Half-year Report

RNS Number : 9548P

Sabien Technology Group PLC

14 February 2019

 

For immediate release

14 February 2019

Sabien Technology Group Plc

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

Unaudited Interim Results for the six months ended 31 December 2018

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 2018 (the "Period") (comparatives are shown for the comparable period in the previous year unless otherwise stated):

Highlights in the Period

·          Sales revenue £342k (2017: £462k)

·          Sales orders received £132k (2017: £225k)

·          Gross profit £291k (2017: £363k)

·          Gross profit margin 85% (2017: 79%)

·         Loss before tax £207k (2017: £233k loss)

·         Net cash at the end of the period £263k (£133k as at 31 December 2017)

·          Sales pipeline of £10.6m at 31 January 2019

·         Overseas sales £39k (2017: £171k)

Current trading and outlook

The Board remains focused on returning the company towards profitability and has continued to manage the Group's working capital tightly during the Period. The cost reduction policy implemented during 2018 has continued to be effective in reducing costs. The six-month period ended December 2018 was another challenging period for the Group given the continuing unpredictability on the timing of conversion of the sales pipeline into sales orders.

The sales pipeline currently stands at £10.6m. 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. Order arrival dates are estimations given to the Company by its clients.

The management of the size of the sales pipeline, its conversion to sales orders and maintaining a healthy gross margin are key performance indicator for the Group as it gives us an indication of the level of business that could be generated over the following 24 months.

Fundraise

In December 2018, the group raised proceeds of £400,000 via the placing of 400,000,000 new ordinary shares with new and existing investors, at a price of 0.1 pence per Placing Share. The Board notes the recently disclosed sales by placees, on which it had no prior notice.

The proceeds of the Placing were used to provide additional working capital for the Company and in particular, to support activities to generate and secure orders from the sales pipeline outlined in the Trading Update published on 6 August 2018 and to allow the Board the ability to evaluate additional acquisition and investment opportunities to enhance the long-term value of the Company for shareholders.

Board Changes

During the Period we made a number of changes to the Board of Sabien with the appointment of Charles Goodfellow as Non-executive Director (Chairman) and John Taylor as a Non-executive Director. Alan O'Brien continues as CEO of the board.

We also announced that Bruce Gordon, Dr Martin Blake and Karl Monaghan had stepped down as Non-executive Directors of the company. 

We are proud of the Sabien Tech team as we continue to return the business towards profitability and, as always, we thank them for their commitment and contribution.

Outlook

The Board remains cautious about providing the market with a forecast to year end as historically, order arrival dates are estimations given to the company by its clients.

We are focussed on improving the sales pipeline conversion rate for the second half of the year. We announced new orders totalling £146,187 in February and are expecting a number of further orders over the coming months to 30 June 2019.

With a significantly reduced cost base and with several M2G phased orders expected, the Board remains optimistic about the Group's product and service offering, the potential market for M2G and the potential prospects to year end June 2019. However, there will still need to be a sustained improvement in the conversion rate of the order book to sales in the year ahead to reach the Board's target of breakeven for the Company.

Charles Goodfellow Non-Executive Chairman	Alan O'Brien Chief Executive Officer
14 February 2019	14 February 2019

For further information please contact:

Sabien Technology Group plc
Alan O'Brien	[phone]
Beaumont Cornish Limited (Nominated Adviser) Michael Cornish / Roland Cornish www.beaumontcornish.com	[phone]
(Peterhouse Capital Limited (Broker) Martin Lampshire and Fungai Ndoro	[phone]

This announcement is inside information for the purposes of Article 7 of Regulation 596/20014. The person who arranged for the release of this announcement on behalf of the Company was Alan O'Brien, Chief Executive Officer.

A copy of this announcement is available on the Company's website at http://www.sabien-tech.co.uk

 

Sabien Technology Group Plc

Unaudited Condensed Group Statement of Comprehensive Income for the period ended 31 December 2018

	Notes	6 months to 31 December 2018	6 months to 31 December 2017	Year to 30 June 2018
		Unaudited	Unaudited	Audited
		£'000	£'000	£'000
Revenue		342	462	588
Cost of Sales		(51)	(99)	(102)
Gross Profit		291	363	486
Administrative expenses		(498)	(597)	(1,331)
Operating Loss		(207)	(234)	(845)
Investment revenues		-	1	-
Loss before tax		(207)	(233)	(845)
Tax credit		-	-	-
Loss for the period attributable to equity holders of the parent company		(207)	(233)	(845)
Other comprehensive income for the period		-	-	-
Total comprehensive income for the period		(207)	(233)	(845)
Loss per share in pence - basic	3	(0.1)p	(0.3)p	(0.6)p
Loss per share in pence - diluted	3	(0.1)p	(0.3)p	(0.6)p

Sabien Technology Group Plc

Unaudited Condensed Group Statement of Financial Position as at 31 December 2018

	Notes	31 December 2018	31 December 2017	30 June  2018
		Unaudited	Unaudited	Audited
		£'000	£'000	£'000
ASSETS
Non-current assets
Property, plant and equipment		26	36	37
Other intangible assets		185	390	198
Total non-current assets		211	426	235
Current assets
Inventories		74	88	79
Trade and other receivables		59	60	110
Cash and cash equivalents		282	133	9
Total current assets		415	281	198
TOTAL ASSETS		626	707	433
EQUITY AND LIABILITIES
Current liabilities
Trade and other payables		355	382	319
Total current liabilities		355	382	319
EQUITY
Equity attributable to equity holders of the parent
Share capital	4	2,971	2,531	2,931
Other reserves		1,348	1,080	1,026
Retained earnings		(4,048)	(3,286)	(3,843)
Total equity		271	325	114
TOTAL EQUITY AND LIABILITIES		626	707	433

 

Sabien Technology Group Plc

Unaudited Condensed Group Cash Flow Statement for the period ended 31 December 2018

		6 months to 31 December 2018	6 months to 31 December 2017	Year to 30 June  2018
		Unaudited	Unaudited	Audited
		£'000	£'000	£'000
Cash flows from operating activities
Loss before taxation		(207)	(233)	(845)
Adjustments for:
Depreciation and amortisation		28	47	90
Impairment of intangibles		-	-	169
Finance income		-	(1)	-
Transfers to equity reserves		-	-	1
Decrease / (Increase) in trade and other receivables		56	22	(28)
Decrease in inventories		5	45	54
Increase in trade and other payables		28	226	133
Cash (used in) / generated by operations		(90)	106	(426)
Corporation taxes recovered		-	-	-
Net cash (outflow) / inflow from operating activities		(90)	106	(426)
Cash flows from investing activities
Proceeds from share issue		379	-	400
Purchase of property, plant and equipment and intangible assets		(5)	-	(21)
Finance income		-	1	-
Net cash inflow from investing activities		374	1	379
Net increase/(decrease) in cash and cash equivalents		284	107	(47)
Cash and cash equivalents at beginning of period		(21)	26	26
Cash and cash equivalents at end of period		263	133	(21)
Cash and cash equivalents comprise:
Cash and cash equivalents		282	133	9
Invoice financing (included in other payables)		(19)	-	(30)
		263	133	(21)

 

Sabien Technology Group Plc

Unaudited Condensed Group Statement of Changes in Equity as at 31 December 2018

	Share capital	Share premium	Share based payment reserve	Retained earnings	Total equity
	£'000	£'000	£'000	£'000	£'000
Balance at 1 July 2017	2,531	981	99	(3,053)	558
Loss for the period 1 July 2017 to 31 December 2017	-	-	-	(233)	(233)
Balance at 31 December 2017	2,531	981	99	(3,286)	325
Loss for the period 1 January 2018 to 30 June 2018	-	-	-	(612)	(612)
Share issue	400	-	-	-	400
Employee share option scheme - value of services provided	-	-	1	-	1
Transfer to retained earnings re lapsed options	-	-	(55)	55	-
Balance at 30 June 2018	2,931	981	45	(3,843)	114
Loss for the period 1 July 2018 to 31 December 2018	-	-	-	(207)	(207)
Share issue	40	324	-	-	364
Transfer to retained earnings re lapsed options	-	-	(2)	2	-
Balance at 31 December 2018	2,971	1,305	43	(4,048)	271

 

Sabien Technology Group Plc

Notes to the Financial Statements for the period ended 31 December 2018

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, despite the losses incurred in the past two financial years and this six month period 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 key performance indicator for the Group is the conversion of its sales pipeline to revenue. The pipeline comprises business cases submitted to clients. The annualised conversion of opening pipeline to sales revenue in the period amounted to 6.5% which was a significant reduction on previous years' conversion rates. This was the result of delays with several of the projects and current market conditions. The Board considers that this rate will be able to be improved in future periods. Based on this conversion rate, and after taking into account the capital raise prior to the end of the calendar year, cashflow forecasts prepared by the Directors 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 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 2018. 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                         3-4 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

IFRS 9 Financial Instruments took effect from 1 January 2018 and has been adopted for the year ended 30 June 2018 using the full retrospective method. The group has reassessed the classification and measurement of financial instruments and this has not given rise to any changes except that financial assets previously classified as "loans and receivables" under IAS 39 are now presented as "financial assets at amortised cost" in the financial statements.

The Group classifies its financial assets as financial assets at amortised cost 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.

Financial assets amortised cost 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 financial assets amortised cost 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.

A loss allowance is recognised on initial recognition of financial assets held at amortised cost, based on expected credit losses, and is re-measured annually with changes appearing in profit or loss. Where there has been a significant increase in credit risk of the financial instrument since initial recognition, the loss allowance is measured based on lifetime expected losses. In all other cases, the loss allowance is measured based on 12-month expected losses. For assets with a maturity of 12 months or less, including trade receivables, the 12-month expected loss allowance is equal to the lifetime expected loss allowance.

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: IFRS 15 Revenue from Contracts with Customers also took effect from 1 January 2018 and has been adopted for the year ended 30 June 2018 using the full retrospective method. The revenue recognition accounting policy applied prior to adoption of IFRS 15 by the company is consistent with the requirements of IFRS 15, and therefore adoption of the standard has not affected amounts recognised in the current or comparative periods.

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 Group'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 from operating lease services rendered to customers is recognised on a straight-line basis.

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 (Group as lessee): 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)          Operating leases (Group as lessor): Assets leased to customers under operating leases are included in property, plant and equipment and are depreciated over their lease term down to their anticipated realisable value on a straight-line basis. Anticipated realisable values are regularly reassessed and the impact upon the depreciation charge is adjusted prospectively.

m)        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 taxable 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 £39k which were 11% of total revenues for the period.

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

	Sales revenue	% of total revenue
	£'000
Customer 1	152	44
Customer 2	52	15
Customer 3	46	13

3.         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 2018	6 months to 31 December 2017	Year to  30  June  2018
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Loss for the period	(207)	(233)	(845)
Basic and Diluted:
Weighted average number of shares in issue	223,588,200	71,504,867	130,254,867
Loss per share - basic and diluted	(0.1)p	(0.3)p	(0.6)p

4.         Share capital

The Company's issued Ordinary share capital is:

	Amount	Number of New Ordinary Shares of 0.01p each	Number of Ordinary Shares of 0.5p each	Number of Deferred Shares of 4.5p each	Number of New Deferred Shares of 0.49p each
Allotted, called up and fully paid:
At 31 December 2018	£2,971,493	590,254,867	-	44,004,867	190,254,867
At 30 June 2018	£2,931,493	-	190,254,867	44,004,867	-
At 31 December 2017	£2,531,495	-	110,254,867	44,004,867	-

At a general meeting of the Company held on 14 December 2018, the Ordinary shares of 0.5p each were split into 190,254,867 New Ordinary shares of 0.01p each and 190,254,867 New Deferred shares of 0.49p each. The Deferred shares have no right to receive notice of attendance or vote at any general meetings of the company and no right to receive any dividend or other distribution.

On 21 December 2018, the Company raised £400k (gross) by the issue of 400,000,000 New Ordinary shares of 0.01p each at a price of 0.1p per share. Net proceeds after expenses amounted to £384k. £5k of the raised proceeds remains unpaid as at the balance sheet date.

5.         Seasonality

The business of the Group is not seasonal.

ENDS

 

END

 

 

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