Final Results

RNS Number : 4231B

Sabien Technology Group PLC

07 October 2015

 



7 October 2015

Sabien Technology Group Plc

("Sabien", the "Company" or the "Group")

Preliminary results for the year to 30 June 2015

Sabien Technology Group Plc, the manufacturer and supplier of M2G, a boiler energy efficiency technology, reports its preliminary results for the year to 30 June 2015.

Highlights 2015

·      Sales for the year £1.74m (2014: £2.14m)

·      Loss before tax £0.57m (2014: £0.29m loss)

·      Sales from Alliance Partners £0.21m (2014: £1.01m)

·      Overseas sales £154k (2014: £188k)

·      Net cash balance at 30 June 2015 was £1.17m (2014: £1.42m)

·      Sales pipeline of £6.2m at 30 June 2015 (2014: £5.8m)

Highlights since the year end

·      Sales pipeline currently standing at c.£5.5m

·      Launch of P35 free pilot programme and recruitment of additional technical personnel

·      Continuing development of M2G to incorporate new features

·      Fund raise of £770k (gross) to fund the P35 free pilot programme, M2G development and recruitment of more technical and marketing personnel

·      Net cash balance at 30 September 2015 of £1.3m

  Outlook

Alan O'Brien, Chief Executive, commented:

Despite a better second half, 2015 turned out to be a disappointing year as revenue targets were missed. In the latter part of the year, we carried out a review of the Group's sales strategy and identified certain areas where improvements could be made which would help accelerate the sales process. These are discussed in more detail in the Strategic Report.

For further information:

Sabien Technology Group Plc

Alan O'Brien, CEO                                                           Tel: [phone]

Gus Orchard, CFO                                                          www.sabien-tech.co.uk

Westhouse Securities                                                     Tel: [phone]

Antonio Bossi/Rose Ramsden

About Sabien Technology

Founded in March 2004 by its CEO, Alan O'Brien, UK-based Sabien Technology specialises in providing proven and commercially viable technology to reduce carbon emissions and energy usage for private and public organisations. Sabien Technology Group Plc was admitted to AIM in 2006.

The M2G is a patented energy efficient technology designed to reduce fuel consumption in commercial boilers. M2G dynamically responds to changing load demand by measuring, identifying and removing dry cycling thus maximising efficiency under all conditions.

M2G can be retro-fitted and fully integrates and complements existing controls, such as BMS, boiler sequencing, weather compensation and building optimisation controls. Using intelligent software and hardware, the M2G unit improves a boiler's efficiency by reducing energy wastage. For further information, please visit our website www.sabien-tech.co.uk.

Financial results

Revenue in the year was £1.74m (2014: £2.14m). The loss before taxation was £0.57m (2014: £0.29m loss).

Sales for the year were 19% lower than in the previous year due to a number of factors including delays in issuing tenders by clients. The loss for the year is due to lower than expected sales revenue. The Group has available tax losses amounting to over £2m. 

At 30 June 2015, cash and cash deposits amounted to £1.17m (2014: £1.42m). The Group has no external debt.

Dividend policy

In view of the loss incurred in the year, no dividend is proposed (2014: Final dividend of 0.275p per share).

Board, management and people

Bruce Gordon, who is an investor in the Company both in a personal capacity and as advisor to TVI2 Capital, joined the Board on 30 September 2015 as a non-executive director.

On behalf of the Board we would like to take this opportunity to thank the whole Sabien team for their dedicated efforts and enthusiasm over the last year. We also thank our customers and other stakeholders, especially our shareholders, for their continuing support.

Outlook

Despite a better second half, 2015 turned out to be a disappointing year as revenue targets were missed. In the latter part of the year, we carried out a review of the Group's sales strategy and identified certain areas where improvements could be made which would help accelerate the sales process. These are discussed in more detail in the Strategic Report.

As part of this review, we decided that the Group needed to increase substantially the number of pilots carried out in a year and that we would no longer charge customers up front for these.  To this end, we identified the need to recruit more technical and sales personnel and invest in routine development to the core M2G product.  We believe that the results of this investment will take at least 12 months to materialise and, in order to maintain a strong balance sheet, we decided to seek more funds from shareholders. We have therefore raised £770k gross (£694k net) from existing and new shareholders since the year end and are using these funds to invest in the P35 free pilot programme, personnel recruitment with headcount increased from 14 to 21, and in the M2G development programme.

Whilst the outlook looks encouraging, a key indicator of progress will be the size of the sales pipeline as we progress during the year.

 

Miriam Maes                                                                            Alan O'Brien

Chairman                                                                                  Chief Executive Officer

 

Strategic Report

For the year ended 30 June 2015

1.   Review of the Group's Business

The Group owns the rights to M2G, a patented energy efficiency product for installation on commercial boilers, both within and outside the UK. It subcontracts the manufacture of M2G to its principal supplier, which is based in Northern Ireland, and the installation of M2G in the UK to a number of trained installation companies.

The Group set a new 5 year growth strategy in May 2015 with the key driver being to remove uncertainty around sales order lumpiness and to help mitigate the delays in mobilising M2G pilots and public sector contract awards brought about by long tender processes.

The key objective for management is to significantly scale up large multi-site M2G pilots in each year over the next 5 years both in the UK and overseas using our in-house Business Development managers, Facilities Management partners and our overseas "Tech Centre" partners. It is intended to run up to 35 multi-site M2G pilots in this coming 2015/16 heating season, up from 8 in 2014/15, and to improve on this level over the next 5 years to 2020.

The Group has also changed its pilot package and will no longer charge clients wishing to pilot M2G.

Management has a robust methodology and process for executing pilot programmes and has built up 8 years of experience and know-how in delivering large scale multi-site pilots and in measurement and verification of the same.

The Group has a strong reputation in the market place, being recognised as the market leader in Boiler Optimisation Controls and has over the summer increased its capacity to deliver significantly more multi-site M2G pilots which our previous experience indicates will lead to an increase in our quoted pipeline and future sales revenue.

Outside the UK, the Group appoints "Tech Centres" which are organisations involved in the supply of boiler systems and controls to customers in their own territories. These Tech Centres are given training in the installation of M2G as part of the appointment process and purchase an agreed minimum number of M2Gs each year.

The Group employs its own direct sales force which is also responsible for working with a number of "indirect" sales partners which are generally facilities management and property management organisations. Sabien's direct sales force targets organisations with multi-site estates within both the public and private sectors.

The Group employs its own project management and technical engineering staff who are responsible for ensuring the smooth roll-out and quality control of each M2G pilot and installation project. The Group places particular importance on this aspect of its business and has won many plaudits from customers for the excellence of its processes and project management. Headcount currently stands at 21 reflecting headcount growth of 7 since July 2015.

The Group is also involved in the research and development of new products within its area of expertise in the energy efficiency/reduction market. It is also looking to add other products which are complementary to its activities.

2.   Principal risks and uncertainties facing the Group

The principal risks faced by the Group are:

·      Downward pressure on gas and oil prices

·      Technology developments and competitive products

·      Changes in legislation

·      Supply chain issues

·      Inability to meet customer demand

·      Non-recurring revenue model

·      Brand awareness and maintenance of reputation

·      Employee retention

The Group places great importance on internal control and risk management. A risk-aware and control-conscious environment is promoted and encouraged throughout the Group. The Board, either directly or through its committees, sets objectives, performance targets and policies for management of key risks facing the Group.

The risks outlined above are not an exhaustive list of those faced by the Group and are not intended to be presented in any order of priority. The Group holds bi-monthly management meetings at which, inter alia, business risks are reviewed and any areas that are causing concern are discussed. A plan of action to resolve issues is then put in place.

3.   Performance of the business in the financial year

·      Business Development - UK

The Group's performance in the year was below management expectations and can be attributed to a number of factors including continuing delays in the award of contracts and the publishing of tenders where contract values are in excess of EC Procurement Thresholds ("OJEC" limits) with a consequent knock-on effect on the forecasting and receipt of orders.

Alliance partners contributed £0.2m of sales representing 12% of the total for the year. This compares with £1.0m in the previous year. The volume of sales from alliance partners will vary from year to year and is dependent on the stage at which each partner is at in the sales cycle with its own clients and pipeline. Major alliance partners with whom we have done business in the year included Jones Lang LaSalle, Norland Managed Services, Mitie Technical Services and SSE Contracting.

Contract wins in the 12 months included: NHS Scotland, University of Salford, Durham County Council, Wiltshire County Council, Northumbria NHS and SSE Contracting (Frimley Park Hospital).

·      Business Development - Overseas

The Group sells M2G internationally through its network of "Sabien Tech Centres". A "Sabien Tech Centre" is a company outside the UK with:

o  An established distribution network and an existing client base in the commercial and industrial heating sector

o  Engineering capability and capacity

o  Competence in commercial boilers and currently offering energy efficiency solutions as part of their product and service suite 

The channel will require a level of M2G operational support in knowledge transfer/sharing and product training.

During the course of the financial year, overseas sales represented 9% of total sales at £154k compared to £188k in the previous year.  In 2013, the Group appointed Fireye, Inc. as a non-exclusive distributor in the USA as well as other overseas territories. Through this relationship with Fireye and with other parties, we have appointed Tech Centres in a number of territories throughout the world.

We remain confident this relationship will bring substantial value to the Group in the future. For further information on Fireye NXM2G, please visit www.flamecontrols.com.

·      UK M2G Pilots

The Group continues to offer a pilot scheme to customers with large estates as part of the monitoring and verification process prior to deploying M2G to their wider estate. For this scheme, we agree to install M2G at up to 3 sites and to monitor the results for a period of 4 weeks using 3^rd party logging technology. As noted above, the Group no longer charges for clients wishing to pilot M2G.

At the conclusion of the pilot period, a report is produced for the customer in which the results are presented along with the likely levels of savings and CO2 emissions were M2G to be deployed over the customer's estate.

The customer will then give the company an indication of the estimated date for an order being placed for the wider estate. The cycle from pilot completion to receiving an order can take several weeks to several months. The reasons for this include:

o  Public Sector clients having to use the OJEC process for orders that exceed legally binding EU limits

o  Client asset rationalisation programmes (purchase and disposal of properties)

o  Absence of actual utility consumption data for the estate

o  Change of client Facility Management provider requiring a bedding-in period prior to activating previously approved energy efficiency programs

There can also be a lack of clarity client-side and/or no clear guidelines on the company's procurement processes. We try to overcome some of these obstacles early in the sales cycle and shorten anticipated order delays by sharing with clients our industry "know-how" and experience of working with other similar organisations. In some instances this isn't possible due to the competitive nature of certain client sectors.

·      Innovation - New product development

As noted above, the Group has launched the M1G, a product for use on hot water heaters. In-field testing was successful and has shown that material savings in gas consumption and paybacks in line with client investment criteria can be made by deploying M1G.

The M1G is designed to prevent the inherent problem of short cycling within direct hot water generators resulting in unnecessary fuel consumption during low load demands. Short cycling is caused when the hot water generator's minimum firing capacity exceeds the current system loss, causing the hot water generator to fire for very short periods.

·      Key Performance Indicators ("KPIs")

The Group has identified a number of key performance indicators which are regularly monitored to ensure that business is on track or to give warning where problems may be arising:

Financial: The management's focus is on the development of the sales pipeline, the maintenance of a healthy gross margin and prudent cost control. The two main performance indicators are unit sales and maintenance of a healthy gross profit margin. During the year, the group sold 1,077 units (2014: 1,277 units) and the gross profit margin was 70.6% (2014: 70.4%). Overhead costs in the year remained virtually static but are expected to increase substantially in the new financial year as a result of our decision to increase headcount and redevelop the M2G product to incorporate a number of new features.

Pipeline: We are continually refining the pipeline and exclude from it any potential business that has not been quoted for or for which the client has not given the Group an indicative start date.

Reputation: The Group's reputation for project management and delivery of its product's benefits on time and within budget is key to its continuing business success. Management is always looking at improving the quality of the Group's performance and will continue to invest in products and solutions to enable it to maintain and enhance its reputation. 

Personnel: The Group is continuing to look for further business development managers with proven experience of the retrofit and energy efficiency controls market. During the year, the Group strengthened its business development team.

4.   Strategy

The Group has developed a formalised 5 year growth strategy for the future which can be summarised as:

·      Significantly scaling M2G pilots in the UK and Overseas

·      Maintaining and strengthening our UK business development capabilities to help drive sales growth of our products(s) and services

·      Broaden and develop our product suite (organic innovation) e.g. M1G, while also scanning the market environment (inorganic innovation) for third party complementary products and services that fit within our market sector

·      Develop a network of overseas distribution partners to grow material revenue for the Group

·      Maintain or exceed an installation capacity in line with company forecasts and to continue providing our clients and partners with a world class project management service and experience

·      Maintaining brand awareness and reputation of the Group

Gus Orchard

Company Secretary

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2015

		2015	2014
	Notes	£'000	£'000
Revenue		1,744	2,139
Cost of sales		(513)	(633)
Gross profit		1,231	1,506
Administrative expenses		(1,812)	(1,815)
Operating loss	3	(581)	(309)
Investment revenues	4	13	16
Loss before tax		(568)	(293)
Tax (charge)/credit	5	(215)	21
Loss for the year attributable to equity holders of the parent company		(783)	(272)
Other comprehensive income		-	-
Total comprehensive income for the year		(783)	(272)
Loss per share in pence - basic	7	(2.4)	(0.9)
Loss per share in pence - diluted	7	(2.4)	(0.9)

The earnings per share calculation relates to both continuing and total operations.

Consolidated and Company Statements of Financial Position

As at 30 June 2015                                                    

		Group		Company
		2015	2014	2015	2014
	Notes	£'000	£'000	£'000	£'000
ASSETS
Non-current assets
Property, plant and equipment		68	106	-	-
Intangible assets		508	555	-	-
Investment in subsidiaries		-	-	3,601	3,601
Deferred tax		-	215	-	-
Total non-current assets		576	876	3,601	3,601
Current assets
Inventories		207	142	-	-
Trade and other receivables		282	599	43	42
Cash and cash equivalents		1,171	1,425	951	1,062
Total current assets		1,660	2,166	994	1,104
TOTAL ASSETS		2,236	3,042	4,595	4,705
EQUITY AND LIABILITIES
Current liabilities
Trade and other payables		281	313	32	27
Total current liabilities		281	313	32	27
EQUITY
Equity attributable to equity holders of the parent
Share capital	8	1,650	1,574	1,650	1,574
Other reserves		187	201	187	201
Retained earnings		118	954	2,726	2,903
Total equity		1,955	2,729	4,563	4,678
TOTAL EQUITY AND LIABILITIES		2,236	3,042	4,595	4,705

Consolidated and Company Cash Flow Statements

For the year ended 30 June 2015

	Group		Company
	2015	2014	2015	2014
	£'000	£'000	£'000	£'000
Cash flows from operating activities
(Loss)/profit before tax	(568)	(293)	(124)	81
Adjustments for:
Dividend received from subsidiary	-	-	-	(200)
Depreciation and amortisation	92	86	-	-
Loss on disposal of property, plant & equipment	-	1	-	-
Finance income	(13)	(16)	(13)	(13)
Transfers to equity reserves	2	1	2	1
Decrease/(increase) in trade and other receivables	317	482	(1)	14
(Increase)/decrease in inventories	(65)	58	-	-
(Decrease)/increase in trade and other payables	(32)	(118)	5	3
Cash (used in)/generated from operations	(267)	201	(131)	(114)
Corporation taxes recovered/(paid)	-	-	-	-
Net cash (outflow)/inflow from operating activities	(267)	201	(131)	(114)
Cash flows from investing activities
Share issue	98	-	98	-
Dividend paid	(91)	(79)	(91)	(79)
Dividend received from subsidiary	-	-	-	200
Purchase of property, plant and equipment	(7)	(70)	-	-
Finance income	13	16	13	13
Net cash generated by/(used in) investing activities	13	(133)	20	134
Net (decrease)/increase in cash and cash equivalents	(254)	68	(111)	20
Cash and cash equivalents at the beginning of the year	1,425	1,357	1,062	1,042
Cash and cash equivalents at the end of the year	1,171	1,425	951	1,062

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

General information

The Company is incorporated in England & Wales under the Companies Act 2006.

1.         Accounting policies

The following significant principal accounting policies have been used consistently in the preparation of the consolidated financial information of the Group. The consolidated information comprises the Company and its subsidiaries (together referred to as "the Group").

a)         Basis of preparation: The financial information in this document has been prepared using accounting principles generally accepted under International Financial Reporting Standards ("IFRS"), as adopted by the European Union.

The Directors expect to apply these accounting policies, which are consistent with International Financial Reporting Standards, in the Group's Annual Report and Financial Statements for all future reporting periods.

The Directors believe that, despite the losses incurred in the past two years and the uncertainty as to the timing of future profitability, the Group is a going concern and have accordingly prepared these financial statements on a going concern basis. The Directors have prepared cashflow forecasts that confirm that the Group will have sufficient working capital to settle its liabilities as they fall due for a period of not less than 12 months from the date of the approval of these financial statements.

The consolidated financial statements have been prepared on the historical cost basis and are presented in £'000 unless otherwise stated.

b)         Basis of consolidation: The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 30 June each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefit from its activities.

Except as noted below, the financial information of subsidiaries is included in the consolidated financial statements using the acquisition method of accounting. On the date of acquisition the assets and liabilities of the relevant subsidiaries are measured at their fair values. All intra-Group transactions, balances, income and expenses are eliminated on consolidation.

2.         Segmental reporting

Based on risks and returns, the directors consider that the primary reporting business format is by business segment which is currently just the supply of energy efficiency products, as this forms the basis of internal reports that are regularly reviewed by the Company's chief operating decision maker in order to allocate resources to the segment and assess its performance. Therefore the disclosures for the primary segment have already been given in these financial statements. The secondary reporting format is by geographical analysis by destination. Non-UK revenues amounted to 9% of the total and are analysed as follows:

Geographical information	Year ended 30 June 2015		Year ended 30 June 2014
	Sales revenue	% of total revenue	Sales revenue	% of total revenue
	£'000		£'000
UK	1,590	91	1,951	91
Other	154	9	188	9
Total	1,744	100	2,139	100

During the period, sales to the group's largest customer was as follows:

	Sales revenue	% of total revenue
	£'000
Customer 1	947	54

3.         Operating loss

Operating loss is stated after charging:

	Year ended 30 June 2015	Year ended 30 June 2014
	£'000	£'000
Depreciation of property, plant & equipment	45	39
Loss on disposal of property, plant & equipment	-	1
Amortisation of intangible assets	47	47
Operating lease rentals - land and buildings	56	52
Loss on foreign exchange	5	1

4.         Investment revenues

	Year ended 30 June 2015	Year ended 30 June 2014
	£'000	£'000
Interest receivable	13	16

5.         Corporation tax

	Year ended 30 June 2015	Year ended 30 June 2014
	£'000	£'000
Current tax	-	-
Deferred tax	215	(21)
Total tax charge/(credit) for the year	215	(21)
The tax charge for the year can be reconciled to the loss as follows:
Loss before tax	(568)	(293)
Tax on loss on ordinary activities at standard UK corporation tax rate of 20% (2014: 20%)	(113)	(58)
Expenses not deductible for tax purposes	-	11
Capital allowances in excess of depreciation	7	(7)
Other short term timing differences	-	-
Unrelieved tax losses	5	33
Tax losses carried forward	101	21
Current tax	-	-

Deferred tax:

The Group has reviewed the carrying value of the deferred tax asset recognised in previous years and has decided that it would be prudent to derecognise the total asset in view of the uncertainty as to the timing of a return to profitability.

The aggregate amount of deductible temporary differences, parent company unused tax losses and unused tax credits for which no deferred tax asset is recognised in the Consolidated Statement of Financial Position is estimated at £2,035k (2014: £254k) which at the standard tax rate would equate to £407k (2014: £51k).

6.         Dividends

	Year ended 30 June 2015	Year ended 30 June 2014
	£'000	£'000
Proposed final dividend for the year ended 30 June 2015 of nil per share (2014: 0.275p)	-	91

7.         Earnings per share

The calculation of earnings per share is based on the loss for the year attributable to equity holders of £783k (2014: £272k loss) and a weighted average number of shares in issue during the period of 32,878,337 (2014: 31,486,511).  At the year end, options over 2,102,410 shares (2014: 2,074,410) were in issue. During the year, warrants for 1,518,356 shares were exercised. Both have been taken into account in calculating diluted earnings per share.

8.         Share capital

	2015	2014
	£'000	£'000
Allotted, called up and fully paid
33,004,867 Ordinary shares of 5p each (2013: 31,486,511)	1,650	1,574

On 6 August 2014, TVI 2 Limited exercised its warrant option over 1,518,356 shares at a price of 6.42p each.

A copy of the annual report for the year ended 30 June 2015 will be available from the company's website at www.sabien-tech.co.uk and will be posted to shareholders on 28 October 2015.

 

END

 

 

FR MFBITMBMMBLA