REG - Nanoco Group PLC - Preliminary Results <Origin Href="QuoteRef">NANON.L</Origin> - Part 2
11/10/2016 07:05
- Part 2: For the preceding part double click ID:nRSK1972Ma
to market changes or
circumstances arising that are beyond the control of the Group. Such changes
are reflected in the assumptions when they occur.
3. Significant accounting policies
The accounting policies set out below are consistent with those of the
previous financial year and are applied consistently by Group entities.
(a) Basis of consolidation
The Group financial statements consolidate the financial statements of Nanoco
Group plc and the entities it controls (its subsidiaries) drawn up to 31 July
each year.
Subsidiaries are all entities over which the Group has the power over the
investee (i.e. existing rights that give it the current ability to direct the
relevant activities of the investee), exposure, or rights, to variable returns
from its involvement with the investee and ability to use its power over the
investee to affect its returns. All Nanoco Group plc's subsidiaries are 100%
owned. Subsidiaries are fully consolidated from the date control passes.
The acquisition method of accounting is used to account for the acquisition of
subsidiaries by the Group. The costs of an acquisition are measured as the
fair value of the assets given, equity instruments issued and liabilities
incurred or assumed at the date of exchange, plus costs directly attributable
to the acquisition. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are initially
measured at fair value at acquisition date irrespective of the extent of any
minority interest. The difference between the cost of acquisition of shares in
subsidiaries and the fair value of the identifiable net assets acquired is
capitalised as goodwill and reviewed annually for impairment. Any deficiency
in the cost of acquisition below the fair value of identifiable net assets
acquired (i.e. discount on acquisition) is recognised directly in the
consolidated statement of comprehensive income.
In the consolidated financial statements, income and cash flow statement items
for Group entities with a functional currency other than Sterling are
translated into Sterling at monthly average exchange rates, which approximate
to the actual rates, for the relevant accounting periods.
All intra-group transactions, balances and unrealised gains on transactions
between Group companies are eliminated on consolidation. Subsidiaries'
accounting policies are amended where necessary to ensure consistency with the
policies adopted by the Group.
(b) Foreign currency transactions
Transactions in foreign currencies are initially recorded in the functional
currency by applying the spot rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies (including
those of the Group's US subsidiary) are retranslated at the functional
currency rate of exchange ruling at the reporting date. All differences are
taken to the consolidated statement of comprehensive income.
Non-monetary items that are measured in terms of historical cost in a foreign
currency are translated using the exchange rates as at the dates of the
initial transactions. Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rates at the date when the fair
value was determined.
(c) Segmental reporting
An operating segment is a component of an entity that engages in business
activities from which it may earn revenues and incur expenses, whose operating
results are regularly reviewed by the entity's chief operating decision maker
to make decisions about resources to be allocated to the segment and assess
its performance, and for which discrete financial information is available. As
at the reporting date the Company operated with only a single segment.
(d) Revenue recognition
Revenue is recognised to the extent that it is probable that economic benefits
will flow to the Group and the revenue can be reliably measured. Revenue is
measured at the fair value of the consideration received or receivable for the
sale of goods or services, excluding discounts, rebates, VAT and other sales
taxes or duties.
The Group's revenues to date comprise amounts earned under joint development
agreements, individual project development programmes and material supply and
licence agreements and revenue from the sale of quantum dot products.
Revenues received in advance of work performed from development programmes are
recognised on a straight-line basis over the period that the development work
is being performed as measured by contractual milestones. Revenue is not
recognised where there is uncertainty regarding the achievement of such
milestones and where either revenue has not been paid or the customer has the
right to recoup advance payments.
Contractual payments received from licence agreements are recognised as
revenue when goods, services or rights and entitlements are supplied. Upfront
licence fees, where control over the intellectual property has been retained
by the Group, are taken to income on a straight-line basis over the initial
period of the contract in accordance with the continuing obligations under the
contract.
Revenue from the sale of products is recognised at the point of transfer of
risks and rewards of ownership, which is generally on shipment of product.
(e) Government grants
Government grants are recognised when it is reasonable to expect that the
grants will be received and that all related conditions are met, usually on
submission of a valid claim for payment.
Government grants of a revenue nature are recognised as other operating income
(2015: rendering of services) in the consolidated statement of comprehensive
income.
Government grants relating to capital expenditure are deducted in arriving at
the carrying amount of the asset.
(f) Cost of sales
Cost of sales comprises the labour, materials and power costs incurred in the
generation of revenue from products sold.
Revenue from royalties and licences and revenue from the rendering of
services, which comprise payments from customers to gain preferential
treatment in terms of supply or pricing, do not have an associated cost of
sale.
(g) Operating loss
Operating losses are stated after research and development and administration
expenses but before finance charges and taxation.
(h) Research and development
Research costs are charged in the consolidated statement of comprehensive
income as they are incurred. Development costs will be capitalised as
intangible assets when it is probable that future economic benefits will flow
to the Group. Such intangible assets will be amortised on a straight-line
basis from the point at which the assets are ready for use over the period of
the expected benefit, and will be reviewed for impairment at each reporting
date based on the circumstances at the reporting date.
The criteria for recognising expenditure as an asset are:
· it is technically feasible to complete the product;
· management intends to complete the product and use or sell it;
· there is an ability to use or sell the product;
· it can be demonstrated how the product will generate probable future
economic benefits;
· adequate technical, financial and other resources are available to
complete the development, use and sale of the product; and
· expenditure attributable to the product can be reliably measured.
Development costs are currently charged against income as incurred since the
criteria for their recognition as an asset are not met.
(i) Lease payments
Rentals payable under operating leases, which are leases where the lessor
retains a significant proportion of the risks and rewards of the underlying
asset, are charged in the consolidated statement of comprehensive income on a
straight-line basis over the expected lease term.
Lease incentives received are recognised as an integral part of the total
lease expense, over the term of the lease.
(j) Finance income and expense
Finance income comprises interest income on funds invested and changes in the
fair value of financial assets at fair value through the consolidated
statement of comprehensive income. Interest income is recognised as interest
accrues using the effective interest rate method.
Finance expense comprises interest expense on borrowings. All borrowing costs
are recognised using the effective interest method.
(k) Income tax
Income tax expense comprises current and deferred tax. Income tax expense is
recognised in the consolidated statement of comprehensive income except to the
extent that it relates to items recognised directly in equity or in other
comprehensive income.
Current income tax assets and liabilities for the current and prior periods
are measured at the amount expected to be recovered from, or paid to, the tax
authorities. The tax rates and tax laws used to compute the amount are those
that are enacted or substantively enacted by the reporting date.
Deferred income tax is recognised on all temporary differences arising between
the tax bases of assets and liabilities and their carrying amounts in the
financial statements with the following exceptions:
· where the temporary difference arises from the initial recognition of
goodwill or of an asset or liability in a transaction that is not a business
combination that at the time of the transaction affects neither accounting nor
taxable profit or loss; and
· in respect of taxable temporary differences associated with investments in
subsidiaries where the timing of the reversal of the temporary differences can
be controlled and it is probable that the temporary differences will not
reverse in the foreseeable future.
Deferred income tax assets and liabilities are measured on an undiscounted
basis using the tax rates and tax laws that have been enacted or substantively
enacted by the balance sheet date and which are expected to apply when the
related deferred tax asset is realised or the deferred tax liability is
settled.
Deferred income tax assets are recognised to the extent that it is probable
that future taxable profits will be available against which differences can be
utilised. An asset is not recognised to the extent that the transfer of
economic benefits in the future is uncertain.
Deferred income tax assets and liabilities are offset only if a legally
enforceable right exists to set off current tax assets against current tax
liabilities, the deferred income taxes relate to the same taxation authority
and that authority permits the Group to make a single payment.
(l) Property, plant and equipment
Property, plant and equipment assets are recognised initially at cost. After
initial recognition, these assets are carried at cost less any accumulated
depreciation and any accumulated impairment losses. Cost comprises the
aggregate amount paid and the fair value of any other consideration given to
acquire the asset and includes costs directly attributable to making the asset
capable of operating as intended.
Depreciation is computed by allocating the depreciable amount of an asset on a
systematic basis over its useful life and is applied separately to each
identifiable component.
The following bases and rates are used to depreciate classes of assets:
Laboratory infrastructure ̶ straight line over remainder of
lease period
Fixtures and fittings ̶ straight line over five years
Office equipment ̶ straight line over three years
Plant and machinery ̶ straight line over five years
The carrying values of tangible fixed assets are reviewed for impairment if
events or changes in circumstances indicate that the carrying value may not be
recoverable, and are written down immediately to their recoverable amount.
Useful lives and residual values are reviewed annually and where adjustments
are required these are made prospectively.
A tangible fixed asset item is derecognised on disposal or when no future
economic benefits are expected to arise from the continued use of the asset.
Any gain or loss arising on the derecognition of the asset is included in the
consolidated statement of comprehensive income in the period of
derecognition.
(m) Intangible assets
Intangible assets acquired either as part of a business combination or from
contractual or other legal rights are recognised separately from goodwill
provided they are separable and their fair value can be measured reliably.
This includes the costs associated with acquiring and registering patents in
respect of intellectual property rights.
Where intangible assets recognised have finite lives, after initial
recognition their carrying value is amortised on a straight-line basis over
those lives. The nature of those intangibles recognised and their estimated
useful lives are as follows:
Patents ̶ straight line over ten
years
(n) Impairment of assets
At each reporting date the Group reviews the carrying value of its plant,
equipment and intangible assets to determine whether there is an indication
that these assets have suffered an impairment loss. If any such indication
exists, or when annual impairment testing for an asset is required, the
Company makes an assessment of the asset's recoverable amount.
An asset's recoverable amount is the higher of an asset's or cash-generating
unit's fair value less costs to sell and its value in use and is determined
for an individual asset, unless the asset does not generate cash inflows that
are largely independent of those from other assets or groups of assets. Where
the carrying value of an asset exceeds its recoverable amount, the asset is
considered impaired and is written down to its recoverable amount. In
assessing value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset. In
determining fair value less costs of disposal, an appropriate valuation model
is used and these calculations are corroborated by valuation multiples or
other available fair value indicators. Impairment losses on continuing
operations are recognised in the consolidated statement of comprehensive
income in those expense categories consistent with the function of the
impaired asset.
An assessment is made at each reporting date as to whether there is any
indication that previously recognised impairment losses may no longer exist or
may have decreased. If such indication exists, the recoverable amount is
estimated. A previously recognised impairment loss is reversed only if there
has been a change in the assumptions used to determine the asset's recoverable
amount since the last impairment loss was recognised. If that is the case the
carrying amount of the asset is increased to its 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 a revalued
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.
(o) Investments in subsidiaries
Investments in subsidiaries are stated in the Company statement of financial
position at cost less provision for any impairment.
(p) 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.
(q) Financial instruments
Financial assets and financial liabilities are recognised when the Group
becomes party to the contractual provisions of the relevant instrument and
derecognises when it ceases to be party to such provisions. Such assets and
liabilities are classified as current if they are expected to be realised or
settled within twelve months after the balance sheet date. Financial assets
and liabilities are initially recognised at fair value and subsequently
measured at either fair value or amortised cost including directly
attributable transaction costs.
The Group has the following categories of financial assets and liabilities:
Loans and receivables
i) 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 uncollectable, it is written off against the
allowance account for trade receivables.
ii) 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.
Financial liabilities at amortised cost
i) 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.
ii) Loans
Obligations for loans and borrowings are measured initially at fair value and
subsequently interest-bearing loans are measured at fair value.
(r) 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.
(s) Shares held by the Employee Benefit Trust ("EBT")
The EBT is consolidated in the financial statements and the shares are
reported as treasury shares in the Group's statements 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.
(t) 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.
(u) 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.
(v) New accounting standards and interpretations
There were no new or amended IFRS, IAS and IFRIC interpretations which were
mandatory for accounting periods ending 31 July 2016 and thereafter that were
relevant to the Group.
A number of new standards, amendments to standards and interpretations are
effective for annual periods ending 31 July 2017 or thereafter and have not
been applied in preparing these consolidated financial statements and those
that are relevant to the Group are summarised below. Other than the
introduction of IFRS 16, 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 Directors consider the adoption of IFRS 15 will not
have a material effect on revenue recognised in earlier periods in view of the
nature of existing licensing contracts. Management will, however, keep the
situation under review and report any deviation from this position at each
reporting period.
The following standards and interpretations have an effective date after the
date of these financial statements and are relevant to the Group:
Effective date
IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception - Amendments to IFRS 10, IFRS 12 and IAS 28 1 January 2016
IAS 1 Disclosure Initiative - Amendments to IAS 1 1 January 2016
IAS 16 and IAS 38 - Clarification of Acceptable Methods of Depreciation and Amortisation - Amendments to IAS 16 and IAS 38 1 January 2016
IAS 27 Equity Method in Separate Financial Statements - Amendments 1 January 2016
to IAS 27
IAS 12 Recognition of Deferred Tax Assets for Unrelieved Losses - Amendments to IAS 12 1 January 2017
IAS 7 Disclosure Initiative - Amendments to IAS 7 1 January 2017
IFRS 15 Revenue from Contracts with Customers 1 January 2018
IFRS 9 Financial Instruments (issued in 2013) 1 January 2018
IFRS 16 Leases 1 January 2019
Annual Improvements to IFRSs 2012 to 2014 Cycle 1 January 2016
4. Segmental information
Operating segments
At 31 July 2016 the Group operated as one segment, being the provision of high
performance nanoparticles manufactured for sale and for research and
development purposes. This is the level at which operating results are
reviewed by the chief operating decision maker (i.e. the Chief Executive) 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 July2016£'000 31 July2015£'000
Analysis of revenue
Products sold 204 445
Rendering of services 114 353
Royalties and licences 156 1,231
474 2,029
Included within rendering of services is revenue from one material customer
amounting to £114,000 (2015: one material customer amounting to £106,000). All
revenue from royalties and licences is from one material customer (2015: one
material customer).
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 July2016£'000 31 July2015£'000
Revenue
UK 20 130
Europe (excluding UK) 42 -
Asia 135 395
USA 277 1,504
474 2,029
All the Group's assets are held in the UK and all of its capital expenditure
arises in the UK.
5. Other operating income
31 July2016£'000 31 July2015£'000
Government grants 284 -
In the prior year income from government grants was not material and was
reported within revenue for rendering of services and totalled £129,000.
6. Operating loss
The Group 31 July2016£'000 31 July2015£'000
Operating loss is stated after charging/(crediting):
Depreciation of tangible fixed assets (see note 11) 991 1,106
Amortisation of intangible assets (see note 12) 298 269
Staff costs (see note 7) 6,801 6,242
Foreign exchange losses/(gains) 4 (27)
Research and development expense* 5,995 5,580
Operating lease rentals (see note 24):
Land and buildings 723 684
* Included within research and development expense are staff costs totalling £4,590,000 (2015: £4,150,000)also included in note 7.
Auditor's remuneration
Audit services:
- Fees payable to Company auditor for the audit of the Parent and the consolidated accounts 20 17
- Auditing the accounts of subsidiaries pursuant to legislation 23 20
Fees payable to Company auditor for other services:
- Services in connection with the review of interim results 8 -
- Services in connection with the Company's move to the Main Market - 173
Total auditor's remuneration 51 210
7. Staff costs
31 July2016£'000 31 July2015£'000
Wages and salaries 5,622 4,833
Social security costs 567 508
Pension contributions 342 282
Share-based payments 270 619
6,801 6,242
Directors' remuneration (including benefits in kind) included in the aggregate remuneration above comprised:
Emoluments for qualifying services 1,227 1,012
Directors' emoluments (excluding social security costs and long-term
incentives, but including benefits in kind) disclosed above include £349,000
paid to the highest paid Director (2015: £322,000).
Aggregate gains made by Directors during the year following the exercise of
share options and jointly owned EBT shares were £nil (2015: £27,000).
Not included in the costs reported above are share awards to be made to
Directors under the deferred bonus plan amounting to £166,000. The awards will
be recognised in the income statement by way of a share-based payment charge
over the deferral period as required by IFRS 2.
The average number of employees during the year (including Directors) was as
follows:
Group 31 July2016Number 31 July2015Number
Directors 9 8
Laboratory and administrative staff 120 101
129 109
8. Finance income and expense
Group 31 July2016£'000 31 July2015£'000
Finance income
Bank interest receivable 193 119
Finance expense
Loan interest payable (12) (3)
181 116
Bank interest receivable includes £12,000 (2015: £44,000), which is receivable
after the year end.
9. Taxation
The tax credit is made up as follows:
Group 31 July2016£'000 31 July2015£'000
Current income tax
Research and development income tax credit receivable (1,970) (1,800)
Adjustment in respect of prior years (30) (113)
Overseas corporation tax 7 7
(1,993) (1,906)
Deferred tax
Charge for the year - -
Total income tax credit (1,993) (1,906)
The adjustments in respect of prior years relate to research and development
income tax credits. The research and development income tax for the year ended
31 July 2015 was submitted in March 2016 and the repayment was received in
April 2016. The income tax receivable shown in the statement of financial
position is the R&D tax credit receivable reported above.
The tax assessed for the year varies from the standard rate of corporation tax
as explained below:
Group 31 July2016£'000 31 July2015£'000
Loss on ordinary activities before taxation (12,600) (10,881)
Tax at standard rate of 20% (2015: 20.67%) (2,520) (2,249)
Effects of:
Expenses not deductible for tax purposes 243 194
Additional reduction for research and development expenditure (1,556) (1,456)
Surrender of research and development relief for repayable tax credit 2,758 2,609
Research and development tax credit receivable (1,970) (1,800)
Share options exercised (CTA 2009 Pt 12 deduction) - (155)
Overseas corporation tax 7 7
Losses and share-based payment charges carried forward not recognised in deferred tax 1,075 1,001
Adjustment in respect of prior years (30) (113)
Changes in tax rate/other adjustments - 56
Tax credit in income statement (1,993) (1,906)
The Group has accumulated losses available to carry forward against future
trading profits of £24.3 million (2015: £19.2 million).
Deferred tax liabilities/(assets) provided/recognised are as follows:
31 July2016£'000 31 July2015£'000
Accelerated capital allowances 189 336
Share-based payments (189) (336)
Tax losses - -
- -
The Group also has deferred tax assets, measured at a standard rate of 20%
(2015: 20%), in respect of share-based payments of £455,000 (2015: £247,000)
and tax losses of £4,850,000 (2015: £3,842,000) which have not been recognised
as an asset as it is not yet probable that future taxable profits will be
available against which the assets can be utilised.
10. Earnings per share
Group 31 July 2016 £'000 31 July2015 £'000
Loss for the financial year attributable to equity shareholders (10,607) (8,975)
Cost of the move to the Main Market - 926
Share-based payments 270 619
Loss for the financial year before the cost of the move to the Main Market and share-based payments (10,337) (7,430)
Weighted average number of shares
Ordinary shares in issue 237,077,578 221,360,893
Adjusted loss per share before the cost of the move to the Main Market and share-based payments (pence) (4.36) (3.36)
Basic loss per share (pence) (4.47) (4.05)
Diluted loss per share has not been presented above as the effect of share
options issued is anti-dilutive.
11. Property, plant and equipment
Group Laboratory infrastructure£'000 Office equipment, fixtures and fittings£'000 Plant and machinery£'000 Total£'000
Cost
At 1 August 2014 2,501 308 4,380 7,189
Additions 77 36 272 385
Disposals - (114) - (114)
At 31 July 2015 2,578 230 4,652 7,460
Additions 67 26 96 189
At 31 July 2016 2,645 256 4,748 7,649
Depreciation
At 1 August 2014 1,645 229 2,532 4,406
Provided during the year 362 46 698 1,106
Eliminated on disposal - (114) - (114)
At 31 July 2015 2,007 161 3,230 5,398
Provided during the year 394 47 550 991
At 31 July 2016 2,401 208 3,780 6,389
Net book value
At 31 July 2016 244 48 968 1,260
At 31 July 2015 571 69 1,422 2,062
The aggregate original cost of tangible assets now fully depreciated but
considered to be still in use is £3,301,000 (2015: £1,570,000).
12. Intangible assets
Group Patents£'000
Cost
At 1 August 2014 2,270
Additions 533
At 31 July 2015 2,803
Additions 900
At 31 July 2016 3,703
Amortisation
At 1 August 2014 713
Provided during the year 269
At 31 July 2015 982
Provided during the year 298
At 31 July 2016 1,280
Net book value
At 31 July 2016 2,423
At 31 July 2015 1,821
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 are
material to the business.
The aggregate original cost of intangible assets now fully depreciated but
considered to be still in use is £154,000 (2015: £50,000).
13. Investment in subsidiaries
Company Shares£'000 Loans£'000 Loan impairment£'000 Total£'000
At 1 August 2014 63,235 22,484 (20,286) 65,433
Increase in respect of share-based payments - 619 - 619
At 31 July 2015 63,235 23,103 (20,286) 66,052
Increase in respect of share-based payments - 270 - 270
At 31 July 2016 63,235 23,373 (20,286) 66,322
By subsidiary
Nanoco Tech Limited 63,235 - - 63,235
Nanoco Life Sciences Limited - 20,286 (20,286) -
Nanoco Technologies Limited - 3,087 - 3,087
At 31 July 2016 63,235 23,373 (20,286) 66,322
Loans to subsidiary undertakings carry no interest and are repayable on
demand. Further information in relation to these loans is given in note 26.
Share of issued ordinary share capital
Subsidiary undertakings Country of incorporation Principal activity 31 July 2016 31 July 2015
Nanoco Life Sciences 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 Manufacture and development of nanoparticles 100% 100%
Nanoco US Inc. ** USA Management services 100% 100%
With the exception of the two companies footnoted 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.
14. Inventories
31 July 2016Group£'000 31 July 2016Company£'000 31 July 2015Group£'000 31 July 2015Company£'000
Raw materials, finished goods and consumables 208 - 208 -
A total of £85,000 was included in cost of sales with respect to inventory
during the year.
15. Trade and other receivables
. 31 July 2016Group£'000 31 July 2016Company£'000 31 July 2015Group£'000 31 July 2015Company£'000
Trade receivables 1,455 - 107 -
Prepayments and accrued income 422 12 430 43
Inter-company short-term loan to subsidiary - 42,976 - 31,823
Other receivables 168 - 365 -
2,045 42,988 902 31,866
Trade receivables are non-interest bearing and are generally due and paid
within 30 to 60 days. The Directors consider that the carrying amount of trade
and other receivables approximates to their fair value and that no impairment
is required at the reporting date. Therefore there is no provision for
impairment at the balance sheet date (2015: same).
Trade receivables are denominated in the following currency:
31 July 2016Group£'000 31 July 2016Company£'000 31 July 2015Group£'000 31 July 2015Company£'000
US Dollars 1,032 - 106 -
Euros 423 - - -
Sterling - - 1 -
1,455 - 107 -
At 31 July the analysis of trade receivables that were past due but not
impaired was as follows:
Not yet due£'000 Due but not impaired£'000 Past due but not impaired >90 days£'000 Past due but not impaired 120 to 150 days£'000 Total£'000
2016 1,374 30 8 43 1,455
2015 18 89 - - 107
16. Cash, cash equivalents and deposits
31 July2016Group£'000 31 July2016Company£'000 31 July2015Group£'000 31 July2015Company£'000
Short-term investments and cash on deposit 5,000 5,000 20,000 20,000
Cash and cash equivalents 9,511 4,057 4,311 12
14,511 9,057 24,311 20,012
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 2016 include deposits with original
maturity of three months or less of £5,000,000 (2015: £4,311,000).
An analysis of cash, cash equivalents and deposits by denominated currency is
given in note 25.
17. Trade and other payables
31 July 2016Group£'000 31 July 2016Company£'000 31 July 2015Group£'000 31 July 2015Company£'000
Current
Trade payables 1,093 - 862 -
Other payables 185 - 137 -
Accruals 1,165 - 910 -
2,443 - 1,909 -
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. Interest is not charged on inter-company
loans (2015: no interest). The average credit period taken is 45 days (2015:
45 days).
18. Financial liabilities
31 July 2016Group£'000 31 July 2016Company£'000 31 July 2015Group£'000 31 July 2015Company£'000
Other loan
Current 32 - 63 -
Non-current - - 32 -
32 - 95 -
The Directors consider that the carrying amount of financial liabilities
approximates to their fair value, insofar 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.
19. Deferred revenue
31 July 2016Group£'000 31 July 2016Company£'000 31 July 2015Group£'000 31 July 2015Company£'000
Current 531 - - -
Non-current 648 - - -
1,179 - - -
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.
20. Issued equity capital
Group Number Share capital£'000 Share premium£'000 Reverse acquisition reserve£'000 Total£'000
Allotted, called up and fully paid ordinary shares of 10p
At 31 July 2014 216,530,436 21,653 94,006 (77,868) 37,791
Shares issued on exercise of options 1,499,523 150 676 - 826
Shares issued in placing 19,047,619 1,905 18,095 - 20,000
Expenses of placing - - (560) - (560)
At 31 July 2015 and 31 July 2016 237,077,578 23,708 112,217 (77,868) 58,057
The Company raised gross proceeds of £20,000,000 from a placing on 1 May 2015
through the issue of 19,047,619 new ordinary shares at an issue price of 105
pence per share. Issue costs associated with the placing totalled £560,000.
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 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 the Company 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 options were exercised this year. Last year the Company issued 1,499,523
shares which had an average exercise price of 55.1 pence.
Company Number Share capital£'000 Share premium£'000 Total£'000
Allotted, called up and fully paid ordinary shares of 10p
At 31 July 2014 216,530,436 21,653 94,006 115,659
Shares issued on exercise of options 1,499,523 150 676 826
Shares issued in placing 19,047,619 1,905 18,095 20,000
Expenses of placing - - (560) (560)
At 31 July 2015 and 31 July 2016 237,077,578 23,708 112,217 135,925
21. Share-based payment reserve
Group and Company £'000
At 31 July 2014 1,826
Share-based payments 619
At 31 July 2015 2,445
Share-based payments 270
At 31 July 2016 2,715
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 £270,000 has been recognised in the statement of comprehensive
income for the year (2015: £619,000).
Share option schemes
The Group operates the following share option schemes, all of which are
operated as Enterprise Management Incentive ("EMI") schemes insofar 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 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
targets being achieved. The exercise price was set at 50 pence, being the
average closing share price on the day preceding the 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
targets being achieved. The exercise price was set at 57 pence, being the
average closing share price on the day preceding the 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 the 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.
Grant in October 2014
Share options were granted to an Executive Director on 14 October 2014. The
exercise price was set at 10 pence, being the nominal value of the share. 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 subject to
performance conditions which were amended during the year so as to be in line
with the 2015 LTIP scheme. As a result of the modification, the fair value of
the award was reduced. However, in accordance with IFRS 2 no change was made
to the charge in the financial statements. Exercise of the award is subject to
the employee remaining a full-time member of staff at the point of exercise.
Nanoco Group plc 2015 Long Term Incentive Plan ("LTIP")
Grant in December 2015
Following approval of the new scheme at the 2015 AGM, share options were
granted to all four Executive Directors at nil cost. The fair value benefit is
measured using a stochastic model, taking into account the terms and
conditions upon which the share options were issued. The options vest at the
end of the three-year performance period subject to meeting the performance
criteria and are exercisable after a two-year holding period until the tenth
anniversary of the award.
Grant in April 2016
Share options were granted to an employee on 12 April 2016 at nil cost. The
fair value benefit is measured using a stochastic model, taking into account
the terms and conditions upon which the share options were issued. The options
vest at the end of a three-year performance period subject to meeting
performance criteria and
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