Company No.: 05568060 Sabien Technology Group Plc Annual Report and Consolidated Financial Statements For the year ended 30 June 2021 Company Information 5th Floor 5 St Helen's Place London EC3A 6AB DIRECTORS Richard Parris (Executive Chairman) Charles Goodfellow (Independent Non-Executive Director) Ranald McGregor-Smith (Non-Executive Director) Edward Sutcliffe (Chief Financial Officer and Executive Director) SECRETARY Edward Sutcliffe COMPANY NUMBER 05568060 REGISTERED OFFICE WEBSITE AUDITORS BANKERS NOMINATED ADVISER BROKER REGISTRARS SOLICITORS 71-75 Shelton Street London WC2H 9JQ www.sabien-tech.co.uk Moore Kingston Smith LLP Devonshire House 60 Goswell Road London EC1M 7AD National Westminster Bank Plc 72-74 High Street Watford Herts WD17 2GZ Allenby Capital Limited 5 St Helen's Place London EC3A 6AB Peterhouse Capital Limited 3rd Floor 80 Cheapside London EC2V 6EE Share Registrars Limited The Courtyard 17 West Street Farnham Surrey GU9 7DR Moore Barlow LLP 11 The Avenue Southampton Hants SO17 1XF Contents Chairman & Chief Executive Officer’s Report Strategic Report Directors’ Report Corporate Governance Remuneration Report Section 172(1) Statement Directors’ Responsibilities Statement Independent Auditors’ Report to the Members of Sabien Technology Group Plc Consolidated Statement of Comprehensive Income Consolidated and Company Statements of Financial Position Consolidated and Company Cash Flow Statements Consolidated Statement of Changes in Equity Company Statement of Changes in Equity Notes to the Consolidated Financial Statements 3 6 12 14 21 23 24 25 31 32 33 34 35 36 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 2021. Sabien Technology Group highlights 2021 • Sales for the year £0.97m (2020: £0.45m) • Loss before tax £0.5m (2020: £1.41m loss) • Sales from Alliance Partners £0.04m (2020: £0.01m) • Overseas sales £0.04m (2020: £0.02m) • Exceptional costs of £0.18m in relation to legal and professional fees incurred in relation to the aborted acquisition and potential reverse takeover of Ptarmigan Health Destinations SA (“PHD”) • Fund raises of £1.7m (gross) • Net cash balance at 30 June 2021 was £1.22m (30 June 2020: £0.60m) Highlights since the year end • Sales of £49k to 26 August 2021 • Orders received but not yet invoiced to 26 August 2021 £24k • Net cash balance at 26 August 2021 of £1.17m Financial results Revenue for the year was £0.97m (2020: £0.45m). The loss before taxation was £0.5m (2020: £1.41m loss). At 30 June 2021, cash and cash equivalents amounted to £1.40m (2020: £0.78m). Dividend policy The directors propose no dividends (2020: nil) in the year. 3 Chairman’s Statement The growth of the “Green Economy” has been notable during the last 12 months. Innovation has accelerated, driven by the changed circumstances in which we find ourselves. Investment has followed, as investors have recognised that this trend is secular rather than temporary. Specific areas of macro-economic focus have informed and supported the Sabien strategy. Demographic, technological and resource change are all likely to accelerate. In combination, the Board believes that these trends will contribute to a “Green Economic” boom over the coming decades. Our mission as a Board is to prepare for this scenario and, having done so, deliver. Our vision is to establish a portfolio of businesses, all linked by reference to the “Green Economy” with clear economic relationships with markets whose dynamics are changing. We have identified key areas for development including wider industrial heating markets, non-refrigerant based cooling, battery recycling and reproduction, and waste to energy sectors together with a number of other “green energy” environmental opportunities in a variety of markets. Sabien’s transition to this more broadly based “Green Economy” focus has been backed by an impressive financial performance. In the year to 30 June 2021, the Group has generated revenue of £0.97m (2020: £0.45m), with £0.56m recorded in the second half, an increase of 87% on the £0.30m for the same period in the previous year. Looking to the current year, I would highlight two key metrics. Sabien carries £43k of orders into 2021 and, as at 30 June 2021, the Group had cash in hand of £1.40m (2020: £0.78m) following the raising of £1.7m (gross) during the year. The security which our forward orders and cash position provides is supporting our planned expansion: operationally and strategically. Operationally, Sabien has extended the application of its M2G technology with its Cloud-based subscription service now available across more than five sites within public sector, sports, and pharmaceutical manufacturing locations. Allied to this important development, Sabien has signed an agreement with Lockular to provide robust data security. Lockular’s platform is agnostic as to which operations are contained on it and, as a result, this agreement provides scalability, Big Data collection and AI insights for further acquisitions which the Company may make, potentially decreasing the time required to generate value. In combination, these actions have given the Company confidence to commit to the next generation of M2G, integrating remote commercial boiler management within a single Cloud-enabled device. Strategically, the Company made an investment into Aeristech, a leading manufacturer of components for hydrogen fuel cells, secured a £400k contract with a UK Government department for the use of M2G technology, and formed a US subsidiary from which it will source US acquisition opportunities in addition to expanding the US market for Sabien’s European products and services. Management strength in depth is critical to bringing strategic initiatives into operational success. During the year under review, Sabien has strengthened its management team with the appointments of Ed Sutcliffe as Chief Financial Officer, Danny Mills as President of the U.S. subsidiary, Sabien Inc., Dr. Athan Fox as Chief Scientific Officer, Tom Sprunt as Managing Director (non-Board) and Ranald McGregor-Smith as non-executive director. Mr. Sutcliffe is a Chartered Accountant and brings a wealth of private and listed company experience to the board. Mr. Mills is a US-based investor and technology operator who has worked with Sabien’s leadership for a number of years. In combination with Richard Parris’ work in US markets, Mr. Mills provides the necessary experience to benefit from President Biden’s Plan for a Clean Energy Revolution and Environmental Justice. Dr. Fox’s experience encompasses organic chemistry, intellectual property prosecution, technology transfer and fund raising for research, technology and innovation. Through Dr. Fox’s work, Sabien is confident of a value-creating entry to the waste-to- energy market. Mr. Sprunt has many years’ commercial experience in the boiler management industry. 4 Mr McGregor-Smith is a corporate financier whose experience at senior level within a number of key financial institutions will be invaluable to the Company as it develops. In all cases, the new appointments bring a wealth of relevant experience and understanding of key markets for the Company. The strengthened Board of Sabien faces an array of opportunities within its chosen market areas. In market capitalisation terms, Sabien is a small company listed on AIM. Executing an expansion strategy via acquisition can be challenging and expensive due to necessary market regulation. The Board will not be deterred by these challenges, and we are actively considering innovative structures within which to maximise the returns to shareholders as soon as possible while minimising execution expenses. As previously announced, during the year the Board was disappointed to be unable to complete the acquisition and associated reverse takeover of PHD. Sabien was unable to secure the required Swiss and UK regulatory approvals in sufficient time to avoid the cancellation of trading in the Company's ordinary shares on the AIM Market. Therefore, the Board took the decision to withdraw from the transaction. Following this withdrawal, Cédriane de Boucaud Truell and Marco Nijhof stepped down from the Sabien Board to continue PHD's growth plans. The Board thanks Cédriane and Marco for their efforts. Following the re-admission to trading of Sabien’s shares we have accomplished a lot. All initiatives were undertaken to sustain and improve the long-term capability of Sabien Technology to deliver. The Board is committed to ensuring that these accomplishments, and those to come, are delivered to the advantage of shareholders, now and in the future. Richard Parris Executive Chairman 27 August 2021 5 STRATEGIC REPORT For the year ended 30 June 2021 1. Review of the Group’s Business “There is a tide in the affairs of men, which taken at the flood, leads on to fortune” William Shakespeare, Julius Caesar. Sabien’s strategy has been developed and will evolve further through the evolution of the “Green Economy”. For example, the UK has committed to achieving a net-zero economy by 2050. The US, across its different markets, is setting similar targets within equivalent timeframes. These ambitious goals demand equally ambitious innovation in products, services, and technology. Sabien is committed to building a portfolio of businesses which are involved directly in the application of emerging and developed technology to the emerging Green Economy. It will do so through organic, partnership and acquisition-led development. During the year ended 30 June 2021, the Group achieved the following steps in its strategic development: • Lockular agreement to provide robust data security; • £100k strategic investment into Aeristech, a leading manufacturer of components for hydrogen fuel cells; • Established a US subsidiary to promote Sabien’s interests in the US and to pursue potential US opportunities; and • Strengthened the management team and board as set out in the Chairman’s report. Sabien’s commitment to growth is set in a context of consistent, long-term shareholder value. This context is determined by clear investment criteria which are used to establish a route to value at the point of commitment. The key consideration in assessing potential investments are the strength of the management team, a defendable technical advantage, and strong financial fundamentals. Faced with an array of significant but still nascent markets, Sabien has strengthened its financial position, its management team, and its understanding of opportunities. The Group is ready to leverage these positions into consistent shareholder value. Since incorporation, the Group has owned 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 marketplace, being recognised as the market leader in Boiler Optimisation Controls. Background to the boiler optimisation business Historically, and to gain a foothold in the UK market, the Group offered paid pilots of its M2G boiler optimisation controller. While the timeline 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 Group being awarded numerous multimillion-pound contracts. Since the initial success enjoyed by the Group, whilst large contracts continue to be won, timing is variable and profitability has suffered as a result. 6 The Group introduced a rental model option during the 2018 financial year 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 was implemented as an additional service line for the Group. Both the rental model and FBA have attracted interest but so far uptake has been slower than hoped. The sales process has historically often involved proving to new customers that the savings promised are real through a time-consuming pilot programme. The new generation cloud enabled M2G device developed in the year has solved that issue by demonstrating savings in real time through a cloud dashboard. 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. 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 11. 7 2. Principal risks and uncertainties facing the Group The principal risks faced by the Group are: Inability to meet customer demand • Downward pressure on gas and oil prices • Technology developments and competitive products • Changes in legislation • Supply chain issues • • Brand awareness and maintenance of reputation • Employee retention • Raising further finance • UK Energy Efficiency Barriers • Continued impact of COVID-19 • Insufficient financial resources to complete acquisition strategy 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 underdeveloped 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. The upgraded and cloud enabled M2G has been designed to resolve these issues. 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. 8 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 Simple Payback (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 sales in the year of £0.97m (2020: £0.45m). Alliance partners contributed £0.04m of sales representing 4.1% 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: o An established distribution network and an existing client base in the commercial and industrial heating sector o Engineering capability and capacity o Competence in commercial boilers and currently offering energy efficiency solutions as part of their product and service suite The network requires a level of M2G operational support in knowledge transfer/sharing and product training. 9 During the course of the financial year, overseas sales represented 4.1% of total sales at £0.04m (2020 - £0.02m). 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. Through our new US subsidiary, Sabien Inc, we intend to further develop this relationship and bring additional value to the Group in the future. For further information on Fireye NXM2G, please visit www.flamecontrols.com. • UK M2G Pilots The Group offers pilots but only on a paid basis and only to customers with large estates. • COVID-19 While there remains uncertainty as to the future impact of the COVID-19 pandemic, the Group continues to conduct ongoing risk assessments of the potential impact of the pandemic on its business. Customer confidence has increased compared to the height of the pandemic last year. This has largely helped the Group achieve sales to pre pandemic levels. Despite this, the Board is aware that uncertainties around the pandemic remain and that these continue to affect demand as potential customers may be more reluctant to commit to future spending. The Group continues to work with its main supplier to actively address the risk of disruption. The Group has taken actions to enhance its operational resilience and position the business towards becoming fully operational. Whilst the Group took advantage of the Coronavirus Job Retention Scheme, the number of employees now working has progressed to near normal levels, whether through working on site in accordance with protective safety measures or through working remotely from home. In addition, the business continues to drive cost control measures. Despite the impact of the pandemic, liquidity remains strong. The Group drew down a Coronavirus Business Interruption Loan last year to provide additional support. Cash flow forecasting is performed by the Group on a monthly basis to ensure that there is sufficient cash to meet operational needs and maintain adequate headroom. The COVID-19 pandemic could result in changes to the outlook in the Group’s markets. Areas of the business that could be impacted include a decrease in spending by key customers, the failure of suppliers to source parts to manufacture our units, the requirement for the Group or its suppliers to reduce site operational levels, the inability to meet delivery requirements, the inability to adequately staff the business, and an increase in the cost or lack of availability of funding. Any of the above could have a material adverse effect on the Group. However, the uncertainties surrounding the development of this pandemic make it difficult to predict the full extent to which the Group may be affected. 4. Key Performance Indicators (“KPIs”) The Group has identified a number of financial and non-financial 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 gross profit margin. During the year, the Group sold 450 units (2020: 193 units) and the gross profit margin was 84.2% (2020: 80.4%). The margin has increased predominantly due to increased direct stock sales this year which generally achieves higher gross profit margins compared to other revenue sources. In addition, overheads have continued to reduce from last year. 10 Non-financial: 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. 5. Strategy and future developments The Group intends to invest for growth in the following areas: • Completion of next generation M2G device integrating remote commercial boiler management within a single Cloud-enabled device. • Development of 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. • Acquisitions of compatible businesses within ‘green energy’ environmental opportunities. • Licensing of relevant green energy technologies. This report was approved and authorised for issue by the Board on 27 August 2021 and signed on its behalf by: Richard Parris Executive Chairman 27 August 2021 11 Directors’ Report For the year ended 30 June 2021 The directors present their report and the consolidated financial statements for the year ended 30 June 2021. The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). In accordance with S414C(11) of the Companies Act 2006, the directors have chosen to include information about future developments and financial instrument risk in the Strategic Report. Principal Activities The principal activity of the Group during the year was the design, manufacture and sale of M1G and M2G, boiler energy efficiency technologies, which are proven to reduce energy consumption on commercial boilers by up to 35%. Review of Business A review of the business, its development and performance for the year and its position at the year end, together with the future prospects of the Group, is contained in the Chairman & Chief Executive Officer’s Report and the Strategic Report. Governance and the Board The Board’s governance system provides balanced support for the executive management team in the development of the Group’s strategy and with the need to ensure effective monitoring of its implementation. The Board and its committees have considered the significant events of the year and their impact on the Group’s business and reputation. During the year the Audit Committee was chaired by Cédriane de Boucaud Truell (replaced by Charles Goodfellow in January 2021), the Remuneration Committee was chaired by Charles Goodfellow, the Risk Committee was chaired by Marco Nijhof (replaced by Ranald McGregor- Smith in February 2021) and the Nomination Committee was chaired by Richard Parris. The Board remains confident in the work of those committees and the overall system of governance. Results and Dividends The Group loss for the year, before taxation, amounted to £509k (2020: £1,409k loss). The Directors do not recommend a final dividend this year (2020 – nil). Directors The Directors who served during the year and their beneficial interest in the Company’s issued share capital at year end were: C. Goodfellow R. Parris C. de Boucaud Truell (resigned 22 January) M. Nijhof (resigned 22 January) R McGregor-Smith (appointed 1 February) E Sutcliffe (appointed 1 March) Date of appointment New ordinary shares of 3p each New ordinary shares of 0.01p each 17 January 2019 2 September 2019 23 September 2019 - 2021 % - 1,506,460 10.3 33,333 0.2 % 2020 - - 33,333,333 2.3 10,000,000 0.7 23 September 2019 33,333 0.2 10,000,000 0.7 1 February 2021 1 March 2021 12 - - - - - - - - Substantial Shareholdings At 30 June 2021, the Company had been notified that (other than Directors) the following were interested in 3% or more of the issued capital of the Company: Richard Parris Sanderson Capital Partners Ltd & Related Parties Richard Edwards Monecor (London) Limited Number of new ordinary shares 1,506,460 633,333 583,688 511,667 % of issued share capital 10.3% 4.3% 4.0% 3.5% At 30 June 2021, there were 14,574,260 Ordinary shares in issue. Auditors Each of the persons who is a director at the date of approval of this annual report confirms that: • so far as the director is aware, there is no relevant audit information of which the company’s auditors are unaware; and the director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the company’s auditors are aware of that information. • This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006. The auditors, Moore Kingston Smith LLP, will be proposed for reappointment in accordance with section 489 of the Companies Act 2006. This report was approved and authorised for issue by the Board on 27 August 2021 and signed on its behalf by: Richard Parris Executive Chairman 27 August 2021 13 Corporate Governance The Company adopts the Quoted Companies Alliance Corporate Governance Code (QCA Code). The QCA Code provides UK small and mid-sized companies with a corporate governance framework that is appropriate for a Company of our size and nature. The Board considers the principles and recommendations contained in the QCA Code to be appropriate for the Company. Statement of compliance with the QCA Code and applying the principles of good governance The Company is committed to meeting these principles as far as it reasonably can, and the commentary below reflects the extent to which the Company has complied with the QCA Code during the period under review. The ten principles set out in the QCA Code are listed below together with a short explanation of how the Company applies each of the principles. Principle One Business Model and 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: • Completion of next generation M2G device integrating remote commercial boiler management within a single Cloud-enabled device. • Development of 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. • Acquisitions of compatible businesses within ‘green energy’ environmental opportunities. • Licensing of relevant green energy technologies. Principle Two Understanding Shareholder Needs and Expectations The Board is committed to maintaining good communication and having constructive dialogue with its shareholders. The Company has close ongoing relationships with its private shareholders. Institutional shareholders and analysts have the opportunity to discuss issues and provide feedback at meetings with the Company. In addition, all shareholders are encouraged to attend the Company’s Annual General Meeting. Investors also have access to current information on the Company though its website, www.sabien-tech.co.uk, and via Richard Parris, Executive Chairman and Edward Sutcliffe, Company Secretary who are available to answer investor relations enquiries. 14 Principle Three Considering wider stakeholder and social responsibilities The Board recognises that the long-term success of the Company is reliant upon the efforts of the employees of the Company and its contractors, suppliers, regulators and other stakeholders. The Board has put in place a range of processes and systems to ensure that there is close oversight and contact with its key resources and relationships. For example, a companywide internal information system shares live information on key suppliers, customers and projects, allowing the Company to efficiently fulfil customer requirements. Furthermore, all employees of the Company participate in an annual assessment process which is designed to ensure that there is an open and confidential dialogue with each person in the Company to promote successful two-way communication with agreement on goals, targets and aspirations of the employee and the Company. These feedback processes help to ensure that the Company can respond to new issues and opportunities that arise to further the success of employees and the Company. The Company has close ongoing relationships with a broad range of its stakeholders and provides them with the opportunity to raise issues and provide feedback to the Company. Principle Four Risk Management The Board, through its committees is responsible for ensuring that procedures are in place and are being implemented effectively to identify, evaluate and manage significant risks faced by the Group. The table below outlines the risks faced by the Group, identifies their impact and the controls that are in place to mitigate them. Activity Risk Impact Control(s) Management Recruitment and retention of key staff Reduction in operating capability Stimulating and safe working environment Regulatory adherence Breach of rules Censure or withdrawal of authorisation Balancing salary with longer term incentive plans Strong compliance regime instilled at all levels of the Company including regular review of any changes to current legislation Inadequate disaster recovery procedures Loss of key operational and financial data Robust compliance Secure off-site storage of data Lack of recurring revenue Over-reliance on capital sales which can be unpredictable Development of cloud enabled subscription model Financial Liquidity, market and credit risk Inability to continue as going concern Robust capital management policies and procedures Inappropriate controls and accounting policies Reduction in asset values Incorrect reporting of assets Appropriate authority and investment levels as set by Treasury and Investment Policies Audit Committee 15 The Board of Directors has overall responsibility for the Group’s system of internal control and for reviewing its effectiveness. The purpose of the system of internal control is to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable, but not absolute, assurance against material misstatement or loss. The Directors have established an organisational structure with clear operating procedures, and lines of responsibility. In particular, any capital investment requires a business case to be presented to and approved by the Board. Financial reporting is carried out within a comprehensive financial planning and accounting framework with oversight by the Audit Committee. The Board has reviewed the need for an internal audit function and concluded that such a function is not currently appropriate given the size of the Group. Principle Five A Well-Functioning Board of Directors As at the date hereof the Board comprised the Executive Chairman, Richard Parris, Chief Financial Officer and Executive Director Edward Sutcliffe, and the Non-Executive Directors, Charles Goodfellow, and Ranald McGregor-Smith. Biographical details of the current Directors are set out within Principle Six below. Executive and Non-Executive Directors retire by rotation in accordance with the Company’s Articles of Association which prescribe that at every Annual General Meeting one third of the directors for the time being or, if their number is not a multiple of three, then the number nearest to but not exceeding one third, shall retire from office. Non-executive directors are initially appointed for a three year term but their appointment is terminable by either party on three months’ written notice. The letters of appointment of all Directors are available for inspection at the Company’s registered office during normal business hours. The Board meets at least six times per annum. It has established an Audit Committee, a Remuneration Committee, a Nominations Committee and a Risk Committee, the particulars of which appear hereafter. The Executive and Non-Executive Directors are considered to be part time but are expected to provide as much time to the Company as is required. The Board considers that this is appropriate given the Company’s current stage of operations. It shall continue to monitor the need to match resources to its operational performance and costs and the matter will be kept under review going forward. Charles Goodfellow and Ranald McGregor- Smith are considered to be Independent Directors by the Board. The Board shall review further appointments as scale and complexity grows. Attendance at Board and Committee Meetings The Company shall report annually on the number of Board and committee meetings held during the year and the attendance record of individual Directors. In order to be efficient, the Directors meet formally and informally both in person and by telephone. The following table shows attendance of the directors at Board and Audit Committee meetings. Richard Parris Cédriane de Boucaud Truell Marco Nijhof Charles Goodfellow Edward Sutcliffe Ranald McGregor-Smith Board Audit Committee Attended 16 11 12 16 2 4 Eligible to attend 17 12 12 16 2 4 Attended 1 1 - 2 - - Eligible to attend 1 1 - 2 - - 16 Richard Parris Cédriane de Boucaud Truell Marco Nijhof Charles Goodfellow Edward Sutcliffe Ranald McGregor-Smith Risk Committee Remuneration Committee Attended 5 4 5 5 - - Eligible to attend 5 5 5 5 - - Attended 2 1 2 2 - - Eligible to attend 2 2 2 2 - - The Nominations Committee did not meet in the year. All appointments in the year were approved by the Board as a whole. Principle Six Appropriate Skills and Experience of the Directors The Board currently consists of four Directors. The Company believes that the current balance of skills in the Board as a whole, reflects a very broad range of commercial and professional skills across geographies and industries and each of the Directors has experience in public markets. The Board recognises that it currently has a limited diversity, and this will form a part of any future recruitment consideration if the Board concludes that replacement or additional directors are required. The Board shall review annually the appropriateness and opportunity for continuing professional development whether formal or informal. Richard Parris Executive Chairman Richard was until 2018 the Chairman and Chief Executive of Intercede, an AIM-traded technology company, which he founded in 1992 and which was admitted to trading on AIM in 2001. Richard Parris is an engineer by training and an entrepreneur by experience, he operationally led Intercede through all phases of its growth, including building its UK technology team to invent, develop and commercialise new software products, including the adoption of Cloud services and IoT delivery models as the core of future business transformation, and securing contracts with major US OEMs to expand US sales. Edward Sutcliffe Chief Financial Officer and Executive Director Edward is an experienced business advisor with a wide range of accounting, management, transactional, turnaround, and board level skills. A Fellow of the Institute of Chartered Accountants in England and Wales, Edward has worked internationally, providing consultancy and expertise in areas including private equity, due diligence, debt raising, financial modelling and analysis, and management and board reporting. Charles Goodfellow Independent Non-executive Director Charles is a corporate broker with over 25 years’ experience of fundraising for small and mid- caps and private companies across a range of sectors and jurisdictions. In addition, he was previously a Director of Acorn Growth plc (re-named Vodere plc). Charles chairs the Audit and Remuneration Committees and is a member of the Risk and Nominations Committees. 17 Ranald McGregor-Smith Independent Non-Executive Director Ranald has worked as a corporate adviser and broker for most of his career and has significant experience in leadership roles at a number of advisory firms, where he worked with both listed and private companies. He has worked with and advised a host of companies and their boards through a 33-year banking career which has encompassed a period of significant change in the equity capital markets. In 2010, Ranald co-founded Whitman Howard Ltd, an investment banking business, before its sale to a large competitor in 2020. Prior to this Ranald spent 20 years at Hoare Govett, latterly as a Board Director. Ranald chairs the Risk and Nominations Committees and is a member of the Audit and Remuneration Committees. Principle Seven Evaluation of Board Performance Internal evaluation of the Board, and individual Directors will be undertaken on an annual basis in the form of peer appraisal and discussions to determine the effectiveness and performance as well as the Directors' continued independence. The results and recommendations that come out of the appraisals for the directors shall identify the key corporate and financial targets that are relevant to each Director and their personal targets in terms of career development and training. Progress against previous targets shall also be assessed where relevant. Principle Eight Corporate Culture The Board recognises that their decisions regarding strategy and risk will impact the corporate culture of the Company as a whole and that this will impact the performance of the Company. The Board is very aware that the tone and culture set by the Board will greatly impact all aspects of the Company as a whole and the way that employees behave. The corporate governance arrangements that the Board has adopted are designed to ensure that the Company delivers long term value to its shareholders and that shareholders have the opportunity to express their views and expectations for the Company in a manner that encourages open dialogue with the Board. A large part of the Company's activities is centred upon what needs to be an open and respectful dialogue with employees, clients and other stakeholders. Therefore, the importance of sound ethical values and behaviours is crucial to the ability of the Company to successfully achieve its corporate objectives. The Board places great importance on this aspect of corporate life and seeks to ensure that this flows through all that the Company does. The directors consider that at present the Company has an open culture facilitating comprehensive dialogue and feedback and enabling positive and constructive challenge. The Company has adopted, with effect from the date on which its shares were admitted to AIM, a code for Directors' and employees' dealings in securities which is appropriate for a company whose securities are traded on AIM and is in accordance with the requirements of the Market Abuse Regulation. Principle Nine Maintenance of Governance Structures and Processes Ultimate authority for all aspects of the Company’s activities rests with the Board, the respective responsibilities of the Executive Chairman arising as a consequence of delegation by the Board. The Board has adopted appropriate delegations of authority which set out matters which are reserved to the Board. The Executive Chairman is responsible for the effectiveness of the Board, 18 primary contact with shareholders, and oversight of management of the Company’s business. Audit Committee Between September 2019 and January 2021, the Audit Committee was chaired by Cédriane de Boucaud Truell and she was supported by Charles Goodfellow and Richard Parris. Since January 2021, the Committee is chaired by Charles Goodfellow who is supported by Ranald McGregor- Smith. This committee meets twice a year. It is responsible for making recommendations to the Board on the appointment of auditors and the audit fee, for reviewing the conduct and control of the annual audit and for reviewing the operation of the internal financial controls. It also has responsibility for the reporting of the financial performance of the Group and for reviewing financial statements prior to publication. Remuneration Committee Between September 2019 and January 2021 the Remuneration Committee was chaired by Charles Goodfellow and he was supported by Marco Nijhof. Since January 2021, Charles has continued to chair the Committee but is now supported by Ranald McGregor-Smith. The Remuneration Committee meets as required during each financial year. It is responsible for reviewing the performance of the executive directors and setting the scale and structure of their remuneration and the basis of their service agreements with due regard to the interest of shareholders. The Remuneration Committee shall also determine the allocation of share options to employees. It is a rule of the Remuneration Committee that a Director shall not participate in discussions or decisions concerning his/her own remuneration. Nominations Committee The Nominations Committee was established at the end of September 2019 and was chaired by Richard Parris and he was supported by Cédriane de Boucaud Truell until January 2021 when they were replaced by Ranald McGregor-Smith as chair and Charles Goodfellow. The Nominations Committee meets to review the size, structure and composition of the Board ensuring that the Board and its Committees have appropriate balance of skills, knowledge and experience. The Nominations Committee reviews all Board appointments. Risk Committee The Risk Committee was established at the end of September 2019 and was chaired by Marco Nijhof and he was supported by Charles Goodfellow until January 2021. Since then the Committee has been chaired by Ranald-McGregor-Smith who is supported by Charles Goodfellow. The Risk Committee assists the Board in fulfilling its oversight responsibilities with regard to Group risk management and compliance framework and governance structure that supports it. Non-Executive Directors The Board has adopted guidelines for the appointment of Non-Executive Directors which have been in place and which have been observed throughout the year. Non-Executive Directors retire by rotation in accordance with the Company’s Articles of Association which prescribe that at every Annual General Meeting one third of the directors for the time being or, if their number is not a multiple of three, then the number nearest to but not exceeding one third, shall retire from office. Non-executive directors are initially appointed for a three year term but their appointment is terminable by either party on three months’ written notice. In accordance with the Companies Act 2006, the Board complies with: a duty to act within their powers; a duty to promote the success of the Company; a duty to exercise independent judgement; a duty to exercise reasonable care, skill and diligence; a duty to avoid conflicts of interest; a duty not to accept benefits from third parties and a duty to declare any interest in a proposed transaction or arrangement. 19 Principle Ten Shareholder Communication The Board is committed to maintaining good communication and having constructive dialogue with its shareholders. The Company has close ongoing relationships with its private shareholders. Institutional shareholders and analysts have the opportunity to discuss issues and provide feedback at meetings with the Company. In addition, all shareholders are encouraged to attend the Company’s Annual General Meeting. Investors also have access to current information on the Company through its website, www.sabien-tech.co.uk, and via Richard Parris, Executive Chairman and Edward Sutcliffe, Company Secretary who are available to answer investor relations enquiries. The Company shall include, when relevant, in its annual report, any matters of note arising from the Audit or Remuneration Committees. 20 Remuneration Report This report should be read in conjunction with note 8 to the accounts. The Remuneration Committee is responsible for reviewing the level and make-up of the remuneration of executive directors. In doing so, the Committee’s aims are: • To determine the policy for the remuneration of the executive directors; • To review the on-going appropriateness of the remuneration policy; • To approve the design of and review share incentive plans and bonus schemes and to determine the awards to be made under such plans or schemes; and • To ensure that the remuneration policies adopted by the Company give due regard to any legal requirements, the provisions and recommendations in the QCA Code and the AIM rules and associated guidance. The components of remuneration are: • Basic salary and benefits determined by the Remuneration Committee which are included in employment agreements and reviewed annually; • Bonuses based upon performance of the Company and the individual concerned; and • Share options. Service contracts The employment contracts of the executive directors with the Company are terminable by either party with no less than three months’ notice in writing to the other. The remuneration of the non-executive directors is determined by the Board within the limits set out in the Articles of Association. The service contracts of the directors, one third of whom who are eligible for re-election at the Annual General Meeting, are as follows: C. Goodfellow R. Parris E Sutcliffe R McGregor-Smith Notice period 1 month 3 months 3 months 3 months Directors’ remuneration during the period (audited) Executive directors R. Parris E. Sutcliffe (appointed 1 March 2021) A. O’Brien (resigned 5 November 2019) Salaries and fees Taxable benefits £’000 £’000 Total 2021 £’000 75 13 - - - - 75 13 - Total 2020 £’000 113 - 120 Non-executive directors C. Goodfellow C. de Boucaud Truell (resigned 22 January 2021) M. Nijhof (resigned 22 January 2021) R. McGregor-Smith (appointed 1 February 2021) J. Taylor (resigned 3 September 2019) Total 30 23 23 - 15 324 Fees paid to R. Parris, C. Goodfellow, C. de Boucaud Truell, M. Nijhof and R McGregor-Smith were paid to Parris LLP, Woodlands Lery Ltd, Cédriane De Boucaud Truell, Unfold EU B.V. and Bridgend Finance Limited respectively. 30 26 26 29 - 199 30 26 26 29 - 199 - - - - - - 21 Sabien Technology Group Share Option Plan (audited) Under the Plan, the Group can make awards of share options to selected directors and eligible employees. No Directors who served during the year held any share options. The mid-market price of the Company’s shares at the end of the financial year was 0.22p. Richard Parris Executive Chairman 27 August 2021 22 Section 172(1) Statement Section 172(1) of the Companies Act 2006 requires the Directors of the Company to act in a way that they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to: a) The likely consequences of any decision in the long-term; b) The interests of the Company’s employees; c) The need to foster the Company’s business relationships with suppliers, customers and others; d) The impact of the Company’s operations on the community and the environment; e) The desirability of the Company maintaining a reputation for high standards of business conduct; and f) The need to act fairly as between members of the Company. The table below sets out the key stakeholder groups, their interest and how the Company has engaged with over the reporting period. Stakeholder group Investors Employees Customers Suppliers Their interests • Comprehensive review of financial performance of the business Business sustainability • • High standard of governance Awareness of long-term • strategy and direction Job satisfaction and fulfilment • • Health and safety on site • • • Training and development Career progression Inclusion • Fulfil order delivery and installation to requirements • Health and safety • • • • Maintain dialogue and visibility Long term returns Post installation support Prompt payment on orders Long term relationship • • Growth of purchasing Community and the environment • • • Sustainability Energy usage Recycling and waste management 23 How management and/or Directors engage • • • • • • Annual and interim reports Company website Shareholder circulations Company announcements AGM Stock exchange announcements • • • • • Performance reviews, objective setting and formal policies and procedures Regular dialogue with key management Company culture which promotes inclusion and sharing of ideas Employee share option policy Additional health and safety support from outsourced specialists Customer survey Clear and consistent communication Post installation support Analysis of savings Fully qualified installers • • • • • • Deposit payments on large orders • • Maintained relationship since inception Advanced notice on orders of the company • Open dialogue to highlight any possible • • • • supply chain issues Products promote energy reduction Corporate and social responsibility policy Environmental policy Comply with the Waste Electric and Electronic Equipment (WEEE) Regulation Directors’ Responsibilities Statement The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable laws and regulations. Company law requires the directors to prepare such financial statements for each financial year. Under that law, the directors have prepared the group and parent financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law, the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and the company and of the profit or loss of the group for that period. In preparing these financial statements, the directors are required to: select suitable accounting policies and then apply them consistently; • • make judgements and accounting estimates that are reasonable and prudent; • state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that company will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. We confirm to the best of our knowledge that: 1. 2. the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and the strategic report and the directors’ report include a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation as a whole together with a description of the principal risks and uncertainties that they face. 24 Independent Auditors’ Report to the Members of Sabien Technology Group Plc Opinion We have audited the financial statements of Sabien Technology Group Plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 30 June 2021 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated and Company Statements of Financial Position, the Consolidated and Company Statements of Cash Flows, the Consolidated and Company Statements of Changes in Equity and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. In our opinion: • • • • the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 30 June 2021 and of the group’s loss for the year then ended; the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs(UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the audit of financial statements section of our report. We are independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Conclusions relating to going concern In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 25 Audit Area and Description Audit approach in intangible asset Carrying value of intangibles The the Consolidated represents Statement of Financial Position intellectual property being the rights to the M2G product acquired from the inventors. The overall decline in revenue over the past five years, and the pre taxation losses are potential indicators of an impairment of the carrying value of the intangible asset. Carrying value of investments and investment in subsidiaries The cost of investment in Aeristech Limited and Sabien Technology Limited in the Company and Consolidated Statements of Financial Position are £100,000 and £6,457,000 respectively at the year end the latter has been fully impaired. In order to satisfy ourselves that the carrying value of intangible asset was appropriate: the • We critically assessed underpinning the assumptions the Directors’ IAS 36 valuation of the intellectual property. • We critically assessed the Directors’ assertion that no impairment was required by reference to trading performance and forecasts. • We performed sensitivity analysis of the Directors’ IAS 36 valuation. • We considered the appropriateness for the amortisation policy of intellectual property. In order to satisfy ourselves that the carrying value of the investments in Aeristech Limited and Sabien Technology Limited were appropriate: • We critically assessed underpinning the the assumptions Directors’ IAS 36 valuation of the investment in Sabien Technology Limited. • We critically assessed the Directors’ assertion that the cost of investment in Sabien Technology Limited remains fully impaired by reference to and forecasts and that no impairment in Aeristech Limited is required. performance trading Going concern The pre taxation losses and the limited visibility on future cash flow receipts indicate that the Company and Group may have a going issue. In order to satisfy ourselves that the going concern basis is appropriate: • We critically assessed the client’s cashflow forecast to 31 December 2022 and assessed the underlying assumptions. • We critically assessed the Directors’ assertion that the Company and Group is a going concern by reference to post year end trading and cashflows and ability to raise further funds if required. 26 Our application of materiality The scope and focus of our audit was influenced by our assessment and application of materiality. We define materiality as the magnitude of misstatement that could reasonably be expected to influence the economic decisions of the users of the financial statements. We use materiality to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial statements both individually and as a whole. Due to the nature of the Group we considered income and profitability to be the main focus for the readers of the financial statements and accordingly this consideration influenced our judgement of materiality. Based on our professional judgement, we determined materiality for the Group to be £27,500, based on an initial calculation of gross assets. On the basis of our risk assessments, together with our assessment of the overall control environment, our judgement was that performance materiality (i.e. our tolerance for misstatement in an individual account or balance) for the Group was 50% of materiality, namely £13,750. We agreed to report to the Audit Committee all audit differences in excess of £1,375, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also reported to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements. An overview of the scope of our audit Our Group audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide controls, and assessing the risks of material misstatement at the Group level. The Group is audited by one audit team, led by the Senior Statutory Auditor. Our approach in respect of key audit matters is set out in the table in the Key Audit Matters Section above. Other information The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Opinions on other matters prescribed by the Companies Act 2006 In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. 27 In our opinion, based on the work undertaken in the course of the audit: • • the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the parent company financial statements; and the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report. We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the parent company financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors’ remuneration specified by law are not made; or • • we have not received all the information and explanations we require for our audit. Responsibilities of directors As explained more fully in the directors’ responsibilities statement set out on page 24, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud The objectives of our audit in respect of fraud, are; to identify and assess the risks of material 28 misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses to those assessed risks; and to respond appropriately to instances of fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both management and those charged with governance of the company. Our approach was as follows: • We obtained an understanding of the legal and regulatory requirements applicable to the group and considered that the most significant are the Companies Act 2006, International Financial Reporting Standards, and UK taxation legislation. • We obtained an understanding of how the group complies with these requirements by discussions with management and those charged with governance. • We assessed the risk of material misstatement of the financial statements, including the risk of material misstatement due to fraud and how it might occur, by holding discussions with management and those charged with governance. • We inquired of management and those charged with governance as to any known instances of non-compliance or suspected non-compliance with laws and regulations. • Based on this understanding, we designed specific appropriate audit procedures to identify instances of non-compliance with laws and regulations. This included making enquiries of management and those charged with governance and obtaining additional corroborative evidence as required. As part of an audit in accordance with ISAs (UK) we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group’s or the parent company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the group or the parent company to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the 29 underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Use of our report This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken for no purpose other than to draw to the attention of the company’s members those matters which we are required to include in an auditor’s report addressed to them. To the fullest extent permitted by law, we do not accept or assume responsibility to any party other than the company and company’s members as a body, for our work, for this report, or for the opinions we have formed. Matthew Banton (Senior Statutory Auditor) for and on behalf of Moore Kingston Smith LLP, Statutory Auditor 27 August 2021 Devonshire House 60 Goswell Road London EC1M 7AD 30 Consolidated Statement of Comprehensive Income For the year ended 30 June 2021 Revenue Cost of sales Gross profit Notes 2021 £’000 971 (153) 818 2020 £’000 454 (89) 365 Administrative expenses (1,182) (1,250) Exceptional item Operating loss Other income Finance expenses Loss before tax Tax credit Loss for the year attributable to equity holders of the parent company 6 5 9 (180) (579) (544) (1,464) 35 - 55 - (509) (1,409) 10 - - (509) (1,409) Other comprehensive income - - Total comprehensive income for the year (509) (1,409) Loss per share in pence – basic Loss per share in pence – diluted 11 11 (6.22) (6.22) (0.11) (0.11) The earnings per share calculation relates to both continuing and total operations. The notes on pages 36 to 55 form part of these financial statements. 31 Consolidated and Company Statements of Financial Position As at 30 June 2021 Company Reg No: 05568060 Group Company 2021 £’000 2020 £’000 2021 £’000 2020 £’000 Notes ASSETS Non-current assets Property, plant and equipment Intangible assets Investments Total non-current assets Current assets Inventories Trade and other receivables Cash and bank balances Total current assets TOTAL ASSETS EQUITY AND LIABILITIES Current liabilities Trade and other payables Borrowings Total current liabilities Non-current liabilities Borrowings Total non-current liabilities EQUITY Equity attributable to equity holders of the parent Share capital Other reserves Retained earnings Total equity 12 13 14 15 16 17 18 19 19 20 35 57 100 192 24 51 1,399 1,474 17 104 - 121 39 83 778 900 - - 100 100 - - - - - 180 977 1,157 - 450 596 1,046 1,666 1,021 1,257 1,046 161 36 197 145 145 627 - 627 181 181 99 - 99 - - 515 - 515 - - 3,350 3,509 (5,535) 1,324 3,058 2,181 3,058 3,350 2,181 3,509 (5,026) (5,701) (4,708) 531 1,158 213 TOTAL EQUITY AND LIABILITIES 1,666 1,021 1,257 1,046 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 £993k (2020: £890k loss). There is no other comprehensive income in the Parent Company. The financial statements were approved and authorised for issue by the Board on 27 August 2021 and were signed on its behalf by: Richard Parris Executive Chairman 27 August 2021 The notes on pages 36 to 55 form part of these financial statements. 32 Consolidated and Company Cash Flow Statements For the year ended 30 June 2021 Cash flows from operating activities Loss before taxation Adjustments for: Depreciation and amortisation Loss on disposal of fixed assets Impairment of investment in subsidiary Decrease / (increase) in trade and other receivables Decrease in inventories (Decrease)/increase in trade and other payables Group 2021 £’000 2020 £’000 Company 2021 £’000 2020 £’000 (509) (1,409) (993) (890) 51 11 - 32 53 1 - 34 - - - 284 15 (466) 15 491 - (430) - - 160 (396) - 488 Net cash outflow from operating activities (866) (815) (1,139) (638) Cash flows from investing activities Investments acquired Purchase of property, plant and equipment (100) (33) - (3) (100) - (160) - Net cash used in investing activities (133) (3) (100) (160) Cash flows from financing activities Proceeds from borrowings Proceeds from share issues Share issue costs - 1,700 (80) 181 726 (49) - 1,700 (80) Net cash generated by financing activities 1,620 858 1,620 - 726 (49) 677 Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year Cash and cash equivalents comprise: Cash and cash equivalents Invoice financing (included in other payables) 621 40 381 (121) 778 738 596 717 1,399 778 977 596 1,399 - 1,399 778 - 778 977 - 977 596 - 596 The notes on pages 36 to 55 form part of these financial statements. 33 Consolidated Statement of Changes in Equity For the year ended 30 June 2021 Share capital Share premium Share based payment reserve Retained earnings Total equity £’000 £’000 £’000 £’000 £’000 3,001 1,560 41 (3,657) 945 - 57 - - - 669 (49) - - - (1,409) (1,409) - - 726 (49) - (40) 40 - 3,058 2,180 1 (5,026) 213 Balance at 1 July 2019 Changes in equity for year Loss for the year Share issues Share issue costs Transfer to retained earnings re lapsed options Balance at 30 June 2020 Changes in equity for year Loss for the year - - Share issues 292 1,408 Share issue costs - (80) - - - (509) (509) - - 1,700 (80) Balance at 30 June 2021 3,350 3,508 1 (5,535) 1,324 The notes on pages 36 to 55 form part of these financial statements. 34 Company Statement of Changes in Equity For the year ended 30 June 2021 Share capital Share premium £’000 £’000 Share based payment reserve £’000 Retained earnings Total equity £’000 £’000 3,001 1,560 41 (3,858) 744 - 57 - - - 669 (49) - - - (890) (890) - - 726 (49) - (40) 40 - 3,058 2,180 1 (4,708) 531 Balance at 1 July 2019 Changes in equity for year Loss for the year Share issues Share issue costs Transfer to retained earnings re lapsed options Balance at 30 June 2020 Changes in equity for year Loss for the year - - Share issues 292 1,408 Share issue costs - (80) - - - (993) (993) - - 1,700 (80) Balance at 30 June 2021 3,350 3,508 1 (5,701) 1,158 The notes on pages 36 to 55 form part of these financial statements. 35 Notes to the Consolidated Financial Statements For the year ended 30 June 2021 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 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 36 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) d) 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 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 37 e) f) g) h) 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. Fixed asset investments: Fixed asset investments are stated at cost less any provision for impairment in value. Deferred consideration: Deferred consideration is discounted from the anticipated settlement date at the Group’s weighted average cost of capital. Inventories: Inventories are valued at the lower of average cost and net realisable value. Financial instruments Financial Assets: 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 at 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 15 and 16. Impairment testing of trade receivables is described in note 16. 38 i) j) 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 18. 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. 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 when signed agreements are exchanged between the two parties for the manufacture and/or delivery of goods. Where the Group is responsible for the project management of the installations, revenue is normally recognised upon installation at the customer site, however there are occasions when the sale of the product and the installation are invoiced and recognised separately when each element is complete. 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) At inception of a contract, the Group assesses whether a contract is, or contains a lease. A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration’. At lease commencement date, the Group recognised a right of use asset and a 39 lease liability on the balance sheet. The right of use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease and any lease made in advance of the lease commencement date (net of any incentives received). The Group depreciates the right of use asset on a straight-line basis from the lease commencement date to the earlier of the end of the useful like of the right of use asset or the end of the lease term. The Group also assesses the right of use asset for impairment when such indicators exist. At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at the date, discounted using the interest rate implicit in the lease if that rate is readily available or the Group’s incremental borrowing rate. Lease payments included in the measurement of the lease liability are made up of fixed payments, variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee, and payments arising from purchase and extension options reasonably certain to be exercised. Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes to fixed payments. When the lease liability is remeasured, the corresponding adjustment is reflected in the right of use asset, or profit and loss if the right of use asset is already reduced to zero. The Group has elected to account for short-term leases and leases of low value assets using the practical expedients. Instead of recognising a right of use assert and lease liability, the payment in relation these are recognised as an expense in profit or loss on a straight-line basis over the lease term. 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. 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. 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. 40 m) n) o) p) g) 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. Adoption of new and revised standards There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning 1 July 2020 that would be expected to have a material impact on the Group. New and revised standards not yet effective Certain new accounting standards and interpretations have been issued but have not been applied by the Group in preparing these financial statements as they are not as yet effective. These standards are not expected to have a material impact on the Group in the current or future periods and on foreseeable future transactions. Foreign currencies Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the statement of financial position date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of transaction. Exchange differences are taken into account in arriving at the operating result. Profit and losses of overseas subsidiary undertakings are translated into sterling at average rates for the year. The statements of financial position of overseas subsidiary undertakings are translated at the rate ruling at the statement of financial position date. Differences arising from the translation of Group investments in overseas subsidiary undertakings are recognised as a separate component of equity. Net exchange differences classified as equity are separately tracked and the cumulative amount disclosed as a translation reserve. The principal place of business of the Group is the United Kingdom with sterling being the functional currency. 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. 41 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; and • borrowings. 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 42 cash flows. Balances due in less than 1 year equal their carrying balances as the impact of discounting is not significant. At 30 June 2021 Trade and other payables Borrowings At 30 June 2020 Trade and other payables Borrowings Less than 1 year £’000 Between 1 and 2 years £’000 Between 2 and 5 years £’000 Over 5 years £’000 161 36 - 36 - 109 - - 627 - - 36 - 109 - 36 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 an increase in loss after tax for the year of £1k (2019: £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 2021 Euro and US dollar exchange rates would have increased the Group’s loss after tax by less than £1k (2020: £1k). • Other Price Risk The Group holds some strategic equity investments in other companies where those complement the Group's operations. The directors believe that the exposure to market price risk from this activity is acceptable in the Group's circumstances. The effect of a 10% increase in the value of the equity investments held at the reporting date would, all other variables held constant, have resulted in an increase in the fair value through other comprehensive income reserve and net assets of £10k (2020: £nil). A 10% decrease in their value would, on the same basis, have decreased the fair value through other comprehensive income reserve and net assets by the same amount. 43 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 Key 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 considered 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 22 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 increase to 450 units in the year (2020: 193 units). Despite the increase in sales revenue the Group incurred a loss of £509,000 in the year (2020: loss of £1,409,000). £180,000 of the loss were exceptional non- 44 recurring costs related to the aborted PHD transaction. The directors are taking steps to return the Group to profitability. Whilst the loss indicates an uncertainty in relation to going concern, the directors consider the Group’s year end cash balance of £1.4m provides sufficient headroom to counteract this uncertainty. The directors have also considered the continued impact of the COVID-19 pandemic, and the measures taken to control it, on the Group. The directors have taken steps to mitigate the impact including the furloughing of staff under the job retention scheme and taking advantage of the Coronavirus Business Interruption Loan Scheme. The directors have therefore taken steps to safeguard the assets of the Group and to enable the Group to continue in business and meet its liabilities as they fall due. The directors have prepared cash flow forecasts to 31 December 2022 based on the conversion of sales pipeline to contracted sales revenue although there can be no certainty that the sales pipeline will be converted into sales revenue in accordance with the cash flow forecasts. The cash flow forecasts confirm that the Group will have sufficient working capital to settle its liabilities as they fall due for a period of not less than twelve months from the date of the approval of these consolidated financial statements. Consequently, the consolidated financial statements have been prepared on a going concern basis. (iv) Impairment of investments 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 14. (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. The Group and Company was loss making in the prior and current financial years and thus a deferred tax asset has not been 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 £6.54m. (vi) Impairment of 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. 45 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 4% of the total and are analysed as follows: Geographical information UK Other Total Year ended 30 June 2021 Year ended 30 June 2020 Sales revenue £’000 930 41 971 % of total revenue 96 4 100 Sales revenue £’000 434 20 454 % of total revenue 96 4 100 During the period, sales to the group’s largest customers were as follows: Customer 1 Customer 2 Sales revenue £’000 636 151 % of total revenue 65 16 No other single customer represented more than 10% of the sales revenue for the year. 5. Operating loss Operating loss is stated after charging/(crediting): Depreciation of property, plant & equipment Amortisation of intangible assets Cost of inventories recognised as an expense 6. Exceptional item Legal and professional fees Year ended 30 June 2021 £’000 4 47 102 Year ended 30 June 2020 £’000 6 47 55 Year ended 30 June 2021 £’000 180 180 Year ended 30 June 2020 £’000 579 579 Exceptional legal and professional fees comprise costs incurred in respect of the PHD acquisition and reverse takeover project which was subsequently aborted and also costs in respect of the readmission to AIM. 46 7. Auditors’ remuneration Fees payable to the Company’s auditors for: - the audit of the Company’s annual accounts Fees payable to the Company’s auditors for other services to the Group: - the audit of the Company’s subsidiary Total audit fees Fees payable to the Company’s auditors for: - other services - corporate finance Total other fees 8. Staff costs Wages and salaries Social security costs Pension costs Year ended 30 June 2021 £’000 Year ended 30 June 2020 £’000 13 21 34 10 20 30 - 23 23 5 100 105 Year ended 30 June 2021 £’000 595 Year ended 30 June 2020 £’000 760 46 63 7 830 7 648 The average monthly number of employees, including directors, during the year was as follows: Directors Administration Year ended 30 June 2021 Nos. 4 7 11 Year ended 30 June 2020 Nos. 4 8 12 The remuneration of key management personnel are detailed in note 23 and in the Remuneration Report. 9. Other income Furlough grants Year ended 30 June 2021 £’000 35 35 Year ended 30 June 2020 £’000 55 55 Other income in the year represents furlough grants received under the UK government’s Coronavirus job retention scheme. 47 10. Corporation tax Current tax Total tax for the year Loss before tax Tax on loss on ordinary activities at standard UK corporation tax rate of 19% (2019: 19%) Expenses not deductible for tax purposes Depreciation in excess of capital allowances Utilised tax losses Tax losses carried forward Foreign losses of subsidiary Current tax Year ended 30 June 2021 £’000 - - Year ended 30 June 2020 £’000 - - (509) (1,409) (97) 39 (6) (47) 104 7 - (268) 128 - (9) 149 - - 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 recurring 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 £6.69m (2020: £6.4m) which at the current tax rate would equate to £1.27m (2020: £1.22m). 11. Earnings per share The calculation of earnings per share is based on the loss for the year attributable to equity holders of £509k (2020: £1,409k loss) and a weighted average number of shares in issue during the period of 8,190,696 (2020: 1,270,881,220). At the year end, options over 35,000 shares (2020: 35,000) were in issue, but have not been taken into account in calculating diluted earnings per share as they are anti-dilutive. 12. Property, plant and equipment Group Cost At 1 July Additions Transfer to inventories Disposals At 30 June Depreciation At 1 July Charge for the year Transfer to inventories Reversed on disposals At 30 June Net Book Value At 30 June 2021 At 30 June 2020 2021 £’000 28 33 (15) (9) 37 11 4 (8) (5) 2 35 17 2020 £’000 148 3 - (123) 28 128 6 - (123) 11 17 20 The Company held no property, plant and equipment at 30 June 2020 and 2019. 48 13. Intangible assets Group Intellectual Property Cost At 1 July and 30 June Amortisation At 1 July Charge for the year At 30 June Net Book Value At 30 June 2021 At 30 June 2020 2021 £’000 2020 £’000 943 943 839 47 886 57 104 792 47 839 104 151 Intellectual Property represents the rights to the M2G product acquired from the inventors. An impairment review performed in accordance with IAS 36 ‘Impairment of Assets’ as detailed in note 14, determined that no impairment was necessary at 30 June 2021. The remaining amortisation period for Intellectual Property is 2 years. The Company held no intangible assets at 30 June 2021 and 2020. 14. Investments Group Cost At 1 July Additions At 30 June Impairment provision At 1 July Impairment in year At 30 June Net Book Value At 30 June 2021 At 30 June 2020 Company Cost At 1 July Additions At 30 June Impairment provision At 1 July Impairment in year At 30 June Net Book Value At 30 June 2021 2021 £’000 - 100 100 - - - 100 - 2021 £’000 6,457 100 6,557 6,457 - 6,457 2020 £’000 - - - - - - - - 2020 £’000 6,297 160 6,457 6,297 160 6,457 100 - 49 At 30 June 2020 - - Details of the fixed asset investments 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 100% through energy reduction Sabien Technology IP Limited Sabien Inc. Northern Ireland Ordinary Ownership of 100% Intellectual Property Delaware (USA) Common Stock Managing carbon through energy reduction 100% Aeristech Limited England & Wales Ordinary Manufacture power-dense 0.3% compressors used within hydrogen fuel cells In February 2021 the Company acquired 0.3% of the issued share capital of Aeristech Limited for a consideration of £100k. As part of the investment, Aeristech has issued the Company with 10,417 warrants with a two-year term, each warrant carrying the right to subscribe for one share in Aeristech at the issue price of £2.40. In March 2021 the Company incorporated Sabien Inc. as a wholly owned US subsidiary in the State of Delaware. Sabien Inc. has been consolidated within the Group financial statements. 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% (2020: 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% (2020: 8%) (rental revenue growth rate 8% (2020: 8%) has been applied over the ten years of the cash flow forecast. 15. Inventories Group Goods held for resale The Company held no inventories at 30 June 2021 and 2020. 2021 £’000 24 2020 £’000 39 50 16. Trade and other receivables Trade receivables Other receivables Amounts due from group undertakings 2021 Group £’000 1 50 - 2020 2020 2021 Group Company Company £’000 £’000 £’000 - - 41 400 37 42 50 143 - 51 83 180 450 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 includes £100k which is covered by a £250k loan facility (2020: £250k) 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. The balance of £43k is due from Sabien Inc. The balance is interest free, unsecured and repayable on demand. Trade receivables are considered impaired if they are not considered recoverable. As at 30 June 2021, the Group had no receivables which were considered to be impaired and against which a full provision has been made. Trade receivables of £1k (2020: £14k) were past due but not impaired. The ageing analysis of these trade receivables is as follows: Up to 3 months 3 to 6 months More than 6 months 2021 £’000 1 - - 1 2020 £’000 41 - - 41 The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies: Pounds sterling Euros 17. Cash and bank balances Cash and bank balances 18. Trade and other payables Trade payables Social security and other taxation Accruals and deferred income Other payables 2021 £’000 51 - 51 2020 £’000 83 - 83 2021 Group £’000 1,399 2020 2020 2021 Group Company Company £’000 £’000 £’000 596 977 778 2021 Group £’000 45 4 84 28 2020 2020 2021 Group Company Company £’000 £’000 £’000 317 36 368 - 12 - 193 45 239 5 18 8 51 161 627 99 515 Sabien Technology Limited is party to an invoice financing agreement. The amounts outstanding under this agreement are secured by way of a debenture over the assets of the Company, attracts interest at a variable rate and are repayable on demand. The balance outstanding on the invoice financing agreement is £nil (2020: £nil). 19. Borrowings Borrowings 2021 Group £’000 181 181 2020 2020 2021 Group Company Company £’000 £’000 £’000 - - 181 - - 181 The Group drew down a Coronavirus Business Interruption Loan in June 2020. The loan is interest free for the first twelve months and at 5% per annum for five years. The balance is unsecured and is repayable in monthly instalments from July 2021.The maturity profile of the loan is shown below: Within 1 year 1-2 years 2-5 years Over 5 years 20. Share capital 2021 Group £’000 36 36 109 - 181 2020 2021 2020 Group Company Company £’000 £’000 £’000 - - - - - 36 - - 109 - - 36 - - 181 Allotted, called up and fully paid 14,574,260 Ordinary shares of 3p each (2020: 1,453,673,157 of 0.01p each) 44,004,867 Deferred shares of 4.5p each (2020: 44,004,867) 190,254,867 New Deferred shares of 0.49p each (2020: 190,254,867) Total 2021 £’000 2020 £’000 438 146 1,980 932 3,350 1,980 932 3,058 On 24 February 2021, the Company raised £1,700k (gross) by the issue of 2,500,000,000 Ordinary shares of 0.01p each at a cash price of 0.05p per share and by the issue of 418,604,651 Ordinary Shares at 0.001075p per share. Net proceeds after expenses amounted to £1,620k. On 29 March 2021 the Company issued 192 Ordinary shares of 0.01p at par. On 29 March 2021, the Company consolidated its share capital of 4,372,278,000 Ordinary shares of 0.01p to 14,574,260 Ordinary shares of 3p each. Share options (see note 22) At the year end date, the following options had been granted: Date of Grant 31 October 2014 Total At 1 July 2020 35,000 35,000 At 30 June 2021 35,000 35,000 Exercise price 54.5p Exercisable from Exercisable to October 2017 October 2024 52 21.Financial instruments Financial assets Amortised cost (loans and receivables) Group £’000 Fair value through profit and loss Total Amortised cost (loans and receivables) Fair value through profit and loss Total Group Group £’000 £’000 Company Company Company £’000 £’000 £’000 Trade and other receivables (excluding prepayments) Financial liabilities 1 1 - - 1 1 - - - - - - Amortised cost (loans and payables) Group £’000 Fair value through profit and loss Group £’000 Total Group £’000 Total Fair value through profit and loss Amortised cost (loans and payables) Company Company Company £’000 £’000 £’000 Trade and other payables Borrowings 161 181 342 - - - 161 181 342 99 - 99 - - - 99 - 99 22. 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 15p 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 20 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: Share price at date of grant Exercise price at date of grant Weighted average fair value Volatility Expected life 53 2021 - 54.5p - 30% 3 years 2020 - 54.5p - 30% 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 (2020: £nil) arising from the share based payments noted above in profit and loss for the year ended 30 June 2021. The following reconciles the outstanding share options granted under the employee share option scheme at the beginning and end of the financial year: Weighted average exercise price 2021 Number 2021 Weighted average exercise price 2020 Number 2020 35,000 54.00 316,371 54.00 - - - - - (281,371) - - 35,000 54.00 35,000 54.00 3.34 years - 4.34 years - Balance at beginning of the financial year Granted during the year Cancelled during the year Balance at end of the financial year Weighted average remaining contractual life At the 2020 Annual General Meeting in March 2021, a new Long Term Incentive Plan (“LTIP”) was approved by shareholders. At the date of this report no options have yet been issued under the LTIP. 23. 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 has entered into service agreements with Richard Parris, Charles Goodfellow and Ranald McGregor-Smith 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 analysed in the Remuneration Report. The aggregate remuneration compromises: Aggregate emoluments Fees 2021 £’000 2020 £’000 13 186 199 120 204 324 The remuneration of the highest paid director during the year was £75k (2020: £120k). The remuneration of individual Directors is disclosed in the Remuneration Report. Charles Goodfellow is employed by the Group’s broker, Peterhouse Capital Limited. Fees paid 54 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 £88k (2020: £58k) and at the year end the amounts due to Peterhouse Capital Limited were £nil (2020: £8k). During the year, the Company charged its subsidiary, Sabien Technology Limited, £50k (2020: £50k) by way of management charges. The Company was also charged by Sabien Technology Limited £13k (2020: £nil) in relation to staff costs. Sabien Technology Limited repaid £36k (2020: £564k) during the year in respect of working capital loans and at the year end the amount outstanding was £100k (2020: £50k). During the year the Company advanced working capital loans of £43k (2020: £nil) to its subsidiary, Sabien Inc. At the year end the amount due from Sabien Inc. was £43k (2020: £nil). 55
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