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ANNUAL REPORT
AND ACCOUNTS
2022
CYANCONNODE AT A GLANCE
A world leader in Narrowband Radio
Frequency (RF) Smart Mesh Networks
CyanConnode is a world leader in the design
and development of narrowband RF smart mesh
networks that enable machine to machine (M2M)
communications. With a wealth of expertise and
experience in smart technology, the Group provides
customers with low-power, end-to-end networking
solutions with high-performance applications that
save energy, as well as providing enhanced service
delivery and improved business efficiency.
CyanConnode’s Omnimesh solution, based on IPv6
6LoWPAN, is an easy to deploy standards-based
wireless Neighbourhood Area Network (NAN).
It is a highly secure IP-based M2M platform that
uses narrowband radio mesh networks and cellular
networks to create scalable, self-healing and self-
configuring deployments that enable rapid innovation
for the implementation of third-party applications.
Narrowband RF networks are low-power and suitable
for applications requiring reliable communications.
CyanConnode’s solutions use sub-GHz frequencies
that maximise the range of its low power networks and
provide excellent penetration through obstructions,
such as buildings, in smart metering deployments.
Strategic Report
1
Highlights
2 Chairman’s Statement
5 Strategic Report
Our Governance
18 Board of Directors
20 Financial Review
22 Corporate Governance Statement
29 Directors’ Remuneration Report
34 Audit Committee Report
36 Directors’ Report
40 Directors’ Responsibilities Statement
Our Financials
41
Independent Auditor's Report
47 Consolidated Income Statement
48 Consolidated Statement of Comprehensive Income
49 Consolidated Statement of Financial Position
50 Consolidated Statement of Changes in Equity
51 Consolidated Cash Flow Statement
52 Company Balance Sheet
53 Company Statement of Changes in Equity
54 Company Cash Flow Statement
55 Notes to the Financial Statements
83 Professional Advisers
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022
Highlights
1
Revenue growth
continues with an
increase of 49%
against 2021.
Financial highlights
•
Increase of 49% in revenue to £9.6 million in 2022 from £6.4 million in 2021,
the highest annual revenue for the Group to date
•
•
•
•
Increase of 61% in gross profit to £5.0 million in 2022 from £3.1 million in 2021
Decrease of 62% in operating loss to £1.0 million in 2022 from £2.7 million in
2021 as the Group moves towards profitability
Adjusted EBITDA profit of £0.1 million in 2022 compared to a loss of
£1.9 million in 2021
Increase of 58% in cash position from £1.5 million in 2021 to £2.4 million in
2022
Operational highlights
•
612,000 Omnimesh Radio Frequency (RF) Modules shipped against current
contracts during the period (FY21: 481,000)
•
•
•
•
•
•
152,000 Omnimesh RF Modules ordered for a new customer in northern India
31,000 Omnimesh RF Modules for a follow-on order for the MEA (Metropolitan
Electricity Authority Smart Grid Project in) Thailand
100,000 Omnimesh RF Modules ordered for a new customer in Africa
Two oversubscribed placings completed, raising £5.15 million before
expenses
Award of London Stock Exchange Green Economy Mark
Winner of the Frost and Sullivan Global Smart Metering Technology
Innovation Leadership Award
Post-Period Highlights
•
1,000,000 Omnimesh RF Modules and associated products ordered from
Genus Power Infrastructure Limited (Genus)
•
•
•
•
•
•
•
Two orders won from IntelliSmart Infrastructure Pvt Ltd (IntelliSmart) for a
total of 300,000 Omnimesh RF Modules and associated products
New order worth USD 6.7 million won from Middle East and North Africa
(MENA) for NB-IoT gateways
Further new order worth USD 2.5 million won from MENA for Cellular
gateways
£2.6 million cash received from customers
Omnimesh integration underway with a further nine meter models
Revamped Distribution Sector Scheme (RDSS) approved by the Government
of India to help Distribution Companies (DISCOMS) to improve their
operational efficiencies
Following an initial delay in the empanelment process, DISCOMS approved
to release tenders under the RDSS Scheme in August 2022
STRATEGIC REPORT 2
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022
Chairman’s Statement
“We were delighted with the record results
achieved during the financial year and the
continued momentum post year end. In
particular winning orders in India for 1.3 million
units and 2 orders in the MENA region worth
$10 million”
John Cronin
Executive Chairman
Operational Review
India
The union budget of 2020-21 paved the way for the
replacement of 250 million conventional electricity meters
with smart meters by 2025. The Revamped Distribution
Sector Scheme (RDSS) was announced at the union
budget of 2021-22, where in the first phase 100 million
smart meters are to be installed by December 2023, with
the remainder by March 2025.
The Ministry of Power, Government of India (GOI), also
produced a revised Standard Bidding Document (SBD)
and a contract agreement that can be directly adopted
by utilities for rolling out the smart metering programme.
These steps have acted as a catalyst in spurring forward
the smart metering program in India and as a result the
scale of tenders has increased significantly.
During the period, CyanConnode won two new orders,
the first one was for 151,740 Omnimesh RF Modules
for Himachal Pradesh State Electricity Board (HPSEB),
marking an entry for CyanConnode into the hilly
regions of the country. The majority of the modules
were dispatched during the period and deployment is
expected to be completed in FY23.
The second order was for 1,000 Omnimesh RF Modules
from IntelliSmart for the state of Assam. This was the
first order from IntelliSmart, and was a precursor to two
larger orders which have been won during FY23 bringing
the total orders for this project to 301,000 Omnimesh RF
Modules. IntelliSmart is also the first service provider to
use the Design, Build, Finance, Own, Operate, Transfer
(DBFOOT) model and it has also installed the first smart
prepaid meter in India under the RDSS.
Key highlights for CyanConnode India for the financial
year ended March 2022 are set out below:
•
•
•
•
•
•
CyanConnode India delivered record annual revenue
and cash collection.
>562,000 Omnimesh RF Modules and 3,907 Omnimesh
Gateways were supplied.
>600,000 Omnimesh RF Modules and 3,752 Omnimesh
Gateways were commissioned.
CyanConnode is now the largest and most
experienced supplier of RF smart mesh networks in
India.
Dedicated space for CyanConnode in the Virtual Smart
Grid Knowledge Centre (SGKC) facilitated by National
Smart Grid Mission and Power Grid Corporation of
India, Ltd. SGKC is a Knowledge Centre platform,
set up by the Ministry of Power GOI, to demonstrate
excellence in Smart Grid (see: http://sgkc.powergrid.in/
cyanconnode.php)
Integration with two further meter manufacturers
(Avon Meters and Linkwell) were recommenced, which
will result in Omnimesh Modules being compatible with
the five leading meter manufacturers in India.
•
Cyber security certification completed on CyanConnode
Head End System (HES) (CERT-IN certified).
John Cronin
Executive Chairman
CHAIRMAN'S STATEMENT
3
APAC and Middle East North Africa
The smart metering market in the Asia Pacific (APAC) and
Middle East North Africa (MENA) region has continued
to mature and presents a significant opportunity for
CyanConnode.
During the year the Group has continued with the
deployment of the order won in 2019 for the Metropolitan
Electricity Authority (MEA), a Thai state enterprise under the
Ministry of Interior. The initial order was for 33,000 Omnimesh
RF Modules and associated products, placed on the Group
by its Agent and Partner, The JST Group (JST), and Forth
Corporation Public Company Limited (Forth). In March
2020, a further 206,000 Omnimesh licenses were ordered
allowing MEA to connect a total of 240,000 meters to the
Omnimesh Head End System (HES). All Omnimesh modules
and gateways were delivered during FY21. During FY22 a
follow-on order was received for a further 31,000 Omnimesh
RF Modules and associated products.
In August 2021, the Group announced an order for
100,000 Omnimesh RF Modules together with Advanced
Metering Infrastructure, Services, Omnimesh Head-End
Software, Perpetual License and an Annual Maintenance
Contract from a new customer for a smart metering
deployment in Africa.
Shortly after the financial year end, the Group announced
an order for a smart metering deployment in the MENA
region. Under the contract CyanConnode will supply
65,000 interoperable smart NB-IoT gateways to Esyasoft
Technologies, UAE. The NB-IoT gateways will communicate
with and control all existing smart meters for both
electricity and water; the gateways will have the capacity
to connect up to one million smart meters.
Europe
In April 2019, a follow-on order worth £0.7m was received
from HM Power (HMP), for smart metering of district
heating and power, which further demonstrates the
flexibility of CyanConnode’s standards-based Omnimesh
products. The order also includes the newly introduced
Omnimesh Long-Range RF Module that has a range of
up to 12km, which thereby increases the resilience of
the RF Smart Mesh Network in rural areas. Delivery of the
Omnimesh Long-Range RF Modules commenced in Q4
2019 with 41,000 modules being delivered during the year.
90,000 modules have been delivered to date.
The UK Government requires UK energy suppliers to rollout
approximately 53 million smart meters to their customers
before the end of 2025. To date, 21.7 million smart meters
have been installed and connected to the digital highway
operated by the Data Communications Company (DCC).
CyanConnode has a contract to provide software licenses
and support for its Radio Frequency (RF) Smart Mesh
Networks, which will be deployed in areas where there is an
unreliable or weak cellular signal, and it believes that the
deployment of its technology will gain momentum during
the latter stages of the rollout.
Fundraisings
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.
In March 2022, CyanConnode completed a further
oversubscribed placing and subscription, raising £2 million
before expenses at a price of 14 pence per share.
The net proceeds of the Placings and the Subscriptions
are being 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.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022STRATEGIC REPORT 4
CHAIRMAN'S STATEMENT
Awards
During the year the Group was the recipient of four
awards and classifications, as follows;
•
•
•
August 2021, CyanConnode was awarded the Green
Economy Classification & Mark by the London Stock
Exchange. This classification, first introduced in 2019,
was created to highlight companies and investment
funds listed on all segments of London Stock Exchange's
Main Market and AIM that are driving the global green
economy. To qualify for the Green Economy Mark,
companies and funds must generate 50% or more of
their total annual revenues from products and services
that contribute to the global green economy.
September 2021, CyanConnode won the 2021 Frost &
Sullivan Global Smart Metering Technology Innovation
Leadership Award. Frost & Sullivan was impressed with
CyanConnode’s innovation in the smart meter industry
and recognised that it has grown from a regional
European pioneer into a global leader.
November 2021, CyanConnode won the Cambridge
Wireless Best Connector Business'' Award. This award
recognises teams or businesses that are deploying
wireless technology to improve products, increase
operational efficiency or bring other benefits. The
award celebrates impactful applications of wireless
technology. CyanConnode was recognised for their
success in bringing smart metering technologies to
market.
•
March 2022, CyanConnode won the Megabuyte Fastest
Growing Company award.
Outlook
Since the period end, CyanConnode has won five orders,
including the largest-ever order from India. They were as
follows;
•
•
April 2022, an order for a smart metering deployment in
the MENA region. Under this contract CyanConnode will
supply 65,000 interoperable smart NB-IoT gateways to
Esyasoft Technologies, UAE. The NB-IoT gateways will
communicate with and control all existing smart
meters for both electricity and water; the gateways will
have the capacity to connect up to one million smart
meters.
May 2022, an order for 100,000 Omnimesh RF Modules
together with advanced metering infrastructure,
standards-based hardware, services, Omnimesh head-
end software, perpetual license and an annual
maintenance contract, for a smart metering project in
Assam. This order was received from IntelliSmart, who
were the first service provider to use the DBFOOT
•
•
•
model and also installed the first smart prepaid meter
in India under the RDSS (Revamped Distribution Sector
Scheme).
June 2022, CyanConnode announced a further order
from Intellismart for the same project for 200,000
Omnimesh RF Modules together with advanced
metering infrastructure, standards-based hardware,
services, Omnimesh head-end software, perpetual
license, and annual maintenance contract.
August 2022, an order was announced for Cellular
Gateways to provide smart communications for an
Advanced Metering Infrastructure project located in the
MENA region. This order, worth USD 2.5 million, was for a
new cellular product to be fitted to existing electricity
meters.
August 2022, the Group was delighted to announce
that its subsidiary, CyanConnode India Pvt Ltd, won
its largest-ever order. The Order was for one million
Omnimesh Modules, together with Advanced Metering
Infrastructure, Standards-Based Hardware, Omnimesh
Head-End Software, Perpetual License and a Support
and Maintenance Contract.
In addition, CyanConnode’s business has continued on
its growth path and is currently integrating with a further
nine meter models, giving access to a larger number of
opportunities.
In India the market has continued to move forward
with its plans to implement 250 million smart meters.
In August 2022, the Government of India approved the
Revamped Distribution Sector Scheme (RDSS) to help
DISCOMs improve their operational efficiencies and
financial sustainability by providing result-linked financial
assistance to DISCOMs to strengthen supply infrastructure.
The scheme has an outlay of Rs 3,03,758 Crore (£30
billion) over 5 years. In addition, following an initial delay
in the empanelment process, DISCOMS were approved to
release tenders under the RDSS Scheme in August 2022.
Eight companies are currently empanelled.
I would once again like to thank all shareholders for
their ongoing support during what has been our most
successful year to date. We look forward to further
order announcements during this financial year as the
Indian smart metering market continues to mature, and
to delivering the backlog of orders won in current and
previous periods.
John Cronin
Executive Chairman
22 August 2022
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 STRATEGIC REPORT
Strategic Report
5
The Omnimesh platform is agnostic, connecting any device
in the neighbourhood network, whilst also offering a hybrid
solution by giving access to multiple communication
technologies.
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 two 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:
•
•
•
•
•
Being Thought Leaders in the Internet of Things
(“IoT”)
Offering customers solutions that result in
optimised hybrid networks solutions that leverage
existing infrastructure
Offering full end-to-end solutions including the
integration of embedded modules into meters and
integration into the customers billing and meter
data management systems
The manufacture and deployment of equipment
using local partners to generate in-country wealth
Building strong relationships with Partners, Utilities,
Governments, Standards Bodies and Regulators
• Providing excellent customer service
The Group aims to generate revenues from:
• Direct sales of hardware and software
•
Licence and royalty fees from licensed hardware
and software
• Support and maintenance fees
•
Related services including project management,
integration, installation services and network
optimisation
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022STRATEGIC REPORT 6
STRATEGIC REPORT
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, the company also now has, within
its portfolio, full capabilities for cellular 2G to 5G, including
NB-IoT, and powerline communications. All of these
communications technologies can be connected to the
same head-end system (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.
Figure 1: CyanConnode RF Mesh Configuration
Source: Company data
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 STRATEGIC REPORT
7
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 and 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, to 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 “net-zero”
emissions by 2050.
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 2022STRATEGIC REPORT 8
STRATEGIC REPORT
The Global Smart Electricity Meters Market Report 2022,
produced by Research & Markets (R&Ms), states that the
global market for smart electricity meters was estimated
at US$10.5 Billion in 2020, and is projected to reach
US$15.2 Billion by 2026, growing at a CAGR of 6.7% over the
analysis period.
R&M’s report also notes utilities are aiming to modernise
their grid operations with advanced solutions, and that
smart electricity meters have emerged as an effective
tool that can flawlessly address their various energy
transmission and distribution losses in a simple and flexible
manner.
s172 Statement
Understanding the needs of stakeholders is fundamental
to the success of the Group. By understanding the
perspectives of all its stakeholders, the Board is able
to ensure that it can best promote the success of the
Company, fully aware of its impacts on them, on the
environment and ultimately, therefore, in the best interests
of its members as a whole. In the event that a decision
had to be made that not all stakeholder groups may have
found favourable, steps would be taken to mitigate any
negative impacts as far as possible, and to communicate
the reasons for such decisions to all stakeholders.
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.
At an operational level, engagement with stakeholders
is reported to the Board via the Executive Directors and
through written and verbal reports from the Group
Leadership Team.
Section 172 of the Companies Act 2006 requires Directors
to act in the way which they consider, in good faith, would
be most likely to promote the success of the Company for
the benefit of its members as a whole, and in doing so have
regard, amongst other matters, to:
A. The likely consequences of any decision in the
long-term
A practical example of consideration of the long-term
consequences of Board decisions can be found on
pages 9 and 11.
B. The interests of the Group’s employees
The Strategic report sets out the Group’s policy towards
employees and how it engages with them in greater
detail on pages 9 and 16-17. CyanConnode’s 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.
C. The need to foster the Company's business relationships
with suppliers, customers and others
See pages 9 to 10.
D. The impact of the Group’s operations on the community
and the environment
We are committed to making a positive contribution
to the communities in which we operate, including
supporting the local community, maintaining good
relationships within the community and providing
employment opportunities.
We are an active member of the Cambridge Network
which provides excellent opportunities for sharing
information and best practice in the Cambridge area.
We also engage with Cambridge Wireless, and during
the year won the Cambridge Wireless Best Connector
Business Award.
We are also engaging with Cambridge University
Computer Science and Engineering departments
with the aim of providing graduate and/or internship
opportunities.
The Group’s focus on the environment is discussed in the
ESG Report from page 11.
E. The desirability of the Company maintaining a
reputation for high standards of business conduct
Examples of this principal are set out throughout this
Strategic Report, particularly in the ESG Report from
page 11. The Group strives to maintain a reputation for
the highest standards of business conduct. Its adoption
of the QCA Corporate Governance Code provides the
oversight and context for how it achieves that and its
procedures to monitor compliance with the Bribery Act
helps to ensure it achieves these high standards.
F. The need to act fairly between members of the
Company
See pages 9 to 10 for examples of how the Group
achieves this standard. The Directors recognise the
need to act fairly between members of the Company.
Wherever a conflict or potential conflict arises, the Board
takes independent legal and professional advice to
ensure that members are treated fairly.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022
STRATEGIC REPORT
9
Covid-19
Throughout the pandemic our Group Leadership Team and
operational teams regularly updated our key stakeholders
regarding the actions we were taking and how they
might be affected. We maintained close contact with our
suppliers to ensure continuity of supply to our customers,
many of whom continued to experience increased
consumer demand. We also maintained close contact with
our customers and end customers to ensure continuity of
deployment of our projects.
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.
The Board provided information to shareholders on
the performance of the business and the effect of the
pandemic in our trading updates, interim and full year
results and at subsequent investor presentations, as well as
on a one-to-one basis as requested.
The following pages set out those we consider to be our
key stakeholders and provides examples of how we have
engaged with them during the course of the year.
Employees
•
Why we engage
Our employees are essential to the success of our
business; our culture and our commitment to our
purpose and values drives our business performance.
We engage with our people regularly and seek to
create an environment in which all staff feel happy and
supported. Further details on our culture can be found
on page 11.
• How we engaged
Our culture is supported by maintaining an open and
active dialogue across the business. Direct engagement
took place through ‘town hall’ type sessions led by
the Executive Chairman and the Chief Financial
Officer, where updates were provided on the business
(information on customer wins, financial results and
strategy) and Covid-19. Employees were encouraged to
ask questions on the business and any other matters.
Indirect engagement was often held virtually due to the
pandemic, with updates provided to the Board. Regular
discussions were held with employees regarding views
on remote working and returning to the office.
• Outcomes and actions
The Group adapted its working practices based on
employee feedback, particularly with regard to its return
to office working policy.
Shareholders
• Why we engage
Shareholder views inform our decision-making and
engagement enables us to explain our strategic goals;
it is important that all shareholders have confidence in
our business and how it is managed, whether they are
institutional investors, private individuals or employee
shareholders.
• How we engaged
The Executive Directors engaged with both institutional
and private investors to present trading updates and
financial results, as well as updates on business and
to obtain feedback, which is important to the Board.
Regular, more informal communication from investors
also provides feedback to the Board, for example emails
received from shareholders. In 2020 and 2021 no AGM
was held due to COVID-19 guidance, however investor
webinars were held on a platform which allowed
shareholders to attend and ask questions and pass
comments before and during the webinars. 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.
The Group intends to revert to these practises from 2022.
The Executive Directors also engaged actively with
analysts who write research on our Company and
industry. This provides shareholders with additional
information on the business and business model.
• Outcomes and actions
An example of how the Board sought feedback from
shareholders was in determining the most appropriate
form of funding acceptable to shareholders in June
2021, following which the Group undertook a heavily
oversubscribed placing. Following further engagement
the Group undertook a further oversubscribed placing in
March 2022. Discussions with shareholders also identified
what other key topics were important to the Group’s
shareholders.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022STRATEGIC REPORT
10
STRATEGIC REPORT
Customers
• Why we engage
It is important that we understand all of our customers’
requirements to allow us to deliver the products and
services they need and maintain a good and open
relationship. Their feedback and support is crucial to the
success of our business.
• How we engaged
The Board engages both directly and indirectly with
customers at an operational level through members
of the Group Leadership Team and their teams. The
majority of the Group’s customers are in India where
the largest part of the Group’s business is. The Executive
Directors visited India in April, September and November
2021 and March 2022 to engage with customers. It
also listened to customers and their needs through
key account management relationships, as well as
working directly with relevant customer departments on
technical, regulatory and logistics matters of concern to
them.
• What we discussed
Key topics of engagement were:
•
•
•
The impact of Covid-19 on lead times and potential
delays to customer deliveries
The changing landscape of the market
Best ways to approach the market to win additional
business
• Ongoing quality of service
• Outcomes and actions
•
•
•
Development of long-term strategic relationships
formed on the basis of trust and understanding which
are mutually beneficial
Additional business opportunities
Working closely with suppliers, particularly those with
long lead time items, to ensure continuity of supply at
the same time meeting deadlines
Suppliers
•
Why we engage
We have a strong supplier base, particularly for
key components required to manufacture our
product, as well as strong relationships with our key
contract equipment manufacturer. Our suppliers are
fundamental to the quality of the products we offer our
customers and it is therefore important to deal with
suppliers who are committed to us and our values.
• How we engaged
The Board indirectly engages with suppliers through
our procurement team, who are responsible for our
supply chain relationships. In addition, the Executive
Directors engaged directly with suppliers to ensure
continuity of long lead time items, and to negotiate best
payment terms with suppliers. They engaged with our
suppliers through physical visits where possible (via the
CyanConnode team in India) and through regular virtual
meetings in the absence of physical visits prevented by
the pandemic
• What we discussed
•
•
•
•
•
Continuity of supply and planning of supply of long
lead time components
Pricing
Flexibility on payment terms
Reciprocal business growth
Provision of our support for a key supplier’s IPO
• Outcomes and actions
•
•
•
•
•
Development of long-term strategic relationships
formed on the basis of trust and understanding,
which are mutually beneficial
Mitigation of sourcing risk by moving procurement of
some products to alternate suppliers
Adequate supply of long lead time items ensuring
supply to meet customer requirements
Flexibility on payment terms
Negotiating lowest possible price increases
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022
STRATEGIC REPORT
11
Board decision-making in practice
During the year the Board made a number of principal
decisions which we regard as those that are material to the
group and to any of our key stakeholder groups.
In making decisions the Board considers the views of its
key stakeholders, as well as the need to maintain our
reputation for high standards of business conduct and the
need to act fairly between the members of the Company.
An example of how the Board considered key stakeholders
is set out below.
• Funding
The Board continuously monitors the Groups’ cashflow
forecasts to ensure the Group has sufficient cash for
operations, as well as for any growth opportunities and
requirements. During the pandemic this was crucial to
ensure the Group could mitigate against any potential
delays in deployment of contracts, or cash being received
from customers. The CFO regularly engages with financial
institutions regarding availability of working capital
solutions and updates the Board on any proposals made to
the Group. During the year the Board engaged with major
shareholders, via the Executive Directors, to discuss some of
the funding proposals available to them. The outcome from
these discussions was that the Board agreed to progress
Material issues
Actions we have taken and will take
with a Placing which was heavily oversubscribed and at a
premium to the share price at the time of closing, which
meant there was minimal dilution to existing shareholders.
Environment, Social and Governance (ESG)
The CyanConnode focus on ESG is not viewed as a
separate exercise to be “completed”, but as a core part
of our business strategy and culture, integrated into work
life and management processes. Through this integrated
approach, CyanConnode ensures every area of the
business delivers sustainable benefits for its customers,
employees, and investors.
One of our key areas of focus is to formalise our ESG
(environmental, social and governance) agenda to ensure
it is both robust and is setting relevant and ambitious
targets. We intend to work to improve how we measure our
impacts across a range of environmental and social areas.
It is important to us that we operate in an ethically, socially
and environmentally responsible way.
As we continue to make progress in improving our
sustainability, our strategy will evolve to ensure that we
continue to challenge ourselves, address all those issues
material to our stakeholders and better understand the
areas where we can achieve most impact.
People and
culture
We are committed to our people and their wellbeing and aim to have a supportive, collaborative
culture and strong values
We have a diverse team across the locations in which we operate. 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. Information relating to our employment practices can be found in the Employee
Matters section on page 16 of this report
Environment and
climate change
CyanConnode seeks to minimise as far as possible its impact on the environment and received
ISO14001 accreditation during 2019. This is subject to annual audits, each of which has been passed.
It works closely with local businesses to put in place joint environmentally friendly policies. More on our
Environmental Policy can be found in the Employee Matters section on page 16 of this report
During 2021, CyanConnode received the London Stock Exchange Green Economy Mark. A requirement
of this award was for more than 70% of the Company’s revenue to come from green technologies.
The Stock Exchange determined that CyanConnode’s technology fulfils the criteria
Responsible
supply chain
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
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022STRATEGIC REPORT 12
STRATEGIC REPORT
Material issues
Actions we have taken and will take
Social
responsibility
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
We have processes and policies in place to ensure awareness of our social responsibilities. 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
Information relating to our employment practices can be found in the Employee Matters section on
page 16 of this report
Data Security
The nature of CyanConnode’s business requires it to have a robust data security policy. This is key to
underpin the trust our partners and customers place in us
CyanConnode received accreditation for the ISO27001 standard in 2019 and is audited on this
accreditation annually. In addition, CyanConnode has strict security requirements due to its
involvement in the UK Smart Metering Programme, and has annual audits against its ISO27001
accreditation by its customers
Further details on practical steps the Group has taken on
ESG 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/.
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.
Key performance indicators
An analysis of the financial performance for the year
using Key Performance Indicators is included within
the Financial Review, see page 21.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 STRATEGIC REPORT
Operational Review
Principal Risks and Uncertainties
13
Risk Management
The Board has overall responsibility for the management
of risk at CyanConnode. The Board monitors the actions
required to mitigate our risks and is responsible for:
• Setting and communicating the Group’s risk appetite
•
Aligning the risk mitigation approach with the Group’s
strategic objectives
• Reviewing and challenging the risk register
•
•
Embedding effective risk management in the culture of
the Group
Empowering people at all levels to engage with risk
management and internal control systems
The Executive Directors are responsible for:
• Day-to-day risk management
•
Reviewing and monitoring risk and mitigation strategies
across the business
Financial risks
1. Pandemic
The Group Leadership along with the ISO Team are
responsible for:
•
Identifying key risks facing the business
• Compiling Group risk registers
•
Determining appropriate and proportionate risk
mitigation strategies
Colleagues are responsible for:
•
•
Identifying key risks facing the business
Management of risk through applying appropriate
controls, policies and processes
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 tables. Many of these risks
have not changed from prior years.
Risk and impact
Delays to deployment of projects, resulting in delays
to revenue and payments from customers
Mitigation
• Continual monitoring of the situation and adopting a flexible
approach to ensure appropriate response to support the business
Delays and difficulties in receiving adequate
components for manufacture of the Group’s
products, resulting in delayed deliveries to
customers
Limited access to the Group’s offices resulting in
delays to software / hardware development
Adverse effect on welfare of employees resulting in
reduced output
• The health, safety and wellbeing of our employees is paramount and
we have worked to ensure a safe working environment for all, offering
as much flexibility as possible
• Adapted work practices to enable everyone who can, to work from
home and to arrange our sites with safety in mind to ensure all
vital operations and projects remained on track. Adopted a staged
approach to the opening of office facilities to protect our employees
• Working closely with existing and new customers, to manage their
immediate and longer-term needs
• Maintaining regular contact with our supply chain to ensure
continuity of supply
• Monitoring the regulatory landscape and market conditions
• Managing cash to protect the Group’s liquidity
• Group Leadership Team providing regular updates to keep all staff
informed and maintain team spirit
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022STRATEGIC REPORT 14
STRATEGIC REPORT
2. Movements in component pricing and stock shortages
Risk and impact
Movements in component pricing can materially
impact profitability and cash
During the past couple of years there have been
significant shortages of certain components and
this has driven up prices globally. In additional these
shortages can lead to possible stock shortages
Mitigation
• Detailed stock planning and stock movement processes
• Monitoring and communication of market conditions and long-term
raw material contracts
• Maintaining close relationships with suppliers to ensure best pricing
possible
• Continuing to identify new suppliers for key raw materials or those
where shortages exist
3. Funding
Risk and impact
There is a risk that there could be delays to
customer deliveries or receipts from customers
Should the Group wish to explore new territories,
products or business opportunities or models there
would be a requirement for additional investment
Mitigation
• 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. They may also require significant
funding at the outset and the Group is in discussions with many
infrastructure funds in this regard
• 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
4. Currency
Risk and impact
We are exposed to both translation and transaction
risk. In addition, transactions are carried out in
currencies other than UK Sterling
Mitigation
• Whilst most of the Group's customers are invoiced in Indian Rupees,
we also contract the manufacture of our hardware in Indian Rupees
and this partially offsets the risk
The majority of our revenues are currently
denominated in Indian Rupees, whilst the majority of
our costs are denominated in UK Sterling
• In Thailand, we sell in US dollars with cost of sales also being paid in
US dollars
• 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 2022 STRATEGIC REPORT
15
People risks
5. Loss of key staff and failure to manage succession
Risk and impact
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
A lack of experienced and engaged employees
will have a detrimental impact on all areas of the
business
Mitigation
• Continue to develop succession planning for positions across the
Group
• Provide well-structured and competitive reward and benefit
packages that ensure our ability to attract and retain employees
• Offer training and development opportunities to support staff in their
careers
• Ensure that employees receive regular performance reviews and
discussions throughout the year to enable any issues to be identified
and resolved in a timely manner
• Develop people managers to ensure that they are equipped with the
right skills to manage and motivate teams
Operational risks
6. Quality of product and service
Risk and impact
A sub-standard quality of product and service could
lead to reputational damage, loss of revenue and
loss of key customers
Mitigation
• Strong supplier qualification process, intake testing and analysis
• Regular review of risk matrix for raw materials handled
• Continuation of visits to suppliers
• Close monitoring of deployment to ensure quality of service and
Service Level Agreements (SLAs)
• Close communication between sales and operations to ensure early
identification of any issues in deployments
• Manage sub-contractor relationships
7. IT issues including network, hardware, data and security
Risk and impact
Loss of IT systems and/ or data, impacting on the
ability of the business to function effectively
Reputational damage and litigation in respect of
data protection
Disruption to or penetration of our information
technology platforms could have a material
adverse impact on the Group
Mitigation
• Well-constructed IT infrastructure with failover capabilities, supported
by a comprehensive asset management database and best
practice maintenance processes such as those required by our
ISO27001 accreditation
• Multi-layered security protection system in place
• Technology resources are continuously monitored by appropriately
trained staff, which provide and maintain process controls aimed at
securing our networks and data.
• Security team continuously searches for and fixes vulnerabilities,
including those reported by third-party security consultants
• Continued investment in infrastructure and particularly software
security
• Ad hoc hacking attempts by third-party security consultants and
penetration testing
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022STRATEGIC REPORT 16
STRATEGIC REPORT
8. Macroeconomic conditions and political risk
Risk and impact
Sales cycles to our customers and end utilities
in emerging markets can be lengthy and
unpredictable leading to loss of stakeholder
confidence and reputation
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, and may delay
award of contracts leading to loss of revenue and
reputational damage
Mitigation
• Maintain close relationships with partners and potential end
customers to respond to the changing demands of the market and
maximise contract wins
• Employ 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
• Analyse market data regularly to provide valuable information on
demand changes, to allow the Group to react to these changes in a
timely manner
• Use local partners who are familiar with local market conditions as
agents or resellers of our technology
• Regular communication with stakeholders to update and educate on
the macroeconomic conditions
Laws and regulatory risks
9. Failure to comply with relevant environmental, H&S and other applicable legislation
Risk and impact
HSE investigations could lead to possible
enforcement actions including fines, enforcement
notices. Failure to comply with relevant legislation
could lead to risk of site closure
Mitigation
• Detailed understanding of legislative requirements with internal
involvement, consultative support and capital investment
• Pro-active role in ensuring the Group’s systems and procedures are
adapted to ensure compliance
• Continuation of relevant training and assessment of employee skills
across the Group
Employee Matters
The responsibility for the recruitment and management of
resources lies with the Executive Directors.
Headcount
The average number of employees increased during
the year ending 31 March 2022 to 59 (2021: 47). 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.
Board level 20% (2021: 20%). At year end women comprised
18% of total employees across the Group (2021: 20%) or
11 out of a total of 60 employees (2021: 11 out of 54). The
Group has and encourages a diverse workforce.
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.
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 29% of the
management team that reports to the Board, or 2 out of
7 employees (2021: 33%, or 2 out of 6 employees) and at
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
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 STRATEGIC REPORT
17
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 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 also available on the Group’s website. 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 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.
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 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
22 August 2022
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022STRATEGIC REPORT 18
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
£5m 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 Financial 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 2022 19
David Johns-Powell
Christopher Jones
Peter Tyler
Non-Executive Director
Non-Executive Director
Non-Executive Director
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 utilising
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.
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.
John Cronin
Executive Chairman
22 August 2022
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022GOVERNANCE 20
GOVERNANCE
Financial Review
Key Financials
Financial Summary
Despite the year having started during the second wave of the Covid-19 pandemic, with many countries being in lockdown, the Group
managed to continue with its deployments and is pleased to have achieved record revenues for the year.
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 costs
Operating loss
Depreciation and amortisation
EBITDA
Stock impairment
Share based compensation
Underlying operating loss
Foreign exchange (gain)/losses
Adjusted EBITDA1
Cash and cash equivalents
Average monthly operating cash outflow
Average
Year end
12 months
Mar 2022
12 months
Mar 2021
15 months
Mar 2020
12 months
Dec 2018
12 months
Dec 2017
£000
9,562
1,755
6,025
(1,018)
616
(401)
62
363
(38)
(131)
58
2,355
(261)
£000
6,437
1,791
5,788
(2,685)
627
(2,058)
108
80
(1,978)
(15)
(1,885)
1,489
(81)
£000
2,451
2,381
7,600
(6,230)
773
(5,457)
4
267
(5,190)
267
(4,919)
1,172
(245)
£000
4,465
2,466
9,061
(6,320)
472
£000
1,171
4,148
11,650
(11,153)
489
(5,848)
(10,664)
578
445
55
422
(5,403)
(10,242)
16
(4,809)
4,564
(487)
52
(9,868)
5,394
(808)
Mar 2022
FTE2
59
60
Mar 2021
Mar 2020
Dec 2018
Dec 2017
FTE
47
54
FTE
50
48
FTE
52
61
FTE
44
52
1 Where Adjusted EBITDA is EBITDA after stock impairment, share-based compensation and foreign exchange losses have been added back
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 UK adopted 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 of £9.6 million was 49% higher than for FY21 (£6.4 million)
• Operating loss for the year to March 2022 was £1.7 million lower than previous year
• EBITDA (loss) for the year to March 2022 was £1.7 million lower than previous year (2021: £2.1 million loss)
• Cash and cash equivalents at the end of FY22 of £2.4 million was £0.9 million higher than the end of FY21
• 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 2022 FINANCIAL REVIEW
21
Financial items of note during the year other than those
set out above were:
• Cash received from customers during FY22 was £8.2 million
(2021: £5.3million)
• Trade and other receivables increased by £2.1 million during
the year to £7.5 million (including retentions), largely due to
the higher revenues recognised during the year
• R&D tax credit of £0.6 million for FY22 at a similar level to FY21
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, the loan from two directors
remained in place at year end, and letters of credit, invoice
discounting and advance payments have been negotiated
on recently won contracts to help with working capital
requirements. The loan from Peter Tyler for £0.1 million was
repaid in April 2022.
Key Performance Indicators (KPIs)
The financial key performance indicators for the Group are
as set out in the key financial results table above. FY2022
revenues were 49% up on the previous year FY21 comparatives
as a result of major contracts in India which started rolling out
during the year. Operating costs for the year increased by 4%
compared to FY21, EBITDA (loss) decreased from £2.1 million
in FY21 to £0.4 million in FY22 and adjusted EBITDA (loss)
decreased from £1.9 million in FY21 to less than £0.1 million
in FY22. The Group’s average headcount increased by 12.
Non-financial KPIs included the number of modules shipped
which increased from 481,000 in FY21 to 612,000 in FY22. The
Group will be agreeing additional non-financial KPIs to be
monitored during FY23.
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, and as highlighted in the previous paragraph, 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
2022 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. Avenues continue to be pursued to secure
working capital facilities to help ease cash flows and mitigate
against any unforeseen delays in deliveries or customer
payments.
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 detailed cashflow scenarios include Letters
of Credit which have been secured from customers against
contracts recently won.
At 31 March 2022 the Group had cash reserves of £2.4 million
(FY21: £1.5m) and based on detailed cash flows provided to
the Board within the FY23/24 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.
To assist with working capital, two directors extended short-term
loans of £400,000 in November 2020. These were still in place
at the end of March 2022. £100,000 was repaid to Peter Tyler
in April 2022. The Company received an advance of £500,000
secured against its R&D tax credit in December 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 2022.
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 36 to the financial statements.
Dividends
The directors do not recommend the payment of a dividend
(2021: £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.
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 2024 which, together, represent the directors’ best
Heather Peacock
Chief Financial Officer
22 August 2022
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022GOVERNANCE 22
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.
As the business continues to grow it needs a strong, effective, entrepreneurial and engaged Board with the right skills and
experience to oversee the strategy, governance, risk and financial frameworks across the organisation. The Board was
refreshed in 2019 with the introduction of two new Non-executive Directors bringing relevant skills and experience to the
Board. There have been no appointments since then.
We will continue to review the Board’s composition to ensure that it maintains appropriate skills, experience,
independence, and particularly diversity and that it remains effective.
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 2022 Strategic Report on pages 5 to 17.
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 and 2021,
the AGM was a closed-door AGM due to COVID-19 restrictions, however the Company held a virtual investor presentation
during the weeks prior to the AGM in both years, encouraging participation by shareholders. It is anticipated that the AGM
shall return to a face-to-face meeting in 2022.
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. Our technology is low-cost, low-power and seeks
to prevent theft from electricity or tampering with electricity meters. These features 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
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 CORPORATE GOVERNANCE STATEMENT
23
the development life cycle to help enrich communities. Further information on how we engage with our stakeholders can
be seen in the s.172 report on pages 8 to 11 of our 2022 Annual Report.
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 16 of our Strategic Report in the 2022 Annual
Report. During the COVID-19 pandemic the Group adapted its working practices to ensure the health and safety of
all employees. Regular discussions were held with employees regarding their wellbeing, and regarding best working
practices during the pandemic. These discussions continue as the Group adapts its working practices to the most
suitable following the easing of restrictions.
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 16-17 of the 2022 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 and has passed all audits for these accreditations since.
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 regular 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 progress on each development.
Please see pages 13 to 16 of the 2022 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.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022GOVERNANCE 24
CORPORATE GOVERNANCE STATEMENT
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.
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 . 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 Group, the Board and its governance, including the planning and implementing of resources.
The Group has an MD & CEO of its entity in India to manage the Indian operations, along with a Chief Operating Officer
who leads the local delivery and engineering staff. A President of Global Sales & Business Development, with focus on
India, due to the high volume of tenders being released during 2022, was appointed in January 2022. A Vice President
of International Sales focuses on sales and opportunities outside of India. A Group Chief Financial Officer manages the
finances of the Group while group engineering and operations are managed by the Group Chief Operating Officer. These
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, including
recruitment and management of resources. This includes formulating and recommending the Group’s strategy for Board
approval and executing the approved strategy.
The Board meets 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 or FY22 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.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 CORPORATE GOVERNANCE STATEMENT
25
Board and Committee attendance during the year
Director
John Cronin
Heather Peacock*
David Johns-Powell
Chris Jones
Peter Tyler
Board
Audit Committee
Committee
Remuneration
7 (7)**
7 (7)**
6 (7)
6 (7)
6 (7)
-
2 (2)
-
2 (2)
2 (2)
-
-
-
4 (4)
4 (4)
* Heather Peacock attended the Audit Committee meetings by invite.
**John Cronin and Heather Peacock each attended an additional meeting which covered regulatory matters. Authority was delegated to them by
the other Directors.
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 18-19 of the 2022 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 the second half of FY22 a formal review of the effectiveness of the Board was performed against the principles of
the QCA Corporate Governance Code for Smaller Companies. Strengths and weaknesses of the Board were identified
during this process, and actions to address any weaknesses are being carried out. Some of the main actions for these
areas of weakness that could be improved upon were as follows:
•
•
•
No strategy sessions / away-days had been held during the years of Covid-19. It was agreed these would
re-commence during the next 12 months
It was agreed that Board evaluations would be performed annually, with the first one having been concluded in 2022
It was identified that the Board had not been updated on the Groups’ accreditations for ISO9001, 14001 and 27001,
These accreditations were received in 2019, with all annual audits since then having been successfully passed. It
was agreed to have more frequent discussions on ISO and policies at an executive level and update the Board as
required
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022GOVERNANCE 26
CORPORATE GOVERNANCE STATEMENT
•
The Board should continually evaluate whether further fully independent non-executive Directors are required on
the Board
Each 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 28.
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 two offices, one in Cambridge in
the UK and one in Gurgaon in India, and has a subsidiary 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 page 17 of the 2022 Annual Report. During FY22 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 pandemic, 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.
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.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 CORPORATE GOVERNANCE STATEMENT
27
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 on pages 24 and 25 of the Corporate Governance Statement in the 2022 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.
Board Composition and Responsibility
At 31 March 2022 the Board comprised five directors, including the Executive Chairman, the Chief Financial Officer and
three non-executive directors, one of whom is considered to be independent. All of the five directors in post at 31 March
2022 served throughout the year.
Name
Executive
John Cronin
Role
Executive Chairman
Heather Peacock
Chief Financial Officer*
Non-executive
William David Johns-Powell
Christopher Jones
Peter Tyler
Appointed
1 April 2021
31 Mar 2022
In post
In post
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.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022GOVERNANCE 28
CORPORATE GOVERNANCE STATEMENT
Audit committee: Peter Tyler (Chairman), Chris Jones. Peter Tyler has held the position of Chairman from 19 March 2019.
The Audit Committee Report on pages 34 to 35 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 29 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.
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
22 August 2022
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 GOVERNANCE
Directors’ Remuneration Report
29
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, which has been repaid since the end of FY22. 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 £5.0m they have invested thus far (see
page 32 for more details of their shareholdings).
John Cronin
Heather Peacock
David Johns-Powell
Peter Tyler
Chris Jones
Total
Total investment
remuneration
Total investment
Annual
to date*
£000
1,153
119
3,018
670
14
4,974
FY 2022
£000
as % of
remuneration
335
209
-
8
30
582
344%
57%
n/a
8375%
47%
855%
* The investment value reflects the cost of actual cash paid at the time of purchase.
In addition during FY21 short term loans were provided to the Company by John Cronin (£300,000) and Peter Tyler
(£100,000). The Company has repaid the loan from Peter Tyler post period end.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022GOVERNANCE 30
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 £90,000 were made to Directors for FY 2022 (2021: £207,433)
Directors’ Share Options
Full details of the directors’ options over ordinary shares of 2.0p are set out below:
Exercise Price
31 March 2022
31 March 2021
As at
As at
Grant Date
Expiry Date
£
Number
Director
John Cronin
Heather Peacock
17/11/17
25/01/18
22/09/20
10/11/21
10/11/21
17/11/17
11/12/17
20/06/18
22/09/20
10/11/21
10/11/21
17/11/27
25/01/28
22/09/30
10/11/31
10/11/31
17/11/27
11/12/27
20/06/28
22/09/30
10/11/31
10/11/31
0.336
0.29
0.10
0.145
0.145
0.308
0.40
0.28
0.10
0.145
0.145
0.10
0.10
0.10
-
200,000
360,342
558,102
589,037
1,707,481
-
25,000
-
90,909
619,424
798,875
Number
558,101
200,000
360,342
-
-
1,118,443
619,424
25,000
745,222
90,909
-
-
1,534,208
1,480,555
57,556
57,556
40,000
40,000
250,000
250,000
57,556
57,556
40,000
40,000
250,000
250,000
Chris Jones
Peter Tyler
22/09/20
22/09/30
22/09/20
22/09/30
David John-Powell
28/09/20
28/09/30
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 DIRECTORS’ REMUNERATION REPORT
31
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.
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. (“EBT”) 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 2022, the following JSOP shares held by John Cronin and Heather Peacock were transferred
back to the Trust and re-issued to John Cronin and Heather Peacock at a price of 14.5p.
Date of issue
23 Oct 2017
Total
Strike Price
John Cronin
Heather Peacock
33.33p
43.40p
49.64p
1,382,425
-
3,219,200
4,601,625
296,568
267,396
-
563,964
A further 1,070,734 JSOP shares were issued to John Cronin and 767,534 JSOP shares were issued to Heather Peacock
during the year at a price of 14.5p per share.
At 31 March 2022, shares held by directors under this scheme were as follows:
Director
John Cronin
Heather Peacock
Participation
As at
As at
Price
31 March 2022
31 March 2021
Grant Date
Expiry Date
£
Number
23/10/17
23/10/17
10/11/21
23/10/17
23/10/17
10/11/21
23/10/22
23/10/22
10/11/26
23/10/22
23/10/22
10/11/26
0.4964
0.333
0.145
0.434
0.333
0.145
-
-
5,672,359
5,672,359
-
-
1,331,498
1,331,498
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.
The above JSOP shares granted in previous 2017 were cancelled and replaced with new JSOP shares on 10 November 2021
with an incremental fair value, of which has been accounted for as a modification and is being spread over the vesting
period of the new options.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022GOVERNANCE 32
DIRECTORS’ REMUNERATION REPORT
Directors’ Interests in Shares in the Company
Director
John Cronin
As at 1 April 2021
Purchased during the year
As at 31 March 2022
David Johns-Powell
As at 1 April 2021
Purchased during the year
Transfer of beneficial interest
As at 31 March 2022
Peter Tyler
As at 1 April 2021
Purchased during the year
As at 31 March 2022
Heather Peacock
As at 1 April 2021
Purchased during the year
As at 31 March 2022
Chris Jones
As at 1 April 2021
Purchased during the year
As at 31 March 2022
Total
As at 1 April 2021
Purchased during the year
Total disposed during the year
As at 31 March 2022
Shares
5,241,200
605,264
5,846,464
19,083,490
567,669
(3,176,656)
16,474,503
2,489,004
-
2,489,004
683,771
195,488
879,259
57,556
78,571
136,127
27,555,021
1,446,992
(3,176,656)
25,825,357
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.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 DIRECTORS’ REMUNERATION REPORT
33
Directors’ Contracts
It is the Company’s policy that the executive directors should have contracts 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 below.
Directors’ Emoluments (audited)
Amounts for the year ended 31 March 2022
Name of Director
Executive
John Cronin
Heather Peacock
Non-Executive
Chris Jones
David Johns-Powell
Peter Tyler
Total
Salary
£
30,000
150,000
30,000
-
7,500
217,500
Fees
£
Pension and
other benefits
£
262,500
-
-
-
-
2,562
8,612
-
-
-
Bonus
£
40,000
50,000
-
-
-
262,500
11,174
90,000
Total for
FY 2022
Services
£
335,062
208,612
30,000
-
7,500
581,174
Total for
FY 2021
Services
£
308,600
203,075
25,625
-
-
537,300
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 22 August 2022 and signed on its behalf by:
Chris Jones
Chairman of the Remuneration Committee
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022GOVERNANCE 34
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 year ended 31 March 2022, 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 year ended 31 March 2021 and after the year end for the
year ended 31 March 2022.
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 2021 Annual Report;
Review of the interim results for the six months ended 30 September 2021; and
Ongoing review of the Group’s cash forecasts, including any impact from COVID-19.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 AUDIT COMMITTEE REPORT
35
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. The Group passed its ISO audits during the year.
Committee Evaluation
During the period the Audit Committee was re-evaluated as part of a full Board evaluation and it was agreed that its
composition remained appropriate. The committee will be evaluated as part of each evaluation of the Board.
Approval
This report was approved by the Board of directors on 22 August 2022 and signed on its behalf by:
Peter Tyler
Chairman of the Audit Committee
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022GOVERNANCE 36
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 2022. The Company’s statement on corporate governance can be found on pages 22 to 28 of
the financial statements. The corporate governance report forms part of the Directors’ Report and is incorporated by
cross reference.
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 2024 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 20 to 21 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 21.
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 28. At 31 March 2022, 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 35.
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 22 to 28.
In accordance with the Companies Act 2006 the Company has no authorised share capital.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 DIRECTORS’ REPORT
37
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
2021 and 31 March 2022.
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 and share options granted to the Directors are shown in the
remuneration committee report on pages 30-32.
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 £1,755,000 (2021: £1,791,000).
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 2022GOVERNANCE 38
DIRECTORS’ REPORT
Significant Holdings
The Company had been notified of the following voting rights of shareholders in the Company at 19 August 2022 and at
the same date its issued share capital consisted of 236,309,035 Ordinary Shares:
Name
Premier Miton Group Plc
S Chari
Herald Investment Management Limited
William David Johns-Powell
Nightingale Investment Co Limited
Biggles Enterprise Limited
CRUX Asset Management
Percentage of
issued share
Number of
capital
ordinary shares
7.67%
7.38%
7.21%
6.97%
3.55%
3.53%
3.50%
18,133,214
17,437,105
17,029,399
16,474,503
8,382,352
8,333,333
8,270,677
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 56 days (2021: 34 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.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 DIRECTORS’ REPORT
39
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 22-23.
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
22 August 2022
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022GOVERNANCE 40
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 and are required by the AIM Rules of the London Stock Exchange to prepare
the group financial statements in accordance with UK-adopted International Accounting Standards and to prepare the
company financial statements in accordance with UK-adopted International Accounting Standards and applicable law.
The group and company financial statements are required by law and UK-adopted International Accounting Standards
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 UK-adopted International Accounting Standards;
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
22 August 2022
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 FINANCIAL STATEMENTS
41
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 2022 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 UK-adopted International Accounting
Standards 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 2022 and of the group’s loss for the year then ended;
the group financial statements have been properly prepared in accordance with UK-adopted International
Accounting Standards;
the parent company financial statements have been properly prepared in accordance with UK-adopted
International Accounting Standards 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 entities1 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.
Summary of our audit approach
Key audit matters
Group
•
•
Revenue recognition
Impairment
Parent Company
•
Impairment
Materiality
Group
•
•
Overall materiality: £191,000 (2021: £325,000)
Performance materiality: £143,000 (2021: £243,000)
Parent Company
•
•
Overall materiality: £133,000 (2021: £106,000)
Performance materiality: £100,000 (2021: £80,000)
Scope
Our audit procedures covered 94% of revenue, 95% of total assets and 99% of loss before
tax.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 42
INDEPENDENT AUDITOR’S REPORT
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
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.
How the matter was
addressed in the audit
We reviewed and challenged management’s assessment of the performance obligations
identified for a sample of contracts.
Group - impairment
Key audit matter
description
We performed cut-off testing and other substantive testing procedures to validate the
recognition of revenue throughout the year was in line with contractual arrangements and
IFRS 15 requirements.
We also considered the adequacy of the group’s revenue recognition accounting policy as
disclosed in note 2 and judgements disclosed in note 3.
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 £3.68m 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 £9.04 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.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 INDEPENDENT AUDITOR’S REPORT
FINANCIAL STATEMENTS
43
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:
Overall materiality
£191,000 (2021: £325,000)
£133,000 (2021: £106,000)
Group
Parent company
Basis for determining
overall materiality
2% of total revenue
1% of net assets (reduced to a suitable level
to support the group audit opinion).
Rationale for benchmark
applied
Total revenue chosen as the group is
revenue growth orientated.
Net assets were chosen as the entity is a
non-trading holding company.
Performance materiality
£143,000 (2021: £243,000)
£100,000 (2021: £80,000)
Basis for determining
performance materiality
Reporting of misstatements
to the Audit Committee
75% of overall materiality
75% of overall materiality
Misstatements in excess of £9,500 and
misstatements below that threshold that, in
our view, warranted reporting on qualitative
grounds.
Misstatements in excess of £7,000 and
misstatements below that threshold that, in
our view, warranted reporting on qualitative
grounds.
An overview of the scope of our audit
Number of
components
Revenue
Total assets
Loss before tax
Full scope audit
Total
3
3
94%
94%
99%
99%
95%
95%
Analytical procedures at group level were performed for the remaining 2 components. Of the above, full scope audits for
one component were undertaken by component auditors.
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 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 2022 44
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.
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 40, 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 2022 INDEPENDENT AUDITOR’S REPORT
FINANCIAL STATEMENTS
45
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 and component auditors:
•
•
•
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
All relevant laws and regulations identified at a Group level and areas susceptible to fraud that could have a material
effect on the financial statements were communicated to component auditors. Any instances of non-compliance with
laws and regulations identified and communicated by a component auditor were considered in our audit approach.
The most significant laws and regulations were determined as follows:
Legislation / Regulation
Additional audit procedures performed by the Group audit engagement team and
component auditors 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 (as noted above) and inspection of legal and regulatory correspondence, if any.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 46
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 matter above.
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, City House
126-130 Hills Road
Cambridge
CB2 1RE
22 August 2022
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 FINANCIAL STATEMENTS
Consolidated income statement
FOR THE YEAR ENDED 31 MARCH 2022
FINANCIAL STATEMENTS
47
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 year
Loss per share (pence)
Basic
Diluted
Year
31 March
2022
£000
9,562
(4,554)
5,008
(6,025)
(38)
(616)
(363)
(1,017)
3
(164)
(1,178)
307
(871)
(0.42)
(0.42)
Note
4
6
35
9
10
11
12
12
Year
31 March
2021
£000
6,437
(3,334)
3,103
(5,788)
(1,978)
(627)
(80)
(2,685)
13
(62)
(2,734)
677
(2,057)
(1.18)
(1.18)
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 48
FINANCIAL STATEMENTS
Consolidated statement of
comprehensive income
FOR THE YEAR ENDED 31 MARCH 2022
Derived from continuing operations and attributable to the equity owners of the Company.
Loss for the year
Exchange differences on translation of foreign operations
Total comprehensive income for the year
Year
31 March
2022
£000
(871)
76
(795)
Year
31 March
2021
£000
(2,057)
(25)
(2,082)
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 FINANCIAL STATEMENTS
Consolidated statement of
financial position
AS AT 31 MARCH 2022
31 March
31 March
49
Non-current assets
Intangible assets
Goodwill
Other financial assets
Property, plant and equipment
Right of use asset
Trade receivables
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
Corporation tax liabilities
Lease liabilities
Total current liabilities
Net current assets
Non-current liabilities
Lease liabilities
Deferred tax liability
Other payables
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
25
17
17
26
27
28
29
30
31
32
33
2022
£000
4,093
1,930
58
31
153
458
6,723
159
6,993
562
2,355
10,069
16,792
(2,364)
(1,867)
(193)
(28)
(4,452)
5,617
(125)
(746)
(38)
(909)
(5,361)
11,431
4,726
73,883
(3,611)
1,068
31
(64,666)
11,431
2021
£000
4,266
1,930
44
36
98
–
6,374
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
The financial statements of CyanConnode Holdings plc (registered number 04554942) were approved by the board of directors
and authorised for issue on 22 August 2022. They were signed on its behalf by:
John Cronin
Director
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022FINANCIAL STATEMENTS 50
FINANCIAL STATEMENTS
Consolidated statement of
changes in equity
FOR THE YEAR ENDED 31 MARCH 2022
Share
Option
Translation
Retained
Reserve
Reserve
Share
Capital
£000
Share
Premium
Account
£000
Own
Shares
Held
£000
Balance at 31 March 2020
3,656
69,547
(3,253)
Loss for the year
Other comprehensive income
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)
Loss for the year
Other comprehensive
income for the year
Total comprehensive
income for the year
–
–
–
–
–
–
–
–
–
Issue of share capital
991
4,221
(358)
Credit to equity for share
options
Transfer
Total transactions with
owners
Balance at 31 March 2022
–
–
–
–
–
–
991
4,726
4,221
73,883
(358)
(3,611)
£000
2,028
–
–
–
–
80
(1,183)
(1,103)
925
–
–
–
–
363
(220)
143
1,068
Losses
£000
(63,141)
(2,057)
Total
Equity
£000
8,817
(2,057)
–
(25)
£000
(20)
–
(25)
(25)
(2,057)
(2,082)
–
–
–
–
–
–
1,183
1,183
(45)
(64,015)
194
80
–
274
7,009
–
76
76
–
–
–
–
31
(871)
(871)
–
76
(871)
(795)
–
–
220
220
(64,666)
4,854
363
–
5,217
11,431
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 FINANCIAL STATEMENTS
Consolidated cash flow statement
FOR THE YEAR ENDED 31 MARCH 2022
51
Net cash outflow from operating activities
Investing activities
Interest received
Purchases of property, plant and equipment
Purchases of intangible assets
(Purchase) / disposal of other financial assets
Net cash outflow from investing activities
Financing activities
Interest paid on borrowings
Cash inflow from borrowings
Cash net (outflow) / inflow from debt factoring
Cash inflow from Directors’ loan
Loan repayment
Capital repayments of lease liabilities
Interest paid on lease liabilities
Proceeds on issue of shares
Share issue costs
Net cash inflow from financing activities
Net increase in cash and cash equivalents
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
Analysis of changes in net cash / (debt)
Note
34
16
13
19
25
25
25
25
17
17
28
Year
31 March
2022
£000
(3,134)
Year
31 March
2021
£000
(977)
3
(26)
(259)
(14)
(296)
(157)
500
(366)
–
(385)
(153)
(7)
5,177
(327)
4,282
852
14
1,489
2,355
13
(23)
(129)
49
(90)
(51)
385
1,333
400
(560)
(176)
(11)
75
–
1,395
328
(11)
1,172
1,489
For the year ended 31 March 2022
Cash and cash equivalents
Short-term borrowings
Lease liabilities
Net cash / (debt) at end of year
For the year ended 31 March 2021
Cash and cash equivalents
Short-term borrowings
Lease liabilities
Net cash / (debt) at end of year
At 1 April
Other non-cash
2021
£000
1,489
(2,118)
(98)
(2,216)
(727)
Cash flow
movements
£000
852
251
160
411
1,263
£000
–
–
(215)
(215)
(215)
At 1 April 2020
Cash flow
movements
Other non-cash
£000
1,172
(560)
(274)
(834)
338
£000
328
(1,558)
187
(1,371)
(1,043)
£000
–
–
(11)
(11)
(11)
Net foreign
exchange
difference
£000
14
–
–
–
14
Net foreign
exchange
difference
£000
(11)
–
–
–
(11)
At 31 March
2022
£000
2,355
(1,867)
(153)
(2,020)
335
At 31 March
2021
£000
1,489
(2,118)
(98)
(2,216)
(727)
Other non-cash movements include interest on lease liabilities and new leases taken on in the year.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022FINANCIAL STATEMENTS 52
FINANCIAL STATEMENTS
Company balance sheet
AS AT 31 MARCH 2022
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
31 March
31 March
Note
14
18
22
23
24
25
28
29
31
33
2022
£000
–
9,036
9,036
2,227
1,618
3,845
12,881
(183)
(900)
(1,083)
2,762
11,798
4,726
73,883
1,068
(67,879)
11,798
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
The Company reported a loss for the financial year ended 31 March 2022 of £3,283,000 (2021: £1,036,000). The financial statements
of CyanConnode Holdings plc (registered number 04554942) were approved by the board of directors and authorised for issue
on 22 August 2022. They were signed on its behalf by:
John Cronin
Director
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 FINANCIAL STATEMENTS
Company statement of changes
in equity
FOR THE YEAR ENDED 31 MARCH 2022
53
Share
Premium
Account
£000
69,547
Share
Option
Reserve
£000
2,028
Balance at 31 March 2020
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
Share
Capital
£000
3,656
–
–
79
–
–
79
–
–
115
–
–
115
Balance at 31 March 2021
3,735
69,662
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
Balance at 31 March 2022
–
–
991
–
–
991
4,726
–
–
4,221
–
–
4,221
73,883
Retained
Losses
£000
(64,963)
(1,036)
Total
Equity
£000
10,268
(1,036)
(1,036)
(1,036)
–
–
1,183
1,183
(64,816)
(3,283)
194
80
–
274
9,506
(3,283)
(3,283)
(3,283)
–
–
220
220
(67,879)
5,212
363
–
5,575
11,798
–
–
–
80
(1,183)
(1,103)
925
–
–
–
363
(220)
143
1,068
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022FINANCIAL STATEMENTS 54
FINANCIAL STATEMENTS
Company cash flow statement
FOR THE YEAR ENDED 31 MARCH 2022
Loss for the year before taxation and interest
Shares issued in lieu of bonus
Net impairment charge
Operating cash outflows before movement in working capital
Increase in receivables
Increase in payables
Net cash outflow from operating activities
Financing activities
Cash inflow from short-term borrowing
Cash inflow from Directors’ loan
Loan repayment
Interest paid on loans
Proceeds on issue of shares
Share issue costs
Net cash inflow from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of year
Analysis of changes in net cash / (debt)
Year
31 March
Year
31 March
2022
£000
(3,198)
5
1,286
(1,907)
(1,551)
6
(3,452)
500
–
(385)
(85)
5,177
(327)
4,880
1,428
190
1,618
2021
£000
(987)
119
767
(101)
(569)
58
(612)
385
400
(560)
(49)
75
–
251
(361)
551
190
For the year ended 31 March 2022
Cash and cash equivalents
Short-term borrowings
Net cash / (debt) at end of year
For the year ended 31 March 2021
Cash and cash equivalents
Short-term borrowings
Net debt at end of year
At 1 April
Other non-cash
At 31 March
2021
£000
190
(785)
(595)
Cash flow
movements
£000
1,428
(115)
1,313
£000
–
–
–
2022
£000
1,618
(900)
718
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)
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 FINANCIAL STATEMENTS
Notes to the financial statements
55
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, rounded to nearest thousand (£’000), 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 UK-adopted International Accounting Standards.
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.
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 2024 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 2022 the Group had cash reserves of £2.4 million (2021: £1.5 million) and based on detailed cash flows provided to the
Board within the FY2023/24 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.
To assist with working capital, two directors extended short-term loans of £400,000 in November 2020. These were still in place at
the end of March 2022. £100,000 was repaid to Peter Tyler in April 2022. The Company received an advance of £500,000 secured
against its R&D tax credit in December 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 2022.
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.
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.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022FINANCIAL STATEMENTS 2. Significant accounting policies (continued)
56
NOTES TO THE FINANCIAL STATEMENTS
2. Significant accounting policies (continued)
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 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 against each
relevant separate performance obligation.
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 / performance obligation
– see “Sale of services” below for more information. Revenue for hardware is recognised when control has been passed 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. Term licenses are recognised evenly over the term of the
license. The full value of committed payments for perpetual licenses is recognised as revenue when it is granted because at
this point the customer is given full “right to use”. Any variable consideration is recognised in revenue when the requirements for
recognition have been met.
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 / performance obligation - see “Sale of services” below for more information.
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;
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 2. Significant accounting policies (continued)
NOTES TO THE FINANCIAL STATEMENTS
57
2. Significant accounting policies (continued)
•
Custom integration of HES software with end customer’s own system;
•
•
•
•
Network planning and optimisation;
Project management;
End user training; and
Annual Maintenance Contract (AMC ) for the Omnimesh system (which 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
over time, 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.
If there are significant time differences between revenue recognition period and invoicing and thereon cash collection, a
financing element is accounted for using an appropriate discount rate. Such a financing element has been recognised on one
contract in the current period (nil in prior period).
The Group implements Service Level Agreements (SLAs) as an assurance to the customers that products and services supplied
are as specified in the contract and will operate at the required levels. The income recognised on the sale of hardware and
services is constrained under the variable consideration rules of IFRS 15 for any expected penalties under SLAs during the
contract.
The Group also implements retention at 5% on the products and services supplied as specified in the contracts. The retention
money is payable by the customers on the completion of the projects. The accounts receivable balance recognised for
retentions is based on the expected level of recovery of outstanding balances.
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.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022FINANCIAL STATEMENTS 58
NOTES TO THE FINANCIAL STATEMENTS
2. Significant accounting policies (continued)
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.
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 regard 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
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 NOTES TO THE FINANCIAL STATEMENTS
59
2. Significant accounting policies (continued)
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.
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.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022FINANCIAL STATEMENTS 60
NOTES TO THE FINANCIAL STATEMENTS
2. Significant accounting policies (continued)
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.
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 Payments.
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.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 NOTES TO THE FINANCIAL STATEMENTS
61
2. Significant accounting policies (continued)
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.
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 2021. 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 2022 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
modules and gateway hardware is recognised at the point that the modules and gateways are received by the customer.
Gateways may later be installed by the Company or by a third party. The revenue for installation services is recognised as a
separate performance obligation when the gateways are installed. The goods and services that CyanConnode supplies and
provides are highly independent, they could be supplied and provided by other suppliers and are not considered transformative
in nature, i.e. one good or service does not significantly modify or customize another. Therefore, they are considered to be
separate performance obligations.
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.
iii. Service level agreement (SLAs)
The Group implements SLAs as an assurance to the customers that products and services supplied are as specified in the
contract and will operate at the required levels. The income recognised on the sale of hardware and services is constrained
under the variable consideration rules of IFRS 15 for any expected penalties under SLAs during the contract. Income as not been
constrained in current and prior year as the level of penalties is not expected to be significant.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022FINANCIAL STATEMENTS 62
NOTES TO THE FINANCIAL STATEMENTS
3. Critical accounting judgements and key sources of estimation
uncertainty (continued)
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 £3.7m carrying value of the related intangible asset at the end of March 2022.
Sensitivities were run based on (i) Pre-tax discount rate of 11.5%; (ii) roll-out ceasing at the end of 2025; and (iii) a range of 10% of
UK households being in areas that do not get a mobile signal ie “not spots”. The “not spots” are where traditional smart meter
technology will not work due to lack of mobile coverage. Where this is the case our innovative technologies are deployed under
the SMIP contract.
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.
iii. Inventory provision
Inventories include stocks of raw materials and finished goods that the directors believe will be sold within the period to March 2024
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 22) 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 £63,000 (2021:
£42,000).
An amount of £3,350,000 (2021: £1,326,000) which is over 90 days old is included in trade debtors, of which a provision of £46,000
has been provided for (2021: £398,000).
CyanConnode Ltd has a loan of £61,030,804 (2021: £57,919,855) with CyanConnode Holdings plc. As at 31 March 2022 a provision
of impairment of the loan was provided in full at £61,030,804 (2021: £57,919,855). The Board has considered the provisions around
impairment of inter-company indebtedness contained within IFRS9 “Financial Instruments” in relation to all intergroup debtors.
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.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 NOTES TO THE FINANCIAL STATEMENTS
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 services* - recognised at a point in time
Revenue from support and maintenance** - recognised over time
Total revenue
* Services can include installation of gateways, training, integration of software etc
2022
£000
7,032
1,347
1,028
155
9,562
63
2021
£000
5,187
136
807
307
6,437
** Support and maintenance can include Annual Maintenance Contract (AMC) or Field Maintenance Services (FMS)
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.
During the year to end of March 2022 there were 3 customers (2021: 3) whose turnover accounted for more than 10% of the
Group’s total revenue as follows:
Customer A
Customer B
Customer C
2022
2021
Turnover
Percentage of
Turnover
Percentage of
£000
4,123
2,370
1,937
Total%
43
24
19
£000
3,815
1,062
624
Total%
59
16
10
Revenue split between Europe, India and other parts of the World was as follows
India
Thailand
Europe
Rest of The World
2022
2021
Turnover
Percentage of
Turnover
Percentage of
£000
8,471
449
502
140
9,562
Total%
89
5
5
1
100
£000
5,302
624
508
3
6,437
Total%
82
10
8
-
100
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022FINANCIAL STATEMENTS 5. Business and geographical segments (continued)
64
NOTES TO THE FINANCIAL STATEMENTS
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
Reversal of bad debt provision
Impairment of inventory
Foreign exchange
Amortisation and depreciation
Other
Other operating costs
2022
£000
3,694
172
66
281
173
582
195
146
(21)
62
34
616
25
2021
£000
3,375
314
41
286
104
328
150
353
-
108
(15)
627
117
6,025
5,788
The total expenditure on research and development including staff costs in the year was £1,755,000 (2021: £1,791,000).
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
2022
£000
68
48
116
2021
£000
43
56
99
2022
Number
2021
Number
18
29
12
59
11
23
13
47
There are no employees in the parent company other than Directors, whom are remunerated by other group companies (2021: nil).
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 NOTES TO THE FINANCIAL STATEMENTS
8. Employee information (continued)
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Other pension costs
Share option charges
65
2021
£000
3,021
184
90
80
3,375
2022
£000
3,043
193
95
363
3,694
At the year end there were employer’s pension contributions provided for but not paid of £9,791 (2021: £59,374).
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
2022
£000
570
33
11
614
2021
£000
532
24
6
562
Specific details of directors’ remuneration and other information (including share-based compensation) are included in the
Remuneration Committee Report within this Annual Report. John Cronin, Chris Jones and Peter Tyler are not the members of the
Company pension scheme.
The highest paid Director received total remuneration of £335,062 (2021: £308,600). Please see page 33 for the details.
9. Finance income
Interest revenue:
Bank deposits
Investment revenue is all earned on cash and cash equivalents.
10. Finance expense
Interest on debt factoring
Interest on loans
Interest on loan from Directors
Interest on lease liabilities
Interest on other including late payments
Total finance expense
2022
£000
2021
£000
3
13
2022
£000
57
31
54
7
15
164
2021
£000
-
31
18
11
2
62
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022FINANCIAL STATEMENTS 66
NOTES TO THE FINANCIAL STATEMENTS
11. Tax
Current tax:
UK corporation tax
Overseas tax
Adjustments in respect of prior years
Deferred tax (note 26)
Origination and reversal of timing differences
Total tax credit
Loss on ordinary activities before tax
Tax on loss at standard corporation tax rate of 19% (2021: 19%)
Effects of:
Expenses not deductible for tax purposes
Capital allowances (less than) / in excess of depreciation
Capitalisation of R&D costs
Losses surrendered for R&D tax credit
R&D tax credit
Unrelieved tax losses not provided for
CyanConnode Pvt Ltd utilisation of losses brought forward
Difference in tax rates
Adjustment in respect of prior period
Total tax credit for the period
2022
£000
(586)
345
-
(241)
(66)
(307)
2022
£000
(1,178)
(224)
60
(10)
(47)
767
(1,020)
408
(284)
43
-
2021
£000
(597)
-
20
(577)
(100)
(677)
2021
£000
(2,734)
(519)
14
1
(25)
783
(1,039)
264
(203)
27
20
(307)
(677)
Factors affecting tax charge in future years
The Finance Act 2021 provided for the main rate of UK corporation tax to increase to 25% for companies with profits over
£250,000. It was substantively enacted in May 2021, and as such the unrecognised deferred tax asset at the balance sheet date
has been calculated at 25% reflecting the tax rate at which it may be utilised in future periods. Tax losses carried forward at the
end of March 2022 were £38,582,446 (2021: £37,094,721).
The Swedish tax rate reduced to 20.6% from 1 January 2021, and the Indian effective tax rate remains unchanged at 25.17% from
1 April 2019 and the deferred tax for Sweden and India has been calculated at these rates.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 NOTES TO THE FINANCIAL STATEMENTS
67
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)
2022
(871)
2021
(2,057)
Weighted average number of ordinary shares for the purposes of basic and diluted loss
per share (excluding own shares held)
205,173,434
174,755,445
Loss per share (pence)
(0.42)
(1.18)
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.
13. Intangible Assets (Group)
Cost
At 1 April 2020
Additions
At 31 March 2021
Additions
At 31 March 2022
Amortisation
At 1 April 2020
Charge for the year
At 31 March 2021
Charge for the year
At 31 March 2022
Carrying amount
At 31 March 2022
At 31 March 2021
Software
SMIP
Software
Development
Intangible
£000
£000
£000
144
-
144
-
144
144
-
144
-
144
-
-
36
129
165
259
424
-
-
-
11
11
413
165
6,100
-
6,100
-
6,100
1,578
421
1,999
421
2,420
3,680
4,101
Total
£000
6,280
129
6,409
259
6,668
1,722
421
2,143
432
2,575
4,093
4,266
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 (2021:
£421,000). 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 as outlined in note 3b(i).
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022FINANCIAL STATEMENTS 68
NOTES TO THE FINANCIAL STATEMENTS
14. Intangible assets (Company)
Cost
Balance at 1 April 2021 and 31 March 2022
Amortisation
Balance at 1 April 2021 and 31 March 2022
Carrying amount
At 1 April 2021 and 31 March 2022
15. Goodwill
Cost at 1 April 2021 and 31 March 2022
Carrying amount at 31 March 2021 and 31 March 2022
Software
£000
144
144
-
Total
£000
144
144
-
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 11.5% (2021: 18.7%)
Compound annual growth rate in revenue over next five years between 15% and 34% (2021: 20% and 29%).
Growth rate in perpetuity 4.5% (2021: 6.5%), 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 15% and 34% over the
next five years with revenues beyond that period based upon a terminal growth rate of 4.5%. The 4.5% 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). Using the above assumptions does not show a
requirement for an impairment to goodwill, however failure to achieve the expected revenue growth could make an impairment
to goodwill possible. Should the expected revenues not be achieved, costs would be adapted to match revenues and this would
mean an impairment would be unlikely.
In the most stretched impairment model, it shows headroom of £0.3 million, however this uses a perpetual growth rate of 1% (3.5%
below market forecasts for growth rates in India) and uses very conservative revenue growth against what is already a very
conservative model (we have seen an actual revenue growth rate at 49% since financial year 2021). On this basis, management
believe that goodwill is not impaired.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022
NOTES TO THE FINANCIAL STATEMENTS
16. Property, plant and equipment
Group
Cost
At 1 April 2020
Additions
Disposal
At 31 March 2021
Additions
At 31 March 2022
Accumulated Depreciation
At 1 April 2020
Charge for the period
Depreciation on disposal
At 31 March 2021
Charge for the year
At 31 March 2022
Carrying Amount
At 31 March 2022
At 31 March 2021
69
Fixtures and
equipment
£000
352
23
(4)
371
26
397
309
30
(4)
335
31
366
31
36
At 31 March 2022 the Group had no contractual commitments outstanding for the acquisition of property, plant and equipment
(2021: £nil).
17. Leases
Right of use asset
Group
Cost
Adoption of IFRS 16 at 1 April 2020
Additions
At 31 March 2021
Additions
At 31 March 2022
Accumulated Depreciation
At 1 April 2020
Charge for the period
At 31 March 2021
Charge for the year
At 31 March 2022
Carrying Amount
At 31 March 2022
At 31 March 2021
Building
£000
471
-
471
208
679
197
176
373
153
526
153
98
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022FINANCIAL STATEMENTS 70
NOTES TO THE FINANCIAL STATEMENTS
17. Leases (continued)
Lease liability movements in the year
As at 1 April
New lease – India head office
Payments
Interest
At 31 March
Lease liabilities
Current
Non - Current
As at 31 March
Amounts recognised in Income Statement
Depreciation
Interest
Year to 31 March
Expenses relating to leases of low-value assets that are not shown above as short-term
lease in the year (included in other operating costs)
2022
£000
98
208
(160)
7
153
2022
£000
28
125
153
2022
£000
153
7
160
67
2021
£000
274
-
(187)
11
98
2021
£000
98
-
98
2021
£000
176
11
187
47
The Group previously leased its head office property on a term of 3 years. Payments of £141,000 (2021: £187,000) were made
against this lease during the year ended 31 March 2022. All lease amounts are recognized where there is a reasonable certainty
that the lease will be extended beyond its break point. From 25 March 2022 the company entered into a new short-term lease
agreement on a term of 18 months with a mutual right of break by serving a Break Notice at any time after 30 November 2022.
This is a low value lease and is considered to be a lease with a period less than one year due to the mutual right of break clause.
The new lease amounts are therefore to be expensed over the lease period in compliance with our accounting policies.
CyanConnode Private Limited leases its office property on a 5 year term with a break clause after 3 years. Payments of £19,000
(2021: £nil) were made against this lease during the year ended 31 March 2022. An incremental borrowing rate of 8.3% was used
to determine the lease liability on inception based on Indian borrowing rates.
18. Subsidiaries
Investment in subsidiaries
As at 1 April
Capital contribution in respect of share-based payment
Impairment in investment in CyanConnode Limited
As at 31 March
Company
Company
2022
£000
9,185
363
(512)
9,036
2021
£000
9,105
80
-
9,185
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 NOTES TO THE FINANCIAL STATEMENTS
71
18. Subsidiaries (continued)
Movement in investment of subsidiaries
Cost
Cost at 1 April
Addition
At 31 March
Impairment
Impairment at 1 April
Impairment in the year
At 31 March
Carrying Amount at 31 March
Company
Company
2022
£000
14,569
363
14,932
(5,384)
(512)
(5,896)
9,036
2021
£000
14,489
80
14,569
(5,384)
-
(5,384)
9,185
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 Delhi-110017
India
Connode Holding AB
Solna Strandväg 80
172 54 Solna
Stockholm
Sweden
Connode AB
Solna Strandväg 80
172 54 Solna
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
19. Other financial assets
Bank securities
The Company held no bank securities at either balance sheet date.
2022
£000
58
2021
£000
44
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022FINANCIAL STATEMENTS 72
NOTES TO THE FINANCIAL STATEMENTS
20. Other non-current assets – trade receivables
Retention money
2022
£000
458
2021
£000
–
The retention money represents 5% retention on contracts that invoices have been issued and the amount is due from customers
on completion of projects. The Group has zero non-settlement of retention historically, and management assessment for
expected credit loss on the retention is low looking forward, therefore management is confident that no provision is required.
21. Inventories
Raw materials
Raw materials - provision
Raw materials – net realisable value
Finished goods – cost
Finished goods - provision
Finished goods – net realisable value
Inventories
2022
£000
171
(49)
122
660
(623)
37
159
2021
£000
294
(147)
147
687
(623)
64
211
Inventories are stated after provisions for impairment of £672,000 (2021: £770,000). £62,000 (2021: £108,000) of stock impairment
charges were recognised in the year, and £160,000 (2021: £Nil) provision was utilised. There has been no impairment reversal
(2021: £nil) in the year. The total cost of inventories expensed in the year amounted £4,606,000 (2021: £3,265,000).
The Company held no inventories at either balance sheet date.
22. 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
2022
£000
6,242
(181)
6,061
600
106
–
226
–
2021
£000
5,550
(435)
5,115
–
114
–
126
–
Trade and other receivables
6,993
5,355
2022
£000
2021
£000
–
–
–
–
7
1,724
58
438
2,227
–
–
–
–
592
56
445
1,093
The contract assets represent revenue recognised in the year but have not been invoiced. Management expects to raise
invoices for these assets in financial year 2023.
CyanConnode Ltd has a loan of £61,030,804 (2021: £57,919,855) with CyanConnode Holdings plc with a current impairment
provision of £61,030,804 (2021: £57,919,855).
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 NOTES TO THE FINANCIAL STATEMENTS
73
22. 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 £774,000 (2021:
£426,000 increased in value). There was also a further loan of £358,000 made to the EBT in the year (2021: £Nil).
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 customers settle Connode AB’s (a wholly owned subsidiary of Connode Holding AB) payments monthly and
both Connode Holding AB and Connode AB have very little running costs so free cash is expected to be generated monthly. It is
expected that future repayments are to be made 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 36.
Expected credit losses
The movement in the expected credit loss provision in the year was as follows:
As at 1 April
Charge in the year
Provision utilised
As at 31 March
Group
2022
£000
(435)
(146)
400
(181)
Group
2021
£000
(82)
(353)
–
(435)
Credit risk
At 31 March 2022 the Group had significant concentration of credit risk in three customers which represented 94% (2021: two
customers 91%) of the Group’s trade receivables. This reliance on three customers in the Indian smart electricity metering sector
is included within our principal risks statement on pages 13 to 16 of this report.
Trade receivables
Not yet due
30 – 59 days
60 – 89 days
90 – 179 days
180 days and over
Total
2022
£000
2,532
550
268
845
2,047
6,242
2021
£000
3,430
454
340
257
1,069
5,550
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 £3,350,000 (2021: £1,326,000) which is over 90 days old is included in trade receivables, this includes amount of
£967,000 which is subject to debt factoring. A provision of £46,000 has been provided based on known exposures and expected
credit losses (2021: £398,000). In addition, provisions have been provided for against each of the above categories: Not yet due at
£87,000, 30 - 59 days at £32,000 and 60 – 89 days at £16,000.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022FINANCIAL STATEMENTS 74
NOTES TO THE FINANCIAL STATEMENTS
23. Cash and cash equivalents
Cash and cash equivalents
Group
Company
2022
£000
2,355
2021
£000
1,489
2022
£000
1,618
2021
£000
190
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.
24. Trade and other payables
Trade payables
Other payables
Accruals
Social security and other taxes
Contract liabilities
Group
Company
2022
£000
955
73
922
325
89
2,364
2021
£000
1,888
147
1,228
327
379
3,969
2022
£000
74
–
109
–
–
183
2021
£000
87
5
85
–
–
177
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 and recently won contracts of which £89,000 is
anticipated to unwind in financial year 2023. During the year revenue of £333,039 (2021: £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 (2021: £nil). The
average credit period taken for trade purchases is 56 days (2021: 30 days) due to significant purchases of meters for smart
metering deployments in the year. The average credit period taken in 2022 for trade purchases by the Company was 56 days
(2021: 34 days).
Trade payables
Not yet due
30 – 59 days
60 – 89 days
Over 90 days
Total
2022
£000
352
603
–
–
955
2021
£000
1,079
720
89
–
1,888
The directors consider that the carrying amount of trade payables approximates to their fair value. Included in accruals is an
amount of £9,791 relating to contributions to the Group’s defined contribution pension plan (2021: £59,374).
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 NOTES TO THE FINANCIAL STATEMENTS
75
25. Short-term borrowings
Advance on R&D tax credit
Loan from Directors
Debt factoring
As at 31 March
Group
Company
2022
£000
500
400
967
1,867
2021
£000
385
400
1,333
2,118
2022
£000
500
400
–
900
2021
£000
385
400
–
785
As at 31 March 2022 a loan of £400,000 (2021: £400,000) from two Directors in assisting with working capital has been extended,
of which £100,000 to April 2022 and £300,000 continue on a rolling month by month basis, unless repayment is requested by the
Director giving no less than 60 days written notice. Interest is charged at 13.5% per annum.
In December 2021, the Company received an advance loan for £500,000 (2021: £385,000) 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 2022. The loan is secured against the R&D tax credit and bears an interest rate of 13% 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 £967,000 (2021: £1,333,000) was owing to the bank.
The facility bore interest at 8.3% per annum at year end.
Connode AB has an overdraft facility for SEK 2 million (£163k) secured against the assets of Connode AB. The balance on this
facility was £nil at 31 March 2022 (2021: £nil).
26. 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 April
Movement during the year (note 11)
At 31 March
Intangibles deferred tax
Deferred tax asset – India
Deferred tax asset – Sweden
Total recognised deferred tax liability
2022
£000
812
(66)
746
2022
£000
758
(12)
–
746
2021
£000
912
(100)
812
2021
£000
845
–
(33)
812
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022FINANCIAL STATEMENTS 76
NOTES TO THE FINANCIAL STATEMENTS
26. Deferred tax (continued)
Unrecognised deferred tax asset
Accelerated capital allowances
Short term timing differences
R&D intangible
Share options
Losses
Total unrecognised deferred tax asset
2022
£000
(3)
(2)
103
(27)
(9,646)
(9,575)
The deferred tax asset has not been recognised due to the unpredictability and uncertainty of future profit streams.
27. Other non-current liabilities
Other payables
2022
£000
38
The other non-current liabilities relate to CyanConnode Private Limited in relation to employment obligations.
28. Share capital
Issued and fully paid, ordinary shares of 2.0 pence each
As at 31 March 2020
Issue of new shares
As at 31 March 2021
Issue of new shares
As at 31 March 2022
No
182,798,523
3,944,375
186,742,898
49,566,137
236,309,035
2021
£000
(3)
(11)
31
–
(7,524)
(7,507)
2021
£000
–
£000
3,656
79
3,735
991
4,726
In the year, shares were issued at prevailing market prices as settlement for professional services provided. £4,710 was raised this
way during the year (2021: £118,700).
In June 2021 the Company successfully raised funding of £3.15m before expenses through a placing of 33,170,076 ordinary shares.
In March 2022 the Company successfully raised further funding of £2m before expenses through a placing of 14,285,718 ordinary
shares.
During the year 201,250 shares were issued as a result of the exercise of share options (2021: none). The Company has one class
of ordinary share which carries no right to fixed income.
29. Share premium account
Amount subscribed for share capital in excess of nominal value.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 NOTES TO THE FINANCIAL STATEMENTS
77
30. Own shares held
Balance at 31 March 2021 and 1 April 2020 (9,467,256 ordinary shares of 2.0 pence per share)
Issue of new shares (1,838,268 ordinary shares of 2.0 pence per share)
Balance at 31 March 2022 (11,305,524 ordinary share of 2.0 pence per share)
Own shares held are those issued to the Employee Benefit Trust.
Group
£000
(3,253)
(358)
(3,611)
Company
£000
–
–
–
31. 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.
32. Translation reserve
The translation reserve records the cumulative exchange differences arising from the translation of the financial statements of
overseas subsidiaries
33. Retained losses
Cumulative net gains and losses recognised in the Consolidated Statement of Comprehensive Income.
34. 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
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 in receivables
(Decrease)/increase in payables
Cash reduction from operating activities
Income taxes received
Net cash outflow from operating activities
2022
£000
(1,017)
31
432
153
20
5
363
(13)
52
(2,054)
(1,568)
(3,583)
449
(3,134)
2021
£000
(2,685)
30
421
176
(15)
119
80
(1,874)
97
(2,463)
2,468
(1,772)
795
(977)
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.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022FINANCIAL STATEMENTS 78
NOTES TO THE FINANCIAL STATEMENTS
35. 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.
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 31.
Details of the share options outstanding during the year were as follows:
Outstanding at beginning of year
Granted during year
Exercised during the year
Modifications during the year
Forfeited during year
Outstanding at the end of the year
Exercisable at the end of the year
2022
2021
Number
of share
options
24,400,486
21,622,674
(201,250)
(7,908,277)
(3,644,993)
34,268,640
12,909,681
Weighted
average
Exercise
price (in £)
0.22
0.17
0.13
0.40
0.25
0.19
0.24
Number
of share
options
21,013,514
5,448,965
–
–
(2,061,993)
24,400,486
9,807,499
Weighted
average
Exercise
price (in £)
0.35
0.10
–
–
0.14
0.22
0.10
The options outstanding at 31 March 2022 had a weighted average exercise price of £0.19 (2021: £0.22 and a weighted average
remaining contractual life of 65 months (2021: 72 months). The options outstanding at year end had exercise prices ranging from
£0.10 to £0.84.
In the year to 31 March 2022, options were granted on 8 April 2021; 22 June, 25 June and 30 June 2021, 5 January and 31 January
2022. The aggregate of the estimated fair value of those options is £1,266,099. In addition, on 10 November 2021 and 17 December
2021, 7,908,277 options and JSOP shares granted in previous years were cancelled and replaced with new options and JSOP
shares with an incremental fair value of £408,062. This incremental fair value has been accounted for as a modification and is
being spread over the vesting period of the new options.
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.
A share option charge of £362,903 (2021: £80,245) was recognised during the year.
The inputs into the Black-Scholes model for options granted during the year (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
2022
18.65p
17.67p
77%
2021
10.00p
10.00p
80%
2020
6.45p
12.00p
66%
4 years
6 years
4 years
1.30%
0%
0.10%
0%
0.5%
0%
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous 48 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.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 NOTES TO THE FINANCIAL STATEMENTS
79
35. Share based payments (continued)
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.
Details of the share warrants outstanding during the year are the same for 2022 as for 2021:
2022
2021
Weighted
Weighted
Number
average Exercise
Number
average Exercise
of warrants
price (in £)
of warrants
price (in £)
Outstanding at beginning of year
Outstanding at the end of the year
Exercisable at the end of the year
341,605
341,605
341,605
0.54
0.54
0.54
341,605
341,605
341,605
The inputs into the Black-Scholes model are as follows:
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Risk free rate
Expected dividend yield
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 48 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.
36. 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 year
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
2022
£000
6,061
–
106
600
2,355
9,122
955
73
1,867
153
3,048
2021
£000
5,115
–
114
–
1,489
6,718
1,888
147
2,118
98
4,251
Company
2022
£000
–
438
1,731
–
1,618
3,787
74
–
900
–
974
2021
£000
–
445
592
–
190
1,227
87
5
785
–
877
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022FINANCIAL STATEMENTS 80
NOTES TO THE FINANCIAL STATEMENTS
36. 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 2022
Non-derivative financial liabilities
Trade payables
Other payables
Short-term borrowing
Lease liabilities
Total
As at 31 March 2021
Non-derivative financial liabilities
Trade payables
Other payables
Short-term borrowing
Lease liabilities
Total
Carrying
Amount
£000
955
73
1,867
153
3,048
Carrying
Amount
£000
1,888
147
2,118
98
4,251
Contractual Cash Flows
Total
£000
(955)
(73)
(1,867)
(182)
(3,077)
1 – 12 months
1 – 2 years
2 – 5 years
£000
£000
£000
(955)
(73)
(1,867)
(38)
(2,933)
–
–
–
(38)
(38)
–
–
–
(106)
(106)
Contractual Cash Flows
Total
£000
(1,888)
(147)
(2,118)
(98)
(4,251)
1 – 12 months
1 – 2 years
2 – 5 years
£000
£000
£000
(1,888)
(147)
(2,118)
(98)
(4,251)
–
–
–
–
–
–
–
–
–
–
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 22 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 £61,030,804 (2021: £57,919,855). In addition, the Company has made a total provision of £2,151,858 (2021: £2,423,135)
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 November 2021. Since the Group holds no collateral, the maximum exposure to credit risk is the
carrying value of trade receivables.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 NOTES TO THE FINANCIAL STATEMENTS
81
36. 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 37 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 2022 exchange rate.
Fixed assets
Current assets
Current liabilities
Net assets
INR
£000
14
8,297
(3,139)
5,172
SEK
£000
415
188
(74)
529
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
2022
£000
880
37
March
2021
£000
702
15
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 2022FINANCIAL STATEMENTS 82
NOTES TO THE FINANCIAL STATEMENTS
36. Financial instruments and risk management (continued)
March
Year ended
Indian Rupee
Swedish Krona
2022
£000
(233)
(40)
March
2021
£000
(374)
(41)
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.
37. Related Party Transactions
Board members
Please refer to page 37 of the Directors’ Report for a full list of directors who served in the year. During the year, 1,446,992 (2021:
3,031,998) newly issued shares were purchased by the directors of the Company for £186,000 (2021: £156,500).
During the year, the Company paid fees of £262,500 (2021: £157,500) in respect of services provided by directors. The balance
outstanding at the year end was £54,000 (2021: £39,640). Please see page 33 for the Directors' Remuneration Report for further
information.
During the year, the loan of £400,000 (2021: £400,000) from two Directors (2021: two) in assisting with working capital remained
in place. The loan is extended, of which £100,000 to April 2022 and £300,000 may continue on a rolling month by month basis.
Interest is charged at 13.5% per annum. During the year interest of £54,000 (2020: £18,000) was incurred and a balance of £Nil
(2021: £3,375) 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 2021
Cash advances/(repayments)
Impairment provision
Loss on foreign exchange revaluation
Balance as at 31 March 2022
Connode
CyanConnode
CyanConnode
Holding AB
Connode AB
£000
£000
Limited
£000
Pvt Limited
£000
404
–
–
(7)
397
37
–
–
–
37
–
3,111
(3,111)
–
–
4
–
–
–
4
CyanConnode Holdings plc makes a management charge for services rendered to CyanConnode Limited. In the year to 31
March 2022 these amounted to £49,000 (2021: £137,000).
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022 FINANCIAL STATEMENTS
83
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2022
FINANCIAL STATEMENTS
Professional Advisers
Nominated Adviser and Broker
Cenkos Securities plc
6 7 8 Tokenhouse Yard
London
EC2R 7AS
Auditor
RSM UK Audit LLP
City House
126-130 Hills Road
Cambridge
CB2 1RE
Solicitors to the Company
Taylor Wessing LLP
5 New Street Square
London
EC4A 3TW
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