Preliminary results for the year to 30 June 2014

RNS Number : 5829T

Sabien Technology Group PLC

07 October 2014

 



7 October 2014

Sabien Technology Group Plc

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

Preliminary results for the year to 30 June 2014

Sabien Technology Group Plc, the manufacturer and supplier of M2G, a boiler energy efficiency technology, is pleased to report its preliminary results for the year to 30 June 2014.

Highlights 2014

·      Sales for the year £2.14m (2013: £2.47m)

·      Loss after tax £0.27m (2013: £0.31m profit)

·      Sales from Alliance Partners £1.01m (2013: £2.02m)

·      Overseas sales £188k (2013: £85k)

·      Non-exclusive distribution agreements signed with Tech Centres in China, Greece, Middle East, India, Italy, France, Germany, Belgium, Netherlands and South Africa

·      Net cash balance at 30 June 2014 was £1.42m (2013: £1.36m)

·      Sales pipeline of £5.8m at 30 June 2014 (2013: £4.6m)

Highlights since the year end

·      Orders brought forward and received since 1 July 2014 total £1.3m

·      Sales pipeline currently standing at c.£6.9m

·      c£1.1m of revenue of the Lincolnshire 3 year contract awarded in Oct 2013 now expected to be delivered in the current financial year

·      Further non-exclusive distribution agreements signed with Tech Centres in Spain and UAE

·      Launched the M1G, a retrofit control technology designed to reduce the operating costs of direct-fired water heaters

·      Net cash balance at 30 September 2014 of £1.3m

·      Proposed final dividend of 0.275p per share

  Outlook

Alan O'Brien, chief executive, commented

"With the stronger pipeline likely to be bolstered by the new overseas Sabien 'Tech Centres' and the introduction of M1G to the product range, we are confident that operational and financial performance will improve significantly during 2015, enabling us to achieve our targets for the year."

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

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 £2.14m (2013: £2.47m). The loss before taxation was £0.29m (2013: £0.40m profit).

Sales for the year were 13% lower than in the previous year due to a number of factors including delays in issuing tenders by clients. However, during the year, the Group has made good progress towards achieving its short term strategic objectives which are discussed further in the Strategic Report.

The loss for the year is due to a combination of lower sales revenue and a planned for increase in administrative expenses due principally to an increase in business development manager headcount. The Group has available tax losses amounting to £1.28m.  In future years, the Group will also benefit from the lower rates of corporation tax introduced under the Patent Box regime as, currently, all the Group's income derives from the exploitation of its M2G patent.

At 30 June 2014, cash and cash deposits amounted to £1.42m (2013: £1.36m). The Group has no external debt.

Dividend policy

As a measure of the Board's confidence in the future it is continuing with its progressive dividend policy introduced last year and proposes to pay a final dividend of 0.275p per share (2013: 0.25p).

Board, management and people

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

We made considerable progress in 2014 on our strategic tests and while there is still much to be done to deliver Sabien's full potential, the UK pipeline growth for 2014/15 is encouraging as it demonstrates the appeal of our M2G technology.

With the stronger pipeline likely to be bolstered by the new overseas Sabien 'Tech Centres' and the introduction of M1G to the product range, we are confident that operational and financial performance will improve significantly during 2015, enabling us to achieve our targets for the year.

Miriam Maes                                                                            Alan O'Brien

Chairman                                                                                  Chief Executive Officer

 

Strategic Report

For the year ended 30 June 2014

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.

 Outside the UK, the Group appoints "Sabien Tech Centres" which are organisations involved in the supply of boiler systems and controls to their own 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.

 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 recently launched M1G which is applicable to hot water heaters. 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 delays in 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. In the first half of the financial year, the Group took steps to try and alleviate the lumpiness of its revenue model caused by order delays by recruiting 3 new business development managers (see KPI - pipeline). The benefits of these recruitments are beginning to be seen and the Group is actively looking for further recruitment into this area.

 Alliance partners contributed £1.0m of sales representing 47% of the total for the year. This compares with £2.0m in the previous year. The volume of sales from alliance partners will vary from year to year and is dependent on what stage the partner is at in the sales cycle with their own clients and pipeline. We are confident that there are a number of good prospects from this source which we anticipate converting to sales revenue over the next year. Major alliance partners with whom we have done business in the year included SSE Contracting, Norland Managed Services, Mitie Technical Services and Jones Lang Lasalle.

 Contract wins in the 12 months included: Lincolnshire County Council, Workspace Management, Advanced Energy Management Services (Renfrewshire Council), South Lanarkshire Council, Mitie Technical Services, IMTECH (Leeds Refit), Jones Lang LaSalle (HSBC), Johnson Controls (CISCO). Orders received since the year end include Mitie Technical Services (Greater London Authority), Durham County Council, Schneider Electric (NHS), Renfrewshire Council, NHS Ayrshire and Arran and follow-on orders from Jones Lang LaSalle (HSBC).

 ·      Business Development - Overseas

 In January 2014, the Group appointed a manager to set up our overseas business with the key objective to develop a network of international third party 'Sabien Tech Centres'. A 'Sabien Tech Centre' is a company in territory (non-UK based) with:

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

o  Engineering capability and capacity; and

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

 The rationale for adopting this approach is that developing a 'Sabien Tech Centre' does not require in-territory pilots to be managed and coordinated by Sabien operations. The channel will require a level of operational support in knowledge transfer/sharing and product training but will not require Sabien to run pilots on behalf of a Sabien Tech Centre.

 Again the impact of this began to be shown during the course of the financial year and overseas sales represented 9% of total sales at £188k compared to £85k in the previous year.  In 2013, the Group had 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 during the year throughout the EU, the Near, Middle and Far East, South Africa and Australasia.

 We stated in last year's report that we anticipated a major contribution to revenue from the Fireye relationship during 2014 but for a number of legitimate reasons, mainly due to a management and ownership restructure, this contribution did not materialise during the year. 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. The company charges for all its pilot programmes and related consultancy services.

 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; client asset rationalisation programmes (purchase and disposal of same);

o  Absence of actual utility consumption data for the estate; and

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.

 The M1G was launched in September 2014 during the Energy Event at the NEC Birmingham.

The Group is also testing other 'inorganic' technologies, i.e. technologies being developed by third parties, that could potentially complement its product suite offering.

 ·      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 1,277 units (2013: 1,437 units) and the gross profit margin was 70.4% (2013: 71.7%). The slight decrease in gross profit was in line with expectations and we are not anticipating any significant increases in pricing. Overhead costs in the year increased by just 30% due principally to an increase in the business development manager headcount and the now completed office relocation.

The Group is continuing to look for further business development managers with proven experience of the retrofit and energy efficiency controls market. 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 products 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 management is constantly aware of the need to recruit and retain key personnel. During the year, the Group has strengthened its business development team and continues to look for industry-proven candidates to join this team.

 4.   Strategy

 During the past 18 months, the Group has developed a formalised strategy for the future which can be summarised as: 

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

·      Broaden our product suite (organic innovation) e.g. M1G and develop 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 company;

·      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; and

·      Maintaining brand awareness and reputation of the Group.

Gus Orchard

Company Secretary

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2014

		2014	2013
	Notes	£'000	£'000
Revenue		2,139	2,471
Cost of sales		(633)	(699)
Gross profit		1,506	1,772
Administrative expenses		(1,815)	(1,391)
Operating (loss)/profit	3	(309)	381
Investment revenues	4	16	20
(Loss)/profit before tax		(293)	401
Tax credit/(charge)	5	21	(89)
(Loss)/profit for the year attributable to equity holders of the parent company		(272)	312
Other comprehensive income		-	-
Total comprehensive income for the year		(272)	312
(Loss)/earnings per share in pence - basic	7	(0.9)	1.0
(Loss)/earnings per share in pence - diluted	7	(0.9)	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 2014                                                     Company Reg No: 05568060

		Group		Company
		2014	2013	2014	2013
	Notes	£'000	£'000	£'000	£'000
ASSETS
Non-current assets
Property, plant and equipment		106	76	-	-
Intangible assets		555	602	-	-
Investment in subsidiaries		-	-	3,601	3,601
Deferred tax		215	-	-	-
Total non-current assets		876	678	3,601	3,601
Current assets
Inventories		142	200	-	-
Trade and other receivables		599	1,081	42	55
Deferred tax		-	194	-	-
Cash and cash equivalents		1,425	1,357	1,062	1,042
Total current assets		2,166	2,832	1,104	1,097
TOTAL ASSETS		3,042	3,510	4,705	4,698
EQUITY AND LIABILITIES
Current liabilities
Trade and other payables		313	431	27	24
Total current liabilities		313	431	27	24
EQUITY
Equity attributable to equity holders of the parent
Share capital	8	1,574	1,574	1,574	1,574
Other reserves		201	200	201	200
Retained earnings		954	1,305	2,903	2,900
Total equity		2,729	3,079	4,678	4,674
TOTAL EQUITY AND LIABILITIES		3,042	3,510	4,705	4,698

Alan O'Brien                                                                                        Gus Orchard

Chief Executive Officer                                                                        Finance Director

Consolidated and Company Cash Flow Statements

For the year ended 30 June 2014

	Group		Company
	2014	2013	2014	2013
	£'000	£'000	£'000	£'000
Cash flows from operating activities
(Loss)/profit before taxation	(293)	401	81	(129)
Adjustments for:
Dividend received from subsidiary	-	-	(200)	-
Depreciation and amortisation	86	72	-	-
Loss on disposal of property, plant & equipment	1	-	-	-
Finance income	(16)	(20)	(13)	(17)
Transfers to equity reserves	1	24	1	24
Decrease/(increase) in trade and other receivables	482	(847)	14	-
Decrease in inventories	58	92	-	-
(Decrease)/increase in trade and other payables	(118)	275	3	-
Cash generated from/(used in) operations	201	(3)	(114)	(122)
Corporation taxes recovered/(paid)	-	-	-	-
Net cash inflow/(outflow) from operating activities	201	(3)	(114)	(122)
Cash flows from investing activities
Dividend paid	(79)	-	(79)	-
Dividend received from subsidiary	-	-	200	-
Purchase of property, plant and equipment	(70)	(62)	-	-
Finance income	16	20	13	17
Net cash (used in)/generated by investing activities	(133)	(42)	134	17
Net increase/(decrease)  in cash and cash equivalents	68	(45)	20	(105)
Cash and cash equivalents at the beginning of the year	1,357	1,402	1,042	1,147
Cash and cash equivalents at the end of the year	1,425	1,357	1,062	1,042

Notes to the Consolidated Financial Statements

For the year ended 30 June 2014

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

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	Sales revenue	% of total revenue
	£'000
UK	1,951	91
Other	188	9
Total	2,139	100

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

	Sales revenue	% of total revenue
	£'000
Customer 1	629	29%
Customer 2	605	28%

3.         Operating (loss)/profit

Operating (loss)/profit is stated after charging:

	Year ended 30 June 2014	Year ended 30 June 2013
	£'000	£'000
Depreciation of property, plant & equipment	39	24
Loss on disposal of property, plant & equipment	1	-
Amortisation of intangible assets	47	48
Operating lease rentals - land and buildings	52	21
Loss on foreign exchange	1	-

4.         Investment revenues

	Year ended 30 June 2014	Year ended 30 June 2013
	£'000	£'000
Interest receivable	16	20

5.         Corporation tax

	Year ended 30 June 2014	Year ended 30 June 2013
	£'000	£'000
Current tax	-	-
Deferred tax	(21)	89
Total tax (credit)/charge for the year	(21)	89
The tax charge for the year can be reconciled to the loss as follows:
(Loss)/profit before tax	(293)	401
Tax on (loss)/profit on ordinary activities at standard UK corporation tax rate of 20% (2013: 20%)	(58)	80
Expenses not deductible for tax purposes	11	6
Capital allowances in excess of depreciation	(7)	(6)
Other short term timing differences	-	-
Unrelieved tax losses	33	9
Tax losses carried forward/(utilised)	21	(89)
Current tax	-	-

Deferred tax:

A deferred tax asset has been recognised in respect of £1,025k of available losses brought forward (2013: £971k) as the Directors believe that it is probable that the Group will continue to be sufficiently profitable in the future to be able to utilise these losses. 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 £254k (2013: £258k) which at the standard tax rate would equate to £51k (2013: £52k).

6.         Dividends

	Year ended 30 June 2014	Year ended 30 June 2013
	£'000	£'000
Proposed final dividend for the year ended 30 June 2014 of 0.275p per share (2013: 0.25p)	91	79

7.         Earnings per share

The calculation of earnings per share is based on the loss for the year attributable to equity holders of £272k (2013: £312k profit) and a weighted average number of shares in issue during the period of 31,486,511 (2013: 31,486,511).  At the year end, warrants for 1,518,356 shares (2013: 1,518,356) and options over 2,102,410 shares (2013: 2,074,410) were in issue.  Both have been taken into account in calculating diluted earnings per share.

8.         Share capital

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

Share warrants

On 7 August 2009, the Company granted 2,952,279 warrants to TVI 2 Limited, exercisable at 6.6p each over a period of five years. Subsequent to the repayment of the loan to TVI 2 Limited in October 2009, the number of warrants granted was reduced to 1,518,356 and they are now exercisable at a price of 6.42p each. These warrants represent 4.6% of the enlarged share capital including Ordinary shares potentially to be issued under the Warrant option. On 6 August 2014, TVI2 Limited exercised its warrant option at a price of 6.42p each.

A copy of the annual report for the year ended 30 June 2014 will be available from the company's website at www.sabien-tech.co.uk and will be posted to shareholders on 27 October 2014.

 

END

 

 

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