REG - Nanoco Group PLC - Preliminary Results <Origin Href="QuoteRef">NANON.L</Origin> - Part 3
11/10/2016 07:05
- Part 3: For the preceding part double click ID:nRSK1972Mb
are exercisable until the tenth anniversary of the
award.
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.
On 14 October 2015, unapproved options were granted to a member of staff with
an exercise price of 56.5 pence. These options vest over a three-year period
from the date of grant with performance conditions 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 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
the option to gain sole ownership was exercised by the option holder on 2
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.
Group and Company Share optionsNumber EBTNumber 2016 totalNumber 2015 totalNumber
Outstanding at 1 August 12,004,233 530,089 12,534,322 14,224,256
Granted during the year 1,695,368 - 1,695,368 380,000
Exercised during the year - - - (1,819,934)
Forfeited/cancelled (221,668) - (221,668) (250,000)
Outstanding at 31 July 13,477,933 530,089 14,008,022 12,534,322
Exercisable at 31 July 10,998,565 530,089 11,528,654 9,251,989
Weighted average exercise price of options
Group and Company 2016Pence 2015Pence
Outstanding at 1 August 51.9 54.4
Granted during the year 5.0 10.0
Exercised during the year - 61.7
Forfeited/cancelled 61.7 57.0
Outstanding at 31 July 48.9 51.9
The weighted average exercise price of options granted during the year to 31
July 2016 was 5 pence (2015: 10 pence). The range of exercise prices for
options and jointly owned EBT shares outstanding at the end of the year was
nil-110 pence (2015: nil-146 pence).
For the share options outstanding as at 31 July 2016, the weighted average
remaining contractual life is 6.1 years (2015: 6.8 years).
No share options were exercised during the year. The weighted average share
price at the date of exercise for those share options exercised during the
year to 31 July 2015 was 109 pence.
The following table lists the inputs to the models used for the years ended 31
July 2016 and 31 July 2015.
Performance-linked grants Non-performance-linked grants
Group and Company 2016 2015 2016 2015
Expected volatility 54% 55% n/a n/a
Risk-free interest rate 0.85% 1.78% n/a n/a
Expected life of options (years average) 3 3 n/a n/a
Weighted average exercise price 5.0p 10.0p n/a n/a
Weighted average share price at date of grant 56.5p 147.0p n/a n/a
Model used Stochastic Binomial n/a n/a
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.
Certain awards are subject to a holding period after vesting. A Finnerty model
has been used to determine a discount for the lack of marketability of the
shares.
22. Merger reserve and capital redemption reserve
Merger reserve
Group £'000
At 31 July 2014, 31 July 2015 and 31 July 2016 (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 reorganisation on 27 June 2007.
Capital redemption reserve
Company £'000
At 31 July 2014, 31 July 2015 and 31 July 2016 4,402
The capital redemption reserve arises from the off-market purchase of deferred
shares on 4 May 2005 and their subsequent cancellation.
23. Movement in revenue reserve and treasury shares
The Group Retaineddeficit£'000 Treasury shares£'000 Totalrevenuereserve£'000
At 31 July 2014 (21,088) (394) (21,482)
Issue of shares by the EBT - 297 297
Loss for the year (8,975) - (8,975)
At 31 July 2015 (30,063) (97) (30,160)
Loss for the year (10,607) - (10,607)
At 31 July 2016 (40,670) (97) (40,767)
No jointly owned EBT shares were granted during the year (2015: nil).
During the year, no jointly owned EBT shares were exercised (2015: 320,411)
for an aggregate consideration of £nil (2015: £297,000).
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 EBT jointly with a
number of the Group's employees. At 31 July 2016 530,089 shares in the Company
were held by the EBT (2015: 530,089). In addition there are 12,222 (2015:
12,222) treasury shares not held by the EBT.
Company Retained deficit£'000 Treasuryshares£'000 Totalrevenuereserve£'000
At 31 July 2014 (25,277) (394) (25,671)
Issue of shares by the EBT - 297 297
Profit for the year 82 - 82
At 31 July 2015 (25,195) (97) (25,292)
Profit for the year 167 - 167
At 31 July 2016 (25,028) (97) (25,125)
24. 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 2016Group£'000 31 July 2015Group£'000
Land and buildings:
Not later than one year 594 723
After one year but not more than five years 1,551 1,752
After five years 226 614
2,371 3,089
25. 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 20 to 23 and in the Group statement of changes
in equity. At 31 July 2016 total equity was £18,763,000 (2015: £29,100,000).
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 instruments
Financial assets/(liabilities) Loans and receivables£'000 Financial liabilities at amortised cost£'000 Group£'000 Loans and receivablesCompany£'000
31 July 2016
Trade receivables 1,455 - 1,455 -
Inter-company short-term loan to subsidiary - - - 42,976
Short-term investments and cash on deposit 5,000 - 5,000 5,000
Trade and other payables - (2,443) (2,443) -
Inter-company long-term loan from subsidiary - - - (450)
Financial liabilities - (32) (32) -
6,455 (2,475) 3,980 47,526
Financial assets/(liabilities) Loans and receivables£'000 Financial liabilities at amortised cost£'000 Group£'000 Loans and receivablesCompany£'000
31 July 2015
Trade receivables 107 - 107 -
Inter-company short-term loan to subsidiary - - - 31,823
Short-term investments and cash on deposit 20,000 - 20,000 20,000
Trade and other payables - (1,909) (1,909) -
Inter-company long-term loan from subsidiary - - - (450)
Financial liabilities - (95) (95) -
20,107 (2,004) 18,103 51,373
The values disclosed in the above table are carrying values. The Board
considers that the carrying amount of financial assets and liabilities
approximates to their fair value.
The main risks arising from the Group's financial instruments are credit risk
and foreign currency risk. The Board of Directors reviews and agrees policies
for managing each of these risks which are summarised below.
Other loans (see note 18) are subject to interest at base rate plus 2%;
however, as the Group's cash deposits, which attract interest at rates set for
the period of the respective deposit, are of a greater amount, any increase in
base rate and thus interest payable is more than offset by higher interest
income.
Credit risk
The Group's principal financial assets are cash, cash equivalents and
deposits. The Group seeks to limit the level of credit risk on the cash
balances by only depositing surplus liquid funds with multiple counterparty
banks that have investment-grade credit ratings.
The Group trades only with recognised, creditworthy third parties. Receivable
balances are monitored on an ongoing basis with the result that the Group's
exposure to bad debts is not significant. The Group's maximum exposure is the
carrying amount as disclosed in note 15, which was neither past due nor
impaired. All trade receivables are ultimately overseen by the Chief Financial
Officer and are managed on a day-to-day basis by the UK credit control team.
Credit limits are set as deemed appropriate for the customer.
The maximum exposure to credit risk in relation to cash, cash equivalents and
deposits is the carrying value at the balance sheet date.
Foreign currency risk
The Group is exposed to currency risk on sales and purchases that are
denominated in a currency other than the respective functional currency of the
Company. These are primarily US Dollars ("USD") and Euros. Transactions
outside of these currencies are limited.
Almost all of the Company's revenue is denominated in USD. The Group purchases
some raw materials, certain services and some assets in USD which partly
offsets its USD revenue, thereby reducing net foreign exchange exposure.
The Group may use forward exchange contracts as an economic hedge against
currency risk, where cash flow can be judged with reasonable certainty.
Foreign exchange swaps and options may be used to hedge foreign currency
receipts in the event that the timing of the receipt is less certain. There
were no open forward contracts as at 31 July 2016 or at 31 July 2015.
The split of Group assets between Sterling and other currencies at the year
end is analysed as follows:
31 July 2016 31 July 2015
Group GBP£'000 EUR£'000 USD£'000 Total£'000 GBP£'000 USD£'000 Total£'000
Cash, cash equivalents and deposits 14,477 5 29 14,511 24,271 40 24,311
Trade receivables - 423 1,032 1,455 1 106 107
Trade payables (546) (49) (498) (1,093) (767) (95) (862)
13,931 379 563 14,873 23,505 51 23,556
Sensitivity analysis to movement in exchange rates
The following table demonstrates the sensitivity to a reasonably possible
change in the Sterling rate against other currencies used within the business,
with all other variables held constant, of the Group's loss before tax (due to
foreign exchange translation of monetary assets and liabilities) and the
Group's equity.
Increase/(decrease) Impact on loss before tax andGroup equity2016£'000 Impact on loss before tax andGroup equity2015£'000
10% (83) (4)
5% (39) (2)
(5)% 35 3
(10)% 68 6
Interest rate risk
As the Group has no significant borrowings the risk is limited to the
reduction of interest received on cash surpluses held at bank which receive a
floating rate of interest. The principal impact to the Group is to
interest-bearing cash and cash equivalent balances held, which are as set out
below:
31 July 2016 31 July 2015
Group Fixed rate£'000 Floating rate£'000 Total£'000 Fixed rate£'000 Floating rate£'000 Total£'000
Cash, cash equivalents and deposits 5,000 9,511 14,511 20,000 4,311 24,311
Company
Cash, cash equivalents and deposits 5,000 4,057 9,057 20,000 12 20,012
The exposure to interest rate movements is immaterial.
Maturity profile
Set out below is the maturity profile of the Group's financial liabilities at
31 July 2016 based on contractual undiscounted payments, including contractual
interest.
2016 Less than one year£'000 One to fiveyears£'000 Greater than five years£'000 Total£'000
Financial liabilities
Trade and other payables 2,443 - - 2,443
Other loans (including contractual interest) 32 - - 32
2,475 - - 2,475
2015 Less than one year£'000 One to five years£'000 Greater than five years£'000 Total£'000
Financial liabilities
Trade and other payables 1,909 - - 1,909
Other loans (including contractual interest) 65 33 - 98
1,974 33 - 2,007
Trade and other payables are due within three months.
The Directors consider that the carrying amount of the financial liabilities
approximates to their fair value.
As all financial assets are expected to mature within the next twelve months,
an aged analysis of financial assets has not been presented.
The Company's financial liability, a long-term loan from a subsidiary
undertaking, is due after more than five years.
26. Related party transactions
The Group
There were no sales to, purchases from or, at the year end, balances with any
related party.
The Company
The following table summarises inter-company balances at the year end between
Nanoco Group plc and subsidiary entities:
Notes 31 July 2016£'000 31 July 2015£'000
Long-term loans owed to Nanoco Group plc by
Nanoco Life Sciences Limited 20,286 20,286
Nanoco Technologies Limited* 3,087 2,817
13 23,373 23,103
Less provision against debt owed by Nanoco Life Sciences Limited 13 (20,286) (20,286)
3,087 2,817
Short-term loan owed to Nanoco Group plc by
Nanoco Technologies Limited** 15 42,976 31,823
Long-term loan owed by Nanoco Group plc to
Nanoco Tech Limited 17 (450) (450)
* The movement in the long-term loan due from Nanoco Technologies Limited
relates to the recharge in respect of the expense for share-based payments for
staff working for Nanoco Technologies Limited and is included in investments.
** The movement in the short-term loan due from Nanoco Technologies Limited
relates to transfers of cash balances between the entities for the purposes of
investing short-term funds and the funding of trading losses.
There are no formal terms of repayment in place for these loans and it has
been confirmed by the Directors that the long-term loans will not be recalled
within the next twelve months.
None of the loans are interest bearing.
27. Compensation of key management personnel (including Directors)
2016£'000 2015£'000
Short-term employee benefits 1,370 1,228
Pension costs 60 98
Benefits in kind - 6
Share-based payments 190 405
1,620 1,737
The key management team comprises the Directors and two members of staff
(2015: one) who are not Directors of the Company. The staff members of the
team are the Supply Chain and Compliance director and the newly appointed
Applications Development director.
28. Contingent liabilities
The Directors consider there are no contingent liabilities at the date of
these financial statements (2015: £nil).
29. Post balance sheet events
On 4 August 2016 a former Director exercised options over 1,000,000 shares
with an aggregate exercise price of £535,000.
This information is provided by RNS
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