Interim Results
Cyan Holdings Plc
13 September 2007
Press Release 13 September 2007
Cyan Holdings Plc
('Cyan' or 'the Group')
Interim Results
Cyan Holdings Plc (AIM:CYAN.L), the fabless semiconductor company specialising
in the development of low powered, configurable microcontroller chips, announces
its Interim Results for the six months to 30 June 2007.
Highlights
• Continued implementation of new strategy
• Established new partnership in Europe with Adaptive Modules ahead of expectations
• First production order received from China Telecom
• Currently developing new product designed specifically for the Chinese market
• Successful placing in July, raising £5 million net at a premium
Commenting on the results, Kenn Lamb, Chief Executive of Cyan, said: 'The Board
is very pleased with the progress which has been made since embarking on the new
strategy, clarifying the Group's position in each of its key geographic markets.
By adopting a local approach to each region, Cyan will be able to address the
needs and demands of each market individually, making its technology a much more
appealing proposition.
'We are delighted with the great support we have received from our shareholders
through the process of restructuring the Group and at our recent Placing. The
proceeds of the Placing will facilitate Cyan's growth, enabling the Board to
drive the Group forward and build its future as an innovative semiconductor
company.'
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For further information, please contact:
Cyan Holdings plc
Kenn Lamb, CEO Tel: +44 (0) 1954 234 400
Andrew Lee, Finance Director
www.cyantechnology.com
Collins Stewart Europe Limited
Chris Howard/Oliver Quarmby Tel: +44 (0) 20 7523 8350
Corporate Finance
www.collins-stewart.com
Media enquiries:
Abchurch Communications
Heather Salmond / Franziska Boehnke / Joanne Shears Tel: +44 (0) 20 7398 7700
franziska.boehnke@abchurch-group.com www.abchurch-group.com
Interim Statement
The first half of 2007 has seen significant changes within the Group, and the
Board is confident that these changes position Cyan to fully realise its
potential in the global markets. Kenn Lamb joined as CEO in April 2007, bringing
over ten years' experience of running engineering teams and international sales
organisations. Since his arrival, the Group has launched the implementation of
a new go-to-market strategy in each of the three global geographies,
strengthening all areas of the business. The Group is now in a position to take
full advantage of its value enhancing proposition for customers, and deliver
steady and stable growth going forward.
In order to fully deploy this new strategy, Cyan successfully raised £5 million
(net) in July 2007 at a premium to the share price. This was achieved despite a
difficult environment in which to raise new money, and Cyan's success reflects
the underlying strength of the products and technology that has been developed
by the Group.
The support which the Group has been shown from existing and new investors
vindicates the action taken by the Board during the first half of this year to
adopt and implement a strategy to turn Cyan around. This will commence with a
restructuring of the management and staffing within the Group. The process of
preparing for this change has inevitably added to the cost base in the first
half of the year and the deployment of the strategy will add incremental but
limited duration costs during the second half of the year. The Board expects
that the restructuring process will be completed by the end of this calendar
year, and that new products will be introduced to the market during the fourth
quarter of 2007 and first quarter of 2008.
In the European market, the new strategy focuses on the extended capability of
the Cyan software tools to work at board level rather than chip level. This will
be achieved by establishing partnerships with businesses selling module level
solutions, which will offer an attractive proposition that not only reduces the
bill of materials, but also provides a software tool to program the module that
can be passed on in turn to their customers. The first such partnership is with
Adaptive Modules, and is for low cost wireless modules; this was announced on 19
June, several months ahead of the Board's expectations. This proves that Cyan is
now in a position to enter the market at the application level, with its
software as the programming tool for production ready modules.
Based upon the considerable experience of the Chinese market gained by Cyan Asia
and its distribution partners, the Board has recognised the need for Cyan's
products in this market to be at a price point around US$2 per chip, in order to
meet local needs. The Group was able to identify a demand for a new product with
a specification that meets the needs of the Chinese domestic market but which
could be manufactured at a substantially lower cost. In accordance with local
expectations, this product will be produced to look and feel Chinese, with local
language datasheets, a Chinese version of the software and the use of local
Chinese sales channels. The product will be manufactured in China following the
Group negotiating and securing lower cost local manufacturing. The product will
be marketed in China in the fourth quarter 2007, with initial versions available
during the first half of 2008.
In July 2007, the Group announced the first production order from China Telecom
for its original MCU chip. The end product is a smart card based payphone with
built in clock in-out capability for installation in factories across China, and
whilst the quantities are currently modest, the receipt of an initial production
order is encouraging and confirms the view that this project has the potential
to increase its contribution to revenues during 2008.
In the North American market, Cyan is currently pursuing a strategy to partner
with established businesses which offer complementary semiconductor technology.
It is the Board's intention to offer such partners access to a low cost
microcontroller, which will enhance the programmability of their own products,
as well as giving access to a software tool. This tool will be made available to
their end customers to fully support the programming of their enhanced product,
and will incorporate application software developed and owned by Cyan. Such
customers will ultimately be users of Cyan MCU's, tools and application
software, but will be purchasing products from established North American
suppliers with key functions in addition to the microcontroller, such as Radio
Frequency communication.
Cyan has already achieved a number of significant milestones, demonstrating that
the Group is on target with the implementation of the new strategy. The Board is
confident of achieving the turn around of the business during 2008, and of
realising the full potential of the Group in 2009. The proceeds of the
successful Placing at the end of July have provided Cyan with sufficient
resources to complete the transformation of the business and consequently enable
rapid sales growth in all three global markets.
INDEPENDENT REVIEW REPORT TO CYAN HOLDINGS PLC
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 June 2007 which comprises the consolidated income
statement, the consolidated statement of changes in equity, the consolidated
balance sheet, the consolidated cash flow statement and related notes 1 to 6.
We have read the other information contained in the interim report and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
This report is made solely to the company, in accordance with Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the company, for our review work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are also responsible for ensuring that the accounting policies and presentation
applied to the interim figures are consistent with those applied in preparing
the preceding annual accounts except where any changes, and the reasons for
them, are disclosed.
First-time adoption of International Financial Reporting Standards
As disclosed in note 1, the next annual financial statements of the group will
be prepared in accordance with International Financial Reporting Standards as
adopted for use in the EU. Accordingly, the interim report has been prepared in
accordance with the recognition and measurement criteria of IFRS and the
disclosure requirements of the Listing Rules that would be applicable if the
company were admitted to the Official List.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with International Standards on Auditing (UK and
Ireland) and therefore provides a lower level of assurance than an audit.
Accordingly, we do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2007.
Emphasis of matter - trade debtors
In forming our review conclusion, we have considered the adequacy of the
disclosures made in note 2 of the interim financial statements concerning the
possible outcome of amounts due from one of the group's customers. There is
uncertainty over the timing and quantum of the amount which may be recovered.
Deloitte & Touche LLP
Chartered Accountants
Cambridge, United Kingdom
12 September 2007
Notes: A review does not provide assurance on the maintenance and integrity of
the website, including controls used to achieve this, and in particular on
whether any changes may have occurred to the financial information since first
published. These matters are the responsibility of the directors but no control
procedures can provide absolute assurance in this area.
Legislation in the United Kingdom governing the preparation and dissemination of
financial information differs from legislation in other jurisdictions.
CONSOLIDATED INCOME STATEMENT
Results for the six months ended 30 June 2007
Note Six months ended 30 Six months ended Re-stated year ended
June 2007 30 June 2006 31 December 2006
unaudited
unaudited
£ £ £
REVENUE: continuing operations 22,496 60,458 269,333
Cost of sales (18,603) (48,874) (205,776)
Gross profit 3,893 11,584 63,557
Administrative expenses
Share based compensation (5,757) (84,286) (173,529)
Other (1,831,600) (1,357,312) (3,035,547)
(1,837,357) (1,441,598) (3,209,076)
OPERATING LOSS: continuing operations (1,833,464) (1,430,014) (3,145,519)
Investment revenues 52,771 107,180 205,898
Finance Costs (53,565) (41,347) (69,225)
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (1,834,258) (1,364,181) (3,008,846)
Tax on loss on ordinary activities 0 0 475,557
LOSS FOR THE PERIOD FROM CONTINUING (1,834,258) (1,364,181) (2,533,289)
OPERATIONS
LOSS PER SHARE (pence)
Basic and diluted 3 (2.1) (1.6) (3.0)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Results for the six months ended 30 June 2007
Six months ended 30 Six months ended Re-stated year
June 2007 30 June 2006 ended 31 December
unaudited 2006
unaudited
£ £ £
At beginning of period 3,336,252 5,638,954 5,638,954
Equity shares issued 94,150 15,841 30,849
Exchange differences on translating foreign 15,569 19,027 26,209
operations recognised directly in equity
Share based compensation 5,757 84,286 173,529
Loss for the financial period (1,834,258) (1,364,181) (2,533,289)
At the end of the period 1,617,470 4,393,927 3,336,252
CONSOLIDATED BALANCE SHEET
30 June 2007
Note Six months ended 30 Six months ended Year ended 31
June 2007 30 June 2006 December 2006
unaudited audited
unaudited
£ £ £
NON CURRENT ASSETS
Intangible assets 43,190 73,982 57,586
Property, plant and equipment 92,275 76,062 78,663
135,465 150,044 136,249
CURRENT ASSETS
Inventory 146,677 127,939 107,922
Trade and other receivables 506,744 78,525 520,942
Cash and cash equivalents 1,099,726 4,297,870 2,820,801
1,753,147 4,504,334 3,449,665
TOTAL ASSETS 1,888,612 4,654,378 3,585,914
CURRENT LIABILITIES (271,142) (260,451) (249,662)
NET CURRENT ASSETS 1,482,005 4,243,883 3,200,003
NET ASSETS 1,617,470 4,393,927 3,336,252
EQUITY
Share capital 171,853 169,762 170,070
Share premium 8,719,997 8,612,930 8,627,630
Retained loss (7,427,250) (4,486,724) (5,648,943)
Share based compensation 152,870 97,959 187,495
TOTAL EQUITY 1,617,470 4,393,927 3,336,252
CONSOLIDATED CASH FLOW STATEMENT
Results for the six months ended 30 June 2007
Note Six months ended Six months ended Re-stated -year
30 June 2007 30 June 2006 ended 31 December
unaudited unaudited 2006 audited
£ £ £
Net cash outflow from operating activities 4 (1,773,779) (1,331,873) (2,869,052)
Investing activities 5 (41,446) 46,222 91,324
Financing 5 94,150 15,841 30,849
Net (Decrease) in cash and cash equivalents (1,721,075) (1,269,810) (2,746,879)
Cash and cash equivalents at beginning of 2,820,801 5,567,680 5,567,680
period
Cash and cash equivalents at end of period 1,099,726 4,297,870 2,820,801
NOTES TO THE FINANCIAL INFORMATION
1. BASIS OF PREPARATION
The interim financial information has been prepared in accordance with the IFRS
accounting policies that are expected to apply in 2007. The Group's IFRS
accounting policies are available on the Company's website
www.cyantechnology.com
These interim financial statements do not constitute statutory financial
statements within the meaning of section 240 of the Companies Act 1985. Results
for the six month periods ended 30 June 2007 and 30 June 2006 have not been
audited. The result for the year ended 31 December 2006 have been extracted
from the statutory financial statements of Cyan Holdings plc and restated in
accordance with the accounting principles applied by the Company.
Statutory financial statements for the year ended 31 December 2006 are available
on the Company's website www.cyantechnology.com and have been filed with the
Registrar of Companies. The Company's auditors issued a report on those
financial statements that was unqualified and did not contain a statement under
section 237(2) or section 237(3) of the Companies Act 1985; however the
auditor's report was modified to emphasise the uncertainty over the timing and
quantum of amounts which may be recovered from one of the Group's customers.
2. TRADE AND OTHER RECEIVABLES
Included within trade and other receivables is an overdue amount of £157,780 in
relation to a customer in China. The directors have assessed the need for a
provision against this risk, are actively pursuing these amounts, have concluded
that no provision is required at present, and are of the opinion that
substantially all amounts from this customer are recoverable.
3. LOSS PER SHARE
Basic and diluted loss per ordinary share has been calculated by dividing the
loss after taxation for the periods as shown in the table below.
Six months ended Six months ended Re-stated year
30 June 2007 30 June 2006 ended 31 December
unaudited unaudited 2006 audited
£ £ £
Losses (£) (1,834,258) (1,364,181) (2,533,289)
Weighted average number of shares 85,398,648 84,670,828 84,814,709
IAS33 'Earnings per Share' requires presentation of diluted EPS when a company
could be called upon to issue shares that would decrease net profit or increase
net loss per share. For a loss making company with outstanding share options,
net loss per share would only be increased by the exercise of out of the money
options. Since it seems inappropriate to assume that option holders would act
irrationally and there are no other diluting future share issues, diluted EPS
equals basic EPS.
4. RECONCILIATION OF OPERATING LOSS TO OPERATING CASH FLOWS
Six months ended Six months ended
30 June 2007 30 June 2006
unaudited unaudited Re-stated year
ended 31
December 2006
£ £ £
Operating loss (1,833,464) (1,430,014) (3,145,519)
Currency translation difference 15,569 19,027 26,209
Depreciation and amortisation 41,436 36,803 76,336
IFRS2 charge 5,757 84,286 173,529
Increase in inventories (38,755) (68,356) (48,339)
(Decrease)/Increase in trade and other receivables 14,198 134,035 (127,019)
(Decrease)/Increase in payables 21,480 (107,654) (88,443)
Net cash outflow from operations (1,773,779) (1,331,873) (3,133,246)
Research and development tax credit received - - 264,194
Net cash outflow from operating activities (1,773,779) (1,331,873) (2,869,052)
5. ANALYSIS OF CASH FLOWS
Six months ended Six months ended Re-stated year
30 June 2007 30 June 2006 ended 31
unaudited unaudited December 2006
£ £ £
Investing activities
Interest receivable and similar income 52,771 107,180 205,898
Interest payable and similar charges (53,565) (41,347) (69,225)
Purchase of property, plant and equipment (40,652) (19,611) (45,349)
Net cash (ouflow)/inflow (41,446) 46,222 91,324
Financing
Exercise of share options 94,150 15,841 30,849
Net cash inflow 94,150 15,841 30,849
6. POST BALANCE SHEET EVENT
Subsequent to 30 June 2007 the group raised further capital through two placings
on the AIM market totaling £5,330,000 through the issue of 53,300,000 ordinary
shares of 0.2 pence each at ten pence per share.
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