CyanConnode : March 2023 Annual Results

CYANCONNODE HOLDINGS PLC

ANNUAL REPORT AND ACCOUNTS

MARCH 2023

Company Registration No. 04554942

Contents

01 Highlights

1. Chairman's Statement

1. Strategic Report

Our Governance

1. Board of Directors

1. Financial Review

1. Corporate Governance Statement

1. Directors' Remuneration Report

1. Audit Committee Report
2. Directors' Report

1. Directors' Responsibilities Statement

Our Financials

1. Independent Auditor's Report

1. Consolidated Income Statement

1. Consolidated Statement of Comprehensive Income
2. Consolidated Statement of Financial Position

1. Consolidated Statement of Changes in Equity
2. Consolidated Cash Flow Statement
3. Company Balance Sheet
4. Company Statement of Changes in Equity
5. Company Cash Flow Statement
6. Notes to Financial Statements

1. Professional Advisers

Company Registration No. 04554942

CyanConnode at a glance

A world leader in Narrowband Radio Frequency (RF) Smart Mesh Networks

CyanConnode is a world leader in the design and development of narrowband RF smart mesh networks that enable machine to machine (M2M) communications. With a wealth of expertise and experience in smart technology, the Group provides customers with low-power,end-to-end networking solutions with high-performance applications that save energy, as well as providing enhanced service delivery and improved business efficiency.

CyanConnode's Omnimesh solution, based on IPv6 6LoWPAN, is an easy to deploy standards-based wireless Neighbourhood Area Network (NAN). It is a highly secure IP-based M2M platform that uses narrowband radio mesh networks and cellular networks to create scalable, self-healing and self-configuring deployments that enable rapid innovation for the implementation of third-party applications.

Narrowband RF networks are low-power and suitable for applications requiring reliable communications. CyanConnode's solutions use sub-GHz frequencies that maximise the range of its low power networks and provide excellent penetration through obstructions, such as buildings, in smart metering deployments.

Highlights

Financial highlights

• Increase of 23% in revenue to £11.7m in FY23 from £9.6m in FY22, the highest annual revenue for the Group to date after four consecutive years of growth1
• Reduction in gross profit to £4.2m in FY23 (FY22: £5.0m) as a result of lower margin sales of third-party products
• Increase in operating loss to £3.3m in FY23 (FY22: £1.0m) as a result of lower gross margin, higher operating costs and a £1.0m impairment of intangible assets
• Increase in EBITDA loss to £2.9m in FY23 (FY22: £0.4m)
• Reduction in adjusted EBITDA2 to loss of £1.6m in FY23 (FY22: £0.06m profit)
• Increase in cash position to £4.1m in FY23 (FY22: £2.4m)
• Increase in cash collected from customers to £10.7m in FY23 (FY22: £8.2m)

Operational highlights

• Orders for 2.3m modules won in India during the period - higher than the total number of modules won in India in the company's history prior to the current year taking order book to 3.6m during the financial year, of which 2.3m were still to be deployed. Post period this order book has increased further to 4.2m as set out in the post period highlights below
• Order worth USD 6.7m won from MENA for NB-IoT gateways
• Further new order worth USD 2.5m won from MENA for Cellular gateways
• Oversubscribed placing and subscriptions completed raising, in aggregate, £5.8m before expenses

1. 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.
2. 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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Operational highlights (continued)

• 391,000 Omnimesh Radio Frequency (RF) Modules shipped against current contracts during the period (FY22: 612,000), along with 46,000 NB-IoT gateways and 63,000 Cellular gateways
• Strategic Framework Agreement signed to deliver 3m units

Post-Period Highlights

• 600,000 Omnimesh RF Modules and associated products ordered from a subsidiary of IntelliSmart Infrastructure Private Limited, taking order book to 4.2m modules
• CyanConnode India recognised as Dun and Bradstreet 'Start-Up 50 Trailblazer'
• Memorandum of Association (MOU) signed with Alfanar
• Revenue of greater than £2.8m in Q1 of FY24, being 2.1 times revenue of the whole of H1 FY23
• 291k modules shipped in Q1 of FY24 vs 391k shipped in the whole of FY23
• £3.6m cash received from customers in Q1 FY24
• Investment into areas such as recruitment to scale up the business

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Chairman's Statement

Dear Shareholders

The financial year ending March 2023 has been the most successful financial year for the Group in terms of revenue, orders won and cash collected from customers. It is encouraging to see the vast increase in volumes and numbers of tenders being released in India after many years working in the country, as the government continues with its plans to roll out 250 million meters by 2025.

In addition, we have seen success with contracts in other territories around the world, particularly in the Middle East North Africa (MENA) region.

I'm encouraged to see the momentum from FY2023 continuing into the current financial year and am delighted to provide more details on the highlights of both FY2023 and the current business in this Annual Report.

Operational Review

India

The union budget of 2020-21 paved the way for the replacement of 250 million conventional electricity meters with smart meters by 2025 by announcing the Revamped Distribution Sector Scheme (RDSS). It also approved an outlay for the RDSS of Rs 3,03,758 Crore (circa £30 billion) over 5 years. In August 2022, the Government of India formally approved the RDSS to help Distribution Companies (DISCOMs) improve their operational efficiencies and financial sustainability by providing result-linked financial assistance to strengthen supply infrastructure. The 'Collection Efficiency' of not less than 98%, as set out in the RDSS and which CyanConnode achieves, favours the Group's technology for network communication and management. RDSS mandates compulsory installation of smart meters across the country and will run for five years from FY22 to FY26. In addition, the Rural Electrification Corporation proposed a Request for Empanelment (RFE) to allow participation in the RDSS tenders. This requires Advanced Metering Infrastructure Service Providers (AMISP) to demonstrate their solutions in a controlled test environment. Empanelment will be required by all AMISPs to allow participation in RDSS tenders. Following an initial delay in the empanelment process, forty-three companies are now empanelled. Of the 250 million smart prepaid meters approved under the RDSS, over 200 million (an addressable market to CyanConnode worth a potential c. £2.5 billion) have been sanctioned so far, according to information recently tabled in the Indian Parliament (set out below).

Smart meters sanctioned under RDSS

State	Consumer*	DT**	Feeder		Consumer	DT**	Feeder
	No. of meters				(per cent share)
Tamil Nadu	30,000,000	472,500	18,274	14.7	8.7	9.2
Uttar Pradesh	26,979,056	1,526,801	20,874	13.2	28.2	10.5
Maharashtra	23,564,747	410,905	29,214	11.5	7.6	14.7
West Bengal	20,717,969	305,419	11,874	10.1	5.6	6.0
Gujarat	16,481,871	300,487	5,229	8.1	5.6	2.6
Rajasthan	14,274,956	434,608	27,128	7.0	8.0	13.6
Kerala	13,289,361	87,615	6,025	6.5	1.6	3.0
Madhya Pradesh	12,980,102	406,503	8,411	6.3	7.5	4.2
Punjab	8,784,807	184,044	12,563	4.3	3.4	6.3
Haryana	7,405,618	195,319	13,204	3.6	3.6	6.6
Total for above states	174,478,487	4,324,201	152,796	85.3	79.8	76.7
Rest of India	30,144,695	1,087,807	46,030	14.7	20.2	23.3
All-India total	204,623,182	5,412,008	198,826	100.0	100.0	100.0

*prepaid;**distribution transformer; Table shows top 10 states wrt consumer smart meters

The win rate from contracts tendered since April 2022 has been approximately 38% in volume and the installed rate is around 25%. CyanConnode is currently bidding for contracts worth over £1 billion in value.

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