Cyanconnode Regulatory News (CYAN)

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

Final Results

CyanConnode (AIM: CYAN), the world leader in narrowband radio mesh networks, announces its audited results for the 12 months ended 31 December 2016.

Operational Highlights

· Revenues of £1.8m versus £0.3m in the prior year

o Delivery well advanced against two contracts to Enzen Global Solutions Pvt Ltd ("Enzen") in India

· Successful acquisition and integration of Connode Holding AB ("Connode")

o Addition of full standards-based technology platform

o UK smart metering contract with expected revenues of £25m in place

o Expansion of the Company's geographic reach

· Largest contract win to date worth £10m in Iran

o Over 50% of the total contract value consists of recurring software license revenue

o Initial deliveries expected in 2H2017

· Two additional smart metering orders from Larsen & Toubro ("L&T") in India

o A total of 14,700 units have now been ordered by L&T

· Operational reach expanded in Europe and the Far East

o Including an order from E.ON and a follow on order from Landis+Gyr

o Distribution agreement with JST Group in Thailand

· New equity funding of £12.8m

o £10.1m (gross) completed in July 2016, including funding to acquire Connode

o £2.3m (gross) completed in Oct/Nov 2016 to fund further growth

Financial Highlights

Post Year End Highlights 

· $5.4m purchase order in Bangladesh

o Half the order is hardware/services to be delivered over the next 12 months

o Half the order is recurring software license revenue with ten year contract term

· Contract win with HM Power Sweden for the supply of 100,000 software licenses

· Contract win with Innologix India for the supply of $150,000 of software licenses

· Memorandum of Understanding ("MoU") signed with Tech Mahindra India

· New equity funding of £3.2m (gross) completed in April 2017

· R&D tax credit cash refund claim of £0.7m (2015: £0.6m) submitted

· Pete Hutton (ex-ARM senior executive) appointed to the Board

John Cronin, Executive Chairman of CyanConnode, commented:

"We are delighted to have achieved significant financial and operational milestones during the period. We won our largest contract to date and completed the successful acquisition and integration of Connode.

"Our narrowband mesh networks are ideally suited to machine-to-machine communication where mobile networks cannot effectively operate. This capability means the Company's combination of hardware and software turnkey solutions continue to gain worldwide market recognition.

"We shall continue to strengthen relationships with existing customers and pursue with vigour new clients and further alliances with influential channel partners. Our ability to deliver real world energy and operating efficiencies underpins our confidence that 2017 will be another transformational year for the Company.

"The current year has already started strongly with a $5.4m purchase order for a utility customer in Bangladesh. Furthermore, we have several exciting near-term opportunities in place and a strong order pipeline, including follow-on orders from existing customers. We are delighted to have successfully evolved our business model and product range, with growing recurring software licence sales set to underpin further strong growth as we continue to drive towards profitability."

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). This inside information is now considered to be in the public domain.

Enquiries:

Chairman's Statement

Review of the Year

2016 was by far our busiest year to date as we built on the foundations laid during the previous period by progressing contracts and strengthening relationships with partners. As such, we generated record revenues including high margin software sales as well as repeat orders from existing customers. These achievements serve to highlight the strength of our business model, where both our hardware and software solutions are being recognised and deployed internationally.

The two major milestone achievements during the period were the £10m purchase order in Iran and the £6.8m acquisition of Connode. The scale of the order from Iran emphasises our ability to compete for and win larger contracts, while also being able to establish ourselves quickly in new territories. We look forward to making the initial deliveries against this contract later this year. Furthermore, the Connode acquisition not only increased our scale and reach, but also added a highly complementary product range including IPv6/6LoWPAN, the latest version of internet protocol and a standards-based technology to our product set.

The demand for smart meters is global, but the specifications are established locally, enabling us to tailor our solutions for each market in which we operate and where local partners are seeking proven international solutions. Historically, we have focused on emerging economies, such as India which accounted for the majority of revenues in 2016, but the acquisition of Connode has opened up more opportunities in the developed world. This includes exposure to the ongoing roll out of smart meters in the UK and follow-on orders in Scandinavian markets. Following completion of the acquisition, we rebranded the Company in November 2016, changing our name to CyanConnode to better reflect the coming together of the two companies and their established brands and technologies.

As the world leader in narrowband radio mesh networks, we were delighted to win two Frost & Sullivan Excellence in Best Practices awards in 2016. These reflect the team's hard work, consistently delivering high levels of value through strategic partnerships. As a result of our efforts we were also recognised at the Independent Power Producers Association of India ("IPPAI") Power Awards for providing one of the industry's best smart metering innovations.

We are delighted by the progress made during 2016 and remain excited by our prospects in a growing number of regions during the coming financial year.

Operational Review

India

Our third smart metering order from L&T for an additional 4,700 units to expand the deployment of our solutions at Tata Power Mumbai, announced in December 2016, highlights the strength of our strategy and the scalability of our model by building on the follow on order for 5,000 units announced at the beginning of the year. Our ability to generate repeat orders with such a large end customer provides the blueprint for other partners and contracts we have in place and as such, we are very positive about the potential here. Tata Power is continuing to grow and now has over 2.6 million consumer customers, including over 660,000 in Mumbai alone. This is the typical pattern for many of the orders that we have in place as we establish relationships with blue chip entities that provide significant roll out opportunities as we become a critical part of their customer offering.

We have won the highest number of Advanced Metering Infrastructure ("AMI") contracts awarded to date in India and are delighted by the progress made during 2016. More than half of the revenues achieved during the period were generated by the delivery of the two contracts worth in aggregate approximately £1.5 million to Enzen. These contracts are being implemented on behalf of Chamundeshwari Electricity Supply Corporation Limited ("CESC") and Paschimanchal Vidyut Vitran Nigam Limited ("PVVNL"), who are both Indian utilities with 2 million and 3.5 million customers respectively.

The visibility and ongoing revenue generation provided by our projects remains key. As such, we continue to build on our relationship with Enzen given that between them PVVNL and CESC have over 5.5 million customers, providing a substantial revenue opportunity for roll out. Our prominence in the region appears to be growing and at a steering committee meeting hosted by the Ministry of Power, an event attended by representatives from the State utilities, CyanConnode and Enzen were congratulated for their successful delivery of the CESC project to date. Our team in India, supported from the UK, now stands at 15 and we look forward to further progress during 2017.

Rest of World

As mentioned, one of the key developments with regards to growing our international reach was the acquisition of Connode, which opened up the UK and developed world markets by adding standards-based technology that would have otherwise cost the Company £2.5 million and 18 months to develop.

The UK smart metering project is now live and the roll out, which will comprise 53 million gas and electricity meters nationwide by 2020, has now commenced. CyanConnode was selected by Telefonica, which is the preferred communications service provider in two out of the three regions tendered by the UK Government, and Toshiba to provide a software platform that uses narrowband mesh technology to complement Telefonica's existing cellular network. This allows households, where the mobile phone network coverage is poor or non-existent, to be reached as part of the UK Smart Meter Implementation Programme ("SMIP"). We have a contract with an expected value of £25 million of software and support revenues and look forward to the roll out scaling up. I am pleased to report that the 2016 milestones under the terms of the SMIP contract were successfully delivered.

As a result of the Connode acquisition, our European exposure also grew during the period through Scandinavian projects with E.ON, as part of one of the first smart city projects in Sweden, and Landis+Gyr in Finland.

The £10m Iran order from Micromodje, announced in April 2016 is for a 360,000 unit smart electricity metering implementation of our solution and its proprietary Head End Software ("HES"). Importantly, Micromodje will host the HES with annual software license income being recognised over a five-year contractual period following the successful smart meter installation. As over 50% of the total £10m order value consists of software license income, the recurring revenues from this purchase order will continue well beyond the two-year hardware installation period.

As previously mentioned, we have started a dialogue with Micromodje on the next planned roll out of one million units, part of the potential overall Iranian market requirement of 33 million smart electricity meters.

In addition, we extended our reach into Thailand via an agreement with the JST Group and during this period we also signed a multi-year strategic partnership with Eppix eSolutions to enable the integration of SAP Hybris software with CyanConnode's enterprise platform.

Financial Review

Revenue increased from £272,012 in 2015 to £1,823,129 in 2016, with the majority coming from the two contracts in India. Operating loss for the year ended 31 December 2016 was £7,939,216 (2015: £4,906,724) and net cash at the 2016 year end was £3,892,505 (2015: £2,461,057. The increased operating loss is mainly as a result of increased investment in both R&D and sales as well as costs arising from the acquisition of Connode.

During the period, the Company raised a total of £12.8m before expenses. As well as funding the Connode acquisition in July 2016, the new monies raised during the period provided funds for growth, development and ongoing working capital requirements.

As a result of the acquisition of Connode, the Group now has intangible assets on the balance sheet of £7.8 million (2015: £nil) made up of a customer contract with Toshiba UK for the rollout of the Connode smart metering solution and goodwill.

Board Changes

Paul Ratcliff joined the Board on 1 January 2016 (replacing Peter Mainz who stepped down on 31 December 2015). Post the year end, Pete Hutton joined the Board on 3 April 2017. His wealth of experience from ARM and within the IoT sector as well as in system and product design will provide additional complementary skills as the business continues to build momentum. Furthermore, his strong network of contacts will undoubtedly be of significant value as we continue to build on the commercial opportunity at CyanConnode through Tier 1 strategic partners. As previously communicated to shareholders, Dr John Read will retire from the Company and step down from the Board following the Company's Annual General Meeting in June 2017 - I would like to thank John for his contribution and commitment to the Company, and wish him all the best in his retirement.

Employees

Once again I would like to thank all our employees for their efforts during the period. Having fully integrated Connode and welcomed its team on board, we have continued to broaden our reach and offering. I very much look forward to working with the enlarged team during 2017 as we further expand our reach into existing and new territories.

Post Period End

Post period end we received a $5.4m purchase order from a specialist in energy management systems for a smart metering contract in Bangladesh, South Asia. This is the Company's first order for a utility customer in Bangladesh and is a further demonstration of our growing geographical sales footprint. We also signed a MoU with Tech Mahindra to market, sell and deliver expertise in narrowband mesh technology for the smart grid, smart city and IoT markets.

Outlook

We are delighted to have achieved so many financial and operational milestones during the period, with the most significant being our largest contract to date and the successful acquisition of Connode.

Our narrowband mesh networks are ideally suited to machine-to-machine communication where mobile networks cannot operate, while our combination of hardware and software turnkey solutions continue to gain worldwide market recognition. By providing better control of the grid, including operating and energy efficiencies and further establishing relationships with existing and new customers we expect that 2017 will be another transformational year for the Company.

The current year has already started strongly with a $5.4m purchase order in Bangladesh. Furthermore, we have several exciting opportunities in place and a strong order pipeline. We are delighted to have successfully evolved our business model and product range, with growing recurring software license sales set to underpin further strong growth as we continue to drive towards profitability.

John Cronin

Executive Chairman

15 May 2017

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. 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 that are significant to CyanConnode Holdings plc and its subsidiary undertakings when viewed as a complete enterprise.

BUSINESS MODEL

Overview

CyanConnode provides an optimised, open standard, 'always on' smart communications platform for the "Grid of Things". Based on narrowband radio mesh technology it allows neighbourhood networks that support interoperability between devices and connectivity in hard to reach places. CyanConnode's low-power narrowband technology is ideally suited to machine-to-machine applications such as electricity, gas and water meters, traffic lights, street lights, in fact any smart city or Internet of Things device.

Within the energy sector, CyanConnode's solutions enable Advanced Metering Infrastructure (AMI), which provides highly secure, bidirectional communication between utilities and consumers, enabling smart metering functionality. CyanConnode's AMI communication platform enhances utilities' service delivery, improves business efficiency and saves energy through improved revenue collection and cash flow, reporting analytics, grid optimisation, demand response and asset management. Smart metering systems also promote sustainable energy through renewable resources such as solar and wind.

Consumers also benefit from CyanConnode's technology, as it allows them to measure and control their energy consumption, benefit from post-paid and pre-paid metering (eg. pay as you go), and time of use tariffs for managing when consumers use their white goods. This allows customers to improve cost management and budgeting and promotes less reliance on diesel generators, which reduces carbon footprint as well as supporting export to the grid through self-generation.

Narrowband radio mesh networks are low-power and best suited to applications requiring long-range and reliable communications. CyanConnode's solutions use frequencies that maximise the range of its network and provide excellent penetration through obstructions, such as buildings, in smart metering deployments.

Addressing the growing demand for energy is a global issue and one that is vital in emerging economies if they are to reach their long-term growth potentials. These regions also experience high energy losses through declining infrastructure, tampering and theft. CyanConnode focuses on some of the largest regions that make up a large percentage of the global smart metering market: India, Iran, Thailand, Bangladesh as well as UK and Scandinavia.

Electricity Metering

CyanConnode provides a communication platform that enables utilities to upgrade 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 (CyanConnode's smart electricity metering solution) 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.

CyanConnode'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 CyanConnode's meter manufacturer partners (such as Larsen & Toubro). With the addition of this module, the meter is then enabled to communicate back to the utility's data centre.

· A second piece of hardware is a Data Concentrator Unit ("DCU") or gateway. This component allows meters in consumers' homes to communicate with each other over a self-forming, self-healing mesh network, with the DCU/gateway accumulating all the data from the meters and communicating it back to the utility data centre over the mobile phone network, ethernet or fibre connection.

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

As a result of the Connode acquisition in July 2016, CyanConnode can also supply software only packages with the hardware element of the solution being provided by partners such as Toshiba for the UK SMIP contract.

CyanConnode 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 2016 it has achieved sales through both channels. Over time CyanConnode expects SIs to take a more dominant role in providing complete solutions to utility customers; they will source software/hardware from CyanConnode and meter manufacturers. CyanConnode 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 becoming key purchasing criteria.

CyanConnode licenses its CyLec software to either the end utility customer to host themselves or on the basis of a CyanConnode hosted Software as a Service ("SaaS") solution. In both cases, it receives either an upfront or a recurring revenue stream that is based on the size of the customer's meter installation base.

Lighting

The business model for lighting is very similar to that of electricity metering. In the case of lighting, the CyanConnode 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 CyanConnode 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 CyanConnode 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 CyanConnode's business model will build rapidly as more CyanConnode 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, CyanConnode's solutions have had over £30 million of product development by very capable engineering teams based in Cambridge, UK and Stockholm, Sweden. This has created substantial barriers to entry as these solutions solve large, complex, cross domain problems. The necessary skills and experience are considerable; they include RF hardware design, regulatory approval, mesh network firmware design, communications infrastructure development, meter protocol, plus interoperability techniques, security, enterprise software and scalability and robustness.

CyanConnode's solutions have been mainly designed and built for emerging markets, whilst its competitors have generally chosen Western markets. They can be integrated into new meters, or retrofitted to existing meter infrastructure to avoid rip-and-replace costs. Its solutions are inherently low power and this has helped CyanConnode to achieve a highly competitive price point for emerging market mass adoption. The CyanConnode mesh network is self-forming and self-healing, which results in significant time (and therefore cost) savings for customers. Its DCU/gateway has been designed to be highly functional, but in a small package which results in a competitive price point. CyanConnode offers sub-GHz wireless mesh solutions that are innately suited to dense housing conditions typical of emerging markets. The network uses license free ISM (Industrial, Scientific and Medical) radio bands, which means that CyanConnode'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

CyanConnode has made good progress in smart metering in target markets during 2016 and in the subsequent period up until the date of preparation of this report. It has also expanded its global focus to include Iran, Bangladesh and other potential emerging markets worldwide.

CyanConnode 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. CyanConnode has now supplied over 21,000 smart meters and associated hardware and software and acted as Enzen's end-to-end solution provider for smart metering. CyanConnode's management believes this is the first commercial implementation of AMI technology by a public utility for consumers in India.

The CESC order was followed up in late 2015 by a purchase order from Enzen for a commercial smart metering implementation for PVVNL in Uttar Pradesh, India. CyanConnode has provided over 13,000 smart meters and associated hardware and software while the Company's Head End Software is being provided as a managed service hosted by CyanConnode and charged on a per meter per year basis, delivering a recurring revenue stream. The order from PVVNL was CyanConnode's second commercial implementation of AMI technology by a public utility for consumers in India.

The visibility and ongoing revenue generation provided by our projects remain key aspects. As such, we continue to build on our relationship with Enzen given that PVVNL and CESC have over five million customers between them. Our prominence in the region appears to be growing and at a January 2017 steering committee meeting hosted by the Ministry of Power, an event attended by representatives from the State utilities, CyanConnode and Enzen were congratulated for their successful delivery of the CESC project to date.

CyanConnode received a first order for 5,000 units from L&T for Tata Power Mumbai for an integrated CyLec solution in 2015. In 2016, the Company received two additional orders taking the cumulative units ordered by Tata Power Mumbai to 14,700. Tata Power continues to grow and now has over 2.6 million consumer customers, including over 660,000 in Mumbai. They have recently been awarded the distribution franchise for Jamshedpur circle from the Jharkhand State Electricity Board.

The Indian market is a huge opportunity for the Company, with an estimated 250 million meters that need to be installed/replaced over the next ten years, as well as the Indian utilities' pressing need to reduce losses due to electricity theft. 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. CyanConnode's AMI solutions address these practical 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 an ability 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 billion 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 by 2019. It also includes a programme to eliminate State Distribution company debt through assignment to States and then bond issues. 22 out of 29 States have now joined the UDAY scheme and the programme has covered 92% of the total debt of the State utilities. 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, he also characterised the UDAY programme as a 'game changer'.

CyanConnode 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 UK smart metering project is now live and the roll out, which will comprise 53 million gas and electricity meters nationwide by 2020, has now commenced. CyanConnode was selected by Telefonica, which is the preferred communications service provider in two out of the three regions tendered by the UK Government, and Toshiba to provide a software platform that uses narrowband mesh technology to complement Telefonica's existing cellular network. This allows households, where the mobile phone network coverage is poor or non-existent, to be reached as part of the UK SMIP. CyanConnode has a contract with an expected value of £25 million of software and support revenues.

As a result of the Connode acquisition, the Company's European exposure also grew during the period through Scandinavian projects with E.ON, as part of one of the first smart city projects in Sweden, and Landis+Gyr in Finland.

In February 2016, the Company 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 by the directors to be one of the first orders secured by a UK business, with support from the specialist UK Trade and Investment team.

The £10m Iran order from Micromodje, announced in April 2016 is for a 360,000 unit smart electricity metering implementation of our solution and its proprietary Head-End Software ("HES"). Importantly, Micromodje will host the HES with annual software license income being recognised over a five-year contractual period following successful smart meter installation. As over 50% of the total £10m order value consists of software license income, the recurring revenues from this purchase order will continue well beyond the two-year hardware installation period. The Company has started a dialogue with Micromodje on the next planned roll out of 1 million units, part of the potential overall Iran market requirement of 33 million smart electricity meters.

Post period end, CyanConnode received a $5.4m purchase order from a specialist in energy management systems for a smart metering contract in Bangladesh, South Asia. This is the Company's first order for a utility customer in Bangladesh and is a further demonstration of the Company's growing geographical sales footprint. The purchase order is for the supply of CyanConnode's AMI solution for a 150,000 unit smart metering deployment. The energy management system company, based in Eastern Europe, will integrate CyanConnode's hardware with its smart meters and shipment to their production facility will take place over the next 12 months. The Company will also provide its Head End Server Software, which will be hosted by the energy management systems customer, with annual software licence income being recognised over a ten year contractual period following successful smart meter implementation. The recurring revenue software licences and annual maintenance contract, which represent 50% of the total purchase order value, will be paid annually in advance and charged on a per meter per year basis.

The Eastern European Company has formed a local entity, a new utility that has entered a long-term agreement with the Bangladeshi Government to provide electricity to consumers. The new utility has a consumer base of four million customers, which provides the potential for substantive follow-on orders. The overall number of electricity consumers in Bangladesh is ~58 million. Bangladesh is among four South Asian countries that are struggling due to increasing pressure from rising electricity demand, failure to collect revenue and poor reliability, according to the Northeast Group. Over the next decade, these countries will make significant investments to modernise smart grid infrastructure, particularly in the metering segment. Smart grid investment is projected to total $8.1 billion over the period 2016-2026, with large-scale funding from the Asian Development Bank, the World Bank as well as bilateral aid organisations.

Lighting

CyanConnode 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 CyanConnode's technology for IoT and smart city solutions on a global basis. CyanConnode also signed an MoU with Tech Mahindra to market, sell and deliver expertise in narrowband mesh technology for the smart grid, smart city and IoT markets.

Operational Review

Key Financials

Commercial orders remained well below the level required to sustain the business. In 2016, the Company raised £12.8 million before expenses, by way of share placings, with a substantial element of this used to purchase Connode. This funding provided the Company incremental financial resources for growth, general working capital, customer and partner development activities in India and other markets as well as further development to integrate CyanConnode'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.

Going Concern 

To assess the ability of CyanConnode 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 2018 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.

The directors have recognised that the Group is trading principally in emerging country markets. 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 Group and 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 Group or Company was unable to continue as a going concern. In the event the Group and 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 its 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 23 to the financial statements.

Dividends

The directors do not recommend the payment of a dividend (2015: £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 CyanConnode's stage of its development.

Consolidated income statement

For the year ended 31 December 2016

Consolidated statement of comprehensive income

Derived from continuing operations and attributable to the equity owners of the Company.

Consolidated balance sheet

At 31 December 2016

Consolidated statement of changes in equity

At 31 December 2016

Consolidated cash flow statement

For the year ended 31 December 2016

Notes to the Financial Statements

For the year ended 31 December 2016

1. General information

CyanConnode Holdings plc is a company incorporated in the United Kingdom under the Companies Act 2006. The address of the registered office is Merlin Place, Milton Road, Cambridge CB4 0DP.

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 2016 or 2015, but is derived from those accounts. Statutory accounts for 2015 have been delivered to the Registrar of Companies and those for 2016 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 15 May 2017 and authorised for issue. The Group's specific IFRS accounting policies can be found in the 2015 annual report.

2. Loss per share

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

Loss

Number of shares

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.

3. Share capital

4. Notes to the consolidated cash flow statement

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 will be available on the Company's website. The Notice of AGM and Proxy Form and the full colour Annual Report and Accounts will be posted to shareholders on 22 May 2017. The AGM will be held on 15 June at 11am at the Company's registered office, Merlin Place, Milton Rd, Cambridge CB4 0DP.