Extracted from Annual Report 20201

Dear Fellow Shareholders,

2021 in Review

The lockdowns following the onset of the Covid-19 pandemic in early 2020 disrupted diamond manufacturing activities in India and retailing activities throughout the world. With the gradual resumption of retail activities in the second half of 2020, leading up to a strong holiday season, the diamond industry rebounded in late 2020, and this positive momentum carried over into 2021. The pent up demand and the fiscal stimuli by many governments contributed to strong consumer demand in 2021. The global personal luxury goods retail trade rebounded dramatically by an unexpected 29%, exceeding forecasts, both for the scale of the recovery itself and the early return to pre-pandemic spending levels (2019 sales figures were actually exceeded in 2021 by 1%). The diamond jewellery value chain was one of the major beneficiaries of this recovery, as other competing channels of discretionary spending, such as international travel, cruises and other experience-related spending, did not rebound due to lingering pandemic-related concerns. U.S. retail sales of diamond jewellery increased by an estimated 56% year over year (y-o-y) 2020 and by an astounding 50% over pre-pandemic 2019. Indeed, Signet, the largest retailer of diamond jewellery in the U.S., reported a 65% increase in sales y-o-y 2020 and 26% y-o-y 2019. Though economic growth is forecast in 2022 to be slower than in 2021, an expansion of a respectable 4% is expected, and, given the remaining impediments to experience-related luxury spending, we expect robust consumer demand for diamond jewellery to persist into at least the first half of 2022.

With the renewed demand for diamonds, rough diamond polishing rebounded strongly in 2021. The major producers, Alrosa and DeBeers, reported 50% and 71% increases, respectively, over 2020 sales (21% and 16% up as compared to 2019), and with prices 23% higher on average for the year. Polished prices also increased strongly in the first half of 2021, as demand outpaced the available inventory reduced during the 2020 disruption, enhancing polishers' margins significantly. In the second half of 2021 polished prices plateaued and then realised another surge in December, primarily for larger sized stones. As polishing activity was robust during all of 2021, even with the strong retail demand throughout the year, polished stone inventories increased in 2021 and at year's end were some 60% higher than at 2020's year-end. The increase in the pricing of rough diamonds in 2021, which continued into the initial months of 2022, on the backdrop of the increasing inventories of polished stones, eroded some of the polishers' margin gains realised in the earlier months of the year.

As a result of the resurgence in rough diamond polishing, 2021 saw a 73% surge in Galaxy® family scans, reaching an all-time record of 33 million stones, with daily peaks of 110,000 stones. This growth significantly outpaced our expectations at 2020 yearend, when, based on the run rate of scanning during the fourth quarter, we forecast a 40% growth in the number of stones to be scanned in 2021. The Group delivered 80 Galaxy® systems in 2021, and, as of 31 December 2021, our installed base was 711 systems. We expect Galaxy® usage to hit a new record again in 2022, as both the installed base expands and the addressable segments of stone sizes and qualities broadens, due to enhanced technologies and new business models to be introduced in 2022, as detailed below.

2021 saw a 73% surge in Galaxy® scans, reaching an all-time record of 33 million stones

Overall recurring revenues, comprised of Galaxy® inclusion scanning, rough diamond digital tenders, Quazer® laser cutting and shaping services, polished diamond trade-related services, and annual maintenance contracts, were approximately 46% of Group revenue in 2021. There are two issues of note I would like to emphasise. First, our revenues from our rough diamond digital tender services expanded in 2021 by 243%. We expect in 2022 to continue to witness expansion in the utilisation of our digital tenders paradigm by both producers and wholesale tender houses, though at a less dramatic rate, as the technology improves transparency and streamlines the sale process to the benefit of both wholesalers and buyers. The adoption of our digital tenders by producers also opens the door for additional collaboration, e.g., on our Sarine Diamond Journey provenance solution, elaborated on below. Secondly, overall rough and polished diamond wholesale and retail related ("Trade") revenues, mostly from digital tenders, the Sarine Profile and the Sarine Diamond Journey were approximately 8% of Group revenue for FY2021, up from 4-5% in previous years. We expect Trade revenues to continue growing in FY2022 from new customers and the broadening adoption of our new technologies.

Overall diamond "Trade" revenues, digital tenders, the Sarine Profile and the Sarine Diamond Journey, were 8% of Group revenue for FY2021, up from 4-5% in previous years

As environmental and sustainability issues are becoming core considerations with consumers (see lead quote by Mr. Bruce Cleaver, CEO DeBeers, DeBeers Diamond Insight Report 2021,, leading brands are increasingly seeking realistic ways of satisfying these demands. We are extremely pleased that leading luxury global brands have adopted or are in advanced stages of evaluating our Sarine Diamond Journey as their sustainability solution of choice. As announced earlier this year, Maison Boucheron has already chosen our offerings, including our AI-derived grading, and we expect additional high-end luxury brands to be announcing their adoption soon. We expect the recognition by these global household-name brands, along with focused marketing to additional leading industry brands, will drive accelerated adoption of the Sarine Diamond Journey by additional retailers in 2022.

Our ongoing partnering with miners Alrosa, Lucara and Grib, and expected cooperation with additional producers, significantly strengthens our Sarine Diamond Journey proposition. This collaboration, along with our existing formidable market-leading presence in the midstream polishing segment, allows us to collate actual documentary traceability data throughout the pipeline flow, with minimal overhead or disruption to existing workflow patterns, making our Sarine Diamond Journey the only viably scalable solution for diamond provenance. To reinforce our value proposition to the miners, we are introducing the Sarine AutoScan, for the high speed scanning of rough stones at the mine. The Sarine AutoScan is designed to robotically scan and weigh rough diamonds a half carat and up at speeds under 10 seconds per stone, availing their economical documentation for subsequent traceability. This will broaden the addressable domain of our traceability service. The Sarine AutoScan will also address acute internal inventory control issues miners experience today, as the initial inventory control point will be moved back to the mine from today's practise of initial data collection at the producer's central sorting facility.

Our revolutionary e-Grading initiative has transitioned from betatesting to initial broader introduction to midstream and downstream customers. Concurrently, the current in-lab implementation of our AI-based grading paradigm is continuing to gain traction with leading U.S. and European industry players. A leading U.S. wholesaler has launched a programme of self-branded diamonds graded by our grading. Their recognition of the value of our consistent and objective grading to their customers, along with its seamless integration with our Sarine Diamond Journey, has led Maison Boucheron to also adopt our grading for their newlylaunched Etoile Paris line of bridal jewellery. Our AI grading has piqued the interest of additional luxury brands, as well. We intend to broaden the e-Grading proposition's acceptance in the midstream polishing segment dramatically in 2022. We will leverage our clear benefits (direct cost reduction, indirect cost elimination, dramatic time-to-market minimisation and operational flexibility) along with our ability to offer polishers a viable cost-effective solution for the grading of their currently non-graded smaller and lower quality goods (an extensive market).

The market for lab-grown diamonds (LGD) continued to expand in 2021. Anecdotal reports by retailers offering LGD indicate anywhere from single digit to 50% growth, with some retailers reporting that a significant portion of their holiday season business was in LGD. Reportedly, LGD are not widely adopted for bridal purchases, as we had argued the case would be in previous discourses on the LGD market, but are gaining traction as a lower-priced complementing product for non-bridal occasions. The market acceptance of LGD jewellery has created, as we have indeed in the past forecast, a new opportunity for the Group. Virtually all our technologies are applicable to LGD. This year we are introducing a Galaxy® inclusion mapping service, specifically adapted to LGD price points. Our Quazer® 3 laser system continues to be the most cost-effective offering for dicing the LGD wafer into the raw cubes, from which the gems are polished. The Sarine Diamond Journey is also applicable to LGD, as it can document their responsible manufacturing and tell their story to that segment of the consumer market. Lastly, our AI-based e-Grading is especially applicable to LGD grading, as it allows grading of the polished LGD at an affordable charge commensurate with LGD pricing, as opposed to the fees typically charged today for grading services. We believe our business from this growing segment will expand in 2022.

2021 Financial Highlights

Revenues grew by 51% to US$ 62.1 million, gross profit margin was 73.8%, profit from operations for FY2021 increased significantly by 303% to US$ 19.2 million, and our net profit surged by 600% to of US$ 16.5 million

Revenues for FY2021 increased by 51% to US$ 62.1 million from US$ 41.0 million in FY2020 due to the strong recovery, as noted above. Gross profit for FY2021 increased by 69% to US$ 45.8 million, as compared to US$ 27.1 million for FY2020, primarily due to our higher revenues. For FY2021 the Group recorded a gross profit margin of 73.8%, better than the 66.1% realised in FY2020, due mainly to increased overall sales and product mix. Due to our higher gross profit and with sales and marketing expenditures still not back to prepandemic levels due to travel restrictions and cancellation of trade shows, our profit from operations for FY2021 grew significantly by 303% to US$ 19.2 million, as compared to US$ 4.8 million in FY2020. For FY2021 the Group's operating margin was 30.9% as compared to only 11.6% for FY2020. For FY2021 the Group reported a net profit of US$ 16.5 million, nearly 600% higher than the net profit of US$ 2.4 million realised in FY2020. This was due to our higher operational profitability, as noted above. Our net profit margin for FY2021 was 26.5%, as compared to 5.8% for FY2020

Looking Ahead to 2022

The Group's main objectives for 2022 are:

  • Continue expansion of our presence in the upstream segment of the industry;
  • Explore new applications of our technologies to the streamlining of rough trading;
  • Maintain our dominant position in the midstream of the value chain;
  • Minimise the impact of the illicit use of our IP;
  • Accelerate the market adoption of our unique polished diamond retail services:
    • Expand traceability programmes with high-end retailers and leverage this recognition to other players
    • Roll out our e-Grading offering to significantly more midstream players, establishing a substantial availability of graded stones for retail use.
  • Continue our efforts to expand into the lab-grown diamond (LGD) market

These objectives will both increase our recurrent revenue stream and balance our business more evenly between the midstream manufacturing segment, mostly in India, and the other value chain segments with a broader geographical dispersal.

To attain these objectives, we will focus our initiatives in 2022 as follows:

Focus the Group's research and development initiatives as follows:

  • Upstream:
    • Launch our new Sarine AutoScan system
    • Explore new applications for our technologies in the rough trade market;

  • Midstream:
    • Launch Advisor® 8.0 with enhanced features specifically for the vast very small stone segment
    • Further enhance the ease of use of the Sarine Diamond Journey;
    • Further refine our e-Grading– implement remote quality assurance and initial fine-sorting capabilities of Clarity and Color;
    • Continue aggressively constraining piracy by technological innovation alongside legal means, and commercial collaborations (like the recent Synova MOU)
  • Downstream products and services:
    • Continue enhancing the value proposition of the Sarine Diamond Journey;

Focus the Group's marketing efforts on:

  • The introduction of new business models for rough stone scanning and planning – e.g., Galaxy® scanning with charges automatically adjusted for lower quality rough natural diamonds and for LGD, so as to significantly expand our market to additional goods currently below the threshold of economically viable scanning.
  • The broader adoption of our Sarine Diamond Journey:
    • Engage with additional luxury brands and leverage successes to other players, with special focus on the U.S. market;
    • Offer it as an independent service or packaged with AIbased 4Cs grading (as with Maison Boucheron);

    • Accelerate engagement with the upstream by introduction of the Sarine AutoScan for the high speed scanning of rough stones at the mine to enable a broader based application of traceability;
  • The rollout of our e-Grading innovation by implementing a four-pronged strategy:
    • Broadening presence in the midstream polishing segment with a clear value-added proposition – direct cost reduction, indirect cost elimination, dramatic time-to-market minimisation and operational flexibility;
    • Addressing the market of non-graded goods, as the cost benefits we offer avail the grading of smaller and lower quality polished diamonds – an extensive market;
    • Engaging with key wholesalers, especially in the fragmented U.S. market;
    • Engaging retailers with a continued focus on luxury brands and expansion to high-end independent retailers and regional retail powerhouses;
  • The direct targeting of consumers, initially in the U.S., enhancing the Sarine brand recognition through targeted social media initiatives relating to the superior accuracy and consistency offered by automated AI-derived grading and the enhanced confidence in the sustainability of the offered polished diamonds and the overall experience provided by the Sarine Diamond Journey.

The current events in Europe may impact our plans for 2022, though to what extent, if at all, it is as yet too early to forecast. For additional information please refer to Management Business Review section.

We have been asked occasionally, including in international forums such as the Dubai Diamond Conference just over a month and a half ago, where our CEO, David Block, was a member of a panel discussing the future of the diamond supply chain, where we see the industry going in the next few years. We have also been asked how, if at all, we see Sarine playing a role in evolving technologies, such as the Metaverse. We have addressed these issues in the Management's Business Review section of this Annual Report.

Intellectual Property (IP) Infringement

The Company continued in 2021 its ongoing efforts to strengthen and expand its valuable IP portfolio by filing new and provisional patent applications in various countries, relating to our latest advances in both new and established technologies, and a number of pending patent applications were granted during this period as well. The Company also made significant headway in its IP enforcement activities as a result of the Indian courts' adoption of video conferencing during the Covid-19 pandemic for conducting hearings and trials which enabled nearly all of our outstanding lawsuits against piracy to move forward at a quick pace. This included a case against a diamond manufacturer, Rudra Diam, that was using pirated versions of our Advisor® diamond planning software, where the court issued an order for Rudra Diam to forfeit all of its counterfeit software and to purchase valid versions from the Company in its place. Barring unforeseen developments in our remaining lawsuits battling piracy, we expect judgements from the courts in a number of matters in 2022.

However, we are not only relying on judicial recourse. We are also leveraging the numerous technological and commercial advantages we have. The recently launched Advisor® 8.0 offers incomparably better planning, both for larger high-value as well as smaller lower valued stones. It also embodies even more sophisticated IP protection means. We are also leveraging our expanding relationships with major producers and retailers, primarily as relating to the digital tenders, the Sarine Diamond Journey and e-Grading, but also encompassing other initiatives, such as the Synova collaboration, to only allow suppliers who are not involved in IP infringement into these ecosystems.


Sarine experienced high profitability in FY2021, due to the phenomenal recovery of the diamond industry, recording a net profit margin of 26.5%. The Group earned US$ 16.5 million (compared to US$ 2.4 million in FY2020), equivalent to basic profit per share of US cents 4.70 (US cents 0.68 profit per share in FY2020) and fully diluted earnings per share of US cents 4.69 (US cents 0.68 profit per share in FY2020). On February 27, 2022, the Board of Directors recommended that the Annual General Meeting (AGM) approve a final dividend of US 1.0 cents per ordinary share for the financial year ended December 31, 2021, as per the stated dividend policy. This will bring our total payout for FY2021 to US 2.5 cents, some US$ 8.8 million, just over half our net profit for the year.


On behalf of the Board of Directors, I would like to first and foremost thank our truly devoted management team and employees for their ongoing commitment to the Group. We would also like to thank our loyal customers and business partners who enhanced their level of partnership with us this past year, especially our conscientious suppliers, who worked with us diligently during these trying times of supply chain disruption. We believe that these long-term relationships will continue to foster the means by which we will bring innovation and value to the global rough and polished diamond trade in 2022 and beyond, as we strive to continue to launch initiatives that benefit all the industry's value chain and its global consumers. Lastly, I thank our loyal shareholders for the continued trust they extend to Sarine and its management.

Respectfully Yours,

Daniel Benjamin Glinert
Executive Chairman of the Board