SVR.L Regulatory News (SVR)

26 March 2014

ServicePower Technologies plc

("ServicePower" or the "Company")

Final Results

ServicePower (AIM:SVR), a market leader for outsourced service and field management, announces its audited results for the year ended 31 December 2013.

Financial summary

· Revenues up 26% to £14.0 million (2012: £11.1 million) reflecting growth in all areas of the business and in each core product

o Revenues recurring in nature increased by 20% to £12.0 million (2012: £10.0 million)

· Gross profit up 47% to £6.6 million (2012: £4.5 million)

· Profit after tax of £0.2 million (2012: restated loss £1.6 million*)

· Cash balance of £2.7 million growing to £3.4 million in January 2014 (2012: £4.5 million)

· Basic and diluted earnings per share of 0.1p (2012: restated loss of 0.87p)

* A prior period restatement to the convertible loan note has been made, affecting the comparative disclosure for finance costs, see note 8.

Operational highlights

· Acquisition of mobility technology from Stratix Corporation, certification of ServiceMobility by AT&T, and integration into ServiceScheduling

· Rollout of enterprise mobility solutions at a number of tier one customers in the US and internationally

· High client retention and increased pace of upgrades to the latest software releases

· Multi-year ServiceOperations contract with Electrolux Home Appliances, as well as an extended contract with AIG Warranty

Post year end

· Landmark agreement with ServiceMax, expanding reach into Salesforce.com customer ecosystem

· Expanded pipeline prospects, with a number of significant contracts under negotiation

· Renewed focus on alliances with consulting firms and global system integrators with appointment of Karl Hohmann, an industry veteran, to executive staff

Marne Martin, CEO of ServicePower, commented, "In 2013, we were extremely pleased to have such a positive resurgence of turnover growth and a recovery from the loss in 2012 to a small profit. With the renewed momentum in the Company, 2014 has begun with stable trading, an interesting pipeline, and some exciting new clients and partnerships. "

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About ServicePower

ServicePower, publicly traded on the AIM market operated by the London Stock Exchange (AIM:SVR), allows companies to locate their employed field resources in the right geography, ensure they have the right mix of skills, and outside this geography create a network of independent, authorised service contractors whose costs are efficiently managed by our sophisticated warranty management software. The schedules and routes for both the employed field resources and the independent servicers are optimised by ServicePower's technology to ensure the right balance between the cost of operations and ensuring customers receive a superior service experience.

ServicePower Technologies Plc

Joint statement of the Chairman and Chief Executive

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Introduction

ServicePower provides the leading optimisation technology in the field service industry for employed and contracted technicians. The patented technology provides field service organisations with a fully mobilised scheduling and dispatch solution which can be used to route and dispatch employed, contracted 3rd party or on demand field resources, based on robust rules-based logic that enables clients to mix resources to achieve productivity, cost, margin and customer service objectives.

Continuous product investment and innovation like cutting edge mobile technology and M2M connected services, strategic alliances and partnerships, and excellent implementation and deployment services are driving increasing global contract momentum. Focused on delivering improved operating margins and shareholder value over time, ServicePower is positioned for financial success.

The financial results for 2013 represent a strong recovery and renewed confidence in the business as compared to 2012. The focus was returned to the core products and servicing client needs with a positive result. Clients were renewed at very high retention rate, some new clients were won, and interest remains strong in the overall product suite. Technologically, the Company is now in an improved position, with growing brand awareness in the marketplace.

With £2.7 million of cash at year end, increasing to £3.4 million in January 2014, the fundamentals of the business remain strong, with ServicePower having a powerful Field Service technology platform that is progressively differentiating itself from the competition.

The Company has two segments, ServiceScheduling (including ServiceMobility) and ServiceOperations (including ServiceClaims, ServiceDispatch, ServiceMarket, S2 and ServiceRatings). The source code and experienced employees that were commercialised in 2013 to launch the product ServiceMobility, were acquired from the Stratix Corporation in January 2013. SmartServices will be rolled out to customers in 2014 as an exciting step in the transformation of ServicePower. SmartServices combines the additional functionality and business logic available via ServiceBroker with the current product suite.

The Board is focused on generating increased organic profits, building channels and alliances, and winning new clients in the verticals where its products are best suited. Likewise, the Company will focus on moving towards a unified platform, and utilising its capabilities to partner with M2M and other technology platforms as SmartServices is commercialised towards the beginning of this year.

Financial Review

All streams of revenue grew in 2013.

Total revenue for the year increased by more than 25% to £14.0 million (2012: £11.1 million) reversing the decline seen in 2012. Within this, ServiceScheduling licence and consultancy revenue increased by 9% to £7.6 million (2012: £7.0 million), whilst ServiceOperations revenue increased by 32% to £6.4 million including £0.9m in license sales (2012: £4.1 million). Mobility, included within the ServicesScheduling segment, increased by 120% to £1.1 million (2012: £0.5 million) reflecting for the first time ServicePower having its own mobility product. The 2013 figures represent the revenue from ServiceMobility versus 2012 from mobility/GPS products re-sold by the Company.

The Company continued to invest in maintaining functionalities across all of its product range, investing £1.0 million in 2013 (2012: £1.0 million) in its organic development efforts separate from acquisitions. Of the £1.0 million invested in 2013, £0.6 million was capitalised based on development activities across ServiceScheduling, ServiceRatings and ServiceBroker in accordance with IAS 38.

Gross profit for the period increased by 47% to £6.6 million (2012: £4.5 million) and profit before tax increased to a profit of £0.05 million (2012: restated loss of £1.6 million*) including the gain from the Stratix acquisition.

The adjusted loss before tax was £0.6 million (2012: restated loss before tax £1.1 million*). The adjusted loss before tax refers to the loss before tax adjusted for a foreign exchange translation gain of £0.3 million (2012: loss of £0.5 million) and gain arising on the Stratix acquisition of £0.4 million). Profit after tax was £0.2 million (2012: restated £1.6 million*).

The basic and diluted profit per share for the full year was 0.1p (2012: retated basic and diluted loss per share of 0.87p*).

Cash balances were £2.7 million at 31 December 2013 (£3.4 as of 17 January 2014), compared to the cash balances at 31 December 2012 of £4.5 million. The decline in cash is primarily related to non-recurring transaction costs detailed in the 2013 Interim Statement and the overhead burden of the staff hired on as part of the Stratix acquisition.

*During the latter part of 2013, the new management team undertook a review of the accounting for the convertible loan note. This review is explained further in note 8.

Operational Review

Creating a complete field services platform

2013 saw ServicePower go back to basics to rebuild its brand awareness in its core product lines, utilising the strength of its products and customer relationships.

Our platform, acknowledged as the leading optimisation technology, has been developed over 20 years by field service experts. The patented technology provides field service organisations with a fully mobilised scheduling and dispatch solution which can be used to route and dispatch employed, contracted 3rd party or on demand field resources, based on robust rules based logic that enables clients to mix resources to achieve productivity, cost, margin and customer service objectives.

Our scheduling technology is unique to the industry. Its patented Simulated Annealing technology and proprietary travel matrix engine enable field service organisations to intelligently schedule the best technicians, for the best job, with the right parts to get the job completed the first time. It also provides robust logic to manage SLA work and complex jobs that other competitive rules based products cannot deliver.

Our M2M connected services technology, a partnership with global device or other product manufacturers and a leading M2M technology provider enables proactive automation of field based events and tie in with our Smart Services business and parts logic in order to provide far superior results for customers compared to competitors which simply monitor GPS devices.

Developed as a global, industry agnostic platform, the ServicePower software supports clients ranging from insurance, third party administration and home warranty providers, to manufacturers of appliances and electronics, heating and air systems, food service, and pool and spa products.

Clients also include global retail, telecom providers, utilities, social housing, facilities management, direct mail/ digital messaging, and information/media measurement, in addition to fire and security and managed print services.

Our innovative field service management platform offers:

· Demonstrated productivity gains of 25-50% with Best in class scheduling and mobility solution for SLA, parts management and complex jobs

· Improved line of sight, fraud control and cost savings of 30% with Industry Leading SaaS Warranty Claims and Dispatch Software and fully outsourced service management

· 40% more efficiently scheduled field resources with Innovative Business Process Logic, Parts Intelligence and Analytics

As a result of building the platform to contain all of the necessary tools, a customer can now turn to ServicePower to manage the complete lifecycle of a job, using a variety of field resources, from optimised scheduling and 3rd party dispatch, to mobile status updates, job based parts management, signature capture, GPS tracking, 3rd party claim payments and analytics.

ServiceScheduling

ServiceScheduling had a resurgence of momentum in 2013 with the release of version nine of the software, a 100% renewal rate of customers (including transitioning many customers to an auto renewal relationship), and the addition of some new customers. The average longevity of ServiceScheduling customer relationships and the average number of technicians/jobs scheduled each day leads the industry. ServicePower was able to complete the development of the enterprise ServiceMobility product in 2013, launch it with a number of blue chip clients, and fully integrate it into its Scheduling product. The integration with our ServiceOperations product is underway and the launch of a cloud version of ServiceMobility is imminent.

ServiceOperations

ServiceOperations had a good year in terms of commercializing new client wins and building transactional volume. Key US customers include: Global Warranty Group, AIG Warranty, Bosch, Square Trade, Brandsmart, Haier America, and many others. Key clients in the UK include Richer Sounds, John Lewis, Tesco and others. A key new contract win in late 2013 was with Electrolux Home Appliances, building on a late 2012 contract for ServiceMarket, and it has now implemented warranty claims management and ServiceStats, followed by dispatch and eventually also ServiceScheduling, ServiceMobility and ServiceGPS.

Market

The Field Service industry is one which is rapidly evolving. Increased competition in service, changing customer dynamics and reduced margins are driving field service organisations toward technology which can be used to improve their competitive edge, increase productivity and efficiency, as well as improve customer service through frequent communications via consumer centric channels like email, mobile 'apps' and social media.

Customers also expect scheduled appointments to eliminate wasted time, and technicians are prepared and knowledgeable enough to complete the job on the first visit.

Smart appliances and connected services or machine to machine technology are driving even more change as field service organisations strive to proactively address repair and maintenance issues, in an effort to reduce costs and improve margin, while anticipating outages and improving customer service.

ServicePower, the acknowledged leader in Optimisation Technology, provides a global, fully mobilized field service management software platform used by clients to improve productivity and efficiency, intelligently schedule appointments, SLA and complex jobs, as well as parts. It automates and enables proactive response to issues detected through connected devices. Our field service platform also enables clients to fully mobilise their field resources through a cutting edge MVEAP mobile application, which supports any connected device, as well as asynchronous movement between devices as onsite conditions change.

Clients may also manage, dispatch and pay 3rd party service providers, seamlessly mixing a variety of labour sources to achieve organizational metrics such as cost and margin, while managing seasonal demand spike and meeting customer response time expectations.

Rounding out our platform, business intelligence provides clients with the ability to monitor, analyse and adjust its processes based on data collected from across the field service organisation. We are seeking to provide more consulting services around the analysis and recommendations of our business intelligence product for customers as part of our SmartServices offering.

Strategic alliances

In recent months we have renewed our focus on strategic partnerships and alliances, extending our market reach and product suite capabilities.

New alliances with leaders such as ServiceMax, a competitive, 100% native field service platform built entirely on Force.com, provides improved penetration of the Force.com customer ecosystem.

The Company is also building stronger partnerships with system integrators to leverage their abilities both in terms of client referrals and implementation support.

Growth Strategy

ServicePower has entered 2014 with a clear strategy for growth, based around four key areas of focus. These are:

1) Growth of ServiceScheduling and mobility licence sales through cross-selling, direct sales and channel relationships

ServiceScheduling is the foundation of the ServicePower platform. We are acknowledged by customers and analysts as one of the best in the world at scheduling with our multi-layer, cost versus rules based optimisation, having invested 20 years of development into the software. Our ability to deliver a truly enterprise level solution, as evidenced by our long standing global tier 1 customer base, is a strong foundation upon which to grow. We believe opportunities for licence growth exist across both our core and additional industry verticals, in many geographies. Demand is growing for our ServiceScheduling and Mobility products from existing clients, new clients and through channel partners that see the fit for their business and/or product lines. Brand awareness is building around the technological benefits of the dual optimisation and cost-based optimisation versus the standard rules based optimisation of many of the competitors. The mobility product likewise is unique in its field service application layer, ability to sync across multiple devices, and the flexibility of its implementation model.

2) Growth of ServiceOperations through adding new clients, launching new products with existing clients and growing transactional revenue

ServiceOperations is experiencing very healthy and steady growth in the marketplace. Being an independent provider of a truly multitenant SaaS platform is valued and the Company is winning business from competitors, especially with the dispatch functionality for the management of work to be performed by contractors. Our full service outsourcing business is providing attractive options for customers seeking a professionally managed network for either supplementary or fully outsourced service network recruitment and management. ServiceDispatch is a unique offering without a direct competitor that offers like for like functionality and supporting consulting and outsourcing services. ServiceClaims is also experiencing renewed momentum with transaction volumes expected to double in 2014.

3) Technology integration and development

The Company's focus is on technology, solving today's field service challenges, and investing in the future of both the multi-channel labour model and parts. Efforts are underway to continue the integration of the new products with the new functionality being released, and transitioning the core products to a unified platform, a common technology stack, and transitioning more infrastructure to the cloud.

4) International expansion and reach into new verticals

We have entered the new year with a good pipeline of opportunities in continental Europe, the Middle East, Asia and Latin America, which we are entering through existing clients and via partners. In order to support these opportunities, additional language capabilities were added to the Scheduling platform in 2013 starting with German travel logic and the complete application translation to the German language to ensure a localized user experience. Additional languages are in process.

Further software releases will support multiple languages within the same deployment, including on premise or hosted instances, a key requirement for the Company's multinational client base. ServiceMobility has been enhanced to support complete localization, including language, and other critical data such as dates, times and user location information, for the Czech Republic. This extension, as well as several additional planned geographical deployment expansions, enhances ServicePower's ability to support its international clients, as well as improve its penetration outside the North American and UK markets. Mobility will also be extended to field based teams in Puerto Rico.

We are also seeing additional opportunities in new verticals, such as social housing, facilities management, retail and the manufacturing industries, which have similar drivers to our core white and brown goods markets.

Board Changes

In January 2013, Marne Martin was appointed to the Board as Chief Financial Officer, and in September 2013 was named Chief Executive Officer

In September 2013, Mark Duffin's resignation from the Board was accepted. He had been put on garden leave in July 2013.

Per the announcement also dated today, Hugh Fitzwilliam- Lay will be taking over as Chairman. The Company thanks Lindsay Bury for his many years of distinguished service and is pleased that he is remaining on the Board of Directors.

Outlook

With demonstrated sales success, and continued investment in strategic innovation and development of our global field management platform, ServicePower is positioned for a strong performance in 2014 and beyond. Our growing, prestigious client base, including some of the best known brands in the world, is proof of our commitment to providing the best, most complete, and technologically advanced field management tool in the world. Trading in 2014 has begun positively, and we are confident of a successful outcome to the year.

Lindsay Bury, Chairman Marne Martin, CEO 26 March 2014

All amounts relate to continuing activities.

A prior period restatement to the convertible loan note has been made, affecting the comparative disclosure for finance costs, see note 8.

There are no items within the above that will be reclassified subsequently to profit or loss (2012: same)

The total comprehensive expense for the year is attributable to the equity holders of the Company.

A prior period restatement to the convertible loan note has been made, affecting the comparative disclosure for finance costs, see note 8.

The 2012 and 2011 balance sheets have been restated in respect of the convertible loan note (see note 8).

Financial information for the year ended 31 December 2013

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1 General information

The financial information included in this preliminary announcement has been extracted from the audited annual financial statements of the group for the years ended 31 December 2013 and 2012. Those financial statements have been prepared in accordance with IFRS as adopted by the European Union.

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. The Group expects to publish full financial statements that comply with IFRS in March 2014.

Going concern

A significant portion of cash receipts comes from the sale of large software licences. The signing of contracts by large corporate customers can be difficult to predict due to long procurement cycles and therefore there is uncertainty in forecasting the timing and quantum of cash receipts from these customers.

At 31 December 2013 the Group had net assets of £3.2 million including £2.8 million of cash and cash equivalents (31 December 2012: restated net assets of £2.8 million including £4.5 million of cash and cash equivalents).

In determining whether the Group's accounts can be prepared on the going concern basis, the directors considered the Group's business activities together with factors likely to affect its future development, performance and its financial position including cash flows, liquidity position and the principal risks and uncertainties relating to its business activities.

Based on cash flow forecasts which take into account the directors' best estimate of current sales orders and opportunities, expenditure forecasts as well as the Group's current cash balance, the directors consider it appropriate to prepare the Group's financial statements on the going concern basis.

2 Revenue

An analysis of the Group's revenue is as follows:

3 Business segments

Segment information reported externally is analysed on the basis of the Group's business streams, namely ServiceScheduling software licences which provide scheduling solutions, and ServiceOperations which provides claims and despatch processing in the consumer electronics market.

Segment information about these businesses is presented below:

The accounting policies of the reportable segments are the same as the Group's accounting policies described in note 2. Segment profit represent the profit earned by each segment without allocation of central administration costs, including directors' salaries, investment revenue and finance costs and income tax expense. This is the measure reported to the Group's Chief Executive for the purpose of resource allocation and assessment of segment performance.

Segment assets

For the purposes of monitoring segment performance and allocating resources between segments the Group's Chief Executive monitors the tangible, intangible and financial assets attributable to each segment. All assets are allocated to reportable segments with the exception of cash and cash equivalents and trade and other receivables of the parent company.

Other segment information

The Group's revenues from its major products and services were as follows:

Geographical information

The Group's operations are located in the United States of America, the United Kingdom and the rest of Europe. The Group's revenue from external customers and information about its segment assets by geographical location are detailed below irrespective of the origin of the services:

Information about major customers

In 2013, included in revenues arising from ServiceScheduling were revenues of approximately £1.6 million from one customer, which represented 11% of Group revenue. In 2012 this customer contributed revenues of £1.6 million, which was 14% of Group revenue.

Included in revenues arising from ServiceOperations are revenues of approximately of £1.0 million (2012: £0.9 million), which arose from sales to a customer whose turnover represents 7% of Group revenue.

4 (Loss)/profit before taxation

Profit/(loss) before taxation has been arrived at after charging/(crediting):

Amounts payable to Deloitte LLP and their associates by the Group in respect of non-audit services were £61,000 (2012: £10,000).

5 Taxation

Corporation tax is calculated at 23.3% (2012: 24.5%) of the estimated assessable loss for the year. The charge for the year can be reconciled to the profit per the income statement as follows:

Subject to agreement with the HMRC, the Group has taxable losses of approximately £16.7 million (2012: £17.2 million), which are available for offset against future trading profits.

No deferred tax asset has been recognised on the basis of the uncertainty of the timing of new licence contracts, particularly given the long procurement processes for new licence agreements.

6 Profit/ (loss) earnings per share

The calculation of the basic and diluted earnings/(loss) per share is based on the following data:

Earnings/(loss)

Number of shares

Earnings/(loss) per share

The convertible loan note and the share warrant issued in 2012 (which expired in 2013) have an anti-dilutive effect and therefore diluted earnings/(loss) per share are capped at basic earnings/(loss) per share.

7 Financial assets

Trade and other receivables

The average credit period taken on sales of goods is 68 days (2012: 66 days). No interest is charged on overdue receivables. The Group has provided fully for receivables it considers to be not recoverable based on historical default experience.

Before accepting any new customer the Group assesses the customer's credit status and reviews on a regular basis thereafter their ability to pay to terms.

Included within other receivables is a performance bond with a customer for £26,731 (2012: £26,000).

Of the trade receivables balance at the end of the year, £246,063 (2012: £368,046) is due from one of the Group's largest customers. There are 4 other customers who represent more than 25 per cent of the total balance of trade receivables.

Included in the Group's trade receivable balance are debtors with a carrying amount of £1,175,170 (2012: £906,000) which are past due but not impaired at the reporting date. In the year the Group has provided £79,784 against debtors with receivable amounts outstanding over 90 days and utilised a prior year provision of £65,000. The Group regards all other amounts as recoverable as there has not been a significant change in credit quality. The Group does not hold any collateral over any of these balances. On average past due receivables are 28 days overdue (2012: 27 days).

The directors consider that the carrying amount of trade and other receivables is approximately equal to fair value.

Bank balances and cash comprise cash held by the Group, short-term bank deposits with an original maturity of three months or less and letters of credit issued to third parties as guarantees of £61,067 (2012: £87,255). The carrying amount of these assets approximates their fair value.

8 Financial liabilities

Trade and other payables

Trade creditors and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 55 days (2012: 53 days).

The directors consider that the carrying amount of trade payables approximates to their fair value.

The company issued convertible loan notes in 2008, which can be converted into a fixed number of shares at the option of the loan note holder. The convertible loan notes are a compound instrument (as defined by IAS 32), including a financial liability to deliver cash and a written call option to convert the loan into a fixed number of shares. In accordance with IAS 32, on inception, the fair value of the liability and the residual equity component was recognised separately in the financial statements (IAS 32.28).

In the current year a partial redemption of the loan notes occurred, with one of the four individual note holders redeeming their loan notes. Under the accounting treatment originally adopted by management this created a gain recorded in the income statement. As a consequence management reviewed the original accounting in late 2013 and identified that the interest rate applied in the original fair value assessment of cash flows was too high.

Management has reperformed the fair value assessment at inception of the convertible debt, which gives rise to a difference in the interest charged to the income statement in each financial year since the inception of the convertible loan notes. This also impacts the carrying value of the liability held on the balance sheet at each financial year end, given that the interest rolls up into the principal amount of the loan bi-annually. This assessment has required management to restate the comparative figures in the financial statements for the current year, by adopting the revised accounting for the year ended 31 December 2012.

The 2012 comparative amounts have been restated as follows:

· equity reserve increased by £0.5 million (2011: same);

· loan note liability decreased by £1.0 million (2011: £0.9 million), based on the initial fair value of the equity and liability being amended, as well as recalculation of the annual interest charge rolling up into the loan each year; and

· retained earnings increased by £0.5 million (2011: £0.4m), recognising that the interest charges rolling up into the loan and charged to the income statement were overstated in prior years.

9 Notes to the cash flow statement

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2013, 2012 or 2011, but is derived from those accounts. Statutory accounts for 2012 have been delivered to the Registrar of Companies and those for 2013 will be delivered following the Company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under s498 (2) or (3) Companies Act 2006.

10 Non-statutory information

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2013, 2012 or 2011, but is derived from those accounts. Statutory accounts for 2012 have been delivered to the Registrar of Companies and those for 2013 will be delivered following the Company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under s498 (2) or (3) Companies Act 2006.