Sabien Tech. Regulatory News (SNT)

11 February 2014

Sabien Technology Group Plc

("Sabien" or the "Group")

Unaudited Interim Results for the period to 31 December 2013

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 2013 (comparatives are shown for the same period in the previous year unless otherwise stated):

Highlights in the period

· Sales revenue £924k (2012/13 - £942k)

o While, similar to last year, a higher proportion of our sales are again scheduled to be delivered during the second half of the period, we are encouraged that this year we now have a number of potentially significant clients, which reflects the way that our sales pipeline is evolving.

· Loss before tax £245k (2012/13 - £67k loss)

o Driven by investment in business development and in organic R&D, the company recruited two new Business Development Managers during the year and began investment in organic R&D. Two experienced executives with sector specific experience and track record were added to the team in July 2013. The team now consists of four BDMs compared to two this time last year.

· Maiden final dividend £79k paid in November

o The company introduced a progressive dividend policy paying a maiden final dividend of 0.25p per share.

· Cash at the end of the period was £1,582k (£1,357k at 30 June 2013)

· £879k of sales orders achieved (2012/13 - £984k)

· Tender award from Lincolnshire County Council for £2.2m over 3 years

o £700k of sales revenue for this contract is expected to be recognised by financial year end.

· New orders received for M2G including: Lincolnshire County Council, Marriott Hotels, Welsh Government, Cofely, Fireye, Greffen, Jones Lang LaSalle and Johnson Controls

· Sales from indirect partners 80% of total sales (2012/13 - 88%)

· Sales pipeline of £6.6m (£6.3m in October 2013's update)

· £221k of orders received since 1 January 2014 giving total orders received for the financial year to date of £1,100k (2012/13 - £1,035k)

· In addition, Sabien and/or its partners are working with a number of clients that could lead to substantial orders in the future.

Chairman and Chief Executive Officer's Report

We are pleased to report on the performance of the Group in the first half of the year delivering another period of new contract wins for the business.

The Board anticipates delivering a full-year trading performance in line with management expectations as the investment made in new Business Development Managers in the first half begins to produce returns along with existing sales pipeline opportunities maturing.

We have a strong order book and are continuing to grow our sales pipeline while also creating further opportunities for revenue growth in overseas markets. The level of sales leads is at an all-time high.

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

We are also making excellent progress on all of the strategic tests we set for the business back in 2013 including growing our sales pipeline, driving sales growth, broadening our product suite, growing our network of overseas distributors and maintaining or exceeding our installation capacity in line with company forecasts. We also aim to continue providing our clients and partners with a world class project management service and experience.

Marketplace and Business Drivers

The market universe for commercial boilers in the UK is estimated to be around 6m and, to date, Sabien has sold 7,500 M2G units which indicates that the Group still has a substantial market opportunity. Sabien is able to gear itself to take advantage of this opportunity without incurring any major cost increases through its ongoing relationships with its sub-contract installers.

The price of energy continues to rise ahead of inflation focusing both public sector and private sector organisations/enterprises on reducing consumption. The cost of carbon also continues to rise which will act as an additional driver.

Why Sabien and M2G?

M2G is a proven patented boiler optimisation control that has delivered verified cost-savings across numerous significant clients including BT, Royal Mail, Lincolnshire County Council, Aviva, Ministry of Defence, NHS, Standard Life, Marriott Hotels, Work Space, Regus, and the Welsh Government.

Sabien outsources the manufacture of M2G to a manufacturer in Northern Ireland and has the infrastructure in place to support the sale and installation of 600-800 M2G units per month.

What will lead to increased M2G sales and revenue?

The strategy is to grow UK and overseas sales revenue through the addition of new Business Development Managers and the appointment of further distribution partners in North America, and the EMEA and APAC regions.

Since strengthening our business development function, we have started to see an increase in the pipeline momentum and would expect these new business opportunities to progress through the pipeline to support the Group and to help meet our market expectations.

The indirect sales channel will also grow as new partners are established and some of our existing partners start to gain material sales traction. Following on from the brand awareness is the focus of developing/acquiring additional products/services that also command premium margins in the boiler/burner market. We are currently proceeding with research and development of a technology that addresses energy efficiency in gas-fired water heaters. The beta model is currently under test at a number of secure sites and evaluation is likely to be completed later in 2014.

Finance

The Group's turnover in the period was £924k and there was a loss before tax of £245k compared to a loss of £67k in the same period last year. It is anticipated that sales revenue will be back end loaded this year similar to the year ended 30 June 2013.

As at 31 December 2013, the Group's cash reserves amounted to £1,582k compared to £1,357k at 30 June 2013 and £1,190k at 31 December 2012. The Group's target is to hold at least 6 month's operating cash on current account and short term deposit.

Current Trading

Since the period ending 31 December 2013, £221k of orders have been received giving total orders received for the year to date of £1,100k which represents 45% of full year revenues of £2,471k for 2012/13. Orders from indirect partners for the year to date amount to £382k which represents 35% of total orders received.

The sales pipeline currently stands at £6.6m. 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. In our annual report published in October, we announced a sales pipeline number of £6.3m.

During the period under review, we have converted £879k of the pipeline into firm orders while increasing 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.

Outlook

The Board remains confident of meeting its management expectations for this financial year. We believe that Sabien is now in the best shape it has ever been with strong growth prospects for M2G both in the UK and internationally.

We look forward to continuing our strategic development, our excellent operating and financial performance, and delivering further growth, thus increasing sustainable shareholder value.

Finally, the Board would like to take this opportunity to thank our employees for their valuable contribution. The calibre of their work is exceptional and will have a major impact in guiding the Group in the second half of the year and beyond.

For further information:

Sabien Technology Group Plc

Unaudited Condensed Group Statement of Comprehensive Income for the period ended 31 December 2013

Sabien Technology Group Plc

Unaudited Condensed Group Statement of Financial Position as at 31 December 2013

Sabien Technology Group Plc

Unaudited Condensed Group Cash Flow Statement for the period ended 31 December 2013

Sabien Technology Group Plc

Unaudited Condensed Group Statement of Changes in Equity as at 31 December 2013

Sabien Technology Group Plc

Notes to the Financial Statements for the period ended 31 December 2013

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 2013. 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 £69k which is 7% of total revenues for the period.

During the period, sales to the Group's largest customer was as follows:

3. Taxation

A deferred tax asset of £194k was recognised at 30 June 2013 in respect of £970k 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.

At the period end, warrants for 1,518,356 shares and 2,102,410 options over shares were in issue.

5. Share capital

The Company's issued ordinary share capital is:

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.