CyanConnode value rockets with growing orders from India, the Middle East, Africa and Thailand (LON:CYAN)

CyanConnode Holdings Plc (LON:CYAN) Executive Chairman John Cronin and Chief Financial Officer Heather Peacock caught up with DirectorsTalk for an exclusive interview to discuss their interim results for the six months ended 30th September 2021.

Q1: Can you provide an overview of CyanConnode for those listeners who are not familiar with your business?

A1: The company is a world leader in Narrowband Radio Frequency (RF) Smart Mesh Networks, which are used for machine to machine (M2M) communication.  As well as being self-forming and self-healing, our RF Smart Mesh Networks are designed for rapid deployment, whilst giving exceptional performance and competitive total cost of ownership.

In June 2018, the company launched its award-winning Omnimesh Advanced Metering Infrastructure (AMI) platform, which has already gained considerable commercial traction, especially in India which is a key market for the Company.

Q2: Can you provide a brief business overview and the key financial highlights from your interim results for the six months to 30 September 2021?

A2: There has been a further significant increase in the volume of modules we shipped to customers and a corresponding increase in revenue and cash collection. Key highlights include:

  • Increase in revenue of 172% to £4.1m from £1.5m in H1 FY21
  • Significant increase in gross profit of 112% to £831k from £477k in H1 2019
  • Reduction in operating loss by 26% from H1 FY21
  • Increase in cash received from customers by 138% to £3.8m from £1.6m in H1 FY21
  • Cash and cash equivalents of £1.7m compared to £1m in H1 FY21
  • Further order wins and the continued rollout of projects in India, Thailand and Europe

We are making great progress in all areas of our business and look forward with optimism for the next period.

Q3: Can you outline what else investors should be taking note of?

A3: In addition to the financial highlights just mentioned, investors should also be taking note of our strong operational performance:  

  • Omnimesh modules shipped to customers up 3.4 times to 315k (H1 FY 2021: 92k)
  • Order for 152,000 Omnimesh modules for a new end customer in Northern India
  • Order for 100,000 Omnimesh modules for a new end customer in Africa
  • Follow-on order from MEA (Metropolitan Electricity Authority) Smart Grid Project in Thailand
  • Key MOU (Memorandum of Understanding) signed with Intellismart (IntelliSmart Infrastructure Private Limited)
  • Heavily oversubscribed Placing completed at a premium to the then share price, raising £3.15 million before expenses
  • Selected as EESL (Energy Efficiency Services Limited) Technology Partner for the Middle East and Africa
  • Global Strategic Alliance signed with SEW (Smart Energy Water)
  • Further strengthening of the Indian Management Team
  • Awarded the London Stock Exchange Green Economy Mark
  • Won the Frost and Sullivan Global Smart Metering Technology Innovation Leadership Award

Q4: Can you talk us through some of your business models?

A4: We’ve got three business models in total.

The one to date that we’ve been using is a Capex Model and this means that capital expenditure is paid to us on milestones of Supply, Installation and Commissioning. In most projects, the installation is done in the first two years of the project and then there’s another eight to ten years support and maintenance then going forward with our software that’s all being deployed.

There’s another model called a Hybrid where some customers will pay a small amount of hardware upfront and then pay per meter per month over six or seven years.

The really exciting model that we’re just working on right now is the Opex Model, per meter per year over ten years and this Opex model is whereby we will set up a Special Purpose Vehicle, an SPV it’s known, with an infrastructure fund putting their money into the SPV and we sell into the SPV. They in turn can then lease the equipment to the DISCOMs and it makes it more affordable for them then to deploy their meters and it gives them the scalability they’re looking for, millions of devices rather than what we’ve been doing today with hundreds of thousands of devices in a contract.

Q5: What progress has been made in the Indian smart metering market during the last six months?

A5: As we have consistently stated, India represents a substantial opportunity for us, and we continue to hold a leading position in the market. India continues to be a significant adopter of smart metering technology, which we are a leading provider of in the country.

In May 2021, we announced the signing of a MOU with Intellismart, a joint venture company formed by EESL and NIIF. Intellismart is a Meter Asset Provider which deploys smart meters by funding CAPEX, which it then recovers through an OPEX model.  Intellismart is focusing on expediting the deployment of 250 million smart meters across India and it can operate at scale by leveraging the expertise and capital of EESL and NIIF.  Under the MOU, CYAN and Intellismart will work on existing EESL and Intellismart projects as well as new ones, in India and international markets. 

In June 2021, CyanConnode India appointed Rajiv Kumar as Managing Director and Chief Executive Officer. Rajiv is a dynamic professional with twenty-five years’ experience in digital energy for transmission and distribution utilities. He joined the business from Intellismart where he managed one of the largest smart meter deployment programs in India in his role as Chief Operating Officer, a role he held since Intellismart was set up in 2019.

In August 2021, the Company announced a new order for 152,000 Omnimesh modules from a new end customer in Northern India. The order includes Services, Omnimesh Head-End Software, Perpetual Licence and an Annual Maintenance Contract. Under the contract we will supply its new Omnimesh Cellular Modules as well as Omnimesh RF Modules. Deployment of this contract has commenced with 40,000 modules being shipped during the period.

Q6: Can you update on the progress made in other territories during the last six months?

A6: In April 2021, the company was pleased to announce it had been selected by EESL Energy Solutions LLC, Dubai, (EESL), as technology partner for projects in the Middle East and Africa for smart metering and smart lighting projects.

In May 2021, a Global Strategic Alliance Agreement was signed with SEW (Smart Energy Water). Headquartered in California, SEW is a global energy and water cloud platform provider serving over three hundred utilities worldwide.

In August 2021, a follow-on order was received from JST (The JST Group), for 31,000 Omnimesh modules and associated gateways, this order is in addition to the 33,000 Omnimesh Modules and 206,735 Omnimesh perpetual software licences purchased in 2019 and 2020. Deployment of this order will follow the successful ‘Go-Live’ phase of the MEA Smart Grid Project, which is expected in Q4 of 2021.

Also in August 2021, a contract for a smart metering deployment in Africa was received. Under the contract, we will supply 100,000 Omnimesh Modules together with Advanced Metering Infrastructure, Services, Omnimesh Head-End Software, Perpetual License and an Annual Maintenance Contract.

Q7: Looking to the next six months, what should investors be looking out for?

A7: Following the announcement of the ~£30 billion “Revamped Power Distribution Scheme” aimed at creation and strengthening of the transmission and distribution infrastructure the Ministry of Power, Government of India has issued a standard bidding document and a contract agreement that can be directly adopted by utilities for rolling out the smart metering programme.

These steps have acted as a catalyst in spurring the smart metering movement in the country as the size of tenders has gone up from thousands to millions of units. There are tenders for 11 million meters that are currently being floated or will be floated shortly. Given the Government’s ambition these numbers are only going to increase exponentially in near future. The Board of CyanConnode, with its experience of understanding the Indian market, believes the Company is well placed to cater to the current and upcoming requirements.

In addition, as markets around the world mature, the company believes that as well as its opportunities in India, it is well placed to capture further orders to build on other projects such as its project in Thailand and the African order announced recently.

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