Trading Update

RNS Number : 4171U

CyanConnode Holdings PLC

12 July 2018

 

CyanConnode Holdings plc

("CyanConnode" or the "Company")

Trading Update

H1 Revenues exceed those achieved in FY 2017

H2 Revenues are expected to materially accelerate

CyanConnode (AIM: CYAN), the world leader in narrowband radio mesh networks, provides a trading update for the six-month period ended 30 June 2018.

Key Developments

During the period the Company continued to grow its product portfolio and geographic reach while further strengthening relationships with existing clients through fulfilment of its orderbook. As a result of its broader geographic reach and the growing size and scale of the order book, the Company has realigned its delivery processes to ensure order fulfilment forecasts were met during the period, enabling the Company to achieve its highest ever first half revenue performance.

Financial Highlights

The Company expects H1 2018 revenues of £1.6 million, which is 37% higher than for the entire FY 2017 with India being the main contributing region.  H1 2018 operating loss before tax is expected to be in the region of £3.3 million, being a significant improvement over the loss before tax of £11.15 million for FY 2017. Furthermore, operating margins were expanded as a direct result of the reduction in overheads with further cost savings expected during the second half for the current financial year. The Company ended the period with £2.8 million of net cash, including £1.4 million from R&D tax credits.

Operating Highlights

India

During the period, the Company announced a US$3.2m order from L&T for Madhya Pradesh Paschim Kshetra Vidyut Vitaran Company Ltd ("MPWZ"), which is the largest government utility project on RF mesh technology to date. Delivery of this contract is commencing this month, with the majority of hardware expected to be delivered during 2018. In addition, Larsen and Toubro ("L&T") placed orders for the Company's Optimal solutions during H1 2018, which brought the total number of units ordered by L&T for this product to date to 31,735.

The Indian smart metering market continues to evolve rapidly and given the experience gained from ongoing pilot projects, the opportunities and scale of deployments is increasing. The Company is excited by the significant market developments and, having strengthened its management team in-country, is well placed to take advantage of the government's plans to move to smart prepaid meters with the recent launch of its new Omnimesh product.  The Minister of Power and New & Renewable energy, R.K Singh announced recently that "in the next three years metering will go smart prepaid and gone will be the days of bills reaching your house. So need of the hour is to scale up manufacturing of smart prepaid meters and to bring down their prices¹".

The Company maintains its market leading position in India, with proven technology that meets the AMI requirements in India and an established partner ecosystem. Leading meter manufacturers, such as Genus, Larsen & Toubro("L&T") and HPL, have integrated CyanConnode's standards-based Omnimesh technology with their IS 16444 smart meters to comply with Bureau of Indian Standards meter protocol and through these channels we expect to see further strong growth.

Indian utilities are issuing large Requests For Proposal's, from 100k to 500k units, for smart meters solution based on RF mesh technology. Through collaboration, the Company is well positioned to submit proposals and is actively working on a pipeline of approximately US$100 million in India.  A number of these pipeline opportunities are at the final stages of tender.

Rest of the World

The smart metering market in the Rest of the World (ROW) is maturing and continues to present a significant opportunity for the Company with a US$320m pipeline. This vast market opportunity brings a number of challenges and key to the Company obtaining a leading position in ROW is to establish strategic alliances.

The contracts in Iran and Bangladesh are still active and are at different stages of the SAT process. The Company continues to work through these key processes with its key partners.

In competitive evaluations, CyanConnode's technology outperforms and works 'first time' against some large and well-established brands. Across ROW, the Company's brand is rapidly becoming synonymous with reliability, delivery and value for money.

The Company continues to reinforce the leading position of its standards-based solution through follow-on orders from the existing customer base in Europe. In June, the Company announced a      Euro 184,000 order for an existing partner for a smart metering deployment for a European utility.

UKSMIP

The Company looks forward to the continued rollout of the UK Smart Metering Implementation Programme (SMIP). Telefonica's SMIP solution is based upon its existing cellular network in the UK, supported by CyanConnode's solution, which connects households without reliable cellular coverage (known as "not-spots" by the mobile phone network operators). The contract, which consists of software license and support fees, is projected to deliver £24m of revenues based on an assumption of 10% of "not-spots" across the UK implementation. However, following a recent Ofcom report²  Network Operators have been tasked to provide 90% coverage of the UK, which is currently only 70%. Based on the current coverage of 70% of the UK, the Company could expect significantly increased revenue from the SMIP contract.

Outlook

The Company has previously stated that H2 2018 revenue will be substantially larger than H1 2018 based partly on contracts already won and already in the delivery phase and partly on new orders expected for hardware to be delivered. Management still believes this will be the case.

John Cronin, CyanConnode Executive Chairman, commented: "The Board is focussed on providing returns to shareholders and has taken a number of steps to ensure the Company moves to a position where it can generate profits as revenues grow. We believe that the steps we have taken in recent months and the opportunity ahead mean that we will be able to deploy further significant contracts as we convert our order book."

[1] https://economictimes.indiatimes.com/industry/energy/power/all-electricity-meters-to-be-smart-prepaid-in-3-years-r-k-singh/articleshow/64493720.cms

[2] https://www.engadget.com/2017/12/18/uk-infrastructure-adonis-ofcom-mobile-coverage/?guccounter=1

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 end-to-end quality of service and total cost of ownership and IPv6 6LoWPAN delivers standards-based IPv6 solutions, enabling rapid innovation for the 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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