TIDMCYAN
RNS Number : 1909F
CyanConnode Holdings PLC
16 May 2017
CyanConnode Holdings plc
("CyanConnode" or the "Company" or the "Group")
Final Results
CyanConnode (AIM: CYAN), the world leader in narrowband radio
mesh networks, announces its audited results for the 12 months
ended 31 December 2016.
Operational Highlights
-- Revenues of GBP1.8m versus GBP0.3m in the prior year
o Delivery well advanced against two contracts to Enzen Global
Solutions Pvt Ltd ("Enzen") in India
-- Successful acquisition and integration of Connode Holding AB ("Connode")
o Addition of full standards-based technology platform
o UK smart metering contract with expected revenues of GBP25m in
place
o Expansion of the Company's geographic reach
-- Largest contract win to date worth GBP10m in Iran
o Over 50% of the total contract value consists of recurring
software license revenue
o Initial deliveries expected in 2H2017
-- Two additional smart metering orders from Larsen & Toubro ("L&T") in India
o A total of 14,700 units have now been ordered by L&T
-- Operational reach expanded in Europe and the Far East
o Including an order from E.ON and a follow on order from
Landis+Gyr
o Distribution agreement with JST Group in Thailand
-- New equity funding of GBP12.8m
o GBP10.1m (gross) completed in July 2016, including funding to
acquire Connode
o GBP2.3m (gross) completed in Oct/Nov 2016 to fund further
growth
Financial Highlights
2016 2015 Percentage change
GBP GBP
---------------------------- -------------- -------------- ------------------
Revenue 1,823,129 272,012 +570%
---------------------------- -------------- -------------- ------------------
Research and development
expenditure 2,912,631 2,038,068 +43%
---------------------------- -------------- -------------- ------------------
Other operating
costs 3,901,151 2,949,409 +32%
Acquisition related
costs 1,564,102 - N/A
Amortisation/depreciation 255,963 29,300 +774%
---------------------------- -------------- -------------- ------------------
Operating loss (7,939,216) (4,906,724) -62%
---------------------------- -------------- -------------- ------------------
Operating loss
excluding
acquisition related
costs/
amortisation/depreciation (6,119,151) (4,877,424) -25%
---------------------------- -------------- -------------- ------------------
Cash and cash equivalents 3,892,505 2,461,057 +58%
---------------------------- -------------- -------------- ------------------
Post Year End Highlights
-- $5.4m purchase order in Bangladesh
o Half the order is hardware/services to be delivered over the
next 12 months
o Half the order is recurring software license revenue with ten
year contract term
-- Contract win with HM Power Sweden for the supply of 100,000 software licenses
-- Contract win with Innologix India for the supply of $150,000 of software licenses
-- Memorandum of Understanding ("MoU") signed with Tech Mahindra India
-- New equity funding of GBP3.2m (gross) completed in April 2017
-- R&D tax credit cash refund claim of GBP0.7m (2015: GBP0.6m) submitted
-- Pete Hutton (ex-ARM senior executive) appointed to the Board
John Cronin, Executive Chairman of CyanConnode, commented:
"We are delighted to have achieved significant financial and
operational milestones during the period. We won our largest
contract to date and completed the successful acquisition and
integration of Connode.
"Our narrowband mesh networks are ideally suited to
machine-to-machine communication where mobile networks cannot
effectively operate. This capability means the Company's
combination of hardware and software turnkey solutions continue to
gain worldwide market recognition.
"We shall continue to strengthen relationships with existing
customers and pursue with vigour new clients and further alliances
with influential channel partners. Our ability to deliver real
world energy and operating efficiencies underpins our confidence
that 2017 will be another transformational year for the
Company.
"The current year has already started strongly with a $5.4m
purchase order for a utility customer in Bangladesh. Furthermore,
we have several exciting near-term opportunities in place and a
strong order pipeline, including follow-on orders from existing
customers. We are delighted to have successfully evolved our
business model and product range, with growing recurring software
licence sales set to underpin further strong growth as we continue
to drive towards profitability."
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). This inside
information is now considered to be in the public domain.
Enquiries:
CyanConnode Holdings plc Tel: +44 (0) 1223 225
060
John Cronin, Executive Chairman www.cyanconnode.com
Simon Smith, Chief Financial Officer
Cantor Fitzgerald Europe - Nomad and Tel: +44 (0) 20 7894
Broker 7000
Andrew Craig / Richard Salmond
Beaufort Securities Limited - Joint Broker Tel: +44 (0) 20 7382
8300
Jon Belliss
Walbrook PR - Financial PR Tel: +44 (0) 20 7933
8780
Paul Cornelius / Nick Rome cyanconnode@walbrookpr.com
Chairman's Statement
Review of the Year
2016 was by far our busiest year to date as we built on the
foundations laid during the previous period by progressing
contracts and strengthening relationships with partners. As such,
we generated record revenues including high margin software sales
as well as repeat orders from existing customers. These
achievements serve to highlight the strength of our business model,
where both our hardware and software solutions are being recognised
and deployed internationally.
The two major milestone achievements during the period were the
GBP10m purchase order in Iran and the GBP6.8m acquisition of
Connode. The scale of the order from Iran emphasises our ability to
compete for and win larger contracts, while also being able to
establish ourselves quickly in new territories. We look forward to
making the initial deliveries against this contract later this
year. Furthermore, the Connode acquisition not only increased our
scale and reach, but also added a highly complementary product
range including IPv6/6LoWPAN, the latest version of internet
protocol and a standards-based technology to our product set.
The demand for smart meters is global, but the specifications
are established locally, enabling us to tailor our solutions for
each market in which we operate and where local partners are
seeking proven international solutions. Historically, we have
focused on emerging economies, such as India which accounted for
the majority of revenues in 2016, but the acquisition of Connode
has opened up more opportunities in the developed world. This
includes exposure to the ongoing roll out of smart meters in the UK
and follow-on orders in Scandinavian markets. Following completion
of the acquisition, we rebranded the Company in November 2016,
changing our name to CyanConnode to better reflect the coming
together of the two companies and their established brands and
technologies.
As the world leader in narrowband radio mesh networks, we were
delighted to win two Frost & Sullivan Excellence in Best
Practices awards in 2016. These reflect the team's hard work,
consistently delivering high levels of value through strategic
partnerships. As a result of our efforts we were also recognised at
the Independent Power Producers Association of India ("IPPAI")
Power Awards for providing one of the industry's best smart
metering innovations.
We are delighted by the progress made during 2016 and remain
excited by our prospects in a growing number of regions during the
coming financial year.
Operational Review
India
Our third smart metering order from L&T for an additional
4,700 units to expand the deployment of our solutions at Tata Power
Mumbai, announced in December 2016, highlights the strength of our
strategy and the scalability of our model by building on the follow
on order for 5,000 units announced at the beginning of the year.
Our ability to generate repeat orders with such a large end
customer provides the blueprint for other partners and contracts we
have in place and as such, we are very positive about the potential
here. Tata Power is continuing to grow and now has over 2.6 million
consumer customers, including over 660,000 in Mumbai alone. This is
the typical pattern for many of the orders that we have in place as
we establish relationships with blue chip entities that provide
significant roll out opportunities as we become a critical part of
their customer offering.
We have won the highest number of Advanced Metering
Infrastructure ("AMI") contracts awarded to date in India and are
delighted by the progress made during 2016. More than half of the
revenues achieved during the period were generated by the delivery
of the two contracts worth in aggregate approximately GBP1.5
million to Enzen. These contracts are being implemented on behalf
of Chamundeshwari Electricity Supply Corporation Limited ("CESC")
and Paschimanchal Vidyut Vitran Nigam Limited ("PVVNL"), who are
both Indian utilities with 2 million and 3.5 million customers
respectively.
The visibility and ongoing revenue generation provided by our
projects remains key. As such, we continue to build on our
relationship with Enzen given that between them PVVNL and CESC have
over 5.5 million customers, providing a substantial revenue
opportunity for roll out. Our prominence in the region appears to
be growing and at a steering committee meeting hosted by the
Ministry of Power, an event attended by representatives from the
State utilities, CyanConnode and Enzen were congratulated for their
successful delivery of the CESC project to date. Our team in India,
supported from the UK, now stands at 15 and we look forward to
further progress during 2017.
Rest of World
As mentioned, one of the key developments with regards to
growing our international reach was the acquisition of Connode,
which opened up the UK and developed world markets by adding
standards-based technology that would have otherwise cost the
Company GBP2.5 million and 18 months to develop.
The UK smart metering project is now live and the roll out,
which will comprise 53 million gas and electricity meters
nationwide by 2020, has now commenced. CyanConnode was selected by
Telefonica, which is the preferred communications service provider
in two out of the three regions tendered by the UK Government, and
Toshiba to provide a software platform that uses narrowband mesh
technology to complement Telefonica's existing cellular network.
This allows households, where the mobile phone network coverage is
poor or non-existent, to be reached as part of the UK Smart Meter
Implementation Programme ("SMIP"). We have a contract with an
expected value of GBP25 million of software and support revenues
and look forward to the roll out scaling up. I am pleased to report
that the 2016 milestones under the terms of the SMIP contract were
successfully delivered.
As a result of the Connode acquisition, our European exposure
also grew during the period through Scandinavian projects with
E.ON, as part of one of the first smart city projects in Sweden,
and Landis+Gyr in Finland.
The GBP10m Iran order from Micromodje, announced in April 2016
is for a 360,000 unit smart electricity metering implementation of
our solution and its proprietary Head End Software ("HES").
Importantly, Micromodje will host the HES with annual software
license income being recognised over a five-year contractual period
following the successful smart meter installation. As over 50% of
the total GBP10m order value consists of software license income,
the recurring revenues from this purchase order will continue well
beyond the two-year hardware installation period.
As previously mentioned, we have started a dialogue with
Micromodje on the next planned roll out of one million units, part
of the potential overall Iranian market requirement of 33 million
smart electricity meters.
In addition, we extended our reach into Thailand via an
agreement with the JST Group and during this period we also signed
a multi-year strategic partnership with Eppix eSolutions to enable
the integration of SAP Hybris software with CyanConnode's
enterprise platform.
Financial Review
Revenue increased from GBP272,012 in 2015 to GBP1,823,129 in
2016, with the majority coming from the two contracts in India.
Operating loss for the year ended 31 December 2016 was GBP7,939,216
(2015: GBP4,906,724) and net cash at the 2016 year end was
GBP3,892,505 (2015: GBP2,461,057. The increased operating loss is
mainly as a result of increased investment in both R&D and
sales as well as costs arising from the acquisition of Connode.
During the period, the Company raised a total of GBP12.8m before
expenses. As well as funding the Connode acquisition in July 2016,
the new monies raised during the period provided funds for growth,
development and ongoing working capital requirements.
As a result of the acquisition of Connode, the Group now has
intangible assets on the balance sheet of GBP7.8 million (2015:
GBPnil) made up of a customer contract with Toshiba UK for the
rollout of the Connode smart metering solution and goodwill.
Board Changes
Paul Ratcliff joined the Board on 1 January 2016 (replacing
Peter Mainz who stepped down on 31 December 2015). Post the year
end, Pete Hutton joined the Board on 3 April 2017. His wealth of
experience from ARM and within the IoT sector as well as in system
and product design will provide additional complementary skills as
the business continues to build momentum. Furthermore, his strong
network of contacts will undoubtedly be of significant value as we
continue to build on the commercial opportunity at CyanConnode
through Tier 1 strategic partners. As previously communicated to
shareholders, Dr John Read will retire from the Company and step
down from the Board following the Company's Annual General Meeting
in June 2017 - I would like to thank John for his contribution and
commitment to the Company, and wish him all the best in his
retirement.
Employees
Once again I would like to thank all our employees for their
efforts during the period. Having fully integrated Connode and
welcomed its team on board, we have continued to broaden our reach
and offering. I very much look forward to working with the enlarged
team during 2017 as we further expand our reach into existing and
new territories.
Post Period End
Post period end we received a $5.4m purchase order from a
specialist in energy management systems for a smart metering
contract in Bangladesh, South Asia. This is the Company's first
order for a utility customer in Bangladesh and is a further
demonstration of our growing geographical sales footprint. We also
signed a MoU with Tech Mahindra to market, sell and deliver
expertise in narrowband mesh technology for the smart grid, smart
city and IoT markets.
Outlook
We are delighted to have achieved so many financial and
operational milestones during the period, with the most significant
being our largest contract to date and the successful acquisition
of Connode.
Our narrowband mesh networks are ideally suited to
machine-to-machine communication where mobile networks cannot
operate, while our combination of hardware and software turnkey
solutions continue to gain worldwide market recognition. By
providing better control of the grid, including operating and
energy efficiencies and further establishing relationships with
existing and new customers we expect that 2017 will be another
transformational year for the Company.
The current year has already started strongly with a $5.4m
purchase order in Bangladesh. Furthermore, we have several exciting
opportunities in place and a strong order pipeline. We are
delighted to have successfully evolved our business model and
product range, with growing recurring software license sales set to
underpin further strong growth as we continue to drive towards
profitability.
John Cronin
Executive Chairman
15 May 2017
Strategic Report
STATEMENT OF SCOPE
This Strategic Report has been prepared solely to provide
additional information for shareholders to assess the Company's
strategies and the potential for those strategies to succeed.
The Strategic Report contains certain forward-looking
statements. These statements are made by the Directors in good
faith based on the information available to them up to the time of
their approval of this report. Such statements should be treated
with caution due to the inherent uncertainties, including both
economic and business risk factors, underlying any such
forward-looking information.
The Directors, in preparing this Strategic Report, have complied
with s414C of the Companies Act 2006.
This Strategic Report has been prepared for the Group as a whole
and therefore gives greater emphasis to those matters that are
significant to CyanConnode Holdings plc and its subsidiary
undertakings when viewed as a complete enterprise.
BUSINESS MODEL
Overview
CyanConnode provides an optimised, open standard, 'always on'
smart communications platform for the "Grid of Things". Based on
narrowband radio mesh technology it allows neighbourhood networks
that support interoperability between devices and connectivity in
hard to reach places. CyanConnode's low-power narrowband technology
is ideally suited to machine-to-machine applications such as
electricity, gas and water meters, traffic lights, street lights,
in fact any smart city or Internet of Things device.
Within the energy sector, CyanConnode's solutions enable
Advanced Metering Infrastructure (AMI), which provides highly
secure, bidirectional communication between utilities and
consumers, enabling smart metering functionality. CyanConnode's AMI
communication platform enhances utilities' service delivery,
improves business efficiency and saves energy through improved
revenue collection and cash flow, reporting analytics, grid
optimisation, demand response and asset management. Smart metering
systems also promote sustainable energy through renewable resources
such as solar and wind.
Consumers also benefit from CyanConnode's technology, as it
allows them to measure and control their energy consumption,
benefit from post-paid and pre-paid metering (eg. pay as you go),
and time of use tariffs for managing when consumers use their white
goods. This allows customers to improve cost management and
budgeting and promotes less reliance on diesel generators, which
reduces carbon footprint as well as supporting export to the grid
through self-generation.
Narrowband radio mesh networks are low-power and best suited to
applications requiring long-range and reliable communications.
CyanConnode's solutions use frequencies that maximise the range of
its network and provide excellent penetration through obstructions,
such as buildings, in smart metering deployments.
Addressing the growing demand for energy is a global issue and
one that is vital in emerging economies if they are to reach their
long-term growth potentials. These regions also experience high
energy losses through declining infrastructure, tampering and
theft. CyanConnode focuses on some of the largest regions that make
up a large percentage of the global smart metering market: India,
Iran, Thailand, Bangladesh as well as UK and Scandinavia.
Electricity Metering
CyanConnode provides a communication platform that enables
utilities to upgrade their power grid infrastructure into a smart
grid that intelligently controls millions of electricity meters,
providing timely information and control to both utilities and
consumers. CyLec (CyanConnode's smart electricity metering
solution) powers the next generation of advanced Radio Frequency
("RF") smart meters, which enable power utilities to reduce losses
and increase revenues through reliable and secure collection of
consumer energy consumption data.
CyanConnode's business model is to provide hardware and software
that enables the smart grid. Its revenue is derived from the
following principal elements:
-- A small hardware communication module that can be integrated
into the electricity meter of CyanConnode's meter manufacturer
partners (such as Larsen & Toubro). With the addition of this
module, the meter is then enabled to communicate back to the
utility's data centre.
-- A second piece of hardware is a Data Concentrator Unit
("DCU") or gateway. This component allows meters in consumers'
homes to communicate with each other over a self-forming,
self-healing mesh network, with the DCU/gateway accumulating all
the data from the meters and communicating it back to the utility
data centre over the mobile phone network, ethernet or fibre
connection.
-- Software "CyLec Server" implemented in the utility's data
centre communicates with the DCU/gateway (and therefore all of the
individual meters) over a secure internet connection (typically a
mobile data network).
As a result of the Connode acquisition in July 2016, CyanConnode
can also supply software only packages with the hardware element of
the solution being provided by partners such as Toshiba for the UK
SMIP contract.
CyanConnode generally sells and delivers solutions through local
partners in each country. Its revenues are derived from sales to
local meter manufacturers or system integrators ("SIs") and in 2016
it has achieved sales through both channels. Over time CyanConnode
expects SIs to take a more dominant role in providing complete
solutions to utility customers; they will source software/hardware
from CyanConnode and meter manufacturers. CyanConnode believes that
its approach to the market is ideally suited to the dynamics of
emerging countries where local partnerships, local manufacturing
and price competitive hardware are becoming key purchasing
criteria.
CyanConnode licenses its CyLec software to either the end
utility customer to host themselves or on the basis of a
CyanConnode hosted Software as a Service ("SaaS") solution. In both
cases, it receives either an upfront or a recurring revenue stream
that is based on the size of the customer's meter installation
base.
Lighting
The business model for lighting is very similar to that of
electricity metering. In the case of lighting, the CyanConnode
module is contained in the lighting ballast. The rest of the
solution and the business model remains the same as metering above,
and this commonality enables CyanConnode to benefit from economies
of scale in development and manufacturing.
Internet of Things/Smart Cities
The business model for IoT/Smart City solutions is also very
similar to that of electricity metering and lighting. The same
CyanConnode modules used for electricity metering and lighting can
be used as nodes within IoT/Smart City networks to connect together
devices such as street traffic cameras, parking sensors, gas
meters, water meters and any other application. The value and
scalability of CyanConnode's business model will build rapidly as
more CyanConnode powered devices are connected through its single
mesh network and feed back to a common data centre containing its
control software.
Competitive Position
To date, CyanConnode's solutions have had over GBP30 million of
product development by very capable engineering teams based in
Cambridge, UK and Stockholm, Sweden. This has created substantial
barriers to entry as these solutions solve large, complex, cross
domain problems. The necessary skills and experience are
considerable; they include RF hardware design, regulatory approval,
mesh network firmware design, communications infrastructure
development, meter protocol, plus interoperability techniques,
security, enterprise software and scalability and robustness.
CyanConnode's solutions have been mainly designed and built for
emerging markets, whilst its competitors have generally chosen
Western markets. They can be integrated into new meters, or
retrofitted to existing meter infrastructure to avoid
rip-and-replace costs. Its solutions are inherently low power and
this has helped CyanConnode to achieve a highly competitive price
point for emerging market mass adoption. The CyanConnode mesh
network is self-forming and self-healing, which results in
significant time (and therefore cost) savings for customers. Its
DCU/gateway has been designed to be highly functional, but in a
small package which results in a competitive price point.
CyanConnode offers sub-GHz wireless mesh solutions that are
innately suited to dense housing conditions typical of emerging
markets. The network uses license free ISM (Industrial, Scientific
and Medical) radio bands, which means that CyanConnode's customers
do not need to invest in or pay for costly tower structures to
carry the radio signals.
A FAIR REVIEW OF THE BUSINESS
Metering
CyanConnode has made good progress in smart metering in target
markets during 2016 and in the subsequent period up until the date
of preparation of this report. It has also expanded its global
focus to include Iran, Bangladesh and other potential emerging
markets worldwide.
CyanConnode received a purchase order in early 2015 worth
approximately GBP1m from Enzen for a large pilot project being
implemented for CESC, Mysore in southwest India. CyanConnode has
now supplied over 21,000 smart meters and associated hardware and
software and acted as Enzen's end-to-end solution provider for
smart metering. CyanConnode's management believes this is the first
commercial implementation of AMI technology by a public utility for
consumers in India.
The CESC order was followed up in late 2015 by a purchase order
from Enzen for a commercial smart metering implementation for PVVNL
in Uttar Pradesh, India. CyanConnode has provided over 13,000 smart
meters and associated hardware and software while the Company's
Head End Software is being provided as a managed service hosted by
CyanConnode and charged on a per meter per year basis, delivering a
recurring revenue stream. The order from PVVNL was CyanConnode's
second commercial implementation of AMI technology by a public
utility for consumers in India.
The visibility and ongoing revenue generation provided by our
projects remain key aspects. As such, we continue to build on our
relationship with Enzen given that PVVNL and CESC have over five
million customers between them. Our prominence in the region
appears to be growing and at a January 2017 steering committee
meeting hosted by the Ministry of Power, an event attended by
representatives from the State utilities, CyanConnode and Enzen
were congratulated for their successful delivery of the CESC
project to date.
CyanConnode received a first order for 5,000 units from L&T
for Tata Power Mumbai for an integrated CyLec solution in 2015. In
2016, the Company received two additional orders taking the
cumulative units ordered by Tata Power Mumbai to 14,700. Tata Power
continues to grow and now has over 2.6 million consumer customers,
including over 660,000 in Mumbai. They have recently been awarded
the distribution franchise for Jamshedpur circle from the Jharkhand
State Electricity Board.
The Indian market is a huge opportunity for the Company, with an
estimated 250 million meters that need to be installed/replaced
over the next ten years, as well as the Indian utilities' pressing
need to reduce losses due to electricity theft. One of the
obstacles the utilities face is collecting data from millions of
meters deployed in rapidly growing and typically unplanned urban
conditions. It is often problematic trying to locate and gain
physical access to the meters and the process is at best slow or
error prone. CyanConnode's AMI solutions address these practical
issues by providing high quality and timely information from each
meter. Its 865MHz based solution has been specifically designed to
cope with demanding specifications such as a communication range of
more than 60 metres and an ability to be read through concrete
walls in order to cope with the dense urban conditions in India. By
comparison, a 2.4GHz Zigbee solution has been observed to struggle
to achieve a reliable communication range greater than 30 metres in
the same challenging conditions.
India's transmission and distribution losses are among the
highest in the world. When non-technical losses such as energy
theft are included in the total, these losses increase to as high
as 65% in some Indian States against an overall average of 30%-40%.
The financial loss has been estimated at 1.7% of the national GDP.
Frost & Sullivan have estimated that $32 billion of power
generated in India is not accounted for through billing to
customers.
In November 2015, the Indian Prime Minister Narendra Modi
approved Ujwal Discom Assurance Yojana ("UDAY") scheme, which is
targeted to deliver financial turnaround for power distribution
companies. The UDAY scheme stipulates the deployment of smart
meters for consumers by 2019. It also includes a programme to
eliminate State Distribution company debt through assignment to
States and then bond issues. 22 out of 29 States have now joined
the UDAY scheme and the programme has covered 92% of the total debt
of the State utilities. In March 2016, the Indian Power Minister
laid out an opportunity to install 250 million smart meters in the
period to the end of 2019, he also characterised the UDAY programme
as a 'game changer'.
CyanConnode provides a platform product (CyLec) to enable
deployment of AMI. AMI is an architecture for automated end-to-end
bi-directional communications between a utility company and
electricity meters (smart meters). The CyLec solution provides
utilities with real time data about power consumption and allows
customers to make informed choices about energy usage based on
price at time of use. The CyLec solution includes hardware and
software to enable this communication and allows easy interfacing
to existing meter data management systems ("MDMS"), billing systems
and other smart grid infrastructure monitoring tools within the
utility such as outage detection and load management. Consumer
meter tamper and electricity theft detection features are included
and this helps utilities ensure they collect revenue for
electricity that is used by consumers.
The UK smart metering project is now live and the roll out,
which will comprise 53 million gas and electricity meters
nationwide by 2020, has now commenced. CyanConnode was selected by
Telefonica, which is the preferred communications service provider
in two out of the three regions tendered by the UK Government, and
Toshiba to provide a software platform that uses narrowband mesh
technology to complement Telefonica's existing cellular network.
This allows households, where the mobile phone network coverage is
poor or non-existent, to be reached as part of the UK SMIP.
CyanConnode has a contract with an expected value of GBP25 million
of software and support revenues.
As a result of the Connode acquisition, the Company's European
exposure also grew during the period through Scandinavian projects
with E.ON, as part of one of the first smart city projects in
Sweden, and Landis+Gyr in Finland.
In February 2016, the Company announced a purchase order from
Micromodje for a street traffic cameras smart metering project in
Iran. The order was placed only a couple of weeks after
international sanctions were lifted on Iran on 16 January 2016 and
is believed by the directors to be one of the first orders secured
by a UK business, with support from the specialist UK Trade and
Investment team.
The GBP10m Iran order from Micromodje, announced in April 2016
is for a 360,000 unit smart electricity metering implementation of
our solution and its proprietary Head-End Software ("HES").
Importantly, Micromodje will host the HES with annual software
license income being recognised over a five-year contractual period
following successful smart meter installation. As over 50% of the
total GBP10m order value consists of software license income, the
recurring revenues from this purchase order will continue well
beyond the two-year hardware installation period. The Company has
started a dialogue with Micromodje on the next planned roll out of
1 million units, part of the potential overall Iran market
requirement of 33 million smart electricity meters.
Post period end, CyanConnode received a $5.4m purchase order
from a specialist in energy management systems for a smart metering
contract in Bangladesh, South Asia. This is the Company's first
order for a utility customer in Bangladesh and is a further
demonstration of the Company's growing geographical sales
footprint. The purchase order is for the supply of CyanConnode's
AMI solution for a 150,000 unit smart metering deployment. The
energy management system company, based in Eastern Europe, will
integrate CyanConnode's hardware with its smart meters and shipment
to their production facility will take place over the next 12
months. The Company will also provide its Head End Server Software,
which will be hosted by the energy management systems customer,
with annual software licence income being recognised over a ten
year contractual period following successful smart meter
implementation. The recurring revenue software licences and annual
maintenance contract, which represent 50% of the total purchase
order value, will be paid annually in advance and charged on a per
meter per year basis.
The Eastern European Company has formed a local entity, a new
utility that has entered a long-term agreement with the Bangladeshi
Government to provide electricity to consumers. The new utility has
a consumer base of four million customers, which provides the
potential for substantive follow-on orders. The overall number of
electricity consumers in Bangladesh is 58 million. Bangladesh is
among four South Asian countries that are struggling due to
increasing pressure from rising electricity demand, failure to
collect revenue and poor reliability, according to the Northeast
Group. Over the next decade, these countries will make significant
investments to modernise smart grid infrastructure, particularly in
the metering segment. Smart grid investment is projected to total
$8.1 billion over the period 2016-2026, with large-scale funding
from the Asian Development Bank, the World Bank as well as
bilateral aid organisations.
Lighting
CyanConnode continues to receive and deploy small orders for its
smart lighting solutions across multiple geographies.
Internet of Things/Smart Cities
The order received in February 2016 from Micromodje in Iran for
smart metering of street traffic cameras starts to demonstrate the
applicability of CyanConnode's technology for IoT and smart city
solutions on a global basis. CyanConnode also signed an MoU with
Tech Mahindra to market, sell and deliver expertise in narrowband
mesh technology for the smart grid, smart city and IoT markets.
Operational Review
Key Financials
Commercial orders remained well below the level required to
sustain the business. In 2016, the Company raised GBP12.8 million
before expenses, by way of share placings, with a substantial
element of this used to purchase Connode. This funding provided the
Company incremental financial resources for growth, general working
capital, customer and partner development activities in India and
other markets as well as further development to integrate
CyanConnode's AMI solution into high level enterprise software.
A summary of the key financial results is set out in the table
below and discussed in this section.
2016 2015 2014 2013
GBP'000 GBP'000 GBP'000 GBP'000
------------------ --------- --------- --------- ---------
Revenue 1,823 272 194 138
------------------ --------- --------- --------- ---------
Research and
development
expenditure 2,913 2,038 1,359 1,155
------------------ --------- --------- --------- ---------
Operating loss 7,939 4,907 3,260 3,267
------------------ --------- --------- --------- ---------
Cash and cash
equivalents 3,893 2,461 2,344 1,636
------------------ --------- --------- --------- ---------
Average monthly
operating cash
outflow 695 438 253 247
------------------ --------- --------- --------- ---------
2016 2015 2014 2013
Number Number Number Number
------------------ --------- --------- --------- ---------
Average employee
headcount 44 31 27 25
------------------ --------- --------- --------- ---------
Going Concern
To assess the ability of CyanConnode Holdings plc ("Group") to
continue as a going concern, the directors have prepared a business
plan and cash flow forecast for the period to 30 June 2018 which,
together, represent the directors' best estimate of the future
development of the Group. The forecast contains certain
assumptions, the most significant of which are the level and timing
of sales and the gross margin on those sales, together with the
need to secure additional finance.
The directors have recognised that the Group is trading
principally in emerging country markets. These markets have an
inherent level of uncertainty associated with them and this may
result in the predicted level of sales not being achieved and/or
the timing of orders being delayed, as has been the case for the
Group in the past. The directors have taken reasonable 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 fundamentally uncertain. This may impact both the
Group's ability to generate positive cash flow and to raise new
finance. Consequently, there is a significant risk that the level
of sales achieved is materially lower than the forecast or at
materially lower margins. This constitutes a material
uncertainty.
Given the commercial prospects at the time of the preparation of
this report, together with the prior track record of the Group in
raising new equity financing, the directors consider that the Group
has a good opportunity to secure the additional funding that will
be required. There remains a significant risk that the required
level of new funding will not be received in the necessary
timescales or at all. This constitutes a material uncertainty.
There is a material uncertainty related to the assumptions
described above which may cast significant doubt on the Group and
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 or Company
was unable to continue as a going concern. In the event the Group
and Company ceased to be a going concern, the adjustments would
include writing down the carrying value of assets, including
stocks, to their recoverable amount and providing for any further
liabilities that might arise.
Notwithstanding the material uncertainties described above, the
directors have a reasonable expectation that the Company and Group
can continue to meet its liabilities as they fall due, for a period
of at least 12 months from the date of approval of this report.
Financial Risk Management Objectives and Policies
Details of the Group's financial risk management objectives and
policies are disclosed in note 23 to the financial statements.
Dividends
The directors do not recommend the payment of a dividend (2015:
GBPnil). The Group has no plans to adopt a dividend policy in the
immediate future and all funds generated by the Group will be
invested in the further development of the business, as is normal
for a company operating in this industry sector and at
CyanConnode's stage of its development.
Consolidated income statement
For the year ended 31 December 2016
Note 2016 2015
----------------------------- ----- ------------ ------------
GBP GBP
----------------------------- ----- ------------ ------------
Continuing operations
----------------------------- ----- ------------ ------------
Revenue 1,823,129 272,012
----------------------------- ----- ------------ ------------
Cost of sales (1,128,498) (161,959)
----------------------------- ----- ------------ ------------
Gross profit 694,631 110,053
----------------------------- ----- ------------ ------------
Other operating costs (6,813,782) (4,987,477)
----------------------------- ----- ------------ ------------
Acquisition related costs (1,564,102) -
----------------------------- ----- ------------ ------------
Amortisation / depreciation (255,963) (29,300)
----------------------------- ----- ------------ ------------
Total operating costs (8,633,847) (5,016,777)
----------------------------- -----
Operating loss (7,939,216) (4,906,724)
----------------------------- -----
Investment income 7,290 8,282
----------------------------- -----
Finance costs (4,525) (917)
----------------------------- ----- ------------ ------------
Loss before tax (7,936,451) (4,899,359)
----------------------------- ----- ------------ ------------
Tax 819,212 579,585
----------------------------- ----- ------------ ------------
Loss for the year (7,117,239) (4,319,774)
----------------------------- ----- ============ ============
Loss per share (pence)
----------------------------- -----
Basic 2 (0.07) (0.08)
----------------------------- ----- ============ ============
Diluted 2 (0.07) (0.08)
----------------------------- ----- ============ ============
Consolidated statement of comprehensive income
For the year ended 31 December 2016
Derived from continuing operations and attributable to the
equity owners of the Company.
2016 2015
------------------------------------- -------------- --------------
GBP GBP
------------------------------------- -------------- --------------
Loss for the year
Items that may be reclassified
subsequently to profit and loss (7,117,239) (4,319,774)
-------------------------------------- -------------- --------------
Exchange differences on translation
of foreign operations (30,963) 4,081
-------------------------------------- -------------- --------------
Total comprehensive income for
the year (7,148,202) (4,315,693)
-------------------------------------- ============== ==============
Consolidated balance sheet
At 31 December 2016
Note 2016 2015
GBP GBP
Non-current assets
Intangible assets 5,889,656 -
Goodwill 1,930,229 -
Investments 41,515 26,308
Property, plant and equipment 78,171 29,967
7,939,571 56,275
Current assets
Inventories 340,178 587,484
Trade and other receivables 2,677,071 845,667
Cash and cash equivalents 3,892,505 2,461,057
6,909,754 3,894,208
Total assets 14,849,325 3,950,483
Current liabilities
Trade and other payables (2,205,302) (747,933)
Total current liabilities (2,205,302) (747,933)
Net current assets 4,704,452 3,146,275
Non-current liabilities
Deferred tax liability (942,938) -
Total non-current liabilities (942,938) -
Total liabilities (3,148,240) (747,933)
Net assets 11,701,085 3,202,550
Equity
Share capital 3 1,579,123 680,320
Share premium account 52,831,234 38,085,627
Own shares held (808,856) (808,856)
Share option reserve 626,738 624,411
Translation reserve (176,624) (145,661)
Retained losses (42,350,530) (35,233,291)
Total equity being equity attributable
to owners of the Company 11,701,085 3,202,550
Consolidated statement of changes in equity
At 31 December 2016
Share
Share Share Own shares Option Translation Retained Total
Capital Premium held Reserve Reserve Losses Equity
GBP GBP GBP GBP GBP GBP GBP
Balance at 31
December
2014 446,493 33,911,618 (808,856) 522,562 (149,742) (30,913,517) 3,008,558
Loss for the
year - - - - - (4,319,774) (4,319,774)
Other
comprehensive
income for the
year - - - - 4,081 - 4,081
Total
comprehensive
income for the
year - - - - 4,081 (4,319,774) (4,315,693)
Issue of share
capital 233,827 4,174,009 - - - - 4,407,836
Credit to
equity
for share
options - - - 101,849 - - 101,849
Balance at 31
December
2015 680,320 38,085,627 (808,856) 624,411 (145,661) (35,233,291) 3,202,550
Loss for the
year - - - - - (7,117,239) (7,117,239)
Other
comprehensive
income for the
year - - - - (30,963) - (30,963)
Total
comprehensive
income for the
year - - - - (30,963) (7,117,239) (7,148,202)
Issue of share
capital 898,803 14,745,607 - - - - 15,644,410
Credit to
equity
for share
options - - - 2,327 - - 2,327
Balance at 31
December
2016 1,579,123 52,831,234 (808,856) 626,738 (176,624) (42,350,530) 11,701,085
Consolidated cash flow statement
For the year ended 31 December 2016
Notes 2016 2015
------------------------------------------- -------- ------------ ------------
GBP GBP
------------------------------------------- -------- ------------ ------------
Net cash outflow from operating
activities 4 (7,061,808) (4,236,638)
------------------------------------------- -------- ------------ ------------
Investing activities
------------------------------------------- -------- ------------ ------------
Acquisition of subsidiary (4,367,670) -
------------------------------------------- -------- ------------ ------------
Interest received 7,289 8,282
------------------------------------------- -------- ------------ ------------
Purchases of property, plant and
equipment (80,289) (35,541)
------------------------------------------- -------- ------------ ------------
Net cash used in investing activities (4,440,670) (27,259)
------------------------------------------- -------- ------------ ------------
Financing activities
------------------------------------------- -------- ------------ ------------
Interest paid (4,525) (917)
------------------------------------------- -------- ------------ ------------
Proceeds on issue of shares 13,487,320 4,678,102
------------------------------------------- -------- ------------ ------------
Share issue costs (533,662) (270,267)
------------------------------------------- -------- ------------ ------------
Purchase of bank securities (15,207) (26,308)
------------------------------------------- -------- ------------ ------------
Net cash from financing activities 12,933,926 4,380,610
------------------------------------------- -------- ------------ ------------
Net increase in cash and cash equivalents 1,431,448 116,713
------------------------------------------- --------
Cash and cash equivalents at beginning
of year 2,461,057 2,344,344
------------------------------------------- --------
Cash and cash equivalents at end
of year 3,892,505 2,461,057
------------------------------------------- -------- ============ ============
Notes to the Financial Statements
For the year ended 31 December 2016
1. General information
CyanConnode Holdings plc is a company incorporated in the United
Kingdom under the Companies Act 2006. The address of the registered
office is Merlin Place, Milton Road, Cambridge CB4 0DP.
The final results announcement is based on the financial
statements which have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the EU.
The financial information set out above does not constitute the
company's statutory accounts for the years ended 31 December 2016
or 2015, but is derived from those accounts. Statutory accounts for
2015 have been delivered to the Registrar of Companies and those
for 2016 will be delivered following the company's annual general
meeting. The auditors have reported on those accounts: their
reports were unqualified and did not contain statements under s498
(2) or (3) Companies Act 2006 or equivalent preceding legislation
but did contain an emphasis of matter concerning the uncertainties
around the Group's ability to continue as a going concern. While
the financial information included in this preliminary announcement
has been prepared in accordance with the measurement and
recognition criteria of IFRS, this announcement itself does not
contain sufficient information to comply with IFRS. The company
expects to publish full financial statements that comply with IFRS,
as adopted by the EU, a copy of which will be posted to the
shareholders.
The financial statements were approved by the Board of Directors
on 15 May 2017 and authorised for issue. The Group's specific IFRS
accounting policies can be found in the 2015 annual report.
2. Loss per share
The calculation of the basic and diluted loss per share is based
on the following data:
Loss
2016 2015
---------------------------------------- --- ---------- ----------
GBP GBP
---------------------------------------- --- ---------- ----------
Loss for the purposes of basic loss
per share being net loss attributable
to equity holders of the parent
---------------------------------------- ---
7,117,239 4,319,774
---------------------------------------- ============== ==========
Number of shares
2016 2015
-------------------------------------- --------------- --------------
No. No.
-------------------------------------- --------------- --------------
Weighted average number of ordinary
shares for the purposes of basic
and diluted loss per share 10,934,000,217 5,631,383,257
-------------------------------------- =============== ================
The denominations used are the same as those detailed above for
both basic and diluted earnings per share from continuing
operations. However, in accordance with IAS 33 "Earnings Per
Share", potential ordinary shares are only considered dilutive when
their conversion would decrease the profit per share or increase
the loss per share from continuing operations attributable to the
equity shareholders.
3. Share capital
2016 2015
-------------------------------------------
GBP GBP
-------------------------------------------
Issued and fully paid:
-------------------------------------------
15,790,791,254 ordinary shares of 0.01
pence each (2015: 6,802,451,764 ordinary
shares of 0.01 pence each) 1,579,123 680,320
-------------------------------------------- ========== ========
4. Notes to the consolidated cash flow statement
2016 2015
----------------------------------------------- --- ------------ ------------
GBP GBP
------------------------------------------------ --- ------------ ------------
Operating loss for the year (7,939,216) (4,906,724)
------------------------------------------------ ------------ ------------
Adjustments for:
------------------------------------------------ --- ------------ ------------
Depreciation of property, plant and equipment 45,619 29,300
------------------------------------------------ ------------ ------------
Amortisation 210,344 -
----------------------------------------------- --- ------------ ------------
Foreign exchange 47,870 -
----------------------------------------------- --- ------------ ------------
Share-based payment expense 2,327 101,849
------------------------------------------------ ------------
Operating cash flows before movements
in working capital (7,633,056) (4,775,575)
------------------------------------------------ ---------------- ------------
(Increase) / decrease in inventories 247,307 (12,954)
------------------------------------------------ ------------ ------------
Increase in receivables (1,713,013) (90,064)
------------------------------------------------
Increase in payables 1,457,369 239,643
------------------------------------------------ ------------ ------------
Cash reduced by operations (7,641,393) (4,638,950)
------------------------------------------------ --- ------------ ------------
Income taxes received 579,585 402,312
------------------------------------------------
Net cash outflow from operating activities (7,061,808) (4,236,638)
------------------------------------------------ --- ------------ ------------
Cash and cash equivalents (which are presented as a single class
of assets on the face of the balance sheet) comprise cash at bank
and other short-term highly liquid investments with maturity of
three months or less.
5. Annual Report and Accounts and Notice of Annual General Meeting
The Company's Annual Report and Accounts in word format will be
available on the Company's website. The Notice of AGM and Proxy
Form and the full colour Annual Report and Accounts will be posted
to shareholders on 22 May 2017. The AGM will be held on 15 June at
11am at the Company's registered office, Merlin Place, Milton Rd,
Cambridge CB4 0DP.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SFMFMIFWSESI
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