REG - CyanConnode Holdings - Final Results
26/07/2023 07:00
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RNS Number : 1716H CyanConnode Holdings PLC 26 July 2023
26 July 2023
CyanConnode Holdings plc
("CyanConnode", "the "Group" or the "Company")
Final Results for the Year Ended 31 March 2023
CyanConnode Holdings plc (AIM: CYAN), a global leader in Narrowband Radio
Frequency (RF) Smart Mesh Networks, announces its audited results for the year
ended 31 March 2023.
Financial highlights
· Increase of 23% in revenue to £11.7m in FY23 from £9.6m in FY22,
the highest annual revenue for the Group to date after four consecutive years
of growth 1 (#_ftn1)
· Reduction in gross profit to £4.2m in FY23 (FY22: £5.0m) as a
result of lower margin sales of third-party products
· Increase in operating loss to £3.3m in FY23 (FY22: £1.0m) as a
result of lower gross margin, higher operating costs and a £1.0m impairment
of intangible assets
· Increase in EBITDA loss to £2.9m in FY23 (FY22: £0.4m loss)
· Reduction in adjusted EBITDA 2 (#_ftn2) to loss of £1.6m in FY23
(FY22: £0.06m profit)
· Increase in cash position to £4.1m in FY23 (FY22: £2.4m)
· Increase in cash collected from customers to £10.7m in FY23 (FY22: £8.2m)
Operational Highlights
· Orders for 2.3m modules won in India during the period - higher than
the total number of modules won in India in the company's history prior to the
current year taking order book to 3.6m during the financial year, of which
2.3m were still to be deployed. Post period this order book has increased
further to 4.2m as set out in the post period highlights below
· Order worth USD 6.7m won from MENA for NB-IoT gateways
· Further new order worth USD 2.5m won from MENA for Cellular gateways
· Oversubscribed placing and subscriptions completed raising, in
aggregate, £5.8m before expenses
· 391,000 Omnimesh Radio Frequency (RF) Modules shipped against current
contracts during the period (FY22: 612,000), along with 46,000 NB-IoT gateways
and 63,000 Cellular gateways
· Strategic Framework Agreement signed to deliver 3m units
Post Year End Highlights
· 600,000 Omnimesh RF Modules and associated products ordered from a
subsidiary of IntelliSmart Infrastructure Private Limited, taking order book
to 4.2m modules
· CyanConnode India recognised as Dun and Bradstreet 'Start-Up 50
Trailblazer'
· Memorandum of Association (MOU) signed with Alfanar
· Revenue of greater than £2.8m in Q1 of FY24, being 2.1 times revenue
of the whole of H1 FY23
· 291k modules shipped in Q1 of FY24 vs 391k shipped in the whole of
FY23
· £3.6m cash received from customers in Q1 FY24
· Investment into areas such as recruitment to scale up the business
John Cronin, Executive Chairman of CyanConnode, commented:
"FY23 has once again shown record revenues and orders won, and a fourth
consecutive year of growth.
Since the year end the number of live tenders in India has continued to
increase and move through the tendering process, and the Company has won a
further 0.6m Omnimesh units.
We'd like to thank all employees for their ongoing hard work and dedication to
achieve these record revenues. We'd also like to thank all shareholders for
their continued support and look forward to continuing to deliver successful
results."
- Ends -
The information contained within this announcement is deemed to constitute
inside information for the purposes of Article 7 of EU Regulation 596/2014
(Market Abuse Regulations) which is part of UK law by virtue of the European
Union (Withdrawal) Act 2018. Upon publication of this announcement, this
inside information is now considered to be in the public domain.
Enquiries:
CyanConnode Holdings plc Tel: +44 (0) 1223 865 750
John Cronin, Executive Chairman www.cyanconnode.com (http://www.cyanconnode.com)
Strand Hanson Limited (Nominated and Financial Adviser) Tel: +44 (0) 20 7409 3494
James Harris / Richard Johnson / David Asquith
Zeus Capital Limited (Broker) Tel: +44 (0) 20 3829 5900
Simon Johnson / Alexandra Campbell-Harris
Chairman's Statement
Dear Shareholders
The financial year ending March 2023 has been the most successful financial
year for the Group in terms of revenue, orders won and cash collected from
customers. It is encouraging to see the vast increase in volumes and numbers
of tenders being released in India after many years working in the country, as
the government continues with its plans to roll out 250 million meters by
2025.
In addition, we have seen success with contracts in other territories around
the world, particularly in the Middle East North Africa (MENA) region.
I'm encouraged to see the momentum from FY2023 continuing into the current
financial year and am delighted to provide more details on the highlights of
both FY2023 and the current business in the FY23 Annual Report.
Operational Re
India
The union budget of 2020-21 paved the way for the replacement of 250 million
conventional electricity meters with smart meters by 2025 by announcing the
Revamped Distribution Sector Scheme (RDSS). It also approved an outlay for the
RDSS of Rs 3,03,758 Crore (circa £30 billion) over 5 years. In August 2022,
the Government of India formally approved the RDSS to help Distribution
Companies (DISCOMs) improve their operational efficiencies and financial
sustainability by providing result-linked financial assistance to strengthen
supply infrastructure. The 'Collection Efficiency' of not less than 98%, as
set out in the RDSS and which CyanConnode achieves, favours the Group's
technology for network communication and management. RDSS mandates compulsory
installation of smart meters across the country and will run for five years
from FY22 to FY26. In addition, the Rural Electrification Corporation proposed
a Request for Empanelment (RFE) to allow participation in the RDSS tenders.
This requires Advanced Metering Infrastructure Service Providers (AMISP) to
demonstrate their solutions in a controlled test environment. Empanelment will
be required by all AMISPs to allow participation in RDSS tenders. Following an
initial delay in the empanelment process, forty-three companies are now
empanelled. Of the 250 million smart prepaid meters approved under the RDSS,
over 200 million (an addressable market to CyanConnode worth a potential c.
£2.5 billion) have been sanctioned so far, according to information recently
tabled in the Indian Parliament (set out below).
Smart meters sanctioned under RDSS
State Consumer* DT** Feeder Consumer DT** Feeder
No. of meters (per cent share)
Tamil Nadu 30,000,000 472,500 18,274 14.7 8.7 9.2
Uttar Pradesh 26,979,056 1,526,801 20,874 13.2 28.2 10.5
Maharashtra 23,564,747 410,905 29,214 11.5 7.6 14.7
West Bengal 20,717,969 305,419 11,874 10.1 5.6 6.0
Gujarat 16,481,871 300,487 5,229 8.1 5.6 2.6
Rajasthan 14,274,956 434,608 27,128 7.0 8.0 13.6
Kerala 13,289,361 87,615 6,025 6.5 1.6 3.0
Madhya Pradesh 12,980,102 406,503 8,411 6.3 7.5 4.2
Punjab 8,784,807 184,044 12,563 4.3 3.4 6.3
Haryana 7,405,618 195,319 13,204 3.6 3.6 6.6
Total for above states 174,478,487 4,324,201 152,796 85.3 79.8 76.7
Rest of India 30,144,695 1,087,807 46,030 14.7 20.2 23.3
All-India total 204,623,182 5,412,008 198,826 100.0 100.0 100.0
*prepaid;**distribution transformer; Table shows top 10 states wrt consumer
smart meters
The win rate from contracts tendered since April 2022 has been approximately
38% in volume and the installed rate is around 25%. CyanConnode is currently
bidding for contracts worth over £1 billion in value.
During the period, CyanConnode won three new orders, totalling approximately
2.3 million units from its customers IntelliSmart, Genus and Monte Carlo
Group, to be deployed in three different states. This volume was significantly
higher than the total volume of units won by the Company in India in all years
prior to FY2023 (1.3 million). All orders were for Omnimesh RF Modules
together with advanced metering infrastructure, standards-based hardware,
services, Omnimesh head-end software, perpetual license and annual maintenance
contracts. To the end of March 2023, a total of 327,000 modules and associated
gateways had been shipped against these new contracts, with a further 282,000
shipped during Q1 FY23, bringing the total modules shipped against these
contracts at the end of June 2023 to 609,000.
The first two orders, totalling 300,000 units, were from IntelliSmart for
deployment in the state of Assam. IntelliSmart is the first service provider
to use the Design, Build, Finance, Own, Operate, Transfer (DBFOOT) model and
it has also installed the first smart prepaid meter in India under the RDSS.
To the end of March 2023, a total of 195,000 modules and associated gateways
had been shipped against these two contracts, with a further 49,000 shipped
during Q1 FY23, bringing the total modules shipped against these contracts at
the end of June 2023 to 244,000.
The third order, CyanConnode's largest order in its history, was for 1 million
units, received by Genus for a deployment in South Bihar. To the end of March
2023, a total of 81,000 modules and associated gateways had been shipped
against this contract, with a further 109,000 shipped during Q1 FY23, bringing
the total modules shipped against these contracts at the end of June 2023 to
190,000.
The fourth order, for 984,000 units was received from a new customer, Monte
Carlo Group, relating to a smart metering deployment in Jabalpur, Madhya
Pradesh. To the end of March 2023, a total of 51,000 modules and associated
gateways had been shipped against this contract, with a further 124,000
shipped during Q1 FY23, bringing the total modules shipped against these
contracts at the end of June 2023 to 175,000.
In February 2023 the Group announced it had entered into a strategic framework
agreement with a key partner to supply its Radio Frequency (RF) mesh
technology in India. As a preferred partner, CyanConnode will provide Omnimesh
RF modules, Advanced Metering Infrastructure, Standards-Based Hardware,
Omnimesh Head-End Software and associated components, Perpetual License,
design, installation, implementation, integration, training and support &
Maintenance Contract for 3 million smart meters.
In March 2023, CyanConnode announced a collaboration with Silicon
Laboratories, Inc. (Silabs) a prominent supplier of System-On-Chips (SOCs),
under which it will integrate SiLabs' FG25 Sub-GHz Wireless SoC into its
Omnimesh product range. The FG25 is certified by the Wi-SUN Alliance (Wireless
Smart Ubiquitous Network Alliance), which is the leading IPv6 sub-GHz mesh
technology for smart city and smart utility applications. The open-source
backbone of Wi-SUN will enable CyanConnode to quickly scale deployments and
leverage the Wi-SUN ecosystem to provide new value to its customers.
CyanConnode's adoption of SiLabs' flagship SoC and Wi-SUN would ensure that it
is the first to meet the technical requirement set by the Government of India
as defined by BIS LITD28 standards for Smart Meter RF Communication systems.
CyanConnode's adoption of SiLabs' flagship SoC and Wi-SUN will ensure that it
continues to meet the Service Level Agreements (SLAs) required by the
Government of India. For a case study of the implementation of the FG25 and
Wi-SUN in India, please visit
https://www.silabs.com/applications/case-studies/leveraging-fg25-and-wi-sun-for-smart-metering-in-india
(https://www.silabs.com/applications/case-studies/leveraging-fg25-and-wi-sun-for-smart-metering-in-india)
.
APAC and Middle East North Africa
The smart metering market in the APAC and MENA continues to mature and
presents a significant opportunity for CyanConnode.
In April 2022, an order was won for a smart metering deployment in the MENA
region. Under this contract CyanConnode will supply 65,000 interoperable smart
NB-IoT gateways which will communicate with and control all existing smart
meters for both electricity and water; the gateways will have the capacity to
connect up to one million smart meters. 46,000 gateways were delivered against
this contract during FY23.
In August 2022, an order was announced for Cellular Gateways to provide smart
communications for an Advanced Metering Infrastructure project located in the
MENA region. This order, worth USD 2.5 million, was for a new cellular product
to be fitted to existing electricity meters. All of these gateways, plus an
additional 5,000 gateways were delivered during FY23.
CyanConnode continues to deliver The Metropolitan Electricity Authority (MEA)
project with JST's partner Forth (Forth Corporation Public Company Limited), a
telecommunication and electronics company that provides products and
integration services throughout Thailand. MEA, who serve around 4 million
customers in the city of Bangkok and two adjacent provinces, is deploying a
Smart Metro Grid platform to improve power availability and reliability, as
well as to analyse distribution losses, automate meter reading, and increase
customer satisfaction.
CyanConnode's Omnimesh technology has been integrated into Forth's electricity
meters, using the frequency bands of 442 and 447MMHz, which have been
allocated to the Thai energy utilities by The National Broadcasting and
Telecommunications Commission (NBTC) of Thailand. During the period
CyanConnode's scope of the Site Acceptance Test (SAT) has been successfully
delivered.
Fundraisings
During October 2022 CyanConnode was pleased to announce a share subscription
to raise £500,000 at a price of 12.25 pence per share, being the mid-market
price at the time.
In January 2023 the Company completed an oversubscribed placing and
subscription, raising £5.25 million before expenses, at a price of 17 pence
per share, the mid-market price at the time of announcement of the
fundraising.
The net proceeds of the above fundraisings are being used to strengthen the
Company's balance sheet, to increase working capital, to allow the Company to
continue to take advantage of its significant growth opportunities and to
execute the Company's growing order book and pipeline.
Post period end and outlook
Momentum has continued into the new financial year, with the Group announcing
a new order in May 2023 from Paschimanchal Infrastructure Pvt Ltd, a
subsidiary of IntelliSmart Infrastructure Private Ltd, for 600,000 Omnimesh
Modules, taking the total number of modules ordered in India to 4.2 million.
The order also includes Advanced Metering Infrastructure (AMI),
Standards-Based Hardware, Services, Omnimesh Head-End Software, a Perpetual
License, and an Annual Maintenance Contract and will support a smart metering
deployment in the utility, Pachimanchal Vidyut Vitran Nigam Ltd (PVVNL),
located in Uttar Pradesh, India.
In April 2023 CyanConnode announced the signing of a Memorandum of Association
with Alfanar, a leading engineering, procurement, and construction (EPC)
player, to explore joint investment opportunities in Advanced Metering
Infrastructure (AMI) projects.
In June 2023 it was announced that CyanConnode Private Limited, the subsidiary
of CyanConnode Holdings plc had been recognised as a Start-Up 50 Trailblazer
by Dun & Bradstreet. This award underscores the Company's firm commitment
to innovation, quality, and customer-centric solutions, with a robust roadmap
for sustainable growth and profitability.
We've been delighted to see the continued revenue growth into the new
financial year, with revenue for the first quarter of greater than £2.8
million, more than double that of the whole of the first half of FY23. In
addition, more than 330k modules have been shipped in the first quarter
compared to 391k being shipped in the whole of FY23.
As a result of the increased business and requirements for the deployments,
the Group is currently recruiting a number of new roles, particularly in India
to scale the business.
I'd like to thank all employees, who have worked incredibly hard over the past
year, for their commitment and contribution. I'd also like to thank our
partners with whom we look forward to continuing to work on these
groundbreaking projects. And as always I'd like to thank all shareholders for
their continued support. We're confident that this momentum will continue
through the current financial year and look forward to updating you throughout
the period.
John Cronin
Executive Chairman
Financial Review
Financial Year 23 has once again produced record results in terms of orders
won and also saw a fourth consecutive year of revenue growth. The revenues
reported during FY23 included revenues not only from the Group's more
traditional models seen for contracts in India, but also revenues from other
territories which included revenue for sale of third-party products, often at
a lower margin. This has resulted in lower than expected gross margin for the
Group.
A summary of the key financial and non-financial Key Performance Indicators
("KPIs") for the year and details relating to its financing position at the
year end are set out in the table below and discussed in this section.
12 months Mar 2023 12 months Mar 2022 12 months Mar 2021 15 months Mar 2020 12 months Dec 2018
£000 £000 £000 £000 £000
Revenue 11,732 9,562 6,437 2,451 4,465
Gross Margin % 36% 52% 48% 56% 61%
R&D expenditure (including staff costs) 2,247 1,755 1,791 2,381 2,466
Operating costs 7,561 6,025 5,788 7,600 9,061
Operating loss (3,347) (1,018) (2,685) (6,230) (6,320)
Depreciation and amortisation 489 616 627 773 472
EBITDA (2,858) (401) (2,058) (5,457) (5,848)
Stock impairment 102 62 108 4 578
Impairment of intangible assets 968 - - - -
Share based compensation 224 363 80 267 445
Foreign exchange losses / (gains) 8 34 (15) 267 16
Adjusted EBITDA 3 (#_ftn3) (1,556) 58 (1,885) (4,919) (4,809)
Cash and cash equivalents 4,070 2,355 1,489 1,172 4,564
Average monthly operating cash outflow (185) (261) (81) (245) (487)
Mar 2023 Mar 2022 Mar 2021 Mar 2020 Dec 2018
FTE 4 (#_ftn4) FTE FTE FTE FTE
Average 64 59 47 50 52
Year end 70 60 54 48 61
Included within the table above are two alternative performance measures
("APMs" - see note 1): EBITDA and adjusted EBITDA. These are additional
measures which are not required under UK adopted International Accounting
Standards. These measures are consistent with those used internally and are
considered important to understanding the financial performance and the
financial health of the Group.
EBITDA (Loss) before Interest, Tax, Depreciation and Amortisation is a measure
of cash generated by operations before changes in working capital. Adjusted
EBITDA is a measure of cash generated by operations before stock impairment,
impairment of investments, share-based compensation, impairment of intangible
assets and foreign exchange losses. It is used to achieve consistency and
comparability between reporting periods.
Notably from the table on the previous page:
• Revenue of £11.7 million was 23% higher than for FY22 (£9.6
million)
• Increase in operating loss to £3.3 million from £ 1.0 million
• Reduction in adjusted EBITDA to loss of £1.6 million in FY23
from £0.06 million in FY22
• EBITDA loss for the year to March 2023 increased to £2.9
million from £0.4 million loss in FY22
• Cash and cash equivalents at the end of FY23 of £4.1 million
was £1.7 million higher than the end of FY22
• Share based compensation charges reflect the fair value of share
options granted to employees over the vesting period of these options. Please
see note 35 to the financial statements of the FY23 Annual Report for more
information.
Financial items of note during the year other than those set out above were:
· Cash received from customers during FY23 was £10.7 million (2022:
£8.2million)
· Trade and other receivables increased by £1.81 million during the
year to £9.26 million (including retentions) as a result of increased
revenue, particularly in the last two months of the financial year
· R&D cash tax credit of £0.7 million for FY23 (FY22: £0.6
million)
During the year an advance against the R&D tax credit was received. This
will be repaid out of the R&D tax credit funds when received from HMRC. In
addition, the loan from one director remained in place at year end, and
letters of credit, invoice discounting and advance payments have been
negotiated on recently won contracts to help with working capital
requirements.
Key Performance Indicators (KPIs)
The financial and non-financial KPIs for the Group are as set out in the table
above and described below.
· FY23 revenues were 23% up on the previous year FY22 as a result of
major contracts in India which started deploying during the year, and
contracts delivered in the MENA region.
· Gross margin for the year reduced from 52% to 36%, mainly as a result
of the sale of third-party hardware at gross margins lower than usual for the
Group. Gross margin will vary from year to year depending on the stage of
deployment of each contract. Hardware, for which revenue is recognised
typically during the first two years of a contract, is at a lower gross margin
than software and services for which revenue can be recognised later in the
deployment.
· Operating costs for the year increased by 25% compared to FY22, as a
result of additional costs required to scale the business up to deploy its
growing backlog of orders and a £1.0 million impairment of intangible
assets.
· Adjusted EBITDA decreased from a profit of £58k in FY22 to a loss of
£1.56 million in FY23 as a result of lower gross margin, increased operating
costs and EBITDA loss increased from a loss of £0.4 million in FY22 to a loss
of £2.9 million in FY23 also as a result of lower gross margin and increased
operating costs, as well as an impairment of intangible assets.
· Average headcount increased by 5, and FTEs at year end increased from
59 in FY22 to 64 in FY23.
· Non-financial KPIs included the number of modules shipped which
decreased from 612,000 in FY22 to 391,000 in FY23. However 46,000 NB-IoT hubs
and 63,000 Cellular Gateways were also delivered in the MENA region.
The Group continually reviews whether additional financial and non-financial
KPIs should be monitored.
The Group's long-term strategy is to deliver shareholder returns by generating
revenue and moving into profitability. It seeks to do this by focusing its
resources on emerging but fast-growing markets where it believes it can reach
a market leading position with its technology. Management uses KPIs to track
business performance, to understand general trends and to consider whether the
Group is meeting its strategic objectives. As it grows, and as highlighted in
the previous paragraph, it intends to review these KPIs and adapt them as
appropriate, in response to how the business and strategy evolves.
The Group's key focus for the financial year ending March 2023 continued to be
to streamline its processes from order to delivery and working to close
further orders. A further focus was ensuring collection of cash from customers
as Group revenues continued to grow.
Dividends
The directors do not recommend the payment of a dividend (2022: £nil). 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 its industry sector and stage of its
development.
Heather Peacock
Chief Financial Officer
CyanConnode Holdings plc
Consolidated income statement
For the year ended 31 March 2023
Note Year Year
31 March 2023 31 March
£000 2022
£000
Continuing operations
Revenue 11,732 9,562
Cost of sales (7,518) (4,554)
Gross profit 4,214 5,008
Exceptional item: impairment of intangible assets 2 (968) -
Other operating costs (6,593) (6,025)
Operating loss (3,347) (1,017)
Amortisation and depreciation 489 616
Share-based payments 224 363
Stock impairment 102 62
Impairment of intangible assets 968 -
Foreign exchange losses 8 34
Adjusted EBITDA (1,556) 58
Finance income 35 3
Finance expense (136) (164)
Loss before tax (3,448) (1,178)
Tax credit 1,042 307
Loss for the year (2,406) (871)
Loss per share (pence)
Basic 3 (1.03) (0.42)
Diluted 3 (1.03) (0.42)
Consolidated statement of comprehensive income
Derived from continuing operations and attributable to the equity owners of
the Company.
For the year ended 31 March 2023 Year Year
31 March 31 March
2023 2022
£000 £000
Loss for the year (2,406) (871)
Exchange differences on translation of foreign operations 21 76
Total comprehensive income for the period (2,385) (795)
CyanConnode Holdings plc
Consolidated statement of financial position
As at 31 March 2023
31 March 31 March
Note 2023 2022
£000 £000
Non-current assets
Intangible assets 3,433 4,093
Goodwill 1,930 1,930
Other financial assets 30 58
Property, plant and equipment 122 31
Right of use asset 62 153
Trade receivables 2,076 1,058
Total non-current assets 7,653 7,323
Current assets
Inventories 793 159
Trade and other receivables 7,182 6,393
R&D tax credit receivables 748 562
Cash and cash equivalents 4,070 2,355
Total current assets 12,793 9,469
Total assets 20,446 16,792
Current liabilities
Trade and other (3,833) (2,364)
payables
Short-term borrowings (1,226) (1,867)
Corporation tax liabilities - (193)
Lease liabilities (29) (28)
Total current liabilities (5,088) (4,452)
Net current assets 7,705 5,017
Non-current liabilities
Lease liabilities (94) (125)
Deferred tax liability (452) (746)
Other payables (42) (38)
Total non-current liabilities (588) (909)
Total liabilities (5,676) (5,361)
Net assets 14,770 11,431
Equity
Share capital 4 5,438 4,726
Share premium account 78,671 73,883
Own shares held (3,611) (3,611)
Share option reserve 804 1,068
Translation reserve 52 31
Retained losses (66,584) (64,666)
Total equity being equity attributable to owners of the Company 14,770 11,431
CyanConnode Holdings plc
Consolidated Statement of Changes in Equity
For the year ended 31 March 2023
Share Share Own Share Translation Retained Total
Capital Premium Shares Option Reserve Losses Equity
£000 Account Held Reserve £000 £000 £000
£000 £000 £000
Balance at 31 March 2021 3,735 69,662 (3,253) 925 (45) (64,015) 7,009
Loss for the year - - - - - (871) (871)
Other comprehensive income for the year - - - - 76 - 76
Total comprehensive income for the year - - - - 76 (871) (795)
Issue of share capital 991 4,221 (358) - - - 4,854
Credit to equity for share options - - - 363 - - 363
Transfer - - - (220) - 220 -
Total transactions with owners 991 4,221 (358) 143 - 220 5,217
Balance at 31 March 2022 4,726 73,883 (3,611) 1,068 31 (64,666) 11,431
Loss for the year - - - - - (2,406) (2,406)
Other comprehensive income for the year - - - - 21 - 21
Total comprehensive income for the year - - - - 21 (2,406) (2,385)
Issue of share capital 712 4,788 - - - - 5,500
Credit to equity for share options - - - 224 - - 224
Transfer - - - (488) - 488 -
Total transactions with owners 712 4,788 - (264) - 488 5,724
Balance at 31 March 2023 5,438 78,671 (3,611) 804 52 (66,584) 14,770
CyanConnode Holdings plc
Consolidated cash flow statement
For the year ended 31 March 2023
Year Year
Note 31 31 March
March
2023 2022
£000 £000
Net cash outflow from operating activities 5 (2,217) (3,134)
Investing activities
Interest received 3 3
Purchases of property, plant and equipment (31) (26)
Purchases of intangible assets (734) (259)
(Purchase) / disposal of other financial assets (4) (14)
Net cash outflow from investing activities (766) (296)
Financing activities
Interest paid on borrowings (125) (157)
Cash inflow from borrowings 500 500
Cash net (outflow) / inflow from debt factoring (541) (366)
Loan repayment (600) (385)
Capital repayments of lease liabilities (30) (153)
Interest paid on lease liabilities (11) (7)
Proceeds on issue of shares 5,844 5,177
Share issue costs (344) (327)
Net cash inflow from financing activities 4,693 4,282
Net increase in cash and cash equivalents 1,710 852
Effects of exchange rate changes on cash and cash equivalents 5 14
Cash and cash equivalents at beginning of the year 2,355 1,489
Cash and cash equivalents at end of the year 4,070 2,355
Analysis of changes in net cash / (debt)
Other non-cash movements £000 Net foreign
At 1 April 2022 exchange difference At 31 March 2023
£000 Cash flow £000 £000 £000
For the year ended 31 March 2023
Cash and cash equivalents 2,355 1,710 - 5 4,070
Short-term borrowings (1,867) 641 - - (1,226)
Lease liabilities (153) 41 (11) - (123)
(2,020) 682 (11) - (1,349)
Net cash / (debt) at end of year 335 2,392 (11) 5 2,721
Other non-cash movements £000 Net foreign
At 1 April 2021 exchange difference At 31 March 2022
£000 Cash flow £000 £000 £000
For the year ended 31 March 2022
Cash and cash equivalents 1,489 852 - 14 2,355
Short-term borrowings (2,118) 251 - - (1,867)
Lease liabilities (98) 160 (215) - (153)
(2,216) 411 (215) - (2,020)
Net cash / (debt) at end of year (727) 1,263 (215) 14 335
Other non-cash movements include interest on lease liabilities and new leases
taken out in the year.
Notes to the Financial Information
For the year ended 31 March 2023
1. General information
CyanConnode Holdings plc, (Company Registered No. 04554942), is a company
limited by shares, 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 UK-adopted International Accounting
Standards. The financial information has been prepared in accordance with the
accounting policies used in the statutory financial statements for the year
ended 31 March 2022.
The financial information set out in the announcement does not constitute the
company's statutory accounts for the years ended 31 March 2022 or 31 March
2023 within the meaning of section 434 of the Companies Act 2006 but is
derived from those audited financial statements. The auditor's report on the
consolidated financial statements for the years ended 31 March 2022 and the
year ended 31 March 2023 is unqualified, does not contain statements under
s498(2) or (3) of the Companies Act 2006 but referred to a material
uncertainty regarding the Group's ability to continue as a going concern.
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 31 March 2025 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, the timing of customer payments and the level of working
capital requirements. The detailed cashflow scenarios include Letters of
Credit which have been secured from customers against contracts recently won.
At 31 March 2023 the Group had cash reserves of £4.1 million (FY22: £2.4m)
and based on detailed cash flows provided to the Board within the FY24/25
budget, there is sufficient cash to see the Group through to profitability
based on its standard operating model. However, should the Group require
additional cash to cover working capital, as a result of rapid growth, there
could be a requirement for additional funding to cover this. The Group is
discussing working capital funding solutions with banks, particularly in
India.
To assist with working capital, a loan from one director for £300,000 is
still in place, after being extended to the Group in November 2020. The
Company received an advance of £500,000 secured against its R&D tax
credit in November 2022 and an invoice discounting facility secured against
Letters of Credit for deliveries of Omnimesh modules in India. The advance
against the R&D tax credit will be repaid out of the HMRC receipt which is
expected to be received by October 2023.
Notwithstanding the material uncertainties described above which may cast
significant doubt on the ability of the Group to continue as a going concern,
on the basis of sensitivities applied to the cash flow forecast, the directors
have a reasonable expectation that the company 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.
Alternative Performance Measures
The Group presents Alternative Performance Measures ("APMs") in addition to
the statutory results of the Group. These are presented in accordance with the
Guidelines on APMs issued by the European Securities and Markets Authority
("ESMA").
2. Exceptional item: impairment of intangible asset
SMIP intangible carrying value
We have modelled expected net cash flows from Connode AB's UK SMIP contract
over the lifetime of the contract and compared the net present value of these
cashflows to the £3,259k carrying value of the related intangible asset at
the end of March 2023. Connode AB's contract involves the supply of software
in areas where traditional smart meter technology would not work due to lack
of mobile coverage ("not-spots"). The intangible asset had originally been
valued based on the assumption that 10% of the areas being supplied by the
contract would be not-spots, which would result in 2.3 million units of
software being supplied over the duration of the contract.
The Group has now been notified by its customer Toshiba, that due to an
end-of-life Telit component, which is essential in the design of the Toshiba
hardware (mesh hub), there will now only be a maximum of 761k mesh hubs
supplied under the contract. In addition, the Group has been notified that 3G
is gradually being switched off in the UK, and meters will be replaced with
4G, commencing in 2025.
A model has now been created based on sensitivities to determine if an
impairment to the intangible asset is required. Sensitivities were run based
on various percentages of the finite number of 761k hubs being activated. Due
to the uncertainties surrounding the contract and taking into account the
numerous delays that have already occurred, the Board has agreed that an
impairment of £968k would be taken in FY23 based on an assumption that 70% of
the finite number of 761k hubs, being 532k meters, would be activated.
We note that if a 60% activation assumption had been adopted then there would
have been an additional impairment of £352k with no impairment arising if an
assumption of 90% had been taken.
3. Loss per share
The calculation of the basic and diluted loss per share is based on the
following data:
2023 2022
Loss for the purposes of basic loss per share being net loss attributable to (2,406) (871)
equity holders of the parent (£000)
Weighted average number of ordinary shares for the purposes of basic and 232,763,664 205,173,434
diluted loss per share (excluding own shares held)
Loss per share (pence) (1.03) (0.42)
The weighted average number of shares and the loss for the year for the
purposes of calculating diluted loss per share are the same as for the basic
loss per share calculation. This is because the outstanding share options
would have the effect of reducing the loss per share and would not, therefore,
be dilutive under the terms of IAS 33.
4. Share capital
Issued and fully paid, ordinary shares of 2.0 pence each No £000
As at 31 March 2021 186,742,898 3,735
Issue of new shares 49,566,137 991
As at 31 March 2022 236,309,035 4,726
Issue of new shares 35,578,329 712
As at 31 March 2023 271,887,364 5,438
In the year, shares were issued at prevailing market prices as settlement for
professional services provided. £68,750 was raised this way during the year
(2022: £4,710).
In October 2022 the Company successfully raised funding of £500,000 before
expenses through a subscription for 4,081,632 ordinary shares.
In January 2023 the Company successfully raised funding of £5.25m before
expenses through a placing of 30,882,354 ordinary shares.
During the year, shares were issued to directors and employees as part payment
for their remuneration. £24,175 was raised this way during the year (2022:
£4,710).
During the year 451,722 shares were issued as a result of the exercise of
share options (2022: 201,250 shares). The Company has one class of ordinary
share which carries no right to fixed income.
5. Reconciliation of operating loss to net cash outflow from operating activities
Group 2023 2022
£000 £000
Operating loss for the year: (3,347) (1,017)
Adjustments for:
Depreciation of property, plant and equipment 32 31
Amortisation of Intangible assets 426 432
Depreciation on right of use assets 31 153
Impairment of intangible assets 968 -
Interest received on contract assets 32 -
Foreign exchange 8 20
Shares issued in lieu of bonus 24 5
Share-option payment expense 224 363
Operating cash flows before movements in working capital (1,602) (13)
(Increase)/decrease in inventories (634) 52
Increase in receivables (1,827) (2,054)
Increase/(decrease) in payables 1,475 (1,568)
Cash reduction from operating activities (2,588) (3,583)
Income taxes received 371 449
Net cash outflow from operating activities (2,217) (3,134)
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.
6. Annual Report and Accounts and Notice of Annual General Meeting
The Notice of AGM and Proxy Form and full colour Annual Report and Accounts
will be sent to shareholders by 1 August 2023 and made available on the
Company's website shortly thereafter.
1 (#_ftnref1) The majority of the Group's revenues are received in rupees
for India and US dollars for the rest of world, whilst accounts are reported
in Pound Sterling. Foreign exchange volatility can have an impact on the
reported figures. Stockmarket Broker forecasts during 2022 used a rate of 1.15
against the USD and 95 against the Rupee
2 (#_ftnref2) Where Adjusted EBITDA is Operating loss before amortisation,
depreciation, stock impairment, impairment of intangible assets, share-based
compensation and foreign exchange losses.
3 (#_ftnref3) Where Adjusted EBITDA is Operating loss before amortisation,
depreciation, stock impairment, impairment of intangible assets, share-based
compensation and foreign exchange losses.
4 (#_ftnref4) Where FTE is the equivalent number of full-time equivalents
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