RNS Number:9441T
Cyan Holdings Plc
29 March 2007
Press Release 29 March 2007
Cyan Holdings Plc
("Cyan" or "the Group")
Final Results
Cyan Holdings Plc (AIM:CYAN.L), the fabless semiconductor company specialising
in the development of low powered, configurable microcontroller chips, announces
its Final Results for the year ended 31 December 2006.
Highlights
* strategic review completed
* new CEO appointed and executive team restructured
* eCOG1X product range available and well received by customers
* trials commenced by Chinese authorities on the EPOS based tax collection
project
* Sales Revenue of #269k, an order of magnitude increase from #30k in 2005
* Sales revenues have been significantly impacted by the delay in the roll
out of the Chinese tax terminal project which is now expected in mid 2007
* Retained Loss of #2,533k and Cash Balance of #2,821k in line with
expectations
Commenting on the results, Mike Hughes, Chairman, said: "Our strategic review
confirmed the value of our products to our customers, identified a better market
penetration strategy and showed that China, including the Chinese domestic
market, offers us the highest potential for growth. The review was led by Kenn
Lamb whose appointment as CEO is a positive addition to Cyan's senior management
and an endorsement of our potential.
"The launch of the eCOG1X product range in August 2006 and its availability in
production quantities early in 2007 is a significant milestone for the Company.
We are pleased to report that it has been well received by our customers. I
believe that our new management team is well positioned to deliver sustainable
growth for our shareholders."
-Ends-
For further information, please contact:
Cyan Holdings plc
Mike Hughes, Chairman Tel: +44 (0) 1954 234 400
www.cyantechnology.com
Collins Stewart Limited
Simon Atkinson, Corporate Finance Tel: +44 (0) 20 7523 8312
www.collins-stewart.com
Media enquiries:
Abchurch Communications
Heather Salmond / Franziska Boehnke Tel: +44 (0) 20 7398 7700
franziska.boehnke@abchurch-group.com www.abchurch-group.com
Chairman's Statement
I am pleased to report on the activities of Cyan for the twelve months to 31
December 2006.
During the last quarter of 2006 we conducted a strategic review of our business
model including an assessment of our product offerings by industry experts. We
are satisfied that our current and in-development range of eCOG
microcontrollers, along with its powerful CyanIDE toolset, meet the demands of
our customers and will deliver sustainable growth in a global and expanding
market.
The strategic review highlighted both the strengths and weaknesses of our chosen
routes to market. The Board has responded quickly in order to build on our
strengths and eliminate our weaknesses. The most significant change is to
increase our focus on our major market, China, through improved product
offerings supported by a restructuring of our executive management team.
We are pleased to announce the appointment of Kenn Lamb as CEO as from 11 April
2007. Kenn was CEO of Elixent Ltd from 2001 to 2006 where he completed a
successful sale of the business to Matsushita of Japan. Prior to Elixent Kenn
was Senior VP Sales at ARC International, a RISC processor semiconductor
business, where he managed the restructuring of the international sales team
building sales from zero. After two years of sales growth ARC completed a
successful London Stock Exchange flotation in September 2000 with a market
capitalisation of #500m. Before joining ARC Kenn was Managing Director of Actel
Inc's European FPGA businesses where his team quadrupled sales in two years
through close management of the distribution sales channel. Kenn's experience
of microprocessors and configurable peripheral technology is ideal for Cyan's
product range.
As a consultant, Kenn led the strategic review of both our approach to the
market and the restructure of our management team, and now joins us to manage
the implementation of the new strategy and accelerate the growth of our
business.
Paul Johnson will report to Kenn Lamb and will retain his title of President and
CTO given his role as founder of the company and to underline his importance in
the company when in senior level discussions in the Far East. Paul is pleased
to be able to concentrate on the development of Cyan's product range and the
supporting CyanIDE software tools as well as working to increase the engineering
capabilities of our team in China. Cyan has a clear product road map and will
be launching important new products in 2008.
As a consequence of the increased focus on China we have agreed that Paul
Barwick, our sales director will leave the company on 31st March, 2007. Dominic
Lun, General Manager of Cyan Asia Limited will report directly to the CEO with
responsibility for all activities in China. I wish to thank Paul for his
important contribution to our business. Paul has helped to build a strong team
in China where we now have over 200 customers showing serious interest in our
product range and our top 10 Chinese design wins, excluding the tax collection
project, have potential for sales of almost one million units per annum. Our
strategy is to become the provider of choice for microcontrollers in the
domestic Chinese market; a market which is growing very quickly. We will do
this by focussing on China, strengthening our Chinese team and widening their
range of activities, partnering with Chinese subcontractors, developing products
specifically for the Chinese internal market, and using our relationship with
subcontractors to influence our penetration of the European market. We believe
that we are well placed to vigorously put this strategy into practice.
Microcontrollers remain a buoyant and growing market. Cyan offers customers the
opportunity to reduce their Bill of Material cost by integrating the functions
of normally separate peripheral devices on to the Cyan MCU chip. This approach
reduces component costs, reduces system power supply needs, and reduces assembly
and test costs. Our unique software development tool, CyanIDE, then allows the
chip assembler coding of peripherals through a straightforward graphical process
that reduces development time and therefore cost. This approach allows the user
to focus on the more important applications software, and makes a tedious part
of the development process much simpler. Overall the customer achieves lower
development costs, lower production costs, and a shorter time to market.
The recent availability of the eCOG1X product range together with the improved
CyanIDE tool, version 1.4, considerably widens the range of applications and
customers that we can address. A measure of interest in the new range is orders
for development kits reaching over 100 units in just two months.
The eCOG1X is a considerable technical achievement and has moved through its
production phase with no problems. We are now able to manufacture in volume to
meet our customers' needs.
We have reported previously in our Interim Statement in 2006 and in our 2005
Annual report on the delays on the Chinese tax collection project and its impact
on our sales and growth. We are pleased to report that the Chinese authorities
have now commenced trials of terminals in a commercial setting. Our Chinese
customer, Pinnacle, has 300 units on trial in petrol stations in Shanxi
province, and Hainan province has issued a request for tenders. Roll out is now
expected in mid 2007. Pinnacle is one of China's most successful Point of Sale
manufacturers with an historical 20% market share. Operating from 32 sales and
support offices throughout China, it expects to be very successful in the new
market. The total market in the first three or four years of roll out is
expected to run into tens of millions of units. Other, smaller, design wins,
are starting to enter their production phases as covered in the Chief
Executive's Review.
We have refocused our sales capability in Europe by the appointment of Glyn as
our German Distributor. With a turn-over in excess of 100 million Euros, Glyn
is now Cyan's largest distributor outside China where Cyan has already seen
significant design-ins and orders. We are also pleased that the Spectrum Group
of independent sales, marketing and operations (ISMO) organisations have been
signed to assist the Company in the development of its business across Europe.
The move will help Cyan in particular to expand its links with key European OEMs
and capitalise on the recent availability of its new eCOG1X microcontroller.
Initially, the agreement encompasses the UK, France, Scandinavia, Benelux, Italy
and Spain.
I wish to thank my fellow directors, our management team and employees, and in
particular our loyal shareholders for their support during our maiden year on
AIM.
We are confident that our new strategy and restructured management team will
lead us to success in 2007.
Mike Hughes
Chairman
29 March 2007
Chief Executive's Review of Operations
During our first year as a public company we achieved many things; considerable
progress in our product development, broader recognition in the market place,
and 44 additional design wins with a sales potential of 1.8 million units per
annum out of a total to date of just over 3 million per annum. The movement of
design wins to full production has, however, been slower than our customers
predicted. We therefore undertook a strategic review covering our product
range, value proposition to our customers and the potential of our market areas
in the fourth quarter of the year. Kenn Lamb, an experienced professional in
the semiconductor industry led the review which incorporated meetings with
customers in the UK, USA and China. This review concluded that;
a. The ability of our product to absorb functions in a customer's design which
would usually be provided by separate peripheral components, delivers a cost
saving that represents a significant incentive to design-in Cyan products.
Competitors must either match this functionality or aggressively discount their
products if they are to offer comparable cost savings, which provides the
opportunity for Cyan to secure a product margin above the industry. The new
eCOG1X family significantly enhances Cyan's ability to deliver these cost
savings, which will become apparent throughout the coming year.
b. The ability of our software tool, CyanIDE, to automate the set-up and
programming of peripherals through a simple graphical process and then support
automated MCU change is unique and is of significant value to our customers. The
current release of CyanIDE demonstrates this capability and the tool will be
enhanced to provide new and extended features that will speed up the design-in
of the Cyan MCU, increase the range of supported peripheral functions,
substantially reduce the customers development time and hence offer additional
cost savings. By achieving this, our customers have the opportunity to get their
product to market more rapidly thereby establishing the potential for enhanced
market share and hence greater profitability.
c. Cyan is exceptionally well positioned to benefit from the pace of growth in
China through a combination of existing relationships with sales channels,
manufacturing partners and the established Cyan Asia team. The Chinese domestic
market has characteristics different to those in other geographies and is
particularly well suited to the features provided by Cyan's product range. We
therefore intend to expand our presence in China, exploit the low cost
environment by extending the engineering capability of our Chinese team and to
develop products specifically for the Chinese domestic market. Cyan has been
particularly successful in penetrating this market through our investment in
technology demonstrators, application notes and one-stop-shop support.
Prime examples of such design wins include a customer who has designed a special
pay-phone using contactless smart cards, which will also act as a "clocking in
and out" terminal, and will be installed in factories throughout China. This is
a project for the largest fixed-network service provider in China and the
volumes are estimated at 100,000 plus per annum. The initial design utilises
the eCOG1k and has commenced field trials. This customer is already planning to
expand its product range to incorporate an LCD display to support advertising
and eventually videocalls which will require the eCOG1X product and application
notes are already under development. CyanIDE's ability to automate the
transition between the eCOG1k and eCOG1X is an example of the value to the
customer of the CyanIDE tool and creates a barrier for competitors who would
otherwise be candidates for the new designs.
A second design win is with a Chinese customer who first used the eCOG1k to
implement a WebServer based on a Cyan application note for remote monitoring of
shipboard equipment. The success of this product has resulted in the company
considering plans to expand into the much larger Chinese industrial control
market. A new project at the same company required a low cost RF communications
system and it selected a Cyan technology demonstrator for the prototype. This
product synchronises the illumination of navigation buoys and will be initially
deployed in Chinese ports but the company intends to make applications for
licences enabling worldwide deployment. A key design problem required a robust
software solution that is being developed by Cyan Asia's engineers as an example
of one-stop-shop support.
d. The majority of consumer end products that are well suited to benefit from
the advantages of Cyan's MCU's are manufactured by global subcontractors who
offer their customers a complete design, development, and manufacturing service.
Cyan will take steps in the coming year to realise a strategy specifically
targeted at these subcontractors. The strategic review identified areas in
which variants of Cyan's products could improve a subcontractor's
competitiveness.
e. The European market, like Japan is challenging for new vendors to establish
an initial foothold. Cyan has enjoyed initial success in these markets through
the development of technology demonstrators that implement a complete system
built around the Cyan MCU. Cyan has developed relationships with manufacturers
in China who already sell large volumes of consumer electronic products into
Europe. These manufacturers focus on developing production products from
technology demonstrators such as those developed by Cyan. Cyan will pursue
proposals by these manufacturers to make available production ready versions of
Cyan's technology demonstrators in the form of modules to be sold back into the
European market. The modules will accelerate the adoption and use of the Cyan
MCU in Europe, overcoming the barrier for new vendors and providing a platform
on which the advantages of the CyanIDE tools can be easily appreciated by
customers.
Technical Highlights
Our new product family eCOG1X became available at the end of 2006 and has been
very well received by the number of customers who were able to start their
designs without the chip, thanks to the CyanIDE tools. It performs better than
we could have hoped for and so far, after extensive testing, we have no bugs to
report. I am pleased to say that the total cost of the eCOG1X design and
development project was less than #1.25 million which is an incredibly small
amount of money for the development of a chip as complex as the eCOG1X. This is
a testament to our R&D methodology and our rapid design processes, providing
complex yet accurate designs.
Our R&D group has not just been designing the eCOG1X chip. The peripherals and
rapid design processes are applicable to all the microcontrollers we plan to
design in the years to come. Part of that is our own 32 bit core to be used
initially in eCOG2. I am pleased to announce that we have the core running in
the lab for the first time. This is a very modern 32 bit core designed
specifically for low power consumption, very high processing power and minimal
memory requirements. All these features are essential for future 32 bit product
designs. Owning our own core gives Cyan enormous freedom to structure our
business without the royalty issues associated with licensing third party cores.
CyanIDE V1.4 has now been released which fully supports the entire eCOG1X range.
This was a significant piece of work as CyanIDE needed to be capable of
supporting over thirty devices in two product families and be structured so that
it can handle 100s of products in the future. This is the fifth major release of
CyanIDE since the company commenced in 2004.
As I said at the head of this review, 2006 has been a very full year and we have
achieved a great many things in developing the potential of our business. I
would like to take this opportunity to thank our employees for their enthusiasm
and hard work.
The Board believes that Cyan has established a range of products that are
leaders in their own field and has identified a market in which their full
potential can be exploited. We look forward to 2007 being a significant year in
the evolution of the Group's prospects.
I am delighted that Kenn has agreed to join us to lead the implementation of our
strategy which applies feedback from users secured over the last year and builds
on our product strengths to provide a firm foundation for sustainable growth.
Kenn's appointment as CEO allows me to concentrate on our development activities
and the strengthening of our engineering capability in China.
Paul Johnson
CEO
29 March 2007
Consolidated Profit and Loss Account
2006 2005
(as re-stated)
# #
TURNOVER: continuing operations 269,333 29,899
Cost of sales (205,776) (4,966)
Gross profit 63,557 24,933
Administrative expenses
Share options charges (173,529) (13,966)
Other (3,035,547) (2,228,526)
(3,209,076) (2,242,492)
OPERATING LOSS: continuing operations (3,145,519) (2,217,559)
Interest receivable and similar income 205,898 61,970
Interest payable and similar charges (69,225) (12,621)
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (3,008,846) (2,168,210)
Tax on loss on ordinary activities 475,557 67,381
RETAINED LOSS FOR THE FINANCIAL YEAR (2,533,289) (2,100,829)
LOSS PER SHARE (pence)
Basic and diluted (3.0) (3.8)
Consolidated Balance Sheet
2006 2005
(as re-stated)
# #
FIXED ASSETS
Intangible assets - 4,000
Tangible assets 136,249 163,236
136,249 167,236
CURRENT ASSETS
Stocks 107,922 59,583
Debtors 520,942 182,560
Investments - short term deposits 2,625,000 5,375,000
Cash at bank and in hand 195,801 192,680
3,449,665 5,809,823
CREDITORS: amounts falling due within one year (249,662) (338,105)
NET CURRENT ASSETS 3,200,003 5,471,718
TOTAL ASSETS LESS CURRENT LIABILITIES, BEING NET ASSETS 3,336,252 5,638,954
CAPITAL AND RESERVES
Called up share capital 170,070 168,621
Share premium account 8,627,630 8,598,230
Profit and loss account (5,648,943) (3,141,863)
Share option reserve 187,495 13,966
EQUITY SHAREHOLDERS' FUNDS 3,336,252 5,638,954
Consolidated Cash Flow Statement
2006 2005
# #
Net cash outflow from operating activities (3,133,246) (2,015,849)
Returns on investments and servicing of finance 136,673 49,349
Taxation 264,194 -
Capital expenditure and financial investment (45,349) (66,114)
Cash outflow before management of liquid resources and (2,777,728) (2,032,614)
financing
Management of liquid resources 2,750,000 (5,375,000)
Financing 30,849 7,396,835
Increase / (decrease) in cash in the year 3,121 (10,779)
Analysis and Reconciliation of Net Funds
At 1 January Cash 31 December
2006 flow 2006
# # #
Cash at bank and in hand 192,680 3,121 195,801
Current asset investments 5,375,000 (2,750,000) 2,625,000
Net funds 5,567,680 (2,746,879) 2,820,801
2006 2005
# #
Increase / (decrease) in cash in the year 3,121 (10,779)
Cash inflow / outflow from (decrease) / increase in liquid resources (2,750,000) 5,375,000
Change in net funds resulting from cash flows (2,746,879) 5,364,221
Movement in net funds in year (2,746,879) 5,364,221
Net funds at 1 January 5,567,680 203,459
Net funds at 31 December 2,820,801 5,567,680
NOTES TO THE FINANCIAL STATEMENTS
Accounting policies
The financial information set out in the announcement does not constitute the
Group's statutory accounts for the year ended 31 December 2006. The financial
information for the year ended 31 December 2005 is derived from the statutory
accounts for that year which have been delivered to the Registrar of Companies.
The auditors reported on those accounts; their report was unqualified and did
not contain a statement under s. 237(2) or (3) Companies Act 1985. The statutory
accounts for the year ended 31 December 2006 have been finalized on the basis of
the financial information presented by the directors in this announcement and
will be delivered to the Registrar of Companies shortly. The audit report has
been modified to reflect uncertainty in the timing and quantum of amounts that
may be recovered relating to an overdue amount of #157,780 from a customer in
China.
The Group's statutory accounts include a prior year adjustment following the
adoption of FRS20 Share Based Payment.
The specific accounting policies that are adopted within the Group's statutory
accounts are described below.
The financial statements are prepared in accordance with applicable United
Kingdom accounting standards.
Accounting convention
The financial statements are prepared under the historical cost convention.
Basic of consolidation
The Group financial statements consolidate the financial statements of the
company and its subsidiary undertakings drawn up to 31 December each year. The
results of subsidiaries acquired or sold are consolidated for the periods from
or to the date on which control passed. Acquisitions are accounted for under
the acquisition method.
Intangible fixed assets
The intellectual property is amortised in equal annual amounts over a period of
three years. The amortisation started in January 2004 when the exploitation of
the intellectual property commenced.
Tangible fixed assets
Depreciation is provided on cost in equal annual instalments over the estimated
useful lives of the assets. The rates of depreciation are as follows:
Leasehold property improvements 20% straight line basis
Office equipment 50% straight line basis
Plant and machinery, tools and equipment 20-25% straight line basis
Fixtures and fittings 25% straight line basis
Stocks
Stocks are stated at the lower of cost and net realisable value.
Research and development
Research and development expenditure is written off to the profit and loss
account as incurred.
Foreign exchange
Transactions denominated in foreign currencies are translated into sterling at
the rates ruling at the dates of the transactions. Monetary assets and
liabilities denominated in foreign currencies at the balance sheet date are
translated at the rates ruling at that date. Translation differences arising
are dealt with in the profit and loss account.
Investments
Investments held as fixed assets are stated at cost less provision for any
impairment in value.
Taxation
Current, including UK corporation tax and foreign tax, is provided at amounts
expected to be paid (or recovered) using the tax rates and laws that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax is provided in full on timing differences, which result in an
obligation at the balance sheet date to pay more tax, or a right to pay less
tax, at a future date, at rates expected to apply when they crystallise based on
current tax rates and law. Timing differences arise from the inclusion of items
of income and expenditure in taxation computations in periods different from
those in which they are included in financial statements. Deferred tax assets
are recognised to the extent that it is regarded as more likely than not that
they will be recovered. Deferred tax assets and liabilities are not discounted.
Leases
Rentals under operating leases are charged on a straight-line basis over the
lease term, even if the payments are not made on such a basis.
Turnover
Turnover is principally derived from the sale of integrated circuits and is
stated net of trade discounts and value added tax. Revenue is recognised on
despatch, which is deemed to be the point at which the risks and rewards of
ownership are transferred.
Share-based Payments
The Group has applied the requirements of FRS 20 (IFRS2) Share-based Payment.
The Group issues equity-settled share-based payments to certain employees.
Equity-settled share-based payments 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 of the equity-settled share-based payments is
expensed on a straight-line basis over the vesting period, based on the Group's
estimate of 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 pricing 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
considerations.
Loss per share
The calculations or earnings per share are based on the following losses and
numbers of shares.
Basic and diluted
2006 2005
(as re-stated)
# #
Loss for the financial year (2,533,289) (2,100,829)
2006 2005
No No
Weighted average number of shares:
For basic and diluted loss per share 84,814,709 54,823,213
Statement of movements on reserves
Group Share premium Share option Profit and loss Total
account reserve account
# # # #
At 1 January 2006 (as originally
stated) 8,598,230 - (3,127,897) 5,470,333
Prior period adjustment - 13,966 (13,966) -
At 1 January 2006 (as re-stated) 8,598,230 13,966 (3,141,863) 5,470,333
Loss for the year - - (2,533,289) (2,533,289)
New issue 29,400 - - 29,400
Currency translation difference on - - 26,209 26,209
foreign currency net investments
Movement in year - 173,529 - 173,529
At 31 December 2006 8,627,630 187,495 (5,648,943) 3,166,182
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
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