Last checked at 12 Jun 2018 07:00
CyanConnode Holdings plc("CyanConnode" or the "Company")
Pre-AGM Update
CyanConnode, the world leader in narrowband radio mesh networks provides an update to shareholders ahead of the Annual General Meeting to be held in Cambridge on 18th June. In response to shareholder feedback over the last several weeks, and in light of the last year's significant under-delivery against the order book, the Board has continued to 'right-size' the business and further cost reductions of £500k pa, effective immediately, have now been made in addition to those previously announced.
Over the preceding two years CyanConnode has achieved some impressive orders for a company of its size, obtaining several large orders across the globe. In many cases, however, it has proved impossible to deliver against these orders to the anticipated time-scales and as a result the Company's revenues have not reached expected levels, with corresponding operating losses being much larger than anticipated.
The reasons for these delivery delays are the subject of constant and intense management and Board scrutiny. Few of the delays are due to problems with the Company's product, delivery or deployment processes; any weaknesses in these areas have always been very quickly resolved.
The overwhelming majority of the issues relate to either customer "readiness" or political factors. CyanConnode is dealing with very large organisations with many layers of management who in many cases have a lower sense of urgency. For all of the Company's sales, the contract has been won by either a meter manufacturer or a system integrator partner, who then have the contract with the end utility customer. Both our customers and, even more so, the end utility customers, can be subject to severe political disturbance. The management team and Board have in the past underestimated the impact of these issues across multiple contracts and geographies, particularly on timing of delivery of the contracts.
Sales
As demonstrated in the two new contracts announced from customers in India in the last three weeks, CyanConnode continues to win new orders which does much to underpin our confidence in the fundamental strength of the market demand for what we offer. India has moved to a more fast-moving and assertive standards-based approach. CyanConnode is very well placed to see more orders in India this year including much larger commitments. The Company has recently won one of the largest orders ever placed by the Indian government and have won the highest number of smart metering contracts in India to date.
Operations
The Company knew that the global market was moving from an embryonic phase to a more active point in its lifecycle - one involving more orders and much higher volumes. This was very clear from the orders won over the last two years. We felt it was therefore important that we act in advance to build up the company's operational capability. This was needed both to deliver CyanConnode's new Omnimesh product (essential for the India market) and to also increase the size and capability of the delivery team to support the orders already won.
The Company has already started delivering Omnimesh into the field and have had large orders for the product placed by both Genus and L&T, who are two of the largest meter manufacturers in India.
CyanConnode have the largest number of successful deployments of smart metering in India, with the CESC Mysore project being used as a reference site by government ministers.
Financials
The combination of the costs in scaling up in line with contracted orders, set alongside delayed deliveries and therefore cash payments from the customer side is the primary cause of our disappointing 2017 results.
In our most recent trading update, we indicated that 1H2018 revenue would be higher than revenue booked for the whole of 2017. As the first half draws to a close, we are re-confirming this and can also confirm our expectation that 2H2018 revenue will be substantially larger than 1H2018 based on contracts already won and already in the delivery phase. We are endeavouring to secure as many customer payments as possible to cover our cost base and we are now seeing a regular stream of these customer payments from our contracts in India as well as both revenue and customer payments from the UK smart metering project.
The further actions taken over the last several weeks, focused on reorganisations within the Company's sales and finance functions, will result in a cost base which is reduced by an additional £500k pa, effective immediately, which is incremental to the cost reductions previously announced and which already took the operating cost base excluding non-cash items down from over £800k per month in 2017 to £670k per month from 1 July 2018 onwards.
John Cronin, CyanConnode Executive Chairman, commented: "I want to thank all shareholders for your continued patience and ongoing support in what has been a difficult year. As shareholders will be aware I have invested approximately £900k in CyanConnode shares since I joined with corresponding investments of approximately £250k and £550k from Harry Berry and Simon Smith. You can be assured that the Board and my senior team are deeply committed to seeing a successful outcome for all of our shareholders and I look forward to speaking with those of you who can attend the AGM in Cambridge next week. I believe that 2018 will represent a turning point in the Company's ability to deliver against its order book and demonstrate high levels of growth."
Enquiries:
CyanConnode Holdings plc | Tel: +44 (0) 1223 225 060 |
John Cronin, Executive Chairman | www.cyanconnode.com |
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FinnCap Ltd (Nomad and Broker) | Tel: +44 (0) 20 7220 0500 |
Adrian Hargrave / Giles Rolls (Corporate Finance) Alice Lane (Corporate Broking) |
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Walbrook PR (Financial PR) Paul Cornelius / Nick Rome
| Tel: +44(0) 20 7933 8780 cyanconnode@walbrookpr.com |
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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 3rd 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.