CYANCONNODE HOLDINGS PLC
ANNUAL REPORT AND ACCOUNTS
MARCH 2024
Company Registration No. 04554942
Contents
01 CyanConnode at a glance
03 Highlights
- Chairman's Statement
- Strategic Report
Our Governance
- Board of Directors
- Financial Review
- Corporate Governance Statement
- Directors' Remuneration Report
- Audit Committee Report
- Directors' Report
- Directors' Responsibilities Statement
Our Financials
- Independent Auditor's Report
- Consolidated Income Statement
- Consolidated Statement of Comprehensive Income
- Consolidated Statement of Financial Position
- Consolidated Statement of Changes in Equity
- Consolidated Cash Flow Statement
- Company Balance Sheet
- Company Statement of Changes in Equity
- Company Cash Flow Statement
- Notes to Financial Statements
- Professional Advisers
Company Registration No. 04554942
CyanConnode at a glance
Delivering IoT Excellence!
Imagine a world where all devices communicate under one seamless network - a world of unmatched connectivity and operational efficiency. This isn't just our dream; it's our mission.
Join us as we transform the future of Internet of Things (IoT) communications.
Vision
To empower our customers with sustainable and universal communication solutions, enabling seamless integration and boosting overall efficiency.
Our vision at CyanConnode goes beyond mere connection. It's about unity. It's about transforming the landscape of IoT communications to create a future where all devices speak a common language, under a universal Canopy. We are not just aiming to be leaders in the IoT communications field, but pioneers paving the way for seamless connectivity.
Mission
At CyanConnode, our mission outlines our method and approach towards our vision. We are committed to delivering comprehensive communication solutions that uphold sustainability, promote transformation, and streamline efficiency. Our mission encapsulates our dedication to create a unified, seamless network, ushering in a new era of IoT communications. We believe in empowering our customers with solutions that are not only cutting- edge but also aligned with our collective responsibility towards a sustainable future.
Pillars
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At CyanConnode, our brand pillars are more than just strategic focus areas; they are the fundamental building blocks that define our approach to business. These pillars are interconnected, forming a cohesive mesh that symbolises our unified vision and customer-centric philosophy. These pillars represent our commitment to creating a unified, seamless network, where everything we do resonates with our customers' needs and aspirations. Together, they reflect our identity and our mission, guiding us towards a new era of IoT communications, always with our customers and our planet at the heart.
The interconnected mesh design emphasises that these pillars are not isolated but are deeply intertwined. Each pillar supports and enhances the others, creating a synergistic relationship that embodies our approach to business. This visual structure demonstrates how we weave Innovation, Sustainability, Employees, and Transformation around our central focus on the Customer, aligning all aspects to deliver a unified, seamless network and leading us towards a new era of IoT communications.
Values
Values at CyanConnode are not just words on a wall; they are the principles that guide our every decision and the foundation on which our culture thrives. Centred around Ownership, they shape our attitude towards our work, our colleagues, our customers, and the world. Ownership embodies our commitment, responsibility, and pride in what we do. It is the core, the heart that infuses life into our values.
At CyanConnode, our values operate like a canopy - ensuring seamless, continuous communication and interconnectedness. At the very core of this mesh lies Ownership, symbolising our prime responsibility and direction. Radiating from it are Collaboration, Adaptability, Excellence, and Integrity - values that resonate as the foundational nodes of our ethos. Just as in a Radio Frequency mesh, where every node has a role to play, every intersection of our values represents a synergy. This meshed approach signifies not just our method of operation but our deep- seated commitment to excellence in IoT.
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Highlights
Financial highlights
- Increase of 60% in revenue to £18.7m in FY24 from £11.7m in FY23, the highest annual revenue for the Group to date after four consecutive years of growth1 as a result of increased order book and acceleration of deployments in India
- Increase in gross profit to £5.6m in FY24 (FY23: £4.2m) as a result of high-volume RF node sales through the Indian entity, and sales of third-party hardware in the Middle East North Africa (MENA) region
- Reduction in gross margin to 30% (FY23: 36%) as a result of sales of third-party hardware and large premiums paid during the year on purchases of end-of-life components for the Group's previous version of gateway. A new lower cost version of the gateway was released in Q4 of FY24. Gross margin in the first two years of projects in India is expected to be around 35-40% due to revenue on hardware in the first two years of a project. After year two of each project it is expected gross margins of greater than 90% will be achieved due to the transition to services revenue
- Operating loss increased to £4.2m in FY24 (FY23: £3.3m) as a result of increased costs incurred throughout the Group offsetting the increased revenues, largely attributable to increased headcount required to scale up the business to deploy its growing backlog of orders and develop industry leading hardware and software required by projects being deployed
- EBITDA loss increased to £3.8m in FY24 (FY23: £2.9m)
- Increase in adjusted EBITDA2 loss to £2.8m in FY24 (FY23: £1.6m loss) as a result of lower gross margin % and increased operational costs
- Decrease in cash position to £0.8m in FY24 (FY23: £4.1m)
- Increase in cash collected from customers to £16.9m in FY24 (FY23: £10.7m) broadly in line with increase in revenues
Operational highlights
- Orders for 2.7m modules won in India during the period (FY23: 2.3m modules) taking the cumulative order book to 6.3m during the financial year.
- Order for 101,360 Cellular Network Interface Card (CNIC) modules won for a deployment in Thailand
- Further new order for 52,300 NBIoT hubs won from the Middle East North Africa (MENA) region
- £2.7m (before expenses) raised in November 2023 through an oversubscribed placing and subscription, together with the issue of warrants at an exercise price of 15.0 pence per ordinary share, which would provide a potential further £4.1m if fully exercised
- 1,370,000 Omnimesh Radio Frequency (RF) Modules shipped against current contracts during the period (FY23: 391,000), along with 55,200 NB-IoT gateways and 5,340 Cellular gateways
- Project Management: JVVNL TN72 & TANGEDCO projects now under Facility Management Services (FMS), ensuring streamlined operations and maintenance
- Gateway 200 Dual SIM: Successfully released the 'Gateway 200 - Dual SIM' version, enhancing network reliability and connectivity
- The majority of the Group's revenues are received in rupees for India and US dollars for the rest of world, whilst accounts are reported in Pound Sterling. Foreign exchange volatility can have an impact on the reported figures.
- Where Adjusted EBITDA is operating loss before amortisation, depreciation, stock impairment, impairment of intangible assets, share-based compensation and foreign exchange losses.
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- Integrated Meter OEMs: Integrated with twelve meter Original Equipment Manufacturers (OEMs)
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Memorandum of Understanding (MOU) signed with Alfanar to explore opportunities in Advanced Metering
Infrastructure (AMI) projects - Investment into recruitment, to scale up the business, and research and development to develop further products in response to market demand
- CSR Initiatives: Supported the education of over 1000 school children, with more than 750 being girls, under our CSR initiatives
- CyanConnode India recognised as Dun and Bradstreet 'Start-Up 50 Trailblazer'
- Exhibitions: Participated in and showcased our solutions at DistribuElec 2024, where we were awarded the best booth
Post-Period Highlights
- 265,000 Omnimesh RF Modules and associated products ordered from a subsidiary of IntelliSmart Infrastructure Private Limited, taking cumulative order book in India alone to 6.6m modules, spanning sixteen utilities, across eleven states in India
- CyanConnode India's subsidiary, DigiSmart Networks Private Ltd successfully empanelled as an Advanced Metering Infrastructure Service Provider (AMISP) for both RF and cellular, making it eligible to bid for smart metering contracts under the Revamped Distribution Sector Scheme (RDSS)
- Revenue of £3.5m in the first quarter of FY25, being 25% higher than the same period in FY24
- £5.0m cash received from customers in the first quarter of FY25, being 40% higher than the same period on FY24
- Cash at end of June 2024 of £1.1m
- Win ratio in India in terms of tenders to date of 29%, and 16% in terms of volumes
- Commencement of setup of a subsidiary in the United Arab Emirates (UAE) to promote business in the MENA region
- Changes to organisation to strengthen leadership in India and streamline global operations by having all engineering and operations reporting into the MD CEO of India
- Key milestones such as Site Acceptance Tests (SATs) and project go-lives achieved across several key projects
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Chairman's Statement
Dear Shareholders
I'm delighted to report that the positive trajectory we have seen in previous years has continued, making the financial year ending in March 2024 the Group's most successful yet in terms of revenue, orders secured, and cash received from customers. Additionally, we have maintained strong progress in the Indian smart metering market, which has seen tenders for over 100 million meters awarded so far out of the total market opportunity of 250 million meters.
We have continued to achieve significant success by securing orders in various global markets, especially in the Middle East and North Africa (MENA) region. As a result, we are in the process of establishing a subsidiary in the United Arab Emirates (UAE) to better serve and expand our presence in this key area.
We were excited to announce that our subsidiary, DigiSmart Networks Private Limited (DigiSmart), has been empanelled as an Advanced Metering Infrastructure Service Provider (AMISP). This accreditation enables DigiSmart to directly participate in upcoming smart metering tenders.
The positive momentum we experienced in FY24 continues into the current financial year and am pleased to share further details on the highlights of FY24 and our current operations within this Annual Report.
Operational Review
India Market
Overview of FY 24
The financial year 2024 witnessed substantial progress in the Indian smart metering sector, propelled by government initiatives and strategic implementations nationwide. A pivotel driver of this transformation has been the Indian government's Revamped Distribution Sector Scheme (RDSS), launched in August 2022. This scheme, with an allocation of ₹3.03 lakh crore (approximately £29 billion) and a gross budgetary support of ₹97,631 crore (approximately £9.5 billion), aims to reduce Aggregate Technical and Commercial (AT&C) losses across India to 12- 15% and eliminate the cost-supply tariff gap by 2025.
Key Developments
Government Initiatives and Mandates
The RDSS requires the installation of 250 million smart meters by 2025. As of the end of FY 24, 222.3 million smart meters had been approved, with contracts awarded for 116.3 million meters. This program is designed to significantly improve billing efficiency and reduce AT&C losses.
Initiatives like "Make in India" and "Skill India" have significantly enhanced domestic manufacturing capabilities for smart meters and related infrastructure by promoting local production and skill development.
Deployment and Installation
The Government of India established ambitious installation targets, yet progress has been slower than initially anticipated, with just 11 million smart meters installed by May 2024. However, the pace picked up markedly in FY 24 compared to previous years, driven by enhancements in the tendering process and concerted efforts to improve the financial stability of Distribution Companies (DISCOMs). Notable deployments occurred in states such as Assam, Bihar, and Maharashtra, where smart meters have significantly improved billing accuracy and reduced AT&C losses.
Public and Private Sector Collaboration
Effective collaboration among DISCOMs, technology providers, and system integrators has been critical in overcoming deployment challenges. Efforts have involved addressing public resistance through community engagement and adapting to diverse infrastructural and environmental conditions across different states.
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Chairman's Statement (continued)
Outlook for the Coming Years
The outlook for the Indian smart metering market remains highly positive, with substantial growth expected in the next few years. Several factors contribute to this positive forecast:
Continued Government Support
The Government of India's continued backing and potential extension of the RDSS beyond 2025 is anticipated to maintain the momentum of smart meter installations (the current government secured its third term following the national election results announced on 4 June 2024). The focus remains on enhancing DISCOM financial performance and operational efficiency through smart metering and infrastructure enhancements.
Market Opportunities
The Government of India's mandate to install 250 million smart meters by 2025 presents a vast market opportunity. With approximately 106 million meters pending award, there is significant potential for technology providers and system integrators to expand their market presence and secure large-scale contracts.
Technological Innovations
Ongoing research and development will lead to more advanced, cost-effective smart metering solutions. Innovations in communication technologies, data analytics, and Internet of Things (IoT) integration will further enhance the capabilities of smart meters, offering better value propositions to utilities and consumers.
Expansion into Rural Areas
Extending smart metering infrastructure to rural and remote areas will be a significant driver of growth. Advanced technologies such as CyanConnode's long-range Radio Frequency (RF) communication will ensure reliable connectivity and service delivery in these challenging terrains.
Sustainability and Environmental Benefits
Smart meters are poised to play a pivotal role in achieving India's sustainability goals by enabling improved energy management, reducing AT&C losses, and promoting energy-efficient practices among consumers. This will contribute significantly to lowering greenhouse gas emissions and overall environmental impact.
The Indian smart metering sector made significant strides in FY24, propelled by government directives and technological advancements. With a robust pipeline of projects and ongoing support from both public and private sectors, the future of smart metering in India looks promising. A strategic emphasis on expanding installations, enhancing technological capabilities, and fostering collaborations will ensure the successful realisation of the RDSS goals and associated initiatives, paving the way for a more efficient and sustainable energy sector in India.
APAC and Middle East North Africa Markets
The smart metering market in the Asia Pacific (APAC) and Middle East North Africa (MENA) regions across electricity and water is expanding, with emerging opportunities in gas utilities, as more utilities start to adopt smart metering initiatives.
In August 2023, CyanConnode expanded its portfolio beyond electricity and water metering into gas metering by successfully implementing a pilot project in Azerbaijan, a new market for CyanConnode. This initiative involved supplying smart retrofit hubs and gateways based on long range (LoRa) technologies for existing gas meters, facilitating automated meter data collection. This underscores CyanConnode's prowess in providing multi-utility solutions.
MENA
In October 2023, CyanConnode secured a contract for supplying NB-IoT Gateways for the ADDC/AADC Smart Metering project (phase 2). Under this agreement, CyanConnode will provide 52,100 interoperable smart NB-IoT gateways capable of communicating with and managing various legacy edge devices for both electricity and water. These gateways will have the capacity to connect to over one million edge devices.
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Chairman's Statement (continued)
By March 2024, 49,900 gateways were delivered under this contract. To bolster our footprint in the MENA region, CyanConnode is currently establishing CyanConnode Communications LLC in Dubai, UAE.
Thailand
CyanConnode, in collaboration with partners JS Technical Service Co Ltd. (JST) and Forth Corporation Public Company Limited (Forth), continues to advance the Smart Metro Grid (SMG) project for the Metropolitan Electricity Authority (MEA), which is nearing Go-Live stage. In February 2024, CyanConnode secured a Letter of Award (LOA) to supply 101,360 CNIC (Cellular Modules) to expand the ongoing MEA SMG Project. This LOA will be fulfilled after the project's Go-Live phase. Additionally, CyanConnode also received supplementary orders from JST, one in May 2023, for the supply of 3,000 RF Modules and another in October 2023 for 4,600 Cellular Modules to fulfil additional requirements for the MEA Smart Metro Grid project. These orders were completed in FY24.
Malaysia
As part of its APAC expansion, CyanConnode is actively collaborating with multiple utilities in Malaysia. The Company is currently in the process of certification of its radio products by Standard and Industrial Research Institute of Malaysia (SIRIM) for MCMC certification.
Fundraising
In November 2023 the Company completed an oversubscribed placing and subscription, raising £2.7 million before expenses. The new shares were issued at a price of 10 pence per share, a 1% discount to the mid-market price at the time of announcement of the fundraising.
The net proceeds from this fundraising are being used to strengthen the Company's balance sheet and to increase working capital. The fundraising has enabled the Company to capitalise on significant growth opportunities and efficiently execute its expanding order book and pipeline, leading to increased revenues during the period. Cash is closely monitored to ensure alignment with these growth opportunities.
Post period end and outlook
The momentum from the previous financial year has continued into FY25. In April 2024, we were pleased to announce a new order from Madhyanchal One Infrastructure Private Limited, a subsidiary of IntelliSmart Infrastructure Private Ltd. This order includes 265,331 Omnimesh Modules, bringing the total CyanConnode orders in India to 6.6 million. The order includes Advanced Metering Infrastructure (AMI), Standards-Based Hardware, Services, Omnimesh Head-End Software, a Perpetual License, and an Annual Maintenance Contract to support smart metering deployment for Madhyanchal Vidyut Vitaran Nigam Ltd (MVVNL) in Lucknow, India.
In May and June 2024, CyanConnode announced that its subsidiary, DigiSmart Networks Private Ltd, had been successfully empanelled as an AMISP in India for both RF communications and cellular technology. These accreditations allow DigiSmart to participate in smart metering contracts under the RDSS.
Additionally, in May 2024, changes were made to the organisation to strengthen its leadership team in India. The new structure brings together seasoned leaders with extensive experience in smart metering, IoT solutions, and technology innovation. This restructuring ensures a robust leadership team and more streamlines organisation capable of driving the company's strategic vision forward.
Revenue growth has been robust in the new financial year, with first-quarter revenue of £5.5 million, marking an increase of 25% compared to the same period in FY24. The Group continues to closely monitor cash and any potential requirement for future funding depending on working capital restraints.
In July 2024 we have been delighted to announce the achievement of key milestones such as SATs and project go- lives across several projects. The "Go Live" milestone is a critical achievement for any project as it signifies the
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Chairman's Statement (continued)
transition to the billing phase, allowing for revenue generation. The SAT qualification process involves rigorous quality and performance testing of the meters and the communication network, ensuring the highest standards of operation.
I want to express my sincere gratitude to all our employees for their exceptional dedication and contributions over the past year. My thanks also go to our valued partners and other stakeholders, with whom we look forward to continuing our collaborations on these innovative projects. Additionally, I extend appreciation to all shareholders for their steadfast support.
We are confident that our current momentum will continue throughout this financial year, and we eagerly look forward to updating you on our progress.
John Cronin
Executive Chairman
24 July 2024
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