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Cyan – a “world leader” adopting a model “similar to ARM Holdings plc”. Really?!? …

By Steve Moore | Tuesday 23 August 2016

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Self-declared “world leader” in technical jargon to describe what it does (Oops, I meant “in narrowband RF mesh networks for Omni Internet of Things communications”), Cyan (CYAN) has announced results for the first half of 2016 – noting its “financial performance reflected the increasing maturity of our offering and relationships” and that it’s “excited by the group's growth prospects”. Hmmm.

Revenue was increased from just £0.16 million in the corresponding 2015 period to £1.03 million, with the company noting “deployments in India, while our £10 million purchase order in Iran highlighted our ability to move quickly into new territories” and “buoyed by the (post period-end) acquisition of Connode, which adds geographic reach and relevant standards to CyanConnode's portfolio, we remain excited by the group's growth prospects”.

However, both operating and post-tax losses increased – to £2.9 million and £2.5 million respectively – and cash fell slightly, to £2.4 million, despite particularly a net £1.6 million working capital inflow (as payables were increased) and £0.6 million of new equity.

Despite also receivables ballooning to £2.2 million, net assets were £2 million lower at £1.2 million and the company has considered it necessary to raise a further £4.3 million of “working capital”. What was that again about financial performance reflecting increasing maturity?

Chairman John Cronin seeks to emphasise “a strong pipeline in place across multiple markets and very much look forward to converting it into more orders in the coming months… firmly believe our strong product offering and relationships will deliver considerable value for our shareholders”, whilst the main results statement also includes “planned evolution to providing in-country partners with the right to manufacture CyanConnode hardware locally under a license fee/royalty model (similar to ARM Holdings plc)”.

Haha – that is a tenuous link to the mighty ARM if ever there was one!, with Cyan still to demonstrate it even has a profitable business model. This all makes it not for me at this juncture; I avoid.

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