CyanConnode Holdings plc (LON:CYAN), a world leader in Narrowband Radio Frequency (RF) Smart Mesh Networks, has announced its audited results for the year ended 31 March 2021.
Operational Highlights
· 481,000 modules shipped against current contracts during the period (FY20: 86,000)
· Order for 350,000 Omnimesh modules worth more than £6 million
· Previously delayed Indian contract resumed worth INR 1 billion (c. £10.5m)
· Commencement of rollout of projects in India and Thailand following easing of COVID-19 lockdowns
· Continued rollout of Swedish projects
· New Senior Management Team appointed in India
Financial Highlights
| Year to Mar2021£m | 15 months to Mar2020£m | % Change | |
| Revenue | 6.4 | 2.5 | + 163% |
| Gross profit | 3.1 | 1.4 | + 126% |
| Operating costs | (5.8) | (7.6) | – 24% |
| Operating loss | (2.7) | (6.2) | – 57% |
| Depreciation and amortisation | (0.6) | (0.8) | – 19% |
| EBITDA ¹ | (2.1) | (5.5) | – 62% |
| Adjusted EBITDA² | (1.9) | (4.9) | – 62% |
| Cash | 1.5 | 1.2 | + 27% |
‘ Where “EBITDA” is Loss before Interest, Tax, Depreciation and Amortisation. This is calculated by adding Depreciation and Amortisation back to the Operating loss.
² Where “Adjusted EBITDA” is calculated as EBITDA after the impact of stock impairment, foreign exchange gains/losses and share-based compensation have been removed.
Post Year End Highlights
· New order won for 152,000 Omnimesh modules for Northern India utility
· Follow-on order received for MEA Smart Grid Project in Thailand
· New order won for 100,000 Omnimesh modules in Africa
· Key Memorandum of Understanding (“MOU”) signed with Intellismart
· Heavily oversubscribed Placing completed raising £3.15 million before expenses of approximately £180k
· CyanConnode selected as EESL Technology Partner for Middle East and Africa
· Global Strategic Alliance signed with Smart Energy Water
· Further strengthening of CyanConnode India Senior Management Team
· CyanConnode awarded the London Stock Exchange Green Economy Mark
John Cronin, Executive Chairman of CyanConnode, commented:
“We have been pleased with the Company’s achievements during the financial year being reported and momentum going into the new one. Despite COVID-19 imposing lockdowns in all countries around the world during our financial year, we’ve seen our highest annual revenues to date.
The market in India is picking up again after its second lockdown during April and May 2021, and we were pleased to receive a contract from Schneider in August 2021 for 152,000 Omnimesh modules and associated gateways, services, Head End Software and support and maintenance services. This further increases the backlog we are delivering in India.
Along with the orders received for Thailand in July 2021 and an African deployment in August 2021, we look forward to an even more successful financial year ahead.
We’d like to thank all employees for their continued hard work and dedication, particularly during the challenges that COVID-19 has presented, and also all shareholders for their continued support.”
Chairman’s Statement
Operational Review
India
During FY21 there was a significant increase in activity in the Indian market as the Government of India moved forward with its plan to deploy 250 million smart meters. Smart meters will help India develop a smart grid, reduce consumer power outages, address challenges evolving from the energy mix and improve billing efficiency. The deployment of smart meters is also expected to reduce Aggregate Technical & Commercial (AT&C) losses.
The National Smart Grid Mission, Minister of Power, Government of India has issued a Standard Bidding Document (SBD) for the selection and appointment of Advanced Metering Infrastructure Service Providers (AMISP) on a Design, Build, Finance, Own, Operate, Transfer (DBFOOT) basis. This approach is structured to manage large scale tenders to facilitate the mass deployment of smart meters.
CyanConnode saw the deployment of its largest order to date (430,000 Omnimesh modules) resume, and also announced the winning of its second largest order to date (350,000 Omnimesh modules). The second largest order was for the Indian state-owned utility Madhya Pradesh Paschim Kshetra Vidyut Vitaran Company Ltd (MPWZ), for smart metering deployments in the towns of Ujjain, Dewas, Ratlam, Mhow and Khargone.
MPWZ serves more than 3 million consumers and CyanConnode has already deployed two orders for this utility. The latest order will increase the total number of Omnimesh modules ordered by MPWZ from 120,000 to 470,000. It is also the first Indian order where the Omnimesh Head End Server (HES), will communicate with both RF Mesh and Cellular Omnimesh modules. Most of the order is being paid for under a CAPEX model with the balance of the order being paid for under an OPEX model with Equated Monthly Instalments (EMI), over a five-year period. The smart meters, which are being supplied by existing partners, will be deployed over thirty months and initial deliveries commenced in Q3 2020.
The value of orders currently being deployed by CyanConnode in India is approximately INR 1.8 billion (c. £19m). The majority of the revenue for these orders is expected to be recognised over two years. The majority of invoices raised against the hardware deliveries are discounted with the Company’s bank in India with Letters of Credit (“LoCs”) providing security.
APAC and Middle East
The smart metering market in the APAC and Middle East continues to mature and presents a significant opportunity for CyanConnode.
In December 2019, an order was received from its Agent and Partner, The JST Group (JST), and Forth Corporation Public Company Limited (Forth). The order included 33,000 Omnimesh RF Modules. The end customer is Metropolitan Electricity Authority (MEA), a Thai state enterprise under the Ministry of Interior. The purchase order relates to a smart metering deployment which includes an Omnimesh Head End Server (HES). Under the agreement CyanConnode is supplying hardware, HES and an Annual Maintenance Contract (AMC). The AMC will deliver a recurring revenue stream over an initial five-year period. Deliverables for the integrated system, as well as hardware deliveries, commenced in 2020 and all modules and gateways ordered in December 2019 were delivered during the period.
In March 2020, a follow-on order from Thailand for 206,735 Omnimesh perpetual software licenses was received. The follow-on order was placed by Forth Corporation Public Company Limited (Forth) with The JST Group (JST) acting as CyanConnode’s Agent. Under the contract, an advance payment of approximately USD 206,000, (circa, £150,000) was made when the order was placed. The additional Omnimesh software licenses will allow MEA to connect up to 240,000 smart meters to the Omnimesh HES, which will serve the Thai Smart Metro Grid project. The order also includes an AMC which provides a further recurring revenue stream over an initial five-year period.
We are delighted to confirm that the project is progressing well and that our Ominmesh technology is operating as expected under the frequency bands of 442MHz and 447MHz, which have been allocated to the Thai energy utilities by The National Broadcasting and Telecommunications Commission (NBTC) of Thailand. As a result, a follow-on order for a further 31,000 Omnimesh modules was received in July 2021.
Europe
In April 2019, a follow-on order worth £0.7m was received from HM Power (HMP), for the smart metering of district heating and power, which demonstrates the flexibility of CyanConnode’s standards-based Omnimesh products. The order also included the new Omnimesh Long-Range RF Module that has a range of up to 12km, which increases the resilience of the RF Smart Network in rural areas. Delivery of the Omnimesh Long-Range RF Modules commenced in Q4 2019 and has continued throughout 2020 with more than 38,000 modules, (approximately one third of the contract), being delivered to the customer during the period.
During 2019, the UK Government announced that it had extended the deadline for the rollout of SMETS2 meters by four years to 2024. In early 2020, the deadline was again extended by a further six months due to the COVID-19 pandemic. The Data Communications Company (DCC) aims to connect around 53 million smart gas and electricity meters to its secure network and in February 2021, it announced that 10 million smart meters had been connected. The roll out of SMETS2 meters commenced in Q4 2018 and as previously announced, CyanConnode believes that, for ease of rapid deployment, installers are initially targeting installations in densely populated areas that have a reliable cellular signal. CyanConnode believes that the installation of its RF technology will gain momentum during the latter stages of the rollout.
Senior Management Changes
In December 2020, the Company was pleased to announce the appointment of Ajoy Rajani as Managing Director & CEO of CyanConnode India, and Ratna Garapati as Chief Operating Officer of CyanConnode India.
Ajoy Rajani is a highly experienced and well-regarded business leader within the Indian Power Sector and has a wealth of expertise in the Telecoms and IT Sectors. He has held various senior positions with Reliance Communications and Reliance Energy for the last sixteen years, with Ajoy also having held the position of Senior Executive Vice President of Adani Energy Mumbai, where he helped drive technological innovation to increase revenues to circa USD 100m.
Ratna Garapati has over 25 years’ experience in product development and management, IT business operations management. Prior to joining CyanConnode, Ratna held the position of Vice President at Trilliant India, where his key achievements included the winning and implementation of multiple smart grid pilots of over 5 million Smart Meters, of which 1.3 million have been commissioned. Prior to Trilliant, Ratna was Chief Delivery Officer of Smart Energy/Cities for Fluentgrid India, where he deployed the world’s largest Cloud Utility Billing Solution in Uttar Pradesh for 22 million consumers in 6 months and demonstrated the scalability of Meter Data Management System, (MDMS), for 10 million smart meters.
In December 2020, the Company also announced the promotion of Allan Baig to Group Chief Operating Officer. Allan joined CyanConnode in June 2017 and has thirty years’ experience in management and engineering with leading technology companies. Prior to joining CyanConnode, he held the position of Project Manager at Landis + Gyr and led their UK Smart Meter Implementation Program, (UKSMIP). Alan was responsible for project management across engineering functions, including product development, systems integration, and deployment, predominantly for UKSMIP. As Group Chief Operating Officer at CyanConnode, he leads all operations and engineering disciplines across teams in the UK and India.
Post period end, Ajoy Rajani has moved to Vice Chair of CyanConnode India and Rajiv Kumar was appointed as Managing Director and Chief Executive Officer of CyanConnode India. Rajiv is a dynamic professional with twenty-five years’ experience in digital energy for transmission and distribution utilities. He joins CyanConnode from Intellismart (Intellismart Infrastructure Private Limited), where he managed one of the largest smart meter deployment programs in India in his role as Chief Operating Officer, a role he held since Intellismart was set up in 2019. He joined Intellismart from EESL (Energy Efficiency Services Limited). Prior to EESL, Rajiv’s experience included a decade working for Schneider Electric, both internationally and in India in strategic roles in their digital energy business, and a decade working for Powergrid Corporation of India.
COVID-19 Update
The COVID-19 pandemic has caused global turmoil in financial and commodity markets. The energy sector was also hit hard, with demand dipping sharply as nearly one-third of the global population stayed indoors during the lockdown. While the world concurrently deals with the continued pandemic and the complexities of climate change, it needs to plan for a clean and resilient recovery of the energy sector. Smart metering presents exciting new opportunities for energy companies and consumers alike and will play an important role in growing a low carbon energy sector. Considering COVID-19 social distancing guidelines and government regulations, or those caused by any natural calamity where physical access is disrupted, it is important to understand that smart metering supports remote meter reading. This provides energy suppliers with the option to connect (or disconnect) remotely, thus avoiding potential personal conflict between the consumer and energy supplier. It also reduces the operational expenditure of the energy supplier, due to manual meter reading and associated inefficiencies or manipulations and eliminates physical activities, thereby helping to reduce the energy supplier’s carbon footprint.
At the time of writing this report, the United Kingdom is entering a period where all government restrictions relating to COVID-19 will be lifted. It is also a period of rapidly increasing cases of the virus in the community, however it is believed that due to the successful rollout of the vaccine across the UK, that there is less risk posed to the community despite the lifting of restrictions. CyanConnode continues to consider the impact of COVID-19 on its business, including first and foremost the wellbeing of employees, as well as contract deliverables to customers and the management of cashflow, to ensure the progression of its projects.
COVID-19 continues to pose significant worldwide uncertainty. CyanConnode has been working hard to tackle the risks and throughout the pandemic has implemented policies to mitigate them, and put in place the most appropriate measures to protect its business. The Directors are confident that the Company has been effectively managing the challenges that COVID-19 presents and will continue to do so.
Outlook
Since the period end, CyanConnode has signed several key partnerships and won two orders, while also successfully completing a heavily oversubscribed share placing at a premium to the share price. The Company has also made additional changes to strengthen its team in India as described above.
In April 2021, CyanConnode announced that it had been selected as technology partner for projects in the Middle East and Africa by EESL Energy Solutions LLC, Dubai (EESL Dubai). EESL Dubai is a joint venture where EESL has partnered with Hansa Energy Solutions to deliver energy efficient projects in Africa and the Middle East.
In May 2021, the Company also signed a Memorandum of Understanding (MOU), with Intellismart (Intellismart Infrastructure Private Limited), a joint venture company formed by EESL, (Energy Efficiency Services Limited), and NIIF, (National Investment and Infrastructure Fund). Intellismart is a Meter Asset Provider which deploys smart meters by funding CAPEX, which it then recovers through an OPEX model. Intellismart is focusing on expediting the deployment of 250 million smart meters across India and can operate at scale by leveraging the expertise and capital of EESL and NIIF. Under the MOU, CyanConnode and Intellismart will work on existing EESL and Intellismart projects as well as new ones, in India and international markets. EESL is promoted by the Ministry of Power (the Government of India), as a Joint Venture of four public sector undertakings, whilst NIIF is a collaborative investment platform for international and Indian investors, which is anchored by the Government of India, and it manages over USD 4.5 billion of equity capital. This collaboration will leverage CyanConnode’s market-leading RF mesh technology as well as EESL and Intellismart’s experience of delivering large-scale projects.
In May 2021, CyanConnode signed a Global Strategic Alliance Agreement with SEW (Smart Energy Water). Headquartered in California, SEW is a global energy and water cloud platform provider serving over 300+ Utilities worldwide. SEW delivers and builds the best digital customer and workforce experiences in the utility industry. Under the terms of the Agreement, CyanConnode and SEW can promote and be authorised to sell the others Products and Services, as well as refer potential customers to each other.
At the start of June 2021, the Company completed a heavily oversubscribed placing and subscription, raising £3.15 million before expenses, at a price of 9.5 pence per share. The issue price represented a premium of approximately 2.2% to the closing market price of 9.3 pence per share on the last business day prior to the announcement of the placing and subscription. The net proceeds of the Placing and the Subscription will be used to strengthen the Company’s balance sheet, to increase working capital, to allow the Company to continue to take advantage of its significant growth opportunities and to execute the Company’s growing order book and pipeline.
In July 2021, CyanConnode was delighted to announce a follow-on order from its partner the JST Group (JST) for the Metropolitan Electricity Authority (MEA) Smart Grid Project. The follow-on order is for 31,000 Omnimesh Modules and associated gateways and is in addition to the 33,000 Omnimesh Modules with associated gateways and perpetual licenses purchased in December 2019 and the 206,735 Omnimesh perpetual software licenses purchased in 2020. Deployment of this order will follow the successful ‘Go-Live’ phase of the MEA Smart Grid Project, which is expected in Q4 of 2021.
In August 2021 the Company also announced an order from Schneider Electric (Schneider Electric India Pvt Limited), for a smart metering deployment in Northern India. Under the purchase order, CyanConnode will supply 152,000 Omnimesh Modules together with Advanced Metering Infrastructure standards-based hardware, Services, Omnimesh Head-End Software, Perpetual License and an Annual Maintenance Contract. Under the contract CyanConnode will supply its new Omnimesh Cellular Modules as well as Omnimesh RF Modules. The supply of Omnimesh Modules is expected to commence in Q3 2021, with all modules being supplied within twelve months. Approximately 80% of revenue will be recognised during the first two years of the contract with the balance of approximately 20% being received during a further seven-year support and maintenance contract, which commences following the ‘Go Live’ phase.
We were delighted to announce a further order in August 2021 for a contract for a smart metering deployment in Africa whereby the Company will supply 100,000 Omnimesh Modules together with Advanced Metering Infrastructure, Services, Omnimesh Head-End Software, Perpetual License and an Annual Maintenance Contract. This opens a new territory for us, with a new customer.
I would once again like to thank shareholders who participated in the placing, and all shareholders for their ongoing support during what has been a challenging but rewarding year. We look forward to further order announcements during this financial year, and to delivering the backlog of orders won in previous periods.
John Cronin
Executive Chairman
