Annual Report and Accounts 2024
Unifying devices under one seamless network
Contents
Strategic Report
01 CyanConnode at a Glance
03 Highlights
04 Chairman’s Statement
07 Strategic Report
Our Governance
24 Board of Directors
26 Financial Review
29 Corporate Governance Statement
36 Directors’ Remuneration Report
41 Audit Committee Report
42 Directors’ Report
45 Directors’ Responsibilities Statement
Our Financials
46 Independent Auditor’s Report
52 Consolidated Income Statement
53 Consolidated Statement of Comprehensive Income
54 Consolidated Statement of Financial Position
55 Consolidated Statement of Changes in Equity
56 Consolidated Cash Flow Statement
57 Company Balance Sheet
58 Company Statement of Changes in Equity
59 Company Cash Flow Statement
60 Notes to the Financial Statements
90 Professional Advisers
Delivering IoT Excellence!
Imagine a world where all devices communicate under one
seamless network - a world of unmatched connectivity and
operational efficiency. This isn't just our dream; it's our mission.
Join us as we transform the future of Internet of Things (IoT)
communications.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
CyanConnode at a Glance
Pillars
At CyanConnode, our brand pillars are more than just strategic
focus areas; they are the fundamental building blocks that define
our approach to business. These pillars are interconnected,
forming a cohesive mesh that symbolises our unified
vision and customer-centric philosophy. These pillars
represent our commitment to creating a unified,
seamless network, where everything we
do resonates with our customers' needs
and aspirations. Together, they reflect
our identity and our mission, guiding us
towards a new era of IoT communications,
always with our customers and our planet
at the heart.
The interconnected mesh design
emphasises that these pillars are not isolated
but are deeply intertwined. Each pillar supports and
enhances the others, creating a synergistic relationship
that embodies our approach to business. This visual
structure demonstrates how we weave Innovation, Sustainability,
Employees, and Transformation around our central focus on
the Customer, aligning all aspects to deliver a unified, seamless
network and leading us towards a new era of IoT communications.
Innovation
Pushing boundaries to
create cutting-edge
solutions
Sustainability
Embedding responsible
practices
Transformation
Driving change to redefine
communication
Employees
Investing in our team's
growth, well-being, and
success
Customer
At the heart of
everything we do
1
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
STRATEGIC REPORT
Vision
To empower our customers with sustainable and
universal communication solutions, enabling seamless
integration and boosting overall efficiency.
Our vision at CyanConnode goes beyond mere
connection. It's about unity. It's about transforming the
landscape of IoT communications to create a future where
all devices speak a common language, under a universal
Canopy. We are not just aiming to be leaders in the IoT
communications field, but pioneers paving the way for
seamless connectivity.
Mission
At CyanConnode, our mission outlines our method
and approach towards our vision. We are committed
to delivering comprehensive communication solutions
that uphold sustainability, promote transformation,
and streamline efficiency. Our mission encapsulates
our dedication to create a unified, seamless network,
ushering in a new era of IoT communications. We believe
in empowering our customers with solutions that are not
only cutting-edge but also aligned with our collective
responsibility towards a sustainable future.
CYANCONNODE AT A GLANCE
Ownership
Taking responsibility and pride in
our work, driving everything we do
Collaboration
Working together to
achieve shared goals
Excellence
Striving for the highest
standards in everything we do
Adaptability
Embracing change and
innovation to stay ahead
Integrity
Upholding ethical practices
and honesty in all our actions
A
D
A
P
T
A
B
I
L
I
T
Y
C
O
L
L
A
B
O
R
A
T
I
O
N
OWNERSHIP
I
N
T
E
G
R
I
T
Y
E
X
C
E
L
L
E
N
C
E
Values
Values at CyanConnode are not just words on a wall; they are the
principles that guide our every decision and the foundation on
which our culture thrives. Centred around Ownership, they shape
our attitude towards our work, our colleagues, our customers, and
the world. Ownership embodies our commitment, responsibility,
and pride in what we do. It is the core, the heart that infuses life
into our values.
At CyanConnode, our values operate like a canopy - ensuring
seamless, continuous communication and interconnectedness. At
the very core of this mesh lies Ownership, symbolising our prime
responsibility and direction. Radiating from it are Collaboration,
Adaptability, Excellence, and Integrity - values that resonate as
the foundational nodes of our ethos. Just as in a Radio Frequency
mesh, where every node has a role to play, every intersection of
our values represents a synergy. This meshed approach signifies
not just our method of operation but our deep-seated commitment
to excellence in IoT.
2
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
Financial highlights
•
Increase of 60% in revenue to £18.7m in FY24 from £11.7m in
FY23, the highest annual revenue for the Group to date after four
consecutive years of growth1 as a result of increased order book
and acceleration of deployments in India
•
Increase in gross profit to £5.6m in FY24 (FY23: £4.2m) as a result of
high-volume RF node sales through the Indian entity, and sales of
third-party hardware in the Middle East North Africa (MENA) region
•
Reduction in gross margin 30% (FY23: 36%) as a result of sales of
third-party hardware and large premiums paid during the year
on purchases of end-of-life components for the Group’s previous
version of gateway. A new lower cost version of the gateway
was released in Q4 of FY24. Gross margin in the first two years of
projects in India is expected to be around 35-40% due to revenue
on hardware in the first two years of a project. After year two of
each project it is expected gross margins of greater than 90% will
be achieved due to the transition to services revenue
•
Operating loss increased to £4.2m in FY24 (FY23: £3.3m) as
a result of increased costs incurred throughout the Group
offsetting the increased revenues, largely attributable to
increased headcount required to scale up the business to deploy
its growing backlog of orders and develop industry leading
hardware and software required by projects being deployed
•
EBITDA loss increased to £3.8m in FY24 (FY23: £2.9m)
•
Increase in adjusted EBITDA2 loss to £2.8m in FY24 (FY23:
£1.6m loss) as a result of lower gross margin % and increased
operational costs
•
Decrease in cash position to £0.8m in FY24 (FY23: £4.1m)
•
Increase in cash collected from customers to £16.9m in FY24
(FY23: £10.7m) broadly in line with increase in revenues
Operational highlights
•
Orders for 2.7m modules won in India during the period (FY23: 2.3m
modules) taking the cumulative order book to 6.3m during the
financial year.
•
Order for 101,360 Cellular Network Interface Card (CNIC) modules won
for a deployment in Thailand
•
Further new order for 52,300 NBIoT hubs won from the Middle East
North Africa (MENA) region
•
£2.7m (before expenses) raised in November 2023 through an
oversubscribed placing and subscription, together with the issue of
warrants at an exercise price of 15.0 pence per ordinary share, which
would provide a potential further £4.1m if fully exercised
•
1,370,000 Omnimesh Radio Frequency (RF) Modules shipped against
current contracts during the period (FY23: 391,000), along with 55,200
NB-IoT gateways and 5,340 Cellular gateways
•
Project Management: JVVNL TN72 & TANGEDCO projects now under
Facility Management Services (FMS), ensuring streamlined operations
and maintenance
•
Gateway 200 Dual SIM: Successfully released the 'Gateway 200 – Dual
SIM' version, enhancing network reliability and connectivity
•
Integrated Meter OEMs: Integrated with twelve meter Original
Equipment Manufacturers (OEMs)
•
Memorandum of Understanding (MOU) signed with Alfanar to explore
opportunities in Advanced Metering Infrastructure (AMI) projects
•
Investment into recruitment, to scale up the business, and research
and development to develop further products in response to market
demand
•
CSR Initiatives: Supported the education of over 1000 school children,
with more than 750 being girls, under our CSR initiatives
•
CyanConnode India recognised as Dun and Bradstreet ‘Start-Up 50
Trailblazer’
•
Exhibitions: Participated in and showcased our solutions at
DistribuElec 2024, where we were awarded the best booth
Post-Period Highlights
•
265,000 Omnimesh RF Modules and associated products ordered
from a subsidiary of IntelliSmart Infrastructure Private Limited, taking
cumulative order book in India alone to 6.6m modules, spanning
sixteen utilities, across eleven states in India
•
CyanConnode India’s subsidiary, DigiSmart Networks Private Ltd
successfully empanelled as an Advanced Metering Infrastructure
Service Provider (AMISP) for both RF and cellular, making it eligible
to bid for smart metering contracts under the Revamped Distribution
Sector Scheme (RDSS)
•
Revenue of £3.5m in the first quarter of FY25, being 25% higher than
the same period in FY24
•
£5.0m cash received from customers in the first quarter of FY25, being
40% higher than the same period on FY24
•
Cash at end of June 2024 of £1.1m
•
Win ratio in India in terms of tenders to date of 29%, and 16% in terms
of volumes
•
Commencement of setup of a subsidiary in the United Arab Emirates
(UAE) to promote business in the MENA region
•
Changes to organisation to strengthen leadership in India and
streamline global operations by having all engineering and operations
reporting into the MD CEO of India
•
Key milestones such as Site Acceptance Tests (SATs) and project go-
lives achieved across several key projects
1 The majority of the Group's revenues are received in rupees for India and US dollars for the rest of world, whilst accounts are reported in Pound Sterling. Foreign
exchange volatility can have an impact on the reported figures.
2 Where Adjusted EBITDA is operating loss before amortisation, depreciation, stock impairment, impairment of intangible assets, share-based compensation and
foreign exchange losses.
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
Highlights
3
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
STRATEGIC REPORT
Chairman’s Statement
We have continued to achieve significant success by securing
orders in various global markets, especially in the Middle
East and North Africa (MENA) region. As a result, we are in the
process of establishing a subsidiary in the United Arab Emirates
(UAE) to better serve and expand our presence in this key area.
We were excited to announce that our subsidiary, DigiSmart
Networks Private Limited (DigiSmart), has been empanelled as
an Advanced Metering Infrastructure Service Provider (AMISP).
This accreditation enables DigiSmart to directly participate in
upcoming smart metering tenders.
The positive momentum we experienced in FY24 continues
into the current financial year and am pleased to share further
details on the highlights of FY24 and our current operations
within this Annual Report.
Operational Review
India Market
Overview of FY24
The financial year 2024 witnessed substantial progress in
the Indian smart metering sector, propelled by government
initiatives and strategic implementations nationwide. A pivotal
driver of this transformation has been the Indian government’s
Revamped Distribution Sector Scheme (RDSS), launched in
August 2022. This scheme, with an allocation of ₹3.03 lakh crore
(approximately £29 billion) and a gross budgetary support
of ₹97,631 crore (approximately £9.5 billion), aims to reduce
Aggregate Technical and Commercial (AT&C) losses across India
to 12-15% and eliminate the cost-supply tariff gap by 2025.
Key Developments
Government Initiatives and Mandates
The RDSS requires the installation of 250 million smart meters
by 2025. As of the end of FY24, 222.3 million smart meters
had been approved, with contracts awarded for 116.3 million
meters. This program is designed to significantly improve billing
efficiency and reduce AT&C losses.
Initiatives like "Make in India" and "Skill India" have significantly
enhanced domestic manufacturing capabilities for smart meters
and related infrastructure by promoting local production and
skill development.
John Cronin
Executive Chairman
Dear Shareholders
I’m delighted to report that the positive trajectory we have
seen in previous years has continued, making the financial
year ending in March 2024 the Group’s most successful
yet in terms of revenue, orders secured, and cash received
from customers. Additionally, we have maintained strong
progress in the Indian smart metering market, which has
seen tenders for over 100 million meters awarded so far out
of the total market opportunity of 250 million meters.
4
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
Deployment and Installation
The Government of India established ambitious installation
targets, yet progress has been slower than initially anticipated,
with just 11 million smart meters installed by May 2024. However,
the pace picked up markedly in FY24 compared to previous
years, driven by enhancements in the tendering process and
concerted efforts to improve the financial stability of Distribution
Companies (DISCOMs). Notable deployments occurred in states
such as Assam, Bihar, and Maharashtra, where smart meters have
significantly improved billing accuracy and reduced AT&C losses.
Public and Private Sector Collaboration
Effective collaboration among DISCOMs, technology providers, and
system integrators has been critical in overcoming deployment
challenges. Efforts have involved addressing public resistance
through community engagement and adapting to diverse
infrastructural and environmental conditions across different states.
Outlook for the Coming Years
The outlook for the Indian smart metering market remains highly
positive, with substantial growth expected in the next few years.
Several factors contribute to this positive forecast:
Continued Government Support
The Government of India’s continued backing and potential
extension of the RDSS beyond 2025 is anticipated to maintain the
momentum of smart meter installations (the current government
secured its third term following the national election results
announced on 4 June 2024). The focus remains on enhancing
DISCOM financial performance and operational efficiency through
smart metering and infrastructure enhancements.
Market Opportunities
The Government of India’s mandate to install 250 million
smart meters by 2025 presents a vast market opportunity. With
approximately 106 million meters pending award, there is significant
potential for technology providers and system integrators to expand
their market presence and secure large-scale contracts.
Technological Innovations
Ongoing research and development will lead to more advanced,
cost-effective smart metering solutions. Innovations in
communication technologies, data analytics, and Internet of Things
(IoT) integration will further enhance the capabilities of smart
meters, offering better value propositions to utilities and consumers.
Expansion into Rural Areas
Extending smart metering infrastructure to rural and remote areas
will be a significant driver of growth. Advanced technologies
such as CyanConnode’s long-range Radio Frequency (RF)
communication will ensure reliable connectivity and service
delivery in these challenging terrains.
Sustainability and Environmental Benefits
Smart meters are poised to play a pivotal role in achieving India’s
sustainability goals by enabling improved energy management,
reducing AT&C losses, and promoting energy-efficient practices
among consumers. This will contribute significantly to lowering
greenhouse gas emissions and overall environmental impact.
The Indian smart metering sector made significant strides in
FY24, propelled by government directives and technological
advancements. With a robust pipeline of projects and ongoing
support from both public and private sectors, the future of smart
metering in India looks promising. A strategic emphasis on
expanding installations, enhancing technological capabilities, and
fostering collaborations will ensure the successful realisation of the
RDSS goals and associated initiatives, paving the way for a more
efficient and sustainable energy sector in India.
APAC and Middle East North Africa Markets
The smart metering market in the Asia Pacific (APAC) and Middle
East North Africa (MENA) regions across electricity and water is
expanding, with emerging opportunities in gas utilities, as more
utilities start to adopt smart metering initiatives.
In August 2023, CyanConnode expanded its portfolio beyond
electricity and water metering into gas metering by successfully
implementing a pilot project in Azerbaijan, a new market for
CyanConnode. This initiative involved supplying smart retrofit hubs
and gateways based on long range (LoRa) technologies for existing gas
meters, facilitating automated meter data collection. This underscores
CyanConnode's prowess in providing multi-utility solutions.
MENA
In October 2023, CyanConnode secured a contract for supplying
NB-IoT Gateways for the ADDC/AADC Smart Metering project
(phase 2). Under this agreement, CyanConnode will provide 52,100
interoperable smart NB-IoT gateways capable of communicating
with and managing various legacy edge devices for both electricity
and water. These gateways will have the capacity to connect to
over one million edge devices.
CHAIRMAN'S STATEMENT
5
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
STRATEGIC REPORT
CHAIRMAN'S STATEMENT
By March 2024, 49,900 gateways were delivered under
this contract. To bolster our footprint in the MENA region,
CyanConnode is currently establishing CyanConnode
Communications LLC in Dubai, UAE.
Thailand
CyanConnode, in collaboration with partners JS Technical Service
Co Ltd. (JST) and Forth Corporation Public Company Limited
(Forth), continues to advance the Smart Metro Grid (SMG) project
for the Metropolitan Electricity Authority (MEA), which is nearing
Go-Live stage. In February 2024, CyanConnode secured a Letter of
Award (LOA) to supply 101,360 CNIC (Cellular Modules) to expand
the ongoing MEA SMG Project. This LOA will be fulfilled after the
project's Go-Live phase. Additionally, CyanConnode also received
supplementary orders from JST, one in May 2023, for the supply of
3,000 RF Modules and another in October 2023 for 4,600 Cellular
Modules to fulfil additional requirements for the MEA Smart Metro
Grid project. These orders were completed in FY24.
Malaysia
As part of its APAC expansion, CyanConnode is actively
collaborating with multiple utilities in Malaysia. The Company is
currently in the process of certification of its radio products by
Standard and Industrial Research Institute of Malaysia (SIRIM) for
MCMC certification.
Fundraising
In November 2023 the Company completed an oversubscribed
placing and subscription, raising £2.7 million before expenses.
The new shares were issued at a price of 10 pence per share, a 1%
discount to the mid-market price at the time of announcement of the
fundraising.
The net proceeds from this fundraising are being used to
strengthen the Company's balance sheet and to increase working
capital. The fundraising has enabled the Company to capitalise
on significant growth opportunities and efficiently execute its
expanding order book and pipeline, leading to increased revenues
during the period. Cash is closely monitored to ensure alignment
with these growth opportunities.
Post period end and outlook
The momentum from the previous financial year has continued
into FY25. In April 2024, we were pleased to announce a new order
from Madhyanchal One Infrastructure Private Limited, a subsidiary
of IntelliSmart Infrastructure Private Ltd. This order includes
265,331 Omnimesh Modules, bringing the total CyanConnode
orders in India to 6.6 million.
The order includes Advanced Metering Infrastructure (AMI),
Standards-Based Hardware, Services, Omnimesh Head-End
Software, a Perpetual License, and an Annual Maintenance
Contract to support smart metering deployment for Madhyanchal
Vidyut Vitaran Nigam Ltd (MVVNL) in Lucknow, India.
In May and June 2024, CyanConnode announced that its
subsidiary, DigiSmart Networks Private Ltd, had been successfully
empanelled as an AMISP in India for both RF communications
and cellular technology. These accreditations allow DigiSmart to
participate in smart metering contracts under the RDSS.
Additionally, in May 2024, changes were made to the organisation
to strengthen its leadership team in India. The new structure
brings together seasoned leaders with extensive experience
in smart metering, IoT solutions, and technology innovation.
This restructuring ensures a robust leadership team and more
streamlines organisation capable of driving the company's
strategic vision forward.
Revenue growth has been robust in the new financial year, with
first-quarter revenue of £5.5 million, marking an increase of 25%
compared to the same period in FY24. The Group continues to
closely monitor cash and any potential requirement for future
funding depending on working capital restraints.
In July 2024 we have been delighted to announce the achievement
of key milestones such as SATs and project go-lives across several
projects. The "Go Live" milestone is a critical achievement for any
project as it signifies the transition to the billing phase, allowing
for revenue generation. The SAT qualification process involves
rigorous quality and performance testing of the meters and the
communication network, ensuring the highest standards of operation.
I want to express my sincere gratitude to all our employees for
their exceptional dedication and contributions over the past year.
My thanks also go to our valued partners and other stakeholders,
with whom we look forward to continuing our collaborations on
these innovative projects. Additionally, I extend appreciation to all
shareholders for their steadfast support.
We are confident that our current momentum will continue
throughout this financial year, and we eagerly look forward to
updating you on our progress.
John Cronin
Executive Chairman
24 July 2024
6
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
STRATEGIC REPORT
Strategic Report
Omnimesh is a highly-scalable and proven end-to-end platform
for markets where performance criteria are stringent and national
deployments are on an immense scale.
The empanelment of DigiSmart Networks as an AMISP enables us to bid
directly for tenders under the RDSS Scheme.
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. It 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 CyanConnode
Holdings plc (the “Company”) is that of a holding company.
CyanConnode, continues to lead in providing cutting-edge IoT
communication solutions, with over 2.7 million devices installed
and managed worldwide.
Business Model
CyanConnode is a communications group 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 further supports these initiatives
having set up an entity in India, employing local talent.
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
7
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
STRATEGIC REPORT
STRATEGIC REPORT
AMISP
In May and June 2024, CyanConnode announced the
empanelment of its subsidiary DigiSmart Networks Private Limited
(DigiSmart), as an Advanced Metering Infrastructure Service
Provider (AMISP) for both RF and cellular technology, this enables
DigiSmart to bid directly on upcoming smart metering tenders
under the Revamped Distribution Sector Scheme (RDSS) on a
Design, Build, Finance, Own, Operate, and Transfer (DBFOOT)
basis.
This will lead to increased order fulfilment and tender
participation, direct engagement in smart metering projects and
operational excellence and market expansion, providing a one
stop solution and aligned economics as set out in the diagrams
below.
Aligned Economics
SPV
CC Delivers:
1.
Platform Staff
2.
Orders
3.
RF Modules
4.
Software
5.
Meters
6.
Installation
7.
System Integration
8.
Long Term O&M Services
AMI Funder Delivers:
1.
Potential Investment in CCI
2.
100% Preference Equity
Funding
3.
Arrange Optimal Debt
Funding
4.
Optimisation of Exit
eg 50% Ords
1 Director
eg. 50% Ords
1 Director
100% Prefs
100% Veto Rights
1st Cash Waterfalls
Upside Sharing
Capex Premium
O&M Performance Bonus
Upside Sharing
Example of Potential Investment in CCI = Support Growth + Benefit from other AMI Platforms
(% equity from each party may vary)
AMI
SPV
Utility
1
AMI
SPV
Utility
2
AMI
SPV
Utility
3
100 %
100 %
100 %
One Stop Solution
Head End
Software,
Services & Project
Mgmt
Hardware
Supply Contractor -1
Meter- MM
Supply Contractor -2
MDM & SI
Supply Contractor -3
Comm System (CCI)
Services Contract-1
Meter- MM
Services Contract -2
Comm System (CCI)
Services Contract-3
MDM & SI
Services Contract-4
Cloud DC
Services Contract-5
Telco
Asset Insurance
UTILITY
SERVICE LEVEL AGREEMENT
8-12 year Lease Agreements
SPV
One Single Service Contract
From AMI to Utility
All Liabilities. Penalties, SLA, are
Back-to-Back with Vendors
Mitigate R/J Risk
CCI Responsible for :
a) Creating a One Stop Solution
b) Resourcing the AMI Platform
CCI Equity
Performance Based
= Risks Aligned
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.
8
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
Figure 1: CyanConnode RF Mesh Configuration
Source: Company data
The current architecture typically allows around 200-250 meters to be
connected to one gateway (although ratios up to 1000:1 have been
deployed) – this ratio is being improved consistently.
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
STRATEGIC REPORT
Integrated, End to End offering
REST
Ethernet/ Cellular
Ethernet/
Cellular
Cellular
Wide
Area
Network
Native
IPv6
IPv6
over
IPv4
or
Smart
Metering
Application
(SMA)
HES
Database
RDBMS
NTP
SYSLOG
Web
Services
Web
Interface
MDM
Mesh Node/Meter
Driver
DLMS
Meter
Radio Mesh Network 6LoWPAN/IPv6
Unlicensed Sub-GHz
Cellular
Node/Meter Driver
DLMS
Meter
cellular
Radio Mesh Network 6LoWPAN/IPv6
Unlicensed Sub-GHz
Gateway Node
Gateway
Mesh Node/Meter
Driver
DLMS
Meter
Mesh Node/Meter
Driver
DLMS
Meter
Mesh Node/Meter
Driver
DLMS
Meter
Network
Management
System
(NMS)
End to End
IPv6
networking
Long Range RF
Mesh Node
DLMS
Meter
Mesh Node/Meter
Driver
DLMS
Meter
Gateway Node
Gateway
Mesh Node/Meter
Driver
DLMS
Meter
Smart Meter - IS 16444
Internal Bistable relay for connect/
disconnect
Prepaid /Postpaid
OTA firmware upgrade
NIC: RF Mesh @ 865-868 MHz/Cellular
Endpoints - Meters + NIC
Web based sofware for data acquisition
Stores and visualize data
Monitors and Alerts to exceptional
conditions
SQL Server, XML Web Services
Standards for interfacing with MDMS
Omnimesh - HES
Web based Meter data
management system
Interfacing with ERP System
Perform Validation,
estimation and editing on
meter reading data
MDMS
Omnimesh AMI system is built from ground up with
security in mind
A layered model combines >30 #security controls to
protect sensitive data & control paths from bad actors
The tech has gained national assurance in multiple
countries, incl. CERT-IN for India
Security
Pole/Wall mountable with
external antennas
RF 865-868 MHz
Join Mesh N/w with Smart
Meters
300+ Smart Meters per Gateway
Gateway
9
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
STRATEGIC REPORT
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 and Forecasts
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.
In India, the Government has mandated the installation of
250 million smart meters in the next few years. This presents a
significant market opportunity to the Group, as recently tenders for
over 100 million smart meters have been awarded to prime bidders.
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.
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.
The smart electricity metering market in Asia-Pacific is inching ever
closer to the historic milestone of 1 billion installed smart meter
devices. The latest research report from the IoT analyst firm Berg
Insight analyses the development of smart metering technology in
China, Japan, South Korea, Taiwan, India, Bangladesh, Indonesia,
the Philippines, Thailand, Vietnam, Australia and New Zealand.
According to the study, the installed base of smart electricity
meters in Asia-Pacific will grow at a compound annual growth rate
(CAGR) of 6.4 percent from 818.6 million units in 2023 to nearly
1.2 billion units in 2029. At this pace, the milestone of 1 billion
installed devices will be reached in mid-2026. The penetration
rate of smart electricity meters in Asia-Pacific will at the same
time grow from 61 percent in 2023 to 80 percent in 2029 while
cumulative shipments during 2024–2029 will amount to a total of
872.7 million units.3
Mattias Carlsson, IoT Analyst at Berg Insight, said “Replacements
of aging first-generation smart meters will be the most important
driver for smart meter shipments in Asia-Pacific throughout the
forecast period. The number of smart meters tendered by the
State Grid of China is also expected to become more stable going
forward at around 65–70 million units per year.”
While East Asia constitutes the most mature smart metering
market in Asia-Pacific, the fastest growing markets are on the
other hand all found in South and Southeast Asia with a wave
of smart metering projects now sweeping across the region. The
most significant growth is expected in India where a massive new
governmental funding scheme was introduced in the early 2020s
with the goal of achieving the installation of 250 million smart
prepayment meters.
“India is already reaping the benefits from the modernisation of
its electricity grid and has in the last two years managed to reduce
overall aggregate and technical losses significantly”, continued
Mr. Carlsson.
In neighbouring Bangladesh, large-scale smart electricity metering
installations are also emerging in a similar push to install smart
prepayment metering by the government.
We also observe positive developments in markets such as
Thailand, the Philippines, Indonesia and Taiwan – particularly
the latter two. The Taiwanese smart metering market is showing
stable growth, with a state-owned utility that has a track record
of meeting set targets. Indonesia still constitutes a nascent smart
STRATEGIC REPORT
3 Smart Metering in Asia-Pacific 6th Edition – Berg Insight
10
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
metering market but is also a huge market opportunity with a
growing economy and impressive electricity user base of almost
86 million”, concluded Mr. Carlsson.
In the UK it has been stated that smart meters are fundamental to
the UK’s targets of reaching Net Zero.
New Identity and Strategic Vision
In the past year, CyanConnode has undertaken a comprehensive
rebranding exercise to better reflect its commitment to innovation,
customer-centric solutions, and sustainable practices. This
rebranding encompasses the Company’s vision, mission, and new
tagline, "Delivering IoT Excellence," symbolising its evolution as a
company and strategic focus on leading the smart metering and
IoT communication sectors.
• Vision: To be the global leader in IoT communications and
smart metering solutions, driving innovation and sustainability
across the energy sector.
• Mission: To provide cutting-edge, reliable, and cost-effective
IoT communication solutions that empower utilities and
consumers, enhance operational efficiency, and promote
sustainable energy management.
Rationale Behind the Rebranding:
The decision to rebrand was driven by several key factors:
• Alignment with Strategic Goals: Our new identity aligns
with our strategic vision of becoming a global leader in IoT
communications and smart metering technologies. It reflects
our dedication to leveraging advanced technologies and
innovative solutions to address the dynamic needs of the
energy sector.
• Emphasis on Innovation: The rebranding underscores our
commitment to continuous innovation. As we expand our
product portfolio and enhance our technological capabilities,
our new identity serves as a visual representation of our
forward-thinking approach.
• Customer-Centric Approach: The new identity highlights
our focus on providing tailored solutions that meet the
specific needs of our customers. It emphasises our role as a
trusted partner in the energy sector, committed to delivering
exceptional service and value.
• Sustainability Commitment: Sustainability is at the core
of our operations. Our new identity reflects our dedication to
developing eco-friendly solutions that contribute to environmental
conservation and support global sustainability goals.
This new identity is more than just a visual change; it represents
a strategic transformation that aligns with our long-term goals.
By integrating our vision, mission, and values into every aspect
of our operations, we are well-positioned to drive growth, foster
innovation, and deliver sustainable value to our stakeholders.
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 Group, 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 page 14,
where it sets out how the views of shareholders were taken into
account when determining the best source of funding.
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 12 and 22 to 23. CyanConnode’s employees 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
Group’s HR department supports employees and managers to
look after employee needs.
STRATEGIC REPORT
11
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
STRATEGIC REPORT
C. The need to foster the Company's business relationships with
suppliers, customers and others
See pages 12 to 14, within the Principal Risks section on
pages 19 to 22 and within the Corporate Governance Statement
on pages 29 to 35, where it sets out how the Board interacts
and fosters business relationships with key stakeholders. The
Group has frequent meetings with key suppliers, customers and
shareholders to update on business developments.
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, a body for organisations engaged in
wireless technology.
We are also engaging with Cambridge University Computer
Science and Engineering departments with the aim of providing
graduate and/or internship opportunities.
During FY24 CyanConnode in India partnered with Nanhi Kali,
a Mahindra Group foundation, to support the Digital Equality
Programme for 700 girls in Gurugram, Haryana, India. This
initiative aimed to bridge the digital divide by providing these
young girls with the necessary tools, resources, and digital
literacy skills to succeed in a rapidly evolving digital world. By
facilitating access to digital education, we empower these girls
to unlock new opportunities and contribute meaningfully to
their communities.
In addition to our partnership with NanhiKali, we have
extended our support to two local government schools by
providing educational toys and course books that were
otherwise unaffordable for the institutions. This support has
touched the lives of 300-400 students, enhancing their learning
experiences and educational outcomes. By enriching their
educational environment, we help create a more engaging and
effective learning atmosphere, encouraging these young minds
to pursue academic excellence and personal growth.
Our Corporate Social Responsibility (CSR) initiatives reflect
our dedication to creating positive and lasting impacts in the
communities we serve. We believe in fostering an inclusive and
equitable society where every individual has the opportunity
to thrive.
The Group’s focus on the environment and the community is
discussed further in the ESG Report from page 15.
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 15. 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.
With the revised QCA Corporate Governance Code having
come into effect in April 2024, we will be reviewing the revised
principals to monitor compliance with this Code.
F. The need to act fairly between members of the Company
See pages 12 to 14 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.
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
CyanConnode is proud of its diverse workforce. It is a multicultural,
global organisation, committed to providing equal opportunities
for training, career development and promotion to all employees,
regardless of any physical disability, gender, religion, race or
nationality.
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 pages 32
to 33.
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 other employee matters. Employees were
encouraged to ask questions on the business and any other
matters. During the period various company functions and team
STRATEGIC REPORT
12
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
building events were also held to engage with employees. These
included Christmas parties, a ‘learn to row’ event in Cambridge
and an offsite event held for the team in India, which included
various team building activities.
Outcomes and actions
The events appear to have led to more open dialogue between
employees and management.
Shareholders
CyanConnode has a large number of shareholders, both
institutional and private, many of whom have been supportive
shareholders for a number of years. These shareholders play an
important role in monitoring the performance of the Group.
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 the 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 2023
the Group held an Annual General Meeting in person and this was
well attended by shareholders who were keen to have face to face
conversations with the Board. In addition, 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.
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 via ongoing discussions to determine the most appropriate
form of funding acceptable to shareholders for example working
capital, convertible loans and direct equity investment into the
Group. Following these discussions the Group undertook an
oversubscribed placing in November 2023, to raise £2.7 million
before expenses. More recently the Executive Directors took on
board feedback from shareholders regarding communication
and held a Q&A session on an investor platform to answers any
questions regarding the business that shareholders had.
Customers
CyanConnode’s works in ecosystems, going to market through
customers, many of whom are well-known multinationals such
as Schneider, Genus, IntelliSmart and the Monte Carlo Group.
The Group integrates with electricity meters to provide its
communication technology which makes the meters smart.
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, Thailand and the UAE various
times during the period 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 changing landscape of the market and business models
• Best ways to approach the market to win additional business
• Negotiation on contractual terms
• Quality delivery of contracts
• 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
• Created a more open dialogue during deployment of contracts
to ensure good communication and successful delivery of
projects
STRATEGIC REPORT
13
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
STRATEGIC REPORT
Suppliers
CyanConnode works closely with its suppliers, particularly component
suppliers and Contract Equipment Manufacturers to ensure
manufacture of quality products at the most competitive prices.
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 and timely delivery 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 and distributors 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 (in both the UK and India) and through reciprocal visits to
each other’s offices, as well as virtual meetings
What we discussed
• Continuity of supply and planning of supply of long lead time
components
• Pricing
• Flexibility on payment terms
• Reciprocal business growth and how to further collaborate
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 prices, including price decreases
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.
Examples 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. The CFO
regularly engages with financial institutions around the world
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. In addition, the Executive Directors discussed the large
opportunities being presented to the Group, which it was hoping
to win. The outcome from these discussions was that the Company
raised £2.7m (before expenses) in November 2023 through an
oversubscribed placing and subscription, together with the issue
of warrants at an exercise price of 15.0 pence per ordinary share,
which would provide a potential further £4.1m if fully exercised.
Q&A session
Early in the new financial year (FY25) a number of shareholders
requested updates on various areas of the business. The result
of this was that in May 2024, the Executive Directors held a Q&A
session to answer all questions by shareholders. This session
was very well received as indicated by feedback provided to the
Company.
STRATEGIC REPORT
14
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
Environment, Social and Governance
(ESG)
CyanConnode remains steadfast in its commitment to
sustainability and environmental responsibility. Our Omnimesh
solution has enabled utilities to improve customer experience,
enhance billing accuracy, and significantly reduce carbon
emissions. CyanConnode’s current order book has the potential
to avoid ~453,000 KG of CO2 emissions annually, primarily by
reducing the need for manual meter readings. This significant
reduction in emissions is achieved through the deployment
of our Omnimesh RF communications solution, which enable
more efficient energy management and operational practices for
utilities.
The environmental benefits of our solutions extend further,
encompassing improved load forecasting and peak load
management. These capabilities allow utilities to better balance
supply and demand, reducing strain on energy resources and
minimising wastage. Additionally, smart meters support the
adoption of energy-efficient lifestyles among consumers by
providing real-time insights into energy usage, encouraging more
conscientious consumption patterns.
Our communication solutions also play a crucial role in demand-
side management and contribute to the reduction of Aggregate
Technical and Commercial (AT&C) losses, enhancing the efficiency
and reliability of energy distribution networks. By mitigating these
losses, we not only improve the sustainability of energy systems
but also support the reduction of greenhouse gas emissions.
CyanConnode is a proud Green Economy Mark company,
underscoring our dedication to environmental stewardship.
Sustainability is a core element of our business strategy and
corporate pillars, guiding our decisions and actions as we strive
to create a more sustainable future. Our continued investment in
developing and deploying eco-friendly communication solutions
demonstrates our commitment to responsible business practices
and our role in fostering a greener, more sustainable world.
STRATEGIC REPORT
15
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
STRATEGIC REPORT
Impact of CyanConnode on Carbon Emission Reduction & savings for Utilities in India
FY24
FY23
Nodes OrderBook
6,565,000
4,200,000
CCI impact on Carbon emission reduction due to reduction of Manual reads
Avg. meter reads per day by a meter reader
40
40
Total no. of Man days required for meter reads
164,125
105,000
Avg. 2 wheeler running per day (in KM) by meter reader
5
5
Total KM to be covered for meter reads
820,625
525,000
Avg. bike mileage per litre of petrol (KM/ ltr)
50
50
Fuel required for monthly meter reading (in ltrs)
16,413
10,500
CO2 (KG) emission per litre of petrol
2
2
Total Monthly CO2 (KG) emission saved due to removal of manual intervention
37,749
24,150
Fuel required for Annual meter reading (in ltrs)
196,950
126,000
Annual CO2 emission avoided (in KG)
452,985
289,800
Avg cost of Manual Meter reading per meter per month (in INR)
15
15
Monthly Savings for utility on account of reduction of manual meter reads (in INR)
98,475,000
63,000,000
Annual savings for utility on account of reduction of manual meter reads (in INR)
1,181,700,000
756,000,000
One litre of Petrol equivalent to kWh
9
9
kWh equivalent to annual fuel saved by CCI
1,752,855
1,121,400
Per capita energy consumption in India (in kWh)
1,208
1,208
Avg members in Indian Household
4
4
Indian homes that can be lit for an entire year from the fuel saved by CC
363
232
CO2 sequestered by one tree annually (in KG)
25
25
Years required by one tree to sequester the annual CO2 avoided by CC
or
Trees required to sequester annual CO2 avoided by CC every year
18,119
11,592
Corporate Social Responsibility (CSR)
CyanConnode is deeply committed to its Corporate Social Responsibility (CSR) mission, focusing on empowering girls, advancing equity,
and sustaining our planet. We recently partnered with Nanhi Kali, a Mahindra Group foundation, to support the Digital Equality Programme
for 700 girls in Gurugram, Haryana, India. This initiative aims to bridge the digital divide by providing these young girls with the necessary
tools, resources, and digital literacy skills to succeed in a rapidly evolving digital world. By facilitating access to digital education, we
empower these girls to unlock new opportunities and contribute meaningfully to their communities.
In addition to our partnership with NanhiKali, we have extended our support to two local government schools by providing educational
toys and course books that were otherwise unaffordable for the institutions. This support has touched the lives of 300-400 students,
enhancing their learning experiences and educational outcomes. By enriching their educational environment, we help create a more
engaging and effective learning atmosphere, encouraging these young minds to pursue academic excellence and personal growth.
STRATEGIC REPORT
16
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
Our CSR initiatives reflect our dedication to creating positive and lasting impacts in the communities we serve. We believe in fostering an
inclusive and equitable society where every individual has the opportunity to thrive.
STRATEGIC REPORT
17
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
STRATEGIC REPORT
Material issues
Actions we have taken and will take
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 pages 22 to 23 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 pages 22 to 23 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. The requirements for this award are reviewed regularly by the Stock
Exchange, and it has recently reconfirmed the Group’s eligibility.
The Group regularly monitors the savings made to utilities in India as a result of deploying its technology.
CyanConnode also monitors the reductions in CO2 emissions resulting from its deployments.
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.
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 pages 22 to 23 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 26.
STRATEGIC REPORT
18
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
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
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 due to
the nature of the business.
Financial risks
1. Global events such as a pandemic
Risk and impact
Delays to deployment of projects, resulting in delays to
revenue and payments from customers.
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.
Mitigation
• Continual monitoring of the situation and adopting a flexible approach to
ensure appropriate response to support the business.
• 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.
STRATEGIC REPORT
Operational Review
Principal Risks and Uncertainties
19
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
STRATEGIC REPORT
2. Movements in component pricing and stock shortages
Risk and impact
Movements in component pricing can materially impact
profitability and cash. During recent years there have been
significant shortages of certain components and this has
driven up prices globally. In addition, these shortages can
lead to possible stock shortages.
If any components in any CyanConnode products reach end-
of-life, it could lead to significant premiums being paid to
source these components from alternative suppliers.
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.
• Continually monitoring stock availability with suppliers to ensure that we are
prepared for any end-of-life products and can source / build in alternatives,
3. Funding
Risk and impact
There is a risk that there could be delays to customer
deliveries or receipts from customers, or extended payment
terms in customers contracts, impacting the availability of
working capital. There is a reliance on three customers in
India and one customer in the UAE.
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 several 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. The ‘OPEX’ model is a model where the utility would pay for the meters
on a per-meter-per-month basis, leading to recurring monthly payments. 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.
4. Currency
Risk and impact
We are exposed to both translation and transaction risk.
• The UK trading entity makes significant sales and
purchases in other currencies; and
• The Indian entity generates significant translation risk.
Mitigation
• Whilst all of the Group's customers in India are invoiced in Indian Rupees, we
also contract the manufacture of our hardware in India in Indian Rupees and this
partially offsets the risk.
• In Thailand, and the MENA region, 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.
OPERATIONAL REVIEW PRINCIPAL RISKS AND UNCERTAINTIES
20
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
OPERATIONAL REVIEW PRINCIPAL RISKS AND UNCERTAINTIES
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 delivery 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 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.
21
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
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. This is done with a specialist Health and Safety organisation.
• 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 2024 to 117 (2023: 64). 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 optimised.
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 25% of employees that reported to the Board, or 2 out
of 8 employees (2023: 44%, or 4 out of 9 employees) and at Board
level 20% (2023: 20%). At year end women comprised 13% of total
employees across the Group (2023: 14%) or 15 out of a total of
120 employees (2023: 10 out of 70). The Group has and encourages
a diverse workforce.
OPERATIONAL REVIEW PRINCIPAL RISKS AND UNCERTAINTIES
22
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
OPERATIONAL REVIEW PRINCIPAL RISKS AND UNCERTAINTIES
Employment Policy
Applications for vacancies are considered based on capabilities
and reflecting the requirements of the role, and resources for
development and training are made available to all employees. In
the event of members of staff becoming disabled, every effort is
made to ensure that their employment with the Group continues,
and that appropriate training is arranged.
Environmental Policy
CyanConnode recognises that it has a moral duty of care as well
as a legal obligation to the environment and is committed to
minimising the impact of its activities on the environment. Taking
a responsible approach to the environment is good business
practice as well as essential in helping the world to tackle climate
change issues. Our technology is also at the heart of new strategies
that will deal with other environmental and resource challenges
such as the management of smart grids and water resources.
During 2019 CyanConnode received ISO14001 accreditation. It also
works closely with its landlord and other companies located in the
same building to ensure environmental awareness and implement
eco-friendly initiatives and policies within the building.
The key points of CyanConnode’s environmental strategy are to:
• Minimise waste by evaluating operations and ensuring they
are as efficient as possible.
• Use products efficiently and actively promote recycling
both internally and amongst its customers and suppliers.
• Source and promote a product range to minimise the
environmental impact of any production and distribution.
• Meet or exceed all the environmental legislation that
relates to the Group.
• Encourage employees to use alternative methods of
transport to work other than motor vehicles.
• In territories other than the UK, building out local
workforces to reduce carbon footprint with less flying.
• Introduce and encourage more online meetings to reduce
travel requirements across the globe.
CyanConnode 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 offices in Cambridge and Gurgaon.
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
24 July 2024
23
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
STRATEGIC REPORT
Heather Peacock
Chief Financial Officer
& Company Secretary
John Cronin
Executive Chairman
“The Board is delighted
at the revenue growth in
FY24 and looks forward
to further growth in FY25
as we move towards
profitability.”
GOVERNANCE
Board of Directors
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.
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.
24
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
Peter Tyler
Non-Executive Director
David Johns-Powell
Non-Executive Director
Björn Lindblom
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.
Björn joined the board as a non-executive
director in January 2024. He joined
Connode in 2011 as Chairman and in 2012
was appointed CEO, a position he held until
Cyan acquired the Company in 2016. After
the acquisition, Björn continued to support
the business providing consultancy services
as needed.
Björn is a successful serial entrepreneur
with a corporate background in the
communications industry with companies
including Ericsson and MCI WorldCom.
Björn has successfully grown several IoT
companies over the last 16 years and
pioneered radio-based smart metering
in the Nordic markets. Björn has served
as CEO, Chairman and board member
in a number of technology companies,
including Allgon AB, listed on NASDAQ
First North. He is currently Co-Founder and
Chairman of Luvly AB, a company designing
and selling sustainable electric vehicles.
Björn holds the role of the Chairman of the
Remuneration Committee and is a member
of the Audit and Nominations Committees.
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
24 July 2024
GOVERNANCE
25
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
GOVERNANCE
Financial Review
Key Financials
Financial Summary
Financial Year 2024 has once again produced record results in terms of orders won and also saw a fourth consecutive year of revenue
growth. The revenues reported during FY24 included revenues not only from the Group’s more traditional models seen for contracts in
India, but also revenues from other territories which included revenue for sale of third-party products, often at a lower margin.
A summary of the key financial and non-financial Key Performance Indicators (“KPIs”) 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.
12 months
Mar 2024
£000
12 months
Mar 2023
£000
12 months
Mar 2022
£000
12 months
Mar 2021
£000
15 months
Mar 2020
£000
Revenue
18,730
11,732
9,562
6,437
2,451
Gross Margin %
30%
36%
52%
48%
56%
R&D expenditure (including staff costs)
3,573
2,247
1,755
1,791
2,381
Operating costs
9,817
7,561
6,025
5,788
7,600
Operating loss
(4,204)
(3,347)
(1,017)
(2,685)
(6,230)
Depreciation and amortisation
398
489
616
627
773
EBITDA
(3,806)
(2,858)
(401)
(2,058)
(5,457)
Stock impairment
20
102
62
108
4
Impairment of intangible assets
791
968
–
–
–
Share based compensation
51
224
363
80
267
Foreign exchange losses / (gains)
194
8
34
(15)
267
Adjusted EBITDA4
(2,750)
(1,556)
58
(1,885)
(4,919)
Cash and cash equivalents
783
4,070
2,355
1,489
1,172
Average monthly operating cash outflow
(242)
(185)
(261)
(81)
(245)
Mar 2024
FTE5
Mar 2023
FTE
Mar 2022
FTE
Mar 2021
FTE
Mar 2020
FTE
Average
117
64
59
47
50
Year end
120
70
60
54
48
4 Where Adjusted EBITDA is Operating loss before amortisation, depreciation, stock impairment, impairment of intangible assets, share-based compensation and foreign
exchange losses.
5 Where FTE is the equivalent number of full-time equivalents
Gross Margin is lower than expected because of third-party sales along with significant one-off costs linked to the difficulty of sourcing an
end-of-life component for the version of gateways being shipped in FY24. These additional costs will not continue going forward, as we
have recently launched our new gateway, which no longer uses this component. Gross margins in the first two years of projects in India are
expected to be around 35-40% as they consist of mainly lower margin hardware, increasing to greater than 90% after year two when the
main revenue transitions to higher margin support and services.
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.
26
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
FINANCIAL REVIEW
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 stock impairment, impairment
of investments, share-based compensation, impairment of
intangible assets and foreign exchange losses. It is used to achieve
consistency and comparability between reporting periods.
Financial items of note during the year:
• Cash received from customers during FY24 was £16.9 million
(2023: £10.7 million)
• Trade and other receivables increased by £4.3 million during
the year to £13.6 million (including retentions) as a result
of increased revenue, particularly in the final quarter of the
financial year
• R&D cash tax credit of £0.7 million for FY24 (FY23: £0.7 million);
value remains the same, despite legislative changes regarding
R&D Tax Credit Claims reducing the amounts to be claimed.
This was as a result of higher R&D spend by the Company
during the year
• Working capital continued to be a key challenge through
FY24. Increase in contract assets with financing components
drives revenue recognition, but the cash for these contractual
obligations won’t be recovered for multiple years, with trade
and other payables increasing to £4.6m from FY23 to £8.5m
in FY24 due to increased demand for future deliverables on
new contracts but also due to managing cashflow (increased
creditor days to 108 in FY24 from 63 in FY23). The cash inflow
from the equity raise (£2.7m before expenses) helped ensure
that working capital during the year was sufficient for the
continued growth
• Following a review of the carrying value of the intangible asset
held on the company’s balance sheet relating the UK Smart
Metering Project (“UKSMIP”), a further impairment of £750k has
been made to be cautious, due to uncertainty on the future of
the contract See note 3 (b) (i) on page 66 for more detail on this.
During the year an advance against the FY23 R&D tax credit was
received and was repaid out of the FY23 R&D tax credit funds
received from HMRC during FY24. A loan has been secured against
the FY24 R&D tax credit since the year end and will be repaid out
of the FY24 R&D tax credit funds received from HMRC. Letters of
credit, invoice discounting and advance payments have been
negotiated on recently won contracts to help with working capital
requirements.
Key Performance Indicators (KPIs)
The financial and non-financial KPIs for the Group are as set out in
the table above and described below.
• FY24 revenues were 60% up on FY23 revenues as a result of
major contracts in India which started deploying during the
year, and contracts delivered in the MENA region.
• Gross margin for the year reduced from 36% to 30%, partly as a
result of the sale of third-party hardware at gross margins lower
than usual for the Group, and largely as a result of a significant
premium paid on the purchase of end-of-life components for
the gateway being deployed. A new gateway started shipping
in Q4 of FY24, using a different component. Gross margin will
however vary from year to year depending on the stage of
deployment of each contract. Hardware, for which revenue is
recognised typically during the first two years of a contract, is
at a lower gross margin than software and services for which
revenue can be recognised later in the deployment.
• Operating costs for the year increased by 37% compared
to FY23, as a result of additional costs, mainly attributable
to increased headcount required to scale the business up
to deploy its growing backlog of orders and development of
industry leading hardware and software developed by internal
and external engineering teams.
• Adjusted EBITDA loss increased from a loss of £1.6 million in
FY23 to a loss of £2.8 million in FY24 as a result of lower gross
margin and increased operating costs
• Cash and cash equivalents at the end of FY24 of £0.8 million
was £3.3 million lower than the end of FY23
• Average headcount increased to 117 (FY23: 64), and FTEs at
year end increased from 70 in FY23 to 120 in FY24.
Non-financial KPIs included the number of modules shipped
which increased from 391,000 in FY23 to 1,371,000 in FY24.
Furthermore, 55,000 NBIot gateways (FY23: 109,000) and 6,000
Omnimesh gateways (FY23: 1,200) were delivered during the year
collectively across MENA and India regions.
The Group continually reviews whether additional financial and
non-financial KPIs should be monitored.
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,
GOVERNANCE
27
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
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 2024
continued to be 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.
Going concern
To assess the ability of CyanConnode Holdings plc (the “Group”)
and company to continue as a going concern, the directors have
prepared a business plan and cash flow forecast for the period
to 31 March 2026 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, the timing of customer payments and
the level of working capital requirements. The detailed cashflow
scenarios include invoice Letters of Credit which have been
secured from customers against contracts recently won.
At 31 March 2024 the Group had cash reserves of £0.8 million (FY23:
£4.1m) and based on detailed cash flows provided to the Board
within the FY25/26 budget, there is sufficient cash to see the Group
through to profitability based on its standard operating model. In
the first quarter of FY25, £5m has been received from customers
and at the end of June 2024 the Group had cash reserves of
£1.1m. However, should the Group require additional cash to
cover working capital, as a result of the targeted rapid growth,
there could be a requirement for additional funding for this. The
Group is discussing working capital funding solutions with banks,
particularly in India, and it is believed that since the Indian entity
was profitable for FY24, a suitable facility could be secured.
To assist with working capital, a loan from one director for
£400,000 is in place, as an advance against the FY24 R&D Tax
Credit, expected to be received by October 2024
Notwithstanding the material uncertainties described above,
which may cast significant doubt on the ability of the Group
and company 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
(2023: £nil). The Group has no plans to adopt a dividend policy in
the immediate future and all funds generated by the Group will be
invested in the further development of the business, as is normal
for its industry sector and stage of its development.
Heather Peacock
Chief Financial Officer
24 July 2024
FINANCIAL REVIEW
28
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
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.
A new QCA Code came into effect in April 2024. The Board has discussed the key changes to this Code, and has agreed to have more detailed
discussions during FY2025 regarding how to ensure compliance with the revised Code.
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 January 2024 with the
replacement of one Non-executive Director bringing relevant skills and experience to the Board.
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 which was in effect until 31 March 2024.
1. Establish a strategy and business model which promote long-term value for shareholders
The strategy and business operations of the Group are set out in the FY2024 Strategic Report on pages 7 to 23.
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). All Board members attend the AGM and 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.
The normal channel of communication with shareholders is via our Chief Financial Officer and Executive Chairman.
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. It also results in large savings and reductions in CO2 emissions by automating the advanced metering infrastructure.
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. Further information on how we engage with our stakeholders can be seen in the s.172 report on pages 11 to 14 of our
FY2024 Annual Report.
GOVERNANCE
29
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
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 22 of our Strategic Report in the FY2024 Annual Report.
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.
Our Environmental policy and Health and Safety Management policy (see page 23 of the FY2024 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. These accreditations are updated as standards are replaced
with new ones.
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 was of particular importance during the COVID-19 pandemic and the Group 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 19 to 22 of the FY24 Annual Report for a summary of the principal risks and uncertainties facing the Group, as well as
mitigating actions.
The Group takes security of personal data seriously and ensures compliance with the GDPR which came into effect on 25 May 2018.
The Group’s privacy policy can be found on the Company’s website at https://cyanconnode.com/about/privacy-policy/
The Group also takes security of all data and its intellectual property very seriously and in 2019 received accreditation for the ISO27001
standard. Quality of product and process are important to the Group. The Group has been accredited for ISO9001:2008 since 2008 and
received accreditation for the ISO9001:2015 standard in 2019. The standards are updated as new standards become applicable.
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.
CORPORATE GOVERNANCE STATEMENT
30
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
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, Björn Lindblom, 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 Björn Lindblom 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 and the Group Engineering function, which all reports into the MD & CEO of India. A Senior Vice President of International
Sales handles all sales and opportunities outside of India. A Group Chief Financial Officer manages the finances of the Group while group
engineering all reports into the MD & CEO of India. 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. It is expected that each non-executive director will dedicate
sufficient time to the Company to understand the business, prepare for and attend Board and committee meetings and carry out other
work that is necessary for them to fulfil their duties as a director.
Board and Committee attendance during the year
Director
Board
Audit Committee
Remuneration
Committee
John Cronin
9 (10)**
–
–
Heather Peacock*
9 (10)**
2 (2)
–
David Johns-Powell
8 (10)***
–
–
Peter Tyler
8 (10)***
2 (2)
–
Björn Lindblom
1 (1)
–
–
Chris Jones****
7 (9)
2 (2)
–
* Heather Peacock attended the Audit Committee meetings by invite.
** John Cronin and Heather Peacock each attended additional meetings which covered regulatory matters. Authority was delegated to them by the other Directors.
*** David Johns-Powell and Peter Tyler each attended a meeting which did not include John Cronin or Heather Peacock as the agenda was a discussion regarding share
options to be awarded to John Cronin and Heather Peacock.
**** Chris Jones resigned and ceased being a Director on 31 January 2024.
There were no formal Remuneration Committee meetings during the year as one took place just before the commencement of FY2024,
and another soon after the end of the financial year.
CORPORATE GOVERNANCE STATEMENT
GOVERNANCE
31
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
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 24 to 25 of the FY2024 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. During FY2024 Chris Jones stepped back from his role as Non-Executive
Director and was replaced by Björn Lindblom. Björn is a serial entrepreneur with a strong managerial track record and over 25 years' experience of
starting and growing technology companies. He was previously Chief Executive of Connode AB prior to its acquisition by Cyan plc in 2016 to form
CyanConnode and more recently, until 2021, has provided consultancy services to the Company. He has also served as Chairman and board member
in several technology companies, including Allgon AB, listed on NASDAQ First North.
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 Group’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.
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.
Each Non-Executive Director’s value and input is continually monitored by the Executive Chairman to ensure they are actively contributing
to the Company achieving its strategic and financial objectives. At the time of the appointment of Björn Lindblom, a discussion was had
between the Board regarding composition. All agreed that the Board is still a well-balanced Board with a good mix of skills.
The Nominations Committee is responsible for succession planning of the Board. Further information on this is set out on pages 34 to 35.
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.
CORPORATE GOVERNANCE STATEMENT
32
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
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 (which has no employees). Our comprehensive set of policies and procedures, many of which fall
under the Company’s ISO accredited procedures, cover all of our operations. They are constantly updated and communicated to relevant
employees and everyone else working on our sites. Details of these policies can be found on pages 22 to 23 of the FY2024 Annual Report.
9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board
The Board is made up of two Executive Directors (Executive Chairman, who covers the role of the CEO, and the Chief Financial Officer), and
three Non-Executive Directors. Further information on the composition of the Board and how it operates is set out in Principle 5 above. In
addition to any matters that are expressly required by law to be approved by the Board, a number of areas are specifically reserved for the
Board as set out in an agreed set of Matters Reserved for the Board which was adapted by the Board in March 2018.
The Group’s overriding principles are that the Board:
• Is established to govern by having the appropriate roles, skills and committees to oversee the governance framework under which
it operates;
• Looks to the future: the Board will devote a large amount of its time to considering the future and providing strategic leadership;
• Is ultimately responsible to shareholders for the oversight and performance of the Group; and
• Is there to support and maintain a culture of governance, performance, accountability and communication within CyanConnode that
embraces and establishes the principles that it has adopted.
The Board has an Audit Committee, a Remuneration Committee and a Nominations Committee to oversee and consider issues of
policy outside of main Board meetings. Each Committee has written terms of reference setting out its duties, authority and reporting
responsibilities, also adopted by the Board in March 2018.
Board committees are authorised to engage the services of external advisers as they deem necessary in the furtherance of
their duties at the Company’s expense. Details concerning the composition and meetings of the committees are contained
on pages 34 and 35 of the Corporate Governance Statement in the FY2022 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 in accordance with AIM Rule 26 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.
CORPORATE GOVERNANCE STATEMENT
GOVERNANCE
33
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
Board Composition and Responsibility
At 31 March 2024 the Board comprised five directors, including the Executive Chairman, the Chief Financial Officer and three non-executive
directors. Four of the five directors in post at 31 March 2024 served throughout the year.
Name
Role
Appointed
In post
1 April 2023
In post
31 Mar 2024
Executive
John Cronin
Executive Chairman
20/03/12
Yes
Yes
Heather Peacock
Chief Financial Officer*
25/07/18
Yes
Yes
Non-executive
William David Johns-Powell
25/07/18
Yes
Yes
Peter Tyler
19/03/19
Yes
Yes
Björn Lindblom
15/01/24
No
Yes
Chris Jones
19/03/19
Yes
No
* Heather Peacock has also held the role of Company Secretary since September 2013.
The Board is responsible for overall strategy, the policy and decision-making framework in which this strategy is implemented, approval
of budgets, monitoring performance, and risk management. The Board meets at least on a quarterly basis and follows a formal agenda.
It also meets as and when required to discuss matters that may arise in between formal Board meetings. All directors are required to retire
by rotation according to the Articles of the Company.
No director has a service agreement requiring more than twelve months’ notice of termination to be given.
The Board is satisfied that an appropriate balance of independence, skills and experience has been and remains in place to enable the
Board to perform its responsibilities effectively. An overview of the skills and experience of each Board member is given above.
The directors may take independent professional advice at the Company’s expense.
Board Subcommittees
The Board has three subcommittees as set out below. Each subcommittee has Terms of Reference, approved by the Board, which set
out the main roles and responsibilities and remit of each committee. A set of Matters Reserved for the Board and a Board Charter, also
approved by the Board, govern the way in which the Board operates and sets out the matters for which the Board has responsibility and
those for which the Executive Directors have responsibility.
Audit committee: Peter Tyler (Chairman), Björn Lindblom. Peter Tyler has held the position of Chairman from 19 March 2019.
The Audit Committee Report on page 41 sets out the roles and responsibilities of the Audit Committee.
Remuneration committee: Björn Lindblom (Chairman), Peter Tyler. Björn Lindblom has held the position of Chairman since 15 January
2024. Chris Jones held the position of Chairman until 15 January 2024.
The Directors’ Remuneration Report on page 36 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 Björn Lindblom.
CORPORATE GOVERNANCE STATEMENT
34
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
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 in accordance with AIM Rule 26. 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
24 July 2024
CORPORATE GOVERNANCE STATEMENT
GOVERNANCE
35
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
GOVERNANCE
Directors’ Remuneration Report
Remuneration Committee
Chris Jones served as chairman of the Remuneration Committee from 19 March 2019 until the appointment of Björn Lindblom
on 15 January 2024, when Mr Lindblom took over the role of Chair.
The only personal financial interests of the members of the Committee are as shareholders. 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 their 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 Group.
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 £5.2m they have invested thus far (see pages 38 to 39 for more
details of their shareholdings).
Total investment
to date*
£000
Annual
remuneration
FY 2024
£000
Total investment
as % of
remuneration
John Cronin
1,243
393
316%
Heather Peacock
168
261
64%
David Johns-Powell
3,093
40
7,733%
Peter Tyler
690
40
1,725%
Björn Lindblom
37
8
463%
Total
5,231
742
705%
* The investment value reflects the cost of actual cash paid at the time of purchase.
In addition, during FY2021 a short-term loan was provided to the Company by John Cronin (£300,000) which was repaid during the year.
36
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
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 £123,000 were accrued for Directors for FY 2024 (FY2023: £106,000)
Directors’ Share Options
Full details of the directors’ options over ordinary shares of 2.0p are set out below:
Director
Grant Date
Expiry Date
Exercise Price
£
As at
31 March 2024
Number
As at
31 March 2023
Number
John Cronin
25/01/18
25/01/28
0.29
200,000
200,000
22/09/20
22/09/30
0.10
360,342
360,342
10/11/21
10/11/31
0.145
558,102
558,102
10/11/21
10/11/31
0.145
589,037
589,037
17/11/23
17/11/33
0.1575
600,000
–
17/11/23
17/11/33
0.14
506,082
–
17/11/23
17/11/33
0.17
442,857
–
3,256,420
1,707,481
Heather Peacock
11/12/17
11/12/27
0.40
25,000
25,000
22/09/20
22/09/30
0.10
90,909
90,909
10/11/21
10/11/31
0.145
619,424
619,424
10/11/21
10/11/31
0.145
798,875
798,875
17/11/23
17/11/33
0.1575
300,000
–
17/11/23
17/11/33
0.14
204,065
–
17/11/23
17/11/33
0.17
178,577
–
2,216,850
1,534,208
Peter Tyler
22/09/20
22/09/30
0.10
40,000
40,000
40,000
40,000
David John-Powell
28/09/20
28/09/30
0.10
250,000
250,000
250,000
250,000
Share options have a life of 10 years. When a director leaves the Company, he or she will be entitled to exercise any vested options for
between three months and one year after leaving the Company. Any options not exercised during this period will then lapse.
DIRECTORS’ REMUNERATION REPORT
GOVERNANCE
37
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
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. The EBT shall vote the shares in accordance with the wishes of the participants.
If any dividend is paid or other distributions are made on a share the joint owners should be entitled to that dividend in proportion to the
respective values of their interest in the JSOP shares on the date on which shares are quoted ex that dividend. The respective value of each
of the owner’s interests shall be calculated on the assumption there had been a disposal of the JSOP shares on that date and that the net
proceeds of such disposal had been equivalent to the closing price (as derived from an appropriate source) for the immediately preceding
dealing day.
At 31 March 2024, shares held by directors under this scheme were as follows:
Director
Grant Date
Expiry Date
Participation
Price
£
As at
31 March 2024
Number
As at
31 March 2023
Number
John Cronin
10/11/21
10/11/26
0.145
5,672,359
5,672,359
5,672,359
5,672,359
Heather Peacock
10/11/21
10/11/26
0.145
1,331,498
1,331,498
1,331,498
1,331,498
JSOP shares have a life of 5 years. When a director leaves the Company, he or she will be entitled to keep the vested shares until the expiry
dates and any unvested shares will be brought back into the Employee Benefit Trust within 90 days of the director leaving the Company.
Directors’ Interests in Shares in the Company
Director
Shares
John Cronin
As at 1 April 2023
6,218,848
Purchased during the year
300,000
As at 31 March 2024
6,518,848
David Johns-Powell
As at 1 April 2023
16,621,561
Purchased during the year
500,000
As at 31 March 2024
17,121,561
Peter Tyler
As at 1 April 2023
2,606,651
Purchased during the year
-
As at 31 March 2024
2,606,651
Heather Peacock
As at 1 April 2023
1,069,246
Purchased during the year
200,000
As at 31 March 2024
1,269,246
DIRECTORS’ REMUNERATION REPORT
38
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
Director
Shares
Björn Lindblom
Held at the time of appointment
912,377
As at 31 March 2024
912,377
Total
As at 1 April 2023
26,516,306
Purchased during the year
1,912,377
As at 31 March 2024
28,428,683
The shareholding for Directors of the Company disclosed above excludes shares held under the Company's Joint Share Ownership Plan
("JSOP") in which they are beneficial co-owner of shares.
Pension Arrangements
Executive directors are entitled to become members of the Company pension scheme. This is a defined contribution scheme whereby
the Company contributes at a rate of 5% of the executive’s gross salary. Heather Peacock is a member of the Company pension scheme.
John Cronin is not a member of this scheme.
Directors’ Contracts
It is the Company’s policy that the executive directors should have contracts 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
Date of contract
John Cronin
20 March 2012
Heather Peacock
25 July 2018
William David Johns-Powell
25 July 2018
Peter Tyler
19 March 2019
Björn Lindblom
15 January 2024
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’ REMUNERATION REPORT
GOVERNANCE
39
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
Directors’ Emoluments (audited)
Amounts for the year ending 31 March 2024
Name of Director
Salary
£
Fees
£
Pension
£
Other Benefits
£
Bonus
£
Total for
FY 2024
Services
£
Total for
FY 2023
Services
£
Executive
John Cronin
40,000
295,000
–
3,458
55,000
393,458
371,998
Heather Peacock
200,000
–
10,000
1,455
50,000
261,455
243,926
Non-Executive
Chris Jones (Note 1)
71,585
40,000
–
–
18,000
129,585
30,000
David Johns-Powell
(Note 2)
–
40,000
–
–
–
40,000
37,500
Peter Tyler
–
40,000
–
–
–
40,000
30,000
Björn Lindblom
–
8,333
–
–
–
8,333
–
Total
311,585
423,333
10,000
4,913
123,000
872,831
713,424
Note 1 – Chris Jones fees included those for an interim role he held for six months during FY2024, covering the COO function of the Group.
Note 2 – David Johns-Powell used all £37,500 of FY2023 fees and £12,500 of FY2024 fees to participate in the placing in November 2023
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.
This report was approved by the Board of Directors on 24 July 2024 and signed on its behalf by:
Björn Lindblom
Chairman of the Remuneration Committee
DIRECTORS’ REMUNERATION REPORT
40
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
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 was Chris Jones until Björn Lindblom joined the Company on
15 January 2024, at which time he replaced Chris Jones. All three were Non-Executive Directors while on the Committee. The Committee
met twice during the year ended 31 March 2024, 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 2023.
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 2023 Annual Report;
• Review of the interim results for the six months ended 30 September 2023; and
• Ongoing review of the Group’s cash forecasts, including review of sufficiency of financing as the business grows.
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 Board evaluation and at a Board meeting and it was agreed that its
new composition of Peter Tyler and Björn Lindblom was 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 24 July 2024 and signed on its behalf by:
Peter Tyler
Chairman of the Audit Committee
GOVERNANCE
Audit Committee Report
GOVERNANCE
41
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
The directors present their annual report on the affairs of the Group together with the audited financial statements for the year ended
31 March 2024. The Company’s statement on corporate governance can be found on pages 29 to 35 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 2026 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 26 to 28 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 36 of the financial statements.
Dividends
The directors’ dividend policy is set out in the Financial Review on page 28.
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 2024, 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 29 to 35.
In accordance with the Companies Act 2006 the Company has no authorised share capital.
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 2023 and 31 March 2024.
GOVERNANCE
Directors’ Report
42
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
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
Peter Tyler
Chris Jones (resigned 31 January 2024)
Björn Lindblom (appointed 15 January 2024)
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 36 to 40.
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 £3,552,248 (2023: £2,247,000).
Directors’ indemnity arrangements
CyanConnode has purchased and maintained throughout the year Directors’ and Officers’ liability insurance in respect of itself and its
Directors.
Significant Holdings
The Company had been notified of the following voting rights of shareholders in the Company at 18 July 2024 and at the same date its
issued share capital consisted of 299,075,864 Ordinary Shares:
Name
Percentage of
issued share
capital
Number of
ordinary shares
Premier Milton Group Plc
10.996%
32,886,536
Herald Investment Management Limited
7.00%
20,945,069
S Chari
6.43%
19,243,144
William David Johns-Powell
5.72%
17,121,561
CRUX Asset Management
4.88%
14,588,755
P Gough
3.83%
11,460,334
DIRECTORS’ REPORT
GOVERNANCE
43
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
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 was higher at 108 days (2023: 63 days), due to back-to-back payment arrangements with key suppliers, and
having points during FY24 where timing of payments had to be closely managed.
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.
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 29 to 30.
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
24 July 2024
DIRECTORS’ REPORT
44
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
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
24 July 2024
GOVERNANCE
45
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
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 2024 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 2024
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 entities and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Summary of our audit approach
Key audit matters
Group
• Revenue recognition
• Impairment
Parent Company
• Impairment
Materiality
Group
• Overall materiality: £374,000 (2023: £234,000)
• Performance materiality: £243,000 (2023: £175,000)
Parent Company
• Overall materiality: £189,000 (2023: £120,000)
• Performance materiality: £122,000 (2023: £90,000)
Scope
Our audit procedures covered 100% of revenue, 100% of total assets and 98% of loss before tax.
FINANCIAL STATEMENTS
Independent Auditor’s Report
TO THE MEMBERS OF CYANCONNODE HOLDINGS PLC
46
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
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.
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.
Group – impairment
Key audit matter description
The group has a significant goodwill balance of £1.93m which is subject to an annual impairment review.
In addition, due to the loss-making nature of the group, other assets including the SMIP intangible 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.
We also considered the adequacy of the judgements disclosed in note 3b.
Parent company – impairment
Key audit matter description
The parent company has investments 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.
INDEPENDENT AUDITOR’S REPORT
FINANCIAL STATEMENTS
47
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
Our application of materiality
When establishing our overall audit strategy, we set certain thresholds which help us to determine the nature, timing and extent of our audit
procedures. When evaluating whether the effects of misstatements, both individually and on the financial statements as a whole, could reasonably
influence the economic decisions of the users we take into account the qualitative nature and the size of the misstatements. Based on our
professional judgement, we determined materiality as follows:
Group
Parent company
Overall materiality
£374,000 (2023: £234,000)
£189,000 (2023: £120,000)
Basis for determining overall
materiality
2% of total revenue
0.5% of net assets, reduced to suitable levels to
support the group 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
£243,000 (2023: £175,000)
£122,000 (2023: 90,000)
Basis for determining
performance materiality
65% (2023: 75%) of overall materiality
65% (2023: 75%) of overall materiality
Reporting of misstatements
to the Audit Committee
Misstatements in excess of £19,000 and
misstatements below that threshold that, in our
view, warranted reporting on qualitative grounds.
Misstatements in excess of £9,000 and
misstatements below that threshold that, in our
view, warranted reporting on qualitative grounds.
An overview of the scope of our audit
The group consists of 5 components, located in the United Kingdom, India and Sweden.
The coverage achieved by our audit procedures was:
Number of components Revenue
Total assets
Loss before tax
Full scope audit
3
98%
100%
98%
Specific audit procedures
1
2%
-
-
Total
4
100%
100%
98%
Analytical procedures at group level were performed for the remaining component. Of the above, full scope audits for one component was
undertaken by component auditors.
Material uncertainty relating 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 in relation to the level of funding required for working capital. The potential need for additional financing indicates 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;
INDEPENDENT AUDITOR’S REPORT
48
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
•
review and consideration of the appropriateness of the sensitivity analysis performed by management and available actions should
performance be behind expectations.
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 45 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.
INDEPENDENT AUDITOR’S REPORT
FINANCIAL STATEMENTS
49
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
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 operates 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.
INDEPENDENT AUDITOR’S REPORT
50
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
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
Review of the financial statement disclosures and testing to supporting documentation;
Completion of disclosure checklists to identify areas of non-compliance
Tax compliance regulations
Inspection of advice received from external tax advisors
Inspection of correspondence with local tax authorities
GDPR
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.
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
Blenheim House
Newmarket Road
Bury St Edmunds
IP33 3SB
INDEPENDENT AUDITOR’S REPORT
FINANCIAL STATEMENTS
51
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
FINANCIAL STATEMENTS
Consolidated Income Statement
FOR THE YEAR ENDED 31 MARCH 2024
Note
Year
31 March
2024
£000
Year
31 March
2023
£000
Continuing operations
Revenue
4
18,730
11,732
Cost of sales
(13,117)
(7,518)
Gross profit
5,613
4,214
Exceptional item: impairment of intangible assets
13
(791)
(968)
Other operating costs
6
(9,026)
(6,593)
Operating loss
(4,204)
(3,347)
Amortisation and depreciation
398
489
Share based payments
35
51
224
Stock impairment
21
20
102
Impairment of intangible assets
13
791
968
Foreign exchange losses
194
8
Adjusted EBITDA
(2,750)
(1,556)
Finance income
9
92
35
Finance expense
10
(113)
(136)
Loss before tax
(4,225)
(3,448)
Tax credit
11
395
1,042
Loss for the year
(3,830)
(2,406)
Loss per share (pence)
Basic
12
(1.41)
(1.03)
Diluted
12
(1.41)
(1.03)
52
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
FINANCIAL STATEMENTS
Consolidated Statement of
Comprehensive Income
FOR THE YEAR ENDED 31 MARCH 2024
Year
31 March
2024
£000
Year
31 March
2023
£000
Loss for the year
(3,830)
(2,406)
Exchange differences on translation of foreign operations
(112)
21
Total comprehensive income for the year
(3,942)
(2,385)
Derived from continuing operations and attributable to the equity owners of the Company.
FINANCIAL STATEMENTS
53
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
FINANCIAL STATEMENTS
Consolidated Statement of
Financial Position
AS AT 31 MARCH 2024
Note
31 March
2024
£000
31 March
2023
£000
Non-current assets
Intangible assets
13
3,759
3,433
Goodwill
15
1,930
1,930
Property, plant and equipment
16
196
30
Right of use asset
17
474
122
Other financial assets
19
51
62
Trade and other receivables
20
3,085
2,076
Total non-current assets
9,495
7,653
Current assets
Inventories
21
1,686
793
Trade and other receivables
22
10,491
7,182
R&D tax credit receivables
665
748
Cash and cash equivalents
23
783
4,070
Total current assets
13,625
12,793
Total assets
23,120
20,446
Current liabilities
Trade and other payables
24
(8,450)
(3,833)
Short-term borrowings
25
-
(1,226)
Corporation tax liability
(508)
-
Lease liabilities
17
(110)
(29)
Total current liabilities
(9,068)
(5,088)
Net current assets
4,557
7,705
Non-current liabilities
Lease liabilities
17
(364)
(94)
Deferred tax liability
26
(170)
(452)
Other payables
27
(87)
(42)
Total non-current liabilities
(621)
(588)
Total liabilities
(9,689)
(5,676)
Net assets
13,431
14,770
Equity
Share capital
28
5,982
5,438
Share premium account
29
80,196
78,671
Own shares held
30
(3,611)
(3,611)
Share option reserve
31
1,412
804
Translation reserve
32
(60)
52
Retained losses
33
(70,488)
(66,584)
Total equity being equity attributable to owners of the Company
13,431
14,770
The financial statements of CyanConnode Holdings plc (registered number 04554942) were approved by the Board of Directors and authorised for
issue on 24 July 2024. They were signed on its behalf by:
John Cronin
Director
54
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
FINANCIAL STATEMENTS
Consolidated Statement of
Changes in Equity
FOR THE YEAR ENDED 31 MARCH 2024
Share
Capital
£000
Share
Premium
Account
£000
Own
Shares
Held
£000
Share
Option
Reserve
£000
Translation
Reserve
£000
Retained
Losses
£000
Total
Equity
£000
Balance at 31 March 2022
4,726
73,883
(3,611)
1,068
31
(64,666)
11,431
Loss for the year
–
–
–
–
–
(2,406)
(2,406)
Other comprehensive income for
the year
–
–
–
–
21
–
21
Total comprehensive income for
the year
–
–
–
–
21
(2,406)
(2,385)
Issue of share capital (net of
expenses)
712
4,788
–
–
–
–
5,500
Credit to equity for share options
–
–
–
224
–
–
224
Transfer
–
–
–
(488)
–
488
–
Total transactions with owners
712
4,788
–
(264)
–
488
5,724
Balance at 31 March 2023
5,438
78,671
(3,611)
804
52
(66,584)
14,770
Loss for the year
–
–
–
–
–
(3,830)
(3,830)
Other comprehensive income for
the year
–
–
–
–
(112)
–
(112)
Total comprehensive income for
the year
–
–
–
–
(112)
(3,830)
(3,942)
Issue of share capital
(net of expenses)
544
1,525
–
–
–
–
2,069
Issue of share warrants
–
–
–
483
–
–
483
Credit to equity for share options
–
–
–
51
–
–
51
Transfer
–
–
–
74
–
(74)
–
Total transactions with owners
544
1,525
–
608
–
(74)
2,603
Balance at 31 March 2024
5,982
80,196
(3,611)
1,412
(60)
(70,488)
13,431
FINANCIAL STATEMENTS
55
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
FINANCIAL STATEMENTS
Consolidated Cash Flow Statement
FOR THE YEAR ENDED 31 MARCH 2024
Note
Year
31 March
2024
£000
Year
31 March
2023
£000
Net cash outflow from operating activities
34
(2,860)
(2,217)
Investing activities
Interest received
15
3
Purchases of property, plant and equipment
16
(224)
(31)
Purchases of intangible assets
13
(1,384)
(734)
Sale/(purchase) of other financial assets
19
11
(4)
Net cash outflow from investing activities
(1,582)
(766)
Financing activities
Interest paid on borrowings
(93)
(125)
Cash inflow from borrowings
25
–
500
Cash outflow from directors loans
25
(300)
–
Cash net outflow from debt factoring
25
(426)
(541)
Loan repayment
25
(500)
(600)
Capital repayments of lease liabilities
17
(74)
(30)
Interest paid on lease liabilities
17
(19)
(11)
Proceeds on issue of shares
28
2,719
5,844
Share issue costs
(167)
(344)
Net cash inflow from financing activities
1,140
4,693
Net increase in cash and cash equivalents
(3,302)
1,710
Effects of exchange rate changes on cash and cash equivalents
15
5
Cash and cash equivalents at beginning of the year
4,070
2,355
Cash and cash equivalents at end of the year
783
4,070
Analysis of changes in net cash / (debt)
For the year ended 31 March 2024
At 1 April
2023
£000
Cash flow
£000
Other non-cash
movements
£000
Net foreign
exchange
difference
£000
At 31 March
2024
£000
Cash and cash equivalents
4,070
(3,302)
–
15
783
Short-term borrowings
(1,226)
1,226
–
–
–
Lease liabilities
(123)
93
(444)
–
(474)
(1,349)
1,319
(444)
–
(474)
Net cash / (debt) at end of year
2,721
(1,983)
(444)
15
309
For the year ended 31 March 2023
At 1 April 2022
£000
Cash flow
£000
Other non-cash
movements
£000
Net foreign
exchange
difference
£000
At 31 March
2023
£000
Cash and cash equivalents
2,355
1,710
–
5
4,070
Short-term borrowings
(1,867)
641
–
–
(1,226)
Lease liabilities
(153)
41
(11)
–
(123)
(2,020)
682
(11)
–
(1,349)
Net cash / (debt) at end of year
335
2,392
(11)
5
2,721
Other non-cash movements include interest on lease liabilities and new leases taken on in the year.
56
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
FINANCIAL STATEMENTS
Company Balance Sheet
AS AT 31 MARCH 2024
Note
31 March
2024
£000
31 March
2023
£000
Non–current assets
Intangible assets
14
–
–
Investments in subsidiaries
18
4,127
5,042
Trade and other receivables
20
1,329
2,299
Total non–current assets
5,456
7,341
Current assets
Trade and other receivables
22
55
81
Cash and cash equivalents
23
20
2,991
Total current assets
75
3,072
Total assets
5,531
10,413
Current liabilities
Trade and other payables
24
(205)
(168)
Short–term borrowings
25
–
(800)
Total current liabilities
(205)
(968)
Net current (liabilities)/assets
(130)
2,104
Net assets
5,326
9,445
Equity
Share capital
28
5,982
5,438
Share premium account
29
80,196
78,671
Share option reserve
31
1,412
804
Retained losses
33
(82,264)
(75,468)
Total equity being equity attributable to owners of the Company
5,326
9,445
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes as it prepares group
accounts. The Company reported a loss for the financial year ended 31 March 2024 of £6,722,000 (2023: £8,077,000). The financial statements of
CyanConnode Holdings plc (registered number 04554942) were approved by the board of directors and authorised for issue 24 July 2024. They
were signed on its behalf by:
John Cronin
Director
FINANCIAL STATEMENTS
57
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
FINANCIAL STATEMENTS
Company Statement of
Changes in Equity
FOR THE YEAR ENDED 31 MARCH 2024
Share
Capital
£000
Share
Premium
Account
£000
Share
Option
Reserve
£000
Retained
Losses
£000
Total
Equity
£000
Balance at 31 March 2022
4,726
73,883
1,068
(67,879)
11,798
Loss for the year
–
–
–
(8,077)
(8,077)
Total comprehensive income for the year
–
–
–
(8,077)
(8,077)
Issue of share capital (net of expenses)
712
4,788
–
–
5,500
Credit to equity for share options
–
–
224
–
224
Transfer
–
–
(488)
488
–
Total transactions with owners
712
4,788
(264)
488
5,724
Balance at 31 March 2023
5,438
78,671
804
(75,468)
9,445
Loss for the year
–
–
–
(6,722)
(6,722)
Total comprehensive income for the year
–
–
–
(6,722)
(6,722)
Issue of share capital (net of expenses)
544
1,525
–
–
2,069
Issue of warrants
–
–
483
–
483
Credit to equity for share options
–
–
51
–
51
Transfer
–
–
74
(74)
–
Total transactions with owners
544
1,525
608
(74)
2,603
Balance at 31 March 2024
5,982
80,196
1,412
(82,264)
5,326
58
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
FINANCIAL STATEMENTS
Company Cash Flow Statement
FOR THE YEAR ENDED 31 MARCH 2024
Year
31 March
2024
£000
Year
31 March
2023
£000
Loss for the year before taxation and interest
(6,669)
(7,995)
Shares issued in lieu of bonus
–
24
Interest received
4
–
Net impairment charge
1,920
4,063
Operating cash outflows before movement in working capital
(4,745)
(3,908)
Decrease/(increase) in receivables
39
(19)
Increase / (decrease) in payables
35
(15)
Net cash outflow from operating activities
(4,671)
(3,942)
Financing activities
Cash inflow from short–term borrowing
–
500
Cash outflow from director’s loan
(300)
–
Loan repayment
(500)
(600)
Interest paid on loans
(52)
(85)
Proceeds on issue of shares
2,719
5,844
Share issue costs
(167)
(344)
Net cash inflow from financing activities
1,700
5,315
Net (decrease)/increase in cash and cash equivalents
(2,971)
1,373
Cash and cash equivalents at beginning of the year
2,991
1,618
Cash and cash equivalents at end of year
20
2,991
Analysis of changes in net cash / (debt)
For the year ended 31 March 2024
At 1 April
2023
£000
Cash flow
£000
Other non-cash
movements
£000
At 31 March
2024
£000
Cash and cash equivalents
2,991
(2,971)
–
20
Short–term borrowings
(800)
800
–
–
Net cash at end of year
2,191
(2,171)
–
20
For the year ended 31 March 2023
At 1 April
2022
£000
Cash flow
£000
Other non-cash
movements
£000
At 31 March
2023
£000
Cash and cash equivalents
1,618
1,373
–
2,991
Short–term borrowings
(900)
100
–
(800)
Net debt at end of year
718
1,473
–
2,191
FINANCIAL STATEMENTS
59
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
FINANCIAL STATEMENTS
Notes to the Financial Statements
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 Suite 2, Ground Floor, The Jeffreys Building, Cowley Road, Cambridge CB4 0DS.
The principal activities of the parent company (the “company”) and its subsidiaries (the “Group”) are set out in the strategic report on page 7.
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 (the “Group”) and company to continue as a going concern, the directors have prepared
a business plan and cash flow forecast for the period to 31 March 2026 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, the timing
of customer payments and the level of working capital requirements. The detailed cashflow scenarios include Letters of Credit which have been
secured from customers against contracts recently won.
At 31 March 2024 the Group had cash reserves of £0.8 million (FY23: £4.1m) and based on detailed cash flows provided to the Board within the FY25/26
budget, there is sufficient cash to see the Group through to profitability based on its standard operating model. In the first quarter of FY25, £5m cash has
been received from customers and at the end of June 2024 the Group had cash reserves of £1.1 million. However, should the Group require additional
cash to cover working capital, as a result of rapid growth, there could be a requirement for additional funding for this. The Group is discussing working
capital funding solutions with banks, particularly in India, and it is believed that since the Indian entity was profitable in FY24, a facility could be secured.
To assist with working capital, a loan from one director received in April 2024 for £400,000 is in place, as an advance against the FY24 R&D Tax
Credit, expected to be received by October 2024.
Notwithstanding the material uncertainties described above, which may cast significant doubt on the ability of the Group and company 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.
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.
60
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
2. Significant accounting policies (continued)
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. 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;
• 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.
NOTES TO THE FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
61
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
2. Significant accounting policies (continued)
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.
In accordance to our group IFRS 15 revenue recognition policy, where significant timing differences arise between the revenue recognition period
and invoicing, and thereon cash collection, a financing element is accounted with contract assets being discounted using an appropriate discount
rate based on the credit rating of the customer, and the interest rates in the specific regions central bank.
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.
Sales commissions directly attributable to individual contracts with customers are deferred on the balance sheet and charged to cost of sales in
line with the recognition of the related income.
Research and development expenditure
An internally generated, or separately acquired, intangible asset arising from development (or from the development phase of an internal project)
is recognised if, and only if, all the following conditions have been demonstrated:
• the technical feasibility of completing the intangible asset so that it will be available for use or sale;
• the intention to complete the intangible asset and use or sell it;
• the ability to use or sell the intangible asset;
• how the intangible asset will generate probable future economic benefits;
• the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
• the ability to measure reliably the expenditure attributable to the intangible asset during its development.
The amount initially recognised for such intangible assets is the sum of the expenditure incurred from the date when the intangible asset first
meets the recognition criteria listed above. Where no internally generated intangible asset can be recognised on the above basis, development
expenditure is recognised in profit or loss in the period in which it is incurred.
The capitalised assets will be amortised over their useful lives of 5 years.
Retirement benefit costs
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due. These were the only payments made by
the Group in the period under review.
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.
NOTES TO THE FINANCIAL STATEMENTS
62
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
2. Significant accounting policies (continued)
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
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.
NOTES TO THE FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
63
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
2. Significant accounting policies (continued)
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.
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.
NOTES TO THE FINANCIAL STATEMENTS
64
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
2. Significant accounting policies (continued)
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 recognised 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 recognised, in its individual financial statements, an
increase in the cost of investment in its subsidiaries equivalent to the equity-settled share-based payment charge recognised in its consolidated
financial statements with the corresponding credit being recognised directly in equity.
When the Company issues options or warrants for services rendered by a non-employee they are measured at fair valued of the services received.
Warrants issued as part of a placing of shares are fair valued using a Black Scholes model. The fair value of warrants issued is credited to a warrant
reserve with the balance of consideration received allocated to share capital and share premium account.
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 2023. 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 2024 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. General approach to critical judgments
At all times, any critical judgement within the groups accounting policies, use a mix of historical and future information (where available) given the
level of growth.
NOTES TO THE FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
65
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
3. Critical accounting judgements and key sources of estimation uncertainty
(continued)
ii. 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 customises another. Therefore, they are
considered to be separate performance obligations.
iii. 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, the internal pricing used
when the contract was bid for and to consider the current market through existing live bids.
iv. 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.
v. Discounting of significant financial element of revenue contracts
The revenue for head end software, hardware and certain services for the Group’s contracts are recognised at a point in time when supplied to the customer,
however some of these elements are paid for over the term of the contract. A significant financing element therefore needs to be considered for these
elements applying a discount based on the time value of money. Judgement is required in applying a suitable discount rate which is dependent on the credit
rating of the customer. Such a financing element has been recognised on three contracts in the current period (three in the prior period).
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 £2,032k carrying value of the related intangible asset at the end of March 2024. Connode AB’s contract involves the supply of software
in areas where traditional smart meter technology would not work due to lack of mobile coverage (“not-spots”).
The Group was notified by its customer Toshiba, in 2023 that due to an end-of-life Telit component, which is essential in the design of the Toshiba hardware
(mesh hub), there would only be 761k mesh hubs supplied under the contract. Toshiba advised in 2024 that the final number supplied was 765k mesh hubs.
In addition, the Group has been notified that 3G is gradually being switched off in the UK, and meters will be replaced with 4G, commencing in 2025. As a
result of this, the Group made an impairment of £968k against the carrying value in FY23.
The key assumptions analysed in determining the possible carrying values included the following:
• The number of mesh hubs activated (generating a one off licence fee)
• The number of mesh hubs active on a monthly basis (generating an ongoing monthly support fee)
• The potential impact of the 3G sunset, expected to happen in 2025 for VMO2 (The Group’s end customer for this contract). This impact could lead to either
a higher number of mesh hubs being activated.
A new model has now been created based on these sensitivities to determine if a further impairment to the intangible asset is required. The models were run
based on various percentages of the finite number of 765k hubs being activated, and being active on a monthly basis. Due to the uncertainties and lack of
information provided to the Group regarding the remainder of the rollout and taking into account the numerous delays that have already occurred, the Board
has agreed that a further impairment of £750k would be taken in FY24 based on an assumption that 75% of the finite number of 765k hubs, being 574k hubs,
would be activated. This is an increase from the 70% assumption in FY23 and is based on history of activations in the fifteen months prior to the end of FY24.
To be cautious it has also been assumed that support fees for a maximum of 56% of the 574k hubs would be received on a monthly basis. If this number were
reduced to a maximum of 53% it would lead to a further impairment of £182k.
A WACC of 11.7% has been used in arriving at the £750k impairment.
NOTES TO THE FINANCIAL STATEMENTS
66
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
3. Critical accounting judgements and key sources of estimation uncertainty
(continued)
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. Development costs
The group assesses the probability of expected future economic benefits using reasonable and supportable assumptions that present
managements best estimate of the set of economic conditions that will exist over the useful life of the asset in accordance with IAS38.
We are currently seeing an increase in development costs as a result of new projects and new development requirements for the market.
Management have carried out an assessment for all projects undertaken during the year, and identified the additional projects that meet the IAS38
development phase criteria. We reviewed these costs closely using the timesheet system and capitalised relevant costs to intangible assets.
For those projects that do not meet the criteria, all expenditure incurred during the year has been written off to the income statement as an expense.
Under IAS 38 each development project must be reviewed at the end of each accounting period to ensure that the recognition criteria are still met.
Management has undertaken a review of all capitalised projects at the year end, and confirmed that the recognition criteria are still met, there has
been no indication of impairment in the year.
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) on trade receivables and contract assets using expected credit losses based on historic levels of bad debt
suffered against current and aged debts. 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.
An amount of £858,000 (2023: £326,000) which is over 90 days overdue is included in trade debtors, of which a provision of £90,000 (2023: £136,000)
is held based on historic credit losses with no specific exposures noted requiring additional provisions.
CyanConnode Ltd has a loan of £69,281,018 (2023: £64,838,214) with CyanConnode Holdings plc. As at 31 March 2024, a 100% (2023:100%)
provision against the loan was recognised based on expected future profitability of the entity. 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. See note 18 for details of impairments booked in the year.
4. Revenue
An analysis of the Group’s revenue is as follows:
2024
£000
2023
£000
Hardware revenue - recognised at a point in time
16,718
9,763
Software licenses - recognised at a point in time
541
1,157
Revenue from services* - recognised at a point in time
1,427
504
Revenue from support and maintenance** - recognised over time
44
308
Total revenue
18,730
11,732
* Services can include installation of gateways, training, integration of software etc
** Support and maintenance can include Annual Maintenance Contract (AMC) or Field Maintenance Services (FMS)
NOTES TO THE FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
67
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
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 2024 there were 3 customers (2023: 3) whose turnover accounted for more than 10% of the Group’s total revenue
as follows:
2024
2023
Turnover
£000
Percentage of
Total%
Turnover
£000
Percentage of
Total%
Customer A
1,710
9
1,500
13
Customer B
3,671
20
5,819
50
Customer C
5,199
28
2,098
18
Customer D
5,335
28
-
-
Revenue split by geographical location was as follows:
2024
2023
Turnover
£000
Percentage of
Total%
Turnover
£000
Percentage of
Total%
India
14,015
75
5,560
47
United Arab Emirates
4,249
23
5,819
50
Rest of The World
466
2
353
3
18,730
100
11,732
100
6. Other operating costs
2024
£000
2023
£000
Staff costs
5,572
4,154
Staff and other costs capitalised to research and development
(1,384)
(734)
Research and development costs (non-staff costs)
465
175
Research and development costs (subcontractor costs)
1,090
141
Rent and site costs
224
179
Office expenses
542
417
Marketing and advertising
176
197
Professional fees
516
426
Audit and accountancy
292
229
Bad debts
242
117
Impairment of inventory
20
102
Fixed assets written off
62
–
Share based payments
51
224
Foreign exchange
194
13
Amortisation and depreciation
393
476
Other
571
477
Other operating costs
9,026
6,593
The total expenditure on research and development including staff costs in the year was £ 3,572,895 (2023: £2,247,000).
NOTES TO THE FINANCIAL STATEMENTS
68
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
7. Auditor’s remuneration
The analysis of auditor’s remuneration, including associate firms, is as follows:
2024
£000
2023
£000
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts
113
121
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
45
45
Total audit fees
158
166
8. Employee information
The average monthly number of employees (including executive directors) was:
2024
Number
2023
Number
Sales and administration
28
21
Research and development
19
25
Operations and logistics
70
18
117
64
There are no employees in the parent company other than Directors, whom are remunerated by other group companies (2023: nil).
2024
£000
2023
£000
Their aggregate remuneration comprised:
Wages and salaries
5,168
3,856
Social security costs
251
195
Other pension costs
153
103
Share based payment
51
224
5,623
4,378
At the year end there were employer’s pension contributions provided for but not paid of £8,282 (2023: £9,279).
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.
2024
£000
2023
£000
Their aggregate remuneration comprised:
Wages, salaries and fees
858
693
Social security costs
29
42
Pension and other benefits
15
21
902
756
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, David Johns-Powell, Björn Lindblom and Peter Tyler are not the members of the Company pension
scheme. The highest paid Director received total remuneration of £393,458 (2023: £371,998). Please see page 40 for the details.
NOTES TO THE FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
69
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
9. Finance income
2024
£000
2023
£000
Discount on contract assets
77
32
Bank deposits
15
3
Total finance income
92
35
10. Finance expense
2024
£000
2023
£000
Interest on debt factoring
27
19
Interest on loans
22
44
Interest on loan from Directors
31
41
Interest on lease liabilities
19
11
Interest on bank overdraft
2
18
Other interest
12
3
Total finance expense
113
136
11. Tax
2024
£000
2023
£000
Current tax:
UK corporation tax
(665)
(748)
Overseas tax
602
–
Adjustments in respect of prior year
(50)
–
(113)
(748)
Deferred tax (note 26)
Origination and reversal of timing differences
(282)
(294)
Total tax credit
(395)
(1,042)
NOTES TO THE FINANCIAL STATEMENTS
70
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
11. Tax (continued)
2024
£000
2023
£000
Loss on ordinary activities before tax
(4,225)
(3,448)
Tax on loss at standard corporation tax rate of 25% (2023: 19%)
(1,056)
(655)
Effects of:
Expenses not deductible for tax purposes
43
19
Capital allowances in excess of depreciation
(14)
–
Capitalisation of R&D costs
(334)
(138)
Losses surrendered for R&D tax credit
1,661
980
R&D tax credit
(1,433)
(1,301)
Unrelieved tax losses and other deductions arising in the year
822
79
Adjustments in respect of prior periods
(50)
–
Difference in tax rates
(34)
(26)
Total tax credit for the year
(395)
(1,042)
Factors affecting tax charge in future years
Tax losses carried forward at the end of March 2024 were £42,353,245 (2023: £39,036,486) of which £42,292,700 (2023: £39,005,763 ) relates to the
UK and £60,545 (2023: £30,723) relates to Sweden.
The Swedish tax rate reduced to 20.6% from 1 January 2021, and the Indian effective tax rate remains unchanged at 29.12% from 1 April 2019 and
the deferred tax for Sweden and India has been calculated at these rates.
12. Loss per share
The calculation of the basic and diluted loss per share is based on the following data:
2024
2023
Loss for the purposes of basic loss per share being net loss attributable to equity holders of the parent
(£000)
(3,830)
(2,406)
Weighted average number of ordinary shares for the purposes of basic and diluted loss per share
(excluding own shares held)
271,910,382
232,763,664
Loss per share (pence)
(1.41)
(1,03)
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.
NOTES TO THE FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
71
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
13. Intangible Assets (Group)
Software
£000
Software
Development
£000
SMIP
Intangible
£000
Total
£000
Cost
At 1 April 2022
144
424
6,100
6,668
Additions
–
734
–
734
At 31 March 2023
144
1,158
6,100
7,402
Additions
–
1,384
–
1,384
Disposal
(144)
–
–
(144)
At 31 March 2024
–
2,542
6,100
8,642
Amortisation
At 1 April 2022
144
11
2,420
2,575
Charge for the year
–
5
421
426
Impairment
–
–
968
968
At 31 March 2023
144
16
3,809
3,969
Charge for the year
–
8
259
267
Disposal
(144)
–
–
(144)
Impairment
–
41
750
791
At 31 March 2024
–
65
4,818
4,883
Carrying amount
At 31 March 2024
–
2,477
1,282
3,759
At 31 March 2023
–
1,142
2,291
3,433
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 £259,000 (2023: £421,000). This is included in other operating
costs. An impairment review of the intangibles assets has been undertaken in the year with an impairment of £750,000 being made (2023:
£968,000). The process and significant assumptions are as outlined in note 3b (i).
NOTES TO THE FINANCIAL STATEMENTS
72
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
14. Intangible assets (Company)
Software
£000
Total
£000
Cost
At 1 April 2023
144
144
Disposal
(144)
(144)
At 31 March 2024
–
–
Amortisation
At 1 April 2023
144
144
Disposal
(144)
(144)
At 31 March 2024
–
–
Carrying amount
At 1 April 2023 and 31 March 2024
–
–
15. Goodwill
Group
£000
Cost at 1 April 2023 and 31 March 2024
1,930
Carrying amount at 31 March 2023 and 31 March 2024
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% (2023: 11.5%)
• Compound annual growth rate in revenue over next five years between 11% and 21.5% (2023: 11% and 54%)
• Growth rate in perpetuity 2% (2023: 2%)
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 11% and 21.5% over the next five years
with revenues beyond that period based upon a terminal growth rate of 2%. The 2% 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.
NOTES TO THE FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
73
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
15. Goodwill (continued)
In the most stretched impairment model, it shows headroom of £866k, however this uses a weighted average cost of capital of 15%, a perpetual
growth rate of 0% (6.5% below market forecasts for growth rates in India) and uses very conservative revenue growth rates ranging from 10% - 27%
over the next five years against what is already a very conservative model (we have seen an actual revenue growth rate of 58% in financial year
2024 and there is strong order book). Should expected revenue growth not be achieved, the Group would revise the level of costs that have been
modelled. On this basis, management believe that goodwill is not impaired.
16. Property, plant and equipment
Group
Fixtures and
equipment
£000
Cost
At 1 April 2022
397
Additions
31
At 31 March 2023
428
Additions
224
Disposals
(25)
At 31 March 2024
627
Accumulated Depreciation
At 1 April 2022
366
Charge for the year
32
At 31 March 2023
398
Charge for the year
58
Depreciation on disposals
(25)
At 31 March 2024
431
Carrying Amount
At 31 March 2024
196
At 31 March 2023
30
At 31 March 2024 the Group had no contractual commitments outstanding for the acquisition of property, plant and equipment (2023: £nil).
NOTES TO THE FINANCIAL STATEMENTS
74
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
17. Leases
Right of use asset
Group
Buildings
£000
Cost
At 1 April 2022
679
Disposals
(513)
At 31 March 2023
166
Additions
425
At 31 March 2024
591
Accumulated Depreciation
At 1 April 2022
526
Charge for the year
31
Disposals
(513)
At 31 March 2023
44
Charge for the year
73
At 31 March 2024
117
Carrying Amount
At 31 March 2024
474
At 31 March 2023
122
Lease liability movements in the year
2024
£000
2023
£000
As at 1 April
123
153
New lease – Cambridge head office
425
–
Payments
(93)
(41)
Interest
19
11
At 31 March
474
123
Lease liabilities
2024
£000
2023
£000
Current
110
29
Non - Current
364
94
As at 31 March
474
123
NOTES TO THE FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
75
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
17. Leases (continued)
Amounts recognised in Income Statement
2024
£000
2023
£000
Expense on short-term lease
103
103
Depreciation
73
31
Interest
19
11
Year to 31 March
195
145
CyanConnode Limited entered into a new lease agreement from 4 October 2023 for its head office in Cambridge on a term of 5 years with a mutual right of
break by serving a notice at any time after 4 October 2026. At year end, there is no expectation that this break will be taken. Payments of £24,000 were made
against the lease for the year ended 31 March 2024. An incremental borrowing rate of 5.91% was used to determine the lease liability on inception based on
United Kingdom borrowing rates.
CyanConnode Private Limited leases its office property on a 5-year term with a break clause after 3 years. Payments of £39,000 (2023: £41,000) were
made against this lease during the year ended 31 March 2024. An incremental borrowing rate of 8.3% was used to determine the lease liability on
inception based on Indian borrowing rates.
CyanConnode Private Limited entered into an agreement for the rental of additional office space on 1 August 2023 for a period of 11 months.
Payments of £30,000 were made against the short-term lease for the year ended 31 March 2024.
18. Subsidiaries
Investment in subsidiaries
Company
2024
£000
Company
2023
£000
As at 1 April
5,042
9,036
Capital contribution in respect of share-based payment
51
224
Impairment in investment in Connode Holdings AB
(806)
(4,010)
Impairment in investment in CyanConnode Limited
(160)
(208)
As at 31 March
4,127
5,042
The impairment in relation to Connode Holdings AB in the year has been based on the future value in use of this sub-group which is based on the
value of the SMIP contract. The process and significant assumptions are as outlined in note 3b (i). The investment in CyanConnode Limited has
also been fully impaired based on the expected future profitability of this company. This led to an impairment of £160,000 (2023: £208,000) in the
year in line with the capital contribution to this company in the year.
NOTES TO THE FINANCIAL STATEMENTS
76
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
18. Subsidiaries (continued)
Movement in investment of subsidiaries
Company
2024
£000
Company
2023
£000
Cost
Cost at 1 April
15,156
14,932
Addition
51
224
At 31 March
15,207
15,156
Impairment
Impairment at 1 April
(10,114)
(5,896)
Impairment in the year
(966)
(4,218)
At 31 March
(11,080)
(10,114)
Carrying Amount at 31 March
4,127
5,042
The members of the Group, all of which are 100% owned are as follows:
CyanConnode Limited
Suite 2, Ground Floor
The Jeffreys Building
St Johns Innovation Park
Cowley Road
Cambridge
CB4 0DS
• 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
CyanConnode Private Limited
B-41 Panchsheel Enclave
New Delhi-110017
India
• 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
DigiSmart Networks Private Limited
8 Kirti Nagar
Sodala
Jaipur
Rajasthan-3020191
India
• 100% of the issued share capital of the Company is held by CyanConnode Private Limited
• The company is incorporated in India and has an accounting period ending 31 March
• The principal activity of the Company is to act as an AMISP and to market and sell the Group’s range of
products in India along with products and services from other companies to provide a full end-to-end
solution to utilities.
Connode Holding 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 Sweden and has an accounting period ending 31 March
• The principal activity of the Company is to act as a holding company
Connode AB
Solna Strandväg 80
172 54 Solna
Stockholm
Sweden
• 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
NOTES TO THE FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
77
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
19. Other financial assets
2024
£000
2023
£000
Bank securities
51
62
The Company held no bank securities at either balance sheet date.
20. Trade and other receivables – non-current assets
Group
Company
2024
£000
2023
£000
2024
£000
2023
£000
Retention money
548
315
–
–
Employee Benefit Trust Loan
–
–
927
1,880
Contract assets
2,537
1,761
–
–
Loans to other group entities
–
–
402
419
Trade and other receivables
3,085
2,076
1,329
2,299
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. However, in accordance to the updated IFRS 9 policy, retentions and contract assets will have the lowest level ECL rate applied. Our
ECL rate is based on a different assessment criteria for aging, to better represent the risk profile of the company. It ranges from 1.07% to 2.5%. Refer to
Note 22 for further details.
The Employee Benefit Trust (EBT) holds own shares issued. The original amount of the EBT loan was £3,615,241 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 decreased by £952,947 (2023 £156,000 increased in value). There was
no further loan made to the EBT in the year (2023: £nil).
The contract assets represent revenue recognised in the year but have not been invoiced. Management expects to raise invoices for these assets in
financial years 2026 to 2029.
The loan from the Company to subsidiaries has arisen as the Company provides support as needed to all subsidiaries. These amounts will be paid
depending on the affordability of each subsidiary. Repayment of these loans is assessed each year to determine whether impairment is required.
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 37.
21. Inventories
2024
£000
2023
£000
Raw materials
743
85
Raw materials - provision
(11)
(31)
Raw materials - net realisable value
732
54
Finished goods - cost
954
739
Finished goods - provision
–
–
Finished goods - net realisable value
954
739
Inventories
1,686
793
NOTES TO THE FINANCIAL STATEMENTS
78
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
21. Inventories (continued)
Inventories are stated after provisions for impairment of £11,000 (2023: £31,000). £20,000 (2023: £102,000) of stock impairment charges were
recognised in the year, and £20,000 (2023: £743,000) provision was utilised. There has been no impairment reversal (2023: £nil) in the year. The total
cost of inventories expensed in the year amounted £12,708,000 (2023: £7,259,000). The Company held no inventories at either balance sheet date.
22. Trade and other receivables – current assets
Group
Company
2024
£000
2023
£000
2024
£000
2023
£000
Trade receivables
8,692
7,224
–
–
Allowance for expected credit losses
(175)
(274)
–
–
8,517
6,950
–
–
Contract assets
910
24
–
–
Other debtors
911
52
12
32
Prepayments
153
156
43
49
Trade and other receivables
10,491
7,182
55
81
CyanConnode Ltd has a loan of £69,281,018 (2023: £64,838,214) with CyanConnode Holdings plc with a current impairment provision of
£69,281,018 (2023: £64,838,214).
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 terms due to
being paid over the contract life.
Expected credit losses
The movement in the expected credit loss provision in the year was as follows:
Group
2024
£000
Group
2023
£000
As at 1 April
(273)
(181)
Credit/(charge) in the year
98
(117)
Provision utilised
–
25
As at 31 March
(175)
(273)
Credit risk
At 31 March 2024 the Group had significant concentration of credit risk in five customers which represented 98% (2023: three customers, 57%) of
the Group’s trade receivables. This reliance on four customers in the India and one customer in UAE is included within our principal risks statement
on pages 19 to 22 of this report.
NOTES TO THE FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
79
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
22. Trade and other receivables – current assets (continued)
Trade receivables
2024 Credit
loss %
applied
2023 Credit
loss %
applied
2024
£000
2023
£000
Not yet due
1.07%
2.00%
7,553
6,813
30 – 59 days
1.07%
6.00%
8
74
60 – 89 days
1.07%
8.00%
273
11
90 – 120 days
2.00%
8.00%
80
4
120 days and over
2.50%
8.00%
778
322
Total
8,692
7,224
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 £858,000 (2023: £326,000) which is over 90 days overdue is included in trade receivables. A provision of £90,000 (2023: £136,000) has
been recognised based on known exposures and expected credit losses.
23. Cash and cash equivalents
Group
Company
2024
£000
2023
£000
2024
£000
2023
£000
Cash and cash equivalents
783
4,070
20
2,991
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.
The guarantee of £10,000 given by Barclays Bank plc to HMRC on behalf of CyanConnode Limited has been satisfied on 4 March 2024. Barclays
Bank plc have granted a foreign exchange facility of £25,000.
24. Trade and other payables
Group
Company
2024
£000
2023
£000
2024
£000
2023
£000
Trade payables
6,226
2,657
44
78
Other payables
290
87
–
–
Accruals
1,310
716
161
90
Social security and other taxes
392
306
–
–
Contract liabilities
232
67
–
–
8,450
3,833
205
168
NOTES TO THE FINANCIAL STATEMENTS
80
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
24. Trade and other payables (continued)
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 £114,000 is anticipated to unwind
in financial year 2025 (2023: £59,000). During the year £nil (2023: £22,342) 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 (2023: £nil). The average credit period taken for trade
purchases is 101 days (2023: 63 days) due to delayed payments for back-to-back arrangements and periodic payment management for cashflow
timing.
Trade payables
2024
£000
2023
£000
Not yet due
2,628
2,187
30 – 59 days
452
384
60 – 89 days
783
–
Over 90 days
2,363
86
Total
6,226
2,657
The directors consider that the carrying amount of trade payables approximates to their fair value.
25. Short-term borrowings
Group
Company
2024
£000
2023
£000
2024
£000
2023
£000
Advance on R&D tax credit
–
500
–
500
Loan from Directors
–
300
–
300
Debt factoring
–
426
–
–
As at 31 March
–
1,226
–
800
A loan of £300,000 (2023: £300,000) from one Director to assist with working capital was repaid in November 2023. Interest was charged at 13.5%
per annum.
In November 2022, the Company received an advance loan for £500,000 against its R&D tax credit. This loan was repaid to the lender out of the
funds received from HMRC for the group’s R&D tax credit. The loan bore interest at 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 and ICICI banks in India which are secured against Letters of Credit provided by a
customer for deliveries of Omnimesh modules. As at the year end a balance of £nil (2023: £426,000) was owing to the bank. The facility bore
interest at 8% (2023: 8%) per annum.
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 2024 (2023: £nil).
To assist with working capital, a loan from one director for £400,000 was put in place after year end, as an advance against the FY24 R&D Tax Credit,
expected to be received by October 2024.
NOTES TO THE FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
81
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
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.
2024
£000
2023
£000
At 1 April
452
746
Movement during the year (note 11)
(282)
(294)
At 31 March
170
452
2024
£000
2023
£000
SMIP Intangibles deferred tax
264
472
Deferred tax asset – India
(82)
(20)
Deferred tax asset – Sweden
(12)
–
Accelerated capital allowances
11
(2)
Short term timing differences
(2)
(2)
R&D intangible
619
285
Losses
(628)
(281)
Total recognised deferred tax liability
170
452
Unrecognised deferred tax asset
2024
£000
2023
£000
Share options
–
(80)
Losses - UK
(9,958)
(9,759)
Total unrecognised deferred tax asset
(9,958)
(9,839)
The deferred tax asset has not been recognised due to the unpredictability and uncertainty of future profit streams.
27. Other non-current liabilities
2024
£000
2023
£000
Other payables
87
42
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
No
£000
As at 31 March 2022
236,309,035
4,726
Issue of new shares
35,578,329
712
As at 31 March 2023
271,887,364
5,438
Issue of new shares
27,188,500
544
As at 31 March 2024
299,075,864
5,982
NOTES TO THE FINANCIAL STATEMENTS
82
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
28. Share capital (continued)
In the year, no shares were issued at prevailing market prices as settlement for professional services provided (2023: £68,750).
In January 2023 the Company successfully raised funding of £5.25m before expenses through a placing of 30,882,354 ordinary shares.
In November 2023 the Company successfully raised funding of £2.72m before expenses through a placing of 27,188,500 ordinary shares.
During the year, shares were issued to directors and employees as part payment for their remuneration. £50,000 was raised this way during the
year (2023: £24,175).
During the year no shares were issued as a result of the exercise of share options (2023: 451,722 shares). 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.
30. Own shares held
Group
£000
Company
£000
Balance at 31 March 2023 (11,305,524 ordinary share of 2.0 pence per share)
(3,611)
–
Movement in year
–
–
Balance at 31 March 2024 (11,305,524 ordinary share of 2.0 pence per share)
(3,611)
–
Own shares held are those issued to the Employee Benefit Trust.
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 retained losses in respect of options exercised or cancelled/lapsed. The reserve also includes the fair value of warrants issued less
transfers to retained losses in respect of warrants that have been exercised or have 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.
NOTES TO THE FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
83
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
34. Reconciliation of operating loss to net cashflow from operating activities
Group
2024
£000
2023
£000
Operating loss for the year
(4,204)
(3,347)
Adjustments for:
Depreciation of property, plant and equipment
58
32
Amortisation of Intangible assets
267
426
Depreciation on right of use assets
73
31
Impairment of intangible assets
791
968
Shares issued in lieu of bonus / service
–
24
Share based payments
51
224
Operating cash flows before movements in working capital
(2,964)
(1,642)
Increase in inventories
(913)
(634)
Increase in receivables
(4,348)
(1,787)
Increase in payables
4,662
1,475
Cash outflow from operating activities
(3,563)
(2,588)
Net income taxes received
703
371
Net cash outflow from operating activities
(2,860)
(2,217)
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 38.
NOTES TO THE FINANCIAL STATEMENTS
84
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
35. Share based payments (continued)
Details of the share options outstanding during the year were as follows:
2024
2023
Number
of share
options
Weighted
average
Exercise
price (in £)
Number
of share
options
Weighted
average
Exercise
price (in £)
Outstanding at beginning of year
24,577,078
0.15
34,268,640
0.19
Granted during year
9,167,271
0.14
4,011,315
0.11
Exercised during the year
–
–
(451,722)
0.10
Forfeited during year
(5,043,338)
0.16
(13,251,155)
0.23
Outstanding at the end of the year
28,701,011
0.15
24,577,078
0.15
Exercisable at the end of the year
16,731,987
0.15
9,097,418
0.18
The options outstanding at 31 March 2024 had a weighted average remaining contractual life of 81 months (2023: 97 months). The options
outstanding at year end had exercise prices ranging from £0.10 to £0.84.
In the year to 31 March 2024, options were granted on 17 November and 30 January. The aggregate of the estimated fair value of those options is
£710,437. In addition, on 30 January, 437,793 replacement options were granted for options granted in 2017 with no incremental fair value.
In the year to 31 March 2023, options were granted on 9 May and 30 September. The aggregate of the estimated fair value of those options is
£239,300. In addition, in April 2022, replacement options were granted for options granted in February 2021 with no incremental fair value.
A share option charge of £51,059 (2023: £224,218) 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:
2024
2023
Weighted average share price
14.55p
22.27p
Weighted average exercise price
15.30p
16.63p
Expected volatility
85%
78%
Expected life
4 years
4 years
Risk free rate
3.50%
3.50%
Expected dividend yield
0%
0%
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous 60 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.
NOTES TO THE FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
85
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
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.
2024
2023
Number
of warrants
Weighted
average Exercise
price (in £)
Number
of warrants
Weighted
average Exercise
price (in £)
Outstanding at beginning of year
341,605
0.54
341,605
0.54
Granted during the year
27,188,500
0.15
–
–
Lapsed during the year
(230,000)
0.54
–
–
Outstanding at the end of the year
27,300,105
0.15
341,605
0.54
Exercisable at the end of the year
111,604
0.61
341,605
0.54
The inputs into the Black-Scholes model for the warrants are as follows:
2024
Pre-2023
Weighted average share price
14.94p
32.78p
Weighted average exercise price
15.0p
54.0p
Expected volatility
85%
65%
Expected life
10 years
10 years
Risk free rate
3.5%
0.5%
Expected dividend yield
0%
0%
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous 60 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:
Group
Company
As at end of year
2024
£000
2023
£000
2024
£000
2023
£000
Financial assets
Classified as amortised cost
Trade receivables
8,517
6,950
–
–
Retention money
548
315
–
–
Intercompany receivables
–
–
401
419
Other debtors
496
45
939
1,912
Contract assets
3,447
1,785
–
–
Cash and cash equivalents
783
4,070
20
2,991
Total financial assets
13,791
13,165
1,360
5,322
NOTES TO THE FINANCIAL STATEMENTS
86
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
36. Financial instruments and risk management (continued)
Group
Company
As at end of year
2024
£000
2023
£000
2024
£000
2023
£000
Financial liabilities
Classified as amortised cost
Trade payables
6,226
2,657
44
78
Other payables
290
87
–
–
Accruals
1,310
716
161
90
Short-term borrowings
–
1,226
–
800
Lease liabilities
474
123
–
–
Total financial liabilities
8,300
4,809
205
968
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 2024
Contractual Cash Flows
Carrying
Amount
£000
Total
£000
1 – 12 months
£000
1 – 2 years
£000
2 – 5 years
£000
Non-derivative financial liabilities
Trade payables
6,226
(6,226)
(6,226)
–
–
Other payables
290
(290)
(290)
–
–
Accruals
1,310
(1,310)
(1,310)
–
–
Lease liabilities
474
(528)
(135)
(138)
(255)
Total
8,300
(8,354)
(7,961)
(138)
(255)
As at 31 March 2023
Contractual Cash Flows
Carrying
Amount
£000
Total
£000
1 – 12 months
£000
1 – 2 years
£000
2 – 5 years
£000
Non-derivative financial liabilities
Trade payables
2,657
(2,657)
(2,657)
–
–
Other payables
87
(87)
(87)
–
–
Accruals
716
(716)
(716)
–
–
Short-term borrowing
1,226
(1,226)
(1,226)
–
–
Lease liabilities
123
(141)
(37)
(40)
(64)
Total
4,809
(4,827)
(4,723)
(40)
(64)
NOTES TO THE FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
87
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
36. Financial instruments and risk management (continued)
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
£69,281,017 (2023: £64,838,214). In addition, the Company has made a total provision of £2,688,189 (2023: £1,996,407) 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.
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 42 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, United Arab Emirates, 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 2024
exchange rate.
INR
£000
SEK
£000
Fixed assets
792
251
Current assets
13,184
81
Current liabilities
(6,540)
(103)
Net assets
7,436
229
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.
NOTES TO THE FINANCIAL STATEMENTS
88
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
36. Financial instruments and risk management (continued)
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
March
2024
£000
March
2023
£000
Indian Rupee
1,252
789
Swedish Krona
39
49
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.
Year ended
March
2024
£000
March
2023
£000
Indian Rupee
(667)
(344)
Swedish Krona
(4)
(37)
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 39 of the Directors’ Report for a full list of directors who served in the year. During the year, 1,000,000 (2023: 827,076) newly
issued shares were purchased by the directors of the Company for £100,000 (2023: £133,000).
During the year, the Company paid fees of £423,333 (2023: £379,605) in respect of services provided by directors. The balance outstanding at the
year-end was £78,500 (2023: £50,000). Please see page 40 of the Directors' Remuneration Report for further information.
To assist with working capital, a loan was granted from one director in December 2020 for £300,000. This was repaid during the year. Interest was
charged at 13.5% per annum. During the year interest of £30,375 (2023: £40,500) was incurred and no balance (2023: £Nil) was outstanding at the
year end.
Transactions between parent company and subsidiaries
Year end balances outstanding and transactions in the year between the parent company and its subsidiaries are disclosed below.
Connode
Holding AB
£000
Connode AB
£000
CyanConnode
Limited
£000
CyanConnode
Private Limited
£000
Loans to related parties
Balance as at 31 March 2023
378
37
–
4
Cash advances/(repayments)
–
–
–
–
Impairment provision
–
–
–
–
Loss on foreign exchange revaluation
(18)
–
–
–
Balance as at 31 March 2024
360
37
–
4
CyanConnode Holdings plc makes a management charge for services rendered to CyanConnode Limited. In the year to 31 March 2024 these
amounted to £194,000 (2023: £297,000).
CyanConnode Ltd has a loan of £69,281,018 (2023: £64,838,214) with CyanConnode Holdings plc with a current impairment provision of
£69,281,018 (2023: £64,838,214).
NOTES TO THE FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
89
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
90
CYANCONNODE ANNUAL REPORT & ACCOUNTS 2024
Nominated and Financial Adviser
Strand Hanson Ltd
26 Mount Row
London
W1K 3SQ
Registrars
Share Registrars Ltd
3, The Millennium Centre
Crosby Way
Farnham
GU9 7XX
Joint Broker
Zeus Capital Ltd
125 Old Broad Street
London
EC2N 1AR
Joint Broker
Panmure Liberum
25 Ropemaker Street
London
EC2Y 9LY
Auditor
RSM UK Audit LLP
Blenheim House
Newmarket Road
Bury St Edmunds
Suffolk
IP33 3SB
Patent Attorneys
Beresford & Co
16 High Holborn
London
WC1V 6BX
Solicitors to the Company
Taylor Wessing LLP
5 New Street Square
London
EC4A 3TW
Principal Banker
Barclays Bank plc
9-11 St Andrews Street
Cambridge
CB2 3AX
Professional Advisers
CYANCONNODE.COM
CyanConnode
Suite 2, Ground Floor, The Jeffreys Building,
St Johns Innovation Park, Cowley Road
Cambridge CB4 0DS