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Cash conserved as CyanConnode growth accelerates

Good news from narrowband radio frequency communications networks developer CyanConnode (LON: CYAN) where full year revenues have soared in the past year. More importantly, the cash position is positive.

Revenues are better than expected. In the year to March 2021, revenues will be more than double the £2.5m achieved in the 15 months to March 2020. Arden had forecast a figure of £5.8m for 2020-21, but it will be around £6.2m. That is an impressive second half performance considering that interim revenues were £1.5m.

Management has been promising growth in demand and contracts have been won, but there have been delays. The trading statement shows that momentum is building.

There is strong demand for the company’s RFMesh smart meter communications technology – both contracted and potential new contracts. India is the major market and the investment in a new management team appears to be working well.  

CyanConnode delivered 141,000 modules in March, taking the total for the year to 481,000. There could be contracts won in other international markets.

Cash

CyanConnode will lose money in 2020-21 and even on forecast 2021-22 revenues of £8.8m it is still expected to report a small pre-tax loss. Expenses have been slashed in recent years and there should not be a significant increase this year.

Advanced payments are helping to fund the growth in demand. There will be continued cash inflows from R&D tax credits that will offset the loss.

Management says that there is £1.5m in the bank but that is not a net cash figure. Arden expected a small net cash figure for March 2021, rising to £500,000 next March.

This shows how well CyanConnode has managed its cash resources at a time of rapid growth. Fears of further fundraisings have haunted the company over the years and held back the share price. This financial position does not mean that there will not be a cash call in the future if it is required to fund growth, but it does mean that the cash will not be needed for the company to survive as it was in the past.

Trading has been better than expected and there is potential for upgrades. The momentum at the end of March should continue into the new financial year.

The share price jumped 14% to 7.6p, although it is still below the high for the year. If the momentum of the business continues, then there should be further upside.

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