REG - Nanoco Group PLC - Preliminary Results <Origin Href="QuoteRef">NANON.L</Origin> - Part 3
16/11/2017 07:06
- Part 3: For the preceding part double click ID:nRSP6522Wb
- - 32 -
The loan was unsecured, bore interest at 2% above base rate, was repayable in
quarterly instalments and was fully repaid in 2017.
20. Deferred revenue
31 July 2017Group£'000 31 July 2017Company£'000 31 July 2016Group£'000 31 July 2016Company£'000
Current 102 - 531 -
Non-current 552 - 648 -
654 - 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.
21. Issued equity capital
Group Number Sharecapital£'000 Sharepremium£'000 Reverseacquisitionreserve£'000 Total£'000
Allotted, called up and fully paid ordinary shares of 10p
At 31 July 2015 and 31 July 2016 237,077,578 23,708 112,217 (77,868) 58,057
Shares issued on exercise of options 1,213,750 121 431 - 552
At 31 July 2017 238,291,328 23,829 112,648 (77,868) 58,609
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
preliminary results 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 preliminary results 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
1,213,750 options were exercised this year (2016: nil) with an average
exercise price of 45.5 pence.
Company Number Sharecapital£'000 Sharepremium£'000 Total£'000
Allotted, called up and fully paid ordinary shares of 10p
At 31 July 2015 and 31 July 2016 237,077,578 23,708 112,217 135,925
Shares issued on exercise of options 1,213,750 121 431 552
At 31 July 2017 238,291,328 23,829 112,648 136,477
22. Share-based payment reserve
Group and Company £'000
At 31 July 2015 2,445
Share-based payments 270
At 31 July 2016 2,715
Share-based payments 242
At 31 July 2017 2,957
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 £242,000 has been recognised in the statement of comprehensive
income for the year (2016: £270,000).
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 and are exercisable until the tenth anniversary of the award,
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 and are exercisable until the tenth anniversary of the award,
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. Vesting of
the award is subject to the employee remaining a full-time member of staff at
the point of vesting. 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 preliminary results. Vesting of the award is subject to
the employee remaining a full-time member of staff at the point of vesting.
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 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 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 are exercisable until the tenth anniversary of the
award.
Grant in November 2016
Options were granted to the Executive Directors and all eligible staff on 22
November 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 and are subject to a two-year holding period. The
options vest at the end of a three-year performance period subject to meeting
performance criteria and 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. Vesting of the award is subject to the
employee remaining a full-time member of staff at the point of vesting. 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 ShareoptionsNumber EBTNumber 2017 totalNumber 2016 totalNumber
Outstanding at 1 August 13,477,933 530,089 14,008,022 12,534,322
Granted during the year 4,158,821 - 4,158,821 1,695,368
Exercised during the year (1,213,750) (530,089) (1,743,839) -
Forfeited/cancelled (286,688) - (286,688) (221,668)
Outstanding at 31 July 16,136,316 - 16,136,316 14,008,022
Exercisable at 31 July 9,784,814 - 9,784,814 11,528,654
Weighted average exercise price of options
Group and Company 2017Pence 2016Pence
Outstanding at 1 August 48.9 51.9
Granted during the year - 5.0
Exercised during the year 31.7 -
Forfeited/cancelled 22.6 61.7
Outstanding at 31 July 38.6 48.9
The weighted average exercise price of options granted during the year to 31
July 2017 was nil (2016: 5 pence). The range of exercise prices for options
outstanding at the end of the year was nil-110 pence (2016: nil-110 pence).
For the share options outstanding as at 31 July 2017, the weighted average
remaining contractual life is 6.4 years (2016: 6.1 years).
The following table lists the inputs to the models used for the years ended 31
July 2017 and 31 July 2016.
Group and Company Market performance-linked grants Non-market performance-linked grants
2017 2016 2017 2016
Expected volatility 59% 54% n/a n/a
Risk-free interest rate 0.26% 0.85% n/a n/a
Expected life of options (years' average) 3 3 3 n/a
Weighted average exercise price nil 5.0p nil n/a
Weighted average share price at date of grant 49p 56.5p 49p n/a
Model used Stochastic Stochastic 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.
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.
23. Merger reserve and capital redemption reserve
Merger reserve
Group £'000
At 31 July 2015, 31 July 2016 and 31 July 2017 (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 2015, 31 July 2016 and 31 July 2017 4,402
The capital redemption reserve arises from the off-market purchase of deferred
shares on 4 May 2005 and their subsequent cancellation.
24. Movement in revenue reserve and treasury shares
Group Retaineddeficit£'000 Treasury shares£'000 Totalrevenuereserve£'000
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)
Loss for the year (9,110) - (9,110)
Exercise of options (77) 77 -
At 31 July 2017 (49,857) (20) (49,877)
During the year, the option to convert jointly owned EBT shares into sole
ownership was exercised (2016: nil) for an aggregate consideration of £1
(2016: £nil).
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 2017 no shares in the Company were
held by the EBT (2016: 530,089). In addition there are 12,222 (2016: 12,222)
treasury shares not held by the EBT.
Company Retained deficit£'000 Treasuryshares£'000 Totalrevenuereserve£'000
At 31 July 2015 (25,195) (97) (25,292)
Profit for the year 167 - 167
At 31 July 2016 (25,028) (97) (25,125)
Profit for the year 30 - 30
Exercise of options (77) 77 -
At 31 July 2017 (25,075) (20) (25,095)
25. 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 2017Group£'000 31 July 2016Group£'000
Land and buildings:
Not later than one year 779 594
After one year but not more than five years 2,039 1,551
After five years - 226
2,818 2,371
26. 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 21 to 24 and in the Group statement of changes
in equity. At 31 July 2017 total equity was £10,447,000 (2016: £18,763,000).
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 andreceivables£'000 Financialliabilities atamortisedcost£'000 Group £'000 Loans andreceivablesCompany£'000
31 July 2017
Trade receivables 111 - 111 -
Inter-company short-term loan to subsidiary - - - 47,957
Trade and other payables - (1,318) (1,318) -
Inter-company long-term loan from subsidiary - - - (450)
111 (1,318) (1,207) 47,507
Financial assets/(liabilities) Loans andreceivables£'000 Financialliabilities atamortisedcost£'000 Group £'000 Loans andreceivablesCompany£'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
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.
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 16, 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 2017 or at 31 July 2016.
The split of Group assets between Sterling and other currencies at the year
end is analysed as follows:
Group 31 July 2017 31 July 2016
GBP£'000 EUR£'000 USD£'000 Total£'000 GBP£'000 EUR£'000 USD£'000 Total£'000
Cash, cash equivalents and deposits 5,659 7 40 5,706 14,477 5 29 14,511
Trade receivables 43 53 15 111 - 423 1,032 1,455
Trade payables (503) (5) (306) (814) (546) (49) (498) (1,093)
5,199 55 (251) 5,003 13,931 379 563 14,873
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) Impacton lossbefore taxand Groupequity2017£'000 Impacton loss before taxand Groupequity2016£'000
10% (32) (83)
5% (16) (39)
(5)% 18 35
(10)% 39 68
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:
Group 31 July 2017 31 July 2016
Fixedrate£'000 Floatingrate£'000 Total£'000 Fixedrate£'000 Floatingrate£'000 Total£'000
Cash, cash equivalents and deposits - 5,706 5,706 5,000 9,511 14,511
Company
Cash, cash equivalents and deposits - 4,670 4,670 5,000 4,057 9,057
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 2017 based on contractual undiscounted payments, including contractual
interest.
2017 Less thanone year£'000 One to fiveyears£'000 Greater thanfive years£'000 Total£'000
Financial liabilities
Trade and other payables 1,318 - - 1,318
1,318 - - 1,318
2016 Less thanone year£'000 One to fiveyears£'000 Greater thanfive 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
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.
27. 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 2017£'000 31 July 2016£'000
Long-term loans owed to Nanoco Group plc by
Nanoco Life Sciences Limited 20,286 20,286
Nanoco Technologies Limited* 3,329 3,087
14 23,615 23,373
Less provision against debt owed by Nanoco Life Sciences Limited 14 (20,286) (20,286)
3,329 3,087
Short-term loan owed to Nanoco Group plc by
Nanoco Technologies Limited** 16 47,957 42,976
Long-term loan owed by Nanoco Group plc to
Nanoco Tech Limited 18 (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.
28. Compensation of key management personnel (including Directors)
2017£'000 2016£'000
Short-term employee benefits 1,218 1,370
Pension costs 73 60
Benefits in kind 32 -
Share-based payments 188 190
1,511 1,620
The key management team comprises the Directors and two members of staff
(2016: two) who are not Directors of the Company. The staff members of the
team are the supply chain and compliance director and the applications
development director.
29. Post balance sheet events
Following shareholder approval at a general meeting held on 14 November 2017,
47,655,821 shares were issued on 15 November 2017 as a result of a placing of
shares at 18 pence each raising cash of £8.0 million net of expenses.
This information is provided by RNS
The company news service from the London Stock ExchangeRecent news on Nanoco
See all newsREG - Nanoco Group PLC - Shoei Litigation Update
AnnouncementREG - Nanoco Group PLC - Conclusion of CDX process & Directorate changes
AnnouncementREG - Nanoco Group PLC - Receipt of Litigation Proceeds
AnnouncementREG - Nanoco Group PLC - Result of AGM
AnnouncementREG - Nanoco Group PLC - Litigation update
Announcement