Trading Update

RNS Number : 3454K

CyanConnode Holdings PLC

10 April 2018

 

CyanConnode Holdings plc
("CyanConnode" or the "Company")

Trading Update

CyanConnode, the world leader in narrowband radio mesh networks, today publishes a trading update for the first calendar quarter of 2018. Since the start of the year, the Company has seen increasing momentum and demand for its products across multiple jurisdictions, which will result in the Company generating more revenues in the first half of 2018 than in the full year for 2017. The Company expects levels of revenues and cash receipts to materially accelerate throughout each quarter of the year and key commercial and financial highlights of the quarter are outlined below.

Commercial Highlights

Following the appointment of Anil Daulani¹, from Tech Mahindra, as Managing Director of CyanConnode India in September 2017, both the sales and delivery teams have been significantly strengthened. The relationships with existing meter and system integration partners have been consolidated and new eco-system partners added. As a result, the sales pipeline in India has expanded and includes multiple large commercial opportunities where orders are expected to be placed in the current calendar quarter and the second half of 2018, resulting in cash and revenues during 2018.

In addition, the Company has generated revenues and been paid for system integration work during the quarter by working with local Tier 1 partners in three separate territories, including two new territories. These three commercial opportunities could result in significant orders which the Company will continue to pursue. An additional benefit of this work is that the Company has increased the number of successful integrations with Tier 1 meter manufacturers, including some manufacturers with which the Company has not previously been engaged.

Once an order has been received from a customer, the project continues through a series of site acceptance tests (SATs) with increasing deployment volumes and complexity. Successful SATs have been delivered by the team in multiple territories during Q1 2018. SATs have also been delivered in territories where orders had been received prior to 2018 such as Iran and Bangladesh.

During the quarter, work on the smart metering contracts in Iran continued. System integration work has taken place on both the smart meter as well as the full end-to end-solution to be deployed locally. Additional commercial opportunities have also been identified in Iran and are being developed.

In the last Trading Update provided on 4 January 2018, the Company updated that it had been notified by a significant customer that deployment for one of the larger contracts had been delayed for reasons outside the Company's control. A regular dialogue has continued with this customer throughout the quarter, including a senior management visit to their head office to meet the CEO. The customer has reconfirmed that they will take delivery of the hardware that CyanConnode manufactured for them in Q4 2017, but currently the Company has little visibility on timing of the first delivery. The Company will provide a further update on progress in relation to this as soon as practicable.

The UK Smart Metering Implementation continues to progress with over 11 million smart meters now installed in homes across the country, according to new figures published by the government. Furthermore, Smart Energy GB outlook survey provides clear evidence that the overwhelming majority of customers who have smart meters installed are happy to have them. The outlook found 73% of people would recommend one and more than eight in ten of people with a smart meter think their energy bill is accurate compared to 67% with a traditional analogue meter. During 2018, the Company expects to benefit from the roll-out of the UK Smart Metering Implementation Programme. Licences for the contract were supplied by Connode and paid for prior to its acquisition by the Company in 2016, and these have been built into the roll out.  

¹ An interview with Anil Daulani is available through this link: 
http://webcasting.brrmedia.co.uk/broadcast/5a1595583b59b604fb0b713a

Financial Highlights

At the end of the quarter, the Company had a global order book of $100 million and a large identifiable global pipeline, with new orders expected in the near term.

The CESC Mysore contract India has now officially passed the User Acceptance Testing milestone which has resulted in a large cash payment having been received. The customer contract from Genus meters for UGVCL in India is proceeding much faster than previous India projects, with deliveries having been made, payments already received, and completion expected in the coming months.

As a result of the increased spending on R&D in 2017, which was to develop the Company's new standards-based Omnimesh platform, an R&D tax credit cash refund claim will be submitted this month for £1.4 million (2016: £0.7 million). This includes an amount for claims submitted for the Swedish entity in prior years.

The Company has taken positive steps to manage and reduce the cost base, with significant reductions being made in the last six months. The cost base from July 2018 is expected to be around £640k per month, which is significantly lower than in 2017.

Admission of final tranche of September 2017 Subscription Shares

On 15 September 2017, the Company announced a placing and subscription to raise £8.6 million through the issue of 30,852,488 ordinary shares of 2 pence each ("Ordinary Shares") at an issue price of 28 pence per Ordinary Share. It was announced that 1,785,714 of these Ordinary Shares were due to be issued to an existing shareholder and admitted on 10 April 2018. As a result of timings resulting from HMRC clearance and approval of EIS relief, these Ordinary Shares will not be admitted on 10 April 2018 and the Company will provide an update as soon as clearance has been granted.

Outlook

The Company remains confident of the commercial opportunities, with further conversion of the current order book into delivered contracts, as well as additional significant orders expected. As a result of the successful deployment of the current contracts in India, further new and extension contracts are expected, including new orders in the near term. A significant development of the Omnimesh platform will complete this quarter², which will facilitate the Company's ability to both compete for and deliver contracts in the larger IoT market. As a result, the Company expects revenues for the first half of the year to be greater than those achieved for the entirety of the 2017 financial year. Assuming that the Company converts a sufficient number of the above opportunities into orders during 2018, the Company expects revenue and cash receipt progression to materially accelerate and therefore the Board remains optimistic of meeting market expectations for revenues during 2018. There is a large level of uncertainty on timings relating to delivery of some larger items in the order book and pipeline, which could cause a significant change in revenues, both to the upside and downside.

The Company will provide a further update on trading progress alongside its annual results announcement for 2017 which is expected in mid-May 2018.

² An interview with Sylvain Vittecoq, CTO, which gives more information on the new Omnimesh platform is available through this link: 
https://www.brrmedia.co.uk/broadcasts-embed/5ac3435c9d7a167511f4d79c/event/?livelink=true&popup=true  

 

John Cronin, CyanConnode Executive Chairman, commented: "Solid progress was made on multiple fronts in the first quarter of 2018. We continue to maintain management team focus on the delivery of the current order book, including the delayed contract highlighted above. In addition to the successful SATs described above I'm particularly pleased by the progress made by Anil Daulani in the India market over the last six months. We continue to be viewed as thought leaders in the smart metering communication industry as a result of the multiple contracts we have won and deployed. The commercial pipeline in India looks very good and we expect to secure additional orders from this pipeline in the near term. All of the above factors give us a good indication of being able to meet market expectation for the year."

The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.

Enquiries:

CyanConnode Holdings plc	Tel: [phone]
John Cronin, Executive Chairman	www.cyanconnode.com
FinnCap Ltd (Nomad and Broker)	Tel: [phone]
Adrian Hargrave / Giles Rolls (Corporate Finance) Alice Lane (Corporate Broking)
Walbrook PR (Financial PR) Paul Cornelius / Nick Rome	Tel:  [phone] [e-mail]

About CyanConnode

CyanConnode is a world leader in narrowband RF mesh networks that enable Omni Internet of Things (IoT) communications. Its innovative solutions use sub GHz frequencies and are optimised for exceptional performance. Optimal solutions provide a higher end-to-end quality of service and a lower total cost of ownership. The IPv6/6LoWPAN product set delivers standards-based solutions enabling innovation and the rapid implementation of 3^rd party applications. Through its global partner eco-system, CyanConnode provides customers with the flexibility and choice required to converge networks for applications in smart cities and IoT, delivering increased customer value.  

For more information, please visit www.cyanconnode.com.

 

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