Unaudited Interim Results for the six months ended 31 December 2017

Investor news

Published: 31 January

Type: Investor news

Year: 2018

Sabien Technology Group Plc

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

 

Unaudited Interim Results for the six months ended 31 December 2017

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 2017 (the "Period") (comparatives are shown for the comparable period in the previous year unless otherwise stated):

Highlights in the Period

·           Sales revenue £462k (2016: £298k)

·           Sales orders received £225k (2016: £313k)

·          Loss before tax £233k (2016: - £826k loss)

·          Net cash at the end of the period £133k (£240k as at 31 December 2016)

·           Sales pipeline of £10.1m at 30 January 2018

·          Overseas sales £171k (2016: £166k)

Current trading and outlook

The Board has continued to manage the Group's working capital tightly during the Period, and the cost reduction policy implemented during 2017 has been effective in reducing the operating loss in the Period to £233k compared to £826k in the comparable six month period ended 31 December 2016.

The Board is still targeting monthly breakeven by December 2018, although the Group will continue to need to raise additional equity funding to provide further working capital. The Group plans to raise additional equity funding during the first quarter of 2018 and the Chairman, Bruce Gordon, has re-confirmed his intention to subscribe for £100,000 of new ordinary shares in such a funding as and when it proceeds.

The Board continues to focus its efforts on returning the Group towards profitability and remains frustrated by the unpredictability of conversion of the sales pipeline into sales orders, with disappointing sales for the period under review, albeit improved compared to the comparable period in 2016. However, the Board is focusing on developing recurring revenues from rental contracts and from Forensic Boiler Audits, a new consultancy service being offered by the Company. The Board believes that these new rental contracts offer the potential to provide stable, consistent revenues and thereby over time provide a greater visibility to the Board on future financial performance.

Despite the challenges, the Board remains confident about the Group's product and services, the potential market and therefore the prospects for the year ahead.

Bruce Gordon

Chairman

Alan O'Brien

Chief Executive Officer

31 January 2018

31 January 2018

For further information please contact:

Sabien Technology Group plc

Alan O'Brien

+44(0)20 7993 3700

Beaumont Cornish Limited

Michael Cornish / Roland Cornish

www.beaumontcornish.com

(Nominated Advisor & Broker)

+44(0)20 7628 3396

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 2017

Notes

6 months to 31 December 2017

6 months to 31 December 2016

Year to

30

June

2017

Unaudited

Unaudited

Audited

£'000

£'000

£'000

Revenue

462

298

509

Cost of Sales

(99)

(78)

(173)

Gross Profit

363

220

336

Administrative expenses

(597)

(1,047)

(1,990)

Operating Loss

(234)

(827)

(1,654)

Investment revenues

1

1

3

Loss before tax

(233)

(826)

(1,651)

Tax credit

3

-

30

30

Loss for the period attributable to equity holders of the parent company

(233)

(796)

(1,621)

Other comprehensive income for the period

-

-

-

Total comprehensive income for the period

(233)

(796)

(1,621)

Loss per share in pence - basic

4

(0.3)p

(1.4)p

(2.3)p

Loss per share in pence - diluted

4

(0.3)p

(1.4)p

(2.3)p

Sabien Technology Group Plc

Unaudited Condensed Group Statement of Financial Position as at 31 December 2017

Notes

31 December 2017

31 December 2016

 30 June

 2017

Unaudited

Unaudited

Audited

£'000

£'000

£'000

ASSETS

Non-current assets

Property, plant and equipment

36

90

59

Other intangible assets

390

437

414

Total non-current assets

426

527

473

Current assets

Inventories

88

202

133

Trade and other receivables

60

98

82

Cash and cash equivalents

133

240

26

Total current assets

281

540

241

TOTAL ASSETS

707

1,067

714

EQUITY AND LIABILITIES

Current liabilities

Trade and other payables

382

127

156

Total current liabilities

382

127

156

EQUITY

Equity attributable to equity holders of the parent

Share capital

5

2,531

2,294

2,531

Other reserves

1,080

944

1,080

Retained earnings

(3,286)

(2,298)

(3,053)

Total equity

325

940

558

TOTAL EQUITY AND LIABILITIES

707

1,067

714

Sabien Technology Group Plc

Unaudited Condensed Group Cash Flow Statement for the period ended 31 December 2017

6 months

to

31 December 2017

6 months

to

31 December 2016

Year

to

30 June

 2017

Unaudited

Unaudited

Audited

£'000

£'000

£'000

Cash flows from operating activities

Loss before taxation

(233)

(826)

(1,651)

Adjustments for:

Depreciation and amortisation

47

56

107

Profit on disposal of property, plant and equipment

(3)

Finance income

(1)

(1)

-

Transfers to equity reserves

-

1

1

Decrease in trade and other receivables

22

111

127

Decrease in inventories

45

19

88

Increase/(decrease) in trade and other payables

226

(90)

(60)

Cash generated by/(used in) operations

106

(730)

(1,391)

Corporation taxes recovered

-

30

30

Net cash inflow/(outflow) from operating activities

106

(700)

(1,361)

Cash flows from investing activities

Proceeds from share issue

-

705

1,147

Purchase of property, plant and equipment and intangible assets

-

(1)

(1)

Proceeds on disposal of property plant and equipment

6

Finance income

1

1

-

Net cash inflow from investing activities

1

705

1,152

Net increase/(decrease) in cash and cash equivalents

107

5

(209)

Cash and cash equivalents at beginning of period

26

235

235

Cash and cash equivalents at end of period

133

240

26

Sabien Technology Group Plc

Unaudited Condensed Group Statement of Changes in Equity as at 31 December 2017

Share capital

Share premium

Share based payment reserve

Retained earnings

Total equity

£'000

£'000

£'000

£'000

£'000

Balance at 1 July 2016

2,200

165

168

(1,502)

1,031

Loss for the period

1 July 2016 to 31 December 2016

-

-

-

(796)

(796)

Share issue

94

611

-

-

705

Balance at 31 December 2016

2,294

776

168

(2,298)

940

Loss for the period

1 January 2017 to 30 June 2017

-

-

-

(825)

(825)

Share issue

237

205

-

-

442

Employee share option scheme - value of services provided

-

-

1

-

1

Transfer to retained earnings re lapsed options

-

-

(70)

70

-

Balance at 30 June 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

Sabien Technology Group Plc

Notes to the Financial Statements for the period ended 31 December 2017

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 10.6% which was a significant reduction on previous years' conversion rates but was an improvement compared to the 30 June 2017 conversion rate of 2.7%. If this conversion rate were to be applied to the sales pipeline at 31 December 2017, 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 period end.

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 2017. 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

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 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 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 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 £171k which were 37% 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

259

56

Customer 2

86

19

Customer 3

68

15

3.         Taxation

6 months to 31 December 2017

6 months to 31 December 2016

Year to

 30

 June

 2017

£'000

£'000

£'000

Corporation tax recovered

-

30

30

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 2017

6 months to 31 December 2016

Year to

 30

 June

 2017

£'000

£'000

£'000

Loss for the period

(233)

(796)

(1,621)

Basic and Diluted:

Weighted average number of shares in issue

71,504,867

56,504,867

71,504,867

Loss per share - basic and diluted

(0.3)p

(1.4)p

(2.3)p

5.         Share capital

The Company's issued Ordinary share capital is:

Amount

Number of New Ordinary Shares of 0.5p each

Number of Deferred Shares of 4.5p each

Allotted, called up and fully paid:

At 31 December 2017 and 30 June 2017

£2,531,495

110,254,867

44,004,867

At 31 December 2016

£2,293,993

62,754,867

44,004,867

At a general meeting of the Company held on 13 July 2016, the Ordinary shares of 5p each were split into 44,004,867 New Ordinary shares of 0.5p each and 44,004,867 Deferred shares of 4.5p 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 16 September 2016, the Company raised £750k (gross) by the issue of 18,750,000 New Ordinary shares of 0.5p each at a price of 4p per share. Net proceeds after expenses amounted to £704k.

On 19 April 2017, the Company raised £475k (gross) by the issue of 47,500,000 New Ordinary shares of 0.5p each at a price of 1p per share. Net proceeds after expenses amounted to £443k.

6.         Seasonality

The business of the Group is not seasonal.