REG - CyanConnode Holdings - Interim results
14/12/2022 07:00
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RNS Number : 6083J CyanConnode Holdings PLC 14 December 2022
14 December 2022
CyanConnode Holdings plc
("CyanConnode" or the "Company")
Interim results for the six months ended 30 September 2022 (H1 FY 2023)
CyanConnode (AIM: CYAN), a world leader in narrowband radio frequency (RF)
mesh networks, announces its interim results for the six months ended 30
September 2022 (H1 FY 2023).
John Cronin, CyanConnode Executive Chairman, commented:
"Revenue for the six months ended 30 September 2022 met our expectations. We
have, in previous statements, spoken of the significant contracts secured so
far this year and as a result revenue for the next quarter is expected to be
at least three times higher than the first six months. The Board hopes that
this success, which we have been working towards for some time now, is a sign
of things to come. Consequently, we are pleased to confirm that we expect to
meet market revenue forecasts for the full financial year ended 31 March 2023.
"Despite a delay to tenders until India's Prime Minister, Shri Narendra Modi
PM, launched the power sector's Revamped Distribution Sector Scheme, (RDSS) in
August 2022, CyanConnode was delighted to announce its first order for one
million Omnimesh Modules from India. However, at the same time tenders were
delayed until India's Prime Minister, Shri Narendra Modi PM, launched the
power sector's Revamped Distribution Sector Scheme, (RDSS) in August 2022. As
we have previously highlighted, the 'Collection Efficiency' of not less than
98%, as set out in the RDSS and which CyanConnode Omnimesh achieves, favours
our technology for network communication and management and as a result our
partners are currently busy tendering for more than 75 million Smart Meters.
CyanConnode therefore expects to announce material orders from India in due
course.
"As well as the positive news flow from India, further substantial orders were
also received from new territories during the period, including orders from
the Middle East and North Africa (MENA) region worth over USD 9 million.
"Our recent win rate from contracts tendered has been 27% in volume (this
financial year) and installed rate is circa 25%. CyanConnode is currently
bidding for contracts worth more than £1 billion in value. Our Partners have
recently been named as Level 1 status for greater than 25 million units,
which, whilst we don't expect to win all of them, suggests a bright future and
we look forward to making further announcements in due course."
Financial Highlights
· Revenue of £1.3m (H1 FY 2022: £4.1m) which is in line with the
Board's expectations (management forecast that circa 90% of full financial
year revenue will be delivered in H2).
· Gross profit of £0.7m (H1 FY 2022: £1.7m)
· Operating loss of £2.4m (H1 FY 2022: loss of £1.2m)
· Cash received from customers of £4.5m (H1 FY 2022: £3.8m)
· Cash and cash equivalents at end of period £1.0m (H1 FY 2022:
£1.7m)
Operational Highlights
· 1,000,000 Omnimesh RF Modules and associated products ordered
from Genus Power Infrastructure Limited (Genus)
· Two orders won from IntelliSmart Infrastructure Pvt Ltd
(IntelliSmart) for a total of 300,000 Omnimesh RF Modules and associated
products
· Order worth USD 6.7 million won from MENA for NB-IoT gateways
· Further new order worth USD 2.5 million won from MENA for
Cellular gateways
· Omnimesh integration implemented for nine new meter types in
India
· RDSS approved by the Government of India
· Power Distribution Companies in India (DISCOMS) empowered to
release tenders under the RDSS
· CyanConnode's technology aligns with RDSS for network
communication and management
Post-Period Highlights
· £0.5 million raised by way of a share subscription
· Revenue for the quarter ending 31 December 2022 expected to be
three times higher than the first half of the financial year
· Revenue for the financial year ending 31 March 2023 expected to
meet market forecasts
· Cash collected from customers since the period end of £2.3
million taking cash received for the nine-month period to £6.8 million
· Cash at end of November 2022 of £1 million
· Current tenders in India for circa 75 million Smart Meters
following the launch of the RDSS Scheme
· £1 million worth of components purchased to meet current orders
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)
Cenkos Securities plc (Nomad and Joint Broker) Tel: +44 (0) 20 7397 8900
Stephen Keys / Charlie Combe (Corporate Finance)
Arden Partners Plc (Joint Broker) Tel: +44 (0) 20 7614 5900
Simon Johnson (Corporate Broking)
About CyanConnode
CyanConnode (AIM:CYAN.L) is a world leader in Narrowband Radio Frequency (RF)
Smart Mesh Networks, which are used for machine to machine (M2M)
communication. As well as being self-forming and self-healing, CyanConnode's
RF Smart Mesh Networks are designed for rapid deployment, whilst giving
exceptional performance and competitive total cost of ownership.
In June 2018, CyanConnode launched its award-winning Omnimesh Advanced
Metering Infrastructure (AMI) platform, which has already gained considerable
commercial traction, especially in India which is a key market for the
Company.
Through a global partner eco-system, which is vendor agnostic, CyanConnode has
several routes to market, therefore it is well positioned to capitalise upon
increasing global demand for smart metering solutions.
For more information, please visit www.cyanconnode.com
(http://www.cyanconnode.com/) .
Chairman's Statement
Financial highlights
Key figures
H1 FY 2023 H1 FY 2022
£'000 £'000 % Change
Revenue 1,347 4,078 - 67%
Gross profit 665 1,696 - 61%
Operating costs (3,043) (2,900) + 5%
Operating loss (2,378) (1,204) + 97%
Cash 1,033 1,740 - 41%
Basic and diluted loss per share 0.94p 0.49p +92%
Revenue and Operating Costs
Revenue for the first six months of FY 2023 was in line with management's
expectations. With orders having been won in India for 1.3m Omnimesh modules
and associated products during H1 of FY 2023, and large orders being won for
other regions, the Company expects a significant increase in revenue during
the second half of FY 2023. The increase in operating costs was mainly due
to the growth of the business and increasing inflation rates.
Cash
During the period cash was utilised to purchase stocks of long lead-time
components to support delivery during the remainder of the financial year.
Stock of 350,000 long lead-time components were held at period end to ensure
H2 FY23 deliveries are met.
Accounts receivable
A total of £4.5m cash has been collected from customers during the period
(FY22: £3.8m), and a further £2.3 million since the period end. Receivables
for new contracts in India, signed during the period and going forward, are
expected to be received earlier than historically due to a change in the
business model, (payments that were previously milestone based will now be
received in Equal Monthly Instalments (EMIs)). Contracts in the MENA region
require payments prior to delivery.
Operational Review
India
The Government of India plans to rollout 250 million smart meters and tenders
for large volumes, which currently total 75 million smart meters, have now
been issued.
CyanConnode has had a successful period in India, doubling its order book in 5
months and significantly increasing its pipeline of opportunities and key
partnerships which include;
· In May 2022, an order was received for 100,000 Omnimesh RF Modules
together with advanced metering infrastructure, standards-based hardware,
services, Omnimesh head-end software, perpetual license and an annual
maintenance contract, for a smart metering project in Assam. This order was
received from IntelliSmart, who were the first service provider to use the
Design, Build, Finance, Own, Operate, Transfer (DBFOOT) model and they also
installed the first smart prepaid meter in India under the RDSS.
· In June 2022, CyanConnode announced a further order from
Intellismart for the same project for 200,000 Omnimesh RF Modules together
with advanced metering infrastructure, standards-based hardware, services,
Omnimesh head-end software, perpetual license, and annual maintenance
contract.
· In August 2022, the Group was delighted to announce that its
subsidiary, CyanConnode India Pvt Ltd, won its largest-ever order. The Order
was for 1,000,000 Omnimesh Modules, together with Advanced Metering
Infrastructure, Standards-Based Hardware, Omnimesh Head-End Software,
Perpetual License and a Support and Maintenance Contract.
In August 2022, the Government of India approved the RDSS to help 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, and the RDSS has an outlay of Rs
3,03,758 Crore (circa £30 billion) over 5 years. RDSS mandates compulsory
installation of smart meters across the country.
In addition, the Rural Electrification Corporation floated 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, thirty-one companies are now empanelled.
CyanConnode's Omnimesh mesh networks reliably meet stringent service level
agreements (SLAs) in dense terrain as well as semi-urban, rural and
mountainous regions, this has resulted in its technology being deployed in
approximately 25% of all smart metering deployments. CyanConnode has a long
track record of successful deployments in India and is regarded as a safe pair
of hands, which is borne out by the strong take-up its Omnimesh platform. The
company is currently integrating its technology into nine new meter types, a
process which is required before new suppliers enter the Indian market.
APAC and MENA
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. The integration of all variants of
water meters for this project is now complete and ten types of electricity
meters have been integrated out of a total of twenty-three. A large part of
this order is expected to be delivered during H2 of this financial year.
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. The integration of the meters
required for this project is now complete and a large part of this project is
also expected to be delivered during H2 of this financial year.
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.
Post period end developments and outlook
In October 2022, the Company raised £0.5 million by way of a share
subscription from an existing shareholder. The net proceeds of this share
subscription will be used for working capital purposes.
Business has expanded significantly since the end of the period with revenue
in the three months following the end of the period expected to be more than
three times the revenue in the first six months. In addition, cash
collection has continued favourably with a further £2.3 million being
collected since the period end, taking total cash collection to date to circa
£6.8 million.
Tenders for significant volumes have begun to be awarded in India. Since the
launch of the RDSS in August 2022, tenders for more than 30 million units have
been awarded, with more than 20 million of those units having been awarded
since mid-November and CyanConnode expects to receive material orders from
those tenders in due course.
Consolidated income statement
Note Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 September 30 September 31 March
2022 2021 2022
£000 £000 £000
Continuing operations
Revenue 1,347 4,078 9,562
Cost of sales (682) (2,382) (4,554)
Gross profit 665 1,696 5,008
Other operating costs (3,043) (2,900) (6,025)
Underlying operating loss (2,035) (838) (38)
Amortisation and depreciation (243) (296) (616)
Share based payments (100) (70) (363)
Operating loss (2,378) (1,204) (1,017)
Finance income 11 3 3
Finance costs (49) (61) (164)
Loss before tax (2,416) (1,262) (1,178)
Tax credit 302 333 307
Loss for the period (2,114) (929) (871)
Loss per share (pence)
Basic 3 (0.94) (0.49) (0.42)
Diluted 3 (0.94) (0.49) (0.42)
Consolidated statement of comprehensive income
Derived from continuing operations and attributable to the equity owners of
the Company
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 September 30 September 31 March
2022 2021 2022
£000 £000 £000
Loss for the period (2,114) (929) (871)
Exchange differences on translation of foreign operations 425 186 76
Total comprehensive income for the year (1,689) (743) (795)
Consolidated statement of financial position
Unaudited Unaudited Audited
As at 30 September 30 September 31 March
2022 2021 2022
£000 £000 £000
Non-current assets
Intangible assets 3,988 4,131 4,093
Goodwill 1,930 1,930 1,930
Fixed asset investments 68 64 58
Property, plant and equipment 33 37 31
Right of use asset 152 25 153
Trade receivables 520 - 458
Total non-current assets 6,691 6,187 6,723
Current assets
Inventories 955 560 159
Trade and other receivables 4,586 7,563 6,993
R&D tax credit receivables 884 276 562
Cash and cash equivalents 1,033 1,740 2,355
Total current assets 7,458 10,139 10,069
Total assets 14,149 16,326 16,792
Current liabilities
Short term borrowing (800) (2,593) (1,867)
Trade and other payables (2,362) (3,612) (2,364)
Corporation tax liabilities (137) - (193)
Lease liabilities (15) (25) (28)
Total current liabilities (3,314) (6,230) (4,452)
Net current assets 4,144 3,909 5,617
Non-current liabilities
Lease liabilities (137) - (125)
Deferred tax liability (745) (779) (746)
Other payables (97) - (38)
Total non-current liabilities (979) (779) (909)
Total liabilities (4,293) (7,009) (5,361)
Net assets 9,317 11,431
9,856
Equity
Share capital 4,728 4,400 4,726
Share premium account 73,895 71,978 73,883
Own shares held (3,611) (3,253) (3,611)
Share option reserve 1,168 995 1,068
Translation reserve 456 141 31
Retained losses (66,780) (64,944) (64,666)
Total equity being equity attributable to 9,317 11,431
owners of the Company 9,856
Consolidated statement of changes in equity
Share Capital £000 Translation Reserve Retained Losses £000 Total Equity £000
Share Own Shares Held Share Option Reserve £000
Premium £000 £000
Account
£000
Balance at 1 April 2021 3,735 69,662 (3,253) 925 (45) (64,015) 7,009
Loss for the period - - - - - (929) (929)
Other comprehensive income for the - - - - 186 - 186
period
Total comprehensive income for - - - - 186 (929) (743)
The period
Issue of share capital 665 2,316 - - - - 2,981
Credit to equity for share options - - - 70 - - 70
Total transactions with owners 665 2,316 - 70 - - 3,051
Balance at 30 September 2021 4,400 71,978 (3,253) 995 141 (64,944) 9,317
Profit for the period - - - - - 58 58
Other comprehensive income for the period - - - - (110) - (110)
Total comprehensive income for the period - - - - (110) 58 (52)
Issue of share capital 326 1,905 (358) - - - 1,873
Credit to equity for share options - - - 293 - - 293
Transfer - - - (220) - 220 -
Total transactions with owners 326 1,905 (358) 73 - 220 2,166
Balance at 31 March 2022 4,726 73,883 (3,611) 1,068 31 (64,666) 11,431
Loss for the period - - - - - (2,114) (2,114)
Other comprehensive income for the period - - - - 425 - 425
Total comprehensive income for the period - - - - 425 (2,114) (1,689)
Issue of share capital 2 12 - - - - 14
Credit to equity for share options - - - 100 - - 100
Total transactions with owners 2 12 - 100 - - 114
Balance at 30 September 2022 4,728 73,895 (3,611) 1,168 456 (66,780) 9,856
Consolidated cash flow statement
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 September 30 September 31 March
2022 2021 2022
£000 £000 £000
Net cash outflow from operating activities (Note 4) (143) (2,968) (3,134)
Investing activities
Interest received 11 3 3
Purchases of property, plant and equipment (6) (6) (26)
Capitalisation of software development (109) (76) (259)
(Purchase)/disposal of investments (10) (20) (14)
Net cash used in investing activities (114) (99) (296)
Financing activities
Interest paid (43) (60) (157)
Cash (outflow)/inflow from borrowing - 860 500
Cash net outflow from debt factoring (967) - (366)
Cash outflow from Directors' loan (100) - -
Loan repayment - (385) (385)
Capital repayments of lease liabilities (15) (73) (153)
Interest paid on lease liabilities (6) (1) (7)
Proceeds on issue of shares - 3,151 5,177
Share issue costs - (174) (327)
Net cash from financing activities (1,131) 3,318 4,282
Net (decrease)/increase in cash and cash equivalents (1,388) 251 852
Effects of exchange rate changes on cash and cash equivalents 66 - 14
Cash and cash equivalents at beginning of period 2,355 1,489 1,489
Cash and cash equivalents at end of period 1,033 1,740 2,355
Notes to the Accounts
1. Basis of Preparation
The interim financial statements are for the six months ended 30 September
2022. They do not include all the information required for full annual
financial statements and should be read in conjunction with the consolidated
financial statements of the Group for the year ended 31 March 2022, which have
been filed at Companies House. The Group's auditor issued a report on those
financial statements that was unqualified and did not contain a statement
under section 498(2) or section 498(3) of the Companies Act 2006, however, the
auditor's report emphasized the uncertainty around the Group's ability to
continue as a going concern.
These interim financial statements have been prepared in accordance with
UK-adopted International Accounting Standards. These financial statements have
been prepared under the historical cost convention.
These interim financial statements have been prepared in accordance with the
accounting policies adopted in the last annual financial statements for the
year to 31 March 2022. The accounting policies have been applied consistently
throughout the group for the purpose of preparation of these interim financial
statements and are expected to be followed throughout the year ending 31 March
2023.
2. Going Concern
To assess the ability of the Group to continue as a going concern, the
Directors have prepared a business plan and cash flow forecast for the period
to 31 March 2024 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 timing of customer payments. These detailed cashflow scenarios include
Letters of Credit which have been secured from the customers against contracts
recently won.
The Group's business activities, together with the factors likely to affect
its future development, performance and position, have been considered in
depth as part of the Directors' assessment of the Group's ability to continue
as a going concern. The Directors have reviewed detailed trading forecasts for
H2 of FY23. An upturn in business activities and revenue is expected during
this period, which will ensure the Group's ability to meet market expectations
for the full financial year. At 30 September 2022 the Group had cash reserves
of £1 million (31 March 2022: £2.4 million) and based on detailed cash flow
provided to the Board to 31 March 2024, there is sufficient cash to see the
Group through to profitability based on its standard operating model. If a
more pessimistic scenario were taken and an assumption were taken that no cash
is received within the next twelve months from any new orders not currently
contracted, and that there were significant delays to receipts from customers,
there is a material uncertainty relating to the Group's ability to continue as
a going concern. Should the Group experience such downside sensitivities the
directors would first continue to look at measures such as cost reduction and
working capital facilities as ways to conserve cash within the business. The
Company has offers of convertible and secured loans which it could accept
should such a requirement arise.
To assist with working capital, one Director has extended a short-term loan of
£300,000. The Company received a R&D tax credit of £585,000 from HMRC in
October 2022 and have an advance of £500,000 in place which is secured
against its R&D tax credit for FY23. The Group also completed a £0.5
million subscription in October 2022.
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.
3. Loss per Share
The calculation of the basic and diluted loss per share is based on the
following data:
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 September 30 September 31 March
2022 2021 2022
Loss for the purposes of basic loss per share being net loss attributable to (2,114) (929) (871)
equity holders of the parent (£000)
Weighted average number of ordinary shares for the purposes of basic and 225,033,577 188,367,747 205,173,434
diluted loss per share
Loss per share (pence) (0.94) (0.49) (0.42)
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.
4. Reconciliation of Operating Loss to Operating Cash Flows
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 September 30 September 31 March
2022 2021 2022
£000 £000 £000
Operating loss for the period: (2,378) (1,204) (1,017)
Adjustments for:
Depreciation of property, plant and equipment 15 13 31
Amortisation of Intangible assets 214 210 432
Depreciation on right of use assets 14 73 153
Foreign exchange 334 (6) 20
Share issued in lieu of service/bonus 14 4 5
Share-option payment expense 100 70 363
Operating cash flows before movements in working capital (1,687) (840) (13)
(Increase)/decrease in inventories (796) (349) 52
Decrease/(increase) in receivables 2,410 (1,908) (2,054)
(Decrease)/increase in payables (2) (468) (1,568)
Cash reduced by operations (75) (3,565) (3,583)
Income taxes received/(paid) (68) 597 449
Net cash outflow from operating activities (143) (2,968) (3,134)
5. Interim Results
The Group's Interim Results report is available for download on the Group's
website. The report will not be posted to shareholders.
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