Final Results

RNS Number : 2442A

Cyan Holdings Plc

06 June 2016

 

Cyan Holdings plc

("Cyan or "the Company")

Results for the year ended 31 December 2015

 

Cyan Holdings plc (AIM: CYAN.L), the integrated system and software design company delivering mesh based flexible wireless solutions for utility metering and lighting control, announces its audited results for the year ended 31 December 2015.

Operational Highlights

                 ·      £1m smart metering order from Enzen Global Solutions in India, following incorporation of wholly owned
             subsidiary in India in January 2015

                 ·      Additional 13,000 unit smart metering order from Enzen in India

                 ·      Letter of intent for $3m smart meter order in Ghana

                 ·      Successful deployment of Cyan smart metering solution at Tata Power Mumbai

                 ·      Proof of concept order and distribution agreement in South Africa

                 ·      Strategic partnership agreement signed with Newcapec to enter China metering market

                 ·      New equity funding of £4.6m (gross) completed in June 2015

                 ·      Winner of a number of prestigious industry awards during the year, including Innovation of the Year Award at
             the 6^th annual Smart Energy UK & Europe Awards

Financial Highlights

	2015 £	2014 £	Percentage change
Revenue	272,012	193,550	+41%
Research and development expenditure	3,125,758	1,843,213	+70%
Other operating costs	1,886,938	1,487,301	+27%
Operating loss	(4,902,643)	(3,260,063)	-50%
Cash and cash equivalents	2,461,057	2,344,344	+5%

Post Year End Highlights

                ·      Transformational £10m purchase order for smart metering in Iran

                ·      As announced on 24 May 2016, the Board is considering its financing options to raise additional funding to be
            used for a potential acquisition and for working capital purposes, although the terms of any potential financing
            are yet to be agreed

                ·      Follow on order for a further 5,000 meters from Larson & Toubro for Tata Power

                ·      Paul Ratcliff joined Cyan Board of Directors as a Non-Executive

                ·      Received an R&D tax credit cash refund of £579,585 (2014: £401,344)

·      Investment of £450,000 at a significant premium to the then share price in March 2016

John Cronin, Executive Chairman of Cyan, commented:

"The last financial year has really demonstrated the value of the investment and momentum that was built in 2014, as our addressable markets continue to grow in terms of global reach and absolute size. We have not only strengthened existing relationships but have established new commercial partners, in new and existing territories. Recent orders further highlighted the scalability of our business model, with the Iran contract being ten times the size of the previous largest order.

"In addition, we continue to develop our name in the industry with the Company winning a number of prestigious awards, including being named winner of the Innovation of the Year Award. This is extremely important in providing the recognition that we feel our products deserve and to increase market demand for our product suite. We look forward to the coming year with confidence and expect to deliver further operational and financial progress."

Cyan Holdings plc	Tel: [phone]
John Cronin, Executive Chairman	www.cyantechnology.com
Cantor Fitzgerald Europe - Nomad and Broker Andrew Craig / Richard Salmond	Tel: [phone]
Beaufort Securities Limited - Joint Broker	Tel:  [phone]
Jon Belliss
Walbrook PR - Financial PR	Tel:  [phone]
Paul Cornelius / Nick Rome	[e-mail]

Chairman's Statement

Review of the year

I am pleased to update you on what has been an extremely busy and exciting year for your Company. During 2015, Cyan continued to build on the momentum achieved during 2014, strengthening relationships with partners in existing markets and establishing new commercial partners in both existing and attractive new territories. The results of our investments were clearly demonstrated in April 2016, when we announced a £10 million smart metering contract in Iran which was ten times larger than our previous largest order.

Any doubts we may have had about the markets not being ready for our products have receded as we are very active in the submission of a number of bids globally and have also received initial orders from new territories following the year end.

We were thrilled to receive two orders from Enzen Global Solutions Pvt Ltd ("Enzen") in India during the year, highlighting our strengthening relationships with key customers as well as the scalability of our business model. In addition, the follow-on order received post year-end to expand the deployment of our smart metering solution at Tata Power Mumbai ("Tata Power") provided further evidence that the Company is well placed to benefit from building on existing relationships.

We also continued to strengthen our geographic reach by signing a letter of intent ("LOI") with El Sewedy Electrometer Group EMG ("El Sewedy") to supply Cyan's CyLec® Advanced Metering Infrastructure ("AMI") solution for a smart meter contract which El Sewedy has been awarded in Western Africa. Following the year-end, we received an £10 million order for smart metering in Iran, which opens up a significant new market for Cyan following the lifting of international trade sanctions in January 2016.

Another significant milestone was our entry into the Chinese smart metering market via a strategic partnership agreement with Newcapec Electronics Company Limited ("Newcapec"). In order to help further drive our growth in Asia we appointed Vikas Kashyap as Vice President Asia during the year with a view to further expanding our presence in the region. We now have 15 staff based in India focused on growing our sales pipeline and delivering customer projects.

Our continued focus on developing AMI opportunities and the combination of services, software and hardware we provide has enabled the Company to benefit from growing recurring revenues and visibility. Importantly, the successful deployment of initial orders and scale of opportunities provided by our partners provide further scope for the Company to grow its footprint.

I was delighted that during 2015 Cyan was named winner of a number of prestigious industry awards, providing our products with the recognition we feel they deserve, and giving a good indication of their potential in a number of fields. In February 2015, Cyan was named winner of the Innovation of the Year Award at the 6^th annual Smart Energy UK & Europe Awards, for its CyLec smart metering solution designed for the power sector in next-generation economies. In November 2015, we were thrilled to win two further awards, the first being the prestigious Smart Metering, ICT & Data Management Award presented at the European Utility Week held in Vienna. This award was for Cyan's CyLec retrofit smart metering module, designed for the power sector in emerging economies. We were also awarded the Future City Technology of the Year Award for our smart city communication platform at the Business Green awards in November 2015, with other shortlisted companies in this category including Siemens.

Your Board made significant further personal investments in the Company during 2015, both as part of the placings described in the financial review and in the open market. We hope that these investments give you, an indication of our confidence in the Company and its future prospects. The Board firmly believes that Cyan is at a pivotal point, with well-established technology that is being recognised as such by the markets we address, and we continue to build on the exciting opportunities currently being presented to the Company.

Financial Review

During the year, the Company raised £4,590,000 before expenses, by way of two share placings. This income provided funds for staffing costs for the delivery of customer projects won in India, development of managed services solutions, business development, customer deployments and further product development work.

Revenue increased from £193,550 in 2014 to £272,012 in 2015. Operating loss for the year ended 31 December 2015 was £4,902,643 (2014: £3,260,063) and net loss increased to £4,315,693 (2014: £2,853,963). Cash at year end was £2,461,057 (2014: £2,344,344).

India

The key driver for the Company in India was that we strengthened relationships with existing clients and won several new orders. The main reference point here is the two contracts worth in aggregate approximately £1.5m from Enzen. These contracts, which were announced in January 2015 and November 2015 are being implemented on behalf of Chamundeshwari Electricity Supply Corporation Limited ("CESC") and Paschimanchal Vidyut Vitran Nigam Limited ("PVVNL") respectively.

Importantly both of these contracts provide both visibility and credibility. The CESC order worth £1m, is believed to be the first commercial implementation of AMI technology by a public utility for consumers in India. As announced, it is for the provision of over 21,000 smart meters and associated hardware and software along with facility management services for a period of two years post deployment. The majority of the revenue on this project will be booked in 2016.

The PVVNL order, with an initial value of circa £500,000, is for the provision of over 13,000 smart meters and associated hardware and software. Again, with Cyan's managed services offering being charged on a per meter per year basis the Company has a visible revenue stream once deployment is complete. As previously announced, the first meters will be installed and commissioned in the first half of 2016 with all the meters deployed and commissioned before the end of the year.

The Company also successfully deployed the Cyan AMI communications solution for 5,000 smart meters for Tata Power during the year. The success of this original project, with meters providing data to generate customer bills, real-time information on electricity outages and other factors related to the quality and cost of power delivery, resulted in a follow on order for a further 5,000 meters post year-end. This demonstrates the confidence that Tata Power place in the quality of the Cyan smart metering solution.

In January 2015, we completed our incorporation of Cyan Technology India Private Limited, a wholly owned subsidiary of Cyan Holdings plc. This subsidiary was set up to show our support for the 'Make in India' and 'Skills India' initiatives of Prime Minister Modi, whereby we intend to provide local people with jobs and skills to support innovation and industry in the country.  At the start of the year we employed six staff in India and have continued to grow the subsidiary over the course of the year. We intend to further expand this operation as additional opportunities present themselves to us.

I was privileged to be invited to a reception at London's Guildhall in November 2015 where Prime Minister Modi and the UK Prime Minister David Cameron met to discuss deepening collaboration between the UK and India. I am delighted that Cyan can be part of the business ties discussed at this reception, particularly the smart city initiatives mentioned by Prime Minister Modi.

Rest of World

The Company's ever-expanding ecosystem of partners ensures that it is well placed for growth in a number of regions. Our focus has been on establishing relationships with partners that provide highly scalable opportunities. The first steps involve getting through the door with the initial aim of proving our solution and then building on this towards a long term, visible order book. Our experienced Board and know-how have led to a number of opportunities and building blocks being put in place in Africa, China, Brazil and Iran - all key markets outside of India.

In March 2015, we announced a non-exclusive distribution agreement with XLink Communications (Pty) Ltd ("XLink") to distribute Cyan's smart metering and lighting solutions as well as related Internet of Things ("IoT") applications in South Africa. This agreement included an initial order for Cyan's smart metering hardware and software, CyLec, for a 100 unit Proof of Concept project in South Africa.

We further broadened our reach in South Africa as Adenco Construction (Pty) Ltd ("Adenco") selected Cyan as a preferred supplier of smart metering and lighting solutions as well as related IoT applications.

The non-binding LOI we signed with El Sewedy in May provides scope for the Company to provide a full AMI solution for up to 200,000 consumers in Ghana, Western Africa. If deployed in full the contract could be worth up to $3m to Cyan. In addition, we received an order from El Sewedy for a 120 smart meter pilot project for an additional 40,000 unit opportunity also in Ghana.

In December we announced that we have entered the Chinese smart metering market via a partnership agreement with Newcapec which also provides significant scope for growth. China remains a key market for Cyan and is one that continues to focus increasingly on IoT. 

In February 2016, we announced a purchase order from Micromodje for a street traffic cameras smart metering project in Iran. The order was placed only a couple of weeks after international sanctions in Iran were lifted on 16 January 2016 and is believed to be one of the first orders secured by a UK business, with support from the specialist UK Trade and Investment team. Following the successful pilot of this smart metering project in February and March 2016, Micromodje placed a £10 million order in April for Cyan's AMI solution for 360,000 electricity meters, with over 50% of the order value being recurring software licenses. This purchase order is significantly larger than any purchase order received to date by Cyan and marks a step change in the Company's commercial progress. Cyan has started a dialogue with Micromodje on the next planned rollout of 1 million units, a meaningful step to securing a greater slice of the Iranian market requirement for smart electricity meters, totalling 33 million meters.

In May 2016, we also announced the signing of an agreement with JST Group in Thailand to distribute Cyan's solutions locally as well as winning the Best International Trade category award at the UK Energy Innovation Awards.

Board Changes

At the end of 2015 Peter Mainz was required to step down from the Board of Directors following his appointment to the Board of Itron. I was pleased, however, that Peter agreed to remain as a Senior Advisor to the Board of Cyan, and would like to thank him for his invaluable contribution and support whilst serving on your Board. I was also pleased to announce the appointment of Paul Ratcliff as a non-executive director to the Company with effect from 1 January 2016. I believe his wealth of business experience will greatly complement the skills of the current Board of Cyan.

I would now also like to announce that it is the intention of John Read, former Chairman of Cyan, to step down from his role as non-executive director during the coming months due to retirement. John has agreed to remain in office until a suitable replacement has been found. We will be commencing a search for this replacement, and will update you further on this at the annual general meeting of the Company.

Employees

I would like to take this opportunity to personally thank each and every one of our employees for their significant efforts during this busy, challenging and exciting year. I am extremely proud of each of their achievements and contribution to the Company and look forward to working with them during 2016, building on the momentum of 2015.

Outlook

2015 was a key year during which we positioned the Company for highly scalable growth. A widened geographic reach and growing levels of recurring revenue provide a solid basis for the year ahead. Having started 2016 with a follow on order for a further 5,000 meters to be installed at Tata Power, and with the new £10 million order from Iran, we are excited by the prospects of repeat orders from current clients and building new relationships in the fast growing territories we're operating in.

We already have a high level of revenue visibility for the current year with the majority of sales from both of the Enzen contracts to be booked this year, with a significant element in the first half. The focus now is on fulfilling these orders and building on our existing order book.

I was delighted to be approached by new investors wishing to take advantage of the EIS tax relief available through investments in Cyan during the tax year ending on 5th April 2016. I was particularly pleased that we were able to secure these investments at a significant premium to the then current share price.

The Board and I are looking forward to the year ahead. Our strategy is starting to work as we build on all of the relationships created and opportunities presented to us in recent years. We are now well placed to take advantage of a growing market in India in particular and other opportunities globally. We remain as focused as ever on driving value for our shareholders. I would like to take this opportunity to personally thank you for your continued support.

John Cronin

Executive Chairman

3 June 2016

Strategic Report

STATEMENT OF SCOPE

This Strategic Report has been prepared solely to provide additional information for shareholders to assess the Company's strategies and the potential for those strategies to succeed.

The Strategic Report contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

The Directors, in preparing this Strategic Report, have complied with s414C of the Companies Act 2006.

This Strategic Report has been prepared for the Group as a whole and therefore gives greater emphasis to those matters which are significant to Cyan Holdings plc and its subsidiary undertakings when viewed as a whole.

BUSINESS MODEL

Electricity Metering

Cyan provides a communication platform that enables utilities to transform their power grid infrastructure into a smart grid that intelligently controls millions of electricity meters, providing timely information and control to both utilities and consumers. CyLec powers the next generation of advanced Radio Frequency ("RF") smart meters which enable power utilities to reduce losses and increase revenues through reliable and secure collection of consumer energy consumption data.

Cyan's business model is to provide hardware and software that enables the smart grid. Its revenue is derived from the following principal elements:

·      A small hardware communication module that can be integrated into the electricity meter of Cyan's meter manufacturer partners (such as Larson & Toubro), or retrofitted to existing legacy meters. With the addition of this module, the meter is then enabled to communicate back to the utility's data centre.

·      A further piece of hardware is a Data Concentrator Unit ("DCU"). This allows meters in consumers' homes to communicate with each other over a self-forming, self-healing mesh network.

·      Software "CyLec Server" that sits in the utility's data centre and communicates with the DCU (and therefore all of the individual meters) over a secure internet connection (typically a mobile data network).

Cyan generally sells and delivers solutions through local partners in each country. Its revenues are derived from sales to local meter manufacturers or system integrators ("SIs") and in 2015 it has concluded sales through both channels. Over time Cyan expects SIs to take a lead role in providing a complete solution to utility customers and will bring in software/hardware from Cyan and meter manufacturers. Cyan believes that its approach to the market is ideally suited to the dynamics of emerging countries where local partnerships, local manufacturing and price competitive hardware are critical.

Cyan licenses its CyLec software to either the end utility customer to host themselves or on the basis of a Cyan hosted Software as a Service ("SaaS") solution. In both cases, it receives either an upfront or a recurring revenue stream that is based on both the size of the customer's meter installation base as well as the features (such as tamper alerts and remote disconnect) that have been enabled for the utility customer.

Lighting

The business model for lighting is very similar to that of electricity metering. In the case of lighting, the Cyan module is contained in the lighting ballast. The rest of the solution and the business model remains the same as metering above and this commonality enables Cyan to benefit from economies of scale in development and manufacturing.

Internet of Things/Smart Cities

The business model for IoT/Smart City solutions is also very similar to that of electricity metering and lighting. The same Cyan modules used for electricity metering and lighting can be used as nodes within IoT/Smart City networks to connect together devices such as street traffic cameras, parking sensors, gas meters, water meters and any other application. The value and scalability of Cyan's business model will build rapidly as more Cyan powered devices are connected through its single mesh network and feed back to a common data centre containing its control software.

Competitive Position

To date, Cyan's solution has had over 200 man-years of development by a very capable engineering team in Cambridge, UK and this has created a substantial barrier to entry. Its solutions solve large, complex, cross domain problems utilising skills such as RF hardware design, regulatory approval experience, mesh network firmware design, communications infrastructure development, meter protocol and interoperability techniques, security, enterprise software, scalability and robustness.

Cyan's solution has been designed and built for emerging markets, whilst its competitors have generally chosen western markets. It can be integrated into new meters, or retrofitted to existing meter infrastructure to avoid rip-and-replace costs. Its solution is inherently low power and this has helped Cyan to achieve a highly competitive price point for emerging market mass adoption. The Cyan mesh network is self-healing and self-configuring, which results in significant time (and therefore cost) savings for customers. Its DCU has also been designed to be highly functional, but in a small package which results in a competitive price point. Cyan offers sub-GHz wireless mesh solutions that are inherently suited to dense housing conditions typical of emerging markets. The network uses license free ISM (Industrial, Scientific and Medical) radio bands, which means that Cyan's customers do not need to invest in or pay for costly tower structures to carry the radio signals.

A FAIR REVIEW OF THE BUSINESS

Metering

Cyan has made good progress in smart metering in existing target markets during 2015 and in the subsequent period up until the date of preparation of this report. It has also expanded its global focus to include Africa, Iran and other potential emerging markets worldwide. In January 2016, the Northeast Group published a research report stating that smart grid infrastructure investment is expected to reach $26 bn by 2025 and that investment in Advanced Metering Infrastructure projects in 2016 would be at twice the level of 2015.

The Government of India produced and released a Smart Grid Vision and Roadmap for India in 2013, which contains plans for 14 smart grid pilot projects. Several of these pilot projects are now underway and Cyan (through its partners) has bid on several of them. As a result of the first of these 14 smart grid projects to be awarded, Cyan received a purchase order in early 2015 worth approximately £1m from Enzen for a large pilot project being implemented for CESC, Mysore in southwest India. Cyan will supply over 21,000 smart meters and associated hardware and software and act as Enzen's end-to-end solution provider for smart metering. Cyan's management believes this is the first commercial implementation of AMI technology by a public utility for consumers in India. Cyan remains well positioned to win further projects out of these 14 smart grid pilot projects.

This was followed up in November 2015 by a purchase order from Enzen for a commercial smart metering implementation for PVVNL in Uttar Pradesh, India. Cyan will provide over 13,000 smart meters and associated hardware and software while the Company's head end software will be provided as a managed service hosted by Cyan and charged on a per meter per year basis, delivering a recurring revenue stream. The order from PVVNL is Cyan's second commercial implementation of AMI technology by a public utility for consumers in India.

Opportunities have emerged with private utilities in India and Cyan has progressed both commercial and pilot project orders throughout 2015. In April 2015, Cyan announced the successful deployment of 4,000 units by Tata Power Mumbai for Cyan's integrated CyLec solution. The Directors believe this to be is the first 865MHz AMI commercial volume project in India. Tata Power placed a follow on order for an additional 5,000 meters in January 2016.

The Indian market is a huge opportunity for the Company, with an estimated 120-200 million meters that need to be installed/replaced over the next 10 years as well as the Indian utilities' pressing need to reduce losses due to electricity theft. In addition, following the election of a new Prime Minister in 2014, one of the top priorities of the new government is to provide stable 24 x 7 power supply to all households by 2019. For this initiative to be successful, most utilities would have to resort to Demand Response (curtailing or shifting certain loads) for which AMI is essential.

One of the obstacles the utilities face is collecting data from millions of meters deployed in rapidly growing and typically unplanned urban conditions. It is often problematic trying to locate and gain physical access to the meters and the process is at best slow or error prone. Cyan's AMI solutions address these key issues by providing high quality and timely information from each meter. Its 865MHz based solution has been specifically designed to cope with demanding specifications such as a communication range of more than 60 metres and to be able to be read through concrete walls in order to cope with the dense urban conditions in India. By comparison, a 2.4GHz Zigbee solution has been observed to struggle to achieve a reliable communication range greater than 30 metres in the same challenging conditions.

India's transmission and distribution losses are among the highest in the world. When non-technical losses such as energy theft are included in the total, these losses increase to as high as 65% in some Indian States against an overall average of 30%-40%. The financial loss has been estimated at 1.7% of the national GDP. Frost & Sullivan have estimated that $32 bn of power generated in India is not accounted for through billing to customers.

In November 2015, the Indian Prime Minister Narendra Modi approved Ujwal Discom Assurance Yojana ("UDAY") scheme, which is targeted to deliver financial turnaround for power distribution

companies. The UDAY scheme stipulates the deployment of smart meters for consumers in phased rollout by 2017 and then 2019, with a target to install 35 million smart meters by 2019. It also includes a programme to eliminate State Distribution company debt through assignment to States and then bond issues. Following this, in February 2016 the President of the India Smart Grid Forum (Reji Pillai) predicted that the market for smart grid in India will reach INR 50,000 Crore (~£5 bn) in the next four to five years, with this being driven by the Government's plan to set up 100 smart cities and 500 smart towns. In March 2016, the Indian Power Minister laid out an opportunity to install 250 million smart meters in the period to the end of 2019 and also characterised the UDAY programme as a 'game changer'.

Cyan provides a platform product (CyLec) to enable deployment of AMI. AMI is an architecture for automated end-to-end bi-directional communications between a utility company and electricity meters (smart meters). The CyLec solution provides utilities with real time data about power consumption and allows customers to make informed choices about energy usage based on price at time of use. The CyLec solution includes hardware and software to enable this communication and allows easy interfacing to existing meter data management systems ("MDMS"), billing systems and other Smart Grid infrastructure monitoring tools within the utility such as outage detection and load management. Consumer meter tamper and electricity theft detection features are included and this helps utilities ensure they collect revenue for electricity that is used by consumers. The CyLec retrofit solution has proven easy to integrate to existing meters from various metering companies to upgrade them to be AMI compatible smart meters.

In South America, the distribution loss rate of 15.5% is the highest in the world due to pervasive electricity theft (power outages are a continuing problem). In some parts of Brazil, power losses reach as high as 20%. According to Northeast Group, spend in South America on smart metering will reach $19 bn with 80.7m meters by 2023. One Brazilian electricity distribution company has estimated that 11GW of power (equivalent to $6 bn) is lost in the country due to AT&C losses.

According to the World Bank, Sub-Saharan Africa is on the threshold of a decade of strong economic growth, yet 68% of its 880 million inhabitants lack access to electricity. To put this into perspective, only 32% of the population has access to electricity, comparable to other emerging countries such as India at 40%. Across the African continent, only 10% of the population has access to the electrical grid and in these areas power is often unreliable. In February 2016, the Northeast Group published a research report stating that sub-Saharan countries will invest $8 bn in electricity metering by 2026 and commented that nearly one third of electricity produced in Africa is never properly billed to customers.

In March 2015, the Company announced that it has signed a proof of concept order and distribution agreement with XLink to distribute Cyan's smart metering and lighting solutions as well as related IoT applications in South Africa. This was followed in May 2015 by the Company's selection by Adenco as a preferred supplier of smart metering and lighting solutions as well as emerging, related IoT applications in South Africa.

Another key development was the letter of intent ("LOI") from El Sewedy Electrometer Group EMG ("El Sewedy") to supply Cyan's CyLec AMI solution for a smart meter contract which El Sewedy has been awarded in Western Africa.

The LOI states that, subject to contract, El Sewedy intends to appoint Cyan to provide a full AMI solution for up to 200,000 consumers in batches over three years.  If deployed in full the contract could be worth up to $3m to Cyan.  Cyan will immediately start working towards signing a contractual order with El Sewedy for the 200,000 meters indicated, but the LOI is no guarantee of the terms or timing of any such order or if a contract will be signed. 

In February 2016, we announced a purchase order from Micromodje for a street traffic cameras smart metering project in Iran. The order was placed only a couple of weeks after international sanctions were lifted on Iran on 16 January 2016 and is believed to be one of the first orders secured by a UK business, with support from the specialist UK Trade and Investment team. Following the successful pilot of this smart metering project in February and March 2016, Micromodje placed a £10 million order in April for Cyan's AMI solution for 360,000 electricity meters, with over 50% of the order value being recurring software licenses. This purchase order is significantly larger than any purchase order received to date by Cyan and marks a step change in the Company's commercial progress. Cyan has started a dialogue with Micromodje on the next planned rollout of 1 million units, leading to the overall Iran market requirement of 33 million smart electricity meters.

Lighting

Cyan continues to receive and deploy small orders for its smart lighting solutions across multiple geographies.

Internet of Things/Smart Cities

The order received in February 2016 from Micromodje in Iran for smart metering of street traffic cameras starts to demonstrate the applicability of Cyan's technology for IoT and smart city solutions on a global basis.

Operational Review

Key Financials

Commercial orders remained well below the level required to sustain the business. In 2015, the Company raised £4,590,000 before expenses, by way of share placings. This income provided the Company incremental financial resources for general working capital, customer and partner development activities in India and further development to integrate Cyan's AMI solution into high level enterprise software.

A summary of the key financial results is set out in the table below and discussed in this section.

	2015 £'000	2014 £'000	2013 £'000	2012 £'000
Revenue	272	194	138	315
Research and development expenditure	3,126	1,843	1,479	1,141
Operating loss	4,903	3,260	3,267	3,104
Cash and cash equivalents	2,461	2,344	1,636	1,619
Average monthly operating cash outflow	438	253	247	278

Going Concern

To assess the ability of Cyan Holdings plc ("Group") to continue as a going concern, the directors have prepared a business plan and cash flow forecast for the period to 30 June 2017 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 gross margin on those sales, together with the need to secure additional finance. At the time of preparation of this report, the Directors are at an advanced stage in the process of raising additional working capital for the Group together with a potential acquisition as announced on 24 May 2016.

The directors have recognised that the Group is trading principally in five emerging country markets, namely India, Brazil, China, Sub-Saharan Africa and Iran. These markets have an inherent level of uncertainty associated with them and this may result in the predicted level of sales not being achieved and/or the timing of orders being delayed, as has been the case for the Group in the past. The directors have taken reasonable steps to satisfy themselves about the robustness of sales forecasts but acknowledge that the timing of customer orders in the Group's target markets is fundamentally uncertain. This may impact both the Group's ability to generate positive cash flow and to raise new finance.  Consequently, there is a significant risk that the level of sales achieved is materially lower than the forecast or at materially lower margins. This constitutes a material uncertainty.

Given the commercial prospects at the time of the preparation of this report, together with the prior track record of the Group in raising new equity financing, the directors consider that the Group has a good opportunity to secure the additional funding that will be required. There remains a significant risk that the required level of new funding will not be received in the necessary timescales or at all. This constitutes a material uncertainty.

There is a material uncertainty related to the assumptions described above which may cast significant doubt on the Company's ability to continue as a going concern and, therefore, it may be unable to realise its assets and discharge its liabilities in the normal course of business.  The financial statements do not include the adjustments that would result if the Company was unable to continue as a going concern.  In the event the Company ceased to be a going concern, the adjustments would include writing down the carrying value of assets, including stocks, to their recoverable amount and providing for any further liabilities that might arise.

Notwithstanding the material uncertainties described above, the directors have a reasonable expectation that the Company and Group can continue to meet their 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 20 to the financial statements.

Dividends

The directors do not recommend the payment of a dividend (2014: £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 a company operating in this industry sector and at Cyan's stage of its development.

Consolidated income statement

For the year ended 31 December 2015

	Note		2015		2014
			£		£
Continuing operations
Revenue			272,012		193,550
Cost of sales			(161,959)		(123,099)
Gross profit			110,053		70,451
Operating costs			(5,012,696)		(3,330,514)
Operating loss			(4,902,643)		(3,260,063)
Investment revenue			8,282		5,157
Finance costs			(917)		(391)
Loss before tax			(4,895,278)		(3,255,297)
Tax			579,585		401,334
Loss for the year			(4,315,693)		(2,853,963)
Loss per share (pence)
Basic	2		(0.8)		(0.1)
Diluted	2		(0.8)		(0.1)

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2015		2015		2014
		£		£
Loss for the year Items that may be reclassified subsequently to profit and loss		(4,315,693)		(2,853,963)
Exchange differences on translation of foreign operations		4,081		-
Total comprehensive income for the period		(4,311,612)		(2,853,963)

Consolidated balance sheet

At 31 December 2015

	Note		2015 £		2014 £
Non-current assets Intangible assets			-		-
Investments			26,308		-
Property, plant and equipment			29,967		23,726
			56,275		23,726
Current assets
Inventories			587,484		574,530
Trade and other receivables			845,667		574,248
Cash and cash equivalents			2,461,057		2,344,344
			3,894,208		3,493,122
Total assets			3,950,483		3,516,848
Current liabilities
Trade and other payables			(747,933)		(508,290)
Total liabilities			(747,933)		(508,290)
Net current assets			3,146,275		2,984,832
Net assets			3,202,550		3,008,558
Equity
Share capital	3		680,320		446,493
Share premium account			38,085,627		33,911,618
Own shares held			(808,856)		(808,856)
Share option reserve			624,411		522,562
Translation reserve			(145,661)		(149,742)
Retained losses			(35,233,291)		(30,913,517)
Total equity being equity attributable to owners of the Company			3,202,550		3,008,558

Consolidated Statement of Changes in Equity

At 31 December 2015

	Share Capital	Share Premium	Own shares held	Share Option Reserve	Translation Reserve	Retained Losses	Total Equity
	£	£	£	£	£	£	£
Balance at 31 December 2013	341,638	30,570,401	(808,856)	376,690	(149,742)	(28,059,554)	2,270,577
Loss for the year	-	-	-	-	-	(2,853,963)	(2,853,963)
Total comprehensive income for the year	-	-	-	-	-	(2,853,963)	(2,853,963)
Issue of share capital	104,855	3,341,217	-	-	-	-	3,446,072
Credit to equity for share options	-	-	-	145,872	-	-	145,872
Balance at 31 December 2014	446,493	33,911,618	(808,856)	522,562	(149,742)	(30,913,517)	3,008,558
Loss for the year	-	-	-	-	-	(4,319,774)	(4,319,774)
Other comprehensive income for the year	-	-	-	-	4,081	-	4,081
Total comprehensive income for the year	-	-	-	-	4,081	(4,319,774)	(4,315,693)
Issue of share capital	233,827	4,174,009	-	-	-	-	4,407,836
Credit to equity for share options	-	-	-	101,849	-	-	101,849
Balance at 31 December 2015	680,320	38,085,627	(808,856)	624,411	(145,661)	(35,233,291)	3,202,550

 

Consolidated cash flow statement

For the year ended 31 December 2015

 

	Notes	2015			2014
		£			£
Net cash outflow from operating activities	4	(4,236,638)		(2,713,621)
Investing activities
Interest received		8,281		5,157
Purchases of property, plant and equipment		(35,541)		(29,022)
Purchases of bank securities		(26,308)		-
Net cash used in investing activities		(53,568)		(23,865)
Financing activities
Interest paid		(918)		(391)
Proceeds on issue of shares		4,678,103		3,655,275
Share issue costs		(270,266)		(209,203)
Net cash from financing activities		4,406,919			3,455,681
Net increase in cash and cash equivalents		116,713			708,195
Cash and cash equivalents at beginning of year		2,344,344			1,636,149
Cash and cash equivalents at end of year		2,461,057			2,344,344

Notes to the Financial Statements

For the year ended 31 December 2015

1.   General information

Cyan Holdings plc is a company incorporated in the United Kingdom under the Companies Act 2006. The address of the registered office is Cyan Holdings plc, Buckingway Business Park, Swavesey CB24 4UQ.

The final results announcement is based on the financial statements which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.

The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2015 or 2014, but is derived from those accounts. Statutory accounts for 2014 have been delivered to the Registrar of Companies and those for 2015 will be delivered following the company's annual general meeting. The auditors have reported on those accounts: their reports were unqualified and did not contain statements under s498 (2) or (3) Companies Act 2006 or equivalent preceding legislation but did contain an emphasis of matter concerning the uncertainties around the Group's ability to continue as a going concern.  While the financial information included in this preliminary announcement has been prepared in accordance with the measurement and recognition criteria of IFRS, this announcement itself does not contain sufficient information to comply with IFRS. The company expects to publish full financial statements that comply with IFRS, as adopted by the EU, a copy of which will be posted to the shareholders.

The financial statements were approved by the Board of Directors on 3 June 2016 and authorised for issue.  The Group's specific IFRS accounting policies can be found in the 2014 annual report.

2.   Loss per share

The calculation of the basic and diluted loss per share is based on the following data:

Loss

			2015		2014
			£		£
Loss for the purposes of basic loss per share being net loss attributable to equity holders of the parent
		4,315,693			2,860,711

Number of shares

			No.				No.
Weighted average number of ordinary shares for the purposes of basic and diluted loss per share				5,631,383,257				3,279,766,136

3.   Share Capital

		2015		2014
		£		£
Issued and fully paid:
6,802,451,764  ordinary shares of 0.01 pence each (2014: 4,464,176,891 ordinary shares of 0.01 pence each)		680,320		446,493

4.   Notes to the consolidated cash flow statement

				2015	2014
				£	£
	Operating loss for the year			(4,902,643)	(3,260,063)
Adjustments for:
	Depreciation of property, plant and equipment			29,300	9,171
	Share-based payment expense			101,849	145,872
Operating cash flows before movements in working capital			(4,771,494)		(3,105,020)
	(Increase) / decrease in inventories			(12,954)	8,670
	Increase in receivables			(93,167)	(97,255)
	Increase in payables			239,643	209,849
Cash reduced by operations				(4,637,972)	(2,983,756)
	Income taxes received			401,334	270,135
Net cash outflow from operating activities				(4,236,638)	(2,713,621)

Cash and cash equivalents (which are presented as a single class of assets on the face of the balance sheet) comprise cash at bank and other short-term highly liquid investments with maturity of three months or less.

5.   Annual Report and Accounts and Notice of Annual General Meeting

The Company's Annual Report and Accounts in word format are available on the Company's website. The Notice of AGM and Proxy Form will be posted to shareholders on 6 June 2016 and the full colour Annual Report and Accounts will be posted to shareholders on 7 June 2016. The AGM will be held on 30 June at 11am at Taylor Vinters, Merlin Place, Milton Rd, Cambridge CB4 0DP.

 

END

 

 

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