Shares in Sabien Technology Group Plc (LON:SNT) lost more than half their value as the boiler optimisation firm issued shares at a deep discount.
The company raised £475,000 by placing 47.5mln shares at a penny a pop, prompting market makers to slash the share price to 1.32p from 3p last night.
The company also warned in a half-year trading statement that a slow conversion rate of the pipeline to confirmed sales orders means the trading performance for the financial year will be considerably below management’s expectations.
Emergency fund-raising
The funds raised will provide the company with the capital necessary to continue with its growth strategy for up to 40 pilot schemes of M2G, its intelligent boiler load control technology, and for pilots of EndoTherm, its energy reduction commercial heating additive.
“Public procurement delays in the receipt of orders have had a major impact on our business's cash flow and we are grateful to our investors who continue to have confidence in the strategy that we have been following for the past two years,” said Alan O’Brien, chief executive officer of Sabien.
“We are confident that the strategy is the correct course to follow and that material orders should be received over the next few months," he added.
Slow conversion of pipeline into orders
As alluded to in the chief executive’s statement, performance in the six months to the end of 2016 was not what the company had hoped for.
Sales revenue eased to £298,000 from £321,000 the year before, although sales orders received rose to £313,000 from £268,000.
It is anticipated that sales revenue will again be back-end loaded this financial year.
The sales pipeline currently stands at £9.7mln, and includes orders where the company has been asked to quote but not yet received a firm order.
Sabien's experience is that it can take between six and 24 months for a customer enquiry to convert to a sales order.
The loss before tax narrowed a little to £826,000 from a loss of £983,000 at the interim stage the previous year.
The company ended the reporting period with cash of £240,000, down from £868,000 just six months earlier.