REG - CyanConnode Holdings - Final Results
25/07/2024 07:00
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RNS Number : 7365X CyanConnode Holdings PLC 25 July 2024
25 July 2024
CyanConnode Holdings plc
("CyanConnode", "the "Group" or the "Company")
Final Results for the Year Ended 31 March 2024
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 2024.
Financial highlights
· Increase of 60% in revenue to £18.7m in FY24 from £11.7m in FY23,
the highest annual revenue for the Group to date after four consecutive years
of growth 1 (#_ftn1) as a result of increased order book and acceleration of
deployments in India
· Increase in gross profit to £5.6m in FY24 (FY23: £4.2m) as a result
of high-volume RF node sales through the Indian entity, and sales of
third-party hardware in the Middle East North Africa (MENA) region
· Reduction in gross margin to 30% (FY23: 36%) as a result of sales of
third-party hardware and large premiums paid during the year on purchases of
end-of-life components for the Group's previous version of gateway. A new,
lower cost version of the gateway was released in Q4 of FY24. Gross margin in
the first two years of projects in India is expected to be around 35-40% due
to revenue on hardware in the first two years of a project. After year two of
each project it is expected gross margins of greater than 90% will be achieved
due to the transition to services revenue
· Operating loss increased to £4.2m in FY24 (FY23: £3.3m) as a result
of increased costs incurred throughout the Group offsetting the increased
revenues, largely attributable to increased headcount required to scale up the
business to deploy its growing backlog of orders and develop industry leading
hardware and software required by projects being deployed
· EBITDA loss increased to £3.8m in FY24 (FY23: £2.9m)
· Increase in adjusted EBITDA 2 (#_ftn2) loss to £2.8m in FY24 (FY23:
£1.6m loss) as a result of lower gross margin % and increased operational
costs
· Decrease in cash position to £0.8m in FY24 (FY23: £4.1m)
· Increase in cash collected from customers to £16.9m in FY24 (FY23:
£10.7m) broadly in line with increase in revenues
Operational Highlights
· Orders for 2.7m modules won in India during the period (FY23: 2.3m
modules) taking the cumulative order book to 6.3m during the financial year
· Order for 101,360 Cellular Network Interface Card (CNIC) modules won
for a deployment in Thailand
· Further new order for 52,300 NBIoT hubs won from the Middle East North
Africa (MENA) region
· £2.7m (before expenses) raised in November 2023 through an
oversubscribed placing and subscription, together with the issue of warrants
at an exercise price of 15.0 pence per ordinary share, which would provide a
potential further £4.1m if fully exercised
· 1,370,000 Omnimesh Radio Frequency (RF) Modules shipped against
current contracts during the period (FY23: 391,000), along with 55,200 NB-IoT
gateways and 5,340 Cellular gateways
· Project Management: JVVNL TN72 & TANGEDCO projects now under
Facility Management Services (FMS), ensuring streamlined operations and
maintenance
· Gateway 200 Dual SIM: Successfully released the 'Gateway 200 - Dual
SIM' version, enhancing network reliability and connectivity
· Integrated Meter OEMs: Integrated with twelve meter Original Equipment
Manufacturers (OEMs)
· Memorandum of Understanding (MOU) signed with Alfanar to explore
opportunities in Advanced Metering Infrastructure (AMI) projects
· Investment into recruitment, to scale up the business, and research
and development to develop further products in response to market demand
· CSR Initiatives: Supported the education of over 1000 school children,
with more than 750 being girls, under our CSR initiatives
· CyanConnode India recognised as Dun and Bradstreet 'Start-Up 50
Trailblazer'
· Exhibitions: Participated in and showcased our solutions at
DistribuElec 2024, where we were awarded the best booth
Post Year End Highlights
· 265,000 Omnimesh RF Modules and associated products ordered from a
subsidiary of IntelliSmart Infrastructure Private Limited, taking cumulative
order book in India alone to 6.6m modules, spanning sixteen utilities, across
eleven states in India
· CyanConnode India's subsidiary, DigiSmart Networks Private Ltd
successfully empanelled as an Advanced Metering Infrastructure Service
Provider (AMISP) for both RF and cellular, making it eligible to bid for smart
metering contracts under the Revamped Distribution Sector Scheme (RDSS)
· Revenue of £3.5m in the first quarter of FY25, being 25% higher than
the same period in FY24
· £5.0m cash received from customers in the first quarter of FY25,
being 40% higher than the same period on FY24
· Cash at end of June 2024 of £1.1m
· Win ratio in India in terms of tenders to date of 29%, and 16% in
terms of volumes
· Commencement of setup of a subsidiary in the United Arab Emirates
(UAE) to promote business in the MENA region
· Changes to organisation to strengthen leadership in India and
streamline global operations by having all engineering and operations
reporting into the MD CEO of India
· Key milestones such as Site Acceptance Tests (SATs) and project
go-lives achieved across several key projects
John Cronin, Executive Chairman of CyanConnode, commented:
"FY24 marked another exceptional period for CyanConnode in terms of our
strategic footprint and revenue, with revenue growth of 60% over FY23,
significantly exceeding market expectations.
During the period and since, our order book has continued to grow; for India
alone, cumulative orders stand at approximately 6.6 million Omnimesh modules.
To the end of March 2024 we had successfully delivered around 2.8 million
Omnimesh modules, and we anticipate that deliveries of Omnimesh modules will
significantly increase during FY25.
We were also delighted with the empanelment of DigiSmart as an AMISP for both
RF and cellular, which we believe will present significant further
opportunities for the Company. More recently we have also been pleased with
the successful achievement of milestones such as SAT and go-live for some of
our key projects.
I look forward to an even more successful FY25!"
- 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 (Joint Broker) Tel: +44 (0) 20 3829 5900
Simon Johnson / Louisa Waddell
Panmure Liberum (Joint Broker) Tel: +44 (0) 20 3100 2000
Rupert Dearden / Freddy Crossley
Chairman's Statement
Dear Shareholders
I'm delighted to report that the positive trajectory we have seen in previous
years has continued, making the financial year ending in March 2024 the
Group's most successful yet in terms of revenue, orders secured, and cash
received from customers. Additionally, we have maintained strong progress in
the Indian smart metering market, which has seen tenders for over 100 million
meters awarded so far out of the total market opportunity of 250 million
meters.
We have continued to achieve significant success by securing orders in various
global markets, especially in the Middle East and North Africa (MENA) region.
As a result, we are in the process of establishing a subsidiary in the United
Arab Emirates (UAE) to better serve and expand our presence in this key area.
We were excited to announce that our subsidiary, DigiSmart Networks Private
Limited (DigiSmart), has been empanelled as an Advanced Metering
Infrastructure Service Provider (AMISP). This accreditation enables DigiSmart
to directly participate in upcoming smart metering tenders.
The positive momentum we experienced in FY24 continues into the current
financial year and I am pleased to share further details on the highlights of
FY24 and our current operations within this results statement.
Operational Review
India Market
Overview of FY24
The financial year 2024 witnessed substantial progress in the Indian smart
metering sector, propelled by government initiatives and strategic
implementations nationwide. A pivotal driver of this transformation has been
the Indian government's Revamped Distribution Sector Scheme (RDSS), launched
in August 2022. This scheme, with an allocation of ₹3.03 lakh crore
(approximately £29 billion) and a gross budgetary support of ₹97,631 crore
(approximately £9.5 billion), aims to reduce Aggregate Technical and
Commercial (AT&C) losses across India to 12-15% and eliminate the
cost-supply tariff gap by 2025.
Key Developments
Government Initiatives and Mandates
The RDSS requires the installation of 250 million smart meters by 2025. As of
the end of FY24, 222.3 million smart meters had been approved, with contracts
awarded for 116.3 million meters. This program is designed to significantly
improve billing efficiency and reduce AT&C losses.
Initiatives like "Make in India" and "Skill India" have significantly enhanced
domestic manufacturing capabilities for smart meters and related
infrastructure by promoting local production and skill development.
Deployment and Installation
The Government of India established ambitious installation targets, yet
progress has been slower than initially anticipated, with just 11 million
smart meters installed by May 2024. However, the pace picked up markedly in
FY24 compared to previous years, driven by enhancements in the tendering
process and concerted efforts to improve the financial stability of
Distribution Companies (DISCOMs). Notable deployments occurred in states such
as Assam, Bihar, and Maharashtra, where smart meters have significantly
improved billing accuracy and reduced AT&C losses.
Public and Private Sector Collaboration
Effective collaboration among DISCOMs, technology providers, and system
integrators has been critical in overcoming deployment challenges. Efforts
have involved addressing public resistance through community engagement and
adapting to diverse infrastructural and environmental conditions across
different states.
Outlook for the Coming Years
The outlook for the Indian smart metering market remains highly positive, with
substantial growth expected in the next few years. Several factors contribute
to this positive forecast:
Continued Government Support
The Government of India's continued backing and potential extension of the
RDSS beyond 2025 is anticipated to maintain the momentum of smart meter
installations (the current government secured its third term following the
national election results announced on 4 June 2024). The focus remains on
enhancing DISCOM financial performance and operational efficiency through
smart metering and infrastructure enhancements.
Market Opportunities
The Government of India's mandate to install 250 million smart meters by 2025
presents a vast market opportunity. With approximately 106 million meters
pending award, there is significant potential for technology providers and
system integrators to expand their market presence and secure large-scale
contracts.
Technological Innovations
Ongoing research and development will lead to more advanced, cost-effective
smart metering solutions. Innovations in communication technologies, data
analytics, and Internet of Things (IoT) integration will further enhance the
capabilities of smart meters, offering better value propositions to utilities
and consumers.
Expansion into Rural Areas
Extending smart metering infrastructure to rural and remote areas will be a
significant driver of growth. Advanced technologies such as CyanConnode's
long-range Radio Frequency (RF) communication will ensure reliable
connectivity and service delivery in these challenging terrains.
Sustainability and Environmental Benefits
Smart meters are poised to play a pivotal role in achieving India's
sustainability goals by enabling improved energy management, reducing AT&C
losses, and promoting energy-efficient practices among consumers. This will
contribute significantly to lowering greenhouse gas emissions and overall
environmental impact.
The Indian smart metering sector made significant strides in FY24, propelled
by government directives and technological advancements. With a robust
pipeline of projects and ongoing support from both public and private sectors,
the future of smart metering in India looks promising. A strategic emphasis on
expanding installations, enhancing technological capabilities, and fostering
collaborations will ensure the successful realisation of the RDSS goals and
associated initiatives, paving the way for a more efficient and sustainable
energy sector in India.
APAC and Middle East North Africa Markets
The smart metering market in the Asia Pacific (APAC) and Middle East North
Africa (MENA) regions across electricity and water is expanding, with emerging
opportunities in gas utilities, as more utilities start to adopt smart
metering initiatives.
In August 2023, CyanConnode expanded its portfolio beyond electricity and
water metering into gas metering by successfully implementing a pilot project
in Azerbaijan, a new market for CyanConnode. This initiative involved
supplying smart retrofit hubs and gateways based on long range (LoRa)
technologies for existing gas meters, facilitating automated meter data
collection. This underscores CyanConnode's prowess in providing multi-utility
solutions.
MENA
In October 2023, CyanConnode secured a contract for supplying NB-IoT Gateways
for the ADDC/AADC Smart Metering project (phase 2). Under this agreement,
CyanConnode will provide 52,100 interoperable smart NB-IoT gateways capable of
communicating with and managing various legacy edge devices for both
electricity and water. These gateways will have the capacity to connect to
over one million edge devices.
By March 2024, 49,900 gateways were delivered under this contract. To bolster
our footprint in the MENA region, CyanConnode is currently establishing
CyanConnode Communications LLC in Dubai, UAE.
Thailand
CyanConnode, in collaboration with partners JS Technical Service Co Ltd. (JST)
and Forth Corporation Public Company Limited (Forth), continues to advance the
Smart Metro Grid (SMG) project for the Metropolitan Electricity Authority
(MEA), which is nearing Go-Live stage. In February 2024, CyanConnode secured a
Letter of Award (LOA) to supply 101,360 CNIC (Cellular Modules) to expand the
ongoing MEA SMG Project. This LOA will be fulfilled after the project's
Go-Live phase. Additionally, CyanConnode also received supplementary orders
from JST, one in May 2023, for the supply of 3,000 RF Modules and another in
October 2023 for 4,600 Cellular Modules to fulfil additional requirements for
the MEA Smart Metro Grid project. These orders were completed in FY24.
Malaysia
As part of its APAC expansion, CyanConnode is actively collaborating with
multiple utilities in Malaysia. The Company is currently in the process of
certification of its radio products by Standard and Industrial Research
Institute of Malaysia (SIRIM) for MCMC certification.
Fundraising
In November 2023 the Company completed an oversubscribed placing and
subscription, raising £2.7 million before expenses. The new shares were
issued at a price of 10 pence per share, a 1% discount to the mid-market price
at the time of announcement of the fundraising.
The net proceeds from this fundraising are being used to strengthen the
Company's balance sheet and to increase working capital. The fundraising has
enabled the Company to capitalise on significant growth opportunities and
efficiently execute its expanding order book and pipeline, leading to
increased revenues during the period. Cash is closely monitored to ensure
alignment with these growth opportunities.
Post period end and outlook
The momentum from the previous financial year has continued into FY25. In
April 2024, we were pleased to announce a new order from Madhyanchal One
Infrastructure Private Limited, a subsidiary of IntelliSmart Infrastructure
Private Ltd. This order includes 265,331 Omnimesh Modules, bringing the total
CyanConnode orders in India to 6.6 million. The order includes Advanced
Metering Infrastructure (AMI), Standards-Based Hardware, Services, Omnimesh
Head-End Software, a Perpetual License, and an Annual Maintenance Contract to
support smart metering deployment for Madhyanchal Vidyut Vitaran Nigam Ltd
(MVVNL) in Lucknow, India.
In May and June 2024, CyanConnode announced that its subsidiary, DigiSmart
Networks Private Ltd, had been successfully empanelled as an AMISP in India
for both RF communications and cellular technology. These accreditations allow
DigiSmart to participate in smart metering contracts under the RDSS.
Additionally, in May 2024, changes were made to the organisation to strengthen
its leadership team in India. The new structure brings together seasoned
leaders with extensive experience in smart metering, IoT solutions, and
technology innovation. This restructuring ensures a robust leadership team and
more streamlined organisation capable of driving the company's strategic
vision forward.
Revenue growth has been robust in the new financial year, with first-quarter
revenue of £5.5 million, marking an increase of 25% compared to the same
period in FY24. The Group continues to closely monitor cash and any potential
requirement for future funding depending on working capital restraints.
In July 2024 we have been delighted to announce the achievement of key
milestones such as SATs and project go-lives across several projects. The "Go
Live" milestone is a critical achievement for any project as it signifies the
transition to the billing phase, allowing for revenue generation. The SAT
qualification process involves rigorous quality and performance testing of the
meters and the communication network, ensuring the highest standards of
operation.
I want to express my sincere gratitude to all our employees for their
exceptional dedication and contributions over the past year. My thanks also go
to our valued partners and other stakeholders, with whom we look forward to
continuing our collaborations on these innovative projects. Additionally, I
extend appreciation to all shareholders for their steadfast support.
We are confident that our current momentum will continue throughout this
financial year, and we eagerly look forward to updating you on our progress.
John Cronin
Executive Chairman
Financial Review
Financial Year 2024 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 FY24 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.
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 2024 12 months Mar 2023 12 months Mar 2022 12 months Mar 2021 15 months Mar 2020
£000 £000 £000 £000 £000
Revenue 18,730 11,732 9,562 6,437 2,451
Gross Margin % 30% 36% 52% 48% 56%
R&D expenditure (including staff costs) 3,573 2,247 1,755 1,791 2,381
Operating costs 9,817 7,561 6,025 5,788 7,600
Operating loss (4,204) (3,347) (1,017) (2,685) (6,230)
Depreciation and amortisation 398 489 616 627 773
EBITDA (3,806) (2,858) (401) (2,058) (5,457)
Stock impairment 20 102 62 108 4
Impairment of intangible assets 791 968 - - -
Share based compensation 51 224 363 80 267
Foreign exchange losses / (gains) 194 8 34 (15) 267
Adjusted EBITDA 3 (#_ftn3) (2,750) (1,556) 58 (1,885) (4,919)
Cash and cash equivalents 783 4,070 2,355 1,489 1,172
Average monthly operating cash outflow (242) (185) (261) (81) (245)
Mar 2024 Mar 2023 Mar 2022 Mar 2021 Mar 2020
FTE 4 (#_ftn4) FTE FTE FTE FTE
Average 117 64 59 47 50
Year end 120 70 60 54 48
Gross Margin is lower than expected because of third-party sales along with
significant one-off costs linked to the difficulty of sourcing an end-of-life
component for the version of gateways being shipped in FY24. These
additional costs will not continue going forward, as we have recently launched
our new gateway, which no longer uses this component. Gross margins in the
first two years of projects in India are expected to be around 35-40% as they
consist of mainly lower margin hardware, increasing to greater than 90% after
year two when the main revenue transitions to higher margin support and
services.
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.
Financial items of note during the year :
· Cash received from customers during FY24 was £16.9 million (2023:
£10.7 million)
· Trade and other receivables increased by £4.3 million during the year
to £13.6 million (including retentions) as a result of increased revenue,
particularly in the final quarter of the financial year
· R&D cash tax credit of £0.7 million for FY24 (FY23: £0.7
million); value remains the same, despite legislative changes regarding
R&D Tax Credit Claims reducing the amounts to be claimed. This was as a
result of higher R&D spend by the Company during the year
· Working capital continued to be a key challenge through FY24. Increase
in contract assets with financing components drives revenue recognition, but
the cash for these contractual obligations won't be recovered for multiple
years, with trade and other payables increasing to £4.6m from FY23 to £8.5m
in FY24 due to increased demand for future deliverables on new contracts but
also due to managing cashflow (increased creditor days to 108 in FY24 from 63
in FY23). The cash inflow from the equity raise (£2.7m before expenses)
helped ensure that working capital during the year was sufficient for the
continued growth
· Following a review of the carrying value of the intangible asset held
on the company's balance sheet relating the UK Smart Metering Project
("UKSMIP"), a further impairment of £750k has been made to be cautious, due
to uncertainty on the future of the contract See note 3 (b) (i) on page 73 for
more detail on this.
During the year an advance against the FY23 R&D tax credit was received
and was repaid out of the FY23 R&D tax credit funds received from HMRC
during FY24. A loan has been secured against the FY24 R&D tax credit since
the year end and will be repaid out of the FY24 R&D tax credit funds
received from HMRC. 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.
· FY24 revenues were 60% up on FY23 revenues 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 36% to 30%, partly as a result
of the sale of third-party hardware at gross margins lower than usual for the
Group, and largely as a result of a significant premiums paid on the purchase
of end-of-life components for the gateway being deployed. A new gateway
started shipping in Q4 of FY24, using a different component. Gross margin will
however 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 37% compared to FY23, as a
result of additional costs, mainly attributable to increased headcount
required to scale the business up to deploy its growing backlog of orders and
development of industry leading hardware and software developed by internal
and external engineering teams.
· Adjusted EBITDA loss increased from a loss of £1.6 million in FY23 to
a loss of £2.8 million in FY24 as a result of lower gross margin and
increased operating costs
· Cash and cash equivalents at the end of FY24 of £0.8 million was
£3.3 million lower than the end of FY23
· Average headcount increased to 117 (FY23: 64), and FTEs at year end
increased from 70 in FY23 to 120 in FY24.
Non-financial KPIs included the number of modules shipped which increased from
391,000 in FY23 to 1,371,000 in FY24. Furthermore, 55,000 NBIot gateways
(FY23: 109,000) and 6,000 Omnimesh gateways (FY23: 1,200) were delivered
during the year collectively across MENA and India regions.
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 2024 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.
Going concern
To assess the ability of CyanConnode Holdings plc (the "Group") and company to
continue as a going concern, the directors have prepared a business plan and
cash flow forecast for the period to 31 March 2026 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 invoice
discounting available in contracts recently won, and the R&D Tax Credit
advance.
At 31 March 2024 the Group had cash reserves of £0.8 million (FY22: £4.1m)
and based on detailed cash flows provided to the Board within the FY25/26
budget, there is sufficient cash to see the Group through to profitability
based on its standard operating model. In the first quarter of FY25, £5m has
been received from customers and at the end of June 2024 the Group had cash
reserves of £1.1 million. However, should the Group require additional cash
to cover working capital, as a result of the targeted rapid growth, there
could be a requirement for additional funding for this. The Group is
discussing working capital funding solutions with banks, particularly in
India, and it is believed that since the Indian entity was profitable for
FY24, a suitable facility could be secured.
To assist with working capital, a loan from one director for £400,000 is in
place, as an advance against the FY24 R&D Tax Credit, expected to be
received by October 2024.
Notwithstanding the material uncertainties described above, which may cast
significant doubt on the ability of the Group and company 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.
Financial Risk Management Objectives and Policies
Details of the Group's financial risk management objectives and policies are
disclosed in note 36 to the financial statements.
Dividends
The directors do not recommend the payment of a dividend (2023: £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
24 July 2024
CyanConnode Holdings plc
Consolidated income statement
For the year ended 31 March 2024
Note Year Year
31 March 31 March
2024 2023
£000 £000
Continuing operations
Revenue 18,730 11,732
Cost of sales (13,117) (7,518)
Gross profit 5,613 4,214
Exceptional item: impairment of intangible assets 2 (791) (968)
Other operating costs (9,026) (6,593)
Operating loss (4,204) (3,347)
Amortisation and depreciation 398 489
Share based payments 51 224
Stock impairment 20 102
Impairment of intangible assets 791 968
Foreign exchange losses 194 8
Adjusted EBITDA (2,750) (1,556)
Finance income 92 35
Finance expense (113) (136)
Loss before tax (4,225) (3,448)
Tax credit 395 1,042
Loss for the year (3,830) (2,406)
Loss per share (pence)
Basic 3 (1.41) (1.03)
Diluted 3 (1.41) (1.03)
Consolidated statement of comprehensive income
Derived from continuing operations and attributable to the equity owners of
the Company.
For the year ended 31 March 2024 Year Year
31 March 31 March
2024 2023
£000 £000
Loss for the year (3,830) (2,406)
Exchange differences on translation of foreign operations (112) 21
Total comprehensive income for the year (3,942) (2,385)
CyanConnode Holdings plc
Consolidated statement of financial position
As at 31 March 2024
31 March 31 March
Note 2024 2023
£000 £000
Non-current assets
Intangible assets 3,759 3,433
Goodwill 1,930 1,930
Property, plant and equipment 196 30
Right of use asset 474 122
Other financial assets 51 62
Trade and other receivables 3,085 2,076
Total non-current assets 9,495 7,653
Current assets
Inventories 1,686 793
Trade and other receivables 10,491 7,182
R&D tax credit receivables 665 748
Cash and cash equivalents 783 4,070
Total current assets 13,625 12,793
Total assets 23,120 20,446
Current liabilities
Trade and other payables (8,450) (3,833)
Short-term borrowings - (1,226)
Corporation tax liability (508) -
Lease liabilities (110) (29)
Total current liabilities (9,068) (5,088)
Net current assets 4,557 7,705
Non-current liabilities
Lease liabilities (364) (94)
Deferred tax liability (170) (452)
Other payables (87) (42)
Total non-current liabilities (621) (588)
Total liabilities (9,689) (5,676)
Net assets 13,431 14,770
Equity
Share capital 4 5,982 5,438
Share premium account 80,196 78,671
Own shares held (3,611) (3,611)
Share option reserve 1,412 804
Translation reserve (60) 52
Retained losses (70,488) (66,584)
Total equity being equity attributable to owners of the Company 13,431 14,770
CyanConnode Holdings plc
Consolidated Statement of Changes in Equity
For the year ended 31 March 2024
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 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 (net of expenses) 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
Loss for the year - - - - - (3,830) (3,830)
Other comprehensive income for the year - - - - (112) - (112)
Total comprehensive income for the year - - - - (112) (3,830) (3,942)
Issue of share capital (net of expenses) 544 1,525 - - - - 2,069
Issue of share warrants - - - 483 - - 483
Credit to equity for share options - - - 51 - - 51
Transfer - - - 74 - (74) -
Total transactions with owners 544 1,525 - 608 - (74) 2,603
Balance at 31 March 2024 5,982 80,196 (3,611) 1,412 (60) (70,488) 13,431
CyanConnode Holdings plc
Consolidated cash flow statement
For the year ended 31 March 2024
Year Year
Note 31 March 2024 31 March
£000 2023
£000
Net cash outflow from operating activities 5 (2,860) (2,217)
Investing activities
Interest received 15 3
Purchases of property, plant and equipment (224) (31)
Purchases of intangible assets (1,384) (734)
Sale/(purchase) of other financial assets 11 (4)
Net cash outflow from investing activities (1,582) (766)
Financing activities
Interest paid on borrowings (93) (125)
Cash inflow from borrowings - 500
Cash outflow from director's loans (300) -
Cash net outflow from debt factoring (426) (541)
Loan repayment (500) (600)
Capital repayments of lease liabilities (74) (30)
Interest paid on lease liabilities (19) (11)
Proceeds on issue of shares 2,719 5,844
Share issue costs (167) (344)
Net cash inflow from financing activities 1,140 4,693
Net increase in cash and cash equivalents (3,302) 1,710
Effects of exchange rate changes on cash and cash equivalents 15 5
Cash and cash equivalents at beginning of the year 4,070 2,355
Cash and cash equivalents at end of the year 783 4,070
Analysis of changes in net cash / (debt)
Other non-cash movements £000 Net foreign
At 1 April 2023 exchange difference At 31 March 2024
£000 Cash flow £000 £000 £000
For the year ended 31 March 2024
Cash and cash equivalents 4,070 (3,302) - 15 783
Short-term borrowings (1,226) 1,226 - - -
Lease liabilities (123) 93 (444) - (474)
(1,349) 1,319 (444) - (474)
Net cash / (debt) at end of year 2,721 (1,983) (444) 15 309
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
Notes to the Financial Information
For the year ended 31 March 2024
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 2024.
The financial information set out in the announcement does not constitute the
company's statutory accounts for the years ended 31 March 2023 or 31 March
2024 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 2023 and the
year ended 31 March 2024 is unqualified, does not contain statements under
s498(2) or (3) of the Companies Act 2006 but refers to a material uncertainty
regarding the Group's ability to continue as a going concern.
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").
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 2026 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 2024 the Group had cash reserves of £0.8 million (FY23: £4.1m)
and based on detailed cash flows provided to the Board within the FY25/26
budget, there is sufficient cash to see the Group through to profitability
based on its standard operating model. In the first quarter of FY25, £5m cash
has been received from customers and at the end of June 2024 the Group had
cash reserves of £1.1 million. 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 for this. The Group is discussing working
capital funding solutions with banks, particularly in India, and it is
believed that since the Indian entity was profitable in FY24, a facility could
be secured.
To assist with working capital, a loan from one director received in April
2024 for £400,000 is in place, as an advance against the FY24 R&D Tax
Credit, expected to be received by October 2024.
Notwithstanding the material uncertainties described above, which may cast
significant doubt on the ability of the Group and company 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.
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 £2,032k carrying value of the related intangible asset at
the end of March 2024. 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 Group was notified by its customer Toshiba, in 2023 that due to an
end-of-life Telit component, which is essential in the design of the Toshiba
hardware (mesh hub), there would only be 761k mesh hubs supplied under the
contract. Toshiba advised in 2024 that the final number supplied was 765k
mesh hubs. 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. As a result of this, the Group made an impairment of £968k against the
carrying value in FY23.
The key assumptions analysed in determining the possible carrying values
included the following:
· The number of mesh hubs activated (generating a one off licence fee)
· The number of mesh hubs active on a monthly basis (generating an
ongoing monthly support fee)
· The potential impact of the 3G sunset, expected to happen in 2025 for
VMO2 (The Group's end customer for this contract). This impact could lead to
either a higher number of mesh hubs being activated.
A new model has now been created based on these sensitivities to determine if
a further impairment to the intangible asset is required. The models were run
based on various percentages of the finite number of 765k hubs being
activated, and being active on a monthly basis. Due to the uncertainties and
lack of information provided to the Group regarding the remainder of the
rollout and taking into account the numerous delays that have already
occurred, the Board has agreed that a further impairment of £750k would be
taken in FY24 based on an assumption that 75% of the finite number of 765k
hubs, being 574k hubs, would be activated. This is an increase from the 70%
assumption in FY23 and is based on history of activations in the fifteen
months prior to the end of FY24. To be cautious it has also been assumed that
support fees for a maximum of 56% of the 574k hubs would be received on a
monthly basis. If this number were reduced to a maximum of 53% it would lead
to a further impairment of £182k.
A WACC of 11.7% has been used in arriving at the £750k impairment.
3. Loss per share
The calculation of the basic and diluted loss per share is based on the
following data:
2024 2023
Loss for the purposes of basic loss per share being net loss attributable to (3,830) (2,406)
equity holders of the parent (£000)
Weighted average number of ordinary shares for the purposes of basic and 271,910,382 232,763,664
diluted loss per share (excluding own shares held)
Loss per share (pence) (1.41) (1,03)
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 2022 236,309,035 4,726
Issue of new shares 35,578,329 712
As at 31 March 2023 271,887,364 5,438
Issue of new shares 27,188,500 544
As at 31 March 2024 299,075,864 5,982
In November 2023 the Company successfully raised funding of £2.72m before
expenses through a placing of 27,188,500 ordinary 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 2024 2023
£000 £000
Operating loss for the year (4,204) (3,347)
Adjustments for:
Depreciation of property, plant and equipment 58 32
Amortisation of Intangible assets 267 426
Depreciation on right of use assets 73 31
Impairment of intangible assets 791 968
Shares issued in lieu of bonus / service - 24
Share based payments 51 224
Operating cash flows before movements in working capital (2,964) (1,642)
Increase in inventories (913) (634)
Increase in receivables (4,348) (1,787)
Increase in payables 4,662 1,475
Cash outflow from operating activities (3,563) (2,588)
Net income taxes received 703 371
Net cash outflow from operating activities (2,860) (2,217)
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 2024 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.
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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