Half Yearly Report

RNS Number : 6387X

Sabien Technology Group PLC

12 February 2013

 



12 February 2013

Sabien Technology Group Plc

("Sabien" or the "Group")

Unaudited Interim Results for the period to 31 December 2012

Sabien Technology Group plc (AIM: SNT), the manufacturer of the patented M2G energy saving devices, announces its unaudited interim results for the six month period ended 31 December 2012 (comparatives are shown for the same period in the previous year unless otherwise stated):

Highlights in the period

·    Sales £942k (2011/12 - £1,492k)

·    Loss before tax £67k (2011/12 - £301k profit)

·    £984k of sales orders achieved (2011/12 - £1,510k)

·    £51k of orders received since 1 January 2013 giving total orders received for the financial year to date of £1,035k (2011/12 - £1,864k)

·    New orders for M2G received from public and private sector organisations

·    Sales from indirect partners increased to 88% of total sales (2011/12 - 21%)

·    Cash at the end of the period was £1,190k (£1,402k at 30 June 2012)

·    Sales pipeline of £6.3m (£6.3m in October 2012's update)

·    First installations of M2G in Europe for major international property manager

·    Retirement of Dr Clive Morton from the Board and appointment of Mrs Miriam Maes as Chairman

Chairman and Chief Executive Officer's Report

Although we made a small loss in the first half, we anticipate delivering a full year trading performance in line with current market expectations with sales performance weighted towards the second half of the year.

Historically, our sales performance has shown a tendency to be higher in the first half year than in the second. However for this financial year a higher proportion of our sales are scheduled to be delivered during the second half of the year. This pattern shift reflects the way that our sales pipeline is evolving.  

Our Marketplace and Business Drivers

The combination of reduced subsidies to renewables, a supportive regulatory environment (Climate Change Act), increased utility costs and efficiency drives across the commercial and industrial sector leaves Sabien ideally positioned to exploit its patented technology offering. With space heating and hot water accounting for 68% of commercial energy use and 50% of UK carbon emissions coming from commercial buildings (DECC 2010), Sabien's M2G device is a simple, cost-effective technology for companies to make significant gas and oil cost savings while adhering to socially responsible investments. The addressable UK market for Sabien is around 6m commercial boilers.

Sabien was set up in 2004 to commercialise M2G, a patented boiler energy efficiency technology, which reduces gas and oil consumption in commercial boilers. In May 2006, Sabien acquired the intellectual property and all commercial rights to M2G and floated on AIM in December 2006. In March 2009, Sabien obtained Underwriters Laboratories (UL) certification which enabled M2G to be sold in the USA.

Sabien operates in a market where companies demand high standards of performance delivery including end to end project management, proven technology solutions with an estate-wide application and a record of delivering proven energy and carbon savings along with validation of the same.    

We continue to win new business with blue-chip and public sector clients, while also securing from existing clients multiple repeat orders for our M2G technology.

Finance

The Group's turnover in the period decreased by 37% to £942k and there was a loss before tax of £67k compared to a profit of £301k in the same period last year.

As at 31 December 2012, the Group's cash reserves amounted to £1,190k compared to £1,402k at 30 June 2012 and £1,343k at 31 December 2011. The Group's target is to hold at least 6 month's operating cash on current account and short term deposit.

Operations

During the period, orders were received from Debut (MOD), Standard Life, EDF Energy, Carillion, Schneider Electric, Glasgow City Council and Jones Lang LaSalle.

Sales from indirect partners in the period increased to 88% of total sales (2011/12 - 21%). This substantial increase in indirect sales is a result of the Group's strategy in recent years to enter into arrangements with large Facilities Management companies and Energy Service companies (ESCOs).

We entered into third party M2G distribution agreements in Australia, Netherlands and Belgium and are also in discussions with third parties in Europe and the US and will update the market when these discussions become material.

During the period we also widened our installation capacity in Europe where we mobilised our first M2G project in the Czech Republic. We anticipate further installations in the second half of the year in France, Germany and Poland.   

Current Trading

£51k of orders have been received since 1 January 2013 giving total orders received for year to date of £1,035k which represents 42% of full year revenues of £2,470k for 2011/12. Orders from indirect partners for the year to date amount to £957k which represents 92% of the orders received.

The sales pipeline currently stands at £6.3m. This pipeline includes both sales opportunities with an order date in the future and those where we have been asked to quote but where no order date has been indicated by the client. In our annual report published in October, we announced a sales pipeline number of £6.3m. During the period under review, we have converted £1m of the pipeline into firm orders while maintaining its overall size. The size of the sales pipeline is a key performance indicator as it gives an indication of the level of business that could be generated over the following 6 to 24 months. Sabien's experience is that it can take between 6 to 18 months for a customer enquiry to convert to a sales order.

Energy Costs

The rising costs of energy in the UK are a major concern for businesses and households. 68% of the UK's biggest companies regard improving operational energy efficiency as a major opportunity for their business. Given that business energy prices have risen by 58% since 2010, it is clear that the threat posed by energy price rises to UK businesses is of significant importance.

Weather and economic activity will not be the only factors impacting on UK power prices. The burning of fossil fuels is likely to become increasingly expensive as the effects of the Large Combustion Plant Directive (LCPD - NOx compliance) and the EU's Industrial Emissions Directive (IED - SOx compliance) impose stricter emissions criteria that will either lead to power plants closing and/or the installation in these facilities of expensive plant processing equipment to reduce sulphur dioxide and nitrogen oxide emissions over the next few years.

Since September 2011 the carbon price support floor (CPS) has exceeded the spot European carbon price. When the Government first announced the introduction of the CPS in March 2011, the Treasury estimated rates of £7.25/tCO₂ and £9.68/tCO₂ for the periods 2014-15 and 2015-16 respectively. However, in the last Budget, the rate for 2014-15 has been increased to £9.55/tCO₂ and the indicative rate for 2015-16 has been set at £12.06/tCO₂  which is a cost that will inevitably be passed on to the end-user. As a result, we believe the ingredients are in place for energy prices to rise faster than inflation in the years ahead particularly with utilities focused on closing the energy gap caused by the retirement of 25% of the UK's generating capacity over the next decade in order to meet 2020 emissions reduction targets.

In our view, Combined Cycle Gas Turbine plants will be used as a substitute for high cost offshore wind, and with 46% of UK electricity supply derived from gas we believe they will increase market share moving forward. There will also be a stronger link between electricity costs and heating expense in the near future. We see M2G as an ideal solution for commercial energy users to reduce their CO₂ emissions and, more importantly, to reduce the cost of heating in the years ahead.   

Outlook

Growth from new and existing business has created a solid platform for 2013. Taken together with the sales performance since 1 January 2013 and orders that we have been informed by our customers will be placed over the next few months, the Group is well positioned to take advantage of market opportunities.

We believe the current economic climate will continue to create significant medium and long-term growth opportunities for the Group, both in the UK and overseas.

The Board feels confident that we will continue to build on our track record of sustainable profitable growth and therefore remains confident of meeting its expectations for this financial year.

We would also like to thank all of our employees for all of their hard work during another challenging period. Without their hard work and dedication, Sabien would not be able to provide a high level of support and project management to its customers.

Miriam Maes	Alan O'Brien
Chairman	Chief Executive Officer

For further information:

Sabien Technology Group plc Alan O'Brien - Chief Executive Officer Gus Orchard - Finance Director	020 7993 3700
Westhouse Securities Limited
Antonio Bossi Petre Norton	020 7601 6100

Sabien Technology Group Plc

Unaudited Condensed Group Statement of Comprehensive Income for the period ended 31 December 2012

	Notes	6 months to 31 December 2012	6 months to 31 December 2011	Year to 30 June 2012
		Unaudited	Unaudited	Audited
		£'000	£'000	£'000
Revenue		942	1,492	2,470
Cost of Sales		(317)	(476)	(753)
Gross Profit		625	1,016	1,717
Administrative expenses		(702)	(723)	(1,457)
Operating (Loss)/Profit		(77)	293	260
Investment revenues		10	8	18
(Loss)/Profit before tax		(67)	301	278
Corporation tax	3	-	63	243
(Loss)/Profit for the period attributable to equity holders of the parent company		(67)	364	521
Other comprehensive income for the period		-	-	-
Total comprehensive income for the period		(67)	364	521
(Loss)/Earnings per share in pence - basic	4	(0.2)p	1.2p	1.6p
(Loss)/Earnings per share in pence - diluted	4	(0.2)p	1.1p	1.5p

Sabien Technology Group Plc

Unaudited Condensed Group Statement of Financial Position as at 31 December 2012

	Notes	31 December 2012	31 December 2011	30 June  2012
		Unaudited	Unaudited	Audited
		£'000	£'000	£'000
Non-current assets
Property, plant and equipment		69	39	38
Other intangible assets		626	673	650
Total non-current assets		695	712	688
Current assets
Inventories		195	214	292
Trade and other receivables		569	645	234
Deferred tax		283	-	283
Cash and cash equivalents		1,190	1,343	1,402
Total current assets		2,237	2,202	2,211
Total Assets		2,932	2,914	2,899
Current liabilities
Trade and other payables		240	343	156
Total current liabilities		240	343	156
Total Liabilities		240	343	156
Net assets		2,692	2,571	2,743
SHAREHOLDERS' EQUITY
Share capital	5	1,574	1,574	1,574
Other reserves		192	2,812	176
Retained earnings/(losses)		926	(1,815)	993
Total equity		2,692	2,571	2,743

Sabien Technology Group Plc

Unaudited Condensed Group Cash Flow Statement for the period ended 31 December 2012

		6 months to 31 December 2012	6 months to 31 December 2011	Year to 30 June  2012
		Unaudited	Unaudited	Audited
		£'000	£'000	£'000
Cash flows from operating activities
(Loss)/Profit before taxation		(67)	301	278
Adjustments for:
Depreciation and amortisation		34	31	61
Finance income		(10)	(8)	(18)
Transfers to equity reserves		16	15	30
(Increase)/decrease in trade and other receivables		(335)	(112)	197
Decrease/(increase) in inventories		97	(67)	(145)
Increase/(decrease) in trade and other payables		84	156	(32)
Cash generated from  operations		(181)	316	371
Net cash (outflow)/inflow from operating activities		(181)	316	371
Cash flows from investing activities
Purchase of property, plant and equipment and intangible assets		(41)	(14)	(20)
Finance income		10	8	18
Net cash used in investing activities		(31)	(6)	(2)
Net (decrease)/increase in cash and cash equivalents		(212)	310	369
Cash and cash equivalents at beginning of period		1,402	1,033	1,033
Cash and cash equivalents at end of period		1,190	1,343	1,402

Sabien Technology Group Plc

Unaudited Condensed Group Statement of Changes in Equity as at 31 December 2012

	Share capital	Share premium	Merger reserve	Shares to be issued	Share based payment reserve	Retained earnings	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 July 2011	1,574	3,422	(771)	38	108	(2,179)	2,192
Profit  for the period 1 July 2011 to 31 December 2011	-	-	-	-	-	364	364
Employee share option scheme - value of services provided	-	-	-	-	15	-	15
Balance at 31 December 2011	1,574	3,422	(771)	38	123	(1,815)	2,571
Cancellation of share premium	-	(3,422)	-	-	-	3,422	-
Profit for the period 1 January 2012 to 30 June 2012	-	-	-	-	-	157	157
Merger reserve transferred to retained earnings	-	-	771	-	-	(771)	-
Employee share option scheme - value of services provided	-	-	-	-	15	-	15
Balance at 30 June 2012	1,574	-	-	38	138	993	2,743
Loss  for the period 1 July 2012 to 31 December 2012	-	-	-	-	-	(67)	(67)
Employee share option scheme - value of services provided	-	-	-	-	16	-	16
Balance at 31 December 2012	1,574	-	-	38	154	926	2,692

Sabien Technology Group Plc

Notes to the Financial Statements for the period ended 31 December 2012

1.         Accounting policies

The interim financial information has not been audited or reviewed by the auditors and does not constitute statutory accounts for the purpose of Sections 434 and 435 of the Companies Act 2006.

The financial information in this document has been prepared using accounting principles generally accepted under International Financial Reporting Standards and is consistent with those used in the preparation of the most recent annual financial statements.

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 the Group is a going concern and have accordingly prepared these financial statements on a going concern basis.

The interim 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) at 31 December 2012. 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.

Accounting for the Company's acquisition of the controlling interest in Sabien Technology Limited: The Company's controlling interest in its directly held subsidiary, Sabien Technology Limited, was acquired through a transaction under common control, as defined in IFRS 3 Business Combinations. The directors note that transactions under common control are outside the scope of IFRS 3 and that there is no guidance elsewhere in IFRS covering such transactions.

IFRS contain specific guidance to be followed where a transaction falls outside the scope of IFRS. This guidance is included at paragraphs 10 to 12 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. This requires, inter alia, that where IFRS does not include guidance for a particular issue, the directors may also consider the most recent pronouncements of other standard setting bodies that use a similar conceptual framework to develop accounting standards. In this regard, it is noted that the UK standard FRS 6 addresses the question of business combinations under common control.

In contrast to IFRS 3, FRS 6 sets out accounting guidance for transactions under common control. The guidance contained in FRS 6 indicates that merger accounting may be used when accounting for transactions under common control.

Having considered the requirements of IAS 8, and the guidance included in FRS 6, it is considered appropriate to use a form of accounting which is similar to pooling of interest when dealing with the transaction in which the Company acquired its controlling interest in Sabien Technology Limited.

In consequence, the Consolidated Financial Statements for Sabien Technology Group Plc report the result of operations for the year as though the acquisition of its controlling interest through a transaction under common control had occurred at 1 October 2005. The effect of intercompany transactions has been eliminated in determining the results of operations for the year prior to acquisition of the controlling interest, meaning that those results are on substantially the same basis as the results of operations for the year after the acquisition of the controlling interest.

Similarly, the consolidated balance sheet and other financial information have been presented as though the assets and liabilities of the combining entities had been transferred at 1 October 2005.

The Group took advantage of Section 131 of the Companies Act 1985 and debited the difference arising on the merger with Sabien Technology Limited to a merger reserve.

c)         Property, plant and equipment: Property, plant and equipment are stated at cost less accumulated depreciation. Assets are written off on a straight-line basis over their estimated useful life commencing when the asset is brought into use. The useful lives of the assets held by the Group are considered to be as follows:

Office equipment, fixtures and fittings              4 years

d)         Intangible assets: Intellectual property, which is controlled through custody of legal rights and could be sold separately from the rest of the business, is capitalised where fair values can be reliably measured.

Intellectual property is amortised on a straight line basis evenly over its expected useful life of 20 years.

Impairment tests on the carrying value of intangible assets are undertaken:

·      At the end of the first full financial year following acquisition

·      In other periods if events or changes in circumstances indicate that the carrying value may not be fully recoverable.

If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Recoverable amount is the higher of the fair value, less costs to sell, and value in use. In assessing the value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only in so far that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised in income immediately.

e)         Fixed asset investments: Fixed asset investments are stated at cost less any provision for impairment in value.

f)          Inventories: Inventories are valued at the lower of average cost and net realisable value.

g)         Financial Instruments

Financial Assets

The Group classifies its financial assets as loans and receivables and cash. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

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 balance sheet date. These are classified as non-current assets.

Trade receivables are classified as loans and receivables and are recognised at fair value less provision for impairment. Trade receivables, with standard payment terms of between 30 to 65 days, are recognised and carried at the lower of their original invoiced and recoverable amount. Where the time value of money is material, receivables are carried at amortised cost. Provision is made when there is objective guidance that the Group will not be able to recover balances in full. Balances are written off when the probability of recovery is assessed as being remote.

Financial Liabilities

The Group classifies its financial liabilities as trade payables and other short term monetary liabilities. Trade payables and other short term monetary liabilities are recorded initially at their fair value and subsequently at amortised cost. They are classified as non-current when the payment falls due more than 12 months after the balance sheet date.

h)         Cash and Cash Equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less, and bank overdrafts.

i)          Revenue recognition: Revenue from sale of goods is recognised upon delivery and installation at a customer site or delivery to a customer's incumbent facilities manager which subsequently carries out the installation itself. Where goods are delivered to overseas distributors, revenue is recognised at the time of shipment from the company's warehouse.

Revenue from services generally arises from pilot projects for customers and is recognised once the pilot has been completed and the results notified to the customer. Pilot projects generally have a duration of between 1 and 3 months.

Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the Group.

Interest income is accrued on a time basis by reference to the principal outstanding and at the effective interest rate applicable.

j)          Share-based payments: The Group has applied the requirements of IFRS2 Share-based Payments. The Group issues options to certain employees. These options are measured at fair value (excluding the effect of non-market based vesting conditions) at the date of grant. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period based on the Group's estimate of the shares that will eventually vest and adjusted for the effect of non-market based vesting conditions.

Fair value is measured by use of the Black-Scholes model. The expected life used in the model has been adjusted, based on management's best estimate for the effects of non-transferability, exercise restrictions and behavioural conditions.

k)         Operating leases: Rentals applicable to operating leases where substantially all of the benefits and risks of ownership remain with the lessor are charged to the statement of comprehensive income on the straight line basis over the lease term.

l)          Taxation: The charge for current tax is based on the results for the period as adjusted for items that are non-assessable or disallowed. It is calculated using rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable profit. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction which affects neither the tax profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interest in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax is calculated at the rates that are expected to apply when the asset or liability is settled. Deferred tax is charged or credited in the statement of comprehensive income, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

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 less than 5% of total revenues for the period and are therefore not reportable.

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

	Sales revenue	% of total revenue
	£'000
Customer 1	260	28%
Customer 2	159	17%

3.         Taxation

A deferred tax asset of £283k was recognised at 30 June 2012 in respect of £1,416k of available losses brought forward as the Directors believe that the Group will continue to be sufficiently profitable in the future to be able to utilise these losses. The Directors do not consider that any adjustment to this estimate is necessary in these interim financial statements.

4.         Earnings per share (EPS)

The calculation of the basic earnings per share is based on the earnings attributable to the ordinary shareholders, divided by the weighted average number of shares in issue in the period.

	6 months to 31 December 2012	6 months to 31 December 2011	Year to 30 June  2012
	£'000	£'000	£'000
(Loss)/Profit for the period	(67)	364	521
Basic:
Weighted average number of shares in issue	31,486,511	31,486,511	31,486,511
(Loss)/Earnings per share - basic	(0.2)p	1.2p	1.6p
Diluted:
Weighted average number of shares	32,650,400	32,650,400	32,650,400
(Loss)/Earnings per share - diluted	(0.2)p	1.1p	1.5p

At the period end, warrants for 1,518,356 shares and options over shares were in issue.

5.         Share capital

The Company's issued ordinary share capital is:

	Amount	Number of Ordinary Shares
Allotted, called up and fully paid:
At 31 December 2012, 31 December 2011 and 30 June 2012	£1,574,326	31,486,511

6.         Seasonality

The business of the Group is not seasonal and there are no substantial and recurring variations between the results in the first half-year period compared to the second half-year.

 

END

 

 

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