CyanConnode highlights progress as it works to narrow cost base

The AIM-traded firm said that would result in the company generating more revenues in the first half of 2018 than in the full year for 2017.

It said it expected levels of revenues and cash receipts to “materially accelerate” throughout each quarter of the year.

On the commercial front, the board said that following the appointment of Anil Daulani from Tech Mahindra as managing director of CyanConnode India in September, both the sales and delivery teams had been “significantly strengthened”.

“The relationships with existing meter and system integration partners have been consolidated and new eco-system partners added,” the board explained in its statement.

“As a result, the sales pipeline in India has expanded and includes multiple large commercial opportunities where orders are expected to be placed in the current calendar quarter and the second half of 2018, resulting in cash and revenues during 2018.”

In addition, the company said it had generated revenues and been paid for system integration work during the quarter by working with local Tier 1 partners in three separate territories, including two new territories.

Those three commercial opportunities could result in “significant” orders, which CyanConnode said it was continuing to pursue.

An additional benefit of that work was that the company had increased the number of successful integrations with Tier 1 meter manufacturers, including some manufacturers with which it had not previously been engaged.

“Once an order has been received from a customer, the project continues through a series of site acceptance tests (SATs) with increasing deployment volumes and complexity,” the board explained.

“Successful SATs have been delivered by the team in multiple territories during the first quarter of 2018.

“SATs have also been delivered in territories where orders had been received prior to 2018 such as Iran and Bangladesh.”

During the quarter, work on the smart metering contracts in Iran also continued, the board said.

System integration work had taken place on both the smart meter as well as the full end-to end-solution to be deployed locally.

Additional commercial opportunities were also identified in Iran, and were being developed.

“In the last trading update provided on 4 January, the company updated that it had been notified by a significant customer that deployment for one of the larger contracts had been delayed for reasons outside the company's control,” the board said.

“A regular dialogue has continued with this customer throughout the quarter, including a senior management visit to their head office to meet the CEO.

“The customer has reconfirmed that they will take delivery of the hardware that CyanConnode manufactured for them in the fourth quarter of 2017, but currently the company has little visibility on timing of the first delivery.”

CyanConnode said it would provide a further update on progress in relation to that as soon as practicable.

In the UK, the firm said the smart metering implementation programme continued to progress, with more than 11 million smart meters now installed in homes across the country, according to new figures published by the government.

Furthermore, the Smart Energy GB outlook survey provided “clear evidence” that the overwhelming majority of customers who had smart meters installed were happy to have them.

The company said the outlook found 73% of people would recommend one, and more than eight in 10 people with a smart meter thought their energy bill was accurate, compared to 67% with a traditional analogue meter.

“During 2018, the company expects to benefit from the roll-out of the UK smart metering implementation programme.

“Licences for the contract were supplied by Connode and paid for prior to its acquisition by the company in 2016, and these have been built into the roll out.”

On the financial front, at the end of the quarter the company had a global order book of $100m and a large identifiable global pipeline, with new orders expected in the near term.

The company said the CESC Mysore contract India had now officially passed the user acceptance testing milestone, which resulted in a large cash payment having been received.

It said the customer contract from Genus meters for UGVCL in India was proceeding “much faster” than previous India projects, with deliveries having been made, payments already received, and completion expected in the coming months.

As a result of the increased spending on R&D in 2017, which was to develop the company's new standards-based Omnimesh platform, an R&D tax credit cash refund claim would be submitted during April for £1.4m.

That included an amount for claims submitted for the Swedish entity in prior years, the board explained.

The company said it had taken “positive steps” to manage and reduce the cost base, with significant reductions being made in the last six months.

It explained that the cost base from July 2018 was expected to be around £0.64m per month, which would be significantly lower than in 2017.

“Solid progress was made on multiple fronts in the first quarter of 2018,” said executive chairman John Cronin.

“We continue to maintain management team focus on the delivery of the current order book, including the delayed contract highlighted above.

“In addition to the successful SATs described above I'm particularly pleased by the progress made by Anil Daulani in the India market over the last six months.”

Cronin said the company was continuing to be viewed as “thought leaders” in the smart metering communication industry, as a result of the multiple contracts it had won and deployed.

“The commercial pipeline in India looks very good and we expect to secure additional orders from this pipeline in the near term.

“All of the above factors give us a good indication of being able to meet market expectation for the year.”