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ANNUAL REPORT AND ACCOUNTS 2021
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.
Strategic Report
1
Highlights
2 Chairman’s Statement
6 Strategic Report
Our Governance
16 Board of Directors
18 Financial Review
20 Corporate Governance Statement
27 Directors’ Remuneration Report
32 Audit Committee Report
34 Directors’ Report
38 Directors’ Responsibilities Statement
Our Financials
39 Independent Auditor's Report
45 Consolidated Income Statement
46 Consolidated Statement of Comprehensive Income
47 Consolidated Statement of Financial Position
48 Consolidated Statement of Changes in Equity
49 Consolidated Cash Flow Statement
50 Company Balance Sheet
51 Company Statement of Changes in Equity
52 Company Cash Flow Statement
53 Notes to Financial Statements
81 Professional Advisers
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021
Highlights
1
Financial highlights
Revenue
Gross profit
Operating costs
Operating loss
Depreciation and amortisation
EBITDA¹
Adjusted EBITDA²
Cash
Year to
Mar 2021
£m
15 months to
Mar 2020
£m
% Improvement
6.4
3.1
(5.8)
(2.7)
(0.6)
(2.1)
(1.9)
1.5
2.5
1.4
(7.6)
(6.2)
(0.8)
(5.5)
(4.9)
1.2
163%
126%
24%
57%
19%
62%
62%
27%
1
2
Where "EBITDA" is Loss before Interest, Tax, Depreciation and Amortisation. This is calculated by adding Depreciation and Amortisation back to the
Operating loss. Please see page 18
of the Financial Review for details.
Where "Adjusted EBITDA" is calculated as EBITDA after the impact of stock impairment, foreign exchange gains/losses and share-based compensation
have been removed. Please see page 18
or details.
Highest revenues
on record during a
challenging but busy
year. No employees
furloughed as Group
enters phase of
significant growth.
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
Post-Period 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
STRATEGIC REPORT 2
STRATEGIC REPORT
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021
Chairman’s Statement
“I’m delighted with the results for the financial
year. Despite the challenges brought about by
COVID-19, with all KPIs being positive, we have
exceeded market expectation and delivered
our highest revenues to date.”
John Cronin
Executive Chairman
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.
CHAIRMAN'S STATEMENT
3
John Cronin
Executive Chairman
“I would like to thank all
employees for their hard work
and commitment during this
period, and all shareholders for
their continued support.”
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 442 and 447MMHz,
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 has driven 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.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021STRATEGIC REPORT 4
CHAIRMAN'S STATEMENT
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.
CyanConnode is confident that it 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 three 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.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 CHAIRMAN'S STATEMENT
5
In August 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
5 August 2021
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.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021STRATEGIC REPORT 6
STRATEGIC REPORT
Strategic Report
The principal activity of the Group during the year was
developing and supplying software and hardware for
wireless machine-to-machine ("M2M") communication
over narrowband RF smart mesh and cellular networks.
Statement of scope
This Strategic Report has been prepared to provide
additional information for shareholders to assess the
Group’s strategies and the potential for those strategies to
succeed.
The Strategic Report contains certain forward-looking
statements. These statements are made by the directors in
good faith based on the information available to them up
to the time of their approval of this report. Such statements
should be treated with caution due to the inherent
uncertainties, including both economic and business risk
factors, underlying any such forward-looking information.
The directors, in preparing this Strategic Report, have
complied with s414C of the Companies Act 2006. This
Strategic Report has been prepared for the Group as a
whole and therefore gives greater emphasis to those
matters that are significant to CyanConnode Holdings
plc and its subsidiary undertakings when viewed as a
complete enterprise.
Principal Activity
The principal activity of the Group during the year was
developing and supplying software and hardware for
wireless machine-to-machine ("M2M") communication
over narrowband RF smart mesh and cellular networks.
The principal activity of the Company is that of a holding
company. Currently the Group has over one million devices
installed and managed throughout the world.
Business Model
CyanConnode is a communications company whose
business model is based on collaborative partnerships,
where it engages with customers and markets by
establishing eco-systems across multiple manufacturers
and system integrators. Our Partners support the transfer
of skills and experience to facilitate customer ownership of
hardware and network infrastructure.
The Group places a high emphasis on engaging with utility
executives, national and regional government officials,
standards bodies and regulators. These activities help
CyanConnode to understand and meet customer and
market needs. A prime example of this strategy in action is
the Group’s Indian business, where CyanConnode supports
the ‘Make in India’ and ‘Skill India’ initiatives of Prime Minister
Modi, by using local partners for the manufacture and
deployment of equipment, which in turn leads to the
generation of in-country wealth.
The Group aims to build a world-class business by:
The Group aims to build a world-class business by:
•
•
Being Thought Leaders in the Internet of Things
Being Thought Leaders in the Internet of Things
(“IoT”)
(“IoT”)
•
•
Offering customers solutions that result in
Offering customers solutions that result in
optimised hybrid networks solutions that lever
optimised hybrid networks solutions that lever
The Group aims to build a world-class business by:
existing infrastructure
existing infrastructure
Being Thought Leaders in the Internet of Things (“IoT”)
Offering full end-to-end solutions including the
Offering full end-to-end solutions including the
Offering customers solutions that result in optimised
integration of embedded modules into meters and
integration of embedded modules into meters and
hybrid networks solutions that lever existing
integration into the customers billing and meter
integration into the customers billing and meter
infrastructure
data management systems
data management systems
•
•
•
•
•
•
•
•
•
•
Offering full end-to-end solutions including the
The manufacture and deployment of equipment
The manufacture and deployment of equipment
integration of embedded modules into meters and
using local partners to generate in-country wealth
using local partners to generate in-country wealth
integration into the customers billing and meter data
management systems
Building strong relationships with Partners, Utilities,
Building strong relationships with Partners, Utilities,
Governments, Standards Bodies and Regulators
Governments, Standards Bodies and Regulators
The manufacture and deployment of equipment using
local partners to generate in-country wealth
• Providing excellent customer service
• Providing excellent customer service
•
The Group aims to generate revenues from:
The Group aims to generate revenues from:
Building strong relationships with Partners, Utilities,
Governments, Standards Bodies and Regulators
• Direct sales of hardware and software
• Direct sales of hardware and software
• Providing excellent customer service
•
•
The Group aims to generate revenues from:
Licence and royalty fees from licensed hardware
Licence and royalty fees from licensed hardware
and software
and software
• Direct sales of hardware and software
• Support and maintenance fees
• Support and maintenance fees
•
•
•
Licence and royalty fees from licensed hardware and
Related services including project management,
Related services including project management,
software
integration, installation services and network
integration, installation services and network
optimisation
optimisation
Related services including project management,
integration, installation services and network
optimisation
• Support and maintenance fees
•
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 STRATEGIC REPORT
7
Our Technology Communications for IoT
Intelligent devices enable two-way communication
between the endpoint device and the central systems of
the provider. These are generally deployed as part of a
broader platform, which includes the intelligent modules
that are embedded in the devices, communications
networks / protocols, and data management systems.
These are essential components for an Internet of Things
(IoT) implementation.
CyanConnode is a specialist provider of communication
technologies for IoT networks. The company delivers
secure, robust IoT communication networks for multiple
enterprise applications, in a wide range of urban and
rural environments. A private network is created between
the endpoint devices (e.g. smart meters), with gateways
aggregating data from a group of local devices. There are
multiple approaches available for networking between
smart devices and central data- gathering hubs. The
appropriate technology will vary by country, topology,
population density, mobile network capacity, backhaul
network availability and other such factors.
Multi-technology Approach
While CyanConnode has historically been a strong
proponent of RF mesh technology, and this remains its
core product offering, but the company also now has,
within its portfolio, full capabilities for cellular 2G to 5G,
including narrowband IoT, and powerline communications.
All of these communications technologies can be
connected to the same head-end server (HES), which is
also provided by CyanConnode. The HES is where the data
is collected and then sent on to a data management
system, which will be managed by a utility in the example
of smart meters.
The network is a mesh where each endpoint connects to
multiple other points, so there is no single point of failure
in the network. If a particular node malfunctions, the mesh
network offers redundancy, such that the other nodes can
still continue to connect via other routes in the network.
Specifically for RF mesh networks, a key attribute is that
every device on the network does not need to be within
range of the gateway, making this approach ideal for rural
locations or where dwellings are widely geographically
dispersed, as well as high density dwellings.
RF Mesh Networks Explained
Narrowband RF mesh technology uses lower bandwidth
radio frequencies (sub-GHz). These frequencies give
better range and coverage than higher frequencies. The
Omnimesh RF platform is an open standards-based (IPv6,
6LoWPAN) network solution that provides long-range and
reliable communication between devices – for example,
between smart meters. RF mesh is a proven, cost-effective
technology for delivering excellent service levels.
The diagram below (Figure 1) shows an RF mesh network
for a smart meter network with the multiple paths from
each node or endpoint meter to the gateway, which is
connected via a long-haul network to the central platform.
As we noted earlier, the central system in a country such
as India may increasingly be a shared platform operated
by a JV entity.
The current architecture typically allows around 250
meters to be connected to one gateway (although ratios
up to 1000:1 have been deployed) – this ratio is being
improved consistently, and the company expects 400-
1,000 meters to be supported by one gateway in future
versions of the platform over the next 18 months.
Figure 1: CyanConnode RF Mesh Configuration
Source: Company data
AMI
(Advance Metering
Infrastructure)
Smart Meter
OmniMesh
(HES)
Communication Infrastructure
(Hybrid: Mesh RF+ Cellular)
P2P
Cellular
Cellular-4G/3G/2G
I
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,
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,
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(Inc. Network Management)
Meter Data Management +
Analytics
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P2P Cellular
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Gateway –
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Gateway –
Cellular backhaul
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021STRATEGIC REPORT
8
STRATEGIC REPORT
Cellular
CyanConnode is a strong advocate of RF mesh
technology. However, no single technology meets the
requirements of every customer in every deployment
environment. For example, cellular technologies may
provide good service levels in areas where there are too
few devices to justify the deployment of a mesh. To cover
a wider market, in March 2020, CyanConnode announced
its new Omnimesh cellular products, which use mobile
network technologies as an alternative to RF to connect
meters, where required. The products are available in all
cellular regions and bands, and support all the 2G, 3G, 4G
and emerging 5G standards, including NB-IoT and Cat-
M1-IoT cellular technologies.
The Omnimesh cellular products have dual SIM capabilities,
and the best available cellular network is automatically
selected for point-to-point connectivity. To allow a mix of RF
and cellular connectivity to be used across a single region,
the updated Omnimesh HES can simultaneously manage
both RF mesh and cellular connected smart meters. This
technology flexibility allows customers to maximise service
levels while minimising costs.
In-meter Gateways
CyanConnode’s development of in-meter gateways has
been well received by utility customers. These allow the
aggregation gateways to be installed in the same units
as endpoint smart meters in individual dwellings, which
represent more secure locations than externally, where
additional costs of secure metal boxes are incurred.
Network Management System
The network management component is focused
on managing the overall mesh network environment
(including device configurations, device status, etc). The
platform scales to millions of nodes. The system offers a
unified interface to view multiple network types across RF
and cellular.
Advance Metering Infrastructure (AMI)
AMI is an integrated system of smart meters,
communications networks, and data management
systems that enables two-way communication
between utilities and customers. AMI enables two-way
communication so that not only can meters be read
automatically, but instructions can be sent to the meter
from a central point, which might be to disconnect
(for example, if a bill has not been paid, or to update
time-based pricing data to manage consumptions).
The information collected from smart meters can be
processed in real time, and signals can be sent to
manage demand.
These systems are widely acknowledged to offer
substantial potential benefits, many of which are central
to the highly positive returns on investment associated
with smart meter implementations.
The analytical processes to understand load patterns and
optimise use of these platforms can be complex and data-
intensive – in fact, there are ongoing programmes at large
utilities around the world to take greater advantage of the
capabilities of AMI platforms that have been implemented.
CyanConnode offers a comprehensive platform that
covers the AMI from the meter endpoint through to the
Meter Data Management System (MDMS), which stores
the huge quantities of data generated by the smart meter
network and will typically be provided by major Enterprise
Resource Planning (ERP) vendors, such as Oracle and SAP.
Market Opportunity
Global environmental concerns are more than ever to
the forefront of political discourse and media attention.
Governments are seeking ways of responding to what
many now view as an imperative for widespread action.
Utilities have a significant part to play by reducing
inefficiencies in both generation and distribution. The
World Bank has demonstrated that it is three times
cheaper for utilities to save lost electricity by improving
Distribution network efficiency, rather than investing
in further generating capacity. Smart metering is an
important technology as it helps both utilities and
consumers, of all types, minimise resource wastage.
CyanConnode’s Narrowband RF Smart Mesh Networks
can be used to control and monitor energy meters over
hybrid networks so as to assist Governments and utilities
in meeting their greenhouse gas emissions target. In the
UK CyanConnode’s technology forms part of the UK Smart
Metering Implementation Programme (UK SMIP), which
will contribute towards the UK meeting its target of cutting
greenhouse gas emissions by at least 40% below 1990 levels.
Market Forecasts
The smart meter market can be broken down into three
subcategories: smart gas meters, smart water meters
and smart electricity meters. Of the three, smart electricity
meters are expected to deliver the highest growth rates, as
the global industry seeks to modernise infrastructure and
systems to drive much-needed improvements to financial
performance, efficiency and resilience of energy grids.
The global market is characterised by quite marked
differentials by region in current smart meter penetration
and, hence, in expected growth rates in smart meter
shipments over the next five to ten years.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 STRATEGIC REPORT
9
One important consideration is the migration towards
smart meter-as-a-service/rental (OPEX) models and
away from CAPEX models which require payment
upfront, as this may significantly increase smart meter
deployment rates going forwards.
Forecasts, in general, suggest significant uplifts in
the volume of smart meter shipments globally, but,
consistent with our observations on regional trends,
the largest geographical market will be Asia-Pacific for
several years to come.
IoT Analytics: in a report published in 2019, IoT Analytics
estimated that over 14% of all meters globally (across
electricity, gas and water) were smart meters, i.e.
intelligent and network-enabled. It expects a 7% CAGR
2018-24 in terms of meter shipments.
MarketsandMarkets anticipates a similar growth rate, with
Asia-Pacific expected to lead the way, driven particularly
by China.
“Smart metering is an
important technology as
it helps both utilities and
consumers, of all types,
minimise resource wastage.
In July 2021, CyanConnode
received the London Stock
Exchange's Green Economy
Mark, recognising its
contribution to the global
green economy. The Mark
supports the Company in
communicating its green
credentials to investors
and other stakeholders,
highlighting its efforts to
support the transition to a low
or net zero economy.”
s172 Statement
Decisions of the CyanConnode Board take into account
not just short-term, but also medium and long-term
consequences, which are carefully considered and
balanced, having regard to the sometimes conflicting
needs and priorities of the business, its customers, partners,
employees and other stakeholders. During the year, a
lot of consideration was given to determine the most
appropriate funding solution for the Group to mitigate
against any potential delays to contracts for example
as a result of COVID-19. As set out later in this statement,
discussions were held with shareholders, which resulted in
the Company completing a heavily oversubscribed placing
at a premium to the share price in June 2021.
. CyanConnode’s
The Strategic report sets out the Group’s policy towards
employees in greater detail on page 14
value is created through innovation, which is a product
of motivated employees. They are of central importance
to the Group’s success, and the directors believe that
the CyanConnode culture and core values create an
environment for engaged and successful employees. The
HR department supports managers to look after employee
needs. During the COVID-19 pandemic, the health
and wellbeing of employees has been of paramount
importance to the Group. At the start of the pandemic
CyanConnode quickly moved to a working from home
policy, enabling all employees to work remotely, and
ensuring no employees were required to be furloughed.
Employees who performed work which could only be
done in the office (for example hardware engineers) were
set up to do this work in the safest environment possible.
The Group invested in temperature guns, hand sanitisers,
gloves and other safety equipment to minimise risks to
employees, and ensured social distancing measures were
put in place in its offices. In India, CyanConnode has made
efforts to support the vaccination of all employees.
CyanConnode’s success depends on strategic relationships
with key investors, partners, customers and suppliers, so
the Board maintains ongoing oversight of these. Board
Reports update the Board on the status of key relationships,
which have Board-level engagement from an operational
perspective. Product development and performance is
constantly monitored, with the Group COO periodically
attending Board meetings to provide updates and feedback
to the Board. Separate Board sessions including the Product
Manager and Group COO are also held periodically to
present the Group’s Roadmap and ideas for new products or
enhanced features and functionalities of existing products.
Customer feedback is continuously captured through
regular account meetings, which are always attended by
management-level, and often director-level, representatives.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021STRATEGIC REPORT 10
STRATEGIC REPORT
The Executive Chairman and the Chief Financial Officer
engage with both institutional and private investors
to provide updates on business and obtain feedback,
which is important to the Board. Regular, more informal
communication from investors also provides feedback
to the Board. In 2020 no AGM was held due to COVID-19
recommendations, however an investor webinar was
held on a platform which allowed shareholders to
attend and ask questions and pass comments before
and during the webinar. Attendees could also provide
feedback following the webinar. In previous years, a Q&A
session has always followed the formal proceedings
at the Company’s AGM, where shareholders could ask
questions and provide feedback.
Environment, Social and Governance (ESG)
CyanConnode seeks to minimise as far as possible
its impact on the environment and received ISO14001
accreditation during 2019. It works closely with local
businesses to put in place joint environmentally friendly
policies. The office of the Cambridge Headquarters has a
Climate Committee who meet periodically to agree ways
that the building and its tenants can implement more
environmentally friendly policies. The Group is mindful of its
corporate social responsibilities and the need to build and
maintain strong relationships across a range of stakeholder
groups is a key principle in what we do. Engaging with our
stakeholders allows us to create a positive legacy and
create strong stakeholder relationships. Our project teams
engage with stakeholders throughout the development
life cycle to help enrich communities. More on our
Environmental Policy can be found in the Employee
Matters section on page 14
of this report.
COVID-19 has meant that most companies around
the globe have had to adapt business practices and
ways of working. At times the challenges presented by
the pandemic have led to conflict of interest between
stakeholders as the stage of the pandemic varied
according to jurisdiction. For example, if partners in
territories with no travel restrictions wanted partners from
territories with travel restrictions to travel for face-to-face
project meetings this could not happen. CyanConnode
has worked closely with employees, partners, suppliers,
and customers to ensure that business has continued in
a manner as close to normal as possible during COVID-19
lockdown periods, while always considering the health and
wellbeing of its employees. Shareholder meetings, investor
presentations and webinars have been held online to
ensure continued engagement with shareholders, and the
executive directors have regular calls with shareholders as
and when requested.
Further details on practical steps the Group has taken
can be found in the Strategic Report, the Directors’
Report and Corporate Governance Statement. The
Board’s adoption and application of the QCA Corporate
Governance Code further supports these principles, with
more detail of the steps it has taken set out in the QCA
website disclosures against the ten principles of the
Code, which can be found on the CyanConnode website
https://cyanconnode.com/investors/governance/
CyanConnode works with the global leaders in its sector.
Accordingly, the highest of standards of business are
demanded. CyanConnode works with these global leaders,
at the forefront of business, industry, and technological
innovation, to ensure these standards are constantly
challenged and improved.
The competing needs of the various stakeholders of the
company are monitored and reviewed at management
and at Board level. Where conflicting needs arise, advice
is sought from the non-executive directors and, as
necessary, from CyanConnode advisors. Through the
careful balancing of stakeholder needs, CyanConnode
seeks to promote success for the long-term benefit of
shareholders. During the period, the Board sought and
considered many different funding options to mitigate
against any potential delays to business as a result of the
pandemic. It consulted with major shareholders to get their
views regarding options available to the Company. In June
2021, the Company completed a successful fundraising at
a premium to the share price at the time, to ensure that
dilution of existing shareholders was kept to a minimum.
Key performance indicators
An analysis of the financial performance for the year
using Key Performance Indicators is included within
the Financial Review, see page 19
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 11
STRATEGIC REPORT
Operational Review
Principal Risks and Uncertainties
The Group is exposed to a number of risks and uncertainties. Those that are considered to be key to the Group are set out in
the following table. Many of these risks have not changed from prior years.
Area of Risk
Description
Mitigating Activity
1. Financial
• The Group is currently loss-making therefore
absorbing cash. However, the Directors
believe that it has sufficient cash reserves,
debtors and future revenues to execute its
current business plan and see it through
to profitability. There is however a risk that
there could be delays to customer deliveries
or receipts from customers. This profile has
improved since the previous period as a result
of Letters of Credit being put in place to ensure
prompt receipt against debtors, however
these risks still remain.
• Should the Group wish to explore new
territories, products or business opportunities
or models there would be a requirement for
additional investment.
• Should the Group be required to use additional
suppliers within the supply chain, for example
for supply of components, there may be
additional working capital requirements.
• In 2020 the world was impacted by the
COVID-19 pandemic which has caused
significant disruption across many industries.
The Group has not been significantly impacted
and has set processes in place to ensure
continuation of operations while always
maintaining a safe work environment for its
employees.
• The Directors regularly monitor the financing
needs of the Group and react quickly should
projects or customer receipts be delayed. The
Group actively communicates with its investors
and potential investors, including through its
nominated advisor and brokers, to update on
cash position. In addition to equity funding, the
Directors are regularly in dialogue with a number
of banks and other organisations to investigate
working capital facilities.
• New business models are also being explored
and some of these such as licensing or the OPEX
model could be significant sources of funding
should they be won.
• Dialogues with banks and other financial
institutions have been positive and the Directors
feel they would be in a position to secure working
capital funding should any projects be delayed
as a result of COVID-19.
• Revised working practices were quickly
implemented including remote working and
online meetings across the business and with
customers, partners and shareholders.
• Mitigation against financial and capital risk is
discussed in the financial section above.
• The market for our products and services,
• CyanConnode continues to adopt a
and smart grid and smart lighting technology
generally, is still developing. If the market
develops less extensively or more slowly than
we expect, our business and revenue growth
could be slower than anticipated.
diversification strategy. This helps to identify
targets in additional emerging markets, and
new business models allowing for a much wider
customer base and less pressure on one specific
market/country/business model.
• The Group’s products compete for
technological superiority over those of
competitors. There is a risk that new product
developments by competitors diminish
the attractiveness of the Group’s products,
reducing sales.
• Research and development costs have reduced
significantly however the Group will continue to
ensure that its products provide the best possible
match to potential and existing customers’
requirements. The Group works closely with
customers to establish their requirements and
evaluates competitor products whilst also
researching the market to ensure a market
leading product suite.
2. Pandemics
3. Growth
Strategy
4. Competitive
Environment
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021STRATEGIC REPORT 12
STRATEGIC REPORT
Area of Risk
Description
Mitigating Activity
5. Macro-
economic
conditions and
political risk
• Sales cycles to our customers and end
utilities in emerging markets can be lengthy
and unpredictable and require significant
employee time and financial resources with
no assurances that a prospective customer
will select our products and services.
• CyanConnode sales and profits may be
impacted by spending slowdowns and/
or increasing inflationary pressures in key
territories.
• The territories in which we operate are subject
to political risk whereby decisions by national
or state governments may impact our ability
to effectively trade in these markets.
• The Group maintains close relationships with
its partners and potential end customers to
respond to the changing demands of the market
and maximise contract wins. The Group has
employed world class experts in their fields in
many areas of the business to respond to market
requirements and anticipate the changing
demands of the market.
• Market data is regularly analysed to provide
valuable information on demand changes,
allowing the Company to react according to
these changes.
• We mitigate the political risk through the effective
use of local partners in each territory who act as
agents or resellers of CyanConnode’s technology.
• Other than Connode in Sweden, which is part of
the European Union, the Group does not trade
substantially with any other EU country and
therefore the outcome of the exit from the EU was
not significant.
6. Laws &
Regulations
• The Group's customers operate in a highly
regulated business environment and changes
in regulation could impose costs on them,
which they could pass on to the Group.
• The design and engineering team have a proven
track record of designing products that meet the
requirements and regulations of the markets we
operate in.
• Some of the markets we are targeting and
have entered are highly complex in terms of
regulations to be followed as a UK exporter.
• The Group has implemented an Anti- Bribery
Policy in line with the Bribery Act 2010, which
sets out strict guidelines regarding the offering
or receiving of gifts or hospitality to ensure
compliance with the Act. Training in Anti-Bribery
is provided regularly to employees, contractors
and partners. All partners are required to
sign acceptance of the CyanConnode Anti-
Bribery policy when entering into partnership
agreements with the Company.
• The Group takes legal advice and advice from
the Department of International Trade regarding
regulations when entering new territories.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 STRATEGIC REPORT
13
Area of Risk
Description
Mitigating Activity
7. Business
Continuity
• CyanConnode depends on a limited number
of contract equipment manufacturers
(“CEMs”) for certain critical aspects of the
manufacture of its products.
• In 2021, CyanConnode relied on three major
customers for the majority of its revenue.
• In 2020-21 the world has been affected by
COVID-19 which has resulted in lockdowns
in most countries around the world. This has
resulted in delays to deployments and signing
of contracts. It has also meant each of the
Group’s subsidiaries have needed to change
their way of working for example working from
home.
• Strong relationships are maintained with several
CEMs in India and China. This helps ensure good
quality and de-risks the effect of geopolitical
factors in a particular territory. It also ensures
that any issues are communicated and can be
mitigated where possible in good time and can
provide the opportunity to switch supplier at short
notice.
• CyanConnode maintains good relationships with
all its customers and continues to maintain its
strong support for them. During the year it has
integrated with additional meter manufacturers
whilst also diversifying its customer base with
new licensing agreements.
• CyanConnode has worked closely with
employees, partners, suppliers, and customers to
ensure that business has continued in a manner
as close to normal as possible during COVID-19
lockdown periods.
8. People
• As with many technology businesses, the
Group is dependent on a relatively small
number of highly skilled staff. The ability of the
Group to retain and motivate its key staff is a
key business risk.
• CyanConnode provides well-structured and
competitive reward and benefit packages
that ensure our ability to attract and retain
employees.
• Training and development opportunities are
• Being a small company there is the added
offered to support staff in their careers.
9. Cyber Risk
10. Currency
Exchange
challenge of requiring staff to be skilled across
a number of areas, with flexibility and agility to
deliver results for customers.
• Disruption to or penetration of our information
technology platforms could have a material
adverse impact on the Group.
• Technology resources are continuously
monitored by appropriately trained staff, which
provide and maintain process controls aimed
at securing our networks and data. In recent
months, we have commissioned external
agencies to carry out penetration testing of our
network in order to ensure we meet industry best
practice. We intend to repeat penetration testing
regularly during the year.
• We are exposed to both translation and
• Whilst most of the Group's customers are
transaction risk. In addition, transactions are
carried out in currencies other than UK Sterling.
• The majority of our revenues are currently
denominated in Indian Rupees, whilst the
majority of our costs are denominated in UK
Sterling.
invoiced in Indian Rupees, we also contract the
manufacture of our hardware in Indian Rupees
and this partially offsets the risk.
• Connode Sweden mainly operates in SEK with
customers paying and suppliers being paid in the
same currency. The only exception is the UK smart
metering project which is paid in UK Sterling.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021STRATEGIC REPORT 14
STRATEGIC REPORT
Employee Matters
Headcount
The average number of employees reduced during
the year ending 31 March 2021 to 47 (2020: 50). The
management, development and delivery of the
Company’s innovative technologies is made possible
through the contribution of highly skilled staff based in
the UK and India. Staffing requirements continue to be
monitored by region to ensure suppliers and customers
are fully supported, while at the same time keeping costs
minimised.
Diversity
CyanConnode is a multicultural, global organisation
and we are committed to providing equal opportunities
for training, career development and promotion to all
employees, regardless of any physical disability, gender,
religion, race or nationality. Women comprised 33% of
the management team that reports to the Board, or 2
out of 6 employees (2020: 29%, or 2 out of 7 employees)
and at Board level 20% (2020: 20%). At year end women
comprised 20% of total employees across the Group
(2020: 21%) or 11 out of a total of 54 employees (2020: 10
out of 48. Despite the engineering industry being a male
dominated industry, the number of women engineers
has increased during the period. The Group also has and
encourages a diverse workforce in terms of nationality.
Employment Policy
Applications for vacancies are considered based on
capabilities and reflecting the requirements of the role,
and resources for development and training are made
available to all employees. In the event of members of
staff becoming disabled, every effort is made to ensure
that their employment with the Group continues and that
appropriate training is arranged.
Environmental Policy
CyanConnode recognises that it has a moral duty of care
as well as a legal obligation to the environment and is
committed to minimising the impact of its activities on
the environment. Taking a responsible approach to the
environment is good business practice as well as essential
in helping the world to tackle climate change issues. Our
technology is also at the heart of new strategies that will
deal with other environmental and resource challenges
such as the management of smart grids and water
resources. During 2019 CyanConnode received ISO14001
accreditation. It also works closely with its landlord and
other companies located in the same building to ensure
environmental awareness and implement eco-friendly
initiatives and policies within the building.
The key points of CyanConnode’s environmental
strategy are to:
•
•
•
•
•
•
•
Minimise waste by evaluating operations and
ensuring they are as efficient as possible.
Use products efficiently and actively promote
recycling both internally and amongst its
customers and suppliers.
Source and promote a product range to minimise
the environmental impact of any production and
distribution.
Meet or exceed all the environmental legislation
that relates to the Group.
Encourage employees to use alternative methods
of transport to work other than motor vehicles.
In territories other than the UK, building out local
workforces to reduce carbon footprint with less flying.
Introduce and encourage more online meetings to
reduce travel requirements across the globe.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 STRATEGIC REPORT
15
The Board is ultimately responsible for health and safety
matters. CyanConnode has a Health and Safety Manager
who manages the health and safety of the Group on a
day-to-day basis taking advice from an external firm of
health and safety consultants. The Board discusses health
and safety at all monthly Board meetings. All accidents
and incidents are reported to them. There were no
accidents or incidents reported during the period.
Ethical Standards
CyanConnode expects the highest of ethical standards
of all its employees and its policies and procedures
support its stated aim of acting with integrity in all aspects
of its operations. Moreover, the same standards are
expected of its suppliers including its contract equipment
manufacturers in India and China and we seek to ensure
compliance by having partners and suppliers sign up to
our policies of business.
Approved by the Board of Directors and signed on behalf
of the Board.
John Cronin
Executive Chairman
5 August 2021
CyanConnode encourages its members of staff to commit
to the environment and works with suppliers who are
certified ISO14001 or work towards the protection of the
environment.
The ultimate responsibility for CyanConnode’s
environmental policy lies with its Board of Directors. The
policy is communicated to all employees within the
Group via email. It is the responsibility of each employee
to follow the rules and procedures the Group has set for
its environmental work. The purchasing department is
responsible for ensuring all environmental considerations
and policies are followed in all purchasing and
procurement for the Group.
Health and Safety Management
The Group operates predominantly in an industry and
environments which are considered relatively low risk
from a health and safety perspective. However, the health
and safety and welfare of CyanConnode’s employees,
contractors and visitors are a priority in Group workplaces
worldwide. There are health and safety risks attached
to some of the work undertaken by employees and to
travel to territories in which CyanConnode is currently
engaging in business. Electrical safety training is given
to all new employees and contractors upon joining
the Group. Travel advice is always checked on the FCO
website prior to employees travelling to any region, and
if a region is considered unsafe employees will not be
permitted to travel there. Employees are advised to be
vigilant while travelling and keep in regular contact with
the CyanConnode Head Office in Cambridge.
During the COVID-19 pandemic the Group has been
focussed on ensuring the wellbeing of its employees,
following government regulations in all jurisdictions in
which it operates. It has implemented a social distancing
policy allowing employees to work in its office in Cambridge
and provided information and guidance to all employees
to ensure their safety and the safety of all its stakeholders.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021STRATEGIC REPORT 16
GOVERNANCE
Board of Directors
“The CyanConnode
Board is made
up of seasoned
entrepreneurs and
professionals with
years of experience
in growing and
running successful
companies.
Their combined
investment of almost
£6m pounds in the
Company confirms
their commitment to
ensure the success of
the Company.”
John Cronin
Executive Chairman
Heather Peacock
Chief Financial Officer
& Company Secretary
Heather joined the Company
in November 2008 as Financial
Controller. Having a background
and qualification in finance
and more than 20 years’ global
financial experience at a senior
level, Heather has worked across
diverse industry verticals in both the
UK and South Africa. Her key areas
of expertise are treasury, mergers
and acquisitions, financial and
cash planning and analysis, legal
and compliance and subsidiaries
governance and management.
She is also an Associate Member of
the Governance Institute, and is the
Group’s Head of HR.
In 2013 Heather was appointed
as Company Secretary for
CyanConnode and was responsible
for the setup of the Company’s
subsidiary and operations in India,
and the acquisition and integration
of Connode in 2016. She was
appointed as Chief Finance Officer
and board director in July 2018, to
ensure robust financial systems
were in place to support the
Company’s growth.
John joined the Board in March
2012 initially as a Non-Executive
Director and is now Executive
Chairman of CyanConnode. He
is a highly successful Chairman,
CEO and MD in International
markets (Europe, Americas, SE.
Asia) in the Technology and
Telecommunications sector
including, Smart Metering, IOT,
Software companies, Infrastructure,
Hardware Utilities and Managed
Services.
John is a seasoned and successful
professional with experience
in raising equity, debt facility
and vendor finance funding as
well as setting up operations in
international markets. He has
created significant value for
shareholders with four company
exits in Picochip, Azure Solutions,
i2 and Netsource Europe. He has
been instrumental in mergers and
acquisitions worldwide, including
Cyan’s acquisition of Connode.
John’s contribution to high-tech
industries includes being Chairman,
CEO, NED, or adviser to Antenova,
GCI Com, Aria networks, Picochip,
Arqiva, i2, Cambridge Networks, Kast,
Azure, Next2Friends, Bailey Fisher,
Netsource, Mercury (C&W), BT and
providing independent consultancy
to private equity and VC firms.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 17
David Johns-Powell
Christopher Jones
Peter Tyler
Non-Executive Director
Non-Executive Director
Non-Executive Director
Peter joined the Board in March
2019 and is a fellow of the
Chartered Institute of Certified
Accountants. He has held a number
of roles in finance, mainly in the
pharmaceutical sector, and is well
versed in growing businesses and
creating shareholder value. Peter
has also been involved in a number
of charities where his role has been
building them up, putting in place
structures, processes and teams
and funding to satisfy the demands
of the programmes.
Peter holds the role of Chairman
of the Audit Committee and is
a member of the Remuneration
Committee.
David, who joined the board in July
2018, has over 30 years’ experience
in Small to Medium Sized Enterprises
over a diverse range of industries
including, Ceramics, Farming,
Insurance, Leisure and Property.
His career started in Ceramics,
where he built a manufacturing
facility from scratch and by utilizing
cutting edge automation, the
business became one of the UK’s
largest manufacturers of ceramic
coffee mugs. As well as local
markets, product was exported
worldwide, and customers included
Cadburys, Disney, Safeway and
Woolworths.
As a Professional Investor, David
is actively involved in several
investments which include a 360
key hotel development, a Beach
Club, a Wood Modification Plant and
a Peak Power Plant.
As well as running his own
businesses, David is also a member
of the Society of Lloyd’s, where he is
one of the few remaining members
that underwrite insurance on an
unlimited liability basis.
Chris joined CyanConnode in
March 2019. A specialist in licensing
models, he has IoT experience and
a strong commercial focus. His
distinguished career has included
holding a wide range of positions at
Arm, most recently as Vice President
of Commercial Operations for its
IoT Services, overseeing product
Licensing and SaaS business
models.
In 2012, he helped to create
Trustonic (a joint venture between
three mobile, device and IoT
security leaders - Arm, Gemalto and
G&D). As Chief Operating Officer
at Trustonic, Chris was responsible
for overseeing the formation of the
company and the implementation
of its strategic direction, managing
core functions of legal, HR, finance,
IT and facilities. From 2004 until 2012,
he was Vice President of Licensing
at Arm. As such, he was responsible
for Arm's CPU/Soc product licensing
and revenue management.
Chris holds the role of Chairman of
the Remuneration Committee and is
a member of the Audit Committee.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021GOVERNANCE 18
GOVERNANCE
Financial Review
Key Financials
Financial Summary
The year to March 2021 presented challenges to the Group as a result of the outbreak of the COVID-19 pandemic which has had an impact
globally. Despite these difficulties, the Group achieved record revenues for the year as set out below. It has also adapted its working
practices and is managing its cash and costs accordingly, and expects to continue to meet its obligations as and when they fall due.
A summary of the key financial results for the year and details relating to its financing position at the year end are set out in the table
below and discussed in this section.
Revenue
R&D expenditure (including staff costs)
Operating loss
Depreciation and amortisation
EBITDA
Stock impairment
Share based compensation
Acquisition - related costs
Foreign exchange (gain)/losses
Adjusted EBITDA1
Cash and cash equivalents
Average monthly operating cash outflow
Average
Year end
12 months
Mar 2021
15 months
Mar 2020
12 months
Dec 2018
12 months
Dec 2017
12 months
Dec 2016
£000
6,437
1,791
(2,685)
627
(2,058)
108
80
-
(15)
(1,885)
1,489
(82)
Mar 2021
FTE2
47
54
£000
2,451
2,381
(6,230)
773
(5,457)
4
267
-
267
(4,919)
1,172
(245)
£000
4,465
2,466
(6,320)
472
£000
1,171
4,148
(11,153)
489
(5,848)
(10,664)
578
445
-
16
(4,809)
4,564
(487)
55
689
-
52
(9,868)
5,394
(808)
£000
1,823
2,913
(7,939)
256
(7,683)
96
2
1,564
48
(5,973)
3,893
(588)
Mar 2020
Dec 2018
Dec 2017
Dec 2016
FTE
50
48
FTE
52
61
FTE
44
52
FTE
31
31
1 Where Adjusted EBITDA is EBITDA after stock impairment, share-based compensation, acquisition-related costs and foreign exchange losses
2 Where FTE is the equivalent number of full-time equivalents
Included within the table above are two alternative performance measures (“APMs” – see note 2): EBITDA and adjusted EBITDA. These
are additional measures which are not required under International Accounting Standards. These measures are consistent with those
used internally and are considered important to understanding the financial performance and the financial health of the Group.
EBITDA (Loss before Interest, Tax, Depreciation and Amortisation) is a measure of cash generated by operations before changes in
working capital. Adjusted EBITDA is a measure of cash generated by operations before changes in working capital and after other items
have been adjusted for as set out in the table above. It is used to achieve consistency and comparability between reporting periods.
Notably from the table above:
• Revenue for the year to March 2021 was £4 million higher than the 15 months to 31 March 2020
• Operating loss for the year to March 2021 was £3.5 million lower than for the previous 15-month period
• Cash at the end of March 2021 was £0.3 million higher than the end of March 2020
• Share based compensation charges reflect the fair value of share options granted to employees over the vesting period of these
options. Please see note 33 for more information
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 FINANCIAL REVIEW
19
Financial items of note during the year other than those
set out above were:
• Cash received from customers during the year was
£5.3 million
• Trade and other receivables increased by £2.5 million during
the year to £5.4 million
• R&D tax credit at a similar level to 2020 (£0.6 million) for the
twelve-month period compared to the previous fifteen-
month period
During the year an advance against the R&D tax credit was
received. This will be repaid out of the R&D tax credit funds when
received from HMRC. In addition, a short term loan was received
from two directors, letters of credit, invoice discounting and
advance payments have been negotiated on recently won
contracts to help with working capital requirements.
Key Performance Indicators (KPIs)
The financial key performance indicators for the Group are
as set out in the key financial results table above. FY2021
revenues were 163% up on the fifteen-month period 2020
comparatives as a result of major contracts in India which
started rolling out during the year. Operating costs for the year
reduced by 24% against the fifteen months for 2020, EBITDA by
62%, and adjusted EBITDA by 62% due to lower share-based
compensation charges and stock provisions. The Group’s
average headcount reduced by 3.
The Group’s long-term strategy is to deliver shareholder returns
by generating revenue and moving into profitability. It seeks to
do this by focusing its resources on emerging but fast-growing
markets where it believes it can reach a market leading position
with its technology. Management uses KPIs to track business
performance, to understand general trends and to consider
whether the Group is meeting its strategic objectives. As it grows,
it intends to review these KPIs and adapt them as appropriate, in
response to how the business and strategy evolves.
The Group’s key focus for the financial year ending March
2021 was to streamline its processes from order to delivery
and working to close further orders. A further focus was
ensuring collection of cash from customers as Group revenues
continued to grow. A number of avenues were pursued to
secure working capital facilities to help ease cash flows
and mitigate against any unforeseen delays in deliveries or
customer payments.
Going concern
To assess the ability of CyanConnode Holdings plc (“Group”)
to continue as a going concern, the directors have prepared a
business plan and cash flow forecast for the period to 31 March
2023 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 timing of customer payments. These
detailed cashflow scenarios include Letters of Credit which have
been secured from customers against contracts recently won.
At 31 March 2021 the Group had cash reserves of £1.5 million
(2020: £1.2m) and based on detailed cash flows provided to
the Board within the FY2022/23 budget, there is sufficient cash
to see the Group through to profitability based on its standard
operating model. If a more pessimistic scenario were taken
and an assumption were taken that no cash is received within
the next twelve months from any new orders not currently
contracted, and that there were significant delays to receipts
from customers, there is a material uncertainty relating to the
Group’s ability to continue as a going concern. Should the Group
experience such downside sensitivities the directors would
first continue to look at measures such as cost reduction and
working capital facilities as ways to conserve cash within the
business. The Company has offers for convertible and secured
loans which it could accept should such a requirement arise.
In addition, during 2020 the COVID-19 pandemic has affected
the global economy and businesses around the world,
particularly during the lockdowns in each country. At the time of
writing this report, the effects continue to be seen.
To assist with working capital, the Group received unsecured
short-term loans of £400,000 from two Directors, an advance of
£385,000 secured against its R&D tax credit in March 2021 and
an invoice discounting facility secured against Letters of Credit
for deliveries of Omnimesh modules in India. The advance
against the R&D tax credit will be repaid out of the HMRC receipt
which is expected to be received by October 2021.
Notwithstanding the material uncertainties described above
which may cast significant doubt on the ability of the Group
to continue as a going concern, on the basis of sensitivities
applied to the cash flow forecast, the directors have a
reasonable expectation that the company can continue to
meet its liabilities as they fall due, for a period of at least 12
months from the date of approval of this report.
Financial Risk Management Objectives and
Policies
Details of the Group’s financial risk management objectives and
policies are disclosed in note 34 to the financial statements.
Dividends
The directors do not recommend the payment of a dividend
(2020: £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 its industry sector and stage of its development.
Heather Peacock
Chief Financial Officer
5 August 2021
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021GOVERNANCE 20
GOVERNANCE
Corporate Governance
Statement
Statement of Compliance with the QCA Corporate Governance Code
As an AIM quoted company, we recognise the importance of applying sound governance principles in the successful
running of the Group. Given the size and nature of the Group and composition of the Board, we have formally adopted
the QCA Corporate Governance Code for Small and Mid-Size Quoted Companies (the QCA Code) and will report
annually on our compliance with the QCA Code in our Annual Report.
The sections below set out how we currently comply with the ten principles of the QCA Code.
Establish a strategy and business model which promote long-term value for shareholders
1.
The strategy and business operations of the Group are set out in the 2021 Strategic Report on pages 6 to 15.
The Executive Directors are responsible for the leadership and day-to-day management of the Group. This includes
formulating and recommending the Group’s long-term strategy for Board approval and then executing the approved
strategy.
2. Seek to understand and meet shareholders needs and expectations
The Group seeks regular dialogue with both existing and potential new shareholders, ensuring our strategy, business
model and performance are clearly understood as well as to understand the needs and expectations of shareholders.
The Executive Chairman and Chief Financial Officer meet regularly with investors and analysts via investor roadshows,
investor presentations and events and hosting tours of our development sites in order to provide them with updates on
the Group’s business and obtain feedback regarding the market’s expectations of the Group.
The Board invites communication from its private investors and usually encourages participation by them at the
Annual General Meeting (AGM). Under normal circumstances, all Board members present at the AGM are available to
answer questions from shareholders. Notice of the AGM is in excess of 21 clear days and the business of the meeting is
conducted with separate resolutions, voted on initially by a show of hands and with the result of the voting being clearly
indicated. The results of the AGM are announced through a regulatory information service. In September 2020, the
AGM was a closed-door AGM as recommended by COVID-19 guidelines, however the Company held a virtual investor
presentation during the weeks prior to the AGM, encouraging participation by shareholders.
The normal channel of communication with shareholders is via our Chief Financial Officer and Executive Chairman. Our
Non-Executive Director, Chris Jones is available to shareholders where concerns have not been resolved through the
normal channels of communication with the Board and for when such contact would be inappropriate.
3.
Take into account wider stakeholder and social responsibilities and their implications for
long-term success
Our technology has been designed to address social problems, particularly in emerging territories such as India where
there are significant losses to the government in the electricity sector. The technology is low-cost, low-power and seeks
to prevent theft from electricity or tampering with electricity meters. These features have allowed utilities to safely read
meters and carry on business remotely during the COVID-19 pandemic.
The Group is mindful of its corporate social responsibilities and the need to build and maintain strong relationships
across a range of stakeholder groups is a key principle in what we do. Engaging with our stakeholders allows us to create
a positive legacy and create strong stakeholder relationships. Our project teams engage with stakeholders throughout
the development life cycle to help enrich communities.
Our employees are at the heart of our business and we consistently strive to ensure they have the opportunity to develop
in a job they enjoy. We embrace diversity and employ people from a range of cultures and backgrounds across the
group. Further information on our diversity policy can be found on page 14 of our Strategic Report in the 2021 Annual
Report. During the COVID-19 pandemic the Group adapted its working practices to ensure the health and safety of all
employees. Regular discussions are held with employees regarding their wellbeing, and regarding best working practices
while the pandemic continues to be present.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 CORPORATE GOVERNANCE STATEMENT
21
The Group’s revenue is dependent on delivering complex projects to specific markets and therefore ensures that cross-
functional teams including senior employees work together with customers and local, in-country employees and
partners to ensure the successful integration of its products and technologies.
Our customers and partners are key to the Group’s success. The sales and delivery teams obtain feedback from
customers regarding current products, product requirements and customer service through regular interactions with
customers mainly comprising both face to face meetings and online discussions where travel is not possible (such as
during the COVID-19 pandemic).
Our Environmental policy and Health and Safety Management policy, see pages 14 to 15 of the 2021 Annual Report,
provides information on the Group’s approach to the environment. The Group was awarded accreditation for the
ISO14001, ISO9001 (2015) and ISO27001 standards in 2019.
CyanConnode fully abides by the Modern Slavery Act 2015.
4.
Embed effective risk management, considering both opportunities and threats, throughout the
organisation
The Board is responsible for the Group’s system of internal controls and for reviewing its effectiveness. Such a system is
designed to mitigate the risk of failure to achieve business objectives and can only provide reasonable, but not absolute,
assurance against material misstatement or loss.
There is an ongoing process for identifying, evaluating and managing the Group’s significant risks and is regularly
reviewed by the Board. This has been of particular importance during the COVID-19 pandemic and the Group has found
its processes to be robust minimising any impact of the lockdown.
The internal control procedures are delegated to Executive Directors and senior management in the Group, operating
within a clearly defined departmental structure. The Board regularly reviews the internal control procedures in light of the
ongoing assessment of the Group’s significant risks.
On a monthly basis, management accounts, including a comprehensive cash flow forecast, are reviewed by the
Board in order to provide effective monitoring of financial performance. At the same time the Board considers other
significant strategic, organisational and compliance issues to ensure that the Group’s assets are safeguarded, and
financial information and accounting records can be relied upon. The Board formally monitors monthly progress on each
development.
Please see pages 11 to 13 of the 2021 Annual Report for a summary of the principal risks and uncertainties facing the
Group, as well as mitigating actions.
The Group takes security of personal data seriously and ensures compliance with the GDPR which came into effect on
25 May 2018. The Group’s privacy policy can be found on the Company’s website at https://cyanconnode.com/about/
privacy-policy/
The Group also takes security of all data and its intellectual property very seriously and in 2019 received accreditation for
the ISO27001 standard. Quality of product and process are important to the Group. The Group has been accredited for
ISO9001:2008 since 2008 and received accreditation for the ISO9001:2015 standard in 2019.
The Group has adopted an Anti-Bribery policy which can be found on the Company’s website at https://cyanconnode.
com/investors/bribery-act/ The Group Bribery Officer ensures that all partners and agents working for the Group
sign acceptance of the terms of this policy prior to engagement with any Group company, and provides training to
employees on this policy.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021GOVERNANCE 22
CORPORATE GOVERNANCE STATEMENT
5. Maintain the Board as a well-functioning, balanced team led by the Chair
The Company and Group are managed by a Board of directors chaired by John Cronin. The Board is responsible for
taking all major strategic decisions and also addressing any significant operational matters. In addition, the Board
reviews the risk profile of the Group and ensures that an adequate system of internal control is in place. A formal
schedule of Matters Reserved for the Board has been adopted and will be reviewed periodically.
It has been agreed that the Board will at any time consist of either two or three Executive Directors and three Non-
Executive Directors. One of the Non-Executive Directors, Chris Jones, is considered by the Board to be independent of
management and free from any business or other relationship that could materially interfere with the exercise of their
independent judgement in accordance with the QCA Code. Both David Johns-Powell and Peter Tyler are only considered
as non-independent due to their shareholdings in the Company.
The Non-Executive Chris Jones is available to shareholders where concerns have not been resolved through the normal
channels of communication with the Board and for when such contact would be inappropriate.
The Board has sufficient members to contain the appropriate balance of skills and experience to effectively operate and
control the business. No one individual has unfettered powers to make decisions.
The Roles of the Chairman and Chief Executive are not separate, however following consultation with the Company’s
Nominated Adviser it is believed that this situation is appropriate for the Group’s current size and stage of growth. This
position is reviewed regularly and discussed with advisers. The Executive Chairman’s main responsibility is the leadership
and management of the Board and its governance. The Group has an MD & CEO of its entity in India to manage the
Indian operations, as well as a Vice-Chair of the entity in India. Engineering and operations are managed by the Group
Chief Operating Officer. These three executive managers are very experienced and it is therefore felt that there is no
need for a separate Chief Executive Officer role.
The Executive Directors are responsible for the leadership and day-to-day management of the Group. This includes
formulating and recommending the Group’s strategy for Board approval and executing the approved strategy. Both
executive directors are employed on a full-time basis by the Company.
The Board meets regularly, at least 4 times a year and more frequently if necessary. In addition to this the Board attends
strategy meetings with senior members of staff presenting on areas of the business and business strategy. No such
meetings were held during FY21 due to travel restrictions and social distancing all as a result of COVID-19, however they
are expected to resume as soon as appropriate. It is expected that each non-executive director will dedicate sufficient
time to the Company to understand the business, prepare for and attend Board and committee meetings and carry out
other work that is necessary for them to fulfil their duties as a director.
Board and Committee attendance during the year
Director
John Cronin
Heather Peacock*
David Johns-Powell
Chris Jones
Peter Tyler
Board Audit Committee
Committee
Remuneration
13 (13)
13 (13)
11 (13)
11 (13)
11 (13)
-
2 (2)
-
2 (2)
2 (2)
1 (1)
1 (1)
-
1 (1)
1 (1)
* Heather Peacock attended the Audit Committee meetings by invite, and the Remuneration Committee meeting in her capacity as Company
Secretary.
The nominations and appointments of new Board members during the period were dealt with via full Board meetings
and discussions rather than via Nominations Committee meetings.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 CORPORATE GOVERNANCE STATEMENT
23
6.
Ensure that between them, the directors have the necessary up-to-date experience, skills and
capabilities
The Board considers that the skills, experience and knowledge of each director gives them the ability to constructively
challenge strategy and decision making and scrutinise performance. Their biographical details are set out on the
Company’s website at https://cyanconnode.com/about/team/ and on pages 16 to 17 of the 2021 Annual Report.
As the business has developed, the composition of the Board has been under review to ensure that it remains
appropriate to the managerial requirements of the group. At least one third of the directors retire annually in rotation in
accordance with the Company’s Articles of Association. This enables the shareholders to decide on the election of the
Company’s Board.
The Board takes decisions regarding the appointment of new directors as a whole and this is only done following a
thorough assessment of a potential candidate’s skills and suitability for the role.
During the course of the year, directors’ skills and knowledge were kept up to date by receiving updates from the
Company Secretary (who is a Member of the Governance Institute and receives regular updates from the Institute and
other bodies) and external advisers, where relevant, on corporate governance matters. Corporate governance is an
agenda item for all Board Meetings where updates are provided and discussed.
Directors have access to independent professional advice at the Company’s expense. In addition, they have access to
the advice and services of the Company Secretary who is responsible to the Board for advice on corporate governance
matters. Chris Jones is the Independent Non-Executive Director.
7.
Evaluate Board performance based on clear and relevant objectives, seeking continuous
improvement
The effectiveness of the Board and its committees are kept under review in accordance with corporate governance best
practice and the performance of the Board is evaluated continuously. During FY21 there was no formal Board evaluation done
as the Board was focussed on ensuring stability within the Company during COVID-19, and delivery of contracts however an
evaluation will be done as early as possible during FY22. Non-Executive Director’s value and input is monitored by the Chair
to ensure they are actively contributing to the Company achieving its strategic and financial objectives. The Nominations
Committee is responsible for succession planning of the Board. Further information on this is set out on page 25.
8. Promote a corporate culture that is based on ethical values and behaviours
We recognise that it is our people who make us different, and we strive to recruit, retain, engage and develop the best.
We continue to encourage our unique and supportive culture, which we believe sets us apart from competitors. The
Group endeavours to ensure that its values are visible throughout its recruitment processes, internal communications
and management style, corporate reports and external announcements. We expect that the Board and Senior
Leadership Team demonstrate these values in their day-to-day work, setting the example for the rest of the Group. All
policies and procedures are designed with these values at their core. The Company Secretary keeps in regular contact
with teams in the UK and in India to ensure that these values are recognised and respected.
Upon commencement of an employee’s contract, they are given an induction programme to provide them with all
information relating to Company procedures and values. The Group operates from three offices, one in Cambridge in the
UK, one in Gurgaon in India and one in Stockholm, Sweden. Our comprehensive set of policies and procedures, many of
which fall under the Company’s ISO accredited procedures, cover all of our operations. They are constantly updated and
communicated to relevant employees and everyone else working on our sites. Details of these policies can be found on
pages 14 to 15 of the 2021 Annual Report. During FY21 the Company was focussed on the health and safety of employees
and setting up policies to comply with social distancing guidance set by governments around the world as a result
of the COVID-19 outbreak. Employees worked from home for most of the year, with safe, socially distanced access to
offices where work could not be performed remotely. The Group did not furlough any employees as a result of business
requirements.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021GOVERNANCE 24
CORPORATE GOVERNANCE STATEMENT
9.
Maintain governance structures and processes that are fit for purpose and support good
decision-making by the Board
The Board is made up of two Executive Directors (Executive Chairman, who covers the role of the CEO, and the Chief
Financial Officer), and three Non-Executive Directors. Further information on the composition of the Board and how it
operates is set out in Principle 5 above. In addition to any matters that are expressly required by law to be approved by
the Board, a number of areas are specifically reserved for the Board as set out in an agreed set of Matters Reserved for
the Board which was adapted by the Board in March 2018.
The Group’s overriding principles are that the Board:
•
•
•
•
Is established to govern by having the appropriate roles, skills and committees to oversee the governance
framework under which it operates;
Looks to the future: the Board will devote a large amount of its time to considering the future and providing strategic
leadership;
Is ultimately responsible to shareholders for the oversight and performance of the Group; and
Is there to support and maintain a culture of governance, performance, accountability and communication within
CyanConnode that embraces and establishes the principles that it has adopted.
The Board has an Audit Committee, a Remuneration Committee and a Nominations Committee to oversee and consider
issues of policy outside of main Board meetings. Each Committee has written terms of reference setting out its duties,
authority and reporting responsibilities, also adopted by the Board in March 2018.
Board committees are authorised to engage the services of external advisers as they deem necessary in the furtherance
of their duties at the Company’s expense. Details concerning the composition and meetings of the committees are
contained in page 25 of the Corporate Governance Statement in the 2021 Annual Report and on the Company’s website
at https://cyanconnode.com/investors/governance/
10.
Communicate how the Group is governed and is performing by maintaining a dialogue with
shareholders and other relevant stakeholders
Communications with shareholders is through the Annual Report and Accounts, full-year and half-year announcements,
periodic market announcements (as appropriate), the AGM, investor presentations, one-to-one meetings and investor
road shows.
The Group’s website www.cyanconnode.com is regularly updated and users can register at https://cyanconnode.com/
investors/shareholder-information/investor-alert/ to be alerted when announcements or details of presentations and
events are posted on the website. Annual reports and notices of meetings for at least the last five years can be found on
the Group’s website.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 CORPORATE GOVERNANCE STATEMENT
25
Board Composition and Responsibility
At 31 March 2021 the Board comprised of five directors, including the Executive Chairman, the Chief Financial Officer and
three non-executive directors, one of whom is considered to be independent. Three of the five directors in post at 31
March 2021 served throughout the year.
Role
Appointed
Resigned
1 April 2020
31 Mar 2021
In post
In post
Name
Executive
John Cronin
Executive Chairman
Heather Peacock
Chief Financial Officer*
Non-executive
William David Johns-Powell
Christopher Jones
Peter Tyler
20/03/12
25/07/18
25/07/18
19/03/19
19/03/19
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
*
Heather Peacock has also held the role of Company Secretary since September 2013.
The Board is responsible for overall strategy, the policy and decision-making framework in which this strategy is
implemented, approval of budgets, monitoring performance, and risk management. The Board meets at least on a
quarterly basis and follows a formal agenda. It also meets as and when required to discuss matters that may arise in
between formal Board meetings. All directors are required to retire by rotation according to the Articles of the Company.
No director has a service agreement requiring more than twelve months’ notice of termination to be given.
The Board is satisfied that an appropriate balance of independence, skills and experience has been and remains in
place to enable the Board to perform its responsibilities effectively. An overview of the skills and experience of each Board
member is given above.
The directors may take independent professional advice at the Company’s expense.
Board Subcommittees
The Board has three subcommittees as set out below. Each subcommittee has Terms of Reference, approved by the
Board, which set out the main roles and responsibilities and remit of each committee. A set of Matters Reserved for the
Board and a Board Charter, also approved by the Board, govern the way in which the Board operates and sets out the
matters for which the Board has responsibility and those for which the Executive Directors have responsibility.
Audit committee: Peter Tyler (Chairman), Chris Jones. Peter Tyler has held the position of Chairman from 19 March 2019.
The Audit Committee Report on page 32 sets out the roles and responsibilities of the Audit Committee.
Remuneration committee: Chris Jones (Chairman). Peter Tyler. Chris Jones has held the position of Chairman since
19 March 2019.
The Directors’ Remuneration Report on page 27 onwards sets out the roles and responsibilities of the Remuneration
Committee and the Remuneration Policy for Executive Directors.
Nominations committee: David Johns-Powell (Chairman), John Cronin, Peter Tyler and Chris Jones
The Company has formal procedures for making appointments to the Board and these are applied to ensure that any
new appointments that might be made meet the desired criteria. The Chair continually considers the makeup of the
Board to ensure it has the required skills for its industry and stage.
Appointment of senior executives such as the CEO & MD of CyanConnode India are made by the Executive Directors in
consultation with the full Board.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021GOVERNANCE 26
CORPORATE GOVERNANCE STATEMENT
Relationships with Shareholders
The Board actively engages with its shareholders on a regular basis, with importance being placed on clear, timely
communications. This is in the form of open presentations at the Annual General Meeting and further private
presentations thereafter to fund managers, analysts, and institutional investors. Information is posted on the Company’s
web site, www.cyanconnode.com. Please take a look at the comprehensive Investor Relations section on this website
which is regularly updated. John Cronin and Heather Peacock are the directors responsible for investor relations.
Approved by the Board of Directors and signed on behalf of the Board.
John Cronin
Executive Chairman
5 August 2021
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 GOVERNANCE
Directors’ Remuneration Report
27
Remuneration Committee
Chris Jones has served as chairman of the Remuneration Committee since 19 March 2019.
The only personal financial interests of the members of the Committee are as shareholders, and in the case of Peter
Tyler as the provider of a short-term loan of £100,000. None of the Committee members has any conflicts of interests
arising from cross-directorships. The Committee makes recommendations to the Board. No director plays a part in any
discussion about his own remuneration.
Whilst companies whose shares are listed on AIM are not formally required to comply with the accounting regulations
regarding directors’ remuneration, the Board supports these regulations and applies them in so far as is practicable and
appropriate for a public Company of its size. In line with previous years, the Directors’ Remuneration Report will not be put
to a shareholders’ vote.
Remuneration Policy for the Executive Directors
Executive remuneration packages are designed to attract, motivate and retain directors of the high calibre needed to
maintain the Group’s market position to reward them for enhancing value to shareholders. Their packages are set to
reflect their responsibilities, experience and marketability. The performance measurement of the executive directors and
key members of senior management and the determination of their annual remuneration package is undertaken by the
Committee to ensure they remain competitive and also align with the success of the Company.
The main elements of the remuneration package for the executive directors and senior management are:
•
•
•
•
•
•
Basic annual salary;
Benefits-in-kind;
Annual bonus payments;
Consultancy fees;
Share option incentives; and
Pension arrangements.
Executive directors are entitled to accept appointments outside the Company (for example Non-Executive Director roles
and Consultancy) providing that the Chairman’s permission is sought and is not in conflict with CyanConnode.
All Directors are encouraged to invest in the Company. This table shows the £5.7m they have invested thus far (see page
29 to 30 for more details of their shareholdings).
John Cronin
David Johns-Powell
Heather Peacock
Peter Tyler
Chris Jones
Total
Total investment
remuneration
Total investment
Annual
to date
£'000
1,083
3,867
99
670
2
5,721
FY 2021
£'000
as % of
remuneration
309
-
204
-
26
539
350%
n/a
49%
n/a
8%
1,061%
In addition during the period short term loans were provided to the Company by John Cronin (£300,000) and Peter Tyler
(£100,000).
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021GOVERNANCE 28
DIRECTORS’ REMUNERATION REPORT
Basic Salary
An executive director’s basic salary is reviewed by the Committee prior to the beginning of each year and when an
individual changes position or responsibility. In deciding appropriate levels, the Committee considers the remuneration
policy for Executive Directors and the Group as a whole. In addition, it relies on objective research, which gives up-to-date
information on a comparator group of companies.
Benefits-in-Kind
The executive directors are entitled to receive certain benefits-in-kind, principally private medical insurance.
Annual Bonus Payments
Annual bonuses are awarded at the discretion of the Remuneration Committee as an incentive and to reward
performance during the financial year pursuant to specific performance criteria including cash collection and revenue
growth. In exercising its discretion, the Committee takes into account the strategic objectives set by the Board to ensure
these are being met. These objectives will evolve as the business grows and are expected to change year on year
according to business requirements. Total bonus payments of £207,433 were made to Directors for FY 2021 (2020: £nil)
Directors’ Share Options
Full details of the directors’ options over ordinary shares of 2.0p are set out below:
Director
John Cronin
Heather Peacock
Chris Jones
Peter Tyler
Grant Date
Expiry Date
17/11/17
25/01/18
22/09/20
17/11/17
11/12/17
20/06/18
22/09/20
17/11/27
25/01/28
22/09/30
17/11/27
11/12/27
20/06/28
22/09/30
22/09/20
22/09/30
22/09/20
22/09/30
David John-Powell
28/09/20
28/09/30
Exercise Price
31 March 2021
31 March 2020
As at
As at
£
0.336
0.29
0.10
0.308
0.40
0.28
0.10
0.10
0.10
0.10
Number
558,101
200,000
360,342
1,118,443
619,424
25,000
745,222
90,909
Number
558,101
200,000
-
758,101
619,424
25,000
745,222
-
1,480,555
1,389,646
57,556
57,556
40,000
40,000
250,000
250,000
-
-
-
-
-
-
Share options have a life of 10 years. When a director leaves the Company, he or she will be entitled to exercise any
vested options for between three months and one year after leaving the Company. Any options not exercised during this
period will then lapse.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 DIRECTORS’ REMUNERATION REPORT
29
Joint Share Ownership Plan
In 2008, the Company established a Joint Share Ownership Plan (“JSOP”) to provide additional incentives to directors
and certain senior executives (the “Participants”). The JSOP shares are held jointly between the Participant and the
CyanConnode Holdings plc Employee Benefit Trust. Under the terms of the JSOP rules the Participants are eligible to
receive the excess of any disposal proceeds received for the JSOP shares over the participation price.
During the year to March 2021 no JSOP shares were granted to any directors of the Company. At 31 March 2021, shares
held by directors under this scheme were as follows:
Director
John Cronin
Heather Peacock
Participation
As at
As at
Price
31 March 2021
31 March 2020
Grant Date
Expiry Date
£
Number
23/10/17
23/10/17
23/10/17
23/10/17
23/10/22
23/10/22
23/10/22
23/10/22
0.4964
0.333
0.434
0.333
3,219,200
1,382,425
4,601,625
267,396
296,568
563,964
Number
3,219,200
1,382,425
4,601,625
267,396
296,568
563,964
JSOP shares have a life of 5 years. When a director leaves the Company, he or she will be entitled to keep the vested
shares until the expiry dates and any unvested shares will be brought back into the Employee Benefit Trust within 90 days
of the director leaving the Company.
Directors’ Interests in Shares in the Company
Director
John Cronin
As at 1 April 2020
Purchased during the year
As at 31 March 2021
David Johns-Powell
As at 1 April 2020
Purchased during the year
As at 31 March 2021
Peter Tyler
As at 1 April 2020
Purchased during the year
As at 31 March 2021
Heather Peacock
As at 1 April 2020
Purchased during the year
As at 31 March 2021
Shares
3,413,467
1,827,733
5,241,200
17,583,490
1,500,000
19,083,490
2,449,004
40,000
2,489,004
278,255
405,516
683,771
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021GOVERNANCE 30
DIRECTORS’ REMUNERATION REPORT
Director
Chris Jones
As at 1 April 2020
Purchased during the year
As at 31 March 2021
Total
As at 1 April 2020
Purchased during the year
As at 31 March 2021
Shares
-
57,556
57,556
23,724,216
3,830,805
27,555,021
The shareholding for Directors of the Company disclosed above excludes shares held under the Company's Joint Share
Ownership Plan ("JSOP") in which they are beneficial co-owner of shares.
Pension Arrangements
Executive directors are entitled to become members of the Company pension scheme. This is a defined contribution
scheme whereby the Company contributes at a rate of 5% of the executive’s gross salary. Heather Peacock is a member
of the Company pension scheme. John Cronin is not a member of this scheme.
Directors’ Contracts
It is the Company’s policy that the executive directors should have contracts with an indefinite term providing for a
maximum of one year’s notice. It may be necessary on occasion to offer longer notice periods, but this has not been
necessary for any director on the current Board. All executive directors have contracts that are subject to twelve months’
notice by either party.
Name of Director
John Cronin
Heather Peacock
William David Johns-Powell
Chris Jones
Peter Tyler
Date of contract
20 March 2012
25 July 2018
25 July 2018
19 March 2019
19 March 2019
Non-Executive Directors
All non-executive directors have specific terms of engagement and their remuneration is determined by the Board within
the limits set by the Articles of Association and based on independent surveys of fees paid to non-executive directors
of similar companies. The fees paid to each non-executive director during the period are set out in the table on the next
page.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 DIRECTORS’ REMUNERATION REPORT
31
Directors’ Emoluments (audited)
Amounts for FY21 ending March 2021
Pension and
other benefits
£
-
-
Total for
FY 2021
Total for 2020
(12 months)
(15 months)
Bonus
£
Services
£
131,600
308,600
-
-
Services
£
242,500
205,288
5,742
75,833
203,075
172,031
Name of Director
Executive
John Cronin (Note 1)
Harry Berry
Heather Peacock
(Note 2)
Non-Executive
Salary
£
19,500
-
121,500
Chris Jones (Note 3)
25,625
David Johns-Powell
Peter Tyler
Paul Ratcliff
Total
-
-
-
Fees
£
157,500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
25,625
31,250
-
-
-
-
-
23,740
674,809
166,625
157,500
5,742
207,433
537,300
Note 1
In July 2019 John Cronin’s remuneration package was adjusted to a basic salary (including fees) of £210,000. A bonus
of £131,600 was awarded to John Cronin for the period (2020: £nil) of which £67,500 was paid in shares. From April 2020,
John Cronin volunteered to non-refundable 30% pay reduction during the COVID-19 outbreak for six months.
Note 2
From December 2020, Heather Peacock’s base salary was adjusted from £130,000 to £150,000 per annum. A bonus of
£75,833 was awarded for the period (2020: £nil), of which £30,000 was paid in shares. From April 2020, Heather Peacock
volunteered to a non-refundable 20% pay reduction during the COVID-19 outbreak for six months.
Note 3
From April 2020, Chris Jones volunteered to non-refundable 25% pay reduction following the COVID-19 outbreak for six
months.
Aggregate emoluments disclosed above do not include any amounts for the value of options to acquire ordinary shares
in the Company granted to or held by the directors.
Approval
This report was approved by the Board of directors on 5 August 2021 and signed on its behalf by:
Chris Jones
Chairman of the Remuneration Committee
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021GOVERNANCE 32
GOVERNANCE
Audit Committee Report
Introduction
This Audit Committee Report has been prepared by the Audit Committee and approved by the Board.
Membership and meetings held
The Audit Committee is chaired by Peter Tyler and its other member is Chris Jones (both Non-Executive Directors). The
Committee met twice during the period ended 31 March 2021, linked to events in the Company’s financial calendar. The
Chief Financial Officer also attended each of these meetings. The external audit partner attended the meeting held in
connection with the Company’s Report and Accounts for the periods ended 31 March 2021.
Role of the Audit Committee
The Terms of Reference for the Audit Committee, which have been prepared in accordance with the QCA Code, provide
for the Committee’s main responsibilities to include:
•
•
•
•
•
•
Monitoring the integrity of the financial statements of the Company and its Group;
Reviewing and challenging the consistency of accounting policies and standards;
Reporting back to the Board on any aspects of the proposed financial reporting of the Group with which it is not
satisfied;
Keep under review the adequacy and effectiveness of the Company’s and Group’s internal financial controls and
systems;
Reviewing the risk identification and risk management processes of the Group, and
Reviewing the Group’s procedures to prevent bribery and corruption in addition to ensuring that appropriate
whistleblowing arrangements are in place.
Internal Audit
Due to the current size of the Group the audit committee obtain sufficient oversight over the operations through
engagement with the Group and attendance of board meetings. It is therefore not considered appropriate to have an
internal audit function.
Key Areas of Focus
The Committee’s particular areas of focus during the year were as follows:
•
•
•
Review of the March 2020 Annual Report;
Review of the interim results for the six months ended 30 September 2020; and
Ongoing review of the Group’s cash forecasts, including any impact from COVID-19.
Management of Risk
As in previous years, the oversight of risk, and risk management are the responsibility of the Board as a whole, rather
than a sub-committee. This is put into effect by the preparation of a Risk Register, maintained as part of the ISO 9001
procedures.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 AUDIT COMMITTEE REPORT
33
Committee Evaluation
During the period a new Audit Committee was appointed as part of a full Board evaluation. The committee will be
evaluated as part of each evaluation of the Board. No evaluation was done during the period.
Approval
This report was approved by the Board of directors on 5 August 2021 and signed on its behalf by:
Peter Tyler
Chairman of the Audit Committee
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021GOVERNANCE 34
GOVERNANCE
Directors’ Report
The directors present their annual report on the affairs of the Group together with the audited financial statements for
the year ended 31 March 2021. The Company’s statement on corporate governance can be found on pages 20 to 26 of
the financial statements. The corporate governance report forms part of the Directors’ Report and is incorporated by
cross reference.
In December 2019, the Group and Company’s reporting date changed from 31 December to 31 March to align with the
reporting date of the Indian subsidiary, which is required by law to have a year end of 31 March. The current financial
period represents the 12-month period to 31 March 2021 while the prior financial period covered the 15-month period to
31 March 2020.
Going Concern
To assess the ability of CyanConnode Holdings plc (“Group”) to continue as a going concern, the directors have
prepared a business plan and cash flow forecast for the period to 31 March 2023 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 timing of customer payments.
The Financial Review on pages 18 to 19 set out more detail regarding the Board’s assessment of its going concern
position.
Financial Risk Management Objectives and Policies
Details of the Group’s financial risk management objectives and policies are set out in note 34 of the financial
statements.
Dividends
The directors’ dividend policy is set out in the Financial Review on page 19.
Share Capital and Capital Structure
Details of the issued share capital, together with details of the movements in the Company’s issued share capital during
the year are shown in note 26. At 31 March 2021, the Company had one class of ordinary shares of 2.0 pence each, which
carried no right to fixed income and represented 100% of the issued share capital of the Company. Each share carried the
right to one vote at general meetings of the Company. The Company’s capital structure consisted only of issued share
capital, which it manages to maximise the return to shareholders.
There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed by the
general provisions of the Articles of Association and prevailing legislation. The directors are not aware of any agreements
between holders of the Company’s shares that may result in restrictions on the transfer of securities or on voting rights.
Details of the employee share schemes are set out in note 33.
No person has any special rights of control over the Company’s share capital and all issued shares are fully paid.
With regard to the appointment and replacement of directors, the Company is governed by its Articles of Association,
the Companies Acts and related legislation. The Articles themselves may be amended by special resolution of the
shareholders. The powers of directors are described in the Corporate Governance Statement on pages 20 to 26.
In accordance with the Companies Act 2006 the Company has no authorised share capital.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 DIRECTORS’ REPORT
35
Capital Risk Management
The primary objectives of the Group’s capital management are to safeguard the Group’s ability to continue as a going
concern, so that it can provide returns for shareholders and benefits for other stakeholders, and to provide an adequate
return to shareholders by pricing products and services commensurately with the level of risk.
The Group manages the capital structure and makes adjustments to it in light of changes in economic conditions and
the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may
issue new shares or sell assets to reduce debt. The Group is not subject to any externally imposed capital requirements.
No changes were made in the objectives, policies or processes for managing capital during the periods ended 31 March
2020 and 31 March 2021.
Directors and their Interests
The Directors who served the Company throughout the year and up to the date of signing, unless otherwise stated, were
as follows:
Executive Directors
John Cronin (Executive Chairman)
Heather Peacock (Chief Financial Officer)
Non-Executive Directors
William David Johns-Powell
Chris Jones
Peter Tyler
The interests of the directors in the shares of the Company are shown in the remuneration committee report on pages 29
to 30.
Research, Design and Development
The Group is committed to the research, design and development of mesh based flexible solutions for metering,
lighting and IoT markets. As a high growth technology company, the focus is to develop unique technology that takes
CyanConnode forward with its strategy to be a world leader in the design and development of Narrowband RF mesh
networks that enable Omni Internet of Things (IoT) communications.
The total expenditure on research and development including staff costs in the period was £1,791,000 (2020: £2,381,000).
Directors’ indemnity arrangements
CyanConnode has purchased and maintained throughout the year Directors’ and Officers’ liability insurance in respect
of itself and its Directors.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021GOVERNANCE 36
DIRECTORS’ REPORT
Significant Holdings
The Company had been notified of the following voting rights of shareholders in the Company at 5 August 2021 and at
the same date its issued share capital consisted of 219,983,799 Ordinary Shares:
Name
William David Johns-Powell
Premier Milton Group Plc
Herald Investment Management Limited
Suresh Chari
Nightingale Investment Co Limited
Biggles Enterprise Limited
CRUX Asset Management
Percentage of
issued share
Number of
capital
ordinary shares
8.77%
7.59%
6.93%
6.10%
3.81%
3.79%
3.11%
19,294,016
16,704,642
15,243,684
13,416,903
8,382,352
8,333,333
6,842,105
Fixed Assets
In the opinion of the directors there is no material difference between the market value of fixed assets and the amounts
at which they are stated in note 16 to the accounts.
Supplier Payment Policy
It is the policy of the Group to settle supplier invoices in line with the terms of business negotiated with them. The average
credit period taken for trade purchases is constant at 30 days (2020: 20 days).
Auditor
Each of the persons who is a director at the date of approval of this annual report confirms that:
•
•
so far as the director is aware, there is no relevant audit information of which the Company’s auditor is unaware;
and
the director has taken all the steps that he/she ought to have taken as a director in order to make himself/herself
aware of any relevant audit information and to establish that the Company’s auditor is aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies Act
2006.
RSM UK Audit LLP has expressed its willingness to continue in office as auditor and a resolution to reappoint it will be
proposed at the forthcoming Annual General Meeting.
Post Balance Sheet Events
On 3 June 2021 CyanConnode Holdings plc raised £3.15 million (before expenses of approximately £180,000) through a
placing of 27,196,395 ordinary shares of 2.0 pence each and a subscription for 5,973,681 New Ordinary Shares.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 DIRECTORS’ REPORT
37
Information in other reports
The company has chosen, in accordance with the Companies Act 2006 s414C(11), to set out in the Chairman’s Statement,
Financial Review, Strategic Report and Corporate Governance Statement, certain information required by the Large and
Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 Sch. 7 to be contained in the Directors’
Report. This information includes how the directors have had regard to the need to foster the company’s business
relationships with suppliers, customers and others. It also includes the effect of having this regard for key stakeholders,
including on the principal decisions taken by the company during the financial year, which can be found in Principle 3 of
the Corporate Governance Report on pages 20 to 21.
This confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies Act
2006.
Approved by the Board of Directors and signed on behalf of the Board.
John Cronin
Executive Chairman
5 August 2021
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021GOVERNANCE 38
GOVERNANCE
Directors’ Responsibilities
Statement
The directors are responsible for preparing the Strategic Report, the Directors’ Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare group and company financial statements for each financial year. The
directors have elected under company law to prepare the group financial statements in accordance with international
accounting standards in conformity with the requirements of the Companies Act 2006 and have elected under company
law to prepare the company financial statements in accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and applicable law.
The group and company financial statements are required by law and international accounting standards in conformity
with the requirements of the Companies Act 2006 to present fairly the financial position of the group and the company
and the financial performance of the group. The Companies Act 2006 provides in relation to such financial statements
that references in the relevant part of that Act to financial statements giving a true and fair view are references to their
achieving a fair presentation.
Under company law the directors must not approve the financial statements unless they are satisfied that they give a true
and fair view of the state of affairs of the group and the company and of the profit or loss of the group for that period.
In preparing each of the group and company financial statements, the directors are required to:
•
select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
•
•
state whether they have been prepared in accordance with international accounting standards in conformity with
the requirements of the Companies Act 2006;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group
and the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Group’s and the company’s transactions and disclose with reasonable accuracy at any time the financial position of the
group and the company and enable them to ensure that the financial statements comply with the requirements of the
Companies Act 2006. They are also responsible for safeguarding the assets of the group and the company and hence
for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on
the CyanConnode Holdings plc website.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
By order of the Board
John Cronin
Executive Chairman
5 August 2021
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 FINANCIAL STATEMENTS
39
FINANCIAL STATEMENTS
Independent Auditor’s Report
TO THE MEMBERS OF CYANCONNODE HOLDINGS PLC
Opinion
We have audited the financial statements of CyanConnode Holdings plc (the ‘parent company’) and its subsidiaries
(the ‘group’) for the year ended 31 March 2021 which comprise the 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 and notes to the financial statements, including significant accounting policies. The
financial reporting framework that has been applied in their preparation is applicable law and International Accounting
Standards in conformity with the requirements of the Companies Act 2006 and, as regards the parent company financial
statements, as applied in accordance with the provisions of the Companies Act 2006.
In our opinion:
•
•
•
the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as
at 31 March 2021 and of the group’s loss for the year then ended;
the group financial statements have been properly prepared in accordance with International Accounting
Standards in conformity with the requirements of the Companies Act 2006;
the parent company financial statements have been properly prepared in accordance with International
Accounting Standards in conformity with the requirements of the Companies Act 2006 and as applied in
accordance with the Companies Act 2006; and
•
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the
financial statements section of our report. We are independent of the group and parent company in accordance with
the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical
Standard as applied to listed entities and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Material uncertainty related to going concern
We draw attention to the going concern wording in note 2 to the financial statements where the directors have identified
that there is uncertainty over the level and timing of cash receipts in respect of certain sales which are required from
customers to allow the group to continue trading without additional finance.
As outlined in note 2, the reliance on customer receipts during a pandemic in countries which are adversely affected and
the potential need for additional financing indicate that a material uncertainty exists that may cast significant doubt on the
group’s and parent company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting
in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the entity’s
ability to continue to adopt the going concern basis of accounting included:
•
•
•
•
understanding how the cash flow forecasts for the going concern period had been prepared and the assumptions
adopted;
testing of the integrity of the forecast model to ensure it was operating as expected;
challenging the key assumptions within the forecast with agreement to supporting data where possible;
review and consideration of the appropriateness of the sensitivity analysis performed by management and
available actions should performance be behind expectations.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 40
INDEPENDENT AUDITOR’S REPORT
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report.
Summary of our audit approach
Key audit matters
Group
•
•
Revenue recognition
Impairment
Parent company
•
Impairment
Materiality
Group
•
•
Overall materiality: £325,000 (2020: £325,000)
Performance materiality: £243,000 (2020: £243,000)
Parent Company
•
•
Overall materiality: £106,000 (2020: £110,000)
Performance materiality: £80,000 (2020: £82,500)
Scope
Our full scope audit procedures covered 92% of revenue, 99% of total assets and 98% of the
loss before tax.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
group and parent company financial statements of the current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on the
overall audit strategy, the allocation of resources in the audit and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the group and parent company financial statements as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
In addition to the matter described in the Material uncertainty related to going concern section we have determined the
matters described below to be the key audit matters to be communicated in our report.
Group - revenue recognition
Key audit matter
description
How the matter was
addressed in the audit
The group’s contracts involve the supply of various products and services. There is
management judgement required to determine the performance obligations in the contracts,
allocate revenue to each of these obligations and ensure income is appropriately recognised
in line with the requirements of IFRS 15.
We reviewed and challenged management’s assessment of the performance obligations
identified for a sample of contracts. We then performed cut-off testing and substantive
testing procedures to validate that the revenue recognised in the year was in line with the
contractual terms and IFRS 15 requirements.
We also considered the adequacy of the group’s revenue recognition accounting policy as
disclosed in note 2.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 INDEPENDENT AUDITOR’S REPORT
FINANCIAL STATEMENTS
41
Group - impairment
Key audit matter
description
The group has a significant goodwill balance of £1.93m which is subject to an annual
impairment review. In addition, due to the loss-making nature of the group, other assets
including the SMIP intangible of £4.10m is also subject to an impairment review.
In performing the impairment review, management judgement is required in a number of
areas including estimating future sales, costs and timing of related cashflows as well as
determining an appropriate discount rate.
How the matter was
addressed in the audit
We critically assessed the impairment reviews performed by management including a review
of the client’s board approved forecasts and discounted cashflow calculations to assess
whether the assumptions appeared reasonable.
We also evaluated management’s sensitivity analysis around the key assumptions to ascertain
the extent of change in those assumptions that individually or collectively would be required to
lead to an impairment.
Parent company - impairment
Key audit matter
description
The parent company has investments of £9.19 million in its subsidiaries and significant
receivable balances due from subsidiary undertakings.
Given the loss-making nature of the subsidiaries, an impairment review of these balances
is required. This involves management judgement including estimating future sales and
cashflows.
How the matter was
addressed in the audit
We critically assessed the impairment review performed by management over the carrying
value of investments and group debtor balances.
Our work included a review of the client’s assessment of the potential for impairment including
a review of board approved forecasts and discounted cashflow calculations to assess whether
the assumptions appeared reasonable.
Our application of materiality
When establishing our overall audit strategy, we set certain thresholds which help us to determine the nature, timing and
extent of our audit procedures. When evaluating whether the effects of misstatements, both individually and on the financial
statements as a whole, could reasonably influence the economic decisions of the users we take into account the qualitative
nature and the size of the misstatements. Based on our professional judgement, we determined materiality as follows:
Group
Parent company
Overall materiality
£325,000 (2020: £325,000)
£106,000 (2020: £110,000)
Basis for determining
overall materiality
5% of average loss before tax over the last
three years
1.1% of net assets
Rationale for benchmark
applied
Loss before tax chosen as the group is profit
orientated.
Net assets were chosen as the entity is a
non-trading holding company.
Performance materiality
£243,000 (2020: £243,000)
£80,000 (2020: £82,500)
Basis for determining
performance materiality
Reporting of misstatements
to the Audit Committee
75% of overall materiality
75% of overall materiality
Misstatements in excess of £15,000 and
misstatements below that threshold that, in
our view, warranted reporting on qualitative
grounds.
Misstatements in excess of £5,000 and
misstatements below that threshold that, in
our view, warranted reporting on qualitative
grounds.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 42
INDEPENDENT AUDITOR’S REPORT
An overview of the scope of our audit
Number of
components
Full scope audit
3
Revenue
92%
Total assets
Loss before tax
99%
98%
Analytical procedures at the group level were performed for the remaining two components. All audit procedures were
undertaken by the group auditor with no reliance placed on component auditors.
Other information
The other information comprises the information included in the annual report, other than the financial statements
and our auditor’s report thereon. The directors are responsible for the other information contained within the annual
report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to
be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required
to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the
work we have performed, we conclude that there is a material misstatement of this other information, we are required to
report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and their environment obtained
in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to
report to you if, in our opinion:
•
•
•
•
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 38, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal
control as the directors determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease
operations, or have no realistic alternative but to do so.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 INDEPENDENT AUDITOR’S REPORT
FINANCIAL STATEMENTS
43
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
The extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities are instances of non-compliance with laws and regulations. The objectives of our audit are to obtain
sufficient appropriate audit evidence regarding compliance with laws and regulations that have a direct effect on the
determination of material amounts and disclosures in the financial statements, to perform audit procedures to help
identify instances of non-compliance with other laws and regulations that may have a material effect on the financial
statements, and to respond appropriately to identified or suspected non-compliance with laws and regulations
identified during the audit.
In relation to fraud, the objectives of our audit are to identify and assess the risk of material misstatement of the financial
statements due to fraud, to obtain sufficient appropriate audit evidence regarding the assessed risks of material
misstatement due to fraud through designing and implementing appropriate responses and to respond appropriately to
fraud or suspected fraud identified during the audit.
However, it is the primary responsibility of management, with the oversight of those charged with governance, to
ensure that the entity's operations are conducted in accordance with the provisions of laws and regulations and for the
prevention and detection of fraud.
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud, the group audit
engagement team:
•
•
•
obtained an understanding of the nature of the industry and sector, including the legal and regulatory frameworks
that the group and parent company operate in and how the group and parent company are complying with the
legal and regulatory frameworks;
inquired of management, and those charged with governance, about their own identification and assessment of
the risks of irregularities, including any known actual, suspected or alleged instances of fraud;
discussed matters about non-compliance with laws and regulations and how fraud might occur including
assessment of how and where the financial statements may be susceptible to fraud.
The most significant laws and regulations were determined as follows:
Legislation / Regulation
Additional audit procedures performed by the Group audit engagement team included:
UK-adopted IAS and
Companies Act 2006
Tax compliance
regulations
GDPR
Review of the financial statement disclosures and testing to supporting documentation;
Completion of disclosure checklists to identify areas of non-compliance.
Inspection of advice received from external tax advisors;
Inspection of correspondence with local tax authorities.
ISAs limit the required audit procedures to identify non-compliance with these laws and
regulations to inquiry of management and where appropriate, those charged with governance.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 44
INDEPENDENT AUDITOR’S REPORT
The areas that we identified as being susceptible to material misstatement due to fraud were:
Risk
Audit procedures performed by the audit engagement team:
Revenue recognition
See key audit matters above. In addition, we reviewed a sample of revenue journals for
appropriateness.
Management override of
controls
Testing the appropriateness of journal entries and other adjustments;
Assessing whether the judgements made in making accounting estimates are indicative of a
potential bias; and
Evaluating the business rationale of any significant transactions that are unusual or outside the
normal course of business.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those
matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a
body, for our audit work, for this report, or for the opinions we have formed.
NEIL STEPHENSON (Senior Statutory Auditor)
For and on behalf of RSM UK Audit LLP, Statutory Auditor
Chartered Accountants
Second Floor, North Wing East, 126-130 Hills Road
Cambridge
CB2 1RE
5 August 2021
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 FINANCIAL STATEMENTS
Consolidated income statement
FOR THE YEAR ENDED 31 MARCH 2021
FINANCIAL STATEMENTS
45
Continuing operations
Revenue
Cost of sales
Gross profit
Other operating costs
Underlying operating loss
Amortisation and depreciation
Share based payments
Operating loss
Finance income
Finance expense
Loss before tax
Tax credit
Loss for the period
Loss per share (pence)
Basic
Diluted
Year
31 March
2021
£’000
15 months
31 March
2020
£’000
Note
4
6
9
10
11
12
12
6,437
(3,334)
3,103
(5,788)
(1,978)
(627)
(80)
2,451
(1,081)
1,370
(7,600)
(5,190)
(773)
(267)
(2,685)
(6,230)
13
(62)
17
(30)
(2,734)
(6,243)
677
(2,057)
(1.18)
(1.18)
576
(5,667)
(3.27)
(3.27)
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 46
FINANCIAL STATEMENTS
Consolidated statement of
comprehensive income
FOR THE YEAR ENDED 31 MARCH 2021
Derived from continuing operations and attributable to the equity owners of the Company.
Loss for the period
Exchange differences on translation of foreign operations
Total comprehensive income for the period
Year
31 March
2021
£’000
(2,057)
(25)
(2,082)
15 months
31 March
2020
£’000
(5,667)
56
(5,611)
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 FINANCIAL STATEMENTS
Consolidated statement of
financial position
AS AT 31 MARCH 2021
47
Non-current assets
Intangible assets
Goodwill
Other financial assets
Property, plant and equipment
Right of use asset
Total non-current assets
Current assets
Inventories
Trade and other receivables
R&D tax credit receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Short-term borrowings
Lease liabilities
Total current liabilities
Net current assets
Non-current liabilities
Lease liabilities
Deferred tax liability
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium account
Own shares held
Share option reserve
Translation reserve
Retained losses
Total equity being equity attributable to owners of the Company
Note
13
15
19
16
17
20
21
22
23
24
17
17
25
26
27
28
29
30
31
31 March
31 March
2021
£'000
4,266
1,930
44
36
98
2020
£'000
4,558
1,930
93
43
274
6,374
6,898
211
5,355
577
1,489
7,632
14,006
(3,969)
(2,118)
(98)
(6,185)
1,447
-
(812)
(812)
(6,997)
7,009
3,735
69,662
(3,253)
925
(45)
(64,015)
7,009
308
2,881
795
1,172
5,156
12,054
(1,491)
(560)
(121)
(2,172)
2,984
(153)
(912)
(1,065)
(3,237)
8,817
3,656
69,547
(3,253)
2,028
(20)
(63,141)
8,817
The financial statements of CyanConnode Holdings plc (registered number 04554942) were approved by the board of directors
and authorised for issue on 5 August 2021. They were signed on its behalf by:
John Cronin
Director
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS 48
FINANCIAL STATEMENTS
Consolidated statement of
changes in equity
FOR THE YEAR ENDED 31 MARCH 2021
Share
Capital
£'000
3,648
Share
Premium
Account
£'000
69,515
Own
Shares
Held
£'000
Share
Option
Translation
Retained
Reserve
£'000
Reserve
£'000
Losses
£'000
(3,253)
1,761
(76)
(57,474)
Total
Equity
£'000
14,121
Balance at 31 December 2018
Loss for the period
Other comprehensive
income for the period
Total comprehensive
income for the period
Issue of share capital
Credit to equity for share
options
Total transactions with
owners
–
–
–
8
–
8
–
–
–
32
–
32
–
–
–
–
–
–
Balance at 31 March 2020
3,656
69,547
(3,253)
Loss for the year
Other comprehensive
expenses for the year
Total comprehensive
income for the year
Issue of share capital
Credit to equity for share
options
Transfer
Total transactions with
owners
–
–
–
79
–
–
79
–
–
–
115
–
–
115
–
–
–
–
–
–
–
Balance at 31 March 2021
3,735
69,662
(3,253)
–
–
–
–
267
267
2,028
–
–
–
–
80
(1,183)
(1,103)
925
–
56
56
–
–
–
(5,667)
(5,667)
–
56
(5,667)
(5,611)
–
–
–
40
267
307
8,817
(20)
(63,141)
–
(2,057)
(2,057)
(25)
–
(25)
(25)
(2,057)
(2,082)
–
–
–
–
–
–
1,183
1,183
(45)
(64,015)
194
80
–
274
7,009
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 FINANCIAL STATEMENTS
Consolidated cash flow statement
FOR THE YEAR ENDED 31 MARCH 2021
49
Net cash outflow from operating activities
Investing activities
Interest received
Purchases of property, plant and equipment
Capitalisation of payments for software development
(Purchase) / disposal of other financial assets
Net cash outflow from investing activities
Financing activities
Interest paid
Cash inflow from borrowings
Cash inflow from Directors’ loan
Loan repayment
Capital repayments of lease liabilities
Interest paid on lease liabilities
Proceeds on issue of shares
Net cash inflow from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period
Analysis of changes in net cash / (debt)
For the year ended 31 March 2021
Cash and cash equivalents
Short-term borrowings
Lease liabilities
Net cash / (debt) at end of year
For the 15 months ended 31 March 2020
Cash and cash equivalents
Short-term borrowings
Lease liabilities
Note
32
16
13
19
24
24
17
17
26
Year
31 March
15 months
31 March
2021
£'000
(988)
13
(23)
(129)
49
(90)
(51)
1,718
400
(560)
(176)
(11)
75
1,395
317
1,172
1,489
2020
£'000
(3,677)
17
(20)
(36)
(49)
(88)
(4)
560
–
–
(197)
(26)
40
373
(3,392)
4,564
1,172
At 1 April
Other non-cash
At 31 March
2020
£'000
1,172
(560)
(274)
(834)
338
Cash flow
movements
£'000
317
(1,558)
187
(1,371)
(1,054)
£'000
–
–
(11)
(11)
(11)
2021
£'000
1,489
(2,118)
(98)
(2,216)
(727)
Other non-cash
At 31 March
£'000
4,564
–
–
–
£'000
(3,392)
(560)
223
(337)
£'000
–
–
(497)
(497)
(497)
2020
£'000
1,172
(560)
(274)
(834)
338
At 1 January 2019
Cash flow
movements
Net cash / (debt) at end of period
4,564
(3,729)
Other non-cash movements include lease liabilities recognised on adoption of IFRS16 and interest on lease liabilities.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS 50
FINANCIAL STATEMENTS
Company balance sheet
AS AT 31 MARCH 2021
Non-current assets
Intangible assets
Investments in subsidiaries
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Short-term borrowings
Total current liabilities
Net current assets
Net assets
Equity
Share capital
Share premium account
Share option reserve
Retained losses
Total equity being equity attributable to owners of the Company
Note
14
18
21
22
23
24
26
27
29
31
31 March
31 March
2021
£'000
—
9,185
9,185
1,093
190
1,283
10,468
(177)
(785)
(962)
321
9,506
3,735
69,662
925
(64,816)
9,506
2020
£'000
—
9,105
9,105
1,291
551
1,842
10,947
(119)
(560)
(679)
1,163
10,268
3,656
69,547
2,028
(64,963)
10,268
The Company reported a loss for the financial period ended 31 March 2021 of £1,036,000 (2020: £5,677,000). The financial
statements of CyanConnode Holdings plc (registered number 04554942) were approved by the board of directors and
authorised for issue on 5 August 2021. They were signed on its behalf by:
John Cronin
Director
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 FINANCIAL STATEMENTS
Company statement of changes
in equity
FOR THE YEAR ENDED 31 MARCH 2021
51
Balance at 31 December 2018
Loss for the period
Total comprehensive income for the
period
Issue of share capital
Credit to equity for share options
Total transactions with owners
Share
Capital
£'000
3,648
–
–
8
–
8
Share
Premium
Account
£'000
69,515
–
–
32
–
32
Share
Option
Reserve
£'000
1,761
–
–
–
267
267
Loss for the year
Total comprehensive income for the
year
Issue of share capital
Credit to equity for share options
Transfer
Total transactions with owners
–
–
79
–
–
79
–
–
115
–
–
115
Balance at 31 March 2021
3,735
69,662
–
–
–
80
(1,183)
(1,103)
925
Retained
Losses
£'000
(59,286)
(5,677)
Total
Equity
£'000
15,638
(5,677)
(5,677)
(5,677)
–
–
–
(1,036)
40
267
307
10,268
(1,036)
(1,036)
(1,036)
–
–
1,183
1,183
194
80
–
274
(64,816)
9,506
Balance at 31 March 2020
3,656
69,547
2,028
(64,963)
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS 52
FINANCIAL STATEMENTS
Company cash flow statement
FOR THE YEAR ENDED 31 MARCH 2021
Loss for the year
Shares issued in lieu of bonus
Net impairment charge
Operating cash outflows before movement in working capital
Increase in receivables
Increase /(decrease) in payables
Net cash outflow from operating activities
Investing activities
Additional investment in subsidiaries
Net cash outflow from investing activities
Financing activities
Cash inflow from short-term borrowing
Cash inflow from Directors’ loan
Loan repayment
Proceeds on issue of shares
Net cash inflow from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of period
Analysis of changes in net cash / (debt)
Year
31 March
15 months
31 March
2021
£'000
(1,036)
119
767
(150)
(569)
58
(661)
-
-
385
400
(560)
75
300
(361)
551
190
2020
£'000
(5,677)
-
4,870
(807)
(2,435)
(77)
(3,319)
(940)
(940)
560
-
-
40
600
(3,659)
4,210
551
For the year ended 31 March 2021
Cash and cash equivalents
Short-term borrowings
Net cash / (debt) at end of year
For the 15 months ended 31 March 2020
Cash and cash equivalents
Short-term borrowings
Net cash / (debt) at end of period
At 1 April
Other non-cash
At 31 March
2020
£'000
551
(560)
(9)
Cash flow
movements
£'000
(361)
(225)
(586)
£'000
–
–
–
2021
£'000
190
(785)
(595)
At 1 January
Other non-cash
At 31 March
2019
£'000
4,210
–
4,210
Cash flow
movements
£'000
(3,659)
(560)
(4,219)
£'000
–
–
–
2020
£'000
551
(560)
(9)
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 FINANCIAL STATEMENTS
Notes to the financial statements
53
1. General information
CyanConnode Holdings plc, (Company Registered No. 04554942), is a public company limited by shares, incorporated in England
and Wales under the Companies Act 2006. The address of the registered office is Merlin Place, Milton Road, Cambridge CB4 0DP.
These financial statements are presented in pounds sterling because that is the currency of the primary economic environment
in which the Group operates. Foreign operations are included in accordance with the policies set out in note 2.
2. Significant accounting policies
Basis of accounting
The financial statements have been prepared in accordance with International Accounting Standards in conformity with the
requirements of the Companies Act 2006.
The financial statements have been prepared on the historical cost basis, with the exception of recognising financial instruments
at fair value. This relates to bank securities only. The principal accounting policies adopted are set out below.
As part of continued operational efficiency and cost management, the Group also aligned its financial year end with its Indian
subsidiary, CyanConnode Private Limited, in period to 31 March 2020. As a result of this change, the amounts presented in these
financial statements for the year to 31 March 2021 are not entirely comparable with the prior 15-month period to 30 March 2020.
Alternative Performance Measures
The Group presents Alternative Performance Measures (“APMs”) in addition to the statutory results of the Group. These are
presented in accordance with the Guidelines on APMs issued by the European Securities and Markets Authority (“ESMA”).
Going concern
To assess the ability of CyanConnode Holdings plc (“Group”) to continue as a going concern, the directors have prepared a
business plan and cash flow forecast for the period to 31 March 2023 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 timing of customer payments. These detailed cashflow scenarios include Letters of Credit which have
been secured from customers against contracts recently won.
At 31 March 2021 the Group had cash reserves of £1.5 million (2020: £1.2m) and based on detailed cash flows provided to the
Board within the FY2022/23 budget, there is sufficient cash to see the Group through to profitability based on its standard
operating model. If a more pessimistic scenario were taken and an assumption were taken that no cash is received within
the next twelve months from any new orders not currently contracted, and that there were significant delays to receipts from
customers, there is a material uncertainty relating to the Group’s ability to continue as a going concern. Should the Group
experience such downside sensitivities the directors would first continue to look at measures such as cost reduction and working
capital facilities as ways to conserve cash within the business. The Company has offers of convertible and secured loans which it
could accept should such a requirement arise.
In addition, during 2020 the COVID-19 pandemic has affected the global economy and businesses around the world, particularly
during the lockdowns in each country. At the time of writing this report, the effects continue to be seen.
To assist with working capital, the Group received unsecured short-term loans of £400,000 from two Directors, an advance of
£385,000 secured against its R&D tax credit in March 2021 and an invoice discounting facility secured against Letters of Credit for
deliveries of Omnimesh modules in India. The advance against the R&D tax credit will be repaid out of the HMRC receipt which is
expected to be received by October 2021.
Notwithstanding the material uncertainties described above, which may cast significant doubt on the ability of the Group to
continue as a going concern, on the basis of sensitivities applied to the cash flow forecast, the directors have a reasonable
expectation that the company can continue to meet its liabilities as they fall due, for a period of at least 12 months from the date
of approval of this report.
Basis of consolidation
The Group financial statements include the financial statements of the Company and all of its subsidiary undertakings.
Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to
be consolidated until the date that such control ceases. All intra-group balances and transactions are eliminated.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS 54
NOTES TO THE FINANCIAL STATEMENTS
2. Significant accounting policies (continued)
The Group applies the acquisition method to account for business combinations. The consideration transferred for the
acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred to the former owners of the acquiree,
and the equity interests issued by the Group. Identifiable assets acquired and liabilities assumed in a business combination are
measured initially at their fair value at the acquisition date.
Foreign currencies
The individual financial statements of each Group company are presented in the currency of the primary economic
environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results
and financial position of each Group company are expressed in pounds sterling, which is the functional currency of the Group,
and the presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual companies, transactions in currencies other than the entity’s functional
currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance
sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing
on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated
at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of
historical cost in a foreign currency are not retranslated.
Exchange differences are recognised in profit or loss in the period in which they arise except for exchange differences on
monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur,
which form part of the net investment in a foreign operation, and which are recognised in the foreign currency translation
reserve and recognised in profit or loss on disposal of the net investment.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are
translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average
exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange
rates at the date of the transactions are used. Exchange differences arising, if any, are classified as equity and recognised in the
Group’s foreign currency translation reserve. Such translation differences are recognised as income or as expenses in the period
in which the operation is disposed of.
Revenue recognition
The Group supplies customers with hardware, software and services. Revenue is usually recognised according to the five-step
approach under IFRS 15 Revenue from Contracts with Customers.
The transaction price is measured at the fair value of the consideration received or receivable and represents amounts
receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales related taxes.
Sale of hardware
Most hardware revenue relates to the sale of RF modules and gateways. RF modules are fitted into electricity and other meters to
make them “smart”. Gateways collect information from the smart meters and send it back to the utility company. CyanConnode
is not responsible for fitting the RF modules into its customers’ meters. Installation of the Gateways can be performed by
CyanConnode or by a third party. Gateway installation is recognised as a separate contractual element – see “Sale of services”
below for more information. Revenue for hardware is recognised when it is delivered to the customer.
Sale of software
CyanConnode has its own standards-based software which it licenses to its customers on either a term or a perpetual basis.
These licenses are referred to as Head End Software (HES) licenses. The full value of the license is recognised as revenue when it
is granted because at this point the customer is given full “right to use”. Sometimes, the price of the HES license is not separately
disclosed in the contract with the end customer but is included with related services. In these cases, the value related to the
HES license is estimated based on the internal pricings CyanConnode used when it bid for the contract. Installation of the HES
software onto the end customer’s servers is recognised as a separate contractual element - see “Sale of services” below for
more information.
Royalties
CyanConnode receives royalties for the manufacture of hardware according to its proprietary design. Royalty revenue is
recognised based on the agreed charge per unit multiplied by the number of units manufactured. No revenue for royalties has
been recognised in the current or prior period.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 NOTES TO THE FINANCIAL STATEMENTS
55
2. Significant accounting policies (continued)
Sale of services
The Group offers a range of services including but not limited to:
•
•
•
•
•
•
•
Installation of HES software on end customer servers;
Installation of gateways;
Custom integration of HES software with end customer’s own system;
Network planning and optimisation;
Project management;
End user training; and
Annual Maintenance Contract for the Omnimesh system (includes the RF modules, gateways and HES software.)
How revenue is recognised for these services depends on the way in which they are delivered:
•
•
If the customer enjoys the value of the service across a period of time, and hence the performance obligation is fulfilled
overtime, then revenue is spread over the period of delivery. This is the case for: project management (for which revenue
is recognised based on stage of completion); and an annual maintenance contract for the Omnimesh system (for which
revenue is recognised in equal increments over time).
If the customer does not enjoy the value of the service over time, the customer enjoys the value of the service at a point in
time, then revenue is recognised at the point of completion. This is the case for: installation of HES software on end customer
servers; installation of gateways; custom integration of HES software with end customer’s own system; network planning and
optimisation; and end user training.
Fair value of consideration
If costs are higher than anticipated to the extent that a contract becomes loss-making as a whole, then a provision for this loss
is charged to the income statement as soon as the loss is reasonably certain. No such loss has been recognised in the current or
prior period.
Recoverability of revenue already recognised
Should collectability of an amount already included in revenue become uncertain, then the estimated amount which is no
longer expected to be recovered is recognised as an operating expense and not as an adjustment of the amount of revenue
originally recognised.
Research and development expenditure
An internally generated, or separately acquired, intangible asset arising from development (or from the development phase of
an internal project) is recognised if, and only if, all the following conditions have been demonstrated:
•
•
•
•
•
•
the technical feasibility of completing the intangible asset so that it will be available for use or sale;
the intention to complete the intangible asset and use or sell it;
the ability to use or sell the intangible asset;
how the intangible asset will generate probable future economic benefits;
the availability of adequate technical, financial and other resources to complete the development and to use or sell the
intangible asset; and
the ability to measure reliably the expenditure attributable to the intangible asset during its development.
The amount initially recognised for such intangible assets is the sum of the expenditure incurred from the date when the
intangible asset first meets the recognition criteria listed above. Where no internally generated intangible asset can be
recognised on the above basis, development expenditure is recognised in profit or loss in the period in which it is incurred.
The capitalised assets will be amortised over their useful lives of 5 years.
Retirement benefit costs
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due. These were the only
payments made by the Group in the period under review.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS 56
NOTES TO THE FINANCIAL STATEMENTS
2. Significant accounting policies (continued)
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the period. Taxable profit differs from net profit as reported in the income
statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes
items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is
accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against
which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference
arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates,
and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is
realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited
directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when
there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes
levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Intangible assets: software
Software is accounted for at cost and amortised in equal annual instalments over a period of 5 years which is its estimated
useful economic life. Provision is made for any impairment.
Intangible assets: customer contracts
Separately acquired customer contracts are included at cost and amortised in equal annual instalments over a period of
15 years which is their estimated useful economic life. Provision is made for any impairment.
Goodwill
Goodwill arising on the acquisition of subsidiary undertakings and businesses, representing any excess of the fair value of the
consideration given over the fair value of the identifiable assets and liabilities acquired, is capitalised and is then assessed
annually for impairment.
Determining whether goodwill is impaired requires an estimation of the higher of value in use of the cash-generating units to
which goodwill has been allocated or fair value less cost of disposal. The value in use calculation requires the entity to estimate
the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present
value. Whilst there is no indication of impairment, the model used by management in performing this assessment contains
estimates in regards to the inputs into the discount rates and the inherent assumptions in forecasting which includes estimates
of the growth in future sales, projected production costs and operating expenditure. Discount rates are based on management’s
assessment of risk inherent in the current business model. The impact of reasonably possible changes in assumptions are
disclosed in note 15. A fair value less cost of disposal is only performed if the value in use model indicates an impairment.
Property, plant and equipment
Fixtures and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is
charged so as to write off the cost or valuation of assets over their estimated useful lives, using the straight-line method to their
estimated residual values on the following bases:
Fixtures and equipment
20% - 50% per annum
Right to use assets are depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
The gain or loss arising on the disposal of an asset is determined as the difference between the sales proceeds and the carrying
amount of the asset and is recognised in the income statement.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 NOTES TO THE FINANCIAL STATEMENTS
57
2. Significant accounting policies (continued)
Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount
of the asset is estimated to determine the extent of the impairment loss (if any).
Where the asset does not generate cash flows that are independent from other assets, the group estimates the recoverable
amount of the cash-generating unit to which the asset belongs. They are allocated to the smallest group of cash-generating
units for which a reasonable and consistent allocation basis can be identified. For this purpose, the Group is taken as a single
cash-generating unit.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised
immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is
treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased
to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in
prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a
revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct
labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition.
Cost is calculated using the weighted average method. Net realisable value represents the estimated selling price less all
estimated costs of completion and costs to be incurred in marketing, selling and distribution.
Financial instruments – assets
Classification and measurement of financial assets
All financial assets are classified as either those which are measured at fair value through profit or loss or Other Comprehensive
Income, and those measured at amortised cost.
Financial assets are initially recognised at fair value. For those which are not subsequently measured at fair value through profit
or loss, this includes directly attributable transaction costs. Trade and other receivables, and contract assets are subsequently
measured at amortised cost.
Recognition and derecognition of financial assets
Financial assets are recognised in the Group’s Balance Sheet when the Group becomes a party to the contractual provisions
of the instrument. The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset
expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another
entity.
Impairment of financial assets
For trade and other receivables, and contract assets, the simplified approach permitted under IFRS 9 is applied. The simplified
approach requires that at the point of initial recognition the expected credit loss across the life of the receivable must be
recognised. As these balances do not contain a significant financing element, the simplified approach relating to expected
lifetime losses is applicable under IFRS 9.
Trade and other receivables
Trade receivables and other receivables are measured and carried at amortised cost using the effective interest method, less
any impairment. The carrying amount of other receivables is reduced by the impairment loss directly and a charge is recorded
in the Income Statement. For trade receivables, the carrying amount is reduced by the expected lifetime losses. Subsequent
recoveries of amounts previously written off are credited against the allowance account and changes in the carrying amount of
the allowance account are recognised in the income statement.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS 58
NOTES TO THE FINANCIAL STATEMENTS
2. Significant accounting policies (continued)
Trade receivables that are assessed not to be impaired individually are also assessed for impairment on a collective basis. Each
period end, on a country-by-country basis we consider the amount of trade debtor provisions booked in the previous twelve
months and book a general provision for doubtful debts according to the expected lifetime credit losses (based on an expected
life of 12 months). The increase/decrease in this provision is then recognised through the income statement.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that
are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
Financial instruments – liabilities
Financial liabilities are recognised in the Group’s Balance Sheet when the Group becomes a party to the contractual provisions
of the instruments and are initially measured at fair value, net of transaction costs. Non-derivative financial liabilities are
subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective
yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating
interest expense over the relevant periods. The effective interest rate is the rate that discounts estimated future cash payments
throughout the expected life of the financial liability or, where appropriate, a shorter period to the net carrying amount on initial
recognition. The Group derecognises financial liabilities when the Group’s obligations are discharged, cancelled or they expire.
The Group manages its foreign exchange risk through natural hedging by proactively planning to match the currency that
revenues are receivable in with the currency of the costs associated with those revenues over the long term.
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are
determined by discounting the expected future cash flows at a rate that reflects the current market assessment of the time
value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision
due to the passage of time is recognised as a finance cost.
Employee benefits
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate
the employment of an employee or to provide termination benefits.
Share-based payments
The Group has applied the requirements of IFRS 2 Share-based Payment. In accordance with the transitional provisions, IFRS 2
has been applied to all grants of equity instruments after 7 November 2002 that were unvested at 1 January 2005.
The cost of equity settled transactions with employees is measured by reference to the fair value on the date they are granted.
Where there are no market conditions attaching to the exercise of the options, the fair value is determined using a range of
inputs into the Black-Scholes pricing model. The fair value of equity-settled transactions is charged to profit or loss over the
period in which the service conditions are fulfilled with a corresponding credit to a share option reserve in equity.
At the end of each reporting period, the Group revises its estimates of the number of options that are expected to vest based on
the non-market vesting conditions and service conditions. It recognises the impact of the revision to original estimates, if any, in
profit or loss, with a corresponding adjustment to equity. On the exercise of share options, an amount equal to the fair value of
the option at the date it was granted is transferred from the share option reserve into retained earnings.
Where the Company grants options over its own shares to the employees of its subsidiaries it recognises, in its individual financial
statements, an increase in the cost of investment in its subsidiaries equivalent to the equity-settled share-based payment charge
recognised in its consolidated financial statements with the corresponding credit being recognised directly in equity.
When the Company issues options or warrants for services rendered by a non-employee they are measured at fair value of the
services received.
Leases
Low value leases and leases of less than one year are recognised on a straight-line basis over the lease term. On inception of
other leases, 'right-of-use' assets have been capitalised in the statement of financial position, measured at the present value of
the unavoidable future lease payments to be made over the lease term discounted at an incremental borrowing rate.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 NOTES TO THE FINANCIAL STATEMENTS
59
2. Significant accounting policies (continued)
The Company’s investments in subsidiaries
The Company recognises its investments in subsidiaries at cost less any impairment in its separate financial statements.
Impairment is determined by assessing the recoverable amount of the investment. The recoverable amount has been assessed
using a value in use model. The value in use calculation requires the entity to estimate the future cash flows expected to and a
suitable discount rate in order to calculate present value. Where the recoverable amount is less than the carrying amount, an
impairment loss is recognised in the Statement of Comprehensive Income.
New accounting standards and interpretations not yet adopted
For the purpose of the preparation of these consolidated financial statements, the Group has applied all standards and
interpretations that are effective for accounting periods beginning on or after 1 April 2020. No new standards, amendments or
interpretations to existing standards that have been published and that are mandatory for the Group’s accounting periods
beginning on or after 1 April 2021 or later periods, have been adopted early.
The new standards and interpretations are not expected to have any significant impact on the financial statements when applied.
3. Critical accounting judgements and key sources of estimation
uncertainty
This section sets out the key areas of judgement and estimation that have the most significant effect on the amounts
recognised in the consolidated Financial Statements.
a. Critical judgements in applying the Group’s and the Company’s accounting policies
Management has made the following key judgements around revenue recognition in applying the Group’s accounting policies
that have a significant effect on the consolidated Group Financial Statements.
i. Separable performance obligations
Judgements have been made around whether performance obligations are separable. For example, revenue relating to
gateway hardware is recognised at the point that hardware is received by the customer. It may later be installed by the
Company or by a third party. In the former case, the revenue for installation services is recognised as a separate performance
obligation when the gateways are installed.
ii. All-inclusive pricing
Some customer contracts involve multiple performance obligations being bundled into one all-inclusive price. To allocate
consideration between performance obligations, the Group must consider whether these performance obligations are
separable as well as the standalone value of each performance obligation. The standalone values are calculated with reference
to pricing on other comparable contracts and the internal pricing used when the contract was bid for.
b. Key sources of estimation uncertainty
Estimates and associated assumptions are based on historical experience and various other factors that are believed to be
reasonable under the circumstances, including current and expected economic conditions. Although these estimates and
associated assumptions are based on management’s best knowledge of current events and circumstances, actual results may
differ.
i. SMIP intangible carrying value
We have modelled expected net cash flows from Connode AB's UK SMIP contract over the lifetime of the contract and compared
the net present value of these cashflows to the £4.1m carrying value of the related intangible asset at the end of March 2021.
Sensitivities were run based on (i) Pre-tax discount rate of 18.7%; (ii) roll-out ceasing at the end of July 2025; and (iii) a range of
10% of UK households being in “not spots”.
A useful economic life of 15 years has been assumed in line with the term of the associated support and maintenance contract.
ii. Goodwill impairment
The recoverable amount of the cash generating unit (“CGU”) is derived from estimates of future cash flows and hence the
goodwill impairment test is also subject to these key estimates. The results of these tests may then be verified by reference
to external market valuation data. Further details on the goodwill balances and the assumptions used in determining the
recoverable amounts are provided in note 15. Sensitivity to the assumptions is also found in this note.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS 60
NOTES TO THE FINANCIAL STATEMENTS
3. Critical accounting judgements and key sources of estimation
uncertainty (continued)
iii. Inventory provision
Inventories include stocks of raw materials and finished goods that the directors believe will be sold within the period to
December 2023 covered by the Group’s business plan. Old stock items have been fully provided for at the year end. The directors
have assumed that the carrying value is recoverable as a result of the sales and gross margins forecast in that plan. Stocks of
product that are not included within the sales forecasts, or which will no longer be supported by the Group have been provided
against in full.
iv. Debtor and intercompany receivable recoverability
The Group tracks its trade debtor ageing and cash collection on a contract-by-contract basis each month. A provision has
been made for expected lifetime credit losses (see Note 21) based on the amount of bad debts in the last twelve months as a
percentage of the total year end debtor balance in each country. The Group revise the estimate of the expected credit loss by
looking at how current and future economic conditions impact the amount of loss on a forward-looking basis.
Increasing the provision for expected lifetime credit losses by 1% would increase the Group’s operating loss by £42,000 (2020:
£34,000)
An amount of £1,326,000 (2020: £658,000) which is over 90 days old is included in trade debtors, of which a provision of £398,000
has been provided for (2020: £82,000).
CyanConnode Ltd has a loan of £57,919,855 (2020: £57,245,613) with CyanConnode Holdings plc. As at 31 March 2021 a provision
of impairment of the loan was provided in full at £57,919,855 (2020: £56,727,452). The Board has considered the provisions around
impairment of inter-company indebtedness contained within IFRS9 “Financial Instruments”.
v. Investments in subsidiaries
The company has made an investment in each of its subsidiaries. Impairment is determined by assessing the recoverable
amount of the investment. The recoverable amount has been assessed using a value in use model. The value in use calculation
requires the entity to estimate the future cash flows to and a suitable discount rate in order to calculate present value.
4. Revenue
An analysis of the Group’s revenue is as follows:
Continuing operations
Hardware revenue - recognised at a point in time
Software licenses - recognised at a point in time
Revenue from non-recurring services - recognised at a point in time
Revenue from other services - recognised over time
Total revenue
2021
£’000
5,187
136
807
307
6,437
2020
£’000
1,721
172
-
558
2,451
5. Business and geographical segments
The Group has concluded that it operates only one business segment as defined by IFRS 8. The information used by the Group’s
chief operating decision maker to make decisions about the allocation of resources and assessing performance is presented
on a consolidated Group basis. Accordingly, no segmental analysis is presented. For the future, the split of the business may
be revised dependent upon geographical contract wins, centres of operations and the strategic direction taken as the Group’s
business develops further.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 NOTES TO THE FINANCIAL STATEMENTS
61
5. Business and geographical segments (continued)
During the period to end of March 2021 there were 3 customers (2020: 2) whose turnover accounted for more than 10% of the
Group’s total revenue as follows:
Customer A
Customer B
Customer C
Customer D
2021
2020
Turnover
Percentage of
Turnover
Percentage of
£’000
1,062
3,815
624
361
Total%
£’000
Total%
16
59
10
6
906
80
215
553
37
3
9
23
Revenue split between Europe, India and other parts of the World was as follows
2021
2020
Turnover
Percentage of
Turnover
Percentage of
India
Finland
Europe
Sweden
Thailand
Rest of World
6. Other operating costs
Staff costs
Research and development costs (excluding staff costs)
Rent and site costs
Office expenses
Marketing and advertising
Professional fees
Audit and accountancy
Bad debts
Impairment of inventory
Foreign exchange
Other
Amortisation and depreciation
Other operating costs
£’000
5,302
-
-
508
624
3
6,437
Total%
82
-
-
8
10
-
100
£’000
1,055
553
391
300
-
152
2,451
2021
£’000
3,375
314
41
286
104
328
150
353
108
(15)
117
627
Total%
43
23
16
12
-
6
100
2020
£’000
4,361
649
61
309
211
409
153
18
4
267
385
773
5,788
7,600
The total expenditure on research and development including staff costs in the period was £1,791,000 (2020: £2,381,000).
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS 62
NOTES TO THE FINANCIAL STATEMENTS
7. Auditor’s remuneration
The analysis of auditor’s remuneration, including associate firms, is as follows:
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts
Fees payable to the Company’s auditor and its associates for other services to the Group
- The audit of the Company’s subsidiaries pursuant to legislation
Total audit fees
8. Employee information
The average monthly number of employees (including executive directors) was:
Sales and administration
Research and development
Operations and logistics
2021
£’000
43
35
78
2020
£’000
43
42
85
2021
Number
2020
Number
11
23
13
47
17
22
11
50
There are no employees in the parent company other than Directors, whom are remunerated by other group companies (2020: nil).
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Other pension costs
Share option charges
2021
£’000
3,021
184
90
80
3,375
2020
£’000
3,691
281
122
267
4,361
At the year end there were employer’s pension contributions provided for but not paid of £59,374 (2020: £61,474).
Key management compensation
The directors are of the opinion that key management personnel during the period comprised the Board of Directors. These
persons had the authority and responsibility for planning, directing and controlling the activities of the Group. Remuneration of
these personnel is detailed below.
Their aggregate remuneration comprised:
Wages, salaries and fees
Social security costs
Other pension costs
2021
£’000
532
24
6
562
2020
£’000
664
49
11
724
Specific details of directors' remuneration and other information (including share-based compensation) are included in the
Remuneration Committee Report within this Annual Report. Neither John Cronin nor Chris Jones are members of the Company
pension scheme.
The highest paid Director received total remuneration of £308,600 (2018: £242,500). Please see page 31 for the details.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 NOTES TO THE FINANCIAL STATEMENTS
63
9. Finance income
Interest revenue:
Bank deposits
Investment revenue is all earned on cash and cash equivalents.
10. Finance expense
Interest on bank overdrafts
Interest on loans
Interest on loan from Directors
Interest on lease liabilities
Total finance expense
11. Tax
Current tax:
UK corporation tax
Adjustments in respect of prior periods
Deferred tax (note 25)
Changes in tax rates
Origination and reversal of timing differences
Total tax credit
2021
£’000
2020
£’000
13
17
2021
£’000
2020
£’000
2
31
18
11
62
4
-
-
26
30
2021
£’000
2020
£’000
(597)
20
-
(100)
(677)
(795)
(2)
(44)
265
(576)
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS 64
NOTES TO THE FINANCIAL STATEMENTS
11. Tax (continued)
Loss on ordinary activities before tax
Tax on loss at standard corporation tax rate of 19% (2020: 19%)
Effects of:
Expenses not deductible for tax purposes
Capital allowances in excess of depreciation
Capitalisation of R&D costs
Other short-term timing differences
Losses surrendered for R&D tax credit
R&D tax credit
Unrelieved tax losses not provided for
CyanConnode Pvt Ltd utilisation of losses b/fwd
Difference in tax rates
Adjustment in respect of prior period
Total tax credit for the period
2021
£’000
(2,734)
(519)
14
1
(25)
-
783
(1,039)
264
(203)
27
20
2020
£’000
(6,243)
(1,186)
419
1
-
3
1,042
(1,384)
622
-
(91)
(2)
(677)
(576)
Factors affecting tax charge in future years
The Finance Act 2020 provided for the main rate of UK corporation tax to remain at 19%, thus cancelling the enacted reduction to
17%. It was substantively enacted on 17 March 2020, and as such the unrecognised deferred asset at the balance sheet date has
been calculated at 19%, reflecting the tax rate at which it may be utilised in future periods.
The Government announced in the spring Budget on 3 March 2021 that the rate of corporation tax will increase from April 2023
to 25% for companies with profits over £250,000. As at 31 March 2021 the legislation had not yet been substantively enacted
and therefore the tax rate for the purpose of determining the deferred tax recognition rate for assets and liabilities expected to
reverse in periods after 1 April 2023 was 19%. The impact of the change is therefore not recognized in these financial statements
but would have increased the unprovided deferred tax asset by approximately £2.2m if it had been enacted before 31 March
2021. The impact will be reflected in the financial statements for the year ending 31 March 2022.
The Swedish tax rate reduced from 22% to 21.4% with effect from 1 January 2019, and will reduce to 20.6% from 1 January 2021, with
the deferred tax being calculated at this lower rate, reflecting the time at which it may be utilised. The Indian effective tax rate of
34.61% reduced to 25.17% from 1 April 2019 and the deferred tax has been calculated at this rate.
12. Loss per share
The calculation of the basic and diluted loss per share is based on the following data:
Loss for the purposes of basic loss per share being net loss attributable to equity holders of
the parent (£’000)
2021
(2,057)
2020
(5,667)
Weighted average number of ordinary shares for the purposes of basic and diluted loss
per share (excluding own shares held)
174,755,445
173,047,934
Loss per share (pence)
(1.18)
(3.27)
The weighted average number of shares and the loss for the year for the purposes of calculating diluted loss per share are
the same as for the basic loss per share calculation. This is because the outstanding share options would have the effect of
reducing the loss per share and would not, therefore, be dilutive under the terms of IAS 33.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 NOTES TO THE FINANCIAL STATEMENTS
13. Intangible Assets (Group)
Cost
At 1 January 2019
Additions
At 31 March 2020
Additions
At 31 March 2021
Amortisation
At 1 January 2019
Charge for the period
At 31 March 2020
Charge for year
At 31 March 2021
Carrying amount
At 31 March 2021
At 31 March 2020
Software
SMIP
Software
Development
Intangible
£’000
£’000
£’000
144
-
144
-
144
144
-
144
-
144
-
-
-
36
36
129
165
-
-
-
-
-
165
36
6,100
-
6,100
-
6,100
1,052
526
1,578
421
1,999
4,101
4,522
65
Total
£’000
6,244
36
6,280
129
6,409
1,196
526
1,722
421
2,143
4,266
4,558
Smart Metering Implementation Programme (‘SMIP’) relates to a contract acquired with the Connode Group in 2016 to partner
Toshiba and Telefonica in their SMETS2 rollout in the UK. CyanConnode’s technology enables their communication hubs to work
in areas of the UK that have no, or intermittent, mobile network coverage. The amortisation charge for the year is £421,000 (2020:
£526,000). This is included in other operating costs. An impairment review of the intangibles assets has been undertaken in the
year with no impairment arising. The process and significant assumptions are in line with the goodwill impairment review as
outlined in note 3 b i..
14. Intangible assets (Company)
Cost
Balance at 1 April 2020 and 31 March 2021
Amortisation
Balance at 1 April 2020 and 31 March 2021
Carrying amount
At 1 April 2020 and 31 March 2021
Software
£’000
Total
£’000
144
144
-
144
144
-
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS
66
NOTES TO THE FINANCIAL STATEMENTS
15. Goodwill
Cost at 1 April 2020 and 31 March 2021
Carrying amount at 31 March 2020 and 31 March 2021
Group
£’000
1,930
1,930
Impairment testing
The Company tests goodwill annually or more frequently if there are indications that goodwill might be impaired. In accordance
with IAS 36: “Impairment of assets” the Company values goodwill at the recoverable amount, being the higher of the value in use
basis and the fair value less costs to sell basis. Note that goodwill has been allocated to a single cash generating unit for the
purposes of this testing.
Value in use calculations have been used to determine the recoverable amount of goodwill. The calculations use the latest
approved forecast extrapolated to perpetuity using growth rates shown below, which do not exceed the long-term growth rate
for the relevant market. Based on impairment testing completed at the year end, no impairment was identified in respect of
goodwill.
Significant assumptions and estimates
The following significant assumptions have been used:
•
•
•
Pre-tax discount rate 18.7% (2020: 18.7%)
Compound annual growth rate in revenue over next five years between 20% and 29% (2020: 20%).
Growth rate in perpetuity 6.5% (2020: 5%), reflecting the rate of the countries to which the goodwill is associated
The Group applies sensitivity analyses to assess whether any reasonable possible changes in assumptions could cause an
impairment that would be material to these Consolidated Financial Statements.
The key assumption in the impairment review is that compound annual revenue growth will be between 20% and 29% over the
next five years with revenues beyond that period based upon a terminal growth rate of 6.5%. The 6.5% growth rate has been used
to reflect the long-term growth rate for the Group's target markets including India (where forecast growth rates in perpetuity in
the main countries in which the Group operates are expected to be higher at around 12.5% to 25% per annum). Using the above
assumptions does not show a requirement for an impairment to goodwill, however a failure to achieve the expected revenue
growth could make an impairment to goodwill possible.
Based upon this impairment review the recoverable amount exceeds its carrying amount by £29m (2020: £8.1m). The
recoverable amount is most sensitive to changes in the sales growth. For example, a 5.5% reduction in the perpetual growth rate
would reduce the terminal value by £19m.
16. Property, plant and equipment
Group
Cost
At 1 January 2019
Additions
At 31 March 2020
Additions
Disposal
At 31 March 2021
Fixtures and
equipment
£’000
332
20
352
23
(4)
371
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 NOTES TO THE FINANCIAL STATEMENTS
16. Property, plant and equipment (continued)
Group
Accumulated Depreciation
At 1 January 2019
Charge for the period
At 31 March 2020
Charge for the year
Depreciation on disposal
At 31 March 2021
Carrying Amount
At 31 March 2021
At 31 March 2020
67
Fixtures and
equipment
£’000
259
50
309
30
(4)
335
36
43
At 31 March 2021 the Group had no contractual commitments outstanding for the acquisition of property, plant and equipment
(2020: £nil).
17. Leases
Right of use asset
Group
Cost
Adoption of IFRS 16 at 1 January 2019
Additions
At 31 March 2020
Additions
At 31 March 2021
Accumulated Depreciation
At 1 January 2019
Charge for the period
At 31 March 2020
Charge for the year
At 31 March 2021
Carrying Amount
At 31 March 2021
At 31 March 2020
Building
£’000
471
-
471
-
471
-
197
197
176
373
98
274
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS 68
NOTES TO THE FINANCIAL STATEMENTS
17. Leases (continued)
Lease liability movements in the year
As at 1 April and 1 January
Payments
Interest
At 31 March
Lease liabilities
Current
Non - Current
As at 31 March
Amounts recognised in Income Statement
Depreciation
Interest
Period to 31 March
Expenses relating to leases of low-value assets that are not shown above as short-term
lease in the year/period (included in other operating costs)
2021
£’000
274
2020
£’000
471
(187)
(223)
11
98
2021
£’000
98
-
98
2021
£’000
176
11
187
47
26
274
2020
£’000
121
153
274
2020
£’000
197
26
223
47
The Group leases its head office property on a term of 3 years. Payments of £187,538 were made against this lease during the
year ended 31 March 2021.
All lease amounts are recognized where there is a reasonable certainty that the lease will be extended beyond its break point,
the assumption is made that the lease will continue to the end of the lease term.
18. Subsidiaries
Investment in subsidiaries
As at 1 April and 1 January
Capital contribution in respect of share-based payment
Investment in CyanConnode Pvt Ltd
As at 31 March
Company
Company
2021
£’000
9,105
80
-
9,185
2020
£’000
7,898
267
940
9,105
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 NOTES TO THE FINANCIAL STATEMENTS
69
18. Subsidiaries (continued)
Movement in investment of subsidiaries
Cost
Cost at 1 April and 1 January
Addition
At 31 March
Impairment
Impairment at 1 April and 1 January
Impairment in period
At 31 March
Carrying Amount at 31 March
Company
Company
2021
£’000
14,489
80
14,569
2020
£’000
13,282
1,207
14,489
(5,384)
(5,384)
-
(5,384)
9,185
-
(5,384)
9,105
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation. The
ultimate holding Company of the Group is CyanConnode Holdings plc. The members of the Group, all of which are 100% owned
are as follows:
CyanConnode Limited
Merlin Place
Milton Road
Cambridge
CB4 0DP
CyanConnode Private Limited
B-41 Panchsheel Enclave
New Dehli-110017
India
Connode Holding AB
Jarnvagsgatan 10
172 35 Sundbyberg
Stockholm
Sweden
Connode AB
Jarnvagsgatan 10
172 35 Sundbyberg
Stockholm
Sweden
•
•
•
•
•
•
•
•
•
•
•
•
100% of the issued share capital of the Company is held by CyanConnode Holdings plc
The company is incorporated in England and Wales and has an accounting period ending
31 March
The principal activity of the Company is research and development, and to market and sell
the Group’s range of products
100% of the issued share capital of the Company is held by CyanConnode Holdings plc
The company is incorporated in India and has an accounting period ending 31 March
The principal activity of the Company is to market and sell the Group’s range of products in
India
100% of the issued share capital of the Company is held by CyanConnode Holdings plc
The company is incorporated in Sweden and has an accounting period ending 31 March
The principal activity of the Company is to act as a holding company
100% of the issued share capital of the Company is held by Connode Holding AB
The company is incorporated in Sweden and has an accounting period ending 31 March
The principal activity of the Company is to market and sell the Group’s range of products in
the Nordic region
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS 70
NOTES TO THE FINANCIAL STATEMENTS
19. Other financial assets
Bank securities
The Company held no bank securities at either balance sheet date.
20. Inventories
Raw materials
Raw materials – provision
Raw materials – net realisable value
Finished goods – cost
Finished goods – provision
Finished goods – net realisable value
Inventories
2021
£’000
44
2021
£’000
294
(147)
147
687
(623)
64
211
2020
£’000
93
2020
£’000
298
(147)
151
701
(544)
157
308
Inventories are stated after provisions for impairment of £771,000 (2020: £691,000). £108,000 (2020: £4,000) of stock impairment
charges were recognised in the year. There have been no impairment reversal (2020: £nil) in the year. The total cost of
inventories expensed in the year amounted £3,265,000 (2020: £1,006,000).
The Company held no inventories at either balance sheet date.
21. Trade and other receivables
Group
Company
Trade receivables
Allowance for expected credit losses
Contract assets
Other debtors
Employee Benefit Trust Loan
Prepayments
Amounts due from group undertakings
2021
£’000
5,550
(435)
5,115
-
114
-
126
-
2020
£’000
2,717
(82)
2,635
63
73
-
110
-
Trade and other receivables
5,355
2,881
2021
£’000
2020
£’000
-
-
-
-
592
56
445
1,093
-
-
-
9
166
54
1,062
1,291
CyanConnode Ltd has a loan of £57,919,855 (2020: £57,245,613) with CyanConnode Holdings plc with a current impairment
provision of £57,919,855 (2020: £56,727,452).
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 NOTES TO THE FINANCIAL STATEMENTS
71
21. Trade and other receivables (continued)
The Employee Benefit Trust (EBT) holds own shares issued. The original amount of the EBT loan was £3,015,135, of which based
on a share price of 33.0 pence for 9,136,772 shares, During the year the fair value of the EBT loan has increased by £426,000
(2020: £724,000 impaired).
The directors consider that the carrying amount of trade and other receivables approximates to their fair value.
Trade receivables are non-interest bearing. Credit terms offered to customers vary upon the country of operation and type of
goods and services provided. Credit terms are often aligned with the credit terms agreed between the meter manufacturer
and the end customer. Hardware sales are normally invoiced on delivery and settled within 30 or 60 days. Software licenses and
other services tend to have longer payment.
Loans to other group entities relates to amounts owed to CyanConnode Holdings plc by Connode Holding AB. This is considered
recoverable because the Company received a cash repayment of £159,000 in the year and expecting future repayments as and
when is required. This intercompany loan is unsecured and will be settled in cash. No guarantees have been given or received.
For more information on loans to other group entities please see note 35.
Expected credit losses
The movement in the expected credit loss provision in the year was as follows:
As at 1 January
Charge in the year
As at 31 March
Group
2021
£’000
(82)
(353)
(435)
Group
2020
£’000
(64)
(18)
(82)
Credit risk
At 31 March 2021 the Group had significant concentration of credit risk in two customers which represented 91% (2020: two
customers 71%) of the Group’s trade receivables. This reliance on two customers in the Indian smart electricity metering sector is
included within our principal risks statement on pages 11 to 13 of this report.
Trade receivables
Not yet due
30 – 59 days
60 – 89 days
Over 90 days
Total
2021
£’000
3,430
454
340
1,326
5,550
2020
£’000
521
10
1,528
658
2,717
Credit control procedures are implemented to ensure that sales are only made to organisations that are willing and able to pay
for them. Such procedures include the establishment and review of customer credit limits and terms. The Group does not hold
any collateral or any other credit enhancements over any of its trade receivables nor does it have legal right of offset against
any amounts owed by the Group to the counterparty.
An amount of £1,326,000 (2020: £658,000) which is over 90 days old is included in trade receivables, of which a provision of
£398,000 has been provided for (2020: £82,000).
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS 72
NOTES TO THE FINANCIAL STATEMENTS
22. Cash and cash equivalents
Cash and cash equivalents
Group
Company
2021
£’000
1,489
2020
£’000
1,172
2021
£’000
190
2020
£’000
551
Cash and cash equivalents comprise cash held by the Group and Company and short-term bank deposits with an original
maturity of three months or less. The carrying amount of these assets approximates to their fair value.
Barclays Bank plc have given a guarantee in respect of £10,000 to HMRC on behalf of CyanConnode Limited. As security for this
guarantee, Barclays hold a legal charge over a deposit account held specifically for this purpose for £10,000. This cash cannot be
used for any other purpose. Barclays Bank plc have granted a foreign exchange facility of £25,000.
23. Trade and other payables
Trade payables
Other payables
Accruals
Social security and other taxes
Contract liabilities
Group
Company
2021
£’000
1,888
147
1,228
327
379
3,969
2020
£’000
171
36
477
138
669
1,491
2021
£’000
87
5
85
-
-
177
2020
£’000
32
6
81
-
-
119
Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs all of which are
payable within a year.
Contract liabilities represent deferred revenue from ongoing contracts MEA Thailand and HMP Sweden, of which £221,000 is
anticipated to unwind in financial year 2022, and the remainder over the next year or two. During the year revenue of £297,000
was recognised, which was part of the prior period contract liabilities closing balance.
The Group has financial risk management policies in place to ensure that all payables are paid within agreed credit timeframes.
Neither the Group nor the Company has incurred interest charges for late payment of invoices during the year (2020: £nil). The
average credit period taken for trade purchases is 30 days (2020: 20 days) due to significant purchases of meters for smart
metering deployments in the year. The average credit period taken in 2021 for trade purchases by the Company was 34 days
(2020: 34 days).
Trade payables
Not yet due
30 – 59 days
60 – 89 days
Over 90 days
Total
2021
£’000
1,079
720
89
-
1,888
2020
£’000
59
14
65
33
171
The directors consider that the carrying amount of trade payables approximates to their fair value. Included in accruals is an
amount of £59,374 relating to contributions to the Group’s defined contribution pension plan (2020: £61,474).
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 NOTES TO THE FINANCIAL STATEMENTS
73
24. Short-term borrowings
Advance on R&D tax credit
Loan from Directors
Debt factoring
As at 31 March 2021
Group
Company
2021
£’000
385
400
1,333
2,118
2020
£’000
560
-
-
560
2021
£’000
385
400
-
785
2020
£’000
560
-
-
560
In December 2020, the Company accepted a loan of £400,000 (2020: £nil) from two Directors (2020: nil) in assisting with working
capital. The loan is repayable on or before 31 October 2021, interest is charged at 13.5% per annum.
In March 2021, the Company received an advance loan for £385,000 (2020: £560,000) against its R&D tax credit. This loan will be
repaid to the lender out of the funds received from HMRC for the Group’s R&D tax credit. These funds are expected to be received
from HMRC by October 2021. The loan is secured against the R&D tax credit and bears an interest rate of 13.5% per annum. The
details of interest charges for the year can be found in note 10.
The Group has entered a debt factoring facility with HDFC bank in India which is secured against Letters of Credit provided by a
customer for deliveries of Omnimesh modules. As at the year end a balance of £1,333,000 (2020: £nil) was owing to the bank. The
facility bore interest at 9.25% per annum at year end. This has since been renegotiated to 8.3%.
Connode AB has an overdraft facility for SEK 2 million (£167k) secured against the assets of Connode AB. The balance on this
facility was £nil at 31 March 2021 (2020: £nil).
25. Deferred tax
This relates primarily to a deferred tax liability recognised on the acquisition of the intangible assets relating to the Connode
acquisition, and amortisation relating thereto.
At 1 January and 1 April
Movement during the year (note 11)
At 31 March
Intangibles deferred tax
Deferred tax asset – Swedish losses
Total recognised deferred tax liability
2021
£’000
912
(100)
812
2021
£’000
845
(33)
812
2020
£’000
690
222
912
2020
£’000
932
(20)
912
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS 74
NOTES TO THE FINANCIAL STATEMENTS
25. Deferred tax (continued)
Unrecognised deferred tax asset
Accelerated capital allowances
Short term timing differences
R&D intangible
Losses
Total unrecognised deferred tax asset
2021
£’000
(3)
(11)
31
(7,524)
(7,507)
The deferred tax asset has not been recognised due to the unpredictability and uncertainty of future profit streams.
26. Share capital
Issued and fully paid, ordinary shares of 2.0 pence each
As at 31 December 2018
Issue of new shares
As at 31 March 2020
Issue of new shares
As at 31 March 2021
No
182,398,523
400,000
182,798,523
3,944,375
186,742,898
2020
£’000
(2)
(5)
-
(7,457)
(7,464)
£’000
3,648
8
3,656
79
3,735
In the year, shares were issued at prevailing market prices as settlement for professional services provided. £118,700 was raised
this way during the year (2020: £40,000).
No shares were issued as a result of the exercise of share options (2020: none). The Company has one class of ordinary share
which carries no right to fixed income.
27. Share premium account
Amount subscribed for share capital in excess of nominal value.
28. Own shares held
Balance at 31 March 2020 and 31 March 2021
(9,467,256 ordinary shares of 2.0 pence per share)
Own shares held are those issued to the Employee Benefit Trust.
Group
£’000
Company
£’000
(3,253)
-
29. Share option reserve
Represents the accumulated balance of share-based payment charges recognised in respect of share options granted by the
Company less transfers to accumulated deficit in respect of options exercised or cancelled/lapsed.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 NOTES TO THE FINANCIAL STATEMENTS
75
30. Translation reserve
The translation reserve records the cumulative exchange differences arising from the translation of the financial statements of
overseas subsidiaries
31. Retained losses
Cumulative net gains and losses recognised in the Consolidated Statement of Comprehensive Income.
32. Reconciliation of operating loss to net cashflow from operating
activities
Group
Operating loss for the year:
Adjustments for:
Depreciation of property, plant and equipment
Amortisation of Intangible assets intangible
Depreciation on right of use assets
Foreign exchange
Shares issued in lieu of bonus
Share-option payment expense
Operating cash flows before movements in working capital
Decrease in inventories
(Increase)/decrease in receivables
Increase/(decrease) in payables
Cash reduction from operating activities
Income taxes received
Net cash outflow from operating activities
2021
£’000
(2,685)
30
421
176
(15)
119
80
(1,874)
97
(2,474)
2,468
(1,783)
795
(988)
2020
£’000
(6,230)
50
526
197
59
-
267
(5,131)
11
1,124
(503)
(4,499)
822
(3,677)
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.
33. Share based payments
Equity-settled share option scheme
The Company has a share option scheme for all employees of the Group. EMI and unapproved options are exercisable at a price
equal to, or at a premium to, the average quoted market price of all the Company’s shares on the date of grant. The vesting
period is typically 3-4 years and the options have a life of 10 years. If the options remain unexercised after the period of 10 years
from the date of grant, they will expire. Options are forfeited if the employee leaves the Group before they vest.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS 76
NOTES TO THE FINANCIAL STATEMENTS
33. Share based payments (continued)
The Company also has a Joint Share Ownership Plan (“JSOP”) under which shares are granted to certain directors and senior
employees of the Company. Shares issued under the JSOP are issued at a premium to the quoted market price at the time of
issue. They typically have vesting periods up to 3 years and a life of 5 years. Further information on shares issued under the JSOP
can be found in the Directors’ Remuneration Report on page 29.
Details of the share options outstanding during the period were as follows:
Outstanding at beginning of period
Granted during period
Forfeited during period
Outstanding at the end of the period
Exercisable at the end of the period
2021
2020
Number
of share
options
21,013,514
5,448,965
(2,061,993)
24,400,486
8,837,704
Weighted
average
Exercise
price (in £)
0.35
0.10
0.14
0.22
0.10
Number
of share
options
21,357,791
3,096,035
(3,440,312)
21,013,514
11,998,392
Weighted
average
Exercise
price (in £)
0.33
0.12
0.46
0.35
0.57
The options outstanding at 31 March 2021 had a weighted average exercise price of £0.22 (2020: £0.37) and a weighted average
remaining contractual life of 72months (2020: 77) months.
In the year to 31 March 2021, options were granted on 22 and 28 September 2020, 8 and 20 January 2021. The aggregate of the
estimated fair value of those options is £262,453.
In the period to 31 March 2020, options were granted on 4 April 2019. The aggregate of the estimated fair values of those options
is £60,603.
A share option charge of £80,245 (2020: £267,000) was recognised during the period.
The inputs into the Black-Scholes model for options granted during the period (EMI, unapproved and JSOP shares) are as follows:
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Risk free rate
Expected dividend yield
2021
10.00p
10.00p
80%
2020
6.45p
12.00p
66%
2018
10.83p
19.00p
65%
6 years
4 years
4 years
0.1%
0%
0.5%
0%
0.5%
0%
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous 72 months.
The expected life used in the model is the time from the grant date to the expected exercise date. The life of the options is
dependent on the expiration date, volatility of the underlying shares and vesting features.
Warrants
The Company issues share warrants, either in connection with the issue of equity or for the service received from third parties.
Warrants are issued at a fixed price and for a fixed number of shares, such that each warrant entitles the holder to subscribe for
one Ordinary Share in the Company. All share warrants vest immediately on issue.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 NOTES TO THE FINANCIAL STATEMENTS
77
33. Share based payments (continued)
Details of the share warrants outstanding during the year are the same for 2021 as for 2020:
2021
2020
Outstanding at beginning of period
Outstanding at the end of the period
Exercisable at the end of the period
The inputs into the Black-Scholes model are as follows:
Number
of warrants
341,605
341,605
341,605
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Risk free rate
Expected dividend yield
Weighted
average
Exercise
Weighted
average
Exercise
Number
price (in £)
of warrants
price (in £)
0.54
0.54
0.54
341,605
341,605
341,605
0.54
0.54
0.54
32.78p
54.0p
65%
10 years
0.5%
0%
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous
36 months. The expected life used in the model has been adjusted, based on management’s best estimates, for the effects
of non- transferability, exercise restrictions and behavioural considerations.
34. Financial instruments and risk management
The table below sets out the Company's accounting classification of each category of financial assets and liabilities and their
carrying values:
As at end of period
Financial assets
Classified as amortised cost
Trade receivables
Intercompany receivables
Other debtors
Contract assets
Cash and cash equivalents
Total financial assets
Financial liabilities
Classified as amortised cost
Trade payables
Other payables
Short-term borrowings
Lease liabilities
Total financial liabilities
Group
2021
£’000
5,115
-
114
-
1,489
6,718
1,888
147
2,118
98
4,251
2020
£’000
2,635
-
73
63
1,172
3,943
171
36
560
274
1,041
Company
2021
£’000
-
445
592
-
190
1,227
87
5
785
-
877
2020
£’000
-
1,062
166
-
551
1,779
32
59
560
-
651
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS 78
NOTES TO THE FINANCIAL STATEMENTS
34. Financial instruments and risk management (continued)
The Directors consider that the financial assets and liabilities have fair values not materially different to carrying values.
The following are the remaining contractual maturities of financial liabilities at the year end. The amounts are gross and
undiscounted and include contractual interest payments and exclude the impact of netting agreements.
As at 31 March 2021
Non-derivative financial liabilities
Trade payables
Other payables
Short-term borrowing
Lease liabilities
Total
As at 31 March 2020
Non-derivative financial liabilities
Trade payables
Other payables
Short-term borrowing
Lease liabilities
Total
Carrying
Amount
£’000
1,888
147
2,118
98
4,251
Carrying
Amount
£’000
171
36
560
274
1,041
Contractual Cash Flows
Total
£’000
(1,888)
(147)
(2,171)
(99)
(4,305)
1 – 12 months
1 – 2 years
2 – 5 years
£’000
£’000
£’000
(1,888)
(147)
(2,171)
(99)
(4,305)
-
-
-
-
-
-
-
-
-
-
Contractual Cash Flows
Total
£’000
(171)
(36)
(598)
(286)
(1,091)
1 – 12 months
1 – 2 years
2 – 5 years
£’000
£’000
£’000
(171)
(36)
(598)
(187)
(992)
-
-
-
(99)
(99)
-
-
-
-
-
Risk management
The Company’s financial function provides services to the business, monitors and manages the financial risks relating to the
operations of the Group. The main types of risk are outlined below. The Group does not enter into or trade financial instruments,
including derivative financial instruments, for any purpose.
Credit risk
The Group’s credit risk is primarily attributable to its trade receivables and cash, the credit risk on other classes of financial asset
is insignificant. The Group's credit risk on cash and cash equivalents was limited because the majority of its liquid resources
are held with mainstream financial institutions which have good credit ratings. The Group's credit risk was therefore primarily
attributable to its trade receivables. Note 21 provides further details regarding the recovery of trade receivables.
The Company has made a provision against the amount of the debt owed to it by its subsidiary company CyanConnode Limited
totalling £57,919,855 (2020: £56,727,452). In addition, the Company has made a total provision of £2,423,135 (2020: £2,849,135)
against the debt owed to it by CyanConnode Employees Benefit Trust which is held with Zedra and relates to the loan for the
EBT shares, to bring the loan in line with market value of the shares held in the Trust. These amounts are not overdue. The EBT
loan is a five-year agreement from October 2017. Since the Group holds no collateral, the maximum exposure to credit risk is the
carrying value of trade receivables.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 NOTES TO THE FINANCIAL STATEMENTS
79
34. Financial instruments and risk management (continued)
Capital risk
Details relating to capital risk and capital risk management are set out in the capital structure section in the Directors’ Report on
page 34 of this report.
Liquidity risk
Liquidity risk of the Group is attributable to the sales level at the current business development stage not being able to generate
sufficient cash flows to support required working capital. It is also attributable to the company not being able to raise sufficient
funding. The Group manages liquidity risk by maintaining adequate reserves and banking facilities and continuously monitoring
forecast and actual cash flows.
Market risk
We operate primarily in the smart electricity metering sector in India, Scandinavia and the UK. Therefore, we are exposed to
changes in market growth rates in this sector as well as macro-economic and political risk in these countries. We are currently
expanding operations both in terms of industry sector and geographic reach. This will help to diversify away this market risk.
At present, the market we are in continues to grow rapidly in line with industry forecasts.
Currency risk
The Group’s activities expose it to the financial risks of changes in foreign currency exchange rates as it undertakes certain
transactions denominated in foreign currencies. It is also exposed to the financial risks of changes in foreign currency exchange
rates as subsidiaries' primary accounting records are held in foreign currencies (INR and SEK). The risk is managed through
careful control of the Group’s foreign currency balances.
The table below is showing assets and liabilities from the overseas group companies which have been converted to Sterling at
the 31 March 2021 exchange rate.
Fixed assets
Current assets
Current liabilities
Net assets
INR
£’000
16
7,059
(4,466)
(2,609)
SEK
£’000
422
82
(59)
445
Foreign currency sensitivity analysis
Currency risks are defined by IFRS 7: "Financial Instruments: Disclosures" as the risk that the fair value or future cash flows of a
financial asset or liability will fluctuate because of changes in foreign exchange rates.
The following table details the transactional impact of hypothetical changes in foreign exchange rates on financial assets and
liabilities at the balance sheet date, illustrating the increase/(decrease) in Group operating profit caused by a 10% strengthening
of the Indian Rupee and Swedish Krona against Sterling compared to the year-end spot rate. The analysis assumes that all other
variables (in particular, other foreign currency exchange rates) remain constant.
Year ended
Indian Rupee
Swedish Krona
March
2021
£’000
702
15
March
2020
£’000
230
144
The following table details the impact of hypothetical changes in foreign exchange rates on financial assets and liabilities at
the balance sheet date, illustrating the increase/(decrease) in Group equity cause by a 10% weakening of the Indian Rupee and
Swedish Krona against Sterling. The analysis assumes that all other variables (in particular, other foreign currency exchange
rates) remain constant.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS 80
NOTES TO THE FINANCIAL STATEMENTS
34. Financial instruments and risk management (continued)
March
Year ended
Indian Rupee
Swedish Krona
2021
£’000
(374)
(41)
March
2020
£’000
(188)
(118)
Fair value of financial instruments
The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. The Group has documented internal policies for
determining fair value, including methodologies used to establish valuation adjustments required for credit risk.
35. Related Party Transactions
Board members
Please refer to page 35 of the Directors’ Report for a full list of directors who served in the period. During the year, 3,031,998 newly
issued shares were purchased by the directors of the Company for £156,500 (2020: nil shares).
During the year, the Company paid fees of £157,500 (2020: £205,000) in respect of services provided by directors. The balance
outstanding at the year end was £39,640 (2020: £nil). Please see page 31 for the Directors' Remuneration Report for further
information.
During the year, the Company accepted a loan of £400,000 (2020: nil) from two Directors (2020: nil) in assisting with working
capital. The loan is repayable on or before 31 October 2021, interest is charged at 13.5% per annum. During the year interest of
£18,000 (2020: nil) was incurred and a balance of £3,375 (2020: nil) was outstanding at the year end.
Transactions between parent company and subsidiaries
Year end balances outstanding and transactions in the year between the parent company and its subsidiaries are disclosed
below.
Loans to related parties
Balance as at 31 March 2020
Cash advances/(repayments)
Impairment provision
Loss on revaluation
Balance as at 31 March 2021
Connode
CyanConnode
CyanConnode
Holding AB
£’000
Limited
£’000
Pvt Limited
£’000
540
(122)
-
23
441
519
673
(1,192)
-
-
4
-
-
-
4
CyanConnode Holdings plc makes a management charge for services rendered to CyanConnode Limited. In the year to
31 March 2021 these amounted to £137,000 (2020: £510,000).
36. Post Balance Sheet Events Review
On 3 June 2021 CyanConnode Holdings plc raised £3.15 million (before expenses of approximately £180,000) through a placing of
27,196,395 ordinary shares of 2.0 pence each and a subscription for 5,973,681 New Ordinary Shares.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021 FINANCIAL STATEMENTS
81
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2021
FINANCIAL STATEMENTS
Professional Advisers
Nominated Adviser and Broker
Arden Partners plc
125 Old Broad Street
London
EC2N 1AR
Auditor
RSM UK Audit LLP
City House
126-130 Hills Road
Cambridge
CB2 1RE
Solicitors to the Company
Trowers & Hamlins LLP
3 Bunhill Row
London
EC1Y 8YZ
Registrars
Share Registrars Ltd
The Courtyard
17 West Street
Farnham
GU9 7DR
Patent Attorneys
Beresford & Co
16 High Holborn
London
WC1V 6BX
Principal Banker
Barclays Bank plc
Chesterton Branch
28 Chesterton Road
Cambridge
CB4 3AZ
DESIGNED AND PRINTED BY PERIVAN
CyanConnode
Merlin Place, Milton Road
Cambridge CB4 0DP
CYANCONNODE.COM