Trading Statement

RNS Number : 2865I

Sabien Technology Group PLC

29 May 2014

 



Sabien Technology Group plc

("Sabien" or "the Company")

Trading Update

The Board of Sabien Technology Group plc (AIM: SNT), the manufacturer and supplier of M2G, an energy efficiency technology, announces that, in light of recently delayed orders, the Company now expects to report a loss of up to c.£0.3m in the financial year to June 30 2014.  

The shortfall in revenue relative to management expectations is due to a delay in the receipt of some substantial customer orders that were expected to be received in the second half of the financial year but which now are expected in the first half of the next financial year.

In line with management expectations administrative expenses for the current financial year are c.£0.5m higher than last year due primarily to the increase in Business Development Manager headcount but also the investment in the indirect channel for overseas development, the move to larger offices and the expenditure on new product development.

The investment made in new Business Development Managers in the first half of this financial year is beginning to produce returns as a number of sales pipeline opportunities are now maturing into orders. The Company is also continuing to expand its overseas distribution network and since February 2014 has added M2G distributors in China, Greece, Pakistan, Iran, UAE, Spain, Israel, Australasia and South Africa. To date we have received initial small orders from these distributors and we expect further growth in both the size of future orders and the number of distributors in the next year. The sales pipeline currently stands at £5.8m which compares with £6.6m at the time of the February trading update and £4.6m as at 30 June 2013.

During the current financial year, the Company has developed a new product for use on hot water calorifiers (small water heaters) which have been previously too small to install an M2G. Based on the analysis of previous roll-outs of M2G, the Company estimates that these calorifiers could represent up to 20% of all the boilers on a typical estate. Results of 'infield' client trials have proven that considerable savings can be made and, as a consequence, we will be launching this new product later in the calendar year.

Despite the delays in orders received, the Company expects to start the new financial year on 1 July 2014 with an order book of at least £0.5m and this, alongside the potential for new revenue sources from the new product and from our overseas distribution network as well as the growth in the existing sales pipeline, gives the Board confidence in the Company's growth prospects.

The Company's net cash position remains strong and, despite the loss forecast for the year, is expected to be at least at the same level at 30 June 2014 as it was at 30 June 2013 (£1.36m). The reason is due to the reduction in working capital over the period.

The Board believes that Sabien has sufficient capital to execute its business plan and deliver the anticipated growth in the years ahead. As a result of the strong cash position and the expectation that work on the delayed orders will commence in the second half of the calendar year, the Board expects to be in a position to continue with its progressive dividend policy following the maiden dividend announced in 2013.

A further trading update will be provided to the market after the end of the current financial year.

Commenting on trading, Alan O'Brien, Chief Executive of Sabien said:

"Although the reduction in revenue this year has been a source of frustration for the management team and me, there have not been any contract cancellations, only delays in the placing of orders.

This year has seen material progress in a number of areas. We have broadened our business development capabilities, signed commercial M2G distribution agreements in Europe, Middle East, Asia and Australasia, and developed and piloted a new product for hot water calorifiers which we intend to launch later in 2014. This is expected to lead to a wider application of our products in our target markets.

I am confident that Sabien's prospects for the medium and long-term remain positive and there is still a substantial market opportunity to create a profitable and valuable business moving forward."

 

END

 

 

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