Sabien Tech. Regulatory News (SNT)

20 July 2015

Sabien Technology Group plc("Sabien" or the "Company")

£770,000 Placing and Subscriptionto pursue new strategy for roll out of M2G systems

Sabien (AIM: SNT), the manufacturer and supplier of M2G, an energy efficiency technology, is pleased to announce that through Westhouse Securities Ltd ("Westhouse") it has conditionally placed with institutional and other investors (the "Placing") 9,860,000 new ordinary shares of 5 pence each (the "Placing Shares") and that TVI 2 Limited, an existing shareholder of the Company, has subscribed (the "Subscription") for 1,140,000 new ordinary shares of 5 pence each (the "Subscription Shares"). The Placing Shares and the Subscription Shares are being issued at 7 pence per share raising £770,000 (before expenses) for the Company.

Highlights

· Placing and Subscription of 11,000,000 new ordinary shares at 7 pence per share to raise £770,000 from institutional and other investors.

· Oversubscribed Placing to new and existing shareholders by Westhouse Securities Ltd as broker to the Company.

· Admission to trading on AIM expected by no later than 28 August 2015.

· The funds raised from the Placing and Subscription will provide Sabien with the capital necessary to support the new more aggressive strategy for the roll out of up to 35 M2G pilot projects for the Company's target client base in FY2016 (vs 10 in FY2015).

· Before receipt of the Placing and Subscription funds the Company had a satisfactory net cash position of £1.1m. The funds received in the Placing and Subscription will be used to fund an increased roll out of pilot projects whilst ensuring that a prudent net cash position is maintained.

Alan O'Brien, Chief Executive Officer of Sabien said: "I am delighted that we have received support from our new and existing shareholders to fund the new strategy for the provision of substantially more M2G pilot projects. This new strategy is expected to reduce our sales cycle by up to 24 weeks by removing a significant barrier to clients agreeing to pilot programmes and to mark a step change in the rate of adoption of M2G by our target client base."

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Background to and reasons for the Placing and Subscription

The Company announced on 15 June 2015 that it expected to report revenue of £1.9m, and a loss of up to £0.6m for the financial year to 30 June 2015. This was largely due to some substantial orders being delayed beyond June 2015, although the Company noted that the sales pipeline of £6.2m and a £1.1m net cash position were robust.

The Company has built a strong reputation in the market place for boiler optimisation controls, built over 8 years of delivering successful client pilot and installation projects. To date the Company has charged clients for running pilot projects (typically c.£20k per pilot). However, the Company has found that many pilots have been delayed by the process of raising a purchase order and, for public sector clients, running a public tender in order to award the pilot. As a result start dates for pilots can be delayed by up to 24 weeks.

Historically, the Company has a high conversion rate from pilots to orders and a number of multi-million pound contracts have been secured in this way. Since 2004 the Company has converted 87% of M2G pilots to its sales pipeline and 69% to an estate-wide roll-out of the Company's technology. The Company now intends to cover the initial costs associated with the pilots itself in order to avoid the delays associated with raising purchase orders and/or a public tender process and to build on this successful method of generating substantial M2G orders. This will enable the Company to scale up the number of pilots it runs and to reduce the sales cycle in which they are delivered. The Company also expects this to give management more visibility over contract award and start dates. The cost of the pilots, including the M2G units, are expected to be recovered from customers for the part of the Company's pipeline which converts to roll-out.

The Company has a thorough selection process for identifying potential customers for its pilot programme and has already secured 10 customers and identified other potential customers for its 2015/16 programme of up to 35 pilots.

The piloting season runs concurrently with the UK heating season, typically from October to April. The next piloting season 2015/16 will be divided into two phases of 18 and 17 pilots respectively. Phase 1 will run from October to December and phase 2 from January to April.

Considering the time commitment and internal costs involved by selected customers in preparing for a pilot, the Company does not expect a decrease in the historic conversion rates from this new piloting strategy.

Based on the new "free" pilot strategy, the Company expects to see a substantial increase in it sales pipeline which should provide greater security over forecasts. The company is targeting a return to profitability by the year to June 2018 and has set itself five year targets of a sales pipeline of £25 million, converting into annual turnover of £8 million with a 25% EBITDA margin.

The Company has already recruited some of the relevant personnel needed to scale up the number of pilots it can deliver and will provide a further update to the market on the pilot programme along with the final results for the year ended 30 June 2015, expected to be in October 2015.

Use of net proceeds

The net proceeds of the Placing and Subscription will be applied (i) to the recruitment of additional personnel required to run the additional pilots (up to 35 in FY2016 and then up to 50 in the following three years); (ii) to the development of the next generation of M2G; and (iii) for working capital purposes to ensure that the Company maintains a strong balance sheet whilst funding the increased number of pilots each year.

Admission

The Placing Shares have been conditionally placed with institutional and other investors by Westhouse Securities Ltd and the Subscription Shares have been subscribed for by TVI 2 Limited. The Placing Shares and the Subscription Shares will, when issued, rank pari passu with the Company's existing issued ordinary shares. It is expected that the Placing Shares and the Subscription Shares will be admitted to trading shortly after HMRC confirms in writing the Company's status in relation to investments by Enterprise Investment Schemes and Venture Capital Trusts and in any event not later than 28 August 2015. A further announcement will be made once confirmation by HMRC has been received and application has been made to AIM for admission of the Placing Shares and Subscription Shares ("Admission").

Placing statistics

Conditionality

The Placing and Subscription are conditional upon, inter alia, receipt of the confirmation from HMRC of advanced assurance that the Placing Shares will be eligible shares for the purposes of section 285 (3) of the Income Tax Act 2007 and that the Placing Shares held by venture capital trusts will be "qualifying holdings" for the purposes of Chapter 4, Part 6, Income Tax Act 2007; the Company having received advanced assurance from HMRC that the Company will be a "qualifying company" and the Placing Shares will be eligible shares for the purposes of the Enterprise Investment Scheme; Admission becoming effective; and the placing agreement between the Company and Westhouse Securities and the subscription agreement between the Company and TVI 2 Limited becoming unconditional and not being terminated in accordance with their terms.

Proposed board changes

The Company also intends to appoint Bruce Gordon as Chairman. Miriam Maes will remain with the Company as a non-executive director. Bruce was formerly senior partner of Deloitte LLP responsible for the Southern Region and is currently the sole shareholder of Thames Valley Capital Ltd which is an advisor to TVI 2 Limited, a c.9% shareholder in the Company. As part of the Placing TVI 2 Limited has subscribed for 1,140,000 Subscription Shares and Bruce Gordon has personally subscribed for 1,425,000 Placing Shares. A further announcement will be made once the appointment of Bruce Gordon as chairman has been finalised.