29th Mar 2007 07:02
Cyan Holdings Plc29 March 2007 Press Release 29 March 2007 Cyan Holdings Plc ("Cyan" or "the Group") Final Results Cyan Holdings Plc (AIM:CYAN.L), the fabless semiconductor company specialisingin the development of low powered, configurable microcontroller chips, announcesits Final Results for the year ended 31 December 2006. Highlights • strategic review completed • new CEO appointed and executive team restructured • eCOG1X product range available and well received by customers • trials commenced by Chinese authorities on the EPOS based tax collection project • Sales Revenue of £269k, an order of magnitude increase from £30k in 2005 • Sales revenues have been significantly impacted by the delay in the roll out of the Chinese tax terminal project which is now expected in mid 2007 • Retained Loss of £2,533k and Cash Balance of £2,821k in line with expectations Commenting on the results, Mike Hughes, Chairman, said: "Our strategic reviewconfirmed the value of our products to our customers, identified a better marketpenetration strategy and showed that China, including the Chinese domesticmarket, offers us the highest potential for growth. The review was led by KennLamb whose appointment as CEO is a positive addition to Cyan's senior managementand an endorsement of our potential. "The launch of the eCOG1X product range in August 2006 and its availability inproduction quantities early in 2007 is a significant milestone for the Company.We are pleased to report that it has been well received by our customers. Ibelieve that our new management team is well positioned to deliver sustainablegrowth for our shareholders." -Ends- For further information, please contact:Cyan Holdings plc Mike Hughes, Chairman Tel: +44 (0) 1954 234 400 www.cyantechnology.com Collins Stewart LimitedSimon Atkinson, Corporate Finance Tel: +44 (0) 20 7523 8312 www.collins-stewart.com Media enquiries:Abchurch CommunicationsHeather Salmond / Franziska Boehnke Tel: +44 (0) 20 7398 [email protected] www.abchurch-group.com Chairman's Statement I am pleased to report on the activities of Cyan for the twelve months to 31December 2006. During the last quarter of 2006 we conducted a strategic review of our businessmodel including an assessment of our product offerings by industry experts. Weare satisfied that our current and in-development range of eCOGmicrocontrollers, along with its powerful CyanIDE toolset, meet the demands ofour customers and will deliver sustainable growth in a global and expandingmarket. The strategic review highlighted both the strengths and weaknesses of our chosenroutes to market. The Board has responded quickly in order to build on ourstrengths and eliminate our weaknesses. The most significant change is toincrease our focus on our major market, China, through improved productofferings supported by a restructuring of our executive management team. We are pleased to announce the appointment of Kenn Lamb as CEO as from 11 April2007. Kenn was CEO of Elixent Ltd from 2001 to 2006 where he completed asuccessful sale of the business to Matsushita of Japan. Prior to Elixent Kennwas Senior VP Sales at ARC International, a RISC processor semiconductorbusiness, where he managed the restructuring of the international sales teambuilding sales from zero. After two years of sales growth ARC completed asuccessful London Stock Exchange flotation in September 2000 with a marketcapitalisation of £500m. Before joining ARC Kenn was Managing Director of ActelInc's European FPGA businesses where his team quadrupled sales in two yearsthrough close management of the distribution sales channel. Kenn's experienceof microprocessors and configurable peripheral technology is ideal for Cyan'sproduct range. As a consultant, Kenn led the strategic review of both our approach to themarket and the restructure of our management team, and now joins us to managethe implementation of the new strategy and accelerate the growth of ourbusiness. Paul Johnson will report to Kenn Lamb and will retain his title of President andCTO given his role as founder of the company and to underline his importance inthe company when in senior level discussions in the Far East. Paul is pleasedto be able to concentrate on the development of Cyan's product range and thesupporting CyanIDE software tools as well as working to increase the engineeringcapabilities of our team in China. Cyan has a clear product road map and willbe launching important new products in 2008. As a consequence of the increased focus on China we have agreed that PaulBarwick, our sales director will leave the company on 31st March, 2007. DominicLun, General Manager of Cyan Asia Limited will report directly to the CEO withresponsibility for all activities in China. I wish to thank Paul for hisimportant contribution to our business. Paul has helped to build a strong teamin China where we now have over 200 customers showing serious interest in ourproduct range and our top 10 Chinese design wins, excluding the tax collectionproject, have potential for sales of almost one million units per annum. Ourstrategy is to become the provider of choice for microcontrollers in thedomestic Chinese market; a market which is growing very quickly. We will dothis by focussing on China, strengthening our Chinese team and widening theirrange of activities, partnering with Chinese subcontractors, developing productsspecifically for the Chinese internal market, and using our relationship withsubcontractors to influence our penetration of the European market. We believethat we are well placed to vigorously put this strategy into practice. Microcontrollers remain a buoyant and growing market. Cyan offers customers theopportunity to reduce their Bill of Material cost by integrating the functionsof normally separate peripheral devices on to the Cyan MCU chip. This approachreduces component costs, reduces system power supply needs, and reduces assemblyand test costs. Our unique software development tool, CyanIDE, then allows thechip assembler coding of peripherals through a straightforward graphical processthat reduces development time and therefore cost. This approach allows the userto focus on the more important applications software, and makes a tedious partof the development process much simpler. Overall the customer achieves lowerdevelopment costs, lower production costs, and a shorter time to market. The recent availability of the eCOG1X product range together with the improvedCyanIDE tool, version 1.4, considerably widens the range of applications andcustomers that we can address. A measure of interest in the new range is ordersfor development kits reaching over 100 units in just two months. The eCOG1X is a considerable technical achievement and has moved through itsproduction phase with no problems. We are now able to manufacture in volume tomeet our customers' needs. We have reported previously in our Interim Statement in 2006 and in our 2005Annual report on the delays on the Chinese tax collection project and its impacton our sales and growth. We are pleased to report that the Chinese authoritieshave now commenced trials of terminals in a commercial setting. Our Chinesecustomer, Pinnacle, has 300 units on trial in petrol stations in Shanxiprovince, and Hainan province has issued a request for tenders. Roll out is nowexpected in mid 2007. Pinnacle is one of China's most successful Point of Salemanufacturers with an historical 20% market share. Operating from 32 sales andsupport offices throughout China, it expects to be very successful in the newmarket. The total market in the first three or four years of roll out isexpected to run into tens of millions of units. Other, smaller, design wins,are starting to enter their production phases as covered in the ChiefExecutive's Review. We have refocused our sales capability in Europe by the appointment of Glyn asour German Distributor. With a turn-over in excess of 100 million Euros, Glynis now Cyan's largest distributor outside China where Cyan has already seensignificant design-ins and orders. We are also pleased that the Spectrum Groupof independent sales, marketing and operations (ISMO) organisations have beensigned to assist the Company in the development of its business across Europe.The move will help Cyan in particular to expand its links with key European OEMsand capitalise on the recent availability of its new eCOG1X microcontroller.Initially, the agreement encompasses the UK, France, Scandinavia, Benelux, Italyand Spain. I wish to thank my fellow directors, our management team and employees, and inparticular our loyal shareholders for their support during our maiden year onAIM. We are confident that our new strategy and restructured management team willlead us to success in 2007. Mike HughesChairman29 March 2007 Chief Executive's Review of Operations During our first year as a public company we achieved many things; considerableprogress in our product development, broader recognition in the market place,and 44 additional design wins with a sales potential of 1.8 million units perannum out of a total to date of just over 3 million per annum. The movement ofdesign wins to full production has, however, been slower than our customerspredicted. We therefore undertook a strategic review covering our productrange, value proposition to our customers and the potential of our market areasin the fourth quarter of the year. Kenn Lamb, an experienced professional inthe semiconductor industry led the review which incorporated meetings withcustomers in the UK, USA and China. This review concluded that; a. The ability of our product to absorb functions in a customer's design whichwould usually be provided by separate peripheral components, delivers a costsaving that represents a significant incentive to design-in Cyan products. Competitors must either match this functionality or aggressively discount theirproducts if they are to offer comparable cost savings, which provides theopportunity for Cyan to secure a product margin above the industry. The neweCOG1X family significantly enhances Cyan's ability to deliver these costsavings, which will become apparent throughout the coming year. b. The ability of our software tool, CyanIDE, to automate the set-up andprogramming of peripherals through a simple graphical process and then supportautomated MCU change is unique and is of significant value to our customers. Thecurrent release of CyanIDE demonstrates this capability and the tool will beenhanced to provide new and extended features that will speed up the design-inof the Cyan MCU, increase the range of supported peripheral functions,substantially reduce the customers development time and hence offer additionalcost savings. By achieving this, our customers have the opportunity to get theirproduct to market more rapidly thereby establishing the potential for enhancedmarket share and hence greater profitability. c. Cyan is exceptionally well positioned to benefit from the pace of growth inChina through a combination of existing relationships with sales channels,manufacturing partners and the established Cyan Asia team. The Chinese domesticmarket has characteristics different to those in other geographies and isparticularly well suited to the features provided by Cyan's product range. Wetherefore intend to expand our presence in China, exploit the low costenvironment by extending the engineering capability of our Chinese team and todevelop products specifically for the Chinese domestic market. Cyan has beenparticularly successful in penetrating this market through our investment intechnology demonstrators, application notes and one-stop-shop support. Prime examples of such design wins include a customer who has designed a specialpay-phone using contactless smart cards, which will also act as a "clocking inand out" terminal, and will be installed in factories throughout China. This isa project for the largest fixed-network service provider in China and thevolumes are estimated at 100,000 plus per annum. The initial design utilisesthe eCOG1k and has commenced field trials. This customer is already planning toexpand its product range to incorporate an LCD display to support advertisingand eventually videocalls which will require the eCOG1X product and applicationnotes are already under development. CyanIDE's ability to automate thetransition between the eCOG1k and eCOG1X is an example of the value to thecustomer of the CyanIDE tool and creates a barrier for competitors who wouldotherwise be candidates for the new designs. A second design win is with a Chinese customer who first used the eCOG1k toimplement a WebServer based on a Cyan application note for remote monitoring ofshipboard equipment. The success of this product has resulted in the companyconsidering plans to expand into the much larger Chinese industrial controlmarket. A new project at the same company required a low cost RF communicationssystem and it selected a Cyan technology demonstrator for the prototype. Thisproduct synchronises the illumination of navigation buoys and will be initiallydeployed in Chinese ports but the company intends to make applications forlicences enabling worldwide deployment. A key design problem required a robustsoftware solution that is being developed by Cyan Asia's engineers as an exampleof one-stop-shop support. d. The majority of consumer end products that are well suited to benefit fromthe advantages of Cyan's MCU's are manufactured by global subcontractors whooffer their customers a complete design, development, and manufacturing service.Cyan will take steps in the coming year to realise a strategy specificallytargeted at these subcontractors. The strategic review identified areas inwhich variants of Cyan's products could improve a subcontractor'scompetitiveness. e. The European market, like Japan is challenging for new vendors to establishan initial foothold. Cyan has enjoyed initial success in these markets throughthe development of technology demonstrators that implement a complete systembuilt around the Cyan MCU. Cyan has developed relationships with manufacturersin China who already sell large volumes of consumer electronic products intoEurope. These manufacturers focus on developing production products fromtechnology demonstrators such as those developed by Cyan. Cyan will pursueproposals by these manufacturers to make available production ready versions ofCyan's technology demonstrators in the form of modules to be sold back into theEuropean market. The modules will accelerate the adoption and use of the CyanMCU in Europe, overcoming the barrier for new vendors and providing a platformon which the advantages of the CyanIDE tools can be easily appreciated bycustomers. Technical Highlights Our new product family eCOG1X became available at the end of 2006 and has beenvery well received by the number of customers who were able to start theirdesigns without the chip, thanks to the CyanIDE tools. It performs better thanwe could have hoped for and so far, after extensive testing, we have no bugs toreport. I am pleased to say that the total cost of the eCOG1X design anddevelopment project was less than £1.25 million which is an incredibly smallamount of money for the development of a chip as complex as the eCOG1X. This isa testament to our R&D methodology and our rapid design processes, providingcomplex yet accurate designs. Our R&D group has not just been designing the eCOG1X chip. The peripherals andrapid design processes are applicable to all the microcontrollers we plan todesign in the years to come. Part of that is our own 32 bit core to be usedinitially in eCOG2. I am pleased to announce that we have the core running inthe lab for the first time. This is a very modern 32 bit core designedspecifically for low power consumption, very high processing power and minimalmemory requirements. All these features are essential for future 32 bit productdesigns. Owning our own core gives Cyan enormous freedom to structure ourbusiness without the royalty issues associated with licensing third party cores. CyanIDE V1.4 has now been released which fully supports the entire eCOG1X range.This was a significant piece of work as CyanIDE needed to be capable ofsupporting over thirty devices in two product families and be structured so thatit can handle 100s of products in the future. This is the fifth major release ofCyanIDE since the company commenced in 2004. As I said at the head of this review, 2006 has been a very full year and we haveachieved a great many things in developing the potential of our business. Iwould like to take this opportunity to thank our employees for their enthusiasmand hard work. The Board believes that Cyan has established a range of products that areleaders in their own field and has identified a market in which their fullpotential can be exploited. We look forward to 2007 being a significant year inthe evolution of the Group's prospects. I am delighted that Kenn has agreed to join us to lead the implementation of ourstrategy which applies feedback from users secured over the last year and buildson our product strengths to provide a firm foundation for sustainable growth.Kenn's appointment as CEO allows me to concentrate on our development activitiesand the strengthening of our engineering capability in China. Paul JohnsonCEO29 March 2007 Consolidated Profit and Loss Account 2006 2005 (as re-stated) £ £ TURNOVER: continuing operations 269,333 29,899 Cost of sales (205,776) (4,966) Gross profit 63,557 24,933 Administrative expensesShare options charges (173,529) (13,966)Other (3,035,547) (2,228,526) (3,209,076) (2,242,492) OPERATING LOSS: continuing operations (3,145,519) (2,217,559) Interest receivable and similar income 205,898 61,970Interest payable and similar charges (69,225) (12,621) LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (3,008,846) (2,168,210) Tax on loss on ordinary activities 475,557 67,381 RETAINED LOSS FOR THE FINANCIAL YEAR (2,533,289) (2,100,829) LOSS PER SHARE (pence)Basic and diluted (3.0) (3.8) Consolidated Balance Sheet 2006 2005 (as re-stated) £ £ FIXED ASSETSIntangible assets - 4,000Tangible assets 136,249 163,236 136,249 167,236 CURRENT ASSETSStocks 107,922 59,583Debtors 520,942 182,560Investments - short term deposits 2,625,000 5,375,000Cash at bank and in hand 195,801 192,680 3,449,665 5,809,823 CREDITORS: amounts falling due within one year (249,662) (338,105) NET CURRENT ASSETS 3,200,003 5,471,718 TOTAL ASSETS LESS CURRENT LIABILITIES, BEING NET ASSETS 3,336,252 5,638,954 CAPITAL AND RESERVESCalled up share capital 170,070 168,621Share premium account 8,627,630 8,598,230Profit and loss account (5,648,943) (3,141,863)Share option reserve 187,495 13,966 EQUITY SHAREHOLDERS' FUNDS 3,336,252 5,638,954 Consolidated Cash Flow Statement 2006 2005 £ £ Net cash outflow from operating activities (3,133,246) (2,015,849) Returns on investments and servicing of finance 136,673 49,349 Taxation 264,194 - Capital expenditure and financial investment (45,349) (66,114) Cash outflow before management of liquid resources and (2,777,728) (2,032,614)financing Management of liquid resources 2,750,000 (5,375,000) Financing 30,849 7,396,835 Increase / (decrease) in cash in the year 3,121 (10,779) Analysis and Reconciliation of Net Funds At 1 January Cash 31 December 2006 flow 2006 £ £ £ Cash at bank and in hand 192,680 3,121 195,801Current asset investments 5,375,000 (2,750,000) 2,625,000 Net funds 5,567,680 (2,746,879) 2,820,801 2006 2005 £ £ Increase / (decrease) in cash in the year 3,121 (10,779)Cash inflow / outflow from (decrease) / increase in liquid resources (2,750,000) 5,375,000 Change in net funds resulting from cash flows (2,746,879) 5,364,221 Movement in net funds in year (2,746,879) 5,364,221Net funds at 1 January 5,567,680 203,459 Net funds at 31 December 2,820,801 5,567,680 NOTES TO THE FINANCIAL STATEMENTS Accounting policies The financial information set out in the announcement does not constitute theGroup's statutory accounts for the year ended 31 December 2006. The financialinformation for the year ended 31 December 2005 is derived from the statutoryaccounts for that year which have been delivered to the Registrar of Companies.The auditors reported on those accounts; their report was unqualified and didnot contain a statement under s. 237(2) or (3) Companies Act 1985. The statutoryaccounts for the year ended 31 December 2006 have been finalized on the basis ofthe financial information presented by the directors in this announcement andwill be delivered to the Registrar of Companies shortly. The audit report hasbeen modified to reflect uncertainty in the timing and quantum of amounts thatmay be recovered relating to an overdue amount of £157,780 from a customer inChina. The Group's statutory accounts include a prior year adjustment following theadoption of FRS20 Share Based Payment. The specific accounting policies that are adopted within the Group's statutoryaccounts are described below. The financial statements are prepared in accordance with applicable UnitedKingdom accounting standards. Accounting convention The financial statements are prepared under the historical cost convention. Basic of consolidation The Group financial statements consolidate the financial statements of thecompany and its subsidiary undertakings drawn up to 31 December each year. Theresults of subsidiaries acquired or sold are consolidated for the periods fromor to the date on which control passed. Acquisitions are accounted for underthe acquisition method. Intangible fixed assets The intellectual property is amortised in equal annual amounts over a period ofthree years. The amortisation started in January 2004 when the exploitation ofthe intellectual property commenced. Tangible fixed assets Depreciation is provided on cost in equal annual instalments over the estimateduseful lives of the assets. The rates of depreciation are as follows: Leasehold property improvements 20% straight line basisOffice equipment 50% straight line basisPlant and machinery, tools and equipment 20-25% straight line basisFixtures and fittings 25% straight line basis Stocks Stocks are stated at the lower of cost and net realisable value. Research and development Research and development expenditure is written off to the profit and lossaccount as incurred. Foreign exchange Transactions denominated in foreign currencies are translated into sterling atthe rates ruling at the dates of the transactions. Monetary assets andliabilities denominated in foreign currencies at the balance sheet date aretranslated at the rates ruling at that date. Translation differences arisingare dealt with in the profit and loss account. Investments Investments held as fixed assets are stated at cost less provision for anyimpairment in value. Taxation Current, including UK corporation tax and foreign tax, is provided at amountsexpected to be paid (or recovered) using the tax rates and laws that have beenenacted or substantively enacted by the balance sheet date. Deferred tax is provided in full on timing differences, which result in anobligation at the balance sheet date to pay more tax, or a right to pay lesstax, at a future date, at rates expected to apply when they crystallise based oncurrent tax rates and law. Timing differences arise from the inclusion of itemsof income and expenditure in taxation computations in periods different fromthose in which they are included in financial statements. Deferred tax assetsare recognised to the extent that it is regarded as more likely than not thatthey will be recovered. Deferred tax assets and liabilities are not discounted. Leases Rentals under operating leases are charged on a straight-line basis over thelease term, even if the payments are not made on such a basis. Turnover Turnover is principally derived from the sale of integrated circuits and isstated net of trade discounts and value added tax. Revenue is recognised ondespatch, which is deemed to be the point at which the risks and rewards ofownership are transferred. Share-based Payments The Group has applied the requirements of FRS 20 (IFRS2) Share-based Payment. The Group issues equity-settled share-based payments to certain employees.Equity-settled share-based payments are measured at fair value (excluding theeffect of non market-based vesting conditions) at the date of grant. The fairvalue determined at the grant date of the equity-settled share-based payments isexpensed on a straight-line basis over the vesting period, based on the Group'sestimate of shares that will eventually vest and adjusted for the effect of nonmarket-based vesting conditions. Fair value is measured by use of the Black-Scholes pricing model. The expectedlife used in the model has been adjusted, based on management's best estimate,for the effects of non-transferability, exercise restrictions, and behaviouralconsiderations. Loss per share The calculations or earnings per share are based on the following losses andnumbers of shares. Basic and diluted 2006 2005 (as re-stated) £ £Loss for the financial year (2,533,289) (2,100,829) 2006 2005 No NoWeighted average number of shares:For basic and diluted loss per share 84,814,709 54,823,213 Statement of movements on reserves Group Share premium Share option Profit and loss Total account reserve account £ £ £ £ At 1 January 2006 (as originally stated) 8,598,230 - (3,127,897) 5,470,333Prior period adjustment - 13,966 (13,966) -At 1 January 2006 (as re-stated) 8,598,230 13,966 (3,141,863) 5,470,333Loss for the year - - (2,533,289) (2,533,289)New issue 29,400 - - 29,400Currency translation difference on - - 26,209 26,209foreign currency net investmentsMovement in year - 173,529 - 173,529At 31 December 2006 8,627,630 187,495 (5,648,943) 3,166,182 - Ends - This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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