indicated.

 

2.         GOING CONCERN

 

The directors have prepared and reviewed sales forecasts, budgets and cash flow projections for the next twelve months and having considered these cash flows and the availability of other financing sources, have concluded that the group will remain a going concern for at least twelve months from the date on which these interim financial statements were approved.  

 

As disclosed in note 7 and the Chairman's statement, the group has raised further equity funding subsequent to the period end.  The directors have included the proceeds of this fund raising round into their cash flow forecasts and consider it to be sufficient for the group's immediate working capital needs.  Should circumstances change or trading results fail to meet targets the directors, may as in previous periods, seek additional equity investment and debt finance from a variety of sources.  If the directors are unsuccessful when seeking any necessary additional investment and finance the group may cease to be a going concern.

 

However having completed their review of sales forecasts, budgets and cash flow projections 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.

 

3.         BUSINESS SEGMENT ANALYSIS

 

                Class of business

 

                The turnover, loss on ordinary activities before taxation and net assets of the Group are attributable to one class of business, that of developing and selling video surveillance equipment.

               




Turnover by location of customer


Geographical areas


Six months to

Six months to

Year to 31




30 June 2015

30 June 2014

December 2014




$'000

$'000

$'000




Unaudited

Unaudited

Audited








UK and Continental  Europe


226

729

1,026


North America


383

514

986


Asia and Middle East


563

196

1,013


Rest of the world


   70

   403

   1,211


 


1,242

1,842

   4,236

 

 

 

 

 

4.         TAXATION

 

The Company 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.  The Company 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.

 

 

5.         LOSS PER SHARE

 

        The loss per share of (1.75c) (31 December 2014: (loss) (1.16c); 30 June 2014: (loss) (1.61c)) has been calculated on the weighted average number of shares in issue during the year namely 88,130,461 (31 December 2014:  70,690,963; 30 June 2014: 56,518,921) and loss of US$ 1,544,553 (31 December 2014: loss US$ 728,802;          30 June 2014: loss US$ 910,273).

                                                                                           

        Due to the immaterial number of options in issue there is no material difference between the diluted and basic loss per share.

 

6.         SIGNIFICANT ACCOUNTING POLICIES

 

Inventories:

 

Inventory of customers who have consented to postpone delivery are not included as inventory of the Company at the balance sheet date.

 

Revenue recognition:

 

For transactions of the "charged and held" type, for which delivery of inventory was postponed until after the balance sheet date, revenue is recorded  upon completion of the system only upon the condition that the customer confirms in writing the terms of the postponed delivery.

 

7.         POST BALANCE SHEET DATE EVENTS

 

          Subsequent to the period end the group conditionally raised approximately £800,000 (before expenses) through the issue of 22,790,972 new ordinary shares of 1p each in the company with existing investors and new shareholders, at a price of 3.5 pence per Placing Share.  The net proceeds of the share issue, amounting to approximately £733,000, will be used to satisfy the group's existing order book and for general working capital purposes.

 

 

 

 

 


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