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Regulatory Story
Company Sabien Technology Group PLC
TIDM SNT
Headline Final Results
Released 07:00 27-Sep-2019
Number 8787N07

RNS Number : 8787N
Sabien Technology Group PLC
27 September 2019
 

For immediate release

 

27 September 2019

 

 

 

Sabien Technology Group plc

("Sabien" or the "Company")

Final Results

Audited Annual Report and Accounts for the year ended 30 June 2019

 

Sabien Technology Group plc, the manufacturer of M1G and M2G boiler energy efficiency technologies has published its audited report and accounts for the year ended 30 June 2019 ("Annual Report and Accounts"). The Annual Report and Accounts have been posted to shareholders and will be available from the Company's website at http://www.sabien-tech.co.uk.

 

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No 596/2014. The person who arranged for the release of this announcement on behalf of the Company was Richard Parris, Chairman and Director.

 

For further information:

 

Sabien Technology Group plc                                         +44(0)20 7993 3700

Richard Parris, Chairman  

Cédriane de Boucaud Truell    

 

Beaumont Cornish Limited (Nominated Advisor)          +44(0)20 7628 3396

Michael Cornish and Roland Cornish    

www.beaumontcornish.com

 

Peterhouse Capital Limited (Broker)                               +44(0)20 7469 0930

Martin Lampshire and Fungai Ndoro

   

Extracts from the Annual Report and Accounts are set out below:

 

 

Chairman & Chief Executive Officer's Report

We report on the results for Sabien Technology Group Plc ("Sabien", "the Company" or "the Group") for the year ended 30 June 2019.

 

Sabien Technology Group highlights 2019

 

·      Sales for the year £1.38m (2018: £0.59m)

 

·      Profit before tax £0.18m (2018: £0.85m loss)

 

·      Sales from Alliance Partners £0.36m (2018: £0.034m)

 

·      Overseas sales £0.131m (2018: £0.181m)

 

·      Fund raises of £0.70m (gross) to provide working capital

 

·      Net cash balance at 30 June 2019 was £0.74m (2018: £0.009m)

 

Highlights since the year end

 

·      Fund raise of £0.33m (gross)

 

·      Sales of £0.06m to 24 September 2019

 

·      Orders received but not yet invoiced to 24 September 2019 £0.04m

 

·      Net cash balance at 24 September 2019 of £0.95m.

 

Financial results

 

Revenue in the year was £1.38m (2018: £0.59m). The profit before taxation was £0.18m (2018:

£0.85m loss).

 

At 30 June 2019, cash and cash deposits amounted to £0.74m (2018: £0.009m).

 

Dividend policy

 

The directors propose no dividends (2018: nil) in the year.

 

Chairman's Statement

 

As announced on 3 September 2019 following the period end, I was delighted to have been appointed Non-executive Chairman of the Company. As I stated at the time, with the UK committing to a carbon neutral economy by 2050, I believe that there is an opportunity to create a next-generation technology platform, pivoted around Sabien's core technology, that can exploit global energy efficiency markets, especially in the US.

 

At the same time as my appointment, the Company also announced the subscription of £326k from the Truell Intergenerational Family Limited Partnership ("TIG"), which has put the Company in a strong position for the next phase of growth.  I will be undertaking a thorough review of the Company's capabilities over the coming weeks and working with Management and the Board to determine the best strategy to increase shareholder value. This may or may not lead to future acquisitions.

 

 

Since my appointment the Board has also welcomed two new Non-executive Directors - Cédriane de Boucaud Truell and Marco Nijhof.  I consider that the appointments of Cédriane and Marco are key to the next stage of Sabien's development as a public company. They both bring significant operational, commercial and corporate finance expertise to the Sabien Board and their assistance and support are important to the Company's future prospects.

 

We are looking forward to building on the Company's success during the financial year ended 30 June 2019 ("Period"), achieved through a combination of the reduced cost base implemented during the prior year, and the receipt of a significant sales order in April from a major government department worth £755k in the year (total contract £846k) for the deployment of Sabien's M2G Boiler Optimisation Technology across parts of its estate. Sabien's overseas distribution network and sales to local councils also contributed to the Company's much improved financial performance in the Period. 

 

Sabien continues to work diligently to bring the near-term pipeline into reported revenue and, with the support of our strategic investor TIG, we look forward to updating shareholders in due course on our development in the year ahead.

 

 

Richard Parris

Non-Executive Chairman                                                      

 

STRATEGIC REPORT

For the year ended 30 June 2019

 

1.   Review of the Company's Business

 

The Group owns the rights to M1G and M2G, patented energy efficiency products for installation on commercial boilers and water heaters, both within and outside the UK. It subcontracts the manufacture of both products to its principal supplier, which is based in Northern Ireland, and installation in the UK to a number of trained installation companies.

 

The Group has a strong reputation in the market place, being recognised as the market leader in Boiler Optimisation Controls.

 

Background

 

Historically and to gain a foothold in the UK market the company offered paid pilots of its M2G boiler optimisation controller. While the time-line from pilot to estate roll-out was typically 6-18 months, this method of technology acceptance and adoption proved successful with clients resulting in the company being awarded numerous multimillion-pound contracts.

 

To grow sales the decision was then taken by the Board and Management to offer pilots for free and between 2015 and 2017 completed a total of 56 'free' major pilots in the UK and Overseas.

 

Our key driver was to test whether offering free pilots would help to remove uncertainty around sales order lumpiness and to help mitigate the delays in mobilising M2G pilots and contract awards brought about by long buying lead times and public tender processes.

 

Offering 'free' pilots has now proven not to materially shorten the sales cycle however we are in commercial discussions about installing our technology with many clients who took part in our free pilot offer and the management team is confident when conditions are right these discussions will materialise into sales.

 

The Company has introduced a Rental model option with a goal of making the piloting and financing of M2G projects easier and risk free for its clients.  In addition, a Forensic Boiler Audit (FBA) service has been implemented as an additional service line for the Company.  Both the Rental model and FBA have attracted interest but so far uptake has been slower than hoped.

 

The FBA remains a good proposition for the future but the team has been forced to focus on its M2G contracts in the year.  The rental model is offered to all sales prospects but the Company has been successful in achieving capital sales instead during the year which have supported working capital.

 

Market - Energy efficiency retrofit - Commercial Gas

 

Our clients are to be found in market sectors where the share of energy costs in total production costs is low - such as in the services sectors, public administrations, or in industries like mechanical engineering and the food sectors.

 

There are three overriding factors influencing contract award lead times, low gas price, availability of capital and the lack of prevalence of Automated Maintenance Reporting (AMR) and/or sub-AMR in the in-built UK building stock.

 

The lack of access to capital as a barrier to implementing energy efficiency initiatives in our experience and in practice, is more complex.  For large companies the internal 'access to capital' problem stems from neglect of energy efficiency within internal capital budgeting procedures, combined with other organisational rules such as strict requirements on payback periods.

 

For small and medium-sized companies, imperfect access to capital prevents the implementation of profitable energy efficiency projects. Energy efficiency investments tend to be classified as discretionary maintenance projects, they are usually given a lower priority over essential maintenance projects or strategic investments.

 

This bias towards strict investment criteria can be worsened by individual managers' incentives to favour large, strategic projects, which are more prestigious than energy management activities.

 

In addition, top management does not consider energy-cost savings as a strategic priority. Thus, given the constraints on time and attention it can be overlooked by top management.

 

Other sales channels

 

Outside the UK, the Group appoints "Tech Centres" which are organisations involved in the supply of boiler systems and controls to customers in their own territories. These Tech Centres are given training in the installation of M2G as part of the appointment process and purchase an agreed minimum number of M2Gs each year.

 

The Group sells both directly and through a number of facilities management and property management organisations. Sabien's sales focus is organisations with multi-site estates within both the public and private sectors.

 

Team

 

The Group employs its own project management and technical engineering staff who are responsible for ensuring the smooth roll-out and quality control of each M2G pilot and installation project. Headcount currently stands at 10.

 

2.   Principal risks and uncertainties facing the Group

 

The principal risks faced by the Group are:

 

·      Downward pressure on gas and oil prices

·      Technology developments and competitive products

·      Changes in legislation

·      Supply chain issues

·      Inability to meet customer demand

·      Non-recurring revenue model however this is now being addressed

·      Brand awareness and maintenance of reputation

·      Employee retention

·      Raising further finance

·      Trading solvently in the short/medium term

 

The Group places great importance on internal control and risk management. A risk-aware and control-conscious environment is promoted and encouraged throughout the Group. The Board, either directly or through its committees, sets objectives, performance targets and policies for management of key risks facing the Group.

 

The risks outlined above are not an exhaustive list of those faced by the Group and are not intended to be presented in any order of priority. The Group holds weekly management meetings at which, inter alia, business risks are reviewed and any areas that are causing concern are discussed. A plan of action to resolve issues is then put in place.

 

 

UK Energy Efficiency Barriers

 

Information, its provision and lack of trust, misaligned financial incentives, and behaviour barriers mean energy efficiency is undervalued. These barriers are often inter-related and work together to reduce investment in energy efficiency.

 

The UK market is under developed thus has relatively limited/mixed expertise and 'know-how' on the Client, vendor side for energy efficiency investment.

 

Information

 

One of the key characteristics of an embryonic market is there is a lack of access to trusted and appropriate information.

 

Energy efficiency improvements are typically made through purchasing upgraded equipment, retro-fit technology and additives however the biggest challenge facing the market is identifying the absolute savings in energy and emissions which means that potential buyers are not in a position to assess the benefits of an energy efficiency proposal.

 

Financing

 

Energy efficiency projects can be undermined by the absence of standardised monitoring and verification processes which means that the benefits of energy efficiency investments are not trusted.

 

It can be difficult to relate back to individual activities to identify opportunities to make energy efficiency improvements. In the absence of clear, trusted information, many buyers do not prioritise energy efficiency investments.

 

Misaligned financial incentives

 

It is not always the case that the person who is responsible for making energy efficiency improvements will receive the benefits of their actions.

 

Commercial rented tenants are responsible for their own bills and therefore it is in their interest to reduce the bills, but contractual arrangements around landlord/tenants or facilities management may inhibit investment.

 

Therefore, energy efficiency investments are not prioritised as they might otherwise be. Energy costs can be a relatively small proportion of costs for many sectors, but in aggregate that energy use is a huge ask of our energy system.

 

Undervaluing energy efficiency

 

The lack of salience of energy efficiency increases the impact of hassle costs and behavioural barriers. Energy efficiency changes may involve significant hassle costs for those carrying out the investment, which increases the costs of the investment e.g. disruption caused by building works or disruption to production lines.

 

Energy efficiency improvements may not be seen as strategic for a company and therefore not prioritised.

 

Outside of the energy intensive industry sectors, energy bills are only a small proportion of business costs. If the relative gain is small, then the hassle costs can act as a significant barrier, especially if there is uncertainty around the benefits of the investment.  While hassle costs are not a market failure, they compound the impact of other behavioural barriers, reducing investment in energy efficiency. This is often why companies are reluctant to invest in energy efficiency, seeking short payback times, even if a project is cost-effective and meets SPB criteria. Wider economic uncertainty is also reducing willingness to invest.

 

 

3.   Performance of the business in the financial year

 

·      Business Development - UK

 

The Group achieved a significant improvement in sales in the year £1.38m (2018: £0.59m).  Whilst there has been no change in Sabien's robust sales process, given the unpredictable nature of the sales pipeline, the Group has moved away from considering sales pipeline conversion as a key metric and instead monitors sales achieved.

 

Alliance partners contributed £0.36m of sales representing 26.1% of the total for the year. The volume of sales from alliance partners will vary from year to year and is dependent on the stage at which each partner is at in the sales cycle with its own clients and pipeline.

 

·      Business Development - Overseas

 

The Group sells M2G internationally through its network of "Sabien Tech Centres". A "Sabien Tech Centre" is a company outside the UK with:

 

An established distribution network and an existing client base in the commercial and industrial heating sector

Engineering capability and capacity

Competence in commercial boilers and currently offering energy efficiency solutions as part of their product and service suite

 

 

The channel will require a level of M2G operational support in knowledge transfer/sharing and product training.

 

During the course of the financial year, overseas sales represented 9.5% of total sales at £0.131m (2018 - £0.18m). In 2013, the Group appointed Fireye, Inc. as a non-exclusive distributor in the USA as well as other overseas territories. Through this relationship with Fireye and with other parties, we have appointed Tech Centres in a number of territories throughout the world.

 

We remain confident this relationship will in time bring material value to the Group in the future. For further information on Fireye NXM2G, please visit www.flamecontrols.com.

 

·      UK M2G Pilots

 

The Group will offer pilots but only on a paid basis and only to customers with large estates.

 

·      M1G

 

The Group launched its M1G, a product for use on hot water heaters in 2014. The M1G is designed to prevent the inherent problem of short cycling within direct hot water generators resulting in unnecessary fuel consumption during low load demands. Short cycling is caused when the hot water generator's minimum firing capacity exceeds the current system loss, causing the hot water generator to fire for very short periods. M1G is sold to customers as an adjunct to M2G sales.

 

·      Key Performance Indicators ("KPIs")

 

The Group has identified a number of key performance indicators which are regularly monitored to ensure that business is on track or to give warning where problems may be arising:

 

Financial: The management's focus is on the development of sales, the maintenance of a healthy gross margin and prudent cost control. The two main performance indicators are unit sales and maintenance of a healthy gross profit margin. During the year, the Company sold 823 units (2018: 385 units) and the gross profit margin was 85.5% (2018: 82.6%). The margin has increased predominantly due to reduced reliance on subcontractors for installations and introduction of high margin revenue streams such as the M2G rental option. In addition, overheads have continued to reduce from last year.

 

Reputation: The Group's reputation for project management and delivery of its product's benefits on time and within budget is key to its continuing business success. Management is always looking at improving the quality of the Group's performance and will continue to invest in products and solutions to enable it to maintain and enhance its reputation.

 

Personnel: In the short-term the Group is not looking to recruit.

 

4.   Strategy

 

Subject to a near term review of the Company's market and capabilities, the Company intends to invest for growth in the following areas:

 

·      Utilise its existing research and development pipeline to make existing hardware (M2G, M1G) Internet-of-Things ("IoT") capable and enable substantial data capturing, storage, and analysis for the Sabien technologies.

 

·      Migrate new product design into the IoT and Cloud-enabled subscription services with the potential to assess third party licensing.

 

·      Enter the key US market through Original Equipment Manufacturer (OEM) relationships.

 

·      Maintain a network of overseas distribution partners to deliver material revenue for the Group.

 

·      Maintain or exceed an installation capacity in line with company forecasts and to continue providing our clients and partners with a world class project management service and experience.

 

·      Maintaining brand awareness and reputation of the Group.

 

This report was approved and authorised for issue by the Board on 26 September 2019 and signed on its behalf by:

 

 

 

 

Alan O'Brien

Chief Executive Officer 26 September 2019

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2019

 

 

 

2019

2018

 

Notes

£'000

£'000

Revenue

 

1,379

588

Cost of sales

 

(200)

(102)

Gross profit

 

1,179

486

Administrative expenses

 

(996)

(1,331)

Operating profit/(loss)

5

183

(845)

Finance expenses

 

(1)

-

Profit/(loss) before tax

 

182

(845)

Tax credit

8

-

-

Profit/(loss) for the year attributable to equity holders of the parent company

 

 

 

182

 

 

(845)

Other comprehensive income

 

-

-

Total comprehensive income for the year

 

 

182

 

(845)

Earnings/(loss) per share in pence - basic

9

0.04

(0.65)

Earnings/(loss) per share in pence - diluted

9

0.04

(0.65)

 

The earnings per share calculation relates to both continuing and total operations.

 

Consolidated and Company Statements of Financial Position

As at 30 June 2019                                                     Company Reg No: 05568060

 

 

Group

Company

 

 

2019

2018

2019

2018

 

Notes

£'000

£'000

£'000

£'000

ASSETS

 

 

 

 

 

Non-current assets

 

 

 

 

 

Property, plant and equipment

10

20

37

-

-

Intangible assets

11

151

198

-

-

Investment in subsidiaries

12

-

-

-

-

Total non-current assets

 

171

235

-

-

Current assets

 

 

 

 

 

Inventories

13

55

79

-

-

Trade and other receivables

14

117

110

54

198

Cash and bank balances

15

738

9

717

8

Total current assets

 

910

198

771

206

TOTAL ASSETS

 

1,081

433

771

206

EQUITY AND LIABILITIES

 

 

 

 

 

Current liabilities

 

 

 

 

 

Trade and other payables

16

136

319

27

92

Total current liabilities

 

136

319

27

92

 

EQUITY

 

 

 

 

 

Equity attributable to equity holders of the parent

 

 

 

 

 

Share capital

17

3,001

2,931

3,001

2,931

Other reserves

 

1,601

1,026

1,601

1,026

Retained earnings

 

(3,657)

(3,843)

   (3,858)

   (3,843)

Total equity

 

945

114

744

114

TOTAL EQUITY AND LIABILITIES

 

1,081

433

771

206

 

As permitted by section 408 of the Companies Act 2006, the Income Statement of the Parent Company is not presented as part of these financial statements. The loss dealt with in the accounts of the Parent Company is £19k (2018: £3,949k loss). There is no other comprehensive income in the Parent Company.

 

The financial statements were approved and authorised for issue by the Board on 26 September 2019 and were signed on its behalf by:

 

Alan O'Brien

Chief Executive Officer

26 September 2019

Consolidated and Company Cash Flow Statements

For the year ended 30 June 2019

 

Group

Company

 

2019

2018

2019

2018

 

£'000

£'000

£'000

£'000

Cash flows from operating activities

 

 

 

 

Profit/(loss) before taxation

182

(845)

(19)

(3,949)

Adjustments for:

 

 

 

 

Depreciation and amortisation

68

90

-

-

Impairment of intangibles

-

169

-

-

Impairment of investment in subsidiary

-

-

-

3,774

Transfers to equity reserves

-

1

-

1

Finance expense

1

-

-

-

(Increase) / Decrease in trade and other receivables

(7)

(28)

144

(130)

Decrease in inventories

24

54

-

-

(Decrease) / Increase in trade and other payables

(153)

133

(65)

71

Cash generated from / (used in) operations

115

(426)

60

(233)

Corporation taxes recovered

-

-

-

-

Net cash inflow / (outflow) from operating activities

115

(426)

60

(233)

Cash flows from investing activities

 

 

 

 

Net proceeds from share issues

649

400

649

400

Investment in subsidiary

-

              -

                        -

  (173)

Purchase of property, plant and equipment

(4)

(21)

-

-

Proceeds on disposal of property plant and equipment

-

-

            -

-

Finance costs

(1)

-

-

-

Net cash generated by investing activities

644

379

649

227

Net increase / (decrease) in cash and cash equivalents

759

(47)

709

(6)

Cash and cash equivalents at the beginning of the year

(21)

26

8

14

Cash and cash equivalents at the end of

the year

738

(21)

717

8

 

 

 

 

 

Cash and cash equivalents comprise:

 

 

 

 

Cash and cash equivalents

738

9

717

8

Invoice financing (included in other payables)

-

(30)

-

-

 

738

(21)

717

8

 

The prior year impairment of the carrying value of the investment in subsidiary, as detailed in note 12, is a significant non-cash transaction.

Consolidated Statement of Changes in Equity

For the year ended 30 June 2019

 

 

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

Changes in equity for year

 

 

 

 

 

Loss for the year

-

-

-

(845)

(845)

Share issues

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

Changes in equity for year

 

 

 

 

 

Profit for the year

-

-

-

182

182

Share issues

70

630

-

-

700

Share issue costs

-

(51)

-

-

(51)

Transfer to retained earnings re lapsed options

 

-

 

-

 

 

(4)

 

 

4

 

 

 

-

Balance at 30 June 2019

 

3,001

 

1,560

 

41

 

(3,657)

 

945

 

The notes on pages 33 to 52 form part of these financial statements.

Company Statement of Changes in Equity

For the year ended 30 June 2019

 

 

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

 

51

 

3,662

Changes in equity for year

 

 

 

 

 

Loss for the year

-

-

-

(3,949)

(3,949)

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

Changes in equity for year

 

 

 

 

 

Loss for the year

-

-

-

(19)

(19)

Share issue

70

630

-

-

700

Share issue costs

-

(51)

-

-

(51)

 

Transfer to retained earnings re lapsed options

 

-

 

-

 

(4)

 

4

 

-

Balance at 30 June 2019

 

3,001

 

1,560

 

41

 

   (3,858)

 

744

 

The notes on pages 33 to 52 form part of these financial statements.

Notes to the Consolidated Financial Statements

For the year ended 30 June 2019

General information

The Company is incorporated in England & Wales under the Companies Act 2006. The address of the registered office is given on page 1.

 

The nature of the Group's operations and principal activities are set out in the Directors' Report.

 

1.         Accounting policies

 

The following significant principal accounting policies have been used consistently in the preparation of the consolidated financial information. 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 uncertainty as to the timing of future profitability, the Group's return to profitability indicates that 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 M2G unit sales which showed a significant increase in the year to 823 units (2018: 385). Based on a prudent level of sales in line with the 2018 financial year therefore not relying on another major contract, and after taking into account the capital raise in September 2019 of £326k (gross), 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 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) made up to 30 June each year. 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 Acquisitions and Mergers which was in place at the time of the transaction 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 which, as with IFRS 3, are outside the scope of that accounting standard. 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 Statement of Financial Position and other financial information have been presented as though the assets and liabilities of the combining entities had been transferred at 1 October 2005.

 

Whilst FRS 6 is no longer effective similar requirements are set out in the current UK Financial Reporting Standard, FRS 102, in respect of such transactions.

 

The Group did take 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. When consolidated retained earnings are available, any debit reserves are offset against these retained earnings. As there were consolidated retained earnings available in the year ended 30 June 2012, the merger reserve was offset against those retained earnings.

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; and

·     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)           Deferred consideration: Deferred consideration is discounted from the anticipated settlement date at the Group's weighted average cost of capital.

 

g)        Inventories: Inventories are valued at the lower of average cost and net realisable value.

h)         Financial instruments

Financial Assets:

IFRS 9 Financial Instruments took effect from 1 July 2018 and has been adopted for the year ended 30 June 2019 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 at 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. 

 

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.

 

Short term financial assets are measured at transaction price, less any impairment. Loans receivable are measured at transaction price net of transaction costs and measured subsequently at amortised cost using the effective interest method, less any impairment.

 

The Group's financial assets are disclosed in notes 13 and 14. Impairment testing of trade receivables is described in note 14.

 

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 greater than 12 months after the year end date and are described in note 16.

 

i)          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.

 

j)          Revenue recognition

Revenue is measured based on the consideration to which the Group expects to be entitled in a contract with a customer and excludes amounts collected on behalf of third parties. The Group recognises revenue when it transfers control of a product or service to a customer.

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. However, in this latter case, where the Group is responsible for the project management of the installations, revenue is recognised upon installation at the customer site. 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 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.

 

k)          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.

l)          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 profit and loss on the straight-line basis over the lease term.

 

m)         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.

 

n)          Taxation

The charge for current tax is based on the results for the year as adjusted for items that are non-assessable or disallowed. It is calculated using rates that have been enacted or substantively enacted by the year end 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.

 

o)         Adoption of new and revised standards

These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.

 

New standards impacting the Company that have been adopted in the annual financial statements for the year ended 30 June 2019, and which have given rise to changes in the Group's accounting policies are:

 

IFRS 9 Financial Instruments (IFRS 9); and

IFRS 15 Revenue from Contracts with Customers (IFRS 15)

 

IFRS 9 took effect from 1 July 2018 and has been adopted for the year ended 30 June 2019 using the full retrospective method. No new credit losses are expected to materialise as a result of this transition. The adoption of IFRS 9 has not given rise to any changes to financial statements.

 

IFRS 15 replaced IAS 18 'Revenue', IAS 11 'Construction Contracts', and several revenue-related Interpretations. The new Standard has been applied retrospectively. Management has reviewed its revenue recognition policies prior to adoption of the new Standard and have concluded previous policies fall in line with IFRS 15. As such there has been no impact on the financial statements and the prior period has not been restated.

 

Other new and amended standards and Interpretations issued by the IASB that will apply for the first time in the next annual financial statements are not expected to impact the Company as they are either not relevant to the Company's activities or require accounting which is consistent with the Company' current accounting policies.

 

p)         New and revised standards not yet effective

The following IFRS and IFRIC Interpretations have been issued but have not been applied by the Group in preparing these financial statements as they are not as yet effective and in some cases had not yet been adopted by the EU. The Group intends to adopt these Standards and Interpretations when they become effective, rather than adopt them early.

 

•        IFRS 16 'Leases'

•       IFRS 10 and IAS 28 (amendments), 'Sale or Contribution of Assets between an Investor and its Associate or Joint Venture'

•   Amendments to IFRS 2, 'Classification and Measurement of Share-based Payment Transactions'

•        Amendments to IAS 7, 'Disclosure Initiative'

•        Amendments to IAS 12, 'Recognition of Deferred Tax Assets for Unrealised Losses'

 

IFRS 16 is a significant change to lease accounting and all leases will require balance sheet recognition of a liability and a right-of-use asset except short term leases and leases of low value assets. The Group is unlikely to enter into any significant operating lease agreements in the near future and is not subject to any agreements on the date of these financial statements, as such, there will be no effect on the financial statements as a result of this standard.

 

A number of IFRS and IFRIC interpretations are also currently in issue which are not relevant for the Group's activities and which have not therefore been adopted in preparing these financial statements.

2.         Financial risk management

Financial Risk Factors

The Group's activities expose it to a variety of financial risks arising from its use of financial instruments: credit risk, liquidity risk and market risk. This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them.

 

Further quantitative information in respect of these risks is presented throughout these financial statements. So far, there have been no substantive changes in the Group's exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note.

The principal financial instruments used by the Group, from which the financial instrument risk arises, are as follows:

trade and other receivables

cash and cash equivalents

trade and other payables

The Board has overall responsibility for the determination of the Group's risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group's finance function. The Board reviews regular finance reports from the Finance Director through which it evaluates any risk exposures with a view to minimising any potential adverse effects on the Group's financial performance. So far, the Group has not used derivative financial instruments to hedge risk exposures as its activities and operations exposure to such risks are not deemed significant. Transactions that are speculative in nature are expressly forbidden.

 

Details regarding the policies that address financial risk are set out below:

 

(i)   Credit Risk

 

Credit risk arises principally from the Group's trade receivables and cash and cash equivalents. It is the risk that the counterparty fails to discharge its obligation in respect of the instruments.

Trade Receivables

The nature of the Group's operations means that all of its current key customers are established businesses and organisations in both the public and private sector. The credit risks are minimised due to the nature of these customers and the concentration of sales to date within established economies. The Group will continually review its credit risk policy, taking particular account of future exposure to developing markets and associated changes in the credit risk profile.

 

The carrying amount in the Consolidated Statement of Financial Position, net of any applicable provisions for loss, represents the amount exposed to credit risk and hence there is no difference between the carrying amount and the maximum credit risk exposure.

 

(ii)   Liquidity Risk

 

Liquidity risk arises from the Group's management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.

 

The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due and have the availability of such funds for its operations. Management monitors rolling forecasts of the Group's liquidity reserve which comprises cash and cash equivalents on the basis of expected cash flow. At the year end date, these projections indicate that the Group expects to have sufficient liquid resources to meet its obligations under all reasonable expected circumstances for the forthcoming year. The Group continues to monitor its liquidity position through budgetary procedures and cash flow analysis.

 

The table below analyses the Group's financial liabilities into relevant maturity groupings based on the remaining period from the year end date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due in less than 1 year equal their carrying balances as the impact of discounting is not significant.

 

 

 

Less than 1 year

Between 1

and 2 years

Between 2

and 5 years

Over 5 years

At 30 June 2019

£'000

£'000

£'000

£'000

Trade and other payables

 

136

 

-

 

-

 

-

 

At 30 June 2018

 

 

 

 

Trade and other payables

 

319

 

-

 

-

 

-

The Group does not have any derivative financial instruments.

 

(iii)  Market Risk

 

Market risk arises from the Group's use of interest bearing, tradable and foreign currency financial instruments. There is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk), foreign exchange rates (currency risk) or other market factors (other price risk).

 

·      Interest Rate Risk

 

The Group invests its surplus cash in a spread of fixed rate short term bank deposits to minimise risk and maximise flexibility. In doing so it limits its exposure to fluctuations in interest rates that are inherent in such a market. Overall risk is not regarded as significant and the effect of a one percentage point increase in the average interest rate during the year would have resulted in a decrease in post- tax profit for the year of £1k (2018: £1k).

 

 

·      Currency Risk

 

The Group operates internationally through its distributorship arrangements in Europe and the US and is exposed to currency risk arising from the Euro and the US dollar. Currency risk arises from future commercial transactions and recognised assets and liabilities. Given the current scale of the Group's overseas operations, overall currency risk is considered to be low.

 

An increase of one percentage point in the average 2019 Euro and US dollar exchange rates would have decreased the Group's profit after tax by less than £1k (2018: £1k).

 

·      Other Price Risk

 

The Group does not hold external investments in equity securities and therefore is not exposed to other price risk.

 

Capital risk management

 

The Group's objective when managing capital is to safeguard the Group's ability to continue as a going concern in order to provide future returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The Group seeks to maintain, at this stage of its development, sufficient funding drawn primarily from equity to enable the Group to meet its working and strategic needs. The Group may issue new shares or realise value from its existing investments and other assets as may be deemed necessary.

 

The Group centrally manages borrowings, investment of surplus funds and financial risks. The objective of holding financial investments is to provide efficient cash and tax management and effective funding for the Group.

 

Fair value estimation

 

Holding trade receivables and payables at book value less impairment provision is deemed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

3.         Critical accounting estimates and judgements

 

Sources of Estimation Uncertainty

The preparation of the consolidated and company financial statements requires the Group and Company to make estimates, judgements and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. The directors base their estimates on historical experience and various other assumptions that they believe are reasonable under the circumstances, the results of which form the basis for making judgements about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

In the process of applying the Group's and Company's accounting policies, management has made a number of judgements and estimations, of which the following are deemed to have the most significant effect on amounts recognised in the financial statements:

 

(i)  Revenue Recognition

No significant criteria are required by the Group in regard to revenue recognition that are not covered by the accounting policy.

 

(ii)  Share-based Payments

The calculation of the estimated fair value of share options and warrants granted can only reasonably be assessed once such options and warrants are exercised. To date, no options or warrants have been exercised and the Group is therefore reliant upon the calculations as explained in the accounting policy and note 20 to the accounts in arriving at an estimated fair value in line with the requirements of IFRS2.

 

(iii)  Going Concern

The key performance indicator for the Group is M2G unit sales which showed a significant increase in the year to 823 units (2018: 385).

 

Following the increase in sales revenue the Group generated a profit for the year of

£182k and at the year end had cash reserves of £738k.  Despite the improved financial performance of the Group, there remains uncertainty of future profitability. The directors are taking steps to address this uncertainty and which they expect will ultimately maintain the Group's profitability as set out below.

 

The Group continues to have substantive discussions with a number of parties who have received the P35 and P40 pilot reports. The Board considers that a number of these discussions will result in significant sales revenue.

 

In addition, the Board is putting in place a new strategy to make the existing hardware internet of things (IoT) compatible, develop IoT and Cloud based subscription services, and develop the US market.

The Group announced that its broker, Peterhouse Capital Limited, had raised gross proceeds of £400k on 14 December 2018 and £300k on 13 May 2019 via the placing of 700,000,000 new ordinary shares with new and existing investors, at a price of 0.1 pence per placing share.  On 3 September 2019 the Group announced a subscription of 296,751,623 new ordinary shares at a price of 0.11 pence per subscription share raising £326k (gross).

 

The cashflow forecasts based on the above 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. Consequently, the financial statements have been prepared on a going concern basis.

 

(iv)  Impairment of Assets

Based on their best estimate of likely future developments within the business, the directors consider that the impairment provision against the carrying value of Investment in Subsidiaries in the Company's Statement of Financial Position as at the year end date remains valid and reasonable, as detailed in note 12.

 

(v)  Deferred Tax Assets

Management judgement is required to determine the amount of deferred tax asset that can be recognised, based upon the likely timing and level of future taxable profits together with an assessment of the effect of future tax planning strategies. In 2015, the Directors decided that it would be prudent not to recognise any deferred tax asset in the financial statements until recurring profitability is attained.

 

Despite the profit for the year which is primarily due to the conversion of one significant lead, and the likelihood of the Company not remaining profitable in the current financial year, no deferred tax asset will be recognised in the financial statements for the year under review.

 

The tax losses available to offset against future taxable profits, subject to HMRC agreement, are estimated at £5.6m.

 

(vi)  Intellectual Property

As a result of a review by the Directors of the unit sales likely to arise over the next year, no change in the value of Intellectual Property has been deemed to be necessary and consequently no provision has been made for impairment.

4.         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 Group'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 10% of the total and are analysed as follows:

 

Geographical information

Year ended 30

June 2019

 

Year ended 30

June 2018

 

 

 

Sales revenue

% of total

revenue

 

Sales revenue

% of total

revenue

 

£'000

 

£'000

 

UK

1,247

90

406

69

Other

132

10

182

31

Total

1,379

100

588

100

 

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

 

 

Sales revenue

% of total revenue

 

£'000

 

Customer 1

755

55

Customer 2

153

11

 

No other single customer represented more than 10% of the sales revenue for the year.

 

5.         Operating profit/(loss)

Operating profit/(loss) is stated after charging/(crediting):

Year ended 30

June 2019

Year ended 30 June 2018

 

£'000

£'000

Depreciation of property, plant & equipment

21

43

Impairment of intangible assets

-

169

Amortisation of intangible assets

       47

              47

Operating lease rentals - land and buildings

-

62

Cost of inventories recognised as an expense

69

54

 

The impairment of intangible assets is further detailed in note 11 of the financial statements.

 

The amortisation and impairment (in the prior year) of intangible assets is included within administrative expenses.

 

6.         Auditors' remuneration

 

Year ended 30 June 2019

Year ended 30

June 2018

 

£'000

£'000

Fees payable to the Company's auditors for:

 

 

- the audit of the Company's annual accounts

10

10

Fees payable to the Company's auditors for other services to the Group:

 

 

- the audit of the Company's subsidiary

18

15

Total audit fees

28

25

Fees payable to the Company's auditors for:

 

 

- taxation compliance services

-

-

- other services

6

6

Total other fees

6

6

 

7.         Staff costs

 

Year ended 30 June 2019

Year ended 30

June 2018

 

£'000

£'000

Wages and salaries

525

545

Social security costs

63

69

 

588

614

 

The average monthly number of employees, including directors, during the year was as follows:

 

 

Year ended 30 June 2019

Year ended 30

June 2018

 

Nos.

Nos.

Directors

3

4

Administration

7

8

 

10

12

Key management personnel are detailed in note 21 and their remuneration is analysed in the Remuneration Report.

 

8.         Corporation tax

 

 

Year ended 30

June 2019

Year ended 30 June 2018

 

£'000

£'000

Current tax

-

-

Total tax credit for the year

-

-

Profit/(loss) before tax

182

(845)

Tax on profit/(loss) on ordinary activities at standard UK corporation tax rate of 19% (2018: 19%)

 

35

 

(161)

Expenses not deductible for tax purposes

4

4

Depreciation in excess of capital allowances

4

4

Utilised tax losses

(43)

-

Tax losses carried forward

-

153

Current tax

-

-

 

Deferred tax:

 

As detailed in note 3 (v), in 2015 the Group reviewed the carrying value of the deferred tax asset recognised in previous years and decided that it would be prudent to derecognise the total asset in view of the uncertainty as to the timing of a return to profitability.

 

The aggregate amount of deductible temporary differences, parent company unused tax losses and unused tax credits for which no deferred tax asset is recognised in the Consolidated Statement of Financial Position is estimated at £5.6m (2018: £5.9m) which at the  current tax rate would equate to £1.06m (2018: £1.1m).

 

9.         Earnings per share

 

The calculation of earnings per share is based on the profit for the year attributable to equity holders of £182k (2018: £845k loss) and a weighted average number of shares in issue during the period of 473,588,200 (2018: 130,254,867). At the year end, options over 316,371 shares (2018: 422,437) were in issue, but have not been taken into account in calculating diluted earnings per share as they are anti-dilutive.

 

10.       Property, plant and equipment

 

Group

2019

2018

 

£'000

£'000

Cost

 

 

At 1 July

310

289

Additions

4

21

Disposals

(166)

-

At 30 June

148

310

 

Depreciation

 

 

At 1 July

273

230

Charge for the year

21

43

Reversed on disposals

(166)

-

At 30 June

128

273

Net Book Value

 

 

At 30 June 2019

20

37

At 30 June 2018

37

59

 

The Company held no property, plant and equipment at 30 June 2019 and 2018.

11.       Intangible assets

 

Group

2019

2018

 

£'000

£'000

Intellectual Property

 

 

Cost

 

 

At 1 July and 30 June

943

943

Amortisation

 

 

At 1 July

745

529

Charge for the year

47

47

Impairment

-

169

At 30 June

792

745

 

Net Book Value

 

 

At 30 June 2019

151

198

At 30 June 2018

198

414

 

Intellectual Property represents the rights to the M2G product acquired from the inventors. As a result of an impairment review performed in accordance with IAS 36 'Impairment of Assets' as detailed in note 12, an impairment of £0.169m was identified in the prior year relating to the intellectual property.

 

The remaining amortisation period for Intellectual Property is 4 years. The Company held no intangible assets at 30 June 2019 and 2018.

 

12.       Investment in subsidiaries

 

Company

2019

2018

 

£'000

£'000

Cost

 

 

At 1 July

6,297

6,124

Additions

-

173

At 30 June

6,297

6,297

Impairment provision

 

 

At 1 July

6,297

2,523

Charge for year

-

3,774

At 30 June

6,297

6,297

Net Book Value

 

 

At 30 June 2019

-

-

At 30 June 2018

-

3,601

 

Details of the subsidiary undertakings at the year end date are as follows:

 

Name of company

Country of incorporation

Class of share

Nature of business

Proportion of voting rights

Sabien Technology Limited

England & Wales

Ordinary

Managing carbon through energy reduction

100%

Sabien

Technology IP Limited

Northern Ireland

Ordinary

Ownership of

Intellectual Property

100%

The Company performs an annual impairment review in accordance with IAS 36 'Impairment of Assets'. In accordance with IAS 36, the recoverable amount is calculated being the higher of value in use and fair value less costs to sell.

 

The value in use is determined using cash flow projections covering a ten year period which have been approved by the Board. They reflect the directors' expectations of the level and timing of revenue and expenses, working capital and operating cash flows based on past experience and future expectations of business performance.

 

The pre-tax discount rate of 9.6% applied to the cash flow projections is derived from the Group's weighted average cost of capital. An average growth rate of 8% (rental revenue growth rate 8%) has been applied over the ten years of the cash flow forecast. In the prior year the impairment review indicated that the investment should be fully impaired resulting in an impairment charge of £3.774m.

 

13.       Inventories

 

Group

2019

2018

 

£'000

£'000

Goods held for resale

55

79

The Company held no inventories at 30 June 2019 and 2018.

 

 

14.       Trade and other receivables

 

 

2019

2018

2019

 

Group

Group

Company

Company

 

£'000

£'000

£'000

£'000

Trade receivables

77

54

-

-

Other receivables

40

56

13

11

Amounts owed by group undertakings

-

-

41

187

 

117

110

54

198

 

The value of trade receivables quoted in the table above also represents the fair value of these items and are due within one year.

 

Amounts due from group undertakings is covered by a £250,000 loan facility (2018: included £250,000) advanced to Sabien Technology Limited. The loan facility is secured by way of a debenture over the assets of Sabien Technology Limited. The loan facility is interest free and repayable on demand.

Trade receivables are considered impaired if they are not considered recoverable. As at 30 June 2019, the Group had no receivables which were considered to be impaired and against which a full provision has been made. Trade receivables of £nil (2018: £nil) were past due but not impaired. The ageing analysis of these trade receivables is as follows:

 

 

2019

2018

 

£'000

£'000

Up to 3 months

77

54

3 to 6 months

-

-

More than 6 months

-

-

 

77

54

The carrying amounts of the Group's trade and other receivables are denominated in the following currencies:

 

2019

2018

 

£'000

£'000

Pounds sterling

116

110

Euros

1

-

 

117

110

 

 

15.       Cash and bank balances

 

 

2019

2018

2019

 

Group

Group

Company

Company

 

£'000

£'000

£'000

£'000

Cash and bank balances

738

9

717

 

 

16.       Trade and other payables

 

 

2019

2018

2019

 

Group

Group

Company

Company

 

£'000

£'000

£'000

£'000

Trade payables

21

145

4

70

Social security and other taxation

4

34

(14)

(8)

Accruals and deferred income

111

109

37

30

Other payables

-

31

-

-

 

136

319

27

 

In the prior year, Sabien Technology Limited entered into an invoice financing agreement. The loan is secured by way of a debenture over the assets of the Company, attracts interest at a variable rate and is repayable on demand.

 

17.       Share capital

 

2019

2018

 

£'000

£'000

Allotted, called up and fully paid

 

 

890,254,867 Ordinary shares of 0.01p each (2018: 190,254,867 Ordinary shares of 0.5p)

89

951

44,004,867 Deferred shares of 4.5p each (2018: 44,004,867 Deferred shares of 4.5p each)

1,980

1,980

190,254,867 New Deferred shares of 0.49p each (2018: nil)

932

-

Total

3,001

2,931

 

On 13 December 2018 the Company passed an Ordinary resolution to subdivide the ordinary shares of 0.5 pence each into one new ordinary share of 0.01 pence each and one new deferred share of 0.49 pence.

 

The Deferred shares and New 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 14 December 2018, the Company raised £400k (gross) by the issue of 400,000,000 Ordinary shares of 0.01p each at a cash price of 0.1p per share. Net proceeds after expenses amounted to £364k.

 

On 17 May 2019, the Company raised £300k (gross) by the issue of 300,000,000 Ordinary shares of 0.01p each at a cash price of 0.1p per share. Net proceeds after expenses amounted to £285k.

 

Share options (see note 20)

 

At the year end date, the following options had been granted:

 

Date of Grant

At 1 July 2018

At 30 June

2019

Exercise

price

Exercisable

from

Exercisable to

1 April 2010

295,694

281,371

54.5p

April 2013

April 2020

25 November 2010

91,743

-

54.5p

November 2013

November 2020

31 October 2014

35,000

35,000

54.5p

October 2017

October 2024

Total

422,437

316,371

 

 

 

 

106,066 share options were cancelled or lapsed in the year under review.

 

18.       Operating lease commitments

 

At the year end date, the Group had the following total commitments under non-cancellable operating leases:

 

Group

Land & buildings

 

2019

2018

 

£'000

£'000

Expiry date:

 

 

Within one year

-

15

Between two and five years

-

-

 

-

15

 

The Company had no commitments under non-cancellable operating leases at 30 June 2019 and 2018.

 

19.       Financial instruments

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

Amortised cost (loans and receivables)

Fair value through profit and loss

Total

Amortised cost (loans and receivables)

Fair value through profit and loss

Total

 

Group

Group

Group

Company

Company

Company

 

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

Trade and other receivables (excluding prepayments)

77

-

77

-

-

-

 

77

-

77

-

-

-

 

 

 

 

 

 

 

 

 

 

Financial liabilities

 

 

Amortised cost (loans and payables)

Fair value through profit and loss

Total

Amortised cost (loans and payables)

Fair value through profit and loss

Total

 

Group

Group

Group

Company

Company

Company

 

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

Trade and other payables

136

-

136

27

-

27

 

136

-

136

27

-

27

 

20.       Share based payments

 

The Company has issued share options under a share option scheme for directors and employees set up in November 2006 under which approved and unapproved share options were granted prior to the flotation of the Company in December 2006. The Company adopted the "Sabien Technology Group Share Option Plan" at the time of flotation and it is intended that options will only be granted under this scheme in future.

 

Under this scheme, directors and employees hold options to subscribe for 0.5p Ordinary shares in Sabien Technology Group Plc at prices based on the mid-market price on the day preceding the relevant share option grant. See note 17 for details of options in issue at the year end date. There are no performance conditions attached to these options. No options were granted in the financial year.

 

The value of the options is measured using the QCA-IRS Option Valuer based on the Black Scholes model. The inputs into the Black Scholes model were as follows:

 

 

2019

2018

Share price at date of grant

-

-

Exercise price at date of grant

54.5p

54.5p

Weighted average fair value

-

-

Volatility

30%

30%

Expected life

3 years

3 years

Risk free interest rate

4.75%

4.75%

 

Expected volatility was determined by reference to volatility used by other similar companies.

 

The expected life used in the model reflects the lack of performance conditions attached to the options granted.

 

The Group has recognised a charge of £nil (2018: £1k) arising from the share based payments noted above in profit and loss for the year ended 30 June 2019 and this has been credited to Other Reserves in the Consolidated and Company Statements of Financial Position.

 

 

The following reconciles the outstanding share options granted under the employee share option scheme at the beginning and end of the financial year:

 

 

 

 

Number

2019

Weighted average exercise price

2019

 

Number

2018

Weighted average exercise price

2018

Balance at

beginning of the financial year

 

422,437

 

53.70

 

557,437

 

53.70

Granted during the year

 

-

 

-

 

-

 

-

Cancelled during the year

 

(106,066)

 

-

 

(135,000)

 

-

Balance at end

of the financial year

 

316,371

 

54.0

 

422,437

 

54.0

Weighted average remaining

contractual life

 

 

1.26 years

 

 

-

 

 

2.03 years

 

 

-

 

 

21.       Related party transactions

 

Key management personnel are those persons having authority and responsibility for planning, controlling and directing the activities of the Group. In the opinion of the Board, the Group's key management personnel are the Directors of Sabien Technology Group Plc. Information regarding their remuneration is given in the Remuneration Report. The Company entered into service agreements with Karl Monaghan, Dr Martin Blake, Bruce Gordon, Charles Goodfellow and John Taylor with entities either controlled by them or in which they have an interest as shareholders. Fees are paid in accordance with those agreements. The remuneration of key management is included within the disclosure detailed in note 7 and is analysed in the Remuneration Report.

 

Charles Goodfellow is employed by the Group's joint brokers, Peterhouse Capital Limited. Fees paid to Peterhouse Capital Limited are proposed to the Board and approved by the Board as a whole. Fees paid to Peterhouse Capital Limited in the year were £64k (2018: £nil) and at the year end the amounts due to Peterhouse Capital Limited were £nil (2018: £nil).

During the year, Sabien Technology Limited was charged £53k (2018: £59k) by way of management charges by Sabien Technology Group Plc, its parent company. Sabien Technology Limited repaid £219k (2018: £115k) during the year in respect of working capital loans and at the year end the amount outstanding, excluding a provision of £nil (2018: £74k) charged in the year, was £41k (2018: £260k).

 

22.       Subsequent events

 

On 3 September 2019 the Group announced a subscription of 296,751,623 new ordinary shares at a price of 0.11 pence per subscription share raising £326k (gross).

 

NOTE

The financial information set out in this announcement does not constitute the Group's statutory financial statements for the year ended 30 June 2019 or 2018, but is derived from these financial statements. The financial statements for the year ended 30 June 2018 have been delivered to the Registrar of Companies. The financial statements for the year ended 31 June 2019 will be forwarded to the Registrar of Companies following the Company's Annual General Meeting. The Auditors have reported on these financial statements; their reports were unqualified and did not contain statements under Section 498(2) or (3) of the Companies Act 2006.


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