Cambridge-based Cyan (CYAN:AIM) is an AIM-quoted Internet of Things (IoT) hopeful looking to play the theme via smart metering solutions. Today it has unveiled ambitious plans to buy Swedish peer Connode in a not insignificant £6.8 million deal, with a £12.6 cash call to boot. Here are some initial thoughts...
1) The deal is being funded by a complex financing arrangement that includes a £10.1 million share placing and subscription of ordinary shares at 0.18p per share (a 14% discount to Monday's 0.21p close), alongside a £2.5 million equity slug.
2) That subscription includes £305,000 from Cyan's senior management who will also receive shares worth up to £730,0000 in lieu of income and bonuses during the period from July 2016 to June 2017.
3) Cyan was bolstered by a transformational £10 million purchase order for smart metering in Iran in April, with orders of a further 5,000 smart meter units from Tata Power in India.
4) Connode will give Cyan a customer base in Europe and expand its operations beyond India, Iran, Africa and China.
5) But the big win for Cyan is Connode's £37 million, multi-year contract with Telefonica O2 to provide wireless mesh networking services as part of the UK smart metering programme.
6) And there are massive doubts about that programme, its cost and what Telecom Plus has today called 'unrealistic timeframes'.
7) Cyan is confident that full year 2016 will be better, but it needs to be – the company chalked-up an operating loss of £4.9 million on piddling £275,000 revenues in fiscal 2015, compared to the Swedish firm's £2.3 million of sales. The shares have dropped 9.5% to 0.19p.