Preliminary Results

RNS Number : 5400A

Cyan Holdings Plc

02 April 2012

 



2 April 2012

Embargoed for 7am

Cyan Holdings plc

("Cyan or "the Company")

Preliminary Results

for the year ended 31 December 2011

Cyan Holdings plc (AIM: CYAN.L), the integrated system design company delivering wireless solutions for lighting control, utility metering and industrial telemetry announces its audited full year results for the year ended 31^st December 2011.

Key achievements

·      Strategic partnership with China's largest street lighting manufacturer

·      Strategic agreement with major Indian supplier of IT services to power utilities

·      Substantial follow on orders from Chinese public lighting authority for tens of thousands of units

·      Equity fund raisings during the year of £2.0M net to position for substantial growth opportunities

 

·      Design wins for CyLec product in several major Indian electricity meter suppliers

·      Successful metering trial and demonstration of 150 plus meter installations in Noida suburb of Delhi

·      Demonstration of live metering installation at International Smart Energy Conference in Delhi

Financial highlights

·      Substantial increase in revenue during 2011 to £455,591 (2010: £139,047)

·      Operating loss for the year of £3,499,499 (2010: £2,954,055)

·      Cash balance at end of year £364,590 (2010: £1,484,437)

Post period end highlights

·      Equity fund raising of a further £1.5M net in January 2012, with warrants attached giving potential further investment of £2.4M by July 2012

·      Five Indian meter suppliers submit CyLec based meters for TNEB project for 1.5M units, the positive outcome of which would be transformational for Cyan

·      John Cronin appointed as non-executive director to Cyan Board and will take over from John Read as Executive Chairman at the Company's AGM in May

Dr John Read, Chairman of Cyan, commented:

"2011 was a strong year for relationship building and pilot demonstrations of Cyan products. We have secured strategic partnerships with majors in both of our key markets, China and India, and on both sides of our product range. These agreements are expected to result in significant orders for the company in due course.

"We have seen follow on orders from China's main Government authority on street lighting, now into the tens of thousands, with the opportunity for eventual orders to total many millions of units. This stands out amongst a number of smaller but nonetheless important orders.

"We are extremely well positioned to exploit significant opportunities in our target markets of metering and lighting in both India and China respectively. Similarly we have the right product range to be seen as the optimum choice in any bidding situation for which we put ourselves forward. The Board is therefore confident that 2012 will be Cyan's most successful year to date."

www.cyantechnology.com

Enquiries:

Cyan Holdings plc John Read, Chairman	Tel: [phone]
Cenkos Securities plc Stephen Keys / Adrian Hargrave XCAP Security plc Joint broker Jon Belliss / Adrian Kirk	Tel: [phone] Tel: [phone]
Newgate Threadneedle (Financial PR) Guy McDougall/ Caroline Evans-Jones	Tel: [phone]

Chairman's Statement

2011 was a year that saw Cyan take significant steps towards becoming a major supplier of complete RF mesh system solutions for lighting control and utility metering. This was demonstrated by tangible orders in our focus markets of China and India, for lighting and metering respectively. At the end of 2011 the Company had both a number of trials in progress and several opportunities for substantial increases in orders in 2012.

Our technology and products deliver cost effective ready-to-deploy solutions which allow established lighting and utility metering manufacturers to easily enhance their products to support remotely managed wireless networks of street-lights or utility-meters. There is increasing global demand for such wireless management networks and in recent years Cyan has made significant investment and has gained extensive expertise in design, manufacture and deployment. We are therefore confident that we now have the correct products, partnerships and market strategy to deliver increased shareholder returns.

Progress in China and India

In the second half of 2011 we announced two key lighting developments in China. Firstly, the news that we had secured a strategic agreement with China's largest street lighting manufacturer, Shanghai Yaming Lighting Co ('Yaming').

Aside from the immediate benefits from Yaming's selection of Cyan, we expect there to be a positive influence on other companies seeking a wireless lighting control solution.

We announced two follow on orders from China Public Lighting Control ('CPLC').The potential requirement for millions of units over the next two years is consistent with our understanding of the size of the lighting market in China and could be transformational to the Company's growth. This is one of a number of active lighting customers in China and India, which promise to deliver significant revenue growth.

Turning to India, the Company demonstrated a live RF mesh based system at the Smart metering Conference in Delhi. Over 150 meters had been deployed by our partner Capital Meters in the NOIDA suburb of Delhi in a variety of testing environments and readings from these were shown in real time as part of the paper presented. As a result of this demonstration interest in our metering products increased substantially.

In December we announced another significant development for our metering products, a strategic alliance with Wipro Technologies, the global Information Technology, Consulting and Outsourcing business. The agreement sees Wipro providing Consulting and IT Services to power utility companies in India deploying wireless meters incorporating CyLec, Cyan Technology's wireless communication solution for electricity metering. Other such strategic alliances are in the pipeline.

The increasing cost of energy and limitations in generating capacity within the developing world are significant factors restraining the potential levels of future economic growth in these countries. Accordingly, energy efficiency continues to be a major focus for the governments of developing nations. As a result of this Governmental pressure we are experiencing a substantial increase in enquiries from both China and India, which is very pleasing.

Funding

By mid-year, Cyan was experiencing a growth in the number and frequency of initial orders for lighting products but not yet at a level that would sustain the cash flow requirements of the business.

 These projects have total requirements significantly larger than the initial orders placed with Cyan. In some cases Cyan has been able to estimate the entire size of the likely follow-on projects and is confident that these opportunities represent major potential revenues.

The pace of new enquiries and the number of active prospects was also increasing and as Cyan began to expand into new geographies these increased the requirement for both working capital and local support. The Board was excited by the opportunities for Cyan's lighting business, and wished to accelerate the development of new back office management systems to address customer demand for secure systems capable of managing networks of hundreds of thousands of lights.

In the Indian metering market interoperability between products from individual meter manufacturers is a critical market requirement. Any one utility must be able to purchase meters from a selection of suppliers. It became necessary for Cyan to work with several meter manufacturers to show how this could be done with the CyLec system where the meters have to be able to talk with each other and thence to a central control unit linked via a GPRS backhaul to servers running a meter data management system ("MDMS"). This required further development and working capital and was a key factor in our decision to raise funds.

The Company raised £2.6 million net of expenses via two placings and an issue of warrants, in July and December 2011. This was in addition to a subscription for £0.9 million raised in January 2011. This money provided the Company with incremental resources for working capital, enabled the acceleration of development of our lighting system, and the investment in pursuing the strategic metering engagements.

2011 was the year when Cyan firmly established its key niches in lighting and metering.  Revenues increased over 2010 and the Board believes the Company is strongly positioned to capitalise on its partnerships and customer engagements within India and China. The Boards expects 2012 to be a year of significant ramp up in order intake, which will translate into revenue increases.

Financial information

Revenue increased significantly from £139,047 in 2010 to £455,591 in 2011. Operating loss for the year ended 31 December 2011 was £3,499,499 (2010: £2,954,055) and net loss increased to £3,151,576 (2010: £2,648,116). This was predominantly due to increased costs incurred to put the Company in a place to secure orders. Cash at year end was £364,590 (2010: £1,484,437) however this was increased on 6 January 2011 by £1.5M net due to a successful placing, mentioned elsewhere in this report.

Post period events

In February 2012 we were able to announce that five major meter suppliers tendering for the 1.5 million unit order at the Tamil Nadu Electricity Board ("TNEB") in India had submitted bids, and sample meters, based on Cyan's CyLec system. Further, that, as far as we know, this was the only solution fully conforming to the requirements of the request for quote. We await the outcome of the assessments and pilots for this opportunity.

In mid March we were pleased to announce that telecoms and smart metering industry veteran John Cronin has joined the board as a non-executive director. He will take over the role of Executive Chairman from me following the Company's AGM in May 2012. It is my intention to stay on the board as a non-executive director for a period following that to provide continued support.

Finally, I would like to take the opportunity to thank Kenn Lamb, who stepped down as CEO on 5 January 2012 for health reasons, for all he achieved during his time in the role. I and the rest of the Board wish him a speedy recovery.

John Read

Executive Chairman

30^th March 2012

Operational Review

Cyan has made considerable progress in 2011, with that momentum accelerating into the first quarter of 2012.

Our business has two principal product groups:

·      Lighting monitoring and control

·      Utility meter monitoring and control

Lighting control and monitoring (CyLux)

Cyan has developed a fully integrated wireless end-to-end system for public lighting such as; street lights, tunnels, highways, industrial parks and public locations, which is capable of dimming the major different types of lamp; HPS, HID and LED. We are confident that the combination of features in our system makes a unique system solution, and we already have manufacturers of the electronic drivers for these lights producing and installing prototype versions incorporating Cyan wireless control; 'CyLux Inside'.

CyLux allows city authorities to remotely set lighting profiles: turning on / off and dimming at preset times for optimised lighting intensity through evening, late night and morning to maximise power saving. Actual power saving is measured and reported by Cyan's system, a very popular feature with customers as many of them are financially incentivised based on the actual energy saving delivered. In addition to the above functionality CyLux can accurately monitor lamp status and proactively identify maintenance or lamp repair requirements with interactive maps showing lamp locations and status.

Our strategic agreement with China's largest street lighting manufacturer, Shanghai Yaming Lighting Co ('Yaming') is extremely pleasing. We have worked hard for some time to secure this partnership, as we believe that it positions us well for future growth in the Chinese street lighting market. Yaming's long history, the size of the Company and its reputation for quality puts them in a strong position to win future large lighting contracts across China.

In July and September 2011 we announced two follow on orders from China Public Lighting Control ('CPLC'). The first was for 12,000 units followed by a second for 20,000, and the total number of units ordered by CPLC now totals 56,000.We understand there are potential requirements for millions of units over the next two years.

Electricity and gas meter reading (CyLec&CyGas)

The primary benefits of smart metering to electricity utilities are the reduction of losses through transmission and theft, and the ability to control tariffs and supply from a central location.

Cyan's metering solutions branded CyLec and CyGas have been developed over the last four years to directly address the problems of tampering and theft. Within the developing world it has become very difficult to accurately check usage and enforce payment. Indeed, a recent article in the Economist suggested that the average annual revenue loss in India to the utilities as a result of tampering and theft, is US$11billion. This figure highlights the extent of this major problem. The senior management of Indian electricity suppliers also tell us that between 30% and 50% of electricity generated is not paid for.

Current model wireless meter installations utilise handheld units permitting meter reading without entering a property. However CyLec enables not only full real-time updates of meter readings and usage to a centralised MDMS system together with 'tamper alerts', but also provides for on-line management of the meters for tariff changes, pay-as-you-go and other key features. It is this total package of capability and the possibilities thus enabled that excites the utilities and system integrators.

CyLec has interoperability as a core feature and can be integrated into existing meter designs without requiring disclosure of proprietary information. We have demonstrated interoperability of meters from several suppliers and this provides for robustness of supply for the purchasing utilities.

We continue to be at the forefront of the development of wireless mesh network solutions for electricity and gas metering. We have seen a substantial ramp up in enquiries and new tender requirements for these products within India and China, where inaccurate readings and tampering are such a major issue.

A significant achievement was the signing of our agreement with Wipro in November. Wipro is a global leader in the Energy and Utilities sector with proven expertise in IT transformational programs and significant domain expertise in the 'Utilities space'. The Company has over 12,000 employees in 54 countries.

By partnering with Wipro, we can combine their service delivery expertise with Cyan's CyLec solution to deliver much sought-after benefits to Indian utilities. Indian utilities are suffering staggeringly high aggregate technical and commercial losses of nearly 30% and they are determined to adopt solutions that help to reduce these losses.

Other strategic partnerships are in negotiation. With these key partnerships in place, Cyan is set to be a leader in supply of solutions to the nationwide reduction in and recapturing of revenues for electrical utilities in India.

Conclusion

We believe Cyan is focussed on the right markets, and that we have market leading products. Our strategic partnerships with majors companies in both of our key markets gives us continued confidence that we are well positioned to deliver shareholder value as our revenues track the pace of growth of these markets. The business is now very well positioned to grow rapidly and I thank all of our staff, the board for their efforts and diligence, and our shareholders for their support.

Outlook for remainder for 2012:

TNEB is one of the largest electricity distributors in India. In November, it published a tender for the supply of 1.5 million meters during the second half of 2012 and first half of 2013 as part of its consumer network upgrade programme. This represents the first phase in what is anticipated to be a total upgrade programme of 18 million meters.

The submission phase of the tender process was completed in early March and we are in a strong position with 5 of the 16 candidates submitting meters containing CyLec technology, including two of the largest meter suppliers to TNEB. We expect the outcome of the tender to be announced by 1 June 2012. We look forward to updating shareholders as further information becomes available.

A positive outcome of this tender would be transformational to the Company.

A further larger tender is expected to be released early in the second quarter of this year.

In addition, with our strategic partnership in place with the largest Chinese street lighting manufacturer, and the large orders already received for our lighting products in China, we believe Cyan to be in a strong position for substantial growth in this market in 2012.

Consolidated income statement

For the year ended 31 December 2011

			2011		2010
			£		£
Continuing operations
Revenue			455,591		139,047
Cost of sales			(321,477)		(96,326)
Gross profit			134,114		42,721
Research and development costs			(1,865,982)		(1,737,703)
Other operating costs			(1,767,631)		(1,259,073)
Operating loss			(3,499,499)		(2,954,055)
Investment revenue			2,146		1,487
Finance costs			(7)		(85)
Loss before tax			(3,497,360)		(2,952,653)
Tax			345,784		304,537
Loss for the year			(3,151,576)		(2,648,116)
Loss per share (pence)
Basic			(0.3)		(0.4)
Diluted			(0.3)		(0.4)

Consolidated Statement of Comprehensive Income For the year ended 31 December 2011 2011 2010   £ £   Loss for the year (3,151,576) (2,648,116)     Exchange differences on translation of foreign operations (34,104) (66,140)   Total comprehensive income for the period (3,185,680) (2,714,256)

 

Consolidated balance sheet

At 31 December 2011

			2011 £		2010 £
Non-current assets
Property, plant and equipment			29,843		29,114
Current assets
Inventories			973,577		872,923
Trade and other receivables			562,182		411,848
Cash and cash equivalents			364,590		1,484,437
			1,900,349		2,769,208
Total assets			1,930,192		2,798,322
Current liabilities
Trade and other payables			349,126		283,872
			349,126		283,872
Total liabilities			349,126		283,872
Net assets			1,581,066		2,514,450
Equity
Share capital			2,385,401		1,847,666
Share premium account			21,965,649		20,378,625
Own shares held			(690,191)		(690,191)
Share option reserve			604,536		476,999
Translation reserve			(328,358)		(294,254)
Retained earnings			(22,355,971)		(19,204,395)
Total equity being equity attributable to equity holders of the parent			1,581,066		2,514,450

 Consolidated statement of changes in equity

at 31 December 2011
		Share Capital £	Share Premium £	Own shares held £	Share Option Reserve £	Translation Reserve £	Retained Losses £	Total Equity £
Balance at 31 December 2009		1,309,565	19,026,290	(690,191)	379,886	(228,114)	(16,556,280)	3,241,157
Loss for the year		-	-	-	-	-	(2,648,116)	(2,648,116)
Other comprehensive income for the year		-	-	-	-	(66,140)	-	(66,140)
Total comprehensive income for the year		-	-	-	-	(66,140)	(2,648,116)	(2,714,256)
Issue of share capital		538,101	1,352,335	-	-	-	-	1,890,436
Credit to equity for share options		-	-	-	97,113	-	-	97,113
Balance at 31 December 2010		1,847,666	20,378,625	(690,191)	476,999	(294,254)	(19,204,395)	2,514,450
Loss for the year		-	-	-	-	-	(3,151,576)	(3,151,576)
Other comprehensive income for the year		-	-	-	-	(34,104)	-	(34,104)
Total comprehensive income for the year						(34,104)	(3,151,576)	(3,185,680)
Issue of share capital		537,735	1,587,024	-	-	-	-	2,124,759
Credit to equity for share options		-	-	-	127,537	-	-	127,537
Balance at 31 December 2011		2,385,401	21,965,649	(690,191)	604,536	(328,358)	(22,355,971)	1,581,066

Consolidated cash flow statement

For the year ended 31 December 2011

		2011		2010
		£		£
Net cash from operating activities		(3,177,846)		(2,293,931)
Investing activities
Interest received		2,146		1,487
Purchases of property, plant and equipment		(29,782)		(15,126)
Net cash from investing activities		(27,636)		(13,639)
Financing activities
Interest paid		(7)		(85)
Proceeds on issue of shares		2,225,862		2,035,913
Share issue costs		(101,103)		(145,477)
Net cash from financing activities		2,124,752		1,890,351
Net (decrease)/increase in cash and cash equivalents		(1,080,730)		(417,219)
Cash and cash equivalents at beginning of year		1,484,437		1,968,072
Effect of foreign exchange rate changes		(39,117)		(66,416)
Cash and cash equivalents at end of year		364,590		1,484,437

Notes to the Financial Information

For the year ended 31 December 2011

1.   General information

Cyan Holdings plc is a Company incorporated in the England and Wales under the Companies Act 2006.  The address of the registered office is Cyan Holdings plc, Buckingway Business Park, Swavesey CB24 4UQ. 

The preliminary 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 2011 or 2010, but is derived from those accounts. Statutory accounts for 2010 have been delivered to the Registrar of Companies and those for 2011 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 30 March 2012 and authorised for issue.  The Group's specific IFRS accounting policies can be found in the 2010 annual report.

Going concern

The directors have prepared a business plan and cash flow forecast for the period to 31 December 2013 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 in order to fund working capital within the next six months. 

At the time of the preparation of these financial statements, the sales forecast includes a potential large contract with an Indian utility customer (TNEB). The TNEB tender has been issued for 1.5M units and the directors believe that the Group is well placed to be awarded contracts (through Indian meter manufacturer partners) for the majority of the tender. If successful, the directors believe that delivery on the tender would commence in Q2 2012 and that this contract would be transformational for the Group in terms of both customer and shareholder perception. The directors understanding is that TNEB have plans to install/replace 18M meters over a 5 year period and further tenders towards this goal will be issued in the second half of 2012. The Group has other significant sales opportunities in the pipeline that are being progressed in parallel.

The directors have recognised that the Group is trading principally in two emerging country markets, namely India and China. 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 inherently uncertain. This may impact both the Group's ability to generate positive cashflow 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.

At the Group's General Meeting held on 5 January 2012, resolutions were passed to: (i) complete  placings of £1.7 million (before expenses) through the issue of 420 million new ordinary shares; and (ii) issue 420 million warrants to the placees that have an exercise price of 0.6p and a 6 month exercise window until 5 July 2012. If exercised in full, the warrants would provide the Group with additional funding of £ 2.5 million (before expenses). Given the commercial prospects at the time of the preparation of this report (particularly TNEB described above), the directors consider that the Group has a good opportunity to see the share price rise above 0.6p before 5 July 2012 and therefore benefit from the exercise of the warrants. If the share price is at or below 0.6p on 5 July 2012, it is likely that the warrants will not be exercised and the Group will need additional funding from another source. There remains a significant risk that the required level of funding will not be received in the necessary timescales or at all. This constitutes a material uncertainty.

Notwithstanding the material uncertainties described above, the directors have a reasonable expectation that the Group and Company 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. Accordingly, they have prepared these financial statements on the going concern basis.

The financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern. In the event the Group ceased to be a going concern, the adjustments would include writing down the carrying value of assets, including inventories, to their recoverable amount and providing for any further liabilities that might arise.

2.   Dividends

The Directors do not recommend the payment of a dividend (2010: £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 this stage of its development.

3.   Earnings per share

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

Earnings

			2011		2010
			£		£
Earnings for the purposes of basic earnings per share being net loss attributable to equity holders of the parent
		3,151,576			2,648,116

Number of shares

			2011			2010
			No.			No.
Weighted average number of ordinary shares for the purposes of basic and diluted earnings per share				1,021,124,228		751,804,821

4.   Share capital

		2011		2010
		number		number
Authorised:
Ordinary shares of 0.2 pence each		1,500,000,000		1,500,000,000
		2011		2010
		£		£
Issued and fully paid:
1,192,700,288 (2010: 923,832,983) ordinary shares of 0.2 pence each		2,385,401		1,847,666

 

5. Notes to the consolidated cash flow statement

			2011		2010
			£		£
	Operating loss for the year		(3,499,499)		(2,954,055)
Adjustments for:
	Depreciation of property, plant and equipment		28,690		26,017
	Share-based payment expense		127,537		97,113
Operating cash flows before movements in working capital			(3,343,272)		(2,830,925)
	(Increase)/decrease in inventories		(100,654)		20,164
	(Increase) in receivables		(116,848)		(17,038)
	Increase in payables		65,255		54,540
Cash reduced by operations			(3,495,519)		(2,773,259)
	Income taxes received		317,673		479,328
Net cash outflow from operating activities			(3,177,846)		(2,293,931)

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.

 

END

 

 

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