TIDMCYAN
RNS Number : 3154N
Cyan Holdings Plc
28 September 2012
Cyan Holdings Plc
("Cyan" or "the Company")
Interim Results for the six months ended 30 June 2012
Cyan Holdings Plc (AIM:CYAN.L), the integrated system and
software design company delivering mesh based flexible wireless
solutions for M2M utility metering and lighting control announces
its Interim Results for the six months ended 30 June 2012.
Highlights
-- Turnover of GBP192,923 (H1 2011: GBP220,277)
-- Successful fund raising of circa GBP1.9 million (net of expenses)
-- Appointment of John Cronin as Executive Chairman at the 2012 AGM
-- Significant position achieved in "potentially transformational" TNEB tender in India
-- Largest order in Company's history (over US$1M) for CyLec(R) products in India
-- Partnership with major Indian electrical and utilities
supplier Larson and Toubro Limited ("L&T")
John Cronin, Executive Chairman, commented:
"Whilst shareholders will no doubt be somewhat disappointed with
the H1 2012 revenue numbers, I want to confirm that we continue to
take significant strides forwards towards achieving our aim of
being the recognised leading provider of smart energy solutions for
the utility and lighting sectors in emerging markets. During the
first half of 2012, we have won orders in India and China and have
strategic partnerships with major manufacturers in both
territories. We are very well positioned in the TNEB tender, which
is now approaching its final stages, and represents a potentially
transformational turning point for the Company in terms of revenues
and financial stability.
We would like to thank our shareholders for their continued
strong support in what continue to be difficult market conditions
in which to raise funding. We hope to be able to confirm that their
patience has been rewarded before the end of 2012."
Enquiries:
Cyan Holdings plc www.cyantechnology.com
John Cronin, Chairman Tel: +44 (0) 1954 234 400
Cenkos Securities plc
NOMAD and Joint Broker
Stephen Keys / Adrian Hargrave Tel: +44 (0) 20 7397 8900
XCAP Securities plc
Joint Broker
Jon Belliss / Adrian Kirk Tel: +44 (0) 20 7101 7070
Newgate Threadneedle
Financial PR
Caroline Evans-Jones / Guy McDougall Tel: +44(0) 20 7653 9850
INTERIM STATEMENT
In my first statement since being appointed at the AGM in May
2012 as Chairman of your Company, I want to recognise that
shareholders will be somewhat disappointed with Cyan's 1H 2012
revenues. This reflects a change of approach at Cyan where the
management team has tightly focused on the Tamil Nadu Electricity
Board ("TNEB") tender to ensure that Cyan has done everything
possible, in terms of product development and sales management, to
ensure that our meter manufacturer partners are awarded a
significant share of the 1.5 million units contract (and ultimately
are well placed for the whole 18 million units that TNEB plan to
replace). The Board's view is that shareholder interests are best
served by ensuring we win this tender which will be
transformational in terms of revenue and financial stability for
Cyan. Given the fact that Cyan is a small UK company, with limited
resources, this has meant less time in terms of lighting product
development and sales management on the ground in China and this
has inevitably meant that lighting revenues in China have not grown
as quickly as originally expected. Nevertheless, I am delighted to
report that Cyan's overall position is exceptionally strong. Whilst
on the surface, any business will legitimately judge its success on
revenue growth and profit, shareholders will be familiar with the
scale of Cyan's ambitious strategy; that being the adoption by
India and China, the world's two largest growth economies, of
Cyan's equipment as standard.
I believe Cyan's solutions to be market leading. Furthermore,
the problems that our solutions help to solve have never been more
prevalent. Indeed, I accepted the invitation to join Cyan, as I
could see the high value opportunity that can be unlocked, through
taking our solutions into the world's largest growth markets.
Cyan's prospects in the Indian Electricity metering market are
now stronger than ever. Whilst we are having to be patient with the
pace of progress on the TNEB tender, this opportunity represents a
potentially significant turning point for the Company and we are
exceptionally well positioned as the process nears its final
stages. It is the view of Cyan's Board, and this has been confirmed
by third parties, that the award of the TNEB tender to Cyan's meter
manufacturer partners will be transformational in terms of Cyan's
perception by customers and will open up an opportunity to
establish the market standard for Automated Metering Infrastructure
("AMI") solutions in India (where more than 100 million smart
meters are expected to be installed over the next 2-10 years).
Metering
As recent press coverage of national power cuts and power grid
breakdowns demonstrate, there is an urgent requirement for upgrades
to Smart Metering, across India's consumer power network.
Whilst shareholders' attention is most likely dominated by our
ongoing participation in the
TNEB tender, to which I will turn shortly, I feel it is
important to outline our other progress over the first 6 months of
the year.
In the first half of 2012, Cyan continued to strengthen its
strategic partnerships in India. Most notably, in February we
announced that we had entered into a partnership with major Indian
electrical and utilities supplier L&T. Both we and L&T have
identified a number of projects in India where there is a need for
865MHz based interoperable wireless AMI with a requirement for end
to end communications enabling remote tamper detection and
reporting. The alliance with L&T is in line with our strategy
of building strategic partnerships with key established players in
India.
Further to this, in May, we announced the largest order in our
history - this order had a value of over US$1M. Cyan has worked
closely with this customer, to provide an interoperable solution
capable of Advanced Metering Reading ("AMR") and AMI. The
integration of our CyLec(R) products is now complete and the
customer has placed an order to fulfil several projects during the
second half of 2012, across a range of utilities. These projects
will embrace some key features for the Indian utility metering
market, such as tamper detection and remote disconnect.
As recent announcements demonstrate, the TNEB tender process has
progressed significantly, albeit slowly, and is nearing the final
stages. Whilst it is frustrating that the TNEB tender has been a
'series of delays', we remain very confident of our competitive
position. We are pleased that the two meter manufacturers who
passed the CPRI tests first time were both Cyan partners and that
two further Cyan partners have told us that they will submit to
CPRI for retesting and will install pilots in parallel. Cyan
continues to support all Cyan partners, on the ground in India as
well as from Cambridge, to ensure that the CyLec(R) technology is
demonstrated successfully to TNEB during the pilot
installations.
Cyan has established a strong position in the Indian smart
metering market by working with leading meter manufacturers, system
integrators and utility providers. These key partners continue to
promote CyLec(R), Cyan's interoperable smart metering solutions
that can be easily integrated. Being part of this eco-system of
decision makers and influencers is key to our success.
We are in the process of migrating our business model away from
a supplier of hardware by adding Software as a Service ("SaaS") to
the revenue stream. For example, in the electricity metering
market, this will take the form of a monthly per meter user fee as
well as annual maintenance and license revenues. These fees are
expected to be borne by the system integrators who will offer a
turnkey service to their utility customers. Cyan's SaaS pricing is
competitive with the current cost in India of reading meters
manually. Several quotes have been provided to customers and this
new revenue source is expected to start in 2013. Incremental
development work is required to complete this new offering.
Provided that the TNEB tender is awarded to it, Cyan is expected
to build out a local operation in India which will be responsible
for local customer support as well as developing new sales
opportunities for Cyan in the local market. Additionally, Cyan has
received requests from its customers in India to start local
sub-contract manufacturing in order to avoid import duties.
Lighting
As mentioned in John Read's statement for the year ended 31
December 2011, the Chinese lighting market has been transformed by
the introduction of Energy Management Contracts ("EMC") which
provide access to Government funding through investment in new EMC
companies set up specifically to reduce national energy
requirements by upgrading existing street lighting to lower energy
technologies. With EMC contracts, cities do not require access to
capital; the cost of the upgrade is funded by the reduction in
energy costs over subsequent years and this business model
incentivises the EMC company to maximise energy savings thus giving
a good prospect that these contracts will meet government energy
reduction goals.
Many lighting companies, including all of Cyan's customers, have
been seeking to participate in this market and the formation of EMC
companies, the award of EMC contracts and the conversion of
existing projects into EMC has delayed project starts and
roll-outs. The cause of the delay seems to now be over, with our
customers having formed new EMC companies and telling us that the
first EMC contracts have been awarded. New prospects continue to be
eager to start incorporating Cyan products because of our proven
success within a number of projects.
Cyan has continued to receive small lighting orders in the
Chinese market during 2012. The EMC delays described above, as well
as the requirement to focus Cyan's product development and sales
management resources on metering in India, mean that China lighting
revenues have not taken off as originally expected. The Board and
management team are taking appropriate steps to rectify this
position for 2013.
Machine to Machine ('M2M')
M2M is the next major opportunity for the wireless terminal
(module) and chip industry.M2M is a broad label describing
technology that enables automated communications between devices.
It allows networked devices to exchange information and perform
actions without the manual assistance of humans. For this reason
these systems are often described as 'smart'. M2M is used in
telemetry, data collection, remote control, robotics, remote
monitoring, status tracking, road traffic control, offsite
diagnostics and maintenance, security systems, logistic services,
fleet management, telemedicine, smart metering and lighting
control. Cyan currently offer M2M applications in wireless metering
and lighting control but the underlying technologies (including
CyNet(R)) are equally suitable for use in other M2M
applications.
Cyan provides technology and is a service provider delivering
the global, wireless mess networks specifically designed for
Machine-to-Machine (M2M) communications. This revolution in cost of
ownership can now enable the demanded M2M volume explosion; 50Bn
connections is 10X the size of the total addressable market for
terminal and silicon in today's cellular industry.
The motive for the M2M links is largely to achieve more
efficient use of resources, be they natural ones like water or
artificial ones like roads.
-- So there is payback immediately and sustainably, not simply
through consumer 'fad', and a business case can be made.
-- Ofgem calculate >GBP1Bn annual savings in the UK from smart meters alone
Financials
For the six months ended 30 June 2012 turnover was GBP192,923,
down slightly on H1 2011 (H1 2011: GBP220,277). The loss for the
period was GBP1,491,953 (H1 2011: GBP1,354,323). Cash balances at
the period end were GBP700,536 (H1 2011: GBP1,103,923).
As already announced in the Annual Report of Cyan Holdings plc
for the year ended 31 December 2011, on 5(th) January 2012
shareholders approved a placing to raise approx GBP1.7M. In
addition, in order to fund the growth of the business and its
additional working capital requirements, Cyan announced on 13(th)
July 2012 that it had secured a further round of finance. The
Company successfully raised circa GBP1.9 million (net of expenses)
as a result of a placing of shares at a price of 0.35 pence per
share.
Cyan would like to take this opportunity to welcome the new
shareholders and thank our existing shareholders for their
support.
Outlook
We expect the coming months to yield significant developments
for Cyan. There is no doubt we are moving towards 'crunch time' in
terms of agreements turning into sizeable orders for our equipment.
The outcome of the TNEB tender is obviously on the horizon, and
this could be an utterly transformational moment for us, should the
result be favourable.
The opportunity is vast, and we have, through hard work,
manoeuvred ourselves into a very promising position.
I look forward to delivering outstanding value for
shareholders.
John Cronin
Executive Chairman
28 September 2012
Consolidated Income Statement
Six months ended 30 June 2012
Unaudited
six months
ended Unaudited six Year ended
30 June months ended 31 December
2012 30 June 2011 2011
Notes GBP GBP GBP
Continuing operations
Revenue 192,923 220,277 455,591
Cost of sales (117,933) (163,978) (321,477
Gross Profit 74,990 56,299 134,114
Research and development
costs (584,431) (774,675) (1,865,982)
Other operating costs (1,134,203) (786,955) (1,767,631)
Operating loss (1,643,644) (1,505,331) (3,499,499)
Investment revenue 1,691 1,008 2,146
Finance costs - - (7)
----------------------- ----------- --------- ------------ -------------- -------------
Loss before tax (1,641,953) (1,504,323) (3,497,360)
Tax 120,000 150,000 345,784
Loss for the period (1,521,953) (1,354,323) (3,151,576)
Loss per share (pence)
Basic 4 (0.12) (0.15) (0.3)
Diluted 4 (0.12) (0.15) (0.3)
Consolidated Statement of Comprehensive Income
Six months ended 30 June 2012
Unaudited Unaudited
six months six months
ended ended Year ended
30 June 30 June 31 December
2012 2011 2011
GBP GBP GBP
Loss for period (1,521,953) (1,354,323) (3,151,576)
Exchange differences on translation
of foreign operations 18,936 68,055 (34,104)
Total comprehensive income for
the period (1,503,017) (1,286,268) (3,185,680)
-------------------------------------- ------------ ------------ -------------
Consolidated Balance Sheet
At 30 June 2012
Unaudited Unaudited 31 December
30 June 2012 30 June 2011 2011
GBP GBP GBP
Non-current assets
Intangible assets - - -
Property, plant and equipment 16,444 44,394 29,843
16,444 44,394 29,843
------------- ------------- ------------------- -------------- ------------------------ --------------------
Current Assets
Inventories 979,921 1,054,266 973,577
Trade and other receivables 320,660 338,418 562,182
Cash and cash equivalents 700,536 1,103,923 364,590
---------------------------------------------- -------------- ------------------------ --------------------
2,001,117 2,496,607 1,900,349
------------- ------------- ------------------- -------------- ------------------------ --------------------
Total assets 2,017,561 2,541,001 1,930,192
------------------------------- ------------- -------------- ------------------------ --------------------
Current liabilities
Trade and other
payables 328,424 343,666 349,126
------------------------------- ------------- -------------- ------------------------ --------------------
Total liabilities 328,424 343,666 349,126
------------------------------- ------------- -------------- ------------------------ --------------------
Net assets 1,689,137 2,197,335 1,581,066
------------------------------- ------------- -------------- ------------------------ --------------------
Equity
Share capital 165,709 2,006,448 2,385,401
Share premium account 25,790,896 21,188,996 21,965,649
Own shares held (690,191) (690,191) (690,191)
Share option
reserve 604,536 476,999 604,536
Translation reserve (303,889) (226,199) (328,358)
Retained earnings (23,877,924) (20,558,718) (22,355,971)
---------------------------------------------- -------------- ------------------------ --------------------
Total equity being attributable
to owners of the Company 1,689,137 2,197,335 1,581,066
------------------------------------------ ----- -------------- ------------------------ --------------------
Consolidated Cash Flow Statement
Six months ended 30 June 2012
Notes Unaudited Unaudited Year ended
six months six months 31 December
ended ended 2011
30 June 30 June
2012 2011
GBP GBP GBP
-------- ------------- ------------- --------------
Net cash outflow from operating activities 5 (1,217,236) (1,390,711) (3,177,846)
-------- ------------- ------------- --------------
Investing activities
-------- ------------- ------------- --------------
Interest received 1,691 1,008 2,146
-------- ------------- ------------- --------------
Purchases of property, plant and
equipment (46,958) (28,171) (29,782)
-------- ------------- ------------- --------------
Net cash used in investing activities (45,267) (27,163) (27,636)
-------- ------------- ------------- --------------
Financing activities
-------- ------------- ------------- --------------
Interest paid - - (7)
-------- ------------- ------------- --------------
Proceeds on issue of shares 1,759,990 986,113 2,225,862
-------- ------------- ------------- --------------
Share issue costs (154,434) (16,960) (101,103)
-------- ------------- ------------- --------------
Net cash from financing activities 1,605,556 969,153 2,124,752
-------- ------------- ------------- --------------
Net increase / (decrease) in cash
and cash equivalents 283,053 (448,721) (1,080,730)
--------
Cash and cash equivalents at beginning
of year 364,590 1,484,437 1,434,437
--------
Effect of foreign exchange rate changes (7,107) 68,207 (39,117)
-------- ------------- ------------- --------------
Cash and cash equivalents at end
of year 700,536 1,103,923 364,590
-------- ============= ============= ==============
Notes to Accounts
Six months ended 30 June 2012
1. Basis of preparation
The interim financial information has been prepared in
accordance with the IFRS accounting policies used in the statutory
financial statements for the year ended 31 December 2011.
These interim financial statements do not constitute statutory
financial statements within the meaning of section 435 of the
Companies Act 2006. Results for the six month periods ended 30 June
2012 and 30 June 2011 have not been audited. The results for the
year ended 31 December 2011 have been extracted from the statutory
financial statements of Cyan Holdings plc.
Statutory financial statements for the year ended 31 December
2011 are available on the Company's website www.cyantechnology.com
and have been filed with the Registrar of Companies. The Company's
auditor issued a report on those financial statements that was
unqualified and did not contain a statement under section 498(2) or
section 498(3) of the Companies Act 2006; however the auditor's
report was modified to emphasise the uncertainty around the
company's ability to continue as a going concern.
2. Going Concern
The directors have prepared a business plan and cash flow
forecast for the period to 31 December 2013. The forecast contains
certain assumptions about the level of future sales and the level
of gross margins. The directors acknowledge that the Group is
trading in a difficult economic environment and in markets that are
relatively new to the Group. This may impact both the Group's
ability to generate positive cash-flow and to raise new finance.
There is a risk that the level of sales achieved is materially
lower than the level forecast or at materially lower margins. The
directors have taken steps to satisfy themselves about the
robustness of sales forecasts but acknowledge that the timing of
customer orders in the Group's target markets is inherently
uncertain. The directors are of the opinion that this business plan
is achievable. On this basis, the directors have assumed that the
company is a going concern.
There is however, material uncertainty related to the
assumptions described above which may cast significant doubt on the
company's ability to continue as a going concern and, therefore, it
may be unable to realise its assets and discharge its liabilities
in the normal course of business. The financial statements do not
include the adjustments that would result if the Group was unable
to continue as a going concern. In the event the Group ceased to be
a going concern, the adjustments would include writing down the
carrying value of assets to their recoverable amount and providing
for any further liabilities that might arise.
3. Post balance sheet event
Since the end of the period, the Group has raised additional
equity funding of circa GBP1.9 million after expenses. The placing
was authorised by existing shareholders on 2 August 2012.
4. Loss per share
Basic and diluted loss per ordinary share has been calculated by
dividing the loss after taxation for the periods as shown in the
table below.
Unaudited Unaudited
six months six months
ended ended
30 June 30 June Year ended
2012 2011 31 December 2011
GBP GBP GBP
Losses (GBP) 1,521,953 1,354,323 3,151,576
Weighted average number
of shares 1,293,298,323 925,996,146 1,021,124,228
IAS33 "Earnings per share" requires presentation of diluted EPS when a company
could be called upon to issue shares that would decrease net profit or increase
net loss per share. For a loss making company with outstanding share options,
net loss per share would only be increased by the exercise of out of the
money options. Since it seems inappropriate to assume that option holders
would act irrationally and there are no other diluting future share issues,
diluted EPS equals basic EPS.
5. Reconciliation of operating loss to operating cash flows
Unaudited Unaudited
six months six months
ended ended Year ended
30 June 30 June 31 December
2012 2011 2011
GBP GBP GBP
Operating loss
for the period (1,643,644) (1,505,331) (3,499,499)
Adjustments for:
Depreciation of property, plant
and equipment 14,784 12,738 28,690
Share-based payment expense - - 127,537
------------------------------------------------ ------------ ------------ -------------
Operating cash flows before movements
in working capital (1,628,860) (1,492,593) (3,343,272)
Increase in inventories (6,344) (181,343) (100,654)
Decrease / (Increase) in receivables 105,300 (94,243) (116,848)
(Decrease) / Increase in payables (20,702) 59,795 65,255
----------------------------------------- --------- ------------ ------------ -------------
Cash reduced by operations (1,550,606) (1,708,384) (3,495,519)
Income taxes received 333,370 317,673 317,673
Net cash outflow from operating
activities (1,217,236) (1,390,711) (3,177,846)
----------------------------------------- --------- ------------ ------------ -------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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