Delivering on promises - Servelec Group on promises ... Operating profit from continuing operations 13,395 10,507 10,852 ... India Kochi Offices UK Sheffield Aberdeen

Delivering on promises

annual report and accounts 2015

Servelec Group plc annual report and accounts 2015

Who we are

Servelec is a UK-headquartered technology group, with significant intellectual property, providing software, hardware and services globally to the health and social care, oil and gas, energy and utilities sectors.

Market overviewsee page 4

Our business modelsee page 14

Risk managementsee page 32

Strategic Report

1 2015 highlights

2 At a glance

4 Market overview

5 Our heritage

6 Chairman’s statement

8 Chief Executive’s statement

10 Chief Financial Officer’s statement

12 Key performance indicators

14 Our business model

15 Our strategy

16 Strategy in action

22 Segmental reviews – Servelec Health & Social Care

26 Segmental reviews – Servelec Controls

29 Segmental reviews – Servelec Technologies

32 Risk management

35 Corporate social responsibility

ContentsGovernance

40 Board of directors and senior management

42 Corporate governance report

46 Nomination committee report

47 Audit committee report

50 Remuneration report

62 Directors’ report

65 Statement of Directors’ responsibilities

Financial Statements

66 Independent auditor’s report

71 Group income statement

71 Group statement of comprehensive income

72 Group statement of financial position

73 Group statement of changes in equity

74 Cash flow statement

75 Notes to the financial statements

97 Statement of director’s responsibilities for the Company financial statements

98 Company balance sheet

99 Company statement of changes in equity

100 Company statement of comprehensive income

101 Notes to the Company financial statements

107 Directors and advisers

1Servelec group plc annual report and accounts 2015

2015 highlights

Operational highlights

• Successful completion of the London and South NPfIT on timeand on budget for our customers

• Acquisition of Aura Healthcare Limited completed

• First major competitive win of an Acute Patient AdministrationSystem under the Shared Business Services framework

• Successful integration of Corelogic

• Initial order of a major upgrade to a number of offshore platforms

• Increased addressable market in Power & Nuclear following the investment in themanagement team

• Launch of S2000 nano battery powered RTU / logger

£63.1m+22% (2014: 23%)

Financial highlights

Revenue (£’000)

15

14

13

63,095

51,753

41,995

£16.2m+32% (2014: 8%)

Underlying Operating Profit(i) (£’000)

£13.4m+27% (2014: -3%)

Operating Profit from Continuing Operations (£’000)

15

14

13

16,151

12,225

11,277

15

14

13

13,395

10,507

10,852

£66.4m+10% (2014: 85%)

Order Entry (£’000)

15

14

13

66,383

60,200

32,601

£19.6m+13% (2014: 92%)

Cash Flow from Operating Activities (£’000)

15

14

13

19,591

17,361

9,064

115%(2014: 141%)

Cash Conversion(ii) (%)

15

14

13

115

141

76

17.1p+35% (2014: n/a)

Earnings per Share (p)

15

14

17.1

12.7

Notes2015

£’0002014

£’0002013

£’000

Operating profit from continuing operations 13,395 10,507 10,852 Exceptional costs 7 – 410 41 Share based payments 25 626 434 – Amortisation of acquired intangibles 14 2,130 874 384

Underlying operating profit from continuing operations 16,151 12,225 11,277

(i) Underlying operating profit excludes share based payments, exceptional costs and acquired intangible amortisation.

(ii) Cash conversion equals cashflow from operating activities divided by underlying operating profit plus amortisation of non-acquired intangible assets and depreciation of property, plant and equipment.

2 Servelec group plcannual report and accounts 2015

Servelec Group plc was founded in 1977 and has a strong technology and engineering heritage. Today the company employs a highly skilled and knowledgeable workforce of circa 600 people, operating globally. The majority of the staff are based across two offices in Sheffield and one in London. One of the Sheffield offices functions as the Group’s headquarters.

At a glance

Servelec Health & Social Care specialises in the design, development, deployment and support of software within secondary care settings and is a market leader in the mental and community health sectors in England. It has over 20 years’ experience in developing clinically-driven, enterprise-wide solutions for use within the NHS and private healthcare organisations and has a software suite that covers Electronic Patient Records, Patient Administration Systems, Bed Management, Clinical Information Systems, and e-Prescribing systems. Within a Social Care setting Servelec provides an Adult and Child Social Care case management system, supporting all the activities of a Social Care practice (case recording, electronic care record, appointment booking) and also includes financial management systems and reporting tools.

Gross Profit

Revenue

Servelec Controls is the largest independent integrator of safety and production control systems to large blue-chip companies mainly in the oil and gas and power and nuclear industry sectors.

Servelec Technologies develops, manufactures and sells end-to-end telemetry products, telemetry / SCADA systems and business optimisation software to the utilities (water, oil and gas and transport), broadcast and industrial markets. It provides consultancy services and sells telemetry products (RTUs) and associated software solutions through its global distribution network.

Revenue

Gross Profit

Revenue

Gross Profit

Servelec Automation provides complex, mission-critical control systems and standalone products to large, blue-chip companies in the energy, water, transport and broadcast industries. It provides whole lifecycle services from consultancy through to design, implementation, delivery, installation and on-going customer support and maintenance, as well as the sale of component products such as RTUs (Remote Telemetry Units) and SCADA software.

52%

53%

23%

19%

25%

28%

Servelec Health & Social Care

Servelec Controls Servelec Technologies

Servelec Automation

The group structure

For more informationsee page 22




Throughout our history we have delivered solutions globally and currently sell our products through established distribution channels across a global network.


Servelec Controls

Servelec Technologies

OfficesUK Sheffield Manchester London Edinburgh

Ireland Dublin

Australia Sydney

India Kochi

OfficesUK Sheffield Aberdeen Warrington Glasgow

OfficesUK Sheffield Dorking

Australia Melbourne

Belgium Waterloo

France Lyon

USA Florida

Canada Calgary

United Arab Emirates Abu Dhabi

255Employees

123Employees

160Employees

Main office Satellite office Offshore development


Market overview

The diverse nature of Servelec’s business and our flexible product portfolio allow us to operate in numerous market sectors across our segments. Traditionally, we have focused on industries with high barriers to entry where our expertise and high levels of intellectual property bring a competitive advantage.

Markets

Core MarketsMental, community and child health, acute care and adult and child social care

Market positionMarket leader in mental and community health sectors in the UK adult and child social care market. Poised to play a leading role in the Converged Care agenda nationally.

Market drivers• Regulatory changes and tightening budgets

are focusing this market on integration and interoperability

• Health & Social Care providers are under increased pressure to make efficiency savings whilst still delivering high standards of care

• In Social Care, Government policy is increasingly focused on giving clients greater choice and control over services in order to promote independence

• Local authorities will need to enable citizens to port their accounts without a break in their care

• There is an increasing expectation from patients to be able to access their records online

• A move towards Converged Care and sharing information securely across multiple care settings

Core MarketsOil and gas, power and nuclear

Market positionLeading supplier to Tier 2 companies in oil and gas market, growing position in power and nuclear with a focus on brownfield sites.

Market drivers• Regulatory requirements and operator cost

saving initiatives focused on reducing the cost of extracting oil and gas from ageing offshore platforms

• Health and safety drives a significant proportion of business

• The dollar price of oil will impact investment in new projects in 2016 but drive the reduction in the price of production

• The remote operations of platforms in response to increased health and safety legislation

• The requirement to significantly extend the life of existing platforms in the face of cost constraints

• Regulatory requirement and significant government investment in high hazard reduction within legacy nuclear facilities resulting in new plant

• Replacement of obsolete technology with modern designs to maintain modern safe operational standards

• Investment for plant life extension of existing generating stations to support continued generation

• Improved efficiency and reductions in cost base to maximise asset performance in generation

Core MarketsOil & gas, energy and utilities

Market positionMarket leader in UK water industry, established global distribution channels.

Market drivers• Pent up demand in the water industry

following a slow start to AMP6 (Asset Management Plan), but the same regulatory spend will now take place within a truncated four year period

• The current UK water sector RTU estate requires regular refreshment and routine replacement

• This AMP period investment is considerably greater than the last period with Servelec’s products timed well to capitalise on what water companies need

• Global RTU markets remain strong motivated by the drive for real-time data to make informed business decisions

• Customer demand for increased monitoring of networked data for business optimisation to deliver operational cost savings

• Globally, the goal of reduced operational costs is a constant and Servelec’s business optimisation solutions achieve this objective


Servelec Controls



Our heritage

Key milestones

Servelec is built on a strong heritage of delivering integrated solutions to a diverse portfolio of customers. With its origins in the Sheffield steel industry the company has developed organically and through acquisition to become a trusted partner in multiple market sectors.

RiO launched

Exit National Program for IT (October) Launch of S2000 nano (H2)Acquired Aura (May)

Acquired Corelogic (December) Launched Flowsure and Optimiser

Acquired Systems Integration & Automation Ltd

Divisional structure implemented: Servelec Healthcare and Servelec Automation

Healthcare commences contract with BT Acquired Scomagg

Acquired by CSE Global of Singapore for £18.6m

Portals acquired by De La Rue; Management Buy-Out of Servelec backed by 3i

Entered healthcare market

Bought by Portals (part of Portals Computer Technology)

Commenced operations, grew out of control systems in Sheffield steel industry

IPO (December)Acquired Tynemarch UK and Semaphore Group Disposal of CSE - Controls, s.r.o

2015

2014

2013

2010

2008

2006

2001

2000

1995

1993

1988

1977


Chairman’s statement

Servelec Group has produced a good performance in 2015, reflecting the benefits of its diversified revenue model. Organic growth is on target overall and the Group has continued on its acquisition path delivering further growth. The Group enters 2016 with a strong order book, an improving pipeline and an improved cash position.

OverviewOverall, the Group has performed well in 2015, with revenue for the year ended 31 December 2015 at £63.1m (2014: £51.8m), an increase of 22% driven largely by performance across Health & Social Care. Underlying operating profit increased by 32% to £16.2m (2014: £12.2m) 13% of which was organic. Profit before taxation increased 26% to £13.4m (2014: £10.6m) due in part to the performance of Corelogic which was acquired in December 2014. Earnings per share was 17.1p (2014: 12.7p), fully diluted EPS 16.7p (2014: 12.5p) an increase of 35% and 34% respectively compared to the previous year.

Health & Social Care delivered a 95% increase in revenue compared to 2014, which includes a full year of trading from Servelec Corelogic. This result included the full exit from the London Refresh which was delivered on time and on budget for 21 Trusts and Provider organisations. 2015 also saw Servelec win a major deployment in the Acute market with its Oceano product for a multi-site Trust covering three hospitals and 13 minor injury units. This is significant as it heralds Servelec’s expansion into the Acute market. Within Social Care significant market share was gained through the delivery of 13 new Mosaic systems and the continued upgrade of Frameworki customers to Mosaic. Operating profit in Health and Social Care increased to £12.1 million, in line with expectations and a 60% increase on 2014. Health and Social Care delivered an extremely positive performance in tender activity in “North New”, creating a strong order book for 2016. As the anticipated Converged Care agenda comes to the fore from 2016 onwards, Servelec remains well positioned to take advantage of this with its strong customer relationships and diverse product portfolio.

The challenging macro market conditions within which the Automation division operates have been well publicised. The downturn in the oil and gas industry has had a significant impact on both segments as each is exposed to this sector. 2015 has been a year of diversification and product investment to counteract the downturn in oil and gas and the slower than anticipated upturn in investment by the UK water industry. Servelec Controls reported a 4% decrease in revenue to £14.4m (2014: £15.0m) with a slight reduction in operating profit to £3.4m (2014: £3.5m). Within Controls - Power and Nuclear the investment in the new management team is reaping benefits of identifying and targeting a larger addressable market in existing and additional sectors. This is starting to gain momentum specifically with Servelec’s move into the

Richard LastChairman


refurbishment of Combined Heat and Power (CHP) plants for export to Turkey and an increased focus on winning business in the Nuclear and Power sectors. Servelec Technologies reported a 20% reduction in revenue to £16.1m (2014: £20.1m) and through rationalisation of the consolidated business reported a 10% reduction in profit to £3.5m (2014: 3.9m). Within Technologies, RTU sales have been impacted by both the oil and gas industry and the UK water market however we see this as a temporary dip and believe the opportunities for business optimisation solutions and investment in products will bring benefits in 2016 and beyond.

As at 31 December 2015, Servelec had gross cash balances of £9.9m compared with £6.0m in 2014. During the year the Group had excellent profit to cash conversion at 115% (2014: 141%) due in part to the favourable timing of monies received from customers, but also demonstrating the Group’s focus on strong cash management.

Corporate developmentIn May 2015, Servelec acquired Aura Limited, a leading developer of healthcare software that helps automate bed management across hospitals, clinics and primary care centres, thereby enabling the improved patient care. Aura's suite of products is sold on a standalone basis and also integrated into Servelec's Oceano and RiO products thereby adding to their functionality. The acquisition has already provided Servelec with a valuable entry point into the Republic of Ireland and Northern Ireland markets through existing contacts and customer relationships.

DividendThe Board is proposing a final dividend of 3.5p per ordinary share which, together with the interim dividend of 1.65p paid in October 2015, equates to a total dividend of 5.15p per ordinary share for the year ended 31 December 2015. The final dividend, which is subject to approval at the company’s AGM, will be paid on 27 May 2016 to shareholders registered at the close of business on 6 May 2016.

Board and employeesI would like to take this opportunity to thank all our employees for their continued hard work and support during 2015. This has been another strong year for Servelec as a whole and this is down to the dedication and enthusiasm of individuals across the Group.

“This is an excellent set of results, delivered alongside important operational steps forward, positioning the business well for 2016 and beyond.”

OutlookThe Board looks forward to 2016 with optimism as Servelec is well positioned for further growth and expansion despite the continuing challenges in the Oil and Gas market. Our Health & Social Care division will benefit from its strong order book and we look forward to winning new business in the North New and North Refresh programmes. We expect the business will build upon its major Oceano win in 2015 providing a strong case study that will, we believe, support further growth opportunities in this sector. We anticipate a strong year to come from Servelec Corelogic as the market continues to replace older social care software systems and we will continue to invest in our relationships with new and existing customers.

The Automation division should start to reap the benefits of our investment in people and products. For Servelec Controls, our expertise in brownfield oil and gas sites and move into remote operations through automation is becoming well known within the sector and we are experiencing a greater level of interest from prospective clients. Given a slow expected rate of recovery in the oil and gas market we have been active in diversifying the use of our skills into other relevant sectors and we see strong opportunities with valuable addressable markets. Servelec Controls performed well in the second half of 2015 and we anticipate this continuing during 2016. Servelec Technologies have started to witness the upturn in AMP6 related orders, as evidenced by the significant recent wins with Southern Water and others. We believe our Technologies business will continue to make gains in international markets as the investments we have made in our products gain traction in the market place.

The Board believes Servelec is positioned well within its core markets and is making gains in new sectors with strong growth potential. The Group has the necessary foundations to grow, develop its businesses and generate good returns for shareholders and other stakeholders.

Richard LastChairman1 March 2016


Chief Executive’s statement

This year has been about delivering on the promises we made in 2014 and our overall result is in line with market expectations. The mix might be slightly different but this demonstrates the benefits of our diversified business model. The outlook is positive for the Group in 2016 with a strong order book and improving market conditions.

2015 performanceGroup performance was strong during 2015, with revenues up 22% to £63.1m and Operating Profit up 27% to £13.4m. These results are in line with market expectations and whilst the mix may be a little different to what was originally anticipated, the nature of the business means the we can weather the ‘headwinds’ that may arise in segments of our market areas and by adapting, deliver an overall result which is on target.

Servelec Health & Social Care Servelec’s Health & Social Care division performed exceptionally well during 2015. Healthcare was driven, in the main, by the Refresh of systems for London and the South which Servelec delivered on time and on budget enabling completion of the National Programme for IT for 21 Trusts and provider organisations that chose to stay with our RiO product. These 21 organisations added to our expanding client base to which we can upsell our services such as RiO Mobile, EPMA and Hosting. Attention turns fully to the other areas of England where we are seeking to further expand our Healthcare business into Mental Health, Community Health and Acute Trusts. This is as part of the run-down of the national programme contracts handled by Computer Science Corporation (CSC); North Refresh and those organisations who opted not to adopt the solution being offered to them, retaining their legacy system; North New. Taking additional market share for our Acute product offering (both RiO and Oceano) is of paramount importance. Building on our collaboration with University Hospitals Birmingham we are really pleased with our recent win for an Acute PAS with a multi-site Trust.

Our investment to grow within Social Care and onward into Converged Care through the acquisition of Corelogic is proving its worth. Our core Social Care product, Mosaic, is market leading and only has one real competitor in a market where customers are reviewing their potential supply chain for the next few years as Local Authorities, through changing Government legislation, are being pressured to upgrade their systems through necessity. Servelec Corelogic has transitioned to being an important part of the Servelec Group with increasing margins. During the period, we have strengthened Servelec Corelogic’s management team in customer service, sales, account management, finance, and product development under the leadership of Garry McCord. Garry moved across to lead Servelec Corelogic following a successful 20 years in Servelec Healthcare, demonstrating our dedication to training our employees and promoting from within where the skills set and opportunities allow.

Alan StubbsChief Executive Officer


Servelec Health & Social Care has improved as a business during 2015 and delivered on profitability, enhanced customer satisfaction and invested in the continual development of our people. Social Care in particular outperformed original expectations and with the market opportunities in Social Care, this is a trend that we can see continuing in 2016.

Servelec AutomationThe constituent parts of Servelec Automation have seen differing fortunes during 2015. Servelec Controls is a business which is primarily focused on brownfield refurbishment, especially in areas where clients invest to improve operational efficiency and reduce manpower thus improving the profitability or indeed chances of survival for the business. The price of oil shows no sign of recovering, even in the mid-term and hence there is a massive reduction in oil and gas markets as operators move to reduce costs. Within the market context we believe our track record in reducing the operating expenditure of our clients through automation and enabling remote operations provides growth opportunities. Given the substantial drop in the oil price the 2015 results for Servelec Controls held up. This is thanks to the diversification enacted by the management team, primarily through the investment in our Power and Nuclear management and sales team and the opportunity taken on during 2015 for the control system refurbishment for Combined Heat and Power (CHP) plants here in the UK that are being sold overseas.

The currently unfavourable market conditions in which it operates has resulted in Servelec Technologies performing below expectations. This has been a year of headwinds created by struggling global sales as a consequence of the suspended new oil and gas projects which impacted RTU sales in USA and Middle East, together with a slower than expected increase in sales under the AMP6 programme for water companies in the UK because of the reduction in their original determination following the general election. Despite these negative factors we have delivered a reasonable result and continued to invest in products and people, particularly our sales teams, and have been working hard to align our distribution channels and sales opportunities. None of this spend has been capitalised during the year. We are now poised to take advantage of the improving market conditions in the UK and other areas as these occur on a global basis.

“This has been a very positive year for Servelec. The Group has delivered on its promises of strong and predictable financial performance, supported by its diversified business model.”

Strategy and outlook Our overall strategy for the business remains unchanged and we have continued to deliver on all of the four pillars. • We have achieved demonstrable organic growth, both in existing

markets and into new areas such as Social Care, Acute Healthcare, Power and Nuclear and CHP plants.

• Product development to enhance existing offerings has continued, specifically with the S2000 nano RTU from Servelec Technologies and the RIO mobile, Portal and Business Analytics in Health & Social Care.

• We have continued to invest in our people to develop our distribution channels and routes to market; and

• The integration of recently acquired businesses, Aura and Corelogic, continues to add value for customers and shareholders and we foresee bolt-on acquisitions continuing in 2016 where they fit with our strategy and meet our strict financial criteria.

Overall this has been a very positive year for Servelec. The Group has delivered on its promises of strong and predictable financial performance, supported by its diversified business model. We finish the 2015 financial year with an improved cash position, a strengthened order book and growing pipelines of opportunities for 2016 which underpin our budget for the year. Along with my colleagues on the Board I am positive about the outlook for 2016. Our portfolio of solutions provides compelling business cases for cost reduction and effective operations which is essential in the current climate. Servelec Automation looks poised for a year of growth as delayed projects get off the ground and Health & Social Care will continue to improve on performance to date, specifically in its Social Care business unit.

Alan StubbsChief Executive Officer1 March 2016


Chief Financial Officer’s statement

The Group delivered strong growth in 2015, as excellent performances within Health & Social Care offset the tough market conditions in the Automation business.

OverviewRevenue for the year ending 31 December 2015 was £63.1m (2014: £51.8m), an increase of 22%. Underlying operating profit increased by 32% to £16.1m (2014: £12.2m) and after allowing for the increased amortisation charge relating to acquisitions, profit before taxation also increased by 22% to £13.4m (2014: £10.6m). The acquisition costs incurred in 2015 were not material, whereas those incurred in 2014 were treated as exceptional costs.

Health & Social Care delivered an exceptional performance in 2015 with revenue up 95% (22% organic, with the remainder from the Corelogic and Aura acquisitions) to £32.5m (2014: £16.6m) and operating profit up 60% to £12.1m (2014: £7.6m). The key to the performance was the excellent work done by the delivery teams in Healthcare transferring the 21 customers from the National Program for Information Technology (NPfIT) to direct, within strict timescales all done on budget. This also enabled a smooth completion of the NPfIT contract and gives a strong message to those looking to exit from the North, Midlands and East NPfIT contracts that Servelec can deliver on its promises.

Corelogic (Social Care) was acquired in December 2014 and so the year to 31 December 2015 saw a full year’s performance included in the results. During the year, Corelogic was integrated into the financial systems and processes of the Group and has added to the growth of the Health & Social Care segment. Corelogic has been implementing 13 new and upgrading 10 customers in 2015 and is now building its sales team ready for the expected churn in the market over the next few years.

The Controls business has had a tough year due to the impact of the low oil price delaying customers’ decisions on major projects. Revenue dropped slightly to £14.4m in the year (2014: £15.0m) with a corresponding reduction in operating profit of 5% to £3.4m (2014: £3.5m). However, the Controls segment is poised to return to growth as customers now turn their attention to operational savings to reduce the cost of oil production. This was shown during the second half of 2015 as a major customer gave the initial order for the upgrade of systems on their offshore platforms. At the start of the year, the Controls segment invested in a new management team for the Power and Nuclear market. Although this has increased overheads for the segment there has also been a significant increase in the pipeline opportunities and a number of large orders is expected to be won in 2016.

Mike CaneChief Financial Officer


Technologies revenue reduced by 20% in 2015 to £16.1m (2014: £20.1m) due to the slow start of AMP6. However, the impact on operating profit was mitigated by the overhead savings implemented at the end of 2014 and so only reduced by 10% to £3.5m (2014: £3.9m). The reduction in Remote Telemetry Unit (RTU) sales in the Oil and Gas sector was expected to be more than offset in the year by the sales required at the start of AMP6 (the water industry’s five year budget cycle). Unfortunately, customers delayed ordering post the general election, however this is now leading to pent up demand as these purchases need to be implemented by the end of the AMP6 period in 2020.

CashCash flow from operating activities was £19.6m (2014: £17.4m) driven by the final unwinding of the BT work in progress relating to the NPfIT contract. The £6m loan notes taken out as part of the acquisition of Corelogic in December 2014 were paid back on their due dates together with a repayment of a £0.9m loan acquired as part of the Aura acquisition in May 2015. Cash balances at the end of 2015 were £9.9m (2014: £6.0m).

Capital expenditureDuring the year we invested £1.4m (2014: £1.3m) in IT and office equipment including further hosting environments for Healthcare customers. We anticipate further expenditure in this area as hosting services become more important to our customers in both Healthcare & Social Care.

TaxationThe underlying rate of taxation is 11% (2014: 18%) which is below the UK standard rate of corporation tax of 20.25%. The difference is partly due to a time based tax credit but also because the Group qualified for small company rates for R&D tax credit in 2014.

Earnings per shareEarnings per share increased to 17.1p for the year ended 31 December 2015 (2014: 12.7p), reflecting the benefit of the acquisitions made at the end of 2014 and in 2015.

OutlookServelec is well positioned to take advantage of the considerable opportunities for growth and development which have been identified as well as continuing to search for earnings enhancing acquisitions.

Within Health & Social Care we are expecting the growth to be driven by the churn in the Social Care market as the Northern Refresh in Healthcare has been stretched over the next three years. Our strong product suites and track record of delivery provides our customers the confidence to select Servelec as their partner demonstrated by the recent Acute win with our Oceano product.

We also believe we are well placed to lead the Converged Care agenda by leveraging our high level of geographical alignment and market leading offerings across the health & social care markets.

The oil price has delayed contracts in the Controls business in 2014 and 2015, however we can now see the market opening up and customers wanting to take advantage of our expertise in order to make savings in production by automating processes. Our investment in a new management team for the Power and Nuclear market has resulted in record order entry in this area of the Controls business and a significantly higher addressable market. We expect the Controls segment to return to profit growth in 2016.

Within Technologies, AMP6 provides significant pent up demand for our products and services. We are starting to see orders released by the large water operators in 2016 and see significant opportunities for our optimisation software products to deliver the savings and efficiencies demanded by the AMP. We launched our S2000 nano product at the end of 2015 and it is about to get type approval for the International market and is already on trial with a number of our distributors outside of the UK.

Overall we expect, and our products and expertise allow us, to capitalise on the opportunities in our chosen markets and our diversified business model enabling us to meet our growth expectations.

Mike CaneChief Financial Officer1 March 2016

Revenue (£’000) Continuing Operations (£’000) Order Entry (£’000)

Group performance

15

14

13

63,095

51,753

41,995

13,395

10,507

10,852

66,383

60,200

32,601

15

14

13

15

14

13


£63.1m+22% (2014: 23%)

Revenue (£’000)

15

1413

63,095

51,75341,995

Relevance and measurement This is reported in detail for the operating segments and is a key driver for the business to track our overall success in project delivery and market share growth.

Performance Group revenue grew by 22% driven by Health & Social Care. Underlying Healthcare revenue grew by 22% and was complemented by a full year of Social Care revenue (+£11.2m). Controls revenue dropped 4% and Technologies revenue was 20% lower than 2014 due to the slow start in AMP6.

£30.3m+29% (2014: 27%)

Gross Profit (£’000)

15

1413

30,280

23,44718,413

Relevance and measurement This is the total profit before operational expenses.

Performance Up 29% due to the growth in Health & Social Care offsetting the drop in Technologies.

£16.2m+32% (2014: 8%)

Underlying Operating Profit(i) (£’000)

15

1413

16,151

12,225 11,277

Relevance and measurement This measures our operating profitability on an International Financial Reporting Standards (IFRS) basis, excluding share based payments, acquired intangible amortisation and exceptionals.

Performance Driven by Health & Social Care’s 28% organic increase plus a full year of Social Care. Controls was slightly down (-4%) due to the investment in the new Power and Nuclear Team. Technologies dropped (10%) as the overhead savings offset the lower sales in 2015.

£13.4m+26% (2014: -3%)

Profit Before Tax (£’000)

15

1413

13,364

10,590 10,908

Relevance and measurement This is profit from ordinary activities, before tax.

Performance 26% growth in profit before tax represents the growth in underlying operating profit offset by an increased acquired amortisation charge following the acquisitions in Health & Social Care.

(i) Underlying operating profit excludes share based payments, exceptional costs and acquired intangible amortisation.

Key performance indicators

Financial highlights of the Servelec Group and comparative figures for the past three years.


£66.4m+10% (2014: 85%)

Order Entry (£’000)

15

1413

66,383

60,200 32,601

Relevance and measurement This is the total contract value of orders received within the year.

Performance Order entry growth continued to benefit from the new orders in Health & Social Care due to the churn in these markets.

£65.1m+5% (2014: 60%)

Order Bank (£’000)

15

1413

65,070

62,287 38,927

Relevance and measurement This is the total future revenue we expect from orders received.

Performance Up 5%, reflecting Healthcare tender activity and incorporating £15.4m order bank from Corelogic, acquired in December 2014. Automation has reduced due to delays in oil and gas orders and the transition to AMP6 in the water industry.

£5.5m+32% (2014: 109%)

R&D Investment (£’000)

15

1413

5,532

4,204 2,013

Relevance and measurement This measures the level of investment we have made in developing new and existing products during the year.

Performance R&D investment has increased due to a full year of Social Care more than offsetting a 15% drop in technologies. This saving is largely due to product rationalisation.


Servelec Group

High level of

intellectual property

management t

eam

Proven and exper

ienc

ed

relationships with client baseStrong long-term

Prov

en en

gineering

appr

oach

Servelec Health & Social CareServelec Controls


Our business model

Servelec is focused on profitable growth. We achieve this by operating only in areas where we can achieve strong, sustainable margins and cash generation.

We work in particular market segments which are heavily regulated and driven by legislation and have consistently maintained our gross margins and profitability. We are a leading provider in mental and community health, social care and UK water and a leading supplier to Tier 2 companies to the UK oil and gas industry.We focus our business on maintaining these positions by building strong client relationships in markets which have high barriers to entry. We utilise our technology and engineering skills, especially project management, to expand into adjacent markets and pride ourselves on delivering systems on time and on budget.

Distinct elements

High level of intellectual property

Servelec has significant intellectual property across both its divisions which we continue to enhance. Servelec Health & Social Care’s core products include the RiO and Oceano products for mental health, community health, child health and acute care and Mosaic and Corius for the social care market. Servelec Automation has a range of products that provide end-to-end functionality, from information collection, collation, business optimisation and automated control.

Proven and experienced management teamServelec’s executive management team is backed up by a strong, long-standing and experienced operational management team and a highly skilled and knowledgeable workforce.

Strong long-term relationships with client baseServelec has established very close commercial relationships with blue-chip customers in all of its end markets with some relationships dating back 30 years. Servelec’s customers include Welsh Water, Severn Trent Water, Centrica, BP, EDF Energy, BT, the NHS, and a large proportion of local authorities in the UK.

Proven engineering approach

The origins of the Group’s business were in the design and manufacture of control systems for the Sheffield steel industry. This engineering ethos of delivering projects on time and on budget remains firmly in the culture of Servelec, both in software and hardware.


Our strategy

Our strategy is to deliver shareholder value by focusing on profitable markets with high barriers to entry, where our expertise and high level of IP brings a competitive advantage. Our strategy is made up of four distinct elements.

Group pillars

Drive organic growth

We continue to organise the business to drive good levels of organic growth. We have a broad range of organic growth opportunities that fit with the capabilities of the business including brownfield refurbishment of platforms around our coastline, efficiency improvements and cost reductions for our utilities clients and continued delivery of true electronic patient records systems that meet the objectives set by the UK Government.

Our clients are important to us and we have been working with a number of them for many years. We always strive to maintain excellent customer relationships thus increasing our level of repeat business and recurring revenues.

Continue to enhance our product capabilityWe will continue to invest in our products across the Group to ensure that we meet the needs of our clients now and in the future and our products continue to comply with relevant legislation, regulation or changing market requirements.

Develop our distribution channels to market Servelec has proven itself with strong positions in its home market. Servelec has a global distributor network which provides access to increased opportunities for the Group. We will continue to invest in our distribution channels to provide access to customers, wherever they are.

Acquire where beneficial to the business

We continue to search for potential acquisitions that will provide both short-term and long-term benefit to the Group. We seek out companies that support our overall growth strategy and where we believe our expertise and experience provides enhanced growth potential for the acquired business.


Strategy in action

The table below summarises progress made during 2015 against our four strategic pillars. Key deliverables are further expanded upon in case studies on the pages which follow.

Our strategy in action

Case Study

pageDrive organic

growth

Continue to enhance our

product capability

Develop our distribution channels to

market

Acquire where beneficial to the business

Developing products to complement the Personalisation agenda 17 3 3

Accessing new sectors and geographical markets through acquisition 18 3

Driving proven applications through established distribution channels toexpand customer base (Optimisation, S2000 nano, SCOPE-X productisation, LT2) 18 3 3 3

Selling additional products (Portals, Hosting and MIS) to existing customer base 3 3

Expanding our business optimisation offering and driving sales in this area 3 3 3

Identifying and addressing available market share in Power and Nuclear 19 3

Successful completion of Southern Refresh 19 3 3

Investment in productisation of Flowsure 3

Successful integration of Aura and Corelogic 3

Aligning products to meet the Converged Care agenda 17 3 3

Investment in management team to gain access to new markets 3

Increasing sales through distribution channels 3

Launching products that position us for future growth 20 3 3

Launching the S2000 nano for harsh environments 3 3 3

Expansion into CHP for export to counteract downturn in Oil & Gas 3

Expanding into the Acute Healthcare sector 20 3 3

Launching hosting service to new and existing customers 21 3 3

Health & Social Care Controls Technologies


Developing products to complement the Personalisation agenda

ObjectiveAligning our product portfolio with the need to drive down costs.

What we did in 2015Servelec Corelogic has added a suite of online portals to its product portfolio to align with the emergence of the Personalisation agenda within social care and the need to drive down costs through the provision of self-service facilities. Another key element in its product portfolio is the Corius Business Intelligence (BI) platform that can compete with the market leading products yet is offered at a fraction of the price. Corius comes equipped with a suite of reports and dashboards that can quickly be deployed to provide in-depth analysis of all areas of care and support. Having BI capability that provides the ability to understand and make sense of large volumes of often disconnected data in real time is vital for organisations in the modern social care.

2016 focus• Our focus in 2016 will be to increase sales of our portals and

Corius to gain further traction in the Social Care market.

Aligning products to meet the Converged Care agenda

ObjectiveThe acquisition of Corelogic in December 2014 means that Servelec is well positioned to take advantage of the Converged Care agenda once it comes on board.

What we did in 2015Servelec has recognised the challenges in providing this data sharing approach. We have developed a product and integration strategy that provides our customers with aligned care planning for regions that have both RiO and Mosaic customers and a broader integration strategy. This is supported by NHS Standards for interoperability between our own systems and those of third parties.

2016 focus• As the Converged Care strategy develops, Servelec is well

positioned to take advantage and able to deliver an integrated system from across Servelec Health & Social Care.


Strategy in action Continued

Driving proven applications through established distribution channels

ObjectiveOrganic growth in the UK Water industry.

What we did in 2015Servelec’s heritage and strong customer relationships in the UK water industry means it is well placed to maximise growth opportunities in this sector. In addition to the ongoing churn inRTU replacement sales, Servelec identified the opportunity towiden the scope of products and services we currently sell through existing channels in the industry.

Having successfully integrated the Semaphore and Tynemarchbusinesses in 2014 the focus in 2015 centred upon productintegration allowing Servelec Technologies to market a complete solution for the collection, management, presentation and optimisation of data to make customer operations more efficient and effective.

2016 Focus• Servelec is currently engaged in sales activity to identify and

push through opportunities to sell this complete solution to existing and new customers in the water industry, directly and through distributors.

Accessing new sectors and geographical markets through acquisition

ObjectiveTo gain access to the Ireland and Northern Ireland healthcare market through the acquisition of Aura.

What we did in 2015Following its acquisition in May 2015, Aura Healthcare has been fully integrated into Servelec Healthcare. This has strengthened Servelec’s Oceano product suite with the integration of Flow (a state of the art touch screen based patient flow solution) and provided additional skills and knowledge for Servelec to capitalise on the Acute market. Servelec also won its first project in the Republic of Ireland with Flow.

2016 focus• In 2016, Servelec will further embed its position in Republic of

Ireland with Flow and also open up new country markets for RiO and Oceano.


Successful completion of Southern Refresh

Identifying and addressing available market share

ObjectiveTo strengthen our presence in traditional markets and deliver organic growth.

What we did in 2015Servelec Health & Social Care has continued to gain ground in winning new projects as part of the successful exit of the Refresh of London and the South which Servelec delivered on time and on budget. This allowed a full exit from the National Programme for IT for 21 Trusts and provider organisations who chose to stay with RiO. We have also won substantial North New projects (those trusts who didn’t take an NPfIT system) and we also announced a further win in an Acute setting to supply a PAS using our Oceano product.

2016 focus• North New will continue to churn throughout 2016 and we

are well positioned to take full advantage.• The majority of the churn is being transacted through the

Shared Business Services framework which Servelec was successful in achieving listings in all six lots.

ObjectiveTo widen access to our addressable market.

What we did in 2015Recognising that Servelec’s Controls business was often too reliant on a small number of slow-to-appoint customers, the division put in place a strategy to diversify into new areas and gain reach in its addressable market. Servelec introduced a new management team into its Power and Nuclear sector which has successfully identified and increased the addressable market. A tangible output of this was the diversification into the control system refurbishment market for Combined Heat and Power plants and this successfully partially offset the downturn in our Oil & Gas business.

2016 focus• To realise the full potential of new and existing clients in new

markets, Servelec Controls is focussing on the addressable market in nuclear, energy and defence which is currently valued at £200m per annum.

• To focus on the drive for the upgrade and remote operation of oil & gas platforms.


Strategy in action Continued

Expanding into the Acute Healthcare sector

ObjectiveTo expand Servelec’s presence in untapped market sectors.

What we did in 2015Servelec announced a further Acute win with a major Trust at the end of 2015. This major three site NHS Trust with 13 minor injury units provides care to entire county region for Acute and Community Services. This win not only signals Servelec’s assertiveness in breaking into the Acute market, but also builds upon its converged care strategy with all the health & social care organisation in the region providing care supported by Servelec solutions – RiO, Mosaic and Oceano. Sales of PICS has gained traction and this is further supporting Servelec’s push into the Acute sector (specifically in the clinical EPR areas) with the contract award of PICS at Royal Orthopaedic Hospital Trust.

2016 focus• Further wins in the Acute market as the North Refresh starts

to churn, using this Trust as a valuable case study.

Launching products that position us for future growth

ObjectiveInvesting in the right products to strengthen Servelec’s market position for the future.

What we did in 2015During this period of delayed start within the UK water sector, Servelec has continued to invest in product development to be even better placed to maximise market share with the acceleration of AMP6 expenditure in 2016. Through close relationships with its clients and market intelligence, Servelec Technologies recognised a gap in the market for a WITS (Water industry Telemetry Standard) based Ultra Low powered RTU / Logger device for Combined Sewers and Overflows (CSO) applications and other underground monitoring. Current competitors gather data for users on an ad hoc basis and store the data offline. Servelec’s solution enables the S2000 nano to collect the data and store and use it in real time within their current Telemetry gathering systems. This provides an immediate benefit to react and prevent situations brought about by extreme conditions such as flooding or blockage. This considerably benefits our customers as blockages or floods can result in heavy penalties brought on by the industry regulator.

2016 focus• As the AMP6 sales upturn gains pace Servelec is well

positioned to gain market share in this sector. • The current UK water sector RTU estate requires regular

refreshment and routine replacement which provides a strong underlying portfolio of business.

• Optimisation provides the costs savings required under AMP6.


Launching Hosting service to new and existing customers

ObjectiveEnhancing our service provision to NHS customer by offering cost effective hosting service.

What we did in 2015Servelec has grown its hosting and managed services footprint considerably over the last two years. Most NHS Trusts now choose to have their Servelec applications hosted and supported through Servelec’s provision. Focus remains on growing this area of the business as NHS Trusts look for cost effective alternatives to in house procured and hosted clinical and administrative applications.

2016 focus• To increase sales of our hosting service to new

and existing NHS and local government customers.


Servelec’s strong position in health and social care positions it well to provide an integrated solution for customers as the market moves towards Converged Care.

Segmental reviews Servelec Health & Social Care

Sue HawkswellManaging Director, Servelec Healthcare

Garry McCordChief Executive Officer, Servelec Corelogic



IntroductionServelec Health & Social Care specialises in the design, development and support of Electronic Patient Record (EPR) and Patient Administration Software (PAS) within secondary care settings and is a market leader in the mental and community health sectors in England. In May 2015, Servelec acquired Aura Healthcare, a provider of patient tracking and bed management software in the Acute health sector, which integrates with and enhances Servelec’s Acute Healthcare software offerings.

Servelec Corelogic is the UK market leading provider of next generation adult social care and children’s services case management software, integrated with financial management and reporting modules. Its flagship product, Mosaic is unique in the market as the only product to offer all three areas of modern social care (Adult, Children’s and Finance) within an integrated system. Servelec has added a suite of online portals to its product portfolio to align with the emergence of the Personalisation agenda within social care and the need to drive down costs through the provision of self-service facilities.

2015 performanceServelec Health & Social Care has performed exceptionally well during 2015 with revenue at £32.5m, a 95% increase over prior year (organic growth of 22%). This result includes the completion of the National Programme for IT (NPfiT) which was delivered on time and on budget for 21 Trusts and Provider organisations. Within Social Care we have focused heavily on the delivery of new Mosaic systems and the continued upgrade of legacy clients to Mosaic. Segment profit was £12.1m, 60% higher than prior year. Following highly successful tender activity, the year finished with a strong order book for 2016, with many customers taking up Servelec’s recently launched hosting service, increasing from 12 to 18 in the year.

We remain the market leader in mental health and community health and understand the demands our customers face. We are providing increasing service delivery and better access to patient information to all our customers by upgrading them to the latest version of RiO, a software system that delivers clinical, administrative and case management support to Health & Social Care practitioners, whether working individually or as teams.

We also continue to support our customers as they mobilise their workforce, creating greater opportunities for our customers to improve patient care. We have seen RiO Mobile mature in 2015 following further product development and increased customer demand for mobile working. We also continue to work closely with all our customers to develop integration and information sharing solutions that meet the needs of the Converged Care agenda.

In the Acute market, our Aura product set has widened our solution offering further, and we now have customers using this software in Northern Ireland and the Republic of Ireland. The Aura team also strengthens our Acute experience and puts us in a good position for 2016 and beyond as we start to capture market share in the North Refresh.

In Social Care a total of ten organisations were upgraded to Mosaic during 2015, with another 13 in ongoing upgrade projects. Also in 2015, we completed the Mosaic Integration System (MIS) which is a critical piece of our future strategy. The establishment of the MIS delivers a seamless information sharing platform between Health & Social Care to provide information exchange between Mosaic and RiO as part of the Converged Care strategy.

Revenue (£’000)

15 15 15

14 14 14

32,532 12,080 £34,622

16,657 7,573 £28,363

Operating Profit from Continuing Operations (£’000) Order Entry (£’000)


We expect the demand for the portal capability to increase significantly during 2016 based on the groundwork carried out in 2015. A key functional aspect of our portal technology is its complete integration with the Mosaic case management system which is a significant unique selling point.

Throughout 2015, we invested £3.1m (2014: £1.3m) in research and product development across Health & Social Care to ensure that our portfolio of Mosaic, Corius, Portals and the MIS will position us to meet the challenges and future needs of our market and that our products support interoperability and paperless and mobile working.

StrategyOur strategy is to maximise the growth across our markets by the pursuit of joint and separate opportunities across healthcare and social care. Our primary objectives are two-fold; first, to have a better understanding and more strategic relationship with our existing customers and, second, to offer the market the most innovative, flexible and cost-effective products thereby securing new business and further extending our customer base.

We will do this by:• Maximising opportunities arising out of the North Refresh

programme focusing on hospital based mental health, community health services and acute hospitals;

• Providing mobile and workforce mobilisation products that deliver secure access to patient data at the point of care for all involved professionals;

• Enhancing our product offerings to our clients to ensure that efficient, productive and safe healthcare is delivered in a cost effective manner;

• Supporting our customers in meeting their local interoperability and information sharing agendas;

• Delivering the most modern, cost effective solutions for adult social care and children’s services that help improve the quality of care within ever diminishing budgets;

• Actively participating in the integration and interoperability agenda with Government partners including HSCIC and NHS England;

• Supporting NHS and social care customers in their delivery against the paperless agenda and patient access targets;

• Taking a leadership role in helping to shape how technology will deliver converged care in partnership with Government and our health & social care customer community;

• Implementing a plan to strengthen our strategic partnerships with our existing customers.

The market in 2016HealthcareThe UK healthcare sector, which is primarily the NHS, deals with around one million patients every day. Regulatory changes and tightening budgets are focusing this market on integration and interoperability. Servelec Health & Social Care is responding to this by collaboratively working with our customers to enable data-sharing underpinned by our technologies, which in turn provides our customers with high-value outcomes to support multi-agency working.

Health & Social Care providers are also under increased pressure to make efficiency savings whilst still delivering high standards of care.

Within an Acute Hospital the Aura Flow product supports this by providing effective management of beds and tracking of patients.

The end of the NPfIT contract for the North Midlands and North-East has been extended from mid-2016 until 2018 giving organisations additional time to procure and deploy replacement systems. This provides Servelec with a bigger window of opportunity to secure more business in the Acute sector over the coming two to three years.

Social careThe world of social care has changed dramatically over recent years against a background of demographic changes. Government policy is increasingly focused on giving clients greater choice and control over services in order to promote independence. This necessitates a re-think of business processes. The biggest changes to adult social care from a national policy perspective arise from the Care Act. This builds on the personalisation of adult social care and restates the importance of personal budgets, patients’ control over their care, and market diversification to provide more choice for people with social care funded packages as well as people funding their own care and support.

These changes will have a significant impact on local authorities, leading to increased demands on current services, resources and infrastructure. Local authorities will need to enable patients to port their accounts without a break in their care. Further, there is an increasing expectation from patients to be able to access their records online. The national government is introducing ‘Digital by Default’ for all transactional services and patients will have the right to expect similar capabilities from local government.

2016 outlookHealthcareTender activity continues to be a large focus of the business, with a significant number of trusts looking to procure systems with the end of the North and Midlands NPfIT programme.

Our position in the Acute market has been strengthened by the acquisition of the proven Aura Flow product which together with Oceano, our established modular EPR software system, and our first Acute win from the SBS framework provide very credible reference sites for future business.

As well as new business wins we also continue to provide support contracts to our 50 RiO customers and 53 Mosaic customers which provides an underlying revenue stream to other activities.

Social careOur significant investment in our product portfolio will see Servelec retain its position as the leading provider of innovative software within our market; able to offer web-based, responsive and cost-effective all-inclusive solutions to meet all aspects of modern social care IT. We are expecting 2016 to be a busy year for new business tenders. The majority of opportunities are expected to be released from the Crown Commercial framework and Servelec Corelogic is an approved supplier on this contract.

We are also confident that our stronger position concerning the provision of hosting will increase our client base for this service.

Segmental reviewsServelec Health & Social Care Continued


Converged careThe pace of change in health & social care is rapid and this is being accelerated by the need to provide patients and service users with a converged approach to health & social care service delivery to deliver better care within the constraints of government spending. This approach is being championed by the major political parties and addresses the needs of a population that is living longer and as a result has more complex medical and social needs. Our customers need to provide Converged Care planning that brings the need of the patient together as one single care pathway, presenting challenges on budgets and cost containment but also on providing relevant and meaningful data across the care settings to support delivery. Servelec has recognised the challenges in providing this data sharing approach and has a product and integration strategy that provides our customers with aligned care planning for regions that have both RiO and Mosaic customers and a broader integration strategy supported by NHS Standards for interoperability between systems. The longer term strategy of complete regions that can seamlessly share information will be realised as Oceano take up increases.

Research and developmentWe continue to focus our research and development teams on the provision of web-based solutions and applications that are aligned to NHS and Government policy drivers and increasingly supporting our customers within their transformation programmes. This will provide our customers in health & social care with technology solutions that will enable them to meet their requirements both operationally and strategically.

Healthcare market opportunities explained

London Refresh The London Refresh came to an end in October 2015 with all NHS trusts replacing systems provided through the NPfIT. Trusts in London primarily utilised the Camden framework for procurement of systems where Servelec was the incumbent. All trusts have now completed this procurement work and Servelec Healthcare has won 21 Trusts.

North New These are trusts in the North, North East and Midlands that do not have a full solution under the Computer Science Corporation contract for the NPfIT or needed to replace their system before the main North Refresh began in 2015. Servelec has won 14 contracts to date.

North Refresh The main tranche of refresh activity in the North, North East and Midlands, mostly relating to trusts who had systems from TPP or iSoft as part of the Computer Science Corporation contract for the NPfIT. Opportunities have extended from June 2016 by a period of up to two further years. Servelec are on a number of key frameworks that can be used by NHS trusts to procure their replacement systems.

Servelec Health & Social Care: product offerings

Servelec integrates with all GP systems – TPP Healthcare, EMIS, INPS

• Modern PAS/EPR developed specifically for the Acute market

• True Clinical Decision Support system developed with UHB proven system with full e-prescribing solution at its core

• Aura acquired May 2015• Controls Patient flow

in hospitals • Augments core Oceano

product, also sold on standalone basis

Mental Health Community Health Child Health

Market leading EPR for Mental, Community and Child Health

• Social Care case management software encompassing:• Child• Adult• Finance

• Fully integrated and ultra-flexible• Ability to customise and configure

locally, plus best practice configuration

Acute Care

Secondary Care Social Care

Primary Care

Solid base of customers, recurring revenues and proven ability to deliver


The UK is on the cusp of realising the benefits of investment in the energy market. Our experience and skills place us in an ideal position to play a key role providing mission critical systems solutions.

Segmental reviews Servelec Controls

Kevan JonesManaging Director, Servelec Controls – Oil & Gas

Alex MooreManaging Director, Servelec Controls – Power & Nuclear


IntroductionServelec Controls – Oil & Gas works alongside many of the world’s leading owners, operators and Engineering Procurement and Construction contractors (EPCs) in the UK Continental Shelf (UKCS) and beyond, providing systems and services that improve safety and efficiency and extend the working life of oil and gas infrastructure.

Servelec Controls – Power & Nuclear has over 40 years’ experience of executing projects within the nuclear environment during which time the business has built an excellent reputation for technical excellence in the supply of innovative systems for real-time control and information management within the power industry.

2015 performance2015 was a challenging year for the Controls business with revenue broadly level at £14.4m (2014: £15.0m) as orders related to the major upgrading of control systems for a number of oil and gas platforms were delayed. Controls segment profit of £3.4m (2014: £3.5m) reflects the high labour content and lower proportion of equipment provision costs in the revenue mix during the year.

Within the power and nuclear sector, Servelec Controls continued to enhance its market position. Adding to the reconfirmation of our position on the Sellafield controls framework in 2014, we were successful in securing a five year framework deal with Drax Power. The introduction of the new management team has created a clear vision of the marketplace and has led to a significant increase in addressable market opportunities. The pipeline of available work for Servelec has increased noticeably which will lead to greater success and revenues moving forward.

StrategyWe are focused on fully maximising the potential inherent within the UK oil and gas and power markets, whilst growing a global presence in oil and gas. We will deliver this by:• Oil & Gas: (i) leveraging our strong position in this mature market

through a focus on lucrative Aberdeen and London and south east markets and targeting overseas project packages via existing and new UK customers; (ii) investment in major turbine projects during 2016/17; and (iii) adding new clients to the portfolio in all regions of the UK;

• Power & Nuclear: driving specialist power and nuclear expertise and experience into the business to maximise existing opportunities within the UK, not only in our traditional decommissioning markets but also applying our skills to complementary market segments.

The market in 2016Oil & GasThe UK oil and gas market is driven both by regulatory requirements and operator cost saving initiatives focused on reducing the cost of extracting oil and gas from ageing offshore platforms. Health and safety drives a significant proportion of business as official bodies have the authority to close down platforms which do not reach minimum health and safety requirements at significant cost to the operator. Although we expect the dollar price of oil will impact investment in new projects in 2016, we see this as a medium term opportunity for our business. Mandatory health and safety control and cost reduction drivers remain and opportunities to reduce the price of production will begin to come to the fore. In addition, we expect to continue discussions around the remote operation of platforms in response to increased health and safety legislation and the real requirement to significantly extend the life of existing platforms in the face of cost constraints.

The oil and gas market presents immense opportunities to Servelec, which has over 30 years’ experience in this sector within the UK. The challenges for global oil and gas providers are the same as in the UK, with providers seeking greater efficiencies and reduced operating costs to offset the lowering price of oil. These drivers play to Servelec’s expertise in brownfield refurbishment and asset life extension. There is potential for a radical change in the industry’s fiscal regime driven by the 2015 UK budget with investment in the future of the UK continental shelf of paramount importance to the UK economy. Oil and gas currently provides the majority of the UK total primary energy supply and demand is not expected to change by 2030. In order for this rate to be sustained further investment is required in the short term, with current levels of investment leading to significant shortfalls in energy supply as soon as 2020.


15 15 15

14 14 14

14,421 3,356 £13,818

14,998 3,524 £13,350

Revenue (£’000)Operating Profit from Continuing Operations (£’000) Order Entry (£’000)


Power & NuclearThe UK power and nuclear market is a diverse and vibrant industry where innovation and efficiency are key drivers in delivering success. Safety and regulatory compliance is at the forefront of every decision and initiative. The market cornerstones are power generation, decommissioning of inactive sites, defence and reprocessing activities. During 2016 key areas of focus are:• Existing nuclear power stations: increased focus on the life

extension of existing nuclear generating sites due to historical delays with the new build programme.

• Nuclear decommissioning: the cycle of major decommissioning projects is now moving from design to implementation phases, where Servelec can add value and provide services to major EPC contractors.

• Defence: the market is growing for technology-based solutions within the existing and new fleet of submarines as well as the various sites around the UK which provide support systems and services.

• National infrastructure: the expansion of our existing offering to the national power infrastructure network. Looking ahead there will be a greater demand for controls system cyber security, a key area of growth and focus for us.

2016 outlookOil & GasThe potential of the Control segment's market within oil and gas continues with the need for operating efficiencies driving a reduced cost of production increasing in a market no longer supporting a high oil price. This provides continuing opportunity for Servelec Controls in 2016 and beyond. The UKCS is striving for major cost reduction programmes provided by increased automation and remote operation of on and off-shore facilities in the UK. The top ten oil and gas customers make up 50% of the Controls business by revenue. Repeat business from these customers will ensure robust future revenue streams.

Technology and innovation is the way forward and Servelec is ideally positioned to offer solutions to improve efficiencies, reduce operating costs and improve safety. Servelec also has a clear competitive advantage in terms of labour rates through the deployment of a wholly employed workforce rather than the use of contractors. For Servelec the changing market, which has caused delays in the confirmation of contracts in 2015, provides an increase in future order intake once the market realigns itself to the new challenges of current market conditions.

Power & NuclearServelec’s expanding addressable market provides huge business prospects for Servelec Controls moving forward.

The new management team is providing tangible traction in moving the business forward. We have also enhanced our operational and technical capabilities adding to the rich and talented resource pool that was already in place. We have the right people with the right skills to provide solutions that maximise value for our clients in this market. The power and nuclear market is changing in terms of how various sites are operated and who manages them. Although this can potentially bring short-term delays in placing projects the outlook is one of vibrancy and diversity.

The power and nuclear market is one of expanding opportunity for Servelec Controls. Pipeline has increased significantly during 2015 which will bring greater opportunity for new business moving forward.

Contracts have been placed in the overall supply chain in 2015 with more being anticipated in the nuclear new build market. Servelec has the skills, capacity and experience to play a key role in this exciting long term programme via our main EPC partners. Our success in agreeing a five year framework deal with Drax Power will allow us to work with this key client to provide innovative solutions. We view this framework as a significant potential flow of work in the coming years. The diversity in our pipeline coupled with greater marketplace activity gives an encouraging view moving into 2016.

As we apply our core skills to different elements of the UK power and nuclear market we expect the source of our order intake to diversify and we believe the application of core skills to new problems represents a tangible opportunity for growth.

“Technology and innovation is the way forward and Servelec is ideally positioned to offer solutions to improve efficiencies, reduce operating costs and improve safety.”

Segmental reviews Servelec Controls Continued


Significant progress has been made in expanding Servelec’s business optimisation software portfolio ready to exploit pent up demand arising from the delayed start of the UK AMP6 water programme.

Segmental reviews Servelec Technologies

Andy SullivanManaging Director, Servelec Technologies


Segmental reviews Servelec Technologies Continued

IntroductionServelec Technologies is a leader in real-time business optimisation solutions to a range of market sectors and experts in making data work hard to make customer businesses more efficient and effective.

2015 performanceDespite strong growth in emerging sectors for the business, Servelec Technologies performed behind expectations in 2015 due to significant delays in the commencement of the UK Water AMP6 programme, coupled with a slower oil & gas sector. Revenue was down 20% on prior year at £16.1m (2014: £20.1m). The impact on segment profit was mitigated by overheads savings and so only reduced by 10% to £3.5m (2014: £3.9m).

Having successfully integrated the Semaphore and Tynemarch businesses in 2014 the focus in 2015 centred upon product integration allowing Servelec Technologies to market a complete solution for the collection, management, presentation and optimisation of data to make customer operations more efficient and effective.

The development of the FlowSure flow anomaly detection software solution brought together artificial neural networks with fuzzy logic technology to create a cost effective solution for identifying and size estimation of bursts and other water flow anomalies in water networks. Early pilot orders in 2015 are complemented by a strong interest from the UK and indeed global water markets.

Further contracts were secured with GRT Gaz in France, and Infrabel in Belgium, extending the breadth and duration of these important product frameworks.

In terms of remote telemetry unit (RTU) hardware development, Servelec launched the S2000 nano low power RTU/logger created for harsh environments. This is a battery powered product capable of sending signals at routine intervals yet able to do so for five or more years on the same batteries.

During this period of delayed start within the UK water sector, Servelec has continued to invest in product development to be even better placed to maximise market share with the acceleration of investment in 2016.

StrategyOur strategy is to become a global brand in real-time business optimisation, through the delivery of a unified product set, across a developing global distributor network. We will deliver this through:• Ongoing productisation developing further intuitive, easy to use

products and off the shelf solutions that will increase recurring licence fee revenue with a focus on high volume sales;

• Leveraging opportunities to cross-sell to existing customers, ensuring a seamless process and improved interface to create a low risk sale;

• Developing new markets focusing on North America, China and Brazil through a growing distributor network.

Research and developmentWe will continue to invest in the development of our product ranges against a five-year technology roadmap defined by our growth strategy.

The market in 2016Within the UK water market, the current five-year investment period (AMP6) which began in April 2015 is yet to gain momentum, with water companies delaying investment to review how they can meet the cost savings required by the regulator, OFWAT. Further investment by Servelec in business optimisation software is aligned to support the water companies in meeting this challenge, with solutions to save money in their operations.

The current UK water sector RTU estate requires regular refreshment and routine replacement. This creates a strong underlying portfolio of business. New equipment is also required for thousands of previously un-adopted sites which must be acquired by the water companies within this current five-year investment period. Servelec has invested over the past four years to ensure that we have the right products to meet the requirements of the water companies, developed in close co-operation with these customers.

Global RTU markets remain strong, driven by the need for the collection and reliable transmission of data to improve business decisions. In the oil and gas sector, investments are still required to maintain infrastructure and Servelec is positioned well to maximise this business, despite lower oil prices.

Servelec has also delivered on a strategy of sector diversification and grown presence in other sectors for RTUs, including broadcast media, rail, power, financial services and the environment. This will be enhanced in 2016.

Financial Highlights

15 15 15

14 14 14

16,142 3,471 £17,943

20,098 3,855 £18,487

Revenue (£’000)Operating Profit from Continuing Operations (£’000) Order Entry (£’000)


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Servelec ‘Out-of-the-box’ RTU through to telemetry offering

Servelec SCOPE-X Telemetry

RTU

RTU

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RTU

RTU

RTU

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SCADA

SCADA

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Local station/facility

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Servelec’s well established Chinese presence continues to flourish, focusing on high technology solutions to the oil and gas market and other utilities.

Product development remains targeted towards the real-time acquisition of data with access to data on fixed and mobile platforms a s part of a situational awareness solution, coupled with performance dashboards which show business performance against business KPIs in real-time.

In addition to an established global presence, Servelec is targeting significant growth in specific regions including North America, China and Brazil.

2016 outlookThe outlook for Servelec Technologies is very positive, with good visibility of future orders provided by AMP6 and continued confidence in the key market drivers for growth. The slow start to AMP6 does not alter the overall programme of work which now must be undertaken in a reduced timeframe.

We estimate our addressable market within AMP6 to be in the region of £200m. OFWAT’s continued focus on improved efficiency, reduction of water leakage and an overall lower cost of water production provides increased opportunities for Servelec Technologies. The releases of the FlowSure flow anomaly detection software and the S2000 nano battery powered RTU/logger for harsh environments have increased the addressable market for Servelec in AMP6 with the significant majority of the investments still to be undertaken.

Outside the water industry, we continue to build on our success in transport (for example at a large UK airport and Infrabel, Belgian Airways) and onshore gas production and distribution (e.g. GRT Gaz and Negev Gas) where we have delivered new deployments of TFlo and Telecoms (e.g. TDF, Broadcast Australia and SURF Telecom).

The investment in the productisation of our software solutions in 2015 provides further increased opportunities for global growth from associated product sales in 2016. The investment included the deployment of the SCOPE-X Telemetry/SCADA software running within a Servelec RTU.

Servelec Technologies: product offerings


SERVELEC BOARD

CORPORATE GO

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Responsibility– Group executives– Business executives– Monitored function

Compliance– Financial– Business development– Health and safety

How– Internal audit– External audit

AUD

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Risk management

Servelec Group adopts a formal risk identification and management process designed to ensure that risks are properly identified, prioritised, evaluated and mitigated to the extent that is possible. Risk management is embedded in the operation of the business.

Our approachBusiness operations maintain risk registers compiled and monitored by the Group Quality and Compliance Manager. The Audit Committee reports to the Board on the risk management process including on matters of internal audit and the evaluation of potential impacts, both financialand reputational.


The following risks are, in the opinion of the Board, the principal risks which affect Servelec Group. It is not intended to be a complete analysis of all risks and may change over time.

Risk Mitigation Movement Status

RegulatoryChanges to legislation may cause customers to divert their spending on the Group’s products.

• Active consultation with Government bodies and dialogue with customers on their expected project spend profiles.

• Continued health and safety legislation and the push for operating efficiencies ensures spending on automation and software solutions.

• Short term delays in AMP6 have impacted Technologies during 2015.

Public Sector Healthcare SpendingA key driver of the Group’s business is the level of UK Government spending on IT relating to healthcare delivery. The rate of growth in expenditure on healthcare related IT may reduce significantly.

• Active consultation with Government bodies. Continuous improvement of the product offering to meet the long-term government objectives.

• The ending of the NPfIT contracts in England is driving market spend in our core areas of expertise. Our success in the London Refresh will assist in us winning in the North Refresh in 2016 and beyond.

• The acquisition of Corelogic ensures the Group is well placed to benefit from any future changes in funding as the country moves to converged care, which is supported by all political parties.

Competitor ActivityThe Group may face significant competition from both domestic and overseas competitors.

• Maintain strong customer relationships and high service levels.

• Internal review of bid feedback.• Regular customer user groups to

understand areas of improvement.

• Healthcare – The high win rate in the LondonRefresh and North New markets together with good feedback on our framework submissions gives us confidence that we are meeting customer expectations.

• Competition for Acute and Social Care wins is increasing as these markets refresh their systems.

• Automation – we have received positive feedback from customers regarding our current product ranges.

OperationalThe Group’s business involves providing customers with highly reliable software and hardware. If the software or hardware contain undetected defects the Group may fail to meet its customers’ performance requirements or otherwise satisfy the contract specifications.

• The Group has rigorous testing and review processes embedded in the design and development operations of the business. It maintains accredited Quality Assurance (QA) systems which are independently checked on a regular basis.

• We have successfully retained our QA accreditations during the year.

• The core financial systems for the Group have been rolled out to key acquisitions during the year.

Revenue recognitionThe Group recognises revenue on projects based on the percentage complete of the individual project. A key element of this calculation is the estimation of the costs to complete on contracts, which is an inherent risk of project accounting.

• The Group has a strong management system and has regular contract reviewswith key management to assess the performance of individual contracts.

• Group policies are rolled out to new acquisitions.

PeopleThe ability of the Group to retain and attract appropriately qualified and experienced staff is key to the continued success of the business.

• The Group believes it has a flexible benefits package and continually reviews the working environment and overall reward to staff.

• Each business regularly matches the future resource requirements to current staff identifying training and recruitment needs.

• Active Graduate Recruitment programme.

• Remuneration Committee to advise on any appointment with OTE over £150,000.

• The Group now employs a professional recruiter within its HR team.

CurrencyThe Group is exposed to translation and transaction foreign exchange risk.

• The Group matches the revenue and costs of all foreign currency transactions to eliminate, so far as possible, currency exposures.

• Foreign exchange policy is monitored by the finance department under policies approved by the Board.

• The uncertainty over whether the UK will remain in the EU is affecting the stability of sterling.

Information TechnologyLoss of data from failure of systems or cyber attack.

• The Group adheres to security standard BS EN ISO27001:2013.

• We have a tried and tested business continuity plan, physical access controls and multiple backups off site.

• We use third party hosting sites for customer hosted solutions. The office in Sheffield city centre also provides additional options for business continuity.

Oil PriceThe US Dollar price of oil in the global market has reduced significantly at the end of 2014 and the beginning of 2015 which may delay the start of major projects

• Servelec Controls specialises in health and safety systems and automation which results in operational cost savings.

• The oil price has not recovered in 2015, however many customers now want to benefit from the cost savings generated by automating processes.


Viability statementIn accordance with provision C.2.2 of the UK Corporate Governance Code 2014, the directors have assessed the viability of the Group over a three year period, taking into account the Group’s current position and the potential impact of the principal risks documented on page 33 of the Annual Report. The directors have also considered going concern on page 64.

The directors have determined that a three year period to 31 December 2018 is an appropriate period over which to provide its viability statement. This is the period reviewed by the Group Board in our strategic planning process and is also aligned to our typical contract length (three to five years).

The Group operates across a broad cross section of markets, including Health and Social Care, Utilities and Energy sectors. Customers regularly repeat buy and are often secured with long term agreements, no single customer being greater than 10% of revenue.

At 31 December 2015, the Group had no borrowings and delivered an operating cash flow of £19.6m.

In making this statement the Board carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity. It was determined that none of the individual risks would in isolation compromise the Group’s viability and so a number of different severe but plausible principal risk combinations were considered, focusing around reduced new contract wins, potential delays in new contract awards and margin erosion.

As noted in note 29, the Group has committed to take out a three year banking facility in order to acquire the operations of Synergy from Tribal Group Plc. The Board has run additional sensitivities to model integration and covenant risks as part of the assessment of viability.

The Board has also reviewed the opportunities to take realistic mitigating actions and believe the internal controls operated within the Group would enable these actions to be taken within the period of review.

Based on this assessment the directors confirm that they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period to 31 December 2018.

Risk management Continued

For more information see 'Going Concern' on page 64


Corporate social responsibility

At Servelec Group Corporate Social Responsibility (CSR) is more than just being aware of our impact on the environment. It is also about the development of our employees, how we relate to our customers, and our relationship with suppliers and our local communities.

Employer of choiceAs an employer of choice, we have a whole lifecycle approach to employees’ careers. We recognise that benefits extend beyond pay and reward and as such offer interesting and rewarding career opportunities across the Group businesses. The return on this investment is demonstrated by our retention rates. We also continue to attract new talent through our successful recruitment programmes, including student and graduate recruitment.

Employee engagement and rewardWe recognise the value and importance of obtaining the views and suggestions of employees and we benefit from the collective knowledge and experiences of our entire workforce. Our staff partnership forum aids two-way communication, facilitating suggestions from employees across the whole Group. Our benefits package currently includes a complement of competitive holiday allowance, company pension scheme and life cover, flexitime, bonus scheme and save-as-you-earn share scheme.

Career development opportunitiesEqual access to ongoing development for our employees is essential. This is supported through our learning and development strategies of identifying training needs and monitoring the effectiveness of the training programmes. Our commitment towards developing the knowledge and skills of our workforce is integral to keeping the company at the forefront of its technical expertise. Many employees undertake further training and professional qualifications and we offer two scholarships each year to support this aim.

Our commitment to progression is evident in the career paths of our employees. We have bi-annual reviews to assess for promotion which, together with our internal recruitment strategy, ensures that employees have a regular opportunity to progress. This assists the business in developing succession planning which is vital for the sustainability and growth of our business, now and in the future.

Student development opportunities and graduate recruitmentThrough our excellent relationships with the universities that neighbour our UK sites, we operate successful student placement and graduate programmes. Students chosen to join the Group on placement soon become valued members of the team, getting involved in project work and making important contributions. We reward our hardworking students with a competitive salary and selected bursaries. A high proportion of students return to us to take up permanent employment once they have completed their studies. The knowledge and experience gained on placement supports a smooth integration following graduation.

Our responsibility framework Our people

• Our people: Within Servelec Group, our employees are essential to the success of the business.

• Our environment: Servelec aims to improve its environmental footprint and create new value for customers through sustainable technologies, products and solutions.

• Our community: Servelec aims to make a positive contribution to the locations where it is based.

Servelec’s approach to CSR is overseen by the Company Secretary, who reports progress to the Board.

Financial satisfaction

Customer satisfaction

Employee satisfaction

Value triangle

Our community

Our environment


Corporate social responsibility Continued

Gender diversity onthe Board

Gender diversity

Gender diversity withinSenior Management

Gender diversity atmanagement level

Gender diversity withinthe workforce

MALE FEMALE

05/00 22/09

Equal opportunitiesServelec is committed to an equal opportunities policy of selecting, training, promoting and rewarding based on merit. We do not tolerate discrimination on the grounds of protected characteristics.

Anti-slavery and human traffickingServelec is committed to ensuring that there is no slavery or human trafficking in its workforce or supply chain by carrying out all necessary measures, as outlined in our anti-slavery and human trafficking policy.

93/35 438/135

Our values

Trustworthy we are straightforward and always act with integrity

Sustainable we aim to meet the needs of the present and the future both environmentally and economically

Dedicatedwe are committed to delivering value for our customers, colleagues, shareholders and the wider community

Objectivewe are equitable and logical in our decision-making and delivery

Responsiblewe act in accordance with good governance and hold ourselves accountable for our actions


Our community

Community eventsThe Servelec is committed to corporate social responsibility and a key aspect of this is the company’s interaction with the community. Servelec supports its employees in their generosity and fundraising efforts by offering matched contributions for team fundraising in aid of registered charities. Over the past year, we have donated to several charitable organisations which have inspired our employees to organise and participate in fundraising efforts, ranging from local causes close to the hearts of our employees to larger national events like Red Nose Day.

Community and charitable supportWe are committed to making a sustainable positive impact on the communities in which we operate.

Servelec actively encourages our businesses around the world to act as good citizens in their local and wider communities. We support local decisions to support community and social projects, charitable organisations. As deemed appropriate on a local level, Servelec offers support and flexibility to allow our employees to become involved in volunteering projects close to their hearts.

Servelec’s charities and fund raising scheme supports employees in their generosity and fundraising efforts. Team fundraising for registered charities associated with the provision of a healthy lifestyle and environmental improvement in the community is matched by the company. Over the past year we have donated to several charities for a wide range of worthy causes.

Health and safetyServelec, led by its Board of Directors, will do everything that is reasonably practicable to protect the health, safety and welfare of both the employees and any other person affected by our activities. The Board, led by the Chief Executive Officer, has overall responsibility for ensuring that we maintain high standards of health and safety. However, we rely on all of our employees, sub-contractors and stakeholders to ensure that safe working practices and behaviours are adopted, and to promote Health and Safety systems and ensure processes are embedded as a core activity.

The health and safety of our employees and all who may be affected by our activities is given the highest priority. We have not had a reportable accident in over 5 years. We endeavour to achieve high standards of health and safety and where non-conformance is identified we encourage reporting of the event so that we can learn from it and put in place preventative actions where appropriate.

Health and safety audits are carried out to an annual plan to ensure compliance of our sites to the safety standards we set and to ensure that our employees operate in a safe manner.

We believe it is essential that all employees have a clear understanding of how workplace health and safety is managed, to ensure this Health and Safety Inductions are given to all new starters.

Senior management also has a crucial role in supporting a strong safety culture. We expect internal stakeholders to take an active interest in, and ownership of, safety in the workplace. This includes:• An understanding of the legal aspects of occupational health and safety,

specifically their legal obligations and responsibilities;• Having and articulating a clear vision for the business, including the

expectation that everyone has a stake in supporting the desired safety culture;

• An appreciation of the elements of safety management, and their interactions i.e. policies and procedures.

In order to improve and maintain a safe environment for our employees, safety notices are communicated throughout the organisation to improve the degree of knowledge that employees and managers have about the influence that they have on safety performance.

Our environment

EnvironmentThrough ISO14001 we employ systems and procedures that ensure the company’s compliance with all relevant laws, regulations and other requirements relating to the environment.

Although Servelec’s own activities do not pose a serious environmental or ecological threat, we recognise the importance of our environmental responsibilities and are committed to the conservation of natural resources, conducting our business in a responsible manner and in complete compliance with local and national legislation.

We believe we can improve our environmental footprint and save energy. This creates new value for our customers through sustainable technologies, products and solutions. We continue to monitor the impact of our products, our operations, and our supply chain on the environment, and work to not only reduce negative external factors but create new opportunities for greater efficiencies.

Our policy is to strive to achieve continual improvement in environmental performance.

We are committed to:• Preventing pollution and reducing the overall impact of our operations

on the environment;• Maintaining an internal management structure for the management of

environmental issues which includes clearly defined responsibilities for environmental management;

• Complying with, and where possible exceeding applicable legal and other requirements relating to the organisation;

• Monitoring our environmental performance and setting objectives and targets for improvement.


Corporate social responsibility Continued

We recognise the key role we have to play in both reducing and contributing to greenhouse gas emissions. The energy consumed at each work place is recorded, and calculated across the business, providing the opportunity to gauge the energy efficiency of each site. In doing this we consider factors that may increase the consumption of energy that are beyond the control of the business, such as climate, or the types of power demands of that location eg. office based against electrical workshops.

The 2015 carbon footprint figures are as follows:

CO2 reporting CO2e tonnes

Fuel type 2015 2014*

Electricity and gas 1,001 768Fuel for travel 375 360

Total 1,376 1,128

Greenhouse gas emission intensity ratio

2015 2014

CO2e tonnes per £100,000 of turnover 2.18 2.18

* 2014 has been restated to ensure reporting on a consistent basis.

We are committed to raising employee awareness on environmental issues and the effects of their activities through company-wide promotion and communication of the 4 ‘R’s Reduce, Replace, Reuse, and Recycle. We recognise that simple, small measures taken in the workplace can have a large impact on reducing environmental damage.

Our stated objectives are to:• Reduce our use of energy turning off lights and electronic equipment

when not in use, installing energy saving light bulbs, and monitoring the use of air conditioning/heating;

• Reuse and Recycle materials in the office such as aluminium cans, paper, printer cartridges and IT equipment providing appropriate facilities to encourage a recycling culture within our offices;

• Support employees with local office initiatives that have a positive environmental focus.

We have developed innovative products that promote energy efficiency and reduce waste. These products can reduce GHG emissions by users of the products. Innovation is at the core of Servelec’s environmental sustainability initiatives. In developing advanced products, solutions, and updated business processes, we are multiplying the impact of the network to create sustainable business models and increased economic opportunity.

Our aim is to build environmental sustainability into each business function and process and, ultimately, into every business decision our employees make around the world. We believe that improved sustainability creates net benefits to our business, our customers, and the planet. Our relationship with our customers is now based on cost, quality, delivery, service, and sustainability.

Environmental sustainability The company’s Environment Management System (EMS) enables us to manage our environmental impacts and programmes in a comprehensive, systematic, and planned manner. Policies are developed under the following governing principles for environmental sustainability. Servelec seeks and maintains ISO14001 certification for sites with significant potential for environmental impact.

Waste recyclingDue to the nature of our business and our commitment to the environment we ensure that waste at all our sites (as required) is sorted and pre-treated prior to disposal. The Group’s objective is to adopt this approach across new acquisitions to further reduce the general waste to landfill.

Environmental policyThe company’s environmental and sustainability policy is designed to reflect the environmental needs and responsibilities of the company’s activities. In particular the policy indicates the organisation’s commitment to continual environmental improvement, the prevention of pollution.Servelec recognises the importance of environmental protection and is committed to operating the Group’s business responsibly and in compliance with environmental law, regulation and approved codes of practice applicable to its business activities. Servelec’s environmental policy, which is reviewed each year, outlines the Group’s key environmental impacts, targets and commitments.

Cycle to workThe business continues to provide increasing awareness of environmental sustainability offering a number of flexible benefits, offering employees the opportunity to participate in a Cycle to Work Scheme, and encourage this at local level with local schemes like CycleBoost delivered on behalf of Sheffield City Council, promoting sustainable travel.

Climate change policyClimate change has now been recognised as an international issue with national governments committed to taking action to reduce greenhouse emissions. As a global IT technologies business we have a role in supporting governments and communities to reduce the impacts of climate change.

We are committed to reducing the greenhouse gas emissions from our operations in a way which supports national government strategies and is in line with our commitment to our customer to provide safe, efficient and reliable services.

Our key climate change commitments are:• To assess the potential impact to our business from evolving climate

change policies as part of our on-going risk management processes;• To report annual on our greenhouse emissions from our business

operations;• To actively promote improved energy efficiency within our business.

Supply chainsWe aim to actively work with our suppliers who commit to our values, especially in reference to fair employment and good environmental practice. We recognise the importance of the supply chain and we are committed to developing secure relationships based on mutual trust for mutual benefit.


Contents

Governance

40 Board of directors and senior management

42 Corporate governance report

46 Nomination committee report

47 Audit committee report

50 Remuneration report

62 Directors’ report

65 Statement of Directors’ responsibilities

Financial Statements

66 Independent auditor’s report

71 Group income statement

71 Group statement of comprehensive income

72 Group statement of financial position

73 Group statement of changes in equity

74 Cash flow statement

75 Notes to the financial statements

97 Statement of director’s responsibilities for the Company financial statements

98 Company balance sheet

99 Company statement of changes in equity

100 Company statement of comprehensive income

101 Notes to the Company financial statements


Board of directors

Senior Management

Alan StubbsChief Executive Officer

Having joined the Group as a software engineer in 1984, Alan was appointed Managing Director of the Company in 2001. In June 2010, he was appointed Chief Operating Officer for parent company CSE Global before taking on the role of Chief Executive Officer of CSE Global in January 2011.

In December 2013, Alan left CSE Global to become Chief Executive Officer of Servelec Group plc following a successful IPO on the London Stock Exchange.

Appointed to the Board: 1995


Richard joined the Company in 2008 as a Non-Executive Director and was appointed Chairman of the Company later that year. He has over 20 years’ senior experience in information technology having worked at Board level for a number of publicly quoted and private companies in the technology sector.

Richard is Chairman and non-executive director of the following AIM listed companies: Gamma Communications plc, a communications company; Arcontech Group plc, a financial software business and Lighthouse Group plc, a financial services business. He is also non-executive director of USA based Corero Network Security plc an IT security company also listed on AIM. In addition Richard is Chairman and non-executive director of The British Smaller Companies VCT2 Plc, a venture capital trust, and Chairman of Tribal Group Plc, a global provider of products and services to the international education, training and learning markets. Both are listed on the main London Stock Exchange. Richard is a Fellow of The Institute of Chartered Accountants in England and Wales.


Mike CaneChief Financial Officer

Mike joined the company as Company secretary in October 2012 and Finance Director in March 2013. Prior to joining the Company, he was Finance Director of Bullock Construction Limited and SPI Limited. From 2001 until 2007 he held the position of group financial controller at Cleanaway Limited. Mike is a member of the Institute of Chartered Accountants in England and Wales having qualified in 1991 whilst working at Price Waterhouse. He holds a Bachelor of Science (Hons) from the University of Manchester.


Garry McCordChief Executive Officer, Servelec Corelogic

Garry was appointed Chief Executive Officer of Servelec Corelogic in July 2015. A Servelec employee since 1994, he has undertaken a number of technical and operational roles within the company. Before joining Corelogic, he supported Sue Hawkswell as a member of the Healthcare senior management team, directing the Development and Delivery functions. Garry was responsible for the assembly and oversight of a number of efficient and high performing teams in these areas underpinning the success of the Healthcare division and helping it to obtain its market leading position.

Kevan JonesManaging Director, Servelec Controls – Oil & Gas

Kevan was appointed Managing Director of Servelec Controls in 2010, following the acquisition of SIA in 2010. In February 2015, Kevan moved to focus specifically on the Oil & Gas business. Kevan has 25 years’ experience in international manufacturing and process engineering at senior management levels and has 13 years’ experience at director level in control system design within the oil and gas and power industries worldwide.

Sue HawkswellManaging Director, Servelec Healthcare

Sue was appointed Managing Director of Servelec Healthcare in 2009. She started her career in healthcare IT as a key architect in the development and delivery of patient- based information solutions to the NHS and brings over 25 years’ healthcare IT experience. This blend of experience and skill has helped steer Servelec Healthcare to a market leading position.


Roger McDowellSenior Independent Non-Executive Director

Roger joined the company as a Non- Executive Director on the 24 October 2013. The early part of Roger's career was spent as CEO of an independent distribution business, growing the company both organically and by acquisition, then leading the business through a main market listing.

Subsequently he has served as a Non-Executive Director or Chairman of numerous listed businesses and his extensive experience includes chairing all Board Committees. Roger is currently Chairman of Avingtrans plc, Senior Independent Non-Executive Director of Tribal plc and Non-Executive Director of IS Solutions Plc, Swallowfield PLC, Proteone Sciences PLC (and Audit Chair) and PTSG Group PLC.


Bernie WaldronIndependent Non-Executive Director

Bernie joined the Company as a Non- Executive Director in 2013. Bernie has more than 30 years’ experience in the global technology marketplace including positions as director of strategy for IBM Corporation, based in New York, general manager of IBM’s industrial sector business for Europe, Middle East and Africa, and Executive Chairman of the former Maersk Data Group of companies, based in Copenhagen. He is now non-executive chair or director of a number of public and private companies.


Alex MooreManaging Director, Servelec Controls – Power & Nuclear

Alex was appointed Managing Director of Servelec Controls – Power & Nuclear in February 2015. Alex has a strong background in power engineering and joined Servelec from Ansaldo NES Limited where he held the position of Business Development Director. Previous to this role Alex was Nuclear Services Director at Capula, where he spent 11 years.

Andy SullivanManaging Director, Servelec Technologies

Andy was appointed Managing Director of Servelec Technologies in 2013. A Chartered Electrical and Electronic Engineer, Andy has over 25 years’ experience in control and monitoring systems, product development & manufacture and consultancy, predominately in the utilities sector. Andy has operated at Senior Management and Managing Director level for the last 10 years.

Committee membership

Remuneration Committee Nomination Committee Audit Committee


• Roger McDowell, Chairman• Richard Last• Bernie Waldron

• Bernie Waldron, Chairman• Richard Last• Roger McDowell

• Richard Last, Chairman• Roger McDowell• Bernie Waldron

See page 47 for Audit Committee report. See page 50 for Remuneration Committee report. See page 46 for Nomination Committee report.

• Richard Last, Chairman• Alan Stubbs, Chief Executive Officer• Mike Cane, Chief Financial Officer• Roger McDowell, Senior Independent Non-Executive Director• Bernie Waldron, Non-Executive Director

SERVELEC GROUP BOARD

AUDIT COMMITTEE REMUNERATION COMMITTEE NOMINATION COMMITTEE

Corporate governance report


Letter from the Chairman

Dear Shareholder

The reports in this section of our Annual Report explain how the Board and each of its committees function and the issues that they have been addressing over the last 12 months.

The Board is committed to the highest standards of corporate governance and to maintaining a sound framework for the control and management of the Group. Since the Group’s listing at the end of 2013, work has continued to ensure full compliance with the provisions of the Code. The progress made in this area is also laid out in this report.


The UK Corporate Governance CodeThe Board is committed to maintaining high standards of corporate governance and maintaining a sound framework for the control and management of the Group. It follows an approach that complies with provisions of the UK Corporate Governance Code dated September 2014 (the “Code”). A copy of the Code can be found at www.frc.org.uk. During the year under review, the Company has complied with the main provisions of the Code and this Report describes how the Company has applied the relevant principles during the year.

Board and committee compositionThe Board consists of three Non-Executive Directors (including the Chairman) and two Executive Directors. Biographies of all members of the Board appear on page 40 and 41. There have not been any changes to the Board during the financial year.


The role of the BoardThe Board is responsible for leading and controlling the Group and has overall authority for the management and conduct of the Group’s business, strategy and development. This includes ensuring the maintenance of a sound system of internal control and risk management (including financial, operational and compliance controls), for reviewing the overall effectiveness of systems in place and for the approval of any changes to the capital, corporate and/or management structure of the Group.

The Board delegates to management the day-to-day running of the Group within defined risk parameters. Board meetings are scheduled to coincide with key events in the corporate calendar including the interim and final results and annual general meeting.

The Board has adopted a formal schedule of matters reserved for its approval and has delegated other specific responsibilities to its Committees. This schedule sets out key aspects of the affairs of the Company, which the Board does not delegate, including key strategic, operational and financial issues. All Directors have access to the advice and services of the Company Secretary who has responsibility for ensuring compliance with the Board’s procedures. All the Directors have the right to have their opposition to, or concerns over, any Board decision noted in the minutes. The Board has adopted guidelines by which Directors may take independent professional advice at the Group’s expense in the performance of their duties.

The Chairman and the Non-Executive Directors met informally without the executives present once a quarter during the year and will continue periodically to hold such meetings during 2016 and beyond.

Conflicts of interestsThe duties to avoid potential conflicts and to disclose such situations for authorisation by the Board are the personal responsibility of each Director. Each Director is required to ensure that he keeps these situations under review and informs the Company Secretary on an ongoing basis of any change in their respective positions.

On 2 December 2013, the Company adopted new Articles of Association. Article 38 authorises the Directors, for the purposes of Section 175 of the Companies Act 2006, to authorise any potential conflict situation, being a situation in which a Director has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the Company. The Director in question is not counted in the quorum at the relevant meeting of the Board and does not vote on the resolution.

The Board has an agreed procedure for dealing with conflicts of interest in relation to matters which are scheduled for Board consideration. Each Director has completed a ’Directors List’ which sets out details of situations where their interests may conflict with those of the Company (’situational conflicts’). These lists have been considered by the Board and situational conflicts authorised. In addition, Directors are reminded at the beginning of each Board meeting to notify the Board of any further conflicts of interest in accordance with Sections 175, 177 and 182 of the Companies Act 2006.

The Articles of Association of the Company require it to indemnify officers of the Company, including officers of wholly-owned subsidiaries, against liabilities arising from the conduct of the Group’s business, to the extent permitted by law. The Group has therefore purchased directors’ and officers’ liability insurance during the year.

Board balance and independenceThe Code recommends that at least half the Board of Directors of UK listed companies, excluding the Chairman, should comprise Non-Executive Directors determined by the Board to be independent in character and judgement and free from relationships or circumstances which may affect, or could appear to affect, the director’s judgement.

The Board regards all of the Non-Executive Directors as Independent Non-Executive Directors within the meaning of the Code and free from any business or other relationship that could materially interfere with the exercise of their independent judgement. The Board believes that the current directorate considerably enhances its ability to develop the Group’s operations.

Role of the Chairman and Chief ExecutiveThe Board is chaired by Richard Last. The Chairman is responsible for the effective leadership of the Board, having regard for the interests of all stakeholders and promoting high standards of corporate governance.

Alan Stubbs is the Chief Executive Officer and is responsible for implementing the Board’s strategy and leading the senior management team. The role is distinct and separate to that of Chairman and clear divisions of accountability and responsibility have been agreed by the Board, and are set out in writing.

Role of the Senior Independent Director (SID)Roger McDowell is the Senior Independent Director. The Code recommends that the Board of Directors of a Company with a premium listing on the Official List should appoint one of the Non-Executive Directors to be the Senior Independent Director to provide a sounding board for the Chairman and to serve as an intermediary for the other Directors when necessary. The Senior Independent Director should be available to shareholders if they have concerns which contact through the normal channels of the Chairman, CEO or other Executive Directors has failed to resolve or for which such contact is inappropriate.

Role of the Company SecretaryMike Cane is the Company Secretary. The role of the Company Secretary is to develop, implement and maintain good corporate governance practices. This includes supporting the Chairman and Non-Executive Directors as appropriate, managing Board and Board committee meetings, facilitating the induction of new Directors, ensuring that appropriate levels of directors’ and officers’ insurance is in place and that the Group is compliant with statutory and regulatory requirements. The responsibilities of the Company Secretary have been agreed by the Board and set out in writing.


Information, meetings and attendanceThe Board operates formally through regular scheduled Board meetings and there is also frequent communication between Directors outside these meetings including as members of the relevant committees.

The Board met formally 11 times during the year with a number of additional ad hoc meetings convened to deal with specific matters requiring Board consideration or approval as required.

Member Appointed AttendedNumber of

meetings

Richard Last 2008 11 11Alan Stubbs 1995 11 11Mike Cane 2013 11 11Roger McDowell 2013 11 11Bernie Waldron 2013 11 11

During the year the Board met to review the Company’slong-term strategic direction and financial plans and monitor performance, including presentations from the Senior Management Team on strategy and performance of individual business divisions. In line with agreed strategy and plans, the Board agreed key objectives for the Chief Executive Officer. The Board met also to consider and ultimately recommend the acquisition of Aura Limited. In December, the Board received a formal presentation of the annual budget for the 2016 financial year for approval. The Chairman is responsible for ensuring that the Directors receive accurate, timely and clear information. Prior to each scheduled Board meeting, a pack is circulated in respect of each financial period, which includes an update on key performance targets, trading performance against budget and includes detailed financial data and analysis. Board packs are generally distributed between three and seven days prior to each meeting to provide sufficient time for Directors to review papers in advance. If Directors are unable to attend a Board meeting for any reason, they nonetheless receive the relevant papers and are consulted prior to the meeting and their views made known to the other Directors. In addition, all Board members have full access to management reports at a Divisional level.

Board committeesThe composition and constitution of the Board’s Committees is set out on page 42. Subject to those matters reserved for its decision, the Board has delegated to its Audit, Nomination and Remuneration Committees certain authorities. There are written terms of reference for each of these committees, available on the Corporate Governance page of the website www.servelec- group.com, and separate reports for each committee are included in this Annual Report and Accounts from page 46.

DevelopmentThere have been no new appointments to the Board since November 2013. The Group has a formal induction and training process for new Directors, including meeting major shareholders and advisers as required.

During 2015, the Chairman agreed with each Director their individual training and development needs and developed specific training programmes, which included ‘deep dive’ product training with business directors, independent of the Executive Team.

Board evaluation The effectiveness of the Board is essential to the success of the Group. During the year an evaluation policy was developed and implemented.

The evaluation process was based on a series of questions devised for the purpose and circulated to the directors. The process reviewed issues such as: the assessment and monitoring of the Company’s strategy and risk appetite; diversity including the balance of knowledge and skills on the Board; succession; and performance of the Board Committees. The results were collated by the Company Secretary and considered by the Chairman or, in the case of the Chairman, by the Senior Independent Director. The Senior Independent Director, after consultation with the other directors, also conducted an appraisal interview with the Chairman.

The performance of the Board as a whole and of each of its principal Committees was considered. The results of the evaluation will form the basis of Board objectives for 2016.

Election of DirectorsThe Board can appoint any person to be a Director, either to fill a vacancy or as an addition to the existing Board provided that the total number of Directors does not exceed 10, the maximum prescribed in the Company’s Articles of Association. Any Director so appointed by the Board shall hold office only until the next annual general meeting and shall then be eligible for election by the shareholders.

In accordance with the Articles of Association, at every annual general meeting of the Company one-third of the Directors or the number nearest to but not less than one-third shall retire from office. The Directors to retire shall be those who have been longest in office since their last appointment or re-appointment. The Company intends to continue this practice but will review it regularly.

External appointmentsThe Executive Directors may accept outside appointments provided that such appointments do not in any way prejudice their ability to perform their duties as Executive Directors of the Company. None of the Executive Directors currently hold any such outside appointments and this position is reconfirmed at each Board meeting to monitor the position.

The Non-Executive Directors’ appointment letters are not specific about the maximum time commitment, recognising that there is always the possibility of an additional time commitment and ad hoc matters that may arise from time to time, particularly when the Group is undergoing a period of increased activity. The average time commitment inevitably increases where a Non-Executive Director assumes additional responsibilities such as being appointed to a Board committee or as a Non-Executive Director on the boards of any of the Group’s subsidiaries, associated or joint venture companies.

Corporate governance report Continued


Communications with shareholdersThe Board considers effective communication with its investors, whether institutional, private or employee shareholders, to be extremely important.

Investor relations activity and a review of the share register are standing items on the Board’s agenda. Reports from analysts and brokers are circulated to the Board. Members of the Board meet institutional investors regularly to provide an opportunity to discuss, in the context of publicly available information, the progress of the Group. The Group also holds investor days, and held such an event on converged care within the Health & Social Care Division in June 2015. Institutional investors and analysts are also invited to attend briefings by the Company following the announcement of the annual and interim results. The Chairman and Non-Executive Directors are available to attend investor relations meetings or to attend meetings with investors or analysts independent of the Group’s management if required.

The Company reports formally twice a year with the half-year results announcement and the preliminary announcement of the full-year results. An interim statement is published on the Company’s website in August and the Annual Report and Accounts is published in March. These reports and other announcements the Company makes from time to time can be found on www.servelec-group.com.

Annual General MeetingThe Company’s Annual General Meeting will take place on Thursday 28 April 2016 at 9.30am, at the offices of Investec plc, 2 Gresham Street, London, EC2V 7QN. The chairmen of the Board’s committees will be present to answer questions put to them by shareholders. The Annual Report and Accounts and Notice of the Annual General Meeting will be sent to shareholders at least 20 working days prior to the date of the meeting.

To encourage shareholders to participate in the AGM process, the Company offers electronic proxy voting through the CREST service and all resolutions will be proposed and voted on at the meeting on an individual basis by shareholders or their proxies. Voting results will be announced through the Regulatory News Service and made available on the Company’s website.

By order of the Board

Richard LastChairman & Non-Executive Director 1 March 2016


Nomination committee report

Richard LastChairman, Nomination Committee

Chairman’s introduction

Dear Shareholder

The Board strongly believes that good governance and strong, responsible, balanced leadership by the Board are critical to creating long-term shareholder value and business success. The Nomination Committee is proactive in discharging its responsibilities, cognisant of the importance of succession planning and the need to align Board and executive leadership skills to the Company’s long-term strategy.

Richard LastChairman, Nomination Committee 1 March 2016

Roles and responsibilitiesUnder normal circumstances the Nomination Committee will meet not less than twice a year to assist the Board in discharging its responsibilities relating to the composition and make-up of the Board and any committees of the Board. It is also responsible for periodically reviewing the Board’s structure and identifying potential candidates to be appointed as Directors or committee members as the need may arise. The Nomination Committee is responsible for evaluating the balance of skills, knowledge and experience and the size, structure and composition of the Board and committees of the Board, retirements and appointments of additional and replacement Directors and committee members and makes appropriate recommendations to the Board on such matters.

The full terms of reference are available on the corporate governance page of the Company’s website at www.servelec-group.com.

Committee membership and attendanceIn accordance with the UK Corporate Governance Code the nomination committee consists of three Non-Executive Directors. The Nomination Committee is chaired by Richard Last and its other members are Roger McDowell and Bernie Waldron. There have not been any changes to the Committee membership during the year.


meetings

Richard Last 2008 2 2Roger McDowell 2013 2 2Bernie Waldron 2013 2 2

Activities of the Nomination Committee in 2015 The Nomination Committee met twice during the financial year to discuss Board composition, Board effectiveness, independence and succession planning.

During the year the Board reviewed its effectiveness by each board member individually completing a questionnaire which was reviewed by the Committee. This process will be repeated on an annual basis.

DiversityThe Company pursues diversity, including gender diversity, throughout the business. When recruiting at Board level, the Nomination Committee requires that executive search firms have signed up to their industry’s voluntary code of conduct (prepared in response to the Davies Review of Women on Boards). The Group follows a policy of appointing talented people on merit at every level and does not have a specific target for numbers of female directors. The Board will also ensure that its own development in this area is consistent with its strategic objectives and enhances Board effectiveness.


Audit committee report

Roger McDowell Chairman Audit Committee

Chairman’s introduction

Dear Shareholder

The Audit Committee plays a central role in the review of Servelec Group’s financial reporting and internal control processes. Our aim is to ensure that these processes deliver high quality and timely information. I would like to thank my independent colleagues for their support during the period under review.

2015 was a year of continued growth for the Group. The successful integration of Corelogic and the acquisition of Aura were key areas of focus for the Audit Committee. In addition, we continue to be vigilant in our monitoring of internal and external risk factors, having recently assisted the Board to conclude a thorough review of the risk register. As a Committee we seek not just to respond to external factors but to endeavour to support and challenge management to anticipate future risks and opportunities.

Amongst regulatory developments, the principal area of focus were the changes to the UK Corporate Governance Code and, in particular, the requirement to ensure that the Board focuses on longer term viability (the Viability Statement). The Committee, Board and management team have worked together to understand the new requirements and allocate sufficient resource to the enhanced levels of analysis, review and reporting necessary to ensure compliance with the new requirement.

The specific duties of the Committee, how we operate and the key areas of focus are detailed in the review below. We are very conscious of increasing shareholder expectation and scrutiny of our work and we would welcome feedback.

Roger McDowell Chairman, Audit Committee 1 March 2016

Roles and responsibilitiesThe Audit Committee assists the Board in discharging its responsibilities with regard to:• Financial reporting, including reviewing and monitoring the integrity

of the Group’s annual and interim financial statements. The Board has also requested that the Committee advise them in ensuring that the financial statements, when taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company’s performance, business model and strategy. The ultimate responsibility for reviewing and approving the annual report and accounts and the half-yearly reports remains with the Board.

• External auditors, including reviewing and monitoring the extent of the non-audit work undertaken by external auditors, advising on the appointment of external auditors, overseeing the Group’s relationship with its external auditors and reviewing the effectiveness of the external audit process.

• Internal audits and controls, including reviewing the effectiveness of the Group’s internal control review function.

The Audit Committee will give due consideration to laws and regulations, the provisions of the UK Corporate Governance Code and the requirements of the Listing Rules. The full terms of reference are available on the corporate governance page of the Company’s website at www.servelec-group.com.

Committee membership and attendanceThere were no changes to the composition of the Audit Committee during the financial year. In accordance with the provisions of the Code, the Audit Committee is made up of three independent Non-Executive Directors. The Audit Committee is chaired by Roger McDowell and its other members are Richard Last and Bernie Waldron. The Board considers that Roger McDowell, by virtue of his former executive and current non-executive roles, has recent and relevant financial experience to act as Chairman of the Committee. Details of relevant experience of all members of the committee are set out on pages 40 – 41. The Chief Executive Officer and Chief Financial Officer attend meetings of the Audit Committee by invitation.


meetings

Richard Last 2008 3 3Roger McDowell 2013 3 3Bernie Waldron 2013 3 3

Activities of the Audit Committee in 2015The Committee met three times during the financial year. The meetings were held to review the results of the external audit for the previous financial year; discuss and agree scope of internal and external audits and reviews for the year, including the review of key areas of judgement.

The Audit Committee discharged its responsibility in relation to a Viability Statement which is referenced on page 34.

The Committee discharged its obligations in response of the financial year as follows:

External auditDuring the year the Audit committee reviewed and approved the scope and timetable for the interim review and final audit. The Committee also reviews the policies to ensure ongoing compliance with the Code. This includes the policy against which to consider the independence of the external auditor consistent with the ethical standards published by the Audit Practices Board and a policy on the engagement of external auditors for the provision of non-audit services.


Independence safeguardsIn accordance with best practice and professional standards, external auditors are required to adhere to a rotation policy whereby the audit engagement partner is rotated after five years. Ernst & Young LLP have been in tenure for 14 years and the current audit engagement partner was appointed in 2013. The external auditors are also required periodically to assess whether, in their professional opinion, they are independent and those views are shared with the Audit Committee. The Committee has authority to take independent advice as it deems appropriate in order to resolve issues on auditor independence. No such advice has to date been required.

Independence assessment by the Audit Committee The Committee has considered the independence requirements, including ensuring that the rotation policy has been complied with. Furthermore, the Committee’s policy in relation to the provision of non-audit services by the external auditor is to ensure that the level of fees paid for such services does not jeopardise the external auditor’s independence and separate external firms are engaged for taxation advisory. The Committee has assessed the performance and independence of the external auditor and recommended to the Board the re-appointment of Ernst & Young LLP as auditor until the conclusion of the AGM in 2016.

Non-audit services provided by the external auditor There were no non-audit services provided by the auditor in 2015.

Financial reportingThe Committee reviewed the interim and annual financial statements. As part of that review process, the members of the Committee were provided with a draft of the full annual report enabling them to ensure that the numbers therein are consistent with those in the financial statements or are sourced from appropriate data. More importantly, the Committee assessed whether the words used were consistent with their understanding of the Company’s business obtained through Board and Audit Committee meetings and other interaction they had had with management, using their experience to assess whether the annual report taken as a whole is fair, balanced and understandable. This additional review by the Audit Committee, supplemented by advice received from external advisors during the drafting process assisted the Board in determining that the report is fair, balanced and understandable at the time that it was approved. The Committee considered the appropriateness of preparing the accounts on a going concern basis, including consideration of forecast plans and supporting assumptions and concluded that the Company’s financial position was such that it continued to be appropriate for accounts to be prepared on a going concern basis.

The Committee, together with the Board considered what were the significant risks and issues in relation to the financial statements and how these would be addressed.

Revenue Recognition(i) Revenue recognition on long-term contracts relies on estimates of

the completion costs for each project and so has an inherent risk of misstatement in the financial statements. The Group has a clear revenue and profit recognition policy (see note 2) and performs regular contract reviews with key staff. The Committee has reviewed the control procedures and performed detailed reviews of significant contracts and analytical review of the profit and loss account. The committee is satisfied that the internal processes and controls are appropriate.

(ii) Product sales are a significant part of the Group. The Committee has reviewed the controls over recording of product sales and are satisfied that they are appropriate.

Acquisition of AuraThe acquisition in May 2015 of Aura Limited was not deemed to present a significant risk due to the size of the acquisition relative to the overall Group. Notwithstanding this, a detailed review of the acquisition was performed by the external auditor as part of the half-year review and the Committee reviewed the methodology and assumptions underlying the valuations and the appropriateness of any fair value adjustments.

Internal controls and risk managementThe Board is responsible for the overall system of internal controls for the Group and for reviewing its effectiveness. It carries out such a review at least annually, covering all material controls including financial, operational and compliance controls and risk management systems.

The system of internal controls is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss.

Operating policies and controls are in place, and cover a wide range of issues including financial reporting, capital expenditure, information technology, business continuity and management of employees. Detailed policies ensure the accuracy and reliability of financial reporting and the preparation of financial statements including the consolidation process. The key elements of the Group’s ongoing processes for the provision of effective internal control and risk management systems, in place throughout the year and at the date of this report, include:• Regular Board meetings to consider matters reserved for the

Directors’ consideration;• Regular management reporting, providing a balanced assessment

of key risks and controls;• An annual Board review of corporate strategy, including a review

of material business risks and uncertainties facing the business;• Established organisational structure with clearly defined lines of

responsibility and levels of authority;• Documented policies and procedures;• Regular review by the Board of financial budgets, forecasts and

performance reported to the Board monthly;• A detailed investment process for major projects, including capital

investment coupled with a post- investment appraisal process.

In reviewing the effectiveness of the system of internal controls, the Committee received self-assurance statements from senior managers responsible for the principal business units confirming that controls and risk management processes in their business units have been operated satisfactorily. These returns were reviewed by the Audit Committee and challenged where appropriate.

The Company Secretary is responsible for compiling and maintaining a risk register to monitor all of the risks facing the business. The key risks were summarised for review and approval by the Audit Committee for inclusion in the annual report and accounts.

In respect of the Group’s financial reporting, the Finance Department is responsible for preparing the Group financial statements using a well-established consolidation process and ensuring that accounting policies are in accordance with International Financial Reporting Standards. All financial information published by the Group is subject to the approval of the Audit Committee.

There have been no changes in the Company’s internal control during the year that have materially affected, or are reasonably likely to materially affect, the Company’s control over financial reporting.

Audit committee report Continued


The Board, with advice from the Audit Committee, is satisfied that an effective system of internal controls and risk management are in place which enable the Company to identify, evaluate and manage key risks and which accord with the guidance of the Turnbull Committee on internal control updated by the FRC in 2005. These processes have been in place since the start of the financial year and up to the date of approval of the accounts. Further details of risk management frameworks and specific material risks and uncertainties facing the business can be found on pages 32 – 34.

WhistleblowingThe Group has in place a whistleblowing policy which encourages employees to report any malpractice or illegal acts or omissions or matters of similar concern by other employees or former employees, contractors, suppliers or advisors using a prescribed reporting procedure. The policy facilitates the reporting of any ethical wrongdoing or malpractice or suspicion which may constitute ethical wrongdoing or malpractice. Examples include bribery, corruption, fraud, dishonesty and illegal practices, which may endanger employees or third parties. There have been no instances of whistleblowing during the year under review.

Internal auditWe have considered the need for internal audit and have concluded that the focus of the role has been on quality assurance, rather than providing assurance on the adequacy of internal control and risk management processes across the Group’s operations.

AccountabilityThe Directors are responsible for preparing the annual report and accounts. They consider that the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to access the Company’s performance, business model and strategy. The responsibilities of the Directors and external auditor are set out on page 65. As set out in the Directors’ Report, the Directors consider the Company’s business to be a going concern.

Roger McDowell Chairman, Audit Committee 1 March 2016


Remuneration report

Bernie WaldronChairman, Remuneration Committee

Information not subject to audit:

Chairman’s annual statement

Dear Shareholder

I am pleased to introduce the Directors’ Remuneration Report for the 2015 financial year-end. This Report has been prepared in accordance with the Schedule 8 to the Large and Medium-Sized Companies and Groups (Accounts and Reports) Regulation 2008. The Annual Report on Remuneration and the Annual Statement will be the subject of an advisory vote at the forthcoming Annual General Meeting.

The Chairman’s statement (on pages 6 and 7) provides a summary of the progress the Group has made over the financial year. In order to continue building on this performance the Remuneration Committee is committed to structuring executive remuneration that supports the Group’s strategy and performance. Short-term performance is incentivised via an annual bonus, part of which will normally be deferred and paid in shares. Long-term performance is incentivised via a long-term incentive plan (LTIP) which is based on achieving Total Shareholder Return (TSR) and Earnings per Share (EPS) growth over a 3-year measurement period. Details of the bonus schemes and LTIP awards to the Executive Directors are summarised in the relevant sections of this report.

Servelec’s remuneration policy was accepted unanimously at the 2014 AGM and we are not proposing any changes to the remuneration policy for the current financial year. The Remuneration Committee will keep the policy under review to ensure that it remains appropriate to the delivery of long-term value for all stakeholders. The Committee remains confident that the policy accepted at the AGM provides the management team with sufficient encouragement and incentive to build on the success the Group has achieved to date.

Bernie WaldronChairman, Remuneration Committee 1 March 2016


Director’s remuneration policyThis part of the Directors’ Remuneration Report sets out the remuneration policy of the Company and has been prepared in accordance with The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 (“the Regulations”). The policy has been developed taking into account the principles of the UK Corporate Governance Code 2014. The policy was accepted unanimously at last year’s AGM and we are not proposing any changes to the Remuneration Policy for the current financial year.

Policy on executive remunerationThe Group’s remuneration policy is designed to ensure that executive directors’ remuneration promotes the long-term success of the Company and that performance-related elements are sufficiently transparent, stretching and rigorously applied. The retention of key management and the alignment of management incentives with the creation of shareholder value are key objectives of this policy.

Setting base salary levels for Executive Directors at an appropriate level is a key to managerial retention. Therefore, the Remuneration Committee seeks to ensure that salaries are market competitive for comparable companies. Total compensation is set within a range around the median level for the Company’s peer group.

The Remuneration Committee is directly responsible for setting the remuneration of Executive Directors and giving guidance on the remuneration of other members of the senior management team.

The Committee ensures that remuneration structures neither encourage nor reward inappropriate risk-taking and are applied with due account taken of the Company’s risk policies and systems. In addition the Committee ensures that the incentive structures for Executive Directors and senior managements will not raise environmental, social or governance risks by inadvertently motivating irresponsible behaviour. More generally, with regard to overall remuneration structures, there is no restriction on the Committee that prevents it from taking into account environment, social or governance matters.

Key elements of remuneration

Remuneration element Purpose Operation Potential Remuneration Performance metrics

Base Salary To attract and retain key executives.

Reviewed annually and fixed for 12 months commencing on 1 January each year. The review is influenced by:• Role, experience and

performance.• Average workforce

salary adjustments.

Comparison with the Company’s peer group salaries are benchmarked by reference to companies of similar size and complexity.

The Executive Directors’ salaries will be reviewed taking account of periodic benchmarking.

The CEO’s salary has increased to £300,000 from 1 January 2016 (previously £285,000).

The CFO’s salary has increased to £157,000 from 1 January 2016 (previously £150,000).

Not applicable.

Benefits To attract and retain key executives.

An Executive Director is entitled to life assurance, a company car, medical insurance and permanent health insurance.

No maximum is set but the Remuneration Committee will monitor the overall cost of the benefits package.

Not applicable.

Pension To attract and retain key executives.

The Executive Directors are members of the Group Retirement Benefits Scheme (a money purchase pension arrangement).

Contributions of 15% and 4.5% per annum of salary are paid into the scheme on behalf of the CEO and CFO respectively.

Not applicable.


Remuneration element Purpose Operation Potential remuneration Performance metrics

Annual Bonus To incentivise delivery of the Group’s annual financial and strategic targets.

Aligns Directors’ interests with shareholders.

Performance is measured on an annual basis for each financial year.

Targets are established at the beginning of each year that are based on the corporate targets. At the end of the year the Committee determines the extent to which these were achieved.

Bonus payments may be paid in cash. However, the Directors will normally be required to participate in the Deferred Share Bonus Plan with a third of any annual bonus being paid in shares that vest two years after the award is made.

Bonuses are capped at a maximum of 100% of salary.

Clawback may be applied to the number of shares, at the discretion of the Committee, if the financial results used to determine the value of the bonus are found to be misstated or if other exceptional circumstances exist, for example, a participant’s material misconduct.

Any bonus is discretionary and subject to achievement against targets set by the Remuneration Committee.

Measures and associated targets will be set and weighted each year in accordance with business priorities. Measures may include financial and non-financial metrics as well as the achievement of personal objectives.

The Committee has the discretion to adjust the formulaic bonus outcome both upwards and downwards to ensure alignment of pay with the underlying performance of the business over the financial year.

Long-Term Incentive Plan To motivate executives and incentivise delivery of performance over the long-term and to facilitate share ownership.

The LTIP is a performance and service-related conditional share award plan.

Initial awards were made on Admission and vest in the financial year 2017 on the date the Remuneration Committee determines the extent to which the performance condition has been met.

The Remuneration Committee would in normal circumstances expect to award LTIPs annually at a maximum of 100% of base salary.

Clawback may be applied to the number of shares, at the discretion of the Committee, if the financial results used to determine the value of the bonus are found to be misstated or if other exceptional circumstances exist, for example, a participant’s material misconduct.

The Remuneration Committee intends to award LTIPs of 100% of base salary to the Executive Directors in the six weeks following the results announcement, in line with the scheme rules.

For these planned awards, 50% is linked to growth in earnings per share above inflation measured over a 3-year performance period whilst the remaining 50% is linked to total shareholder return over a 3-year performance period. Further details are set out in the Annual Report on Remuneration on page 61.

For future awards, the Remuneration Committee will assess what measures and targets best support the long-term focus of the company, and it is therefore possible that these measures and targets will be different from those used previously.

Policy for other employee arrangements

Save As You Earn share option plan

To motivate and facilitate share ownership.

An ’all-employee’ share option plan, approved by HMRC, supervised by the Remuneration Committee.

Employees, including Executive Directors, may enter into a savings contract under which they agree to save up to a maximum of £500 per month (or such limit as may be permitted by the tax legislation governing SAYE schemes from time to time) for 3 to 5 years.

Not applicable.

Remuneration report Continued


Remuneration element Purpose Operation Potential remuneration Performance metrics

Executive Share Option Plan

To motivate and facilitate share ownership.

Options to acquire shares may be granted to eligible employees at the discretion of the Remuneration Committee.

Following Admission, options were granted to certain senior managers and employees, not Executive Directors. Part A of the ESOP has been approved by HMRC for tax purposes. It is not intended to grant awards under this scheme to Executive Directors.

The number of shares in respect of which options can be granted is limited in respect of any financial year to shares with a market value of no more than 100% of salary. The aggregate market value of shares at the date of grant in respect of which unexercised options can be held at any time under the HMRC-approved scheme cannot exceed £30,000.

The Remuneration Committee may impose one or more objective conditions on any option preventing its exercise unless and until such condition has been satisfied. The Remuneration Committee, prior to the grant of the option, will determine such performance conditions. No options have to date been granted to Executive Directors under this scheme. The Remuneration Committee intends to award this scheme to selected employees in the six weeks following the results announcement, in line with the scheme rules.

Chairman and Non- Executive Directors

To attract and retain Non-Executive Directors of the right calibre.

The Chairman and Non- Executive Directors’ remuneration comprises only fees.

The Chairman’s fee is approved by the Board on the recommendation of the Remuneration Committee.

Fees for the Non-Executive Directors are approved by the Board on the recommendation of the Chairman and Executive Directors. The Non- Executive Directors are not involved in any discussion or decision about their own remuneration.

Additional fees, over and above the base fee for the Non-Executive Directors, are payable to the chairmen of the Audit and Remuneration Committees and to the Senior Independent Non- Executive Director.

The Chairman and the other Non-Executive Directors are entitled to reimbursement of reasonable expenses.

Details of the fees currently payable are set out in the Annual Report on Remuneration on page 55. The fees are reviewed periodically taking into consideration the time commitment and responsibilities of the role and fees paid in other companies of comparable size and complexity.

Not applicable.

Malus and clawbackMalus is the possible reduction of deferred awards and clawback is the possible recovery of awards that have already been made to executives. Mindful of the provisions of current best practice and the guidance of the UK Corporate Governance Code, the Committee has decided that awards under the Deferred Share Bonus Plan, including any awards held during any additional holding period, may be reduced or cancelled at the Committee’s discretion in such cases as material misstatement of results, gross misconduct or fraud.


Alignment of executive remuneration and the marketIn 2013, the Company engaged h2glenfern, a remuneration advisory practice, to undertake a benchmarking exercise for use in considering remuneration levels and developing the Board’s remuneration policy in respect of both the Board and senior management. h2glenfern compiled a comparator group drawn from the Official List and AIM, which was agreed with the Board. The companies selected were well-known companies in the technology sector with market capitalisations and revenue/profit profiles in a broad range around Servelec’s market capitalisation and business size, recognising that Servelec will compete with these companies for executives and senior managers and be assessed against them and compete with them for investment.

The Committee intends to formally benchmark the remuneration levels of the Board every three years.

The resulting remuneration structure reflects the Company’s financial and corporate circumstances and plans and, the Board believes, will be effective and competitive and reflect the objectives of shareholders.

How employee pay is taken into considerationWhen setting pay and benefits for Executive Directors and senior managers, the Remuneration Committee takes account of pay and conditions across the Group. The Company endeavours to provide competitive remuneration packages for all employees and carries out internal benchmarks for employees. Employees may be eligible to join the all employee ESOP at the discretion of the Remuneration Committee and all UK Employees are eligible to join the SAYE scheme.

The Company has not consulted with its employees in formulating this policy.

Shareholder views on remunerationThe Chairman of the Remuneration Committee will be available for contact with institutional investors concerning the Company’s approach to remuneration. The Company welcomes dialogue with its shareholders and will seek the views of its significant shareholders if and when any major changes are being proposed to the policy. When any significant changes are proposed to the remuneration policy, the chairman of the Remuneration Committee will consult with major shareholders in advance and, if requested, will arrange meetings to discuss these.

The policy approved at the AGM on 29 April 2014 has been developed taking into account the principles of the UK Corporate Governance Code 2014.

Policy on recruitmentThe Committee will consider the remuneration of new executive appointees to the Board by reference to the Remuneration Policy set out above. The Committee would not usually expect to pay sign-on payments or compensate new directors for any variable remuneration forfeited from any employment prior to joining the Board but may consider doing so depending on the circumstances, recognising that the Company needs to attract appropriately skilled and experienced individuals. Generally, any buy-outs of awards forfeited would be made on a comparable basis using the LTIP, within its parameters stated in the policy table, so as to align the new Executive Director’s interest with that of the shareholders. Salary will be set so as to be competitive with comparable companies and taking account of the experience and seniority of the appointee coming into the new role. New Executive Directors will receive benefits and pension contributions in line with Company’s existing policy and will be able to participate in the annual bonus scheme on a pro-rated basis for the portion of the financial year for which they are in post.


Policy on loss of officeDirectors and senior executives leaving employment from the Group, other than in circumstances of gross misconduct, will be entitled to receive salary in accordance with their notice periods and pro-rated annual bonus based on performance to the date of leaving. The notice periods and the contractual rights on termination of each Director are set out in the section on service agreements on page 55. In this regard, it should be noted that the Chief Executive’s notice period (12 months on either side) may be extended to 24 months following a change of control of the Company. The Company’s share schemes also provide leaver provisions as follows:

SAYE (Save as You Earn)An Executive Director who ceases to be a Director or employee of the group by reason of death, retirement, ill-health, injury or disability, redundancy, or the sale of the company or business for which he works will be a good leaver. As such he will be permitted to exercise his options.

If the Director ceases to be an Employee or Director either before the third anniversary of the grant of the award for any reason other than the good leaver reasons above or more than three years after the grant of the award as a result of being summarily dismissed, any Option granted to him shall lapse on such cessation.

ESOP (Executive Share Option Plan)An Executive Director who ceases to be a Director or employee of the group by reason of death, retirement, ill-health, injury or disability, redundancy, or the sale of the company or business for which he works will be a good leaver. As such he will be permitted to exercise his options.

Where the cessation is on any other grounds, awards will lapse, provided that the Committee has discretion to treat the Executive Director as a good leaver.

Awards held by good leavers that are already capable of exercise at the date of cessation may be exercised between six and 12 months (depending of the reason for leaving) of the leaving date. If the good leaver ceases to be an employee or Director before the third anniversary of the grant of the award the Committee has discretion to allow the award to vest on the normal vesting date.

DSBP (Deferred Share Bonus Plan)Share awards, which represent deferrals of previously earned bonus, lapse on the Executive Director resigning or giving notice of resignation. An Executive Director who ceases to be a Director or employee of the group by reason of death, retirement, ill-health, injury or disability, redundancy, or the sale of the company or business for which he works will be a good leaver. Awards will be subject to time pro-rating.

LTIP (Long-Term Incentive Plan)An Executive Director who ceases to be a Director or employee of the group by reason of death, retirement, ill-health, injury or disability, redundancy, or the sale of the company or business for which he works will be a good leaver. Where the cessation is on any other grounds, awards will lapse, provided that the Committee has discretion to treat the Executive Director as a good leaver. Awards held by good leavers will continue and will vest on the normal vesting date, unless the Committee decides to accelerate vesting. Awards will remain subject to the performance conditions and, unless the Committee determines otherwise, subject to time pro-rating.

External appointmentsIt is the Board’s policy to allow Executive Directors to accept directorships of other quoted and non-quoted companies provided that they have obtained the consent of the Chairman of the Company. Any such directorships must be formally notified to the Board.


Service agreements

Alan Stubbs Mike Cane

Date of service agreement 12 November 2013 12 November 2013

Notice period 12 months’ notice given by either party. This notice period extends to 24 months following a change of control of the Company

6 months’ notice given by either party

Basic salary Currently £300,000 reviewed annually Currently £157,000 reviewed annually

Bonus Purely discretionary and not part of the contractual remuneration

Share schemes May participate in any share scheme adopted by the Company

Pension contributions Equivalent to 15% of salary contributed by the Company as a cash allowance into the Company’s Group Retirement Benefit money purchase scheme

Equivalent to 4.5% of salary contributed by the Company into the Company’s Group Retirement Benefit money purchase scheme

Contractual benefits Car, Life Assurance (4 x Salary), Medical and permanent health insurance, 12 months base pay for sickness

Car, Life Assurance (4 x Salary), Medical and permanent health insurance, 6 months base pay for sickness

Termination payments Company has discretion to pay a payment in lieu of notice to terminate the employment forthwith in the event of notice being given by either party. This will include the appropriate pro-rata amount for pensions contributions and contractual benefits

Chairman and Non-Executive DirectorsThe remuneration of the Chairman of the Company and the Non-Executive Directors consists of fees that are paid via the payroll, with the exception of the Chairman who invoices the Company for his fees. The Chairman and Non-Executive Directors are not entitled to receive any compensation on termination of their employment and are not entitled to participate in the Servelec Share Schemes or any of the Group’s bonus or pension schemes. Neither the Chairman nor any of the Non-Executive Directors has a service contract with the Company; however each has entered into a letter of appointment with the Company.

Non-Executive Directors’ fees and letters of appointmentThe Non-Executive Chairman has a letter of appointment stating that his appointment is expected to last at least three years from Admission to Listing. On their initial appointment, each of the Non-Executive Directors signed a letter of appointment with the Company for an initial period of three years from Admission. The letters of appointment of all serving Non-Executive Directors have been drafted in accordance with provision B.7.1 of the UK Corporate Governance Code, thus obliging directors to be subject to election by shareholders at the first annual general meeting after their appointment and to re- election thereafter at intervals of no more than three years. The amendments have been drafted such that renewed appointment will not necessitate a new letter of appointment.

Each Non-Executive Director is expected to commit sufficient time in fulfilling their duties as a Director of the Company. A base fee is paid to each Non-Executive Director to reflect the time commitment and level of involvement they are required to make in the activities of the Board as a whole. In addition to their annual base fees, additional fees are paid for chairing the Board committees and for the role of Senior Independent Non-Executive Director.

Base Fee£’000

SeniorIndependent

NED£’000

Nomination Committee

Chairmanship£’000

Remuneration Committee


Audit Committee


Total£’000

Richard Last 93.6 – 2.7 – – 96.3Bernie Waldron 41.6 – – 2.7 – 44.3Roger McDowell 41.6 5.2 – – 2.7 49.5

Unless otherwise determined, the Director concerned may give not less than 3 months’ notice of termination of the appointment. Copies of the Directors’ letters of appointment and service agreements are available for inspection at the Company’s registered office.

The key terms of the Non-Executive Directors’ letters of appointment are as follows:

DirectorDate of original

letter of appointmentNotice period from

Director to the Company Duration of term*Unexpired

termTotal fees

per annum

Richard Last 24 October 2013 6 months3 years from

Admission to Listing 9 months £96,250

Roger McDowell 24 October 2013 3 months3 years from


Bernie Waldron 30 October 2013 3 months3 years from


* Unexpired term: The Non-Executive Directors all have contracts that provide that each will serve for an initial 3-year period from the date of Admission to Listing on 2 December 2013. Each offered themselves for election at the Company’s first AGM on 29 April 2014 and their appointments are subject to the provisions of the Articles of Association that require them to offer themselves for re-election at intervals of no more than 3 years. The unexpired term is calculated with reference to the date of Admission to Listing.


Scenarios

Assumptions

Fixed • Consists of base salary, benefits and pension contributions.• Base salary is that to be paid in 2016.• Benefits measured as benefits figure in the single figure table.• The pension is measured as the amount of the employer’s contribution.

On-Target Based on what the Executive Director would receive if performance was in line with target (excluding share price appreciation and dividends):• Annual Bonus assumes annual targets set by the Remuneration Committee are met, which would pay out 50% of bonus maximum.• LTIP: consists of the performance level at which 50% of the maximum face value vests.

Maximum Based on the maximum remuneration receivable (excluding share price appreciation and dividends):• Annual Bonus: consists of the maximum bonus (100% of base salary).• LTIP: assumes maximum vesting of awards based on the intended normal LTIP grant of 100% of salary.

Note:These scenarios assume an annual maximum LTIP grant of 100% of salary, which is the policy of the Remuneration Committee. The Remuneration Committee does have the ability to grant LTIPs at up to 200% of salary (rising to 300% for exceptional circumstances), but as stated above, in normal circumstances it would only expect to make annual grants at a maximum face value of 100% of salary.

0200400600800

1,0001,200

£’00

0

Min

Alan Stubbs – Chief Executive Officer

Target Max

LTIPAnnual BonusFixed

374 374 374150

300150

300

0100200300400500600

Min

Mike Cane – Chief Financial Officer

Target Max

£’00

0

178 178 17879

15779

157



Annual report on RemunerationIntroductionThis Annual Report on Remuneration sets out information about the remuneration of the Directors and senior management of the Company for the year ended 31 December 2015. This report has been prepared in accordance with the provisions of the Companies Act 2006 and Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended) and 9.8.8R of the Listing Rules. An advisory resolution to approve this report will be put to shareholders at the forthcoming AGM. The information on pages 57 to 61 has been audited.

Remuneration Committee MembershipThe UK Corporate Governance Code provides that the Remuneration Committee should comprise at least two members who are independent Non-Executive Directors (other than the Chairman). Appointments to the Remuneration Committee are made by the Board on the recommendation of the Nomination Committee and are for a period of up to three years, which may be extended for further periods of up to three years, provided that the Director whose appointment is being considered still meets the criteria for membership. The Remuneration Committee consisted of the following Directors during the year ended 31 December 2015:• Bernie Waldron (Chairman), Independent Non-Executive Director;• Roger McDowell, Senior Independent Non-Executive Director; and• Richard Last, Non-Executive Chairman.

Role of the Remuneration CommitteeThe Remuneration Committee assists the Board in determining its responsibilities in relation to remuneration, including making recommendations to the Board on the Company’s policy on executive remuneration, including setting the over- arching principles, parameters and governance framework of the Group’s remuneration policy and determining the remuneration and benefits package of each of the Executive Directors and the Company Secretary and providing guidance on the remuneration of the senior management group. The Remuneration Committee also ensures compliance with the UK Corporate Governance Code in relation to remuneration wherever possible.

Terms of reference for the Remuneration Committee have been approved by the Board and are available on the corporate governance page on the Company’s website, www.servelec-group.com.

Activities of the Remuneration Committee in 2015The Remuneration Committee met six times in 2015 to agree the remuneration report and to discuss target figures for Annual Bonus, LTIP and grant SAYE options.

AdvisersPrior to Listing, the Company received independent advice from h2glenfern Remuneration Advisory (a division of h2glenfern Limited) on a number of remuneration issues including helping the Board develop its remuneration policy since when no additional independent advice has been sought. As mentioned earlier, the Committee intends formally to benchmark the remuneration levels of the Board every three years. No advice on Remuneration was therefore taken in 2015.

The Company Secretary ensures that the Remuneration Committee fulfils its duties under its terms of reference and provides regular updates to the Remuneration Committee on relevant regulatory developments in the UK.

The following information has been subject to audit:

Single total figure of remunerationDirectors’ remuneration is made up of payments from the UK. The UK payments have been accounted for in Servelec Group plc. The detailed emoluments received by the Executive and Non-Executive Directors for the year ended 31 December 2015 are detailed below:

Year ended 31 December 2015

Salary/FeesTaxable

Benefits Bonus(i) Pension(ii) Total

ChairmanRichard Last 94,400 – – – 94,400 Non Executive DirectorsRoger McDowell 48,500 – – – 48,500 Bernie Waldron 43,400 – – – 43,400

Total Non Execs 186,300 – – – 186,300

Executive DirectorsAlan Stubbs(ii) 285,000 28,805 50,000 42,750 406,555Mike Cane 150,000 13,425 26,316 7,500 197,241

Total Execs 435,000 42,230 76,316 50,250 603,796

Total Remuneration 621,300 42,230 76,316 50,250 790,096

(i) 100% of bonus is paid in shares that vest 2 years after the award is made(ii) From July 2015 an allowance equivalent to the pension contributions less employers NI was paid through the payroll to Alan Stubbs in lieu of his pension entitlement.



Salary/FeesTaxable

Benefits Bonus(iii) Pension Total

ChairmanRichard Last 92,500 – – – 92,500 Non Executive DirectorsRoger McDowell 47,500 – – – 47,500 Bernie Waldron 42,500 – – – 42,500

Total Non Execs 182,500 – – – 182,500

Executive DirectorsAlan Stubbs 275,000 23,816 76,725 41,250 416,791 Mike Cane 150,000 12,542 39,060 6,300 197,902

Total Execs 415,000 36,358 115,785 47,550 614,493

Total Remuneration 597,500 36,358 115,785 47,550 797,193

(iii) One third of bonus is paid in shares that vest 2 years after award is made.

Long-term incentive planFollowing Listing in December 2013, the Remuneration Committee granted performance and service-related conditional share awards to the Executive Directors under the LTIP. No further awards were therefore made in 2014. An award was made in 2015 and will be awarded annually thereafter.

The Committee intends to award LTIPs of 100% of base salary to the Executive Directors in the six weeks following the results announcement, in line with the scheme rules.

Save As You Earn Option Plan

Director Award dateAwards held at

31/12/14Granted during

the period

Exercised/ lapsed in the

periodExercise price (£)

Awards held at 31/12/15

Mike Cane 02/12/13 5,027 Nil Nil 1.79 5,02729/10/15 Nil 3,474 Nil 2.59 3,474

Alan Stubbs 29/10/15 Nil 6,949 Nil 2.59 6,949

Total 5,027 10,423 15,450

Directors LTIP interests

Director Award dateAwards held at

31/12/14Granted during

the period

Exercised/ lapsed in the

periodAwards held at

31/12/15

Alan Stubbs 02/12/13 307,263 Nil Nil 307,26322/4/15 100,000 Nil 100,000

Mike Cane 02/12/13 92,179 Nil 92,17922/4/15 52,632 Nil 52,632

Total 399,442 152,632 Nil 552,074

Deferred Share Bonus Plan Award date Type of award No of shares subject to award

Alan Stubbs 22/4/15 Option 9,026Mike Cane 22/4/15 Option 4,582

Directors’ share interestsThe number of Ordinary Shares of the Company in which the Directors were beneficially interested at 31 December 2015 was:

Director31 December

201531 December

2014

Richard Last 418,994 418,994Roger McDowell 139,665 139,665Bernie Waldron 27,933 27,933Alan Stubbs 838,000 838,000Mike Cane 74,300 74,300

As at 1 March 2016 this has not changed.



Share ownership guidelinesThe Remuneration Committee has considered whether a share ownership guideline should be set for Executive Directors and has determined that no such guideline should be set.

The following information has not been subject to audit:

Percentage change in the remuneration of the Chief Executive OfficerThe table below demonstrates the percentage of change in base salary, value of taxable benefits and bonus for the CEO compared to all employees of the Group.

Percentage change of CEO 2015 2014% increase

2015% increase

Employee rem

Salary 285,000 275,000 4% –BIKs 28,805 23,816 21% n/aBonus 50,000 76,725 (35)% (15)%Pension 42,750 41,250 4% Nil

Total 406,555 416,791 (2)%

Notes:(1) CEO remuneration is from the single total figure of remuneration table on page 57.(2) The % increase in average remuneration for employees is calculated using wages and salaries (excluding share-based payments, overtime and allowances) for those employees

employed in 2015 and 2014.(3) The % increase in average performance related remuneration is based on the increase in bonus payments for employees of the group who were eligible for a bonus and

employed for both periods.(4) Benefits across the Group remained the same, other than amendments in accordance with HM Revenue & Customs guidelines. The average percentage change in taxable

benefits does not produce a meaningful comparison.(5) Pension rates have not changed across the period.

Relative importance of the spend on payThe chart below shows the Company’s total employee remuneration and dividends distributed for the year under review and the prior year as well as the year-on-year change.

Key highlights:• Total profit after tax from continuing operations was £11,898,000 (2014: £8,693,000).• Staff costs for 2015 were £26,194,000 (2014: £22,419,000). The increase reflects a 4% increase in salaries for existing staff and an increase in

overall staff numbers, predominantly from the full year of CoreLogic Semaphore.• The Company is proposing final dividend of 3.5p for the year ending 31 December 2015.

Payments to departing directorsDuring the year, the Company has not made any payments to past Directors; neither has it made any payments to Directors for loss of office.

Comparison of company performance and CEO remunerationThe following chart shows the total remuneration figure for the Chief Executive role. The current CEO, Alan Stubbs, was also appointed to Chief Executive Officer of CSE Global Ltd (the previous parent company) in January 2011 and the table includes remuneration for both roles. The Company was listed on the London Stock Exchange in December 2013.

Year ended 31 December (£’000)

CEO remuneration Paid by 2010 2011 2012 2013 2014 2015

Salary and benefits UK 222 177 138 157 340 357Singapore 34 133 167 180 – –

Annual bonus UK – – – – 77 50Singapore 600 300 450 3,000 – –

Total remuneration 856 610 755 3,337 417 407

The TSR for Servelec Group plc was rebased on 2 December 2013 at the opening price of £2.07 per share. The issue price was £1.79 and this table excludes the additional value created for Servelec shareholders as a result of the difference between the issue price and the opening price.


TSR data

Application of the policy for 2016The policy will apply to any remuneration made on or after 28 April 2016.

SalaryThe salaries are effective from 1 January 2016 are:

£’000

Alan Stubbs 300Mike Cane 157

Benefits (excluding pension contributions)These will remain as life assurance, a company car, medical insurance and permanent health insurance.

PensionEmployer contributions to the Group Retirement Benefits Scheme money purchase pension arrangement will remain as stated in the policy.

The CEO has opted to have his pension contributions paid in cash less employer’s NI contributions. Mr Stubbs will therefore now receive £39,543 as the cash equivalent of pension.

Annual BonusThe Remuneration Committee has set stretching targets focused on both profit and cash performance for the Company. Although the target detail is considered commercially sensitive the measures and weightings for the year commencing 1 January 2016 are:

Operating profit Operating cashflow Maximum

Alan Stubbs 66.66% 33.33% 100% salaryMike Cane 66.66% 33.33% 100% salary

Two-thirds of any bonus earned will be paid in cash and one-third in shares under the Deferred Share Bonus Plan.

90

100

110

120

130

140

150

160

170

Servelec Group plc FTSE Small Cap (excl. Investment Trusts)

Shar

e pr

ice

(reb

ased

to 1

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t 2 D

ec 2

013)

December 2013 December 2014Apil 2014 August 2014 December 2015Apil 2015 August 2015



LTIPThe Committee intends to award LTIPs of 100% of base salary to the Executive Directors within six weeks of the result announcement, in line with the scheme rules. These levels will be reviewed by the Remuneration Committee for each future LTIP cycle to ensure that they are both realistic and suitably challenging. The 2016 LTIP award performance criteria will be decided by the Remuneration Committee during this six week period.

The LTIP awards are subject to the following performance conditions. The vesting of 50% of an award will be subject to a condition that measures growth in earnings per share (’EPS’) of the Company above inflation over a 3-year performance period:

EPS growth

% Shares Subject LTIP granted 2013 LTIP granted 2015

NIL <8% RPI <14% RPI30% 8% RPI 14% RPI100% 12% RPI 18% RPI

Between 30% and 100% on straight line basis Between 30% and 100% on straight line basis

The vesting of the remaining 50% of an award will be subject to a condition that measures the Company’s Total Shareholder Return (’TSR’) over a 3 year performance period.

TSR growth

% Shares Subject LTIP granted 2013 LTIP granted 2015

NIL <8% RPI <8% RPI30% 8% RPI 8% RPI100% 15% RPI 15% RPI

Between 30% and 100% on straight line basis Between 30% and 100% on straight line basis

The Remuneration Committee may reduce the number of shares to which the LTIP awards relate if the financial results used to determine the number of shares to which any award relates or to measure the satisfaction of a performance condition have been misstated or facts or assumptions used for those purposes are discovered to be incorrect or if the Remuneration Committee determines that other exceptional circumstances exist, for example, a participant’s material misconduct.

LTIP awards will normally vest on the latter of:• The date the Remuneration Committee determines whether any performance condition and/or any other condition has been satisfied

(and then only to the extent that the performance condition and/or any other condition has been satisfied; and• The third anniversary of the grant date.

2015 Shareholder votingAt the Servelec AGM held on 28 April 2015 the shareholders approved the Remuneration Report for the year ended 31 December 2014. Below is the result in respect of the resolution, which required a simple majority of the votes to be cast in favour in order for the resolution to be passed.

Votes for Votes against

96.58% 3.42%

21,916 votes were withheld.

2016 shareholder votingThe annual remuneration report will be put to an advisory shareholder vote at the forthcoming AGM to be held on Thursday 28 April 2016.

ApprovalThis Directors Remuneration Report has been approved by the Board of Directors of Servelec Group plc.

Signed on behalf of the Board of Directors.

Bernie WaldronChairman, Remuneration Committee 1 March 2016


Directors’ report

The Directors are pleased to present the Annual Report and consolidated financial statements of Servelec Group plc for the year ended 31 December 2015.

The corporate governance report on pages 42 to 45 and the corporate social responsibility report (with regard to information about the employment of disabled persons, employee involvement and greenhouse gas emissions) are also incorporated into this report by reference.

The Company has chosen, in accordance with section 414C (11) of the Companies Act 2006 to include the disclosure of likely future developments in the strategic report (see pages 1 to 39).

Financial risk managementThe Company’s objectives and policies on financial risk management including information on the Company’s exposures to market risk, including foreign currency, commodity price, interest rate, inflation rate and equity price risks, credit risk and liquidity risk can be found in note 23 to the financial statements.

The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic Report on pages 1 to 38. The financial position of the Group, its cash flows and liquidity position are described in the Financial Statements on pages 66 to 106. In addition, note 23 to the financial statements includes the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk.

Results and dividendsResults for the year are set out in the Group Income Statement on page 71.

The Directors are proposing the payment of a final dividend of 3.5p in respect of the year ended 31 December 2015.

DirectorsThe names and biographies of the current Directors of the Company are set out on pages 40 and 41 of this Annual Report.

Directors’ share interestsParticulars of the number of Ordinary Shares of the Company in which the Directors were beneficially interested on 31 December 2015 and at 31 December 2014 are set out in the Directors’ Remuneration Report on pages 50 – 61.

Directors’ indemnitiesThe articles permit the Board to grant the Directors indemnities in relation to their duties as Directors, including third party indemnity provisions (within the meaning of the Companies Act) in respect of any liabilities incurred by them in connection with any negligence, default, breach of duty or breach of trust in relation to the Company. No such indemnities have to date been granted.

Compensation for loss of officeThere are no agreements between the Company and its Directors or employees providing for compensation for loss of office or employment that occurs as a result of a takeover bid. Further details of the Directors’ service contracts can be found in the Directors’ Remuneration Report on pages 50 – 61.

Directors’ and Officers’ liability insuranceDirectors’ and Officers’ Liability Insurance cover is in place at the date of this report. The Board remains satisfied that an appropriate level of cover is in place and a review of cover takes place on an annual basis.

Significant agreements: change of controlWe have eight major contracts within the Servelec Group which contain clauses that give the corresponding customers the right to terminate in the event of a change of control subsequent to a takeover bid. Four of these contracts are with Servelec Health & Social Care, one is with Servelec Controls and the remaining contracts are with Servelec Technologies. For three of these contracts the customer’s right of termination subsists for a period of no longer than six months (post-takeover) following which the right to terminate expires. In three of the contracts, the right to terminate is conditional upon the customer exercising its discretion on reasonable grounds.

As disclosed in the Remuneration Report page 55, the Chief Executive Officer’s notice period extends from 12 months to 24 months following a change of control of the Company.

The Company does not have any agreements with any Non-Executive Director, Executive Director or employee that would provide compensation for loss of office or employment resulting from a change of control.

Articles of associationThe Articles of Association (adopted by special resolution on 18 October 2013) may only be amended by special resolution of the shareholders. A copy of the articles is available on request from the Company Secretary.

Share capital: structure, rights and restrictionsDetails of the Company’s share capital are set out in note 24 to the Financial Statements on page 92 . The Company has a single class of share capital divided into Ordinary Shares of £0.18 each. The Ordinary Shares are listed on the London Stock Exchange. The rights and obligations attaching to these shares are governed by UK law and the Company’s Articles of Association.

Voting rights attaching to sharesOrdinary shareholders are entitled to receive notice and to attend and speak at any general meeting of the Company. On a show of hands every shareholder present in person or by proxy (or being a corporation represented by a duly authorised representative) shall have one vote, and on a poll every shareholder who is present in person or by proxy shall have one vote for every share held. The Notice of Annual General Meeting specifies deadlines for exercising voting rights and appointing a proxy or proxies.

Deadlines for exercising voting rights attaching to sharesThe Articles provide a deadline for the submission of proxy forms (whether by an instrument in writing or electronically) of not less than 48 hours before the time appointed for the holding of the meeting or the adjourned meeting.

Shares in uncertificated formDirectors may determine that shares may be held in uncertificated form and title to such shares may be transferred by means of a relevant system or that shares should be cease to be so held and transferred.


Variation of rights attaching to sharesThe articles provide that rights attached to any class of shares may be varied with the written consent of the holders of not less than three-quarters in nominal value of the issued shares, or with the sanction of a special resolution passed at a separate general meeting of the holders of those shares. At every such separate general meeting, the quorum shall be two persons holding or representing by proxy at least one-third in nominal value of the issued shares (calculated excluding any shares held in treasury). The rights conferred upon the holders of any shares shall not, unless otherwise expressly provided in the rights attaching to those shares, be deemed to be varied by the creation or issue of further shares ranking pari passu with them.

Restrictions on voting rights attaching to shares There are no restrictions on the transfer of the Ordinary Shares other than:• the standard restrictions for a UK-quoted company set out in article

17.5 of the Articles of Association; • where, from time to time, certain restrictions may become imposed

by laws and regulations (for example, insider trading laws); and• pursuant to the Listing Rules of the Financial Conduct Authority

whereby certain Directors, officers and employees of the Company require the approval of the Company to deal in the Ordinary Shares.

No shareholder holds securities carrying special rights as to the control of the Company. There are no limitations on the holding of securities. There are no restrictions on voting rights or any arrangements by which, with the Company’s co-operation, financial rights carried by securities are held by a person other than the holder of the securities. There are no agreements between holders of securities that are known to the Company which may result in restrictions on the transfer of voting rights.

Authority to purchase own sharesBy a resolution at the AGM on 28 April 2015, the Directors were authorised to purchase up to 10% of its issued Ordinary Share capital as at the date of admission to listing. This authority will expire at the Annual General Meeting in 2016 at which a resolution to renew the authority for a further year will be proposed. No shares have been purchased by the Company in the last twelve months.

As at 1 March 2016, being the latest practicable date prior to the publication of this report, the Company did not hold any shares in treasury.

Appointment and replacement of DirectorsUnless determined by ordinary resolution of the Company, the number of Directors shall not be less than two or more than ten in number. A Director is not required to hold any shares in the Company by way of qualification.

The Board may appoint any person to be a Director and such Director shall hold office only until the next AGM, when he or she shall be eligible for appointment by the shareholders. The articles provide that at each AGM, one-third of the Directors for the time being (or, if their number is not a multiple of three, then the number nearest to but not less than one-third) shall retire from office. A Director who retires at any AGM shall be eligible for re-appointment. In addition, any director appointed by the Board shall hold office only until the next following AGM and shall then be eligible for appointment.

Power of DirectorsSubject to the Articles, the Companies Act and any directions given by special resolution, the business of the Company shall be managed by the Board who may exercise all the powers of the Company to, for example, borrow money; mortgage or charge any of its undertaking, property and uncalled capital; and issue debentures and other securities, whether outright or as collateral security for any debt, liability or obligation of the Company.

Greenhouse gas emissionsThe Company’s disclosures on greenhouse gas emissions can be found in the CSR section of the Strategic Report on page 38 and form part of the Directors’ Report.

Employment policiesArrangements for consulting and involving Group employees on matters affecting their interests at work, and informing them of the performance of their employing business and the Group, are developed in ways appropriate to each business. A variety of approaches is adopted aimed at encouraging the involvement of employees in effective communication and consultation, and the contribution of productive ideas at all levels.

Employment policies are designed to provide equal opportunities irrespective of race, caste, national origin, religion, age, disability, gender, marital status, sexual orientation or political affiliation. Group policy is to ensure that disabled applicants for employment are given full and fair consideration having regard to their particular aptitudes and abilities, and that existing disabled employees are given equal access to training, career development and promotion opportunities. In the event of existing employees becoming disabled, all reasonable means would be explored to achieve retention in employment in the same or an alternative capacity, including arranging appropriate training. Further details in relation to the Group’s Employment policy is set out in the CSR section of the Strategic Report on page 36 .

Political donationsThe Company has made no political donations during 2014 and intends to continue its policy of not doing so for the foreseeable future.

Major interests in sharesAs at 31 December 2015, the Company had been advised, in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority, of the following notifiable interests (whether directly or indirectly held) in 3% or more of its voting rights:

Notification received fromNumber of

voting rights %

Schroders plc 12,933,509 18.638Strategic Equity Capital 5,946,927 8.57Henderson Global Investors 4,710,293 6.78Legal & General Group Plc 3,853,612 5.54Invesco Limited 3,726,329 5.37NFU Mutual Insurance Society Ltd 3,482,200 5.02Old Mutual Plc 2,642,840 3.81SFM UK Management LLP 2,218,652 3.24

Since the year end there have been the following significant changes:

Notification received fromNumber of

voting rights %

Aviva plc 2,305,000 3.32


Directors’ report Continued

Audit informationEach of the Directors at the date of the approval of this report confirms that:• so far as he is aware, there is no relevant audit information of which

the Company’s auditors are unaware; and• he has taken all the reasonable steps that he ought to have taken as

a Director to make himself aware of any relevant audit information and to establish that the Company’s auditors are aware of the information.

The confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.

AuditorsThe Auditors, Ernst & Young LLP have indicated their willingness to continue in office and a resolution seeking to reappoint them will be proposed at the Annual General Meeting.

Annual general meetingThe Company’s Annual General Meeting will be held at Thursday 28 April 2016 at 9.30am, at the offices of Investec Plc, 2 Gresham Street, London, EC2V 7QN. Details of the meeting venue and the resolutions to be proposed are set out in a separate Notice of Meeting which accompanies the Annual Report. The Directors consider that all of the proposed resolutions are in the best interests of the Company and its shareholders as a whole. It is the Directors’ recommendation that you support the proposed resolutions and vote in favour of them, as each of the Directors intends to do.

Going concernAfter making enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. In making this assessment they have considered the Company and Group budgets, and cash flow forecasts for the period to December 2016. The Company has considerable financial resources, negligible liquidity risk and is operating within a sector that is experiencing relatively stable demand for its products. The Directors therefore have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

The Directors have also considered the viability of the Company over a three year period as reported on page 34.

Post Balance Sheet EventOn 1 March 2016, Servelec Group agreed to purchase the Synergy business from Tribal Group Plc (see Note 29).

The Directors’ Report has been approved by the Board of Directors of Servelec Group plc.

Signed on behalf of the Board.

Richard LastChairman and Non-Executive Director1 March 2016


Statement of Directors’ responsibilities in relation to the Group financial statements

The Directors are responsible for preparing the Annual Report and the Group Financial Statements in accordance with applicable United Kingdom law and those International Financial Reporting Standards (IFRS) as adopted by the European Union.

Under Company Law the Directors must not approve the Group Financial Statements unless they are satisfied that they present fairly the financial position of the Group and the financial performance and cash flows of the Group for that period. In preparing the Group Financial Statements, the Directors are required to:• select suitable accounting policies in accordance with IAS 8

’Accounting Policies, Change in Accounting Estimates and Errors’ and then apply them consistently;

• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

• provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group’s financial position and financial performance;

• state that the Group has complied with IFRSs, subject to any material departures disclosed and explained in the Financial Statements; and

• make judgements and accounting estimates that are reasonable and prudent.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the Financial Statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are also responsible for preparing the Strategic Report, Directors’ Report, the Directors Remuneration Report, the Audit Committee Report and the Corporate Governance Statement in accordance with the Companies Act 2006 and applicable regulations, including the requirements of the Listing Rules and the Disclosure and Transparency Rules.

Directors’ Responsibility StatementEach of the Directors listed on pages 40 – 41, confirms that to the best of their knowledge:• the Financial Statements, prepared in accordance with IFRS as

adopted by the European Union, give a true and fair review of the assets, liabilities, financial position and results of Servelec and its subsidiaries included in the consolidation taken as a whole;

• the Strategic Report (including the business model, the strategy, the business reviews, the divisional reviews, the risk management report and corporate Social Responsibility report) and the Directors’ Report (including the Corporate Governance Reports) include a fair review of the development and performance of the business and the position of Servelec and its subsidiaries included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

• the Report (including the Financial Statements), taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess and provide Servelec’s performance, business model and strategy.

Signed on behalf of the Board

AR Stubbs MG CaneChief Executive Officer Chief Financial Officer


Our opinion on the financial statementsIn our opinion:• Servelec Group plc’s Group financial statements and Parent company financial statements (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 profit 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 United Kingdom Generally Accepted Accounting

Practice, including FRS101 Reduced Disclosure Framework; 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.

What we have auditedServelec plc’s financial statements comprise:

Group Parent company

Consolidated balance sheet as at 31 December 2015 Balance sheet as at 31 December 2015

Consolidated income statement for the year then ended Related notes i to xiv to the financial statements

Consolidated statement of comprehensive income for the year then ended Statement of comprehensive income for the year then ended

Consolidated statement of changes in equity for the year then ended Statement of changes in equity for the year then ended

Consolidated cash flow statement for the year then ended

Related notes 1 to 29 to the financial statements

The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including FRS 101 “Reduced Disclosure Framework”.

Overview of our audit approach

Risks of material misstatement

• Revenue Recognition relating to long-term contracts. • Revenue Recognition relating to product sales.

Audit scope • We performed an audit of the complete financial information of 6 components and audit procedures on specific balances for a further 2 components.

• The components where we performed full or specific audit procedures accounted for 101% of profit before tax (2014: 101%), 97% of revenue (2014: 95%), and 99% of total assets (2014: 100%).

• For the remaining components we have performed review and other procedures as appropriate.

Materiality • Overall Group materiality of £670,000 which represents 5% of profit before tax.

Independent auditor’s report to the members of Servelec Group plc


Our assessment of risk of material misstatement We identified the risks of material misstatement described below as those that had the greatest effect on our overall audit strategy, the allocation of resources in the audit and the direction of the efforts of the audit team. In addressing these risks, we have performed the procedures below which were designed in the context of the financial statements as a whole and, consequently, we do not express any opinion on these individual areas.

Risk Our response to the riskWhat we concluded to the Audit Committee

Revenue recognition: long-term contract accountingRefer to page 48 (Audit Committee Report) and page 76 (notes).

We focused on this area as revenue recognised from long-term contracts makes up approximately three quarters of the total Group revenue. Further, the timing of revenue recognition has inherent complexities when accounting for long-term contracts, as recognition relies on estimates of the costs to complete for each project.

As such, there is the potential for error and for management to manipulate of the timing of revenue recognition.

With the exception of newly acquired entities (determined as entities acquired with in the previous 24 months), we performed audit procedures on the internal financial controls in place on all in scope entities to ensure the appropriate determination of the percentage completion of each contract. For newly acquired entities, being 1 of the 8 in scope locations, we did not test controls and instead performed additional test of transactions, applying a lower testing threshold. This was assessed as the most effective audit approach whilst the entity is transitioned into the Group.

For all in scope entities, we performed analytical review procedures, which included comparing costs incurred, sales invoices raised and margins per contract to that at prior year. We met with the project manager for each significant contract to understand the progress during the period, the risk areas associated with each contract, appropriateness of forecast costs to complete including any contingency provisions, and comparison of margins and forecasts to the prior year position. All key terms were agreed to the contract for each significant contract.

We performed detailed tests of transactions, agreeing a sample of costs and income back to supporting evidence, such as invoices and contractual billing schedule. We also ensured that management’s policies and processes for making these estimates continue to be appropriate and are applied consistently to all contracts through our test of contract management controls and discussions held with Group management and project managers. We challenged and applied professional scepticism to judgements and accounting treatments made by management arising from contractual disputes and other risks. We recalculated forecast margin, work in progress and revenue for all contracts to ensure that the calculations were correctly performed and in line with the Group’s accounting policies as well as the requirements of IFRS.

We consider these to be the key judgemental areas driving the recognition of revenue and margins in respect of long term contracts.

Based on our audit procedures we concluded that revenue is appropriately recognised in accordance with IAS 11 and IAS 18.

Revenue recognised from long-term contracts makes up approximately 85% of the total Group revenue.

We performed full and specific scope audit procedures over this risk area in 8 locations, which covered 95% of the risk amount.

Other procedures are performed on the remaining balance as discussed in ”The scope of our audit” section of this report.

Revenue recognition: product salesRefer to page 48 (Audit Committee Report) and page 76 (notes).

Revenue recognised from product sales makes up approximately one quarter of the total Group revenue. There is a risk concerning inappropriate revenue recognition when the risks and rewards of the product have not yet passed to the customer and revenue is recognised.

The component auditors carried out a fully substantive audit approach, which consisted of overall analytical review procedures on monthly revenue and margin analysis by product line and other substantive procedures. The other procedures performed included cut-off testing, review of credit notes raised post year end and detailed test of transactions back to supporting evidence.

We reviewed and discussed the planned approach to test revenue recognition with the component auditors. We reviewed the results of the testing performed and discussed further with the component auditors as deemed necessary. For the location designation full scope, we attended the audit closing meeting and reviewed the audit working papers to verify that the audit procedures carried out on revenue testing were in line with the approach agreed in order to address the significant risk identified.

Based on our audit procedures we concluded that revenue is appropriately recognised in accordance with IAS 18.

Revenue recognised from product sales makes up approximately 15% of the total Group revenue.

The component auditors performed full and specific scope audit procedures over this risk area in 2 locations, which covered 74% of the risk amount.

Other procedures are performed on the remaining balance as discussed in ”The scope of our audit” section of this report.

In the prior year, our auditor’s report included a risk of material misstatement in relation to Accounting for the acquisition of Corelogic. In the current year, this was no longer designated as a risk of material misstatement.


The scope of our audit Tailoring the scopeOur assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each entity within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We take into account size, risk profile, the organisation of the group, changes in the business environment and other factors when assessing the level of work to be performed at each entity.

In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate quantitative coverage of significant accounts in the financial statements, of the 14 reporting components of the Group, we selected 8 components covering entities within UK, Belgium and Australia, which represent the principal business units within the Group.

Of the 8 components selected, we performed an audit of the complete financial information of 6 components (“full scope components”) which were selected based on their size or risk characteristics. For the remaining 2 components (“specific scope components”), we performed audit procedures on specific accounts within those components that we considered had the potential for the greatest impact on the significant accounts in the financial statements either because of the size of these accounts or their risk profile. The audit scope of these components may not have included testing of all significant accounts of the component but will have contributed to the coverage of significant tested for the Group.

We consider revenue, profit before tax excluding non-recurring items and total assets to be key measures for the Group.

2015 2014

Number of components subject to full audits 6 5Number of components subject to specific scope audit procedures 2 2

Coverage of revenue from full scope components 93% 88%Coverage of revenue from specific scope components 4% 7%

Coverage of revenue from full and specific scope components 97% 95%

Coverage of profit before tax excluding non-recurring items from full scope components 101% 101%Coverage of profit before tax excluding non-recurring items from specific scope components 0% 0%

Coverage of profit before tax excluding non-recurring items from full and specific scope components 101% 101%

Coverage of total assets from full scope components 93% 87%

Coverage of total assets from specific scope components 6% 2%

Coverage of total assets from full and specific scope components 99% 89%

Of the remaining 6 components that together represent -1% of the Group’s profit before tax, none are individually greater than 1% of the Group’s profit before tax. For these components, we performed other procedures, including analytical review, testing of consolidation journals and intercompany eliminations and foreign currency translation recalculations to respond to any potential risks of material misstatement to the Group financial statements.

The charts below illustrate the coverage obtained from the work performed by our audit teams.

Profit before tax Revenue Total assets

101% Full scope components0% Specific scope components-1% Other procedures

93% Full scope components

4% Specific scope components3% Other procedures

93% Full scope components

6% Specific scope components1% Other procedures

Involvement with component teams In establishing our overall approach to the Group audit, we determined the type of work that needed to be undertaken at each of the components by us, as the group audit engagement team, or by component auditors from other firms operating under our instruction.

Of the 6 full scope components, audit procedures were performed on 5 of these directly by the primary audit team. For the specific scope component, as the work was performed by component auditors, we determined the appropriate level of involvement to enable us to determine that sufficient audit evidence had been obtained as a basis for our opinion on the Group as a whole.

Independent auditor’s report to the members of Servelec Group plcContinued


The Group audit team continued to follow a programme of planned visits that has been designed to ensure that the Senior Statutory Auditor or his designate visits each full scope location at least once every other year on a rotational basis. During the current year’s audit cycle, visits were undertaken by the primary audit team to the component team in Belgium, being the only full scope location not audited by the primary team. This visit involved:• Discussing the audit approach and the relevant financial statement risks with the component team;• Meeting with local management and attending the closing meeting; and• Reviewing key audit working papers on the relevant financial statement risk areas.

The group team interacted regularly with the component teams where appropriate during various stages of the audit, reviewed key working papers and were responsible for the scope and direction of the audit process. This, together with the additional procedures performed at Group level, gave us appropriate evidence for our opinion on the Group financial statements.

Our application of materialityWe apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in forming our audit opinion.

MaterialityThe magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures.

We determined materiality for the Group to be £670,000 (2014: £550,000), which is 5% (2014: 5%) of profit before tax excluding non-recurring items. We believe that profit before tax excluding non-recurring items of £nil (2014: £410,000) provides us with most relevant measure of Group profitability.

Performance materialityThe application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.

On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was that performance materiality was 75% (2014: 75%) of our planning materiality, namely £502,000 (2014: £413,000). We have set performance materiality at this percentage due to our past experience of the audit that indicate a lower risk of misstatements, both corrected and uncorrected.

Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement accounts is undertaken based on a percentage of total performance materiality. The performance materiality set for each component is based on the relative scale and risk of the component to the Group as a whole and our assessment of the risk of misstatement at that component. In the current year, the range of performance materiality allocated to components was £88,000 to £327,000 (2014: £82,500 to £390,000).

Reporting thresholdAn amount below which identified misstatements are considered as being clearly trivial.

We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £33,500 (2014: £27,500), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.

We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant qualitative considerations in forming our opinion.

Scope of the audit of the financial statementsAn audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group’s and the parent company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Respective responsibilities of directors and auditorAs explained more fully in the Directors’ Responsibilities Statement set out on page 65, 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 and express an opinion on 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.

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.


Opinion on other matters prescribed by the Companies Act 2006In our opinion:• the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and• the information given in the Strategic Report and the Directors’ 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

ISAs (UK and Ireland) reporting

We are required to report to you if, in our opinion, financial and non-financial information in the annual report is: • materially inconsistent with the information in the audited financial statements; or • apparently materially incorrect based on, or materially inconsistent with, our knowledge of the

Group acquired in the course of performing our audit; or • otherwise misleading.

In particular, we are required to report whether we have identified any inconsistencies between our knowledge acquired in the course of performing the audit and the directors’ statement that they consider the annual report and accounts taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the entity’s performance, business model and strategy; and whether the annual report appropriately addresses those matters that we communicated to the audit committee that we consider should have been disclosed.

We have no exceptions to report.

Companies Act 2006 reporting

We are required 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 and the part of the Directors’ Remuneration Report

to be audited 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.


Listing rules review requirements

We are required to review:• the directors’ statement, set out on page 65, in relation to going concern; and• the part of the Corporate Governance Statement relating to the company’s compliance with the

ten provisions of the UK Corporate Governance Code specified for our review.


Statement on the Directors’ Assessment of the Principal Risks that Would Threaten the Solvency or Liquidity of the Entity

ISAs (UK and Ireland) reporting

We are required to give a statement as to whether we have anything material to add or to draw attention to in relation to:• the directors’ confirmation in the annual report that they have carried out a robust assessment

of the principal risks facing the entity, including those that would threaten its business model, future performance, solvency or liquidity;

• the disclosures in the annual report that describe those risks and explain how they are being managed or mitigated;

• the directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of accounting in preparing them, and their identification of any material uncertainties to the entity’s ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements; and

• the directors’ explanation in the annual report as to how they have assessed the prospects of the entity, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the entity will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.

We have nothing material to add or to draw attention to.

Stuart Watson Senior statutory auditorfor and on behalf of Ernst & Young LLP, Statutory AuditorLeeds1 March 2016

Notes:1. The maintenance and integrity of the Servelec Group PLC web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of

these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the web site.

2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Independent auditor’s report to the members of Servelec Group plcContinued


Group income statementFor the year ended 31 December

Note2015

£’0002014

£’000

Revenue 3,4 63,095 51,753Cost of sales (32,815) (28,306)

Gross profit 30,280 23,447Selling and distribution expenses (2,427) (1,875)Administration and other expenses before amortisation (12,328) (10,191)

EBITA* 15,525 11,381

Amortisation on acquired intangible assets (2,130) (874)

Operating profit from continuing operations 6 13,395 10,507Finance costs 11 (68) (9)Finance income 10 37 92

Profit before taxation from continuing operations 13,364 10,590Income tax expense 12 (1,466) (1,897)

Profit for the financial period 11,898 8,693

Earnings per share:Basic earnings per share for continuing operations 8 17.1p 12.7pDiluted earnings per share for continuing operations 16.7p 12.5p

* EBITA equals operating profit from continuing operations excluding acquired intangible amortisation.

Group statement of comprehensive income2015

£’0002014

£’000

Profit for the financial period 11,898 8,693

Other comprehensive income to be reclassified through the income statementExchange differences on translation of foreign operations (233) (909)

Total comprehensive income for the financial period, net of tax 11,665 7,784


Group statement of financial position

Note31 Dec 2015

£’00031 Dec 2014

£’000

ASSETSNon-current assetsProperty, plant and equipment 13 3,048 2,613Intangible assets* 14 47,739 47,277Deferred tax asset 12 270 163

Total non-current assets 51,057 50,003

Current assetsInventories 16 1,482 1,280Trade and other receivables 17 22,151 27,674Cash and cash equivalents 19 9,896 5,960

Total current assets 33,529 34,914

TOTAL ASSETS 84,586 84,917

EQUITY AND LIABILITIESCurrent LiabilitiesTrade and other payables* 20 17,372 24,514Current corporation tax 285 2,053

Total current liabilities 17,657 26,567

Non-current liabilitiesProvisions 21 189 324Deferred tax liabilities 12 2,383 2,734

Total non-current liabilities 2,572 3,058

TOTAL LIABILITIES 20,229 29,625

Equity shareholders’ fundsShare capital 24 12,491 12,491Share premium 24 3,563 3,563Share-based payment reserve 25 1,173 546Currency translation reserve (1,069) (836)Retained earnings 48,199 39,528

Total equity shareholders’ funds 64,357 55,292

TOTAL EQUITY AND LIABILITIES 84,586 84,917

* Comparatives have been restated as a result of a hindsight adjustment for a business combination (note 27).

Approved by the Board on 1 March 2016 and signed on its behalf by:



Group statement of changes in equity

NoteShare capital

£’000

Share premium

£’000

Share-basedpayment

reserve£’000

Currency translation

reserve£’000

Retained earnings

£’000Total£’000

Balance as at 1 January 2014 12,300 754 41 73 31,859 45,027

Profit for the period – – – – 8,693 8,693Other comprehensive income – – – (909) – (909)Share-based payments 25 – – 434 – – 434Tax on share-based payments – – 71 – – 71Issue of shares 24 191 2,809 – – – 3,000Dividends 9 – – – – (1,024) (1,024)

Balance as at 31 December 2014 12,491 3,563 546 (836) 39,528 55,292

Profit for the period – – – – 11,898 11,898Other comprehensive income – – – (233) – (233)Share-based payments 25 – – 626 – – 626Tax on share-based payments – – 1 – – 1Issue of shares 24 – – – – – –Dividends 9 – – – – (3,227) (3,227)

Balance as at 31 December 2015 12,491 3,563 1,173 (1,069) 48,199 64,357


Note2015

£’0002014

£’000

Profit before tax 13,364 10,590Adjustments to reconcile profit before tax to net cash flows:

Depreciation and impairment of property, plant and equipment 13 852 405Share based payment expenses 25 626 434Amortisation and impairment of intangible assets 14 2,207 929Loss on disposal of property, plant and equipment – –Finance income 10 (37) (92)Finance costs 11 68 9Movement in provisions 21 (135) (205)

Working capital adjustments(Increase)/decrease in trade and other receivables and prepayments 6,043 2,580(Increase)/decrease in inventories (202) (196)Increase/(decrease) in trade and other payables (3,195) 2,907

Cash flows from operating activities 19,591 17,361

Interest received 37 92Interest paid (68) (9)Income tax paid (3,814) (2,699)

Net cash flows from operating activities 15,746 14,745

Investing activitiesPurchase of property, plant and equipment and intangibles (1,382) (1,316)Acquisition of subsidiary undertaking net of cash acquired 27 (84) (13,322)

Net cash flows from investing activities (1,466) (14,638)

Financing activitiesRepayments of loans (6,901) –Dividends paid (3,227) (1,024)Proceeds from the issue of shares – –

Net cash flows from financing activities (10,128) (1,024)

Net increase in cash and cash equivalents 4,152 (917)

Net foreign exchange difference (216) (661)

Cash and cash equivalents at start of period 5,960 7,538

Cash and cash equivalents at end of period 9,896 5,960

Cash flow statementFor the year ended 31 December


1. General informationThe principal activities of Servelec Group plc (“Company”) and its subsidiaries (together “the Group”) are the design, manufacture, installation and commissioning of patient record systems, social care case management software, process automation systems, wide area Telemetry systems including pipeline control systems, management information systems and the development, manufacture and sale of electronic and microprocessor monitoring equipment.

Servelec Group plc is a public limited company incorporated and domiciled in the United Kingdom with company number 3098411. The registered office is located at Rotherside Road, Sheffield, S21 4HL. The Company wholly owns the subsidiaries listed in note 26, which together form Servelec Group plc (“the Group”). The historical financial information presented in the financial statements is at and for the years ended 31 December 2015 and 31 December 2014 and comprises a consolidation of the financial information of Servelec Group plc and all of its subsidiaries.

2. Summary of significant accounting policiesThe basis of preparation and accounting policies used in preparing the Group financial information for the years ended 31 December 2015 and 2014 are set out below. These accounting policies have been consistently applied in all material respects to all the periods presented. The financial statements are presented in Sterling (£’000).

Basis of preparationThe consolidated historical financial information has been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted for use in the European Union. The financial information has been prepared based on those standards and using the principal accounting policies outlined below.

The financial information has been prepared on a historical cost basis, excepted where stated otherwise.

The financial information has been presented in sterling, rounded to the nearest thousand (£’000) unless otherwise stated and has been prepared on a going concern basis.

The statement of financial position has been categorised into current and non-current items in accordance with IAS 1 ’Presentation of Financial Statements’. To aid clarity, a number of items have been summarised both in the balance sheet and in the income statement. These are discussed in detail in the notes to the financial statements.

New standards and interpretations There are no IFRS or IFRIC interpretations effective for the first time this financial year that have had a material impact on the Group.

Adoption of new and revised standardsThe directors also considered the impact on the Group of other new and revised accounting standards, interpretations or amendments. The following revised and new accounting standards may have a material impact on the Group are currently issued but not yet effective for the Group for the year ended 31 December 2015:• IFRS 15, “Revenue from Contracts with Customers” (effective date 1 January 2018)• IFRS 16, “Leases” (effective date 1 January 2019)• IFRS 9, “Financial Instruments” (effective date 1 January 2018)

The Group is in the process of assessing the impact that the application of these standards will have on the Group’s financial statements.

Going concernThe financial statements have been prepared on a going concern basis. In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future.

Further information in relation to the Group’s business activities, together with the factors likely to affect its future development, performance and position is set out in the Strategic Report on pages 1 to 38.

Note 23 to the financial statements includes the Group’s objectives, policies and processes for managing its capital, its financial risk management objectives and its exposure to foreign exchange, credit and interest rate risk. Further details of the Group’s cash balances are included in note 19 of the financial statements.

The Directors have assessed the future funding requirements of the Group and the Company and compared them to the level of cash in the business. The assessment included a detailed review of financial and cash flow forecasts for at least the 12-month period from the date of signing the Annual Report. The Directors considered a range of potential scenarios within the key markets the Group serves and how these might impact on the Group’s cash flow. The Directors also considered what mitigating actions the Group could take to limit any adverse consequences. The Group’s forecasts and projections show that the Group should be able to operate without the need for any borrowing facilities.

Having undertaken this work, the Directors are of the opinion that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Annual Report and Accounts.

Notes to the financial statements


2. Summary of significant accounting policies continuedConsolidationThe financial information comprises a consolidation of the financial information of Servelec Group plc and all its subsidiaries. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.

Subsidiaries are all entities over which the Group has control. The Group controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Thus, the Group controls an investee if and only if the Group has all of the following: power over the investee; exposure, or rights, to variable returns from its involvement with the investee; and the ability to use its power over the investee to affect the amount of the investor’s returns. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

Inter-company transactions, balances and unrealised gains and losses resulting from intra-group transactions and dividends are eliminated in full.

Segment informationOperating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segment has been identified as the main Board of Directors.

RevenueRevenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty.

Rendering of servicesRevenue from the rendering of services is recognised with reference to the stage of completion. Stage of completion is measured by reference to costs incurred to date as a percentage of total estimated costs. Revenue on short-term projects is recognised once the service has been fully delivered to the client.

Sale of goodsRevenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods.

Long-term contractsIn the case of long-term contracts, revenue reflects the value of contract activity during the year in proportion to the costs incurred to date. Long-term contracts are valued at cost plus attributable profit less foreseeable losses. Attributable profit is included when the outcome of a contract can be assessed with reasonable certainty. The value of long-term contracts is accounted for within revenue and the excess of this value over payments received on account is included in receivables. Payments received on account in excess of this value are included in payables.

Licence incomeLicences charged to customers for the use of proprietary software are assessed on a contract by contract basis and depending on the terms are either taken on delivery or spread on a usage basis over the term of the contract.

Interest incomeFor all financial instruments measured at amortised cost, interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income is included in finance income in the income statement.

Foreign currencyFunctional and presentation currencyThe Group’s consolidated financial statements are presented in Sterling, which is also the parent company’s functional currency. For each entity the Group determines the functional currency and items included in the financial statements of each entity are measured using that functional currency.

The functional currency is the currency of the primary economic environment in which the company operates.

Transactions and balancesTransactions in foreign currencies are initially recorded in the functional currency by applying the spot exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the balance sheet date. All differences are taken to the income statement.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

Notes to the financial statements Continued


2. Summary of significant accounting policies continuedGroup companiesThe assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation are translated into Sterling at the rate of exchange ruling at the balance sheet date. Income and expenses are translated at exchange rates ruling at the time of the transaction. The resulting exchange differences are taken directly to a separate component of equity.

Property, plant and equipmentProperty, plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing part of the property, plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met.

Depreciation is calculated to write down the cost of the assets over the estimated useful lives on the following bases:• Plant, machinery, fixtures and fittings 10-25% per annum• Motor vehicles 25% per annum• Freehold property 2% per annum

The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at the end of each reporting period and adjusted prospectively, if appropriate. The carrying values of property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable.

An item of property, plant and equipment and any significant part is derecognised upon disposal or where no future economic benefits are expected to arise from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised.

Intangible assetsGoodwillGoodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in ’intangible assets’. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

For the purposes of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash generating units (’CGUs’) that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

Computer software and licencesThird party software licences purchased and software recognised when acquired as part of a business combination are amortised in equal amounts over a period of 5 to 7 years, which is estimated to be their useful life.

Customer relationshipsIntangible assets classified as customer relationships are recognised when acquired as part of a business combination and are measured initially at fair value. Customer relationships are amortised evenly over their expected useful lives of 10 to 15 years.

Order backlogIntangible assets classified as order backlog are recognised when acquired as part of a business combination and are measured initially at fair value. Order backlogs are amortised evenly over their expected useful lives of between 1 and 6 years.

Research and development costsResearch costs are expensed as incurred. Development expenditures are capitalised and recognised as an intangible asset when the Group can demonstrate: • it is technically feasible to complete the intangible asset so that it will be available for use or sale;• its intention to complete and use or sell the asset;• how the asset will generate probable future economic benefits;• adequate technical, financial and other resources to complete the development and to use or sell the asset; and• the ability to reliably measure the expenditure during development.

Costs that qualify for capitalisation include both internal and external costs, but are limited to those that are directly related to the specific project. Development costs are included at capitalised costs less accumulated amortisation and any recognised impairment loss.

Amortisation is calculated to write down the cost of the asset on a straight-line basis over their estimated useful lives, which range from up to 5 years. Useful lives are reviewed at the end of each reporting period and adjusted if appropriate.


2. Summary of significant accounting policies continuedImpairment of non-financial assetsAssets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. Where the asset does not generate cash flows that are independent from other assets, the Company estimates the recoverable amount of the cash-generating unit (CGU) to which the asset belongs. For tangibles and intangibles the allocation is made to those CGU units that are expected to benefit from the asset.

Any impairment charge is recognised in the income statement in the period in which it occurs. Where an impairment loss subsequently reverses due to a change in the original estimate, the carrying amount of the asset is increased to the revised estimate of its recoverable amount. Financial instrumentsFinancial assetsThe Group classifies its financial assets as loans and receivables. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting date. These are classified as non-current assets. The Company’s loans and receivables comprise ’trade and other receivables’ and cash and cash equivalents in the statement of financial position. Subsequent to initial recognition, these assets are carried at amortised cost using the effective interest method.

Financial liabilitiesThe Company initially recognises its financial liabilities at fair value and subsequently they are measured at amortised cost using the effective interest method.

Impairment of financial assetsAn assessment of whether there is objective evidence of impairment is carried out for all financial assets at the balance sheet date. This assessment may be of individual assets (’individual impairment’) or of a portfolio of assets (’collective impairment’). A financial asset is considered to be impaired if, and only if, there is objective evidence of impairment as a result of 1 or more events that occurred after the initial recognition of the asset (a ’loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset that can be reliably estimated.

For individual impairment the principal loss event is 1 or more missed payments, although other loss events can also be taken into account, including arrangements in place to pay less than the contractual payments, fraud and bankruptcy or other financial difficulty indicators. An assessment of collective impairment will be made of financial assets with similar risk characteristics. For these assets, portfolio loss experience is used to provide objective evidence of impairment.

For financial assets carried at amortised cost, the charge to the income statement reflects the movement in the level of provisions made, together with amounts written off net of recoveries in the period.

Dividend distributionDividend distribution to the Company’s shareholders is recognised as a liability in the Company’s financial statements in the period in which the dividends are approved by the Board of Directors. Dividends are paid at the discretion of the Board of Directors.

Share-based paymentsThe Group operates equity settled, share-based compensation plans. The fair value of the employee services received in exchange for the grant of the options is calculated using a Black-Scholes pricing model and is recognised as an expense over the vesting period. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options or performance shares granted. At each balance sheet date, the Group revises its estimates of the number of options that are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in the income statement, and a corresponding adjustment to equity over the remaining vesting period. No expense is recognised for awards that do not ultimately vest except for awards where vesting is conditional upon market or non-vesting conditions which are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied provided that all other performance or service conditions are satisfied.

PensionsThe Group operate a defined contribution scheme. Assets of the scheme are held separately from those of the company in independently administered funds. The amount charged against profits represents the contribution payable to the schemes in respect of the financial period.

LeasesThe determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at its inception date. The arrangement is assessed for whether fulfilment of the arrangement is dependent upon the use of a specific asset or assets or the arrangement conveys the right to use the asset or assets, even if that right is not explicitly specified in an arrangement.

Operating leasesLeases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Operating lease payments are recognised as an operating expense in the income statement on a straight-line basis over the lease term.



2. Summary of significant accounting policies continuedInventoriesInventories are valued at the lower of cost and net realisable value.

Cash and cash equivalentsCash and cash equivalents in the statement of financial position comprise cash at bank, short-term deposits held at call with banks and other short-term highly liquid investments with original maturities of 3 months or less, and bank overdrafts. In the balance sheet, bank overdrafts are shown as borrowings in current liabilities.

Current taxationCurrent tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantially enacted by the balance sheet date.

Income tax relating to items recognised in comprehensive income or directly in equity is recognised in comprehensive income or equity and not in the income statement.

Deferred taxationDeferred income tax is provided using the liability method on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, with the following exceptions:• where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business

combination that at the time of the transaction affects neither accounting nor taxable profit or loss;• in respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary

differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and• deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which deductible

temporary differences, carried forward tax credits or tax losses can be utilised.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date.

Discontinued operationsThe Group classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. The criteria for held for sale classification is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the income statement.

Property, plant and equipment and intangible assets are not depreciated or amortised once classified as held for sale.


2. Summary of significant accounting policies continuedBusiness combinations and goodwillBusiness combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interest in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses.

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests over the identifiable assets acquired and liabilities assumed. If the consideration transferred is less than the fair value of the net assets acquired, the gain is recognised directly in the income statement.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognised in profit or loss.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IAS 39 Financial Instruments: Recognition and Measurement, is measured at fair value with changes in fair value recognised in profit or loss or as a change to other comprehensive income. If the contingent consideration is not within the scope of IAS 39, it is measured in accordance with the appropriate IFRS. Contingent consideration that is classified as equity is not remeasured and subsequent settlement is accounted for within equity.

The preparation of the financial statements in accordance with IFRS requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Estimates and assumptionsThe key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances beyond the control of the Group. Such changes are reflected in the assumptions when they occur.

Contract costsAs set out in the revenue recognition accounting policy note, revenue from long-term contracts is recognised in proportion to the costs incurred to date. Costs to complete on contracts are based on management estimates and are reviewed on a monthly basis for appropriateness. Changes to estimates can result in variations in the percentage complete of a contract and therefore the amounts charged to the Group’s income statement.

Business combinationsAs set out in the business combinations and goodwill accounting policy note, intangible assets and goodwill is calculated based on management estimates of fair value calculated with reference to the information available at the time.

Exceptional itemsThe Group discloses exceptional items in a separate note (note 7) being those material items of income and expense which, because of the nature and expected infrequency of the events giving rise to them, merit separate presentation to allow shareholders to understand better the elements of financial performance in the year, so as to facilitate comparison with prior periods and to assess better trends in financial performance.

3. RevenueRevenue recognised in the income statement is analysed as follows:

2015£’000

2014 £’000

Sale of goods 8,567 11,780Rendering of services 20,600 7,215Long-term contracts 33,928 32,758

63,095 51,753

No revenue was derived from exchanges of goods or services.



4. Segment informationFor management purposes, the Group is organised into business units according to the nature of the products and services, and has two divisions and three reportable segments as follows:

The Health & Social Care division develops high quality, enterprise-wide systems for implementation across community health, mental health, child health, social care and hospital based services. The segment supplies software and IT solutions and services into the healthcare and social services markets. It is made up of two business units, Healthcare and Social Care, which have been aggregated as the Board consider that they have similar economic characteristics.

The Automation division is made up of two operating segments, Controls and Technologies.

The Controls segment is engaged in the provision of complex, mission critical control and safety systems to the oil and gas, power and nuclear industries.

The Technologies segment specialises in wide area telemetry control systems, business optimisation consultancy and remote telemetry units to the water, oil and gas and rail industries.

Management monitors the operating results of its business units separately for the purposes of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss, which in certain respects, as explained in the table below, is measured differently from operating profit or loss in the consolidated financial statements. This measurement basis excludes the effect of central services, non-recurring expenditure, purchased intangible amortisation and group financing costs which are not allocated to operating segments.

Transfer prices between operating segments are on an arm’s-length basis in a manner similar to transactions with third parties.

The following tables present revenue and profit information for continuing operations regarding the Group’s business segments for the years ended 31 December 2015 and 31 December 2014.

Automation


Servelec Health &

Social Care£’000

ServelecControls

£’000

ServelecTechnologies

£’000Central

£’000Total£’000

Segment revenue 32,532 14,421 16,142 – 63,095Cost of sales (16,347) (8,694) (7,774) – (32,815)

Gross profit 16,185 5,727 8,368 – 30,280Overheads (4,105) (2,371) (4,897) (2,756) (14,129)Share-based payments – – – (626) (626)Amortisation of acquired intangibles (note 6, 13) – – – (2,130) (2,130)

Segment operating profit from continuing operations 12,080 3,356 3,471 (5,512) 13,395


Servelec Health &

Social Care£’000

Automation

ServelecControls

£’000

ServelecTechnologies

£’000Central

£’000Total£’000

Segment revenue 16,657 14,998 20,098 – 51,753Cost of sales (8,029) (9,616) (10,661) – (28,306)

Gross profit 8,628 5,382 9,437 – 23,447Overheads (1,055) (1,858) (5,582) (2,727) (11,222)Exceptional costs (note 7) – – – (410) (410)Share-based payments – – – (434) (434)Amortisation of acquired intangibles (note 6, 13) – – – (874) (874)

Segment operating profit from continuing operations 7,573 3,524 3,855 (4,445) 10,507

Operating assets and liability information are measured on a Group basis and so have not been disclosed at segment level.


4. Segment information continuedAdjustments and eliminationsSegment profit for each operating segment excludes net finance costs of £68,000 (2014: £9,000).

Geographical information

Revenue from external customers2015

£’0002014

£’000

United Kingdom 51,948 40,765Europe (excluding UK) 4,123 6,037Middle East 643 687Africa 198 549Far East 4,378 1,076Australasia 1,547 1,667North America 258 972

Total 63,095 51,753

Non-current assets for this purpose consist of property, plant and equipment and intangible assets and are all located in the United Kingdom .

5. Staff costs2015

£’0002014

£’000

Wages and salaries 22,473 19,141Social security costs 2,449 2,358Pension costs for the defined contribution scheme 1,272 920

Total 26,194 22,419

The average monthly number of employees during the period was made up as follows:2015 2014

Production 481 403Marketing, sales and distribution 28 20Administration 70 46

Total 579 469

6. Group operating profit2015

£’0002014

£’000

This is stated after charging/(crediting)Research and development costs written off 5,532 4,204

Depreciation of property, plant and equipment – owned assets 852 405Amortisation of intangible assets (included within administration & other expenses) 77 55Amortisation of acquired intangible assets 2,130 874

Total depreciation and amortisation expense 3,059 1,334

Fees payable to the Company’s auditor and its associates included in operating costs:– EY – Audit of Group Financial Statements 55 47– EY– Audit of Company Subsidiaries 78 75Total audit 133 122Audit related assurance services 15 15Total fees 148 137Fees payable to the other auditors of the associates included in operating costs:– Foster Raffan - Audit services 30 10– Foster Raffan - Non-audit services – 11– BDO 36 13– Ellacotts 9 –– Bullimores 13 –Net loss on foreign currency translation (52) (91)Operating lease rentals payable 1,109 782Cost of inventories recognised as an expense (note 16) 35 41



7. Exceptional items2015

£’0002014

£’000

Recognised in arriving at operating profit from continuing operations:Acquisition costs (note 27) – 310Aborted acquisition costs – 100

Total exceptional items – 410

During the year the Group did not incur any material costs (2014: £410,000) in respect of successful and aborted acquisitions.

8. Earnings per shareBasic earnings per share amounts are calculated by dividing profit for the year attributable to ordinary equity holders of the parent by the weighted average number of Ordinary Shares outstanding during the year.

The following reflects the income and share data used in the basic earnings per share computation:2015

£’0002014

£’000

Net profit attributable to ordinary equity holders of the Parent 11,898 8,693

Thousands Thousands

Basic weighted average number of shares 69,394 68,387Dilutive potential Ordinary Shares 1,697 1,417Diluted weighted average number of shares 71,091 69,804

Basic earnings per share from continuing operations 17.1p 12.7pDiluted earnings per share from continuing operations 16.7p 12.5p

The following transactions involving ordinary shares has occurred since the reporting date and the date of completion of the historical information

18 January 2016

111 new ordinary shares issued under the Company’s SAYE scheme.

16,273 new ordinary shares issued by way of satisfaction of deferred consideration of the acquisition of Aura Healthcare Limited (note 27(b)).

9. Dividends paid and proposedDeclared and paid during the year

2015£’000

2014£’000

Equity dividends on Ordinary SharesFinal dividend for 2014: 3.0p (2013: nil) 2,082 –Interim dividend for 2015: 1.65p (2014: 1.5p) 1,145 1,024

Dividends paid 3,227 1,024

Final dividend for 2015 of 3.5p per share (2014: 3.0p)Proposed for approval by shareholders at the AGM.

10. Finance income2015

£’0002014

£’000

Bank interest 34 89Other interest 3 3

Total interest income for financial assets measured at amortised cost 37 92

11. Finance costs2015

£’0002014

£’000

Interest on loan notes (59) (7)Other interest (9) (2)

Total interest expense for financial liabilities measured at amortised cost (68) (9)


12. Income tax expense(a) Tax charged in the income statement

2015 £’000

2014£’000

Current income taxUK & foreign corporation tax 3,012 2,364Amounts overprovided in previous years (968) (319)

Total income tax on continuing operations 2,044 2,045

Deferred taxOrigination and reversal of temporary difference (605) (148)Adjustment in respect of prior periods 27 –

Total deferred tax (578) (148)

Tax expense in the income statement on continuing operations 1,466 1,897

(b) Tax relating to items charged or credited to other comprehensive income2015

£’0002014

£’000

Deferred taxTax on share based payments 1 71

Total deferred tax 1 71

Tax expense in the statement of other comprehensive income 1 71

(c) Reconciliation of income tax credit/chargeThe income tax expense in the income statement for the period differs from the standard rate of corporation tax in the UK of 20.25%, (2014: 21.5%). The differences are reconciled below:

2015£’000

2014£’000

Profit before taxation from continuing operations 13,364 10,590Tax on profit on ordinary activities at 20.25% (2014: 21.5%) 2,706 2,277

Expenses not allowable for tax purposes 383 133Income not taxable (29) –Adjustments in respect of prior periods (941) (318)R&D tax credits (312) (175)Losses arising in period not recognised (28) –Other timing differences (183) (20)Other (130) –

Total tax expense reported in the income statement 1,466 1,897

The large companies rates was reduced to 20% from 1 April 2015. Finance (No. 2) Act 2015 received Royal Assent on 26 October 2015 and enacted a reduction in the main rate of corporation tax to 19% from 1 April 2017 and 18% from 1 April 2020. Deferred tax has provided at relevant rates dependent upon the timings of reversal.

(d) Deferred taxDeferred tax included in the balance sheet is as follows:

31 Dec 2015£’000

31 Dec 2014£’000

Deferred tax liabilityIntangible Assets 2,159 2,643Accelerated capital allowances 224 91

2,383 2,734

Deferred tax asset

Other timing differences 270 163



12. Income tax expense continued(e) Deferred tax in the income statement

2015£’000

2014£’000

Intangible assets (603) (48)Deferred tax liability on accelerated capital allowances 132 (27)Other timing difference (107) (73)

(578) (148)

13. Property, plant and equipment

Freehold property

£’000Motor vehicles

£’000

Plant, machinery,

fixtures & fittings

£’000Total£’000

At 1 January 2014 639 160 2,358 3,157Acquisitions – – 220 220Additions – – 1,316 1,316Disposals – (161) – (161)Foreign currency adjustment 1 3 (46) (42)

At 31 December 2014 640 2 3,848 4,490

Acquisitions – – 69 69Additions – – 1,235 1,235Foreign currency adjustment – (2) (47) (49)

At 31 December 2015 640 – 5,105 5,745

Accumulated depreciation:At 1 January 2014 54 153 1,470 1,677

Charge for the period 13 3 389 405Disposals – (159) – (159)Foreign currency adjustment (3) 3 (46) (46)

At 31 December 2014 64 – 1,813 1,877

Charge for the period 13 – 839 852Foreign currency adjustment – – (32) (32)

At 31 December 2015 77 – 2,620 2,697

Net book value

Freeholdproperty

£’000

Motorvehicles

£’000

Plant, machinery,

fixtures & fittings

£’000Total£’000

At 31 December 2014 576 2 2,035 2,613

At 31 December 2015 563 – 2,485 3,048


14. Intangible assets

Goodwill£’000

Licences£’000

Computer software

£’000

Customer relationships

£’000

Order backlog

£’000Total£’000

Cost:At 1 January 2014 16,399 126 2,158 2,831 689 22,203Acquisitions (i) 16,750 – 2,214 6,286 1,796 27,046Additions – 1 11 – – 12

At 31 December 2014 (i) 33,149 127 4,383 9,117 2,485 49,261

Acquisitions 1,926 – 646 – – 2,572Additions – 85 62 – – 147

At 31 December 2015 35,075 212 5,091 9,117 2,485 51,980

AmortisationAt 1 January 2014 – 49 102 620 334 1,105Charge for the period – 25 410 439 55 929

At 31 December 2014 – 74 512 1,059 389 2,034

Charge for the period (ii) – 41 928 840 398 2,207

At 31 December 2015 – 115 1,440 1,899 787 4,241

Net book valueGoodwill

£’000Licences

£’000

Computersoftware

£’000

Customer relationships

£’000Order backlog

£’000Total£’000

At 31 December 2014 33,149 53 3,871 8,058 2,096 47,227

At 31 December 2015 35,075 97 3,651 7,218 1,698 47,739

(i) Goodwill on acquisitions in 2014 has been restated as a result hindsight adjustment for a business combination (note 27).(ii) £2,130,000 (2014: £874,000) of amortisation in the year relates to acquired intangible assets.

Customer relationships have a remaining amortisation period of 14 years (31 December 2014: 15 years). Computer software has a remaining amortisation period of 5 years (31 December 2014: 5 years). Order backlog has a remaining amortisation period of 7 years (31 December 2014: 8 years).

Licences have a remaining amortisation period of 4 years (31 December 2014: 5 years).

15. Impairment test for goodwillGoodwill acquired through business combinations has been allocated for annual impairment testing purposes to five cash-generating units, as follows:

31 Dec 2015£’000

31 Dec 2014£’000

Corelogic 16,750 16,750Aura 1,926 –Servelec Systems 456 456Semaphore 3,819 3,819Tynemarch 916 916Controls 11,208 11,208

35,075 33,149

The recoverable amount of a CGU is determined based on value-in use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a 3-year period extrapolated for a further 2 years assuming annual growth rates of 2% in perpetuity. The pre-tax cash flows for the 5-year period have been discounted back to the period end using weighted average costs of capital of 11.7% to 18.1%. This exercise has confirmed that there is no impairment. Cash flows beyond the 5-year period are extrapolated using the estimated growth rates stated in the key assumptions.

Key assumptions used in value in use calculationsThe calculation of value in use for each of the CGUs is most sensitive to the following assumptions:• Discount rate 11.7%• Growth rate 2% from year 4 to perpetuity• Gross margins in line with current values

Discount rateDiscount rates represent the current market assessment of the risks specific to each CGU, taking into consideration the time value of money and individual risks of the underlying assets that have not been incorporated into the cash flow estimates. The discount rate calculation is based on the specific circumstances of the Group and its operating segments and is derived from its weighted average cost of capital (WACC).

Management has applied the same assumptions, as noted above, to all CGUs apart from Tynemarch where a discount rate of 18.1% was used.



15. Impairment test for goodwill continuedSensitivity to changes in assumptionsCorelogicCorelogic’s recoverable amount currently exceeds its carrying value by £4,395,000.

The value in use of this cash generating unit is approximately equal to its carrying amount if a discount rate of 13.2% is applied to the calculation.

Other cash generating units With regards to the assessment of value in use of the other cash generating units, management believes that no reasonable possible change in any of the above key assumptions would cause the carrying amount of the unit to materially exceed its recoverable amount.

16. Inventories31 Dec 2015

£’00031 Dec 2014

£’000

Raw materials and consumables 480 420Work in progress 212 256Finished goods and goods for resale 790 604

Total inventories 1,482 1,280

During the year ended 31 December 2015 £nil (2014: £41,000) was recognised as an expense for inventories carried at net realisable value. This is recognised in cost of sales.

All inventories are carried at cost less a provision to take account of slow-moving and obsolete items. Changes in the provision for slow-moving and obsolete stock were as follows:

31 Dec 2015£’000

31 Dec 2014£’000

At beginning of period 811 928Acquisitions (35) –Charged to income – 41Amount utilised (274) (158)

At end of period 502 811

17. Trade and other receivables31 Dec 2015

£’00031 Dec 2014

£’000

Trade receivables 13,389 15,494Less: provision for impairment of receivables (341) (444)

Trade receivables – net 13,048 15,050Amounts due from customers for contract work 7,386 11,331Prepayment and accrued income 999 738Other debtors 718 555

Total trade and other receivables 22,151 27,674

Trade receivables are non-interest bearing and are generally on terms of 30 days.

At 31 December 2015, trade receivables of an initial value of £341,000 (31 December 2014: £444,000) were impaired and fully provided for.

See below for the movements in the provision for impairment:2015

£’0002014

£’000

At 1 January 444 505Charged for period – –Utilised (103) (61)

At 31 December 341 444

The ageing analysis of trade receivables was as follows:31 Dec 2015

£’00031 Dec 2014

£’000

Neither past due nor Impaired 5,624 9,862Past Due but not Impaired Less than 30 days 4,166 3,277

30-60 days 2,001 89960-90 days 421 613

Greater than 90 days 836 399

13,048 15,050


18. Contracts in progressTotal income and expense recognised under IAS 11 on contract in progress in the year:

2015£’000

2014£’000

Costs incurred for the period 23,607 21,206Recognised profits 30,310 18,767

Contract revenue for the period 53,917 39,973

53,917 39,973Less progress billing and advances (59,706) (40,751)

(5,789) (778)Brought forward 9,269 10,047

Carried forward 3,480 9,269

Aggregate amount of costs incurred and recognised profits (less losses) to date 53,917 39,973

Retention asset 12,051 15,010Advances received (8,837) (5,741)

3,214 9,269

Retention assets are included in trade receivables. Advances are presented as part of amounts due to customers for contract work.

19. Cash and cash equivalents31 Dec 2015

£’00031 Dec 2014

£’000

Cash at bank and in hand 2,953 3,161Cash on short-term deposits 6,943 2,799

Total cash and cash equivalents 9,896 5,960

Cash at bank earns interest at a floating rate based on daily bank deposit rates. Short-term deposits are made for varying periods, depending on the immediate cash requirements of the group, and earn interest at the respective short-term deposit rates.

20. Trade and other payables

31 Dec 2015£’000

31 Dec 2014Restated*

£’000

Amounts due to customers for contract work* 8,837 6,441Trade creditors 2,383 2,896Other taxes and social security 2,378 3,074Other creditors 705 953Accruals and deferred income 3,069 5,150Loan notes – 6,000

Total trade and other payables 17,372 24,514

Trade payables are non-interest bearing and are normally settled on 30 day terms and other payables are non-interest bearing and have an average term of 2 months.

Loan notes of £6,000,000 in relation to the acquisition of Corelogic were repaid during the year (see note 27).

* Amounts due to customers for contract work has been restated as a result of a hindsight adjustment for a business combination (see note 27).



21. Provisions

Dilapidations£’000

Contingent Consideration

£’000Total

Provisions

As at 1 January 2014 160 360 520

Acquired during the year 9 – 9Arising during the year 10 – 10Released during the year – (215) (215)

As at 31 December 2014 179 145 324

Acquired during the year – 50 50Utilised during the year – (50) (50)Arising during the year 10 – 10Released during the year – (145) (145)

As at 31 December 2015 189 – 189

31 Dec2015

£’000

31 Dec2014

£’000

Non-current provisions 189 324

DilapidationsThis provision relates to potential dilapidation costs on property leases. The provision is management’s best estimate of potential future costs expected to be incurred on exit of the leases, which is not anticipated until 2029 at the earliest.

Contingent considerationA provision was established for the potential additional costs relating to an earn out on the Tynemarch acquisition – see note 23.

22. Commitments and contingenciesOperating lease commitmentsThe Company has entered into an operating lease in respect of the Eckington premises of £272,000 per annum (Dec-14 – £240,000). In 2009 the company entered a Deed of Variation with the landlord, whereby in exchange for an extension of the existing premises an extension of the lease was entered into. The extended lease will expire in 2029 and a rent review was made in October 2010 and every 5 years thereafter. In 2014 the company entered into an operating lease in respect of the Sheffield city centre premises of £170,000 per annum. The lease expires in 2029, has a break clause in 2021 and rent reviews in 2021 and 2024. There are no restrictions placed upon the Company by entering into these leases. The lease expenditure charged to the income statement during the 12 months ended 31 December 2015 is £1,109,000 (Dec-14: £782,000). Future minimum rentals payable under non-cancellable operating leases as at 31 December 2015 and 2014 analysed by the period in which they fall due are as follows:

2015£’000

2014£’000

Less than 1 year 1,036 1,034Between 1 and 5 years 2,667 2,720More than 5 years 2,321 2,731

6,024 6,485

Capital commitments2015

£’0002014

£’000

Contracted but not provided – 164

The Company has given counter indemnities amounting to £100,000 (31 December 2014: £122,000) in respect of performance bonds issued by banks on behalf of Group companies, in the normal course of business.


23. Financial instruments and financial risk management objectives and policiesFair valuesThe Group’s financial instruments comprise cash and cash equivalents (note 19), trade receivables (note 17) trade payables (note 20) and interest-bearing loans and borrowings. The carrying value of these assets and liabilities does not differ materially from their fair value.

Financial risk management objectives and policiesThe Group is exposed to market risk, liquidity risk and credit risk. The Group’s senior management oversees the management of these risks. This note presents information about the Group’s exposure to each of the above risks, the Group’s management of capital, and the Group’s objectives, policies and procedures for measuring and managing risk. The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework.

Capital risk managementThe prime objective of the Group’s capital management is to ensure that it maintains the financial flexibility needed to allow for value-creating investments as well as healthy balance sheet ratios.

The Group is profitable and has high cash conversion. As a result capital risk is not significant for the Group and measurement of capital management is not a tool used in the internal management reporting procedures of the Group.

The Group currently has no bank loans. Should additional cash be required to fund specific projects or acquisitions the Group would fund short-term requirements by external borrowings.

Market riskMarket risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Key market risks affecting the Group include interest rate risk and currency risk. Financial instruments affected by market risk include loans and borrowings and deposits.

Interest rate riskThe Group has only limited exposure to interest rate risk as it does not have any external borrowings.

Foreign currency riskForeign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s operating activities (when revenue or expense is denominated in a different currency from the Group’s functional currency) and the Group’s net investments in foreign subsidiaries.

Exposure to foreign currency risk is monitored by the Finance Department under policies approved by the Board. An assessment of the risks is provided to the Board at regular intervals and is discussed to ensure the risk mitigation procedures are compliant with Group policy and that any new risks are appropriately managed.

The exposure to a short-term fluctuation in exchange rates on the investment in foreign subsidiaries is not expected to have a material impact on the results of the Group.

Credit riskCredit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily for trade receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.

The Group’s principal financial assets are cash and cash equivalents and trade and other receivables, which represent the Group’s maximum exposure to credit risk in relation to financial assets. The Group’s credit risk is primarily attributable to its trade and other receivables. The requirement for an impairment is analysed at each reporting date on an individual basis for major customers. Additionally, minor receivables are grouped together into homogenous groups and assessed for impairment collectively. The calculation is based on actual historical data.

The Group has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults. The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the Group’s maximum exposure to credit risk.

At 31 December 2015 there was no single customer owing a significant proportion of net trade receivables (31 December 2014: £6,594,000 from one customer which accounted for approximately 24% of net trade receivables).



23. Financial instruments and financial risk management objectives and policies continuedLiquidity riskThe table below summarises the maturity profile of the group’s financial liabilities at 31 December 2015 and 2014 based on contractual undiscounted payments.

On demand£’000

Less than 1 year

£’000Total£’000

31 December 2014Trade and other payables 4,649 19,165 17,814Interest bearing loans and borrowings – 6,000 6,000

4,649 19,165 23,814

31 December 2015Trade and other payables 4,760 12,612 17,372

Management review the liquidity position of the Group on a regular basis from KPI and other management information. All liabilities are due within 1 year and it is therefore considered unlikely that any would be settled significantly earlier than indicated.

Fair values of financial assets and financial liabilitiesSet out below is a comparison by category of carrying amounts and fair values of all the Group’s financial instruments that are carried in the financial statements.

Carrying amount Fair value

2015£’000

2014*£’000

2015£’000

2014*£’000

AssetsCash and cash equivalents 9,896 5,960 9,896 5,960Trade and other receivables 21,152 26,936 21,152 26,936LiabilitiesCurrentTrade and other payables (14,994) (15,440) (14,994) (15,440)Loan notes – (6,000) – (6,000)Non-currentDilapidation provision (189) (179) (189) (179)Contingent consideration – (145) – (145)

For all financial instruments other than contingent consideration , their carrying amount approximates to fair value. Contingent consideration is a level 3 financial instrument under the IFRS 13 hierarchy.

The fair value of contingent consideration has been estimated based on management’s profit projections.

* Trade and other payables restated as a result of a hindsight adjustment (note 27).

Contingent consideration£’000

Fair value of contingent consideration at 1 January 2015 145Changes in fair value taken to the profit and loss account* (145)

Fair value of contingent consideration at 31 December 2015 –

* Provision for contingent consideration has been released due to the post acquisition criteria not being satisfied.


24. Issued capital and reservesAuthorised shares

31 Dec 2015Thousands

31 Dec 2014Thousands

Ordinary Shares of 18 pence each 69,394 69,394

Ordinary shares issued and fully paid31 Dec 2015

Thousands31 Dec 2015

£’00031 Dec 2014


£’000

Share capitalShares at beginning of the period 69,394 12,491 68,332 12,300Shares issued – – 1,062 191

Shares at end of period 69,394 12,491 69,394 12,491

On 15 December 2014, the Group issued 1,061,665 18p shares as part of the consideration for the purchase of the Corelogic Group of companies (see note 27).

31 Dec 2015£’000

31 Dec 2014£’000

Share premiumShares at the beginning of the period 3,563 754Shares issued – 2,809

3,563 3,563

25. Share-based paymentsGroup executive share option planIn November 2013 Servelec Group plc introduced an executive share option plan. Share options are granted to employees, as determined by the Remuneration Committee and only vest in accordance with the performance conditions for each executive as determined by the Remuneration Committee. The options cannot be exercised within 3 years and have a maximum life of 10 years. The option will be settled by the issue of new shares and there are no cash settlement alternatives.

Date GrantedNumber Granted Exercise Price

Vesting Period Years

Expiry Period Years

Options granted during the year 23 April 2015 474,996 £2.83 3 10

Save-as-you-earn (SAYE) schemeIn November 2013 Servelec Group plc introduced a SAYE scheme which was conditional upon admission to the London Stock Exchange. Under the scheme employees may elect to save between £5 and £500 (2013: £250) per month.



Expiry Period Years

Options granted during the year 29 October 2015 300,369 £2.59 3 10

Long-term incentive planIn November 2013 Servelec Group plc introduced an LTIP share option scheme for granting options to senior executives, as determined by the Remuneration Committee. The exercise price of the options is nil. The options only vest in accordance with the performance conditions for each executive as determined by the Remuneration Committee. The options cannot be exercised within 3 years and have a maximum life of 10 years. The option will be settled by the issue of new shares and there are no cash settlement alternatives.



Expiry Period Years

Options granted during the year 22 April 2015 152,632 £nil 3 10

Deferred share bonus plan (DSBP)Share awards were granted to senior executives, as determined by the Remuneration Committee. The exercise price of the awards will be subject to time pro rating.



Expiry Period Years


Further details of the vesting conditions are in the Remuneration Committee report on pages 50 to 61.



25. Share-based payments continuedThe following table summarises the number and weighted average exercise prices (WAEP) of and movements in, share options during the year.

2015No

2015WAEP(£)

2014No

2014WAEP(£)

Outstanding as at 1 January 1,228,101 1.21 1,294,363 1.18Granted during the year 941,605 2.25 111,899 2.56Performance condition expired (107,154) 2.62 (178,161) 1.83

Outstanding at 31 December 2,062,552 1.61 1,228,101 1.21

• There are no options exercisable at the year end.• The following table lists the inputs to the models used.

2015 2014

Dividend yield 1.5% 1.5%Volatility 0.3 0.3Expected life of option 3.5 years 3.5 yearsShare price at: –9 January 2014 – £2.4029 November 2014 – £2.7223 April 2015 £2.80 –

The expected life of the options has been estimated as 6 months following exercise date. As there is little historical data the volatility has been estimated at 0.35 based on similar quoted companies.

The fair value of the share options is measured at the grant date taking into account the terms and conditions upon which the instruments were granted. The cost of the options is recognised over expected vesting period. Until the liability is settled it is re-measured at each reporting date with changes in fair value recognised in profit or loss.

The expense recognised during the year to 31 December 2015 is £626,000 (31 December 2014: £434,000).

26. Related party disclosuresIdentity of related partiesServelec Group plc is the ultimate parent company.

The consolidated financial statements of the Group include:

Company Country of registration and number ClassShares held

(%)

Servelec Healthcare Limited England (No. 1323205) Ordinary 100Servelec Systems Limited England (No. 6879601) Ordinary 100Servelec Controls Limited England (No. 4608506) Ordinary 100Servelec Controls (Motherwell) Limited Scotland (No. SC050341) Ordinary 100Seprol Limited England (No. 1610543) Ordinary 100Tynemarch Holdings Limited England (No. 3397034) Ordinary 100Tynemarch Systems Limited England (No. 1774901) Ordinary 100Servelec Technologies Limited England (No. 08661987) Ordinary 100Semaphore Belgium SA Belgium (No. RLE (Nivelles) 0886.847.541) Ordinary 100Servelec Technologies Pty Ltd.(formerly Semaphore Australia Pty Limited) Australia (No. CAN 006805910) Ordinary 100Servelec Technologies Inc USA (No. F09000000761) Ordinary 100Servelec Corelogic Limited England (No. 03811329) Ordinary 100Corelogic Global Limited England (No. 07264571) Ordinary 100Servelec Corelogic Systems Private Limited(formerly Framework Systems and Solutions Private

Limited) India (No. U72200KL2010FTC026591) Ordinary 100Servelec Corelogic Pty Ltd Australia (No.160793966) Ordinary 100Servelec Aura Limited (formerly Aura Healthcare Limited) England (No. 08077134) Ordinary 100Aura Healthcare Consulting Limited England (No. 8076847) Ordinary 100Immix Health UK Limited England (No. 8039248) Ordinary 100Aura Healthcare Ireland Limited Ireland (No. IE537865) Ordinary 100


26. Related party disclosures continuedServelec Healthcare Limited supplies software and IT solutions and services into the healthcare markets. Servelec Systems Limited is involved in the design, manufacture, installation and commissioning of control and management information systems, the development, manufacture and sale of electronic and microprocessor monitoring equipment. Servelec Controls Limited, a systems integrator, is principally engaged in the supply of computer based information solutions and services. Servelec Controls (Motherwell) Limited became a non-trading subsidiary with effect from 1 April 2011 and Seprol Limited is dormant. Tynemarch Holdings Limited is a holding company and Tynemarch Systems Limited delivers optimisation software and consultancy, predominantly in the water industry.

Semaphore Belgium SA, Servelec Technologies Pty Limited and Servelec Technologies Inc. companies involved in the design, manufacture and sale of electronic and micro processor monitoring equipment.

Servelec Corelogic Limited and Servelec Corelogic Pty Ltd supply adult and children’s social care case management software, together with associated financial management modules. Corelogic Global Limited is a dormant company and Servelec Corelogic Systems Private Limited supplies development resources to the Group.

Servelec Aura Limited and Aura Healthcare Ireland Limited supply bed flow management software.

Transactions with related partiesThe Company did not trade with any other related parties in the year.

Compensation of key management personnelKey management includes the Directors. The compensation paid or payable to key management for employee services is shown below:

2015£’000

2014£’000

Short-term employee benefits 1,509 1,426Pension contributions 68 60Share based payments 474 320

Total compensation paid to key management personnel 2,051 1,806

Directors’ emoluments are set out in the Directors’ Remuneration Report on pages 50 – 61.

27. Business combinationsa). Acquisition of Corelogic LimitedOn 12 December 2014, the Group acquired 100% of the voting shares of Corelogic Limited (now Servelec Corelogic Ltd) and its subsidiaries Corelogic Global Limited, Corelogic Mosaic Pty and Framework Systems and Solutions Private Limited, a software company which supplies adult and children’s social care case management software, together with associated financial management modules to the UK and Australia markets.

Following the fair value accounting for the business in 2014, a hindsight adjustment was identified as a result of work done on the revenue recognition of contracts. The adjustment resulted in a hindsight adjustment of £700,000. This impacted goodwill (note 13) and amounts due to customers for contract work (note 20). There was no impact to the income statements in 2014.

The fair values of the identifiable assets and liabilities of the Corelogic Group of companies as at the date of acquisition were:

Fair value recognised on

acquisition£’000

Hindsight adjustment

£’000


acquisition £’000

AssetsProperty, plant and equipment 220 220Cash and cash equivalents 1,168 1,168Trade and other receivables 1,953 1,953Software 2,214 2,214Order Backlog 1,796 1,796Customer relationships 6,286 6,286

LiabilitiesTrade and other payables (4,128) (700) (4,828)Provisions (9) (9)Deferred tax liability (2,060) (2,060)

Total identifiable net assets at fair value 7,440 (700) 6,740Goodwill arising on acquisition 16,050 16,750

23,490 23,490



27. Business combinations continuedThe goodwill of £16,750,000 comprises the value of the assembled workforce and expected value of synergies. Goodwill is allocated entirely to the Health & Social Care segment. None of the goodwill is expected to be deductible for income tax purposes.

All receivables are expected to be collected and fair value equals gross value.

The deferred tax liability mainly comprises the accelerated depreciation for tax purposes of tangible and intangible assets.

£’000

Purchase considerationShares issued 3,000Loan notes issued 6,000Cash paid 14,490

Total consideration 23,490

Analysis of cash flows on acquisition:Transaction costs of the acquisition (included in cash flows from operating activities) (310)Net cash acquired with the subsidiary (included in cash flows from investing activities) (13,322)

Net cash flow on acquisition (13,632)

The fair value of the consideration given is £23,490,000.

Transaction costs of £310,000 have been expensed and are included in administrative expenses and exceptional items (note 7).

The Group issued 1,061,665 shares as part consideration for the acquisition of Corelogic Limited. The fair value of the shares is the published price of the shares of the Group at the acquisition date. Therefore the fair value of the consideration given in shares is £3,000,000.

The Group issued loan notes to the value of £6,000,000 as part consideration for the acquisition of Corelogic Limited. The details are set out below:

Loan Note Repayable DateInterest Payable

£2,000,000 31 March 2015 2%£4,000,000 30 June 2015 2%

The interest payable converts to 10% from the issue date if the loan note is not repaid on the due date. All loan notes were repaid by the due date.

b). Acquisition of Aura Healthcare LimitedOn 5 May 2015, the Group acquired 100% of the voting shares of Aura Healthcare Limited (now Servelec Aura Limited) to supplement the current healthcare offering. Servelec Aura Limited is a developer of software for the healthcare sector that controls bed management and patient flows across hospitals, clinics and primary care centres enabling improved care of patients.

The provisional fair values of the identifiable assets and liabilities of Aura Healthcare Limited as at the date of acquisition were:

Net assets as at date of

acquisition£’000

Fair value adjustments

£’000

FurtherAdjustment (i)

£’000


acquisition£’000

AssetsProperty, plant and equipment 69 – – 69Trade and other receivables 520 – – 520Software – 646 – 646

LiabilitiesTrade and other payables (1,651) 161 (513) (2,003)Bank overdraft (84) – – (84)Loans (901) – – (901)Deferred tax liability – (94) (29) (123)

Total identifiable net liabilities at fair value (2,047) 713 (542) (1,876)

Goodwill arising on acquisition – – – 1,926Total consideration 50

(i) A review of revenue recognition post acquisition has identified £513,000 of adjustments to the provisional fair value of amounts due to customers for contract work, disclosed in the Interim Financial Statements.


27. Business combinations continuedThe goodwill of £1,926,000 comprises the value of the assembled workforce and expected value of synergies. Goodwill is allocated entirely to the Health & Social Care segment. None of the goodwill is expected to be deductible for income tax purposes.

All receivables are expected to be collected and fair value equals gross value.

£’000

Purchase considerationCash paid –Contingent consideration 50

Total consideration 50

Analysis of cash flows on acquisition:Transaction costs of the acquisition (included in cash flows from operating activities) (73)Net cash acquired with the subsidiary (included in cash flows from investing activities) (84)Net cash flow on acquisition (157)

The fair value of the consideration given is £50,001. The contingent consideration is dependent upon receipt of a purchase order for Flow, which was received during the year. This was satisfied by the issue of shares on 18 January 2016 (note 8).

A further maximum amount of £300,000 will become payable, contingent on the attainment of certain performance conditions over a 3 year period ending April 2018, which will be satisfied by the issue of shares at the prevailing share price at the time of issue. This amount will be treated as remuneration and therefore has not been included in the total consideration figure.

Transaction costs of £73,000 have been expensed and are included in administrative expenses.

28. PensionsThe Group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Group in independently administered funds. The total pension cost payable by the Group amounted to £1,272,000 (2014: £920,000).

29. Post Balance Sheet EventsOn 1 March 2016, Servelec Group agreed to purchase the Synergy business from Tribal Group Plc for a cash consideration of £20,250,000 on a cash free debt free basis.

The transaction is subject to shareholder approval of the seller and is expected to complete by the end of March 2016. The acquisition is to be funded by a £20,000,000 credit facility from Lloyds bank over a fixed term of three years.

Just prior to completion the trade and assets will be transferred into a new company (Newco) and all relevant staff will TUPE across. Servelec Group will then acquire 100% of the shares of Newco for the cash consideration.

Synergy’s suite of solutions delivers improved support for children, young people and families within local Government and will provide authorities with a single view of a child. It will be acquired by Servelec Corelogic Limited and fit within Servelec’s existing Health & Social Care segment.

As the transaction has not completed by the reporting date it is not possible to fair value the assets and goodwill.



The Directors are responsible for preparing the Directors’ report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the Company for that period. In preparing those financial statements, the Directors are required to:• select suitable accounting policies and then apply them consistently;• make judgements and estimates that are reasonable and prudent;• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the

financial statements; and• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Statement of director’s responsibilities for the Company financial statements


Company balance sheetFor the year ended 31 December 2015

Notes2015

£’0002014

£’000

AssetsNon-current assetsTangible fixed assets (v) 489 454Intangible assets (vi) 1,018 1,244Deferred tax asset 150 150Investments (vii) 58,534 58,484

Total non-current assets 60,191 60,332

Current assetsDebtors (ix) 17,983 3,245Cash and cash equivalents – 2,726

Total current assets 17,983 5,971

Total assets 78,174 66,303

Equity and LiabilitiesCurrent liabilities Creditors (x) 27,147 21,756

Total current liabilities 27,147 21,756

Non-current liabilities Provisions (xi) 180 315Deferred tax liabilities 43 19

Total non-current liabilities 223 334

Total liabilities 27,370 22,090

Equity shareholders’ funds Share capital (xii) 12,491 12,491Share premium (xiii) 3,563 3,563Share-based payment reserve 1,173 546Retained earnings 33,577 27,613

Total equity shareholders’ funds 50,804 44,213

Total equity and liabilities 78,174 66,3003

Approved by the Board on 1 March 2016 and signed on its behalf by:



Company statement of changes in equity

NoteShare capital

£’000

Share premium

£’000

Share-based payment

reserve£’000

Retained earnings

£’000Total£’000

Balance as at 1 January 2014 12,300 754 41 19,722 32,817

Profit for the period – – – 8,915 8,915Share-based payments – – 434 – 434Tax on share-based payments – – 71 – 71Issue of shares 191 2,809 – – 3,000Dividends – – – (1,024) (1,024)

Balance as at 31 December 2014 12,491 3,563 546 27,613 44,213

Profit for the period – – – 9,191 9,191Share-based payments – – 626 – 626Tax on share based payments – – 1 – 1Issue of shares – – – – –Dividends – – – (3,227) (3,227)

Balance as at 31 December 2015 12,491 3,563 1,173 33,577 50,804


Company statement of comprehensive incomeFor the year ended 31 December 2015

2015£’000

2014£’000

Profit for the financial year attributable to members of the Parent Company 9,191 8,915

Total comprehensive income for the year 9,191 8,915


Authorisation of financial statements and statement of compliance with FRS 101 The parent company financial statements of Servelec Group plc (the “Company”) for the year ended 31 December 2015 were authorised for issue by the board of directors on 1 March 2016 and the balance sheet was signed on the board’s behalf by A Stubbs and M Cane. Servelec Group plc is a public limited company incorporated and domiciled in England and Wales. The Company’s ordinary shares are traded on the London Stock Exchange.

These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101). The financial statements are prepared under the historical cost convention.

No profit and loss account is presented by the Company as permitted by Section 408 of the Companies Act 2006.

The results of Servelec Group plc are included in the consolidated financial statements of Servelec Group plc which are available from Rotherside Road, Sheffield S21 4HL.

The accounting policies which follow set out those policies which apply in preparing the financial statements for the year ended 31 December 2015. The financial statements are prepared in Sterling and are rounded to the nearest thousand pounds (£000).

(i) Accounting policiesBasis of preparationThe Company has transitioned to FRS 101 from previously extant UK Generally Accepted Accounting Practice for all periods presented. Transition tables showing all material adjustments are disclosed in note (xiii). The accounting policies which follow set out those policies which apply in preparing the financial statements for the year ended 31 December 2015.

The Company has taken advantage of the following disclosure exemptions under FRS 101:(a) the requirements of paragraphs 45(b) and 46-52 of IFRS 2 Share based Payment(b) the requirements of IFRS 7 Financial Instruments: Disclosures, (c) the requirements of paragraphs 91-99 of IFRS 13 Fair Value Measurement,(d) the requirement in paragraph 38 of IAS 1 ‘Presentation of Financial Statements’ to present comparative information in respect of:

(i) paragraph 79(a)(iv) of IAS 1;(ii) paragraph 73(e) of IAS 16 Property, Plant and Equipment;(iii) paragraph 118(e) of IAS 38 Intangible Assets;

(e) The requirements of paragraphs 10(d), 10(f), 3(c) and 134-136 of IAS 1 Presentation of Financial Statements; (f) The requirements of IAS 7 Statement of Cash Flows;(g) The requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors;(h) The requirements of paragraph 17 of IAS 24 Related Party Disclosures;(i) The requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or more members of a

group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member; and(j) The requirements of paragraphs 134(d)-134(f) and 135(c)-135(e) of IAS 36 Impairment of Assets.

Intangible fixed assetsIntangible assets are recognised at cost. Software licences are amortised in equal amounts over a period of 4 – 6 years, which is estimated to be their useful life.

Tangible fixed assetsTangible assets are recognised at cost. Depreciation is provided on all tangible fixed assets, at rates calculated to write off the cost, less estimated residual value based on prices prevailing at the date of acquisition of each asset evenly over its expected useful life, as follows:Plant and machinery – 25% per annum Fixtures and fittings – 25% per annum

The carrying values of tangible fixed assets are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.

InvestmentsInvestments held as fixed assets are stated at cost less provision for any impairment.

Notes to the Company financial statements


(i) Accounting policies continuedDeferred taxationDeferred income tax is provided using the liability method on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, with the following exceptions:• where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business

combination that at the time of the transaction affects neither accounting nor taxable profit or loss;• in respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary

differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and• deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which deductible

temporary differences, carried forward tax credits or tax losses can be utilised.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date.

Transactions and balancesTransactions in foreign currencies are initially recorded in the functional currency by applying the spot exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the balance sheet date. All differences are taken to the income statement.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

Pension costsThe Group operates a defined contribution pension scheme. Assets of the scheme are held separately from those of the Company in independently administered funds. The amount charged against profits represents the contribution payable to the schemes in respect of the financial period.

Share-based paymentsThe Group operates equity-settled, share-based compensation plans. The fair value of the employee services received in exchange for the grant of the options is calculated using a Black-Scholes pricing model and is recognised as an expense over the vesting period. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options or performance shares granted. At each balance sheet date, the Group revises its estimates of the number of options that are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in the income statement, and a corresponding adjustment to equity over the remaining vesting period. No expense is recognised for awards that do not ultimately vest except for awards where vesting is conditional upon market or non-vesting conditions which are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied provided that all other performance or service conditions are satisfied.

(ii) Deferred TaxThe deferred tax included in the balance sheet is as follows:

2015£’000

2014£’000

Deferred Tax Asset 150 150

Deferred Tax Liabilities (43) (19)

The standard rate of corporation tax in the United Kingdom for the year is 20.25% (2014: 21.5%). The Finance Act 2013 received Royal Assent on 17 July 2013 and enacted a reduction in the main rate of corporation tax to 21% with effect from 1 April 2014 and a further reduction of 1% will be applied to bring the main rate of corporation tax to 20% from 1 April 2015. Deferred tax has therefore been provided at 20%.

(iii) Dividends Paid and Proposed

Declared and paid during the year2015

£’0002014

£’000

Equity dividends on Ordinary SharesFinal dividend for 2014: 3.0p (2013: nil) 2,082 –Interim dividend for 2015: 1.65p (2014: 1.5p) 1,145 1,024

Dividends paid 3,227 1,024

Final dividend for 2015 of 3.5p per share (2014: 3.0p)Proposed for approval by shareholders at the AGM.

(iv) Profit attributable to the members of the parent companyThe profits dealt with in the financial statements of the parent company is £9,192,000 (2014: £8,915,000).

Notes to the Company financial statementsContinued


(v) Tangible fixed assets

Company

Plant and machinery, fixtures and fittings

£’000

Cost:At 1 January 2014 1,101Additions 300Transfers (note vi) (117)

At 31 December 2014 1,284Additions 151

At 31 December 2015 1,435

Accumulated depreciation:At 1 January 2014 767Charge for the year 91Transfers (note vi) (28)

At 31 December 2014 830Charge for the year 116


Net book value:At 31 December 2014 454


(vi) Intangible fixed assetsCompany

Licences£’000

Cost:At 1 January 2014 1,496Additions 11Transfers (note v) 117

At 31 December 2014 1,624Additions 62


Accumulated depreciation:At 1 January 2014 79Charge for the year 273Transfers (note v) 28

At 31 December 2014 380Charge for the year 288


Net book value:At 31 December 2014 1,244


(vii) Investments in subsidiary companies

Company

Ordinary Share in subsidiary undertakings

£’000

Cost:At 1 January 2014 34,994Additions 23,490

At 31 December 2014 58,484

Additions 50

As at 31 December 2015 58,534


(vii) Investments in subsidiary companies continuedShares in the subsidiaries

Company Country of registration and number Class and percentage of shares held

Servelec Healthcare Limited England (No. 1323205) Ordinary 100%Servelec Systems Limited England (No. 6879601) Ordinary 100%Servelec Controls Limited England (No. 4608506) Ordinary 100%Servelec Controls (Motherwell) Limited Scotland (No.SC050341) Ordinary 100%Seprol Limited England (No. 1610543) Ordinary 100%Servelec Technologies Limited England (No. 08661987) Ordinary 100%Servelec Semaphore Belgium S A Belgium (No. RLE (Nivelles) 0886.847.541) Ordinary 51%Tynemarch Holdings Limited England (No. 3397034) Ordinary 100%Servelec Corelogic Limited England (No. 03811329) Ordinary 100%Servelec Aura Limited

(formerly Aura Healthcare Limited) England (No. 8076847) Ordinary 100%

On 12 December 2014, the Company acquired 100% of the share capital of Corelogic Limited (now Servelec Corelogic Ltd) and its subsidiary companies. (See note 27.)

On 5 May 2015, the Company acquired 100% of the share capital of Aura Healthcare Limited (now Servelec Aura Ltd) and its subsidiary companies. (See note 27.)

A full list of the Groups subsidiaries are detailed in note 26. The investments made by the Company in 2015 are summarised below.

£’000

Aura Healthcare Limited (note 27b) 50

(ix) Debtors2015

£’0002014

£’000

Trade debtors –Amounts owed by subsidiary undertakings 17,821 2,972Prepayments and accrued income 87 131Other debtors 75 22Corporation tax – 120

17,983 3,245

(x) Creditors:Amounts falling due within one year

2015£’000

2014£’000

Bank Overdraft 2,934 7,607Amounts owed to subsidiary undertakings 23,091 6,766Trade creditors 294 538Current corporation tax 254 –Other creditors 15 44Accruals and deferred income 559 801Loan notes – 6,000

27,147 21,756

(xi) Provisions:Dilapidations

£’000

Contingent consideration

£’000

Total provisions

£’000

At 1 January 2014 160 360 520Arising during the year 10 – 10Released during the year – (215) (215)

As at 31 December 2014 170 145 315Acquired during the year – 50 50Utilised during the year – (50) (50)Arising during the year 10 – 10Released during the year – (145) (145)

As at 31 December 2015 180 – 180

Analysed as31 Dec 2015

£’00031 Dec 2014

£’000

Non-current provisions 180 315

Notes to the Company financial statementsContinued


(xi) Provisions continuedDilapidationsThis provision relates to potential dilapidation costs on property leases.

Contingent considerationA provision was established for the potential additional costs relating to an earn out on the Tynemarch acquisition – see note 23.

(xii) Issued share capitalAuthorised shares

31 Dec 2015 31 Dec 2014

Ordinary Shares of 18 pence each 69,394 69,394

Ordinary shares issued and fully paid31 Dec 2015


£’00031 Dec 2014


£’000

Share capitalShares at beginning of the period 69,394 12,491 68,332 12,300Shares issued – – 1,062 191

Shares at end of period 69,394 12,491 69,394 12,491

On 15 December 2014, the Group issued 1,061,665 18p shares as part of the consideration for the purchase of the Corelogic Group of companies (see note 27).

(xiii) Share-based paymentsGroup executive share option planIn November 2013 Servelec Group plc introduced an executive share option plan. Share options are granted to employees, as determined by the Remuneration Committee and only vest in accordance with the performance conditions for each executive as determined by the Remuneration Committee. The options cannot be exercised within 3 years and have a maximum life of 10 years. The option will be settled by the issue of new shares and there are no cash settlement alternatives.



Expiry Period Years

Options granted during the year 23 April 2015 474,996 £2.83 3 10

Save-as-you-earn (SAYE) schemeIn November 2013 Servelec Group plc introduced a SAYE scheme which was conditional upon admission to the London Stock Exchange. Under the scheme employees may elect to save between £5 and £500 (2013: £250) per month.



Expiry Period Years

Options granted during the year 29 October 2015 300,369 £2.59 3 10

Long-term incentive planIn November 2013 Servelec Group plc introduced an LTIP share option scheme for granting options to senior executives, as determined by the Remuneration Committee. The exercise price of the options is nil. The options only vest in accordance with the performance conditions for each executive as determined by the Remuneration Committee. The options cannot be exercised within 3 years and have a maximum life of 10 years. The option will be settled by the issue of new shares and there are no cash settlement alternatives.



Expiry Period Years


Deferred share bonus plan (DSBP)Share awards were granted to senior executives, as determined by the Remuneration Committee. The exercise price of the awards will be subject to time pro rating.



Expiry Period Years


No options were granted in the year.

Further details of the vesting conditions are in the Remuneration Committee report on pages 50 – 61.


(xiii) Share-based payments continuedThe following table summarises the number and weighted average exercise prices (WAEP) of and movements in, share options during the year.

2015Number

2015WAEP(£)

2014Number

2014WAEP(£)

Outstanding as at 1 January 1,228,101 1.21 1,294,363 1.18Granted during the year 941,605 2.25 111,899 2.56Performance condition expired (107,154) 2.62 (178,161) 1.83

Outstanding at 31 December 2,062,552 1.61 1,228,101 1.21

• There are no options exercisable at the year end.• The following table lists the inputs to the models used.

2015 2014

Dividend yield 1.5% 1.5%Volatility 0.3 0.3Expected life of option 3.5 years 3.5 yearsShare price at:9 January 2014 – £2.4029 November 2014 – £2.7223 April 2015 £2.80 –

The expected life of the options has been estimated as 6 months following exercise date. As there is little historical data the volatility has been estimated at 0.3 based on similar quoted companies.

The fair value of the share options is measured at the grant date taking into account the terms and conditions upon which the instruments were granted. The cost of the options is recognised over expected vesting period. Until the liability is settled it is re-measured at each reporting date with changes in fair value recognised in profit or loss.

The expense recognised during the year to 31 December 2015 is £626,000 (31 December 2013: £434,000).

(ix) Contingent liabilitiesThe Company has given cross guarantees for all sums owed by Servelec Systems Limited, Servelec Healthcare Limited, Servelec Controls Limited, Seprol Limited and Servelec Controls (Motherwell) Limited. This has been secured by a debenture over all of Servelec Group plc assets.

At 31 December 2015 the amount outstanding was £nil (2014: £nil).

(x) PensionsThe Company operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Group in independently administered funds. The total pension cost payable by the Company amounted to £127,000 (2014: £101,000).

(xi) Related party transactionsThe Company has taken advantage of the exemption of ISA24 not to disclose related party transactions with Group companies.

(xii) Financial commitmentsThe Company has annual commitments under an operating lease in respect of the head office premises of £272,000 (2014: £240,000). The lease expires in 2029 and a rent review as made in October 2010 and every 5 years thereafter.

Capital commitments2015

£’0002014

£’000

Contracted but not provided – 164

(xiii) FRS101 TransitionThere were no adjustments or disclosure differences identified in transitioning from UK Gaap to FRS101.

(xiv) Post balance sheet eventsOn 1 March 2016, Servelec Group agreed to purchase the Synergy business from Tribal Group Plc for a cash consideration of £20,250,000 on a cash free debt free basis.

The transaction is subject to shareholder approval of the seller and is expected to complete by the end of March 2016. The acquisition is to be funded by a £20,000,000 credit facility from Lloyds bank over a fixed term of three years.

Just prior to completion the trade and assets will be transferred into a new company (Newco) and all relevant staff will TUPE across. Servelec Group will then acquire 100% of the shares of Newco for the cash consideration.

Synergy’s suite of solutions delivers improved support for children, young people and families within local Government and will provide authorities with a single view of a child. It will be acquired by Servelec Corelogic Limited and fit within Servelec’s existing Health & Social Care segment.

As the transaction has not completed by the reporting date it is not possible to fair value the assets and goodwill.

Notes to the Company financial statements Continued

107Servelec Group plc Annual Report and Accounts 2015

FSC LOGO TO BE PLACED HERE

Directors and advisers

Directors Richard Last, Chairman and Non Executive DirectorAlan Russell Stubbs, Chief Executive OfficerMichael Geoffrey Cane, Chief Financial OfficerRoger Steven McDowell, Senior Independent Non-Executive DirectorBernerd Joseph Waldron, Independent Non-Executive Director

Company Secretary Michael Cane

Registered Office of the Company Rotherside RoadEckingtonSheffieldSouth YorkshireS21 4HL

Sponsor, financial adviser, sole bookrunner and broker

Investec Bank plc2 Gresham StreetLondonEC2V 7QP

English legal advisers to the LLP Company Walker Morris LLPKings Court12 King StreetLeedsWest YorkshireLS1 2HL

Reporting Accountant and Auditors Ernst & Young LLP1 Bridgewater PlaceWater LaneLeedsWest YorkshireLS11 5QR

Registrars Capita Registrars LimitedThe Registry34 Beckenham RoadBeckenhamKentBR3 4TU

Financial public relations advisers to the Company

Tulchan Communications LLP85 Fleet StreetLondonEC4Y 1AE

Servelec Group plcRotherside RoadEckingtonSheffieldS21 4HLUnited Kingdom

Tel: +44 (0) 1246 437 400www.servelec-group.com

Servelec Group plc annual report and accounts 2015

Documents

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