- Part 2: For the preceding part double click ID:nRSN1851Ua
recoverable amount. That
increased amount cannot exceed the carrying amount that would have been
determined, net of depreciation, had no impairment loss been recognised for
the asset in prior years. Such reversal is recognised in the Consolidated
Statement of Comprehensive Income unless the asset is carried at re-valued
amount, in which case the reversal is treated as a valuation increase. After
such a reversal the depreciation charge is adjusted in future periods to
allocate the asset's revised carrying amount, less any residual value, on a
systematic basis over its remaining useful life.
The carrying values of plant, equipment and intangible assets as at the
reporting date have not been subjected to impairment charges.
(m) Investments in subsidiaries
Investments in subsidiaries are stated in the Company Statement of Financial
Position at cost less provision for any impairment.
(n) Inventories
Inventories are stated at the lower of cost and net realisable value. Cost
based on latest contractual prices includes all costs incurred in bringing
each product to its present location and condition. Net realisable value is
based on estimated selling price less any further costs expected to be
incurred to disposal. Provision is made for slow-moving or obsolete items.
(o) Trade and other receivables
Trade receivables, which generally have 30 to 60 day terms, are recognised and
carried at the lower of their original invoiced value and recoverable amount.
The time value of money is not material.
Provision is made when there is objective evidence that the Group will not be
able to recover balances in full. Significant financial difficulties faced by
the customer, probability that the customer will enter bankruptcy or financial
reorganisation and default in payments are considered indicators that the
trade receivable is impaired. The amount of the provision is the difference
between the asset's carrying amount and the present value of estimated future
cash flows, discounted at the original effective interest rate. The carrying
value of the asset is reduced through the use of an allowance account, and the
amount of the loss is recognised in the Consolidated Statement of
Comprehensive Income within administrative expenses.
When a trade receivable is uncollectible, it is written off against the
allowance account for trade receivables.
(p) Cash, cash equivalents and short-term investments
Cash and cash equivalents comprise cash at hand and deposits with maturities
of three months or less. Short-term investments comprise deposits with
maturities of more than three months, but no greater than twelve months.
(q) Trade and other payables
Trade and other payables are non-interest bearing and are initially recognised
at fair value. They are subsequently measured at amortised cost using the
effective interest rate method.
(r) Borrowings
Borrowings are recognised when the Group becomes party to related contracts
and are measured initially at fair value, net of directly attributable
transaction costs incurred. After initial recognition, borrowings are stated
at amortised cost.
Borrowings are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least twelve
months after the reporting date.
Costs of borrowing funds are expensed in the period in which they occur.
(s) Provisions
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event and it is probable that an outflow
of resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the
obligation.
The expense relating to any provision is presented in the Consolidated
Statement of Comprehensive Income, net of any expected reimbursement, but only
where recoverability of such reimbursement is virtually certain.
Provisions are discounted using a current pre-tax rate that reflects, where
appropriate, the risk specific to the liability. Where discounting is used,
the increase in the provision due to the passage of time is recognised as a
finance cost.
There were no provisions at 31 July 2014 (2013: Nil).
(t) Financial assets and liabilities
Financial assets and liabilities are recognised when the Group becomes party
to the contracts that give rise to them and are classified as financial assets
and liabilities at fair value through the Consolidated Statement of
Comprehensive Income. The Group determines the classification of its
financial assets and liabilities at initial recognition and re-evaluates this
designation at each financial year end.
A financial asset or liability is generally de-recognised when the contract
that gives rise to it is settled, sold, cancelled or expires.
At the year end, the Group had no financial assets or liabilities designated
at fair value through the Consolidated Statement of Comprehensive Income
(2013: £nil).
(u) Share capital
Proceeds on issue of shares are included in shareholders' equity, net of
transaction costs. The carrying amount is not re-measured in subsequent
years.
(v) Shares held by the Employee Benefit Trust
The Employee Benefit Trust is consolidated in the financial statements and the
shares are reported as treasury shares in the Group's Statement of Financial
Position. Shares are treated as though they had been cancelled when
calculating earnings per share until such time that the shares are exercised.
The Employee Benefit Trust is treated similarly in the financial statements of
the parent company.
(w) Share-based payments
Equity settled share-based payment transactions are measured with reference to
the fair value at the date of grant, recognised on a straight line basis over
the vesting period, based on the Company's estimate of shares that will
eventually vest. Fair value is measured using a suitable option pricing
model.
At each reporting date before vesting, the cumulative expense is calculated,
representing the extent to which the vesting period has expired and
management's best estimate of the achievement or otherwise of non-market
conditions and the number of equity instruments that will ultimately vest.
The movement in cumulative expense since the previous reporting date is
recognised in the Consolidated Statement of Comprehensive Income, with a
corresponding entry in equity.
Where the terms of an equity-settled award are modified or a new award is
designated as replacing a cancelled or settled award, the cost based on the
original award terms continues to be recognised over the original vesting
period. In addition, an expense is recognised over the remainder of the new
vesting period for the incremental fair value of any modification, based on
the difference between the fair value of the original award and the fair value
of the modified award, both as measured on the date of the modification. No
reduction is recognised if this difference is negative.
Where awards are granted to the employees of the subsidiary company, the fair
value of the awards at grant date is recorded in the Company's financial
statements as an increase in the value of the investment with a corresponding
increase in equity via the share-based payment reserve.
(x) Defined contribution pension scheme
The Group operates a defined contribution pension scheme. The assets of the
scheme are held separately from those of the Company in an independently
administered fund. The amounts charged against profits represent the
contributions payable to the scheme in respect of the accounting period.
(y) New accounting standards and interpretations
The following new and amended IFRS, IAS and IFRIC interpretations were
mandatory for accounting periods ending 31 July 2014 and thereafter, but have
no material effect on the Group's financial statements.
· IFRS 1 Government Loans (Amendments)
· IFRS 7 Disclosures - Offsetting Financial Assets and Financial
Liabilities (Amendments)
· IFRS 13 Fair Value Measurements
· Annual Improvements to IFRSs 2009 to 2011 cycle
A number of new standards, amendments to standards and interpretations are
effective for annual periods ending 31 July 2015 or thereafter and have not
been applied in preparing these consolidated financial statements and those
that are relevant to the Group are summarised below. None of these are
expected to have a significant effect on the consolidated financial statements
of the Group in the period of initial application.
The following standards and interpretations have an effective date after the
date of these financial statements.
Effective date
IFRS 10 Consolidated Financial Statements, IAS 27 Separate Financial Statements 1 January 2014
IFRS 11 Joint Arrangements, IAS 28 Investments in Associates and Joint Ventures 1 January 2014
IFRS 12 Disclosure of Interests in Other Entities 1 January 2014
IFRS 11 Accounting for Acquisitions of Interests in Joint Operations 1 January 2016
IFRS 15 Revenue from Contracts with Customers 1 January 2017
IFRS 9 Financial Instruments (issued in 2013) 1 January 2018
IAS 32 Offsetting Financial Assets and Financial Liabilities (Amendments) 1 January 2014
IAS 36 Recoverable Amount Disclosures for Non-Financial Assets (Amendments) 1 January 2014
IAS 39 Novation of Derivatives and Continuation of Hedge Accounting (Amendments) 1 January 2014
IAS 27 Equity Method in Separate Financial Statements (Amendments) 1 January 2016
IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation 1 January 2016
Annual Improvements to IFRSs 2010 to 2012 Cycle 1 July 2014
Annual Improvements to IFRSs 2011 to 2013 Cycle 1 July 2014
The effective dates stated above for IFRS 10, 11, 12, IAS 27 Separate
Financial Statements and IAS 28 are based on the date of European Union (EU)
adoption. As the Group prepares its financial statements in accordance with
IFRS as adopted by the EU, the application of new standards and
interpretations will be subject to their having been endorsed for use in the
EU via the EU Endorsement mechanism. In the majority of cases this will
result in an effective date consistent with that given in the original
standard or interpretation but the need for endorsement restricts the Group's
discretion to early adopt standards.
4. Segmental information
Operating segments
At 31 July 2014 the Group operated as one segment, being the provision of high
performance nano- particles for research and development purposes. This is the
level at which operating results are reviewed by the chief operating decision
maker (i.e. the CEO) 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.
31 July2014 31 July 2013
£000 £000
Analysis of revenue
Products sold 178 110
Rendering of services 1,255 2,116
Royalties and licences - 1,702
1,433 3,928
Included within rendering of services is revenue from one material customer
amounting to £754,000 (2013: two material customers amounting to £1,573,000)
and £184,000 (2013: £283,000) from government grants. During the year ended
31 July 2013 revenue from royalties and licences comprised two customers.
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:
31 July 2014 31 July 2013
£000 £000
Revenue
UK 159 254
Europe (excluding UK) 26 42
Asia 1,139 2,854
USA 109 778
1,433 3,928
All the Group's assets are held in the UK and all of its capital expenditure
arises in the UK.
5. Operating loss
31 July2014 31 July 2013
The Group £000 £000
Operating loss is stated after charging /(crediting):
Depreciation of tangible fixed assets (see note 10) 1,181 901
Amortisation of intangible assets (see note 11) 209 152
Staff costs (see note 6) 5,107 4,336
Foreign exchange losses/(gains) 4 (13)
Research and development expense** 5,177 4,068
Cost of inventories recognised as an expense (included in cost of sales) 1,561 1,272
Operating lease rentals (see note 22):
Land and buildings 674 614
Auditor's remuneration:Audit services:
- Fees payable to Company auditor for the audit of the parent and the consolidated accounts 10 10
Fees payable to Company auditor for other services:
- Auditing the accounts of subsidiaries pursuant to legislation 19 18
- Other services 2 3
Total auditor's remuneration 31 31
** Included within research and development expense are staff costs totalling
£3,452,000 (2013: £2,666,000) also included in note 6.
6. Staff costs
31 July 2014 31 July 2013
£000 £000
Wages and salaries 3,777 2,960
Social security costs 424 296
Pension contributions 333 210
Share-based payments 573 870
5,107 4,336
Directors' remuneration (including benefits-in-kind) included in the aggregate remuneration above comprised:
Emoluments for qualifying services 879 1,228
Directors' emoluments (excluding social security costs, but including benefits
in kind) disclosed above include £359,000 paid to the highest paid director
(2013: £736,000).
Aggregate gains made by directors during the year following the exercise of
share options and jointly owned EBT shares were £nil (2013: £3,198,000).
The average number of employees during the year (including directors), was as
follows:
31 July 2014 31 July 2013
The Group Number Number
Directors 7 7
Laboratory and administrative staff 97 73
104 80
7. Finance income and expense
31 July2014 31 July2013
The Group £000 £000
Finance income:
Bank interest receivable 194 286
Finance expense:
Loan interest payable (5) (6)
189 280
Bank interest receivable includes £25,000 (2013: £68,000) which is receivable
after the year end.
8. Income tax
The tax credit is made up as follows:
31 July2014 31 July2013
The Group £000 £000
Current income tax:
UK corporation tax losses in the year - -
Research and development income tax credit receivable (1,210) (870)
Adjustment in respect of prior years (48) (50)
Overseas corporation tax 9 -
Total current income tax (1,249) (920)
The tax assessed for the year varies from the standard rate of corporation tax as explained below: 31 July2014 31 July2013
The Group £000 £000
Loss on ordinary activities before taxation (9,060) (5,042)
Tax at standard rate of 22.33% (2013: 23.67%) (2,023) (1,193)
Effects of:
Expenses not deductible for tax purposes 43 207
Movement in unprovided deferred tax - (236)
Additional reduction for research and development expenditure (1,390) (1,121)
Surrender of research and development relief for repayable tax credit 2,471 1,972
Research and development tax credit receivable (1,210) (870)
Share options exercised (CTA 2009 Pt 12 deduction) - (509)
Overseas corporation tax paid 9 -
Tax losses carried forward 899 880
Adjustment in respect of prior years (48) (50)
Tax credit in income statement (1,249) (920)
Reductions of the main rate of corporation tax from 23% to 21% from 1 April
2014 and to 20% from 1 April 2015 were substantively enacted on 2 July 2013.
The changes in tax rate are not considered to have had a material impact.
The Group has accumulated losses available to carry forward against future
trading profits of £15.3m (2013: £12.0m).
The estimated value of the deferred tax asset, measured at a standard rate of
20% (2013: 20%) is £3,070,000 (2013: £2,391,000), of which £nil (2013:
£220,000) has been recognised. Remaining tax losses have not been recognised
as an asset as it is not probable that future taxable profits will be
available against which the unused tax losses can be utilised.
The Group has a deferred tax asset for share-based payments, for which the
tax, measured at a standard rate of 21% (2013: 21%) is £464,000 (2013:
£361,000); a further £18,000 has not been recognised as an asset as the
transfer of economic benefits in the future is uncertain (2013: nil).
The Group also has a deferred tax liability being accelerated capital
allowances, for which the tax, measured at a standard rate of 20% (2013: 20%)
is £464,000 (2013: £581,000).
9. Earnings per share
31 July 2014 31 July2013
The Group £000 £000
Loss for the financial year attributable to equity shareholders (7,811) (4,122)
Share-based payments 573 870
Loss for the financial year before share-based payments (7,238) (3,252)
Weighted average number of shares:
Ordinary shares in issue 214,248,996 205,826,395
Adjusted loss per share before share-based payments (pence) (3.38) (1.58)
Basic loss per share (pence) (3.65) (2.00)
Diluted loss per share has not been presented above as the effect of share
options issued is anti-dilutive.
10. Tangible fixed assets
Laboratory infrastructure Office equipment, fixtures and fittings Plant and machinery Total
The Group £000 £000 £000 £000
Cost:
At 31 July 2012 2,029 343 2,689 5,061
Additions 402 71 1,302 1,775
Disposals - (24) - (24)
At 31 July 2013 2,431 390 3,991 6,812
Additions 70 35 389 494
Disposals - (117) - (117)
At 31 July 2014 2,501 308 4,380 7,189
Depreciation:
At 31 July 2012 965 234 1,266 2,465
Provided during the year 309 61 531 901
Disposals - (24) - (24)
At 31 July 2013 1,274 271 1,797 3,342
Provided during the year 371 75 735 1,181
Eliminated on disposal - (117) - (117)
At 31 July 2014 1,645 229 2,532 4,406
Net book value:
At 31 July 2014 856 79 1,848 2,783
At 31 July 2013 1,157 119 2,194 3,470
11. Intangible assets
Patents
The Group £000
Cost:
At 31 July 2012 1,394
Additions 340
At 31 July 2013 1,734
Additions 536
At 31 July 2014 2,270
Amortisation:
At 31 July 2012 352
Provided during the year 152
At 31 July 2013 504
Provided during the year 209
At 31 July 2014 713
Net book value:
At 31 July 2014 1,557
At 31 July 2013 1,230
Intangible assets are amortised on a straight line basis over ten years. Amortisation provided during the period is recognised in administrative expenses. The Group does not believe that any of its patents in isolation is material to the business.
12. Investment in subsidiaries
Shares Loans Loan impairment Total
The Company £000 £000 £000 £000
At 31 July 2012 63,235 21,041 (20,286) 63,990
Increase in respect of share-based payments - 870 - 870
At 31 July 2013 63,235 21,911 (20,286) 64,860
Increase in respect of share-based payments - 573 573
At 31 July 2014 63,235 22,484 (20,286) 65,433
By subsidiary
Nanoco Tech Limited 63,235 - - 63,235
Nanoco Life Sciences Limited - 20,286 (20,286) -
Nanoco Technologies Limited - 2,198 - 2,198
At 31 July 2014 63,235 22,484 (20,286) 65,433
Loans to subsidiary undertakings carry no interest and are repayable on
demand. Further information in relation to these loans is given in note 24.
Share of issued ordinary share capital
Subsidiary undertakings Country of incorporation Principal activity 31 July 2014 31 July 2013
Nanoco Life Sciences Limited (formerly Evolutec Limited) England and Wales Research and development 100% 100%
Nanoco Tech Limited England and Wales Holding company 100% 100%
Nanoco Technologies Limited* England and Wales Research and develop nano particles 100% 100%
Nanoco US Inc.** USA Management services 100% 100%
With the exception of the companies noted below all other shareholdings are
owned by Nanoco Group PLC.
*Share capital is owned by Nanoco Tech Limited.
**Nanoco US Inc. is a wholly owned subsidiary of Nanoco Tech Limited. It was
formed in July 2013 primarily in order to provide the services of US located
staff to the rest of the Group.
13. Inventories
31 July 2014 31 July 2014 31 July 2013 31 July
2013
Group Company Group Company
£000 £000 £000 £000
Raw materials and consumables 134 - 120 -
14. Trade and other receivables
31 July 2014 31 July 2014 31 July 2013 31 July
2013
Group Company Group Company
£000 £000 £000 £000
Trade receivables 116 - 114 -
Prepayments 375 - 446 -
Inter-company short-term loan to subsidiary - 27,500 - 17,055
Other receivables 142 - 372 -
633 27,500 932 17,055
The directors consider that the carrying amount of trade and other receivables
approximates to their fair value.
Trade receivables are denominated in the following currency:
31 July 2014 31 July 2014 31 July 2013 31 July
2013
Group Company Group Company
£000 £000 £000 £000
US Dollars 116 - 114 -
At 31 July the analysis of trade receivables that were past due but not
impaired was as follows:
Total Neither past due nor impaired Past due but not impaired >90 days Past due but not impaired 120 to 150 days
£000 £000 £000 £000
2014 116 89 18 9
2013 114 114 - -
15. Cash, cash equivalents and deposits
31 July 2014 31 July 2014 31 July 2013 31 July
2013
Group Company Group Company
£000 £000 £000 £000
Short-term investments and cash on deposit 5,791 - 6,176 1,500
Cash and cash equivalents 6,391 3,733 3,768 2,902
12,182 3,733 9,944 4,402
Under IAS 7, cash held on long-term deposits (being deposits with maturity of
greater than three months and no more than twelve months) that cannot readily
be converted into cash has been classified as a short-term investment. The
maturity on this investment was less than twelve months at the reporting
date.
Cash and cash equivalents at 31 July 2014 include deposits with original
maturity of three months or less of £6,391,000 (2013: £3,768,000).
An analysis of cash, cash equivalents and deposits by denominated currency is
given in note 23.
16. Trade and other payables
31 July 2014 31 July 2014 31 July 2013 31 July 2013
Group Company Group Company
£000 £000 £000 £000
Current
Current payables 760 - 1,277 -
Other payables 98 - 109 -
Deferred revenue 119 - 112 -
Accruals 471 - 453 -
` 1,448 - 1,951 -
Non-current
Long-term loan from subsidiary - 450 - 450
- 450 - 450
The directors consider that the carrying amount of trade and other payables
approximates to their fair value.
17. Financial liabilities
31 July 2014 31 July 2014 31 July 2013 31 July
2013
Group Company Group Company
£000 £000 £000 £000
Other loan:
Current 63 - 63 -
Non-current 95 - 158 -
158 - 221 -
The directors consider that the carrying amount of financial liabilities
approximate to their fair value, in so far as this is an arm's length
transaction taken out at a market rate of interest.
The loan is unsecured, bears interest at 2% above base rate, is repayable in
quarterly instalments and will be fully repaid in 2017.
18. Issued equity capital
Share capital Share premium Reverse acquisition reserve Total
The Group Number £000 £000 £000 £000
Authorised ordinary shares of 10p:
At 31 July 2012, 31 July 2013 and 31 July 2014 250,000,000 25,000 - - 25,000
Allotted, called up and fully paid ordinary shares of 10p:
As at 31 July 2012 207,384,167 20,738 84,509 (77,772) 27,475
Shares issued on exercise of options 2,776,842 278 397 (96) 579
As at 31 July 2013 210,161,009 21,016 84,906 (77,868) 28,054
Shares issued in placing 6,369,427 637 9,363 - 10,000
Expenses of placing - - (263) - (263)
As at 31 July 2014 216,530,436 21,653 94,006 (77,868) 37,791
The balances classified as share capital and share premium include the total
net proceeds (nominal value and share premium respectively) on issue of the
Company's equity share capital, comprising 10 pence ordinary shares.
The retained loss and other equity balances recognised in the Group financial
statements reflect the consolidated retained loss and other equity balances of
Nanoco Tech Limited immediately before the business combination which was
reported in the year ended 31 July 2009. The consolidated results for the
period from 1 August 2008 to the date of the acquisition by Nanoco Group PLC
are those of Nanoco Tech Limited. However, the equity structure appearing in
the Group financial statements reflects the equity structure of the legal
parent, including the equity instruments issued under the share for share
exchange to effect the transaction. The effect of using the equity structure
of the legal parent gives rise to an adjustment to the Group's issued equity
capital in the form of a reverse acquisition reserve.
Shares issued on exercise of options
No shares were issued on the exercise of options during the year (2013:
2,776,842 shares with an average exercise price of 20.86 pence were issued
resulting in share proceeds of £579,000).
During the year ended 31 July 2013, options exercised included certain options
which had an exercise price that was less than the nominal value of shares
issued (see note 20).
The Company raised gross proceeds of £10,000,000 from a placing on 15 October
2013 through the issue of 6,369,427 new ordinary shares at an issue price of
157 pence per share. Issue costs associated with the placing totalled
£263,000.
Share capital Share premium Total
The Company Number £000 £000 £000
Authorised ordinary shares of 10p:
At 31 July 2012, 31 July 2013 and 31 July 2014 250,000,000 25,000 - 25,000
Allotted, called up and fully paid ordinary shares of 10p:
As at 31 July 2012 207,384,167 20,738 84,509 105,247
Shares issued on exercise of options 2,776,842 278 397 675
As at 31 July 2013 210,161,009 21,016 84,906 105,922
Shares issued in placing 6,369,427 637 9,363 10,000
Expenses of placing - - (263) (263)
As at 31 July 2014 216,530,436 21,653 94,006 115,659
19. Share-based payment reserve
The Group and Company £000
At 31 July 2012 851
Share-based payments 870
Issue of shares by EBT (468)
At 31 July 2013 1,253
Share-based payments 573
At 31 July 2014 1,826
The share-based payment reserve accumulates the corresponding credit entry in
respect of share-based payment charges. Movements in the reserve are
disclosed in the Consolidated Statement of Changes in Equity.
A charge of £573,000 has been recognised in the Statement of Comprehensive
Income for the year (2013: £870,000).
Share option schemes
The Group operates the following share option schemes all of which are
operated as Enterprise Management Incentive ("EMI") schemes in so far as the
share options being issued meet the EMI criteria as defined by HM Revenue &
Customs. Share options issued that do not meet EMI criteria are issued as
unapproved share options, but are subject to the same exercise performance
conditions.
Nanoco Tech Share Incentive Plan
Share options issued under the Nanoco Tech Share Incentive Plan had been
issued to staff who were employed by Nanoco Tech Limited in the period from 1
September 2006 up to the date of the reverse take-over on 1 May 2009. These
options were conditional on achievement of share price performance criteria
and either a sale or listing of the Company. All of the relevant vesting
conditions have been successfully met and options are capable of being
exercised at any time from 1 August 2010 to 31 August 2016. Following the
reverse take-over the number of share options in issue were increased in line
with the terms of the reverse acquisition by a factor of 4.55 times and the
exercise price decreased by 4.55 times. This was reflected as a reverse
acquisition adjustment in the 2009 accounts.
Nanoco Group PLC Long Term Incentive Plan ("LTIP")
- Grant in November 2011
Share options were granted to staff and executive directors on 25 November
2011. The options granted to executive directors were subject to commercial
revenue targets being achieved over a three year period from the date of
grant. The exercise price was set at 50 pence, being the average closing share
price on the day preceding issue of the share options. The fair value benefit
is measured using a binomial model, taking into account the terms and
conditions upon which the share options were issued. Share options issued to
staff vest over a three year period from the date of grant but are not subject
to performance conditions.
- Grant in October 2012
Share options were granted to staff and executive directors on 22 October
2012. The options granted to executive directors were subject to commercial
revenue targets being achieved over a three year period from the date of
grant. The exercise price was set at 57 pence, being the average closing share
price on the day preceding issue of the share options. The fair value benefit
is measured using a binomial model, taking into account the terms and
conditions upon which the share options were issued. Share options issued to
staff vest over a three year period from the date of grant but are not subject
to performance conditions.
- Grant in May 2014
Share options were granted to certain staff on 23 May 2014. The exercise price
was set at 89 pence, being the average closing share price on the day
preceding issue of the share options. The fair value benefit is measured using
a binomial model, taking into account the terms and conditions upon which the
share options were issued. The options vest at the end of three years from the
date of grant and are exercisable until the tenth anniversary of the award.
The awards are not subject to performance conditions. Exercise of the award is
subject to the employee remaining a full time member of staff at the point of
exercise. No options were granted to executive directors.
- Other awards
Share options are awarded to management and key staff as a mechanism for
attracting and retaining key members of staff. The options are issued at
either market price on the day preceding grant or in the event of abnormal
price movements at an average market price for the week preceding grant date.
These options vest over a three year period from the date of grant and are
exercisable until the tenth anniversary of the award. Exercise of the award is
subject to the employee remaining a full time member of staff at the point of
exercise. The fair value benefit is measured using a binomial valuation model,
taking into account the terms and conditions upon which the share options were
issued.
Shares held in the Employee Benefit Trust ("EBT")
The Group operates a jointly owned EBT share scheme for senior management
under which the trustee of the Group-sponsored EBT has acquired shares in the
Company jointly with a number of employees. The shares were acquired pursuant
to certain conditions set out in jointly owned agreements ("JOA"). Subject to
meeting the performance criteria conditions set out in the JOA, the employees
are able to exercise an option to acquire the trustee's interests in the
jointly owned EBT shares at the option price. The jointly owned EBT shares
issued on 1 September 2006 had met the option conditions on 1 August 2010 and
are capable of being exercised at any time until 31 August 2016.
The fair value benefit is measured using a binomial valuation model, taking
into account the terms and conditions upon which the jointly owned shares were
issued.
The following tables illustrate the number and weighted average exercise
prices of, and movements in, share options and jointly owned EBT shares during
the year.
Share options EBT 2014 total 2013 total
The Group and Company Number Number Number Number
Outstanding at 1 August 13,064,756 850,500 13,915,256 12,899,184
Granted during the year 444,000 - 444,000 8,260,000
Exercised during the year - - - (6,176,828)
Lapsed/cancelled (135,000) - (135,000) (1,067,100)
Outstanding at 31 July 13,373,756 850,500 14,224,256 13,915,256
Exercisable at 31 July 4,118,090 850,500 4,968,590 1,261,923
During the prior year ended 31 July 2013, options over 3,387,986 shares,
jointly owned by the EBT and which had been issued at their original market
value of £603,000, were exercised for an aggregate consideration of £135,000;
the balance of £468,000 was charged to the share-based payment reserve.
Weighted average exercise price of options
2014 2013
The Group and Company Pence Pence
Outstanding at 1 August 56.8 34.3
Granted during the year 89.0 60.8
Exercised during the year - 13.4
Forfeited/cancelled 113.2 95.6
Outstanding at 31 July 54.4 56.8
The weighted average fair value of options granted during the year to 31 July
2014 was 89 pence (2013: 61 pence). The range of exercise prices for options
and jointly owned EBT shares outstanding at the end of the year was nil -146
pence, (2013: nil - 146 pence).
For the share options outstanding as at 31 July 2014, the weighted average
remaining contractual life is 7.6 years (2013: 8.5 years).
No share options were exercised during the year (2013: the weighted average
share price at the date of exercise for those share options exercised was 110
pence).
The following table lists the inputs to the models used for the years ended 31
July 2014 and 31 July 2013.
The Group and Company Performance linked grants Non-performance linked grants
2014 2013 2014 2013
Expected volatility (%) n/a 50%-55% 56% 50%-55%
Risk-free interest rate (%) n/a 0.8% 1.84% 0.7%-0.9%
Expected life of options (year's average) n/a 2.5 years 3 years 2 years
Weighted average exercise price (pence) n/a 61p 89.0 62.5p
Weighted average share price at date of grant (pence) n/a 57p 89.0 62.5p
Model used Binomial Binomial Binomial Binomial
The expected life of the options is based on historical data and is not
necessarily indicative of exercise patterns that may occur. The expected
volatility reflects the assumption that the historical volatility is
indicative of future trends, which may also not necessarily be the actual
outcome.
No other features of options granted were incorporated into the measurement of
fair value.
20. Merger reserve and capital redemption reserve
Merger reserve
The Group £000
At 31 July 2012, 31 July 2013 and 31 July 2014 (1,242)
The merger reserve arises under section 612 of the Companies Act 2006 on the
shares issued by Nanoco Tech Limited to acquire Nanoco Technologies Limited as
part of a simple Group re-organisation on 27 June 2007.
Capital redemption reserveThe Company £000
At 31 July 2012 4,498
Share options exercised at a discount to nominal value (96)
At 31 July 2013 4,402
Share options exercised at a discount to nominal value -
At 31 July 2014 4,402
The capital redemption reserve arises from the off-market purchase of deferred
shares on 4 May 2005 and their subsequent cancellation.
Certain share options exercised during the year ended 31 July 2013 had an
exercise price less than nominal value. The aggregate discount to nominal
value on these options was £96,000 and was charged to the Company's capital
redemption reserve and, on consolidation, to the Group's reverse acquisition
reserve. The discount arose as a result of the formula agreed, at the time of
the acquisition of Nanoco Tech Limited by the Company on 1 May 2009, for
converting share options in Nanoco Tech Limited into equivalent share options
in the Company. This accounting treatment was authorised at the AGM held on 16
December 2011.
21. Movement in revenue reserve and treasury shares
The Group Retained deficit Treasury shares Total
revenue reserve
£000 £000 £000
As at 31 July 2012 (9,155) (997) (10,152)
Issue of shares by EBT - 603 603
Loss for the year (4,122) - (4,122)
As at 31 July 2013 (13,277) (394) (13,671)
Loss for the year (7,811) - (7,811)
As at 31 July 2014 (21,088) (394) (21,482)
No jointly owned EBT shares were granted during the year (2013: no shares).
No jointly owned EBT shares were exercised during the year. (2013: options
over 3,387,986 shares, jointly owned by the EBT and which had been issued at
their original market value of £603,000, were exercised for an aggregate
consideration of £135,000; the balance of £468,000 is charged to the
share-based payment reserve).
Retained deficit represents the cumulative loss attributable to the equity
holders of the parent company.
Treasury shares include the value of Nanoco Group PLC shares issued as jointly
owned equity shares and held by the Nanoco Group sponsored Employee Benefit
Trust ("EBT") jointly with a number of the Group's employees. At 31 July 2014
850,500 shares in the Company were held by the EBT (2013: 850,500). In
addition there are 12,222 (2013: 12,222) treasury shares not held by the EBT.
Retained deficit Treasury shares Total
revenue reserve
The Company £000 £000 £000
At 31 July 2012 (25,412) (997) (26,409)
Issue of shares by EBT - 603 603
Profit for the year 96 - 96
At 31 July 2013 (25,316) (394) (25,710)
Profit for the year 39 - 39
At 31 July 2014 (25,277) (394) (25,671)
22. Commitments
Operating lease commitments
The Group leases premises under non-cancellable operating lease agreements.
The future aggregate minimum lease and service charge payments under
non-cancellable operating leases are as follows:
31 July 2014 31 July 2013
Group Group
£000 £000
Land and buildings:
Not later than one year 584 667
After one year but not more than five years 1,722 1,912
After five years 1,002 1,390
3,308 3,969
23. Financial risk management
Overview
This note presents information about the Group's exposure to various kinds of
financial risks, the Group's objectives, policies and processes for measuring
and managing risk, and the Group's management of capital.
The Board of Directors has overall responsibility for the establishment and
oversight of the Group's risk management framework. The executive directors
report regularly to the Board on Group risk management.
Capital risk management
The Company reviews its forecast capital requirements on a half-yearly basis
to ensure that entities in the Group will be able to continue as a going
concern while maximising the return to stakeholders.
The capital structure of the Group consists of equity attributable to equity
holders of the parent, comprising issued share capital, reserves and retained
earnings as disclosed in notes 18, 19, 20 and 21 and in the Group Statement of
Changes in Equity. Total equity was £16,893,000 at 31 July 2014 (£14,394,000
at 31 July 2013).
The Company is not subject to externally imposed capital requirements.
Liquidity risk
The Group's approach to managing liquidity is to ensure that, as far as
possible, it will always have sufficient liquidity to meet its liabilities
when due, under both normal and stressed conditions, without incurring
unacceptable losses or risking damage to the Group's reputation.
The Group manages all of its external bank relationships centrally in
accordance with defined treasury policies. The policies include the minimum
acceptable credit rating of relationship banks and financial transaction
authority limits. Any material change to the Group's principal banking
facility requires Board approval. The Group seeks to mitigate the risk of bank
failure by ensuring that it maintains relationships with a number of
investment grade banks.
At the reporting date the Group was cash positive with no outstanding
borrowings, apart from a long-term loan which is being repaid on a quarterly
basis in line with the terms of the loan agreement.
Categorisation of financial
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