REG - Nanoco Group PLC - Interim Results
28/03/2023 07:00
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RNS Number : 3847U Nanoco Group PLC 28 March 2023
28 March 2023
NANOCO GROUP PLC
("Nanoco", the "Company" or the "Group")
Interim Results
Nanoco Group plc (LSE: NANO), a world leader in the development and
manufacture of cadmium-free quantum dots and other specific nanomaterials
emanating from its technology platform, announces unaudited Interim Results
for the half year ended 31 January 2023 ("the Period" or "H1 FY23").
A fully underpinned organic business with significant growth opportunities
· Final validation underway for commercial production materials, with
orders anticipated by the end of 2023
· Significant forecast growth in core markets, with increasing end user
applications in Sensing and increasing QD market share in Display
· Litigation proceeds underpin commercial business, with Nanoco on a
firm financial footing to plan for the longer term
· Litigation validated the Group's core IP, with further potential
monetisation initiatives ongoing
Operational Summary - good organic progress
· Nearing full production validation of two nano-materials for European
Electronics Customer
· Facility and staffing levels being prepared for potential production
orders
· Delivered development milestones for Asian Chemical company, new
agreements being discussed
· Other early-stage engagements with customers in display with
materials on test
IP Monetisation - first tranche proceeds received
· Previously announced IP sale and license agreements: gross proceeds
of £124.3m ($150.0m) with net proceeds after costs of £71.4m (c.$90.0m)
· Payments received as a lump sum in two equal tranches (March 2023 and
February 2024)
· Nanoco core patents validated by Patent Trial and Appeal Board
('PTAB')
· Retained Special Adviser to support internal team evaluating
opportunities to pursue further monetisation of the Company's IP
Financial Summary - enhanced financial position
· Revenue increased 45% to £1.6m (H1 FY22: £1.1m) in line with the
Board's expectations
· Adjusted LBITDA £1.1m (H1 FY22: loss £1.1m) in line with the
Board's expectations, includes strategic investment in additional capability
and impact of recent inflationary cost increases
· Results in H2 reflect the significant benefit of the IP sale and the
license agreement
· Payment and use of proceeds from sale of IP and license agreement:
o First tranche of £62.1m received in March 2023 with majority used to pay
funder and advisors
o Second tranche due in March 2024 (~£62.1m 1 (#_ftn1) ) will be wholly
for Nanoco
· Period end net cash of £6.0m with monthly net cash burn of c.£0.1m
per month, prior to receipt of proceeds from sale of IP and license
agreement post period end
Brian Tenner, Chief Executive Officer of Nanoco Group plc, said:
"We are closer to commercial production than at any time in our 20 year
history, with orders anticipated by the end of 2023. Our organic growth runway
is now underpinned by a firm financial footing following the monetisation of
the Group's IP portfolio as a result of the outcome of the lawsuit.
"The litigation process also allowed us to successfully validate Nanoco's IP
and, combined with the work we have done to right-size the Group's cost base
over the last few years, Nanoco is now positioned as an agile player with
validated IP operating in attractive and growing core end markets of Sensing
and Display. It also allows us to proactively pursue new licensing
opportunities with other companies employing certain quantum dot technologies,
accompanied by the financial wherewithal not to be bullied by other
potentially infringing parties, no matter what size.
"Overall Nanoco is in a strong position, has an encouraging outlook and looks
to the future with confidence."
Webcast for sell side analysts
A conference call and webcast for sell side analysts will be held at 10:00am
(UK time) this morning (28 March 2023):
For further details please contact MHP Communications on 0203 128 8990 or at
nanoco@mhpgroup.com (mailto:nanoco@mhpgroup.com)
A recording of the webcast will also be made available on Nanoco's website
www.nanocotechnologies.com, later today.
Investor Meet Company presentation for investors
There will be a further presentation for investors via the Investor Meet
Company platform on 29 March 2023 at 10:00am. Questions must be submitted in
advance via the Investor Meet Company Dashboard before 5:00pm on 28 March
2023. Investors can sign up to the Investor Meet Company platform for free and
register their interest in events hosted by Nanoco Group Plc via:
https://www.investormeetcompany.com/nanoco-group-plc/register-investor
(https://www.investormeetcompany.com/nanoco-group-plc/register-investor)
Investors who already follow Nanoco Group Plc on the Investor Meet Company
platform will automatically be invited.
For further information, please contact:
Nanoco Group
PLC:
+44 (0) 1928 761
404
Brian Tenner, CEO
Liam Gray, CFO & Company Secretary
Peel Hunt (Joint Corporate
Broker):
+44 (0) 20 7418 8900
Paul Gillam
James Smith
Turner Pope Investments (Joint Corporate Broker):
Andrew
Thacker
+44 (0) 20 3657 0050
James Pope
MHP
Communications:
+44 (0) 20 3128 8990
Reg Hoare
Pete Lambie
Christian Harte
nanoco@mhpgroup.com
FORWARD LOOKING STATEMENTS
This announcement (including information incorporated by reference in this
announcement) and other information published by Nanoco may contain statements
about Nanoco that are or may be deemed to be forward looking statements.
Such statements are prospective in nature. All statements other than
historical statements of facts may be forward looking statements. Without
limitation, statements containing the words "targets", "plans", "believes",
"expects", "aims", "intends", "will", "may", "anticipates", "estimates",
"projects" or "considers" or other similar words may be forward looking
statements.
Forward looking statements inherently contain risks and uncertainties as they
relate to events or circumstances in the future. Important factors such as
business or economic cycles, the terms and conditions of Nanoco's financing
arrangements, tax rates, or increased competition may cause Nanoco's actual
financial results, performance or achievements to differ materially from any
forward looking statements. Due to such uncertainties and risks, readers are
cautioned not to place undue reliance on such forward looking statements,
which speak only as of the date hereof. Nanoco disclaims any obligation to
update any forward looking or other statements contained herein, except as
required by applicable law.
Notes for editors:
About Nanoco Group plc
Nanoco (LSE: NANO) harnesses the power of nano-materials. Nano-materials are
materials with dimensions typically in the range 1 - 100 nm. Nano-materials
have a range of useful properties, including optical and electronic. Quantum
dots are a subclass of nano-material that have size-dependent optical and
electronic properties. The Group produces quantum dots and other
nano-materials. Within the sphere of quantum dots, the Group exploits
different characteristics of the quantum dots to target different performance
criteria that are attractive to specific markets or end-user applications such
as the Display, Sensor and Electronics markets. An interesting property of
quantum dots is size-tunable absorption spectrum. Nanoco's HEATWAVE™ quantum
dots can be tuned to absorb light at different wavelengths across the
near-infrared spectrum, rendering them useful for applications including image
sensors. Another interesting property of quantum dots is photoluminescence:
the emission of longer wavelength light upon excitation by light of a shorter
wavelength. The colour of light emitted depends on the particle size. Nanoco's
CFQD® quantum dots are free of cadmium and other toxic heavy metals, and can
be tuned to emit light at different wavelengths across the visible and
infrared spectrum, rendering them useful for a wide range of applications
including displays, lighting and biological imaging.
Nanoco was founded in 2001 and is headquartered in Runcorn, UK, with a US
subsidiary, Nanoco Inc., in Concord, MA. Nanoco continues to build out a
world-class, patent-protected IP portfolio generated both by its own
innovation engine, as well as through acquisition.
Nanoco is listed on the Main Market of the London Stock Exchange and trades
under the ticker symbol NANO. For further information, please visit:
www.nanocotechnologies.com (http://www.nanocotechnologies.com) .
Business Review
Overview - A fully underpinned organic business with significant growth
opportunities
Our commercial business remains our primary focus and we continued to make
steady positive progress throughout the Period. We are closer to commercial
production than at any time in our 20 year history, with orders anticipated by
the end of CY23, whilst the proceeds from the Samsung litigation underpin our
commercial business, with Nanoco on a firm financial footing to plan for the
longer term.
Final validation underway for commercial production materials, with orders
anticipated by the end of 2023
Sensing
We continued our progress to final validation of production ready materials
for our European customer project for sensing applications. We are now aiming
to have two fully validated sensing materials by the end of FY23 (compared to
previous expectations of one validated material). Discussions are ongoing with
regard to next steps on other new development materials.
We have delivered all of the technical milestones for our important European
electronics customer and we are now reinforcing our place in the supply chain
with equipment upgrades and increased raw material stocks. We are also
investing in additional front line researchers, production chemists and direct
support staff as activity levels increase across all parts of the business.
This will not only allow us to capture the opportunities that will flow from
having production validated materials but also to invest in developing new
materials in sensing, display and other potential applications.
We have also made solid progress on a new material for our Asian Chemical
Company customer. While that project is approximately two to three years
earlier in the development cycle, it also has the potential to require
significant volumes of our materials as demand grows for affordable high
performance sensors. We are currently reviewing options to accelerate the
programme and to deepen our collaboration, while continuing to deliver small
quantities of development materials for device testing.
The Group is also currently working on two projects that are part funded by
grants from Innovate UK, the UK's innovation agency. One of those projects is
targeting a third generation sensing material with the potential for even more
advanced performance. The second of these projects concerns the creation of
novel nano-materials that are potentially applicable in the field of quantum
computing.
Display
We continue to pursue small scale development projects with a number of
customers in display including having material on test. As reported
previously, we work on a reactive basis to opportunities in adjacent markets
such as horticultural and lighting applications.
Runcorn relocation
During the Period we completed the exit from the ground floor of our
Manchester facility. We have now successfully relocated our whole team into
our Runcorn facility. The CFQD side of the facility has now been taken out of
mothball and is almost fully recommissioned. That part of the facility is also
now host to our R&D activities. This was made possible by the strategic
decision to focus our activities on a 'dot only' strategy, which freed up a
significant amount of laboratory space that had been devoted to non-core
activities.
We have retained our full capability following the move from Manchester, with
only a very small number of staff not being able to make the transition. With
a step up in activity levels across the business we have started a cautious
campaign of recruitment to expand our front line production and R&D teams
with additional direct support staff as required. This also reflects our
continued momentum towards final production validation of two materials before
the end of FY23 and potential commercial production orders in the current
calendar year (CY23). The financial benefits of exiting the Manchester
facility are being used to offset recent inflationary cost increases and will
largely fund the activity driven increases in headcount we are putting in
place.
We forecast significant growth in core markets, with increasing end user
applications in Sensing and increasing QD market share in Display
Sensing
The size of any first production orders will depend on the end user customer
application. As with any new technology, initial demand may be modest in scale
before expanding into a broader range of customers, applications and devices.
Independent market researchers Yole (Image Sensors Europe 2023) estimate 6.1%
compound annual growth rate for CMOS Image Sensors in the six years to 2028,
with an increasing share of that market for 3D sensors and multi-spectral
cameras where the performance of these devices can be significantly enhanced
by the integration of quantum dots.
Display
Display materials remains a key focus for Nanoco and we forecast increased
share in the QD display market. The current market for flat panel televisions
is approximately 250 million units per annum. Displays containing quantum dots
are estimated to have accounted for around 6% of this market in 2022 (or 15
million TV's). Approximately 90% of the QD TVs sold today are cadmium free 2
(#_ftn2) , reflecting Samsung's market dominance. Within the QD TV market, the
number of cadmium based units is expected to fall significantly, reflecting
toxicity and environmental concerns (RoHS).
The QD share of the total TV market is estimated to rise to around 35% by 2030
(in excess of 100 million units) with Samsung's share expected to decline over
the same period(2). The combination of cadmium free systems taking a larger
share of the overall market, together with a fall in Samsung's relative share,
is expected to create an opportunity for Nanoco as both a manufacturer of
cadmium free quantum dots and as the owner of a validated IP portfolio
fundamental to the manufacture of cadmium free quantum dots at an industrial
scale. The need for access to Nanoco's IP portfolio will grow over time in
line with the number of cadmium free display products being sold in the
market.
Proceeds from litigation underpin commercial business, with Nanoco on a firm
financial footing to plan for the longer term
Nanoco began litigation against Samsung for the alleged infringement of our IP
back in February 2020 with the Company valued at under £60.0m. Due to the
likely significant cost of the litigation (legal fees and expenses anticipated
to be in excess of $10.0m) and the limited resources at our disposal, Nanoco
ran a competitive tender process and obtained independent offers of litigation
funding from four different providers of non-recourse litigation funding.
Following the tender process, GLS Capital was appointed as the litigation
funding partner based on a combination of superior commercial terms and the
knowledge and experience of the GLS team. The terms of that agreement, whilst
confidential, meant no funding risk was borne by Nanoco with a multiple of
invested capital being paid to GLS Capital only if the litigation provided a
return to the Company, and, unlike traditional financing, with no return of
capital if the litigation was unsuccessful.
Nearly three years later, in early January 2023, Nanoco and Samsung mutually
agreed to stay the trial in Marshall, Texas to give 30 days to finalise
commercial agreements. That period of negotiation resulted in two agreements
that were signed on 3 February 2023. The agreements brought to an end three
years of litigation activity in a number of jurisdictions. The financial
impact of the agreements is set out in the notes to these Interim Financial
Statements.
As noted previously, the IP sale of 118 non-core patents has little impact on
Nanoco's current or planned commercial activities, particularly as the sale
agreement includes a license back to Nanoco to be able to continue using those
same patents. The IP license is a global perpetual royalty free license,
reflecting the upfront nature of the payment received. As a non-exclusive
license it also does not impede Nanoco's current or planned commercial
activities.
As previously announced, in deciding what to do with the second tranche of
proceeds in February 2024, the Board will balance any investment needs of
Nanoco's growing organic business with a firm intention to deliver a material
return of capital to shareholders.
Successful outcome to litigation validates the Group's core IP, with further
potential monetisation initiatives ongoing
As a UK-based business specialising in the design, scale up and manufacture of
novel nano-materials, we will continue to take steps to protect our platform
technology and our IP portfolio.
Following the validation of our IP by the Patent Trial and Appeal Board and
the subsequent licensing of our remaining patent portfolio by Samsung, the
Group is confident in the potential applicability of our IP to other
participants in the cadmium free quantum dot display market. At present that
market is dominated by Samsung but as QD TVs capture a larger share of the
total flat panel TV market, and as more market participants create or expand
their market presence, the economic case for enforcement of our IP will grow
in the medium term.
The group will explore opportunities to encourage market participants to take
a license over Nanoco's IP as an alternative to potentially costly future
litigation. We have retained a Special Adviser for the next steps in our IP
licensing strategy and are reviewing potential IP licensing partners,
alongside our internal business team who are evaluating potential value
opportunities.
Background to sale of IP and licensing agreements
In assessing whether or not to agree to the proposed IP sale and license
agreements, the Board took extensive advice and carefully considered the
balance of potential risks and rewards that could be expected if the
litigation had continued.
Against the possible benefits of continuing the litigation, the Board weighed
the possible downside risks which included the risk of losing at trial,
winning at trial with an award based on either Samsung's damages model or on
Nanoco's own 'low case' damages model (sometimes referred to in public court
papers as the 'Dow' approach, which was considerably lower than the settlement
value agreed). The Board believes that winning with Nanoco's 'high case'
damages model would inevitably have led to an appeals process potentially
lasting a number of years with the risks of losing on appeal, a re-trial, or a
re-trial of damages only and possibly resulting in a lower damages award. The
Board also considered the incremental funding costs of an extended litigation
process and the potentially significant impact of the time value of money.
Any settlement process invariably involves an element of compromise to remove
risks. Having weighed up the risks and rewards of continuing the litigation,
the Board concluded that it was in the best interests of all stakeholders to
accept the proposed commercial agreements.
Outlook - well positioned to deliver
We continue to make strong and steady progress in delivering new nanomaterials
for our customers. We are nearing the final pre-production validation step for
two of our materials and anticipate potential commercial production orders by
the end of CY23, bringing us closer to commercial production than at any time
in our 20 year history. We continue to develop new materials and engage with
new customers in the sensing and display fields of use, to ensure we build up
a wide customer and product base.
The litigation process allowed us to successfully validate Nanoco's IP and,
combined with the work we have done to right size the Group's cost base over
the last few years, we have now positioned Nanoco as an agile player with
validated IP operating in the attractive and growing core end markets of
Sensing and Display.
Market forecasts for infra-red sensors and quantum dot based technologies show
strong positive growth for the next five years. That will create an
environment where Nanoco's unique cadmium free quantum dots and other novel
nano-materials can leverage their strong performance characteristics into
large mass produced commercial applications.
By successfully delivering the transformational outcome to the Samsung
litigation, the business is now able to plan for the longer term on a firm
financial footing. The resulting cash flows will allow us to invest in the
commercial business while exploring opportunities to generate further value
from our IP.
Overall Nanoco is in a strong position, has an encouraging outlook and looks
to the future with confidence.
Dr Christopher
Richards
Brian Tenner
Chairman
Chief Executive Officer
28 March 2023
28 March 2023
Financial review
Revenue
Revenue in the Period increased 45% to £1.6m (H1 2022: £1.1m). The majority
of revenue relates to development work on sensing materials throughout the
Period.
Sources of revenue H1 FY23 H1 FY22 FY22
£m £m £m
Services 1.1 / 70.5% 0.7 / 63.1% 1.6 / 64.1%
Material sales 0.4 / 26.2% 0.3 / 32.0% 0.8 / 31.7%
Licence & royalties 0.1 / 3.3% 0.1 / 4.9% 0.1 / 4.2%
Total revenue 1.6 /100.0% 1.1 /100.0% 2.5 /100.0%
Services continue as the major revenue driver, generated primarily from one
important electronics customer in the current and prior year. Material sales
represents continued shipments of nano-materials to supply chain partners in
sensing and display markets.
Operating expenses
Operating expenses comprise R&D and administrative expenses. Gross
investment in R&D to support the ongoing development of our nano-materials
was £0.9m in the Period (H1 FY22: £1.0m) and administrative expenses were
£2.5m (H1 FY22: £2.3m).
With the exit from both floors of the Manchester facility completing in
November 2022, we have generated gross annual savings of £0.7m. These savings
have been used to offset recent inflationary cost increases and will also fund
the expansion in headcount driven by increased activity levels across the
business and in the run up to potential commercial production orders at the
end of CY23.
Other operating income in the Period was £0.1m (H1 FY22: £0.2m).
Operating loss and Adjusted LBITDA
The combination of higher revenue and the continued focus on cost control led
to an 18% improvement in our adjusted operating loss in the Period to £1.4m,
an improvement of £0.3m. Adjusted LBITDA in the Period stayed broadly in line
with prior year.
H1 FY23 H1 FY22 FY22
£m £m £m
Operating (loss) (2.1) (2.1) (4.8)
Share-based payment charge 0.5 0.4 0.6
Litigation costs 0.1 - -
Employers NI on SBP 0.1 - 0.3
Adjusted operating loss (1.4) (1.7) (3.9)
Depreciation 0.2 0.3 0.5
Amortisation 0.1 0.2 0.5
Impairment 0.0 0.1 0.8
Adjusted(*) LBITDA (1.1) (1.1) (2.1)
Management monitor Adjusted(*) LBITDA as it is a close approximation for
operating cash flow which is considered a KPI at a time when the Group is
closely managing its cash resources. The non-cash charges for share based
payments (including the associated national insurance charges), depreciation
and amortisation and one off litigation costs are added back to the operating
result to arrive at Adjusted LBTIDA. These are therefore excluded to provide
users of the accounts with a clearer understanding of underlying business
performance.
Sale of IP and IP license with Samsung
As previously announced, both contracts were signed shortly after the Period
end. In accordance with the requirements of IAS10, Events After the Reporting
Period, these contracts have had no impact on the financial results or
position in the Period but have been taken into account in the assessment of
the going concern basis for preparation of these Interim Condensed
Consolidated Financial Statements. Note 7 sets out the expected financial
impact of the two contracts on the second half of FY23 and reporting periods
arising thereafter as a non-adjusting post balance sheet event.
Taxation
The Group continues to make R&D tax credit claims on qualifying
expenditure. The tax credit for the Period is estimated at £0.3m (H1 2022:
£0.3m). The amount receivable at 31 January 2023 was £0.3m (H1 FY22:
£1.0m), with the amount receivable at 31 July 2022 (£0.5m) being received in
January 2023.
The Group is reviewing with its tax advisers its historical practice of
surrendering tax losses for a cash refund as the proceeds from the contracts
with Samsung may change the optimal approach to the Group's tax affairs,
alongside the potential to benefit from the UK's Patent Box tax regime.
Net result
The loss after tax for H1 FY23 was £2.1m (H1 FY22: loss of £2.1m).
Earnings per share
The basic loss per share was 0.64 pence per share (H1 FY22: loss of 0.67
pence). As at 31 January 2023 there were 322,445,744 ordinary shares in issue
(31 July 2022: 322,445,744) including treasury shares.
Cash position and liquidity
During H1 FY23, the Group generated a significantly improved net cash outflow
of £0.8m, being less than half the outflow in the comparative period (H1
FY22: £2.0m) to leave a cash balance of £6.0m.
Expenditure on fixed assets has been increased as the Group reinforces its
production capabilities. Expenditure on new patents has remained subdued but
is likely to increase as new materials are developed.
Working capital
The Group is maintaining its investment in working capital in preparation for
potential commercial production orders by the end of CY23. This is to ensure
that the Group is seen as a robust part of the supply chain by its major
customers. Our contracts with customers also include mechanisms to give Nanoco
advance notice of significant changes in demand that should be adequate to
ensure that Nanoco has appropriate raw materials on hand when production needs
to be ramped up.
Brexit
The UK's Brexit deal with the European Union removes the threat of tariffs on
chemicals exports (our primary export) and other impacts on additional
administrative tasks have continued to be minimal.
Principal risks
The Directors have considered the principal risks which may have a material
impact on the Group's performance. The majority of applicable risks throughout
the Period remained as disclosed on pages 27 to 29 of the 2022 Annual Report
and Accounts.
However, as a result of the contracts signed with Samsung shortly after the
period end, the profile of two of the Group's principal risks has changed
significantly. The principal overarching risk that the Group would exhaust its
financial resources before becoming self-financing through its commercial
operations has now been wholly mitigated as a result of the cash flow received
from Samsung after the Period end and the expected cash flow in February 2024.
The second principal risk of an adverse outcome to the litigation with Samsung
has now been eliminated.
Going concern
The interim condensed consolidated financial statements have been prepared on
a going concern basis. In determining the appropriate basis of preparation of
the financial statements, the Directors are required to consider whether the
Group can continue in operational existence for the foreseeable future.
For the purposes of assessing whether 'going concern' is an appropriate basis
for preparing the interim condensed consolidated financial statements, the
Directors have used their detailed forecasts for the period to 31 July 2023
and summary forecasts for the following financial year (the 'forecast
period'). These reflect current and expected business activities and the
expected net cash flows that will result from the sale of IP and license
agreement with Samsung as well as the matters set out in the section above on
Principal risks.
A sensitivity analysis has been performed to reflect a possible downside
scenario that only includes already contracted revenues for the forecast
period.
On the basis of the information above and having made appropriate enquiries,
at the time of approving the interim condensed consolidated financial
statements, the Directors have a reasonable expectation that the Company has
access to adequate resources to continue in operational existence for the
foreseeable future, that is, at least 12 months from the date of the issue of
these interim condensed consolidated financial statements.
Accordingly, they continue to adopt the going concern basis in preparing the
interim condensed consolidated financial statements. The financial statements
do not reflect any adjustments that would be required to be made if they were
prepared on a basis other than the going concern basis.
Liam Gray
Chief Financial Officer
28 March 2023
Responsibility statement
The Directors of Nanoco Group plc, as listed on pages 40 and 41 of the 2022
Annual Report and Accounts, confirm to the best of their knowledge:
a) the condensed set of financial statements has been prepared in
accordance with International Accounting Standard 34 Interim Financial
Reporting, as required by paragraph 4.2.4 of the Disclosure and Transparency
Rules ("DTR");
b) the condensed set of financial statements, which has been prepared in
accordance with the applicable set of accounting standards, gives a true and
fair view of the assets, liabilities, financial position and profit or loss of
the issuer, or the undertakings included in the consolidation as a whole as
required by DTR 4.2.10;
c) the interim management report includes a fair review of the
information required by DTR 4.2.7 - an indication of important events which
have occurred during the first six months of the year and a description of the
principal risks and uncertainties for the remaining six months of the year;
and
d) the interim management report includes a fair review of the
information required by DTR 4.2.8 - the disclosure of related party
transactions occurring during the first six months of the year and any changes
in related party transactions disclosed in the 2022 Annual Report and
Accounts.
By order of the Board
Liam Gray
Chief Financial Officer
28 March 2023
Condensed consolidated statement of comprehensive income
For the six months ended 31 January 2023
H1 FY23 H1 FY22 FY22
(Unaudited) (Unaudited) (Audited)
Notes £'000 £'000 £'000
Revenue 3 1,562 1,099 2,467
Cost of sales (293) (109) (420)
Gross profit 1,269 990 2,047
Other operating income (grants) 78 179 361
Research and development expenses (938) (990) (1,770)
Administrative expenses (2,499) (2,321) (5,409)
Operating loss (2,090) (2,142) (4,771)
- Before share-based payments (1,613) (1,790) (4,152)
- Share-based payments (477) (352) (619)
- Operating loss as shown above (2,090) (2,142) (4,771)
Net finance (expense) (244) (205) (450)
Loss before taxation (2,334) (2,347) (5,221)
Taxation 255 286 524
Loss after tax (2,079) (2,061) (4,697)
Other comprehensive income
(Loss)/profit on exchange rate translations - - -
Loss after taxation for the year and total comprehensive loss for the year (2,079) (2,061) (4,697)
Loss per share:
Basic and diluted earnings / (loss) 4 (0.64)p (0.67)p (1.52)p
The loss for the current and preceding year arises from the Group's continuing
operations and is attributable to the equity holders of the Parent Company.
The basic and diluted loss per share reported in H1 FY22 and FY22 are the
same, as the effect of share options is anti-dilutive.
Condensed consolidated statement of changes in equity
For the six months ended 31 January 2023
Share-based
Reverse
Share Share acquisition payment Merger Accumulated
capital premium reserve reserve reserve loss Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 31 July 2021 (audited) 30,570 117,292 (77,868) 4,318 (1,242) (70,018) 3,052
Loss for the six months to 31 January 2022 - - - - - (2,061) (2,061)
Share-based payments - - - 352 - - 352
New equity shares issued 146 - - (146) - - -
At 31 January 2022 (unaudited) 30,716 117,292 (77,868) 4,524 (1,242) (72,079) 1,343
Loss for the six months to 31 July 2022 - - - - - (2,636) (2,636)
Share-based payments - - - 392 - - 392
Issue of share capital on placing 1,528 4,127 - - - - 5,655
Costs of share placing - (274) - - - - (274)
At 31 July 2022 (audited) 32,244 121,145 (77,868) 4,916 (1,242) (74,715) 4,480
Loss for the six months to 31 January 2023 - - - - - (2,079) (2,079)
Share-based payments - - - 477 - - 477
At 31 January 2023 (unaudited) 32,244 121,145 (77,868) 5,393 (1,242) (76,794) 2,878
Condensed consolidated statement of financial position
As at 31 January 2023
31 January 31 January 31 July
2023 2022 2022
(Unaudited) (Unaudited) (Audited)
Notes £'000 £'000 £'000
Assets
Non-current assets
Property, plant and equipment 232 115 98
Right of use assets 2,018 136 56
Intangible assets 1,470 2,610 1,616
3,720 2,861 1,770
Current assets
Inventories 104 66 174
Trade and other receivables 734 1,009 1,664
Income tax asset 254 972 524
Cash and cash equivalents 5,978 1,776 6,762
7,070 3,823 9,124
Total assets 10,790 6,684 10,894
Liabilities
Current liabilities
Trade and other payables (1,625) (1,113) (1,510)
Lease liabilities 6 (429) (331) (153)
Provisions - - (172)
Deferred revenue 5 (105) (103) (560)
(2,159) (1,547) (2,395)
Non-current liabilities
Lease liabilities 6 (1,617) (19) (16)
Provisions - - (40)
Deferred revenue 5 - (95) (44)
Financial liabilities (4,136) (3,680) (3,919)
(5,753) (3,794) (4,019)
Total liabilities (7,912) (5,341) (6,414)
Net assets 2,878 1,343 4,480
Capital and reserves
Share capital 32,244 30,716 32,244
Share premium 121,145 117,292 121,145
Reverse Acquisition Reserve (77,868) (77,868) (77,868)
Share-based payment reserve 5,393 4,524 4,916
Merger reserve (1,242) (1,242) (1,242)
Accumulated loss (76,794) (72,079) (74,715)
Total equity 2,878 1,343 4,480
Approved by the Board and authorised for issue on 28 March 2023.
Brian Tenner
Liam Gray
Chief Executive
Officer
Chief Financial Officer
Condensed consolidated cash flow statement
For the six months ended 31 January 2023
Six months to Six months to Year to
31 January 31 January 31 July
2023 2022 2022
( )
(Unaudited) (Unaudited) Audited
£'000 £'000 £'000
Loss before tax (2,334) (2,347) (5,221)
Adjustments for:
Net finance expense 218 195 450
(Profit) / Loss on exchange rate translations 4 54 (211)
Depreciation of tangible fixed assets 35 84 105
Depreciation of right of use asset 157 204 366
Amortisation of intangible assets 155 245 498
Impairment of intangible assets 15 71 858
Share-based payments 477 352 619
Gain on disposal of tangible fixed assets - (26) (36)
Interest paid - (1) -
Changes in working capital:
Decrease/(increase) in inventories 70 44 (64)
Decrease in trade and other receivables 930 218 (141)
Increase / (Decrease) in trade and other payables 115 (548) (105)
(Decrease)/increase in provisions (212) - 212
(Decrease)/increase in deferred revenue (499) (201) 205
Cash outflow from operating activities (869) (1,656) (2,465)
Research and development tax credit received 524 - 688
Net cash outflow from operating activities (345) (1,656) (1,777)
Cash flows from investing activities
Purchases of tangible fixed assets (169) - (4)
Purchases of intangible fixed assets (24) (68) (114)
Acquisition of right of use assets (2,119) - -
Proceeds from sale of tangible fixed assets - 26 36
Net cash outflow from investing activities (2,312) (42) (82)
Cash flows from financing activities
Proceeds from placing of ordinary share capital - - 5,655
Costs of placing - - (274)
Acquisition of lease liabilities 2,119 - -
Payment of lease liabilities (capital) (216) (318) (506)
Payment of lease liabilities (interest) (26) (10) (83)
Interest paid (1) - (3)
Net cash outflow from investing activities 1,876 (328) 4,789
(Decrease) / Increase in cash and cash equivalents (781) (2,026) 2,930
Cash and cash equivalents at the start of the period 6,762 3,813 3,813
Effects of exchange rate changes (3) (11) 19
Cash and cash equivalents at the end of the period 5,978 1,776 6,762
Notes to the interim condensed consolidated financial statements
For the six months ended 31 January 2023
1. Corporate information
Nanoco Group plc (the "Company") has a premium listing on the Main Market of
the London Stock Exchange and is incorporated and domiciled in the UK. The
Group Interim Report and Accounts for the six months ended 31 January 2023 was
authorised for issue in accordance with a resolution by the Directors on 28
March 2023.
These interim condensed consolidated financial statements include the
financial statements of Nanoco Group plc and the entities it controls (its
subsidiaries).
These interim condensed consolidated financial statements are unaudited and do
not constitute statutory accounts of the Group as defined in section 434 of
the Companies Act 2006.
2. Accounting policies
a. Basis of preparation
These interim condensed consolidated financial statements have been prepared
in accordance with the Disclosure and Transparency Rules of the Financial
Conduct Authority, IAS 34 Interim Financial Reporting as adopted by the
European Union, using the recognition and measurement principles of IFRS as
adopted by the European Union and have been prepared under the historical cost
convention. As required by the Disclosure Guidance and Transparency Rules of
the Financial Conduct Authority the accounting policies adopted in these
condensed consolidated financial statements are consistent with those followed
in the preparation of the Group's Annual Report and Accounts for the year to
31 July 2022.
These interim condensed consolidated financial statements include audited
comparatives for the year to 31 July 2022. The 2022 Annual Report and
Accounts, which was prepared in accordance with International Financial
Reporting Standards ("IFRS") as adopted by the European Union, received an
unqualified audit opinion and have been filed with the Registrar of Companies.
The financial statements of the Group for the year ended 31 July 2022 are
available from the Company's registered office, or from the website
www.nanocotechnologies.com.
b. Presentation of figures
Certain figures contained in this announcement, including financial
information, have been subject to rounding adjustments. Accordingly, in some
cases, the sum or percentage change of the numbers contained in this
announcement may not conform exactly to the total figure given.
c. Going concern
The interim condensed consolidated financial statements have been prepared on
a going concern basis as set out in the Financial Review section.
d. Use of estimates and judgements
Preparation of the interim condensed consolidated financial statements
requires management to make judgements, estimates and assumptions affecting
the application of accounting policies and the reporting of assets,
liabilities, income and expenses. Actual results may differ from these
estimates. The significant judgements made by management in applying the
Group's accounting policies and key sources of estimated uncertainty were the
same as those applied to the consolidated financial statements for the year
ended 31 July 2022. These are summarised below:
Estimates Judgements
Equity-settled share-based payments Capitalisation (or not) of research and development expenditure
Impairment of intellectual property and tangible fixed assets Revenue recognition
Taxation Going concern
3. Segmental information
Operating segments
At 31 January 2023 and 2022, the Group operated as one segment, being the
research, development and manufacture of products and services based on high
performance nanoparticles. This is the level at which operating results are
reviewed by the chief operating decision maker (i.e. the Board) to make
decisions about resources, and for which financial information is available.
All revenues have been generated from continuing operations and are from
external customers.
Six months to Six months to Year to
31 January 31 January 31 July
2023 2022 2022
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Analysis of revenue - by type
Products sold 409 352 782
Rendering of services 1,101 693 1,582
Royalties and licences 52 54 103
1,562 1,099 2,467
There was a material customer who generated revenue of £1,215,000 (2022: one
material customer amounting to £899,000).
The Group operates in four main geographic areas, although all are managed in
the UK. The Group's revenue per geographical segment based on the customer's
location is as follows:
Six months to Six months to Year to
31 January 31 January 31 July
2023 2022 2022
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Analysis of revenue - by geography
Holland 954 599 1,474
Japan 286 131 244
Taiwan 165 192 351
France 114 164 348
USA 34 - 27
Canada 9 9 19
Singapore - 3 3
UK - 1 1
1,562 1,099 2,467
All the Group's assets are held in the UK and all of its capital expenditure
arises in the UK. The loss before taxation and attributable to the single
segment was £2,334,000 (2022: £2,347,000).
4. (Loss) per share
Six months to Six months to Year to
31 January 31 January 31 July
2023 2022 2022
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Loss for the period attributable to equity shareholders (2,079) (2,061) (4,697)
Share-based payments 477 352 619
Adjusted loss for the period (1,602) (1,709) (4,078)
Weighted average number of shares No. No. No.
Ordinary shares in issue 322,445,744 306,167,992 308,610,928
Adjusted loss per share (pence) (0.50) (0.56) (1.32)
Basic loss per share (pence) (0.64) (0.67) (1.52)
Diluted loss per share is not presented as the effect of share options issued
is anti-dilutive. The adjusted loss is presented as the Board measures
underlying business performance which excludes non-cash IFRS2 charges.
5. Deferred revenue
31 January 31 January 31 July
2023 2022 2022
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Current
Upfront licence fees 95 103 103
Milestone Payments 10 - 457
Total current 105 103 560
Non-current
Upfront licence fees - 95 44
Total non-current - 95 44
Total deferred revenue 105 198 604
Deferred revenue arises under IFRS where upfront licence fees are accounted
for on a straight-line basis over the initial term of the contract or where
performance criteria have not been satisfied in the accounting period.
6. Lease liabilities
Six months to Six months to Year to
31 January 31 January 31 July
2023 2022 2022
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Current
Property Leases 429 331 153
Non-current
Property Leases 1,617 19 16
Total lease liabilities 2,046 350 169
7. Post Balance Sheet Event
On 3 February 2023, the Group signed agreements with Samsung for a sale of
part of the Group's IP portfolio and a license on the remaining IP. The two
contracts also ended the litigation against Samsung for the alleged
infringement of the Group's IP on a no fault basis. The information and tables
below set out the expected impact of the transactions on the Group's financial
statements for FY23. Given the signature date of the agreements, they are a
non-adjusting post balance sheet event and hence there is no impact of the
transactions in these Interim Financial Statements (other than these
disclosures).
Some of the figures presented are estimates as detailed tax computations will
not be finalised until the end of the financial year and equally some figures
are translated using the most recent foreign exchange rates which may change
over time as the transaction is reflected in the accounts at different
reporting periods.
Estimated income statement impact for FY23 Total Sale of IP IP Licence Litigation costs
£m £m £m
Revenue (licence fee income) 3.0 - 3.0 -
Administrative costs (litigation costs) (50.2) - - (50.2)
Profit on disposal of intangible assets 70.0 70.0 - -
Net operating profit 22.8 70.0 3.0 (50.2)
Interest payable on loan notes (4.7)
Profit before tax 18.1
The sale of IP will be recognised in full in H2 of FY23 as a profit on
disposal of intangible assets. The litigation costs will also be recognised in
full in H2 of FY23 as an administrative expense. The profit on disposal of
intangible assets is made up of proceeds of £70.4m less £0.4m of net book
value at the time of sale.
The IP license income will be recognised as revenue over the average remaining
life of the patent portfolio as it exists at 3 February 2023. This is
estimated to be approximately 8.8 years from 3 February 2023. This approach to
revenue recognition reflects the fact that the IP license includes continuing
performance obligations over the lifetime of the patent portfolio in the form
of access to the portfolio and is consistent with the requirements of IFRS 15,
Revenue from Contracts with Customers. The license income in FY23 reflects the
6 months of the revenue recognition period included in FY23.
The following table sets out the estimated balance sheet impact of the
agreements as at 31 July 2023.
Expected balance sheet impact as at 31 July FY23
£m
Proceeds receivable (debtors due within 1 year) 62.1
Deferred income (due within one year) (6.0)
Deferred income due after more than one year (44.8)
Disposal of intangible assets (0.4)
Withholding tax asset 2.7
Cash 4.5
Net assets 18.1
The figures above are shown before the impact of any UK taxation. The Group's
accumulated tax losses (£42.8m as at 31 January 2023) will be available to
partially offset the net income arising from the agreements subject to the
UK's normal rules on the utilisation of losses. A deferred tax asset will be
recognised at year end in relation to the Korean withholding tax paid (and
payable) on the license fee revenue. It is possible that a further deferred
tax asset will be recognised in respect of the Group's accumulated and unused
prior year losses depending on the final tax calculations for FY23 which will
be disclosed in the Annual Report and Accounts for FY23.
Cash flow impact in FY23 FY23
£m
Proceeds received from the disposal of intangible assets 35.2
Increase in deferred revenue (license income) 26.9
Administrative expenses (50.2)
Korean withholding tax (2.7)
Interest paid (4.7)
Net cash inflow in FY23 4.5
The first tranche of payments was received shortly after the period end in
March 2023. The second tranche of payments is still expected to be received in
February 2024 subject to a similar level of Korean withholding tax.
- Ends -
1 (#_ftnref1) Using current foreign exchange rate
2 (#_ftnref2) Management estimates using a variety of independent market
research reports
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